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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No. (File No. 33-63951)
Post-Effective Amendment No. 4
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 6 (File No. 811-7405)
STRATEGIST WORLD FUND, INC.
(formerly 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:
immediately upon filing pursuant to paragraph (b)
X on June 27, 1997 pursuant to paragraph (b)
60 days after filing pursuant to paragraph (a)(i) on (date) pursuant to
paragraph (a)(i) 75 days after filing pursuant to paragraph (a)(ii) on
(date) paragraph (a)(ii) of rule 485.
If appropriate, check the following box:
this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
The Registrant has registered an indefinite number or amount of securities under
the Securities Act of 1933 pursuant to Rule 24f of the Investment Company Act of
1940. Registrant's Rule 24f-2 Notice for the fiscal year ended Oct. 31, 1997
will be filed on or about Dec. 16, 1997.
World Trust has also executed this Amendment to the Registration Statement.
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<TABLE>
<CAPTION>
Cross reference sheet for Strategist Emerging Markets Fund, Strategist World Growth Fund and
Strategist World Income 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.
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; Fund expenses 11 Table of Contents
(b) The Funds in brief; Fund expenses 12 NA
(c) The Funds in brief; Fund expenses
13(a) Additional Investment Policies; all
3(a) NA appendices except Dollar-Cost Averaging
(b) NA (b) Additional Investment Policies
(c) Performance (c) Additional Investment Policies
(d) NA (d) Security Transactions
4(a) The Funds in brief; Investment policies 14(a) Board Members and Officers
and risks; How the Funds and Portfolios (b) Board Members and Officers
are organized (c) Board Members and Officers
(b) Investment policies and risks
(c) Investment policies and risks 15(a) NA
(b) NA
5(a) Board members and officers (c) Board Members and Officers
(b)(i) Investment Manager; About
the Advisor 16(a)(i) How the Funds and Portfolios are organized*;
(b)(ii) Investment manager; Administrator and About the Advisor
transfer agent (a)(ii) Agreements: Investment Management Services
(b)(iii) Investment Manager Agreement, Plan and Agreement of Distribution/
(c) Portfolio managers Distribution Agreement
(d) Administrator and transfer agent (a)(iii) NA
(e) Administrator and transfer agent (b) NA
(f) Investment manager; Administrator and (c) NA
transfer agent; Distributor (d) Agreements: Administrative Services Agreement
(g) About the Advisor (e) NA
(f) Agreements: Plan and Agreement of
5A(a) NA Distribution/Distribution Agreement
(b) NA (g) NA
(h) Custodian; Independent Auditors
(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 Advisor
(d) NA (c) Security Transactions
(e) Cover page; Special shareholder services (d) Security Transactions
(f) Dividends and capital gains distributions; (e) Security Transactions
Reinvestments
(g) Taxes 18(a) Shares; Voting rights*
(h) Special considerations regarding master/ (b) NA
feeder structure
19(a) Investing in the Fund
7(a) Distributor (b) Valuing Fund shares*; Investing in the Funds;
(b) Valuing Fund shares Redeeming shares
(c) NA (c) Redeeming shares
(d) How to purchase shares
(e) NA 20 Taxes
(f) Distributor
21(a) Agreements: Plan and Agreement of
8(a) How to redeem shares; Special considerations Distribution/Distribution Agreement, Placement
regarding master/feeder structure Agency Agreement
(b) NA (b) Agreements: Plan and Agreement of
(c) How to purchase, exchange or redeem shares: Distribution/Distribution Agreement, Placement
Other important information Agency Agreement
(d) How to purchase, exchange or redeem shares:
How to redeem shares 22(a) NA
(b) Performance Information (for all funds except
9 None money market funds)
23 Financial Statements
</TABLE>
*Designates page number in prospectus.
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Strategist World Fund, Inc.
Prospectus
June 27, 1997
This prospectus describes three, no-load mutual funds. Strategist World Fund,
Inc is a mutual fund with series of capital stock representing interests in
Strategist Emerging Markets Fund (a diversified mutual fund), Strategist World
Growth Fund (a diversified mutual fund) and Strategist World Income Fund (a
non-diversified mutual fund). Each Fund has its own goals and investment
policies.
The goal of Strategist Emerging Markets Fund and of Strategist World Growth Fund
is long-term growth of capital.
The goal of Strategist World Income Fund is a high total return through income
and growth of capital.
Each Fund has chosen to participate in a master/feeder structure. Each Fund
seeks to achieve its goal by investing all of its assets in a corresponding
Portfolio of World Trust. Each Portfolio is managed by American Express
Financial Corporation and has the same goal as the corresponding Fund. This
arrangement is commonly known
as a master/feeder structure.
This prospectus contains facts that can help you decide if one or more of the
Funds is the right investment for you. Read it before you invest and keep it for
future reference.
Additional facts about the Funds are in a Statement of Additional Information
(SAI), filed with the Securities and Exchange Commission (SEC) and available for
reference, along with other related materials, on the SEC Internet web site
(http://www.sec.gov). The SAI is incorporated here by reference. For a free
copy, contact American Express Financial Direct.
Like all mutual funds, 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.
Please note that these Funds:
o are not bank deposits
o are not federally insured
o are not endorsed by any bank or government agency
o are not guaranteed to achieve their goals
American Express Financial Direct
P.O. Box 59196
Minneapolis, MN
55459-0196
800-AXP-SERV
TTY: 800-710-5260
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Table of contents
The Funds in brief
Goals and types of Fund investments and their risks
Structure of the Funds
Manager and distributor
Portfolio managers
Fund expenses
Performance
Financial highlights
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
Methods of exchanging or redeeming 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 Funds and Portfolios 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
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The Funds in brief
Strategist World Fund, Inc. (the Company) is a mutual fund with series of
capital stock representing interests in Strategist Emerging Markets Fund
(Emerging Markets Fund), Strategist World Growth Fund (World Growth Fund) and
Strategist World Income Fund (World Income Fund) (collectively referred to as
the Funds). Emerging Markets Fund and World Growth Fund are diversified mutual
funds and World Income Fund is a non-diversified mutual fund. Each Fund has its
own goals and investment policies. Each of the Funds seeks to achieve its own
goals by investing all of its assets in a corresponding series (the Portfolio)
of World Trust (the Trust), rather than by directly investing in and managing
its own portfolio of securities.
Goals and types of Fund investments and their risks
Emerging Markets Fund seeks to provide shareholders with long-term growth of
capital. It does so by investing all of its assets in Emerging Markets
Portfolio, a diversified mutual fund that invests primarily in the equity
securities of issuers in countries with developing or emerging markets. Emerging
Markets Portfolio also invests in debt securities, derivative instruments and
money market instruments.
World Growth Fund seeks to provide shareholders with long-term growth of
capital. It does so by investing all of its assets in World Growth Portfolio, a
diversified mutual fund that invests primarily in equity securities of companies
throughout the world. World Growth Portfolio also invests in debt securities,
derivative instruments and money market instruments.
World Income 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 World
Income Portfolio, 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. World Income
Portfolio also may invest in common and preferred stocks, derivative instruments
and money market instruments.
Because investments involve risk, a Fund cannot guarantee achieving its goals.
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 a Fund only if you are willing to assume these risks.
Structure of the Funds
Each Fund uses what is commonly known as a master/feeder structure. This means
the Fund (the feeder fund) invests all of its assets in the Portfolio (the
master fund). The Portfolio actually invests in and manages the securities and
has the same goals and investment
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PAGE 6
policies as the Fund. This structure is described in more detail in the section
captioned "Special considerations regarding master/feeder structure." Here is an
illustration of the structure:
Investors
buy shares in
the Fund
The Fund
invests in
the Portfolio
The Portfolio invests in
securities, such as stocks
or bonds
Manager and distributor
Each Portfolio is managed by American Express Financial Corporation (the
Advisor), a provider of financial services since 1894. The Advisor currently
manages more than $150 billion in assets. These assets are managed by a team of
highly skilled, experienced professionals, backed by one of the nation's largest
investment departments. Our team of professionals includes portfolio managers,
senior economists and supporting staff, stock and bond analysts including
Chartered Financial Analysts, and investment managers and researchers based in
London and Hong Kong who add a global dimension to our expertise. These
professionals evaluate thousands of securities.
Shares of the Funds are sold through American Express Service Corporation (the
Distributor), an affiliated company of the Advisor.
Portfolio managers
Emerging Markets Portfolio
Ian King joined the Advisor in 1995 and serves as portfolio manager. He has
managed the assets of the Portfolio since November 1996. Prior to joining the
Advisor he was portfolio manager of INVESCO from 1989 to 1992 and director of
Lehman Brothers Global Asset Management Ltd. from 1992 to 1995.
World Growth Portfolio
Richard Lazarchic joined the Advisor in 1979 and serves as portfolio manager. He
has managed the assets of World Growth Portfolio and its predecessor fund since
July 1995. He also serves as portfolio manager of IDS Life Series International
Equity Portfolio. He was portfolio manager of IDS Utilities Income Fund from
1989 to 1993, IDS Diversified Equity Income Fund from 1990 to 1994 and IDS
Managed Retirement Fund from 1993 to 1995.
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World Income Portfolio
Ray Goodner joined the Advisor in 1977 and serves as vice president and senior
portfolio manager. He has managed the assets of World Income Portfolio and its
predecessor fund since 1989. He also has managed the assets of the predecessor
of Quality Income Portfolio, a separate portfolio in the Preferred Master Trust
Group, IDS Global Balanced Fund and IDS Life Global Yield Fund.
Fund expenses
The purpose of the following table and example is to summarize the aggregate
expenses of each Fund and its corresponding Portfolio and to assist investors in
understanding the various costs and expenses that investors in each Fund may
bear directly or indirectly. The Company's board believes that, over time, the
aggregate per share expenses of a Fund and its corresponding Portfolio should be
approximately equal to (and may be less than) the per share expenses a Fund
would have if the Company retained its own investment advisor and the assets of
each Fund were invested directly in the type of securities held by the
corresponding Portfolio. For additional information concerning Fund and
Portfolio expenses, see "How the Funds and Portfolios are organized."
Shareholder transaction expenses(a)
Maximum sales charge on purchases(b)
(as a percentage of offering price)
Emerging Markets World Growth World Income
Fund Fund Fund
0% 0% 0%
Annual Fund and allocated Portfolio operating expenses (as a percentage of
average daily net assets):
Emerging Markets World Growth World Income
Fund Fund Fund
Management fee(c) 1.05% 0.78% 0.76%
12b-1 fee 0.25% 0.25% 0.25%
Other expenses(d) 0.90% 0.72% 0.34%
Total (after reimbursement) 2.20% 1.75% 1.35%
(a)A wire redemption charge, currently $15, is deducted from the shareholder's
Investment Management Account for wire redemptions made at the request of the
shareholder. (b)There are no sales loads; however, each 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 8
(c)The management fee is paid by the Trust on behalf of the
Portfolio.
(d)Other expenses include an administrative services fee, a
transfer agency fee and other nonadvisory expenses.
The Advisor and the Distributor have agreed to waive certain fees and to absorb
certain other Fund expenses until Oct. 31, 1997. Under this agreement, Emerging
Markets Fund's total expenses will not exceed 2.20%, World Growth Fund's total
expenses will not exceed 1.75% and World Income Fund's total expenses will not
exceed 1.35%. Without this agreement, the estimated Other expenses and Total
fund operating expenses would have been: 9.15% and 10.45% for Emerging Markets
Fund, 6.27% and 7.30% for World Growth Fund and 6.99% and 8.02% for World Income
Fund.
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:
Emerging Markets World Growth World Income
Fund Fund Fund
1 year $22 $18 $14
3 years $69 $55 $43
5 years $118 $95 $74
10 years $254 $207 $163
The table and example do not represent actual expenses, past or future. Actual
expenses may be higher or lower than those shown. Because the Funds pay annual
distribution (12b-1) fees, long-term shareholders may indirectly pay an
equivalent of more than a 7.25% sales charge, the maximum permitted by the
National Association of Securities Dealers.
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Performance
Financial highlights
The table below shows certain important information for evaluating each Fund's
results.
<TABLE>
<CAPTION>
Emerging World World
Markets Growth Income
Fund Fund Fund
1997f 1997e 1996a 1997e 1996a
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $5.00 $7.08 $7.32 $6.24 $6.05
Income from investment operations:
Net investment income .01 .02 .04 .33 .15
Net gains (losses) (both realized
and unrealized) .63 .10 (.28) (.27) .25
Total from investment operations .64 .12 (.24) .06 .40
Less distributions:
Dividends from net investment income (.01) (.01) -- (.20) (.15)
Excess distributions of net investment
income -- -- -- -- (.06)
Distributions from realized gains -- -- -- (.02) --
Total distributions (.01) (.01) -- (.22) (.21)
Net asset value, end of period 5.63 7.19 7.08 6.08 6.24
Ratios/supplemental data:
Net assets, end of period (in thousands) $639 $569 $489 $553 $524
Ratio of expenses to average daily
net assetsd 2.20%c 1.62%c 1.75%c .59%c 1.35%c
Ratio of net income to average
daily net assets .15%c .50%c 1.61%c 6.70%c 5.87%c
Total returng 12.9% 1.7% (3.3%) (.4%) 6.6%
Portfolio turnover rate (excluding
short-term securities) for the
underlying Portfolio 13% 91% 58% 33% 24%
Average brokerage commission rate
for the underlying Portfolioh $.0030 $.0146 $.0086 $ -- $ --
</TABLE>
a Inception date was May 13, 1996.
b For a share outstanding throughout the period. Rounded to the nearest cent.
c Adjusted to an annual basis.
d The Advisor and Distributor voluntarily limited total operating expenses for
Emerging Markets Fund, World Growth Fund and World Income Fund. Without this
agreement, the ratio of expenses to average daily net assets would have been
10.45% for Emerging Markets Fund for the period ended 1997, 7.30% and 17.33%
for World Growth Fund for periods ended 1997 and 1996, respectively, and 8.02%
and 19.23% for World Income Fund for periods ended 1997 and 1996,
respectively.
e Six months ended April 30, 1997 (Unaudited).
f Inception date was Nov. 13, 1996 (Unaudited).
g Total return does not reflect payment of a sales charge.
h The Fund is required to disclose an average brokerage commission rate per
share for security trades on which commissions are charged. The comparability
of this information may be affected by the fact that commission rates per
share vary significantly among foreign countries.
The annual information in this table for World Growth Fund and World Income Fund
has been audited by KPMG Peat Marwick LLP, independent auditors. Additional
information about the performance of World Growth Fund and World Income Fund are
contained in the Funds' annual report which, if not included with this
prospectus, may be obtained without charge. The six-month information for World
Growth and World Income Fund and the information for Emerging Markets Fund, are
unaudited.
Total returns
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.
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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.
Average annual total returns as of April 30, 1997
Purchase 1 year 5 years Since
made ago ago inception(a)
Emerging Markets Fund(b) -- % -- % +12.92%
World Growth Fund(c) -1.63% +7.61% +6.87%
EAFE Index -5.36% +10.00% 4.86%(d)
Lipper International
Fund Index +9.28% +11.26% +7.88%(d)
World Income Fund(c) +5.58% +8.94% +10.00%
Salomon Brothers
Global Govt.
Bond Composite
Index +0.75% +8.06% +8.92%(e)
Lipper General World
Income Fund Index +7.92% +7.42% +8.44%(e)
Cumulative total returns as of April 30, 1997
Purchase 1 year 5 years Since
made ago ago inception(a)
Emerging Markets Fund(b) -- % -- % +12.92%
World Growth Fund(c) -1.63% +44.42% +58.49%
EAFE Index -5.36% +61.08% +38.90%(d)
Lipper International
Fund Index +9.28% +70.49% +69.03%(d)
World Income Fund(c) +5.58% +53.55% +116.86%
Salomon Brothers
Global Govt.
Bond Composite
Index +0.75% +47.32% +99.51%(e)
Lipper General World
Income Fund Index +7.92% +43.02% +92.53%(e)
(a)Inception date was May 29, 1990 for IDS Global Growth Fund and March 20, 1989
for IDS Global Bond Fund (the predecessor funds).
(b)Inception date was Nov. 13, 1996.
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(c)On May 13, 1996, IDS Global Growth Fund and IDS Global Bond Fund (the
predecessor funds) converted to a master/feeder structure and transferred all of
their assets to World Growth Portfolio and World Income Portfolio, respectively.
