AMERICAN
EXPRESS
Strategist Income Fund, Inc.
2000 Annual Report
Strategist Government Income Fund
Strategist High Yield Fund
Strategist Quality Income Fund
<PAGE>
Table of Contents
From the Portfolio Managers 2
The Fund's Long-term Performance 8
Independent Auditors' Report (Strategist Income Fund, Inc.) 14
Financial Statements (Strategist Income Fund, Inc.) 15
Notes to Financial Statements (Strategist Income Fund, Inc.) 20
Federal Income Tax Information (Strategist Income Fund, Inc.) 27
Independent Auditors' Report (Government Income Portfolio) 30
Financial Statements (Government Income Portfolio) 31
Notes to Financial Statements (Government Income Portfolio) 34
Investments in Securities (Government Income Portfolio) 40
Independent Auditors' Report (High Yield Portfolio) 49
Financial Statements (High Yield Portfolio) 50
Notes to Financial Statements (High Yield Portfolio) 53
Investments in Securities (High Yield Portfolio) 57
Independent Auditors' Report (Quality Income Portfolio) 82
Financial Statements (Quality Income Portfolio) 83
Notes to Financial Statements (Quality Income Portfolio) 86
Investments in Securities (Quality Income Portfolio) 91
<PAGE>
(picture of)
James W. Snyder
Portfolio Manager
From the Portfolio Manager
Strategist Government Income Fund
Rising interest rates led to a poor environment for bonds during the past 12
months. Strategist Government Income Fund's performance reflected the
conditions, as it experienced a loss of 0.34% for the fiscal year -- June 1999
through May 2000.
Although inflation showed little indication of getting out of hand, fixed-income
investors found enough to worry about during the period. Leading the list were
an economy that continued to show remarkably strong growth, an extremely tight
labor market and a run-up in the price of oil. That combination, many investors
apparently concluded, probably would fan the fire under inflation before long.
That view was reinforced by the actions of the Federal Reserve, which raised
short-term interest rates six times during the 12 months.
The result of the hand-wringing and the Fed's actions was increased selling
pressure on most types of bonds, which caused interest rates to rise and,
ultimately, caused prices to fall. Also having an effect was a substantial
supply of new bonds, which tended to hold down prices on all non-U.S. Treasury
issues, including the mortgage-backed securities in the portfolio. About
mid-period, the supply shrank somewhat, lending some support to the mortgage
sector.
Looking at the portfolio's holdings, I kept nearly all of the assets invested in
mortgage-backed bonds issued by the Federal National Mortgage Association
(commonly known as "Fannie Mae") and the Federal Home Loan Mortgage Corporation
("Freddie Mac"). At the outset of the period, the portfolio held a
higher-than-usual level of cash reserves, which provided something of a cushion
for the Fund's net asset value as interest rates rose. I gradually reduced the
cash over the ensuing months.
I also employed short sales and a substantial investment in a variety of
derivatives -- including futures, options, dollar rolls and forward contracts --
to reduce volatility in the Fund's value and enhance the return. Although the
net effect of these investments actually turned out to be negative, it was
weakness in mortgage-backed bonds that played the biggest role in holding back
the Fund's performance. On a related point, because of considerable volatility
in the mortgage sector and increased use of dollar rolls, the turnover in the
portfolio was unusually high during the period.
STRATEGIST INCOME FUND, INC.
<PAGE>
As the new fiscal year begins, recent data have indicated that the economy may
be starting to slow down a bit. If subsequent reports confirm that trend, I
think it's likely that the Federal Reserve will raise short-term interest rates
only modestly in the months ahead. Assuming that outlook proves to be reasonably
accurate, I expect corresponding improvement in the bond market.
James W. Snyder
Note to shareholders: As you know, effective July 14, 2000, your Fund was
reorganized into AXP Federal Income Fund, which has identical investment
policies and the same investment manager as the Strategist fund. There will be
no change in how your assets are managed.
ANNUAL REPORT - 2000
<PAGE>
(picture of) Jack Utter and Scott Schroepfer
Jack Utter and Scott Schroepfer
Portfolio Managers
From the Portfolio Managers
Strategist High Yield Fund
The bond market struggled for much of the past 12 months, as concerns about
inflation and rising interest rates dominated the investment environment.
Although high-yield issues fared better than some sectors of the market, an
overall decline in prices resulted in Strategist High Yield Fund experiencing a
loss of 2.01% on a total return basis for the fiscal year -- June 1999 through
May 2000.
The period got off to a reasonably good start, as the economy continued to forge
ahead with little sign of higher inflation. Thanks in part to strength in its
telecommunications and paper/forest product holdings, the Fund produced positive
results through the first two months.
RATE HIKES PRESSURE MARKET
But the tone of the bond market quickly changed, as investors, prompted by a
hike in short-term interest rates by the Federal Reserve Board (the Fed) in June
1999, became increasingly worried that higher inflation and still-higher
interest rates might lie ahead. That concern was reinforced by another Fed rate
hike in late August. While high-yield bonds suffered less from the rise in rates
than did some sectors of the market, a substantial supply of new issues and a
drop-off in demand on the part of investors in high-yield mutual funds kept
downward pressure on prices through the fall.
News of still-tame inflation finally boosted investors' spirits in November and
December. High-yield bonds responded with sharp gains, with the Fund's holdings
among telecommunications and media bonds performing especially well. But four
subsequent interest-rate increases by the Fed, as well as an increase in the
level of defaults in the high-yield sector, dragged down bond prices and,
consequently, the Fund's net asset value for the ensuing months of the fiscal
year.
STRATEGIST INCOME FUND, INC.
<PAGE>
As we look toward the new fiscal year, with economic growth showing little sign
of slacking off, we think the Fed may decide to push short-term interest rates
somewhat higher in the months ahead to avoid a run-up in inflation.
Nevertheless, while that almost surely would present a near-term problem for the
bond market, we think it might ultimately lead to better performance as the
period progresses. Beyond that, because their yields are at historically high
levels, we think high-yield bonds have the potential to attract increased
interest from investors and, therefore, could enjoy improved prices in the new
fiscal year.
Jack Utter
Scott Schroepfer
Note to shareholders: As you know, effective July 14, 2000, your Fund was
reorganized into AXP Extra Income Fund, which has identical investment policies
and the same investment manager as the Strategist fund. There will be no change
in how your assets are managed.
ANNUAL REPORT - 2000
<PAGE>
(picture of) Ray Goodner
Ray Goodner
Portfolio Manager
From the Portfolio Manager
Strategist Quality Income Fund
The U.S. bond market struggled most of the past 12 months, as rising interest
rates depressed bond prices for much of the period. Strategist Quality Income
Fund did manage to finish with a positive result, however, as it produced a
total return of 0.75% for the fiscal year -- June 1999 through May 2000.
With the economy continuing to grow at a rapid rate, unemployment at a
record-low level and the price of oil more than doubling in a matter of months,
the unwelcome specter of higher inflation made bond investors uneasy throughout
the period. The Federal Reserve Board (the Fed) saw some threat to the
still-tame inflation environment, too, as it raised short-term interest rates
six times over the 12 months in an effort to cool off the economy and,
ultimately, relieve potential upward pressure on prices. The end result was that
interest rates across the maturity range crept higher from mid-1999 through last
January, pushing down bond prices in the process. Compounding the situation was
a heavy supply of corporate bonds, which further eroded support for the bond
market.
TREASURY BUY-BACK HELPS
Some relief finally did arrive in the form of a bond buy-back program
implemented by the U.S. Treasury. Prompted by a federal budget surplus, the
department decided to retire in advance of maturity some $30 billion of its
long-term debt. As it did so, yields on long-term Treasury issues fell
considerably from February through April, driving up prices in the process. The
rally benefited the Fund's long-term, high grade holdings.
Given the largely difficult environment for most of the year, I maintained a
defensive maturity structure in the portfolio. That centered on keeping a
shorter-than-average duration to provide some protection against rising interest
rates. (Duration, a function of the average maturity of the securities in the
portfolio, affects the Fund's sensitivity to interest-rate changes. Generally,
the longer the duration, the greater the sensitivity.) In addition, I held a
higher-than-normal level of cash reserves.
STRATEGIST INCOME FUND, INC.
<PAGE>
Looking at bond sectors, the biggest areas of investment were U.S. Treasury
bonds, which gave the Fund a substantial performance boost late in the period,
and mortgage-backed securities. The next-largest exposure was to high-grade
corporate bonds. I also held some foreign bonds denominated in U.S. dollars.
While they amounted to a modest portion of the portfolio, their strong price
gains did benefit performance.
Heading into the new fiscal year, it appears that economic growth is starting to
moderate, which should limit the Federal Reserve's need to raise interest rates.
If that outlook proves to be reasonably accurate, the bond market and the Fund
should enjoy a better environment. In the meantime, I plan to stay with a
largely conservative investment strategy to guard against a potential rise in
inflation.
Ray Goodner
Note to shareholders: As you know, effective July 14, 2000, your Fund was
reorganized into AXP Selective Fund, which has identical investment policies and
the same investment manager as the Strategist fund. There will be no change in
ow your assets are managed.
ANNUAL REPORT - 2000
<PAGE>
The Fund's Long-term Performance
How your $10,000 has grown in Strategist Government Income Fund
$20,000
(Line graph comparing the performance of: Lehman Brothers Aggregate
Bond Index; Lipper Short/Intermediate U.S. Government Funds Index;
Merrill Lynch 1-5 Year U.S. Government Index; and Strategist
Government Income Fund, each starting at $10,000 on 6/30/96, with a
close gradual increase for all funds over time, ending with Strategist
Government Income Fund at 11,998 on 5/00)
$10,000
6/30/96 5/97 5/98 5/99 5/00
Average Annual Total Returns (as of May 31, 2000)
1 year 5 years 10 years
-0.34% +4.99% +6.24%
Assumes: Holding period from 6/30/96 to 5/31/00. Returns do not reflect taxes
payable on distributions. Reinvestment of all income and capital gain
distributions for the Fund has a value of $2,930. Also see "Past Performance" in
the Fund's current prospectus.
On the graph above you can see how the Fund's total return compared to
three widely cited performance indexes, the Merrill Lynch 1-5 Year U.S.
Government Index, Lipper Short/Intermediate U.S. Government Funds Index and the
Lehman Brothers Aggregate Bond Index. Recently, the Fund's investment manager
recommended to the Fund that the Fund change its comparative index from the
Lehman Brothers Aggregate Bond Index to the Merrill Lynch 1-5 Year U.S.
Government Index. The investment manager made this recommendation because the
new index more closely represents the Fund's holdings. We will include both
indexes in this transition year. In the future, however, only the Merrill Lynch
1-5 Year U.S. Government Index will be included. Your investment and return
values fluctuate so that your shares, when redeemed, may be worth more or less
than the original cost. This was a period of widely fluctuating security prices.
Past performance is no guarantee of future results.
On June 10, 1996, AXP Federal Income Fund (the predecessor fund) converted
to a master/feeder structure and transferred all of its assets to Government
Income Portfolio. The performance information, prior to June 10, 1996, in the
total return table represents performance of the corresponding predecessor fund
prior to March 20, 1995 and Class A shares of the corresponding predecessor fund
STRATEGIST INCOME FUND, INC.
<PAGE>
from March 20, 1995 through June 10, 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 estimated aggregate fees and
expenses of the Fund and historical fees and expenses of the predecessor fund.
Merrill Lynch 1-5 Year U.S. Government Index, an unmanaged index, is made up of
a representative list of government bonds. The index is frequently used as a
general measure of government bond performance. However, the securities used to
create the index may not be representative of the debt securities held in the
Portfolio.
Lipper Short/Intermediate U.S. Government Funds Index, an unmanaged index
published by Lipper Inc., includes the 30 largest funds that are generally
similar to the Fund, although some funds in the index may have somewhat dfferent
investment policies and objectives.
Lehman Brothers Aggregate Bond Index, an unmanaged index, is made up of a
representative list of government, corporate, asset-backed and mortgage backed
securities. The index is frequently used as a general measure of bond market
performance. The index reflects reinvestment of all distributions and changes in
market prices, but excludes brokerage commissions or other fees. However, the
securities used to create the index may not be representative of the debt
securities held in the Portfolio.
ANNUAL REPORT - 2000
<PAGE>
The Fund's Long-term Performance
How your $10,000 has grown in Strategist High Yield Fund
$20,000
(Line graph comparing the performance of: Lehman Brothers Aggregate
Bond Index; Lipper High Yield Funds Index; Merrill Lynch High Yield
Bond Index; and Strategist High Yield Fund, each starting at $10,000
on 6/30/96, with a close gradual increase for all funds over time,
ending with Strategist High Yield Fund at 11,899 on 5/00)
$10,000
6/30/96 5/97 5/98 5/99 5/00
Average Annual Total Returns (as of May 31, 2000)
1 year 5 years 10 years
-2.01% +6.53% +10.31%
Assumes: Holding period from 6/30/96 to 5/31/00. Returns do not reflect taxes
payable on distributions. Reinvestment of all income and capital gain
distributions for the Fund has a value of $3,825. Also see "Past Performance" in
the Fund's current prospectus.
On the graph above you can see how the Fund's total return compared to
three widely cited performance indexes, the Merrill Lynch High Yield Bond Index,
Lipper High Yield Funds Index and the Lehman Brothers Aggregate Bond Index.
Recently, the Fund's investment manager recommended to the Fund that the Fund
change its comparative index from the Lehman Brothers Aggregate Bond Index to
the Merrill Lynch High Yield Bond Index. The investment manager made this
recommendation because the new index more closely represents the Fund's
holdings. We will include both indexes in this transition year. In the future,
however, only the Merrill Lynch High Yield Bond Index will be included. Your
investment and return values fluctuate so that your shares, when redeemed, may
be worth more or less than the original cost. This was a period of widely
fluctuating security prices. Past performance is no guarantee of future results.
On June 10, 1996, AXP Extra Income Fund (the predecessor fund) converted to a
master/feeder structure and transferred all of its assets to High Yield
Portfolio. The performance information, prior to June 10, 1996, in the total
return table represents performance of the corresponding predecessor fund prior
to March 20, 1995 and Class A shares of the corresponding predecessor fund from
STRATEGIST INCOME FUND, INC.
<PAGE>
March 20, 1995 through June 10, 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 estimated aggregate fees and
expenses of the Fund and historical fees and expenses of the predecessor
fund.
Merrill Lynch High Yield Bond Index provides a broad-based measure of
performance of the non-investment grade U.S. domestic bond market. The index
currently captures close to $200 billion of the outstanding debt of domestic
market issuers rated below investment grade but not in default. The index is
"rule-based," which means there is a defined list of criteria that a bond must
meet in order to qualify for inclusion in the index.
Lipper High Yield Funds Index, an unmanaged index published by Lipper Inc.,
includes the 30 largest funds that are generally similar to the Fund, although
some funds in the index may have somewhat different investment policies or
objectives.
Lehman Brothers Aggregate Bond Index, an unmanaged index, is made up of a
representative list of government, corporate, asset-backed and mortgage-backed
securities. The index is frequently used as a general measure of bond market
performance. The index reflects reinvestment of all distributions and changes in
market prices, but excludes brokerage commissions or other fees. However, the
securities used to create the index may not be representative of the debt
securities held in the Portfolio.
ANNUAL REPORT - 2000
<PAGE>
The Fund's Long-term Performance
How your $10,000 has grown in Strategist Quality Income Fund
$20,000
(Line graph comparing the performance of: Lehman Brothers Aggregate
Bond Index; Lipper Corporate Debt - A rated Index; and Strategist
Quality Income Fund, each starting at $10,000 on 6/30/96, with a close
gradual increase for all funds over time, ending with Strategist
Quality Income Fund at 12,247 on 5/00)
$10,000
6/30/96 5/97 5/98 5/99 5/00
Average Annual Total Returns (as of May 31, 2000)
1 year 5 years 10 years
+0.75% +5.24% +7.90%
Assumes: Holding period from 6/30/96 to 5/31/00. Returns do not reflect taxes
payable on distributions. Reinvestment of all income and capital gain
distributions for the Fund has a value of $2,842. Also see "Past Performance" in
the Fund's current prospectus.
On the graph above you can see how the Fund's total return compared to two
widely cited performance indexes, the Lehman Brothers Aggregate Bond Index and
Lipper Corporate Debt - A rated Index. Your investment and return values
fluctuate so that your shares, when redeemed, may be worth more or less than the
original cost. This was a period of widely fluctuating security prices. Past
performance is no guarantee of future results.
On June 10, 1996, AXP Selective Fund (the predecessor fund) converted to a
master/feeder structure and transferred all of its assets to Quality Income
Portfolio. The performance information, prior to June 10, 1996, in the total
return table represents performance of the corresponding predecessor fund prior
to March 20, 1995 and Class A shares of the corresponding predecessor fund from
March 20, 1995 through June 10, 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 estimated aggregate fees and expenses of the Fund
and historical fees and expenses of the predecessor fund.
STRATEGIST INCOME FUND, INC.
<PAGE>
Lehman Brothers Aggregate Bond Index, an unmanaged index, is made up of a
representative list of government, corporate, asset-backed and mortgage-backed
securities. The index is frequently used as a general measure of bond market
performance. The index reflects reinvestment of all distributions and changes in
market prices, but excludes brokerage commissions or other fees. However, the
securities used to create the index may not be representative of the debt
securities held in the Portfolio.
Lipper Corporate Debt - A rated Index, an unmanaged index published by Lipper
Inc., includes the 30 largest funds that are generally similar to the Fund,
although some funds in the index may have somewhat different investment policies
or objectives.
ANNUAL REPORT - 2000
<PAGE>
Independent Auditors' Report
THE BOARD AND SHAREHOLDERS
STRATEGIST INCOME FUND, INC.
We have audited the accompanying statements of assets and liabilities of
Strategist Government Income Fund, Strategist High Yield Fund and Strategist
Quality Income Fund (series of Strategist Income Fund, Inc.) as of May 31, 2000,
and the related statements of operations for the year then ended and the
statements of changes in net assets for each of the years in the two-year period
ended May 31, 2000 and the financial highlights for the three-year period ended
May 31, 2000, and for the period from June 10, 1996 (commencement of operations)
to May 31, 1997. These financial statements and financial highlights are the
responsibility of fund management. Our responsibility is to express an opinion
on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audits to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Strategist Government Income
Fund, Strategist High Yield Fund and Strategist Quality Income Fund as of May
31, 2000, and the results of their operations, the changes in their net assets
and the financial highlights for the periods stated in the first paragraph
above, in conformity with accounting principles generally accepted in the United
States of America.
KPMG LLP
Minneapolis, Minnesota
July 7, 2000
STRATEGIST INCOME FUND, INC.
