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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No.
Post-Effective Amendment No. 1 X
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 3 (File No. 811-7403) X
STRATEGIST GROWTH AND INCOME FUND, INC.
(formerly Express Direct Growth and Income Fund, Inc.)
IDS Tower 10, Minneapolis, Minnesota 55440-0010
Eileen J. Newhouse - IDS Tower 10,
Minneapolis, Minnesota 55440-0010
(612) 671-2772
It is proposed that this filing will become effective (check
appropriate box)
_____immediately upon filing pursuant to paragraph (b)
__X__on Nov. 29, 1996 pursuant to paragraph (b)
_____60 days after filing pursuant to paragraph (a)(i)
_____on (date) pursuant to paragraph (a)(i)
_____75 days after filing pursuant to paragraph (a)(ii)
_____on (date) pursuant to paragraph (a)(ii) of rule 485.
If appropriate, check the following box:
_____this post-effective amendment designates a new effective date
for a previously filed post-effective amendment.
The Registrant has registered an indefinite number or amount of
securities under the Securities Act of 1933 pursuant to Rule 24f of
the Investment Company Act of 1940. Registrant's most recent 24f-2
notice will be submitted on or about Nov. 29, 1996.
Growth and Income Trust has also executed this Amendment to the
Registration Statement.
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<TABLE><CAPTION>
Cross reference sheet for the Fund showing the location in its prospectus and the Statement of Additional Information of the
information called for by the items enumerated in Parts A and B of Form N-1A.
Negative answers omitted from prospectus are so indicated.
<S> <C> <S> <C>
PART A PART B
Section Section in
Item No. in Prospectus Item No. Statement of Additional Information
1 Cover page of prospectus 10 Cover page of SAI
2(a) The Funds in brief; Fund 11 Table of Contents
expenses
(b) The Funds in brief; Fund 12 NA
expenses
(c) The Funds in brief; Fund 13(a) Additional Investment Policies; all
expenses appendices except Dollar-Cost Averaging
(b) Additional Investment Policies
3(a) Financial Highlights (c) Additional Investment Policies
(b) NA (d) Security Transactions
(c) Performance
(d) Financial Highlights 14(a) Board Members and Officers
(b) Board Members and Officers
4(a) The Funds in brief; Investment policies (c) Board Members and Officers
and risks; How the Funds and Portfolios
are organized 15(a) NA
(b) Investment policies and risks (b) NA
(c) Investment policies and risks (c) Board Members and Officers
5(a) Board members and officers 16(a)(i) How the Funds and Portfolios are organized**;
About the Advisor
(b)(i) Manager and distributor; About the Advisor (a)(ii) Agreements: Investment Management Services
(b)(ii) Investment manager; Administrator and Agreement, Plan and Agreement
transfer agent of Distribution/Distribution Agreement
(b)(iii) Investment manager (a)(iii) NA
(c) Portfolio managers (b) NA
(d) Administrator and transfer agent (c) NA
(e) Administrator and transfer agent (d) Agreements: Administrative Services Agreement
(f) Investment manager; Administrator and (e) NA
transfer agent; Distributor (f) Agreements: Plan and Agreement of
(g) About the Advisor Distribution/Distribution Agreement
(g) NA
5A(a) * (h) Custodian; Independent Auditors
(b) * (i) Agreements: Transfer Agency Agreement; Custodian
6(a) Shares; Voting rights 17(a) Security Transactions
(b) NA (b) Brokerage Commissions Paid to Brokers Affiliated
(c) NA with American Express Financial Corporation
(d) NA (c) Security Transactions
(e) Cover page; Special shareholder services (d) Security Transactions
(f) Dividend and capital gain distributions; (e) Security Transactions
Reinvestments
(g) Taxes 18(a) Shares; Voting rights**
(h) Special considerations regarding master/ (b) NA
feeder structure
7(a) Distributor 19(a) Investing in the Fund
(b) Valuing Fund shares (b) Valuing Fund shares**; Investing in the Funds;
(c) NA Redeeming Shares
(d) How to purchase shares (c) Redeeming Shares
(e) NA
(f) Distributor 20 Taxes
8(a) How to redeem shares; Special considerations 21(a) Agreements: Plan and Supplemental Agreement of
regarding master/feeder structure Distribution/Distribution Agreement, Placement
(b) NA Agency Agreement
(c) How to purchase, exchange or redeem shares:
Other important information (b) Agreements: Plan and Supplemental Agreement of
(d) How to purchase, exchange or redeem shares: Distribution/Distribution Agreement, Placement
How to redeem shares Agency Agreement
9 None 22(a) NA
(b) Performance Information (for all funds except
money market funds)
23 Financial Statements
*Designates information is located in annual report
**Designates page number in prospectus.
/TABLE
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Strategist Growth and Income Fund, Inc.
Prospectus
Nov. 29, 1996
This prospectus describes four diversified, no-load mutual funds.
Strategist Growth and Income Fund, Inc. is a series mutual fund
with four series of capital stock representing interests in
Strategist Balanced Fund, Strategist Equity Fund, Strategist Equity
Income Fund and Strategist Total Return Fund. Each Fund has its
own goals and investment policies.
Each Fund seeks to provide shareholders with current income and
growth of capital.
Each Fund has chosen to participate in a master/feeder structure.
Each Fund seeks to achieve its goal by investing all of its assets
in a corresponding Portfolio of Growth and Income Trust. Each
Portfolio is a separate investment company managed by American
Express Financial Corporation that has the same goal as the Fund.
This arrangement is commonly known as a master/feeder structure.
This prospectus contains facts that can help you decide if one or
more of the Funds is the right investment for you. Read it before
you invest and keep it for future reference.
Additional facts about the Funds are in a Statement of Additional
Information (SAI), filed with the Securities and Exchange
Commission (SEC) and available for reference, along with other
related materials, on the SEC Internet web site
(http://www.sec.gov). The SAI, dated Nov. 29, 1996, is
incorporated here by reference. For a free copy, contact American
Express Financial Direct.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
American Express Financial Direct
P.O. Box 59196
Minneapolis, MN
55459-0196
1-800-AXP-SERV
TTY: 1-800-710-5260
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Table of contents
The Funds in brief
Goals and types of Fund investments and their risks
Structure of the Funds
Manager and distributor
Portfolio managers
Fund expenses
Performance
Financial highlights
Total returns
Investment policies and risks
Facts about investments and their risks
Valuing Fund shares
How to purchase, exchange or redeem shares
How to purchase shares
How to exchange shares
How to redeem shares
Systematic purchase plans
Other important information
Special shareholder services
Services
Quick telephone reference
Distributions and taxes
Dividend and capital gain distributions
Reinvestments
Taxes
How to determine the correct TIN
How the Funds and Portfolios are organized
Shares
Voting rights
Shareholder meetings
Special considerations regarding master/feeder structure
Board members and officers
Investment manager
Administrator and transfer agent
Distributor
About the Advisor
Appendices
Description of corporate bond ratings
Descriptions of derivative instruments
<PAGE>
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The Funds in brief
Strategist Growth and Income Fund, Inc. (the Company) is a series
mutual fund with four series of capital stock representing
interests in Strategist Balanced Fund (Balanced Fund), Strategist
Equity Fund (Equity Fund), Strategist Equity Income Fund (Equity
Income Fund) and Strategist Total Return Fund (Total Return Fund)
(the Funds). Each Fund is a diversified mutual fund with its own
goals and investment policies. Each of the Funds seeks to achieve
its own goals by investing all of its assets in a corresponding
series (the Portfolio) of Growth and Income Trust (the Trust)
rather than by directly investing in and managing its own portfolio
of securities.
Goals and types of Fund investments and their risks
Balanced Fund seeks to provide shareholders with a balance of
growth of capital and current income. It does so by investing all
of its assets in Balanced Portfolio, a Portfolio of the Trust with
the same investment objective as Balanced Fund. Balanced Portfolio
is a diversified mutual fund that balances its investments between
common stocks and senior securities (preferred stocks and debt
securities) issued by U.S. and foreign companies. No more than 65%
of Balanced Portfolio's total assets will be invested in common
stocks and no less than 35% in senior securities, convertible
securities, derivative instruments and money market instruments.
Equity Fund seeks to provide shareholders with current income and
growth of capital. It does so by investing all of its assets in
Equity Portfolio, a Portfolio of the Trust with the same investment
objective as Equity Fund. Equity Portfolio is a diversified mutual
fund that invests primarily in common stocks and securities
convertible into common stock. It also may invest in preferred
stocks, debt securities, foreign securities, derivative instruments
and money market instruments.
Equity Income Fund seeks to provide shareholders with a high level
of current income and, as a secondary goal, steady growth of
capital. It does so by investing all of its assets in Equity
Income Portfolio, a Portfolio of the Trust with the same investment
objectives as Equity Income Fund. Equity Income Portfolio is a
diversified mutual fund that invests primarily in dividend-paying
stocks. Equity Income Portfolio also invests in other common
stocks, foreign securities, convertible securities, debt
securities, derivative instruments and money market instruments.
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Total Return Fund seeks to provide shareholders maximum total
return through a combination of growth of capital and current
income. It does so by investing all of its assets in Total Return
Portfolio, a Portfolio of the Trust with the same investment
objective as Total Return Fund. Total Return Portfolio is a
diversified mutual fund that invests in U.S. equity securities,
U.S. and foreign debt securities, foreign equity securities and
money market instruments. The Portfolio provides diversification
among these major investment categories. The Portfolio has a
target mix that represents the way the Portfolio's investments will
be allocated over the long-term. This mix will vary over short-
term periods based on the management team's outlook for the
different markets. The Portfolio may also use derivative
instruments. Some of the Portfolio's investments may be considered
speculative and involve additional investment risks.
Because investments involve risk, a Fund cannot guarantee achieving
its goals. Some of the Portfolios' investments may be considered
speculative and involve additional investment risks.
Structure of the Funds
Each Fund uses what is commonly known as a master/feeder structure.
This means that it is a feeder fund that invests all of its assets
in a Portfolio that is its master fund. The Portfolio actually
invests in and manages the securities and has the same goals and
investment policies as the Fund. This structure is described in
more detail in the section captioned "Special considerations
regarding master/feeder structure." Here is an illustration of the
structure:
Investors
buy shares in
the Fund
The Fund
invests in
the Portfolio
the Portfolio invests in
securities, such as stocks
or bonds
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Manager and distributor
Each Portfolio is managed by American Express Financial Corporation
(the Advisor), a provider of financial services since 1894. The
Advisor currently manages more than $132 billion in assets. Shares
of the Funds are sold through American Express Service Corporation
(the Distributor), an affiliated company of the Advisor.
Portfolio managers
Balanced Portfolio
Edward Labenski joined the Advisor in 1975 and serves as
president -- IDS Fixed-Income Advisors of IDS Advisory Group, Inc.
and senior portfolio manager. He has managed the assets of the
fixed-income portion of Balanced Portfolio and its predecessor fund
since 1987.
Tom Medcalf joined the Advisor in 1977 and serves as vice president
and senior portfolio manager. He has managed the assets of the
equity portion of Balanced Portfolio and its predecessor fund since
1983 and serves as portfolio manager of IDS Equity Value Fund.
Equity Portfolio
Dick Warden joined the Advisor in 1962 and serves as portfolio
manager. He has managed the assets of Equity Portfolio and its
predecessor fund since January 1995. He also serves as portfolio
manager of IDS Precious Metals Fund.
Equity Income Portfolio
Keith Tufte joined the Advisor in 1990 and serves as portfolio
manager. He has managed the assets of Equity Income Portfolio and
its predecessor fund since September 1994. He also manages IDS
Wealth Management yield portfolios and serves as associate
portfolio manager of IDS Equity Value Fund.
Total Return Portfolio
To determine the appropriate allocation of assets among U.S.
equities, debt securities, international equities and cash, an
asset allocation team has been established:
Peter J. Anderson has served as leader for the team since December
1995. He joined the Advisor in 1982. He was president of IDS
Advisory Group Inc. from 1985 to 1993 and has been chairman of the
board since 1993.
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PAGE 8
William Westhoff has served as senior consulting manager for the
Total Return Portfolio and its predecessor fund since December
1995. He joined the Advisor in 1971. He has been senior vice
president of global investments since 1994 and was senior vice
president of fixed income management from 1989 to 1994.
Frederick Quirsfeld has served as senior consulting manager for the
Total Return Portfolio and its predecessor fund since December
1995. He joined the Advisor in 1985. He serves as vice president
and senior portfolio manager and has managed IDS Bond Fund since
1985.
Day to day portfolio management for Total Return Portfolio is the
responsibility of the following managers:
Guru Baliga has served as U.S. equities specialist for the Total
Return Portfolio and its predecessor fund since Dec. 1995. He
joined the Advisor in 1991 as a research analyst. He became
portfolio manager of IDS Blue Chip Advantage Fund in 1994. He also
is portfolio manager of Aggressive Growth Portfolio, IDS Small
Company Index Fund and IDS Advisory accounts.
Steve Merrell has served as debt securities specialist for the
Total Return Portfolio and its predecessor fund since December
1995. He joined the Advisor in 1988 as a quantitative investment
analyst. From 1990 to 1991, he worked for JP Morgan Futures, Inc.
marketing futures-based investment strategies. He rejoined the
Advisor in 1991 as a portfolio manager and currently manages IDS
Life Special Income Fund and a number of IDS Advisory accounts.
Paul Hopkins has served as international equities specialist for
the Total Return Portfolio and its predecessor fund since December
1995. He joined the Advisor in 1992 as chief investment officer
and executive vice president of IDS International, Inc. He manages
IDS International Fund and IDS Life International Equity Fund.
Prior to joining the Advisor, he had been a director of
international equities for Banker's Trust.