The performance information in the foregoing tables represents performance of
the corresponding predecessor funds prior to March 20, 1995 and of Class A
shares of the predecessor funds from March 20, 1995 through May 13, 1996
adjusted to reflect the absence of sales charges on shares of the Funds sold
through this prospectus. The historical performance has not been adjusted for
any difference between the estimated aggregate fees and expenses of the Funds
and historical fees and expenses of the predecessor Funds.
(d)Measurement period started June 1, 1990.
(e)Measurement period started April 1, 1989.
These examples show total returns from hypothetical investments in each Fund.
These returns are compared to those of popular indexes for the same periods.
For purposes of calculation, information about each 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 a Fund's future performance.
Morgan Stanley Capital International EAFE Index (EAFE Index), an unmanaged 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. The index reflects
reinvestment of all distributions and changes in market prices, but excludes
brokerage commissions or other fees.
Lipper International Fund Index, an unmanaged index published by Lipper
Analytical Services, Inc., includes 30 funds that are generally similar to World
Growth Portfolio, although some funds in the index may have somewhat different
investment policies or objectives.
Salomon Brothers Global Government Bond Composite Index is an unmanaged
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 World
Income Portfolio. The index reflects reinvestment of all distributions and
changes in market prices, but excludes brokerage commissions or other fees.
Lipper General World Income Fund Index, an unmanaged index published by Lipper
Analytical Services, Inc., includes 30 funds that are generally similar to World
Income Portfolio, although some funds in the index may have somewhat different
policies or objectives.
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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 World
Income 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
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
The policies described below apply both to the Fund and the Portfolio.
Emerging Markets Portfolio - Emerging Markets Portfolio invests primarily in
equity securities of issuers in countries with developing or emerging markets.
Under normal market conditions, at least 65% of the Portfolio's total assets
will be invested in emerging market equity securities of at least three
different countries. The Portfolio also may invest in debt securities,
derivative instruments and money market instruments.
World Growth Portfolio - World Growth 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.
World Income Portfolio - World Income 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.
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PAGE 13
The various types of investments described above that the portfolio managers use
to achieve investment performance are explained in more detail in the next
section and in the SAI.
Facts about investments and their risks
Emerging markets: Emerging markets are considered to be those countries
characterized as developing or emerging by either the World Bank or the United
Nations. Some examples of emerging market countries are Brazil, India, Malaysia
and Thailand. As used in this prospectus, emerging market equity securities
include securities traded in countries with developing or emerging markets as
well as securities traded in any market, if the issuer derives 50% or more of
its total revenue from goods or services produced in emerging market countries
or from sales made in emerging market countries. Equity investments in
developing markets are high risk investments, subject to significant price
fluctuation due to the potential lack of liquidity experienced by these market
places, the possibility that emerging markets will be less efficient in pricing
equity securities and the potential inability of emerging markets to deal with
significant price declines in an orderly manner. Emerging markets generally grow
more rapidly than developed markets. Emerging market companies tend to be
smaller companies producing goods or providing services in less developed global
economies. Emerging market companies can be of any size and can be in any
industry. Normally, emerging market companies retain a large part of their
earnings for research, development and reinvestment in capital assets.
Therefore, they tend not to emphasize the payment of dividends.
Common stocks: Stock prices are subject to market fluctuations. Stocks of
foreign companies may be subject to abrupt or erratic price movements. While
many 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,
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 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
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PAGE 14
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.
Emerging Markets Portfolio may invest up to 20% of its net assets in bonds.
Emerging Markets Portfolio may invest up to 10% of its net assets in bonds rated
below investment grade, including Brady Bonds.
World Growth Portfolio may invest up to 20% of its net assets in bonds. World
Growth Portfolio will not invest more than 5% of its net assets in bonds below
investment grade, including Brady bonds.
World Income Portfolio invests in securities rated B or better by
Moody's Investors Services, Inc. (Moody's) or Standard & Poor's
Corporation (S&P).
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.
World Income Portfolio
Bond ratings and holdings for the fiscal year
ending Oct. 31, 1996
Percent of
net assets
in unrated
S&P Rating Protection of securities
Percent of (or Moody's principal and assessed by
net assets equivalent) interest the Advisor
40.90% AAA Highest quality 0.36%
10.96 AA High quality --
5.94 A Upper medium grade --
4.58 BBB Medium grade --
8.85 BB Moderately speculative --
2.01 B Speculative --
-- CCC Highly speculative --
-- CC Poor quality --
-- C Lowest quality --
-- D In default --
1.10 Unrated Unrated securities 0.74
The table above excludes money market instruments that are considered investment
grade securities. See Appendix to the prospectus describing corporate bond
ratings for further information.
For the period from Nov. 1, 1995 to May 12, 1996, the information in the table
above relates to IDS Global Bond Fund, a fund that transferred its assets to
World Income Portfolio on May 13, 1996.
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
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PAGE 15
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.
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 difficult to complete the
transaction. These risks are increased in countries with emerging markets
because they often have relatively unstable governments and less established
economies. 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.
Diversification: Since World Income Portfolio is a non-diversified mutual fund,
it may concentrate its investments in securities of fewer issuers than would a
diversified fund. Accordingly, World Income Portfolio may have more risk than
mutual funds that have broader diversification.
Derivative instruments: A 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
<PAGE>
PAGE 16
losses of premiums, rapid changes in prices, defaults by other parties and
inability to close such instruments. A 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 Portfolios will designate cash or appropriate liquid
assets to cover portfolio obligations. No more than 5% of each 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. This does not, however, limit the portion of a Portfolio's assets at
risk to 5%. The Portfolios are not limited as to the percentage of their 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 other instruments that are illiquid: A security or other
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. Securities and instruments, however, can be
sold in private sales, and many may be sold to other institutions and qualified
buyers or on foreign markets. Each 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 a Portfolio's net assets will be held in
securities and other 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
a 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 boards.
Lending portfolio securities: Each 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 a 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 a 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
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PAGE 17
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 held by a Portfolio 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
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 Funds through an Investment Management Account
(IMA) maintained with American Express Service Corporation (the Distributor).
There is no fee to open an IMA account. Payment for shares must be made directly
to the Distributor.
Complete an IMA Account Application (available by calling 1-800- AXP-SERV) and
mail the application to American Express Financial 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.
If you already have an IMA account, you may buy shares in the Funds as described
below and need not open a new 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 a 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.
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PAGE 18
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 Funds. 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 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(s) 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. Each 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.
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PAGE 19
How to exchange shares
The exchange privilege allows you to exchange your investment in a Fund at no
charge for shares of other funds in the Strategist Fund Group available in your
state. For complete information on any other fund, including fees and expenses,
read that fund's prospectus carefully. 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. Each
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
Funds 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
Funds and their 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. Each 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. Normally, payment for redeemed shares will be
credited directly to your IMA account on the next business day. However, the
Fund may delay payment, but 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 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
<PAGE>
PAGE 20
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 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
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. The privilege to initiate transactions by
telephone is automatically available through your IMA account. Each 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, a Fund may be liable for losses due to unauthorized
or fraudulent instructions. Telephone privileges may be modified or discontinued
at any time.
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PAGE 21
Systematic purchase plans
The Distributor offers a Systematic Purchase Plan (SPP) that allows you to make
periodic investments in the Funds automatically and conveniently. A SPP can be
used as a dollar cost averaging program and saves you the 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 or 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 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
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PAGE 22
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
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 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. Each 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.
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PAGE 23
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 Funds or
their Distributor. This prospectus does not constitute an offering by the Funds
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, you will
receive 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 Direct Team
Fund performance, objectives and account inquiries, redemptions and exchanges,
dividend payments or reinvestments and automatic payment arrangements
800-AXP-SERV
TTY Service
For the hearing impaired
800-710-5260
Distributions and taxes
As a shareholder you are entitled to your share of a Fund's net income and any
net gains realized on its investments. Each 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
A Portfolio allocates investment income from dividends and interest and net
realized capital gains or losses, if any, to a Fund. A Fund deducts direct and
allocated expenses from the investment income. Net investment income from
dividends and interest is distributed to you as dividends by the end of the
calendar year for Emerging Markets Fund and World Growth Fund and at the end of
each calendar quarter for World Income Fund. Short-term capital gains are
distributed at the end of the calendar year and are included in net investment
income. Long-term capital gains are realized whenever a security held for more
than one year is sold for a higher price than was paid for it. A Fund will
offset any net
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PAGE 24
realized capital gains by any available capital loss carryovers. Net realized
long-term capital gains, if any, are distributed at the end of the calendar year
as capital gain distributions. Before they are distributed, both net investment
income and net long-term capital gains are included in the value of each share.
After they are 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.)
Reinvestments
Dividends and capital gain distributions are automatically reinvested in
additional shares of a 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 Funds have received a Private Letter Ruling from the Internal Revenue
Service stating that, for purposes of the Internal Revenue Code, each 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 respective Fund
declares them regardless of whether you take them in cash or reinvest them.
Income received by a 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).
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PAGE 25
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 800-AXP-SERV for federal Form W-9,
"Request for Taxpayer Identification Number and
Certification."
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PAGE 26
Important: This information is a brief and selective summary of certain federal
tax rules that apply to each Fund. Tax matters are highly individual and
complex, and you should consult a qualified tax advisor about your personal
situation.
How the Funds and Portfolios are organized
Shares
The Company is currently composed of four funds, each issuing its own series of
capital stock. Each Fund is owned by its shareholders. All shares issued by a
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 Funds 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
Each Fund pursues its goals by investing its assets in a master fund called a
Portfolio. This means that a Fund does not invest directly in securities; rather
the respective Portfolio invests in and manages its portfolio of securities. The
goals and investment policies of each Portfolio are described under the captions
"Investment policies and risks" and "Facts about investments and their risks."
Additional information on investment policies may be found in the SAI.
Board considerations: The board considered the advantages and disadvantages of
investing each Fund's assets in the respective Portfolio. The board believes
that the master/feeder structure will be in the best interest of each Fund and
its shareholders since it offers the opportunity for economies of scale. A Fund
may redeem all of its assets from the corresponding Portfolio at any time.
Should the board determine that it is in the best interest of a Fund and its
shareholders to terminate its investment in the Portfolio, it would consider
hiring an investment advisor to manage the Fund's assets, or other appropriate
options. A Fund would terminate its investment if the Portfolio changed its
goals, investment policies or restrictions without the same change being
approved by the Fund.
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PAGE 27
Other feeders: Each Portfolio sells securities to other affiliated mutual funds
and may sell securities to non-affiliated investment companies and institutional
accounts (known as feeders). These feeders buy the Portfolio's securities on the
same terms and conditions as the Fund and pay their proportionate share of the
Portfolio's expenses. However, their operating costs and sales charges are
different from those of the Fund. Therefore, the investment returns for other
feeders are different from the returns of a Fund. Information about other
feeders may be obtained by calling a service representative at 800-437-3133.
Each feeder that invests in a Portfolio is different and activities of its
investors may adversely affect all other feeders, including the Fund. For
example, if one feeder decides to terminate its investment in a Portfolio, that
Portfolio may elect to redeem in cash or in kind. If cash is used, the Portfolio
will incur brokerage, taxes and other costs in selling securities to raise the
cash. This may result in less investment diversification if entire investment
positions are sold, and it also may result in less liquidity among the remaining
assets. If in-kind distribution is made, a smaller pool of assets remains that
may affect brokerage rates and investment options. In both cases, expenses may
rise since there are fewer assets to cover the costs of managing those assets.
Shareholder meetings: Whenever a Portfolio proposes to change a fundamental
investment policy or to take any other action requiring approval of its security
holders, the corresponding Fund will hold a shareholder meeting. The Fund will
vote for or against the Portfolio's proposals in proportion to the vote it
receives for or against the same proposals from its shareholders.
Board members and officers
Shareholders of the Company elect a board that oversees the operations of the
Funds 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
Each Portfolio pays the Advisor for managing its assets. Each Fund pays its
proportionate share of the fee. Under the Investment Management Services
Agreement, the Advisor is paid a fee for these services based on the average
daily net assets of each Portfolio, as follows:
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PAGE 28
Emerging Markets Portfolio
Assets Annual rate at
(billions) each asset level
- ---------- ----------------
First $0.25 1.10%
Next 0.25 1.08
Next 0.25 1.06
Next 0.25 1.04
Next 1.0 1.02
Over 2.0 1.00
World Growth Portfolio
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
World Income Portfolio
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, each Portfolio also pays taxes, brokerage commissions and
nonadvisory expenses.
Administrator and transfer agent
The Fund pays the Advisor for shareholder accounting and transfer agent services
under two agreements. The first agreement, the Administrative Services
Agreement, has a declining annual rate that decreases as assets increase. For
Emerging Markets Fund, the fee ranges from 0.10% to 0.05%. For World Growth
Fund, the fee ranges from 0.06% to 0.035%. For World Income Fund, the fee ranges
from 0.06% to 0.04%. The second agreement, the Transfer Agency Agreement has an
annual fee of $20 per shareholder account for Emerging Markets Fund and World
Growth Fund and an annual fee of $25 per shareholder account for World Income
Fund.
Distributor
The Funds sell shares through the Distributor under a Distribution Agreement.
The Distributor is located at P.O. Box 59196, Minneapolis, MN 55459-0196 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
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PAGE 29
Distributor provide information to investors about individual investment
programs, the Funds and their operations, new account applications, exchange and
redemption requests. The Funds reserve the right to sell shares through other
financial intermediaries or broker/dealers. In that event, the account terms
would also be governed by rules that the intermediary may establish.
To help defray costs, including costs for marketing, sales administration,
training, overhead, direct marketing programs, advertising and related
functions, the Funds pay 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, each Fund pays a distribution fee at an annual rate of 0.25% of
that Fund's average daily net assets for distribution- related services. This
fee will not cover all of the costs incurred by the Distributor.
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 Portfolios may pay
brokerage commissions to broker-dealer affiliates of the Advisor.
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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.
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PAGE 31
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.
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Appendix B
Descriptions of derivative instruments
What follows are brief descriptions of derivative instruments a Portfolio may
use. At various times a 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 or sell an instrument for a set price on a future date. A
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 a 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
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.
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PAGE 33
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 34
STATEMENT OF ADDITIONAL INFORMATION
FOR
STRATEGIST WORLD FUND, INC.
June 27, 1997
This Statement of Additional Information (SAI) is not a prospectus. It should be
read together with the Funds' prospectus and the financial statements contained
in the Annual Report and Semi-Annual Report which may be obtained by calling
American Express Financial Direct, 800-AXP-SERV (TTY: 800-710-5260) or by
writing to P.O. Box 59196, Minneapolis, MN 55459-0196.
This SAI is dated June 27, 1997, and it is to be used with the Funds' prospectus
dated June 27, 1997, the Annual Report for the fiscal period ended Oct. 31, 1996
and the Semi-Annual Report for the fiscal period ended April 30, 1997.
<PAGE>
PAGE 35
TABLE OF CONTENTS
Goals and Investment Policies............See Prospectus
Additional Investment Policies........................p. 3
Security Transactions.................................p. 14
Brokerage Commissions Paid to
Brokers Affiliated with the Advisor...................p. 17
Performance Information...............................p. 17
Valuing Fund Shares...................................p. 20
Investing in the Funds................................p. 21
Redeeming Shares......................................p. 22
Capital Loss Carryover................................p. 23
Taxes.................................................p. 23
Agreements............................................p. 25
Organizational Information............................p. 28
Board Members and Officers............................p. 28
Independent Auditors..................................p. 35
Financial Statements..................................p. 35
Prospectus............................................p. 35
Appendix A: Foreign Currency Transactions............p. 36
Appendix B: Options and Futures Contracts............p. 41
Appendix C: Mortgage-Backed Securities...............p. 48
Appendix D: Dollar-Cost Averaging....................p. 49
Financial Statements for Emerging Markets Fund........p. 50
<PAGE>
PAGE 36
ADDITIONAL INVESTMENT POLICIES
Strategist World Fund, Inc. (the Company) is a mutual fund with series of
capital stock representing interests in Strategist Emerging Markets Fund
(Emerging Markets Fund), Strategist World Growth Fund (World Growth Fund) and
Strategist World Income Fund (World Income Fund) (Emerging Markets Fund, World
Growth Fund and World Income Fund are collectively referred to herein as the
Funds, and individually, a Fund). Each Fund, except World Income Fund, is a
diversified mutual fund. World Income Fund is a non-diversified mutual fund.
Each Fund has its own goals and investment policies. Each of the Funds seeks to
achieve its goals by investing all of its assets in a corresponding series (each
a 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 a Fund or Portfolio cannot be changed
without the approval of a majority of the outstanding voting securities of the
Fund or Portfolio, respectively, as defined in the Investment Company Act of
1940 (the 1940 Act). Whenever a 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 Funds' other investment policies, each Fund may
invest its assets in an open-end management investment company having the same
investment objectives, policies and restrictions as that Fund for the purpose of
having those assets managed as part of a combined pool.
