AMERICAN EXPRESS Financial Direct
Strategist World Fund, Inc.
1999 Semiannual Report
Strategist Emerging Markets Fund
Strategist World Growth Fund
Strategist World Income Fund
<PAGE>
Table of Contents
From the Portfolio Managers 2
Financial Statements (Strategist World Fund, Inc.) 8
Notes to Financial Statements (Strategist World Fund, Inc.) 13
Financial Statements (Emerging Markets Portfolio) 20
Notes to Financial Statements (Emerging Markets Portfolio) 23
Investments in Securities (Emerging Markets Portfolio) 30
Financial Statements (World Growth Portfolio) 39
Notes to Financial Statements (World Growth Portfolio) 42
Investments in Securities (World Growth Portfolio) 47
Financial Statements (World Income Portfolio) 55
Notes to Financial Statements (World Income Portfolio) 58
Investments in Securities (World Income Portfolio) 64
<PAGE>
From the Portfolio Manager
Strategist Emerging Markets Fund
(picture of) Ian King
Ian King
Portfolio manager
Rebounds in the stock markets of many smaller countries set the stage for an
exceptionally strong period for Strategist Emerging Markets Fund. Over the first
half of the fiscal year, November 1998 through April 1999, the Fund generated a
gain of 37.98%.
The period began with the emerging markets trying to recover from the
devastation of a second bout of the so-called "Asian flu," the financial plague
that resurfaced in the summer and early fall of 1998 and sent many stock markets
into a virtual free fall. But, thanks in large part to three reductions in
short-term interest rates by the Federal Reserve in the U.S., enough hope had
returned to the emerging markets that they were able to make good progress
during November.
After a lackluster winter that yielded practically flat results, the markets
regained their positive momentum. Taking support from a rebound in commodity
prices, particularly oil, as well as surging stock markets in the U.S. and, to a
lesser degree, Europe, they quickly turned an advance into a spectacular rally
that produced double-digit returns in both March and April.
A VARIETY OF WINNERS
Among those leading the charge were Turkey, Mexico, South Korea, Thailand and
South Africa, each of which was well-represented in the Fund's portfolio.
Investments in other markets made positive contributions as well, including
Brazil, Greece and Taiwan. The great majority of the assets (92% at period-end)
were invested in emerging markets, with the modest remainder in cash.
As for changes to the portfolio, I greatly reduced the cash reserves in the
portfolio last November (from roughly 18% to 7%) and put the extra funds to work
in stocks. This strategy worked to the Fund's advantage over the ensuing months,
when many markets rallied.
Looking forward, while the past six months certainly have been gratifying, I
would caution investors that the recent success does not guarantee smooth
sailing from here on out. Conditions in emerging markets can -- and do -- change
with great speed. Still, I do think that, on the whole, these markets are on
more solid ground than a year or even six months ago. My view as this is being
written in mid-May is that as long as the U.S. stock market holds together and
interest in cyclical, largely commodity-driven stocks remains healthy, the
emerging markets can be expected to deliver positive performance.
Ian King
<PAGE>
From the Portfolio Manager
Strategist World Growth
(picture of) John O'Brien
John O'Brien
Portfolio manager
A calmer global investment environment and healthy stock markets in Europe and
the United States set the stage for a strong performance by Strategist World
Growth Fund in the first half of the fiscal year. For the six months -- November
1998 through April 1999 -- the Fund generated a total return of 20.04%. (This
figure compares with the 19.07% generated by the Morgan Stanley Capital
International All Country World Free Index, an unmanaged group of stocks
commonly used to measure the performance of major worldwide markets.)
Showing few ill effects from the global financial turmoil that had hit just a
few months earlier, stocks were already on the move in most major markets when
the period began last year. Supported by continued low inflation and reductions
in interest rates in the U.S. and Europe, stocks in those regions recorded
strong gains through January. In that month, Europe's new currency, the euro,
enjoyed a smooth launch, which added to the positive investment tone in that
region. After a moderate retreat in February brought on by a temporary rise in
interest rates, U.S. stocks quickly got back on track and finished the period
with two straight positive months.
PUTTING CASH TO WORK
To take advantage of the improving environment, I began reducing the level of
cash reserves in the portfolio at the outset of the period. I put the extra
funds to work in stocks, which enhanced the Fund's performance over the ensuing
months.
I kept most of the portfolio invested in Europe during the period, chiefly in
the United Kingdom, France, Italy, Germany and the Netherlands. That strategy
stemmed from the relationship of potential corporate earnings growth to the
level of stock prices in Europe, which appeared more attractive compared with
other regions. The U.S. comprised the next-largest exposure. For the most part,
I avoided Japan, whose economy continued to struggle but whose stock market did
show occasional signs of recovery, and the emerging markets of Southeast Asia
and Latin America, which were in the earliest stage of recovery from the
financial meltdown of last summer.
Looking toward the second half of the fiscal year, the investment environment
continues to be largely favorable. In the U.S., the economy remains robust,
while inflation and interest rates remain low. In Europe, while the economies
are growing at slower rates, stock valuations continue to be relatively more
attractive. Therefore, I expect to stick with an emphasis on Europe unless a
change in conditions warrants a shift.
John O'Brien
<PAGE>
From the Portfolio Manager
Strategist World Income
(picture of) Ray Goodner
Ray Goodner
Portfolio manager
It was a mixed environment for bonds over the past six months, as a rebound in
emerging-market bonds was offset by lackluster results in some major markets.
Strategist World Income Fund's performance reflected these conditions, as it
generated a total return (net asset value change and dividends) of 0.69% for the
first half of the fiscal year -- November 1998 through April 1999.
The period got off to a good start, as falling interest rates in the U.S. and
Europe provided a boost for bond prices. The biggest beneficiaries of the
positive trend, though, were the smaller, or emerging, markets of Latin America
and Southeast Asia, which had been pummeled in previous months by a second bout
of the financial malady that came to be known as the "Asian flu." The upturn in
the emerging markets continued through the end of the period, making them the
best-performing segment of the global bond market for the six months. While they
made up a relatively modest portion of the portfolio (about 18% throughout the
period), their strong gains had a distinctly positive effect on Fund
performance.
U.S. rates reverse direction
Here at home, government bonds experienced two very different environments. With
interest rates following an overall downward path through January, Treasury
bonds, a substantial area of investment for the Fund, rallied nicely. Then, over
the final three months, interest rates reversed direction, causing Treasuries to
lose ground.
In Europe, sluggish economies prompted monetary authorities to lower interest
rates, which in turn helped bond prices. However, generally weak currencies,
especially the new euro, reduced the ultimate return for the Fund. Investments
in Europe, which emphasized countries not linked to the euro, principally the
United Kingdom and Scandinavia, experienced the best overall performance thanks
to relatively strong currencies over the six months.
Looking at changes to the portfolio, I reduced its duration somewhat early in
the period to lessen the sensitivity of the Fund's value to changes in interest
rates. About mid-period, I added a bit to holdings in Europe to take advantage
of lower bond prices and currency values. Lastly, I sold some holdings in
emerging markets given that prices there had risen so dramatically.
As for the rest of the fiscal year, in light of the fact that the U.S. economy
remains quite strong and smaller foreign economies are showing signs of
recovery, global inflation may pick up moderately in the months ahead. That, in
turn, could put upward pressure on interest rates and cause bonds to struggle.
On the other hand, I do expect better performance from Europe. This stems from
my belief that the euro is likely to recover, thereby enhancing returns for
U.S.-based investors.
Ray Goodner
<PAGE>
<TABLE>
<CAPTION>
Financial Statements
Statements of assets and liabilities
Strategist World Fund, Inc.
Strategist Strategist Strategist
Emerging World World
April 30, 1999 (Unaudited) Markets Fund Growth Fund Income Fund
Assets
<S> <C> <C> <C>
Investment in corresponding Portfolio (Note 1) $604,043 $883,317 $666,551
Organizational costs (Note 1) 25 1,057 --
Other receivables 34 9 16
-- - --
Total assets 604,102 884,383 666,567
------- ------- -------
Liabilities
Dividends payable to shareholders -- -- 2,561
Accrued distribution fee 4 6 4
Accrued transfer agency fee 2 1 1
Accrued administrative services fee 2 1 1
Other accrued expenses 13,581 9,554 13,283
------ ----- ------
Total liabilities 13,589 9,562 15,850
------ ----- ------
Net assets applicable to outstanding capital stock $590,513 $874,821 $650,717
======== ======== ========
Represented by
Capital stock-- $.01 par value (Note 1) $ 1,491 $ 869 $ 1,073
Additional paid-in capital 736,738 644,319 649,087
Undistributed (excess of distributions over)
net investment income (756) (4,295) 2,651
Accumulated net realized gain (loss) (258,838) 41,604 (4,981)
Unrealized appreciation (depreciation)
on investments and on translation of assets
and liabilities in foreign currencies 111,878 192,324 2,887
------- ------- -----
Total -- representing net assets applicable to
outstanding capital stock $590,513 $874,821 $650,717
======== ======== ========
Shares outstanding 149,051 86,857 107,305
------- ------ -------
Net asset value per share of outstanding capital stock $ 3.96 $ 10.07 $ 6.06
-------- -------- --------
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Statements of operations
Strategist World Fund, Inc.
Strategist Strategist Strategist
Emerging World World
Six months ended April 30, 1999 (Unaudited) Markets Fund Growth Fund Income Fund
Investment income
Income:
<S> <C> <C> <C>
Dividends $ 3,414 $ 3,673 $ 127
Interest 1,175 1,238 21,761
Less foreign taxes withheld (176) (415) (2)
---- ---- --
Total income 4,413 4,496 21,886
----- ----- ------
Expenses (Note 2):
Expenses allocated from corresponding Portfolio 3,292 3,266 2,673
Distribution fee 588 1,016 812
Transfer agency fee 313 214 106
Administrative services fees and expenses 235 244 195
Compensation of board members 464 416 459
Registration fees 6,976 4,565 3,867
Audit fees 1,750 1,750 1,750
Other 1,305 439 1,843
----- --- -----
Total expenses 14,923 11,910 11,705
Less expenses reimbursed by AEFC (9,754) (4,784) (7,320)
------ ------ ------
Total net expenses 5,169 7,126 4,385
----- ----- -----
Investment income (loss)-- net (756) (2,630) 17,501
---- ------ ------
Realized and unrealized gain (loss) -- net Net realized gain (loss) on:
Security transactions (38,382) 41,847 (3,693)
Financial futures contracts -- -- (669)
Foreign currency transactions (29) (229) 304
Option contracts written 233
---
Net realized gain (loss) on investments (38,411) 41,618 (3,825)
Net change in unrealized appreciation (depreciation)
on investments and on translation of assets
and liabilities in foreign currencies 201,658 106,533 (9,070)
------- ------- ------
Net gain (loss) on investments and foreign currencies 163,247 148,151 (12,895)
------- ------- -------
Net increase (decrease) in net assets resulting
from operations $162,491 $145,521 $ 4,606
======== ======== =======
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Statements of changes in net assets
Strategist World Fund, Inc.
