STRATEGIST WORLD FUND INC, 485BPOS, 1999-12-27

STRATEGIST WORLD FUND INC
485BPOS, 1999-12-27

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<PAGE>

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form N-1A

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

Pre-Effective Amendment No. (File No. 33-63951)

Post-Effective Amendment No. 8

and/or

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940

Amendment No. 10 (File No. 811-7405)

STRATEGIST WORLD FUND, INC.
(formerly Express Direct World Fund, Inc.)
IDS Tower 10, Minneapolis, Minnesota 55440-0010

Eileen J. Newhouse - IDS Tower 10,
Minneapolis, Minnesota 55440-0010
(612) 671-2772

Approximate Date of Proposed Public Offering:

[ ] immediately upon filing pursuant to paragraph (b)
[X] on Dec. 30, 1999 pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(1)
[ ] on (date) pursuant to paragraph (a)(1)
[ ] 75 days after filing pursuant to paragraph (a)(2)
[ ] on (date) paragraph (a)(2) of rule 485.

If appropriate, check the following box:
[ ] this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.

World Trust has also executed this Amendment to the Registration Statement.

<PAGE>

Strategist World Fund, Inc.

Prospectus/Dec. 30, 1999

Strategist Emerging Markets Fund

Strategist World Growth Fund

Strategist World Income Fund

Please note that each Fund:

o is not a bank deposit

o is not federally insured

o is not endorsed by any bank or government agency

o is not guaranteed to achieve its goals

Like all mutual funds, the Securities and Exchange Commission has not approved
or disapproved these securities or passed upon the adequacy of this prospectus.
Any representation to the contrary is a criminal offense.

<PAGE>

Table of Contents

TAKE A CLOSER LOOK AT:
The Funds 2
Strategist Emerging Markets 2
Goal 2
Investment Strategy 2
Risks 4
Past Performance 6
Fees and Expenses 8
Management 9

Strategist World Growth Fund 10
Goal 10
Investment Strategy 10
Risks 12
Past Performance 13
Fees and Expenses 15
Management 16

Strategist World Income Fund 17
Goal 17
Investment Strategy 17
Risks 18
Past Performance 20
Fees and Expenses 22
Management 23

Buying and Selling Shares 23
Valuing Fund Shares 23
Purchasing Shares 24
Exchanging/Selling Shares 28

Distributions and Taxes 30

Personalized Shareholder
Information 32

Master/Feeder Structure 33

Business Structure 34

Quick Telephone Reference 36

Financial Highlights 37

<PAGE>

The Funds

Strategist Emerging Markets Fund, Strategist World Growth Fund and Strategist
World Income Fund are closed to new accounts. Existing shareholders of these
Funds may continue to purchase additional shares. See "Purchasing Shares." The
Funds may resume sales to new investors at some future date, but they have no
present intention to do so.

References to "Fund" throughout this prospectus refer to Strategist Emerging
Markets Fund, Strategist World Growth Fund and Strategist World Income Fund,
singularly or collectively as the context requires.

Strategist Emerging Markets Fund

GOAL

The Fund seeks to provide shareholders with long-term capital growth. Because
any investment involves risk, achieving this goal cannot be guaranteed. The Fund
seeks to achieve its goal by investing all of its assets in a master portfolio
rather than by directly investing in and managing its own portfolio of
securities. The master portfolio has the same goal and investment policies as
the Fund.

INVESTMENT STRATEGY

The Fund's assets primarily are invested in equity securities of companies in
emerging market countries. Emerging markets are countries characterized as
developing or emerging by either the World Bank or the United Nations. Under
normal market conditions, at least 65% of the Fund's total assets will be
invested in companies located in at least three different emerging market
countries. Included within this 65% are the securities of companies that earn
50% or more of their total revenues from goods or services produced in emerging
market countries or from sales made in emerging market countries.

<PAGE>

The selection of geographic regions is the primary decision in building the
investment portfolio.

American Express Financial Corporation (AEFC), the Fund's investment manager,
chooses investments by:

o Considering opportunities and risks within emerging market countries.

o Determining the percentage of assets to invest in a particular country
based upon its economic outlook, political environment, and growth rate
(the Fund may invest a significant portion of its assets in a particular
country or region).

o Identifying companies with:

-- effective management,

-- financial strength,

-- prospects for growth and development, and

-- high demand for their products or services.

o Identifying securities with sufficient liquidity in trading volume
(however, AEFC may invest up to 10% of the Fund's net assets in illiquid
securities).

o Buying securities of those companies AEFC considers to be industry market
leaders offering the best opportunity for long-term growth.

In evaluating whether to sell a security, AEFC considers, among other factors,
whether:

-- the security is overvalued, and

-- the company or the security continues to meet the standards described
above.

Because the economies of emerging markets can change much more rapidly than that
of the U.S., AEFC will focus on the risks associated with potential currency
devaluations or sharp changes in monetary policy. If AEFC believes economic or
political developments may result in lower share prices, it will attempt to
reduce the investments in that country.

AEFC closely monitors the Fund's exposure to foreign currency fluctuations. From
time to time, AEFC may purchase derivative instruments to hedge against currency
fluctuations.

<PAGE>

The Fund also may invest in money market securities, debt securities, and other
instruments. During weak or declining markets, the Fund may invest more of its
assets in these securities. Although the Fund will invest in these securities
primarily to avoid losses, this type of investing also could cause the Fund to
lose the opportunity to participate in market improvement. AEFC may make
frequent securities trades that could result in increased fees, expenses and
taxes.

For more information on strategies and holdings, see the Fund's Statement of
Additional Information (SAI) and the annual/semiannual reports.

RISKS

This Fund is designed for long-term investors with above-average risk tolerance.
Please remember that with any mutual fund investment you may lose money.
Principal risks associated with an investment in the Fund include:

Market Risk

Foreign/Emerging Markets Risk

Liquidity Risk

Style Risk

Sector/Concentration Risk

Market Risk
The market may drop and you may lose money. Market risk may affect a single
issuer, sector of the economy, industry, or the market as a whole. The market
value of all securities may move up and down, sometimes rapidly and
unpredictably.

Foreign/Emerging Markets Risk
The following are all components of foreign/emerging markets risk:

Country risk includes the political, economic, and other conditions of a
country. These conditions include lack of publicly available information, less
government oversight (including lack of accounting, auditing, and financial
reporting standards), the possibility of government-imposed restrictions, and
even the nationalization of assets.

<PAGE>

Currency risk results from the constantly changing exchange rate between local
currency and the U.S. dollar. Whenever the Fund holds securities valued in a
foreign currency or holds the currency, changes in the exchange rate add or
subtract from the value of the investment.

Custody risk refers to the process of clearing and settling trades. It also
covers holding securities with local agents and depositories. Low trading
volumes and volatile prices in less developed markets make trades harder to
complete and settle. Local agents are held only to the standard of care of the
local market. Governments or trade groups may compel local agents to hold
securities in designated depositories that are not subject to independent
evaluation. The less developed a country's securities market is, the greater the
likelihood of problems occurring.

Emerging Markets risk includes the dramatic pace of change (economic, social,
and political) in these countries as well as the other considerations listed
above. These markets are in early stages of development and are extremely
volatile. They can be marked by extreme inflation, devaluation of currencies,
dependence on trade partners, and hostile relations with neighboring countries.

Liquidity Risk
Securities may be difficult or impossible to sell at the time that the Fund
would like. The Fund may have to lower the selling price, sell other
investments, or forego an investment opportunity.

Style Risk
AEFC purchases growth stocks based on the expectation that the companies will
have strong growth in earnings. The price paid often reflects an expected rate
of growth. If that growth fails to occur, the price of the stock may decline
quickly.

Sector/Concentration Risk
Investments that are concentrated in a particular issuer, geographic region, or
industry will be more susceptible to changes in price (the more you diversify,
the more you spread risk).

<PAGE>

PAST PERFORMANCE

The following bar chart and table show the risks and variability of investing in
the Fund by showing:

o how the Fund's performance has varied for each full calendar year that the
fund has existed, and

o how the Fund's average annual total returns compare to other recognized
indexes.

How the Fund performed in the past does not indicate how the Fund will perform
in the future.

Strategist Emerging Markets Fund Performance (based on calendar years)

+5.36% -31.40%
________________________________________________________________________________
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998

During the period shown in the bar chart, the highest return for a calendar
quarter was +17.11% (quarter ending December 1998) and the lowest return for a
calendar quarter was -27.95% (quarter ending September 1998).

The Fund's year to date return as of Sept. 30, 1999, was +30.84%.

(Printed prospectus has bar chart)

<PAGE>

________________________________________________________________________________
Average Annual Total Returns (as of Dec. 31, 1998)
________________________________________________________________________________
Past 1 year Since inception

Strategist Emerging Markets Fund -31.40% -13.13%a

MSCI Emerging Markets Free Index -25.34% -17.92%b

Lipper Emerging Markets Fund Index -26.87% -17.98%b

a Inception date was Nov. 13, 1996.
b Measurement period started Dec. 1, 1996.

This table shows total returns from a hypothetical investment in the Fund. These
returns are compared to the indexes shown for the same periods. For purposes of
this calculation information about the Fund assumes no adjustments for taxes an
investor may have paid on the reinvested income and capital gains.

Morgan Stanley Capital International (MSCI) Emerging Markets Free Index is an
unmanaged market capitalization-weighted index compiled from a composite of
securities markets of 26 emerging market countries. The index reflects
reinvestment of all distributions and changes in market prices, but excludes
brokerage commissions or other fees.

Lipper Emerging Markets Fund Index, published by Lipper Analytical Services,
Inc., includes 31 funds that are generally similar to the Fund, although some
may have somewhat different investment policies or objectives.

<PAGE>

FEES AND EXPENSES

Fund investors pay various expenses. The table below describes the fees and
expenses that you may pay if you buy and hold shares of the Fund.

________________________________________________________________________________
Shareholder Feesa (fees paid directly from your investment)
________________________________________________________________________________

Maximum sales charge (load)
imposed on purchasesb (as a
percentage of offering price) 0%

________________________________________________________________________________
Annual Fund operating expensesc (expenses that are deducted from Fund assets)
________________________________________________________________________________

As a percentage of average daily net assets:

Management fees 0.92%

Distribution (12b-1) fees 0.25%

Other expensesd 1.03%

Totale 2.20%

a A wire transfer charge, currently $15, is deducted from your brokerage
account for wire transfers made at your request.
b There are no sales loads; however, the Fund reserves the right upon 60
days advance written notice to shareholders to impose a redemption fee of
up to 1% on shares redeemed within one year of purchase.
c Both in this table and the following example, Fund operating expenses
include expenses charged by both the Fund and the Portfolio.
d Other expenses include an administrative services fee, a transfer agency
fee and other nonadvisory expenses.
e The Advisor and the Distributor have agreed to waive certain fees and
to absorb certain other Fund expenses until Oct. 31, 2000. Under this
agreement, total expenses will not exceed 2.20%. For the most recent
fiscal year actual total expenses with fee waivers and expense reimbursement
were 2.20%.

<PAGE>

Example

This example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds.

Assume you invest $10,000 and the Fund earns a 5% annual return. The operating
expenses remain the same each year. If you sell your shares at the end of the
years shown, your costs would be:

1 year 3 years 5 years 10 years

$223 $688 $1,181 $2,539

This example does not represent actual expenses, past or future. Actual expenses
may be higher or lower than those shown.

MANAGEMENT

The Fund's assets are invested in Emerging Markets Portfolio, which is managed
by AEFC and its London-based subsidiary American Express Asset Management
International Inc. Ian King, co-portfolio manager, joined the Investment Manager
in 1995. He has managed the assets of the Portfolio since November 1996. He also
is a member of the portfolio management team for Total Return Portfolio. Prior
to joining AEFC, he was director of Lehman Brothers Global Asset Management Ltd.
from 1992 to 1995.

Julian A.S. Thompson, co-portfolio manager of the Portfolio, joined AEFC in
1999. Prior to joining AEFC, from 1993-1999, he was an Investment Manager -
Emerging Markets for Stewart Ivory, a Scottish investment company.

<PAGE>

Strategist World Growth Fund

GOAL

INVESTMENT STRATEGY

The Fund's assets primarily are invested in equity securities of companies
around the world that are positioned to meet market needs in a changing world
economy. These companies are located in developed and in emerging countries.
Under normal market conditions, at least 65% of the Fund's total assets are
invested in common stocks and convertible securities of companies located in at
least three different countries.

The selection of companies is the primary decision in building the investment
portfolio.

In pursuit of the Fund's goal, American Express Financial Corporation (AEFC),
the Fund's investment manager, chooses investments by:

o Identifying large companies around the world.

o Identifying companies with:

-- financial strength,

-- high demand for their products or services,

-- competitive market advantage, and

-- effective management.

o Considering opportunities and risks by country and currency.

<PAGE>

AEFC decides how much to invest in various countries and then buys those
securities that offer the best opportunity for long-term growth.

In evaluating whether to sell a security, AEFC considers, among other factors,
whether:

-- the company has met growth expectations, and

-- the company or the security continues to meet the standards described
above.

AEFC closely monitors the Fund's exposure to foreign currency fluctuations. From
time to time, AEFC may purchase derivative instruments to hedge against currency
fluctuations.

Although not a primary investment strategy, the Fund may utilize derivative
instruments to produce incremental earnings and to increase flexibility. The
Fund also may invest in other instruments such as money market securities,
preferred stocks, convertible securities, and debt securities.

During weak or declining markets, the Fund may invest more of its assets in
money market securities. Although the Fund primarily will invest in these
securities to avoid losses, this type of investment also could prevent the Fund
from achieving its investment objective. During these times, AEFC may make
frequent securities trades that could result in increased fees, expenses, and
taxes.

For more information on strategies and holdings, see the Fund's Statement of
Additional Information (SAI) and the annual/semiannual reports.

<PAGE>

RISKS

Market Risk

Foreign/Emerging Markets Risk

Style Risk

Foreign/Emerging Markets Risk
The following are all components of foreign/emerging markets risk:

Emerging markets risk includes the dramatic pace of change (economic, social,
and political) in these countries as well as the other considerations listed
above. These markets are in early stages of development and are extremely
volatile. They can be marked by extreme inflation, devaluation of currencies,
dependence on trade partners, and hostile relations with neighboring countries.

<PAGE>

PAST PERFORMANCE

The following bar chart and table show the risks and variability of investing in
the Fund by showing:

o how the Fund's performance has varied for each full calendar year shown on
the chart below, and

o how the Fund's average annual total returns compare to other recognized
indexes.

How the Fund performed in the past does not indicate how the Fund will perform
in the future.

________________________________________________________________________________
Strategist World Growth Fund Performance (based on calendar years)
________________________________________________________________________________

+13.85% +39.13% +6.36% +13.98% +7.00% +26.17%
________________________________________________________________________________
1989 1990* 1991 1992 1993 1994 1995 1996 1997 1998

-2.22% -7.39%

During the period shown in the bar chart, the highest return for a calendar
quarter was 21.48% (quarter ending December 1998) and the lowest return for a
calendar quarter was -17.33% (quarter ending September 1998).

The Fund's year to date return as of Sept. 30, 1999, was +3.50%.

* Inception date was May 29, 1990 for AXP Global Growth Fund (the predecessor
fund). On May 13, 1996, the predecessor fund converted to a master/feeder
structure and transferred all of its assets to World Growth Portfolio. The
performance information in this and the following table represent
performance of the predecessor fund prior to March 20, 1995 and of Class A
shares of the predecessor fund from March 20, 1995 through May 13, 1996
adjusted to reflect the absence of sales charges on shares of the Fund. The
historical performance has not been adjusted for any difference between the
fees and expenses of the Fund and historical fees and expenses of the
predecessor fund.

(Printed prospectus has bar chart)

<PAGE>

Strategist World Growth Fund +26.17% + 8.75% + 9.43%a

MSCI All Country World Free Index +21.97% +13.94% +11.52%b

Lipper International Fund Index +12.66% + 8.59% +8.30%b

a Inception date was May 29, 1990
b Measurement period started June 1, 1990.

This table shows total returns from a hypothetical investment in the Fund. These
returns are compared to the indexes shown for the same periods. For purposes of
this calculation, information about the Fund assumes no adjustments for taxes an
investor may have paid on the reinvested income and capital gains.

Morgan Stanley Capital International (MSCI) All Country World Free Index is an
unmanaged index compiled from a composite of securities markets of 47 countries,
including Canada, the United States and 26 emerging market countries. The index
reflects reinvestment of all distributions and changes in market prices, but
excludes brokerage commissions or other fees.

Lipper International Fund Index, an unmanaged index published by Lipper
Analytical Services, Inc., includes 30 funds that are generally similar to the
Fund, although some may have somewhat different investment policies or
objectives.

<PAGE>

FEES AND EXPENSES

Fund investors pay various expenses. The table below describes the fees and
expenses that you may pay if you buy and hold shares of the Fund.

Shareholder Feesa (fees paid directly from your investment)
________________________________________________________________________________

Maximum sales charge (load)
imposed on purchasesb (as a
percentage of offering price) 0%

As a percentage of average daily net assets:

Management fees 0.75%

Distribution (12b-1) fees 0.25%

Other expensesd 0.75%

Totale 1.75%

a A wire transfer charge, currently $15, is deducted from your brokerage
account for wire transfers made at your request.
b There are no sales loads; however the Fund imposes a 0.50% fee for shares
sold or exchanged within 180 days of their purchase date. This fee
reimburses the Fund for brokerage fees and other costs incurred. This fee
also helps assure that long-term shareholders are not unfairly bearing the
costs associated with frequent traders.
c Both in this table and the following example, Fund operating expenses
include expenses charged by both the Fund and the Portfolio.
d Other expenses include an administrative services fee, a transfer agency
fee and other nonadvisory expenses.
e The Advisor and the Distributor have agreed to waive certain fees and to
absorb certain other Fund expenses until Oct. 31, 2000. Because of this
agreement, total expenses will not exceed 1.75%. For the most recent fiscal
year, actual total expenses with fee waivers and expense reimbursement were
1.71%.

<PAGE>

Example

This example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds.

Assume you invest $10,000 and the Fund earns a 5% annual return. The operating
expenses remain the same each year. If you hold your shares until the end of the
years shown, your costs would be:

1 year 3 years 5 years 10 years

$178 $551 $950 $2,067

This example does not represent actual expenses, past or future. Actual expenses
may be higher or lower than those shown.

MANAGEMENT

The Fund's assets are invested in World Growth Portfolio, which is managed by
AEFC and its London-based subsidiary, American Express Asset Management
International Inc. Richard Leadem, senior vice president and portfolio manager,
joined AEFC in 1997. He became portfolio manager of World Growth Portfolio in
December 1999. Prior to joining AEFC he was a senior portfolio manager at
Mercury Asset Management from 1994 to 1997.

<PAGE>

Strategist World Income Fund

GOAL

The Fund seeks to provide shareholders with high total return through income and
growth of capital. Because any investment involves risk, achieving this goal
cannot be guaranteed. The Fund seeks to achieve its goal by investing all of its
assets in a master portfolio rather than by directly investing in and managing
its own portfolio of securities. The master portfolio has the same goal and
investment policies as the Fund.

INVESTMENT STRATEGY

The Fund is a non-diversified mutual fund that invests primarily in debt
obligations of U.S. and foreign issuers. Under normal market conditions, at
least 80% of the Fund's net assets will be invested in investment-grade
corporate or government debt obligations including money market instruments of
issuers located in at least three different countries. Although the Fund
emphasizes high and medium-quality debt securities, it will assume some credit
risk to achieve higher dividends and /or capital appreciation (by buying junk
bonds).

The selection of investment-grade government and corporate debt obligations is
the primary decision in building the portfolio.

In pursuit of the Fund's goal, American Express Financial Corporation (AEFC),
the Fund's investment manager, chooses investments by:

o Considering opportunities and risks by credit rating and currency.

o Identifying investment-grade U.S. and foreign bonds.

o Identifying below investment-grade U.S. and foreign bonds (junk bonds).

o Identifying bonds that can take advantage of currency movements and
interest rate differences among nations.

In evaluating whether to sell a security, AEFC considers, among other factors,
whether:

-- the security is overvalued, and

-- the security continues to meet the standards described above.

<PAGE>

AEFC closely monitors the Fund's exposure to foreign currency fluctuations. From
time to time, AEFC may purchase derivative instruments (such as options and
forward contracts) to hedge against currency fluctuations. Additionally, the
Fund may utilize derivative instruments to produce incremental earnings and to
increase flexibility.

Although not a primary investment strategy, the Fund also may invest in other
instruments such as money market securities.

During weak or declining markets, the Fund may invest more of its assets in
money market securities. Although the Fund primarily will invest in these
securities to avoid losses, this type of investing also could prevent the Fund
from achieving its investment objective. During these times, AEFC may make
frequent securities trades that could result in increased fees, expenses and
taxes.

For more information on strategies and holdings, see the Fund's Statement of
Additional Information (SAI) and the annual/semiannual reports.

RISKS

Please remember that with any mutual fund investment you may lose money. In
addition, since the Fund is a non-diversified mutual fund, it may concentrate
its investments in securities of fewer issuers than would a diversified fund.
Accordingly, the Fund may have more risk than mutual funds that have broader
diversification.
Principal risks associated with an investment in the Fund include:

Interest Rate Risk

Foreign/Emerging Markets Risk

Credit Risk

Liquidity Risk

Interest Rate Risk
The risk of losses attributable to changes in interest rates. This term is
generally associated with bond prices (when interest rates rise, bond prices
fall). In general, the longer the maturity of a debt obligation, the higher its
yield and the greater the sensitivity to changes in interest rates.

<PAGE>

Foreign/Emerging Markets Risk
The following are all components of foreign/emerging markets risk:

Emerging markets risk includes the dramatic pace of change (economic, social,
and political) in emerging market countries as well as the other considerations
listed above. These markets are in early stages of development and are extremely
volatile. They can be marked by extreme inflation, devaluation of currencies,
dependence on trade partners, and hostile relations with neighboring countries.

Credit Risk
The risk that the issuer of a security, or the counterparty to a contract, will
default or otherwise become unable to honor a financial obligation (such as
payments due on a bond or a note). The price of junk bonds may react more to the
ability of the issuing company to pay interest and principal when due than to
changes in interest rates. They have greater price fluctuations and are more
likely to experience a default.

<PAGE>

PAST PERFORMANCE

The following bar chart and table show the risks and variability of investing in
the Fund by showing:

o how the Fund's performance varied for each full calendar year shown on the
chart below, and

o how the Fund's average annual total returns compare to other recognized
indexes.

How the Fund performed in the past does not indicate how the Fund will perform
in the future.

________________________________________________________________________________
Strategist World Income Fund Performance (based on calendar years)
________________________________________________________________________________

+12.91% +15.39% +8.14% +16.43% +19.20% +7.45% +2.47% +8.35%
________________________________________________________________________________
1989* 1990 1991 1992 1993 1994 1995 1996 1997 1998

-4.73%

During the period shown in the bar chart, the highest return for a calendar
quarter was +4.26% (quarter ending June 1997) and the lowest return for a
calendar quarter was -3.48% (quarter ending March 1997).

The Fund's year to date return as of Sept. 30, 1999, was -3.02%.

* Inception date was March 20, 1989 for AXP Global Bond Fund (the predecessor
fund). On May 13, 1996, the predecessor fund converted to a master/feeder
structure and transferred all of its assets to World Income Portfolio. The
performance information in this and the following table, represents
performance of the predecessor fund prior to March 20, 1995 and of Class A
shares of the predecessor fund from March 20, 1995 through May 13, 1996
adjusted to reflect the absence of sales charges on shares of the Fund. The
historical performance has not been adjusted for any difference between the
fees and expenses of the Fund and historical fees and expenses of the
predecessor fund.

(Printed prospectus has bar chart)

<PAGE>

Strategist World Income Fund + 8.35% +5.87% +9.55%a

Salomon Smith Barney World Government
Bond Index +15.31% +7.85% +9.52%b

Lipper Global Income Fund Index +12.66% +5.78% +8.20%b

a Inception date was March 20, 1989.
b Measurement period started April 1, 1989.

Salomon Smith Barney World Government Bond Index is an unmanaged
market-capitalization weighted benchmark that tracks the performance of the 17
government bond markets around the world. It is widely recognized by investors
as a measurement index for portfolios of world government bond securities. The
index reflects reinvestment of all distributions and changes in market prices,
but excludes brokerage commissions and other fees.

Lipper Global Income Fund Index, an unmanaged index published by Lipper
Analytical Services, Inc., includes 30 funds that are generally similar to the
Fund, although some may have somewhat different policies or objectives.

<PAGE>

FEES AND EXPENSES

Fund investors pay various expenses. The table below describes the fees and
expenses that you may pay if you buy and hold shares of the Fund.

Maximum sales charge (load)
imposed on purchasesb (as a
percentage of offering price) 0%

As a percentage of average daily net assets:

Management feesd 0.75%

Distribution (12b-1) fees 0.25%

Other expensese 0.35%

Totalf 1.35%

a A wire transfer charge, currently $15, is deducted from your brokerage
account for wire transfers made at your request.
b There are no sales loads; however, the Fund imposes a 0.50% fee for shares
sold or exchanged within 180 days of their purchase date. This fee
reimburses the Fund for brokerage fees and other costs incurred. This fee
also helps assure that long-term shareholders are not unfairly bearing the
costs associated with frequent traders.
c Both in this table and the following example, Fund operating expenses
include expenses charged by both the Fund and the Portfolio.
d The management fee is paid by the Trust on behalf of the Portfolio.
e Other expenses include an administrative services fee, a transfer agency
fee and other nonadvisory expenses.
f The Advisor and the Distributor have agreed to waive certain fees and to
absorb certain other Fund expenses until Oct. 31, 2000. Under this
agreement, total expenses will not exceed 1.35%. For the most recent fiscal
year actual total expenses with fee waivers and expense reimbursement were
1.35%.

<PAGE>

Example

This example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds.

Assume you invest $10,000 and the Fund earns a 5% annual return. The operating
expenses remain the same each year. If you sell your shares at the end of the
years shown, your costs would be:

1 year 3 years 5 years 10 years

$137 $428 $740 $1,629

This example does not represent actual expenses, past or future. Actual expenses
may be higher or lower than those shown.

MANAGEMENT

The Fund's assets are invested in World Income Portfolio, which is managed by
AEFC. Ray Goodner, vice president and senior portfolio manager, joined the
Investment Manager in 1977. He has managed the assets of World Income Portfolio
since 1989. He also serves as portfolio manager for Quality Income Portfolio.

Buying and Selling Shares

VALUING FUND SHARES

The public offering price for a single Fund share is the net asset value (NAV).
The NAV is the value of a single Fund share. The NAV usually changes daily, and
is calculated at the close of business of the New York Stock Exchange, normally
3 p.m. Central Time (CT), each business day (any day the New York Stock Exchange
is open).

The Fund's investments are valued based on market quotations, or where market
quotations are not readily available, based on methods selected in good faith by
the board. If the Fund's investment policies permit it to invest in securities
that are listed on foreign stock exchanges that trade on weekends or other days
when the Fund does not price its shares, the value of the Fund's underlying
investments may change on days when you could not buy or sell shares of the
Fund. Please see the SAI for further information.

<PAGE>

PURCHASING SHARES

The Fund is closed to new accounts. Purchases are limited to existing accounts
only. The discussion below regarding brokerage accounts and the purchase of
shares of the Fund is qualified by this limitation.

You may purchase additional shares of the Fund in which you are invested through
a brokerage account maintained with American Express Financial Advisors Inc.
(the Distributor). Payment for shares must be made directly to the Distributor.

Important: When you open an account, you must provide your correct Taxpayer
Identification Number (TIN), which is either your Social Security or Employer
Identification number.