Fund expenses
The purpose of the following table and example is to summarize the
aggregate expenses of each Fund and its corresponding Portfolio and
to assist investors in understanding the various costs and expenses
that investors in the Fund may bear directly or indirectly. The
Company's board believes that, over time, the aggregate per share
expenses of a Fund and its corresponding Portfolio should be
approximately equal to (and may be less than) the per share
expenses a Fund would have if the Company retained its own
investment advisor and the assets of each Fund were invested
directly in the type of securities held by the corresponding
Portfolio. For additional information concerning Fund and
Portfolio expenses, see "How the Funds and Portfolios are
organized."
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Shareholder transaction expenses+
Maximum sales charge on purchases*
(as a percentage of offering price)
Balanced Equity Equity Total
Fund Fund Income Fund Return Fund
0% 0% 0% 0%
Annual Fund and allocated Portfolio operating expenses
(% of average daily net assets):
Balanced Equity Equity Total
Fund Fund Income Fund Return Fund
Management fee** 0.52% 0.50% 0.53% 0.42%
12b-1 fee 0.25 0.25 0.25 0.25
Other expenses*** 0.48 0.50 0.47 0.63
Total (after
reimbursement) 1.25 1.25 1.25 1.30
+A wire redemption charge, currently $15.00, is deducted from the
shareholder's Investment Management Account for wire redemptions
made at the request of the shareholder.
*There are no sales loads; however, each Fund reserves the right to
impose a redemption fee upon 60 days' notice to shareholders.
**The management fee is paid by the Trust on behalf of each
Portfolio. It includes the impact of a performance fee that
decreased the management fee by 0.001% for Balanced Fund, 0.005%
for Equity Fund and 0.035% for Total Return Fund for the period
from May 13, 1996 to Sept. 30, 1996.
***Other expenses include an administrative services fee, a
transfer agency fee and other nonadvisory expenses.
The Advisor and the Distributor have agreed to waive certain fees
and to absorb certain other Fund expenses until Sept. 30, 1997.
Under this agreement, Balanced, Equity and Equity Income Fund's
total expenses will not exceed 1.25% and Total Return Fund's total
expenses will not exceed 1.30%. Without this agreement, the
estimated Other expenses and Total fund operating expense would
have been: for Balanced Fund, 33.27% and 34.04%; for Equity Fund,
33.46% and 34.21%; for Equity Income Fund, 23.48% and 24.26%; and
for Total Return Fund, 30.93% and 31.60%. These ratios are
annualized and may not be indicative of the actual expenses.
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Example: Suppose for each year for the next 10 years, Fund
expenses are as above and annual return is 5%. If you sold your
shares at the end of the following years, for each $1,000 invested,
you would pay the expenses of:
Balanced Equity Equity Total
Fund Fund Income Fund Return Fund
1 year $13 $13 $13 $13
3 years $40 $40 $40 $41
5 years $69 $69 $69 $71
10 years $152 $152 $152 $157
The table and example do not represent actual expenses, past or
future. Actual expenses may be higher or lower than those shown.
Because the Funds pay annual distribution (12b-1) fees, long-term
shareholders may indirectly pay an equivalent of more than a 7.25%
sales charge, the maximum permitted by the National Association of
Securities Dealers.
Performance
Financial highlights
Fiscal period ended Sept. 30, 1996
Per share income and capital changes**
<TABLE><CAPTION>
Equity Total
Balanced Income Return Equity
Fund Fund Fund Fund
<S> <C> <C> <C> <C>
Net asset value, $ 13.36 $ 8.68 $ 11.89 $ 21.73
beginning of period
Income from investment operations:
Net investment income .18 .13 .06 .21
Net gains (both realized .17 .23 .31 .62
and unrealized)
Total from investment .35 .36 .37 .83
operations
Dividends from net (.14) (.12) (.04) (.16)
investment income
Net asset value, $ 13.57 $ 8.92 $ 12.22 $ 22.40
end of period
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Ratios/supplemental data
Net assets, end of $ 525 $ 534 $ 529 $ 534
period (in thousands)
Ratio of expenses to 1.25%+ 1.25%+ 1.30%+ 1.25%+
average daily net assets++
Ratio of net income 3.91%+ 3.51%+ 0.96%+ 3.06%+
to average daily net assets
Total return 2.6% 4.1% 3.2% 3.8%
Portfolio turnover rate (excluding 14% 17% 35% 21%
short-term securities)
for the underlying Portfolio
Average brokerage commission rate
for the underlying Portfolio# $0.0483 $0.0324 $0.0384 $0.0488
</TABLE>
*Inception date was May 13, 1996.
**For a share outstanding throughout the period. Rounded to the
nearest cent.
+Adjusted to an annual basis.
++The Advisor and Distributor voluntarily limited total operating
expenses to 1.25% (1.30% for Strategist Total Return) of average
daily net assets. Without this agreement, the ratio of expenses to
average daily net assets would have been 34.04% for Balanced Fund,
24.26% for Equity Income Fund, 31.60% for Total Return Fund and
34.21% for Equity Fund.
The rate is calculated by dividing the total brokerage commissions
paid on applicable purchases and sales of portfolio securities for
the period by the total number of related shares purchased and
sold.
The information in this table has been audited by KPMG Peat Marwick
LLP, independent auditors. The independent auditor's report and
additional information about the performance of the Balanced,
Equity Income, Total Return and Equity Funds are contained in the
Funds' annual report which, if not included with this prospectus,
may be obtained without charge.
Total returns
Total return is the sum of all of your returns for a given period,
assuming you reinvest all distributions. It is calculated by
taking the total value of shares you own at the end of the period
(including shares acquired by reinvestment), less the price of
shares you purchased at the beginning of the period.
Average annual total return is the annually compounded rate of
return over a given time period (usually two or more years). It is
the total return for the period converted to an equivalent annual
figure.
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PAGE 12
Average annual total returns as of Sept. 30, 1996
Purchase 1 year 5 years 10 years Since
made ago ago ago inception
Balanced Fund +11.80% +11.50% +11.45% --%
Lipper Balanced Fund
Index +11.83% +10.99% +11.13% --%
Equity Income Fund +17.02% +14.93% --% +16.81%*
Lipper Equity Income
Fund Index +15.44% +13.58% --% +16.19%**
Total Return Fund + 8.41% +11.87% +13.91% --%
Lipper Flexible
Portfolio Fund
Index +11.82% +10.87% --% +11.20%***
Equity Fund +16.44% +13.33% +13.83% --%
Lipper Growth and
Income Fund Index +17.09% +14.25% +13.23% --%
S&P 500 +27.13% +15.19% +14.98% +18.12%**
*Inception date was Oct. 15, 1990.
**Measurement period started Nov. 1, 1990.
***Inception date was Dec. 31, 1987 for Lipper Flexible Portfolio
Fund Index.
Cumulative total returns as of Sept. 30, 1996
Purchase 1 year 5 years 10 years Since
made ago ago ago inception
Balanced Fund +11.80% + 72.34% +195.67% --%
Lipper Balanced Fund
Index +11.83% + 68.41% +187.37% --%
Equity Income Fund +17.02% +100.52% --% +152.63%*
Lipper Equity Income
Fund Index +15.44% + 89.06% --% +142.62%**
Total Return Fund + 8.41% + 75.21% +267.81% --%
Lipper Flexible
Portfolio Fund Index +11.82% + 67.51% --% +153.37%***
Equity Fund +16.44% + 86.95% +265.23% --%
Lipper Growth and
Income Fund Index +17.09% + 94.67% +246.30% --%
S&P 500 +27.13% +102.84% +303.77% +167.16%**
*Inception date was Oct. 15, 1990.
**Measurement period started Nov. 1, 1990.
***Inception date was Dec. 31, 1987 for Lipper Flexible Portfolio
Fund Index.
On May 13, 1996, IDS Mutual, IDS Diversified Equity Income Fund,
IDS Managed Allocation Fund and IDS Stock Fund (the predecessor
funds) converted to a master/feeder structure and transferred all
of their assets to Balanced Portfolio, Equity Income Portfolio,
Total Return Portfolio and Equity Portfolio, respectively. The
performance information in the foregoing tables represents
performance of the corresponding predecessor funds prior to March
20, 1995 and of Class A shares of the corresponding predecessor <PAGE>
PAGE 13
funds from March 20, 1995 through Sept. 30, 1996, adjusted to
reflect the absence of sales charges on shares of the Funds sold
through this prospectus. The performance has not been adjusted for
any difference between the estimated aggregate fees and expenses of
the Funds and fees and expenses of the predecessor funds.
These examples show total returns from hypothetical investments in
each Fund. These returns are compared to those of popular indexes
for the same periods.
For purposes of calculation, information about each Fund makes no
adjustments for taxes an investor may have paid on the reinvested
income and capital gains, and covers a period of widely fluctuating
securities prices. Returns shown should not be considered a
representation of a Fund's future performance.
Lipper Balanced Fund Index, an unmanaged index published by Lipper
Analytical Services, Inc., includes 30 funds that are generally
similar to Balanced Portfolio. Lipper Equity Income Fund Index is
an unmanaged index that includes 30 funds that are generally
similar to Equity Income Portfolio. Lipper Flexible Portfolio
Funds Index includes 30 funds that are generally similar to Total
Return Portfolio. Lipper Growth and Income Fund Index is an
unmanaged index that includes 30 funds that are generally similar
to Equity Portfolio. In each case some funds in the index may have
somewhat different investment policies or objectives than the
Portfolios to which they are compared.
Standard & Poor's 500 Stock Index (S&P 500), an unmanaged list of
common stocks, is frequently used as a general measure of market
performance. The index reflects reinvestment of all distributions
and changes in market prices, but excludes brokerage commissions or
other fees.
Investment policies and risks
The policies described below apply both to the Fund and the
Portfolio.
Balanced Portfolio - Balanced Portfolio balances its investments
between common stocks and senior securities (preferred stocks and
bonds) issued by U.S. and foreign companies. Balanced Portfolio
buys common stocks that it believes offer both current income and
growth potential. Balanced Portfolio buys senior securities for
stability of value and regular income. No more than 65% of <PAGE>
PAGE 14
Balanced Portfolio's total assets will be invested in common stocks
and no less than 35% in senior securities, convertible securities,
derivative instruments and money market instruments. At least 25%
of the Portfolio's assets will be invested in debt securities and
convertible securities.
Equity Portfolio - Equity Portfolio invests primarily in common
stocks and securities convertible into common stock of U.S. and
foreign companies. Under normal market conditions, at least 65% of
Equity Portfolio's total assets will be so invested. Other
investments will include preferred stocks, debt securities,
derivative instruments and money market instruments.
Equity Income Portfolio - Equity Income Portfolio will invest at
least 65% of its net assets in dividend-paying common and preferred
stocks under normal market conditions. Often these stocks are
issued by established companies in the utilities, financial,
consumer and energy sectors of the economy. In selecting stocks,
the investment manager will look at factors such as the current
dividend, the present price of the security, the ability of the
company to maintain and increase the dividend, and the likelihood
the company will continue to grow. The other assets of Equity
Income Portfolio will be invested in other common stocks, foreign
securities, convertible securities, debt securities, derivative
instruments and money market instruments.
Total Return Portfolio - Total Return Portfolio allocates its
investments generally among four asset classes: U.S. equities,
U.S. and foreign debt securities, foreign equity securities and
cash. It may use derivative instruments and make investments not
in these classes. The portion to be invested in each class is
determined by the investment management team based on its judgment
as to which mix of assets will provide the most favorable total
return. That mix, called the Market Mix, may be reset periodically
and is expected to be reset at least once every 12 to 18 months.
Day-to-day the asset mix will vary from the Market Mix but will
remain within the ranges described below.
Range Market Mix
U.S. equity securities 25-75% 50%
U.S. and foreign debt securities 10-50 25
foreign equity securities 10-50 25
cash 0-30 0
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PAGE 15
No more than 15% of the Portfolio's total assets will be invested
in below investment-grade debt securities and no more than 50% will
be invested in foreign securities. The Portfolio seeks to reduce
its overall risk by diversification but its performance will be
affected by many factors. Because of diversification in certain
market conditions the Portfolio's investment performance will not
be as great as a Portfolio that invests in only one class of
securities.
The various types of investments described above that the portfolio
managers use to achieve investment performance are explained in
more detail in the next section and in the SAI.
Facts about investments and their risks
Common stocks: Stock prices are subject to market fluctuations.
Stocks of larger, established companies that pay dividends may be
less volatile than the stock market as a whole.
Preferred stocks: If a company earns a profit, it generally must
pay its preferred stockholders a dividend at a pre-established
rate.
Convertible securities: These securities generally are preferred
stocks or bonds that can be exchanged for other securities, usually
common stock, at prestated prices. When the trading price of the
common stock makes the exchange likely, convertible securities
trade more like common stock.
Debt securities: The price of bonds generally falls as interest
rates increase and rise as interest rates decrease. The price of
bonds also fluctuates if the credit rating is upgraded or
downgraded. The price of bonds below investment grade may react
more to the ability of the issuing company to pay interest and
principal when due than to changes in interest rates. These bonds
have greater price fluctuations, are more likely to experience a
default, and sometimes are referred to as "junk bonds." Reduced
market liquidity for these bonds may occasionally make it more
difficult to value them. In valuing bonds, a Portfolio relies both
on independent rating agencies and the investment manager's credit
analysis. Securities that are subsequently downgraded in quality
may continue to be held by a Portfolio and will be sold only when
the investment manager believes it is advantageous to do so.
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PAGE 16
Balanced Portfolio and Equity Portfolio will not invest more than
5% of the Portfolio's net assets in bonds below investment grade.