Investment Policies applicable to Emerging Markets 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.
'Purchase more than 10% of the outstanding voting securities of an
issuer.
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PAGE 37
'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
members and officers.
'Lend Portfolio securities in excess of 30% of its net assets. The current
policy of the 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.
'Concentrate in any industry. According to the present interpretation by the
Securities and Exchange Commission (SEC), this means no more than 25% of total
assets, based on current market value at time of purchase, can be invested in
any one industry.
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:
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PAGE 38
'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 policy, 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.
Some countries permit foreign investment only indirectly, through closed-end
investment companies. At times, shares of these closed-end investment companies
may be purchased only at market prices representing premiums to their net asset
values. If the Portfolio buys shares of a closed-end investment company,
shareholders will bear both their proportionate share of the expenses of the
Portfolio and, indirectly, the expenses of the closed-end investment company.
'Invest in a company to control or manage it.
'Invest in exploration or development programs such as oil, gas or
mineral leases.
'Purchase securities of an issuer if the board members and officers of the
Portfolio and of 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
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.
'Invest more than 5% of its net assets in warrants.
'Invest more than 10% of its net assets in securities and other 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, nonnegotiable fixed-time
deposits, 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.
<PAGE>
PAGE 39
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.
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 may also purchase short-term notes and obligations (rated in the top
two classifications by Moody's Investors Service, Inc. (Moody's) or Standard &
Poor's Corporations (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 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.
The Portfolio may invest in foreign securities that are traded in the form of
American Depositary Receipts (ADRs). ADRs are receipts typically issued by a
U.S. bank or trust company evidencing ownership of the underlying securities of
foreign issuers. European Depositary Receipts (EDRs) and Global Depositary
Receipts (GDRs) are receipts typically issued by foreign banks or trust
companies, evidencing ownership of underlying securities issued by either a
foreign or U.S. issuer. Generally Depositary Receipts in registered form are
designed for use in the U.S. securities market and Depositary Receipts in bearer
form are designed for use in securities markets outside the U.S. Depositary
Receipts may not
<PAGE>
PAGE 40
necessarily be denominated in the same currency as the underlying securities
into which they may be converted. Depositary Receipts also involve the risks of
other investments in foreign securities.
Investment Policies applicable to World Growth 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.
'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.
<PAGE>
PAGE 41
'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 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 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 policy, 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.
'Invest in a company to control or manage it.
<PAGE>
PAGE 42
'Invest in exploration or development programs such as oil, gas or
mineral leases.
'Invest more than 5% of its net assets in warrants.
'Invest more than 10% of its net assets in securities and other 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.
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 or S&P or the equivalent) of U.S. and foreign
banks and corporations and may use repurchase agreements with broker-dealers
<PAGE>
PAGE 43
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.
The Portfolio may invest in foreign securities that are traded in the form of
American Depositary Receipts (ADRs). ADRs are receipts typically issued by a
U.S. bank or trust company evidencing ownership of the underlying securities of
foreign issuers. European Depositary Receipts (EDRs) and Global Depositary
Receipts (GDRs) are receipts typically issued by foreign banks or trust
companies, evidencing ownership of underlying securities issued by either a
foreign or U.S. issuer. Generally Depositary Receipts in registered form are
designed for use in the U.S. securities market and Depositary Receipts in bearer
form are designed for use in securities markets outside the U.S. Depositary
Receipts may not necessarily be denominated in the same currency as the
underlying securities into which they may be converted. Depositary Receipts also
involve the risks of other investments in foreign securities.
Investment Policies applicable to World Income 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.
'Purchase more than 10% of the outstanding voting securities of an
issuer.
<PAGE>
PAGE 44
'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 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 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.
<PAGE>
PAGE 45
'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 policy, 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.
'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.
'Invest more than 10% of its net assets in securities and other 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 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.
<PAGE>
PAGE 46
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 or 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
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.
The Portfolio may invest in foreign securities that are traded in the form of
American Depositary Receipts (ADRs). ADRs are receipts typically issued by a
U.S. bank or trust company evidencing ownership of the underlying securities of
foreign issuers. European Depositary Receipts (EDRs) and Global Depositary
Receipts (GDRs) are receipts typically issued by foreign banks or trust
companies, evidencing ownership of underlying securities issued by either a
foreign or U.S. issuer. Generally Depositary Receipts in registered form are
designed for use in the U.S. securities market and Depositary Receipts in bearer
form are designed for use in securities markets outside the U.S. Depositary
Receipts may not necessarily be denominated in the same currency as the
underlying securities into which they may be converted. Depositary Receipts also
involve the risks of other investments in foreign securities.
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. For a discussion on dollar-cost
averaging, see Appendix D.
<PAGE>
PAGE 47
SECURITY TRANSACTIONS
Subject to policies set by the board, the Advisor is authorized to determine,
consistent with each Fund's and 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.
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 fund or trust for which
it acts as investment manager. 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
<PAGE>
PAGE 48
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 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 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 a Portfolio is made independently from any
decision made for other portfolios, funds or other accounts advised by the
Advisor or any of its subsidiaries. When a Portfolio buys or sells the same
security as another portfolio, fund 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 a Portfolio, a 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.
For the period from Nov. 13, 1996 to April 30, 1997, Emerging Markets Portfolio
paid total brokerage commissions of $386,015. For the fiscal period from May 13,
1996, to Oct. 31, 1996, World Growth Portfolio and World Income Portfolio paid
total brokerage
<PAGE>
PAGE 49
commissions of $9,806 and $1,884, respectively. Substantially all firms through
whom transactions were executed provide research services.
Transactions amounting to $228,443,000, on which $953,997 in commissions were
imputed or paid, were specifically directed to firms in exchange for research
services for World Growth Portfolio.
No transactions were directed to brokers because of research services they
provided to Emerging Markets Portfolio and World Income Portfolio.
The Portfolios held securities of their regular brokers or dealers or of the
parents of those brokers or dealers that derived more than 15% of gross revenue
from securities-related activities as of the period from Nov. 13, 1996, to April
30, 1997, for Emerging Markets Portfolio and as of the fiscal period ended Oct.
31, 1996 for World Growth Portfolio and World Income Portfolio, as presented
below:
Value of Securities
Owned at End of
Name of Issuer Period
Emerging Markets Portfolio
Dean Witter $3,989,000
World Growth Portfolio
Dean Witter $8,470,307
Goldman Sachs Group 6,475,354
Morgan Stanley Group 1,776,952
NationsBank 4,975,938
World Income Portfolio
Dean Witter $4,298,104
First Chicago 4,997,083
For the period from Nov. 13, 1996 to April 30, 1997 the portfolio turnover rate
was 13% for Emerging Markets Portfolio. For the fiscal years 1996 and 1995, the
portfolio turnover rates were 134% and 90% for World Growth Portfolio and 49%
and 92% for World Income Portfolio. Higher turnover rates may result in higher
brokerage expenses. The variation in turnover rates can be attributed to a
change in management style.
For periods prior to the commencement of operations of World Growth Portfolio
and World Income Portfolio turnover rates are based on the turnover rates of the
corresponding IDS Funds, which transferred all of their assets to the Portfolios
on May 13, 1996. A high turnover rate (in excess of 100%) results in higher fees
and expenses.
<PAGE>
PAGE 50
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 a 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 a Portfolio will receive prices and executions at
least as favorable as those offered by qualified independent brokers performing
similar brokerage and other services for a Portfolio and (ii) the affiliate
charges a 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.
No brokerage commissions were paid to brokers affiliated with the Advisor for
the period from Nov. 13 1996 to April 30, 1997 for Emerging Markets Portfolio
and for the fiscal period from May 13, 1996 to Oct. 31, 1996 for World Income
Portfolio.
Information about brokerage commissions paid by the Portfolios to brokers
affiliated with the Advisor for the fiscal period from May 13, 1996 to Oct. 31,
1996 for World Growth Portfolio is contained in the following table:
<TABLE>
<CAPTION>
Aggregate Percent of
Dollar Aggregate Dollar
Amount of Percent of Amount of
Nature Commissions Aggregate Transactions
of Paid to Brokerage Involving Payment
Portfolio Broker Affiliation Broker Commissions of Commissions
<S> <C> <C> <C> <C> <C>
World Growth American (1) $5,831 .18% NA
Enterprise
Investment
Services Inc.
</TABLE>
(1) Wholly-owned subsidiary of the Advisor.
PERFORMANCE INFORMATION
The Funds may quote various performance figures to illustrate past performance.
Average annual total return and current yield quotations used by the Funds are
based on standardized methods of computing performance as required by the SEC.
An explanation of the methods used by the Funds to compute performance follows
below.
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PAGE 51
Average annual total return
The Funds 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 Funds may calculate aggregate total return for certain periods representing
the cumulative change in the value of an investment in the Funds 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)
Annualized yield
World Income 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
World Income Fund's annualized yield was 6.47% for the 30-day
period ended Oct. 31, 1996.
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PAGE 52
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
World Income Fund's distribution yield was 21.30% for the 30-day
period ended Oct. 31, 1996.
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, Morningstar, 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 May 13, 1996, IDS Global Growth Fund and IDS Global Bond Fund (the IDS
Funds), two open-end investment companies managed by the Advisor, transferred
all of their respective assets to World Growth Portfolio and World Income
Portfolio, respectively, in exchange for units of the Portfolios. Also on May
13, 1996, World Growth Fund and World Income Fund transferred all of their
respective assets to the corresponding Portfolio of the Trust in connection with
the commencement of their operations.
On March 20, 1995, the IDS Funds 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 World Growth Fund and World Income Fund
is based on the performance of the corresponding IDS Fund prior to March 20,
1995 and to Class A shares of the IDS Fund from March 20, 1995 through May 13,
1996, adjusted for differences in sales charge. The historical performance for
these periods has not
<PAGE>
PAGE 53
been adjusted for any difference between the estimated aggregate fees and
expenses of the Funds and historical fees and expenses of the IDS Funds.
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.
On the first business day following the end of the period ended April 30, 1997
for Emerging Markets Fund and the fiscal period ended Oct. 31, 1996 for World
Growth Fund and World Income Fund, the computations looked like this:
<TABLE>
<CAPTION>
Net assets before Shares outstanding Net asset value
Fund Date shareholder transactions at the end of previous day of one share
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Emerging Markets May 1, 1997 $641,929 divided by 113,415 equals $5.66
World Growth Nov. 1, 1996 490,358 69,111 7.10
World Income Nov. 1, 1996 526,791 83,841 6.28
</TABLE>
In determining net assets before shareholder transactions, the securities held
by each 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.
'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
<PAGE>
PAGE 54
of the Exchange that will not be reflected in the computation of each
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 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 Portfolio. 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, American Express Service Corporation (AESC) and each
of the Funds will be closed on the following holidays: New Year's
Day, Memorial Day, Independence Day, Labor Day, Thanksgiving Day
and Christmas Day.
INVESTING IN THE FUNDS
Each 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 AESC. Of course, SIPC account protection does not protect
shareholders from share price fluctuations.
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PAGE 55
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 Funds
(or a 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 each Portfolio's securities is not reasonably practicable or it is
not reasonably practicable for each Fund to determine the fair value of its net
assets, or
'The SEC, under the provisions of the 1940 Act, as amended, declares a period of
emergency to exist.
Should each 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 each Fund
Each 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 each Fund not to exercise this
right with respect to any shareholder whose account has a value of $1,000 or
more ($500 in the case of Custodial accounts, IRA's and other retirement plans).
In any event, before each 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 each 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 each Fund at the beginning of such period. Although redemptions in
excess of this limitation would normally be paid in cash, each 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 each Fund as determined by the
board. In such circumstances, the securities distributed would be valued as set
forth in the Prospectus. Should each Fund distribute securities, a shareholder
may incur brokerage fees or other transaction costs in converting the securities
to cash.
<PAGE>
PAGE 56
CAPITAL LOSS CARRYOVER
For federal income tax purposes, World Growth Fund had a total capital loss
carryover of $14,481 at Oct. 31, 1996, that if not offset by subsequent capital
gains will expire in 2004.
It is unlikely that the board will authorize a distribution of any net realized
capital gains until the available capital loss carryover has been offset or has
expired except as required by Internal Revenue Service rules.
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 a Fund's dividend that is attributable to dividends the
Fund received from domestic (U.S.) securities. For the fiscal period from May
13, 1996 to Oct. 31, 1996, none of World Growth Fund's net investment income
dividends or World Income Fund's net investment income dividends qualified for
the corporate deduction. The exclusion for dividends received by individuals is
no longer generally available.
A 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 Funds have no current intention to invest in PFICS.
Income earned by a 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 a 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, a 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 Funds 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 a 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 a Fund to a qualified
account, this type of exchange is considered a sale of shares. You pay no sales
charge, but the
<PAGE>
PAGE 57
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 a 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 a Fund's investment company taxable income to
be distributed to its shareholders as ordinary income. If a Fund incurs a loss,
a portion of the dividends distributed to shareholders may be considered a
return of capital.
Under federal tax law, by the end of a calendar year a 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. A 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. Each 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.
<PAGE>
PAGE 58
AGREEMENTS
Investment Management Services Agreement
The Trust, on behalf of each Portfolio, has an Investment Management Services
Agreement with the Advisor. For managing the assets of the Portfolios, the
Advisor is paid a fee based upon the following schedule:
Emerging Markets Portfolio World Growth Portfolio
Assets Annual rate at Assets Annual rate at
(billions) each asset level (billions) each asset level
- ---------- ---------------- ---------- ----------------
First $0.25 1.10% First $0.25 0.800%
Next 0.25 1.08 Next 0.25 0.775
Next 0.25 1.06 Next 0.25 0.750
Next 0.25 1.04 Next 0.25 0.725
Next 1.0 1.02 Next 1.0 0.700
Over 2.0 1.00 Over 2.0 0.675
World Income Portfolio
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
On April 30, 1997, the daily rate applied to Emerging Markets Portfolio's net
assets on an annual basis was 1.10%. On Oct. 31, 1996, the daily rates applied
to World Growth Portfolio and World Income Portfolio were 0.758% and 0.740%,
respectively . 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. For the period from Nov. 13, 1996 to April
30, 1997, the total amount paid was $326,973 for Emerging Markets Portfolio. For
the fiscal period from May 13, 1996 to Oct. 31, 1996, the total amount paid was
$3,704,753 for World Growth Portfolio and $2,730,146 for World Income Portfolio.
The amounts are allocated among the Funds investing in the Portfolios.
Under the Agreement, each 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; 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. For the period from Nov. 13, 1996 to April
30, 1997, Emerging Markets Portfolio and Emerging Markets Fund paid nonadvisory
expenses of $39,069. For the fiscal period from May 13, 1996 to Oct. 31, 1996,
World Growth Portfolio
<PAGE>
PAGE 59
and World Growth Fund paid nonadvisory expenses of $530,101 and World Income
Portfolio and World Income Fund paid nonadvisory
expenses of $78,812.
Administrative Services Agreement
The Company, on behalf of each Fund, has an Administrative Services Agreement
with the Advisor. Under this agreement, each Fund pays the Advisor for providing
administration and accounting services. The fee is payable from the assets of
each Fund and is calculated as follows:
Emerging Markets Fund World Growth Fund
Assets Annual rate at Assets Annual rate at
(billions) each asset level (billions) each asset level
- ---------- ---------------- ---------- ----------------
First $0.25 0.10% First $0.25 0.060%
Next 0.25 0.09 Next 0.25 0.055
Next 0.25 0.08 Next 0.25 0.050
Next 0.25 0.07 Next 0.25 0.045
Next 1.0 0.06 Next 1.0 0.040
Over 2.0 0.05 Over 2.0 0.035
World Income 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
On April 30, 1997, the daily rate applied to Emerging Markets Fund's net assets
on an annual basis was 0.10%. On Oct. 31, 1996, the daily rates applied to World
Growth Fund and World Income Fund were 0.060% and 0.60%, respectively.
The fee is calculated for each calendar day on the basis of net assets as of the
close of business two business days prior to the day for which the calculation
is made. For the period from Nov. 13, 1996 to April 30, 1997, Emerging Markets
Fund paid fees of $262. For the fiscal period from May 13, 1996 to Oct. 31,
1996, World Growth Fund and World Income Fund paid fees of $97 and $101,
repectively.