<PAGE>
<TABLE>
<CAPTION>
Financial Statements
Statements of assets and liabilities
Strategist Income Fund, Inc.
May 31, 2000 Strategist Strategist Strategist
Government High Yield Quality
Income Fund Fund Income Fund
Assets
<S> <C> <C> <C> <C>
Investments in corresponding Portfolio (Note 1) $815,057 $1,628,446 $747,326
Expense receivable from AEFC 1,024 -- 4
----- ----- -----
Total assets 816,081 1,628,446 747,330
------- --------- -------
Liabilities
Dividends payable to shareholders 410 5,810 1,025
Accrued transfer agency fee 2 2 1
Accrued administrative services fee 1 2 1
Other accrued expenses 3,056 4,317 5,343
----- ----- -----
Total liabilities 3,469 10,131 6,370
----- ------ -----
Net assets applicable to outstanding capital stock $812,612 $1,618,315 $740,960
======== ========== ========
Represented by
Capital stock-- $.01 par value (Note 1) $ 1,818 $ 4,648 $ 869
Additional paid-in capital 890,568 2,049,388 780,672
Undistributed net investment income 2,606 7,227 1,372
Accumulated net realized gain (loss) (56,366) (141,312) (12,131)
Unrealized appreciation (depreciation) on investments (26,014) (301,636) (29,822)
------- -------- -------
Total -- representing net assets applicable to
outstanding capital stock $812,612 $1,618,315 $740,960
======== ========== ========
Shares outstanding 181,752 464,820 86,879
------- ------- ------
Net asset value per share of outstanding capital stock $ 4.47 $ 3.48 $ 8.53
------- ---------- --------
See accompanying notes to financial statements.
</TABLE>
ANNUAL REPORT - 2000
<PAGE>
<TABLE>
<CAPTION>
Statements of operations
Strategist Income Fund, Inc.
Year ended May 31, 2000 Strategist Strategist Strategist
Government High Yield Quality
Income Fund Fund Income Fund
Investment income
Income:
<S> <C> <C> <C>
Dividends $ -- $ 19,751 $ 414
Interest 58,585 174,762 52,832
Less foreign taxes withheld -- (2) --
--- --- ---
Total income 58,585 194,511 53,246
------ ------- ------
Expenses (Note 2):
Expenses allocated from corresponding Portfolio 4,469 9,817 3,964
Distribution fee 768 1,484 649
Transfer agency fee 592 919 346
Administrative services fees and expenses 436 849 376
Compensation of board members 812 521 812
Registration fees 20,691 21,129 12,924
Audit fees 3,600 3,600 3,600
Printing and postage 480 333 357
Other 2,092 1,343 968
----- ----- ---
Total expenses 33,940 39,995 23,996
Less expenses reimbursed by AEFC (24,290) (35,812) (16,070)
------- ------- -------
Total net expenses 9,650 4,183 7,926
----- ----- -----
Investment income (loss)-- net 48,935 190,328 45,320
------ ------- ------
Realized and unrealized gain (loss) -- net Net realized gain (loss) on:
Security transactions (62,245) (75,020) (11,969)
Closed short positions in securities 983 -- --
Financial futures contracts 491 -- 2,089
Foreign currency transactions -- (1,566) 96
Options contracts written 18,038 -- --
------ ------ ------
Net realized gain (loss) on investments (42,733) (76,586) (9,784)
Net change in unrealized appreciation
(depreciation) on investments (8,266) (148,990) (30,467)
------ -------- -------
Net gain (loss) on investments (50,999) (225,576) (40,251)
------- -------- -------
Net increase (decrease) in net assets
resulting from operations $ (2,064) $ (35,248) $ 5,069
========= ========== =========
See accompanying notes to financial statements.
</TABLE>
STRATEGIST INCOME FUND, INC.
<PAGE>
<TABLE>
<CAPTION>
Statements of changes in net assets
Strategist Income Fund, Inc.
Strategist Government
Income Fund
Year ended May 31, 2000 1999
Operations and distributions
<S> <C> <C>
Investment income (loss)-- net $ 48,935 $ 44,023
Net realized gain (loss) on investments (42,733) 22,247
Net change in unrealized appreciation
(depreciation) on investments (8,266) (35,378)
------ -------
Net increase (decrease) in net assets resulting from operations (2,064) 30,892
------ ------
Distributions to shareholders from:
Net investment income (48,459) (44,231)
Net realized gain (13,718) (14,001)
------- -------
Total distributions (62,177) (58,232)
------- -------
Capital share transactions (Note 3)
Proceeds from sales 13,207 273,402
Reinvestment of distributions at net asset value 57,415 58,028
Payments for redemptions (92,888) (62,923)
------- -------
Increase (decrease) in net assets from capital share transactions(22,266) 268,507
------- -------
Total increase (decrease) in net assets (86,507) 241,167
Net assets at beginning of year 899,119 657,952
------- -------
Net assets at end of year $812,612 $899,119
======== ========
Undistributed net investment income $ 2,606 $ 1,080
--------- ----------
See accompanying notes to financial statements.
</TABLE>
ANNUAL REPORT - 2000
<PAGE>
<TABLE>
<CAPTION>
Statements of changes in net assets
Strategist Income Fund, Inc.
Strategist
High Yield Fund
Year ended May 31, 2000 1999
Operations and distributions
<S> <C> <C>
Investment income (loss)-- net $ 190,328 $ 169,409
Net realized gain (loss) on investments (76,586) (66,406)
Net change in unrealized appreciation
(depreciation) on investments (148,990) (185,856)
-------- --------
Net increase (decrease) in net assets resulting
from operations (35,248) (82,853)
------- -------
Distributions to shareholders from:
Net investment income (182,407) (176,522)
Net realized gain -- (18,715)
------- -------
Total distributions (182,407) (195,237)
-------- --------
Capital share transactions (Note 3)
Proceeds from sales 182,777 1,140,763
Reinvestment of distributions at net asset value 125,074 140,321
Payments for redemptions (145,813) (466,187)
-------- --------
Increase (decrease) in net assets from capital
share transactions 162,038 814,897
------- -------
Total increase (decrease) in net assets (55,617) 536,807
Net assets at beginning of year 1,673,932 1,137,125
--------- ---------
Net assets at end of year $1,618,315 $1,673,932
========== ==========
Undistributed net investment income $ 7,227 $ 911
---------- ----------
See accompanying notes to financial statements.
</TABLE>
STRATEGIST INCOME FUND, INC.
<PAGE>
<TABLE>
<CAPTION>
Statements of changes in net assets Strategist Income Fund, Inc.
Strategist Quality
Income Fund
Year ended May 31, 2000 1999
Operations and distributions
<S> <C> <C>
Investment income (loss)-- net $ 45,320 $ 41,799
Net realized gain (loss) on investments (9,784) 14,233
Net change in unrealized appreciation
(depreciation) on investments (30,467) (31,558)
------- -------
Net increase (decrease) in net assets resulting from operations 5,069 24,474
----- ------
Distributions to shareholders from:
Net investment income (46,484) (41,686)
Net realized gain (8,731) (5,030)
------ ------
Total distributions (55,215) (46,716)
------- -------
Capital share transactions (Note 3)
Proceeds from sales 3,405 116,122
Reinvestment of distributions at net asset value 54,236 46,716
Payments for redemptions (23,470) (56,369)
------- -------
Increase (decrease) in net assets from capital share transactions 34,171 106,469
------ -------
Total increase (decrease) in net assets (15,975) 84,227
Net assets at beginning of year 756,935 672,708
------- -------
Net assets at end of year $740,960 $756,935
======== ========
Undistributed net investment income $ 1,372 $ 650
-------- --------
See accompanying notes to financial statements.
</TABLE>
ANNUAL REPORT - 2000
<PAGE>
Notes to Financial Statements
Strategist Income Fund, Inc.
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Strategist Government Income Fund (Government Income Fund), Strategist High
Yield Fund (High Yield Fund), and Strategist Quality Income Fund (Quality Income
Fund) are series of capital stock within Strategist Income Fund, Inc. Each Fund
is registered under the Investment Company Act of 1940 (as amended) as a
diversified, open-end management investment company. Each Fund has 3 billion
authorized shares of capital stock.
Effective July 14, 2000, Strategist Government Income Fund, Strategist High
Yield Fund, and Strategist Quality Income Fund were reorganized into AXP Federal
Income Fund, AXP Extra Income Fund and AXP Selective Fund, respectively, which
have identical investment policies and the same investment managers as the
Strategist funds.
Investments in Portfolios
Each of the Funds seeks to achieve its investment objectives by investing all of
its net investable assets in a corresponding series (the Portfolio) of Income
Trust (the Trust).
Government Income Fund invests all of its assets in the Government Income
Portfolio, an open-end investment company that has the same objectives as the
Fund. Government Income Portfolio invests primarily in U.S. government and
government agency securities.
High Yield Fund invests all of its assets in the High Yield Portfolio, an
open-end investment company that has the same objectives as the Fund. High Yield
Portfolio invests primarily in long-term corporate bonds in the lower ranking
categories, commonly known as junk bonds.
Quality Income Fund invests all of its assets in the Quality Income Portfolio,
an open-end investment company that has the same objectives as the Fund. Quality
Income Portfolio invests primarily in investment-grade bonds.
Each Fund records daily its share of the corresponding Portfolio's income,
expenses and realized and unrealized gains and losses. The financial statements
of the Portfolios are included elsewhere in this report and should be read in
conjunction with the Funds' financial statements. Each Fund records its
investment in the corresponding Portfolio at the value that is equal to the
Fund's proportionate ownership interest in the Portfolios' net assets. As of May
31, 2000, the percentages of the corresponding Portfolio owned by Government
Income Fund, High Yield Fund and Quality Income Fund were 0.04%, 0.05% and
0.06%, respectively.
STRATEGIST INCOME FUND, INC.
<PAGE>
Valuation of securities held by the Portfolios is discussed in Note 1 of the
Portfolios' "Notes to financial statements" (included elsewhere in this report).
Use of estimates
Preparing financial statements that conform to accounting principles generally
accepted in the United States of America requires management to make estimates
(e.g., on assets and liabilities) that could differ from actual results.
Federal taxes
The Fund's policy is to comply with all sections of the Internal Revenue Code
that apply to regulated investment companies and to distribute substantially all
of its taxable income to the shareholders. No provision for income or excise
taxes is thus required.
Net investment income (loss) and net realized gains (losses) may differ for
financial statement and tax purposes primarily because of deferred losses on
certain futures contracts, the recognition of certain foreign currency gains
(losses) as ordinary income (loss) for tax purposes, and losses deferred due to
"wash sale" transactions. The character of distributions made during the year
from net investment income or net realized gains may differ from their ultimate
characterization for federal income tax purposes. Also, due to the timing of
dividend distributions, the fiscal year in which amounts are distributed may
differ from the year that the income or realized gains (losses) were recorded by
the Funds.
<TABLE>
<CAPTION>
On the statement of assets and liabilities, as a result of permanent book-to-tax
differences, undistributed net investment income and accumulated net realized
gain (loss) have been increased (decreased), resulting in a net reclassification
adjustment to additional paid-in-capital by the following:
Government High Quality
Income Yield Income
Fund Fund Fund
<S> <C> <C> <C>
Undistributed net investment income $1,050 $(1,605) $1,886
Accumulated net realized gain (loss) 12 1,605 (231)
-- ----- ----
Additional paid-in-capital reductions (increase) $1,062 $ -- $1,655
------ ----- ------
</TABLE>
ANNUAL REPORT - 2000
<PAGE>
Dividends to shareholders
Dividends from net investment income, declared daily and paid monthly for
Government Income Fund, High Yield Fund, and Quality Income Fund, when
available, are reinvested in additional shares of the Funds at net asset value
or payable in cash. Capital gains, when available, are distributed along with
the income dividend.
Other
As of May 31, 2000, American Express Financial Corporation (AEFC) owned 136,214
shares of Government Income Fund, 170,668 shares of High Yield Fund and 72,832
shares of Quality Income Fund.
2. EXPENSES AND SALES CHARGES
In addition to the expenses allocated from the Portfolio, each Fund accrues its
own expenses as follows:
Each Fund has an agreement with AEFC to provide administrative services. Under
an Administrative Services Agreement, each Fund pays AEFC a fee for
administration and accounting services at a percentage of the Fund's average
daily net assets in reducing percentages from 0.05% to 0.025% annually.
Under a separate Transfer Agency Agreement, American Express Client Service
Corporation (AECSC) maintains shareholder accounts and records. Each Fund pays
AECSC an annual fee per shareholder account of $25.
As of Oct. 1, 1999, American Express Financial Advisors Inc. is the Funds'
Distributor. Prior to Oct. 1, 1999, under a Plan and Agreement of Distribution,
each Fund paid American Express Service Corporation a distribution fee at an
annual rate of 0.25% of the Fund's average daily net assets for distribution
services.
A redemption fee of 0.50% is applied and retained by High Yield Fund if shares
are redeemed or exchanged within 180 days of purchase.
AEFC has agreed to waive certain fees and to absorb certain other Fund expenses
through May 31, 2000. Under this agreement, each Fund's total expenses will not
exceed 1.10% (1.20% for High Yield Fund) of each of the Fund's average daily net
assets. In addition, for the year ended May 31, 2000, AEFC further voluntarily
agreed to waive certain fees and expenses to 0.25% for High Yield Fund and 1.06%
for Quality Income Fund.
STRATEGIST INCOME FUND, INC.
<PAGE>
<TABLE>
<CAPTION>
3. CAPITAL SHARE TRANSACTIONS
Transactions in shares of capital stock for the years indicated are as follows:
Year ended May 31, 2000
Government High Quality
Income Yield Income
Fund Fund Fund
<S> <C> <C> <C>
Sold 2,831 46,875 388
Issued for reinvested distributions 12,344 33,515 6,185
Redeemed (20,008) (38,383) (2,655)
------- ------- ------
Net increase (decrease) (4,833) 42,007 3,918
------ ------ -----
Year ended May 31, 1999
Government High Quality
Income Yield Income
Fund Fund Fund
Sold 55,436 254,861 12,360
Issued for reinvested distributions 11,755 34,590 4,993
Redeemed (12,803) (113,505) (5,994)
------- -------- ------
Net increase (decrease) 54,388 175,946 11,359
------ ------- ------
</TABLE>
4. CAPITAL LOSS CARRYOVER
For federal income tax purposes, Government Income Fund, High Yield Fund and
Quality Income Fund have capital loss carryovers as of May 31, 2000 of $51,422,
$140,777 and $10,640, respectively, that if not offset by subsequent capital
gains, will expire in 2008 through 2009 for Government Income Fund, in 2007
through 2009 for High Yield Fund and in 2008 through 2009 for Quality Income
Fund. It is unlikely the board will authorize a distribution of any net realized
capital gains until the available capital loss carryover has been offset or
expires.
ANNUAL REPORT - 2000
<PAGE>
<TABLE>
<CAPTION>
5. FINANCIAL HIGHLIGHTS
The tables below show certain important financial information for evaluating
each Fund's results.
Government Income Fund
Fiscal period ended May 31,
Per share income and capital changesa
2000 1999 1998 1997b
<S> <C> <C> <C> <C>
Net asset value, beginning of period $4.82 $4.98 $4.93 $4.91
Income from investment operations:
Net investment income (loss) .26 .28 .32 .30
Net gains (losses) (both realized and unrealized) (.28) (.07) .11 .06
Total from investment operations (.02) .21 .43 .36
Less distributions:
Dividends from net investment income (.26) (.28) (.33) (.30)
Distributions from realized gains (.07) (.09) (.05) (.04)
Total distributions (.33) (.37) (.38) (.34)
Net asset value, end of period $4.47 $4.82 $4.98 $4.93
Ratios/supplemental data
Net assets, end of period (in thousands) $812 $899 $658 $548
Ratio of expenses to average daily net assetsc 1.10% 1.09% 1.09% 1.10%d
Ratio of net investment income (loss) to
average daily net assets 5.60% 5.57% 6.44% 6.48%d
Portfolio turnover rate
(excluding short-term securities) 674% 278% 159% 146%
Total return (.34%) 4.19% 9.04% 7.59%
a For a share outstanding throughout the period. Rounded to the nearest cent.
b Inception date was June 10, 1996.
c The Advisor and Distributor voluntarily limited total operating expenses.
Without this agreement, the ratio of expenses to average daily net assets
would have been 3.88%, 1.41%, 1.57% and 25.68% for the periods ended 2000,
1999, 1998 and 1997, respectively.
d Adjusted to an annual basis.
</TABLE>
STRATEGIST INCOME FUND, INC.
<PAGE>
<TABLE>
<CAPTION>
High Yield Fund
Fiscal period ended May 31,
Per share income and capital changesa
<S> <C> <C> <C> <C>
2000 1999 1998 1997b
Net asset value, beginning of period $3.96 $4.61 $4.41 $4.31
Income from investment operations:
Net investment income (loss) .41 .39 .43 .38
Net gains (losses) (both realized and unrealized) (.49) (.58) .17 .09
Total from investment operations (.08) (.19) .60 .47
Less distributions:
Dividends from net investment income (.40) (.42) (.40) (.37)
Distributions from realized gains -- (.04) -- --
Total distributions (.40) (.46) (.40) (.37)
Net asset value, end of period $3.48 $3.96 $4.61 $4.41
Ratios/supplemental data
Net assets, end of period (in thousands) $1,618 $1,674 $1,137 $960
Ratio of expenses to average daily net assetsc .25% 1.19% .72% 1.19%d
Ratio of net investment income (loss)
to average daily net assets 11.19% 9.73% 9.28% 8.90%d
Portfolio turnover rate
(excluding short-term securities) 44% 47% 81% 92%
Total return (2.01%) (3.94%) 14.02% 11.40%
a For a share outstanding throughout the period. Rounded to the nearest cent.
b Inception date was June 10, 1996.
c The Advisor and Distributor voluntarily limited total operating expenses.
Without this agreement, the ratio of expenses to average daily net assets
would have been 2.35%, 1.85%, 2.15% and 11.48% for the periods ended 2000,
1999, 1998 and 1997, respectively.
d Adjusted to an annual basis.