Equity Portfolio may purchase securities rated C or better by
Moody's or S&P or non-rated securities of equivalent investment
quality in the judgment of the investment manager. Total Return
Portfolio will not invest more than 15% of the Portfolio's total
assets in bonds below investment grade. No more than 20% of Equity
Income Portfolio's net assets may be invested in bonds below
investment grade unless the bonds are convertible securities.
Debt securities sold at a deep discount: Some bonds are sold at
deep discounts because they do not pay interest until maturity.
They include zero coupon bonds and PIK (pay-in-kind) bonds. To
comply with tax laws, a Portfolio has to recognize a computed
amount of interest income and pay dividends to unitholders even
though no cash has been received. In some instances, a Portfolio
may have to sell securities to have sufficient cash to pay the
dividend.
Foreign investments: Securities of foreign companies and
governments may be traded in the United States, but often they are
traded only on foreign markets. Frequently, there is less
information about foreign companies and less government supervision
of foreign markets. Foreign investments are subject to currency
fluctuations and political and economic risks of the countries in
which the investments are made, including the possibility of
seizure or nationalization of companies, imposition of withholding
taxes on income, establishment of exchange controls or adoption of
other restrictions that might affect an investment adversely. If
an investment is made in a foreign market, the local currency may
be purchased using a forward contract in which the price of the
foreign currency in U.S. dollars is established on the date the
trade is made, but delivery of the currency is not made until the
securities are received. As long as a Portfolio holds foreign
currencies or securities valued in foreign currencies, the value of
those assets will be affected by changes in the value of the
currencies relative to the U.S. dollar. Because of the limited
trading volume in some foreign markets, efforts to buy or sell a
security may change the price of the security, and it may be
difficult to complete the transaction. The limited liquidity and
price fluctuations in emerging markets could make investments in
developing countries more volatile.
Balanced, Equity Income and Equity Portfolios may invest up to 25%
of their total assets in foreign investments. Total Return
Portfolio may invest up to 50% of its total assets in foreign
investments.
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Derivative instruments: A portfolio manager may use derivative
instruments in addition to securities to achieve investment
performance. Derivative instruments include futures, options and
forward contracts. Such instruments may be used to maintain cash
reserves while remaining fully invested, to offset anticipated
declines in values of investments, to facilitate trading, to reduce
transaction costs or to pursue higher investment returns.
Derivative instruments are characterized by requiring little or no
initial payment and a daily change in price based on or derived
from a security, a currency, a group of securities or currencies,
or an index. A number of strategies or combination of instruments
can be used to achieve the desired investment performance
characteristics. A small change in the value of the underlying
security, currency or index will cause a sizable gain or loss in
the price of the derivative instrument. Derivative instruments
allow the portfolio manager to change the investment performance
characteristics very quickly and at lower costs. Risks include
losses of premiums, rapid changes in prices, defaults by other
parties and inability to close such instruments. A Portfolio will
use derivative instruments only to achieve the same investment
performance characteristics it could achieve by directly holding
those securities and currencies permitted under the investment
policies. The Portfolios will designate cash or appropriate liquid
assets to cover portfolio obligations. No more than 5% of each
Portfolio's net assets can be used at any one time for good faith
deposits on futures and premiums for options on futures that do not
offset existing investment positions. This does not, however,
limit the portion of a Portfolio's assets at risk to 5%. The
Portfolios are not limited as to the percentage of their assets
that may be invested in permissible investments, including
derivatives, except as otherwise explicitly provided in this
prospectus or the SAI. For descriptions of these and other types
of derivative instruments, see the Appendix to this prospectus and
the SAI.
Securities and other instruments that are illiquid: A security or
other instrument is illiquid if it cannot be sold quickly in the
normal course of business. Some investments cannot be resold to
the U.S. public because of their terms or government regulations.
All securities and other instruments, however, can be sold in
private sales, and many may be sold to other institutions and
qualified buyers or on foreign markets. Each portfolio manager
will follow guidelines established by the board and consider
relevant factors such as the nature of the security and the number
of likely buyers when determining whether a security is illiquid.
No more than 10% of a Portfolio's net assets will be held in
securities and other instruments that are illiquid.
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PAGE 18
Money market instruments: Short-term debt securities rated in the
top two grades or the equivalent are used to meet daily cash needs
and at various times to hold assets until better investment
opportunities arise. Generally, less than 25% of Balanced, Equity
Income and Equity Portfolios' total assets are in these money
market instruments. Total Return Portfolio may invest up to 30% of
its total assets in these money market instruments to meet daily
cash needs and if the portfolio management team decides that asset
category is most appropriate. However, for temporary defensive
purposes these investments could exceed that amount for a limited
period of time.
The investment policies described above may be changed by the
boards.
Lending portfolio securities: Each Portfolio may lend its
securities to earn income so long as borrowers provide collateral
equal to the market value of the loans. The risks are that
borrowers will not provide collateral when required or return
securities when due. Unless holders of a majority of the
outstanding voting securities approve otherwise, loans may not
exceed 30% of a Portfolio's net assets.
Valuing Fund shares
The net asset value (NAV) is the value of a single Fund share. It
is the total value of a Fund's investments in the corresponding
Portfolio and other assets, less any liabilities, divided by the
number of shares outstanding. The NAV is the price at which you
purchase Fund shares and the price you receive when you sell your
shares. It usually changes from day to day and is calculated at
the close of business, normally 3 p.m. Central time, each business
day (any day the New York Stock Exchange is open). NAV generally
declines as interest rates increase and rises as interest rates
decline.
To establish the net assets, all securities held by a Portfolio are
valued as of the close of each business day. In valuing assets:
o Securities (except bonds) and assets with available market
values are valued on that basis.
o Securities maturing in 60 days or less are valued at
amortized cost.
o Bonds and assets without readily available market values are
valued according to methods selected in good faith by the
board.
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PAGE 19
How to purchase, exchange or redeem shares
How to purchase shares
You may purchase shares of the Funds through an Investment
Management Account (IMA) maintained with American Express Service
Corporation (the Distributor). There is no fee to open an IMA
account. Payment for shares must be made directly to the
Distributor.
Complete an IMA Account Application (available by calling 1-800-
AXP-SERV) and mail the application to American Express Financial
Direct, P.O. Box 59196, Minneapolis, MN 55459-0196. Corporations
and other organizations should contact the Distributor to determine
which additional forms may be necessary to open an IMA account.
If you already have an IMA account, you may buy shares in the Funds
as described below and need not open a new account.
You may deposit money into your IMA account by check, wire or many
other forms of electronic funds transfer (securities may also be
deposited). All deposit checks should be made payable to the
Distributor. If you would like to wire funds into your existing
IMA account, please contact the Distributor at 1-800-AXP-SERV for
instructions.
Minimum Fund investment requirements. Your initial investment in a
Fund may be as low as $2,000 ($1,000 for custodial accounts,
Individual Retirement Accounts and certain other retirement plans).
The minimum subsequent investment is $100. These requirements may
be reduced or waived as described in the SAI.
When and at what price shares will be purchased. You must have
money available in your IMA account in order to purchase Fund
shares. If your request and payment (including money transmitted
by wire) are received and accepted by the Distributor before 2 p.m.
Central time, your money will be invested at the net asset value
determined as of the close of business (normally 3 p.m. Central
time) that day. If your request and payment are received after
that time, your request will not be accepted or your payment
invested until the next business day. (See "Valuing Fund shares.")
Methods of purchasing shares. There are three convenient ways to
purchase shares of the Funds. You may choose the one that works
best for you. The Distributor will send you confirmation of your
purchase request.
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PAGE 20
By phone:
You may use money in your IMA account to make initial and
subsequent purchases. To place your order, call 1-800-AXP-
SERV.
By mail:
Written purchase requests (along with any checks) should be
mailed to American Express Financial Direct, P.O. Box 59196,
Minneapolis, MN 55459-0196, and should contain the following
information:
o your IMA account number (or an IMA Account Application)
o the name of the Fund(s) and the dollar amount of shares
you would like purchased
Your check should be made out to the Distributor. It will be
deposited into your IMA account and used, as necessary, to
cover your purchase request.
By systematic purchase:
Once you have opened an IMA account, you may authorize the
Distributor to automatically purchase shares on your behalf
at intervals and in amounts selected by you. (See
"Systematic purchase plans.")
Other purchase information. Each Fund reserves the right, in its
sole discretion and without prior notice to shareholders, to
withdraw or suspend all or any part of the offering made by this
prospectus, to reject purchase requests or to change the minimum
investment requirements. All requests to purchase shares of the
Fund are subject to acceptance by the Fund and the Distributor and
are not binding until confirmed or accepted in writing. The
Distributor will charge a $15 service fee against an investor's IMA
account if his or her investment check is returned because of
insufficient or uncollected funds or a stop payment order.
How to exchange shares
The exchange privilege allows you to exchange your investment in a
Fund at no charge for shares of other funds in the Strategist Fund
Group available in your state. For complete information, including
fees and expenses, read the prospectus carefully before exchanging
into a new fund. Any exchange will involve the redemption of Fund
shares and the purchase of shares in another fund on the basis of
the net asset value per share of each fund. An exchange may result
in a gain or loss and is a taxable event for federal income tax
purposes. When exchanging into another fund you must meet that
fund's minimum investment requirements. Each Fund reserves the
right to modify, terminate or limit the exchange privilege. The
current limit is four exchanges per calendar year. The Distributor
and the Funds reserve the right to reject any exchange, limit the
amount or modify or discontinue the exchange privilege, to prevent
abuse or adverse effects on the Funds and their shareholders.
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PAGE 21
How to redeem shares
The price at which shares will be redeemed. Shares will be
redeemed at the net asset value per share next determined after
receipt by the Distributor of proper redemption instructions, as
described below.
Payment of redemption proceeds. Normally, payment for redeemed
shares will be credited directly to your IMA account on the next
business day. However, the Fund may delay payment, but no later
than seven days after the Distributor receives your redemption
instructions in proper form. Redemption proceeds will be held
there or mailed to you depending on the account standing
instructions you selected.
If you recently purchased shares by check, your redemption proceeds
may be held in your IMA account until your check clears (which may
take up to 10 days from the purchase date) before a check is mailed
to you.
A redemption is a taxable transaction. If your proceeds from your
redemption are more or less than the cost of your shares, you will
have a gain or loss, which can affect your tax liability.
Redeeming shares held in an IRA or qualified retirement account may
subject you to certain federal taxes, penalties and reporting
requirements. Consult your tax advisor.
Methods of exchanging or redeeming shares
By phone:
You may exchange or redeem your shares by calling 1-800-AXP-SERV.
Telephone exchanges or redemptions may be difficult to implement
during periods of drastic economic or market changes. If you
experience difficulties in exchanging or redeeming shares by
telephone, you can mail your exchange or redemption requests as
described below.
To properly process your telephone exchange or redemption request
we will need the following information:
o your IMA account number and your name (for exchanges, both
funds must be registered in the same ownership)
o the name of the Fund from which you wish to exchange or
redeem shares
o the dollar amount or number of shares you want to exchange or
redeem
o the name of the fund into which shares are to be exchanged,
if applicable
Telephone exchange or redemption requests received before 2 p.m.
(Central time) on any business day, once the caller's identity and
account ownership have been verified by the Distributor, will be
processed at the net asset value determined as of the close of
business (normally 3 p.m. Central time) that day.
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PAGE 22
By mail:
You may also request an exchange or redemption by writing to
American Express Financial Direct, P.O. Box 59196, Minneapolis, MN
55459-0196. Once an exchange or redemption request is mailed it is
irrevocable and cannot be modified or canceled.
To properly process your mailed exchange or redemption request, we
will need a letter from you that contains the following
information:
o your IMA account number
o the name of the fund from which you wish to exchange or
redeem shares
o the dollar amount or number of shares you want to exchange or
redeem
o the name of the fund into which shares are to be exchanged,
if applicable
o a signature of at least one of the IMA account holders in the
exact form specified on the account
Telephone transactions. You may make purchase, redemption and
exchange requests by mail or by calling 1-800-AXP-SERV where
trained representatives are available to answer questions about the
Funds and your account. The privilege to initiate transactions by
telephone is automatically available through your IMA account.
Each Fund will honor any telephone transaction believed to be
authentic and will use reasonable procedures to confirm that
instructions communicated by telephone are genuine. This includes
asking identifying questions and tape recording calls. If these
procedures are not followed, a Fund may be liable for losses due to
unauthorized or fraudulent instructions. Telephone privileges may
be modified or discontinued at any time.
Systematic purchase plans
The Distributor offers a Systematic Purchase Plan (SPP) that allows
you to make periodic investments in the Funds automatically and
conveniently. A SPP can be used as a dollar cost averaging program
and saves you the time and expense associated with writing checks
or wiring funds.
Investment minimums: You can make automatic investments in any
amount, from $100 to $50,000.
Investment methods: Automatic investments are made from your IMA
account and you may select from several different investment
methods to make automatic investment(s):
a) Using uninvested cash in your IMA account: If you elect to
use this option to make your automatic investments,
uninvested cash in your IMA account will be used to make the
investment and, if necessary, shares of your Money Market
Fund will be redeemed to cover the balance of the purchase.
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PAGE 23
b) Using bank authorization or direct deposit: Bank
authorizations (transfers from a bank checking or savings
account) and direct deposit (automatic deposit of all or a
portion of a payroll or government check) are two of the
investment method options that are available through SPP.
Money is transferred into your IMA account and automatic
investments can be made using these amounts.
If you elect to use bank authorizations and/or direct deposit for
your automatic investments, you will select two dates: a transfer
date (when the money is transferred into your IMA account) and your
investment date. The automatic investment date selected may be the
same day of your bank authorization or direct deposit. Your
investment date should be on or close to the transfer/deposit date
in order to minimize uninvested cash in your IMA account.