Under the agreement, each Fund also pays taxes; audit and certain legal fees;
registration fees for shares; office expenses; consultant's fees; compensation
of board members, officers and employees; corporate filing fees; organizational
expenses; and expenses properly payable by each Fund approved by the board.
Transfer Agency Agreement
The Company, on behalf of each 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
<PAGE>
PAGE 60
and distribution functions and for performing shareholder account administration
agent functions in connection with the issuance, exchange and redemption or
repurchase of the Funds' shares. The fee is determined by multiplying the number
of shareholder accounts at the end of the day by a rate of $20 per year for
Emerging Markets Fund and World Growth Fund and $25 per year for World Income
Fund and dividing by the number of days in the year. The fees paid to the
Advisor may be changed from time to time upon agreement of the parties without
shareholder approval. For the period from Nov. 13, 1996 to April 30, 1997,
Emerging Markets Fund paid fees of $62. For the fiscal period from May 13, 1996
to Oct. 31, 1996, World Growth Fund and World Income Fund each paid a fee of
$20.
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 shares
of the Funds. Under the Plan, the Distributor is paid a fee at an annual rate of
0.25% of each Fund's average daily net assets.
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 the expenditures were made. The Plan
and any agreement related to it may be terminated at any time with respect to a
Fund 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, by vote of a majority of
the outstanding voting securities of a Fund or by the Distributor. The Plan (or
any agreement related to it) will terminate in the event of its assignment, as
that term is defined in the 1940 Act, 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. For the period from Nov. 13, 1996 to April 30, 1997, Emerging Markets
Fund paid fees of $654. For the fiscal period from May 13, 1996 to Oct. 31,
1996, World Growth Fund and World Income Fund paid fees of $404 and $421,
respectively.
<PAGE>
PAGE 61
Custodian Agreement
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. Each Fund also retains the custodian pursuant to a
custodian agreement. 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 Trust pays the custodian a maintenance charge per Portfolio and a
charge per transaction in addition to reimbursing the custodian's out-of-pocket
expenses.
Total fees and expenses
For the period from Nov. 13, 1996 to April 30, 1997, Emerging Markets Fund paid
total fees and nonadvisory expenses of $5,755. For the fiscal period from May
13, 1996 to Oct. 31, 1996, World Growth Fund and World Income Fund paid total
fees and nonadvisory expenses of $2,839 and $2,283, respectively. The Advisor
and the Distributor have agreed to waive certain fees and to absorb certain
other Fund expenses until Oct. 31, 1997. Under this agreement, Emerging Markets
Fund's total expenses will not exceed 2.20%, World Growth Fund's total expenses
will not exceed 1.75% and World Income Fund's total expenses will not exceed
1.35%.
ORGANIZATIONAL INFORMATION
Each Fund is a series of Strategist 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.
BOARD MEMBERS AND OFFICERS
The following is a list of the Company's board members who are board members of
all 15 funds in the Strategist Fund Group. All shares of the Funds have
cumulative voting rights with respect to the election of board members.
Directors of Strategist Fund Group
Rodney P. Burwell
Born in 1939
Xerxes Corporation
7901 Xerxes Ave. S.
Minneapolis, MN
Chairman, Xerxes Corporation (fiberglass storage tanks). Director,
Children's Broadcasting Network, Vaughn Communications, Sunbelt
Nursery Group, Fairview Corporation.
William J. Heron Jr.*
Born in 1941
American Express Company
World Financial Center
New York, NY
<PAGE>
PAGE 62
Vice president of all funds in the Strategist Fund Group. President of American
Express Financial Direct since 1995. Chief executive officer, Swig Investment
Company from 1993 to 1995. Group executive, Citicorp/Citibank from 1985 to 1993.
Jean B. Keffeler
Born in 1945
The Keffeler Company
3033 Excelsior Blvd.
Minneapolis, MN
President, The Keffeler Company (management advisory services).
Director, National Computer Systems, American Paging Systems, Inc.
Thomas R. McBurney
Born in 1938
McBurney Management Advisors
1800 International Centre
900 2nd Ave. S.
Minneapolis, MN
President, McBurney Management Advisors. Director, The Valspar
Corporation (paints), Wenger Corporation, Security American
Financial Enterprises, Allina, Space Center Enterprises,
Greenspring Corporation.
James A. Mitchell*
Born in 1941
2900 IDS Tower
Minneapolis, MN
President of all funds in the Strategist Fund Group. Executive vice president
and director of the Advisor. Chairman of the board and chief executive officer
of IDS Life Insurance Company.
Director, IDS Life Funds.
*Interested person of the Company by reason of being an officer, board member,
employee and/or shareholder of the Advisor or American Express.
In addition to Mr. Mitchell, who is president, and Mr. Heron, who is vice
president, the Funds' other officers are:
Eileen J. Newhouse
Born in 1955
IDS Tower 10
Minneapolis, MN
Secretary of all funds in the Strategist Fund Group. Counsel of
the Advisor.
Melinda S. Urion
Born in 1953
IDS Tower 10
Minneapolis, MN
<PAGE>
PAGE 63
Treasurer of all funds in the Strategist Fund Group. Director, senior vice
president and chief financial officer of the Advisor. Director and executive
vice president and controller of IDS Life Insurance Company.
Compensation for the Fund Board Members
Once the assets of the Fund reach $20 million, members of the board who are not
officers of the Advisor or an affiliate receive an annual fee of $1,000 for
Emerging Markets Fund, $1,000 for World Growth Fund and $1,000 for World Income
Fund. Once the assets of all funds in the Strategist Fund Group reach $100
million, members of the board who are not officers of the Advisor or an
affiliate also will receive a fee of $1,000 for attendance at board meetings.
Board members serving more than one fund will receive an aggregate of $1,000
whether attending one or more meetings held on the same day. The cost of the fee
will be shared by the funds served by the director.
During the period from Nov. 13, 1996 to April 30, 1997, the members of the board
for Emerging Markets Fund received no compensation. On April 30, 1997, Emerging
Markets Fund's board members as a group owned less than 1% of the outstanding
shares of the Fund. During the fiscal period from May 13, 1996 to Oct. 31, 1996,
the members of the board for World Growth Fund and World Income Fund received no
compensation. On Oct. 31, 1996, World Growth and World Income Funds' board
members as a group owned less than 1% of the outstanding shares of each Fund.
The following is a list of the Trust's board members. They serve 15 Master Trust
portfolios and 47 IDS and IDS Life funds (except for William H. Dudley who does
not serve the nine IDS Life funds). All units have cumulative voting rights with
respect to the election of board members.
Trustees of the Preferred Master Trust Group
H. Brewster Atwater, Jr.
Born in 1941
4900 IDS Tower
Minneapolis, MN
Former Chairman and chief executive officer, General Mills, Inc.
Director, Merck & Co., Inc. and Darden Restaurants, Inc.
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, Union Pacific Resources and FPL Group, Inc.
(holding company for Florida Power and Light).
<PAGE>
PAGE 64
William H. Dudley**
Born in 1932
2900 IDS Tower
Minneapolis, MN
Executive vice president and director of the Advisor.
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 the Advisor. Previously,
senior vice president, finance and chief financial officer of the Advisor.
Heinz F. Hutter+'
Born in 1929
P.O. Box 2187
Minneapolis, MN
Former president and chief operating officer, Cargill, Incorporated (commodity
merchants and processors).
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.
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. Former nine-term U.S. Congressman, U.S. Secretary of Defense
and Presidential Counsellor. Director, 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).
<PAGE>
PAGE 65
William R. Pearce+*
Born in 1927
901 S. Marquette Ave.
Minneapolis, MN
President and director, Board Services Corporation (provides administrative
services to boards). Director, trustee and officer of registered investment
companies whose boards are served by the company. Former vice chairman of the
board, Cargill, Incorporated (commodity merchants and processors).
Alan K. Simpson
Born in 1931
1201 Sunshine Ave.
Cody, WY
Former three-term United States Senator for Wyoming. Former
Assistant Republican Leader, U.S. Senate. Director, PacifiCorp
(electric power.)
Edson W. Spencer+
Born in 1926
4900 IDS Center
80 S. 8th St.
Minneapolis, MN
President, Spencer Associates Inc. (consulting). Former chairman
of the board and chief executive officer, Honeywell Inc. Director,
Boise Cascade Corporation (forest products). Member of
International Advisory Council of NEC (Japan).
John R. Thomas**
Born in 1937
2900 IDS Tower
Minneapolis, MN
Senior vice president and director of the Advisor.
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 retired chief executive officer, The Valspar
Corporation (paints). Director, Bemis Corporation (packaging), Donaldson Company
(air cleaners & mufflers) and
General Mills, Inc. (consumer foods).
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PAGE 66
+ 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 the Advisor 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
Vice president, treasurer and corporate secretary of Board Services Corporation.
Vice president, general counsel and secretary for the Trust.
Officers who are also officers and/or employees of the Advisor:
Peter J. Anderson
Born in 1942
IDS Tower 10
Minneapolis, MN
Director and senior vice president-investments of the Advisor. Vice
president-investments for the Trust.
Melinda S. Urion
Born in 1953
IDS Tower 10
Minneapolis, MN
Director, senior vice president and chief financial officer of the Advisor.
Director, executive vice president and controller of IDS Life Insurance Company.
Treasurer for the Trust.
Compensation for the Portfolio Board Members
Once the assets of the Portfolio reach $20 million, members of the board who are
not officers of a Portfolio or of the Advisor receive an annual fee of $100 for
Emerging Markets Portfolio, $600 for World Growth Portfolio and $300 for World
Income Portfolio. They also receive attendance and other fees. These fees
include for each day in attendance at meetings of the board, $50; for meetings
of the Contracts and Investment Review Committees, $50; meetings of the Audit
Committee, $25; for traveling from out-of-state, $8; and as Chair of the
Contracts Committee, $90. Expenses for attending meetings are reimbursed.
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During the period from Nov. 13, 1996 to April 30, 1997, the members of the board
for Emerging Markets Portfolio, for attending up to 14 meetings, received the
following compensation:
<TABLE>
<CAPTION>
Compensation Table
for Emerging Markets Portfolio
Pension or Estimated Total cash
Aggregate Retirement annual compensation from
compensation benefits benefit the Preferred Master
from the accrued as upon Trust Group and IDS
Board member Portfolio Portfolio expenses retirement MUTUAL FUND GROUP
<S> <C> <C> <C> <C>
H. Brewster
Atwater, Jr. $333 $0 $0 $34,600
Lynne V. Cheney 361 0 0 37,500
Robert F. Froehlke 333 0 0 34,800
Heinz F. Hutter 358 0 0 36,000
Anne P. Jones 487 0 0 45,500
Melvin R. Laird 411 0 0 40,500
Alan K. Simpson 236 0 0 30,200
Edson W. Spencer 608 0 0 50,900
Wheelock Whitney 458 0 0 42,000
C. Angus Wurtele 408 0 0 38,900
During the fiscal period from May 13, 1996 to Oct. 31, 1996, the members of the
board, for attending up to 25 meetings received the following compensation:
Compensation Table
for World Growth Portfolio
Pension or Estimated Total cash
Aggregate Retirement annual compensation from
compensation benefits benefit the Preferred Master
from the accrued as upon Trust Group and IDS
Board member Portfolio Portfolio expenses retirement MUTUAL FUND GROUP
- ------------------------------------------------------------------------------------------
Lynne V. Cheney $356 $0 $0 $74,500
Robert F. Froehlke 399 0 0 76,800
Heinz F. Hutter 377 0 0 77,300
Anne P. Jones 381 0 0 77,400
Melvin R. Laird 418 0 0 80,600
Edson W. Spencer 419 0 0 83,300
Wheelock Whitney 369 0 0 75,200
C. Angus Wurtele 387 0 0 75,300
Compensation Table
for World Income Portfolio
Pension or Estimated Total cash
Aggregate Retirement annual compensation from
compensation benefits benefit the Preferred Master
from the accrued as upon Trust Group and IDS
Board member Portfolio Portfolio expenses retirement MUTUAL FUND GROUP
- ------------------------------------------------------------------------------------------
Lynne V. Cheney $289 $0 $0 $74,500
Robert F. Froehlke 332 0 0 76,800
Heinz F. Hutter 310 0 0 77,300
Anne P. Jones 314 0 0 77,400
Melvin R. Laird 351 0 0 80,600
Edson W. Spencer 352 0 0 83,300
Wheelock Whitney 302 0 0 75,200
C. Angus Wurtele 320 0 0 75,300
</TABLE>
During the period from Nov. 13, 1996 to April 30, 1997, no board member earned
more than $60,000 from Emerging Markets Portfolio. All board members as a group
earned $1,706 from Emerging Markets Portfolio. During the fiscal period from May
13, 1996 to Oct. 31, 1996, no board member earned more than $60,000 from World
Growth Portfolio or World Income Portfolio. All board members as a group earned
$1,783 from World Growth Portfolio and $1,338 from World Income Portfolio.
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INDEPENDENT AUDITORS
World Growth and World Income Funds' and corresponding Portfolios' financial
statements contained in the Annual Report to shareholders for the fiscal period
ended Oct. 31, 1996 were 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 Funds.
FINANCIAL STATEMENTS
The Independent Auditors' Report and the Financial Statements, including Notes
to the Financial Statements and the Schedule of Investments in Securities,
contained in the 1996 Annual Report to shareholders (which has been audited),
pursuant to Section 30(d) of the 1940 Act, as amended, are hereby incorporated
in this SAI by reference. The Financial Statements, including Notes to the
Financial Statements and the Schedule of Investments in Securities, contained in
the 1997 Semi-Annual Report to shareholders (unaudited), pursuant to Section
30(d) of the 1940 Act, as amended, are hereby incorporated in this SAI by
reference. No other portion of the Annual or Semi-Annual Report, however, is
incorporated by reference.
PROSPECTUS
The prospectus dated June 27, 1997 is hereby incorporated in this SAI by
reference.
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PAGE 69
APPENDIX A
FOREIGN CURRENCY TRANSACTIONS
Since investments in foreign countries usually involve currencies of foreign
countries, and since a 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, a Portfolio may incur costs in
connection with conversions between various currencies.
Spot Rates and Forward Contracts. A 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.
A Portfolio may enter into forward contracts to settle a security transaction or
handle dividend and interest collection. When a 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, a 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.
Emerging Markets Portfolio and World Growth Portfolio also may enter into
forward contracts when management of a Portfolio believes the currency of a
particular foreign country may suffer a substantial decline against other
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 Portfolio's securities denominated in such foreign currency. World Income
Portfolio may enter into forward contracts when management of the Portfolio
believes the currency of a particular foreign country may change in relationship
to the U.S. dollar or another 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.
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World Income Portfolio will not enter into such forward contracts or maintain a
net exposure to such contracts when consummating the contracts would obligate a
Portfolio to deliver an amount of foreign currency in excess of an offsetting
position composed of the Portfolio's securities and cash. Emerging Markets
Portfolio and World Growth Portfolio will not enter into such forward contracts
or maintain a net exposure to such contracts when consummating the contract or
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. Under normal circumstances, consideration of the prospect for currency
parities will be incorporated into the longer term investment strategies. The
Advisor believes it is important, however, to have the flexibility to enter into
such forward contracts when it determines it is in the best interest of the
Portfolio to do so.
A Portfolio will designate cash or securities in an amount equal to the value of
a Portfolio's total assets committed to consummating forward contracts. 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 a Portfolio's commitments on such contracts.
At maturity of a forward contract, a 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 a Portfolio retains a security and engages in an offsetting transaction, a
Portfolio will incur a gain or a loss (as described below) to the extent there
has been movement in forward contract prices. If a 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 a
Portfolio enters into a forward contract for selling foreign currency and the
date it enters into an offsetting contract for purchasing the foreign currency,
a 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, a 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 a 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 a 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 a security if its market value exceeds the amount of foreign
currency a Portfolio is obligated to deliver.
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A Portfolio's dealing in forward contracts will be limited to the transactions
described above. This method of protecting the value of 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 a 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 a Portfolio
at one rate, while offering a lesser rate of exchange should a Portfolio desire
to resell that currency to the dealer.
Options on Foreign Currencies. A Portfolio may buy put and call options and
write covered call and cash-secured put 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, a Portfolio may buy put options on the foreign currency. If the
value of the currency does decline, a 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 a Portfolio which otherwise would have resulted.
Conversely, where a change in the dollar value of a currency in which securities
to be acquired are denominated is projected, which would increase the cost of
such securities, the Portfolio may buy call options thereon. The purchase of
such options could offset, at least partially, the effects of the adverse
movements in exchange rates.