Strategist Emerging Markets Fund
April 30, 1999 Oct. 31, 1998
Six months ended Year ended
(Unaudited)
Operations and distributions
<S> <C> <C>
Investment income (loss)-- net $ (756) $ 3,330
Net realized gain (loss) on investments (38,411) (223,049)
Net change in unrealized appreciation (depreciation)
on investments and on translation of assets
and liabilities in foreign currencies 201,658 (2,821)
------- ------
Net increase (decrease) in net assets
resulting from operations 162,491 (222,540)
------- --------
Distributions to shareholders from:
Net investment income -- (1,190)
Net realized gains -- (106,562)
---- --------
Total distributions -- (107,752)
---- --------
Capital share transactions (Note 3)
Proceeds from sales 8,991 39,868
Reinvestment of distributions at net asset value -- 107,752
Payments for redemptions (2,542) (46,501)
------ -------
Increase (decrease) in net assets from capital
share transactions 6,449 101,119
----- -------
Total increase (decrease) in net assets 168,940 (229,173)
Net assets at beginning of period 421,573 650,746
------- -------
Net assets at end of period $590,513 $421,573
======== ========
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Statements of changes in net assets
Strategist World Fund, Inc.
Strategist World Growth Fund
April 30, 1999 Oct. 31, 1998
Six months ended Year ended
(Unaudited)
Operations and distributions
<S> <C> <C>
Investment income (loss)-- net $ (2,630) $ (559)
Net realized gain (loss) on investments 41,618 36,779
Net change in unrealized appreciation (depreciation)
on investments and on translation of assets
and liabilities in foreign currencies 106,533 64,689
------- ------
Net increase (decrease) in net assets
resulting from operations 145,521 100,909
------- -------
Distributions to shareholders from:
Net investment income (1,770) (3,155)
Net realized gains (29,010) --
------- -----
Total distributions (30,780) (3,155)
------- ------
Capital share transactions (Note 3)
Proceeds from sales 8,515 28,699
Reinvestment of distributions at net asset value 30,780 3,155
Payments for redemptions (1,350) (11,703)
------ -------
Increase (decrease) in net assets from capital
share transactions 37,945 20,151
------ ------
Total increase (decrease) in net assets 152,686 117,905
Net assets at beginning of period 722,135 604,230
------- -------
Net assets at end of period $874,821 $722,135
======== ========
Undistributed (excess of distributions over) net investment income $ (4,295) $ 105
-------- --------
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Statements of changes in net assets
Strategist World Fund, Inc.
Strategist World Income Fund
April 30, 1999 Oct. 31, 1998
Six months ended Year ended
(Unaudited)
Operations and distributions
<S> <C> <C>
Investment income (loss)-- net $ 17,501 $ 40,476
Net realized gain (loss) on investments (3,825) (8,054)
Net change in unrealized appreciation (depreciation)
on investments and on translation of assets
and liabilities in foreign currencies (9,070) 2,557
------ -----
Net increase (decrease) in net assets
resulting from operations 4,606 34,979
----- ------
Distributions to shareholders from:
Net investment income (18,357) (29,563)
Net realized gain (2,062) (15,746)
------ -------
Total distributions (20,419) (45,309)
------- -------
Capital share transactions (Note 3)
Proceeds from sales 3,200 3,735
Reinvestment of distributions at net asset value 20,449 45,309
Payments for redemptions -- (20,693)
------ -------
Increase (decrease) in net assets from capital
share transactions 23,649 28,351
------ ------
Total increase (decrease) in net assets 7,836 18,021
Net assets at beginning of period 642,881 624,860
------- -------
Net assets at end of period $650,717 $642,881
======== ========
Undistributed net investment income $ 2,651 $ 3,507
-------- --------
See accompanying notes to financial statements.
</TABLE>
<PAGE>
Notes to Financial Statements
Strategist World Fund, Inc.
(Unaudited as to April 30, 1999)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Strategist Emerging Markets Fund (Emerging Markets Fund), Strategist World
Growth Fund (World Growth Fund), and Strategist World Income Fund (World Income
Fund), are series of capital stock within Strategist World Fund, Inc. Each Fund
is registered under the Investment Company Act of 1940 (as amended) as a
diversified, open-end management investment company. Each Fund has 3 billion
authorized shares of capital stock.
Investments in Portfolios
Each of the Funds seeks to achieve its investment objectives by investing all of
its net investable assets in a corresponding series of World Trust (the Trust).
Emerging Markets Fund invests all of its assets in the Emerging Markets
Portfolio, an open-end investment company that has the same objectives as the
Fund. Emerging Markets 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.
World Growth Fund invests all of its assets in the World Growth Portfolio, an
open-end investment company that has the same objectives as the Fund. World
Growth 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.
World Income Fund invests all of its assets in the World Income Portfolio, an
open-end investment company that has the same objectives as the Fund. World
Income Portfolio invests primarily in debt securities of U.S. and foreign
issuers.
Each Fund records daily its share of the corresponding Portfolio's income,
expenses and realized and unrealized gains and losses. The financial statements
of the Portfolios are included elsewhere in this report and should be read in
conjunction with the Fund's financial statements. Each Fund records its
investment in the corresponding Portfolio at value that is equal to the Fund's
proportionate ownership interest in the Portfolio's net assets. As of
April 30, 1999, the percentages of the corresponding Portfolio owned by Emerging
Markets Fund, World Growth Fund and World Income Fund were 0.17%, 0.05% and
0.07%, respectively. Valuation of securities held by the Portfolios is discussed
in Note 1 of the Portfolios' "Notes to financial statements" (included elsewhere
in this report).
Organizational costs
Each 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 American Express Financial Corporation (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.
Use of estimates
Preparing financial statements that conform to generally accepted accounting
principles requires management to make estimates (e.g., on assets and
liabilities) that could differ from actual results.
Federal taxes
The Fund's policy is to comply with all sections of the Internal Revenue Code
that apply to regulated investment companies and to distribute all of its
taxable income to the shareholders. No provision for income or excise taxes is
thus required.
Net investment income (loss) and net realized gains (losses) may differ for
financial statement and tax purposes primarily because of deferred losses on
certain futures contracts, the recognition of certain foreign currency gains
(losses) as ordinary income (loss) for tax purposes, and losses deferred due to
"wash sale" transactions. The character of distributions made during the year
from net investment income or net realized gains may differ from their ultimate
characterization for federal income tax purposes. Also, due to the timing of
dividend distributions, the fiscal year in which amounts are distributed may
differ from the year that the income or realized gains (losses) were recorded by
the Funds.
Dividends to shareholders
Dividends from net investment income, declared and paid at the end of each
calendar year for Emerging Markets Fund and World Growth Fund and declared daily
and paid each calendar quarter for World Income Fund are reinvested in
additional shares of the Funds 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
As of April 30, 1999, AEFC owned 120,255 shares for Emerging Markets Fund,
71,944 shares for World Growth Fund and 98,100 shares for World Income Fund.
2. EXPENSES AND SALES CHARGES
In addition to the expenses allocated from the Portfolio, each Fund accrues its
own expenses as follows:
Each Fund has an agreement with AEFC to provide administrative services. Under
an Administrative Services Agreement, each 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% for Emerging
Markets Fund, from 0.06% to 0.035% for World Growth Fund and from 0.06% to 0.04%
for World Income Fund annually.
Under a separate Transfer Agency Agreement, American Express Client Service
Corporation (AECSC) maintains shareholder accounts and records. Each Fund pays
AECSC an annual fee per shareholder account of $20 ($25 for World Income Fund).
Under a Plan and Agreement of Distribution, each 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 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 Fund expenses through Dec. 31, 1999. Under this agreement, each Fund's
total expenses will not exceed 2.20% of Emerging Markets Fund's average daily
net assets, 1.75% of World Growth Fund's average daily net assets and 1.35% of
World Income Fund's average daily net assets.
<PAGE>
<TABLE>
<CAPTION>
3. CAPITAL SHARE TRANSACTIONS
Transactions in shares of capital stock for the periods indicated are as
follows:
Six months ended April 30, 1999
Emerging World World
Markets Fund Growth Fund Income Fund
<S> <C> <C> <C>
Sold 2,850 896 516
Issued for reinvested distributions -- 3,278 3,302
Redeemed (801) (145) --
---- ---- -----
Net increase (decrease) 2,049 4,029 3,818
Year ended Oct. 31, 1998
Emerging World World
Markets Fund Growth Fund Income Fund
Sold 9,248 3,297 611
Issued for reinvested distributions 24,544 413 7,305
Redeemed (10,235) (1,528) (3,296)
------- ------ ------
Net increase (decrease) 23,557 2,182 4,620
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
4. FINANCIAL HIGHLIGHTS
The tables below show certain important financial information for evaluating each
Fund's results.
Emerging Markets Fund
Fiscal period ended Oct. 31,
Per share income and capital changesa
1999b 1998 1997c
<S> <C> <C> <C>
Net asset value, beginning of period $2.87 $5.27 $5.00
----- ----- -----
Income from investment operations:
Net investment income (loss) (.01) .02 .01
Net gains (losses) (both realized and unrealized) 1.10 (1.55) .27
---- ----- ---
Total from investment operations 1.09 (1.53) .28
---- ----- ---
Less distributions:
Dividends from net investment income -- (.01) (.01)
Distributions from realized gains -- (.86) --
---- ---- ----
Total distributions -- (.87) (.01)
---- ---- ----
Net asset value, end of period $3.96 $2.87 $5.27
----- ----- -----
Ratios/supplemental data
Net assets, end of period (in thousands) $591 $422 $651
---- ---- ----
Ratio of expenses to average daily net assetsd 2.20%e 2.19% 2.20%e
---- ---- ----
Ratio of net investment income (loss) to average daily net assets (.32%)e .58% .12%e
---- --- ---
Portfolio turnover rate (excluding short-term securities) 79% 108% 87%
-- --- --
Total return 37.98% (34.82%) 5.90%
----- ------ ----
a For a share outstanding throughout the period. Rounded to the nearest cent.
b Six months ended April 30, 1999 (Unaudited).
c Inception date was Nov. 13, 1996.
d The Advisor and Distributor voluntarily limited total operating expenses.