</TABLE>
ANNUAL REPORT - 2000
<PAGE>
<TABLE>
<CAPTION>
Quality Income Fund
Fiscal period ended May 31,
Per share income and capital changesa
<S> <C> <C> <C> <C>
2000 1999 1998 1997b
Net asset value, beginning of period $9.12 $9.40 $9.15 $8.95
Income from investment operations:
Net investment income (loss) .53 .53 .58 .55
Net gains (losses) (both realized and unrealized (.48) (.21) .34 .18
Total from investment operations .05 .32 .92 .73
Less distributions:
Dividends from net investment income (.54) (.54) (.61) (.53)
Distributions from realized gains (.10) (.06) (.06) --
Total distributions (.64) (.60) (.67) (.53)
Net asset value, end of period $8.53 $9.12 $9.40 $9.15
Ratios/supplemental data
Net assets, end of period (in thousands) $741 $757 $673 $575
Ratio of expenses to average daily net assetsc 1.06% 1.09% .97% 1.10%d
Ratio of net investment income (loss)
to average daily net assets 6.04% 5.68% 6.22% 6.33%d
Portfolio turnover rate
(excluding short-term securities) 62% 30% 20% 31%
Total return .75% 3.38% 10.30% 8.31%
a For a share outstanding throughout the period. Rounded to the nearest cent.
b Inception date was June 10, 1996.
c The Advisor and Distributor voluntarily limited total operating expenses.
Without this agreement, the ratio of expenses to average daily net assets
would have been 3.20%, 3.58%, 1.48% and 13.34% for the periods ended 2000,
1999, 1998 and 1997, respectively.
d Adjusted to an annual basis.
</TABLE>
STRATEGIST INCOME FUND, INC.
<PAGE>
Federal Income Tax Information
(Unaudited)
The Funds are required by the Internal Revenue Code of 1986 to tell their
shareholders about the tax treatment of the dividends they pay during their
fiscal year. The dividends listed below are reported to you on Form 1099-DIV,
Dividends and Distributions. Shareholders should consult a tax advisor on how to
report distributions for state and local tax purposes.
Strategist Government Income Fund Fiscal year ended May 31, 2000
Income distributions taxable as dividend income, none qualifying for deduction
by corporations.
Payable date Per share
June 23, 1999 $0.01931
July 26, 1999 0.02143
Aug. 26, 1999 0.01988
Sept. 22, 1999 0.01622
Oct. 25, 1999 0.02437
Nov. 23, 1999 0.02404
Dec. 22, 1999 0.07323
Jan. 24, 2000 0.02187
Feb. 24, 2000 0.02177
March 23, 2000 0.01974
April 24, 2000 0.02426
May 24, 2000 0.02343
Total $0.30955
Capital gain distribution taxable as long-term capital gain.
Payable date Per share
Dec. 22, 1999 $0.02489
Total distributions $0.33444
The distribution of $0.09812 per share, payable Dec. 22, 1999, consisted of
$0.02356 derived from net investment income, $0.04967 from net short-term
capital gains (a total of $0.07323 taxable as dividend income) and $0.02489 from
net long-term capital gains.
ANNUAL REPORT - 2000
<PAGE>
Strategist High Yield Fund
Fiscal year ended May 31, 2000
Income distributions taxable as dividend income, 10.42% qualifying for deduction
by corporations.
Payable date Per share
June 23, 1999 $0.02985
July 26, 1999 0.02750
Aug. 26, 1999 0.02749
Sept. 22, 1999 0.02700
Oct. 25, 1999 0.02999
Nov. 23, 1999 0.03500
Dec. 22, 1999 0.03499
Jan. 24, 2000 0.03499
Feb. 24, 2000 0.03800
March 23, 2000 0.03799
April 24, 2000 0.03501
May 24, 2000 0.03800
Total $0.39581
STRATEGIST INCOME FUND, INC.
<PAGE>
Strategist Quality Income Fund
Fiscal year ended May 31, 2000
Income distributions taxable as dividend income, .91% qualifying for deduction
by corporations.
Payable date Per share
June 23, 1999 $0.03907
July 26, 1999 0.04739
Aug. 26, 1999 0.04419
Sept. 22, 1999 0.03570
Oct. 25, 1999 0.04092
Nov. 23, 1999 0.04233
Dec. 22, 1999 0.06884
Jan. 24, 2000 0.05682
Feb. 24, 2000 0.04013
March 23, 2000 0.03975
April 24, 2000 0.05372
May 24, 2000 0.04735
Total $0.55621
Capital gain distribution taxable as long-term capital gain.
Payable date Per share
Dec. 22, 1999 $0.08745
Total distributions $0.64366
The distribution of $0.15629 per share, payable Dec. 22, 1999, consisted of
$0.05184 derived from net investment income, $0.01700 from net short-term
capital gains (a total of $0.06884 taxable as dividend income) and $0.08745 from
net long-term capital gains.
ANNUAL REPORT - 2000
<PAGE>
Independent Auditors' Report
THE BOARD OF TRUSTEES AND UNITHOLDERS INCOME TRUST
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments in securities, of Government Income Portfolio (a
series of Income Trust) as of May 31, 2000, and the related statement of
operations for the year then ended and the statements of changes in net assets
for each of the years in the two-year period ended May 31, 2000. These financial
statements are the responsibility of portfolio management. Our responsibility is
to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of May
31, 2000, by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Government Income Portfolio as
of May 31, 2000, and the results of its operations and the changes in its net
assets for the periods stated in the first paragraph above, in conformity with
accounting principles generally accepted in the United States of America.
KPMG LLP
Minneapolis, Minnesota
July 7, 2000
STRATEGIST INCOME FUND, INC.
<PAGE>
<TABLE>
<CAPTION>
Financial Statements
Statement of assets and liabilities Government Income Portfolio
May 31, 2000
Assets
Investments in securities, at value (Note 1)
<S> <C> <C>
(identified cost $3,226,502,884) $3,157,773,338
Cash in bank on demand deposit 1,043,163
Accrued interest receivable 14,296,622
Receivable for investment securities sold 1,083,609,037
-------------
Total assets 4,256,722,160
-------------
Liabilities
Payable for investment securities purchased 773,829,803
Payable for securities purchased on a when-issued basis (Note 1) 894,712,190
Payable upon return of securities loaned (Note 5) 13,487,500
Accrued investment management services fee 31,696
Other accrued expenses 11,384
Securities sold short (Notes 1 and 3) 260,105,901
Options contracts written, at value (premium received $13,318,749) (Note 6) 17,121,367
----------
Total liabilities 1,959,299,841
-------------
Net assets $2,297,422,319
==============
See accompanying notes to financial statements.
</TABLE>
ANNUAL REPORT - 2000
<PAGE>
<TABLE>
<CAPTION>
Statement of operations
Government Income Portfolio
Year ended May 31, 2000
Investment income
Income:
<S> <C>
Interest $ 202,837,013
-------------
Expenses (Note 2):
Investment management services fee 15,111,807
Compensation of board members 13,862
Custodian fees 332,304
Audit fees 34,500
Other 66,284
------
Total expenses 15,558,757
Earnings credits on cash balances (Note 2) (22,218)
-------
Total net expenses 15,536,539
----------
Investment income (loss) -- net 187,300,474
-----------
Realized and unrealized gain (loss) -- net Net realized gain (loss) on:
Security transactions (Note 3) (216,975,961)
Closed short positions in securities (Notes 1 and 3) 2,594,292
Financial futures contracts 1,557,406
Options contracts written (Note 6) 50,809,894
----------
Net realized gain (loss) on investments (162,014,369)
Net change in unrealized appreciation (depreciation) on investments (11,756,905)
-----------
Net gain (loss) on investments (173,771,274)
------------
Net increase (decrease) in net assets resulting from operations $ 13,529,200
==============
See accompanying notes to financial statements.
</TABLE>
STRATEGIST INCOME FUND, INC.
<PAGE>
<TABLE>
<CAPTION>
Statements of changes in net assets
Government Income Portfolio
Year ended May 31, 2000 1999
Operations
<S> <C> <C>
Investment income (loss) -- net $ 187,300,474 $ 170,696,388
Net realized gain (loss) on investments (162,014,369) 77,523,298
Net change in unrealized appreciation (depreciation) on investments (11,756,905) (129,475,710)
----------- ------------
Net increase (decrease) in net assets resulting from operations 13,529,200 118,743,976
Net contributions (withdrawals) from partners (1,130,555,315) 726,433,297
-------------- -----------
Total increase (decrease) in net assets (1,117,026,115) 845,177,273
Net assets at beginning of year 3,414,448,434 2,569,271,161
------------- -------------
Net assets at end of year $ 2,297,422,319 $3,414,448,434
=============== ==============
See accompanying notes to financial statements.
</TABLE>
ANNUAL REPORT - 2000
<PAGE>
Notes to Financial Statements
Government Income Portfolio
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Government Income Portfolio (the Portfolio) is a series of Income Trust (the
Trust) and is registered under the Investment Company Act of 1940 (as amended)
as a diversified, open-end management investment company. The Portfolio seeks to
provide a high level of current income and safety of principal consistent with
investment in U.S. government and government agency securities. The Declaration
of Trust permits the Trustees to issue non-transferable interests in the
Portfolio.
The Portfolio's significant accounting policies are summarized below:
Use of estimates
Preparing financial statements that conform to accounting principles generally
accepted in the United States of America requires management to make estimates
(e.g., on assets and liabilities) that could differ from actual results.
Valuation of securities
All securities are valued at the close of each business day. Securities traded
on national securities exchanges or included in national market systems are
valued at the last quoted sales price. Debt securities are generally traded in
the over-the-counter market and are valued at a price that reflects fair value
as quoted by dealers in these securities or by an independent pricing service.
Securities for which market quotations are not readily available are valued at
fair value according to methods selected in good faith by the board. Short-term
securities maturing in more than 60 days from the valuation date are valued at
the market price or approximate market value based on current interest rates;
those maturing in 60 days or less are valued at amortized cost.
STRATEGIST INCOME FUND, INC.
<PAGE>
Option transactions
To produce incremental earnings, protect gains and facilitate buying and selling
of securities for investments, the Portfolio may buy and sell put and call
options and write put and call options. This may include purchasing
mortgage-backed security (MBS) put spread options and writing covered MBS call
spread options. MBS spread options are based upon the changes in the price
spread between a specified mortgage-backed security and a like-duration Treasury
security. The risk in writing a call option is that the Portfolio gives up the
opportunity for profit if the market price of the security increases. The risk
in writing a put option is that the Portfolio may incur a loss if the market
price of the security decreases and the option is exercised. The risk in buying
an option is that the Portfolio pays a premium whether or not the option is
exercised. The Portfolio also has the additional risk of being unable to enter
into a closing transaction if a liquid secondary market does not exist. The
Portfolio also may write over-the-counter options where completing the
obligation depends upon the credit standing of the other party.
Option contracts are valued daily at the closing prices on their primary
exchanges and unrealized appreciation or depreciation is recorded. The Portfolio
will realize a gain or loss when the option transaction expires or closes. When
options on debt securities or futures are exercised, the Portfolio will realize
a gain or loss. When other options are exercised, the proceeds on sales for a
written call option, the purchase cost for a written put option or the cost of a
security for a purchased put or call option is adjusted by the amount of premium
received or paid.
Futures transactions
To gain exposure to or protect itself from market changes, the Portfolio may buy
and sell financial futures contracts. Risks of entering into futures contracts
and related options include the possibility of an illiquid market and that a
change in the value of the contract or option may not correlate with changes in
the value of the underlying securities.
ANNUAL REPORT - 2000
<PAGE>
Upon entering into a futures contract, the Portfolio is required to deposit
either cash or securities in an amount (initial margin) equal to a certain
percentage of the contract value. Subsequent payments (variation margin) are
made or received by the Portfolio each day. The variation margin payments are
equal to the daily changes in the contract value and are recorded as unrealized
gains and losses. The Portfolio recognizes a realized gain or loss when the
contract is closed or expires.
Short sales
The Portfolio may engage in short sales. In these transactions, the Portfolio
sells a security that it does not own. The Portfolio is obligated to replace the
security that was sold short by purchasing it at the market price at the time of
replacement or entering into an offsetting transaction with the broker. The
price at such time may be more or less than the price at which the Portfolio
sold the security.
Securities purchased on a when-issued basis
Delivery and payment for securities that have been purchased by the Portfolio on
a forward-commitment or when-issued basis can take place one month or more after
the transaction date. During this period, such securities are subject to market
fluctuations, and they may affect the Portfolio's gross assets the same as owned
securities. The Portfolio designates cash or liquid securities at least equal to
the amount of its commitment. As of May 31, 2000, the Portfolio had entered into
outstanding when-issued or forward-commitments of $894,712,190.
The Portfolio also enters into transactions to sell purchase commitments to
third parties at current market values and concurrently acquires other purchase
commitments for similar securities at later dates. As an inducement for the
Portfolio to "roll over" its purchase commitments, the Portfolio receives
negotiated amounts in the form of reductions of the purchase price of the
commitment.
STRATEGIST INCOME FUND, INC.
<PAGE>
Federal taxes
For federal income tax purposes the Portfolio qualifies as a partnership and
each investor in the Portfolio is treated as the owner of its proportionate
share of the net assets, income, expenses and realized and unrealized gains and
losses of the Portfolio. As a "pass-through" entity, the Portfolio therefore
does not pay any income dividends or capital gain distributions.
Other
Security transactions are accounted for on the date securities are purchased or
sold. Interest income, including level-yield amortization of premium and
discount, is accrued daily.
2. FEES AND EXPENSES
The Trust, on behalf of the Portfolio, has an Investment Management Services
Agreement with AEFC to manage its portfolio. Under this agreement, AEFC
determines which securities will be purchased, held or sold. The management fee
is a percentage of the Portfolio's average daily net assets in reducing
percentages from 0.52% to 0.395% annually.
Under the agreement, the Trust also pays taxes, brokerage commissions and
nonadvisory expenses, which include custodian fees, audit and certain legal
fees, fidelity bond premiums, registration fees for units, office expenses,
consultants' fees, compensation of trustees, corporate filing fees, expenses
incurred in connection with lending securities of the Portfolio and any other
expenses properly payable by the Trust or Portfolio and approved by the board.
During the year ended May 31, 2000, the Portfolio's custodian fees were reduced
by $22,218 as a result of earnings credits from overnight cash balances. The
Portfolio also pays custodian fees to American Express Trust Company, an
affiliate of AEFC.
According to a Placement Agency Agreement, American Express Financial
Advisors Inc. acts as placement agent of the Trust's units.
ANNUAL REPORT - 2000
<PAGE>
3. SECURITIES TRANSACTIONS
Cost of purchases and proceeds from sales of securities (other than short-term
obligations) aggregated $27,381,442,222 and $28,308,158,694, respectively, for
the year ended May 31, 2000. For the same period, the portfolio turnover rate
was 674%. Realized gains and losses are determined on an identified cost basis.
As of May 31, 2000, the following securities were sold short.
Principal Issuer
amount Proceeds Value
FNMA 15 6.5% TBA $86,000,000 $81,431,250 $81,619,375
FNMA 30 7.0% TBA 85,500,000 80,464,375 81,091,406
US Treasury 4.75% 109,000,000 97,395,137 97,395,120
----------- ---------- ----------
Total $280,500,000 $259,290,762 $260,105,901
------------ ------------ ------------
4. INTEREST RATE FUTURES CONTRACTS
As of May 31, 2000, investments in securities included securities valued at
$68,104,472 that were pledged as collateral to cover initial margin deposits on
9,964 open purchase contracts and 14,628 open sale contracts. The notional
market value of the open purchase contracts as of May 31, 2000, was
$2,227,435,932 with a net unrealized loss of $2,844,458. The market value of the
open sale contracts as of May 31, 2000, was $2,676,346,826 with a net unrealized
loss of $1,333,675. See "Summary of significant accounting policies."
5. LENDING OF PORTFOLIO SECURITIES
As of May 31, 2000, securities valued at $13,192,920 were on loan to brokers.
For collateral, the Portfolio received $13,487,500 in cash. Income from
securities lending amounted to $2,514,029 for the year ended May 31, 2000. The
risks to the Portfolio of securities lending are that the borrower may not
provide additional collateral when required or return the securities when due.
STRATEGIST INCOME FUND, INC.
<PAGE>
6. OPTIONS CONTRACTS WRITTEN
Contracts and premium amounts associated with options contracts written are
as follows:
Year ended May 31, 2000
Puts Calls
Contracts Premium Contracts Premium
Balance May 31, 1999 2,351 $3,162,193 33,129 $15,694,987
Opened 201,691 53,866,737 348,502 137,268,842
Closed (54,049) (23,232,060) (207,001) (95,487,329)
Exercised (55,648) (14,051,730) (35,513) (16,115,208)
Expired (83,423) (16,202,611) (117,968) (31,585,072)
------- ----------- -------- -----------
Balance May 31, 2000 10,922 $3,542,529 21,149 $9,776,220
------ ---------- ------ ----------
See "Summary of significant accounting policies."
ANNUAL REPORT - 2000
<PAGE>
<TABLE>
<CAPTION>
Investments in Securities
Government Income Portfolio May 31, 2000
(Percentages represent value of investments compared to net assets)
Bonds (130.3%)
Issuer Coupon Principal Value(a)
rate amount
Mortgage-backed securities (123.9%)
Federal Home Loan Mtge Corp
<S> <C> <C> <C> <C> <C>
07-01-03 6.50% $6,555 $6,422
09-01-09 6.50 3,411,614 3,258,381
10-01-10 7.00 8,803,349 8,555,805
01-01-13 6.00 10,056,790 9,400,434
02-01-13 6.50 696,716 662,374
04-01-14 6.00 39,101,880 36,470,307
05-01-14 6.50 985,555 936,515
06-01-14 6.50 5,631,915 5,351,699
07-01-14 6.50 42,743,448 40,616,601
08-01-14 6.50 4,530,861 4,305,413
09-01-14 6.50 2,532,073 2,406,081
10-01-14 6.50 2,574,992 2,446,865
11-01-14 6.50 14,765,114 14,030,425
11-01-14 7.50 22,912,470 22,601,052
12-01-14 7.50 2,383,325 2,350,932
01-01-15 6.50 789,663 749,964
01-01-15 7.50 1,899,689 1,873,869
02-01-15 6.50 2,949,505 2,802,743
02-01-15 7.50 955,996 942,702
03-01-15 6.50 6,394,091 6,074,472
03-01-15 7.50 7,048,089 6,950,548
04-01-15 7.50 256,141,413 252,646,229
05-01-15 7.50 6,229,450 6,142,821
06-01-15 7.50 164,850,000(b) 162,531,796
06-01-15 8.00 86,500,000(b) 86,770,313
07-01-15 7.50 57,000,000(b) 56,144,999
11-01-23 8.00 9,455,978 9,442,272
05-01-24 7.50 3,920,161 3,835,325
07-01-24 8.00 1,027,517 1,023,564
See accompanying notes to investments in securities.
STRATEGIST INCOME FUND, INC.