If you do not provide the correct TIN, you could be subject to backup
withholding of 31% of taxable distributions and proceeds from certain sales and
exchanges. You also could be subject to further penalties, such as:

o a $50 penalty for each failure to supply your correct TIN,

o a civil penalty of $500 for a false statement that results in no backup
withholding, and

o criminal penalties for falsifying information.

You also could be subject to backup withholding for failure to report interest
or dividends on your tax return. For details on TIN requirements, call
800-297-7378 to obtain a copy of federal Form W-9, "Request for Taxpayer
Identification Number and Certification."

Deposits into your brokerage account
You may deposit money into your brokerage account by check, wire or many other
forms of electronic funds transfer (securities also may be deposited). All
deposit checks should be made payable to American Express Financial Advisors
Inc. If you would like to wire funds into your existing brokerage account or add
to your account by electronic transfer, please contact the Distributor at
800-297-7378 for instructions.

Minimum Fund investment requirements
Your initial investment in the Fund may be as low as $2,000 ($1,000 for
custodial accounts, Individual Retirement Accounts and certain other retirement
plans). The minimum subsequent investment is $100. These requirements may be
reduced or waived as described in the SAI.

When and at what price shares will be purchased
You must have money available in your brokerage account in order to purchase
Fund shares. If your request and payment (including money transmitted by wire)
are received and accepted by the Distributor before 2 p.m. CT, your order will
be priced at the next calculated NAV. See "Valuing Fund Shares."

<PAGE>

Methods of purchasing shares
You may purchase shares of the Fund in three ways.

________________________________________________________________________________
1 By telephone:
________________________________________________________________________________

You may use money in your brokerage account to make purchases. To place your
order, call 800-297-7378.

________________________________________________________________________________
2 By mail:
________________________________________________________________________________

Mail written purchase requests (along with any checks) to American Express
Financial Direct, P.O. Box 59196, Minneapolis, MN 55459-0196. These requests
should include:

o your brokerage account number (or a brokerage account application), and

o the name of the Fund and the dollar amount of shares you would like
purchased.

Your check should be made payable to American Express Financial Advisors Inc. It
will be deposited into your brokerage account and used to cover your purchase
request.

________________________________________________________________________________
3 By systematic purchase:
________________________________________________________________________________

Once you have opened a brokerage account, you may authorize the Distributor to
automatically purchase shares on your behalf at intervals and in amounts
selected by you as described below.

Systematic Purchase Plan
The Distributor offers a Systematic Purchase Plan (SPP) that allows you to make
periodic investments in the Fund automatically and conveniently. Participating
in the SPP will save you the time and expense associated with writing checks or
wiring money.

Investment minimums
You can make automatic investments in any amount, from $100 to $50,000.

<PAGE>

Investment methods
There are two ways to make automatic investments in your brokerage account:

(1) Using uninvested cash in your brokerage account: If you elect this option,
uninvested cash in your brokerage account will be used to make the
investment and, if necessary, shares of your Money Market Fund will be sold
to cover the balance of the purchase.

(2) Using bank authorizations: If you elect this option, money is transferred
from your bank checking or savings account into your brokerage account for
automatic investments.

You will need to select a transfer date (when the money is transferred into your
brokerage account). If you change your bank authorization date, it may also be
necessary to change your automatic investment date to coincide with the new
transfer date.

Investment frequency
You can select the frequency of your automatic investments (example: twice
monthly, monthly or quarterly). Quarterly investments are made on the date
selected in the first month of each quarter (January, April, July and October).

Changing instructions to an already established plan
If you want to change the fund(s) selected for your SPP you may call
800-297-7378, or send written instructions clearly outlining the changes to
American Express Financial Direct, P.O. Box 59196, Minneapolis, MN 55459-0196.
These instructions must include:

o The funds with SPP that you want to cancel,

o The newly selected fund(s) in which you want to begin making automatic
investments (for which you have an existing account) and the amount to be
invested in each fund, and

o The investment frequency and investment dates for your new automatic
investments.

Terminating your SPP
If you wish to terminate your SPP, you may call 800-297-7378, or send written
instructions to American Express Financial Direct, P.O. Box 59196, Minneapolis,
MN 55459-0196.

Terminating bank authorizations
If you wish to terminate your bank authorizations, you may do so at any time by
notifying American Express Financial Direct in writing or by calling
800-297-7378. Your bank authorization will not automatically terminate when you
cancel your SPP.

<PAGE>

If you are canceling your bank authorizations and you wish to cancel your SPP,
you must also provide instructions stating that the Distributor should cancel
your SPP. You may notify the Distributor by sending written instructions to
American Express Financial Direct, P.O. Box 59196, Minneapolis, MN 55459-0196 or
telephoning 800-297-7378. Your systematic investments will continue using
brokerage account assets if the Distributor does not receive notification to
terminate your systematic investments as well.

To avoid procedural difficulties, the Distributor must receive instructions to
change or terminate your SPP or bank authorizations at least 10 days prior to
your scheduled investment date.

Minimum balance and account requirements
The Fund reserves the right to sell your shares if, as a result of sales, the
aggregate value of your holdings in the Fund drops below $1,000 ($500 in the
case of custodial accounts, IRAs and other retirement plans). You will be
notified in writing 30 days before the Fund takes such action to allow you to
increase your holdings to the minimum level. If you close your brokerage
account, the Fund will automatically sell your shares and mail the proceeds to
you.

Wire transfers to your bank
Money can be wired from your brokerage account to your bank account. Call the
Distributor at 800-297-7378 for additional information on wire transfers. A $15
service fee will be charged against your brokerage account for each wire sent.

<PAGE>

EXCHANGING/SELLING SHARES

Exchanging Shares
You can exchange your shares of the Fund for shares of other funds in the
Strategist Fund Group in which you have an existing account at any time. For
complete information on the other funds, including fees and expenses, read that
fund's prospectus carefully. Your exchange will be priced at the next NAV
calculated after it is accepted by that fund. When exchanging into another fund
you must meet that fund's minimum investment requirements. You may make up to
four exchanges per calendar year.

The Distributor and the Fund reserve the right to reject any exchange, limit the
amount or modify or discontinue the exchange privilege to prevent abuse or
adverse effects on the Fund and its shareholders. For example, if exchanges are
too numerous or too large, they may disrupt a Fund's investment strategies or
increase its costs.

Selling Shares
You may sell your shares at any time. Your sale price will be the next NAV
calculated after receipt by the Distributor of proper sale instructions, as
described below.

There are no sales loads; however, the Fund imposes a 0.50% fee for shares sold
or exchanged within 180 days of their purchase date. This fee reimburses the
Fund for brokerage fees and other costs incurred. This fee also helps assure
that long-term shareholders are not unfairly bearing the costs associated with
frequent traders.

Normally, payment for shares sold will be credited directly to your brokerage
account on the next business day. However, the Fund may delay payment, but no
later than seven days after the Distributor receives your selling instructions
in proper form. Sale proceeds will be held in your brokerage account or mailed
to you according to your account instructions.

If you recently purchased shares by check, your sale proceeds may be held in
your brokerage account until your check clears (which may take up to 10 days
from the purchase date) before a check is mailed to you.

The Fund reserves the right to redeem in kind.

<PAGE>
Two ways to request an exchange or sale of shares

________________________________________________________________________________
1 By telephone:
________________________________________________________________________________

You may exchange or sell your shares by calling 800-297-7378. Alternatively, you
can mail your exchange or sale requests as described below.

To properly process your telephone exchange or sale request we will need the
following information:

o your brokerage account number and your name (for exchanges, both funds must
be registered in the same ownership),

o the name of the fund from which you wish to exchange or sell shares,

o the dollar amount or number of shares you want to exchange or sell, and

o the name of the fund into which shares are to be exchanged, if applicable.

Telephone exchange or sale requests received before 2 p.m. CT on any business
day, once the caller's identity and account ownership have been verified by the
Distributor, will be processed at the next calculated NAV. See "Valuing Fund
Shares."

________________________________________________________________________________
2 By mail:
________________________________________________________________________________

You also may request an exchange or sale by writing to American Express
Financial Direct, P.O. Box 59196, Minneapolis, MN 55459-0196. Once an exchange
or sale request is mailed it is irrevocable and cannot be modified or canceled.

To properly process your mailed exchange or sale request, we will need a letter
from you that contains the following information:

o your brokerage account number,

o the name of the fund from which you wish to exchange or sell shares,

o the dollar amount or number of shares you want to exchange or sell,

o the name of the fund into which shares are to be exchanged, if applicable,
and

o a signature of at least one of the brokerage account holders in the exact
form specified on the account.

Telephone Transactions
The privilege to initiate transactions by telephone is automatically available
through your brokerage account. The Fund will honor any telephone transaction
believed to be authentic and will use reasonable procedures to confirm that
instructions communicated by telephone are genuine. The Fund may modify or
discontinue telephone privileges at any time.

<PAGE>

Distributions and Taxes

As a shareholder you are entitled to your share of the Fund's net income and net
gains. The Fund distributes dividends and capital gains to qualify as a
regulated investment company and to avoid paying corporate income and excise
taxes.

DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS

The Fund's net investment income is distributed to you as dividends. Capital
gains are realized when a security is sold for a higher price than was paid for
it. Each realized capital gain or loss is long-term or short-term depending on
the length of time the Fund held the security. Realized capital gains or losses
offset each other. The Fund offsets any net realized capital gains by any
available capital loss carryovers. Net short-term capital gains are included in
net investment income. Net realized long-term capital gains, if any, are
distributed by the end of the calendar year as capital gain distributions.

REINVESTMENTS

Dividends and capital gain distributions are automatically reinvested in
additional shares of the Fund unless you request distributions in cash. We
reinvest the distributions for you at the next calculated NAV after the
distribution is paid. If you choose cash distributions, you will receive cash
only for distributions declared after your request has been processed.

TAXES

Distributions are subject to federal income tax and may be subject to state and
local taxes in the year they are declared. You must report distributions on your
tax returns, even if they are reinvested in additional shares.

If you buy shares shortly before the record date of a distribution you may pay
taxes on money earned by the Fund before you were a shareholder. You will pay
the full pre-distribution price for the shares, then receive a portion of your
investment back as a distribution, which may be taxable.

<PAGE>

For tax purposes, an exchange is considered a sale and purchase, and may result
in a gain or loss. A sale is a taxable transaction. If you sell shares for less
than their cost, the difference is a capital loss. If you sell shares for more
than their cost, the difference is a capital gain. Your gain may be short term
(for shares held for one year or less) or long term (for shares held for more
than one year).

Selling shares held in an IRA or qualified retirement account may subject you to
federal taxes, penalties and reporting requirements. Please consult your tax
advisor.

Important: This information is a brief and selective summary of some of the tax
rules that apply to the Fund. Because tax matters are highly individual and
complex, you should consult a qualified tax advisor.

<PAGE>

Personalized Shareholder Information

To help you track and evaluate the performance of your investments, you will
receive these individualized reports:

QUARTERLY STATEMENTS

List all of your holdings and transactions during the previous three months.

YEARLY TAX STATEMENTS

Feature average-cost-basis reporting of capital gains or losses if you sell your
shares along with distribution information to simplify tax calculations.

<PAGE>

Master/Feeder Structure

The Fund uses a master/feeder structure. This means that the Fund (a feeder
fund) invests all of its assets in a Portfolio (the master fund). Other feeder
funds also invest in the Portfolio. The master/feeder structure offers the
potential for reduced costs because it spreads fixed costs of portfolio
management over a larger pool of assets. The Fund may withdraw its assets from
the corresponding Portfolio at any time if the Fund's board determines that it
is best. In that event, the board would consider what action should be taken,
including whether to hire an investment advisor to manage the Fund's assets
directly or to invest all of the Fund's assets in another pooled investment
entity. Here is an illustration of the structure:

Investors buy shares in the Fund

The Fund buys units in the Portfolio

The Portfolio invests in securities, such as stocks or bonds

Other feeders may include mutual funds and institutional accounts. These feeders
buy the Portfolio's securities on the same terms and conditions as the Fund and
pay their proportionate share of the Portfolio's expenses. However, their
operating costs and sales charges are different from those of the Fund.
Therefore, the investment returns for other feeders are different from the
returns of the Fund. Information about other feeders may be obtained by calling
American Express Financial Direct at 800-437-3133.

<PAGE>

Business Structure

_______________________________________________________________________________
Shareholders
________________________________________________________________________________

Transfer Agent:
American Express Client Service Corporation

Maintains shareholder accounts and records for the Fund; receives a fee based on
the number of accounts it services.

Administrative Services Agent:
American Express Financial Corporation

Provides administrative and accounting services for the Fund; receives a fee
based on average daily net assets.

The Fund invests its assets in the Portfolio. The Fund and/or the Portfolio
have contracts with certain service providers.

The Fund

Distributor:
American Express Financial Advisors Inc.

Markets and distributes shares; receives distribution fee.

Subadviser:
American Express Asset Management International, Inc.

Subadvises Emerging Markets Fund and World Growth Fund's assets.**

Investment Manager:
American Express Financial Corporation

Manages the Portfolio's investments and receives a fee based on average daily
net assets*.

The Portfolio

Custodian:
American Express Trust Company

Provides safekeeping of assets; receives a fee that varies based on the number
of securities held.

* Each Portfolio pays AEFC a fee for managing its assets. Each Fund pays its
proportionate share of the fee. Under the Investment Management Services
Agreement, the fee for the most recent fiscal year was 0.92% of average
daily net assets for Emerging Markets Portfolio, 0.75% for World Growth
Portfolio, and 0.75% for World Income Portfolio. Under the Agreement, each
Portfolio also pays taxes, brokerage commissions and nonadvisory expenses.
The fee will be adjusted based on the Fund's performance for Emerging
Markets and World Growth Portfolios, effective Jan. 1, 2000 and will cover
the six-month period beginning July 1, 1999.

** AEFC pays the Subadviser for managing Emerging Markets Fund and World
Growth Fund's assets. The fee for the most recent fiscal year was 0.50% of
Emerging Markets Portfolio's average daily net assets and 0.35% of World
Growth Portfolio's average daily net assets.

<PAGE>

ABOUT AMERICAN EXPRESS FINANCIAL CORPORATION

American Express Financial Corporation (AEFC), the Fund's investment manager has
been a provider of financial services since 1894, and as of the most recent
fiscal year end manages more than $236 billion in assets.

AEFC, located at IDS Tower 10, Minneapolis, MN 55440-0010, is a wholly-owned
subsidiary of American Express Company, a financial services company with
headquarters at American Express Tower, World Financial Center, New York, NY
10285.

YEAR 2000

The Fund could be adversely affected if the computer systems used by AEFC and
the Fund's other service providers do not properly process and calculate
date-related information from and after Jan. 1, 2000. While Year 2000-related
computer problems could have a negative effect on the Fund, AEFC is working to
avoid such problems and to obtain assurances from service providers that they
are taking similar steps.

The companies, governments or international markets in which the Fund invests
also may be adversely affected by Year 2000 issues. To the extent a portfolio
holding is adversely affected by a Year 2000 processing issue, the Fund's return
could be adversely affected.

<PAGE>

Quick Telephone Reference

AMERICAN EXPRESS FINANCIAL DIRECT TEAM: CALL THE FINANCIAL CONSULTANTS

Fund performance, objectives and account inquiries, sales and exchanges,
dividend payments or reinvestments and automatic payment arrangements:
800-297-7378

TTY SERVICE

For the hearing impaired: 800-710-5260

<PAGE>

Financial Highlights
<TABLE>
<CAPTION>

Emerging Markets Fund
Fiscal period ended Oct. 31,

Per share income and capital changesa

1999 1998 1997b
<S> <C> <C> <C>
Net asset value, beginning of period $2.87 $5.27 $5.00

Income from investment operations:

Net investment income (loss) -- .02 .01

Net gains (losses) (both realized and unrealized) 1.32 (1.55) .27

Total from investment operations 1.32 (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 $4.19 $2.87 $5.27

Ratios/supplemental data

Net assets, end of period (in thousands) $ 629 $ 422 $ 651

Ratio of expenses to average daily net assetsc 2.20% 2.19% 2.20%d

Ratio of net investment income (loss)
to average daily net assets .01% .58% .12%d

Portfolio turnover rate
(excluding short-term securities) 143% 108% 87%

Total return 45.99% (34.82%) 5.90%

a For a share outstanding throughout the period. Rounded to the nearest cent.
b Inception date was Nov. 13, 1996.
c The Advisor and Distributor limited total operating expenses. Without this
agreement, the ratio of expenses to average daily net assets would have
been 6.17%, 4.66% and 9.61% for the periods ended 1999, 1998 and 1997,
respectively.
d Adjusted to an annual basis.
</TABLE>

<PAGE>

World Growth Fund
Fiscal period ended Oct. 31,

Per share income and capital changesa

1999 1998 1997 1996b
<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) 2.04 1.28 .40 (.28)

Total from investment operations 2.01 1.27 .42 (.24)

Less distributions:

Dividends from and in excess of net investment income (.02) (.04) (.01) --

Distributions from realized gains (.35) -- -- --

Total distributions (.37) (.04) (.01) --

Net asset value, end of period $10.36 $8.72 $7.49 $7.08

Ratios/supplemental data

Net assets, end of period (in thousands) $ 902 $ 722 $ 604 $ 489

Ratio of expenses to average daily net assetsc 1.71% 1.69% 1.65% 1.75%d

Ratio of net investment income (loss)
to average daily net assets (.31%) (.08%) .26% 1.61%d

Portfolio turnover rate
(excluding short-term securities) 83% 80% 199% 58%

Total return 23.09% 17.02% 5.98% (3.28%)

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 limited total operating expenses. Without this
agreement, the ratio of expenses to average daily net assets would have
been 2.85%, 2.80%, 5.13% and 17.33% for the periods ended 1999, 1998, 1997
and 1996, respectively.
d Adjusted to an annual basis.
</TABLE>

<PAGE>

World Income Fund
Fiscal period ended Oct. 31,

Per share income and capital changesa

1999 1998 1997 1996b
<S> <C> <C> <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) .33 .40 .36 .15

Net gains (losses) (both realized and unrealized) (.36) (.05) (.03) .25

Total from investment operations (.03) .35 .33 .40

Less distributions:

Dividends from net investment income (.29) (.30) (.23) (.15)

Excess distributions of net investment income -- -- -- (.06)

Distributions from realized gains (.02) (.16) (.02) --

Total distributions (.31) (.46) (.25) (.21)

Net asset value, end of period $5.87 $6.21 $6.32 $6.24

Ratios/supplemental data

Net assets, end of period (in thousands) $ 623 $ 643 $ 627 $ 524

Ratio of expenses to average daily net assetsc 1.35% 1.12% 1.35% 1.35%d

Ratio of net investment income (loss)
to average daily net assets 5.45% 6.50% 6.28% 5.87%d

Portfolio turnover rate
(excluding short-term securities) 48% 27% 55% 24%

Total return (.33%) 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 limited total operating expenses. Without this
agreement, the ratio of expenses to average daily net assets would have
been 3.46%, 2.29%, 5.36% and 19.23% for the periods ended 1999, 1998, 1997
and 1996, respectively.
d Adjusted to an annual basis.
</TABLE>

The information in these tables has been audited by KPMG LLP, independent
auditors. The independent auditors' report and additional information about the
performance of the Funds are contained in the Funds' annual report which, if not
included with this prospectus, may be obtained without charge.

<PAGE>

The Fund, along with the other funds in the Strategist Fund Group, is
distributed by American Express Financial Advisors Inc.

Additional information about the Fund and its investments is available in the
Fund's Statement of Additional Information (SAI), annual and semiannual reports
to shareholders. In the Fund's annual report, you will find a discussion of
market conditions and investment strategies that significantly affected the Fund
during the last fiscal year. The SAI is incorporated by reference in this
prospectus. For a free copy of the SAI, annual or semiannual report, or to make
inquiries about the Fund contact American Express Financial Direct.

American Express Financial Direct
P.O. Box 59196,
Minneapolis, MN 55459-0196

800-297-7378 TTY: 800-710-5620

Web site address: http://www.americanexpress.com/direct

You may review and copy information about the Fund, including its SAI, at the
Securities and Exchange Commission's (Commission) Public Reference Room in
Washington, D.C. (for information about the public reference room call
1-800-SEC-0330). Reports and other information about the Fund are available on
the Commission's Internet site at http://www.sec.gov. Copies of this information
may be obtained by writing and paying a duplicating fee to the Public Reference
Section of the Commission, Washington, D.C. 20549-6009.

Investment Company Act File 811-7405
S-6131 F (12/99)

<PAGE>

Strategist World Technologies Fund

Prospectus
Dec. 30, 1999

Please note that this Fund:
o is not a bank deposit
o is not federally insured
o is not endorsed by any bank or government agency
o is not guaranteed to achieve its goal

<PAGE>

Table of Contents

TAKE A CLOSER LOOK AT:

The Fund

Goal
Investment Strategy
Risks
Past Performance
Fees and Expenses
Management

Buying and Selling Shares
Valuing Fund Shares
Purchasing Shares
Exchanging/Selling Shares

Distributions and Taxes

Personalized Shareholder Information

Master/Feeder Structure

Business Structure

Quick Telephone Reference

Financial Highlights

<PAGE>

THE FUND IN BRIEF

GOAL
The Fund seeks to provide shareholders with long-term capital growth. Because
any investment involves risk, achieving the goal cannot be guaranteed. The Fund
seeks to achieve its goal by investing all of its assets in a master portfolio
rather than by directly investing in and managing its own portfolio of
securities. The master portfolio has the same goal and investment policies as
the Fund.

INVESTMENT STRATEGY
The Fund's assets primarily are invested in equity securities of companies in
the information technology sector. Under normal market conditions, at least 65%
of the Fund's total assets are invested in companies in this sector. Investments
will be in at least three different countries.

The selection of companies is the primary decision in building the investment
portfolio.

In pursuit of the Fund's goal, American Express Financial Corporation (AEFC),
the Fund's investment manager, chooses investments by:

o Identifying companies that AEFC believes to be principally engaged in the
development, advancement, production and/or use of products or services
related to information processing, data processing and/or information
presentation.
o Identifying companies with: - high demand for their products and/or
services, - competitive market position, and - effective management.
o Considering opportunities and risks within the technology,
telecommunications, and media sectors.

In evaluating whether to sell a security, AEFC considers, among other factors,
whether:
- the security is overvalued,
- the company or the security continues to meet the standards described
above,
- the company meets earnings expectations, and
- the company's industry experiences a broad down-turn.

Although not a primary investment strategy, the Fund also may invest in other
instruments, such as money market securities and debt securities. Additionally,
the Fund may utilize derivative instruments to produce incremental earnings to
hedge existing positions and to increase flexibility.

During weak or declining markets, the Fund may invest more of its assets in
money market securities. Although the Fund primarily will invest in these
securities to avoid losses, this type of investing also could prevent the Fund
from achieving its investment objective. During these times, AEFC may make
frequent securities trades that could result in increased fees, expenses and
taxes.

For more information on strategies and holdings, see the Fund's Statement of
Additional Information (SAI) and the annual/semiannual reports.

RISKS
This Fund is designed for investors with above-average risk tolerance. Please
remember that with any mutual fund investment you may lose money. Principal
risks associated with an investment in the Fund include:

Market Risk
Sector/Concentration Risk
Style Risk

<PAGE>

Sector/Concentration Risk
Investments that are concentrated in a particular issuer, geographic region or
industry will be more susceptible to changes in price (i.e., the more you
diversify, the more you spread risk).

PAST PERFORMANCE
The following bar chart and table show the risks and variability of investing in
the Fund by showing:

o how the Fund's performance has varied for each full calendar year that
the Fund has existed, and

o how the Fund's average annual total returns compare to other
recognized indexes.

How the Fund performed in the past does not indicate how the Fund will perform
in the future.

Strategist World Technologies Fund Performance (based on calendar years)

+7.71 +41.05
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998

During the period shown in the bar chart, the highest return for a calendar
quarter was 47.44% (quarter ending December 1998) and the lowest return for a
calendar quarter was -21.60% (quarter ending September 1998).

The Fund's year to date return as of Sept. 30, 1999, was 54.83%.

Average Annual Total Returns (as of Dec. 31, 1998)

1 year Since inception

Strategist World Technologies Fund +41.05% +20.88%(a)

S&P 500 Index +26.67% +26.25%(b)

Lipper Science & Technology Funds Index +46.94% +23.75%(b)

(a) Inception date was Nov. 13, 1996
(b) Measurement period started Dec. 1, 1996.

<PAGE>

S&P 500 Index, an unmanaged list of common stocks, is frequently used as a
general measure of market performance. The index reflects reinvestment of all
distributions and changes in market prices, but excludes brokerage commissions
or other fees. However, the S&P 500 companies are generally larger than those in
which the Fund invests.

Lipper Science & Technology Funds Index, published by Lipper Analytical
Services, Inc., includes 10 funds that are generally similar to the Fund,
although some funds in the index may have somewhat different investment policies
or objectives.

FEES AND EXPENSES
Fund investors pay various expenses. The table below describes the fees and
expenses that you may pay if you buy and hold shares of the Fund.

Shareholder Fees(a) (fees paid directly from your investment)

Maximum sales charge 0%
(load) imposed on purchases(b)
(as a percentage
of offering price)

Annual Fund operating expensesc (expenses that are deducted from Fund assets) As
a percentage of average daily net assets:

Management fees(d) 0.72%
Distribution (12b-1) fees 0.25%
Other expenses(e) 0.53%
Total(f) 1.50%

a A wire transfer charge, currently $15, is deducted from your brokerage
account for wire transfers made at your request.
b There are no sales loads, however, the Fund imposes a 0.50% fee for shares
sold or exchanged within 180 days of their purchase date. This fee
reimburses the Fund for brokerage fees and other costs incurred. This fee
also helps assure that long-term shareholders are not unfairly bearing the
costs associated with frequent traders.
c Both in this table and the following example, Fund operating expenses
include expenses charged by both the Fund and the Portfolio.
d The management fee is paid by the Trust on behalf of the Portfolio.
e Other expenses include an administrative services fee, a transfer agency fee
and other nonadvisory expenses.
f The Advisor and the Distributor have agreed to waive certain fees and to
absorb certain other Fund expenses until Oct. 31, 2000. Under this
agreement, total expenses will not exceed 1.50%. For the most recent fiscal
year, actual total expenses with fee waivers and expense reimbursement were
1.47%.

Example
This example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds.

Assume you invest $10,000 and the Fund earns a 5% annual return. The operating
expenses remain the same each year. If you hold your shares until the end of the
years shown, your costs would be:

1 year 3 years 5 years 10 years
$153 $474 $819 $1,796

This example does not represent actual expenses, past or future. Actual expenses
may be higher or lower than those shown.

MANAGEMENT
The Fund's assets are invested in World Technologies Portfolio, which is managed
by AEFC. Louis Giglio, senior portfolio manager, joined AEFC in January 1994 as
a senior equity analyst. He has managed the assets of the Portfolio since
November 1996. He also serves as portfolio manager of AXP Strategy Aggressive
Fund and IDS Life Series Fund, Equity Portfolio. Prior to joining AEFC, he had
eight years of experience as a financial analyst with Bear, Stearns & Co.
covering the microcomputer software and computer services industries.

<PAGE>

Buying and Selling Shares

VALUING FUND SHARES
The public offering price for a single Fund share is the net asset value (NAV).
The NAV is the value of a single Fund share. The NAV usually changes daily, and
is calculated at the close of business of the New York Stock Exchange, normally
3 p.m. Central Time (CT), each business day (any day the New York Stock Exchange
is open).

PURCHASING SHARES

Important: When you open an account, you must provide your correct Taxpayer
Identification Number (TIN), which is either your Social Security or Employer
Identification number.

o a $50 penalty for each failure to supply your correct TIN,
o a civil penalty of $500 for a false statement that results in no
backup withholding, and
o criminal penalties for falsifying information.