Without this agreement, the ratio of expenses to average daily net assets
would have been 6.35%, 4.66% and 9.61% for the periods ended 1999, 1998
and 1997, respectively.
e Adjusted to an annual basis.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
World Growth Fund
Fiscal period ended Oct. 31,
Per share income and capital changesa
1999b 1998 1997 1996c
<S> <C> <C> <C> <C>
Net asset value, beginning of period $8.72 $7.49 $7.08 $7.32
----- ----- ----- -----
Income from investment operations:
Net investment income (loss) (.03) (.01) .02 .04
Net gains (losses) (both realized and unrealized) 1.75 1.28 .40 (.28)
---- ---- --- ----
Total from investment operations 1.72 1.27 .42 (.24)
---- ---- --- ----
Less distributions:
Dividends from net investment income (.02) (.04) (.01) --
Distributions from realized gains (.35) -- -- --
---- ---- ---- ----
Total distributions (.37) (.04) (.01) --
---- ---- ---- ----
Net asset value, end of period $10.07 $8.72 $7.49 $7.08
------ ----- ----- -----
Ratios/supplemental data
Net assets, end of period (in thousands) $875 $722 $604 $489
---- ---- ---- ----
Ratio of expenses to average daily net assetsd 1.75%e 1.69% 1.65% 1.75%e
---- ---- ---- ----
Ratio of net investment income (loss) to
average daily net assets (.65%)e (.08%) .26% 1.61%e
---- ---- --- ----
Portfolio turnover rate (excluding short-term securities) 38% 80% 199% 58%
-- -- --- --
Total return 20.04% 17.02% 5.98% (3.28%)
----- ----- ---- -----
a For a share outstanding throughout the period. Rounded to the nearest cent.
b Six months ended April 30, 1999 (Unaudited).
c Inception date was May 13, 1996.
d The Advisor and Distributor voluntarily limited total operating expenses.
Without this agreement, the ratio of expenses to average daily net assets
would have been 2.93%, 2.80%, 5.13% and 17.33% for the periods ended 1999,
1998, 1997, and 1996, respectively.
e Adjusted to an annual basis.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
World Income Fund
Fiscal period ended Oct. 31,
Per share income and capital changesa
1999e 1998 1997 1996b
<S> <C> <C> <C> <C>
Net asset value, beginning of period $6.21 $6.32 $6.24 $6.05
----- ----- ----- -----
Income from investment operations:
Net investment income (loss) .17 .40 .36 .15
Net gains (losses) (both realized and unrealized) (.12) (.05) (.03) .25
---- ---- ---- ---
Total from investment operations .05 .35 .33 .40
--- --- --- ---
Less distributions:
Dividends from net investment income (.18) (.30) (.23) (.15)
Excess distributions of net investment income -- -- -- (.06)
Distributions from realized gains (.02) (.16) (.02) --
---- ---- ---- ----
Total distributions (.20) (.46) (.25) (.21)
---- ---- ---- ----
Net asset value, end of period $6.06 $6.21 $6.32 $6.24
----- ----- ----- -----
Ratios/supplemental data
Net assets, end of period (in thousands) $651 $643 $627 $524
---- ---- ---- ----
Ratio of expenses to average daily net assetsc 1.35%d 1.12% 1.35% 1.35%d
---- ---- ---- ----
Ratio of net investment income (loss) to average daily net assets 5.39%d 6.50% 6.28% 5.87%d
---- ---- ---- ----
Portfolio turnover rate (excluding short-term securities) 26% 27% 55% 24%
-- -- -- --
Total return .69% 5.38% 6.61% 5.16%
--- ---- ---- ----
a For a share outstanding throughout the period. Rounded to the nearest cent.
b Inception date was May 13, 1996.
c The Advisor and Distributor voluntarily limited total operating expenses.
Without this agreement, the ratio of expenses to average daily net assets
would have been 3.61%, 2.29%, 5.36% and 19.23% for the periods ended 1999,
1998, 1997 and 1996, respectively.
d Adjusted to an annual basis.
e Six months ended April 30, 1999 (Unaudited). Ian King
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Financial Statements
Statement of assets and liabilities
Emerging Markets Portfolio
April 30, 1999 (Unaudited)
Assets
Investments in securities, at value (Note 1)
<S> <C>
(identified cost $289,446,189) $355,446,467
Cash in bank on demand deposit 6,993,551
Dividends and accrued interest receivable 372,758
Receivable for investment securities sold 1,681,981
---------
Total assets 364,494,757
-----------
Liabilities
Payable for investment securities purchased 5,371,459
Unrealized depreciation on foreign currency contracts held, at value (Notes 1 and 5) 3,137
Payable upon return of securities loaned (Note 4) 2,487,200
Accrued investment management services fee 10,625
Other accrued expenses 88,607
------
Total liabilities 7,961,028
---------
Net assets $356,533,729
============
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Statement of operations
Emerging Markets Portfolio
Six months ended April 30, 1999 (Unaudited)
Investment income
Income:
<S> <C>
Dividends $ 2,097,225
Interest 733,739
Less foreign taxes withheld (107,376)
--------
Total income 2,723,588
---------
Expenses (Note 2):
Investment management services fee 1,643,145
Compensation of board members 5,138
Custodian fees 378,898
Audit fees 8,250
Other 13,228
------
Total expenses 2,048,659
Earnings credits on cash balances (Note 2) (2,620)
------
Total net expenses 2,046,039
---------
Investment income (loss) -- net 677,549
-------
Realized and unrealized gain (loss) -- net Net realized gain (loss) on:
Security transactions (Note 3) (26,398,848)
Foreign currency transactions (552,250)
--------
Net realized gain (loss) on investments (26,951,098)
Net change in unrealized appreciation (depreciation) on investments
and on translation of assets and liabilities in foreign currencies 125,755,397
-----------
Net gain (loss) on investments and foreign currencies 98,804,299
----------
Net increase (decrease) in net assets resulting from operations $99,481,848
-----------
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Statements of changes in net assets
Emerging Markets Portfolio
April 30, 1999 Oct. 31, 1998
Six months ended Year ended
(Unaudited)
Operations
<S> <C> <C>
Investment income (loss)-- net $ 677,549 $ 5,371,569
Net realized gain (loss) on investments (26,951,098) (139,437,993)
Net change in unrealized appreciation (depreciation) on investments
and on translation of assets and liabilities in foreign currencies 125,755,397 (10,113,028)
----------- -----------
Net increase (decrease) in net assets resulting from operations 99,481,848 (144,179,452)
Net contributions (withdrawals) from partners (27,944,992) 70,718,053
----------- ----------
Total increase (decrease) in net assets 71,536,856 (73,461,399)
Net assets at beginning of period 284,996,873 358,458,272
----------- -----------
Net assets at end of period $356,533,729 $284,996,873
============ ============
See accompanying notes to financial statements.
</TABLE>
<PAGE>
Notes to Financial Statements
Emerging Markets Portfolio
(Unaudited as to April 30, 1999)
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 invests primarily in equity securities of issuers in countries with
developing or emerging markets. The Declaration of Trust permits the Trustees to
issue non-transferable interests in the Portfolio.
The Portfolio's significant accounting policies are summarized below:
Use of estimates
Preparing financial statements that conform to generally accepted accounting
principles requires management to make estimates (e.g., on assets and
liabilities) that could differ from actual results.
Valuation of securities
All securities are valued at the close of each business day. Securities traded
on national securities exchanges or included in national market systems are
valued at the last quoted sales price. Debt securities are generally traded in
the over-the-counter market and are valued at a price that reflects fair value
as quoted by dealers in these securities or by an independent pricing service.
Securities for which market quotations are not readily available are valued at
fair value according to methods selected in good faith by the board. Short-term
securities maturing in more than 60 days from the valuation date are valued at
the market price or approximate market value based on current interest rates;
those maturing in 60 days or less are valued at amortized cost.
Option transactions
To produce incremental earnings, protect gains and facilitate buying and selling
of securities for investments, the Portfolio may buy and write options traded on
any U.S. or foreign exchange or in the over-the-counter market where completing
the obligation depends upon the credit standing of the other party. The
Portfolio also may buy and sell put and call options and write covered call
options on portfolio securities as well as write cash-secured put options. The
risk in writing a call option is that the Portfolio gives up the opportunity for
profit if the market price of the security increases. The risk in writing a put
option is that the Portfolio may incur a loss if the market price of the
security decreases and the option is exercised. The risk in buying an option is
that the Portfolio pays a premium whether or not the option is exercised. The
Portfolio also has the additional risk of being unable to enter into a closing
transaction if a liquid secondary market does not exist.
Option contracts are valued daily at the closing prices on their primary
exchanges and unrealized appreciation or depreciation is recorded. The Portfolio
will realize a gain or loss when the option transaction expires or closes. When
an option is exercised, the proceeds on sales for a written call option, the
purchase cost for a written put option or the cost of a security for a purchased
put or call option is adjusted by the amount of premium received or paid.
Futures transactions
To gain exposure to or protect itself from market changes, the Portfolio may buy
and sell financial futures contracts traded on any U.S. or foreign exchange. The
Portfolio also may buy and write put and call options on these futures
contracts. Risks of entering into futures contracts and related options include
the possibility of an illiquid market and that a change in the value of the
contract or option may not correlate with changes in the value of the underlying
securities.
Upon entering into a futures contract, the Portfolio is required to deposit
either cash or securities in an amount (initial margin) equal to a certain
percentage of the contract value. Subsequent payments (variation margin) are
made or received by the Portfolio each day. The variation margin payments are
equal to the daily changes in the contract value and are recorded as unrealized
gains and losses. The Portfolio recognizes a realized gain or loss when the
contract is closed or expires.
Foreign currency translations and foreign currency contracts
Securities and other assets and liabilities denominated in foreign currencies
are translated daily into U.S. dollars 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,
if any, may arise from sales of foreign currency, closed forward contracts,
exchange gains or losses realized between the trade date and settlement date on
securities transactions, and other translation gains or losses on dividends,
interest income and foreign withholding taxes.
The Portfolio may enter into forward foreign currency exchange contracts for
operational purposes and to protect against adverse exchange rate fluctuation.
The net U.S. dollar value of foreign currency underlying all contractual
commitments held by the Portfolio and the resulting unrealized appreciation or
depreciation are determined using foreign currency exchange rates from an
independent pricing service. The Portfolio is subject to the credit risk that
the other party will not complete its contract obligations.
Federal taxes
For federal income tax purposes the Portfolio qualifies as a partnership and
each investor in the Portfolio is treated as the owner of its proportionate
share of the net assets, income, expenses and realized and unrealized gains and
losses of the Portfolio. As a "pass-through" entity, the Portfolio therefore
does not pay any income dividends or capital gain distributions.
Other
Security transactions are accounted for on the date securities are purchased or
sold. Dividend income is recognized on the ex-dividend date or upon receipt of
ex-dividend notification in the case of certain foreign securities. Interest
income, including level-yield amortization of premium and discount, is accrued
daily.
2. FEES AND EXPENSES
The Trust, on behalf of the Portfolio, has an Investment Management Services
Agreement with AEFC to manage its portfolio. Under this agreement, AEFC
determines which securities will be purchased, held or sold. The management fee
is a percentage of the Portfolio's average daily net assets in reducing
percentages from 1.10% to 1.00% annually.