<PAGE>
Bonds (continued)
Issuer Coupon Principal Value(a)
rate amount
07-01-24 8.00 4,201,038(f,g) 4,185,285
01-01-25 9.00 4,423,950 4,544,836
06-01-25 8.00 6,881,457 6,855,652
08-01-25 8.00 1,786,830 1,778,458
02-01-26 6.00 15,763,203 14,245,312
05-01-26 9.00 9,503,310 9,772,739
01-01-28 6.00 2,622,251 2,363,267
02-01-28 6.00 16,653,994 14,990,142
09-01-28 6.00 17,740,268 15,963,238
10-01-28 6.00 12,920,269 11,626,054
06-01-29 7.00 24,205,784 23,006,546
07-01-29 7.00 25,600,689(f,g) 24,332,342
Collateralized Mtge Obligation
11-15-23 4.00 4,701,968 4,538,816
Interest Only
01-01-20 10.00 116,266(c) 32,696
01-01-29 6.00 20,216,925(c) 6,484,141
Principal Only
09-15-03 6.46 5,018,363(d) 4,386,887
05-15-08 7.14 5,689,699(d) 4,355,459
05-15-08 8.13 4,976,200(d) 4,284,139
03-15-09 7.38 2,932,684(d) 2,416,664
11-15-23 7.86 834,511(d) 604,385
Federal Natl Mtge Assn
09-01-07 8.50 2,009,595 2,034,813
05-01-13 6.00 52,646,724 49,021,235
06-01-13 6.00 43,393,091 40,404,848
09-01-13 6.00 101,755 94,748
10-01-13 6.00 15,989,429 14,888,325
11-01-13 6.00 16,841,681 15,681,886
12-01-13 5.50 25,694,101 23,403,021
12-01-13 6.00 3,704,547 3,449,435
01-01-14 5.50 34,695,206 31,601,519
01-01-14 6.00 2,725,777 2,538,068
02-01-14 5.50 16,666,249 15,177,677
03-01-14 6.00 4,328,701 4,030,607
04-01-14 5.50 170,398,624 155,204,591
06-01-14 6.50 51,466,284 48,913,993
See accompanying notes to investments in securities.
ANNUAL REPORT - 2000
<PAGE>
Bonds (continued)
Issuer Coupon Principal Value(a)
rate amount
07-01-14 5.50 117,925,055 107,409,964
07-01-14 6.50 222,987 211,822
08-01-14 6.50 3,840,147 3,647,862
09-01-14 6.00 378,668 352,225
09-01-14 6.50 3,319,006 3,152,816
10-01-14 7.00 1,159,607 1,123,008
03-01-15 7.00 48,250,841 46,727,967
03-01-15 7.50 8,000,793 7,883,262
04-01-15 7.00 4,330,622 4,191,399
05-01-15 7.00 19,517,174 18,889,727
05-01-15 7.50 13,501,350 13,309,378
06-01-15 7.00 1,000,100 967,948
06-01-15 7.00 87,000,000(b) 84,172,500
06-01-15 7.50 51,500,000(b) 50,759,688
11-01-21 8.00 1,771,301 1,764,822
03-01-23 9.00 1,120,136 1,154,059
08-25-23 6.00 14,400,000 12,445,095
09-01-23 6.50 36,341,798 33,938,706
11-01-23 6.00 9,223,410 8,384,994
12-01-23 7.00 11,709,891 11,187,065
01-01-24 6.50 13,335,079 12,453,301
06-01-24 9.00 3,785,104 3,895,413
09-01-25 6.50 17,935,367 16,672,738
11-01-25 6.50 17,900,277 16,640,119
02-01-26 6.00 481,601 434,356
02-01-26 8.00 1,774,434 1,763,433
04-01-26 6.00 265,143 239,132
05-01-26 7.50 12,319,962 12,016,588
02-01-27 6.00 2,114,827 1,904,612
04-01-27 6.00 5,023,203 4,523,894
04-01-27 6.50 11,482,212 10,648,733
04-01-27 7.00 6,919,924 6,579,410
09-01-27 7.00 5,638,193 5,360,751
03-01-28 6.00 20,343,032 18,300,722
04-01-28 6.00 44,152,483 39,709,379
04-01-28 6.00 9,323,622(f,g) 8,396,849
05-01-28 6.00 8,871,190 7,978,115
05-01-28 6.50 19,228,106 17,807,248
07-01-28 6.00 9,293,088 8,357,541
See accompanying notes to investments in securities.
STRATEGIST INCOME FUND, INC.
<PAGE>
Bonds (continued)
Issuer Coupon Principal Value(a)
rate amount
09-01-28 6.00 89,137,598 80,163,995
10-01-28 6.00 16,081,304 14,462,378
10-01-28 6.50 45,596,564 42,227,213
04-01-29 6.00 10,974,450 9,858,502
05-01-29 6.00 5,467,163 4,911,228
07-01-29 6.00 5,222,992 4,691,886
09-01-29 7.00 15,442,746 14,658,446
09-01-29 7.50 4,645,775 4,510,769
10-01-29 7.00 6,169,789 5,856,440
11-01-29 7.50 1,459,873 1,418,960
12-01-29 7.50 21,898,124 21,284,430
01-01-30 7.50 14,794,951 14,380,323
02-01-30 7.50 110,359,189 107,236,945
03-01-30 7.50 112,547,110 109,317,613
04-01-30 7.50 5,080,437 4,934,175
06-01-30 7.50 43,000,000(b) 41,736,875
06-01-30 8.00 43,000,000(b) 42,623,750
07-01-30 8.00 314,000,000(b) 310,761,873
07-01-30 8.50 21,950,000(b) 22,114,625
08-01-30 8.00 36,000,000(b) 35,572,500
Collateralized Mtge Obligation
11-25-08 5.50 2,084,009 2,013,674
07-25-12 7.00 2,367,417 2,307,711
01-25-19 3.00 3,684,286 3,552,822
08-25-21 4.50 5,062,618 4,916,732
08-25-23 6.50 15,000,000 13,857,600
Interest Only
08-01-18 9.50 41,978(c) 11,745
01-15-20 10.00 1,994,603(c) 534,793
02-25-22 9.50 310,055(c) 84,510
07-25-22 8.50 7,006,241(c) 2,022,108
11-01-29 7.50 226,850(c) 78,895
Inverse Floater
08-25-23 4.09 664,314(h) 555,433
03-25-24 4.63 947,682(h) 714,047
Principal Only
06-25-21 12.57 245,231(d) 188,102
Govt Natl Mtge Assn
08-20-19 11.00 132,557 143,371
Total 2,847,603,857
See accompanying notes to investments in securities.
ANNUAL REPORT - 2000
<PAGE>
Bonds (continued)
Issuer Coupon Principal Value(a)
rate amount
U.S. government obligations (6.8%)
Resolution Funding Corp
Zero Coupon
04-15-06 5.75 4,803,000(i) 3,233,091
04-15-08 5.88 21,250,000(i) 12,298,225
10-15-12 8.04 8,400,000(i) 3,560,340
07-15-17 7.28 6,650,000(i) 2,066,813
01-15-18 7.20 8,000,000(i) 2,404,392
10-15-18 7.87 7,500,000(i) 2,145,375
U.S. Treasury
02-15-03 10.75 15,000,000(f,g) 16,462,500
11-15-03 4.25 1,950,000 1,809,235
05-15-04 12.38 7,000,000 8,356,250
08-15-05 6.50 5,000,000 4,978,100
08-15-05 10.75 4,750,000(f,g) 5,592,365
05-15-06 6.88 12,600,000 12,783,078
02-15-10 6.50 21,500,000(e) 21,819,060
11-15-16 7.50 22,000,000(f,g) 24,396,020
Zero Coupon
11-15-04 5.65 33,000,000(f,g,i) 24,717,661
Total 146,622,505
Total bonds
(Cost: $3,062,086,858) $2,994,226,362
</TABLE>
<TABLE>
<CAPTION>
Options purchased (--%)
Issuer Notional Exercise Expiration Value(a)
amount Price date
Call
<S> <C> <C> <C> <C>
Sept. U.S. Treasury Bond Futures $43,000,000 $100 Aug. 2000 $161,250
Puts
Federal Natl Mtge Assn 43,000,000 96 June 2000 13,437
Federal Natl Mtge Assn 43,000,000 98 June 2000 13,438
Sept. U.S. Treasury Bond Futures 17,200,000 94 Aug. 2000 185,437
Total options purchased
(Cost: $1,202,380) $373,562
</TABLE>
STRATEGIST INCOME FUND, INC.
<PAGE>
<TABLE>
<CAPTION>
Short-term securities (7.1%)
Issuer Annualized Amount Value(a)
yield on date payable at
of purchase maturity
U.S. government agencies (5.1%)
Federal Home Loan Bank Disc Nts
<S> <C> <C> <C> <C> <C>
06-14-00 6.35% $50,000,000 $49,876,915
06-21-00 6.01 1,700,000 1,693,781
07-21-00 6.45 19,600,000 19,416,753
Federal Home Loan Mtge Corp Disc Nts
07-06-00 6.10 2,200,000 2,185,398
08-10-00 6.59 13,900,000 13,717,698
Federal Natl Mtge Assn Disc Nt
06-20-00 5.98 31,000,000 30,897,353
Total 117,787,898
Commercial paper (2.0%)
Exxon Mobil Australia
06-14-00 6.49 45,500,000(j) 45,385,516
Total short-term securities
(Cost: $163,213,646) $163,173,414
Total investments in securities
(Cost: $3,226,502,884)(k) $3,157,773,338
See accompanying notes to investments in securities.
</TABLE>
ANNUAL REPORT - 2000
<PAGE>
Notes to investments in securities
(a) Securities are valued by procedures described in Note 1 to the financial
statements.
(b) At May 31, 2000, the cost of securities purchased, including interest
purchased, on a when-issued basis was $894,712,190.
(c) Interest-only represents securities that entitle holders to receive only
interest payments on the underlying mortgages. The yield to maturity of an
interest-only is extremely sensitive to the rate of principal payments on the
underlying mortgage assets. A rapid (slow) rate of principal repayments may have
an adverse (positive) effect on yield to maturity. The principal amount shown is
the notional amount of the underlying mortgages.
(d) Principal-only represents securities that entitle holders to receive only
principal payments on the underlying mortgages. The yield to maturity of a
principal-only is sensitive to the rate of principal payments on the underlying
mortgage assets. A slow (rapid) rate of principal repayments may have an adverse
(positive) effect on yield to maturity. Interest rate disclosed represents
original yield based upon the estimated timing of future cash flows.
(e) Security is partially or fully on loan. See Note 5 to the financial
statements.
<TABLE>
<CAPTION>
(f) Partially pledged as initial deposit on the following open interest rate
futures contracts (see Note 4 to the financial statements):
Type of security Notional amount
Purchase contracts
<S> <C> <C> <C>
Eurodollar June 2000, 90-day $186,750,000
Eurodollar Sept. 2000, 90-day 186,750,000
Eurodollar Dec. 2000, 90-day 188,000,000
Eurodollar March 2001, 90-day 290,500,000
Eurodollar June 2001, 90-day 348,000,000
Eurodollar Sept. 2001, 90-day 563,250,000
Eurodollar Dec. 2001, 90-day 101,250,000
Eurodollar March 2002, 90-day 443,750,000
U.S. Treasury Bonds June 2000 46,600,000
U.S. Treasury Notes Sept. 2000, 2-year 43,000,000
U.S. Treasury Notes Sept. 2000, 10-year 5,000,000
STRATEGIST INCOME FUND, INC.
<PAGE>
Type of security Notional amount
Sale contracts
Eurodollar June 2002, 90-day $72,500,000
Eurodollar Sept. 2002, 90-day 72,500,000
Eurodollar Dec. 2002, 90-day 222,500,000
Eurodollar March 2003, 90-day 955,000,000
Eurodollar June 2003, 90-day 233,000,000
Eurodollar Sept. 2003, 90-day 297,500,000
Eurodollar Dec. 2003, 90-day 201,750,000
Eurodollar March 2004, 90-day 26,750,000
U.S. Treasury Bonds Sept. 2000 103,200,000
U.S. Treasury Note Sept. 2000, 10-year 58,200,000
U.S. Treasury Notes June 2000, 5-year 95,000,000
U.S. Treasury Notes June 2000, 10-year 145,100,000
U.S. Treasury Notes Sept. 2000, 5-year 228,700,000
(g) At May 31, 2000, securities valued at $1,297,449,625 were held to cover open
call options written as follows:
Issuer Notional Exercise Expiration Value(a)
amount price date
Federal Natl Mtge Assn $86,000,000 $97 June 2000 $483,750
U.S. Treasury Bond Futures July 2000 30,100,000 94 June 2000 602,000
U.S. Treasury Bond Futures Sept. 2000 34,400,000 94 Aug. 2000 919,123
U.S. Treasury Note Futures July 2000, 5-year 189,200,000 97 June 2000 1,507,678
U.S. Treasury Note Futures July 2000, 5-year 94,600,000 98 June 2000 458,214
U.S. Treasury Note Futures July 2000, 10-year 103,200,000 96 June 2000 1,209,370
U.S. Treasury Note Futures Sept. 2000, 5-year 17,200,000 97 Aug. 2000 198,875
U.S. Treasury Note Futures Sept. 2000, 5-year 301,000,000 98 Aug. 2000 2,633,750
U.S. Treasury Note Futures Sept. 2000, 5-year 51,600,000 98 Aug. 2000 322,500
U.S. Treasury Note Futures Sept. 2000, 5-year 77,400,000 99 Aug. 2000 362,813
U.S. Treasury Note Futures Sept. 2000, 10-year 356,200,000 96 Aug. 2000 6,122,187
Total $14,820,260
ANNUAL REPORT - 2000
<PAGE>
At May 31, 2000, cash or short-term securities were designated to cover open put
options written as follows:
Issuer Notional Exercise Expiration Value(a)
amount price date
Federal Natl Mtge Assn $43,000,000 $97 July 2000 $248,594
U.S. Treasury Bond Futures July 2000, 10-year 8,600,000 95 June 2000 14,781
U.S. Treasury Bond Futures Sept. 2000 86,000,000 92 Aug. 2000 470,308
U.S. Treasury Note Futures July 2000, 5-year 129,000,000 96 June 2000 60,462
U.S. Treasury Note Futures July 2000, 5-year 266,600,000 97 June 2000 539,462
U.S. Treasury Note Futures Sept. 2000, 5-year 172,000,000 97 Aug. 2000 967,500
Total $2,301,107
</TABLE>
(h) Inverse floaters represent securities that pay interest at a rate that
increases (decreases) in the same magnitude as, or in a multiple of, a decline
(increase) in the LIBOR (London InterBank Offering Rate) Index. Interest rate
disclosed is the rate in effect on May 31, 2000.
(i) For zero coupon bonds, the interest rate disclosed represents the annualized
effective yield on the date of acquisition.
(j) Commercial paper sold within terms of a private placement memorandum, exempt
from registration under Section 4(2) of the Securities Act of 1933, as amended,
and may be sold only to dealers in that program or other "accredited investors."
This security has been determined to be liquid under guidelines established by
the board.
(k) At May 31, 2000, the cost of securities for federal income tax purposes was
$3,227,570,579 and the aggregate gross unrealized appreciation and depreciation
based on that cost was:
Unrealized appreciation $9,277,288
Unrealized depreciation (79,074,529)
-----------
Net unrealized depreciation $(69,797,241)
STRATEGIST INCOME FUND, INC.
<PAGE>
Independent Auditors' Report
THE BOARD OF TRUSTEES AND UNITHOLDERS INCOME TRUST
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments in securities, of High Yield Portfolio (a series of
Income Trust) as of May 31, 2000, and the related statement of operations for
the year then ended and the statements of changes in net assets for each of the
years in the two-year period ended May 31, 2000. These financial statements are
the responsibility of portfolio management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of May
31, 2000, by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of High Yield Portfolio as of May
31, 2000, and the results of its operations and the changes in its net assets
for the periods stated in the first paragraph above, in conformity with
accounting principles generally accepted in the United States of America.
KPMG LLP
Minneapolis, Minnesota
July 7, 2000
ANNUAL REPORT - 2000
<PAGE>
<TABLE>
<CAPTION>
Financial Statements
Statement of assets and liabilities High Yield Portfolio
May 31, 2000
Assets
Investments in securities, at value (Note 1)
Investments in securities of unaffiliated issuers
<S> <C> <C>
(identified cost $3,643,728,604) $3,070,140,210
Investments in securities of affiliated issuers
(identified cost $48,973,125) 4,672,969
---------
Total investments in securities (identified cost $3,692,701,729) 3,074,813,179
Other prepaid assets 44,088
Accrued interest and dividends receivable 94,914,361
Receivable for investment securities sold 2,006,055
---------
Total assets 3,171,777,683
-------------
Liabilities
Disbursement in excess of cash on demand deposit 1,473,775
Payable for investment securities purchased 19,827,596
Accrued investment management services fee 48,378
Other accrued expenses 39,954
------
Total liabilities 21,389,703
----------
Net assets $3,150,387,980
==============
See accompanying notes to financial statements.
</TABLE>
STRATEGIST INCOME FUND, INC.
<PAGE>
<TABLE>
<CAPTION>
Statement of operations
High Yield Portfolio
Year ended May 31, 2000
Investment income
Income:
<S> <C>
Dividends $ 41,992,601
Interest 370,989,153
Less foreign taxes withheld (11,458)
-------
Total income 412,970,296
-----------
Expenses (Note 2):
Investment management services fee 20,387,627
Compensation of board members 15,283
Custodian fees 195,003
Audit fees 35,250
Other 302,730
-------
Total expenses 20,935,893
Earnings credits on cash balances (Note 2) (35,281)
-------
Total net expenses 20,900,612
----------
Investment income (loss) -- net 392,069,684
-----------
Realized and unrealized gain (loss) -- net Net realized gain (loss) on:
Security transactions (Note 3) (149,572,739)
Foreign currency transactions (3,632,499)
----------
Net realized gain (loss) on investments (153,205,238)
Net change in unrealized appreciation (depreciation) on investments
and on translation of assets and liabilities in foreign currencies (311,617,708)
------------
Net gain (loss) on investments (464,822,946)
------------
Net increase (decrease) in net assets resulting from operations $ (72,753,262)
==============
See accompanying notes to financial statements.
</TABLE>
ANNUAL REPORT - 2000
<PAGE>
<TABLE>
<CAPTION>
Statements of changes in net assets
High Yield Portfolio
Year ended May 31, 2000 1999
Operations
<S> <C> <C>
Investment income (loss) -- net $ 392,069,684 $ 394,989,832
Net realized gain (loss) on investments (153,205,238) (127,910,210)
Net change in unrealized appreciation (depreciation) on investments
and on translation of assets and liabilities in foreign currencies (311,617,708) (413,949,530)
------------ ------------
Net increase (decrease) in net assets resulting from operations (72,753,262) (146,869,908)
Net contributions (withdrawals) from partners (671,455,648) (122,534,167)
------------ ------------
Total increase (decrease) in net assets (744,208,910) (269,404,075)
Net assets at beginning of year 3,894,596,890 4,164,000,965
------------- -------------
Net assets at end of year $3,150,387,980 $3,894,596,890
============== ==============
See accompanying notes to financial statements.