If you make changes to your bank authorization or direct deposit
date, it may also be necessary to change your automatic investment
date to coincide with the new transfer/deposit date.
Investment frequency: You can select the frequency of your
automatic investments (twice monthly, monthly or quarterly) and
choose either the 5th or the 20th of the month for your automatic
investment dates. Quarterly investments are made on the date
selected in the first month of each quarter (January, April, July
and October).
Changing instructions to an already established plan: If you want
to change the fund(s) selected for your SPP you may do so by
calling 1-800-AXP-SERV, or by sending written instructions clearly
outlining the changes to American Express Financial Direct, P.O.
Box 59196, Minneapolis, MN 55459-0196. Written notification must
include the following:
o The funds with SPP that you want to cancel
o The newly selected fund(s) in which you want to begin
making automatic investments and the amount to be
invested in each fund
o The investment frequency and investment dates for your
new automatic investments
Information on changing bank authorization and direct deposit
instructions is included in the Systematic Purchase Plan Terms and
Conditions brochure that you will receive after enrolling in SPP.
Terminating your SPP. If you wish to terminate your SPP, you may
call 1-800-AXP-SERV, or send written instructions to American
Express Financial Direct, P.O. Box 59196, Minneapolis, MN 55459-
0196.
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PAGE 24
Terminating bank authorizations and direct deposit. If you wish to
terminate your bank authorizations, you may do so at any time by
notifying American Express Financial Direct in writing. You must
notify your employer or government agency to cancel direct deposit.
Your bank authorization and/or direct deposit will not
automatically terminate when you cancel your SPP.
IMPORTANT: If you are canceling your bank authorizations and/or
direct deposit and you wish to cancel your SPP, you must also
provide instructions stating that the Distributor should cancel
your SPP. You may notify the Distributor by sending written
instructions to the address above or telephoning 1-800-AXP-SERV.
Your systematic investments will continue using IMA account assets
if the Distributor does not receive notification to terminate your
systematic investments as well.
To avoid procedural difficulties, the Distributor should receive
instructions to change or terminate your SPP or bank authorizations
at least 10 days prior to your scheduled investment date.
Additional information. This information is only a summary of the
Systematic Purchase Plan Terms and Conditions brochure that you
will receive if you choose to enroll in SPP. Please read it
carefully and keep it for future reference.
Other important information
Minimum balance and account requirements. Each Fund reserves the
right to redeem your shares if, as a result of redemptions, the
aggregate value of your holdings in the Fund drops below $1,000
($500 in the case of custodial accounts, IRAs and other retirement
plans). You will be notified in writing 30 days before the Fund
takes such action to allow you to increase your holdings to the
minimum level. If you close your IMA account, the Fund will
automatically redeem your shares.
Wire transfers to your bank. Funds can be wired from your IMA
account to your bank account. Call the Distributor for additional
information on wire transfers. A $15 service fee will be charged
against your IMA account for each wire sent.
No person has been authorized to give any information or to make
any representations not contained in this prospectus in connection
with the offering being made by this prospectus and, if given or
made, such information or representation must not be relied upon as
having been authorized by the Funds or their Distributor. This
prospectus does not constitute an offering by the Funds or by the
Distributor in any jurisdiction in which such offering may not be
lawfully made.
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PAGE 25
Special shareholder services
Services
To help you track and evaluate the performance of your investments,
you will receive these services:
Quarterly statements listing all of your holdings and transactions
during the previous three months.
Yearly tax statements featuring average-cost-basis reporting of
capital gains or losses if you redeem your shares along with
distribution information which simplifies tax calculations.
Quick telephone reference
American Express Financial Direct Team
Fund performance, objectives and account inquiries, redemptions and
exchanges, dividend payments or reinvestments and automatic payment
arrangements
1-800-AXP-SERV
TTY Service
For the hearing impaired
1-800-710-5260
Distributions and taxes
As a shareholder you are entitled to your share of a Fund's net
income and any net gains realized on its investments. Each Fund
distributes dividends and capital gain distributions to qualify as
a regulated investment company and to avoid paying corporate income
and excise taxes. Dividend and capital gain distributions will
have tax consequences you should know about.
Dividend and capital gain distributions
The Portfolios allocate investment income from dividends and
interest and net realized capital gains or losses, if any, to the
Funds. Each Fund deducts direct and allocated expenses from the
investment income. The Fund's net investment income is distributed
to you at the end of each calendar quarter as dividends. Short-
term capital gains are distributed at the end of the calendar year
and are included in net investment income. Long-term capital gains
are realized whenever a security held for more than one year is <PAGE>
PAGE 26
sold for a higher price. Each Fund will offset any net realized
capital gains by any available capital loss carryovers. Net
realized long-term capital gains, if any, are distributed at the
end of the calendar year as capital gain distributions. Before
they're distributed, both net investment income and net long-term
capital gains are included in the value of each share. After
they're distributed, the value of each share drops by the per-share
amount of the distribution. (If your distributions are reinvested,
the total value of your holdings will not change.)
Reinvestments
Dividends and capital gain distributions are automatically
reinvested in additional shares of a Fund, unless you request the
Fund in writing or by phone to pay distributions to you in cash.
The reinvestment price is the net asset value at close of business
on the day the distribution is paid. (Your quarterly statement
will confirm the amount invested and the number of shares
purchased.)
If you choose cash distributions, you will receive only those
declared after your request has been processed.
Taxes
The Funds have received a Private Letter Ruling from the Internal
Revenue Service stating that, for purposes of the Internal Revenue
Code, each Fund will be regarded as directly holding its allocable
share of the income and gain realized by the Portfolio.
Distributions are subject to federal income tax and also may be
subject to state and local taxes. Distributions are taxable in the
year the Fund declares them regardless of whether you take them in
cash or reinvest them.
Each January, you will receive a tax statement showing the kinds
and total amount of all distributions you received during the
previous year. You must report distributions on your tax returns,
even if they are reinvested in additional shares.
Buying a dividend creates a tax liability. This means buying
shares shortly before a net investment income or a capital gain
distribution. You pay the full pre-distribution price for the
shares, then receive a portion of your investment back as a
distribution, which is taxable.
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PAGE 27
Redemptions and exchanges subject you to a tax on any capital gain.
If you sell shares for more than their cost, the difference is a
capital gain. Your gain may be either short term (for shares held
for one year or less) or long term (for shares held for more than
one year).
Your Taxpayer Identification Number (TIN) is important. As with
any financial account you open, you must list your current and
correct Taxpayer Identification Number (TIN) -- either your Social
Security or Employer Identification number. The TIN must be
certified under penalties of perjury on your application when you
open an account.
If you don't provide the TIN, or the TIN you report is incorrect,
you could be subject to backup withholding of 31% of taxable
distributions and proceeds from certain sales and exchanges. You
also could be subject to further penalties, such as:
o a $50 penalty for each failure to supply your correct TIN
o a civil penalty of $500 if you make a false statement that
results in no backup withholding
o criminal penalty for falsifying information
You also could be subject to backup withholding because you failed
to report interest or dividends on your tax return as required.
How to determine the correct TIN
Use the Social Security or
For this type of account: Employer Identification number
of:
Individual or joint account The individual or individuals
listed on the account
Custodian account of a minor The minor
(Uniform Gifts/Transfers to Minors
Act)
A living trust The grantor-trustee (the person
who puts the money into the
trust)
An irrevocable trust, pension The legal entity (not the
trust or estate personal representative or
trustee, unless no legal entity
is designated in the account
title)
Sole proprietorship The owner
Partnership The partnership
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PAGE 28
Corporate The corporation
Association, club or The organization
tax-exempt organization
For details on TIN requirements, call 1-800-AXP-SERV for federal
Form W-9, "Request for Taxpayer Identification Number and
Certification."
Important: This information is a brief and selective summary of
certain federal tax rules that apply to each Fund. Tax matters are
highly individual and complex, and you should consult a qualified
tax advisor about your personal situation.
How the Funds and Portfolios are organized
Each Fund is a series of Strategist Growth and Income Fund, Inc.,
an open-end management investment company, as defined in the
Investment Company Act of 1940. The Company was incorporated on
Sept. 1, 1995 in Minnesota. The Company's headquarters are at IDS
Tower 10, Minneapolis, MN 55440-0010.
Shares
The Company currently is composed of four Funds, each issuing its
own series of capital stock. Each Fund is owned by its
shareholders. All shares issued by a Fund are of the same class --
capital stock. Par value is 1 cent per share. Both full and
fractional shares can be issued.
The shares of each Fund making up the Company represent an interest
in that Fund's assets only (and profits or losses), and, in the
event of liquidation, each share of a Fund would have the same
rights to dividends and assets as every other share of that Fund.
Voting rights
As a shareholder, you have voting rights over the Fund's management
and fundamental policies. You are entitled to one vote for each
share you own. Shares of the Funds have cumulative voting rights.
Shareholder meetings
The Company does not hold annual shareholder meetings. However,
the board members may call meetings at their discretion, or on
demand by holders of 10% or more of the Company's outstanding
shares, to elect or remove board members.
<PAGE>
PAGE 29
Special considerations regarding master/feeder structure
The Fund pursues its goals by investing its assets in a master fund
called the Portfolio. This means that the Fund does not invest
directly in securities; rather the Portfolio invests in and manages
its portfolio of securities. The Portfolio is a separate
investment company, but it has the same goals and investment
policies as the Fund. The goals and investment policies of the
Portfolio are described under the captions "Investment policies and
risks" and "Facts about investments and their risks." Additional
information on investment policies may be found in the SAI.
Board considerations. The board considered the advantages and
disadvantages of investing the Fund's assets in the Portfolio. The
board believes that the master/feeder structure can be in the best
interest of the Fund and its shareholders since it offers the
opportunity for economies of scale. The Fund may redeem all of its
assets from the Portfolio at any time. Should the board determine
that it is in the best interest of the Fund and its shareholders to
terminate its investment in the Portfolio, it would consider hiring
an investment advisor to manage the Fund's assets, or other
appropriate options. The Fund would terminate its investment if
the Portfolio changed its goals, investment policies or
restrictions without the same change being approved by the Fund.
Other feeders: The Portfolio sells securities to other affiliated
mutual funds and may sell securities to non-affiliated investment
companies and institutional accounts (known as feeders). These
feeders buy the Portfolio's securities on the same terms and
conditions as the Fund and pay their proportionate share of the
Portfolio's expenses. However, their operating costs and sales
charges are different from those of the Fund. Therefore, the
investment returns for other feeders are different from the returns
of the Fund. Information about other feeders may be obtained by
calling American Express Financial Advisors at 1-800-AXP-SERV.
Each feeder that invests in the Portfolio is different and
activities of its investors may adversely affect all other feeders,
including the Fund. For example, if one feeder decides to
terminate its investment in the Portfolio, the Portfolio may elect
to redeem in cash or in kind. If cash is used, the Portfolio will
incur brokerage, taxes and other costs in selling securities to
raise the cash. This may result in less investment diversification
if entire investment positions are sold, and it also may result in
less liquidity among the remaining assets. If in-kind distribution
is made, a smaller pool of assets remains that may affect brokerage
rates and investment options. In both cases, expenses may rise
since there are fewer assets to cover the costs of managing those
assets.
<PAGE>
PAGE 30
Shareholder meetings: Whenever the Portfolio proposes to change a
fundamental investment policy or to take any action requiring
approval of its security holders, the Fund must hold a shareholder
meeting. The Fund will vote for or against the Portfolio's
proposals in proportion to the vote it receives for or against the
same proposals from its shareholders.
Board members and officers
Shareholders of the Company elect a board that oversees the
operations of the Funds and chooses the Company's officers. The
Company's officers are responsible for day-to-day business
decisions based on policies set by the board. Information about
the board members and officers of both the Company and the Trust is
found in the SAI under the caption "Board Members and Officers."
Investment manager
Each Portfolio pays the Advisor for managing its assets. Each Fund
pays its proportionate share of the fee. Under the Investment
Management Services Agreement, the Advisor is paid a fee for these
services based on the average daily net assets of each Portfolio,
as follows:
Balanced Portfolio
Assets Annual rate at
(billions) each asset level
First $1.0 0.530%
Next 1.0 0.505
Next 1.0 0.480
Next 3.0 0.455
Over 6.0 0.430
Equity Portfolio
Equity Income Portfolio
Total Return Portfolio
Assets Annual rate at
(billions) each asset level
First $0.50 0.530%
Next 0.50 0.505
Next 1.0 0.480
Next 1.0 0.455
Next 3.0 0.430
Over 6.0 0.400
The fees for Balanced, Equity, and Total Return Portfolios may be
increased or decreased by a performance adjustment based on a
comparison of performance to an Index (the Index). For Balanced
Portfolio the Index is the Lipper Balanced Fund Index. For Equity
Portfolio the Index is the Lipper Growth and Income Fund Index.
For Total Return Portfolio the Index is the Lipper Flexible
Portfolio Fund Index. The maximum adjustment is 0.08% of each
Portfolio's average daily net assets on an annual basis. Under the
agreement, each Portfolio also pays taxes, brokerage commissions
and non-advisory expenses.
<PAGE>
PAGE 31
Administrator and transfer agent
The Fund pays the Advisor for shareholder accounting and transfer
agent services under two agreements. The first agreement, the
Administrative Services Agreement, has a declining annual rate that
decreases as assets increase. For each Fund, the fee ranges from
0.04% to 0.02%. The second agreement, the Transfer Agency
Agreement, has an annual fee of $20 per shareholder account.