Under the agreement, the Trust also pays taxes, brokerage commissions and
nonadvisory expenses, which include custodian fees, audit and certain legal
fees, fidelity bond premiums, registration fees for units, office expenses,
consultants' fees, compensation of trustees, corporate filing fees, expenses
incurred in connection with lending securities of the Portfolio and any other
expenses properly payable by the Trust or Portfolio and approved by the board.
AEFC has a sub-investment Advisory Agreement with American Express Asset
Management International Inc. (International), a wholly-owned subsidiary of
AEFC.
The Portfolio also pays custodian fees to American Express Trust Company, an
affiliate of AEFC.
During the six months ended April 30, 1999, the Portfolio's custodian fees were
reduced by $2,620 as a result of earnings credits from overnight cash balances.
According to a Placement Agency Agreement, American Express Financial Advisors
Inc. acts as placement agent of the Trust's units.
3. SECURITIES TRANSACTIONS
Cost of purchases and proceeds from sales of securities (other than short-term
obligations) aggregated $217,387,112 and $225,023,757, respectively, for the six
months ended April 30, 1999. For the same period, the portfolio turnover rate
was 79%. Realized gains and losses are determined on an identified cost basis.
4. LENDING OF PORTFOLIO SECURITIES
As of April 30, 1999, securities valued at $2,454,640 were on loan to brokers.
For collateral, the Portfolio received $2,487,200 in cash. Income from
securities lending amounted to $39,849 for the six months ended April 30, 1999.
The risks to the Portfolio of securities lending are that the borrower may not
provide additional collateral when required or return the securities when due.
<PAGE>
<TABLE>
<CAPTION>
5. FOREIGN CURRENCY CONTRACTS
As of April 30, 1999, the Portfolio has foreign currency exchange contracts that
obligate it to deliver currencies at specified future dates. The unrealized
appreciation and/or depreciation on these contracts is included in the
accompanying financial statements. See "Summary of significant accounting
policies." The terms of the open contracts are as follows:
Exchange date Currency to Currency to Unrealized Unrealized
be delivered be received appreciation depreciation
<S> <C> <C> <C> <C>
May 3, 1999 1,681,291 1,681,628 $-- $ 353
Argentine Peso U.S. Dollar
May 4, 1999 1,413,500 8,584,186 -- 2,784
U.S. Dollar South African Rand ----- ------
Total $-- $3,137
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Investments in Securities
Emerging Markets Portfolio
April 30, 1999 (Unaudited)
(Percentages represent value of investments compared to net assets)
Common stocks (92.2%)
Issuer Shares Value(a)
Argentina (2.3%)
Energy
<S> <C> <C>
YPF Sociedad Anonima ADR 199,000 $8,358,000
Brazil (13.1%)
Banks and savings & loans (2.8%)
Uniao de Bancos Brasileiros GDR 405,000 10,049,063
Energy (3.1%)
Petroleo Brasileiro ADR 687,700(b) 11,109,518
Utilities -- electric (0.9%)
Companhia Paranaense de Energia ADR 389,000 3,184,938
Utilities -- telephone (6.3%)
Tele Centro Sul Participacoes ADR 142,000(b) 7,543,750
Tele Sudeste Celular Participacoes ADR 185,260(b,c) 5,291,489
Telesp Participacoes 389,293,000 9,728,821
Total 22,564,060
Chile (1.9%)
Chemicals (1.0%)
Sociedad Quimica y Minera de Chile ADR 99,440 3,666,850
Utilities -- telephone (0.9%)
Compania de Telecomunicaciones de Chile ADR 126,224 3,337,047
Egypt (0.2%)
Building materials & construction
Suez Cement GDR 44,060(d) 739,107
Greece (6.0%)
Banks and savings & loans (3.3%)
Alpha Credit Bank 88,400 6,310,186
Commercial Bank of Greece 31,600 5,526,410
Total 11,836,596
Building materials & construction (1.4%)
Titan Cement 67,000 5,173,914
Utilities -- telephone (1.3%)
Panafon Hellenic Telecom 168,900(b,d) 4,499,250
Hong Kong (2.2%)
Multi-industry conglomerates
Cosco Pacific 11,440,000 7,748,312
Hungary (2.5%)
Banks and savings & loans (1.4%)
OTP Bank GDR 120,526(d) 5,155,500
Utilities -- telephone (1.1%)
Matav ADR 142,000(b) 3,993,750
India (5.0%)
Automotive & related (0.5%)
Tata Engineering & Locomotive GDR 551,000 1,804,525
Banks and savings & loans (0.4%)
State Bank of India GDR 150,000 1,338,750
Miscellaneous (2.2%)
Videsh Sanchar Nigam GDR 668,000(d) 7,999,300
Textiles & apparel (1.0%)
Reliance Inds GDR 488,000(d) 3,660,000
Utilities -- telephone (0.9%)
Mahanagar Telephone Nigam GDR 306,048(b,d) 3,190,550
Indonesia (1.3%)
Utilities -- telephone
Indosat 2,413,000 4,663,123
Israel (3.6%)
Banks and savings & loans (1.3%)
Bank Hapoalim 1,890,000 4,510,485
Communications equipment & services (1.6%)
ECI Telecommunications 155,000 5,715,625
Utilities -- telephone (0.7%)
Bezeq Israeli Telecommunication 647,170 2,515,032
Mexico (14.2%)
Banks and savings & loans (3.2%)
Grupo Financiero Banamex Accival 4,427,471(b) 11,284,299
Beverages & tobacco (4.2%)
Coca-Cola FEMSA ADR 285,200 5,900,075
Fomento Economico Mexicano ADR 252,500 9,184,688
Total 15,084,763
Media (3.2%)
Grupo Televisa 277,900(b) 11,393,900
Metals (0.9%)
Hylsamex 1,072,330 3,098,615
Paper & packaging (2.0%)
Kimberly-Clark de Mexico ADR 345,000 6,986,250
Retail (0.7%)
Organizacion Soriana Cl B 589,602 2,654,485
Peru (1.0%)
Utilities -- telephone
Telefonica del Peru ADR 237,000 3,569,813
Philippines (2.0%)
Banks and savings & loans (1.1%)
Bank of the Philippine Islands 1,247,000 3,935,283
Utilities -- telephone (0.9%)
Philippine Long Distance Telephone ADR 100,988(c) 3,256,863
Poland (1.0%)
Banks and savings & loans
Bank Rozwoju Eksportu 156,957 3,493,668
South Africa (6.9%)
Computers & office equipment (1.5%)
Comparex Holdings 712,900 5,389,238
Metals (3.4%)
Anglo American 90,300(b) 4,665,620
AngloGold ADR 323,800 7,730,726
Total 12,396,346
Multi-industry conglomerates (2.0%)
Barlow 1,163,300 6,977,939
South Korea (11.3%)
Banks and savings & loans (2.7%)
Hana Bank GDR 356,766 4,914,452
Shinhan Bank 426,300 4,698,806
Total 9,613,258
Building materials & construction (--%)
Hyundai Engineering & Construction 6,140(b) 57,603
Electronics (2.6%)
LG Cable & Machinery 394,700 5,180,753
Samsung Display Devices 79,300 4,070,088
Total 9,250,841
Financial services (1.7%)
LG Securities 242,987 6,133,461
Utilities -- electric (1.3%)
Korea Electric Power 155,700(b) 4,480,387
Utilities -- telephone (3.0%)
Korea Telecom 248,000 10,850,652
Taiwan (7.1%)
Banks and savings & loans (0.5%)
Bank Sinopac 2,478,000 1,743,025
Computers & office equipment (1.5%)
Asustek Computer GDR 139,900(b) 1,892,148
Synnex Technology Intl 781,000(b) 3,558,705
Total 5,450,853
Electronics (4.2%)
Compal Electronics 1,990,573(b) 6,878,824
Hon Hai Precision Inds 830,000(b) 4,518,022
Taiwan Semiconductor Mfg 1,090,000(b) 3,683,328
Total 15,080,174
Metals (0.9%)
China Steel 4,173,000 3,317,952
Thailand (3.5%)
Banks and savings & loans (2.5%)
Thai Farmers Bank 3,184,000(b) 8,827,640
Media (1.0%)
BEC World Public 674,000 3,537,234
Turkey (6.3%)
Banks and savings & loans (4.9%)
Akbank T.A.S. 229,000,000 7,304,871
Yapi Kredit Finance 425,134,000 10,198,114
Total 17,502,985
Multi-industry conglomerates (1.4%)
Haci Omer Sabanci Holding 185,000,000 5,069,000
United Kingdom (0.5%)
Banks and savings & loans
Zagrebacka Banka 186,010 1,627,588
Total common stocks
(Cost: $263,527,123) $328,877,410
Preferred stock & other (0.5%)
Issuer Shares Value(a)
Chile (--%)
Sociedad Quimica
Rights 5,749(f) $--
Greece (--%)
Natl Bank of Greece
Rights 42,160 122,433
South Korea (0.2%)
LG Cable & Machinery
Rights 128,998 542,692
Thailand (0.3%)
Siam Commercial Bank
5.25% Cv 1,703,000(d) 1,184,695
Total preferred stock & other
(Cost: $1,197,846) $1,849,820
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Short-term securities (6.9%)
Issuer Annualized Amount Value(a)
yield on date payable at
of purchase maturity
U.S. government agencies (5.9%)
Federal Home Loan Bank Disc Nt
<S> <C> <C> <C> <C>
05-26-99 4.70% $3,200,000 $3,189,578
Federal Home Loan Mtge Corp Disc Nts
05-06-99 4.75 1,700,000 1,698,881
05-12-99 4.80 900,000 898,688
05-14-99 4.69 2,500,000 2,495,775
05-14-99 4.71 5,100,000 5,091,345
05-18-99 4.79 600,000 598,482
05-25-99 4.79 1,100,000 1,096,509
06-07-99 4.78 1,700,000 1,690,842
06-16-99 4.75 1,700,000 1,688,792
06-22-99 4.71 2,600,000 2,582,424
Total 21,031,316
Commercial paper (1.0%)
Ciesco LP
05-03-99 4.86 800,000 799,785
Delaware Funding
05-25-99 4.82 700,000(e) 697,760
Novartis Finance
05-13-99 4.82 500,000(e) 499,198
Salomon Smith Barney
06-09-99 4.82 1,700,000 1,691,178
Total 3,687,921
Total short-term securities
(Cost: $24,721,220) $24,719,237
Total investments in securities
(Cost: $289,446,189)(g) $355,446,467
</TABLE>
<PAGE>
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) Security is partially or fully on loan. See Note 4 to the financial
statements.
(d) Represents a security sold under Rule 144A, which is exempt from
registration under the Securities Act of 1933, as amended. This security has
been determined to be liquid under guidelines established by the board.