</TABLE>
STRATEGIST INCOME FUND, INC.
<PAGE>
Notes to Financial Statements
High Yield Portfolio
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
High Yield Portfolio (the Portfolio) is a series of Income Trust (the Trust) and
is registered under the Investment Company Act of 1940 (as amended) as a
diversified, open-end management investment company. The Portfolio invests
primarily in long-term corporate bonds in the lower-rating categories, commonly
known as junk bonds. The Declaration of Trust permits the Trustees to issue
non-transferable interests in the Portfolio.
The Portfolio's significant accounting policies are summarized below:
Use of estimates
Preparing financial statements that conform to accounting principles generally
accepted in the United States of America requires management to make estimates
(e.g., on assets and liabilities) that could differ from actual results.
Valuation of securities
All securities are valued at the close of each business day. Securities traded
on national securities exchanges or included in national market systems are
valued at the last quoted sales price. Debt securities are generally traded in
the over-the-counter market and are valued at a price that reflects fair value
as quoted by dealers in these securities or by an independent pricing service.
Securities for which market quotations are not readily available are valued at
fair value according to methods selected in good faith by the board. Short-term
securities maturing in more than 60 days from the valuation date are valued at
the market price or approximate market value based on current interest rates;
those maturing in 60 days or less are valued at amortized cost.
ANNUAL REPORT - 2000
<PAGE>
Option transactions
To produce incremental earnings, protect gains and facilitate buying and selling
of securities for investments, the Portfolio may buy and write options traded on
any U.S. or foreign exchange or in the over-the-counter market where completing
the obligation depends upon the credit standing of the other party. The
Portfolio also may buy and sell put and call options and write covered call
options on portfolio securities as well as write cash-secured put options. The
risk in writing a call option is that the Portfolio gives up the opportunity for
profit if the market price of the security increases. The risk in writing a put
option is that the Portfolio may incur a loss if the market price of the
security decreases and the option is exercised. The risk in buying an option is
that the Portfolio pays a premium whether or not the option is exercised. The
Portfolio also has the additional risk of being unable to enter into a closing
transaction if a liquid secondary market does not exist.
Option contracts are valued daily at the closing prices on their primary
exchanges and unrealized appreciation or depreciation is recorded. The Portfolio
will realize a gain or loss when the option transaction expires or closes. When
options on debt securities or futures are exercised, the Portfolio will realize
a gain or loss. When other options are exercised, the proceeds on sales for a
written call option, the purchase cost for a written put option or the cost of a
security for a purchased put or call option is adjusted by the amount of premium
received or paid.
Futures transactions
To gain exposure to or protect itself from market changes, the Portfolio may buy
and sell financial futures contracts traded on any U.S. or foreign exchange. The
Portfolio also may buy and write put and call options on these futures
contracts. Risks of entering into futures contracts and related options include
the possibility of an illiquid market and that a change in the value of the
contract or option may not correlate with changes in the value of the underlying
securities.
Upon entering into a futures contract, the Portfolio is required to deposit
either cash or securities in an amount (initial margin) equal to a certain
percentage of the contract value. Subsequent payments (variation margin) are
made or received by the Portfolio each day. The variation margin payments are
equal to the daily changes in the contract value and are recorded as unrealized
gains and losses. The Portfolio recognizes a realized gain or loss when the
contract is closed or expires.
STRATEGIST INCOME FUND, INC.
<PAGE>
Foreign currency translations and foreign currency contracts
Securities and other assets and liabilities denominated in foreign currencies
are translated daily into U.S. dollars. Foreign currency amounts related to the
purchase or sale of securities and income and expenses are translated at the
exchange rate on the transaction date. The effect of changes in foreign exchange
rates on realized and unrealized security gains or losses is reflected as a
component of such gains or losses. In the statement of operations, net realized
gains or losses from foreign currency transactions, if any, may arise from sales
of foreign currency, closed forward contracts, exchange gains or losses realized
between the trade date and settlement date on securities transactions, and other
translation gains or losses on dividends, interest income and foreign
withholding taxes.
The Portfolio may enter into forward foreign currency exchange contracts for
operational purposes and to protect against adverse exchange rate fluctuation.
The net U.S. dollar value of foreign currency underlying all contractual
commitments held by the Portfolio and the resulting unrealized appreciation or
depreciation are determined using foreign currency exchange rates from an
independent pricing service. The Portfolio is subject to the credit risk that
the other party will not complete its contract obligations.
Illiquid securities
As of May 31, 2000, investments in securities included issues that are illiquid
which the Portfolio currently limits to 10% of net assets, at market value, at
the time of purchase. The aggregate value of such securities as of May 31, 2000
was $91,694,404 representing 2.91% of net assets. According to board guidelines,
certain unregistered securities are determined to be liquid and are not included
within the 10% limitation specified above.
Federal taxes
For federal income tax purposes the Portfolio qualifies as a partnership and
each investor in the Portfolio is treated as the owner of its proportionate
share of the net assets, income, expenses and realized and unrealized gains and
losses of the Portfolio. As a "pass-through" entity, the Portfolio therefore
does not pay any income dividends or capital gain distributions.
Other
Security transactions are accounted for on the date securities are purchased or
sold. Dividend income is recognized on the ex-dividend date. Interest income,
including level-yield amortization of premium and discount, is accrued daily.
ANNUAL REPORT - 2000
<PAGE>
2. FEES AND EXPENSES
The Trust, on behalf of the Portfolio, has an Investment Management Services
Agreement with AEFC to manage its portfolio. Under this agreement, AEFC
determines which securities will be purchased, held or sold. The management fee
is a percentage of the Portfolio's average daily net assets in reducing
percentages from 0.59% to 0.465% annually.
Under the agreement, the Trust also pays taxes, brokerage commissions and
nonadvisory expenses, which include custodian fees, audit and certain legal
fees, fidelity bond premiums, registration fees for units, office expenses,
consultants' fees, compensation of trustees, corporate filing fees, expenses
incurred in connection with lending securities of the Portfolio and any other
expenses properly payable by the Trust or Portfolio and approved by the board.
During the year ended May 31, 2000, the Portfolio's custodian fees were reduced
by $35,281 as a result of earnings credits from overnight cash balances. The
Portfolio also pays custodian fees to American Express Trust Company, an
affiliate of AEFC.
According to a Placement Agency Agreement, American Express Financial
Advisors Inc. acts as placement agent of the Trust's units.
3. SECURITIES TRANSACTIONS
Cost of purchases and proceeds from sales of securities (other than short-term
obligations) aggregated $1,524,601,369 and $1,892,546,259, respectively, for the
year ended May 31, 2000. For the same period, the portfolio turnover rate was
44%. Realized gains and losses are determined on an identified cost basis.
Income from securities lending amounted to $42 for the year ended May 31, 2000.
The risks to the Portfolio of securities lending are that the borrower may not
provide additional collateral when required or return the securities when due.
STRATEGIST INCOME FUND, INC.
<PAGE>
<TABLE>
<CAPTION>
Investments in Securities
High Yield Portfolio
May 31, 2000
(Percentages represent value of investments compared to net assets)
Bonds (79.3%)
Issuer Coupon Principal Value(a)
rate amount
Mortgage-backed securities (0.1%)
Federal Home Loan Mtge Corp
<S> <C> <C> <C> <C> <C>
08-01-17 7.50% $2,605(e) $2,636
Merrill Lynch Mtge Investors
06-15-21 7.58 4,040,151(k) 3,761,128
Total 3,763,764
Aerospace & defense (1.6%)
BE Aerospace
Sr Sub Nts Series B
03-01-08 8.00 10,750,000 8,505,938
Compass Aerospace
Company Guaranty Series B
04-15-05 10.13 12,335,000 4,317,250
Fairchild
Company Guaranty
04-15-09 10.75 28,050,000 18,513,000
Sequa
Sr Nts
08-01-09 9.00 20,750,000 19,193,750
Total 50,529,938
Automotive & related (3.2%)
EV Intl
Company Guaranty Series A
03-15-07 11.00 10,500,000 7,140,000
French (JL) Auto Casting
Company Guaranty Series B
06-01-09 11.50 14,600,000 13,651,000
Hayes Lemmerz Intl
Company Guaranty Series B
07-15-07 9.13 10,000,000 8,922,500
Lear
Company Guaranty Series B
05-15-09 8.11 20,000,000 17,914,800
See accompanying notes to investments in securities.
ANNUAL REPORT - 2000
<PAGE>
Bonds (continued)
Issuer Coupon Principal Value(a)
rate amount
MSX Intl
Company Guaranty
01-15-08 11.38 13,110,000 12,323,400
Oxford Automotive
Company Guaranty Series D
06-15-07 10.13 25,120,000 23,487,200
Venture Holdings Trust
Sr Nts Series B
07-01-05 9.50 25,000,000 18,750,000
Total 102,188,900
Beverages & tobacco (0.4%)
Canandaigua Brands
Company Guaranty
03-01-09 8.50 12,500,000 11,531,250
Chemicals (2.0%)
Allied Waste North America
Company Guaranty Series B
08-01-09 10.00 42,650,000 33,693,500
Lyondell Chemical
Series B
05-01-07 9.88 18,300,000 17,659,500
Sovereign Specialty Chemical
03-15-10 11.88 7,450,000(d) 7,524,500
Sterling Chemicals
Company Guaranty Series B
07-15-06 12.38 5,000,000 5,075,000
Total 63,952,500
Commercial finance (0.1%)
Advance Holding
Zero Coupon Series B
04-15-03 12.45 8,800,000(g) 3,960,000
Communications equipment & services (13.3%)
360 Networks
(U.S. Dollar) Sr Nts
05-01-08 13.00 5,960,000(c,d) 5,885,500
08-01-09 12.00 16,000,000(c) 14,800,000
AirGate PCS
Zero Coupon Sr Sub Nts
10-01-04 13.50 8,350,000(g) 4,717,750
See accompanying notes to investments in securities.
STRATEGIST INCOME FUND, INC.
<PAGE>
Bonds (continued)
Issuer Coupon Principal Value(a)
rate amount
Birch Telecom
Sr Nts
06-15-08 14.00 14,000,000 14,000,000
Caprock Communications
Sr Nts Series B
07-15-08 12.00 17,000,000 15,470,000
Celcaribe
Sr Nts
03-15-04 13.50 11,150,000 9,003,625
Covad Communications Group
Sr Nts
02-15-09 12.50 10,000,000 9,400,000
DLJ Secured Loan Trust
Sr Secured Ctfs
07-07-07 10.13 11,500,000(d) 11,376,145
Dobson/Sygnet Communications
Sr Nts
12-15-08 12.25 16,000,000 16,880,000
EchoStar DBS
Sr Nts
02-01-09 9.38 41,015,000 38,759,174
Esprit Telecom Group
(U.S. Dollar) Sr Nts
12-15-07 11.50 17,900,000(c) 14,499,000
06-15-08 10.88 17,000,000(c) 13,260,000
GST Telecommunications
Sr Sub Nts
11-15-07 12.75 6,750,000(b) 337,500
GT Group Telecom
(U.S. Dollar) Zero Coupon
02-01-05 13.25 27,400,000(c,d,g) 14,248,000
KMC Telecom Holdings
Sr Nts
05-15-09 13.50 12,000,000 10,920,000
Zero Coupon Sr Disc Nts
02-15-03 12.68 12,000,000(g) 5,760,000
MJD Communications
Sr Sub Nts Series B
05-01-08 9.50 5,525,000 5,027,750
Nextel Partners
Sr Nts
03-15-10 11.00 5,975,000(d) 5,721,063
See accompanying notes to investments in securities.
ANNUAL REPORT - 2000
<PAGE>
Bonds (continued)
Issuer Coupon Principal Value(a)
rate amount
NTL
Zero Coupon Sr Nts Series B
02-01-01 11.40 40,000,000(g) 36,399,999
Orius Capital
Sr Sub Nts
02-01-10 12.75 6,650,000(d) 6,783,000
Price Communications Wireless
Company Guaranty Series B
12-15-06 9.13 26,850,000 27,118,500
Rhythms NetConnections
02-15-10 14.00 15,000,000(d) 12,600,000
Sr Nts
04-15-09 12.75 10,000,000 8,000,000
Spectrasite Holdings
Zero Coupon Sr Disc Nts
04-15-04 11.25 21,450,000(g) 11,583,000
Tele1 Europe
(U.S. Dollar) Sr Nts
05-15-09 13.00 8,000,000(c) 7,760,000
Telehub Communications
Zero Coupon Company Guaranty
07-31-01 13.88 12,000,000(b,g) 1,215,000
Triton Communications
Zero Coupon Company Guaranty
05-01-03 10.86 11,000,000(g) 7,947,500
UbiquiTel
Zero Coupon Company Guaranty
04-15-05 14.00 12,150,000(d,g) 6,682,500
Versatel Telecom
(European Monetary Unit)
12-17-04 4.00 3,050,000(c,d) 2,927,571
(U.S. Dollar) Sr Nts
05-15-08 13.25 19,600,000(c) 18,620,000
Vialog
Company Guaranty
11-15-01 12.75 22,600,000 19,888,000
Voicestream Wireless
Sr Nts
08-15-06 11.63 32,175,000 33,783,750
Sr Nts Series A
08-15-06 11.63 9,050,000 9,502,500
Total 420,876,827
See accompanying notes to investments in securities.
STRATEGIST INCOME FUND, INC.
<PAGE>
Bonds (continued)
Issuer Coupon Principal Value(a)
rate amount
Computers & office equipment (1.9%)
Concentric Network
Sr Nts
12-15-07 12.75 5,600,000 5,859,000
Cooperative Computing
Sr Sub Nts
02-01-08 9.00 20,250,000 6,885,000
Globix
Sr Nts
02-01-10 12.50 32,575,000(d) 27,525,875
PSINet
Sr Nts
12-01-06 10.50 1,390,000(d) 1,237,100
Verio
Sr Nts
04-01-05 10.38 7,000,000 7,350,000
12-01-08 11.25 11,000,000 12,237,500
Total 61,094,475
Electronics (0.4%)
Metromedia Fiber Network
Sr Nts Series B
11-15-08 10.00 13,750,000 13,096,875
Energy (1.9%)
Clark R&M
Sr Sub Nts
11-15-07 8.88 10,100,000 5,353,000
Energy Corp of America
Sr Sub Nts Series A
05-15-07 9.50 14,900,000 9,945,750
Hurricane Hydrocarbons
(U.S. Dollar) Sr Nts
11-01-04 11.75 11,375,063(b,c,d) 10,763,653
Lodestar Holdings
Company Guaranty
05-15-05 11.50 23,475,000 3,990,750
Ocean Energy
Company Guaranty Series B
07-01-08 8.38 14,000,000 13,160,000
Rayovac
Sr Sub Nts Series B
11-01-06 10.25 11,814,000 12,109,350
See accompanying notes to investments in securities.
ANNUAL REPORT - 2000
<PAGE>
Bonds (continued)
Issuer Coupon Principal Value(a)
rate amount
Roil
(U.S. Dollar)
12-05-02 12.78 4,039,200(c,d) 3,756,456
Total 59,078,959
Energy equipment & services (0.1%)
Seven Seas Petroleum
Sr Nts Series B
05-15-05 12.50 8,000,000 2,000,000
Financial services (2.1%)
AOA Holdings LLC
Sr Nts
06-01-06 10.38 15,500,000 14,880,000
Gemini Inds
12-23-01 13.50 13,567,500(b,i) 1,356,750
Indah Kiat Finance Mauritius
(U.S. Dollar) Company Guaranty
07-01-07 10.00 16,850,000(c) 9,099,000
LaBranche
03-01-07 12.00 20,000,000(d) 19,600,000
RBF Finance
Company Guaranty
03-15-09 11.38 20,775,000 22,333,125
Total 67,268,875
Food (0.6%)
Aurora Foods
Sr Sub Nts Series D
02-15-07 9.88 23,625,000 12,166,875
RAB Enterprises
Company Guaranty
05-01-05 10.50 9,600,000 6,336,000
Total 18,502,875
Health care (0.5%)
Alaris Medical
Zero Coupon Sr Disc Nts
08-01-03 11.12 16,000,000(g) 3,600,000
Alaris Medical Systems
Company Guaranty
12-01-06 9.75 16,450,000 12,255,250
Total 15,855,250
See accompanying notes to investments in securities.
STRATEGIST INCOME FUND, INC.
<PAGE>
Bonds (continued)
Issuer Coupon Principal Value(a)
rate amount
Health care services (2.1%)
Fountain View
Company Guaranty Series B
04-15-08 11.25 8,600,000 4,042,000
Genesis Health Ventures
Sr Sub Nts
10-01-06 9.25 9,725,000(b) 1,361,500
Magellan Health Services
Sr Sub Nts
02-15-08 9.00 23,500,000 8,695,000
Oxford Health Plans
Sr Nts
05-15-05 11.00 21,700,000 22,459,500
Paracelsus Healthcare
Sr Sub Nts
08-15-06 10.00 26,275,000(b) 5,780,500
Physician Sales & Service
Company Guaranty
10-01-07 8.50 9,350,000 8,321,500
Tenet Healthcare
Sr Sub Nts Series B
12-01-08 8.13 17,050,000 15,430,250
Total 66,090,250
Industrial equipment & services (2.1%)
Blount
Company Guaranty
06-15-05 7.00 12,200,000 10,004,000
Fairfield Mfg
Sr Sub Nts
10-15-08 9.63 13,600,000 11,560,000
Grove Holdings/Capital LLC
Zero Coupon
05-01-03 11.63 4,000,000(b,g) 320,000
Grove Inds LLC
05-01-10 14.50 3,590,509(b) 251,336
Laidlaw
(U.S. Dollar)
05-01-05 6.50 7,875,000(c) 1,791,563
Motor & Gears
Sr Nts Series D
11-15-06 10.75 30,500,000 29,584,999
See accompanying notes to investments in securities.