Minimum Fund investment requirements
Your initial investment in the Fund may be as low as $2,000 ($1,000 for
custodial accounts, Individual Retirement Accounts and certain other retirement
plans). The minimum subsequent investment is $100.
These requirements may be reduced or waived as described in the SAI.

<PAGE>

Methods of purchasing shares
You may purchase shares of the Fund in three ways.

(1) By telephone:

You may use money in your brokerage account to make purchases. To place
your order, call 800-297-7378.

(2) By mail:

Mail written purchase requests (along with any checks) to American
Express Financial Direct, P.O. Box 59196, Minneapolis, MN 55459-0196.
These requests should include:

o your brokerage account number (or a brokerage account
application), and
o the name of the Fund and the dollar amount of shares you would
like purchased.

Your check should be made payable to American Express Financial
Advisors Inc. It will be deposited into your brokerage account and used
to cover your purchase request.

(3) By systematic purchase:

Once you have opened a brokerage account, you may authorize the
Distributor to automatically purchase shares on your behalf at
intervals and in amounts selected by you as described below.

Investment minimums
You can make automatic investments in any amount, from $100 to $50,000.

Investment methods
There are two ways to make automatic investments in your brokerage account:

(1) Using uninvested cash in your brokerage account: If you elect this
option, uninvested cash in your brokerage account will be used to make
the investment and, if necessary, shares of your Money Market Fund will
be sold to cover the balance of the purchase.

(2) Using bank authorizations: If you elect this option, money is
transferred from your bank checking or savings account into your
brokerage account for automatic investments.

<PAGE>

o The funds with SPP that you want to cancel,

o The newly selected fund(s) in which you want to begin making automatic
investments (for which you have an existing account) and the amount to
be invested in each fund, and

o The investment frequency and investment dates for your new automatic
investments.

Terminating your SPP
If you wish to terminate your SPP, you may call 800-297-7378, or send written
instructions to American Express Financial Direct, P.O. Box 59196, Minneapolis,
MN 55459-0196.

To avoid procedural difficulties, the Distributor must receive instructions to
change or terminate your SPP or bank authorizations at least 10 days prior to
your scheduled investment date.

EXCHANGING/SELLING SHARES

<PAGE>

Selling Shares
You may sell your shares at any time. Your sale price will be the next NAV
calculated after receipt by the Distributor of proper sale instructions, as
described below.

The Fund reserves the right to redeem in kind.

Two ways to request an exchange or sale of shares

(1) By telephone:

You may exchange or sell your shares by calling 800-297-7378.
Alternatively, you can mail your exchange or sale requests as described
below.

To properly process your telephone exchange or sale request we will
need the following information:

o your brokerage account number and your name (for exchanges, both
funds must be registered in the same ownership),
o the name of the fund from which you wish to exchange or sell shares,
o the dollar amount or number of shares you want to exchange or sell,
and o the name of the fund into which shares are to be exchanged, if
applicable.

(2) By mail:

You also may request an exchange or sale by writing to American Express
Financial Direct, P.O. Box 59196, Minneapolis, MN 55459-0196. Once an
exchange or sale request is mailed it is irrevocable and cannot be
modified or canceled.

To properly process your mailed exchange or sale request, we will need
a letter from you that contains the following information:

o your brokerage account number,
o the name of the fund from which you wish to exchange or sell
shares,
o the dollar amount or number of shares you want to exchange or
sell,
o the name of the fund into which shares are to be exchanged, if
applicable, and
o a signature of at least one of the brokerage account holders in
the exact form specified on the account.

<PAGE>

Distributions and Taxes

Dividends and Capital Gain Distributions
The Fund's net investment income is distributed to you as dividends. Capital
gains are realized when a security is sold for a higher price than was paid for
it. Each realized capital gain or loss is long-term or short-term depending on
the length of time the Fund held the security. Realized capital gains or losses
offset each other. The Fund offsets any net realized capital gains by any
available capital loss carryovers. Net short-term capital gains are included in
net investment income. Net realized long-term capital gains, if any, are
distributed by the end of the calendar year as capital gain distributions.

REINVESTMENTS
Dividends and capital gain distributions are automatically reinvested in
additional shares of the Fund unless you request distributions in cash. We
reinvest the distributions for you at the next calculated NAV after the
distribution is paid. If you choose cash distributions, you will receive cash
only for distributions declared after your request has been processed.

TAXES
Distributions are subject to federal income tax and may be subject to state and
local taxes in the year they are declared. You must report distributions on your
tax returns, even if they are reinvested in additional shares.

Selling shares held in an IRA or qualified retirement account may subject you to
federal taxes, penalties and reporting requirements. Please consult your tax
advisor.

Personalized Shareholder Information
To help you track and evaluate the performance of your investments, you will
receive these individualized reports:

QUARTERLY STATEMENTS
List all of your holdings and transactions during the previous three months.

<PAGE>

YEARLY TAX STATEMENTS
Feature average-cost-basis reporting of capital gains or losses if you sell your
shares along with distribution information to simplify tax calculations.

Master/Feeder Structure

Investors buy shares in the Fund

The Fund buys units in the Portfolio

The Portfolio invests in
securities, such as stocks or bonds

Business Structure
<S> <C> <C> <C>
--------------------
Shareholders
--------------------

- ----------------------- --------------------- -------------------- --------------------
Transfer Agent: Administrative Distributor:
American Express Services Agent: American Express
Client Service American Express Financial Advisors
Corporation Financial Inc.
Corporation The Fund
Maintains shareholder Markets and
accounts and records Provides The Fund distributes
for the Fund; administrative and invests its shares; receives
receives a fee based accounting services assets in distribution fee.
on the number of for the Fund; the
accounts it services. receives a fee Portfolio.
based on average The Fund
daily net assets. and/or
- ----------------------- --------------------- -------------------- --------------------
the
Portfolio
--------------------- -------------------- --------------------
Investment Manager: have Custodian:
American Express contracts American Express
Financial with Trust Company
Corporation certain
service Provides
Manages the providers. safekeeping of
Portfolio's The Portfolio assets; receives a
investments and fee that varies
receives a fee based on the
based on average number of
daily net assets*. securities held.
--------------------- -------------------- --------------------
</TABLE>

* The Portfolio pays AEFC a fee for managing its assets. The Fund pays its
proportionate share of the fee. Under the Investment Management Services
Agreement, the fee for the most recent fiscal year was 0.72% of average
daily net assets. Under the Agreement, the Portfolio also pays taxes,
brokerage commissions and nonadvisory expenses.

ABOUT AMERICAN EXPRESS FINANCIAL CORPORATION
American Express Financial Corporation (AEFC), the Fund's investment manager has
been a provider of financial services since 1894, and as of the most recent
fiscal year end manages more than $236 billion in assets.

YEAR 2000
The Fund could be adversely affected if the computer systems used by AEFC and
the Fund's other service providers do not properly process and calculate
date-related information from and after Jan. 1, 2000. While Year 2000-related
computer problems could have a negative effect on the Fund, AEFC is working to
avoid such problems and to obtain assurances from service providers that they
are taking similar steps.

Quick Telephone Reference

AMERICAN EXPRESS FINANCIAL DIRECT TEAM: CALL THE FINANCIAL CONSULTANTS
Fund performance, objectives and account inquiries, sales and exchanges,
dividend payments or reinvestments and automatic payment arrangements:
800-297-7378

TTY SERVICE
For the hearing impaired: 800-710-5260

<PAGE>

Financial Highlights

The table below shows certain important
financial information for evaluating the
Fund's results.

Strategist World Technologies Fund

Fiscal period ended Oct. 31,
Per share income and capital changesa
1999 1998 1997b
Net asset value, beginning of period $ 5.40 $5.27 $5.00
- -------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (.12) (.08) (.07)
Net gains (losses) (both realized and .59 .21 .34
unrealized)
- -------------------------------------------------------------------------------
Total from investment operations .58 .13 .27
- -------------------------------------------------------------------------------
Net asset value, end of period $11.21 $5.40 $5.27
- -------------------------------------------------------------------------------
Ratios/supplemental data:
Net assets, end of period (in thousands) $1,121 $540 $ 527
- -------------------------------------------------------------------------------
Ratio of expenses to average daily net .14% .14% 1.50%c
assetsd
- -------------------------------------------------------------------------------
Ratio of net investment income (loss)
to average daily net assets (1.37%) (1.45%) (1.39%)c
- -------------------------------------------------------------------------------
Portfolio turnover rate
(excluding short-term securities) 113% 200% 164%
- -------------------------------------------------------------------------------
Total return 107.59% 2.47% 5.40%
- -------------------------------------------------------------------------------

a For a share outstanding throughout the period. Rounded to the nearest cent.

b Inception date. Period from Nov. 13, 1996 to Oct. 31, 1997.

c Adjusted to an annual basis.

d The Advisor and Distributor voluntarily limited total operating expenses to
1.50%. Without this agreement, the ratio of expenses to average daily net
assets would have been 2.24%, 3.21% and 2.36% for periods ended 1999, 1998
and 1997, respectively.

The information in these tables has been audited by KPMG LLP, independent
auditors. The independent auditors' report and additional information about the
performance of the Fund are contained in the Fund's annual report which, if not
included with this prospectus, may be obtained without charge.

The Fund, along with the other funds in the Strategist Fund Group, is
distributed by American Express Financial Advisors Inc.

American Express Financial Direct
P.O. Box 59196, Minneapolis, MN 55459-0196
800-297-7378 TTY: 800-710-5620
Web site address:
http://www.americanexpress.com/direct

Investment Company Act File #811-7405

<PAGE>

STATEMENT OF ADDITIONAL INFORMATION

FOR

STRATEGIST WORLD FUND, INC.

STRATEGIST EMERGING MARKETS FUND
STRATEGIST WORLD GROWTH FUND
STRATEGIST WORLD INCOME FUND

(singularly and collectively with the corresponding portfolio(s) of World Trust
(the Trust) and the Trust, where the context requires, referred to as the
"Fund")

Dec. 30, 1999

This Statement of Additional Information (SAI) is not a prospectus. It should be
read together with the prospectus and the financial statements contained in the
most recent Annual Report to shareholders (Annual Report) that may be obtained
by calling American Express Financial Direct, 800-AXP-SERV (TTY: 800-710-5260)
or by writing to P.O. Box 59196, Minneapolis, MN 55459-0196.

The Independent Auditors' Report and the Financial Statements, including Notes
to the Financial Statements and the Schedule of Investments in Securities,
contained in the Annual Report are incorporated in this SAI by reference. No
other portion of the Annual Report, however, is incorporated by reference. The
prospectus for the Fund, dated the same date as this SAI, also is incorporated
in this SAI by reference.

<PAGE>

TABLE OF CONTENTS

Mutual Fund Checklist.....................................................p.3
Fundamental Investment Policies...........................................p.5
Investment Strategies and Types of Investments............................p.8
Information Regarding Risks and Investment Strategies....................p.11
Security Transactions....................................................p.33
Brokerage Commissions Paid to Brokers Affiliated
with the Adviser.......................................................p.35
Performance Information..................................................p.35
Valuing Fund Shares......................................................p.37
Selling Shares...........................................................p.38
Capital Loss Carryover...................................................p.39
Taxes....................................................................p.39
Agreements...............................................................p.40
Organizational Information...............................................p.43
Board Members and Officers...............................................p.45
Compensation for Board Members...........................................p.49
Independent Auditors.....................................................p.50
Appendix: Description of Ratings........................................p.51

<PAGE>

MUTUAL FUND CHECKLIST

|X| Mutual funds are NOT guaranteed or insured by any
bank or government agency. You can lose money.

|X| Mutual funds ALWAYS carry investment risks. Some
types carry more risk than others.

|X| A higher rate of return typically involves a
higher risk of loss.

|X| Past performance is not a reliable indicator of
future performance.

|X| ALL mutual funds have costs that lower investment
return.

|X| You can buy some mutual funds by contacting them
directly. Others, like this one, are sold mainly
through brokers, banks, financial planners, or
insurance agents. If you buy through these
financial professionals, you generally will pay a
sales charge.

|X| Shop around. Compare a mutual fund with others of
the same type before you buy.

OTHER IDEAS FOR SUCCESSFUL MUTUAL FUND INVESTING:

Develop a Financial Plan

Have a plan - even a simple plan can help you take control of your financial
future.

Dollar-Cost Averaging

An investment technique that works well for many investors is one that
eliminates random buy and sell decisions. One such system is dollar-cost
averaging. Dollar-cost averaging involves building a portfolio through the
investment of fixed amounts of money on a regular basis regardless of the price
or market condition. This may enable an investor to smooth out the effects of
the volatility of the financial markets. By using this strategy, more shares
will be purchased when the price is low and less when the price is high. As the
accompanying chart illustrates, dollar-cost averaging tends to keep the average
price paid for the shares lower than the average market price of shares
purchased, although there is no guarantee.

While this does not ensure a profit and does not protect against a loss if the
market declines, it is an effective way for many shareholders who can continue
investing through changing market conditions to accumulate shares to meet
long-term goals.

<PAGE>

Dollar-cost averaging:

- -------------------------------------------------------------
Regular Market Price Shares
Investment of a Share Acquired
- -------------------------------------------------------------
$100 $6.00 16.7
100 4.00 25.0
100 4.00 25.0
100 6.00 16.7
100 5.00 20.0
----- -------- ------
$500 $25.00 103.4

Average market price of a share over 5 periods: $5.00 ($25.00 divided by 5)
The average price you paid for each share: $4.84 ($500 divided by 103.4)

Diversify

Diversify your portfolio. By investing in different asset classes and different
economic environments you help protect against poor performance in one type of
investment while including investments most likely to help you achieve your
important goals.

Understand Your Investment

Know what you are buying. Make sure you understand the potential risks, rewards,
costs, and expenses associated with each of your investments.

<PAGE>

FUNDAMENTAL INVESTMENT POLICIES

The Fund pursues its investment objective by investing all of its assets in a
portfolio of the Trust, a separate investment company, rather than by directly
investing in and managing its own portfolio of securities. The Portfolio has the
same investment objectives, policies, and restrictions as the Fund.

Fundamental investment policies adopted by the Fund cannot be changed without
the approval of a majority of the outstanding voting securities of the Fund as
defined in the Investment Company Act of 1940, as amended (the 1940 Act).

Notwithstanding any of the Fund's other investment policies, the Fund may invest
its assets in an open-end management investment company having substantially the
same investment objectives, policies, and restrictions as the Fund for the
purpose of having those assets managed as part of a combined pool.

The policies below are fundamental policies that apply to the Fund and may be
changed only with shareholder approval. Unless holders of a majority of the
outstanding voting securities agree to make the change, the Fund will not:

Strategist Emerging Markets Fund

o Act as an underwriter (sell securities for others). However, under the
securities laws, the Fund may be deemed to be an underwriter when it
purchases securities directly from the issuer and later resells them.

o Borrow money or property, except as a temporary measure for extraordinary
or emergency purposes, in an amount not exceeding one-third of the market
value of its total assets (including borrowings) less liabilities (other
than borrowings) immediately after the borrowing.

o Make cash loans if the total commitment amount exceeds 5% of the Fund's
total assets.

o Concentrate in any one industry. According to the present interpretation by
the Securities and Exchange Commission (SEC), this means no more than 25%
of the Fund's total assets, based on current market value at time of
purchase, can be invested in any one industry.

o Purchase more than 10% of the outstanding voting securities of an issuer.

o Invest more than 5% of its total assets in securities of any one company,
government, or political subdivision thereof, except the limitation will
not apply to investments in securities issued by the U.S. government, its
agencies, or instrumentalities, and except that up to 25% of the Fund's
total assets may be invested without regard to this 5% limitation.

o Buy or sell real estate, unless acquired as a result of ownership of
securities or other instruments, except this shall not prevent the Fund
from investing in securities or other instruments backed by real estate or
securities of companies engaged in the real estate business or real estate
investment trusts. For purposes of this policy, real estate includes real
estate limited partnerships.

o Buy or sell physical commodities unless acquired as a result of ownership
of securities or other instruments, except this shall not prevent the Fund
from buying or selling options and futures contracts or from investing in
securities or other instruments backed by, or whose value is derived from,
physical commodities.

o Make a loan of any part of its assets to American Express Financial
Corporation (the Advisor), to the board members and officers of the Advisor
or to its own board members and officers.

<PAGE>

o Lend Fund securities in excess of 30% of its net assets.

o Issue senior securities, except as permitted under the 1940 Act.

Strategist World Growth Fund

o Make cash loans if the total commitment amount exceeds 5% of the Fund's
total assets.

o Concentrate in any one industry. According to the present interpretation by
the SEC, this means no more than 25% of the Fund's total assets, based on
current market value at time of purchase, can be invested in any one
industry.

o Purchase more than 10% of the outstanding voting securities of an issuer.

o Make a loan of any part of its assets to the Advisor, to the board members
and officers of the Advisor or to its own board members and officers.

o Lend Fund securities in excess of 30% of its net assets.

o Issue senior securities, except as permitted under the 1940 Act.

Strategist World Income Fund

o Make cash loans if the total commitment amount exceeds 5% of the Fund's
total assets.

<PAGE>

o Purchase more than 10% of the outstanding voting securities of an issuer.

o Make a loan of any part of its assets to the Advisor, to the board members
and officers of the Advisor or to its own board members and officers.

o Lend Fund securities in excess of 30% of its net assets.

o Issue senior securities, except as permitted under the 1940 Act.

Except for the fundamental investment policies listed above, the other
investment policies described in the prospectus and in this SAI are not
fundamental and may be changed by the board at any time.

<PAGE>
INVESTMENT STRATEGIES AND TYPES OF INVESTMENTS

This table shows various investment strategies and investments that many funds
are allowed to engage in and purchase. It is intended to show the breadth of
investments that the investment manager may make on behalf of the Fund. For a
description of principal risks, please see the prospectus. Notwithstanding the
Fund's ability to utilize these strategies and techniques, the investment
manager is not obligated to use them at any particular time. For example, even
though the investment manager is authorized to adopt temporary defensive
positions and is authorized to attempt to hedge against certain types of risk
these practices are left to the investment manager's sole discretion.

Investment strategies & types of investments: Allowable for
the Fund?
- ---------------------------------------------------------- ---------- ----------
Strategist Strategist Strategist
Emerging World World
Markets Growth Income
- ---------------------------------------------------------- ---------- ----------
Agency and Government Securities yes yes yes
- ---------------------------------------------------------- ---------- ----------
Borrowing yes yes yes
- ---------------------------------------------------------- ---------- ----------
Cash/Money Market Instruments yes yes yes
- ---------------------------------------------------------- ---------- ----------
Collateralized Bond Obligations yes yes yes
- ---------------------------------------------------------- ---------- ----------
Commercial Paper yes yes yes
- ---------------------------------------------------------- ---------- ----------
Common Stock yes yes yes
- ---------------------------------------------------------- ---------- ----------
Convertible Securities yes yes yes
- ---------------------------------------------------------- ---------- ----------
Corporate Bonds yes yes yes
- ---------------------------------------------------------- ---------- ----------
Debt Obligations yes yes yes
- ---------------------------------------------------------- ---------- ----------
Depositary Receipts yes yes yes
- ---------------------------------------------------------- ---------- ----------
Derivative Instruments yes yes yes
- ---------------------------------------------------------- ---------- ----------
Foreign Currency Transactions yes yes yes
- ---------------------------------------------------------- ---------- ----------
Foreign Securities yes yes yes
- ---------------------------------------------------------- ---------- ----------
High-Yield (High-Risk) Securities (Junk Bonds) yes yes yes
- ---------------------------------------------------------- ---------- ----------
Illiquid and Restricted Securities yes yes yes
- ---------------------------------------------------------- ---------- ----------
Indexed Securities yes yes yes
- ---------------------------------------------------------- ---------- ----------
Inverse Floaters no no yes
- ---------------------------------------------------------- ---------- ----------
Investment Companies yes yes yes
- ---------------------------------------------------------- ---------- ----------
Lending of Portfolio Securities yes yes yes
- ---------------------------------------------------------- ---------- ----------
Loan Participations yes yes yes
- ---------------------------------------------------------- ---------- ----------
Mortgage- and Asset-Backed Securities yes yes yes
- ---------------------------------------------------------- ---------- ----------
Mortgage Dollar Rolls no no yes
- ---------------------------------------------------------- ---------- ----------
Municipal Obligations yes yes yes
- ---------------------------------------------------------- ---------- ----------
Preferred Stock yes yes yes
- ---------------------------------------------------------- ---------- ----------
Real Estate Investment Trusts yes yes yes
- ---------------------------------------------------------- ---------- ----------
Repurchase Agreements yes yes yes
- ---------------------------------------------------------- ---------- ----------
Reverse Repurchase Agreements yes yes yes
- ---------------------------------------------------------- ---------- ----------
Short Sales no no no
- ---------------------------------------------------------- ---------- ----------
Sovereign Debt yes yes yes
- ---------------------------------------------------------- ---------- ----------
Structured Products yes yes yes
- ---------------------------------------------------------- ---------- ----------
Variable- or Floating-Rate Securities yes yes yes
- ---------------------------------------------------------- ---------- ----------
Warrants yes yes yes
- ---------------------------------------------------------- ---------- ----------
When-Issued Securities yes yes yes
- ---------------------------------------------------------- ---------- ----------
Zero-Coupon, Step-Coupon, and
Pay-in-Kind Securities yes yes yes
- ---------------------------------------------------------- ---------- ----------
<PAGE>

The following are guidelines that may be changed by the board at any time:

For Strategist Emerging Markets:

o Under normal market conditions, at least 65% of the Fund's total assets
will be invested in emerging market equity securities of at least three
different countries.

o The Fund may invest up to 20% of its net assets in bonds.

o The Fund may invest up to 10% of its net assets in bonds rated below
investment grade, including Brady bonds.

o No more than 5% of the Fund's net assets can be used at any one time for
good faith deposits on futures and premiums for options on futures that do
not offset existing investment positions.

o No more than 10% of the Fund's net assets will be held in securities and
other instruments that are illiquid.

o Ordinarily, less than 25% of the Fund's total assets are invested in money
market instruments.

o The Fund will not buy on margin or sell short, except the Fund may make
margin payments in connection with transactions in derivative instruments.

o The Fund will not invest more than 10% of its total assets in securities of
investment companies.

o The Fund will not invest in a company to control or manage it.

For Strategist World Growth:

o Under normal market conditions, at least 65% of the Fund's total assets
will be invested in common stocks and convertible securities of companies
in at least three different countries.

o The Fund may invest up to 20% of its net assets in bonds.

o The Fund will not invest more than 5% of its net assets in bonds below
investment grade, including Brady bonds.

o No more than 5% of the Fund's net assets can be used at any one time for
good faith deposits on futures and premiums for options on futures that do
not offset existing investment positions.

o No more than 10% of the Fund's net assets will be held in securities and
other instruments that are illiquid.

o Ordinarily, less than 25% of the Fund's total assets are invested in money
market instruments.

o The Fund will not buy on margin or sell short, except the Fund may make
margin payments in connection with transactions in derivative instruments.

o The Fund will not invest more than 10% of its total assets in securities of
investment companies.

o The Fund will not invest in a company to control or manage it.

<PAGE>

For Strategist World Income:

o Under normal market conditions, at least 80% of the Fund's net assets will
be invested in investment-grade corporate or government debt securities
including money market instruments of issuers located in at least three
different countries.

o The Fund may not purchase debt securities rated lower than B by Moody's
Investors Service Inc. or the equivalent.

o No more than 5% of the Fund's net assets can be used at any one time for
good faith deposits on futures and premiums for options on futures that do
not offset existing investment positions.

o No more than 10% of the Fund's net assets will be held in securities and
other instruments that are illiquid.

o Ordinarily, less than 25% of the Fund's total assets are invested in money
market instruments.

o The Fund will not buy on margin or sell short, except the Fund may make
margin payments in connection with transactions in derivative instruments.

o The Fund will not invest more than 10% of its total assets in securities of
investment companies.

o The Fund will not invest in a company to control or manage it.

<PAGE>

INFORMATION REGARDING RISKS AND INVESTMENT STRATEGIES

RISKS

The following is a summary of common risk characteristics. Following this
summary is a description of certain investments and investment strategies and
the risks most commonly associated with them (including certain risks not
described below and, in some cases, a more comprehensive discussion of how the
risks apply to a particular investment or investment strategy). Please remember
that a mutual fund's risk profile is largely defined by the fund's primary
securities and investment strategies. However, most mutual funds are allowed to
use certain other strategies and investments that may have different risk
characteristics. Accordingly, one or more of the following types of risk will be
associated with the Fund at any time (for a description of principal risks,
please see the prospectus):

Call/Prepayment Risk

The risk that a bond or other security might be called (or otherwise converted,
prepaid, or redeemed) before maturity. This type of risk is closely related to
"reinvestment risk."

Correlation Risk

The risk that a given transaction may fail to achieve its objectives due to an
imperfect relationship between markets. Certain investments may react more
negatively than others in response to changing market conditions.

Credit Risk

The risk that the issuer of a security, or the counterparty to a contract, will
default or otherwise become unable to honor a financial obligation (such as
payments due on a bond or a note). The price of junk bonds may react more to the
ability of the issuing company to pay interest and principal when due than to
changes in interest rates. Junk bonds have greater price fluctuations and are
more likely to experience a default than investment grade bonds.

Event Risk

Occasionally, the value of a security may be seriously and unexpectedly changed
by a natural or industrial accident or occurrence.

Foreign/Emerging Markets Risk

The following are all components of foreign/emerging markets risk:

Country risk includes the political, economic, and other conditions of
a country. These conditions include lack of publicly available information, less
government oversight (including lack of accounting, auditing, and financial
reporting standards), the possibility of government-imposed restrictions, and
even the nationalization of assets.

Currency risk results from the constantly changing exchange rate
between local currency and the U.S. dollar. Whenever the Fund holds securities
valued in a foreign currency or holds the currency, changes in the exchange rate
add or subtract from the value of the investment.

<PAGE>

Custody risk refers to the process of clearing and settling trades. It
also covers holding securities with local agents and depositories. Low trading
volumes and volatile prices in less developed markets make trades harder to
complete and settle. Local agents are held only to the standard of care of the
local market. Governments or trade groups may compel local agents to hold
securities in designated depositories that are not subject to independent
evaluation. The less developed a country's securities market is, the greater the
likelihood of problems occurring.

Emerging markets risk includes the dramatic pace of change (economic,
social, and political) in emerging market countries as well as the other
considerations listed above. These markets are in early stages of development
and are extremely volatile. They can be marked by extreme inflation, devaluation
of currencies, dependence on trade partners, and hostile relations with
neighboring countries.

Inflation Risk

Also known as purchasing power risk, inflation risk measures the effects of
continually rising prices on investments. If an investment's yield is lower than
the rate of inflation, your money will have less purchasing power as time goes
on.

Interest Rate Risk

The risk of losses attributable to changes in interest rates. This term is
generally associated with bond prices (when interest rates rise, bond prices
fall). In general, the longer the maturity of a bond, the higher its yield and
the greater its sensitivity to changes in interest rates.

Issuer Risk

The risk that an issuer, or the value of its stocks or bonds, will perform
poorly. Poor performance may be caused by poor management decisions, competitive
pressures, breakthroughs in technology, reliance on suppliers, labor problems or
shortages, corporate restructurings, fraudulent disclosures, or other factors.

Legal/Legislative Risk

Congress and other governmental units have the power to change existing laws
affecting securities. A change in law might affect an investment adversely.

Leverage Risk

Some derivative investments (such as options, futures, or options on futures)
require little or no initial payment and base their price on a security, a
currency, or an index. A small change in the value of the underlying security,
currency, or index may cause a sizable gain or loss in the price of the
instrument.

Liquidity Risk

Securities may be difficult or impossible to sell at the time that the Fund
would like. The Fund may have to lower the selling price, sell other
investments, or forego an investment opportunity.