Distributor
The Funds sell shares through the Distributor under a Distribution
Agreement. The Distributor is located at P.O. Box 59196,
Minneapolis, MN 55459-0196, and is a wholly owned subsidiary of
Travel Related Services, Inc., a wholly owned subsidiary of
American Express Company, a financial services company with
headquarters at American Express Tower, World Financial Center, New
York, NY 10285. Financial consultants representing the Distributor
provide information to investors about individual investment
programs, the Funds and their operations, new account applications,
exchange and redemption requests. The Funds reserve the right to
sell shares through other financial intermediaries or
broker/dealers. In that event, the account terms would also be
governed by rules that the intermediary may establish.
To help defray costs, including costs for marketing, sales
administration, training, overhead, advertising and related
functions, the Funds pay the Distributor a distribution fee, also
known as a 12b-1 fee. This fee is paid under a Plan and Agreement
of Distribution that follows the terms of Rule 12b-1 of the
Investment Company Act of 1940. Under this Agreement, each Fund
pays a distribution fee at an annual rate of 0.25% of the Fund's
average daily net assets for distribution-related services. This
fee will not cover all of the costs incurred by the Distributor.
Total fees and expenses (excluding taxes and brokerage commissions)
cannot exceed the most restrictive applicable state expense
limitation.
<PAGE>
PAGE 32
About the Advisor
The Advisor is located at IDS Tower 10, Minneapolis, MN 55440-0010.
It is a wholly owned subsidiary of American Express Company. The
Portfolios may pay brokerage commissions to broker-dealer
affiliates of the Advisor.
<PAGE>
PAGE 33
Appendix A
Description of corporate bond ratings
Bond ratings concern the quality of the issuing corporation. They
are not an opinion of the market value of the security. Such
ratings are opinions on whether the principal and interest will be
repaid when due. A security's rating may change, which could
affect its price. Ratings by Moody's Investors Service, Inc. are
Aaa, Aa, A, Baa, Ba, B, Caa, Ca and C. Ratings by Standard &
Poor's Corporation are AAA, AA, A, BBB, BB, B, CCC, CC, C and D.
The following is a compilation of the two agencies' rating
descriptions. For further information, see the SAI.
Aaa/AAA - Judged to be of the best quality and carry the smallest
degree of investment risk. Interest and principal are secure.
Aa/AA - Judged to be high-grade although margins of protection for
interest and principal may not be quite as good as Aaa or AAA rated
securities.
A - Considered upper-medium grade. Protection for interest and
principal is deemed adequate but may be susceptible to future
impairment.
Baa/BBB - Considered medium-grade obligations. Protection for
interest and principal is adequate over the short-term; however,
these obligations may have certain speculative characteristics.
Ba/BB - Considered to have speculative elements. The protection of
interest and principal payments may be very moderate.
B - Lack characteristics of more desirable investments. There may
be small assurance over any long period of time of the payment of
interest and principal.
Caa/CCC - Are of poor standing. Such issues may be in default or
there may be risk with respect to principal or interest.
Ca/CC - Represent obligations that are highly speculative. Such
issues are often in default or have other marked shortcomings.
C - Are obligations with a higher degree of speculation. These
securities have major risk exposures to default.
D - Are in payment default. The D rating is used when interest
payments or principal payments are not made on the due date.
Non-rated securities will be considered for investment when they
possess a risk comparable to that of rated securities consistent
with the Portfolio's objectives and policies. When assessing the
risk involved in each non-rated security, the Portfolio will
consider the financial condition of the issuer or the protection
afforded by the terms of the security.
<PAGE>
PAGE 34
Definitions of zero-coupon and pay-in-kind securities
A zero-coupon security is a security that is sold at a deep
discount from its face value and makes no periodic interest
payments. The buyer of such a security receives a rate of return
by gradual appreciation of the security, which is redeemed at face
value on the maturity date.
A pay-in-kind security is a security in which the issuer has the
option to make interest payments in cash or in additional
securities. The securities issued as interest usually have the
same terms, including maturity date, as the pay-in-kind securities.
<PAGE>
PAGE 35
Appendix B
Descriptions of derivative instruments
What follows are brief descriptions of derivative instruments a
Portfolio may use. At various times a Portfolio may use some or
all of these instruments and is not limited to these instruments.
It may use other similar types of instruments if they are
consistent with the Portfolio's investment goal and policies. For
more information on these instruments, see the SAI.
Options and futures contracts. An option is an agreement to buy or
sell an instrument at a set price during a certain period of time.
A futures contract is an agreement to buy or sell an instrument for
a set price on a future date. A Portfolio may buy and sell options
and futures contracts to manage its exposure to changing interest
rates, security prices and currency exchange rates. Options and
futures may be used to hedge a Portfolio's investments against
price fluctuations or to increase market exposure.
Asset-backed and mortgage-backed securities. Asset-backed
securities include interests in pools of assets such as motor
vehicle installment sale contracts, installment loan contracts,
leases on various types of real and personal property, receivables
from revolving credit (credit card) agreements or other categories
of receivables. Mortgage-backed securities include collateralized
mortgage obligations and stripped mortgage-backed securities.
Interest and principal payments depend on payment of the underlying
loans or mortgages. The value of these securities may also be
affected by changes in interest rates, the market's perception of
the issuers and the creditworthiness of the parties involved. The
non-mortgage related asset-backed securities do not have the
benefit of a security interest in the related collateral. Stripped
mortgage-backed securities include interest only (IO) and principal
only (PO) securities. Cash flows and yields on IOs and POs are
extremely sensitive to the rate of principal payments on the
underlying mortgage loans or mortgage-backed securities.
Indexed securities. The value of indexed securities is linked to
currencies, interest rates, commodities, indexes or other financial
indicators. Most indexed securities are short- to intermediate-
term fixed income securities whose values at maturity or interest
rates rise or fall according to the change in one or more specified
underlying instruments. Indexed securities may be more volatile
than the underlying instrument itself.
Structured products. Structured products are over-the-counter
financial instruments created specifically to meet the needs of one
or a small number of investors. The instrument may consist of a
warrant, an option or a forward contract embedded in a note or any
of a wide variety of debt, equity and/or currency combinations.
Risks of structured products include the inability to close such
instruments, rapid changes in the market and defaults by other
parties.
<PAGE>
PAGE 36
STATEMENT OF ADDITIONAL INFORMATION
FOR
STRATEGIST GROWTH AND INCOME FUND, INC.
Nov. 29, 1996
This Statement of Additional Information (SAI) is not a prospectus.
It should be read together with the Funds' prospectus and the
financial statements contained in the Annual Report which may be
obtained by calling American Express Financial Direct, 1-800-AXP-
SERV (TTY: 1-800-710-5260) or by writing to P.O. Box 59196,
Minneapolis, MN 55459-0196.
This SAI is dated Nov. 29, 1996, and it is to be used with the
Funds' prospectus dated Nov. 29, 1996, and the Annual Report for
the fiscal period ended Sept. 30, 1996.
<PAGE>
PAGE 37
TABLE OF CONTENTS
Goals and Investment Policies........................See Prospectus
Additional Investment Policies.............................p. 3
Security Transactions......................................p. 17
Brokerage Commissions Paid to Brokers Affiliated
with the Advisor...........................................p. 21
Performance Information....................................p. 22
Valuing Fund Shares........................................p. 25
Investing in the Funds.....................................p. 26
Redeeming Shares...........................................p. 27
Pay-out Plans..............................................p. 28
Capital Loss Carryover.....................................p. 29
Taxes......................................................p. 29
Agreements.................................................p. 31
Organizational Information.................................p. 35
Board Members and Officers.................................p. 35
Custodian..................................................p. 43
Independent Auditors.......................................p. 43
Financial Statements.......................................p. 43
Prospectus.................................................p. 43
Appendix A: Additional Information on Investment Policies.p. 44
Appendix B: Foreign Currency Transactions.................p. 45
Appendix C: Options and Futures Contracts.................p. 50
Appendix D: Mortgage-Backed Securities....................p. 57
Appendix E: Dollar-Cost Averaging.........................p. 58
<PAGE>
PAGE 38
ADDITIONAL INVESTMENT POLICIES
Strategist Growth and Income Fund, Inc. (the Company) is a mutual
fund with four series of capital stock representing interests in
Strategist Balanced Fund (Balanced Fund), Strategist Equity Fund
(Equity Fund), Strategist Equity Income Fund (Equity Income Fund)
and Strategist Total Return Fund (Total Return Fund). (Balanced
Fund, Equity Fund, Equity Income Fund and Total Return Fund are
collectively the Funds, and individually a Fund). Each Fund is a
diversified mutual fund with its own goals and investment policies.
Each of the Funds seeks to achieve its goals by investing all of
its assets in a corresponding series (each a Portfolio) of Growth
and Income Trust (the Trust), a separate investment company, rather
than by directly investing in and managing its own portfolio of
securities.
Fundamental investment policies adopted by a Fund or Portfolio
cannot be changed without the approval of a majority of the
outstanding voting securities of the Fund or Portfolio, as defined
in the Investment Company Act of 1940 (the 1940 Act). Whenever a
Fund is requested to vote on a change in the investment policies of
the corresponding Portfolio, the Company will hold a meeting of
Fund shareholders and will cast the Fund's vote as instructed by
the shareholders.
Notwithstanding any of the Fund's other investment policies, a Fund
may invest its assets in an open-end management investment company
having substantially the same investment objectives, policies and
restrictions as the Fund for the purpose of having those assets
managed as part of a combined pool.
Investment Policies Applicable to Balanced Portfolio:
These are investment policies in addition to those presented in the
prospectus. The policies below are fundamental policies that apply
both to the Fund and its corresponding Portfolio and may be changed
only with shareholder/unitholder approval. Unless shareholders of
a majority of the outstanding voting securities agree to make the
change, the Portfolio will not:
'Act as an underwriter (sell securities for others). However,
under the securities laws, the Portfolio may be deemed to be an
underwriter when it purchases securities directly from the issuer
and later resells them.
'Borrow money or property, except as a temporary measure for
extraordinary or emergency purposes, in an amount not exceeding
one-third of the market value of its total assets (including
borrowings) less liabilities (other than borrowings) immediately
after the borrowing. The Portfolio has not borrowed in the past
and has no present intention to borrow.
'Make cash loans if the total commitment amount exceeds 5% of the
Portfolio's total assets.
<PAGE>
PAGE 39
'Concentrate in any one industry. According to the present
interpretation by the Securities and Exchange Commission (SEC),
this means no more than 25% of the Portfolio's total assets, based
on current market value at the time of purchase, can be invested in
any one industry.
'Purchase more than 10% of the outstanding voting securities of an
issuer.
'Invest more than 5% of its total assets in securities of any one
company, government or political subdivision thereof, except the
limitation will not apply to investments in securities issued by
the U.S. government, its agencies or instrumentalities, and except
that up to 25% of the Portfolio's total assets may be invested
without regard to this 5% limitation.
'Buy or sell real estate, unless acquired as a result of ownership
of securities or other instruments, except this shall not prevent
the Portfolio from investing in securities or other instruments
backed by real estate or securities of companies engaged in the
real estate business or real estate investment trusts. For
purposes of this policy, real estate includes real estate limited
partnerships.
'Buy or sell physical commodities unless acquired as a result of
ownership of securities or other instruments, except this shall not
prevent the Portfolio from buying or selling options and futures
contracts or from investing in securities or other instruments
backed by, or whose value is derived from, physical commodities.
'Make a loan of any part of its assets to American Express
Financial Corporation (the Advisor), to the board members and
officers of the Advisor or to its own board members and officers.
'Purchase securities of an issuer if the board members and officers
of the Fund, the Portfolio and the Advisor hold more than a certain
percentage of the issuer's outstanding securities. If the holdings
of all board members and officers of the Fund, the Portfolio and
the Advisor who own more than 0.5% of an issuer's securities are
added together, and if in total they own more than 5%, the
Portfolio will not purchase securities of that issuer.
'Lend Portfolio securities in excess of 30% of its net assets. The
current policy of the board is to make these loans, either long- or
short-term, to broker-dealers. In making such loans, the Portfolio
gets the market price in cash, U.S. government securities, letters
of credit or such other collateral as may be permitted by
regulatory agencies and approved by the board. If the market price
of the loaned securities goes up, the Portfolio will get additional
collateral on a daily basis. The risks are that the borrower may
not provide additional collateral when required or return the
securities when due. During the existence of the loan, the
Portfolio receives cash payments equivalent to all interest or <PAGE>
PAGE 40
other distributions paid on the loaned securities. A loan will not
be made unless the Advisor believes the opportunity for additional
income outweighs the risks.
The policies below are non-fundamental policies that apply both to
the Fund and its corresponding Portfolio and may be changed without
shareholder/unitholder approval. Unless changed by the board, the
Portfolio will not:
'Buy on margin or sell short, but it may make margin payments in
connection with transactions in futures contracts.
'Invest in a company to control or manage it.
'Pledge or mortgage its assets beyond 15% of total assets. If the
Portfolio were ever to do so, valuation of the pledged or mortgaged
assets would be based on market values. For purposes of this
policy, collateral arrangements for margin deposits on futures
contracts are not deemed to be a pledge of assets.
'Invest more than 5% of its total assets in securities of
companies, including any predecessors, that have a record of less
than three years continuous operations.
'Invest more than 10% of its assets in securities of investment
companies. Under one state's law, the Portfolio is limited to
investments in the open market where on commission or profit to a
sponsor or dealer results from the purchase other than the
customary broker's commission or when the purchase is part of a
plan or merger consideration, reorganization or acquisition.
'Invest more than 5% of its net assets in warrants. Under one
state's law no more than 2% of the Portfolio's net assets may be
invested in warrants not listed on the New York or American Stock
Exchange.
'Invest in exploration or development programs, such as oil, gas or
mineral leases.