As in the case of other types of options, however, the benefit to a 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, a
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.
A Portfolio may write options on foreign currencies for the same types of
hedging purposes. For example, when a 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
<PAGE>
PAGE 72
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.
Similarly, instead of purchasing a call option to hedge against an anticipated
increase in the dollar cost of securities to be acquired, the Portfolio could
write a put option on the relevant currency which, if rates move in the manner
projected, will expire unexercised and allow the Portfolio to hedge such
increased cost up to the amount of the premium.
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 a 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 a 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 a 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 a Portfolio to
liquidate open positions at a profit prior to exercise or expiration, or to
limit losses in the event of adverse market movements.
<PAGE>
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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. A Portfolio may enter into
currency futures contracts to buy or sell currencies. It also may buy put call
options and write covered call and cash- secured 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 in U.S. dollars. A Portfolio may use currency futures
for the same purposes as currency forward contracts, subject to Commodity
Futures Trading Commission (CFTC) limitations. 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
a Portfolio's investments. A currency hedge, for example, should protect a
Yen-denominated bond against a decline in the Yen, but will not protect a
Portfolio against price decline if the issuer's creditworthiness deteriorates.
Because the value of a 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 a Portfolio's
investments denominated in that currency over time.
A Portfolio will hold securities or other options or futures positions whose
values are expected to offset its obligations. A Portfolio will not enter into
an option or futures position that exposes a 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 74
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 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
market. It is anticipated the trading technique will be utilized
<PAGE>
PAGE 75
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 76
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 77
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.
<PAGE>
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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 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
<PAGE>
PAGE 79
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. 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.
<PAGE>
PAGE 80
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>
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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 a 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 a Portfolio.
Stripped Mortgage-Backed Securities. A 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. A 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. A 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>
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APPENDIX D
DOLLAR-COST AVERAGING
A technique that works well for many investors is one that eliminates random buy
and sell decisions. One such system is dollar-cost averaging. Dollar-cost
averaging involves building a portfolio through the investment of fixed amounts
of money on a regular basis regardless of the price or market condition. This
may enable an investor to smooth out the effects of the volatility of the
financial markets. By using this strategy, more shares will be purchased when
the price is low and less when the price is high. As the accompanying chart
illustrates, dollar-cost averaging tends to keep the average price paid for the
shares lower than the average market price of shares purchased, although there
is no guarantee.
While this technique does not ensure a profit and does not protect against a
loss if the market declines, it is an effective way for many shareholders who
can continue investing on a regular basis through changing market conditions,
including times when the price of their shares falls or the market declines, to
accumulate shares in a fund to meet long-term goals.
Dollar-cost averaging
Regular Market Price Shares
Investment of a Share Acquired
$100 $6.00 16.7
100 4.00 25.0
100 4.00 25.0
100 6.00 16.7
100 5.00 20.0
---- ----- -----
$500 $25.00 103.4
Average market price of a share over 5 periods:
$5.00 ($25.00 divided by 5).
The average price you paid for each share:
$4.84 ($500 divided by 103.4).
<PAGE>
Strategist World Fund, Inc.
Financial statements
Statement of assets and liabilities
Strategist Emerging Markets Fund
April 30, 1997
<TABLE>
<CAPTION>
Assets
(Unaudited)
<S> <C>
Investment in Emerging Markets Portfolio (Note 1) $634,242
Organizational costs (Note 1) 47
Other receivables 16,270
------
Total assets 650,559
--------
Liabilities
Other accrued expenses 11,972
-------
Total liabilities 11,972
-------
Net assets applicable to outstanding capital stock $638,587
========
Represented by
Capital stock -- authorized 3,000,000,000 shares
of $.01 par value: outstanding 113,415 shares $ 1,134
Additional paid-in capital 571,750
Excess of distributions over net investment income (1,068)
Accumulated net realized loss (Notes 1 and 4) (816)
Unrealized appreciation of investments and on translation
of assets and liabilities in foreign currencies 67,587
Total -- representing net assets applicable to
outstanding capital stock $638,587
========
Net asset value per share of outstanding capital stock $ 5.63
-----------
See accompanying notes to financial statements.
</TABLE>
<PAGE>
Strategist World Fund, Inc.
Financial statements
Statement of operations
Strategist Emerging Markets Fund
For the period from Nov. 13, 1996
(commencement of operations) to April 30, 1997
<TABLE>
<CAPTION>
Investment income
(Unaudited)
Income:
<S> <C>
Interest $ 4,685
Dividends 1,464
------
Total income 6,149
------
Expenses (Note 2):
Distribution fee 654
Transfer agency fee 62
Administrative services fees and expenses 262
Postage 4,353
Registration fees 12,028
Reports to shareholders 2,343
Audit fees 803
Other 3,760
------
Total feeder expenses 24,265
Expenses allocated from corresponding Portfolio 3,086
------
Total expenses 27,351
Less expenses reimbursed by AEFC (21,596)
-------
Total net expenses 5,755
------
Investment income-- net 394
----
Realized and unrealized gain (loss) -- net
Net realized loss on investments and foreign currencies (816)
Net change in unrealized appreciation or depreciation
of investments and on translation of assets
and liabilities in foreign currencies 67,587
-------
Net gain on investments and foreign currencies 66,771
-------
Net increase in net assets resulting from operations $67,165
=======
See accompanying notes to financial statements.
</TABLE>
<PAGE>
Strategist World Fund, Inc.
Financial statements
Statement of changes in net assets
Strategist Emerging Markets Fund
For the period from Nov. 13, 1996
(commencement of operations) to April 30, 1997
<TABLE>
<CAPTION>
Operations and distributions (Unaudited)
<S> <C>
Investment income-- net $ 394
Net loss on investments and foreign currencies (816)
Net change in unrealized appreciation or depreciation
of investments and on translation of assets
and liabilities in foreign currencies 67,587
------
Net increase in net assets resulting from operations 67,165
------
Distributions to shareholders from:
Net investment income (1,462)
Capital share transactions (Note 3)
Proceeds from sales 570,422
Reinvestment of distributions at net asset value 1,462
------
Increase in net assets from capital share transactions 571,884
-------
Total increase in net assets 637,587
Net assets at beginning of period (Note 1) 1,000
------
Net assets at end of period (including excess of
distributions over net investment income of $(1,068)) $638,587
========
See accompanying notes to financial statements.
</TABLE>
<PAGE>
Strategist World Fund, Inc.
Notes to financial statements
Strategist Emerging Markets Fund
(Unaudited as to April 30, 1997)
- --------------------------------------------------------------------------------
1. Summary of significant accounting policies
The Fund is a series of capital stock within Strategist World Fund, Inc. and is
registered under the Investment Company Act of 1940 (as amended) as a
diversified, open-end management investment company. On Nov. 12, 1996, American
Express Financial Corporation (AEFC) invested $1,000 in Emerging Markets Fund
which represented 200 shares. Operations commenced on Nov. 13, 1996.
Investment in Portfolios
The Fund seeks to achieve its investment objectives by investing all of its net
investable assets in the Emerging Markets Portfolio (the Portfolio), a series of
World Trust, an open-end investment company that has the same objectives as the
Fund. The Portfolio seeks to provide shareholders with a long-term growth of
capital by investing primarily in equity securities of issuers in countries with
developing or emerging markets.
The Fund records daily its share of the Portfolio's income, expenses and
realized and unrealized gains and losses. The financial statements of the
Portfolio are included elsewhere in this report and should be read in
conjunction with the Fund's financial statements.
The Fund records its investment in the Portfolio at value that is equal to the
Fund's proportionate ownership interest in the net assets of the Portfolio. As
of April 30, 1997, the percentage of the Portfolio owned by the Fund was 0.40%.
Valuation of securities held by the Portfolio is discussed in Note 1 of the
Portfolios' "Notes to financial statements," which are included elsewhere in
this report.
Organizational costs
The Fund incurred organizational expenses in connection with the start-up and
initial registration of the Fund. These costs will be amortized over 60 months
on a straight-line basis beginning with the commencement of operations. If any
or all of the shares held by AEFC representing initial capital of the Fund are
redeemed during the amortization period, the redemption proceeds will be reduced
by the pro rata portion of the unamortized organizational cost balance.
<PAGE>
Strategist World Fund, Inc.
Use of estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of increase and decrease in net assets from operations
during the period. Actual results could differ from those estimates.
Federal taxes
Since the Fund's policy is to comply with all sections of the Internal Revenue
Code applicable to regulated investment companies and to distribute all of its
taxable income to the shareholders, no provision for income or excise taxes is
required.
Net investment income (loss) and net realized gains (losses) allocated from the
Portfolio may differ for financial statement and tax purposes primarily because
of the deferral of losses on certain futures contracts, the recognition of
certain foreign currency gains (losses) as ordinary income (loss) for tax
purposes, and losses deferred due to "wash sale" transactions. The character of
distributions made during the year from net investment income or net realized
gains may differ from their ultimate characterization for federal income tax
purposes. Also, due to the timing of dividend distributions, the fiscal year in
which amounts are distributed may differ from the year that the income or
realized gains (losses) were recorded by the Fund.
Dividends to shareholders
An annual dividend declared and paid by the end of the calendar year from net
investment income is reinvested in additional shares of the Fund at net asset
value or payable in cash. Capital gains, when available, are distributed along
with the last income dividend of the calendar year.
Other
At April 30, 1997, AEFC owned 201 shares of the Fund. At April 30, 1997,
American Express Company (the parent company of AEFC) owned 100,087 shares of
the Fund.
<PAGE>
Strategist World Fund, Inc.
- --------------------------------------------------------------------------------
2. Expenses and sales charges
In addition to the expenses allocated from the Portfolio, the Fund accrues its
own expenses as follows:
The Fund entered into agreements with AEFC for providing administrative services
and transfer agent services.
Under its Administrative Services Agreement, the Fund pays AEFC a fee for
administration and accounting services at a percentage of the Fund's average
daily net assets in reducing percentages from 0.10% to 0.05% annually.
Additional administrative service expenses paid by the Fund are office expenses,
consultants' fees and compensation of officers and employees. Under this
agreement, the Fund also pays taxes, audit and certain legal fees, registration
fees for shares, compensation of board members, corporate filing fees,
organizational expenses, and any other expenses properly payable by the Fund
approved by the board.
Under a separate Transfer Agency Agreement, AEFC maintains shareholder accounts
and records. The Fund pays AEFC an annual fee per shareholder account of $20.
Under a Plan and Agreement of Distribution, the Fund pays American Express
Service Corporation (the Distributor) a distribution fee at an annual rate of
0.25% of the Fund's average daily net assets for distribution related services.
A redemption fee of 0.50% is applied and retained by the Fund, if shares are
redeemed or exchanged within 180 days of purchase.
AEFC and the Distributor have agreed to waive certain fees and to absorb certain
other of Fund expenses until Oct. 31, 1997. Under this agreement, the Fund's
total expenses will not exceed 2.20% of the Fund's average daily net assets.
- --------------------------------------------------------------------------------
3. Capital share transactions
Transactions in shares of capital stock for the period indicated is as follows:
Period ended April 30, 1997*
Emerging Markets Fund
- -----------------------------------------------------------------
Sold 112,928
Issued for reinvested 287
distributions
Redeemed --
- -----------------------------------------------------------------
Net increase 113,215
- -----------------------------------------------------------------
*Inception date was Nov. 13, 1996.
<PAGE>
Strategist World Fund, Inc.
Financial statements
Statement of assets and liabilities
Emerging Markets Portfolio
April 30, 1997
<TABLE>
<CAPTION>
Assets
(Unaudited)
Investments in securities, at value (Note 1)
<S> <C>
(identified cost $156,405,542) $161,232,759
Cash in bank on demand deposit 1,274,238
Dividends and accrued interest receivable 11,928
Receivable for investment securities sold 1,406,233
Unrealized appreciation on foreign currency contracts held,
at value (Notes 1 and 4) 63
---
Total assets 163,925,221
Liabilities
Payable for investment securities purchased 3,026,880
Unrealized depreciation on foreign currency contracts held,
at value (Notes 1 and 4) 84
Accrued investment management services fee 4,741
Other accrued expenses 13,124
-------
Total liabilities 3,044,829
---------
Net assets $160,880,392
See accompanying notes to financial statements.
</TABLE>
<PAGE>
Strategist World Fund, Inc.
Financial statements
Statement of operations
Emerging Markets Portfolio
For the period from Nov. 13, 1996
(commencement of operations) to April 30, 1997
<TABLE>
<CAPTION>
Investment income
(Unaudited)
Income:
<S> <C>
Interest (net of foreign taxes withheld of $2,946) $ 374,710
Dividends (net of foreign taxes withheld of $8,380) 148,148
-------
Total income 522,858
-------
Expenses (Note 2):
Investment management services fee 326,973
Compensation of board members 1,706
Custodian fees 26,140
Audit fees 6,246
Administrative services fees and expenses 95
Other 1,094
-----
Total expenses 362,254
Earnings credits on cash balances (Note 2) (989)
-------
Total net expenses 361,265
Investment income -- net 161,593
-------
Realized and unrealized gain (loss) -- net
Net realized loss on security and foreign currency transactions
(including loss of $55,682 from foreign currency transactions) (Note 3) (1,121,703)
Net change in unrealized appreciation or
depreciation of investments and on translation
of assets and liabilities in foreign currencies 4,826,619
---------
Net gain on investments and foreign currencies 3,704,916
---------
Net increase in net assets resulting from operations $3,866,509
----------
See accompanying notes to financial statements.
</TABLE>
<PAGE>
Strategist World Fund, Inc.
Financial statements
Statement of changes in net assets
Emerging Markets Portfolio
For the period from Nov. 13, 1996
(commencement of operations) to April 30, 1997
<TABLE>
<CAPTION>
Operations
(Unaudited)
<S> <C>
Investment income-- net $ 161,593
Net realized loss on investments and foreign currencies (1,121,703)
Net change in unrealized appreciation or
depreciation of investments and on translation
of assets and liabilities in foreign currencies 4,826,619
------------
Net increase in net assets resulting from operations 3,866,509
Net contributions 157,009,883
------------
Total increase in net assets 160,876,392
Net assets at beginning of period (Note 1) 4,000
------------
Net assets at end of period $160,880,392
============
See accompanying notes to financial statements.
</TABLE>
<PAGE>
Strategist World Fund, Inc.
Notes to financial statements
Emerging Markets Portfolio
(Unaudited as to April 30, 1997)
- --------------------------------------------------------------------------------
1. Summary of significant accounting policies
Emerging Markets Portfolio (the Portfolio) is a series of World Trust (the
Trust) and is registered under the Investment Company Act of 1940 (as amended)
as a diversified, open-end management investment company. Emerging Markets
Portfolio seeks to provide a long-term growth of capital by investing primarily
in common stocks and securities convertible into common stocks of companies
throughout the world. The Declaration of Trust permits the Trustees to issue
non-transferable interests in the Portfolio. On Nov. 12, 1996, AEFC contibuted
$4,000 to the Portfolio. Operations commenced on Nov. 13, 1996.
Significant accounting polices followed by the Portfolio are summarized below:
Use of estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of increase and decrease in net assets from operations
during the period. Actual results could differ from those estimates.
Valuation of securities
All securities are valued at the close of each business day. Securities traded
on national securities exchanges or included in national market systems are
valued at the last quoted sales price; securities for which market quotations
are not readily available are valued at fair value according to methods selected
in good faith by the board. Determination of fair value involves, among other
things, reference to market indexes, matrixes and data from independent brokers.
Short-term securities maturing in more than 60 days from the valuation date are
valued at the market price or approximate market value based on current interest
rates; those maturing in 60 days or less are valued at amortized cost.
<PAGE>
Strategist World Fund, Inc.
Option transactions
In order to produce incremental earnings, protect gains and facilitate buying
and selling of securities for investment purposes, the Portfolio may buy or
write options traded on any U.S. or foreign exchange where the completion of the
obligation is dependent upon the credit standing of the other party. The
Portfolio also may buy and sell put and call options and write covered call
options on portfolio securities and may write cash-secured put options. The risk
in writing a call option is that the Portfolio gives up the opportunity of
profit if the market price of the security increases. The risk in writing a put
option is that the Portfolio may incur a loss if the market price of the
security decreases and the option is exercised. The risk in buying an option is
that the Portfolio pays a premium whether or not the option is exercised. The
Portfolio also has the additional risk of not being able to enter into a closing
transaction if a liquid secondary market does not exist.