(e) Commercial paper sold within terms of a private placement memorandum, exempt
from registration under Section 4(2) of the Securities Act of 1933, as amended,
and may be sold only to dealers in that program or other "accredited investors."
This security has been determined to be liquid under guidelines established by
the board.
(f) Negligible market value.
(g) At April 30, 1999, the cost of securities for federal income tax purposes
was approximately $289,446,000 and the approximate aggregate gross unrealized
appreciation and depreciation based on that cost was:
Unrealized appreciation $74,876,000
Unrealized depreciation (8,876,000)
----------
Net unrealized appreciation $66,000,000
<PAGE>
<TABLE>
<CAPTION>
Financial Statements
Statement of assets and liabilities
World Growth Portfolio
April 30, 1999 (Unaudited)
Assets
Investments in securities, at value (Note 1)
<S> <C>
(identified cost $1,464,745,530) $1,802,275,486
Cash in bank on demand deposit 2,263,140
Dividends and accrued interest receivable 3,023,298
Receivable for investment securities sold 59,591,744
Unrealized appreciation on foreign currency contracts held, at value (Notes 1 and 4) 224,928
U.S. government securities held as collateral (Note 5) 10,399,988
----------
Total assets 1,877,778,584
-------------
Liabilities
Payable for investment securities purchased 1,996,086
Payable upon return of securities loaned (Note 5) 250,150,738
Accrued investment management services fee 33,087
Other accrued expenses 120,711
-------
Total liabilities 252,300,622
-----------
Net assets $1,625,477,962
==============
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Statement of operations
World Growth Portfolio
Six months ended April 30, 1999 (Unaudited)
Investment income
Income:
<S> <C>
Dividends $ 6,610,540
Interest 2,213,198
Less foreign taxes withheld (748,427)
--------
Total income 8,075,311
---------
Expenses (Note 2):
Investment management services fee 5,451,466
Compensation of board members 6,686
Custodian fees 320,725
Audit fees 11,250
Other 21,504
------
Total expenses 5,811,631
Earnings credits on cash balances (Note 2) (2,339)
------
Total net expenses 5,809,292
---------
Investment income (loss) -- net 2,266,019
---------
Realized and unrealized gain (loss) -- net Net realized gain (loss) on:
Security transactions (Note 3) 72,456,796
Foreign currency transactions (537,612)
--------
Net realized gain (loss) on investments 71,919,184
Net change in unrealized appreciation (depreciation) on investments
and on translation of assets and liabilities in foreign currencies 189,318,664
-----------
Net gain (loss) on investments and foreign currencies 261,237,848
-----------
Net increase (decrease) in net assets resulting from operations $263,503,867
============
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Statements of changes in net assets
World Growth Portfolio
April 30, 1999 Oct. 31, 1998
Six months ended Year ended
(Unaudited)
Operations
<S> <C> <C>
Investment income (loss)-- net $ 2,266,019 $ 9,469,973
Net realized gain (loss) on investments 71,919,184 69,879,530
Net change in unrealized appreciation (depreciation ) on investments
and on translation of assets and liabilities in foreign currencies 189,318,664 104,617,372
----------- -----------
Net increase (decrease) in net assets resulting from operations 263,503,867 183,966,875
Net contributions (withdrawals) from partners 81,929,457 (37,038,141)
---------- -----------
Total increase (decrease) in net assets 345,433,324 146,928,734
Net assets at beginning of period 1,280,044,638 1,133,115,904
------------- -------------
Net assets at end of period $1,625,477,962 $1,280,044,638
============== ==============
See accompanying notes to financial statements.
</TABLE>
<PAGE>
Notes to Financial Statements
World Growth Portfolio
(Unaudited as to April 30, 1999)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
World Growth 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. World Growth Portfolio
seeks to provide long-term capital growth by investing primarily in equity
securities of companies throughout the world. The Declaration of Trust permits
the Trustees to issue non-transferable interests in the Portfolio.
The Portfolio's significant accounting policies are summarized below:
Use of estimates
Preparing financial statements that conform to generally accepted accounting
principles requires management to make estimates (e.g., on assets and
liabilities) that could differ from actual results.
Valuation of securities
All securities are valued at the close of each business day. Securities traded
on national securities exchanges or included in national market systems are
valued at the last quoted sales price. Debt securities are generally traded in
the over-the-counter market and are valued at a price that reflects fair value
as quoted by dealers in these securities or by an independent pricing service.
Securities for which market quotations are not readily available are valued at
fair value according to methods selected in good faith by the board. Short-term
securities maturing in more than 60 days from the valuation date are valued at
the market price or approximate market value based on current interest rates;
those maturing in 60 days or less are valued at amortized cost.
Option transactions
To produce incremental earnings, protect gains and facilitate buying and selling
of securities for investments, the Portfolio may buy and write options traded on
any U.S. or foreign exchange or in the over-the-counter market where completing
the obligation depends upon the credit standing of the other party. The
Portfolio also may buy and sell put and call options and write covered call
options on portfolio securities as well as write cash-secured put options. The
risk in writing a call option is that the Portfolio gives up the opportunity for
profit if the market price of the security increases. The risk in writing a put
option is that the Portfolio may incur a loss if the market price of the
security decreases and the option is exercised. The risk in buying an option is
that the Portfolio pays a premium whether or not the option is exercised. The
Portfolio also has the additional risk of being unable to enter into a closing
transaction if a liquid secondary market does not exist.
Option contracts are valued daily at the closing prices on their primary
exchanges and unrealized appreciation or depreciation is recorded. The Portfolio
will realize a gain or loss when the option transaction expires or closes. When
an option is exercised, the proceeds on sales for a written call option, the
purchase cost for a written put option or the cost of a security for a purchased
put or call option is adjusted by the amount of premium received or paid.
Futures transactions To gain exposure to or protect itself from market changes,
the Portfolio may buy and sell financial futures contracts traded on any U.S. or
foreign exchange. The Portfolio also may
buy and write put and call options on these futures contracts. Risks of entering
into futures contracts and related options include the possibility of an
illiquid market and that a change in the value of the contract or option may not
correlate with changes in the value of the underlying securities.
Upon entering into a futures contract, the Portfolio is required to deposit
either cash or securities in an amount (initial margin) equal to a certain
percentage of the contract value. Subsequent payments (variation margin) are
made or received by the Portfolio each day. The variation margin payments are
equal to the daily changes in the contract value and are recorded as unrealized
gains and losses. The Portfolio recognizes a realized gain or loss when the
contract is closed or expires.
Foreign currency translations and foreign currency contracts
Securities and other assets and liabilities denominated in foreign currencies
are translated daily into U.S. dollars 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,
if any, may arise from sales of foreign currency, closed forward contracts,
exchange gains or losses realized between the trade date and settlement date on
securities transactions, and other translation gains or losses on dividends,
interest income and foreign withholding taxes.
The Portfolio may enter into forward foreign currency exchange contracts for
operational purposes and to protect against adverse exchange rate fluctuation.
The net U.S. dollar value of foreign currency underlying all contractual
commitments held by the Portfolio and the resulting unrealized appreciation or
depreciation are determined using foreign currency exchange rates from an
independent pricing service. The Portfolio is subject to the credit risk that
the other party will not complete its contract obligations.
Federal taxes
For federal income tax purposes the Portfolio qualifies as a partnership and
each investor in the Portfolio is treated as the owner of its proportionate
share of the net assets, income, expenses and realized and unrealized gains and
losses of the Portfolio. As a "pass-through" entity, the Portfolio therefore
does not pay any income dividends or capital gain distributions.
Other
Security transactions are accounted for on the date securities are purchased or
sold. Dividend income is recognized on the ex-dividend date or upon receipt of
ex-dividend notification in the case of certain foreign securities. For U.S.
dollar denominated bonds, interest income, including level-yield amortization of
premium and discount, is accrued daily. For foreign bonds, except for original
issue discount, the Portfolio does not amortize premium and discount.
2. FEES AND EXPENSES
The Trust, on behalf of the Portfolio, has an Investment Management Services
Agreement with AEFC to manage its portfolio. Under this agreement, AEFC
determines which securities will be purchased, held or sold. The management fee
is a percentage of the Portfolio's average daily net assets in reducing
percentages from 0.8% to 0.675% annually.
Under the agreement, the Trust also pays taxes, brokerage commissions and
nonadvisory expenses, which include custodian fees, audit and certain legal
fees, fidelity bond premiums, registration fees for units, office expenses,
consultants' fees, compensation of trustees, corporate filing fees, expenses
incurred in connection with lending securities of the Portfolio and any other
expenses properly payable by the Trust or Portfolio and approved by the board.
AEFC has a sub-investment Advisory Agreement with American Express Asset
Management International Inc. (International), a wholly-owned subsidiary of
AEFC.
The Portfolio also pays custodian fees to American Express Trust Company, an
affiliate of AEFC.
During the six months ended April 30, 1999, the Portfolio's custodian fees were
reduced by $2,339 as a result of earnings credits from overnight cash balances.
According to a Placement Agency Agreement, American Express Financial Advisors
Inc. acts as placement agent of the Trust's units.
3. SECURITIES TRANSACTIONS
Cost of purchases and proceeds from sales of securities (other than short-term
obligations) aggregated $600,193,489 and $536,342,938, respectively, for the six
months ended April 30, 1999. For the same period, the portfolio turnover rate
was 38%. Realized gains and losses are determined on an identified cost basis.
<PAGE>
<TABLE>
<CAPTION>
4. FOREIGN CURRENCY CONTRACTS
As of April 30, 1999, the Portfolio has foreign currency exchange contracts that
obligate it to deliver currencies at specified future dates. The unrealized
appreciation and/or depreciation on these contracts is included in the
accompanying financial statements. See "Summary of significant accounting
policies." The terms of the open contracts are as follows:
Exchange date Currency to Currency to Unrealized Unrealized
be delivered be received appreciation depreciation
<S> <C> <C> <C> <C>
May 3, 1999 1,993,928 18,433,864 $ 1,079 $--
U.S. Dollar Mexican Peso
May 3, 1999 1,426,841 1,518,231 10,630 --
European Monetary Unit U.S. Dollar
May 7, 1999 438,852,431 3,683,502 7,867 --
Japanese Yen U.S. Dollar
May 9, 1999 5,790,367,801 48,682,280 184,707 --
Japanese Yen U.S. Dollar
May 28, 1999 2,319,713 2,471,654 20,645 --
European Monetary Unit U.S. Dollar -------- -----
Total $224,928 $--
5. LENDING OF PORTFOLIO SECURITIES
As of April 30, 1999, securities valued at $240,382,468 were on loan to brokers.