'Invest more than 10% of its net assets in securities and
derivative instruments that are illiquid. For purposes of this
policy illiquid securities include some privately placed
securities, public securities, and Rule 144A securities that for
one reason or another may no longer have a readily available
market, repurchase agreements with maturities greater than seven
days, non-negotiable fixed-time deposits and over-the-counter
options.
In determining the liquidity of Rule 144A securities, which are
unregistered securities offered to qualified institutional buyers,
and interest-only and principal-only fixed mortgage-backed
securities (IOs and POs) issued by the U.S. government or its <PAGE>
PAGE 41
agencies and instrumentalities, the Advisor, under guidelines
established by the board, will consider any relevant factors
including the frequency of trades, the number of dealers willing to
purchase or sell the security and the nature of marketplace trades.
In determining the liquidity of commercial paper issued in
transactions not involving a public offering under Section 4(2) of
the Securities Act of 1933, the Advisor, under guidelines
established by the board, will evaluate relevant factors such as
the issuer and the size and nature of its commercial paper
programs, the willingness and ability of the issuer or dealer to
repurchase the paper, and the nature of the clearance and
settlement procedures for the paper.
The Portfolio may make contracts to purchase securities for a fixed
price at a future date beyond normal settlement time (when-issued
securities or forward commitments). Under normal market
conditions, the Portfolio does not intend to commit more than 5% of
its total assets to these practices. The Portfolio does not pay
for the securities or receive dividends or interest on them until
the contractual settlement date. The Portfolio will designate cash
or liquid high-grade debt securities at least equal in value to its
commitments to purchase the securities. When-issued securities or
forward commitments are subject to market fluctuations and they may
affect the Portfolio's total assets the same as owned securities.
The Portfolio may maintain a portion of its assets in cash and
cash-equivalent investments. The cash-equivalent investments the
Portfolio may use are short-term U.S. and Canadian government
securities and negotiable certificates of deposit, non-negotiable
fixed-time deposits, bankers' acceptances and letters of credit of
banks or savings and loan associations having capital, surplus and
undivided profits (as of the date of its most recently published
annual financial statements) in excess of $100 million (or the
equivalent in the instance of a foreign branch of a U.S. bank) at
the date of investment. Any cash-equivalent investments in foreign
securities will be subject to the limitations on foreign
investments described in the prospectus. The Portfolio also may
purchase short-term corporate notes and obligations rated in the
top two classifications by Moody's Investors Service, Inc.
(Moody's) or Standard & Poor's Corporation (S&P) or the equivalent
and may use repurchase agreements with broker-dealers registered
under the Securities Exchange Act of 1934 and with commercial
banks. A risk of a repurchase agreement is that if the seller
seeks the protection of the bankruptcy laws, the Portfolio's
ability to liquidate the security involved could be impaired.
The Portfolio may invest in foreign securities that are traded in
the form of American Depository Receipts (ADRs). ADRs are receipts
typically issued by a U.S. bank or trust company evidencing
ownership of the underlying securities of foreign issuers.
Generally, ADRs, in registered form, are denominated in U.S.
dollars and are designed for use in the U.S. securities market.
Thus, these securities are not denominated in the same currency as <PAGE>
PAGE 42
the securities into which they may be converted. ADRs are
considered to be foreign investments and thus subject to the risks
and investment limitation set forth under "Foreign investments" in
the prospectus.
Investment Policies applicable to Equity Portfolio:
These are investment policies in addition to those presented in the
prospectus. The policies below are fundamental policies that apply
both to the Fund and its corresponding Portfolio and may be changed
only with shareholder/unitholder approval. Unless shareholders of
a majority of the outstanding voting securities agree to make the
change, the Portfolio will not:
'Act as an underwriter (sell securities for others). However,
under the securities laws, the Portfolio may be deemed to be an
underwriter when it purchases securities directly from the issuer
and later resells them.
'Borrow money or property, except as a temporary measure for
extraordinary or emergency purposes, in an amount not exceeding
one-third of the market value of its total assets (including
borrowings) less liabilities (other than borrowings) immediately
after the borrowing. The Portfolio has not borrowed in the past
and has no present intention to borrow.
'Make cash loans if the total commitment amount exceeds 5% of the
Portfolio's total assets.
'Concentrate in any one industry. According to the present
interpretation by the SEC, this means no more than 25% of the
Portfolio's total assets, based on current market value at the time
of purchase, can be invested in any one industry.
'Purchase more than 10% of the outstanding voting securities of an
issuer.
'Invest more than 5% of its total assets in securities of any one
company, government or political subdivision thereof, except the
limitation will not apply to investments in securities issued by
the U.S. government, its agencies or instrumentalities, and except
that up to 25% of the Portfolio's total assets may be invested
without regard to this 5% limitation.
'Buy or sell real estate, unless acquired as a result of ownership
of securities or other instruments, except this shall not prevent
the Portfolio from investing in securities or other instruments
backed by real estate or securities of companies engaged in the
real estate business or real estate investment trusts. For
purposes of this policy, real estate includes real estate limited
partnerships.
<PAGE>
PAGE 43
'Buy or sell physical commodities unless acquired as a result of
ownership of securities or other instruments, except this shall not
prevent the Portfolio from buying or selling options and futures
contracts or from investing in securities or other instruments
backed by, or whose value is derived from, physical commodities.
'Invest in securities of investment companies except by purchase in
the open market where the dealer's or sponsor's profit is the
regular commission. The Advisor may wish to invest in another
investment company if, for example, that is the only way to invest
in a foreign market. If such investment is ever made, not more
than 10% of the Portfolio's net assets will be so invested. To the
extent the Portfolio were to make such investments, the shareholder
may be the subject to duplicate advisory, administrative and
distribution fees.
'Purchase securities of an issuer if the board members and officers
of the Fund, the Portfolio and the Advisor hold more than a certain
percentage of the issuer's outstanding securities. If the holdings
of all board members and officers of the Fund, the Portfolio and
the Advisor who own more than 0.5% of an issuer's securities are
added together, and if in total they own more than 5%, the
Portfolio will not purchase securities of that issuer.
'Lend Portfolio securities in excess of 30% of its net assets. The
current policy of the board is to make these loans, either long- or
short-term, to broker-dealers. In making such loans, the Portfolio
gets the market price in cash, U.S. government securities, letters
of credit or such other collateral as may be permitted by
regulatory agencies and approved by the board. If the market price
of the loaned securities goes up, the Portfolio will get additional
collateral on a daily basis. The risks are that the borrower may
not provide additional collateral when required or return the
securities when due. During the existence of the loan, the
Portfolio receives cash payments equivalent to all interest or
other distributions paid on the loaned securities. A loan will not
be made unless the Advisor believes the opportunity for additional
income outweighs the risks.
The policies below are non-fundamental policies that apply both to
the Fund and its correspoding Portfolio and may be changed without
shareholder/unitholder approval. Unless changed by the board, the
Portfolio will not:
'Buy on margin or sell short, but it may make margin payments in
connection with transactions in futures contracts.
'Pledge or mortgage its assets beyond 15% of total assets. If the
Portfolio were ever to do so, valuation of the pledged or mortgaged
assets would be based on market values. For purposes of this
policy, collateral arrangements for margin deposits on futures
contracts are not deemed to be a pledge of assets.
<PAGE>
PAGE 44
'Invest more than 5% of its total assets in securities of
companies, including any predecessors, that have a record of less
than three years continuous operations.
'Invest in a company to control or manage it.
'Invest more than 5% of its net assets in warrants. Under one
state's law no more than 2% of the Portfolio's net assets may be
invested in warrants not listed on the New York or American Stock
Exchange.
'Invest in exploration or development programs, such as oil, gas or
mineral leases.
'Invest more than 10% of its net assets in securities and
derivative instruments that are illiquid. For purposes of this
policy illiquid securities include some privately placed
securities, public securities and Rule 144A securities that for one
reason or another may no longer have a readily available market,
repurchase agreements with maturities greater than seven days, non-
negotiable fixed-time deposits and over-the-counter options.
In determining the liquidity of Rule 144A securities, which are
unregistered securities offered to qualified institutional buyers,
and interest-only and principal-only fixed mortgage-backed
securities (IOs and POs) issued by the U.S. government or its
agencies and instrumentalities, the Advisor, under guidelines
established by the board, will consider any relevant factors
including the frequency of trades, the number of dealers willing to
purchase or sell the security and the nature of marketplace trades.
In determining the liquidity of commercial paper issued in
transactions not involving a public offering under Section 4(2) of
the Securities Act of 1933, the Advisor, under guidelines
established by the board, will evaluate relevant factors such as
the issuer and the size and nature of its commercial paper
programs, the willingness and ability of the issuer or dealer to
repurchase the paper, and the nature of the clearance and
settlement procedures for the paper.
The Portfolio may make contracts to purchase securities for a fixed
price at a future date beyond normal settlement time (when-issued
securities or forward commitments). Under normal market
conditions, the Portfolio does not intend to commit more than 5% of
its total assets to these practices. The Portfolio does not pay
for the securities or receive dividends or interest on them until
the contractual settlement date. The Portfolio will designate cash
or liquid high-grade debt securities at least equal in value to its
commitments to purchase the securities. When-issued securities or
forward commitments are subject to market fluctuations and they may
affect the Portfolio's total assets the same as owned securities.
<PAGE>
PAGE 45
The Portfolio may maintain a portion of its assets in cash and
cash-equivalent investments. The cash-equivalent investments the
Portfolio may use are short-term U.S. and Canadian government
securities and negotiable certificates of deposit, non-negotiable
fixed-time deposits, bankers' acceptances and letters of credit of
banks or savings and loan associations having capital, surplus and
undivided profits (as of the date of its most recently published
annual financial statements) in excess of $100 million (or the
equivalent in the instance of a foreign branch of a U.S. bank) at
the date of investment. Any cash-equivalent investments in foreign
securities will be subject to the limitations on foreign
investments described in the prospectus. The Portfolio also may
purchase short-term corporate notes and obligations rated in the
top two classifications by Moody's or S&P or the equivalent and may
use repurchase agreements with broker-dealers registered under the
Securities Exchange Act of 1934 and with commercial banks. A risk
of a repurchase agreement is that if the seller seeks the
protection of the bankruptcy laws, the Portfolio's ability to
liquidate the security involved could be impaired.
The Portfolio may invest in foreign securities that are traded in
the form of American Depository Receipts (ADRs). ADRs are receipts
typically issued by a U.S. bank or trust company evidencing
ownership of the underlying securities of foreign issuers.
Generally, ADRs, in registered form, are denominated in U.S.
dollars and are designed for use in the U.S. securities market.
Thus, these securities are not denominated in the same currency as
the securities into which they may be converted. ADRs are
considered to be foreign investments and thus subject to the risks
and investment limitation set forth under "Foreign investments" in
the prospectus.
Investment Policies applicable to Equity Income Portfolio:
These are investment policies in addition to those presented in the
prospectus. The policies below are fundamental policies that apply
both to the Fund and its corresponding Portfolio and may be changed
only with shareholder/unitholder approval. Unless shareholders of
a majority of the outstanding voting securities agree to make the
change, the Portfolio will not:
'Act as an underwriter (sell securities for others). However,
under the securities laws, the Portfolio may be deemed to be an
underwriter when it purchases securities directly from the issuer
and later resells them.
'Borrow money or property, except as a temporary measure for
extraordinary or emergency purposes, in an amount not exceeding
one-third of the market value of its total assets (including
borrowings) less liabilities (other than borrowings) immediately
after the borrowing. The Portfolio has not borrowed in the past
and has no present intention to borrow.
<PAGE>
PAGE 46
'Make cash loans if the total commitment amount exceeds 5% of the
Portfolio's total assets.
'Purchase more than 10% of the outstanding voting securities of an
issuer.
'Invest more than 5% of its total assets in securities of any one
company, government or political subdivision thereof, except the
limitation will not apply to investments in securities issued by
the U.S. government, its agencies or instrumentalities, and except
that up to 25% of the Portfolio's total assets may be invested
without regard to this 5% limitation.
'Buy or sell real estate, unless acquired as a result of ownership
of securities or other instruments, except this shall not prevent
the Portfolio from investing in securities or other instruments
backed by real estate or securities of companies engaged in the
real estate business or real estate investment trusts. For
purposes of this policy, real estate includes real estate limited
partnerships.
'Buy or sell physical commodities unless acquired as a result of
ownership of securities or other instruments, except this shall not
prevent the Portfolio from buying or selling options and futures
contracts or from investing in securities or other instruments
backed by, or whose value is derived from, physical commodities.
'Lend Portfolio securities in excess of 30% of its net assets. The
current policy of the board is to make these loans, either long- or
short-term, to broker-dealers. In making such loans, the Portfolio
gets the market price in cash, U.S. government securities, letters
of credit or such other collateral as may be permitted by
regulatory agencies and approved by the board. If the market price
of the loaned securities goes up, the Portfolio will get additional
collateral on a daily basis. The risks are that the borrower may
not provide additional collateral when required or return the
securities when due. During the existence of the loan, the
Portfolio receives cash payments equivalent to all interest or
other distributions paid on the loaned securities. A loan will not
be made unless the Advisor believes the opportunity for additional
income outweighs the risks.
'Concentrate in any one industry. According to the present
interpretation by the SEC, this means no more than 25% of the
Portfolio's total assets, based on current market value at time of
purchase, can be invested in any one industry.
The policies below are non-fundamental policies that apply both to
the Fund and its corresponding Portfolio and may be changed without
shareholder/unitholder approval. Unless changed by the board, the
Portfolio will not:
'Buy on margin or sell short, but it may make margin payments in
connection with transactions in futures contracts.