Option contracts are valued daily at the closing prices on their primary
exchanges and unrealized appreciation or depreciation is recorded. The Portfolio
will realize a gain or loss upon expiration or closing of the option
transaction. When an option is exercised, the proceeds on sales for a written
call option, the purchase cost for a written put option or the cost of a
security for a purchased put or call option is adjusted by the amount of premium
received or paid.
Futures transactions
In order to gain exposure to or protect itself from changes in the market, the
Portfolio may buy and sell financial futures contracts traded on any U.S. or
foreign exchange. The Portfolio also may buy or write put and call options on
these futures contracts. Risks of entering into futures contracts and related
options include the possibility that there may be an illiquid market and that a
change in the value of the contract or option may not correlate with changes in
the value of the underlying securities.
Upon entering into a futures contract, the Portfolio is required to deposit
either cash or securities in an amount (initial margin) equal to a certain
percentage of the contract value. Subsequent payments (variation margin) are
made or received by the Portfolio each day. The variation margin payments are
equal to the daily changes in the contract value and are recorded as unrealized
gains and losses. The Portfolio recognizes a realized gain or loss when the
contract is closed or expires.
<PAGE>
Strategist World Fund, Inc.
Foreign currency translations
and foreign currency contracts
Securities and other assets and liabilities denominated in foreign currencies
are translated daily into U.S. dollars at the closing rate of exchange. Foreign
currency amounts related to the purchase or sale of securities and income and
expenses are translated at the exchange rate on the transaction date. The effect
of changes in foreign exchange rates on realized and unrealized security gains
or losses is reflected as a component of such gains or losses. In the statement
of operations, net realized gains or losses from foreign currency transactions
may arise from sales of foreign currency, closed forward contracts, exchange
gains or losses realized between the trade date and settlement dates on
securities transactions, and other translation gains or losses on dividends,
interest income and foreign withholding taxes.
The Portfolio may enter into forward foreign currency exchange contracts for
operational purposes and to protect against adverse exchange rate fluctuation.
The net U.S. dollar value of foreign currency underlying all contractual
commitments held by the Portfolio and the resulting unrealized appreciation or
depreciation are determined using foreign currency exchange rates from an
independent pricing service. The Portfolio is subject to the credit risk that
the other party will not complete the obligations of the contract.
Federal taxes
For federal income tax purposes the Portfolio qualifies as a partnership and
each investor in the Portfolio is treated as the owner of its proportionate
share of the net assets, income, expenses and realized and unrealized gains and
losses of the Portfolio. Accordingly, as a "pass-through" entity, the Portfolio
does not pay any income dividends or capital gain distributions.
Other
Security transactions are accounted for on the date securities are purchased or
sold. Dividend income is recognized on the ex-dividend date or upon receipt of
ex-dividend notification in the case of certain foreign securities. Interest
income, including level-yield amortization of premium and discount, is accrued
daily.
- --------------------------------------------------------------------------------
2. Fees and expenses
The Trust, on behalf of the Portfolio, has entered into an Investment Management
Services Agreement with American Express Financial Corporation (AEFC) for
managing its portfolio. Under this agreement, AEFC determines which securities
will be purchased, held or sold. The management fee is a percentage of the
Portfolio's average daily net assets in reducing percentages from 1.10% to 1.00%
annually.
<PAGE>
Strategist World Fund, Inc.
Under the agreement, the Trust also pays taxes, brokerage commissions and
nonadvisory expenses, which include custodian fees to be paid to an affiliate of
AEFC, audit and certain legal fees, fidelity bond premiums, registration fees
for units, office expenses, consultants' fees, compensation of trustees,
corporate filing fees, and any other expenses properly payable by the Trust or
Portfolio, approved by the board.
During the period from Nov. 13, 1996 to April 30, 1997, the Portfolio's
custodian fees were reduced by $989 as a result of earnings credits from
overnight cash balances.
Pursuant to a Placement Agency Agreement, American Express Financial Advisors
Inc. acts as placement agent of the units of the Trust.
- --------------------------------------------------------------------------------
3. Securities transactions
Cost of purchases and proceeds from sales of securities (other than short-term
obligations) aggregated $135,013,929 and $7,589,748, respectively, for the
period from Nov. 13, 1996 to April 30, 1997. For the same period, the portfolio
turnover rate was 13%. Realized gains and losses are determined on an identified
cost basis.
- --------------------------------------------------------------------------------
4. Foreign currency contracts
At April 30, 1997, the Portfolio had entered into two foreign currency exchange
contracts that obligate the Portfolio to deliver currencies at specified future
dates. The unrealized appreciation and/or depreciation (see Summary of
significant accounting policies) on these contracts is included in the
accompanying financial statements. The terms of the open contracts are as
follows:
Exchange Currency to Currency to Unrealized Unrealized
date be delivered be received appreciation depreciation
May 1, 1997 2,164,578 16,767,253 $-- $84
U.S. Dollar Hong Kong Dollar
4,213,404 543,931 63 --
Hong Kong U.S. Dollar
Dollar $63 $84
<PAGE>
Investments in securities
Emerging Markets Portfolio (Percentages represent value of
April 30, 1997 (Unaudited) investments compared to net assets)
Common stocks (81.5%)
Issuer Shares Value (a)
Argentina (8.3%)
Banks and savings & loans (3.5%)
Banco de Galicia - Buenos Aires 230,000 $5,595,469
Metals (1.5%)
Siderar 600,000 (b) 2,358,336
Utilities -- telephone (3.3%)
Telefonica de Argentina 160,000 5,320,000
Brazil (11.9%)
Energy (3.1%)
Petroleo Brasileiro ADR 240,000 (b) 5,037,598
Utilities -- electric (4.8%)
CEMIG ADR 100,000 4,515,000
Companhia Energetica de Sao Paulo 24,400,000 (b) 1,296,128
Eletropaula 9,000,000 (b) 1,806,840
Total 7,617,968
Utilities -- telephone (4.0%)
Telecomunicacoes Brasileiras - Telebras ADR 55,900 6,414,525
Chile (1.6%)
Utilities -- telephone
Cia de Telecomunicaciones de Chile ADR 80,000 2,590,000
China (5.4%)
Airlines (0.6%)
China Eastern Airlines 3,160,000 (b) 989,219
Multi-industry conglomerates (1.9%)
China Merchants 2,900,000 3,107,208
Utilities -- electric (2.9%)
Beijing Datang Power Generation 8,950,000 (b) 4,650,321
Croatia (3.0%)
Banks and savings & loans (1.4%)
Zagrebacka Banka GDR 65,000 (b) 2,307,500
Health care (1.6%)
Pliva GDR 160,000 (b) 2,571,998
Czech Republic (0.4%)
Utilities -- telephone
SPT Telekom 6,000 (b) 633,987
Egypt (2.9%)
Building materials & construction
Suez Cement GDR 260,000 (b) 4,706,000
Hong Kong (10.5%)
Building materials & construction (0.5%)
New World Infrastructure 370,000 (b) 1,046,021
Financial services (1.3%)
Guangzhou Investment Co 4,300,000 2,039,950
Food (2.4%)
Guangnan Holdings 2,660,000 3,828,695
Health care (0.9%)
Shandong Xinhau Pharmaceutical 3,900,000 1,397,081
Household products (0.7%)
Guangdong Kelon Elec Holdings 1,100,000 1,064,997
Industrial equipment & services (1.3%)
GZI Transportation 3,450,000 (b) 2,070,935
Multi-industry conglomerates (3.4%)
China Travel Intl Investment 4,000,000 2,104,176
Shanghai Industrial Holdings 592,000 3,331,982
Total 5,436,158
Indonesia (1.9%)
Banks and savings & loans (0.4%)
Bank Negara 1,218,000 676,667
<PAGE>
Building materials & construction (0.4%)
PT Semen Gresik 261,000 636,396
Retail (0.3%)
PT Matahari Putra Prima 381,500 533,795
Utilities -- telephone (0.8%)
PT Telekomunikasi 846,000 1,227,222
Malaysia (6.3%)
Automotive & related (0.9%)
Perusahaan Otomobil 250,000 (b) 1,493,726
Banks and savings & loans (2.0%)
Malayan Banking 205,000 (b) 2,041,426
Public Bank Malaysia 680,000 (b) 1,126,787
Total 3,168,213
Building materials & construction (0.6%)
IJM 400,000 876,319
Leisure time & entertainment (1.0%)
Tanjong 439,000 1,591,276
Media (0.6%)
New Straits Times Press 174,000 970,325
Utilities -- electric (1.2%)
Tenaga Nasional 425,000 1,963,752
Mexico (7.3%)
Beverages & tobacco (2.3%)
FEMSA 785,000 3,705,388
Building materials & construction (1.8%)
Cemex 800,000 2,930,328
Media (0.9%)
Grupo Televisa 60,000 (b) 1,387,500
Paper & packaging (2.3%)
Kimberly-Clark de Mexico ADR 200,000 3,746,000
Peru (1.9%)
Metals
Compania de Minas Buenaventura ADR 137,300 2,986,275
Philippines (4.4%)
Banks and savings & loans (0.6%)
Bank of the Philippine Islands 180,000 (b) 972,695
Building materials & construction (1.1%)
HI Cement 5,220,000 (b) 1,741,977
Utilities -- electric (1.0%)
Manila Electric 260,000 1,616,989
Utilities -- telephone (1.7%)
Philippine Long Distance Telephone ADR 48,000 2,676,000
Russia (8.8%)
Energy equipment & services (5.0%)
Chernogorneft ADR 500,000 (b) 4,781,250
Surgutneftegaz ADR 90,000 (b) 3,307,500
Total 8,088,750
Utilities -- electric (3.8%)
Mosenergo ADR 30,000 (b,c) 1,187,004
Mosenergo ADR 125,000 (b) 4,945,848
Total 6,132,852
South Africa (5.1%)
Energy equipment & services (3.7%)
Ingwe Coal 200,000 1,259,418
Sasol 360,000 4,614,866
Total 5,874,284
Retail (1.4%)
Meikles Africa ADR 1,000,000 (b) 2,330,000
Turkey (1.8%)
Metals
Eregli Demir Ve Celik Fabrikalari 30,000,000 2,931,840
Total common stocks $131,042,535
(Cost: $126,344,310)
Other (0.1%)
<PAGE>
Issuer Shares Value(a)
Hong Kong
Guangnan Holdings
Warrants 300,857 $141,758
GZI Transportation
Warrants 50,000 968
Total other $142,726
(Cost: $13,734)
Short-term securities (18.7%)
Issuer Annualized Amount Value (a)
yield on payable at
date of maturity
purchase
U.S. government agency (1.7%)
Federal Home Loan Mtge Corp Disc Nts
05-06-97 5.46% $1,100,000 $1,099,169
05-06-97 5.37 1,400,000 1,398,958
05-08-97 5.43 300,000 299,684
Total 2,797,811
Commerical paper (14.8%)
AT&T
05-02-97 5.43 5,800,000 5,799,127
Dean Witter, Discover & Co
05-19-97 5.52 4,000,000 3,989,000
Fleet Funding
05-20-97 5.53 3,113,000 (d) 3,103,947
MCI Communications
05-30-97 5.53 1,100,000 (d) 1,095,126
Novartis Finance
05-02-97 5.57 3,000,000 2,999,538
Paccar Financial
05-05-97 5.57 1,900,000 1,898,828
05-23-97 5.52 2,400,000 2,391,933
USAA Capital
05-23-97 5.51 2,500,000 2,491,613
Total 23,769,112
Letter of credit (2.2%)
Bank of New York - River Fuel Co
06-06-97 5.58 3,500,000 (d) 3,480,575
Total short-term securities
(Cost: $30,047,498) $30,047,498
Total investment in securities $161,232,759
(Cost: $156,405,542) (e)
Notes to investments in securities
(a) Securities are valued by procedures described in Note 1 to the financial
statements. Foreign security values are stated in U.S. dollars.
(b) Non-income producing.
(c) Represents a security sold under Rule 144A, which is exempt from
registration under the Securities Act of 1933, as amended. This security has
been determined to be liquid under guidelines established by the board.
(d) Commercial paper sold within terms of a private placement memorandum, exempt
under Section 4(2) of the Securities Act of 1933, as amended, and may be sold
only to dealers in that program or other "accredited investors." This security
has been determined to be liquid under guidelines established by the board.
(e) At April 30, 1997, the cost of securities for federal income tax purposes
was approximately $156,406,000 and the approximate aggregate gross unrealized
appreciation and depreciation
Unrealized appreciation $11,446,000
Unrealized depreciation (6,619,000
- -------------------------------------------------------------------------------
Net unrealized appreciation $4,827,000
- -------------------------------------------------------------------------------
<PAGE>
Strategist World Fund, Inc.
Statement of assets and liabilities
Strategist Emerging Markets Fund
May 31, 1997
Assets (Unaudited)
Investment in Emerging Markets Portfolio $686,337
Organizational costs 46
Other receivables 13,895
-------
Total assets 700,278
-------
Liabilities
Other accrued expenses 13,716
-------
Total liabilities 13,716
-------
Net assets applicable to outstanding capital stock $686,562
========
Represented by
Capital stock -- authorized 3,000,000,000 shares
of $.01 par value: outstanding 113,967 shares $ 1,140
Additional paid-in capital 574,884
Excess of distributions over net investment income (689)
Accumulated net realized gain 13,878
Unrealized appreciation of investments and on translation
of assets and liabilities in foreign currencies 97,349
-------
Total -- representing net assets applicable to
outstanding capital stock $686,562
Net asset value per share of outstanding
capital stock $ 6.02
<PAGE>
Strategist World Fund, Inc.
Statement of operations
Strategist Emerging Markets Fund
For the one month ended May 31, 1997
Investment income
(Unaudited)
Income:
Dividends $ 1,034
Interest 519
----------
Total income 1,553
----------
Expenses:
Distribution fee 133
Transfer agency fee 38
Administrative services fees and expenses 53
Postage 777
Registration fees 2,276
Reports to shareholders 419
Audit fees 143
Other 676
---------
Total feeder expenses 4,515
Expenses allocated from corresponding Portfolio 566
Total expenses 5,081
Less expenses reimbursed by AEFC ( 3,907)
---------
Total net expenses 1,174
---------
Investment income -- net 379
---------
Realized and unrealized gain -- net
Net realized gain on investments and foreign
currencies 14,694
Net change in unrealized appreciation or depreciation
of investments and on translation of assets and
liabilities in foreign currencies 29,762
---------
Net gain on investments and foreign currencies 44,456
---------
Net increase in net assets resulting from operations $44,835
=========
<PAGE>
Strategist World Fund, Inc.
Statement of changes in net assets
Strategist Emerging Markets Fund
For the month ended May 31, 1997
Operations (Unaudited)
Investment income -- net $ 379
Net gain on investments and foreign currencies 14,694
Net change in unrealized appreciation or depreciation
of investments and on translation of assets
and liabilities in foreign currencies 29,762
------
Net increase in net assets resulting from operations 44,835
------
Capital share transactions
Proceeds from sales 3,140
-----
Increase in net assets from capital share transactions 3,140
-----
Total increase in net assets 47,975
Net assets at beginning of period 638,587
-------
Net assets at end of period (including excess of
distributions over net investment income
of $(689)) $686,562
========
<PAGE>
PAGE 83
PART C. OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) FINANCIAL STATEMENTS:
Financial Statements filed as part of this post-effective amendment:
Strategist World Fund, Inc.: - Emerging Markets Fund
Statement of assets and liabilities, April 30, 1997
Statement of operations, for the period from Nov. 13, 1996
(commencement of operations) to April 30, 1997
Statement of changes in net assets, for the period from
Nov. 13, 1996 (commencement of operations) to April 30,
1997
Notes to financial statements
Emerging Markets Portfolio:
Statement of assets and liabilities, April 30, 1997
Statement of operations, for the period from Nov. 13, 1996
(commencement of operations) to April 30, 1997
Statement of changes in net assets, for the period from
Nov. 13, 1996 (commencement of operations) to April 30,
1997
Notes to financial statements
Investments in securities, April 30, 1997
Notes to investments in securities
Strategist World Fund, Inc. - Emerging Markets Fund
Statement of assets and liabilities, for the one month ended
May 31, 1997
Statement of operations, for the one month ended
May 31, 1997
Statement of changes in net assets, for the one month ended
May 31, 1997
Registrant's annual report to shareholders for Strategist World Growth
and World Income Funds filed electronically pursuant to Section 270.30d-1
on or about Dec. 26, 1996 is
incorporated herein by reference.
Registrant's semi-annual report to shareholders for Strategist World
Growth and World Income Funds filed electronically pursuant to Section
270.30d-1 on or about June 25th, 1997 is incorporated herein by
reference.