ANNUAL REPORT - 2000
<PAGE>
Bonds (continued)
Issuer Coupon Principal Value(a)
rate amount
Thermadyne Holdings
Zero Coupon
06-01-03 12.50 12,000,000(g) 4,980,000
Thermadyne Mfg
Company Guaranty
06-01-08 9.88 11,000,000 8,635,000
Total 67,126,898
Insurance (0.4%)
Americo Life
Sr Sub Nts
06-01-05 9.25 15,000,000 13,500,000
Leisure time & entertainment (5.6%)
Alliance Atlantis Communications
(U.S. Dollar) Sr Sub Nts
12-15-09 13.00 12,450,000(c) 12,574,500
AMC Entertainment
Sr Sub Nts
03-15-09 9.50 1,700,000 799,000
02-01-11 9.50 14,500,000 6,742,500
Coast Hotels & Casino
Company Guaranty
04-01-09 9.50 13,635,000 12,748,725
Hammons (JQ) Hotels
1st Mtge
02-15-04 8.88 12,000,000 10,530,000
Hollywood Casino Shreveport
1st Mtge
08-01-06 13.00 8,900,000(d) 9,478,500
Icon Health & Fitness
Company Guaranty
09-27-05 12.00 5,550,000(d) 3,330,000
Isle of Capri Casinos/Capital
1st Mtge Series B
08-31-04 13.00 15,750,000 17,167,500
Lodgenet Entertainment
Sr Nts
12-15-06 10.25 15,000,000 14,400,000
Premier Cruises
Sr Nts
03-15-08 11.00 11,000,000(b,h,i) --
See accompanying notes to investments in securities.
STRATEGIST INCOME FUND, INC.
<PAGE>
Bonds (continued)
Issuer Coupon Principal Value(a)
rate amount
Premier Parks
Sr Nts
04-01-06 9.25 10,000,000 9,250,000
06-15-07 9.75 13,650,000 13,001,625
Regal Cinemas
Sr Sub Nts
06-01-08 9.50 21,500,000 8,815,000
12-15-10 8.88 17,250,000 6,210,000
Trump Atlantic City Assn/Funding
1st Mtge Company Guaranty
05-01-06 11.25 37,120,000 26,540,800
Trump Holdings & Funding
Sr Nts
06-15-05 15.50 28,050,000 16,830,000
United Artists Theatres
Series 1995A
07-01-15 9.30 12,912,735 8,470,108
Sr Sub Nts Series B
04-15-08 9.75 27,000,000(b) 1,046,250
Total 177,934,508
Media (8.8%)
Adelphia Communications
Sr Nts
05-01-09 7.88 14,000,000 11,375,000
Sr Nts Series B
02-01-08 8.38 9,500,000 8,170,000
AMFM
Zero Coupon Sr Disc Nts
02-01-02 7.49 8,000,000(g) 7,180,000
AMFM Operating
Pay-in-kind
10-31-06 12.63 6,863,000(j) 7,892,450
Australis Holdings
(U.S. Dollar) Zero Coupon Sr Disc Nts
11-01-00 13.35 17,900,000(b,c,g) 111,875
Australis Media
(U.S. Dollar)
11-01-00 14.00 1,785,504(b,c,i) 1,700,890
05-15-03 15.75 43,969,560(b,c,g) 439,696
Benedek Communications
Zero Coupon Sr Disc Nts
05-15-01 13.89 13,500,000(g) 11,711,250
See accompanying notes to investments in securities.
ANNUAL REPORT - 2000
<PAGE>
Bonds (continued)
Issuer Coupon Principal Value(a)
rate amount
Big City Radio
Zero Coupon Company Guaranty
03-15-01 11.25 10,000,000(g) 5,300,000
Capstar Broadcasting
Sub Deb Pay-in-kind
07-01-09 12.00 5,056,200(j) 5,814,630
Central Euro Media
(U.S. Dollar) Sr Nts
08-15-04 9.38 12,175,000(c) 4,383,000
Charter Communications Holdings/Charter Capital
Sr Nts
04-01-09 10.00 9,600,000(d) 8,760,000
01-15-10 10.25 12,750,000(d) 11,666,250
Charter Communications LLC/Capital
Zero Coupon Sr Disc Nts
04-01-04 14.16 24,650,000(g) 12,787,188
Coaxial Communications/Phoenix
Company Guaranty
08-15-06 10.00 10,000,000 9,562,500
Golden Sky Systems
Company Guaranty Series B
08-01-06 12.38 8,500,000 9,350,000
MDC Communications
(U.S. Dollar) Sr Sub Nts
12-01-06 10.50 16,350,000(c) 15,205,500
Paxson Communications
Sr Sub Nts
10-01-02 11.63 13,500,000 13,770,000
Pegasus Media & Communications
Series B
07-01-05 12.50 15,400,000 16,015,999
Sr Nts Series B
10-15-05 9.63 11,100,000 10,656,000
Price Communications Wireless
Sr Sub Nts
07-15-07 11.75 10,000,000 10,850,000
Radio Unica
Zero Coupon Company Guaranty
08-01-02 11.74 13,000,000(g) 7,995,000
Regional Independent Medical
(U.S. Dollar) Sr Nts
07-01-08 10.50 15,200,000(c) 15,200,000
See accompanying notes to investments in securities.
STRATEGIST INCOME FUND, INC.
<PAGE>
Bonds (continued)
Issuer Coupon Principal Value(a)
rate amount
Sinclair Broadcasting Group
Company Guaranty
07-15-07 9.00 11,500,000 9,890,000
Telemundo Holdings
Zero Coupon Sr Disc Nts Series B
08-15-03 11.50 17,000,000(g) 11,475,000
TeleWest Communications
(U.S. Dollar) Sr Nts
11-01-08 11.25 8,000,000(c) 8,120,000
(U.S. Dollar) Zero Coupon
10-01-00 11.64 7,000,000(c,g) 6,615,000
(U.S. Dollar) Zero Coupon Sr Disc Nts
04-15-04 8.96 13,725,000(c,g) 7,548,750
Veninfotel
(U.S. Dollar) Cv Pay-in-kind
03-01-02 10.00 10,939,556(c,i,j) 16,409,334
WRC Media/Weekly Read/JLC
Sr Sub Nts
11-15-09 12.75 12,500,000(d) 12,015,625
Total 277,970,937
Metals (3.1%)
AK Steel
Company Guaranty
02-15-09 7.88 15,000,000 13,200,000
EnviroSource
Sr Nts
06-15-03 9.75 26,648,000 16,921,480
Great Lakes Acquisition
Zero Coupon Series B
05-15-03 21.06 12,000,000(g) 5,850,000
Great Lakes Carbon
Company Guaranty Pay-in-kind Series B
05-15-08 10.25 6,100,000(j) 5,230,750
Imexsa Export Trust
(U.S. Dollar)
05-31-03 10.13 7,051,896(c,d) 6,875,599
Maxxam Group Holdings
Sr Nts Series B
08-01-03 12.00 12,000,000 11,010,000
Ormet
Company Guaranty
08-15-08 11.00 17,000,000(d) 15,640,000
See accompanying notes to investments in securities.
ANNUAL REPORT - 2000
<PAGE>
Bonds (continued)
Issuer Coupon Principal Value(a)
rate amount
Pen Holdings
Company Guaranty Series B
06-15-08 9.88 8,915,000 7,310,300
Renco Steel Holdings
Sr Nts Series B
02-01-05 10.88 8,500,000 7,490,625
Sheffield Steel
1st Mtge Series B
12-01-05 11.50 10,200,000 7,446,000
Total 96,974,754
Miscellaneous (9.6%)
Adams Outdoor Advertising
Sr Nts
03-15-06 10.75 10,800,000 10,962,000
Advanced Glassfiber Yarn
Sr Sub Nts
01-15-09 9.88 17,720,000 16,169,500
Argo-Tech
Company Guaranty Series D
10-01-07 8.63 13,000,000 8,840,000
Bistro Trust
12-31-02 9.50 10,000,000(d) 9,366,100
Booth Creek Ski Holdings
Sr Nts Series B
03-15-07 12.50 4,500,000 3,251,250
Centaur Mining & Exploration
(U.S. Dollar) Company Guaranty
12-01-07 11.00 11,500,000(c) 10,120,000
Comforce Operating
Sr Nts Series B
12-01-07 12.00 4,750,000 2,660,000
Consolidated Container
07-15-09 10.13 13,500,000 13,162,500
Cybernet Internet Service
Sr Nts
07-01-09 14.00 10,250,000 7,200,625
Dura Operating
Company Guaranty Series B
05-01-09 9.00 9,000,000 7,920,000
ECM Funding LP
06-10-02 11.92 1,078,342(i) 1,062,167
See accompanying notes to investments in securities.
STRATEGIST INCOME FUND, INC.
<PAGE>
Bonds (continued)
Issuer Coupon Principal Value(a)
rate amount
Equinix
12-01-07 13.00 17,000,000(d) 17,510,000
Falcon Products
Company Guaranty Series B
06-15-09 11.38 15,250,000 14,030,000
Great Central Mines
(U.S. Dollar) Sr Nts
04-01-08 8.88 10,000,000(c) 8,950,000
Iron Mountain
Company Guaranty
05-15-08 8.13 25,150,000 21,880,500
ISG Resources
04-15-08 10.00 19,045,000 16,950,050
Knology Holdings
Zero Coupon Sr Disc Nts
10-15-02 12.14 6,600,000(g) 4,092,000
Nationwide Credit
Sr Nts Series A
01-15-08 10.25 4,725,000 3,496,500
Nextel Partners
Zero Coupon Sr Disc Nts
02-01-04 13.78 31,124,000(g) 19,919,360
Norcal Waste Systems
Company Guaranty Series B
11-15-05 13.50 20,300,000 21,162,750
NSM Steel
Company Guaranty
02-01-06 12.00 7,703,284(b,d) 308,131
02-01-08 12.25 11,700,000(b,d) 117,000
Omega Cabinets
Sr Sub Nts
06-15-07 10.50 4,925,000 4,432,500
Outsourcing Solutions
Sr Sub Nts Series B
11-01-06 11.00 37,395,000 32,907,600
Park-Ohio Inds
Sr Sub Nts
12-01-07 9.25 19,025,000 16,742,000
Poland Telecom Finance
(U.S. Dollar) Company Guaranty Series B
12-01-07 14.00 13,200,000(b,c) 3,300,000
SC Intl
09-01-07 9.25 17,650,000 15,929,125
See accompanying notes to investments in securities.
ANNUAL REPORT - 2000
<PAGE>
Bonds (continued)
Issuer Coupon Principal Value(a)
rate amount
Stellex Inds
Sr Sub Nts Series B
11-01-07 9.50 11,450,000(b) 5,739,313
Talton Holdings
Company Guaranty Sr Nts Series B
06-30-07 11.00 3,650,000 3,102,500
Total 301,283,471
Multi-industry conglomerates (1.1%)
Communications & Power Inds
Sr Sub Nts Series B
08-01-05 12.00 10,000,000 7,500,000
Jordan Inds
Sr Nts Series D
08-01-07 10.38 10,660,000 9,753,900
Zero Coupon Sr Sub Debs Series B
04-01-02 11.75 17,692,251(g) 11,323,041
Metromedia Intl Group
Sr Disc Nts Series B
09-30-07 10.50 5,826,000 2,854,740
Prime Succession
Sr Sub Nts
08-15-04 10.75 13,475,000(b) 2,695,000
Total 34,126,681
Paper & packaging (6.3%)
Berry Plastics
Company Guaranty Series C
04-15-04 12.25 3,250,000 3,128,125
Sr Sub Nts Series B
07-15-07 11.00 10,500,000 9,135,000
BPC Holding
Sr Nts Series B
06-15-06 12.50 12,528,000 10,617,480
Crown Paper
Sr Sub Nts
09-01-05 11.00 29,470,000(b) 8,546,300
Doman Inds
(U.S. Dollar) Company Guaranty
07-01-04 12.00 9,750,000(c) 9,896,250
(U.S. Dollar) Sr Nts Series B
11-15-07 9.25 15,475,000(c) 11,683,625
See accompanying notes to investments in securities.
STRATEGIST INCOME FUND, INC.
<PAGE>
Bonds (continued)
Issuer Coupon Principal Value(a)
rate amount
Gaylord Container
Sr Nts
06-15-07 9.75 20,325,000 16,463,250
02-15-08 9.88 6,675,000 4,906,125
Graham Packaging/GPC Capital
Zero Coupon Sr Disc Nts Series B
01-15-03 11.57 6,900,000(g) 3,726,000
Packaging Corp of America
Company Guaranty
04-01-09 9.63 9,905,000 9,706,900
Repap New Brunswick
(U.S. Dollar) Sr Nts
06-01-04 9.00 33,275,000(c) 31,444,875
Riverwood Intl
Company Guaranty
04-01-08 10.88 10,000,000 9,200,000
Company Guaranty Sr Nts
04-01-06 10.25 5,000,000 4,837,500
Silgan Holdings
06-01-09 9.00 13,250,000 12,587,500
Pay-in-kind
07-15-06 13.25 5,621,000(j) 6,211,205
Stone Container
Sr Nts
08-01-16 12.58 9,000,000(k) 9,348,750
Tjiwi Kimia Intl
(U.S. Dollar) Company Guaranty
08-01-01 13.25 7,000,000(c) 5,880,000
Warren (SD)
Pay-in-kind
12-15-06 14.00 27,690,873(j) 30,459,960
Total 197,778,845
Restaurants & lodging (2.3%)
Domino's
Company Guaranty Series B
01-15-09 10.38 14,325,000 13,143,188
Florida Panthers Holdings
Company Guaranty
04-15-09 9.88 11,000,000 10,175,000
MGM Grand
Sr Sub Nts
06-01-07 9.75 30,000,000 29,662,500
See accompanying notes to investments in securities.
ANNUAL REPORT - 2000
<PAGE>
Bonds (continued)
Issuer Coupon Principal Value(a)
rate amount
Prime Hospitality
Sr Sub Nts Series B
04-01-07 9.75 18,700,000 18,045,500
Total 71,026,188
Retail (0.9%)
Dairy Mart Convenience Stores
Sr Sub Nts
03-15-04 10.25 17,675,000 12,991,125
Sr Sub Nts Series B
03-15-04 10.25 6,250,000 4,593,750
Eye Care Centers of America
Company Guaranty
05-01-08 9.13 5,525,000 2,928,250
Flooring America
Company Guaranty
10-15-07 9.25 9,245,000 7,361,331
Total 27,874,456
Textiles & apparel (0.7%)
Anvil Knitwear
Sr Nts Series B
03-15-07 10.88 8,560,000 7,490,000
Galey & Lord
Company Guaranty
03-01-08 9.13 20,050,000 9,774,375
GFSI Holdings
Zero Coupon Sr Disc Nts Series B
09-15-04 10.77 17,300,000(g) 3,979,000
Steel Heddle Group
Zero Coupon Series B
06-01-03 13.74 6,200,000(g) 496,000
Total 21,739,375
Transportation (0.7%)
American Architectural
Company Guaranty
12-01-07 11.75 12,900,000 3,225,000
Global Ocean Carriers
Sr Nts
07-15-07 10.25 13,500,000(b) 6,108,750
See accompanying notes to investments in securities.
STRATEGIST INCOME FUND, INC.
<PAGE>
Bonds (continued)
Issuer Coupon Principal Value(a)
rate amount
Greater Beijing First Expressways
(U.S. Dollar) Sr Nts
06-15-04 9.25 3,500,000(c) 1,120,000
06-15-07 9.50 5,000,000(c) 1,500,000
Hermes Europe RailTel
(U.S. Dollar) Sr Nts
01-15-09 10.38 10,500,000(c) 8,715,000
Total 20,668,750
Utilities -- telephone (7.3%)
Allegiance Telecom
Zero Coupon Sr Disc Nts Series B
02-15-03 11.99 30,450,000(g) 21,467,250
COLT Telecom Group
(U.S. Dollar) Zero Coupon (with warrants)
12-15-01 12.00 8,500,000(c,g) 10,646,250
Energis
(U.S. Dollar)
06-15-09 9.75 8,175,000(c) 7,929,750
Geotek Communications
Cv Sr Sub Nts
02-15-01 12.00 4,135,000(b) 5,169
Intermedia Communications
Zero Coupon Sr Disc Nts
05-15-01 8.36 3,400,000(g) 3,162,000
Zero Coupon Sr Disc Nts Series B
07-15-02 10.65 28,715,000(g) 21,249,100
ITC Deltacom
Sr Nts
03-01-08 8.88 17,250,000 15,525,000
11-15-08 9.75 4,500,000 4,297,500
Level 3 Communications
03-15-08 11.00 20,000,000(d) 19,000,000
McLeod USA
Sr Nts
03-15-08 8.38 980,000 872,200
02-15-09 8.13 13,000,000 11,505,000
Metromedia Fiber Network
Sr Nts
12-15-09 10.00 15,000,000 14,250,000
Nextel Communications
11-15-09 9.38 4,025,000 3,783,500
See accompanying notes to investments in securities.
ANNUAL REPORT - 2000
<PAGE>
Bonds (continued)
Issuer Coupon Principal Value(a)
rate amount
Panamsat Intl Systems
Pay-in-kind
04-15-05 12.75 4,000(j) 4,255
Primus Telecomm Group
Sr Nts
08-01-04 11.75 11,550,000 9,817,500
01-15-09 11.25 4,250,000 3,442,500
Sr Nts Series B
05-15-08 9.88 10,000,000 7,600,000
PSINet
Sr Nts
12-01-06 10.50 16,075,000 14,306,750
RSL Communications
(U.S. Dollar) Company Guaranty
11-15-06 12.25 29,867,000(c) 28,970,990
United Pan-Europe Communications
(U.S. Dollar) Sr Nts
02-01-10 11.25 9,200,000(c,d) 7,866,000
02-01-10 11.50 5,550,000(c,d) 4,773,000
11-01-09 11.25 8,500,000(c,i) 7,225,000
(U.S. Dollar) Sr Nts Series B
08-01-09 11.25 10,200,000(c) 8,466,000
Voicestream Wireless
Sr Nts
09-15-09 11.50 4,865,000(d) 5,108,250
Total 231,272,964
Total bonds
(Cost: $3,027,364,518) $2,499,068,565
</TABLE>
<TABLE>
<CAPTION>
Common stocks (2.3%)
Issuer Shares Value(a)
<S> <C> <C>
Arena Brands 111,111(b,i) $2,999,997
Celcaribe 1,812,990(b,d) 3,172,733
Clearnet Communications CL A 42,240(b,c) 1,214,400
Communications & Power Inds 3,500(b,i) 525,000
Gaylord Container Cl A 1,000,000(b) 4,000,000
Global TeleSystems Group 215,400(b) 2,396,325
Globix 274,912(b) 6,219,884
Intermedia Communications 446,693(b) 11,167,325
Jack in the Box 21,000(b) 521,063
Nextel Communications Cl A 51,056(b) 4,729,062
See accompanying notes to investments in securities.
STRATEGIST INCOME FUND, INC.