Management Risk

The risk that a strategy or selection method utilized by the investment manager
may fail to produce the intended result. When all other factors have been
accounted for and the investment manager chooses an investment, there is always
the possibility that the choice will be a poor one.

<PAGE>

Market Risk

The market may drop and you may lose money. Market risk may affect a single
issuer, sector of the economy, industry, or the market as a whole. The market
value of all securities may move up and down, sometimes rapidly and
unpredictably.

Reinvestment Risk

The risk that an investor will not be able to reinvest income or principal at
the same rate it currently is earning.

Sector/Concentration Risk

Investments that are concentrated in a particular issuer, geographic region, or
industry will be more susceptible to changes in price (the more you diversify,
the more you spread risk).

Small Company Risk

Investments in small and medium companies often involve greater risks than
investments in larger, more established companies because small and medium
companies may lack the management experience, financial resources, product
diversification, and competitive strengths of larger companies. In addition, in
many instances the securities of small and medium companies are traded only
over-the-counter or on regional securities exchanges and the frequency and
volume of their trading is substantially less than is typical of larger
companies.

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INVESTMENT STRATEGIES

The following information supplements the discussion of the Fund's investment
objectives, policies, and strategies that are described in the prospectus and in
this SAI. The following describes many strategies that many mutual funds use and
types of securities that they purchase. Please refer to the section entitled
Investment Strategies and Types of Investments to see which are applicable to
the Fund.

Agency and Government Securities

The U.S. government and its agencies issue many different types of securities.
U.S. Treasury bonds, notes, and bills and securities including mortgage pass
through certificates of the Government National Mortgage Association (GNMA) are
guaranteed by the U.S. government. Other U.S. government securities are issued
or guaranteed by federal agencies or government-sponsored enterprises but are
not guaranteed by the U.S. government. This may increase the credit risk
associated with these investments.

Government-sponsored entities issuing securities include privately owned,
publicly chartered entities created to reduce borrowing costs for certain
sectors of the economy, such as farmers, homeowners, and students. They include
the Federal Farm Credit Bank System, Farm Credit Financial Assistance
Corporation, Federal Home Loan Bank, FHLMC, FNMA, Student Loan Marketing
Association (SLMA), and Resolution Trust Corporation (RTC). Government-sponsored
entities may issue discount notes (with maturities ranging from overnight to 360
days) and bonds. Agency and government securities are subject to the same
concerns as other debt obligations. (See also Debt Obligations and Mortgage- and
Asset-Backed Securities.)

Although one or more of the other risks described in this SAI may apply, the
largest risks associated with agency and government securities include:
Call/Prepayment Risk, Inflation Risk, Interest Rate Risk, Management Risk, and
Reinvestment Risk.

Borrowing

The Fund may borrow money from banks for temporary or emergency purposes and
make other investments or engage in other transactions permissible under the
1940 Act that may be considered a borrowing (such as derivative instruments).
Borrowings are subject to costs (in addition to any interest that may be paid)
and typically reduce the Fund's total return. Except as qualified above,
however, the Fund will not buy securities on margin.

Although one or more of the other risks described in this SAI may apply, the
largest risks associated with borrowing include: Inflation Risk and Management
Risk.

Cash/Money Market Instruments

The Fund may maintain a portion of its assets in cash and cash-equivalent
investments. Cash-equivalent investments include short-term U.S. and Canadian
government securities and negotiable certificates of deposit, non-negotiable
fixed-time deposits, bankers' acceptances, and letters of credit of banks or
savings and loan associations having capital, surplus, and undivided profits (as
of the date of its most recently published annual financial statements) in
excess of $100 million (or the equivalent in the instance of a foreign branch of
a U.S. bank) at the date of investment. The Fund also may purchase short-term
notes and obligations of U.S. and foreign banks and corporations and may use
repurchase agreements with broker-dealers registered under the Securities
Exchange Act of 1934 and with commercial banks. (See also Commercial Paper, Debt
Obligations, Repurchase Agreements, and Variable- or Floating-Rate Securities.)
These types of instruments generally offer low rates of return and subject the
Fund to certain costs and expenses.

See the appendix for a discussion of securities ratings.

<PAGE>

Although one or more of the other risks described in this SAI may apply, the
largest risks associated with cash/money market instruments include: Credit
Risk, Inflation Risk, and Management Risk.

Collateralized Bond Obligations

Collateralized bond obligations (CBOs) are investment grade bonds backed by a
pool of junk bonds. CBOs are similar in concept to collateralized mortgage
obligations (CMOs), but differ in that CBOs represent different degrees of
credit quality rather than different maturities. (See also Mortgage- and
Asset-Backed Securities.) Underwriters of CBOs package a large and diversified
pool of high-risk, high-yield junk bonds, which is then separated into "tiers."
Typically, the first tier represents the higher quality collateral and pays the
lowest interest rate; the second tier is backed by riskier bonds and pays a
higher rate; the third tier represents the lowest credit quality and instead of
receiving a fixed interest rate receives the residual interest payments--money
that is left over after the higher tiers have been paid. CBOs, like CMOs, are
substantially overcollateralized and this, plus the diversification of the pool
backing them, earns them investment-grade bond ratings. Holders of third-tier
CBOs stand to earn high yields or less money depending on the rate of defaults
in the collateral pool. (See also High-Yield (High-Risk) Securities.)

Although one or more of the other risks described in this SAI may apply, the
largest risks associated with CBOs include: Call/Prepayment Risk, Credit Risk,
Interest Rate Risk, and Management Risk.

Commercial Paper

Commercial paper is a short-term debt obligation with a maturity ranging from 2
to 270 days issued by banks, corporations, and other borrowers. It is sold to
investors with temporary idle cash as a way to increase returns on a short-term
basis. These instruments are generally unsecured, which increases the credit
risk associated with this type of investment. (See also Debt Obligations and
Illiquid and Restricted Securities.)

Although one or more of the other risks described in this SAI may apply, the
largest risks associated with commercial paper include: Credit Risk, Liquidity
Risk, and Management Risk.

Common Stock

Common stock represents units of ownership in a corporation. Owners typically
are entitled to vote on the selection of directors and other important matters
as well as to receive dividends on their holdings. In the event that a
corporation is liquidated, the claims of secured and unsecured creditors and
owners of bonds and preferred stock take precedence over the claims of those who
own common stock.

The price of common stock is generally determined by corporate earnings, type of
products or services offered, projected growth rates, experience of management,
liquidity, and general market conditions for the markets on which the stock
trades.

Although one or more of the other risks described in this SAI may apply, the
largest risks associated with common stock include: Issuer Risk, Management
Risk, Market Risk, and Small Company Risk.

Convertible Securities

<PAGE>

convertible security matures or is redeemed, converted, or exchanged.
Convertible securities have unique investment characteristics in that they
generally (i) have higher yields than common stocks but lower yields than
comparable non-convertible securities, (ii) are less subject to fluctuation in
value than the underlying stock since they have fixed income characteristics,
and (iii) provide the potential for capital appreciation if the market price of
the underlying common stock increases.

The value of a convertible security is a function of its "investment value"
(determined by its yield in comparison with the yields of other securities of
comparable maturity and quality that do not have a conversion privilege) and its
"conversion value" (the security's worth, at market value, if converted into the
underlying common stock). The investment value of a convertible security is
influenced by changes in interest rates, with investment value declining as
interest rates increase and increasing as interest rates decline. The credit
standing of the issuer and other factors also may have an effect on the
convertible security's investment value. The conversion value of a convertible
security is determined by the market price of the underlying common stock. If
the conversion value is low relative to the investment value, the price of the
convertible security is governed principally by its investment value. Generally,
the conversion value decreases as the convertible security approaches maturity.
To the extent the market price of the underlying common stock approaches or
exceeds the conversion price, the price of the convertible security will be
increasingly influenced by its conversion value. A convertible security
generally will sell at a premium over its conversion value by the extent to
which investors place value on the right to acquire the underlying common stock
while holding a fixed income security.

Although one or more of the other risks described in this SAI may apply, the
largest risks associated with convertible securities include: Call/Prepayment
Risk, Interest Rate Risk, Issuer Risk, Management Risk, Market Risk, and
Reinvestment Risk.

Corporate Bonds

Corporate bonds are debt obligations issued by private corporations, as distinct
from bonds issued by a government agency or a municipality. Corporate bonds
typically have four distinguishing features: (1) they are taxable; (2) they have
a par value of $1,000; (3) they have a term maturity, which means they come due
all at once; and (4) many are traded on major exchanges. Corporate bonds are
subject to the same concerns as other debt obligations. (See also Debt
Obligations and High-Yield (High-Risk) Securities.)

Corporate bonds may be either secured or unsecured. Unsecured corporate bonds
are generally referred to as "debentures." See the appendix for a discussion of
securities ratings.

Although one or more of the other risks described in this SAI may apply, the
largest risks associated with corporate bonds include: Call/Prepayment Risk,
Credit Risk, Interest Rate Risk, Issuer Risk, Management Risk, and Reinvestment
Risk.

Debt Obligations

Many different types of debt obligations exist (for example, bills, bonds, or
notes). Issuers of debt obligations have a contractual obligation to pay
interest at a specified rate on specified dates and to repay principal on a
specified maturity date. Certain debt obligations (usually intermediate- and
long-term bonds) have provisions that allow the issuer to redeem or "call" a
bond before its maturity. Issuers are most likely to call these securities
during periods of falling interest rates. When this happens, an investor may
have to replace these securities with lower yielding securities, which could
result in a lower return.

The market value of debt obligations is affected primarily by changes in
prevailing interest rates and the issuers perceived ability to repay the debt.
The market value of a debt obligation generally reacts inversely to interest
rate changes. When prevailing interest rates decline, the price usually rises,
and when prevailing interest rates rise, the price usually declines.

<PAGE>

In general, the longer the maturity of a debt obligation, the higher its yield
and the greater the sensitivity to changes in interest rates. Conversely, the
shorter the maturity, the lower the yield but the greater the price stability.

As noted, the values of debt obligations also may be affected by changes in the
credit rating or financial condition of their issuers. Generally, the lower the
quality rating of a security, the higher the degree of risk as to the payment of
interest and return of principal. To compensate investors for taking on such
increased risk, those issuers deemed to be less creditworthy generally must
offer their investors higher interest rates than do issuers with better credit
ratings. (See also Agency and Government Securities, Corporate Bonds, and
High-Yield (High-Risk) Securities.)

All ratings limitations are applied at the time of purchase. Subsequent to
purchase, a debt security may cease to be rated or its rating may be reduced
below the minimum required for purchase by the Fund. Neither event will require
the sale of such a security, but it will be a factor in considering whether to
continue to hold the security. To the extent that ratings change as a result of
changes in a rating organization or their rating systems, the Fund will attempt
to use comparable ratings as standards for selecting investments.

See the appendix for a discussion of securities ratings.

Although one or more of the other risks described in this SAI may apply, the
largest risks associated with debt obligations include: Call/Prepayment Risk,
Credit Risk, Interest Rate Risk, Issuer Risk, Management Risk, and Reinvestment
Risk.

Depositary Receipts

Some foreign securities are traded in the form of American Depositary Receipts
(ADRs). ADRs are receipts typically issued by a U.S. bank or trust company
evidencing ownership of the underlying securities of foreign issuers. European
Depositary Receipts (EDRs) and Global Depositary Receipts (GDRs) are receipts
typically issued by foreign banks or trust companies, evidencing ownership of
underlying securities issued by either a foreign or U.S. issuer. Generally,
depositary receipts in registered form are designed for use in the U.S. and
depositary receipts in bearer form are designed for use in securities markets
outside the U.S. Depositary receipts may not necessarily be denominated in the
same currency as the underlying securities into which they may be converted.
Depositary receipts involve the risks of other investments in foreign
securities. In addition, ADR holders may not have all the legal rights of
shareholders and may experience difficulty in receiving shareholder
communications. (See also Common Stock and Foreign Securities.)

Although one or more of the other risks described in this SAI may apply, the
largest risks associated with depositary receipts include: Foreign/Emerging
Markets Risk, Issuer Risk, Management Risk, and Market Risk.

Derivative Instruments

Derivative instruments are commonly defined to include securities or contracts
whose values depend, in whole or in part, on (or "derive" from) the value of one
or more other assets, such as securities, currencies, or commodities.

A derivative instrument generally consists of, is based upon, or exhibits
characteristics similar to options or forward contracts. Such instruments may be
used to maintain cash reserves while remaining fully invested, to offset
anticipated declines in values of investments, to facilitate trading, to reduce
transaction costs, or to pursue higher investment returns. Derivative
instruments are characterized by requiring little or no initial payment. Their
value changes daily based on a security, a currency, a group of securities or
currencies, or an index. A small change in the value of the underlying security,
currency, or index can cause a sizable percentage gain or loss in the price of
the derivative instrument.

<PAGE>

Options and forward contracts are considered to be the basic "building blocks"
of derivatives. For example, forward-based derivatives include forward
contracts, swap contracts, and exchange-traded futures. Forward-based
derivatives are sometimes referred to generically as "futures contracts."
Option-based derivatives include privately negotiated, over-the-counter (OTC)
options (including caps, floors, collars, and options on futures) and
exchange-traded options on futures. Diverse types of derivatives may be created
by combining options or futures in different ways, and by applying these
structures to a wide range of underlying assets.

Options. An option is a contract. A person who buys a call option for a
security has the right to buy the security at a set price for the length of the
contract. A person who sells a call option is called a writer. The writer of a
call option agrees for the length of the contract to sell the security at the
set price when the buyer wants to exercise the option, no matter what the market
price of the security is at that time. A person who buys a put option has the
right to sell a security at a set price for the length of the contract. A person
who writes a put option agrees to buy the security at the set price if the
purchaser wants to exercise the option during the length of the contract, no
matter what the market price of the security is at that time. An option is
covered if the writer owns the security (in the case of a call) or sets aside
the cash or securities of equivalent value (in the case of a put) that would be
required upon exercise.

The price paid by the buyer for an option is called a premium. In addition to
the premium, the buyer generally pays a broker a commission. The writer receives
a premium, less another commission, at the time the option is written. The
premium received by the writer is retained whether or not the option is
exercised. A writer of a call option may have to sell the security for a
below-market price if the market price rises above the exercise price. A writer
of a put option may have to pay an above-market price for the security if its
market price decreases below the exercise price.

When an option is purchased, the buyer pays a premium and a commission. It then
pays a second commission on the purchase or sale of the underlying security when
the option is exercised. For record keeping and tax purposes, the price obtained
on the sale of the underlying security is the combination of the exercise price,
the premium, and both commissions.

One of the risks an investor assumes when it buys an option is the loss of the
premium. To be beneficial to the investor, the price of the underlying security
must change within the time set by the option contract. Furthermore, the change
must be sufficient to cover the premium paid, the commissions paid both in the
acquisition of the option and in a closing transaction or in the exercise of the
option and sale (in the case of a call) or purchase (in the case of a put) of
the underlying security. Even then, the price change in the underlying security
does not ensure a profit since prices in the option market may not reflect such
a change.

Options on many securities are listed on options exchanges. If the Fund writes
listed options, it will follow the rules of the options exchange. Options are
valued at the close of the New York Stock Exchange. An option listed on a
national exchange, CBOE, or NASDAQ will be valued at the last quoted sales price
or, if such a price is not readily available, at the mean of the last bid and
ask prices.

Options on certain securities are not actively traded on any exchange, but may
be entered into directly with a dealer. These options may be more difficult to
close. If an investor is unable to effect a closing purchase transaction, it
will not be able to sell the underlying security until the call written by the
investor expires or is exercised.

Futures Contracts. A futures contract is a sales contract between a
buyer (holding the "long" position) and a seller (holding the "short" position)
for an asset with delivery deferred until a future date. The buyer agrees to pay
a fixed price at the agreed future date and the seller agrees to deliver the
asset. The seller hopes that the market price on the delivery date is less than
the agreed upon price, while the buyer hopes for the contrary. Many futures
contracts trade in a manner similar to the way a stock trades on a stock
exchange and the commodity exchanges.

<PAGE>

Generally, a futures contract is terminated by entering into an offsetting
transaction. An offsetting transaction is effected by an investor taking an
opposite position. At the time a futures contract is made, a good faith deposit
called initial margin is set up. Daily thereafter, the futures contract is
valued and the payment of variation margin is required so that each day a buyer
would pay out cash in an amount equal to any decline in the contract's value or
receive cash equal to any increase. At the time a futures contract is closed
out, a nominal commission is paid, which is generally lower than the commission
on a comparable transaction in the cash market.

Futures contracts may be based on various securities, securities indices (such
as the S&P 500 Index), foreign currencies and other financial instruments and
indices.

Options on Futures Contracts. Options on futures contracts give the
holder a right to buy or sell futures contracts in the future. Unlike a futures
contract, which requires the parties to the contract to buy and sell a security
on a set date (some futures are settled in cash), an option on a futures
contract merely entitles its holder to decide on or before a future date (within
nine months of the date of issue) whether to enter into a contract. If the
holder decides not to enter into the contract, all that is lost is the amount
(premium) paid for the option. Further, because the value of the option is fixed
at the point of sale, there are no daily payments of cash to reflect the change
in the value of the underlying contract. However, since an option gives the
buyer the right to enter into a contract at a set price for a fixed period of
time, its value does change daily.

One of the risks in buying an option on a futures contract is the loss of the
premium paid for the option. The risk involved in writing options on futures
contracts an investor owns, or on securities held in its portfolio, is that
there could be an increase in the market value of these contracts or securities.
If that occurred, the option would be exercised and the asset sold at a lower
price than the cash market price. To some extent, the risk of not realizing a
gain could be reduced by entering into a closing transaction. An investor could
enter into a closing transaction by purchasing an option with the same terms as
the one previously sold. The cost to close the option and terminate the
investor's obligation, however, might still result in a loss. Further, the
investor might not be able to close the option because of insufficient activity
in the options market. Purchasing options also limits the use of monies that
might otherwise be available for long-term investments.

Options on Stock Indexes. Options on stock indexes are securities
traded on national securities exchanges. An option on a stock index is similar
to an option on a futures contract except all settlements are in cash. A fund
exercising a put, for example, would receive the difference between the exercise
price and the current index level.

Tax Treatment. As permitted under federal income tax laws and to the
extent the Fund is allowed to invest in futures contacts, the Fund intends to
identify futures contracts as mixed straddles and not mark them to market, that
is, not treat them as having been sold at the end of the year at market value.
Such an election may result in the Fund being required to defer recognizing
losses incurred on futures contracts and on underlying securities identified as
hedged positions and require recognition of unrealized gain.

Federal income tax treatment of gains or losses from transactions in options on
futures contracts and indexes will depend on whether the option is a section
1256 contract. If the option is a non-equity option, the Fund will either make a
1256(d) election and treat the option as a mixed straddle or mark to market the
option at fiscal year end and treat the gain/loss as 40% short-term and 60%
long-term.

The IRS has ruled publicly that an exchange-traded call option is a security for
purposes of the 50%-of-assets test and that its issuer is the issuer of the
underlying security, not the writer of the option, for purposes of the
diversification requirements.

<PAGE>

Accounting for futures contracts will be according to generally accepted
accounting principles. Initial margin deposits will be recognized as assets due
from a broker (the Fund's agent in acquiring the futures position). During the
period the futures contract is open, changes in value of the contract will be
recognized as unrealized gains or losses by marking to market on a daily basis
to reflect the market value of the contract at the end of each day's trading.
Variation margin payments will be made or received depending upon whether gains
or losses are incurred. All contracts and options will be valued at the
last-quoted sales price on their primary exchange.

Other Risks of Derivatives.

Derivatives are risky investments.

The primary risk of derivatives is the same as the risk of the underlying asset,
namely that the value of the underlying asset may go up or down. Adverse
movements in the value of an underlying asset can expose an investor to losses.
Derivative instruments may include elements of leverage and, accordingly, the
fluctuation of the value of the derivative instrument in relation to the
underlying asset may be magnified. The successful use of derivative instruments
depends upon a variety of factors, particularly the investment manager's ability
to predict movements of the securities, currencies, and commodity markets, which
requires different skills than predicting changes in the prices of individual
securities.
There can be no assurance that any particular strategy will succeed.

Another risk is the risk that a loss may be sustained as a result of the failure
of a counterparty to comply with the terms of a derivative instrument. The
counterparty risk for exchange-traded derivative instruments is generally less
than for privately-negotiated or OTC derivative instruments, since generally a
clearing agency, which is the issuer or counterparty to each exchange-traded
instrument, provides a guarantee of performance. For privately-negotiated
instruments, there is no similar clearing agency guarantee. In all transactions,
an investor will bear the risk that the counterparty will default, and this
could result in a loss of the expected benefit of the derivative transaction and
possibly other losses.

When a derivative transaction is used to completely hedge another position,
changes in the market value of the combined position (the derivative instrument
plus the position being hedged) result from an imperfect correlation between the
price movements of the two instruments. With a perfect hedge, the value of the
combined position remains unchanged for any change in the price of the
underlying asset. With an imperfect hedge, the values of the derivative
instrument and its hedge are not perfectly correlated. For example, if the value
of a derivative instrument used in a short hedge (such as writing a call option,
buying a put option, or selling a futures contract) increased by less than the
decline in value of the hedged investment, the hedge would not be perfectly
correlated. Such a lack of correlation might occur due to factors unrelated to
the value of the investments being hedged, such as speculative or other
pressures on the markets in which these instruments are traded.

Derivatives also are subject to the risk that they cannot be sold, closed out,
or replaced quickly at or very close to their fundamental value. Generally,
exchange contracts are very liquid because the exchange clearinghouse is the
counterparty of every contract. OTC transactions are less liquid than
exchange-traded derivatives since they often can only be closed out with the
other party to the transaction.

Another risk is caused by the legal unenforcibility of a party's obligations
under the derivative. A counterparty that has lost money in a derivative
transaction may try to avoid payment by exploiting various legal uncertainties
about certain derivative products.

(See also Foreign Currency Transactions.)

Although one or more of the other risks described in this SAI may apply, the
largest risks associated with derivative instruments include: Leverage Risk,
Liquidity Risk, and Management Risk.

<PAGE>

Foreign Currency Transactions

Since investments in foreign countries usually involve currencies of foreign
countries, the value of the Fund's assets as measured in U.S. dollars may be
affected favorably or unfavorably by changes in currency exchange rates and
exchange control regulations. Also, the Fund may incur costs in connection with
conversions between various currencies. Currency exchange rates may fluctuate
significantly over short periods of time causing the Fund's NAV to fluctuate.
Currency exchange rates are generally determined by the forces of supply and
demand in the foreign exchange markets, actual or anticipated changes in
interest rates, and other complex factors. Currency exchange rates also can be
affected by the intervention of U.S. or foreign governments or central banks, or
the failure to intervene, or by currency controls or political developments.

Spot Rates and Derivative Instruments. The Fund conducts its foreign currency
exchange transactions either at the spot (cash) rate prevailing in the foreign
currency exchange market or by entering into forward currency exchange contracts
(forward contracts) as a hedge against fluctuations in future foreign exchange
rates. (See also Derivative Instruments). These contracts are traded in the
interbank market conducted directly between currency traders (usually large
commercial banks) and their customers. Because foreign currency transactions
occurring in the interbank market might involve substantially larger amounts
than those involved in the use of such derivative instruments, the Fund could be
disadvantaged by having to deal in the odd lot market for the underlying foreign
currencies at prices that are less favorable than for round lots.

The Fund may enter into forward contracts to settle a security transaction or
handle dividend and interest collection. When the Fund enters into a contract
for the purchase or sale of a security denominated in a foreign currency or has
been notified of a dividend or interest payment, it may desire to lock in the
price of the security or the amount of the payment in dollars. By entering into
a forward contract, the Fund will be able to protect itself against a possible
loss resulting from an adverse change in the relationship between different
currencies from the date the security is purchased or sold to the date on which
payment is made or received or when the dividend or interest is actually
received.

The Fund also may enter into forward contracts when management of the Fund
believes the currency of a particular foreign country may change in relationship
to another currency. The precise matching of forward contract amounts and the
value of securities involved generally will not be possible since the future
value of securities in foreign currencies more than likely will change between
the date the forward contract is entered into and the date it matures. The
projection of short-term currency market movements is extremely difficult and
successful execution of a short-term hedging strategy is highly uncertain. The
Fund will not enter into such forward contracts or maintain a net exposure to
such contracts when consummating the contracts would obligate the Fund to
deliver an amount of foreign currency in excess of the value of the Fund's
securities or other assets denominated in that currency.

The Fund will designate cash or securities in an amount equal to the value of
the Fund's total assets committed to consummating forward contracts entered into
under the second circumstance set forth above. If the value of the securities
declines, additional cash or securities will be designated on a daily basis so
that the value of the cash or securities will equal the amount of the Fund's
commitments on such contracts.

At maturity of a forward contract, the Fund may either sell the security and
make delivery of the foreign currency or retain the security and terminate its
contractual obligation to deliver the foreign currency by purchasing an
offsetting contract with the same currency trader obligating it to buy, on the
same maturity date, the same amount of foreign currency.

<PAGE>

If the Fund retains the security and engages in an offsetting transaction, the
Fund will incur a gain or loss (as described below) to the extent there has been
movement in forward contract prices. If the Fund engages in an offsetting
transaction, it may subsequently enter into a new forward contract to sell the
foreign currency. Should forward prices decline between the date the Fund enters
into a forward contract for selling foreign currency and the date it enters into
an offsetting contract for purchasing the foreign currency, the Fund will
realize a gain to the extent that the price of the currency it has agreed to
sell exceeds the price of the currency it has agreed to buy. Should forward
prices increase, the Fund will suffer a loss to the extent the price of the
currency it has agreed to buy exceeds the price of the currency it has agreed to
sell.

It is impossible to forecast what the market value of securities will be at the
expiration of a contract. Accordingly, it may be necessary for the Fund to buy
additional foreign currency on the spot market (and bear the expense of that
purchase) if the market value of the security is less than the amount of foreign
currency the Fund is obligated to deliver and a decision is made to sell the
security and make delivery of the foreign currency. Conversely, it may be
necessary to sell on the spot market some of the foreign currency received on
the sale of the portfolio security if its market value exceeds the amount of
foreign currency the Fund is obligated to deliver.

The Fund's dealing in forward contracts will be limited to the transactions
described above. This method of protecting the value of the Fund's securities
against a decline in the value of a currency does not eliminate fluctuations in
the underlying prices of the securities. It simply establishes a rate of
exchange that can be achieved at some point in time. Although forward contracts
tend to minimize the risk of loss due to a decline in value of hedged currency,
they tend to limit any potential gain that might result should the value of such
currency increase.

Although the Fund values its assets each business day in terms of U.S. dollars,
it does not intend to convert its foreign currencies into U.S. dollars on a
daily basis. It will do so from time to time, and shareholders should be aware
of currency conversion costs. Although foreign exchange dealers do not charge a
fee for conversion, they do realize a profit based on the difference (spread)
between the prices at which they are buying and selling various currencies.
Thus, a dealer may offer to sell a foreign currency to the Fund at one rate,
while offering a lesser rate of exchange should the Fund desire to resell that
currency to the dealer.

Options on Foreign Currencies. The Fund may buy options on foreign currencies
for hedging purposes. For example, a decline in the dollar value of a foreign
currency in which securities are denominated will reduce the dollar value of
such securities, even if their value in the foreign currency remains constant.
In order to protect against the diminutions in the value of securities, the Fund
may buy options on the foreign currency. If the value of the currency does
decline, the Fund will have the right to sell the currency for a fixed amount in
dollars and will offset, in whole or in part, the adverse effect on its
portfolio that otherwise would have resulted.