(b) EXHIBITS:
1.(a) Articles of Incorporation, dated Sept. 1, 1995, filed
electronically on or about Nov. 1, 1995 as Exhibit 1 to
Registrant's initial Registration Statement, are incorporated herein by
reference.
<PAGE>
PAGE 84
(b) Articles of Amendment of Express Direct World Fund, Inc., dated April
4th, 1996 filed electronically on or about April 17, 1996 as Exhibit 1(b)
to Registrant's Pre-Effective Amendment No. 2 are incorporated herein by
reference.
2. Copy of By-laws dated April 24, 1996, filed electronically
herewith.
3. Not Applicable.
4. Not Applicable.
5. Not Applicable.
6(a) Copy of Distribution Agreement between Strategist World
Fund, Inc. on behalf of Strategist World Growth Fund and
Strategist World Income Fund and American Express Service
Corporation, dated May 13, 1996, filed electronically
as Exhibit 6(a) to Registrant's Post-Effective Amendment No.
3 to Registration Statement No. 33-63951, is incorporated
herein by reference.
6(b) Copy of Distribution Agreement between Strategist World
Fund, Inc. on behalf of Strategist Emerging Markets Fund and
Strategist World Technologies Fund and American Express
Service Corporation dated Nov. 13, 1996, filed
electronically as Exhibit 6(b) to Registrant's Post-
Effective Amendment No. 3 to Registration Statement No. 33-
63951, is incorporated herein by reference.
7. Not Applicable.
8(a) Copy of Custodian Agreement between Strategist World Fund,
Inc. on behalf of Strategist World Growth Fund and
Strategist World Income Fund and American Express Trust
Company, dated May 13, 1996, filed electronically
as Exhibit 8(a) to Registrant's Post-Effective Amendment No.
3 to Registration Statement No. 33-63951, is incorporated
herein by reference.
8(b) Copy of Custodian Agreement between Strategist World
Fund, Inc., on behalf of Strategist Emerging Markets Fund
and Strategist World Technologies Fund, and American
Express Trust Company, dated Nov. 13, 1996, filed
electronically as Exhibit 8(b) to Registrant's Post-
Effective Amendment No. 3 to Registration Statement No.
33-63951, is incorporated herein by reference.
8(c) Copy of Addendum to the Custodian Agreement between
Strategist World Fund, Inc., on behalf of Strategist World
Growth Fund and Strategist World Income Fund, American
Express Trust Company and American Express Financial
Corporation, dated May 13, 1996, filed electronically
as Exhibit 8(c) to Registrant's Post-Effective Amendment No.
3 to Registration Statement No. 33-63951, is incorporated
herein by reference.
<PAGE>
PAGE 85
8(d) Copy of Addendum to the Custodian Agreement between
Strategist World Fund, Inc. on behalf of Strategist Emerging
Markets Fund and Strategist World Technologies Fund,
American Express Trust Company and American Express
Financial Corporation, dated Nov. 13, 1996, filed
electronically as Exhibit 8(d) to Registrant's Post-
Effective Amendment No. 3 to Registration Statement No. 33-
63951, is incorporated herein by reference.
9(a) Copy of Transfer Agency Agreement between Strategist World Fund, Inc., on
behalf of Strategist World Growth Fund and Strategist World Income Fund
and American Express Financial Corporation, dated May 13, 1996, filed
electronically as Exhibit 9(a) to Registrant's Post-Effective Amendment
No. 3 to Registration Statement No. 33-63951, is incorporated herein by
reference.
9(b) Copy of Transfer Agency Agreement between Strategist
World Fund, Inc., on behalf of Strategist Emerging
Markets Fund and Strategist World Technologies Fund, and
American Express Financial Corporation, dated Nov. 13, 1996,
filed electronically as Exhibit 9(b) to Registrant's Post-
Effective Amendment No. 3 to Registration Statemetn No. 33-
63951, is incorporated herein by reference.
9(c) Copy of Administrative Services Agreement between Strategist World Fund,
Inc., on behalf of Strategist World Growth Fund and Strategist World
Income Fund, and American Express Financial Corporation, dated May 13,
1996, filed electronically as Exhibit 9(c) to Registrant's Post-
Effective Amendment No. 3 to Registration Statement No. 33- 63951, is
incorporated herein by reference.
9(d) Copy of Administrative Services Agreement between
Strategist World Fund, Inc., on behalf of Strategist
Emerging Markets Fund and Strategist World Technologies
Fund, and American Express Financial Corporation, dated
Nov. 13, 1996, filed electronically as Exhibit 9(d) to
Registrant's Post-Effective Amendment No. 3 to Registration
Statement No. 33-63951, is incorporated herein by reference.
9(e) Copy of Agreement and Declaration of Unitholders between IDS Global
Series, Inc., on behalf of IDS Global Bond Fund and Strategist World
Fund, Inc., on behalf of Strategist World Income Fund, dated May 13,
1996, filed electronically as Exhibit 9(e) to Registrant's Post-Effective
Amendment No. 3 to Registration Statement No. 33-63951, is incorporated
herein by reference.
9(f) Copy of Agreement and Declaration of Unitholders between IDS Global
Series, Inc., on behalf of IDS Global Growth Fund and Strategist World
Fund, Inc., on behalf of Strategist World Growth Fund, dated May 13,
1996, filed electronically as Exhibit 9(f) to Registrant's Post-Effective
Amendment No. 3 to Registration Statement No. 33-63951, is incorporated
herein by reference.
<PAGE>
PAGE 86
9(g) Copy of Agreement and Declaration of Unitholders between IDS
Global Series, Inc., on behalf of IDS Emerging Markets Fund,
and Strategist World Fund, Inc., on behalf of Strategist
Emerging Markets Fund dated Nov. 13, 1996, filed
electronically as Exhibit 9(g) to Registrant's Post-
Effective Amendment No. 3 to Registration Statement No. 33
63951, is incorporated herein by reference.
9(h) Copy of Agreement and Declaration of Unitholders between IDS
Global Series, Inc., on behalf of IDS Innovations, and
Strategist World Fund, Inc., on behalf of Strategist World
Technologies Fund dated Nov. 13, 1996, filed
electronically as Exhibit 9(h) to Registrant's Post-
Effective Amendment No. 3 to Registration Statement No. 33-
63951, is incorporated herein by reference.
10. Opinion and consent of counsel as to the legality of the securities being
registered is filed with Registrant's most recent 24f-2 notice.
11. Independent auditors' consent, is filed electronically
herewith.
12. Not Applicable.
13(a) Copy of Share Purchase Agreement between Strategist World,
Inc. and American Express Financial Corporation dated April
16, 1996, is filed electronically herewith.
14. Not Applicable.
15(a) Copy of Plan and Agreement of Distribution between
Strategist World Fund, Inc., on behalf of Strategist World
Growth Fund and Strategist World Income Fund, and American
Express Service Corporation, dated May 13, 1996, filed
electronically as Exhibit 15(a) to Registrant's Post-
Effective Amendment No. 3 to Registration Statement No. 33-
63951, is incorporated herein by reference.
15(b) Copy of Plan and Agreement of Distribution between
Strategist World Fund, Inc., on behalf of Strategist
Emerging Markets Fund and Strategist World Technologies
Fund, and American Express Service Corporation, dated
Nov. 13, 1996, filed electronically as Exhibit 15(b) to
Registrant's Post-Effective Amendment No. 3 to Registration
Statement No. 33-63951, is incorporated herein by reference.
16. Schedule of computation of each performance quotation to be
filed electronically as Exhibit 16 to Registrant's
Pre-Effective Amendment No. 2, is incorporated herein by
reference.
17. Financial data schedule, is filed electronically herewith.
18. Not Applicable.
<PAGE>
PAGE 87
19(a) Directors' Power of Attorney to sign Amendments to this Registration
Statement, dated April 24, 1996, is filed electronically as Exhibit 19(a)
to Registrant's Post- Effective Amendment No. 1 is incorporated herein by
reference.
19(b) Officers' Power of Attorney to sign Amendments to this Registration
Statement, dated April 24, 1996, is filed electronically as Exhibit 19(b)
to Registrant's Post- Effective Amendment No. 1 is incorporated herein by
reference.
19(c) Trustee's Power of Attorney to sign Amendments to this Registration
Statement, dated January 8, 1997, is filed electronically herewith.
19(d) Officers' Power of Attorney to sign Amendments to this Registration
Statement, dated April 11, 1996, filed as Exhibit 19(b) to Registrant's
Pre-Effective Amendment No. 2, is incorporated herein by reference.
Item 25. Persons Controlled by or Under Common Control with
Registrant
Item 26. Number of Holders of Securities
(1) (2)
Number of Record
Holders as of
Title of Class June 20, 1997
Common Stock
$.01 par value
Strategist Emerging Markets Fund 26
Strategist World Growth Fund 20
Strategist World Income Fund 10
Item 27. Indemnification
The Articles of Incorporation of the Registrant provide that the Fund shall
indemnify any person who was or is a party or is threatened to be made a party,
by reason of the fact that she or he is or was a director, officer, employee or
agent of the Fund, or is or was serving at the request of the Fund as a
director, officer, employee or agent of another company, partnership, joint
venture, trust or other enterprise, to any threatened, pending or completed
action, suit or proceeding, wherever brought, and the Fund may purchase
liability insurance and advance legal expense, all to the fullest extent
permitted by the laws of the State of Minnesota, as now existing or hereafter
amended. The By-laws of the Registrant provide that present or former directors
or officers of the Fund made or threatened to be made a party to or involved
(including as a witness) in an actual or threatened action, suit or proceeding
shall be indemnified by the Fund to the full extent authorized by the Minnesota
Business Corporation Act, all as more fully set forth in the By-laws filed as an
exhibit to this registration statement.
<PAGE>
PAGE 88
Insofar as indemnification for liability arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successsful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be goverened by the final adjudication
of such issue.
Any indemnification hereunder shall not be exclusive of any other rights of
indemnification to which the directors, officers, employees or agents might
otherwise be entitled. No indemnification shall be made in violation of the
Investment Company Act of 1940.
<PAGE>
PAGE 1
American Express Financial Corporation is the investment advisor of
the Portfolios of the Trust.
<PAGE>
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.
Item 32. Undertakings
(a) Not Applicable.
(b) Registrant hereby 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 the post-effective amendment to Registrant's 1933
Act Registration Statement or within 60 days of the four
to six month period in compliance with the generic
comment letter of the Division of Investment Management
dated Feb. 25, 1995, section V - Financial Statements, or
commencement of operations by the Fund, whichever is
later.
(c) The Registrant undertakes to furnish each person to whom
a prospectus is delivered with a copy of the Registrant's
latest annual report to shareholders, upon request and
without charge.
<PAGE>
PAGE 89
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant, Strategist World Fund, Inc., certifies that
it meets the requirements for the effectiveness of this Amendment to its
Registration Statement pursuant to Rule 485(b) under the Securities Act of 1933
and has duly caused this Amendment to its 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 26th day of June, 1997.
STRATEGIST WORLD FUND, INC.
By /s/ James A. Mitchell*
James A. Mitchell
President
By /s/ Melinda S. Urion*
Melinda S. Urion
Treasurer
Pursuant to the requirements of the Securities Act of 1933, this Amendment to
its Registration Statement has been signed below by the following persons in the
capacities indicated on the 26th day of June, 1997.
Signature Title
By/s/ Rodney P. Burwell** Director
Rodney P. Burwell
By/s/ William J. Heron Jr.** Director
William J. Heron
By/s/ Jean B. Keffeler** Director
Jean B. Keffeler
By/s/ Thomas R. McBurney** Director
Thomas R. McBurney
By/s/ James A. Mitchell** Director
James A. Mitchell
* Signed pursuant to Officer's Power of Attorney dated April 24, 1996, filed
electronically as Exhibit 19(b) to Registrant's Post- Effective Amendment No. 1,
by:
Eileen J. Newhouse
** Signed pursuant to Directors Power of Attorney dated April 24, 1996, filed
electronically as Exhibit 19(a) to Registrant's Post- Effective Amendment No. 1,
by:
Eileen J. Newhouse
<PAGE>
PAGE 90
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 Amendment to the
Registration Statement signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Minneapolis and State of Minnesota on the 26th day of
June, 1997.
WORLD TRUST
By /s/ William R. Pearce**
William R. Pearce
President
By /s/ Melinda S. Urion
Melinda S. Urion
Treasurer
Pursuant to the requirements of the Securities Act of 1933, this Amendment to
the Registration Statement has been signed below by the following persons in the
capacities indicated on the 26th day of June, 1997.
Signature Capacity
/s/ William R. Pearce* Trustee
William R. Pearce
/s/ H. Brewster Atwater, Jr. Trustee
H. Brewster Atwater, Jr.
/s/ Lynne V. Cheney* Trustee
Lynne V. Cheney
/s/ William H. Dudley* Trustee
William H. Dudley
/s/ Robert F. Froehlke* Trustee
Robert F. Froehlke
/s/ David R. Hubers* Trustee
David R. Hubers
/s/ Heinz F. Hutter* Trustee
Heinz F. Hutter
/s/ Anne P. Jones* Trustee
Anne P. Jones
/s/ Melvin R. Laird* Trustee
Melvin R. Laird
<PAGE>
PAGE 91
Signatures Capacity
/s/ Alan K. Simpson* Trustee
Alan K. Simpson
/s/ Edson W. Spencer Trustee
Edson W. Spencer
/s/ John R. Thomas* Trustee
John R. Thomas
/s/ Wheelock Whitney Trustee
Wheelock Whitney
/s/ C. Angus Wurtele* Trustee
C. Angus Wurtele
* Signed pursuant to Trustees Power of Attorney dated January 8,
1997, filed as Exhibit 19(a) to Registrant's Post-Effective
Amendment No. 4, by:
- -----------------------------------
Leslie L. Ogg
** Signed pursuant to Officers' Power of Attorney dated April 11,
1996, filed as Exhibit 19(b) to Registrant's Pre-Effective
Amendment No. 2, by:
- ----------------------------------
Leslie L. Ogg
<PAGE>
PAGE 92
CONTENTS OF THIS
POST-EFFECTIVE AMENDMENT NO. 4
TO REGISTRATION STATEMENT NO. 33-63951
This post-effective amendment 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.
Exhibits.
The signatures.
<PAGE>
PAGE 1
EXHIBIT INDEX
Exhibit 2. Copy of By-laws dated April 24, 1996.
Exhibit 11. Independent auditors' consent.
Exhibit 13(a). Copy of Share Purchase Agreement between Strategist
World, Inc. and American Express Financial
Corporation dated April 16, 1996.
Exhibit 17. Financial data schedule.
Exhibit 19(c). Trustee's Power of Attorney to sign Amendments to this
Registration Statement, dated January 8, 1997.
<PAGE>
PAGE 1
Effective date: April 24, 1996
BY-LAWS
OF
STRATEGIST WORLD FUND, INC.
ARTICLE I
Corporate Seal
The corporate seal shall bear the inscription "Strategist World Fund,
Inc., Minnesota, Incorporated 1995".
ARTICLE II
Meeting of Shareholders
Section 1. No regular meeting of shareholders need be held, however, a
majority of directors present at a duly held meeting may call a regular meeting
of shareholders by fixing the date, time and place for a meeting. A regular
meeting of the shareholders shall include an election of directors. No meeting
shall be considered a regular meeting unless specifically designated as such in
the notice of meeting. Regular meetings may be held no more frequently than once
per year.
Section 2. The holders of at least ten percent (10%) of the shares
outstanding and entitled to vote, present in person or by proxy, shall
constitute a quorum, but the holders of a smaller amount may adjourn from time
to time without further notice, other than by notice at the time, until a quorum
is secured at any such adjourned meeting. In case a quorum is not present, the
meeting may be adjourned from time to time without notice other than by notice
at the meeting. At any adjourned meeting at which a quorum may be present, any
business may be transacted which might have been transacted at the meeting as
originally called.
Section 3. At each meeting of the shareholders, the polls may be opened
and closed, the proxies and ballots may be received and taken in charge, and all
questions touching the qualification of voters, the validity of proxies, and
acceptances or rejections of votes may be decided by two (2) inspectors of
election. Inspectors may be appointed by the Board of Directors before or at the
meeting. If no such appointment shall have been made or if any inspector be
absent or fails to act, the presiding officer at the meeting shall appoint a
person or persons to fill such vacancy. Inspectors shall take charge of the
polls and, when the vote is completed, shall make a certificate of the result of
the vote taken and of such other facts as may be required by law.