<PAGE>
Common stocks (continued)
Issuer Shares Value(a)
OpTel 17,000(b,d) 170
Pagemart Nationwide 50,750(b) 406,000
PhoneTel Technologies 1,786,000(b,l) 753,469
Premier Holdings 814,645(i) 2,647,596
Price Communications 630,000(b) 14,371,875
RCN 7,431(b) 171,377
Specialty Foods 300,000(b) 75,000
Versatel Telecom Intl ADR 225,000(b,c) 7,692,187
Western Wireless Cl A 120,000(b) 5,737,500
Wilshire Financial Services Group 2,412,000(b,l) 3,919,500
Wilshire Real Estate Investment Trust 140,000(b) 310,625
WRC Media 16,912 4,228
Total common stocks
(Cost: $107,119,319) $73,035,316
Preferred stocks & other (12.1%)
Issuer Shares Value(a)
AirGate PCS
Warrants 16,700 $1,077,150
Allegiance Telecom
Warrants 30,450 3,798,638
American Restaurant Group
12.00% Pay-in-kind Series B 4,404(j) 880,800
Warrants 3,500 35
APP Finance II Mauritius Cl B
12.00% 2,380(b,c) 1,142,400
Australis Holdings
Warrants 13,400(b,c) 134
Bar Technologies
Warrants 10,000 6,250
Benedek Communications
11.50% Pay-in-kind 7,000(b,j) 3,850,000
Warrants 70,000 140,000
Bestel
Warrants 4,000 440,000
Birch Telecom
Warrants 14,000 770,000
Cable Satisfaction
Warrants 5,845(c) 5,757,325
Century Maintenance
13.25% Pay-in-kind Series C 145,112(j) 10,593,176
See accompanying notes to investments in securities.
ANNUAL REPORT - 2000
<PAGE>
Preferred stocks & other (continued)
Issuer Shares Value(a)
Clark Materials Handling
13.00% 7,869(b) 984
Communications & Power Inds
14.00% Pay-in-kind Series B 221,112(j) 15,035,638
Concentric Network
13.50% Pay-in-kind Series B 14,468(j) 13,961,620
Crown Packaging
Warrants 10,000(h) --
CSC Holdings
11.13% Pay-in-kind Series M 368,345(j) 39,044,569
11.75% Pay-in-kind Series H 168,715(j) 18,221,220
Cybernet Internet
Warrants 10,250 615,000
Dairy Mart
Warrants 311,333 108,967
Dobson Communications
13.00% Pay-in-kind 12,899(j) 13,801,930
Earthwatch
12.00% Cv 314,426(b,d) 710,603
Fairfield Mfg
11.25% Pay-in-kind 6,580(b,j) 5,592,999
HarCor Energy
Warrants 110,000 55,000
HF Holdings
Warrants 53,125 53,125
Hosiery Corp of America
Warrants 10,000 400,000
Intermedia Communications
7.00% Cv Series F 240,000(b) 4,980,000
13.50% Pay-in-kind Series B 29,479(j) 27,710,260
Intl Wireless Communications
Warrants 14,750 148
Iridium World Communications
Warrants 17,150 172
Jitney-Jungle Stores of America Cl A
15.00% 109,500(b) 136,875
KMC Telecom Holdings
Warrants 12,000 36,000
Knology Holdings
Warrants 11,000 22,000
Nakornthai Strip Mill
Warrants 7,407,184 7
See accompanying notes to investments in securities.
STRATEGIST INCOME FUND, INC.
<PAGE>
Preferred stocks & other (continued)
Issuer Shares Value(a)
Nextel Communications
11.13% Pay-in-kind Series E 14,878(j) $13,687,760
13.00% Pay-in-kind Series D 23,296(j) 24,111,360
NTL
13.00% Pay-in-kind Series B 29,376(j) 29,375,999
Paxson Communications
12.50% Pay-in-kind Exchangeable 273,150(b,j) 27,451,575
Pegasus Communications
12.75% Pay-in-kind 62,500(b,j) 7,414,063
12.75% Pay-in-kind Series A 4,285(b,j) 4,627,800
PLD Telekom
Warrants 4,000(b) 40
Warrants 4,000 200
Poland Telecom
Warrants 13,200(c) 1,650
Primus Telecommunications
Warrants 11,550 323,400
R&B Falcon
Warrants 6,000 2,913,750
RSL Communications
Warrants 9,500 483,313
Rural Cellular
12.25% 20,619(b) 19,536,503
SGW Holding
12.50% Cm Pay-in-kind Series B 149,610(b,i,j) 2,289,033
Cv Series A 87,091(b,i) 783,819
Warrants 2,750(i) 783,338
Sinclair Capital
11.63% 140,000 13,020,000
Telehub Communications
Warrants 12,000 120
Unifi Communications
Warrants 10,000 100
Varde Fund V LP 25,000,000(b,i,m) 25,000,000
Vialog
Warrants 22,600 1,175,200
Wayland Investment Fund LLC 26,000,000(b,i,m) 28,911,480
XM Satellite Radio
14.00% Cv 10,750(d) 9,459,999
Total preferred stocks & other
(Cost: $435,759,616) $380,293,527
</TABLE>
See accompanying notes to investments in securities.
ANNUAL REPORT - 2000
<PAGE>
<TABLE>
<CAPTION>
Short-term securities (3.9%)
Issuer Annualized Amount Value(a)
yield on date payable at
of purchase maturity
U.S. government agencies (1.5%)
Federal Home Loan Bank Disc Nts
<S> <C> <C> <C> <C>
06-21-00 6.01% $2,100,000 $2,092,318
06-30-00 6.21 10,300,000 10,246,954
07-14-00 6.41 9,200,000 9,126,140
Federal Home Loan Mtge Corp Disc Nt
07-11-00 6.49 8,000,000 7,941,324
Federal Natl Mtge Assn Disc Nts
06-01-00 5.94 9,600,000 9,598,314
06-15-00 6.02 200,000 199,479
07-13-00 6.26 8,400,000 8,333,000
Total 47,537,529
Commercial paper (2.1%)
Barton Capital Corp
06-12-00 6.09 8,500,000(f) 8,482,773
CAFCO
06-06-00 6.09 12,200,000(f) 12,187,515
Corporate Receivables
06-19-00 6.11 600,000(f) 598,046
CXC
07-20-00 6.63 10,500,000(f) 10,400,986
Falcon Asset
07-13-00 6.58 9,800,000(f) 9,722,310
Fleet Funding
06-09-00 6.09 8,500,000(f) 8,487,080
Ford Motor Credit
06-02-00 6.04 4,100,000 4,098,579
Paccar Financial
06-06-00 6.26 1,000,000 998,958
Procter & Gamble
06-08-00 6.09 900,000 898,750
Variable Funding Capital
07-20-00 6.64 9,400,000(f) 9,311,358
Total 65,186,355
See accompanying notes to investments in securities.
STRATEGIST INCOME FUND, INC.
<PAGE>
Short-term securities (continued)
Issuer Annualized Amount Value(a)
yield on date payable at
of purchase maturity
Letter of credit (0.3%)
Bank of America-
AES Hawaii
07-28-00 6.53 9,800,000 9,691,887
Total short-term securities
(Cost: $122,458,276) $122,415,771
Total investments in securities
(Cost: $3,692,701,729)(n) $3,074,813,179
See accompanying notes to investments in securities.
</TABLE>
ANNUAL REPORT - 2000
<PAGE>
Notes to investments in securities
(a) Securities are valued by procedures described in Note 1 to the financial
statements.
(b) Non-income producing. For long-term debt securities, item identified is in
default as to payment of interest and/or principal.
(c) Foreign security values are stated in U.S. dollars. For debt securities,
principal amounts are denominated in the currency indicated. As of May 31, 2000,
the value of foreign securities represented 12.60% of net assets.
(d) Represents a security sold under Rule 144A, which is exempt from
registration under the Securities Act of 1933, as amended. This security has
been determined to be liquid under guidelines established by the board.
(e) Adjustable rate mortgage; interest rate varies to reflect current market
conditions; rate shown is the effective rate on May 31, 2000.
(f) Commercial paper sold within terms of a private placement memorandum, exempt
from registration under Section 4(2) of the Securities Act of 1933, as amended,
and may be sold only to dealers in that program or other "accredited investors."
This security has been determined to be liquid under guidelines established by
the board.
(g) For those zero coupon bonds that become coupon paying at a future date, the
interest rate disclosed represents the annualized effective yield from the date
of acquisition to interest reset date disclosed.
(h) Negligible market value.
<TABLE>
<CAPTION>
(i) Identifies issues considered to be illiquid as to their marketability (see
Note 1 to the financial statements). Information concerning such security
holdings at May 31, 2000, is as follows:
Security Acquisition Cost
dates
Arena Brands
<S> <C> <C> <C>
Common 09-03-92 $5,888,888
Australis Media
14.00% 2000 12-17-97 thru 06-11-99 1,224,992
Communications & Power Inds
Common 08-17-95 350,000
ECM Funding LP
11.92% 20020 4-13-92 thru 12-10-99 1,078,342
Gemini Inds
13.50% 2001 05-24-00 thru 05-25-00 13,554,000
Premier Cruises*
11.00% 2008 03-06-98 thru 03-13-98 10,706,600
Premier Holdings
Common 07-19-99 10,706,600
STRATEGIST INCOME FUND, INC.
<PAGE>
Security Acquisition Cost
dates
SGW Holding
12.50% Pay-in-kind Series B 08-12-97 thru 05-07-99 2,402,023
Cv Series A 08-12-97 899,998
Warrants 08-12-97 867,900
United Pan-Europe Communications*
(U.S. Dollar) 11.25% Sr Nts 2009 10-22-99 8,437,270
Varde Fund V LP 04-27-00 thru 04-28-00 25,000,000
Veninfotel
(U.S. Dollar) 10.00% Cv Pay-in-kind 2002 03-05-97 thru 03-09-00 10,939,556
Wayland Investment Fund LLC 05-17-00 28,911,480
*Represents a security sold under Rule 144A, which is exempt from registration
under the Securities Act of 1933, as amended.
</TABLE>
<TABLE>
<CAPTION>
(j) Pay-in-kind securities are securities in which the issuer makes interest or
dividend payments in cash or in additional securities. The securities usually
have the same terms as the original holdings.
(k) Interest rate varies either based on a predetermined schedule or to reflect
current market conditions; rate shown is the effective rate on May 31, 2000.
(l) Investments representing 5% or more of the outstanding voting securities of
the issuer. Transactions with companies that are or were affiliates during the
year ended May 31, 2000 are as follows:
Issuer Beginning Purchase Sales Ending Dividend Value(a)
cost cost cost cost income
PhoneTel
<S> <C> <C> <C> <C> <C> <C>
Technologies* $-- $23,769,375 $-- $23,769,375 $-- $753,469
Wilshire Financial
Services Group* -- 25,203,750 -- 25,203,750 -- 3,919,500
Total $-- $48,973,125 $-- $48,973,125 $-- $4,672,969
*Issuer was not an affiliate for the entire year ended May 31, 2000.
</TABLE>
(m) The share amounts for Limited Liability Companies (LLC) and Limited
Partnerships (LP) represent capital contributions.
(n) At May 31, 2000, the cost of securities for federal income tax purposes was
$3,693,707,051 and the aggregate gross unrealized appreciation and depreciation
based on that cost was:
Unrealized appreciation $63,855,670
Unrealized depreciation (682,749,542)
------------
Net unrealized depreciation $(618,893,872)
ANNUAL REPORT - 2000
<PAGE>
Independent Auditors' Report
THE BOARD OF TRUSTEES AND UNITHOLDERS INCOME TRUST
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments in securities, of Quality Income Portfolio (a series
of Income Trust) as of May 31, 2000, and the related statement of operations for
the year then ended and the statements of changes in net assets for each of the
years in the two-year period ended May 31, 2000. These financial statements are
the responsibility of portfolio management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of May
31, 2000, by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Quality Income Portfolio as of
May 31, 2000, and the results of its operations and the changes in its net
assets for the periods stated in the first paragraph above, in conformity with
accounting principles generally accepted in the United States of America.
KPMG LLP
Minneapolis, Minnesota
July 7, 2000
STRATEGIST INCOME FUND, INC.
<PAGE>
<TABLE>
<CAPTION>
Financial Statements
Statement of assets and liabilities
Quality Income Portfolio
May 31, 2000
Assets
Investments in securities, at value (Note 1)
<S> <C> <C>
(identified cost $1,393,024,112) $1,335,991,548
Dividends and accrued interest receivable 17,622,509
Receivable for investment securities sold 40,766,818
Unrealized appreciation on foreign currency contracts held, at value
(Notes 1 and 5) 974
---
Total assets 1,394,381,849
-------------
Liabilities
Disbursements in excess of cash on demand deposit 4,017,153
Payable for investment securities purchased 85,541,048
Accrued investment management services fee 18,318
Other accrued expenses 44,895
------
Total liabilities 89,621,414
----------
Net assets $1,304,760,435
==============
See accompanying notes to financial statements.
</TABLE>
ANNUAL REPORT - 2000
<PAGE>
<TABLE>
<CAPTION>
Statement of operations
Quality Income Portfolio
Year ended May 31, 2000
Investment income
Income:
<S> <C>
Dividends $ 807,500
Interest 102,084,037
-----------
Total income 102,891,537
Expenses (Note 2):
Investment management services fee 7,488,279
Compensation of board members 10,474
Custodian fees 80,550
Audit fees 31,500
Other 14,354
------
Total expenses 7,625,157
Earnings credits on cash balances (Note 2) (4,760)
------
Total net expenses 7,620,397
---------
Investment income (loss) -- net 95,271,140
----------
Realized and unrealized gain (loss) -- net Net realized gain (loss) on:
Security transactions (Note 3) (16,996,675)
Financial future contracts 3,664,722
Foreign currency transactions 387,420
-------
Net realized gain (loss) on investments (12,944,533)
Net change in unrealized appreciation (depreciation) on investments
and on translation of assets and liabilities in foreign currencies (65,492,632)
-----------
Net gain (loss) on investments and foreign currencies (78,437,165)
-----------
Net increase (decrease) in net assets resulting from operations $ 16,833,975
============
See accompanying notes to financial statements.
</TABLE>
STRATEGIST INCOME FUND, INC.
<PAGE>
<TABLE>
<CAPTION>
Statements of changes in net assets
Quality Income Portfolio
Year ended May 31, 2000 1999
Operations
<S> <C> <C>
Investment income (loss) -- net $ 95,271,140 $ 100,906,199
Net realized gain (loss) on investments (12,944,533) 41,663,256
Net change in unrealized appreciation (depreciation) on investments
and on translation of assets and liabilities in foreign currencies (65,492,632) (78,170,119)
----------- -----------
Net increase (decrease) in net assets resulting from operations 16,833,975 64,399,336
Net contributions (withdrawals) from partners (289,912,100) (93,477,216)
------------ -----------
Total increase (decrease) in net assets (273,078,125) (29,077,880)
Net assets at beginning of year 1,577,838,560 1,606,916,440
------------- -------------
Net assets at end of year $1,304,760,435 $1,577,838,560
============== ==============
See accompanying notes to financial statements.
</TABLE>
ANNUAL REPORT - 2000
<PAGE>
Notes to Financial Statements
Quality Income Portfolio
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Quality Income Portfolio (the Portfolio) is a series of Income Trust (the Trust)
and is registered under the Investment Company Act of 1940 (as amended) as a
diversified, open-end management investment company. The Portfolio invests
primarily in investment-grade bonds. The Declaration of Trust permits the
Trustees to issue non-transferable interests in the Portfolio.
The Portfolio's significant accounting policies are summarized below:
Use of estimates
Preparing financial statements that conform to accounting principles generally
accepted in the United States of America requires management to make estimates
(e.g., on assets and liabilities) that could differ from actual results.
Valuation of securities
All securities are valued at the close of each business day. Securities traded
on national securities exchanges or included in national market systems are
valued at the last quoted sales price. Debt securities are generally traded in
the over-the-counter market and are valued at a price that reflects fair value
as quoted by dealers in these securities or by an independent pricing service.
Securities for which market quotations are not readily available are valued at
fair value according to methods selected in good faith by the board. Short-term
securities maturing in more than 60 days from the valuation date are valued at
the market price or approximate market value based on current interest rates;
those maturing in 60 days or less are valued at amortized cost.
STRATEGIST INCOME FUND, INC.
<PAGE>
Option transactions
To produce incremental earnings, protect gains and facilitate buying and selling
of securities for investments, the Portfolio may buy and write options traded on
any U.S. or foreign exchange or in the over-the-counter market where completing
the obligation depends upon the credit standing of the other party. The
Portfolio also may buy and sell put and call options and write covered call
options on portfolio securities as well as write cash-secured put options. The
risk in writing a call option is that the Portfolio gives up the opportunity for
profit if the market price of the security increases. The risk in writing a put
option is that the Portfolio may incur a loss if the market price of the
security decreases and the option is exercised. The risk in buying an option is
that the Portfolio pays a premium whether or not the option is exercised. The
Portfolio also has the additional risk of being unable to enter into a closing
transaction if a liquid secondary market does not exist.
Option contracts are valued daily at the closing prices on their primary
exchanges and unrealized appreciation or depreciation is recorded. The Portfolio
will realize a gain or loss when the option transaction expires or closes. When
options on debt securities or futures are exercised, the Portfolio will realize
a gain or loss. When other options are exercised, the proceeds on sales for a
written call option, the purchase cost for a written put option or the cost of a
security for a purchased put or call option is adjusted by the amount of premium
received or paid.
Futures transactions
To gain exposure to or protect itself from market changes, the Portfolio may buy
and sell financial futures contracts traded on any U.S. or foreign exchange. The
Portfolio also may buy and write put and call options on these futures
contracts. Risks of entering into futures contracts and related options include
the possibility of an illiquid market and that a change in the value of the
contract or option may not correlate with changes in the value of the underlying
securities.
Upon entering into a futures contract, the Portfolio is required to deposit
either cash or securities in an amount (initial margin) equal to a certain
percentage of the contract value. Subsequent payments (variation margin) are
made or received by the Portfolio each day. The variation margin payments are
equal to the daily changes in the contract value and are recorded as unrealized
gains and losses. The Portfolio recognizes a realized gain or loss when the
contract is closed or expires.
ANNUAL REPORT - 2000
<PAGE>
Foreign currency translations and foreign currency contracts
Securities and other assets and liabilities denominated in foreign currencies
are translated daily into U.S. dollars. Foreign currency amounts related to the
purchase or sale of securities and income and expenses are translated at the
exchange rate on the transaction date. The effect of changes in foreign exchange
rates on realized and unrealized security gains or losses is reflected as a
component of such gains or losses. In the statement of operations, net realized
gains or losses from foreign currency transactions, if any, may arise from sales
of foreign currency, closed forward contracts, exchange gains or losses realized
between the trade date and settlement date on securities transactions, and other
translation gains or losses on dividends, interest income and foreign
withholding taxes.