For collateral, the Portfolio received $239,750,750 in cash and U.S. government
securities valued at $10,399,988. Income from securities lending amounted to
$309,508 for the six months ended April 30, 1999. The risks to the Portfolio of
securities lending are that the borrower may not provide additional collateral
when required or return the securities when due.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Investments in Securities
World Growth Portfolio
April 30, 1999 (Unaudited)
(Percentages represent value of investments compared to net assets)
Common stocks (91.9%)
Issuer Shares Value(a)
Argentina (0.8%)
Multi-industry conglomerates (0.4%)
<S> <C> <C>
Perez Companc ADR 550,000(c) $6,844,806
Utilities -- telephone (0.4%)
Telefonica de Argentina ADR 170,000 6,353,750
Australia (1.6%)
Insurance (0.8%)
AMP 1,096,000 12,801,170
Transportation (0.8%)
Brambles Inds 465,000 13,664,025
Canada (2.0%)
Communications equipment & services (0.8%)
Nortel Networks 200,000(b,c) 13,637,500
Multi-industry conglomerates (0.5%)
Bombardier Cl B 570,100(c) 8,841,793
Utilities -- telephone (0.7%)
BCE 231,800 10,590,363
France (9.4%)
Banks and savings & loans (2.2%)
Banque Natl de Paris 429,496(c) 35,601,052
Electronics (5.8%)
Elf Aquitaine 105,000 16,308,621
SGS-Thomson Microelectronics 304,000 31,670,962
Total Petroleum Cl B 340,423(b) 46,615,960
Total 94,595,543
Food (1.1%)
Sodexho Alliance 112,548(b) 18,468,001
Utilities -- electric (0.3%)
Suez Lyonnaise des Eaux 27,231 4,632,336
Germany (4.9%)
Automotive & related (1.5%)
Volkswagen 337,648 23,938,534
Industrial equipment & services (3.4%)
Mannesmann 415,148 54,655,230
Italy (6.2%)
Banks and savings & loans (5.9%)
Banca Intesa 6,003,766(c) 31,971,855
Instituto Bancario San Paolo di Torino 1,891,494(c) 28,379,409
Unicredito Italiano 6,854,148(c) 34,762,182
Total 95,113,446
Utilities -- telephone (0.3%)
Telecom Italia 482,653 5,135,428
Japan (0.1%)
Electronics
Fujikura 281,000(c) 1,463,898
Mexico (1.2%)
Banks and savings & loans (0.1%)
Grupo Financiero Banamex Accival 752,950(b) 1,919,044
Multi-industry conglomerate (0.5%)
Grupo Financiero Banorte Cl B 6,000,000(b) 7,779,222
Paper & packaging (0.6%)
Kimberly-Clark de Mexico 2,400,000 9,350,650
Netherlands (5.2%)
Industrial equipment & services (2.8%)
Philips Electronics 524,676 45,181,372
Utilities -- telephone (2.4%)
Equant 433,900 39,381,588
Singapore (0.6%)
Financial services
DBS Land 5,296,000 9,803,426
Spain (3.4%)
Building materials & construction (1.0%)
Fomento de Construcciones y Contractas 273,596 16,708,918
Utilities -- telephone (2.4%)
Telefonica de Espana 845,600 39,624,985
Sweden (3.3%)
Banks and savings & loans (0.7%)
Nordbanken Holding 1,785,832(c) 11,216,989
Communications equipment & services (2.6%)
Ericsson (LM) Cl B 1,631,854 42,836,657
Switzerland (3.5%)
Banks and savings & loans
UBS 165,863(c) 56,327,954
United Kingdom (15.0%)
Media (0.8%)
British Sky Broadcasting Group 1,550,309 13,705,352
Multi-industry conglomerates (5.2%)
General Electric 5,579,197 58,881,171
Williams 3,696,116 25,197,532
Total 84,078,703
Retail (1.6%)
Great Universal Stores 2,350,454 26,791,415
Transportation (0.4%)
Stagecoach Holdings 2,054,688 7,123,603
Utilities -- telephone (7.0%)
Cable & Wireless Communications 2,856,859(c) 32,609,331
Orange 2,684,808 36,411,903
Vodafone 2,458,089 45,003,186
Total 114,024,420
United States (34.4%)
Banks and savings & loans (1.5%)
Bank of America 343,720 24,683,393
Chemicals (2.8%)
Du Pont (EI) de Nemours 398,700 28,158,188
Monsanto 396,740 17,952,485
Total 46,110,673
Communications equipment & services (1.0%)
Lucent Technologies 280,200 16,847,025
Computers & office equipment (7.4%)
America Online 167,000 23,839,250
Cisco Systems 282,100(b) 32,177,030
Electronic Data Systems 343,000(c) 18,436,250
Hewlett-Packard 293,900 23,181,363
Intl Business Machines 109,000 22,801,438
Total 120,435,331
Electronics (1.5%)
Intel 386,600 23,655,088
Energy (2.0%)
Texaco 530,900 33,313,975
Financial services (3.4%)
Citigroup 424,100 31,913,525
Fannie Mae 338,090 23,983,259
Total 55,896,784
Health care (2.7%)
Boston Scientific 573,100(b) 24,392,569
Pfizer 168,000 19,330,500
Total 43,723,069
Household products (0.9%)
Colgate-Palmolive 145,000 14,853,438
Insurance (1.3%)
American Intl Group 182,100 21,385,369
Leisure time & entertainment (0.7%)
Disney (Walt) 351,000 11,144,250
Multi-industry conglomerates (1.3%)
General Electric 196,600 20,741,300
Retail (3.8%)
Rite Aid 460,000 10,723,750
Safeway 272,000(b) 14,671,000
Wal-Mart Stores 543,800 25,014,800
Walgreen 430,000 11,556,250
Total 61,965,800
Utilities -- telephone (4.1%)
MCI WorldCom 211,600(b) 17,390,875
AT&T 347,100 17,528,550
Frontier 308,300 17,014,306
SBC Communications 269,400 15,086,400
Total 67,020,131
Total common stocks
(Cost: $1,162,691,566) $1,493,966,799
Other (0.5%)
Issuer Shares Value(a)
Italy
Banca Intesa
Warrants 6,003,766 $6,850,897
Spain
Telefonica
Rights 845,600 786,239
Total other
(Cost: $1,321,579) $7,637,136
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Short-term securities (18.5%)
Issuer Annualized Amount Value(a)
yield on date payable at
of purchase maturity
U.S. government agencies (15.7%)
Federal Home Loan Bank Disc Nts
<S> <C> <C> <C> <C>
05-21-99 4.77% $4,700,000 $4,687,623
05-26-99 4.70 16,400,000 16,346,586
Federal Home Loan Mtge Corp Disc Nts
05-04-99 4.76 8,600,000 8,596,603
05-14-99 4.69 4,600,000 4,592,226
05-17-99 4.80 7,500,000 7,482,050
05-18-99 4.79 13,400,000 13,366,096
05-20-99 4.76 17,700,000 17,655,767
05-25-99 4.74 9,100,000 9,071,365
06-07-99 4.78 13,400,000 13,327,815
06-11-99 4.74 34,700,000 34,513,863
06-15-99 4.77 22,300,000 22,156,026
06-16-99 4.75 43,500,000 43,213,196
06-18-99 4.75 16,300,000 16,188,192
06-21-99 4.72 9,400,000 9,335,349
Federal Natl Mtge Assn Disc Nts
05-18-99 4.70 13,800,000 13,769,437
05-18-99 4.77 19,400,000 19,356,485
Total 253,658,679
Commercial paper (2.9%)
Ameritech Capital Funding
05-11-99 4.84 10,300,000(d) 10,286,209
BMW US Capital
05-05-99 4.86 4,400,000 4,397,639
Delaware Funding
06-17-99 4.83 3,700,000(d) 3,676,813
Fleet Funding
06-11-99 4.85 6,900,000(d) 6,862,123
Goldman Sachs Group
05-20-99 4.84 1,800,000 1,795,421
Natl Australia Funding (Delaware)
05-03-99 4.82 20,000,000 19,994,667
Total 47,012,872
Total short-term securities
(Cost: $300,732,385) $300,671,551
Total investments in securities
(Cost: $1,464,745,530)(e) $1,802,275,486
</TABLE>
<PAGE>
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) Security is partially or fully on loan. See Note 5 to the financial
statements.
(d) Commercial paper sold within terms of a private placement memorandum, exempt
from registration under Section 4(2) of the Securities Act of 1933, as amended,
and may be sold only to dealers in that program or other "accredited investors."
This security has been determined to be liquid under guidelines established by
the board.
(e) At April 30, 1999, the cost of securities for federal income tax purposes
was approximately $1,464,746,000 and the approximate aggregate gross unrealized
appreciation and depreciation based on that cost was:
Unrealized appreciation $362,548,000
Unrealized depreciation (25,019,000)
-----------
Net unrealized appreciation $337,529,000
<PAGE>
<TABLE>
<CAPTION>
Financial Statements
Statement of assets and liabilities
World Income Portfolio
April 30, 1999 (Unaudited)
Assets
Investments in securities, at value (Note 1)
<S> <C>
(identified cost $929,785,671) $ 933,687,780
Cash in bank on demand deposit 1,103,077
Dividends and accrued interest receivable 23,346,415
Receivable for investment securities sold 1,248,838
Unrealized appreciation on foreign currency contracts held, at value (Notes 1 and 4) 818,120
U.S. government securities held as collateral for securities loaned (Note 5) 95,701,108
----------
Total assets 1,055,905,338
-------------
Liabilities
Payable for investment securities purchased 10,410,890
Unrealized depreciation on foreign currency contracts held, at value (Notes 1 and 4) 61,090
Payable upon return of securities loaned (Note 5) 96,649,108
Accrued investment management services fee 19,162
Other accrued expenses 75,016
------
Total liabilities 107,215,266
-----------
Net assets $ 948,690,072
==============
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Statement of operations
World Income Portfolio
Six months ended April 30, 1999 (Unaudited)
Investment income
Income:
<S> <C>
Dividends $ 194,250
Interest 32,091,758
Less foreign taxes withheld (2,300)
------
Total income 32,283,708
----------
Expenses (Note 2):
Investment management services fee 3,606,067
Compensation of board members 6,118
Custodian fees 160,327
Audit fees 11,438
Other 53,091
------
Total expenses 3,837,041
Earnings credits on cash balances (Note 2) (3,573)
------
Total net expenses 3,833,468
---------
Investment income (loss) -- net 28,450,240
----------
Realized and unrealized gain (loss) -- net Net realized gain (loss) on:
Security transactions (Note 3) (5,179,084)
Financial futures contracts (941,375)
Foreign currency transactions 604,610
Options contracts written (Note 7) 346,961
-------
Net realized gain (loss) on investments (5,168,888)
Net change in unrealized appreciation (depreciation) on investments
and on translation of assets and liabilities in foreign currencies (13,769,194)
-----------
Net gain (loss) on investments and foreign currencies (18,938,082)
-----------
Net increase (decrease) in net assets resulting from operations $ 9,512,158
============
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Statements of changes in net assets
World Income Portfolio
April 30, 1999 Oct. 31, 1998
Six months ended Year ended
(Unaudited)
Operations
<S> <C> <C>
Investment income (loss)-- net $ 28,450,240 $ 61,053,694
Net realized gain (loss) on investments (5,168,888) (12,436,385)
Net change in unrealized appreciation (depreciation) on investments
and on translation of assets and liabilities in foreign currencies (13,769,194) 3,660,313
----------- ---------
Net increase (decrease) in net assets resulting from operations 9,512,158 52,277,622
Net contributions (withdrawals) from partners (49,200,200) (49,153,308)
----------- -----------
Total increase (decrease) in net assets (39,688,042) 3,124,314
Net assets at beginning of period 988,378,114 985,253,800
----------- -----------
Net assets at end of period $948,690,072 $988,378,114
============ ============
See accompanying notes to financial statements.
