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AMERICAN EXPRESS
Financial Direct
Strategist World Fund, Inc.
1996 Annual Report
Strategist Emerging Markets Fund
Strategist World Growth Fund
Strategist World Income Fund
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Table of contents
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From the portfolio managers................................................1
Independent auditors' report...............................................5
Financial statements (Strategist World Fund, Inc.).........................6
Notes to financial statements (Strategist World Fund, Inc.)................9
Independent auditors' report (World Growth Portfolio).....................14
Financial statements (World Growth Portfolio).............................15
Notes to financial statements (World Growth Portfolio)....................18
Investments in securities (World Growth Portfolio)........................24
Notes to investments in securities (World Growth Portfolio)...............40
Independent auditors' report (World Income Portfolio).....................42
Financial statements (World Income Portfolio).............................43
Notes to financial statements (World Income Portfolio)....................46
Investments in securities (World Income Portfolio)........................51
Notes to investments in securities (World Income Portfolio)...............58
Federal income tax information............................................60
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From the portfolio manager
Strategist World Growth Fund
(photo of Richard Lazarchic)
Richard Lazarchic
Portfolio Manager
Strategist World Growth Fund began operations just after a period
of very strong performance among overseas stocks, primarily in
emerging markets in Latin American and Southeast Asia.
Unfortunately, the momentum was difficult to sustain after May.
Despite such sluggish returns generated by foreign markets in
general through most of the summer, the Portfolio held its own
thanks to successful stock selection. However, two particularly
harsh months, July and October, resulted in an overall negative
return for the period. In the five-and-a-half months since its
inception, the Portfolio declined in value by slightly more than
three percent.
Locking in profits
Although the Portfolio is heavily invested in stocks from around
the world, including the U.S., I did raise the cash position to as
high as approximately one-fifth of the Portfolio during the summer.
That was partly the result of profit-taking in some stocks which
provided dramatic, short-term gains for the Portfolio. For a time,
I postponed reinvesting those profits in other stocks until
conditions appeared more favorable.
By September, much of that money was again invested in stocks. Of
particular interest have been emerging markets in Latin America and
parts of Asia. For instance, holdings in Argentina represent the
fifth-largest country exposure in the Portfolio, which far exceeds
that nation's representation in world markets as a whole. I also
added to the Portfolio's U.S. position in early fall, allowing
shareholders to take advantage of continued bullish trends in the
domestic market.
Foreign markets stumble late
As the Fund's fiscal year was coming to a close at the end of
October, foreign markets were reeling. The Japanese market, which
represents the Portfolio's largest exposure (about 14% of the
Portfolio), lost 7% of its value in that month alone, tied to
concerns about impending elections.
A number of technology stocks in Southeast Asia's emerging markets
also went into a tailspin, a residual effect of a sell-off of
technology issues in the U.S. in the summer.
However, to lessen the impact of downturns in a particular economy,
region or industry, the Portfolio is broadly diversified. In
particular, I have increased our holdings of stocks in the consumer
products and natural resource sectors.
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Also, I am focusing more explicitly on stocks of companies that
have demonstrated consistent, above-average earnings growth and the
potential to maintain that trend. The Portfolio will typically
avoid stocks that are dependent on the good fortune of local
economies.
Brighter outlook
Looking forward, the fundamental economic and investment factors
look favorable for most regions of the world. Latin America, where
economic growth continues to be strong, is particularly attractive.
As has been the practice with this Portfolio, I will continue to
diversify our investments, seeking out companies from across the
globe and in a variety of industries that demonstrate positive
growth potential.
/s/ Richard Lazarchic
Richard Lazarchic
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From the portfolio manager
Strategist World Income Fund
(photo of Ray Goodner)
Ray Goodner
Portfolio Manager
In the nearly six-month period of Strategist World Income Fund's
operation in the past fiscal year, bond markets around the world
performed favorably. As a result, the Fund logged a total return
of 6.6% for the period form its inception in May.
This Portfolio seeks to benefit from investments in world bond
market in two distinct ways. First, it attempts to capitalize on
favorable interest rate trends in specific markets. As interest
rates decline, bond values rise. Second, the Portfolio is
positioned to benefit from favorable currency valuations between
the dollar and foreign currencies.
A boom in emerging markets
The most favorable bond markets in the last few months were found
in so-called emerging market nations, countries with fast-
developing economies. In particular, the Portfolio benefitted from
strong bond markets in Latin American nations such as Brazil,
Argentina, Mexico and Venezuela. During the year, I increased the
Portfolio's position in emerging markets, and that proved to be
beneficial.
Other positive returns were achieved in some of Europe's higher-
yielding markets, including Italy, Spain and Sweden. In those
countries, bond prices rose and local currencies strengthened
against the dollar, both positive factors for shareholders.
Major markets mark time
While some of the smaller countries represented in the Portfolio
performed well, most major markets were flat or up modestly over
the period. Notably, I reduced the Portfolio's U.S. holdings in
the spring. In addition, the duration of our U.S. bond component
was reduced, making it less susceptible to the effects of rising
interest rates.
During the period, I also cut back on the Portfolio's Japanese bond
holdings. This was based on concerns about the strength of the
dollar versus the yen and the direction of Japan's bond market.
Other major markets, such as Germany and the United Kingdom, also
failed to contribute significantly to performance in the past few
months.
During that time, the Portfolio's cash level was raised to close to
20 percent. However, by the end of the fiscal year, much of that
money was put back to work.
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Opportunities for the next year
In the coming months, it appears that emerging markets will
continue to perform well. Currently, about 15% of the Portfolio's
assets were devoted to emerging market investments. Additional
areas of concentration include European markets and Japan, where I
expect the yen to appreciate against the dollar, a favorable trend
for shareholders. It is important to note that world bond and
currency markets can change direction rapidly. Therefore, as has
been my practice, I will use a selective approach to try to achieve
positive investment returns while carefully monitoring trends that
could affect the fortunes of specific markets and making necessary
adjustments to the Portfolio.
/s/ Ray Goodner
Ray Goodner<PAGE>
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Federal income tax information
Strategist World Income Fund
The Fund is required by the Internal Revenue Code of 1986 to tell
its shareholders about the tax treatment of the dividends it pays
during its fiscal year. The dividends listed below will be
reported to you on a Form 1099-DIV, Dividends and Distributions,
next January. Shareholders should consult a tax advisor on how to
report distributions for state and local purposes.
Strategist World Income Fund
Fiscal year ended Oct. 31, 1996
Income distribution taxable as dividend income, none qualifying for
deduction by corporations.
Payable date Per share
June 27, 1996 0.02443
Sept. 26, 1996 0.06655
Total distributions $0.09098
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