The Portfolio may enter into forward foreign currency exchange contracts for
operational purposes and to protect against adverse exchange rate fluctuation.
The net U.S. dollar value of foreign currency underlying all contractual
commitments held by the Portfolio and the resulting unrealized appreciation or
depreciation are determined using foreign currency exchange rates from an
independent pricing service. The Portfolio is subject to the credit risk that
the other party will not complete its contract obligations.
Securities purchased on a when-issued basis
Delivery and payment for securities that have been purchased by the Portfolio on
a forward-commitment or when-issued basis can take place one month or more after
the transaction date. During this period, such securities are subject to market
fluctuations, and they may affect the Portfolio's gross net assets the same as
owned securities. The Portfolio designates cash or liquid high-grade debt
securities at least equal to the amount of its commitment. As of May 31, 2000,
the Portfolio had entered into outstanding when-issued or forward-commitments of
$43,762,057.
The Portfolio also enters into transactions to sell purchase commitments to
third parties at current market values and concurrently acquires other purchase
commitments for similar securities at later dates. As an inducement for the
Portfolio to "roll over" its purchase commitments, the Portfolio receives
negotiated amounts in the form of reductions of the purchase price of the
commitment.
Federal taxes
For federal income tax purposes the Portfolio qualifies as a partnership and
each investor in the Portfolio is treated as the owner of its proportionate
share of the net assets, income, expenses and realized and unrealized gains and
losses of the Portfolio. As a "pass-through" entity, the Portfolio therefore
does not pay any income dividends or capital gain distributions.
STRATEGIST INCOME FUND, INC.
<PAGE>
Other
Security transactions are accounted for on the date securities are purchased or
sold. Dividend income is recognized on the ex-dividend date or upon receipt of
ex-dividend notification in the case of certain foreign securities. Interest
income, including level-yield amortization of premium and discount, is accrued
daily.
2. FEES AND EXPENSES
The Trust, on behalf of the Portfolio, has an Investment Management Services
Agreement with AEFC to manage its portfolio. Under this agreement, AEFC
determines which securities will be purchased, held or sold. The management fee
is a percentage of the Portfolio's average daily net assets in reducing
percentages from 0.52% to 0.395% annually.
Under the agreement, the Trust also pays taxes, brokerage commissions and
nonadvisory expenses, which include custodian fees, audit and certain legal
fees, fidelity bond premiums, registration fees for units, office expenses,
consultants' fees, compensation of trustees, corporate filing fees, expenses
incurred in connection with lending securities of the Portfolio and any other
expenses properly payable by the Trust or Portfolio and approved by the board.
During the year ended May 31, 2000, the Portfolio's custodian fees were reduced
by $4,760 as a result of earnings credits from overnight cash balances. The
Portfolio also pays custodian fees to American Express Trust Company, an
affiliate of AEFC.
According to a Placement Agency Agreement, American Express Financial
Advisors Inc. acts as placement agent of the Trust's units.
3. SECURITIES TRANSACTIONS
Cost of purchases and proceeds from sales of securities (other than short-term
obligations) aggregated $853,515,406 and $979,604,975, respectively, for the
year ended May 31, 2000. For the same period, the portfolio turnover rate was
62%. Realized gains and losses are determined on an identified cost basis.
ANNUAL REPORT - 2000
<PAGE>
4. INTEREST RATE FUTURES CONTRACTS
As of May 31, 2000, investment is securities included securities valued at
$13,306,920 that were pledged as collateral to cover initial margin deposit on
760 open sales contracts. The market value of the open sales contracts as of May
31, 2000, was $73,206,252 with a net unrealized loss of $807,104. See "Summary
of significant accounting policies."
5. FOREIGN CURRENCY CONTRACTS
As of May 31 , 2000, the Portfolio has a foreign currency exchange contract that
obligates it to deliver currency at a specified future date. The unrealized
appreciation and/or depreciation on this contract is included in the
accompanying financial statements. See "Summary of significant accounting
policies." The terms of the open contract are as follows:
Exchange date Currency to Currency to Unrealized Unrealized
be delivered be received appreciation depreciation
June 5, 2000 539,254 575,901 $974 $--
U.S. Dollar European Monetary Unit
Total $974 $--
STRATEGIST INCOME FUND, INC.
<PAGE>
<TABLE>
<CAPTION>
Investments in Securities
Quality Income Portfolio
May 31, 2000
(Percentages represent value of investments compared to net assets)
Bonds (96.1%)
Issuer Coupon Principal Value(a)
rate amount
Government obligations (29.4%)
Federal Republic of Germany
(European Monetary Unit)
<S> <C> <C> <C> <C> <C>
11-11-04 7.50% 11,000,000(c) $11,113,776
Overseas Private Investment
U.S. Govt Guaranty Series 1996A
01-15-09 6.99 9,444,413 9,225,964
People's Republic of China
(U.S. Dollar)
01-15-96 9.00 10,000,000(c) 9,623,940
Resolution Funding Corp
Zero Coupon
04-15-16 8.13 47,000,000(j) 16,311,350
U.S. Treasury
08-15-00 6.00 11,400,000 11,405,358
11-15-01 7.50 72,000,000 72,686,159
02-15-04 5.88 8,000,000 7,806,240
05-15-04 7.25 25,000,000 25,507,750
08-15-04 7.25 26,800,000 27,407,288
05-15-06 6.88 31,150,000 31,602,610
11-15-16 7.50 138,370,000(h) 153,439,877
TIPS
01-15-07 3.38 8,050,000(g) 8,269,089
Total 384,399,401
Mortgage-backed securities (32.1%)
Federal Home Loan Mtge Corp
11-01-14 7.50 9,845,504 9,711,687
04-01-15 7.50 21,670,015 21,375,483
07-01-16 8.00 409 410
01-01-17 8.00 3,015 3,001
03-01-17 8.50 79,253 80,392
06-01-17 8.50 48,241 48,874
See accompanying notes to investments in securities.
ANNUAL REPORT - 2000
<PAGE>
Bonds (continued)
Issuer Coupon Principal Value(a)
rate amount
04-01-20 9.00 923,118 949,372
04-01-21 9.00 720,525 743,041
03-01-22 8.50 1,672,023 1,699,194
08-01-22 8.50 1,638,968 1,666,634
06-01-24 7.50 7,374,552 7,206,338
02-01-25 8.00 2,897,497 2,886,631
Collateralized Mtge Obligation
09-01-19 8.50 82,382 83,489
Federal Housing Admin
01-01-24 7.43 8,236,055 7,521,835
Federal Natl Mtge Assn
11-01-02 10.00 64 66
06-15-09 6.38 50,000,000 46,193,999
04-01-14 5.50 2,650,000 2,412,023
04-01-14 6.50 16,831,890 15,997,194
12-01-14 5.50 10,000,000 9,101,974
06-01-15 6.50 15,000,000(b) 14,235,938
10-01-23 6.50 7,466,128 6,980,830
11-01-26 8.00 5,019,049 4,984,518
04-01-27 7.50 6,606,505 6,435,133
06-01-27 7.50 7,152,290 6,964,542
07-01-27 8.00 5,669,397 5,630,024
01-01-28 6.50 2,720,951 2,524,526
05-01-28 6.50 16,675,505 15,445,687
12-01-28 6.50 17,813,620 16,477,598
02-01-29 6.50 18,040,081 16,687,075
03-01-29 6.00 3,854,954 3,459,821
03-01-29 6.50 14,204,300 13,148,772
05-01-29 6.00 978,312 878,035
06-01-29 7.00 20,341,050 19,307,977
07-01-29 6.00 14,641,299 13,140,566
09-01-29 7.00 20,169,863 19,145,484
11-01-29 7.00 19,719,247 18,702,522
12-01-29 7.50 19,724,414 19,171,638
01-01-30 8.00 5,972,427 5,926,301
02-01-30 8.00 19,647,392 19,495,650
07-01-30 8.00 30,000,000(b) 29,690,624
Collateralized Mtge Obligation
10-25-19 8.50 1,448,659 1,477,033
See accompanying notes to investments in securities.
STRATEGIST INCOME FUND, INC.
<PAGE>
Bonds (continued)
Issuer Coupon Principal Value(a)
rate amount
Principal Only
09-01-18 9.50 387,285(f) 294,609
Trust Series Z
02-25-24 6.00 24,711,753(i) 20,051,364
Govt Natl Mtge Assn
05-15-26 7.50 9,844,036 9,681,019
Prudential Bache
Collateralized Mtge Obligation
04-01-19 7.97 1,956,931 1,955,816
Total 419,574,739
Automotive & related (1.9%)
Daimler-Benz North America
Company Guaranty Medium-term Nts Series A
09-15-06 7.38 18,745,000 18,168,591
General Motors
05-15-03 8.88 7,050,000 7,264,179
Total 25,432,770
Banks and savings & loans (5.5%)
ABN-Amro Bank
Sub Nts Series B
05-15-23 7.75 12,000,000 11,150,400
Bank of America
Sub Nts
11-01-01 9.25 8,950,000 9,162,831
Bayerische Landesbank
Deposit Nts
02-26-01 5.63 13,750,000 13,585,413
Cullen/Frost Capital
Series A
02-01-27 8.42 10,000,000 8,779,200
Morgan (JP)
Sr Sub Medium-term Nts Series A
02-15-12 4.00 9,350,000(l) 8,082,701
NCNB
Sub Nts
10-15-01 9.13 10,000,000 10,197,700
Sanwa Finance Aruba
(U.S. Dollar)
07-15-09 8.35 12,000,000(c) 11,671,764
Total 72,630,009
See accompanying notes to investments in securities.
ANNUAL REPORT - 2000
<PAGE>
Bonds (continued)
Issuer Coupon Principal Value(a)
rate amount
Building materials & construction (0.4%)
Foster Wheeler
11-15-05 6.75 5,850,000 4,783,188
Chemicals (0.9%)
Dow Chemical
01-15-09 5.97 12,755,000 11,336,032
Communications equipment & services (0.7%)
Telekom Malaysia
(U.S. Dollar)
08-01-25 7.88 10,000,000(c,d) 8,612,950
Electronics (0.7%)
Hyundai Semiconductor
(U.S. Dollar) Sr Nts
05-15-07 8.63 10,800,000(c,d) 9,230,727
Energy (3.5%)
PDV America
Sr Nts
08-01-03 7.88 16,500,000 15,453,454
Phillips Petroleum
03-15-28 7.13 12,000,000 9,724,176
Texaco Capital
Gtd Deb
03-01-43 7.50 12,000,000 10,800,480
USX-Marathon Group
05-15-22 9.38 9,200,000 9,725,578
Total 45,703,688
Financial services (1.5%)
Marlin Water Trust
Sr Nts
12-15-01 7.09 8,300,000 8,176,479
Railcar Leasing LLC
01-15-13 7.13 12,150,000(d) 11,703,852
Total 19,880,331
See accompanying notes to investments in securities.
STRATEGIST INCOME FUND, INC.
<PAGE>
Bonds (continued)
Issuer Coupon Principal Value(a)
rate amount
Health care services (2.0%)
AETNA Services
08-15-03 6.38 13,650,000 13,010,907
HEALTHSOUTH
Sr Nts
06-15-08 7.00 11,150,000 8,885,926
Service Corp Intl
03-15-08 6.50 9,550,000 4,631,750
Total 26,528,583
Industrial equipment & services (1.1%)
ARAMARK Services
08-01-04 6.75 15,000,000 13,958,025
Insurance (4.2%)
Arkwright CSN Trust
08-15-26 9.63 11,000,000(d) 10,914,948
Conseco
Medium-term Nts Series B
06-21-01 7.60 10,000,000 7,350,000
Nationwide CSN Trust
02-15-25 9.88 11,500,000(d) 11,900,453
SAFECO Capital
Company Guaranty
07-15-37 8.07 15,000,000 12,177,960
SunAmerica
08-01-08 9.95 11,000,000 12,227,523
Total 54,570,884
Media (0.9%)
Cox Enterprises
06-14-02 6.63 12,000,000(d) 11,714,040
Metals (0.8%)
Alcan Aluminum
(U.S. Dollar)
01-15-22 8.88 9,600,000(c) 9,885,984
Miscellaneous (0.1%)
Jasmine Submarine Telecom
Sr Nts
05-30-11 8.48 1,372,928(d) 1,240,193
See accompanying notes to investments in securities.
ANNUAL REPORT - 2000
<PAGE>
Bonds (continued)
Issuer Coupon Principal Value(a)
rate amount
Retail (2.0%)
Dayton Hudson
06-15-23 7.88 18,850,000 17,062,832
Wal-Mart CRAVE Trust
07-17-06 7.00 8,757,418(d) 8,433,569
Total 25,496,401
Transportation (1.3%)
Burlington Northern Santa Fe
12-15-25 7.00 10,000,000 8,439,870
Enterprise Rent-A-Car USA Finance
02-15-08 6.80 10,000,000(d) 8,901,400
Total 17,341,270
Utilities -- electric (3.5%)
Arizona Public Service
1st Mtge Sale Lease-backed Obligation
12-30-15 8.00 9,000,000 8,401,860
Edison Mission Energy
Sr Nts
06-15-09 7.73 8,600,000 8,019,775
Israel Electric
(U.S. Dollar) Sr Nts
12-15-26 7.88 9,000,000(c,d) 7,987,140
Korea Electric Power
(U.S. Dollar) Zero Coupon
04-01-16 10.07 35,000,000(c,k) 5,709,445
Salton Sea Funding
Series C
05-30-10 7.84 10,000,000 9,634,400
Wisconsin Electric Power
12-01-95 6.88 8,000,000 6,352,160
Total 46,104,780
See accompanying notes to investments in securities.
STRATEGIST INCOME FUND, INC.
<PAGE>
Bonds (continued)
Issuer Coupon Principal Value(a)
rate amount
Utilities -- gas (0.7%)
El Paso Energy
Sr Nts Series B
07-15-01 6.63 8,675,000 8,529,000
Utilities -- telephone (2.8%)
GTE Florida
02-01-28 6.86 12,450,000 10,332,380
New York Telephone
07-15-31 9.38 14,000,000 14,239,540
U S WEST Capital Funding
Company Guaranty
08-15-01 6.88 12,000,000 11,876,640
Total 36,448,560
Total bonds
(Cost: $1,310,584,633) $1,253,401,555
Preferred stock (0.7%)
Issuer Shares Value(a)
Salomon Income Financing Trust
9.50% 340,000 $8,670,000
Total preferred stock
(Cost: $8,500,000) $8,670,000
See accompanying notes to investments in securities.
ANNUAL REPORT - 2000
<PAGE>
Short-term securities (5.7%)
Issuer Annualized Amount Value(a)
yield on date payable at
of purchase maturity
U.S. government agencies (5.2%)
Federal Home Loan Bank Disc Nts
06-09-00 5.95% $18,500,000 $18,472,527
07-21-00 6.45 500,000 495,325
Federal Home Loan Mtge Corp Disc Nts
06-22-00 6.03 13,700,000 13,646,649
07-11-00 6.48 10,700,000 10,621,643
07-14-00 6.45 14,900,000 14,783,447
Federal Natl Mtge Assn Disc Nt
07-17-00 6.46 9,600,000 9,516,277
Total 67,535,868
Commercial paper (0.5%)
Ciesco LP
07-25-00 6.63 1,000,000 989,978
Fleet Funding
06-09-00 6.09 1,900,000(e) 1,897,112
Kimberly Clark
06-05-00 6.11 3,500,000(e) 3,497,035
Total 6,384,125
Total short-term securities
(Cost: $73,939,479) $73,919,993
Total investments in securities
(Cost: $1,393,024,112)(m) $1,335,991,548
</TABLE>
Notes to investments in securities
(a) Securities are valued by procedures described in Note 1 to the financial
statements.
(b) At May 31, 2000, the cost of securities purchased, including interest
purchased, on a when-issued basis was $43,762,057.
(c) Foreign security values are stated in U.S. dollars. For debt securities,
principal amounts are denominated in the currency indicated. As of May 31, 2000,
the value of foreign securities represented 5.66% of net assets.
(d) Represents a security sold under Rule 144A, which is exempt from
registration under the Securities Act of 1933, as amended. This security has
been determined to be liquid under guidelines established by the board.
STRATEGIST INCOME FUND, INC.
<PAGE>
(e) Commercial paper sold within terms of a private placement memorandum, exempt
from registration under Section 4(2) of the Securities Act of 1933, as amended,
and may be sold only to dealers in that program or other "accredited investors."
This security has been determined to be liquid under guidelines established by
the board.
(f) Principal-only represents securities that entitle holders to receive only
principal payments on the underlying mortgages. The yield to maturity of a
principal-only is sensitive to the rate of principal payments on the underlying
mortgage assets. A slow (rapid) rate of principal repayments may have an adverse
(positive) effect on yield to maturity. Interest rate disclosed represents
original yield based upon the estimated timing of future cash flows.
(g) U.S. Treasury inflation-protection securities (TIPS) are securities in which
the principal amount is adjusted for inflation and the semiannual interest
payments equal a fixed percentage of the inflation-adjusted principal amount.
(h) Partially pledged as initial deposit on the following open interest rate
futures contracts (see Note 4 to the financial statements):
Type of security Notional amount
Sale contracts U.S. Treasury Bonds, Sept. 2000 $36,000,000
U.S. Treasury Notes, June 2000, 10-year 40,000,000
(i) This security is a collateralized mortgage obligation that pays no interest
or principal during its initial accrual period until previous series within the
trust have been paid off. Interest is accrued at an effective yield; similar to
a zero coupon bond.
(j) For zero coupon bonds, the interest rate disclosed represents the annualized
effective yield on the date of acquisition.
(k) For those zero coupon bonds that become coupon paying at a future date, the
interest rate disclosed represents the annualized effective yield from the date
of acquisition to interest reset date disclosed.
(l) Interest rate varies either based on a predetermined schedule or to reflect
current market conditions; rate shown is the effective rate on May 31, 2000.
(m) At May 31, 2000, the cost of securities for federal income tax purposes was
$1,393,935,024 and the aggregate gross unrealized appreciation and depreciation
based on that cost was:
Unrealized appreciation $5,995,962
Unrealized depreciation (63,939,438)
-----------
Net unrealized depreciation $(57,943,476)
ANNUAL REPORT - 2000
<PAGE>
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<PAGE>
Distributed by American Express Financial Advisors Inc. Member NASD.
American Express Company is separate from American Express Financial Advisors
Inc. and is not a broker-dealer.
S-6148 E (7/00)