As in the case of other types of options, however, the benefit to the Fund
derived from purchases of foreign currency options will be reduced by the amount
of the premium and related transaction costs. In addition, where currency
exchange rates do not move in the direction or to the extent anticipated, the
Fund could sustain losses on transactions in foreign currency options that would
require it to forego a portion or all of the benefits of advantageous changes in
rates.

The Fund may write options on foreign currencies for the same types of hedging
purposes. For example, when the Fund anticipates a decline in the dollar value
of foreign-denominated securities due to adverse fluctuations in exchange rates
it could, instead of purchasing a put option, write a call option on the
relevant currency. If the expected decline occurs, the option will most likely
not be exercised and the diminution in value of securities will be fully or
partially offset by the amount of the premium received.

<PAGE>

As in the case of other types of options, however, the writing of a foreign
currency option will constitute only a partial hedge up to the amount of the
premium, and only if rates move in the expected direction. If this does not
occur, the option may be exercised and the Fund would be required to buy or sell
the underlying currency at a loss that may not be offset by the amount of the
premium. Through the writing of options on foreign currencies, the Fund also may
be required to forego all or a portion of the benefits that might otherwise have
been obtained from favorable movements on exchange rates.

All options written on foreign currencies will be covered. An option written on
foreign currencies is covered if the Fund holds currency sufficient to cover the
option or has an absolute and immediate right to acquire that currency without
additional cash consideration upon conversion of assets denominated in that
currency or exchange of other currency held in its portfolio. An option writer
could lose amounts substantially in excess of its initial investments, due to
the margin and collateral requirements associated with such positions.

Options on foreign currencies are traded through financial institutions acting
as market-makers, although foreign currency options also are traded on certain
national securities exchanges, such as the Philadelphia Stock Exchange and the
Chicago Board Options Exchange, subject to SEC regulation. In an
over-the-counter trading environment, many of the protections afforded to
exchange participants will not be available. For example, there are no daily
price fluctuation limits, and adverse market movements could therefore continue
to an unlimited extent over a period of time. Although the purchaser of an
option cannot lose more than the amount of the premium plus related transaction
costs, this entire amount could be lost.

Foreign currency option positions entered into on a national securities exchange
are cleared and guaranteed by the Options Clearing Corporation (OCC), thereby
reducing the risk of counterparty default. Further, a liquid secondary market in
options traded on a national securities exchange may be more readily available
than in the over-the-counter market, potentially permitting the Fund to
liquidate open positions at a profit prior to exercise or expiration, or to
limit losses in the event of adverse market movements.

The purchase and sale of exchange-traded foreign currency options, however, is
subject to the risks of availability of a liquid secondary market described
above, as well as the risks regarding adverse market movements, margining of
options written, the nature of the foreign currency market, possible
intervention by governmental authorities and the effects of other political and
economic events. In addition, exchange-traded options on foreign currencies
involve certain risks not presented by the over-the-counter market. For example,
exercise and settlement of such options must be made exclusively through the
OCC, which has established banking relationships in certain foreign countries
for that purpose. As a result, the OCC may, if it determines that foreign
governmental restrictions or taxes would prevent the orderly settlement of
foreign currency option exercises, or would result in undue burdens on OCC or
its clearing member, impose special procedures on exercise and settlement, such
as technical changes in the mechanics of delivery of currency, the fixing of
dollar settlement prices or prohibitions on exercise.

Foreign Currency Futures and Related Options. The Fund may enter into currency
futures contracts to sell currencies. It also may buy put options and write
covered call options on currency futures. Currency futures contracts are similar
to currency forward contracts, except that they are traded on exchanges (and
have margin requirements) and are standardized as to contract size and delivery
date. Most currency futures call for payment of delivery in U.S. dollars. The
Fund may use currency futures for the same purposes as currency forward
contracts, subject to Commodity Futures Trading Commission (CFTC) limitations.

Currency futures and options on futures values can be expected to correlate with
exchange rates, but will not reflect other factors that may affect the value of
the Fund's investments. A currency hedge, for example, should protect a
Yen-denominated bond against a decline in the Yen, but will not protect the Fund
against price decline if the issuer's creditworthiness deteriorates. Because the
value of the Fund's investments denominated in foreign currency will change in
response to many factors other than exchange rates, it may not be possible to
match the amount of a forward contract to the value of the Fund's investments
denominated in that currency over time.

<PAGE>

The Fund will hold securities or other options or futures positions whose values
are expected to offset its obligations. The Fund will not enter into an option
or futures position that exposes the Fund to an obligation to another party
unless it owns either (i) an offsetting position in securities or (ii) cash,
receivables and short-term debt securities with a value sufficient to cover its
potential obligations.

(See also Derivative Instruments and Foreign Securities.)

Although one or more of the other risks described in this SAI may apply, the
largest risks associated with foreign currency transactions include: Correlation
Risk, Interest Rate Risk, Leverage Risk, Liquidity Risk, and Management Risk.

Foreign Securities and Domestic Companies with Foreign Operations

Foreign securities, foreign currencies, and securities issued by U.S. entities
with substantial foreign operations involve special risks, including those set
forth below, which are not typically associated with investing in U.S.
securities. Foreign companies are not generally subject to uniform accounting,
auditing, and financial reporting standards comparable to those applicable to
domestic companies. Additionally, many foreign stock markets, while growing in
volume of trading activity, have substantially less volume than the New York
Stock Exchange, and securities of some foreign companies are less liquid and
more volatile than securities of domestic companies. Similarly, volume and
liquidity in most foreign bond markets are less than the volume and liquidity in
the U.S. and, at times, volatility of price can be greater than in the U.S.
Further, foreign markets have different clearance, settlement, registration, and
communication procedures and in certain markets there have been times when
settlements have been unable to keep pace with the volume of securities
transactions making it difficult to conduct such transactions. Delays in such
procedures could result in temporary periods when assets are uninvested and no
return is earned on them. The inability of an investor to make intended security
purchases due to such problems could cause the investor to miss attractive
investment opportunities. Payment for securities without delivery may be
required in certain foreign markets and, when participating in new issues, some
foreign countries require payment to be made in advance of issuance (at the time
of issuance, the market value of the security may be more or less than the
purchase price). Some foreign markets also have compulsory depositories (i.e.,
an investor does not have a choice as to where the securities are held). Fixed
commissions on some foreign stock exchanges are generally higher than negotiated
commissions on U.S. exchanges. Further, an investor may encounter difficulties
or be unable to pursue legal remedies and obtain judgments in foreign courts.
There is generally less government supervision and regulation of business and
industry practices, stock exchanges, brokers, and listed companies than in the
U.S. It may be more difficult for an investor's agents to keep currently
informed about corporate actions such as stock dividends or other matters that
may affect the prices of portfolio securities. Communications between the U.S.
and foreign countries may be less reliable than within the U.S., thus increasing
the risk of delays or loss of certificates for portfolio securities. In
addition, with respect to certain foreign countries, there is the possibility of
nationalization, expropriation, the imposition of additional withholding or
confiscatory taxes, political, social, or economic instability, diplomatic
developments that could affect investments in those countries, or other
unforeseen actions by regulatory bodies (such as changes to settlement or
custody procedures).

The risks of foreign investing may be magnified for investments in emerging
markets, which may have relatively unstable governments, economies based on only
a few industries, and securities markets that trade a small number of
securities.

<PAGE>

currencies during the transition period from January 1, 1999 to December 31,
2000 and beyond; whether the interest rate, tax or labor regimes of European
countries participating in the euro will converge over time; and whether the
conversion of the currencies of other EU countries such as the United Kingdom,
Denmark, and Greece into the euro and the admission of other non-EU countries
such as Poland, Latvia, and Lithuania as members of the EU may have an impact on
the euro.

Although one or more of the other risks described in this SAI may apply, the
largest risks associated with foreign securities include: Foreign/Emerging
Markets Risk, Issuer Risk, and Management Risk.

High-Yield (High-Risk) Securities (Junk Bonds)

High yield (high-risk) securities are sometimes referred to as "junk bonds."
They are non-investment grade (lower quality) securities that have speculative
characteristics. Lower quality securities, while generally offering higher
yields than investment grade securities with similar maturities, involve greater
risks, including the possibility of default or bankruptcy. They are regarded as
predominantly speculative with respect to the issuer's capacity to pay interest
and repay principal. The special risk considerations in connection with
investments in these securities are discussed below.

See the appendix for a discussion of securities ratings. (See also Debt
Obligations.)

The lower-quality and comparable unrated security market is relatively new and
its growth has paralleled a long economic expansion. As a result, it is not
clear how this market may withstand a prolonged recession or economic downturn.
Such conditions could severely disrupt the market for and adversely affect the
value of such securities.

All interest-bearing securities typically experience appreciation when interest
rates decline and depreciation when interest rates rise. The market values of
lower-quality and comparable unrated securities tend to reflect individual
corporate developments to a greater extent than do higher rated securities,
which react primarily to fluctuations in the general level of interest rates.
Lower-quality and comparable unrated securities also tend to be more sensitive
to economic conditions than are higher-rated securities. As a result, they
generally involve more credit risks than securities in the higher-rated
categories. During an economic downturn or a sustained period of rising interest
rates, highly leveraged issuers of lower-quality securities may experience
financial stress and may not have sufficient revenues to meet their payment
obligations. The issuer's ability to service its debt obligations also may be
adversely affected by specific corporate developments, the issuer's inability to
meet specific projected business forecast, or the unavailability of additional
financing. The risk of loss due to default by an issuer of these securities is
significantly greater than issuers of higher-rated securities because such
securities are generally unsecured and are often subordinated to other
creditors. Further, if the issuer of a lower quality security defaulted, an
investor might incur additional expenses to seek recovery.

Credit ratings issued by credit rating agencies are designed to evaluate the
safety of principal and interest payments of rated securities. They do not,
however, evaluate the market value risk of lower-quality securities and,
therefore, may not fully reflect the true risks of an investment. In addition,
credit rating agencies may or may not make timely changes in a rating to reflect
changes in the economy or in the condition of the issuer that affect the market
value of the securities. Consequently, credit ratings are used only as a
preliminary indicator of investment quality.

<PAGE>

adverse impact on the market price of the security. The lack of a liquid
secondary market for certain securities also may make it more difficult for an
investor to obtain accurate market quotations. Market quotations are generally
available on many lower-quality and comparable unrated issues only from a
limited number of dealers and may not necessarily represent firm bids of such
dealers or prices for actual sales.

Legislation may be adopted from time to time designed to limit the use of
certain lower quality and comparable unrated securities by certain issuers.

Although one or more of the other risks described in this SAI may apply, the
largest risks associated with high-yield (high-risk) securities include:
Call/Prepayment Risk, Credit Risk, Currency Risk, Interest Rate Risk, and
Management Risk.

Illiquid and Restricted Securities

The Fund may invest in illiquid securities (i.e., securities that are not
readily marketable). These securities may include, but are not limited to,
certain securities that are subject to legal or contractual restrictions on
resale, certain repurchase agreements, and derivative instruments.

To the extent the Fund invests in illiquid or restricted securities, it may
encounter difficulty in determining a market value for such securities.
Disposing of illiquid or restricted securities may involve time-consuming
negotiations and legal expense, and it may be difficult or impossible for the
Fund to sell such an investment promptly and at an acceptable price.

Although one or more of the other risks described in this SAI may apply, the
largest risks associated with illiquid and restricted securities include:
Liquidity Risk and Management Risk.

Indexed Securities

The value of indexed securities is linked to currencies, interest rates,
commodities, indexes, or other financial indicators. Most indexed securities are
short- to intermediate-term fixed income securities whose values at maturity or
interest rates rise or fall according to the change in one or more specified
underlying instruments. Indexed securities may be more volatile than the
underlying instrument itself and they may be less liquid than the securities
represented by the index. (See also Derivative Instruments.)

Although one or more of the other risks described in this SAI may apply, the
largest risks associated with indexed securities include: Liquidity Risk,
Management Risk, and Market Risk.

Inverse Floaters

Inverse floaters are created by underwriters using the interest payment on
securities. A portion of the interest received is paid to holders of instruments
based on current interest rates for short-term securities. The remainder, minus
a servicing fee, is paid to holders of inverse floaters. As interest rates go
down, the holders of the inverse floaters receive more income and an increase in
the price for the inverse floaters. As interest rates go up, the holders of the
inverse floaters receive less income and a decrease in the price for the inverse
floaters. (See also Derivative Instruments.)

Although one or more of the other risks described in this SAI may apply, the
largest risks associated with inverse floaters include: Interest Rate Risk and
Management Risk.

<PAGE>

Investment Companies

The Fund may invest in securities issued by registered and unregistered
investment companies. These investments may involve the duplication of advisory
fees and certain other expenses.

Although one or more of the other risks described in this SAI may apply, the
largest risk associated with the securities of other investment companies
includes: Management Risk and Market Risk.

Lending of Portfolio Securities

The Fund may lend certain of its portfolio securities to broker-dealers. The
current policy of the Fund's board is to make these loans, either long- or
short-term, to broker-dealers. In making loans, the Fund receives the market
price in cash, U.S. government securities, letters of credit, or such other
collateral as may be permitted by regulatory agencies and approved by the board.
If the market price of the loaned securities goes up, the Fund will get
additional collateral on a daily basis. The risks are that the borrower may not
provide additional collateral when required or return the securities when due.
During the existence of the loan, the Fund receives cash payments equivalent to
all interest or other distributions paid on the loaned securities. The Fund may
pay reasonable administrative and custodial fees in connection with a loan and
may pay a negotiated portion of the interest earned on the cash or money market
instruments held as collateral to the borrower or placing broker. The Fund will
receive reasonable interest on the loan or a flat fee from the borrower and
amounts equivalent to any dividends, interest, or other distributions on the
securities loaned.

Although one or more of the other risks described in this SAI may apply, the
largest risks associated with the lending of portfolio securities include:
Credit Risk and Management Risk.

Loan Participations

Loans, loan participations, and interests in securitized loan pools are
interests in amounts owed by a corporate, governmental, or other borrower to a
lender or consortium of lenders (typically banks, insurance companies,
investment banks, government agencies, or international agencies). Loans involve
a risk of loss in case of default or insolvency of the borrower and may offer
less legal protection to an investor in the event of fraud or misrepresentation.

Although one or more of the other risks described in this SAI may apply, the
largest risks associated with loan participations include: Credit Risk and
Management Risk.

Mortgage- and Asset-Backed Securities

Mortgage-backed securities represent direct or indirect participations in, or
are secured by and payable from, mortgage loans secured by real property, and
include single- and multi-class pass-through securities and Collateralized
Mortgage Obligations (CMOs). These securities may be issued or guaranteed by
U.S. government agencies or instrumentalities (see also Agency and Government
Securities), or by private issuers, generally originators and investors in
mortgage loans, including savings associations, mortgage bankers, commercial
banks, investment bankers, and special purpose entities. Mortgage-backed
securities issued by private lenders may be supported by pools of mortgage loans
or other mortgage-backed securities that are guaranteed, directly or indirectly,
by the U.S. government or one of its agencies or instrumentalities, or they may
be issued without any governmental guarantee of the underlying mortgage assets
but with some form of non-governmental credit enhancement.

<PAGE>

Stripped mortgage-backed securities are a type of mortgage-backed security that
receive differing proportions of the interest and principal payments from the
underlying assets. Generally, there are two classes of stripped mortgage-backed
securities: Interest Only (IO) and Principal Only (PO). IOs entitle the holder
to receive distributions consisting of all or a portion of the interest on the
underlying pool of mortgage loans or mortgage-backed securities. POs entitle the
holder to receive distributions consisting of all or a portion of the principal
of the underlying pool of mortgage loans or mortgage-backed securities. The cash
flows and yields on IOs and POs are extremely sensitive to the rate of principal
payments (including prepayments) on the underlying mortgage loans or
mortgage-backed securities. A rapid rate of principal payments may adversely
affect the yield to maturity of IOs. A slow rate of principal payments may
adversely affect the yield to maturity of POs. If prepayments of principal are
greater than anticipated, an investor in IOs may incur substantial losses. If
prepayments of principal are slower than anticipated, the yield on a PO will be
affected more severely than would be the case with a traditional mortgage-backed
security.

CMOs are hybrid mortgage-related instruments secured by pools of mortgage loans
or other mortgage-related securities, such as mortgage pass through securities
or stripped mortgage-backed securities. CMOs may be structured into multiple
classes, often referred to as "tranches," with each class bearing a different
stated maturity and entitled to a different schedule for payments of principal
and interest, including prepayments. Principal prepayments on collateral
underlying a CMO may cause it to be retired substantially earlier than its
stated maturity.

The yield characteristics of mortgage-backed securities differ from those of
other debt securities. Among the differences are that interest and principal
payments are made more frequently on mortgage-backed securities, usually
monthly, and principal may be repaid at any time. These factors may reduce the
expected yield.

Asset-backed securities have structural characteristics similar to
mortgage-backed securities. Asset-backed debt obligations represent direct or
indirect participation in, or secured by and payable from, assets such as motor
vehicle installment sales contracts, other installment loan contracts, home
equity loans, leases of various types of property, and receivables from credit
card or other revolving credit arrangements. The credit quality of most
asset-backed securities depends primarily on the credit quality of the assets
underlying such securities, how well the entity issuing the security is
insulated from the credit risk of the originator or any other affiliated
entities, and the amount and quality of any credit enhancement of the
securities. Payments or distributions of principal and interest on asset-backed
debt obligations may be supported by non-governmental credit enhancements
including letters of credit, reserve funds, overcollateralization, and
guarantees by third parties. The market for privately issued asset-backed debt
obligations is smaller and less liquid than the market for government sponsored
mortgage-backed securities. (See also Derivative Instruments.)

Although one or more of the other risks described in this SAI may apply, the
largest risks associated with mortgage- and asset-backed securities include:
Call/Prepayment Risk, Credit Risk, Interest Rate Risk, Liquidity Risk, and
Management Risk.

Mortgage Dollar Rolls

Mortgage dollar rolls are investments whereby an investor would sell
mortgage-backed securities for delivery in the current month and simultaneously
contract to purchase substantially similar securities on a specified future
date. While an investor would forego principal and interest paid on the
mortgage-backed securities during the roll period, the investor would be
compensated by the difference between the current sales price and the lower
price for the future purchase as well as by any interest earned on the proceeds
of the initial sale. The investor also could be compensated through the receipt
of fee income equivalent to a lower forward price.

Although one or more of the other risks described in this SAI may apply, the
largest risks associated with mortgage dollar rolls include: Credit Risk,
Interest Rate Risk, and Management Risk.

<PAGE>

Municipal Obligations

Municipal obligations include debt obligations issued by or on behalf of states,
territories, possessions, or sovereign nations within territorial boundaries of
the United States (including the District of Columbia and Puerto Rico). The
interest on these obligations is generally exempt from federal income tax.
Municipal obligations are generally classified as either "general obligations"
or "revenue obligations."

General obligation bonds are secured by the issuer's pledge of its full faith,
credit, and taxing power for the payment of interest and principal. Revenue
bonds are payable only from the revenues derived from a project or facility or
from the proceeds of a specified revenue source. Industrial development bonds
are generally revenue bonds secured by payments from and the credit of private
users. Municipal notes are issued to meet the short-term funding requirements of
state, regional, and local governments. Municipal notes include tax anticipation
notes, bond anticipation notes, revenue anticipation notes, tax and revenue
anticipation notes, construction loan notes, short-term discount notes,
tax-exempt commercial paper, demand notes, and similar instruments.

Municipal lease obligations may take the form of a lease, an installment
purchase, or a conditional sales contract. They are issued by state and local
governments and authorities to acquire land, equipment, and facilities. An
investor may purchase these obligations directly, or it may purchase
participation interests in such obligations. Municipal leases may be subject to
greater risks than general obligation or revenue bonds. State constitutions and
statutes set forth requirements that states or municipalities must meet in order
to issue municipal obligations. Municipal leases may contain a covenant by the
state or municipality to budget for and make payments due under the obligation.
Certain municipal leases may, however, provide that the issuer is not obligated
to make payments on the obligation in future years unless funds have been
appropriated for this purpose each year.

Yields on municipal bonds and notes depend on a variety of factors, including
money market conditions, municipal bond market conditions, the size of a
particular offering, the maturity of the obligation, and the rating of the
issue. The municipal bond market has a large number of different issuers, many
having smaller sized bond issues, and a wide choice of different maturities
within each issue. For these reasons, most municipal bonds do not trade on a
daily basis and many trade only rarely. Because many of these bonds trade
infrequently, the spread between the bid and offer may be wider and the time
needed to develop a bid or an offer may be longer than other security markets.
See the appendix for a discussion of securities ratings. (See also Debt
Obligations.)

Taxable Municipal Obligations. There is another type of municipal obligation
that is subject to federal income tax for a variety of reasons. These municipal
obligations do not qualify for the federal income exemption because (a) they did
not receive necessary authorization for tax-exempt treatment from state or local
government authorities, (b) they exceed certain regulatory limitations on the
cost of issuance for tax-exempt financing or (c) they finance public or private
activities that do not qualify for the federal income tax exemption. These
non-qualifying activities might include, for example, certain types of
multi-family housing, certain professional and local sports facilities,
refinancing of certain municipal debt, and borrowing to replenish a
municipality's underfunded pension plan.

Although one or more of the other risks described in this SAI may apply, the
largest risks associated with municipal obligations include: Credit Risk, Event
Risk, Inflation Risk, Interest Rate Risk, Legal/Legislative Risk, and Market
Risk.

Preferred Stock

Preferred stock is a type of stock that pays dividends at a specified rate and
that has preference over common stock in the payment of dividends and the
liquidation of assets. Preferred stock does not ordinarily carry voting rights.

<PAGE>

The price of a preferred stock is generally determined by earnings, type of
products or services, projected growth rates, experience of management,
liquidity, and general market conditions of the markets on which the stock
trades.

Although one or more of the other risks described in this SAI may apply, the
largest risks associated with preferred stock include: Issuer Risk, Management
Risk, and Market Risk.

Real Estate Investment Trusts

Real estate investment trusts (REITs) are entities that manage a portfolio of
real estate to earn profits for their shareholders. REITs can make investments
in real estate such as shopping centers, nursing homes, office buildings,
apartment complexes, and hotels. REITs can be subject to extreme volatility due
to fluctuations in the demand for real estate, changes in interest rates, and
adverse economic conditions. Additionally, the failure of a REIT to continue to
qualify as a REIT for tax purposes can materially affect its value.

Although one or more of the other risks described in this SAI may apply, the
largest associated with REITs include: Issuer Risk, Management Risk, and Market
Risk.

Repurchase Agreements

The Fund may enter into repurchase agreements with certain banks or non-bank
dealers. In a repurchase agreement, the Fund buys a security at one price, and
at the time of sale, the seller agrees to repurchase the obligation at a
mutually agreed upon time and price (usually within seven days). The repurchase
agreement thereby determines the yield during the purchaser's holding period,
while the seller's obligation to repurchase is secured by the value of the
underlying security. Repurchase agreements could involve certain risks in the
event of a default or insolvency of the other party to the agreement, including
possible delays or restrictions upon the Fund's ability to dispose of the
underlying securities.

Although one or more of the other risks described in this SAI may apply, the
largest risks associated with repurchase agreements include: Credit Risk and
Management Risk.

Reverse Repurchase Agreements

In a reverse repurchase agreement, the investor would sell a security and enter
into an agreement to repurchase the security at a specified future date and
price. The investor generally retains the right to interest and principal
payments on the security. Since the investor receives cash upon entering into a
reverse repurchase agreement, it may be considered a borrowing. (See also
Derivative Instruments.)

Although one or more of the other risks described in this SAI may apply, the
largest risks associated with reverse repurchase agreements include: Credit
Risk, Interest Rate Risk, and Management Risk.

Short Sales

With short sales, an investor sells a security that it does not own in
anticipation of a decline in the market value of the security. To complete the
transaction, the investor must borrow the security to make delivery to the
buyer. The investor is obligated to replace the security that was borrowed by
purchasing it at the market price at the time of replacement. The price at such
time may be more or less than the price at which the investor sold the security.
A fund that is allowed to utilize short sales will designate cash or liquid
securities to cover its open short positions. Those funds also may engage in
"short sales against the box," a form of short-selling that involves selling a
security that an investor owns (or has an unconditioned right to purchase) for
delivery at a future date. This technique allows an investor to hedge
protectively against anticipated declines in the market of its securities. If
the value of the securities sold short increased between the date of the short
sale and the date on which the borrowed security is replaced, the investor loses
the opportunity to participate in the gain. A "Short Sale against the box" will
result in a constructive sale of appreciated securities thereby generating
capital gains to the Fund.

<PAGE>

Although one or more of the other risks described in this SAI may apply, the
largest risks associated with short sales include: Management Risk and Market
Risk.

Sovereign Debt

A sovereign debtor's willingness or ability to repay principal and pay interest
in a timely manner may be affected by a variety of factors, including its cash
flow situation, the extent of its reserves, the availability of sufficient
foreign exchange on the date a payment is due, the relative size of the debt
service burden to the economy as a whole, the sovereign debtor's policy toward
international lenders, and the political constraints to which a sovereign debtor
may be subject. (See also Foreign Securities.)

With respect to sovereign debt of emerging market issuers, investors should be
aware that certain emerging market countries are among the largest debtors to
commercial banks and foreign governments. At times, certain emerging market
countries have declared moratoria on the payment of principal and interest on
external debt.

Certain emerging market countries have experienced difficulty in servicing their
sovereign debt on a timely basis that led to defaults and the restructuring of
certain indebtedness.

Sovereign debt includes Brady Bonds, which are securities issued under the
framework of the Brady Plan, an initiative announced by former U.S. Treasury
Secretary Nicholas F. Brady in 1989 as a mechanism for debtor nations to
restructure their outstanding external commercial bank indebtedness.

Although one or more of the other risks described in this SAI may apply, the
largest risks associated with sovereign debt include: Credit Risk,
Foreign/Emerging Markets Risk, and Management Risk.

Structured Products

Structured products are over-the-counter financial instruments created
specifically to meet the needs of one or a small number of investors. The
instrument may consist of a warrant, an option, or a forward contract embedded
in a note or any of a wide variety of debt, equity, and/or currency
combinations. Risks of structured products include the inability to close such
instruments, rapid changes in the market, and defaults by other parties. (See
also Derivative Instruments.)

Although one or more of the other risks described in this SAI may apply, the
largest risks associated with structured products include: Credit Risk,
Liquidity Risk, and Management Risk.

Variable- or Floating-Rate Securities

The Fund may invest in securities that offer a variable- or floating-rate of
interest. Variable-rate securities provide for automatic establishment of a new
interest rate at fixed intervals (e.g., daily, monthly, semi-annually, etc.).
Floating-rate securities generally provide for automatic adjustment of the
interest rate whenever some specified interest rate index changes.

Variable- or floating-rate securities frequently include a demand feature
enabling the holder to sell the securities to the issuer at par. In many cases,
the demand feature can be exercised at any time. Some securities that do not
have variable or floating interest rates may be accompanied by puts producing
similar results and price characteristics.

<PAGE>

notice to the holders of such obligations. Because these obligations are direct
lending arrangements between the lender and borrower, it is not contemplated
that such instruments generally will be traded. There generally is not an
established secondary market for these obligations. Accordingly, where these
obligations are not secured by letters of credit or other credit support
arrangements, the Fund's right to redeem is dependent on the ability of the
borrower to pay principal and interest on demand. Such obligations frequently
are not rated by credit rating agencies and may involve heightened risk of
default by the issuer.

Although one or more of the other risks described in this SAI may apply, the
largest risks associated with variable- or floating-rate securities include:
Credit Risk and Management Risk.