<PAGE>
PAGE 47
'Pledge or mortgage its assets beyond 15% of total assets. If the
Portfolio were ever to do so, valuation of the pledged or mortgaged
assets would be based on market values. For purposes of this
policy, collateral arrangements for margin deposits on futures
contracts are not deemed to be a pledge of assets.
'Invest more than 5% of its total assets in securities of
companies, including any predecessors, that have a record of less
than three years continuous operations.
'Invest in a company to control or manage it.
'Invest in exploration or development programs, such as oil, gas or
mineral leases.
'Invest more than 10% of its assets in securities of investment
companies. Under one state's law, the Portfolio is limited to
investments in the open market where on commission or profit to a
sponsor or dealer results from the purchase other than the
customary broker's commission or when the purchase is part of a
plan or merger consideration, reorganization or acquisition.
'Purchase securities of an issuer if the board members and officers
of the Fund, the Portfolio and the Advisor hold more than a certain
percentage of the issuer's outstanding securities. If the holdings
of all board members and officers of the Fund, the Portfolio and
the Advisor who own more than 0.5% of an issuer's securities are
added together, and if in total they own more than 5%, a Portfolio
will not purchase securities of that issuer.
'Invest more than 5% of its net assets in warrants. Under one
state's law no more than 2% of the Portfolio's net assets may be
invested in warrants not listed on the New York or American Stock
Exchange.
'Invest more than 10% of its net assets in securities and
derivative instruments that are illiquid. For purposes of this
policy illiquid securities include some privately placed
securities, public securities and Rule 144A securities that for one
reason or another may no longer have a readily available market,
repurchase agreements with maturities greater than seven days, non-
negotiable fixed-time deposits and over-the-counter options.
In determining the liquidity of Rule 144A securities, which are
unregistered securities offered to qualified institutional buyers,
and interest-only and principal-only fixed mortgage-backed
securities (IOs and POs) issued by the U.S. government or its
agencies and instrumentalities, the Advisor, under guidelines
established by the board, will consider any relevant factors
including the frequency of trades, the number of dealers willing to
purchase or sell the security and the nature of marketplace trades.
<PAGE>
PAGE 48
In determining the liquidity of commercial paper issued in
transactions not involving a public offering under Section 4(2) of
the Securities Act of 1933, the Advisor, under guidelines
established by the board, will evaluate relevant factors such as
the issuer and the size and nature of its commercial paper
programs, the willingness and ability of the issuer or dealer to
repurchase the paper, and the nature of the clearance and
settlement procedures for the paper.
The Portfolio may make contracts to purchase securities for a fixed
price at a future date beyond normal settlement time (when-issued
securities or forward commitments). Under normal market
conditions, the Portfolio does not intend to commit more than 5% of
its total assets to these practices. The Portfolio does not pay
for the securities or receive dividends or interest on them until
the contractual settlement date. The Portfolio will designate cash
or liquid high-grade debt securities at least equal in value to its
commitments to purchase the securities. When-issued securities or
forward commitments are subject to market fluctuations and they may
affect the Portfolio's total assets the same as owned securities.
The Portfolio may maintain a portion of its assets in cash and
cash-equivalent investments. The cash-equivalent investments the
Portfolio may use are short-term U.S. and Canadian government
securities and negotiable certificates of deposit, non-negotiable
fixed-time deposits, bankers' acceptances and letters of credit of
banks or savings and loan associations having capital, surplus and
undivided profits (as of the date of its most recently published
annual financial statements) in excess of $100 million (or the
equivalent in the instance of a foreign branch of a U.S. bank) at
the date of investment. Any cash-equivalent investments in foreign
securities will be subject to the limitations on foreign
investments described in the prospectus. The Portfolio also may
purchase short-term corporate notes and obligations rated in the
top two classifications by Moody's or S&P or the equivalent and may
use repurchase agreements with broker-dealers registered under the
Securities Exchange Act of 1934 and with commercial banks. A risk
of a repurchase agreement is that if the seller seeks the
protection of the bankruptcy laws, the Portfolio's ability to
liquidate the security involved could be impaired.
The Portfolio may invest in foreign securities that are traded in
the form of American Depository Receipts (ADRs). ADRs are receipts
typically issued by a U.S. bank or trust company evidencing
ownership of the underlying securities of foreign issuers.
Generally, ADRs, in registered form, are denominated in U.S.
dollars and are designed for use in the U.S. securities market.
Thus, these securities are not denominated in the same currency as
the securities into which they may be converted. ADRs are
considered to be foreign investments and thus subject to the risks
and investment limitation set forth under "Foreign investments" in
the prospectus.
<PAGE>
PAGE 49
Investment Policies applicable to Total Return Portfolio:
These are investment policies in addition to those presented in the
prospectus. The policies below are fundamental policies that apply
both to the Fund and its corresponding Portfolio and may be changed
only with shareholder/unitholder approval. Unless shareholders of
a majority of the outstanding voting securities agree to make the
change, the Portfolio will not:
'Act as an underwriter (sell securities for others). However,
under the securities laws, the Portfolio may be deemed to be an
underwriter when it purchases securities directly from the issuer
and later resells them.
'Borrow money or property, except as a temporary measure for
extraordinary or emergency purposes, in an amount not exceeding
one-third of the market value of its total assets (including
borrowings) less liabilities (other than borrowings) immediately
after the borrowing. The Portfolio has not borrowed in the past
and has no present intention to borrow.
'Make cash loans if the total commitment amount exceeds 5% of the
Portfolio's total assets.
'Concentrate in any one industry. According to the present
interpretation by the SEC, this means no more than 25% of the
Portfolio's total assets, based on current market value at time of
purchase, can be invested in any one industry.
'Purchase more than 10% of the outstanding voting securities of an
issuer.
'Invest more than 5% of its total assets in securities of any one
company, government or political subdivision thereof, except the
limitation will not apply to investments in securities issued by
the U.S. government, its agencies or instrumentalities, and except
that up to 25% of the Portfolio's total assets may be invested
without regard to this 5% limitation.
'Buy or sell real estate, unless acquired as a result of ownership
of securities or other instruments, except this shall not prevent
the Portfolio from investing in securities or other instruments
backed by real estate or securities of companies engaged in the
real estate business or real estate investment trusts. For
purposes of this policy, real estate includes real estate limited
partnerships.
'Buy or sell physical commodities unless acquired as a result of
ownership of securities or other instruments, except this shall not
prevent the Portfolio from buying or selling options and futures
contracts or from investing in securities or other instruments
backed by, or whose value is derived from, physical commodities.
<PAGE>
PAGE 50
'Make a loan of any part of its assets to the Advisor, to the board
members and officers of the Advisor or to its own board members and
officers.
'Purchase securities of an issuer if the board members and officers
of the Fund, the Portfolio and the Advisor hold more than a certain
percentage of the issuer's outstanding securities. If the holdings
of all board members and officers of the Fund, the Portfolio and
the Advisor who own more than 0.5% of an issuer's securities are
added together, and if in total they own more than 5%, the
Portfolio will not purchase securities of that issuer.
'Lend Portfolio securities in excess of 30% of its net assets. The
current policy of the board is to make these loans, either long- or
short-term, to broker-dealers. In making such loans, the Portfolio
gets the market price in cash, U.S. government securities, letters
of credit or such other collateral as may be permitted by
regulatory agencies and approved by the board. If the market price
of the loaned securities goes up, the Portfolio will get additional
collateral on a daily basis. The risks are that the borrower may
not provide additional collateral when required or return the
securities when due. During the existence of the loan, the
Portfolio receives cash payments equivalent to all interest or
other distributions paid on the loaned securities. A loan will not
be made unless the Advisor believes the opportunity for additional
income outweighs the risks.
'Issue senior securities, except this restriction shall not be
deemed to prohibit the Portfolio from borrowing from banks, using
options or futures contracts, lending its securities or entering
into repurchase agreements.
The policies below are non-fundamental policies that apply both to
the Fund and its corresponding Portfolio and may be changed without
shareholder/unitholder approval. Unless changed by the board, the
Portfolio will not:
'Buy on margin or sell short, but it may make margin payments in
connection with transactions in futures contracts.
'Pledge or mortgage its assets beyond 15% of total assets. If the
Portfolio were ever to do so, valuation of the pledged or mortgaged
assets would be based on market values. For purposes of this
policy, collateral arrangements for margin deposits on futures
contracts are not deemed to be a pledge of assets.
'Invest more than 5% of its total assets in securities of
companies, including any predecessors, that have a record of less
than three years continuous operations.
'Invest more than 10% of its assets in securities of investment
companies. Under one state's law, the Portfolio is limited to
investments in the open market where on commission or profit to a
sponsor or dealer results from the purchase other than the <PAGE>
PAGE 51
customary broker's commission or when the purchase is part of a
plan or merger consideration, reorganization or acquisition.
'Invest in a company to control or manage it.
'Invest in exploration or development programs, such as oil, gas or
mineral leases.
'Invest more than 5% of its net assets in warrants. Under one
state's law no more than 2% of the Portfolio's net assets may be
invested in warrants not listed on the New York or American Stock
Exchange.
'Invest more than 10% of its net assets in securities and
derivative instruments that are illiquid. For purposes of this
policy illiquid securities include some privately placed
securities, public securities and Rule 144A securities that for one
reason or another may no longer have a readily available market,
repurchase agreements with maturities greater than seven days, non-
negotiable fixed-time deposits and over-the-counter options.
In determining the liquidity of Rule 144A securities, which are
unregistered securities offered to qualified institutional buyers,
and interest-only and principal-only fixed mortgage-backed
securities (IOs and POs) issued by the U.S. government or its
agencies and instrumentalities, the Advisor, under guidelines
established by the board, will consider any relevant factors
including the frequency of trades, the number of dealers willing to
purchase or sell the security and the nature of marketplace trades.
In determining the liquidity of commercial paper issued in
transactions not involving a public offering under Section 4(2) of
the Securities Act of 1933, the Advisor, under guidelines
established by the board, will evaluate relevant factors such as
the issuer and the size and nature of its commercial paper
programs, the willingness and ability of the issuer or dealer to
repurchase the paper, and the nature of the clearance and
settlement procedures for the paper.
The Portfolio may make contracts to purchase securities for a fixed
price at a future date beyond normal settlement time (when-issued
securities or forward commitments). Under normal market
conditions, the Portfolio does not intend to commit more than 5% of
its total assets to these practices. The Portfolio does not pay
for the securities or receive dividends or interest on them until
the contractual settlement date. The Portfolio will designate cash
or liquid high-grade debt securities at least equal in value to its
commitments to purchase the securities. When-issued securities or
forward commitments are subject to market fluctuations and they may
affect the Portfolio's total assets the same as owned securities.
<PAGE>
PAGE 52
The Portfolio may maintain a portion of its assets in cash and
cash-equivalent investments. The cash-equivalent investments the
Portfolio may use are short-term U.S. and Canadian government
securities and negotiable certificates of deposit, non-negotiable
fixed-time deposits, bankers' acceptances and letters of credit of
banks or savings and loan associations having capital, surplus and
undivided profits (as of the date of its most recently published
annual financial statements) in excess of $100 million (or the
equivalent in the instance of a foreign branch of a U.S. bank) at
the date of investment. Any cash-equivalent investments in foreign
securities will be subject to the limitations on foreign
investments described in the prospectus. The Portfolio also may
purchase short-term corporate notes and obligations rated in the
top two classifications by Moody's or S&P or the equivalent and may
use repurchase agreements with broker-dealers registered under the
Securities Exchange Act of 1934 and with commercial banks. A risk
of a repurchase agreement is that if the seller seeks the
protection of the bankruptcy laws, the Portfolio's ability to
liquidate the security involved could be impaired.
The Portfolio may invest in foreign securities that are traded in
the form of American Depository Receipts (ADRs). ADRs are receipts
typically issued by a U.S. bank or trust company evidencing
ownership of the underlying securities of foreign issuers.
Generally, ADRs, in registered form, are denominated in U.S.
dollars and are designed for use in the U.S. securities market.
Thus, these securities are not denominated in the same currency as
the securities into which they may be converted. ADRs are
considered to be foreign investments and thus subject to the risks
and investment limitation set forth under "Foreign investments" in
the prospectus.
For a discussion on additional information on investment policies,
see Appendix A. For a discussion on foreign currency transactions,
see Appendix B. For a discussion on options and futures contracts,
see Appendix C. For a discussion on mortgage-backed securities,
see Appendix D. For a discussion on dollar-cost averaging, see
Appendix E.
SECURITY TRANSACTIONS
Subject to policies set by the board, the Advisor is authorized to
determine, consistent with a Portfolio's investment goal and
policies, which securities will be purchased, held or sold. In
determining where the buy and sell orders are to be placed, the
Advisor has been directed to use its best efforts to obtain the
best available price and most favorable execution except where
otherwise authorized by the board. In selecting broker-dealers to
execute transactions, the Advisor may consider the price of the
security including commission or mark-up, the size and difficulty
of the order, the reliability, integrity, financial soundness and
general operation and execution capabilities of the broker, the
broker's expertise in particular markets, and research services
provided by the broker.
<PAGE>
PAGE 53
The Advisor has a strict Code of Ethics that prohibits its
affiliated personnel from engaging in personal investment
activities that compete with or attempt to take advantage of
planned portfolio transactions for any fund or trust for which it
acts as investment manager. The Advisor carefully monitors
compliance with its Code of Ethics.
On occasion, it may be desirable to compensate a broker for
research services or for brokerage services by paying a commission
that might not otherwise be charged or a commission in excess of
the amount another broker might charge. The board has adopted a
policy authorizing the Advisor to do so to the extent authorized by
law, if the Advisor determines, in good faith, that such commission
is reasonable in relation to the value of the brokerage or research
services provided by a broker or dealer, viewed either in the light
of that transaction or the Advisor's overall responsibilities to
the Portfolios advised by the Advisor.