Section 4. Special meetings of the shareholders may be called at any time
as provided for by the laws of the State of Minnesota.
<PAGE>
PAGE 2
Section 5. Shareholders shall take action by the affirmative vote of the
holders of a majority of the voting power of the shares present and entitled to
vote except where a larger portion is otherwise required.
ARTICLE III
Directors
Section 1. An organizational meeting of the Board of Directors shall be
held as soon as convenient to a majority of the directors, after the final
adjournment of each regular meeting of the shareholders, and no notice shall be
required. Other meetings of the Board of Directors may be previously scheduled
or called by the President or any two directors. Notice of specially called
meetings shall be sufficient if given to each director at least five days prior
thereto by mail or one day prior thereto by telephone, telegraph or in person,
unless such notice period is waived by each director.
Section 2. The Board of Directors shall fix and change, as it may from
time to time determine, by majority vote, the compensation to be paid the
directors, officers and all employees appointed by the Board of Directors.
Section 3. A director may give advance written consent or opposition to a
proposal to be acted on at a Board meeting. If the director is not present at
the meeting, consent or opposition to a proposal does not constitute presence
for purposes of determining the existence of a quorum, but consent or opposition
shall be counted as a vote in favor of or against the proposal and shall be
entered in the minutes of the meeting, if the proposal acted on at the meeting
is substantially the same or has substantially the same effect as the proposal
to which the director has consented or objected.
Section 4. A majority of the directors shall constitute a quorum, but a
smaller number may adjourn from time to time without notice, other than by
announcement at the meeting, until a quorum is secured; and, likewise, in case a
quorum is present, the meeting may be adjourned from time to time without notice
other than by announcement at the meeting. At any adjourned meeting at which a
quorum may be present, any business may be transacted which might have been
transacted at the meeting as originally called.
Section 5. The Board of Directors may, by resolution passed by a majority
of the whole Board, designate an Executive Committee of two or more directors,
which may meet at stated times or on notice to all by any of their number during
intervals between meetings of the Board. The Executive Committee shall advise
with and aid the officers of the Fund in all matters concerning its interests
and the management of its business, and generally perform such duties and
exercise such powers as may be delegated to it from time to time by the Board of
Directors. Vacancies in the membership of such Executive Committee shall be
filled by the Board of Directors.
<PAGE>
PAGE 3
Section 6. From time to time the Board of Directors may, by resolution
passed by a majority of the whole Board, appoint any other committee or
committees for any purpose or purposes, which committee or committees shall have
such powers as shall be specified in the resolution of appointment.
Section 7. The quorum for such committee established by the Board of
Directors is two members regardless of the number of members serving on the
committee.
Section 8. Any action required or permitted to be taken at any meeting of
the Board of Directors or of a duly appointed committee of the Board of
Directors may be taken in any manner permitted by law.
ARTICLE IV
Officers
Section 1. The Fund shall have a President who shall serve as the chief
executive officer, a Treasurer who shall serve as the chief financial officer,
and may have such other officers as the Board of Directors may choose from time
to time.
Section 2. The Treasurer shall be the chief financial officer of the Fund,
shall keep or cause to be kept full and accurate accounts of receipts and
disbursements in books belonging to the Fund, and shall perform such other
duties as the Board of Directors may from time to time prescribe or require.
Section 3. Any person designated by the Board of Directors as a Vice
President shall be vested with all the powers and required to perform all the
duties of the President in the President's absence or disability, shall at all
times be vested with the same power as the President to sign and deliver in the
name of the Fund any deeds, mortgages, bonds, contracts or other instruments
pertaining to the business of the Fund, and shall perform such other duties as
may be prescribed by the Board of Directors.
Section 4. Any person designed by the Board of Directors as Secretary
shall attend all meetings of the shareholders of the Fund, the Board of
Directors, and such other meetings as may be designated by the Board of
Directors. The Secretary shall record all of the proceedings of such meetings in
a book or books to be kept for that purpose; shall have custody of the seal,
stock certificate books and minute books of the Fund; may affix the seal of the
Fund to any instrument and perform such additional duties as shall be assigned
by the Board of Directors.
Section 5. The officers of the Fund shall hold office until their
successors are chosen and qualify in their stead. Any officer chosen and
appointed by the Board of Directors may be removed either with or without cause
at any time by the Board of Directors.
<PAGE>
PAGE 4
ARTICLE V
Capital Stock
Shares of capital stock shall be uncertificated.
ARTICLE VI
Transfers
Section 1. Shares of stock of the Fund shall be transferred on the books
of the Fund at the request of the holder thereof in person or of her or his duly
authorized attorney upon surrender of the certificate or certificates therefor,
if any, or in their absence by a request for transfer in a form acceptable to
the Fund that may include the request be in writing, and be signed by the
registered holder or by his duly authorized attorney in the manner specified by
the Fund. No transfer or assignment of shares shall affect the right of the Fund
to pay any dividend due upon the shares, or to treat the holder of record as the
holder in fact, until such transfer or assignment is registered on the books of
the Fund and the Fund shall be entitled to treat the holder of record of any of
its shares as the holder in fact thereof and accordingly shall not be bound to
recognize any equitable or other claim to, or interest in, such shares on the
part of any person whether or not it shall have express or other notice thereof,
save as may be expressly provided by law.
Section 2. The Board of Directors shall have power and authority from time
to time to appoint one or more transfer agents and/or clerks and registrars for
the securities issued by the Fund and to make such rules and regulations as it
may deem expedient concerning the issue, transfer and registration of such
securities.
Section 3. If any security issued by the Fund be lost, stolen, mutilated
or destroyed, the security may be transferred upon giving of a satisfactory bond
of indemnity in an amount which, in the judgment of the Board of Directors, is
sufficient to indemnify the Fund against any claim that may result therefrom.
ARTICLE VII
Definitions
For all purposes of the Articles of Incorporation and these By-Laws, the
term "business day" shall be defined as a day with respect to which the New York
Stock Exchange is open for business.
ARTICLE VIII
Custodian or Trustee Agreements
The Fund shall enter into a custodian or trustee agreement with a bank or
trust company having aggregate capital, surplus and undivided profits of not
less than $2,000,000 for the custody of the Fund's securities and other assets.
All securities and cash assets owned or acquired by the Fund shall be held by
such custodian or trustee pursuant to the terms of such agreement and
<PAGE>
PAGE 5
the Fund shall deposit or cause to be deposited with such custodian or trustee
all such securities and cash assets. The agreement between the Fund and the
custodian or trustee may be terminated at any time by a vote of a majority of
the outstanding shares of the Fund.
ARTICLE IX
Miscellaneous
Section 1. The fiscal year of the Fund shall begin on the first day of
November in each year and end on the thirty-first day of October following.
Section 2. If the sale of shares issued by the Fund shall at any time be
discontinued, the Board of Directors may in its discretion, pursuant to
resolution, deduct from the value of the assets an amount equal to the brokerage
commissions, transfer taxes, and charges, if any, which would be payable on the
sale of such securities if they were then being sold.
ARTICLE X
Indemnification
Section 1. Each person made or threatened to be made a party to or is
involved (including, without limitation, as a witness) in any actual or
threatened action, suit or proceeding whether civil, criminal, administrative,
arbitration, or investigative, including a proceeding by or in the right of the
Fund by reason of the former or present capacity as a director or officer of the
Fund or who, while a director or officer of the Fund, is or was serving at the
request of the Fund or whose duties as a director or officer involve or involved
service as a director, officer, partner, trustee or agent of another
organization or employee benefit plan, whether the basis of any proceeding is
alleged action in an official capacity or in any capacity while serving as a
director, officer, partner, trustee or agent, shall be indemnified and held
harmless by the Fund to the full extent authorized by the Minnesota Business
Corporation Act, as the same or may hereafter be amended (but, in the case of
any such amendment, only to the extent that such amendment permits the Fund to
provide broader indemnification rights than the law permitted the Fund to
provide prior to such amendment, or by any other applicable law as then in
effect, against judgments, penalties, fines including, without limitation,
excise taxes assessed against the person with respect to an employee benefit
plan, settlements and reasonable expenses, including attorneys' fees and
disbursements, incurred in connection therewith and such indemnification shall
continue as to any person who has ceased to be a director or officer and shall
inure to the benefit of the person's heirs, executors and administrators
provided, however, in an action brought against the Fund to enforce rights to
indemnification, the director or officer shall be indemnified only if the action
was authorized by the Board of Directors of the Fund. The right to
indemnification conferred by this Section shall be a contract right and shall
include the right to be paid by the Fund in advance of the final disposition of
a proceeding for expenses incurred in connection therewith provided,
<PAGE>
PAGE 6
however, such payment of expenses shall be made only upon receipt of a written
undertaking by the director or officer to repay all amounts so paid if it is
ultimately determined that the director or officer is not entitled to
indemnification.
Section 2. Each person who upon written request to the Fund has not
received payment within thirty days may at any time thereafter bring suit
against the Fund to recover any unpaid amount and, to the extent successful, in
whole or in part, shall be entitled to be paid the expenses of prosecuting such
suit. Each person shall be presumed to be entitled to indemnification upon
filing a written request for payment and the Fund shall have the burden of proof
to overcome the presumption that the director or officer is not so entitled.
Neither the determination by the Fund, whether by the Board of Directors,
special legal counsel or by shareholder, nor the failure of the Fund to have
made any determination shall be a defense or create the presumption that the
director or officer is not entitled to indemnification.
Section 3. The right to indemnification and to the payment of expenses
prior to any final determination shall not be exclusive of any other right which
any person may have or hereinafter acquire under any statute, provision of the
Articles of Incorporation, by-law, agreement, vote of shareholders or otherwise
and notwithstanding any provisions in this Article X, the Fund is not obligated
to make any payment with respect to any claim for which payment is required to
be made to or on behalf of the director or officer under any insurance policy,
except with respect to any excess beyond the amount of required payment under
such insurance and no indemnification will be made in violation of the
provisions of the Investment Company Act of 1940.
<PAGE>
PAGE 1
Independent Auditors' Consent
- -------------------------------------------------------------------
The board and shareholders
Strategist World Fund, Inc.
Strategist World Growth Fund
Strategist World Income Fund
We consent to the use of our reports included or incorporated herein by
reference, and to the references to our Firm under the heading "Financial
highlights" in Part A and "INDEPENDENT AUDITORS" in Part B of the Registration
Statement.
KPMG Peat Marwick LLP
Minneapolis, Minnesota
June 27, 1997
<PAGE>
PAGE 1
SHARE PURCHASE AGREEMENT
This agreement is entered into between Strategist World Fund, Inc., a Minnesota
corporation (the Corporation) and American Express Financial Corporation, a
Delaware corporation (AEFC), as of this 16th day of April, 1996.
In order to provide the Corporation with its initial capital, the Corporation
hereby sells to AEFC and AEFC hereby purchases from the Corporation $100,000
worth of shares of the Corporation. The Corporation hereby acknowledges receipt
from AEFC in the amount of $100,000 in full payment for the shares.
AEFC represents and warrants to the Corporation that the shares are being
acquired for investment and not with a view to distribution and that AEFC has no
current intention to dispose of the shares.
Strategist World Fund, Inc.
By: /s/ William H. Dudley
William H. Dudley
President
American Express Financial Corporation
By: /s/ James A. Mitchell
James A. Mitchell
Executive Vice President
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<NAME> STRATEGIST WORLD GROWTH FUND
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<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-END> APR-30-1997
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<RECEIVABLES> 54
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<APPREC-INCREASE-CURRENT> 11876
<NET-CHANGE-FROM-OPS> 4972
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<DISTRIBUTIONS-OF-INCOME> 957
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<DISTRIBUTIONS-OTHER> 0
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<NUMBER-OF-SHARES-REDEEMED> 2603
<SHARES-REINVESTED> 132
<NET-CHANGE-IN-ASSETS> 79744
<ACCUMULATED-NII-PRIOR> 979
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</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
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<NAME> STRATEGIST WORLD INCOME FUND
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<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-END> APR-30-1997
<INVESTMENTS-AT-COST> 0
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<OTHER-ITEMS-ASSETS> 0
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<PAYABLE-FOR-SECURITIES> 0
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<OTHER-ITEMS-LIABILITIES> 35473
<TOTAL-LIABILITIES> 35473
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 549656
<SHARES-COMMON-STOCK> 90984
<SHARES-COMMON-PRIOR> 83841
<ACCUMULATED-NII-CURRENT> 7209
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 4700
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (8385)
<NET-ASSETS> 553180
<DIVIDEND-INCOME> 8
<INTEREST-INCOME> 19782
<OTHER-INCOME> 0
<EXPENSES-NET> 1592
<NET-INVESTMENT-INCOME> 18198
<REALIZED-GAINS-CURRENT> 4596
<APPREC-INCREASE-CURRENT> (27013)
<NET-CHANGE-FROM-OPS> (4219)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 8905
<DISTRIBUTIONS-OF-GAINS> 1848
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 4174
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 2969
<NET-CHANGE-IN-ASSETS> 29673
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 1952
<OVERDISTRIB-NII-PRIOR> 2084
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 2201
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 21764
<AVERAGE-NET-ASSETS> 547575
<PER-SHARE-NAV-BEGIN> 6.24
<PER-SHARE-NII> 0.33
<PER-SHARE-GAIN-APPREC> (0.27)
<PER-SHARE-DIVIDEND> 0.20
<PER-SHARE-DISTRIBUTIONS> 0.02
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 6.08
<EXPENSE-RATIO> 0.59
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 3
<NAME> STRATEGIST EMERGING MARKETS FUND
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-END> APR-30-1997
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 0
<RECEIVABLES> 16270
<ASSETS-OTHER> 634289
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 650559
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 11972
<TOTAL-LIABILITIES> 11972
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 572884
<SHARES-COMMON-STOCK> 113415
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 1068
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 816
<ACCUM-APPREC-OR-DEPREC> 67587
<NET-ASSETS> 638587
<DIVIDEND-INCOME> 1464
<INTEREST-INCOME> 4685
<OTHER-INCOME> 0
<EXPENSES-NET> 5755
<NET-INVESTMENT-INCOME> 394
<REALIZED-GAINS-CURRENT> (816)
<APPREC-INCREASE-CURRENT> 67587
<NET-CHANGE-FROM-OPS> 67165
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 1462
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 112928
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 287
<NET-CHANGE-IN-ASSETS> 637587
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 3086
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 27351
<AVERAGE-NET-ASSETS> 568721
<PER-SHARE-NAV-BEGIN> 5.00
<PER-SHARE-NII> 0.01
<PER-SHARE-GAIN-APPREC> 0.63
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<RETURNS-OF-CAPITAL> 0
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<EXPENSE-RATIO> 2.20
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<AVG-DEBT-PER-SHARE> 0
</TABLE>
<PAGE>
PAGE 1
TRUSTEES POWER OF ATTORNEY
City of Minneapolis
State of Minnesota
Each of the undersigned, as trustees of the below listed open-end,
diversified investment companies that previously have filed registration
statements and amendments thereto pursuant to the requirements of the Investment
Company Act of 1940 with the Securities and Exchange Commission:
1940 Act
Reg. Number
Growth Trust 811-07395
Growth and Income Trust 811-07393
Income Trust 811-07307
Tax-Free Income Trust 811-07397
World Trust 811-07399
hereby constitutes and appoints William R. Pearce and Leslie L. Ogg or either
one of them, as her or his attorney-in-fact and agent, to sign for her or him in
her or his name, place and stead any and all further amendments to said
registration statements filed pursuant to said Act and any rules and regulations
thereunder, and to file such amendments with all exhibits thereto and other
documents in connection therewith with the Securities and Exchange Commission,
granting to either of them the full power and authority to do and perform each
and every act required and necessary to be done in connection therewith.
Dated the 8th day of January, 1997.
/s/ H. Brewster Atwater, Jr. /s/ Melvin R. Laird
H. Brewster Atwater, Jr. Melvin R. Laird
/s/ Lynne V. Cheney /s/ William R. Pearce
Lynne V. Cheney William R. Pearce
/s/ William H. Dudley /s/ Alan K. Simpson
William H. Dudley Alan K. Simpson
/s/ Robert F. Froehlke /s/ Edson W. Spencer
Robert F. Froehlke Edson W. Spencer
/s/ David R. Hubers /s/ John R. Thomas
David R. Hubers John R. Thomas
/s/ Heinz F. Hutter /s/ Wheelock Whitney
Heinz F. Hutter Wheelock Whitney
/s/ Anne P. Jones /s/ C. Angus Wurtele
Anne P. Jones C. Angus Wurtele