Warrants

Warrants are securities giving the holder the right, but not the obligation, to
buy the stock of an issuer at a given price (generally higher than the value of
the stock at the time of issuance) during a specified period or perpetually.
Warrants may be acquired separately or in connection with the acquisition of
securities. Warrants do not carry with them the right to dividends or voting
rights and they do not represent any rights in the assets of the issuer.
Warrants may be considered to have more speculative characteristics than certain
other types of investments. In addition, the value of a warrant does not
necessarily change with the value of the underlying securities, and a warrant
ceases to have value if it is not exercised prior to its expiration date.

Although one or more of the other risks described in this SAI may apply, the
largest risks associated with warrants include: Management Risk and Market Risk.

When-Issued Securities

These instruments are contracts to purchase securities for a fixed price at a
future date beyond normal settlement time (when-issued securities or forward
commitments). The price of debt obligations purchased on a when-issued basis,
which may be expressed in yield terms, generally is fixed at the time the
commitment to purchase is made, but delivery and payment for the securities take
place at a later date. Normally, the settlement date occurs within 45 days of
the purchase although in some cases settlement may take longer. The investor
does not pay for the securities or receive dividends or interest on them until
the contractual settlement date. Such instruments involve a risk of loss if the
value of the security to be purchased declines prior to the settlement date,
which risk is in addition to the risk of decline in value of the investor's
other assets. In addition, when the Fund engages in forward commitment and
when-issued transactions, it relies on the counterparty to consummate the
transaction. The failure of the counterparty to consummate the transaction may
result in the Fund losing the opportunity to obtain a price and yield considered
to be advantageous.

Although one or more of the other risks described in this SAI may apply, the
largest risks associated with when-issued securities include: Credit Risk and
Management Risk.

Zero-Coupon, Step-Coupon, and Pay-in-Kind Securities

These securities are debt obligations that do not make regular cash interest
payments (see also Debt Obligations). Zero-coupon and step-coupon securities are
sold at a deep discount to their face value because they do not pay interest
until maturity. Pay-in-kind securities pay interest through the issuance of
additional securities. Because these securities do not pay current cash income,
the price of these securities can be extremely volatile when interest rates
fluctuate. See the appendix for a discussion of securities ratings.

Although one or more of the other risks described in this SAI may apply, the
largest risks associated with zero-coupon, step-coupon, and pay-in-kind
securities include: Credit Risk, Interest Rate Risk, and Management Risk.

<PAGE>

SECURITY TRANSACTIONS

Subject to policies set by the board, the Advisor is authorized to determine,
consistent with the Fund's investment goal and policies, which securities will
be purchased, held, or sold. In determining where the buy and sell orders are to
be placed, the Advisor has been directed to use its best efforts to obtain the
best available price and the most favorable execution except where otherwise
authorized by the board. In selecting broker-dealers to execute transactions,
the Advisor may consider the price of the security, including commission or
mark-up, the size and difficulty of the order, the reliability, integrity,
financial soundness, and general operation and execution capabilities of the
broker, the broker's expertise in particular markets, and research services
provided by the broker.

The Advisor has a strict Code of Ethics that prohibits its affiliated personnel
from engaging in personal investment activities that compete with or attempt to
take advantage of planned portfolio transactions for any fund or trust for which
it acts as investment manager.

On occasion, it may be desirable to compensate a broker for research services or
for brokerage services by paying a commission that might not otherwise be
charged or a commission in excess of the amount another broker might charge. The
board has adopted a policy authorizing the Advisor to do so to the extent
authorized by law, if the Advisor determines, in good faith, that such
commission is reasonable in relation to the value of the brokerage or research
services provided by a broker or dealer, viewed either in the light of that
transaction or the Advisor's overall responsibilities with respect to the
portfolios advised by the Advisor.

Research provided by brokers supplements the Advisor's own research activities.
Such services include economic data on, and analysis of, U.S. and foreign
economies; information on specific industries; information about specific
companies, including earnings estimates; purchase recommendations for stocks and
bonds; portfolio strategy services; political, economic, business, and industry
trend assessments; historical statistical information; market data services
providing information on specific issues and prices; and technical analysis of
various aspects of the securities markets, including technical charts. Research
services may take the form of written reports, computer software, or personal
contact by telephone or at seminars or other meetings. The Advisor has obtained,
and in the future may obtain, computer hardware from brokers, including but not
limited to personal computers that will be used exclusively for investment
decision-making purposes, which include the research, portfolio management, and
trading functions and other services to the extent permitted under an
interpretation by the SEC.

Normally, a Fund's securities are traded on a principal rather than an agency
basis. In other words, the Advisor will trade directly with the issuer or with a
dealer who buys or sells for its own account, rather than acting on behalf of
another client. The Advisor does not pay the dealer commissions. Instead the
dealer's profit, if any, is the difference, or spread, between the dealer's
purchase and sale price for the security.

When paying a commission that might not otherwise be charged or a commission in
excess of the amount another broker might charge, the Advisor must follow
procedures authorized by the board. To date, three procedures have been
authorized. One procedure permits the Advisor to direct an order to buy or sell
a security traded on a national securities exchange to a specific broker for
research services it has provided. The second procedure permits the Advisor, in
order to obtain research, to direct an order on an agency basis to buy or sell a
security traded in the over-the-counter market to a firm that does not make a
market in that security. The commission paid generally includes compensation for
research services. The third procedure permits the Advisor, in order to obtain
research and brokerage services, to cause the Fund to pay a commission in excess
of the amount another broker might have charged. The Advisor has advised the
Fund that it is necessary to do business with a number of brokerage firms on a
continuing basis to obtain such services as the handling of large orders, the
willingness of a broker to risk its own money by taking a position in a
security, and the specialized handling of a particular group of securities that
only certain brokers may be able to offer. As a result of this arrangement, some
portfolio transactions may not be

<PAGE>

effected at the lowest commission, but the Advisor believes it may obtain better
overall execution. the Advisor has represented that under all three procedures
the amount of commission paid will be reasonable and competitive in relation to
the value of the brokerage services performed or research provided.

All other transactions will be placed on the basis of obtaining the best
available price and the most favorable execution. In so doing, if in the
professional opinion of the person responsible for selecting the broker or
dealer, several firms can execute the transaction on the same basis,
consideration will be given by such person to those firms offering research
services. Such services may be used by the Advisor in providing advice to all
the trusts in the Preferred Master Trust Group, their corresponding funds and
other accounts advised by the Advisor, even though it is not possible to relate
the benefits to any particular fund, portfolio or account.

Each investment decision made for the Fund is made independently from any
decision made for another portfolio, fund, or other account advised by the
Advisor or any of its subsidiaries. When the Fund buys or sells the same
security as another portfolio, fund, or account, the Advisor carries out the
purchase or sale in a way the Fund agrees in advance is fair. Although sharing
in large transactions may adversely affect the price or volume purchased or sold
by the Fund, the Fund hopes to gain an overall advantage in execution.

On a periodic basis, the Advisor makes a comprehensive review of the
broker-dealers and the overall reasonableness of their commissions. The review
evaluates execution, operational efficiency, and research services.

For fiscal years noted below, each Fund paid the following total brokerage
commissions. Substantially all firms through whom transactions were executed
provide research services.

Emerging Markets World Growth World Income
Oct. 31 Portfolio Portfolio Portfolio
1999 $2,485,641 $5,482,008 $ 15,524

1998 9,338,172 3,420,465 4,200

1997 1,458,233 8,099,200 1,457,733

No transactions were directed to brokers because of research services they
provided to each Fund except for the affiliates as noted below.

As of the end of the most recent fiscal year, Emerging Markets Portfolio held no
securities of its regular brokers or dealers or of the parent of those brokers
or dealers that derived more than 15% of gross revenue from securities-related
activities.

As of the end of the most recent fiscal year, each Fund held securities of its
regular brokers or dealers of the parent of those brokers or dealers that
derived more than 15% of gross revenue from securities-related activities as
presented below:

Value of Securities
Fund Name of Issuer owned at End of Fiscal Year
---- -------------- ---------------------------
World Growth Portfolio Bank of America $16,494,163
Goldman Sachs Group 9,517,550
Merrill Lynch 1,194,357

World Income Portfolio Salomon Smith Barney 10,147,570

The portfolio turnover rates for the two most recent fiscal years were as
follows:

Emerging Markets World Growth World Income
Oct. 31 Portfolio Portfolio Portfolio
1999 143% 83% 48%

1998 108 80 27

Higher turnover rates may result in higher brokerage expenses. The variation in
turnover rates can be attributed primarily to a rising market for emerging
markets securities combined with Y2K-related volatility.

<PAGE>

BROKERAGE COMMISSIONS PAID TO BROKERS AFFILIATED WITH THE ADVISOR

Affiliates of American Express Company (of which the Advisor is a wholly-owned
subsidiary) may engage in brokerage and other securities transactions on behalf
of the Fund according to procedures adopted by the board and to the extent
consistent with applicable provisions of the federal securities laws. The
Advisor will use an American Express affiliate only if (i) the Advisor
determines that the Fund will receive prices and executions at least as
favorable as those offered by qualified independent brokers performing similar
brokerage and other services for the Fund and (ii) the affiliate charges the
Fund commission rates consistent with those the affiliate charges comparable
unaffiliated customers in similar transactions and if such use is consistent
with terms of the Investment Management Services Agreement.

No brokerage commissions were paid to brokers affiliated with the Advisor for
the three most recent fiscal years for Emerging Markets Portfolio and World
Income Portfolio. Information about brokerage commissions paid by World Growth
Portfolio for the last three fiscal years to brokers affiliated with the Advisor
is contained in the following table:
<TABLE>
<CAPTION>

As of the end of Fiscal Year

1999 1998 1997

------------------------------------------ ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C>

Percent of
--------- -------------- ------------ ------------- Aggregate ------------ -------------
Dollar
Aggregate Amount of Aggregate Aggregate
Dollar Percent of Transactions Dollar Dollar
amount of Aggregate Involving Amount of Amount of
Commissions Brokerage Payment of Commissions Commissions
Nature of Paid to Commissions Commissions Paid to Paid to
Fund Broker Affiliation Broker Broker Broker
- ------------ -------- ------------ ----------- ----------- ------------ ----------- -----------
World Growth + * None None None None $61,457
</TABLE>

+ American Enterprise Investment Services Inc.
* Wholly-owned subsidiary of the Advisor

PERFORMANCE INFORMATION

The Fund may quote various performance figures to illustrate past performance.
Average annual total return and current yield quotations, if applicable, used by
the Fund are based on standardized methods of computing performance as required
by the SEC. An explanation of the methods used by the Fund to compute
performance follows below.

Average annual total return

The Fund may calculate average annual total return for certain periods by
finding the average annual compounded rates of return over the period that would
equate the initial amount invested to the ending redeemable value, according to
the following formula:

P(1+T)n = ERV

where: P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $1,000
payment, made at the beginning of a period, at the end of
the period (or fractional portion thereof)

<PAGE>

AGGREGATE TOTAL RETURN

The Fund may calculate aggregate total return for certain periods representing
the cumulative change in the value of an investment in the Fund over a specified
period of time according to the following formula:

ERV - P
-------
P

where: P = a hypothetical initial payment of $1,000
ERV = ending redeemable value of a hypothetical $1,000
payment, made at the beginning of a period, at the end of
the period (or fractional portion thereof)

ANNUALIZED YIELD

The Fund may calculate an annualized yield by dividing the net investment income
per share deemed earned during a 30-day period by the net asset value per share
on the last day of the period and annualizing the results.

Yield is calculated according to the following formula:

Yield = 2[(a-b + 1)6 - 1]
---
cd

where: a = dividends and interest earned during the period
b = expenses accrued for the period (net of reimbursements)
c = the average daily number of shares outstanding during the period
that were entitled to receive dividends
d = the maximum offering price per share on the last day of the period

The Fund's annualized yield was 5.65% for World Income Fund for the 30-day
period ended Oct. 30, 1999.

The Fund's yield, calculated as described above according to the formula
prescribed by the SEC, is a hypothetical return based on market value yield to
maturity for the corresponding Portfolio's securities. It is not necessarily
indicative of the amount which was or may be paid to the Fund's shareholders.
Actual amounts paid to Fund shareholders are reflected in the distribution
yield.

Distribution yield

Distribution yield is calculated according to the following formula:

D divided by POP(F) equals DY
--- -----
30 30

where: D = sum of dividends for 30-day period
POP = sum of public offering price for 30-day period
F = annualizing factor DY = distribution yield

The Fund's distribution yield was 4.32% for World Income Fund for the 30-day
period ended Oct. 30, 1999.

On May 13, 1996, AXP Global Growth Fund and AXP Global Bond Fund (the American
Express funds), two open-end investment companies managed by the Advisor,
transferred all of their respective assets to World Growth Portfolio and World
Income Portfolio, respectively, in exchange for units of the Portfolios. Also on
May 13, 1996, World Growth Fund and World Income Fund transferred all of their
respective assets to the corresponding Portfolio of the Trust in connection with
the commencement of their operations.

<PAGE>

On March 20, 1995, the American Express funds converted to a multiple class
structure pursuant to which three classes of shares are offered: Class A, Class
B and Class Y. Prior to July 1, 1999, Class A shares were sold with a 5% sales
charge, a 0.175% service fee and no 12b-1 fee. Effective July 1, 1999, Class A
shares are sold with a 5% sales charge and a 12b-1 fee of up to 0.25%.
Performance for periods prior to May 13, 1996 is based on the performance of the
corresponding American Express fund adjusted for differences in sales charges.
For the period from March 20, 1995 to May 13, 1996, performance is based on the
performance of Class A shares of the corresponding American Express fund. The
historical performance for these periods has not been adjusted for any
difference between the estimated aggregate fees and expenses of the Fund and
historical fees and expenses of the American Express fund.

In its sales material and other communications, the Fund may quote, compare or
refer to rankings, yields, or returns as published by independent statistical
services or publishers and publications such as The Bank Rate Monitor National
Index, Barron's, Business Week, CDA Technologies, Donoghue's Money Market Fund
Report, Financial Services Week, Financial Times, Financial World, Forbes,
Fortune, Global Investor, Institutional Investor, Investor's Business Daily,
Kiplinger's Personal Finance, Lipper Analytical Services, Money, Morningstar,
Mutual Fund Forecaster, Newsweek, The New York Times, Personal Investor,
Shearson Lehman Aggregate Bond Index, Stanger Report, Sylvia Porter's Personal
Finance, USA Today, U.S. News and World Report, The Wall Street Journal, and
Wiesenberger Investment Companies Service. The Fund also may compare its
performance to a wide variety of indexes or averages. There are similarities and
differences between the investments that the Fund may purchase and the
investments measured by the indexes or averages and the composition of the
indexes or averages will differ from that of the Fund.

VALUING FUND SHARES

As of the end of the most recent fiscal year, the computations looked like this:

Net asset
Net assets Shares value of
Fund outstanding one share
- ------------------- ----------- ------------ -------------- -------- -----------
Emerging Markets $628,794 divided by 150,064 Equals $ 4.19

World Growth 901,903 87,092 10.36
World Income 623,457 106,213 5.87

In determining net assets before shareholder transactions, the securities held
by the Fund's securities are valued as follows as of the close of business of
the New York Stock Exchange (the Exchange):

o Securities traded on a securities exchange for which a last-quoted sales
price is readily available are valued at the last-quoted sales price on the
exchange where such security is primarily traded.

o Securities traded on a securities exchange for which a last-quoted sales
price is not readily available are valued at the mean of the closing bid
and asked prices, looking first to the bid and asked prices on the exchange
where the security is primarily traded and, if none exist, to the
over-the-counter market.

o Securities included in the NASDAQ National Market System are valued at the
last-quoted sales price in this market.

o Securities included in the NASDAQ National Market System for which a
last-quoted sales price is not readily available, and other securities
traded over-the-counter but not included in the NASDAQ National Market
System are valued at the mean of the closing bid and asked prices.

o Futures and options traded on major exchanges are valued at the last-quoted
sales price on their primary exchange.

<PAGE>

foreign currencies are translated into U.S. dollars at the current rate
of exchange. Occasionally, events affecting the value of such securities
may occur between such times and the close of the Exchange that will not be
reflected in the computation of the Fund's net asset value. If events
materially affecting the value of such securities occur during such period,
these securities will be valued at their fair value according to procedures
decided upon in good faith by the board.

o Short-term securities maturing more than 60 days from the valuation date
are valued at the readily available market price or approximate market
value based on current interest rates. Short-term securities maturing in 60
days or less that originally had maturities of more than 60 days at
acquisition date are valued at amortized cost using the market value on the
61st day before maturity. Short-term securities maturing in 60 days or less
at acquisition date are valued at amortized cost. Amortized cost is an
approximation of market value determined by systematically increasing the
carrying value of a security if acquired at a discount, or reducing the
carrying value if acquired at a premium, so that the carrying value is
equal to maturity value on the maturity date.

o Securities without a readily available market price and other assets are
valued at fair value as determined in good faith by the board. The board is
responsible for selecting methods it believes provide fair value. When
possible, bonds are valued by a pricing service independent from the
Portfolio. If a valuation of a bond is not available from a pricing
service, the bond will be valued by a dealer knowledgeable about the bond
if such a dealer is available.

SELLING SHARES

You have a right to sell your shares at any time. For an explanation of sales
procedures, please see the prospectus.

During an emergency, the board can suspend the computation of net asset value,
stop accepting payments for purchase of shares or suspend the duty of the Funds
to redeem shares for more than seven days. Such emergency situations would occur
if:

o The Exchange closes for reasons other than the usual weekend and holiday
closings or trading on the Exchange is restricted, or

o Disposal of the Fund's securities is not reasonably practicable or it is
not reasonably practicable for the Fund to determine the fair value of its
net assets, or

o The SEC, under the provisions of the 1940 Act, declares a period of
emergency to exist.

Should the Fund stop selling shares, the board members may make a deduction from
the value of the assets held by the Fund to cover the cost of future
liquidations of the assets so as to distribute fairly these costs among all
shareholders.

The Fund reserves the right to redeem, involuntarily, the shares of any
shareholder whose account has a value of less than a minimum amount but only
where the value of such account has been reduced by voluntary redemption of
shares. Until further notice, it is the policy of the Fund not to exercise this
right with respect to any shareholder whose account has a value of $1,000 or
more ($500 in the case of Custodial accounts, IRAs and other retirement plans).
In any event, before the Fund redeems such shares and sends the proceeds to the
shareholder, it will notify the shareholder that the value of the shares in the
account is less than the minimum amount and allow the shareholder 30 days to
make an additional investment in an amount which will increase the value of the
accounts to at least $1,000.

<PAGE>

whole or in part in securities or other assets in case of an emergency, or if
the payment of such redemption in cash would be detrimental to the existing
shareholders of the Fund as determined by the board. In such circumstances, the
securities distributed would be valued as set forth in the Prospectus. Should
the Fund distribute securities, a shareholder may incur brokerage fees or other
transaction costs in converting the securities to cash.

Rejection of Business

The Fund reserves the right to reject any business, in its sole discretion.

CAPITAL LOSS CARRYOVER

For federal income tax purposes, the Emerging Markets and World Income had total
capital loss carryovers of $199,302 at the end of the most recent fiscal year,
that if not offset by subsequent capital gains will expire as follows:

Fund 2006 2007
- ---- ---- ----
Emerging Markets $198,739
World Income $563

It is unlikely that the board will authorize a distribution of any net realized
capital gains until the available capital loss carryover has been offset or has
expired except as required by Internal Revenue Service rules.]

TAXES

You may be able to defer taxes on current income from a Fund by investing
through an IRA 401(k) plan account or other qualified retirement account. If you
move all or part of a non-qualified investment in a Fund to a qualified account,
this type of exchange is considered a redemption of shares. You pay no sales
charge, but the exchange may result in a gain or loss for tax purposes, or
excess contributions under IRA or qualified plan regulations.

Net investment income dividends received should be treated as dividend income
for federal income tax purposes. Corporate shareholders are generally entitled
to a deduction equal to 70% of that portion of the Fund's dividend that is
attributable to dividends the Fund received from domestic (U.S.) securities. For
the most recent fiscal year, the following percentage of the Fund's net
investment income dividends qualified for the corporate deduction:

Emerging Markets None
World Growth 10.85%
World Income None

The Fund may be subject to U.S. taxes resulting from holdings in a passive
foreign investment company (PFIC). A foreign corporation is a PFIC when 75% or
more of its gross income for the taxable year is passive income or 50% or more
of the average value of its assets consists of assets that produce or could
produce passive income.

Income earned by the Fund may have had foreign taxes imposed and withheld on it
in foreign countries. Tax conventions between certain countries and the U.S. may
reduce or eliminate such taxes. If more than 50% of the Fund's total assets at
the close of its fiscal year consists of securities of foreign corporations, the
Fund will be eligible to file an election with the Internal Revenue Service
under which shareholders of the Fund would be required to include their pro rata
portions of foreign taxes withheld by foreign countries as gross income in their
federal income tax returns. These pro rata portions of foreign taxes withheld
may be taken as a credit or deduction in computing the shareholders' federal
income taxes. If the election is filed,

<PAGE>

the Fund will report to its shareholders the per share amount of such foreign
taxes withheld and the amount of foreign tax credit or deduction available for
federal income tax purposes.

Capital gain distributions, if any, received by shareholders should be treated
as long-term capital gains regardless of how long they owned their shares.
Short-term capital gains earned by the Fund are paid to shareholders as part of
their ordinary income dividend and are taxable. A special 28% rate on capital
gains may apply to sales of precious metals, if any, owned directly by the Fund.
A special 25% rate on capital gains may apply to investments in REITs.

Under the Internal Revenue Code of 1986 (the Code), gains or losses attributable
to fluctuations in exchange rates that occur between the time the Fund accrues
interest or other receivables, or accrues expenses or other liabilities
denominated in a foreign currency and the time the Fund actually collects such
receivables or pays such liabilities generally are treated as ordinary income or
ordinary loss. Similarly, gains or losses on disposition of debt securities
denominated in a foreign currency attributable to fluctuations in the value of
the foreign currency between the date of acquisition of the security and the
date of disposition also are treated as ordinary gains or losses. These gains or
losses, referred to under the Code as "section 988" gains or losses, may
increase or decrease the amount of the Fund's investment company taxable income
to be distributed to its shareholders as ordinary income.

Under federal tax law, by the end of a calendar year the Fund must declare and
pay dividends representing 98% of ordinary income for that calendar year and 98%
of net capital gains (both long-term and short-term) for the 12-month period
ending Oct. 31 of that calendar year. The Fund is subject to an excise tax equal
to 4% of the excess, if any, of the amount required to be distributed over the
amount actually distributed. The Fund intends to comply with federal tax law and
avoid any excise tax.

For purposes of the excise tax distributions, "section 988" ordinary gains and
losses are distributable based on an Oct. 31 year end. This is an exception to
the general rule that ordinary income is paid based on a calendar year end.

If a mutual fund is the holder of record of any share of stock on the record
date for any dividend payable with respect to such stock, such dividend shall be
included in gross income by the Fund as of the later of (1) the date such share
became ex-dividend or (2) the date the Fund acquired such share. Because the
dividends on some foreign equity investments may be received some time after the
stock goes ex-dividend, and in certain rare cases may never be received by the
Fund, this rule may cause the Fund to take into income dividend income that it
has not received and pay such income to its shareholders. To the extent that the
dividend is never received, the Fund will take a loss at the time that a
determination is made that the dividend will not be received.

This is a brief summary that relates to federal income taxation only.
Shareholders should consult their tax advisor as to the application of federal,
state, and local income tax laws to Fund distributions.

AGREEMENTS

Investment Management Services Agreement

AEFC, a wholly-owned subsidiary of American Express Company, is the investment
manager for the Fund. Under the Investment Management Services Agreement, the
Advisor, subject to the policies set by the board, provides investment
management services.

For its services, the Advisor is paid a fee based on the following schedule.
Each Fund pays its proportionate share of the fee.

<PAGE>

Emerging Markets World Growth

Assets Annual rate at Assets Annual rate at
(billions) each asset level (billions) each asset level
First $0.25 1.10% First $0.25 0.800%
Next 0.25 1.08 Next 0.25 0.775
Next 0.25 1.06 Next 0.25 0.750
Next 0.25 1.04 Next 0.25 0.725
Next 1.00 1.02 Next 1.00 0.700
Over 2.00 1.00 Over 2.00 0.675

World Income

Assets Annual rate at
(billions) each asset level
---------- ----------------
First $0.25 0.770%
Next 0.25 0.745
Next 0.25 0.720
Next 0.25 0.695
Over 1.00 0.670

On the last day of the most recent fiscal year, the daily rates applied to the
Funds' net assets on an annual basis were equal to 1.09% for Emerging Markets,
0.736% for World Growth and 0.740% for World Income. The fee is calculated for
each calendar day on the basis of net assets as the close of business two days
prior to the day for which the calculation is made. The Advisor has agreed to
certain fee waivers and expense reimbursements as discussed in the Fund's
prospectus.

Before the fee based on the asset charge is paid for a Emerging Markets and
World Growth, it is increased or decreased based on investment performance
compared to Lipper Emerging Markets Income Fund Index for Emerging Markets and
Lipper Global Fund Index for World Growth. Solely for purposes of calculating
the performance incentive adjustment, the Index is compared to the performance
of Class A shares of another fund that invests in the Portfolio (the comparison
fund). For Emerging Markets, the comparison fund is AXP Emerging Markets Fund.
For World Growth, the comparison fund is AXP Global Growth Fund. The adjustment,
determined monthly, will be calculated using the percentage point difference
between the change in the net asset value of one share of the comparison fund
and the change in the Index. The performance of the comparison fund is measured
by computing the percentage difference between the opening and closing net asset
value of one share, as of the last business day of the period selected for
comparison, adjusted for dividend or capital gain distributions which are
treated as reinvested at the end of the month during which the distribution was
made. The performance of the Index for the same period is established by
measuring the percentage difference between the beginning and ending Index for
the comparison period. The performance is adjusted for dividend or capital gain
distributions (on the securities which comprise the Index), which are treated as
reinvested at the end of the month during which the distribution was made. One
percentage point will be subtracted from the calculation to help assure that
incentive adjustments are attributable to the Advisor's management abilities
rather than random fluctuations and the result multiplied by 0.01%. That number
will be multiplied times the average net assets for the comparison period and
then divided by the number of months in the comparison period to determine the
monthly adjustment.

Where the comparison fund performance exceeds that of the Index, the base fee
will be increased. Where the performance of the Index exceeds the performance of
the comparison fund, the base fee will be decreased. The maximum monthly
increase or decrease will be 0.12% of average net assets on an annual basis.

The 12 month comparison period rolls over with each succeeding month, so that it
always equals 12 months, ending with the month for which the performance
adjustment is being computed.

<PAGE>

The management fee is paid monthly. For fiscal years noted below, each Portfolio
paid the following management fees. The amounts are allocated among the Funds
investing in the Portfolios.

Oct. 31, Emerging Markets World Growth World Income
- --------- ---------------- ------------ ------------
1999 $3,716,803 $11,563,612 $6,861,563
1998 4,047,093 9,358,529 7,213,154
1997 1,970,475 8,978,698 6,721,234

Under the Agreement, the Fund also pays taxes, brokerage commissions and
nonadvisory expenses, which include custodian fees; audit and certain legal
fees; fidelity bond premiums; registration fees for units; office expenses;
consultants' fees; compensation of board members, officers and employees;
corporate filing fees; organizational expenses; expenses incurred in connection
with lending securities; and expenses properly payable by the Fund, approved by
the board. For fiscal years noted below, each Fund and corresponding Portfolio
paid the following nonadvisory expenses. All fees are net of earnings credits.

Oct. 31, Emerging Markets World Growth World Income
- --------- ---------------- ------------ ------------
1999 $683,504 $686,103 $343,859
1998 791,044 687,805 342,247
1997 195,628 937,490 298,501

Sub-Investment Adviser:

American Express Asset Management International Inc. (Sub-Adviser), a
wholly-owned subsidiary of AEFC located at IDS Tower 10, Minneapolis, MN
#55440-0010 sub-advises the assets in the Emerging Markets Portfolio and World
Growth Portfolio. Sub-Adviser, subject to the supervision and approval of AEFC,
provides investment advisory assistance and day-to-day management of the Fund's
portfolio, as well as investment research and statistical information, under an
Investment Advisory Agreement with AEFC.