</TABLE>
<PAGE>
Notes to Financial Statements
World Income Portfolio
(Unaudited as to April 30, 1999)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
World Income 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
non-diversified, open-end management investment company. World Income Portfolio
invests primarily in debt securities of U.S. and foreign issuers. The
Declaration of Trust permits the Trustees to issue non-transferable interests in
the Portfolio.
The Portfolio's significant accounting policies are summarized below:
Use of estimates
Preparing financial statements that conform to generally accepted accounting
principles requires management to make estimates (e.g., on assets and
liabilities) that could differ from actual results.
Valuation of securities
All securities are valued at the close of each business day. Securities traded
on national securities exchanges or included in national market systems are
valued at the last quoted sales price. Debt securities are generally traded in
the over-the-counter market and are valued at a price that reflects fair value
as quoted by dealers in these securities or by an independent pricing service.
Securities for which market quotations are not readily available are valued at
fair value according to methods selected in good faith by the board. Short-term
securities maturing in more than 60 days from the valuation date are valued at
the market price or approximate market value based on current interest rates;
those maturing in 60 days or less are valued at amortized cost.
Option transactions
To produce incremental earnings, protect gains and facilitate buying and selling
of securities for investments, the Portfolio may buy and write options traded on
any U.S. or foreign exchange or in the over-the-counter market where completing
the obligation depends upon the credit standing of the other party. The
Portfolio also may buy and sell put and call options and write covered call
options on portfolio securities as well as write cash-secured put options. The
risk in writing a call option is that the Portfolio gives up the opportunity for
profit if the market price of the security increases. The risk in writing a put
option is that the Portfolio may incur a loss if the market price of the
security decreases and the option is exercised. The risk in buying an option is
that the Portfolio pays a premium whether or not the option is exercised. The
Portfolio also has the additional risk of being unable to enter into a closing
transaction if a liquid secondary market does not exist.
Option contracts are valued daily at the closing prices on their primary
exchanges and unrealized appreciation or depreciation is recorded. The Portfolio
will realize a gain or loss when the option transaction expires or closes. When
an option is exercised, the proceeds on sales for a written call option, the
purchase cost for a written put option or the cost of a security for a purchased
put or call option is adjusted by the amount of premium received or paid.
Futures transactions
To gain exposure to or protect itself from market changes, the Portfolio may buy
and sell financial futures contracts traded on any U.S. or foreign exchange. The
Portfolio also may buy and write put and call options on these futures
contracts. Risks of entering into futures contracts and related options include
the possibility of an illiquid market and that a change in the value of the
contract or option may not correlate with changes in the value of the underlying
securities.
Upon entering into a futures contract, the Portfolio is required to deposit
either cash or securities in an amount (initial margin) equal to a certain
percentage of the contract value. Subsequent payments (variation margin) are
made or received by the Portfolio each day. The variation margin payments are
equal to the daily changes in the contract value and are recorded as unrealized
gains and losses. The Portfolio recognizes a realized gain or loss when the
contract is closed or expires.
Foreign currency translations and foreign currency contracts
Securities and other assets and liabilities denominated in foreign currencies
are translated daily into U.S. dollars 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,
if any, may arise from sales of foreign currency, closed forward contracts,
exchange gains or losses realized between the trade date and settlement date on
securities transactions, and other translation gains or losses on dividends,
interest income and foreign withholding taxes.
The Portfolio may enter into forward foreign currency exchange contracts for
operational purposes and to protect against adverse exchange rate fluctuation.
The net U.S. dollar value of foreign currency underlying all contractual
commitments held by the Portfolio and the resulting unrealized appreciation or
depreciation are determined using foreign currency exchange rates from an
independent pricing service. The Portfolio is subject to the credit risk that
the other party will not complete its contract obligations.
Federal taxes
For federal income tax purposes the Portfolio qualifies as a partnership and
each investor in the Portfolio is treated as the owner of its proportionate
share of the net assets, income, expenses and realized and unrealized gains and
losses of the Portfolio. As a "pass-through" entity, the Portfolio therefore
does not pay any income dividends or capital gain distributions.
Other
Security transactions are accounted for on the date securities are purchased or
sold. Dividend income is recognized on the ex-dividend date or upon receipt of
ex-dividend notification in the case of certain foreign securities. For U.S.
dollar denominated bonds, interest income, including level-yield amortization of
premium and discount is accrued daily. For foreign bonds the Fund amortizes
premium and original issue discount daily and market discount is recognized at
the time of sale.
2. FEES AND EXPENSES
The Trust, on behalf of the Portfolio, has an Investment Management Services
Agreement with AEFC to manage its portfolio. Under this agreement, AEFC
determines which securities will be purchased, held or sold. The management fee
is a percentage of the Portfolio's average daily net assets in reducing
percentages from 0.77% to 0.67% annually.
Under the agreement, the Trust also pays taxes, brokerage commissions and
nonadvisory expenses, which include custodian fees, audit and certain legal
fees, fidelity bond premiums, registration fees for units, office expenses,
consultants' fees, compensation of trustees, corporate filing fees, expenses
incurred in connection with lending securities of the Portfolio and any other
expenses properly payable by the Trust or Portfolio and approved by the board.
The Portfolio also pays custodian fees to American Express Trust Company, an
affiliate of AEFC.
During the six months ended April 30, 1999, the Portfolio's custodian fees were
reduced by $3,573 as a result of earnings credits from overnight cash balances.
According to a Placement Agency Agreement, American Express Financial Advisors
Inc. acts as placement agent of the Trust's units.
3. SECURITIES TRANSACTIONS
Cost of purchases and proceeds from sales of securities (other than short-term
obligations) aggregated $231,825,488 and $327,823,837, respectively, for the six
months ended April 30, 1999. For the same period, the portfolio turnover rate
was 26%. Realized gains and losses are determined on an identified cost basis.
<PAGE>
<TABLE>
<CAPTION>
4. FOREIGN CURRENCY CONTRACTS
As of April 30, 1999, the Portfolio has foreign currency exchange contracts that
obligate it to deliver currencies at specified future dates. The unrealized
appreciation and/or depreciation on these contracts is included in the
accompanying financial statements. See "Summary of significant accounting
policies." The terms of the open contracts are as follows:
Exchange date Currency to Currency to Unrealized Unrealized
be delivered be received appreciation depreciation
<S> <C> <C> <C> <C>
May 3, 1999 10,471,980 9,853,199 $ -- $61,090
U.S. Dollar European Monetary Unit
May 5, 1999 70,000,000 8,537,522 241,281 --
Swedish Krona U.S. Dollar
May 17, 1999 13,440,000 14,603,635 390,762 --
European Monetary Unit U.S. Dollar
June 14, 1999 12,000,000 19,483,200 186,077 --
British Pound U.S. Dollar -------- -------
Total $818,120 $61,090
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
5. LENDING OF PORTFOLIO SECURITIES
As of April 30, 1999, securities valued at $94,448,356 were on loan to brokers.
For collateral, the Portfolio received $948,000 in cash and U.S. government
securities valued at $95,701,108. Income from securities lending amounted to
$97,716 for the six months ended April 30, 1999. The risks to the Portfolio of
securities lending are that the borrower may not provide additional collateral
when required or return the securities when due.
6. INTEREST RATE FUTURES CONTRACTS
As of April 30, 1999, investments in securities included securities valued at
$4,724,725 that were pledged as collateral to cover initial margin deposits on
150 open purchase contracts and 100 open sales contracts. The market value of
the open purchase contracts as of April 30, 1999 was $15,787,500 with a net
unrealized loss of $152,475. The market value of the open sales contracts as of
April 30, 1999 was $12,018,750 with a net unrealized gain of $205,850.