Administrative Services Agreement

The Fund has an Administrative Services Agreement with the Advisor. Under this
agreement, each Fund pays the Advisor for providing administration and
accounting services. The fee is calculated as follows:

Emerging Markets Fund World Growth Fund

Assets Annual rate at Assets Annual rate at
(billions) each asset level (billions) each asset level
First $0.25 0.10% First $0.25 0.060%
Next 0.25 0.09 Next 0.25 0.055
Next 0.25 0.08 Next 0.25 0.050
Next 0.25 0.07 Next 0.25 0.045
Next 1.00 0.06 Next 1.00 0.040
Over 2.00 0.05 Over 2.00 0.035

World Income Fund

Assets Annual rate at
(billions) each asset level
---------- ----------------
First $0.25 0.060%
Next 0.25 0.055
Next 0.25 0.050
Next 0.25 0.045
Over 1.00 0.040

<PAGE>

On the last day of the most recent fiscal year, the daily rates applied to the
Funds' net assets on an annual basis were equal to 0.10% for Emerging Markets,
0.06% for World Growth and 0.06 for World Income.

For fiscal year noted below each Fund paid the following administrative fees.

Oct. 31, Emerging Markets World Growth World Income
1999 $545 $505 $383
1998 574 425 374
1997 629 357 343

Under the agreement, the Fund also pays taxes; audit and certain legal fees;
registration fees for shares; office expenses; consultant's fees; compensation
of board members, officers and employees; corporate filing fees; organizational
expenses; and expenses properly payable by the Fund approved by the board.

Transfer Agency Agreement

The Fund has a Transfer Agency Agreement with American Express Client Service
Corporation (AECSC). This agreement governs the responsibility for administering
and/or performing transfer agent functions, for acting as service agent in
connection with dividend and distribution functions and for performing
shareholder account administration agent functions in connection with the
issuance, exchange and redemption or repurchase of the Funds' shares. The fee is
determined by multiplying the number of shareholder accounts at the end of the
day by a rate of $20 per year for Emerging Markets and World Growth and $25 per
year for World Income and dividing by the number of days in the year. The fees
paid to AECSC may be changed by the board without shareholder approval.

Distribution Agreement

American Express Financial Advisors Inc. (Distributor) is the Fund's principal
underwriter. The Fund's shares are offered on a continuous basis.

Under a prior agreement, the Fund paid a fee to help defray the costs of
distribution and servicing under a Plan and Agreement of Distribution pursuant
to Rule 12b-1 under the 1940 Act. Under the Plan, the Fund paid a fee at an
annual rate of 0.25% of the Fund's average daily net assets. For the most recent
fiscal year, the Funds paid fees of $1,245 for Emerging Markets Fund, $1,940 for
World Growth Fund and $1,474 for World Income Fund. These costs covered almost
all aspects of distributing shares of the Funds.

Custodian Agreement

The Fund's securities and cash are held by American Express Trust Company, 1200
Northstar Center West, 625 Marquette Ave., Minneapolis, MN 55402-2307, through a
custodian agreement. The custodian is permitted to deposit some or all of its
securities in central depository systems as allowed by federal law. For its
services, the Fund pays the custodian a maintenance charge and a charge per
transaction in addition to reimbursing the custodian's out-of-pocket expenses.

The custodian has entered into a sub-custodian agreement with Bank of New York,
90 Washington Street, New York, NY 10286. As part of this arrangement,
securities purchased outside the United Stated are maintained in the custody of
various foreign branches of Bank of New York or in other financial institutions
as permitted by law and by the Fund's sub-custodian agreement.

ORGANIZATIONAL INFORMATION

The Fund is an open-end management investment company. The Fund headquarters are
at P.O. Box 59196, Minneapolis, MN 55459-0196.

<PAGE>

The shares of the Fund represent an interest in that fund's assets only (and
profits or losses), and, in the event of liquidation, each share of the Fund
would have the same rights to dividends and assets as every other share of that
Fund.

VOTING RIGHTS

As a shareholder in the Fund, you have voting rights over the Fund's management
and fundamental policies. You are entitled to one vote for each share you own.
Each class, if applicable, has exclusive voting rights with respect to matters
for which separate class voting is appropriate under applicable law. All shares
have cumulative voting rights with respect to the election of board members.
This means that you have as many votes as the number of shares you own,
including fractional shares, multiplied by the number of members to be elected.

Dividend Rights

Dividends paid by the Fund, if any, with respect to each class of shares, if
applicable, will be calculated in the same manner, at the same time, on the same
day, and will be in the same amount, except for differences resulting from
differences in fee structures.
<TABLE>
<CAPTION>

Fund History Table for All Publicly Offered Funds in the Strategist Fund Group
<S> <C> <C> <C> <C> <C> <C>

Date of Form of Inception State of Fiscal Diversified
Organization Organization Date Organization Year End
- --------------------------------------- ------------ ------------ ------------ ------------ ------------ ------------
Strategist Growth Fund, Inc. 9/1/95 Corporation MN
Strategist Growth Fund 5/13/96 7/31 Yes
Strategist Growth Trends Fund 5/13/96 7/31 Yes
Strategist Special Growth Fund 8/19/96 7/31 Yes
- --------------------------------------- ------------ ------------ ------------ ------------ ------------ ------------
Strategist Growth & Income Fund, Inc. 9/1/95 Corporation MN
Strategist Balanced Fund 5/13/96 9/30 Yes
Strategist Equity Fund 5/13/96 9/30 Yes
Strategist Equity Income Fund 5/13/96 9/30 Yes
Strategist Total Return Fund 5/13/96 9/30 Yes
- --------------------------------------- ------------ ------------ ------------ ------------ ------------ ------------
Strategist Income Fund, Inc. 5/25/95 Corporation MN
Strategist Government Income Fund 6/10/96 5/31 Yes
Strategist High Yield Fund 6/10/96 5/31 Yes
Strategist Quality Income Fund 6/10/96 5/31 Yes
- --------------------------------------- ------------ ------------ ------------ ------------ ------------ ------------
Strategist Tax-Free Income Fund, Inc. 9/1/95 Corporation MN
Strategist Tax-Free High Yield Fund 5/13/96 11/30 Yes
- --------------------------------------- ------------ ------------ ------------ ------------ ------------ ------------
Strategist World Fund, Inc. 9/1/95 Corporation MN
Strategist Emerging Markets Fund 11/13/96 10/31 Yes
Strategist World Growth Fund 5/13/96 10/31 Yes
Strategist World Income Fund 5/13/96 10/31 No
- --------------------------------------- ------------ ------------ ------------ ------------ ------------ ------------
</TABLE>

<PAGE>

BOARD MEMBERS AND OFFICERS

DIRECTORS OF STRATEGIST FUND GROUP

Shareholders elect a board that oversees the Fund's operations. The board
appoints officers who are responsible for day-to-day business decisions based on
policies set by the board.

The following is a list of the Fund's board members who are board members of all
15 funds in the Strategist Fund Group.

Rodney P. Burwell
Born in 1939
Xerxes Corporation
7901 Xerxes Ave. S.
Minneapolis, MN

Chairman, Xerxes Corporation (fiberglass storage tanks). Director, Fairview
Corporation.

Jean B. Keffeler
Born in 1945
3424 Zenith Avenue South
Minneapolis, MN

Independent management consultant. Director, National Computer Systems.

Thomas R. McBurney
Born in 1938
McBurney Management Advisors
1700 Foshay Tower
821 Marquette Ave.
Minneapolis, MN

President, McBurney Management Advisors. Director, The Valspar Corporation
(paints), Wenger Corporation, Allina, Space Center Enterprises and Greenspring
Corporation.

James A. Mitchell*
Born in 1941
2900 IDS Tower
Minneapolis, MN

President of all funds in the Strategist Fund Group. Chairman of the board, IDS
Life Insurance Company.

John R. Thomas*
Born in 1937
2900 IDS Tower
Minneapolis, MN

Vice president of all funds in the Strategist Fund Group. President and board
member of the American Express funds. Senior vice president of the Advisor.

*Interested person of the Company by reason of being an officer, board member,
employee and/or shareholder of the Advisor or American Express.

<PAGE>

In addition to Mr. Mitchell, who is president, and Mr. Thomas, who is vice
president, the Fund's other officers are:

John M. Knight
Born in 1952
IDS Tower 10
Minneapolis, MN

Treasurer of all funds in the Strategist Fund Group. Vice president - investment
accounting of the Advisor.

Eileen J. Newhouse
Born in 1955
IDS Tower 10
Minneapolis, MN

Secretary of all funds in the Strategist Fund Group. Counsel of the Advisor.

Trustees of the Preferred Master Trust Group

The following is a list of the Trust's board members. They serve 15 Master Trust
portfolios and 53 American Express funds.

H. Brewster Atwater, Jr.'
Born in 1931
4900 IDS Tower
Minneapolis, MN

Retired chairman and chief executive officer, General Mills, Inc. Director,
Merck & Co., Inc. and Darden Restaurants, Inc.

Arne H. Carlson+'*
Born in 1934
901 S. Marquette Ave.
Minneapolis, MN

Chairman and chief executive officer of the Trust. Chairman, Board Services
Corporation (provides administrative services to boards). Former Governor of
Minnesota.

Lynne V. Cheney
Born in 1941
American Enterprise Institute
for Public Policy Research (AEI)
1150 17th St., N.W. Washington, D.C.

Distinguished Fellow AEI. Former Chair of National Endowment of the Humanities.
Director, The Reader's Digest Association Inc., Lockheed-Martin, and Union
Pacific Resources.

William H. Dudley'**
Born in 1932
2900 IDS Tower
Minneapolis, MN

Senior advisor to the chief executive officer of the Advisor.

<PAGE>

David R. Hubers**
Born in 1943
2900 IDS Tower
Minneapolis, MN

President, chief executive officer and director of the Advisor.

Heinz F. Hutter+'
Born in 1929
P.O. Box 2187
Minneapolis, MN

Retired president and chief operating officer, Cargill, Incorporated (commodity
merchants and processors).

Anne P. Jones+
Born in 1935
5716 Bent Branch Rd.
Bethesda, MD

Attorney and telecommunications consultant. Former partner, law firm of
Sutherland, Asbill & Brennan. Director, Motorola, Inc. (electronics), C-Cor
Electronics, Inc., and Amnex, Inc. (communications).

William R. Pearce'
Born in 1927
2050 One Financial Plaza
Minneapolis, MN

RII Weyerhaeuser World Timberfund, L.P. (develops timber resources) - management
committee. Retired vice chairman of the board, Cargill, Incorporated (commodity
merchants and processors). Former chairman, Board Services Corporation.

Alan K. Simpson+
Born in 1931
1201 Sunshine Ave.
Cody, WY

Director of The Institute of Politics, Harvard University. Former three-term
United States Senator for Wyoming. Former Assistant Republican Leader, U.S.
Senate. Director, PacifiCorp (electric power) and Biogen (bio-pharmaceuticals).

John R. Thomas+'**
Born in 1937
2900 IDS Tower
Minneapolis, MN

Senior vice president of the Advisor.

<PAGE>

C. Angus Wurtele+'
Born in 1934
Valspar Corporation
Suite 1700
Foshay Tower
Minneapolis, MN

Retired chairman of the board and retired chief executive officer, The Valspar
Corporation (paints). Director, Valspar, Bemis Corporation (packaging) and
General Mills, Inc. (consumer foods).

+ Member of executive committee.
' Member of investment review committee.
* Interested person by reason of being an officer and employee of the Trust.
**Interested person by reason of being an officer, board member, employee and/or
shareholder of the Advisor or American Express.

The board has appointed officers who are responsible for day-to-day business
decisions based on policies it has established. In addition to Mr. Carlson, who
is chairman of the board, and Mr. Thomas, who is president, the Trust's other
officers are:

Leslie L. Ogg
Born in 1938
901 S. Marquette Ave.
Minneapolis, MN

President of Board Services Corporation. Vice president, general counsel and
secretary for the Trust.

Officers who also are officers and employees of the Advisor:

Peter J. Anderson
Born in 1942
IDS Tower 10
Minneapolis, MN

Director and senior vice president-investments of the Advisor. Vice
president-investments for the Trust.

Frederick C. Quirsfeld
Born in 1947
IDS Tower 10
Minneapolis, MN

Vice president - taxable mutual fund investments of the Advisor. Vice president
- - fixed income investments for the Trust.

John M. Knight
Born in 1952
IDS Tower 10
Minneapolis, MN

Vice president - investment accounting of the Advisor. Treasurer for the Trust.

<PAGE>

COMPENSATION FOR BOARD MEMBERS

Compensation for Fund Board Members

During the most recent fiscal year, the independent members of the Fund board,
for attending up to four meetings, received the following compensation:

Compensation Table
for Emerging Markets Fund
Total cash compensation
Aggregate from the
Board member compensation from the Fund Strategist Fund Group

Rodney P. Burwell $267 $18,000
Jean B. Keffeler 267 18,000
Thomas R. McBurney 267 18,000

Compensation Table
for World Growth Fund
Total cash compensation
Aggregate from the
Board member compensation from the Fund Strategist Fund Group

Rodney P. Burwell $267 $18,000
Jean B. Keffeler 267 18,000
Thomas R. McBurney 267 18,000

Compensation Table
for World Income Fund
Total cash compensation
Aggregate from the
Board member compensation from the Fund Strategist Fund Group

Rodney P. Burwell $267 $18,000
Jean B. Keffeler 267 18,000
Thomas R. McBurney 267 18,000

As of 30 days prior to the date of this SAI, the Fund's board members and
officers as a group owned less than 1% of the outstanding shares of the Fund.

Compensation for Portfolio Board Members

During the most recent fiscal year, the independent members of the board for
Emerging Markets Portfolio, World Growth Portfolio and World Income Portfolio,
for attending up to 27 meetings, received the following compensation:

<PAGE>

Compensation Table
for Emerging Markets Portfolio

Total cash compensation
Aggregate from the Preferred Master
Compensation from Trust Group and
Board member the Portfolio American Express Funds

H. Brewster Atwater, Jr. $1,250 $119,650

Lynne V. Cheney 907 102,100

Heinz F. Hutter 950 101,600

Anne P. Jones 1,007 108,000

William R. Pearce 608 62,650

Alan K. Simpson 907 102,100

C. Angus Wurtele 1,375 127,150

Compensation Table
for World Growth Portfolio

Total cash compensation
Aggregate from the Preferred Master
Compensation from Trust Group and
Board member the Portfolio American Express Funds

H. Brewster Atwater, Jr. $1,633 $119,650

Lynne V. Cheney 1,317 102,100

Heinz F. Hutter 1,333 101,600

Anne P. Jones 1,416 108,000

William R. Pearce 842 62,650

Alan K. Simpson 1,317 102,100

C. Angus Wurtele 1,758 127,150

Compensation Table
for World Income Portfolio

Total cash compensation
Aggregate from the Preferred Master
Compensation from Trust Group and
Board member the Portfolio American Express Funds

H. Brewster Atwater, Jr. $1,467 $119,650

Lynne V. Cheney 1,139 102,100

Heinz F. Hutter 1,167 101,600

Anne P. Jones 1,240 108,000

William R. Pearce 725 62,650

Alan K. Simpson 1,139 102,100

C. Angus Wurtele 1,592 127,150

INDEPENDENT AUDITORS

The financial statements contained in the Annual Report were audited by
independent auditors, KPMG LLP, 4200 Norwest Center, 90 S. Seventh St.,
Minneapolis, MN 55402-3900. The independent auditors also provide other
accounting and tax-related services as requested by the Fund.

<PAGE>

APPENDIX

DESCRIPTION OF RATINGS

Standard & Poor's Debt Ratings

A Standard & Poor's corporate or municipal debt rating is a current assessment
of the creditworthiness of an obligor with respect to a specific obligation.
This assessment may take into consideration obligors such as guarantors,
insurers, or lessees.

The debt rating is not a recommendation to purchase, sell, or hold a security,
inasmuch as it does not comment as to market price or suitability for a
particular investor.

The ratings are based on current information furnished by the issuer or obtained
by S&P from other sources it considers reliable. S&P does not perform an audit
in connection with any rating and may, on occasion, rely on unaudited financial
information. The ratings may be changed, suspended, or withdrawn as a result of
changes in, or unavailability of such information or based on other
circumstances.

The ratings are based, in varying degrees, on the following considerations:

o Likelihood of default capacity and willingness of the obligor as
to the timely payment of interest and repayment of principal in
accordance with the terms of the obligation.

o Nature of and provisions of the obligation.

o Protection afforded by, and relative position of, the obligation
in the event of bankruptcy, reorganization, or other arrangement
under the laws of bankruptcy and other laws affecting creditors'
rights.

Investment Grade

Debt rated AAA has the highest rating assigned by Standard & Poor's. Capacity to
pay interest and repay principal is extremely strong.

Debt rated AA has a very strong capacity to pay interest and repay principal and
differs from the highest rated issues only in a small degree.

Debt rated A has a strong capacity to pay interest and repay principal, although
it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher-rated categories.

Debt rated BBB is regarded as having an adequate capacity to pay interest and
repay principal. Whereas it normally exhibits adequate protection parameters,
adverse economic conditions or changing circumstances are more likely to lead to
a weakened capacity to pay interest and repay principal for debt in this
category than in higher-rated categories.

Speculative grade

Debt rated BB, B, CCC, CC, and C is regarded as having predominantly speculative
characteristics with respect to capacity to pay interest and repay principal. BB
indicates the least degree of speculation and C the highest. While such debt
will likely have some quality and protective characteristics, these are
outweighed by large uncertainties or major exposures to adverse conditions.

<PAGE>

Debt rated BB has less near-term vulnerability to default than other speculative
issues. However, it faces major ongoing uncertainies or exposure to adverse
business, financial, or economic conditions that could lead to inadequate
capacity to meet timely interest and principal payments. The BB rating category
also is used for debt subordinated to senior debt that is assigned an actual or
implied BBB- rating.

Debt rated B has a greater vulnerability to default but currently has the
capacity to meet interest payments and principal repayments. Adverse business,
financial, or economic conditions will likely impair capacity or willingness to
pay interest and repay principal. The B rating category also is used for debt
subordinated to senior debt that is assigned an actual or implied BB or BB-
rating.

Debt rated CCC has a currently identifiable vulnerability to default and is
dependent upon favorable business, financial, and economic conditions to meet
timely payment of interest and repayment of principal. In the event of adverse
business, financial, or economic conditions, it is not likely to have the
capacity to pay interest and repay principal. The CCC rating category also is
used for debt subordinated to senior debt that is assigned an actual or implied
B or B- rating.

Debt rated CC typically is applied to debt subordinated to senior debt that is
assigned an actual or implied CCC rating.

Debt rated C typically is applied to debt subordinated to senior debt that is
assigned an actual or implied CCC rating. The C rating may be used to cover a
situation where a bankruptcy petition has been filed, but debt service payments
are continued.

The rating CI is reserved for income bonds on which no interest is being paid.

Debt rated D is in payment default. The D rating category is used when interest
payments or principal payments are not made on the date due, even if the
applicable grace period has not expired, unless S&P believes that such payments
will be made during such grace period. The D rating also will be used upon the
filing of a bankruptcy petition if debt service payments are jeopardized.

Moody's Long-Term Debt Ratings

Aaa - Bonds that are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk. Interest payments are protected by a
large or by an exceptionally stable margin and principal is secure. While the
various protective elements are likely to change, such changes as can be
visualized are most unlikely to impair the fundamentally strong position of such
issues.

Aa - Bonds that are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as high grade
bonds. They are rated lower than the best bonds because margins of protection
may not be as large as in Aaa securities or fluctuation of protective elements
may be of greater amplitude or there may be other elements present that make the
long-term risk appear somewhat larger than in Aaa securities.

A - Bonds that are rated A possess many favorable investment attributes and are
to be considered as upper-medium grade obligations. Factors giving security to
principal and interest are considered adequate, but elements may be present that
suggest a susceptibility to impairment some time in the future.

Baa - Bonds that are rated Baa are considered as medium-grade obligations (i.e.,
they are neither highly protected nor poorly secured). Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.

<PAGE>

Ba - Bonds that are rated Ba are judged to have speculative elements--their
future cannot be considered as well-assured. Often the protection of interest
and principal payments may be very moderate, and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.

B - Bonds that are rated B generally lack characteristics of a desirable
investment. Assurance of interest and principal payments or maintenance of other
terms of the contract over any long period of time may be small.

Caa - Bonds that are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.

Ca - Bonds that are rated Ca represent obligations that are speculative in a
high degree. Such issues are often in default or have other marked shortcomings.

C - Bonds that are rated C are the lowest rated class of bonds, and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing.

SHORT-TERM RATINGS

Standard & Poor's Commercial Paper Ratings

A Standard & Poor's commercial paper rating is a current assessment of the
likelihood of timely payment of debt considered short-term in the relevant
market.

Ratings are graded into several categories, ranging from A-1 for the highest
quality obligations to D for the lowest. These categories are as follows:

A-1 This highest category indicates that the degree of safety
regarding timely payment is strong. Those issues determined to
possess extremely strong safety characteristics are denoted
with a plus sign (+) designation.

A-2 Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as
high as for issues designated A-1.

A-3 Issues carrying this designation have adequate capacity for
timely payment. They are, however, more vulnerable to the
adverse effects of changes in circumstances than obligations
carrying the higher designations.

B Issues are regarded as having only speculative capacity for
timely payment.

C This rating is assigned to short-term debt obligations with
doubtful capacity for payment.

D Debt rated D is in payment default. The D rating category is
used when interest payments or principal payments are not made
on the date due, even if the applicable grace period has not
expired, unless S&P believes that such payments will be made
during such grace period.

<PAGE>

Standard & Poor's Note Ratings

An S&P note rating reflects the liquidity factors and market-access risks unique
to notes. Notes maturing in three years or less will likely receive a note
rating. Notes maturing beyond three years will most likely receive a long-term
debt rating.

Note rating symbols and definitions are as follows:

SP-1 Strong capacity to pay principal and interest. Issues
determined to possess very strong characteristics are given a
plus (+) designation.

SP-2 Satisfactory capacity to pay principal and interest, with some
vulnerability to adverse financial and economic changes over
the term of the notes.

SP-3 Speculative capacity to pay principal and interest.

Moody's Short-Term Ratings

Moody's short-term debt ratings are opinions of the ability of issuers to repay
punctually senior debt obligations. These obligations have an original maturity
not exceeding one year, unless explicitly noted.

Moody's employs the following three designations, all judged to be investment
grade, to indicate the relative repayment ability of rated issuers:

Issuers rated Prime-l (or supporting institutions) have a superior
ability for repayment of senior short-term debt obligations. Prime-l
repayment ability will often be evidenced by many of the following
characteristics: (i) leading market positions in well-established
industries, (ii) high rates of return on funds employed, (iii)
conservative capitalization structure with moderate reliance on debt
and ample asset protection, (iv) broad margins in earnings coverage of
fixed financial charges and high internal cash generation, and (v) well
established access to a range of financial markets and assured sources
of alternate liquidity.

Issuers rated Prime-2 (or supporting institutions) have a strong
ability for repayment of senior short-term debt obligations. This will
normally be evidenced by many of the characteristics cited above, but
to a lesser degree. Earnings trends and coverage ratios, while sound,
may be more subject to variation. Capitalization characteristics, while
still appropriate, may be more affected by external conditions. Ample
alternate liquidity is maintained.

Issuers rated Prime-3 (or supporting institutions) have an acceptable
ability for repayment of senior short-term obligations. The effect of
industry characteristics and market compositions may be more
pronounced. Variability in earnings and profitability may result in
changes in the level of debt protection measurements and may require
relatively high financial leverage.
Adequate alternate liquidity is maintained.

Issuers rated Not Prime do not fall within any of the Prime rating
categories.

<PAGE>

Moody's & S&P's
Short-Term Muni Bonds and Notes

Short-term municipal bonds and notes are rated by Moody's and by S&P. The
ratings reflect the liquidity concerns and market access risks unique to notes.

Moody's MIG 1/VMIG 1 indicates the best quality. There is present strong
protection by established cash flows, superior liquidity support or demonstrated
broad-based access to the market for refinancing.

Moody's MIG 2/VMIG 2 indicates high quality. Margins of protection are ample
although not so large as in the preceding group.

Moody's MIG 3/VMIG 3 indicates favorable quality. All security elements are
accounted for but there is lacking the undeniable strength of the preceding
grades. Liquidity and cash flow protection may be narrow and market access for
refinancing is likely to be less well established.

Moody' s MIG 4/VMIG 4 indicates adequate quality. Protection commonly regarded
as required of an investment security is present and although not distinctly or
predominantly speculative, there is specific risk.

Standard & Poor's rating SP-1 indicates very strong or strong capacity to pay
principal and interest. Those issues determined to possess overwhelming safety
characteristics will be given a plus (+) designation.

Standard & Poor's rating SP-2 indicates satisfactory capacity to pay principal
and interest.

Standard & Poor's rating SP-3 indicates speculative capacity to pay principal
and interest.

<PAGE>

STATEMENT OF ADDITIONAL INFORMATION

FOR

STRATEGIST WORLD FUND, INC.

STRATEGIST WORLD TECHNOLOGIES

(singularly and collectively with the corresponding portfolio of World Trust
(the Trust) and the Trust, where the context requires, referred to as the
"Fund")

Dec. 30, 1999

<PAGE>

Strategist World Technologies Fund
sec-spec\mstrfeed\stratgst\world\worldtec\99stmt.rft

TABLE OF CONTENTS

Mutual Fund Checklist.............................................p.3
Fundamental Investment Policies...................................p.5
Investment Strategies and Types of Investments....................p.6
Information Regarding Risks and Investment Strategies.............p.8
Security Transactions............................................p.29
Brokerage Commissions Paid to Brokers Affiliated
with the Adviser...............................................p.31
Performance Information..........................................p.32
Valuing Fund Shares..............................................p.33
Selling Shares...................................................p.34
Taxes............................................................p.34
Agreements.......................................................p.36
Organizational Information.......................................p.38
Board Members and Officers.......................................p.39
Compensation for Board Members...................................p.43
Independent Auditors.............................................p.43
Appendix: Description of Ratings................................p.44

<PAGE>

MUTUAL FUND CHECKLIST

|X| Mutual funds are NOT guaranteed or insured by any
bank or government agency. You can lose money.

|X| Mutual funds ALWAYS carry investment risks. Some
types carry more risk than others.

|X| A higher rate of return typically involves a
higher risk of loss.

|X| Past performance is not a reliable indicator of
future performance.

|X| ALL mutual funds have costs that lower investment
return.

|X| Shop around. Compare a mutual fund with others of
the same type before you buy.

OTHER IDEAS FOR SUCCESSFUL MUTUAL FUND INVESTING:

Develop a Financial Plan

Have a plan - even a simple plan can help you take control of your financial
future.

Dollar-Cost Averaging

<PAGE>

Dollar-cost averaging:

Average market price of a share over 5 periods: $5.00 ($25.00 divided by 5)
The average price you paid for each share: $4.84 ($500 divided by 103.4)

Diversify

Understand Your Investment

Know what you are buying. Make sure you understand the potential risks, rewards,
costs, and expenses associated with each of your investments.

<PAGE>

FUNDAMENTAL INVESTMENT POLICIES

o Make cash loans if the total commitment amount exceeds 5% of the Fund's
total assets.

o Purchase more than 10% of the outstanding voting securities of an issuer.

o Make a loan of any part of its assets to American Express Financial
Corporation (the Advisor), to the board members and officers of the Advisor
or to its own board members and officers.

o Lend Fund securities in excess of 30% of its net assets.

o Issue senior securities, except as permitted under the 1940 Act.

Except for the fundamental investment policies listed above, the other
investment policies described in the prospectus and in this SAI are not
fundamental and may be changed by the board at any time.

<PAGE>
INVESTMENT STRATEGIES AND TYPES OF INVESTMENTS

This table shows various investment strategies and investments that many funds
are allowed to engage in and purchase. It is intended to show the breadth of
investments that the investment manager may make on behalf of the Fund. For a
description of principal risks, please see the prospectus. Notwithstanding the
Fund's ability to utilize these strategies and techniques, the investment
manager is not obligated to use them at any particular time. For example, even
though the investment manager is authorized to adopt temporary defensive
positions and is authorized to hedge against certain types of risk, these
practices are left to the investment manager's sole discretion.

Investment strategies & types of investments: Strategist World
Technologies
Allowable for the Fund?
- -----------------------------------------------------------------------------
Agency and Government Securities yes
- -----------------------------------------------------------------------------
Borrowing yes
- -----------------------------------------------------------------------------
Cash/Money Market Instruments yes
- -----------------------------------------------------------------------------
Collateralized Bond Obligations yes
- -----------------------------------------------------------------------------
Commercial Paper yes
- -----------------------------------------------------------------------------
Common Stock yes
- -----------------------------------------------------------------------------
Convertible Securities yes
- -----------------------------------------------------------------------------
Corporate Bonds yes
- -----------------------------------------------------------------------------
Debt Obligations yes
- -----------------------------------------------------------------------------
Depositary Receipts yes
- -----------------------------------------------------------------------------
Derivative Instruments yes
- -----------------------------------------------------------------------------
Foreign Currency Transactions yes
- -----------------------------------------------------------------------------
Foreign Securities yes
- -----------------------------------------------------------------------------
High-Yield (High-Risk) Securities (Junk Bonds) yes
- -----------------------------------------------------------------------------
Illiquid and Restricted Securities yes
- -----------------------------------------------------------------------------
Indexed Securities yes
- -----------------------------------------------------------------------------
Inverse Floaters no
- -----------------------------------------------------------------------------
Investment Companies yes
- -----------------------------------------------------------------------------
Lending of Portfolio Securities yes
- -----------------------------------------------------------------------------
Loan Participations yes
- -----------------------------------------------------------------------------
Mortgage- and Asset-Backed Securities yes
- -----------------------------------------------------------------------------
Mortgage Dollar Rolls no
- -----------------------------------------------------------------------------
Municipal Obligations yes
- -----------------------------------------------------------------------------
Preferred Stock yes
- -----------------------------------------------------------------------------
Real Estate Investment Trusts yes
- -----------------------------------------------------------------------------
Repurchase Agreements yes
- -----------------------------------------------------------------------------
Reverse Repurchase Agreements yes
- -----------------------------------------------------------------------------
Short Sales no
- -----------------------------------------------------------------------------
Sovereign Debt yes
- -----------------------------------------------------------------------------
Structured Products yes
- -----------------------------------------------------------------------------
Variable- or Floating-Rate Securities yes
- -----------------------------------------------------------------------------
Warrants yes
- -----------------------------------------------------------------------------
When-Issued Securities yes
- -----------------------------------------------------------------------------
Zero-Coupon, Step-Coupon,
and Pay-in-Kind Securities yes
- -----------------------------------------------------------------------------
<PAGE>

The following are guidelines that may be changed by the board at any time:

o Under normal market conditions, at least 65% of the Fund's total assets
will be invested in companies in the information technology sector.

o The Fund may invest up to 20% of its net assets in bonds.

o The Fund will not invest more than 5% of its net assets in bonds below
investment grade, including Brady bonds.

o No more than 5% of the Fund's net assets can be used at any one time for
good faith deposits on futures and premiums for options on futures that do
not offset existing investment positions.

o No more than 10% of the Fund's net assets will be held in securities and
other instruments that are illiquid.

o Ordinarily, less than 25% of the Fund's total assets are invested in money
market instruments.

o The Fund will not buy on margin or sell short, except the Fund may make
margin payments in connection with transactions in derivative instruments.

o The Fund will not invest more than 10% of its total assets in securities of
investment companies.

o The Fund will not invest in a company to control or manage it.

<PAGE>

INFORMATION REGARDING RISKS AND INVESTMENT STRATEGIES

RISKS

Call/Prepayment Risk

The risk that a bond or other security might be called (or otherwise converted,
prepaid, or redeemed) before maturity. This type of risk is closely related to
"reinvestment risk."

Correlation Risk

Credit Risk

Event Risk

Occasionally, the value of a security may be seriously and unexpectedly changed
by a natural or industrial accident or occurrence.

Foreign/Emerging Markets Risk

The following are all components of foreign/emerging markets risk:

Country risk includes the political, economic, and other conditions of
a country. These conditions include lack of publicly available information, less
government oversight (including lack of accounting, auditing, and financial
reporting standards), the possibility of government-imposed restrictions, and
even the nationalization of assets.

Currency risk results from the constantly changing exchange rate
between local currency and the U.S. dollar. Whenever the Fund holds securities
valued in a foreign currency or holds the currency, changes in the exchange rate
add or subtract from the value of the investment.

Custody risk refers to the process of clearing and settling trades. It
also covers holding securities with local agents and depositories. Low trading
volumes and volatile prices in less developed markets make trades harder to
complete and settle. Local agents are held only to the standard of care of the
local market. Governments or trade groups may compel local agents to hold
securities in designated depositories that are not subject to independent
evaluation. The less developed a country's securities market is, the greater the
likelihood of problems occurring.

<PAGE>

Emerging markets risk includes the dramatic pace of change (economic,
social, and political) in emerging market countries as well as the other
considerations listed above. These markets are in early stages of development
and are extremely volatile. They can be marked by extreme inflation, devaluation
of currencies, dependence on trade partners, and hostile relations with
neighboring countries.

Inflation Risk

Interest Rate Risk

Issuer Risk

Legal/Legislative Risk

Congress and other governmental units have the power to change existing laws
affecting securities. A change in law might affect an investment adversely.

Leverage Risk

Liquidity Risk

Securities may be difficult or impossible to sell at the time that the Fund
would like. The Fund may have to lower the selling price, sell other
investments, or forego an investment opportunity.

Management Risk

Market Risk

Reinvestment Risk

The risk that an investor will not be able to reinvest income or principal at
the same rate it currently is earning.

<PAGE>

Sector/Concentration Risk

Investments that are concentrated in a particular issuer, geographic region, or
industry will be more susceptible to changes in price (the more you diversify,
the more you spread risk).

Small Company Risk

<PAGE>

INVESTMENT STRATEGIES

Agency and Government Securities

Borrowing

Although one or more of the other risks described in this SAI may apply, the
largest risks associated with borrowing include: Inflation Risk and Management
Risk.

Cash/Money Market Instruments

See the appendix for a discussion of securities ratings.

Although one or more of the other risks described in this SAI may apply, the
largest risks associated with cash/money market instruments include: Credit
Risk, Inflation Risk, and Management Risk.

<PAGE>

Collateralized Bond Obligations

Although one or more of the other risks described in this SAI may apply, the
largest risks associated with CBOs include: Call/Prepayment Risk, Credit Risk,
Interest Rate Risk, and Management Risk.

Commercial Paper

Although one or more of the other risks described in this SAI may apply, the
largest risks associated with commercial paper include: Credit Risk, Liquidity
Risk, and Management Risk.

Common Stock

Although one or more of the other risks described in this SAI may apply, the
largest risks associated with common stock include: Issuer Risk, Management
Risk, Market Risk, and Small Company Risk.

Convertible Securities

Convertible securities are bonds, debentures, notes, preferred stocks, or other
securities that may be converted into common stock of the same or a different
issuer within a particular period of time at a specified price. Some convertible
securities, such as preferred equity-redemption cumulative stock (PERCs), have
mandatory conversion features. Others are voluntary. A convertible security
entitles the holder to receive interest normally paid or accrued on debt or the
dividend paid on preferred stock until the convertible security matures or is
redeemed, converted, or exchanged. Convertible securities have unique investment
characteristics in that they generally (i) have higher yields than common stocks
but lower yields than comparable non-convertible securities, (ii) are less
subject to fluctuation in value than the underlying stock since they have fixed
income characteristics, and (iii) provide the potential for capital appreciation
if the market price of the underlying common stock increases.

<PAGE>

Corporate Bonds

Corporate bonds may be either secured or unsecured. Unsecured corporate bonds
are generally referred to as "debentures." See the appendix for a discussion of
securities ratings.

Debt Obligations

<PAGE>

issuers deemed to be less creditworthy generally must offer their investors
higher interest rates than do issuers with better credit ratings. (See also
Agency and Government Securities, Corporate Bonds, and High-Yield (High-Risk)
Securities.)

See the appendix for a discussion of securities ratings.

Depositary Receipts

Derivative Instruments

<PAGE>

Futures contracts may be based on various securities, securities indices (such
as the S&P 500 Index), foreign currencies and other financial instruments and
indices.

<PAGE>

Options on Futures Contracts. Options on futures contracts give the holder a
right to buy or sell futures contracts in the future. Unlike a futures contract,
which requires the parties to the contract to buy and sell a security on a set
date (some futures are settled in cash), an option on a futures contract merely
entitles its holder to decide on or before a future date (within nine months of
the date of issue) whether to enter into a contract. If the holder decides not
to enter into the contract, all that is lost is the amount (premium) paid for
the option. Further, because the value of the option is fixed at the point of
sale, there are no daily payments of cash to reflect the change in the value of
the underlying contract. However, since an option gives the buyer the right to
enter into a contract at a set price for a fixed period of time, its value does
change daily.

Other Risks of Derivatives.

Derivatives are risky investments.

<PAGE>

of derivative instruments depends upon a variety of factors, particularly the
investment manager's ability to predict movements of the securities, currencies,
and commodity markets, which requires different skills than predicting changes
in the prices of individual securities. There can be no assurance that any
particular strategy will succeed.

(See also Foreign Currency Transactions.)

Although one or more of the other risks described in this SAI may apply, the
largest risks associated with derivative instruments include: Leverage Risk,
Liquidity Risk, and Management Risk.

Foreign Currency Transactions

<PAGE>

occurring in the interbank market might involve substantially larger amounts
than those involved in the use of such derivative instruments, the Fund could be
disadvantaged by having to deal in the odd lot market for the underlying foreign
currencies at prices that are less favorable than for round lots.

<PAGE>

(See also Derivative Instruments and Foreign Securities.)

Foreign Securities and Domestic Companies with Foreign Operations

<PAGE>

the market value of the security may be more or less than the purchase price).
Some foreign markets also have compulsory depositories (i.e., an investor does
not have a choice as to where the securities are held). Fixed commissions on
some foreign stock exchanges are generally higher than negotiated commissions on
U.S. exchanges. Further, an investor may encounter difficulties or be unable to
pursue legal remedies and obtain judgments in foreign courts. There is generally
less government supervision and regulation of business and industry practices,
stock exchanges, brokers, and listed companies than in the U.S. It may be more
difficult for an investor's agents to keep currently informed about corporate
actions such as stock dividends or other matters that may affect the prices of
portfolio securities. Communications between the U.S. and foreign countries may
be less reliable than within the U.S., thus increasing the risk of delays or
loss of certificates for portfolio securities. In addition, with respect to
certain foreign countries, there is the possibility of nationalization,
expropriation, the imposition of additional withholding or confiscatory taxes,
political, social, or economic instability, diplomatic developments that could
affect investments in those countries, or other unforeseen actions by regulatory
bodies (such as changes to settlement or custody procedures).

The introduction of a single currency, the euro, on January 1, 1999 for
participating European nations in the Economic and Monetary Union ("EU")
presents unique uncertainties, including whether the payment and operational
systems of banks and other financial institutions will be ready by the scheduled
launch date; the creation of suitable clearing and settlement payment systems
for the new currency; the legal treatment of certain outstanding financial
contracts after January 1, 1999 that refer to existing currencies rather than
the euro; the establishment and maintenance of exchange rates; the fluctuation
of the euro relative to non-euro currencies during the transition period from
January 1, 1999 to December 31, 2000 and beyond; whether the interest rate, tax
or labor regimes of European countries participating in the euro will converge
over time; and whether the conversion of the currencies of other EU countries
such as the United Kingdom, Denmark, and Greece into the euro and the admission
of other non-EU countries such as Poland, Latvia, and Lithuania as members of
the EU may have an impact on the euro.

Although one or more of the other risks described in this SAI may apply, the
largest risks associated with foreign securities include: Foreign/Emerging
Markets Risk, Issuer Risk, and Management Risk.

High-Yield (High-Risk) Securities (Junk Bonds)

See the appendix for a discussion of securities ratings. (See also Debt
Obligations.)

<PAGE>

period of rising interest rates, highly leveraged issuers of lower-quality
securities may experience financial stress and may not have sufficient revenues
to meet their payment obligations. The issuer's ability to service its debt
obligations also may be adversely affected by specific corporate developments,
the issuer's inability to meet specific projected business forecast, or the
unavailability of additional financing. The risk of loss due to default by an
issuer of these securities is significantly greater than issuers of higher-rated
securities because such securities are generally unsecured and are often
subordinated to other creditors. Further, if the issuer of a lower quality
security defaulted, an investor might incur additional expenses to seek
recovery.

An investor may have difficulty disposing of certain lower-quality and
comparable unrated securities because there may be a thin trading market for
such securities. Because not all dealers maintain markets in all lower quality
and comparable unrated securities, there is no established retail secondary
market for many of these securities. To the extent a secondary trading market
does exist, it is generally not as liquid as the secondary market for
higher-rated securities. The lack of a liquid secondary market may have an
adverse impact on the market price of the security. The lack of a liquid
secondary market for certain securities also may make it more difficult for an
investor to obtain accurate market quotations. Market quotations are generally
available on many lower-quality and comparable unrated issues only from a
limited number of dealers and may not necessarily represent firm bids of such
dealers or prices for actual sales.

Legislation may be adopted from time to time designed to limit the use of
certain lower quality and comparable unrated securities by certain issuers.

Illiquid and Restricted Securities

Although one or more of the other risks described in this SAI may apply, the
largest risks associated with illiquid and restricted securities include:
Liquidity Risk and Management Risk.

Indexed Securities

Although one or more of the other risks described in this SAI may apply, the
largest risks associated with indexed securities include: Liquidity Risk,
Management Risk, and Market Risk.

<PAGE>

Inverse Floaters

Although one or more of the other risks described in this SAI may apply, the
largest risks associated with inverse floaters include: Interest Rate Risk and
Management Risk.

Investment Companies

The Fund may invest in securities issued by registered and unregistered
investment companies. These investments may involve the duplication of advisory
fees and certain other expenses.

Although one or more of the other risks described in this SAI may apply, the
largest risk associated with the securities of other investment companies
includes: Management Risk and Market Risk.

Lending of Portfolio Securities

Although one or more of the other risks described in this SAI may apply, the
largest risks associated with the lending of portfolio securities include:
Credit Risk and Management Risk.

Loan Participations

Although one or more of the other risks described in this SAI may apply, the
largest risks associated with loan participations include: Credit Risk and
Management Risk.

Mortgage- and Asset-Backed Securities

<PAGE>

commercial banks, investment bankers, and special purpose entities.
Mortgage-backed securities issued by private lenders may be supported by pools
of mortgage loans or other mortgage-backed securities that are guaranteed,
directly or indirectly, by the U.S. government or one of its agencies or
instrumentalities, or they may be issued without any governmental guarantee of
the underlying mortgage assets but with some form of non-governmental credit
enhancement.

Mortgage Dollar Rolls

<PAGE>

Although one or more of the other risks described in this SAI may apply, the
largest risks associated with mortgage dollar rolls include: Credit Risk,
Interest Rate Risk, and Management Risk.

Municipal Obligations

Preferred Stock

<PAGE>

Although one or more of the other risks described in this SAI may apply, the
largest risks associated with preferred stock include: Issuer Risk, Management
Risk, and Market Risk.

Real Estate Investment Trusts

Although one or more of the other risks described in this SAI may apply, the
largest associated with REITs include: Issuer Risk, Management Risk, and Market
Risk.

Repurchase Agreements

Although one or more of the other risks described in this SAI may apply, the
largest risks associated with repurchase agreements include: Credit Risk and
Management Risk.

Reverse Repurchase Agreements

Although one or more of the other risks described in this SAI may apply, the
largest risks associated with reverse repurchase agreements include: Credit
Risk, Interest Rate Risk, and Management Risk.

Short Sales

With short sales, an investor sells a security that it does not own in
anticipation of a decline in the market value of the security. To complete the
transaction, the investor must borrow the security to make delivery to the
buyer. The investor is obligated to replace the security that was borrowed by
purchasing it at the market price at the time of replacement. The price at such
time may be more or less than the price at which the investor sold the security.
A fund that is allowed to utilize short sales will designate cash or liquid
securities to cover its open short positions. Those funds also may engage in
"short sales against the box," a form of short-selling that involves selling a
security that an investor owns (or has an unconditioned right to purchase) for
delivery at a future date. This technique allows an investor to hedge
protectively against anticipated declines in the market of its securities. If
the value of the securities sold short increased between the date of the short
sale and the date on which the borrowed security is replaced, the investor loses
the opportunity to participate in the gain. A "short sale against the box" will
result in a constructive sale of appreciated securities thereby generating
capital gains to the Fund.

<PAGE>

Although one or more of the other risks described in this SAI may apply, the
largest risks associated with short sales include: Management Risk and Market
Risk.

Sovereign Debt

Certain emerging market countries have experienced difficulty in servicing their
sovereign debt on a timely basis that led to defaults and the restructuring of
certain indebtedness.

Although one or more of the other risks described in this SAI may apply, the
largest risks associated with sovereign debt include: Credit Risk,
Foreign/Emerging Markets Risk, and Management Risk.

Structured Products

Although one or more of the other risks described in this SAI may apply, the
largest risks associated with structured products include: Credit Risk,
Liquidity Risk, and Management Risk.

Variable- or Floating-Rate Securities

Variable-rate demand notes include master demand notes that are obligations that
permit the Fund to invest fluctuating amounts, which may change daily without
penalty, pursuant to direct arrangements between the Fund as lender, and the
borrower. The interest rates on these notes fluctuate from time to time. The
issuer of such obligations normally has a corresponding right, after a given
period, to prepay in its discretion the outstanding principal amount of the
obligations plus accrued interest upon a specified number of days' notice to the
holders of such obligations. Because these obligations are direct lending
arrangements between the lender and borrower, it is not contemplated that such
instruments generally will be traded. There generally is not an established
secondary market for these obligations. Accordingly, where these obligations are
not secured by

<PAGE>

letters of credit or other credit support arrangements, the Fund's right to
redeem is dependent on the ability of the borrower to pay principal and interest
on demand. Such obligations frequently are not rated by credit rating agencies
and may involve heightened risk of default by the issuer.

Although one or more of the other risks described in this SAI may apply, the
largest risks associated with variable- or floating-rate securities include:
Credit Risk and Management Risk.

Warrants

Although one or more of the other risks described in this SAI may apply, the
largest risks associated with warrants include: Management Risk and Market Risk.

When-Issued Securities

Although one or more of the other risks described in this SAI may apply, the
largest risks associated with when-issued securities include: Credit Risk and
Management Risk.

Zero-Coupon, Step-Coupon, and Pay-in-Kind Securities

<PAGE>

SECURITY TRANSACTIONS

<PAGE>

The Fund paid total brokerage commissions of $5,135 for fiscal year ended Oct.
31, 1999, $9,329 for fiscal year 1998, and none for fiscal year 1997.
Substantially all firms through whom transactions were executed provide research
services.

No transactions were directed to brokers because of research services they
provided to the Fund.

As of the end of the most recent fiscal year, the Fund held no securities of its
regular brokers or dealers or of the parent of those brokers or dealers that
derived more than 15% of gross revenue from securities-related activities.

The portfolio turnover rate was 113% in the most recent fiscal year, and 200% in
the year before. Higher turnover rates may result in higher brokerage expenses.

<PAGE>

BROKERAGE COMMISSIONS PAID TO BROKERS AFFILIATED WITH THE ADVISOR

Information about brokerage commissions paid by the Fund for the last three
fiscal years to brokers affiliated with the Advisor is contained in the
following table:
<TABLE>
<CAPTION>

As of the end of Fiscal Year

1999 1998 1997

------------------------------------------ ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C>

Percent of
Aggregate
Dollar
Aggregate Amount of Aggregate Aggregate
Dollar Percent of Transactions Dollar Dollar
amount of Aggregate Involving Amount of Amount of
Commissions Brokerage Payment of Commissions Commissions
Nature of Paid to Commissions Commissions Paid to Paid to
Fund Broker Affiliation Broker Broker Broker
- ------------ ----------- ------------- ----------- ----------- ------------ ----------- -----------
World American Wholly-owned None None None $45 None
Technologies Enterprise subsidiary
Investment of the
Services Advisor
Inc.
</TABLE>

<PAGE>

PERFORMANCE INFORMATION

Average annual total return

P(1+T)n = ERV

Aggregate total return

ERV - P
---------
P

<PAGE>

VALUING FUND SHARES
<TABLE>
<CAPTION>

As of the end of the most recent fiscal year, the computations looked like this:
<S> <C> <C> <C> <C> <C>

Net asset value
Fund Net assets Shares of one share
outstanding
- -------------------- ----------------- ----------------- ----------------- ----------------- -----------------
World Technologies $1,121,205 divided by 100,000 equals $11.21
</TABLE>

o Securities included in the NASDAQ National Market System are valued at the
last-quoted sales price in this market.

o Futures and options traded on major exchanges are valued at the last-quoted
sales price on their primary exchange.

o Foreign securities traded outside the United States are generally valued as
of the time their trading is complete, which is usually different from the
close of the Exchange. Foreign securities quoted in foreign currencies are
translated into U.S. dollars at the current rate of exchange. Occasionally,
events affecting the value of such securities may occur between such times
and the close of the Exchange that will not be reflected in the computation
of the Fund's net asset value. If events materially affecting the value of
such securities occur during such period, these securities will be valued
at their fair value according to procedures decided upon in good faith by
the board.

<PAGE>

SELLING SHARES

You have a right to sell your shares at any time. For an explanation of sales
procedures, please see the prospectus.

o The Exchange closes for reasons other than the usual weekend and holiday
closings or trading on the Exchange is restricted, or

o Disposal of the Fund's securities is not reasonably practicable or it is
not reasonably practicable for the Fund to determine the fair value of its
net assets, or

o The SEC, under the provisions of the 1940 Act, declares a period of
emergency to exist.

The Fund has elected to be governed by Rule 18f-1 under the 1940 Act, which
obligates the Fund to redeem shares in cash, with respect to any one shareholder
during any 90-day period, up to the lesser of $250,000 or 1% of the net assets
of that Fund at the beginning of such period. Although redemptions in excess of
this limitation would normally be paid in cash, the Fund reserves the right to
make payments in whole or in part in securities or other assets in case of an
emergency, or if the payment of such redemption in cash would be detrimental to
the existing shareholders of the Fund as determined by the board. In such
circumstances, the securities distributed would be valued as set forth in the
Prospectus. Should the Fund distribute securities, a shareholder may incur
brokerage fees or other transaction costs in converting the securities to cash.

Rejection of Business

The Fund reserves the right to reject any business, in its sole discretion.

TAXES

Net investment income dividends received should be treated as dividend income
for federal income tax purposes. Corporate shareholders are generally entitled
to a deduction equal to 70% of that portion of the Fund's dividend that is
attributable to dividends the Fund received from domestic (U.S.) securities. For
the most recent fiscal year, 0.20% of the Fund's net investment income dividends
qualified for the corporate deduction.

<PAGE>

AGREEMENTS

Investment Management Services Agreement

For its services, the Advisor is paid a fee based on the following schedule. The
Fund pays its proportionate share of the fee.

World Technologies Portfolio

Assets Annual rate at
(billions) each asset level
---------- ----------------
First $0.25 0.720%
Next 0.25 0.695
Next 0.25 0.670
Next 0.25 0.645
Next 1.00 0.620
Over 2.00 0.595

On the last day of the most recent fiscal year, the daily rates applied to the
Fund's net assets on an annual basis were equal to 0.720% for the Fund. The fee
is calculated for each calendar day on the basis of net assets at the close of
business two days prior to the day for which the calculation is made.

The management fee is paid monthly. For fiscal years noted below, the Portfolio
paid the following management fees. The amount is allocated among the funds.

Oct. 31, World Technologies
1999 $ 48,655
1998 32,945
1997 27,140

Under the Agreement, the Fund also pays taxes, brokerage commissions and
nonadvisory expenses, which include custodian fees; audit and certain legal
fees; fidelity bond premiums; registration fees for units; office expenses;
consultants' fees; compensation of board members, officers and employees;
corporate filing fees; organizational expenses; expenses incurred in connection
with lending portfolio securities; and expenses properly payable by the Fund,
approved by the board. For fiscal years noted below, the Fund and corresponding
Portfolio paid the following nonadvisory expenses. All fees are net of earnings
credits.

Oct. 31, World Technologies
1999 $ 24,977
1998 34,384
1997 19,299

Administrative Services Agreement

The Fund has an Administrative Services Agreement with the Advisor. Under this
agreement, the Fund pays the Advisor for providing administration and accounting
services. The fee is calculated as follows:

<PAGE>

World Technologies Fund

Assets Annual rate at
(billions) each asset level
---------- ----------------
First $0.25 0.060%
Next 0.25 0.055
Next 0.25 0.050
Next 0.25 0.045
Next 1.00 0.040
Over 2.00 0.035

On the last day of the most recent fiscal year, the daily rates applied to the
Fund's net assets on an annual basis were equal to 0.060%. The fee is calculated
for each calendar day on the basis of net assets as of the close of business two
business days prior to the day for which the calculation is made. Under the
agreement, the Fund paid fees of $504 for fiscal year 1999, $341 for fiscal year
1998 and $178 for fiscal period 1997.

TRANSFER AGENCY AGREEMENT

The Fund has a Transfer Agency Agreement with American Express Client Service
Corporation (AECSC). This agreement governs the responsibility for administering
and/or performing transfer agent functions, for acting as service agent in
connection with dividend and distribution functions and for performing
shareholder account administration agent functions in connection with the
issuance, exchange and redemption or repurchase of the Fund's shares. The fee is
determined by multiplying the number of shareholder accounts at the end of the
day by a rate of $20 per year and dividing by the number of days in the year.
The fees paid to AECSC may be changed by the board without shareholder approval.

DISTRIBUTION AGREEMENT

American Express Financial Advisors Inc. (Distributor) is the Fund's principal
underwriter. The Fund's shares are offered on a continuous basis.

Under a prior agreement, the Fund paid a fee to help defray the costs of
distribution and servicing under a Plan and Agreement of Distribution pursuant
to Rule 12b-1 under the 1940 Act. Under the Plan, the Fund paid a fee at an
annual rate of 0.25 of the Fund's average daily net assets. For the most recent
fiscal year, the Fund paid fees of $1,900. These costs covered almost all
aspects of distributing shares of the Fund.

Part of the sales charge may be paid to selling dealers who have agreements with
AEFA. AEFA will retain the balance of the sales charge. At times the entire
sales charge may be paid to selling dealers.

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CUSTODIAN AGREEMENT

ORGANIZATIONAL INFORMATION

The Fund is an open-end management investment company. The Fund headquarters are
at P.O. Box 59196, Minneapolis, MN 55459-0196.

VOTING RIGHTS

DIVIDEND RIGHTS

Fund History Table for All Publicly Offered Funds in the Strategist Fund Group
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BOARD MEMBERS AND OFFICERS

Directors of Strategist Fund Group