7. OPTIONS CONTRACTS WRITTEN
Contracts and premium amounts associated with options contracts written are as
follows
Six months ended April 30, 1999
Puts Calls
Contracts Premium Contracts Premium
<S> <C> <C> <C> <C>
Balance Oct. 31, 1998 -- $ -- -- $ --
Opened 300 1,038,700 500 797,700
Expired (300) (1,038,700) -- --
Closed -- -- (500) (797,700)
---- ---------- ---- --------
Balance April 30, 1999 -- $ -- -- $ --
</TABLE>
<PAGE>
<TABLE>
Investments in Securities
World Income Portfolio
April 30, 1999 (Unaudited)
(Percentages represent value of investments compared to net assets)
Bonds (86.8%)(c)
Issuer Coupon Principal Value(a)
rate amount
Argentina (0.8%)
Republic of Argentina
(Japanese Yen)
<S> <C> <C> <C>
03-27-01 5.50% 880,000,000 $7,248,880
Australia (1.0%)
New South Wales Treasury
(Australian Dollar)
03-01-08 8.00 12,300,000 9,394,109
Bermuda (0.2%)
Central Euro Media
(European Monetary Unit) Sr Nts Series RG
08-15-04 8.13 3,925,000 1,738,733
Canada (3.9%)
Govt of Canada
(Canadian Dollar)
06-01-23 8.00 38,810,000 35,775,138
Rogers Cablesystems
(Canadian Dollar)
01-15-14 9.65 2,000,000 1,513,176
Cayman Islands (0.2%)
Roil
(U.S. Dollar)
12-05-02 12.78 4,149,900(d) 1,452,465
China (1.8%)
Greater Beijing First Expressways
(U.S. Dollar) Sr Nts
06-15-04 9.25 3,500,000(d) 1,925,000
06-15-07 9.50 8,750,000(d) 4,637,500
Total 6,562,500
People's Republic of China
(U.S. Dollar)
07-03-01 7.38 4,450,000 4,531,880
Zhuhai Highway
(U.S. Dollar) Sub Nts
07-01-08 12.00 11,350,000(d) 6,015,500
Denmark (5.1%)
Govt of Denmark
(Danish Krone)
11-15-00 9.00 40,000,000 6,176,939
05-15-03 8.00 113,200,000 18,802,283
03-15-06 8.00 65,000,000 11,366,019
11-10-24 7.00 70,000,000 12,340,047
Total 48,685,288
France (1.2%)
Govt of France
(European Monetary Unit)
04-25-05 7.50 8,710,000 11,238,382
Germany (7.4%)
Federal Republic of Germany
(European Monetary Unit)
07-22-02 8.00 18,471,330 22,482,814
11-11-04 7.50 33,175,566 42,287,041
07-04-27 6.50 4,305,512 5,648,474
Total 70,418,329
Greece (2.7%)
Hellenic Republic
(Greek Drachma)
03-21-00 9.80 2,550,000,000 8,317,700
04-01-03 8.90 4,888,000,000 17,121,353
Total 25,439,053
Hong Kong (0.5%)
Hutchison Whampoa Finance
(U.S. Dollar) Company Guaranty
08-01-27 7.50 5,000,000(d) 4,501,008
Indonesia (0.9%)
Indah Kiat Finance Mauritius
(U.S. Dollar) Company Guaranty
07-01-07 10.00 4,350,000(b) 2,936,250
Indah Kiat Pulp & Paper
(U.S. Dollar)
11-01-00 8.88 2,500,000(b) 2,062,500
Tjiwi Kimia Finance Mauritius
(U.S. Dollar) Company Guaranty
08-01-04 10.00 2,450,000(b) 1,617,000
Tjiwi Kimia Intl
(U.S. Dollar) Company Guaranty
08-01-01 13.25 2,000,000(b) 1,620,000
Italy (4.3%)
Govt of Italy
(European Monetary Unit)
01-01-04 8.50 23,821,533 30,549,378
11-01-26 7.25 7,886,283 10,676,070
Total 41,225,448
Japan (0.1%)
Nippon Express
(Japanese Yen) Cv Series 4
03-31-04 1.00 120,000,000 1,055,316
Malaysia (0.4%)
Petronas
(U.S. Dollar)
08-15-15 7.75 4,550,000(d) 4,209,843
Mexico (1.5%)
Banco Nacional de Comercio Exterior
(U.S. Dollar)
02-02-04 7.25 4,150,000 3,815,406
Imexsa Export Trust
(U.S. Dollar)
05-31-03 10.13 2,639,406(d) 2,533,830
United Mexican States
(British Pound) Medium-term Nts Series E
05-30-02 8.75 5,000,000 7,996,303
Norway (1.6%)
Govt of Norway
(Norwegian Krone)
11-30-04 5.75 60,000,000 8,096,394
01-15-07 6.75 48,000,000 6,948,864
Total 15,045,258
Philippines (0.6%)
Philippine Long Distance Telephone
(U.S. Dollar) Medium-term Nts Series E
03-06-07 7.85 6,200,000(d,e) 5,516,970
Russia (0.2%)
Rostelecom
(U.S. Dollar)
02-15-00 9.38 5,000,000(b) 1,750,000
Slovenia (1.1%)
Republic of Slovenia
(European Monetary Unit)
06-16-04 5.75 17,750,000 10,319,789
South Korea (0.5%)
Korea Electric Power
(U.S. Dollar)
12-01-03 6.38 5,040,000 4,836,660
Spain (2.5%)
Govt of Spain
(European Monetary Unit)
04-30-06 8.80 17,441,371 24,077,290
Sweden (4.8%)
Govt of Sweden
(Japanese Yen) Medium-term Nts
06-21-99 3.88 600,000,000 5,050,251
(Swedish Krona)
02-09-05 6.00 44,500,000 5,911,591
08-15-07 8.00 185,200,000 27,999,264
Total 38,961,106
Paulson Enterprenad
(Swedish Krona)
12-15-00 4.75 56,560,000 6,733,848
United Kingdom (11.9%)
Abbey Natl First Capital
(U.S. Dollar) Sub Nts
10-15-04 8.20 5,000,000 5,492,094
Colt Telecom Group
(European Monetary Unit)
07-31-08 7.63 6,400,000 3,569,846
Texon Intl
(European Monetary Unit) Sr Nts
02-01-08 10.00 4,000,000 2,031,268
United Kingdom Treasury
(British Pound)
03-03-00 9.00 21,700,000 36,025,231
06-10-03 8.00 27,000,000 48,292,210
12-07-05 8.50 9,200,000 17,852,927
Total 102,170,368
United States (30.5%)
Chesapeake
(U.S. Dollar)
05-01-03 9.88 1,000,000 1,127,362
Citicorp
(European Monetary Unit)
09-19-09 3.47 10,800,000 6,389,682
Cleveland Electric Illuminating
(U.S. Dollar) 1st Mtge Series B
05-15-05 9.50 3,000,000 3,202,948
Dayton Hudson
(U.S. Dollar)
12-01-22 8.50 3,265,000 3,547,647
Executive Risk Capital
(U.S. Dollar) Company Guaranty Series B
02-01-27 8.68 3,500,000 3,728,347
Federal Natl Mtge Assn
(U.S. Dollar)
02-01-27 7.50 2,724,828 2,802,049
06-01-27 7.50 4,517,248 4,645,267
Total 7,447,316
Federal Natl Mtge Assn Global
(Japanese Yen)
12-20-99 2.00 500,000,000 4,234,076
General Motors
(U.S. Dollar)
07-15-01 9.13 2,000,000 2,131,916
GTE North
(U.S. Dollar) Series F
02-15-10 6.38 9,950,000 10,006,536
Nationwide CSN Trust
(U.S. Dollar)
02-15-25 9.88 7,000,000(d) 8,138,191
New York Life Insurance
(U.S. Dollar)
12-15-23 7.50 7,000,000(d) 6,793,151
Overseas Private Investment
(U.S. Dollar) U.S. Govt Guaranty Series 1996A
01-15-09 6.99 7,500,000 7,714,125
PDV America
(U.S. Dollar) Sr Nts
08-01-03 7.88 3,500,000 3,259,704
Phillips Petroleum
(U.S. Dollar)
04-15-23 7.92 3,115,000 3,209,975
Questar Pipeline
(U.S. Dollar)
06-01-21 9.38 1,000,000 1,078,029
Salomon Smith Barney Holdings
(U.S. Dollar)
01-15-03 6.13 10,400,000 10,424,352
Southern California Gas
(U.S. Dollar) 1st Mtge Series BB
03-01-23 7.38 900,000 899,361
Swiss Bank
(U.S. Dollar) Sub Deb
07-15-25 7.50 4,700,000 4,967,909
TU Electric Capital
(U.S. Dollar) Company Guaranty
01-30-37 8.18 6,150,000 6,404,840
U S WEST Communications
(U.S. Dollar)
11-10-26 7.20 6,000,000 5,978,527
U.S. Treasury
(U.S. Dollar)
02-15-00 5.88 10,000,000 10,076,619
11-15-01 7.50 62,000,000(e,f) 65,432,363
11-15-16 7.50 79,950,000(e,f) 93,709,755
(U.S. Dollar) TIPS
01-15-07 3.38 10,000,000(g) 10,017,394
Total 179,236,131
USX
(U.S. Dollar)
03-01-08 6.85 4,775,000 4,761,895
Zurich Capital
(U.S. Dollar) Company Guaranty
06-01-37 8.38 4,550,000(d) 4,820,836
Venezuela (1.1%)
PDVSA Finance
(U.S. Dollar)
02-15-10 9.75 10,000,000(d) 9,964,296
Total bonds
(Cost: $819,289,854) $823,557,986
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Preferred stock & other (0.5%)(c)
Issuer Shares Value(a)
Mexico Value
<S> <C> <C>
Rights 1,000(h) $--
Pinto Totta Intl Finance
7.77% 5,000(b,d) 4,650,000
Total preferred stock & other
(Cost: $5,000,000) $4,650,000
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Short-term securities (11.1%)
Issuer Annualized Amount Value(a)
yield on date payable at
of purchase maturity
U.S. government agencies (8.3%)
Federal Home Loan Mtge Corp Disc Nts
<S> <C> <C> <C> <C>
05-04-99 4.74% $12,300,000 $12,293,522
05-05-99 4.77 9,500,000 9,493,706
05-20-99 4.74 15,600,000 15,559,049
05-25-99 4.74 6,200,000 6,179,678
06-15-99 4.74 15,100,000 15,009,123
06-16-99 4.75 9,300,000 9,240,627
Federal Natl Mtge Assn Disc Nt
06-14-99 4.73 11,400,000 11,333,024
Total 79,108,729
Commercial paper (2.4%)
CAFCO
06-15-99 4.83 6,900,000(i) 6,857,680
Delaware Funding
05-11-99 4.86 900,000(i) 898,666
Deutsche Bank Financial
05-26-99 4.81 4,400,000 4,384,778
Falcon Asset
06-01-99 4.84 1,100,000(i) 1,095,287
Fleet Funding
06-09-99 4.83 8,200,000(i) 8,156,267
Westpac Capital
06-10-99 4.83 1,700,000 1,690,707
Total 23,083,385
Letter of credit (0.4%)
Bank of America-
AES Hawaii
05-28-99 4.82 3,300,000 3,287,680
Total short-term securities
(Cost: $105,495,817) $105,479,794
Total investments in securities
(Cost: $929,785,671)(j) $933,687,780
</TABLE>
<PAGE>
Notes to investments in securities
(a) Securities are valued by procedures described in Note 1 to the financial
statements.
(b) Non-income producing. For long-term debt securities, item identified is in
default as to payment of interest and/or principal.
(c) Foreign security values are stated in U.S. dollars. For debt securities,
principal amounts are denominated in the currency indicated.
(d) Represents a security sold under Rule 144A, which is exempt from
registration under the Securities Act of 1933, as amended. This security has
been determined to be liquid under guidelines established by the board.
(e) Security is partially or fully on loan. See Note 5 to the financial
statements.
(f) Partially pledged as initial deposit on the following open interest rate
futures contracts (see Note 6 to the financial statements):
Type of security Notional amount
Purchase contracts
Japanese Yen, June 1999 $187,500
Sale contracts
U.S. Treasury Bonds, June 1999 100,000
(g) U.S. Treasury inflation-protection securities (TIPS) are securities in which
the principal amount is adjusted for inflation and the semiannual interest
payments equal a fixed percentage of the inflation-adjusted principal amount.
(h) Negligible market value.
(i) Commercial paper sold within terms of a private placement memorandum, exempt
from registration under Section 4(2) of the Securities Act of 1933, as amended,
and may be sold only to dealers in that program or other "accredited investors."
This security has been determined to be liquid under guidelines established by
the board.
(j) At April 30, 1999, the cost of securities for federal income tax purposes
was approximately $931,431,000 and the approximate aggregate gross unrealized
appreciation and depreciation based on that cost was:
Unrealized appreciation $29,410,000
Unrealized depreciation (27,153,000)
-----------
Net unrealized appreciation $2,257,000
<PAGE>
American Express Service Corporation, Distributor
S-6145 D (6/99)