Research provided by brokers supplements the Advisor's own research
activities. Such services include economic data on, and analysis
of, U.S. and foreign economies; information on specific industries;
information about specific companies, including earnings estimates;
purchase recommendations for stocks and bonds; portfolio strategy
services; political, economic, business and industry trend
assessments; historical statistical information; market data
services providing information on specific issues and prices; and
technical analysis of various aspects of the securities markets,
including technical charts. Research services may take the form of
written reports, computer software or personal contact by telephone
or at seminars or other meetings. The Advisor has obtained, and in
the future may obtain, computer hardware from brokers, including
but not limited to personal computers that will be used exclusively
for investment decision-making purposes, which include the
research, portfolio management and trading functions and other
services to the extent permitted under an interpretation by the
SEC.
When paying a commission that might not otherwise be charged or a
commission in excess of the amount another broker might charge, the
Advisor must follow procedures authorized by the board. To date,
three procedures have been authorized. One procedure permits the
Advisor to direct an order to buy or sell a security traded on a
national securities exchange to a specific broker for research
services it has provided. The second procedure permits the
Advisor, in order to obtain research, to direct an order on an
agency basis to buy or sell a security traded in the over-the-
counter market to a firm that does not make a market in that
security. The commission paid generally includes compensation for
research services. The third procedure permits the Advisor, in
order to obtain research and brokerage services, to cause the
Portfolio to pay a commission in excess of the amount another
broker might have charged. The Advisor has advised the Trust it is
necessary to do business with a number of brokerage firms on a
continuing basis to obtain such services as the handling of large <PAGE>
PAGE 54
orders, the willingness of a broker to risk its own money by taking
a position in a security, and the specialized handling of a
particular group of securities that only certain brokers may be
able to offer. As a result of this arrangement, some Portfolio
transactions may not be effected at the lowest commission, but the
Advisor believes it may obtain better overall execution. The
Advisor has assured the Trust that under all three procedures the
amount of commission paid will be reasonable and competitive in
relation to the value of the brokerage services performed or
research provided.
All other transactions shall be placed on the basis of obtaining
the best available price and most favorable execution. In so
doing, if, in the professional opinion of the person responsible
for selecting the broker or dealer, several firms can execute the
transaction on the same basis, consideration will be given by such
person to those firms offering research services. Such services
may be used by the Advisor in providing advice to all the Trusts in
the Preferred Master Trust Group, their corresponding Funds and
other accounts advised by the Advisor, even though it is not
possible to relate the benefits to any particular fund, portfolio
or account.
Each investment decision made for a Portfolio is made independently
from any decision made for other portfolios or accounts advised by
the Advisor or any of its subsidiaries. When a Portfolio buys or
sells the same security as another portfolio or account, the
Advisor carries out the purchase or sale in a way the Trust agrees
in advance is fair. Although sharing in large transactions may
adversely affect the price or volume purchased or sold by a
Portfolio, a Portfolio hopes to gain an overall advantage in
execution. The Advisor has assured the Trust it will continue to
seek ways to reduce brokerage costs.
On a periodic basis, the Advisor makes a comprehensive review of
the broker-dealers it uses and the overall reasonableness of their
commissions. The review evaluates execution, operational
efficiency and research services.
For the fiscal period from May 13, 1996, to Sept. 30, 1996,
Balanced Portfolio, Equity Portfolio, Equity Income Portfolio and
Total Return Portfolio paid total brokerage commissions of
$3,836,080, $3,197,700, $2,585,347 and $7,372,053, respectively.
The Portfolios began operations on May 13, 1996. Substantially all
firms through whom transactions were executed provide research
services.
Transactions amounting to $62,799,000, on which $99,240 in
commissions were imputed or paid, were specifically directed to
firms in exchange for research services for Balanced Portfolio.
Transactions amounting to $212,022,000, on which $285,531 in
commissions were imputed or paid, were specifically directed to
firms in exchange for research services for Equity Portfolio.
<PAGE>
PAGE 55
Transactions amounting to $8,729,000, on which $13,500 in
commissions were imputed or paid, were specifically directed to
firms in exchange for research services for Equity Income
Portfolio. Transactions amounting to $37,135,000, on which $60,618
in commissions were imputed or paid, were specifically directed to
firms in exchange for research services for Total Return Portfolio.
As of the fiscal period ended Sept. 30, 1996, each Portfolio held
securities of its regular brokers or dealers or of the parents of
those brokers or dealers that derived more than 15% of gross
revenue from securities-related activities as presented below:
Value of Securities
Owned at End of
Name of Issuer Fiscal Period
Balanced Portfolio
BankAmerica $ 5,991,100
Dean Witter 34,449,384
Goldman Sachs 9,964,200
J.P. Morgan 28,884,375
Merrill Lynch 12,573,687
Morgan Stanley Group 12,586,917
NationsBank 34,734,375
Salomon Brothers 6,484,870
Equity Portfolio
BankAmerica $ 2,693,580
Merrill Lynch 20,857,500
J.P. Morgan 17,775,000
First Chicago 18,100,000
NationsBank 43,437,500
Morgan Stanley 6,992,718
Equity Income Portfolio
First Chicago $ 7,918,750
J.P. Morgan 18,663,750
NationsBank 20,415,625
Dean Witter 7,268,774
Goldman Sachs 11,866,691
Merrill Lynch 3,592,510
Total Return Portfolio
First Chicago $16,858,508
NationsBank 50,648,125
Alex Brown 410,913
Dean Witter 3,366,000
Inter-Regional Financial Group 19,425
Legg Mason 252,800
Quick & Reilly 262,500
Raymond James 164,900<PAGE>
PAGE 56
For the fiscal periods 1996 and 1995, the portfolio turnover rates
were 45% and 38% for Balanced Portfolio, 71% and 69% for Equity
Portfolio, 84% and 98% for Equity Income Portfolio and 142% and 90%
for Total Return Portfolio. Higher turnover rates may result in
higher brokerage expenses. The variation in turnover rates for
Total Return Portfolio can be attributed to a change in investment
policy and management style.
For periods prior to the commencement of operations of Balanced
Portfolio, Equity Portfolio, Equity Income Portfolio and Total
Return Portfolio, turnover rates are based on the turnover rates of
the corresponding IDS Funds, which transferred all of their assets
to the Portfolios on May 13, 1996. A high turnover rate (in excess
of 100%) results in higher fees and expenses.
BROKERAGE COMMISSIONS PAID TO BROKERS AFFILIATED WITH THE ADVISOR
Affiliates of American Express Company (American Express) (of which
the Advisor is a wholly owned subsidiary) may engage in brokerage
and other securities transactions on behalf of a Portfolio
according to procedures adopted by the board and to the extent
consistent with applicable provisions of the federal securities
laws. The Advisor will use an American Express affiliate only if
(i) the Advisor determines that a Portfolio will receive prices and
executions at least as favorable as those offered by qualified
independent brokers performing similar brokerage and other services
for a Portfolio and (ii) the affiliate charges a Portfolio
commission rates consistent with those the affiliate charges
comparable unaffiliated customers in similar transactions and if
such use is consistent with terms of the Investment Management
Services Agreement.
The Advisor may direct brokerage to compensate an affiliate. The
Advisor will receive research on South Africa from New Africa
Advisors, a wholly-owned subsidiary of Sloan Financial Group. The
Advisor owns 100% of IDS Capital Holdings Inc. which in turn owns
40% of Sloan Financial Group. New Africa Advisors will send
research to the Advisor and in turn the Advisor will direct trades
to a particular broker. The broker will have an agreement to pay
New Africa Advisors. All transactions will be on a best execution
basis. Compensation received will be reasonable for the services
rendered.
<PAGE>
PAGE 57
Information about brokerage commissions paid by Balanced Portfolio,
Equity Portfolio, Equity Income Portfolio and Total Return
Portfolio to brokers affiliated with the Advisor for the fiscal
period from May 13, 1996 to Sept. 30, 1996 is contained in the
following table:
<TABLE><CAPTION>
For the Fiscal Period from May 13, 1996 to September 30, 1996.
Aggregate Percent of
Dollar Aggregate Dollar
Amount of Percent of Amount of
Nature Commissions Aggregate Transactions
of Paid to Brokerage Involving Payment
Portfolio Broker Affiliation Broker Commissions of Commissions
<S> <C> <C> <C> <C> <C>
Balanced American (1) $13,249 1.05% N/A
Enterprise
Investment
Services Inc.
Equity American (1) 45,119 3.89 N/A
Enterprise
Investment
Services Inc.
Equity Income American (1) 44,672 6.17 N/A
Enterprise
Investment
Services Inc.
Total Return American (1) 103,248 5.59 N/A
Enterprise
Investment
Services Inc.
(1) Wholly owned subsidiary of the Advisor.
</TABLE>
PERFORMANCE INFORMATION
A Fund may quote various performance figures to illustrate past
performance. Average annual total return and current yield
quotations are based on standardized methods of computing
performance as required by the SEC. An explanation of these and
any other methods used by a Fund to compute performance follows
below.
Average annual total return
A Fund may calculate average annual total return for certain
periods by finding the average annual compounded rates of return
over the period that would equate the initial amount invested to
the ending redeemable value, according to the following formula:
P(1+T)n = ERV
where: P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $1,000
payment, made at the beginning of a period, at the
end of the period (or fractional portion thereof)
<PAGE>
PAGE 58
Aggregate total return
A Fund may calculate aggregate total return for certain periods
representing the cumulative change in the value of an investment in
each Fund over a specified period of time according to the
following formula:
ERV - P
P
where: P = a hypothetical initial payment of $1,000
ERV = ending redeemable value of a hypothetical $1,000
payment, made at the beginning of a period, at the
end of the period (or fractional portion thereof)
Annualized yield
A Fund may calculate an annualized yield by dividing the net
investment income per share deemed earned during a period by the
net asset value per share on the last day of the period and
annualizing the results.
Yield is calculated according to the following formula:
Yield = 2[(a-b + 1)6 - 1]
cd
where: a = dividends and interest earned during the period
b = aggregate expenses accrued for the period (net of
reimbursements)
c = the average daily number of shares outstanding
during the period that were entitled to receive
dividends
d = the maximum offering price per share on the last
day of the period
A Fund's yield, calculated as described above according to the
formula prescribed by the SEC, is a hypothetical return based on
market value yield to maturity for each corresponding Portfolio's
securities. It is not necessarily indicative of the amount which
was or may be paid to a Fund's shareholders. Actual amounts paid
to a Fund's shareholders are reflected in the distribution yield.
<PAGE>
PAGE 59
Distribution yield
Distribution yield is calculated according to the following
formula:
D divided by POP F equals DY
30 30
where: D = sum of dividends for 30-day period
POP = sum of public offering price for 30-day period
F = annualizing factor
DY = distribution yield
In its sales material and other communications, a Fund may quote,
compare or refer to rankings, yields or returns as published by
independent statistical services or publishers and publications
such as The Bank Rate Monitor National Index, Barron's, Business
Week, Donoghue's Money Market Fund Report, Financial Services Week,
Financial Times, Financial World, Forbes, Fortune, Global Investor,
Institutional Investor, Investor's Daily, Kiplinger's Personal
Finance, Lipper Analytical Services, Money, Mutual Fund Forecaster,
Newsweek, The New York Times, Personal Investor, Stanger Report,
Sylvia Porter's Personal Finance, USA Today, U.S. News and World
Report, The Wall Street Journal and Wiesenberger Investment
Companies Service.
On May 13, 1996, IDS Mutual, IDS Diversified Equity Income Fund,
IDS Managed Retirement Fund and IDS Stock Fund (the IDS Funds),
four open-end investment companies managed by the Advisor,
transferred all of their respective assets to Balanced Portfolio, ,
Equity Portfolio, Equity Income Portfolio and Total Return
Portfolio, respectively, in exchange for units of the Portfolio.
Also on May 13, 1996, Balanced Fund, Equity Fund, Equity Income
Fund and Total Return Fund transferred all of their respective
assets to the corresponding Portfolio of the Trust in connection
with the commencement of their operations.
On March 20, 1995, the IDS Funds converted to a multiple class
structure pursuant to which three classes of shares are offered:
Class A, Class B and Class Y. Class A shares are sold with a 5%
sales charge, a 0.175% service fee and no 12b-1 fee. Performance
quoted by Balanced Fund, Equity Fund, Equity Income Fund and Total
Return Fund is based on performance and yield of the corresponding
IDS Fund prior to March 20, 1995 and to Class A shares of the
corresponding IDS Fund from March 20, 1995 through Sept. 30, 1996,
adjusted for differences in sales charge. The performance for
these periods has not been adjusted for any difference between the
estimated aggregate fees and expenses of the Funds and fees and
expenses of the IDS Funds.
<PAGE>
PAGE 60
VALUING FUND SHARES
The value of an individual share is determined by using the net
asset value before shareholder transactions for the day and
dividing that figure by the number of shares outstanding at the end
of the previous day.
On Oct. 1, 1996, the first business day following the end of the
fiscal period, the computations looked like this:
<TABLE><CAPTION>
Net assets before Shares outstanding Net asset value
shareholder transactions at the end of previous day of one share
<S> <C> <C> <C>
Balanced Fund $526,590 divided by 38,663 equals $13.62
Equity Fund 552,012 23,845 23.15
Equity Income Fund 535,550 59,838 8.95
Total Return Fund 529,490 43,259 12.24
</TABLE>
In determining net assets before shareholder transactions, the
securities held by a Fund's corresponding Portfolio are valued as
follows as of the close of business of the New York Stock Exchange
(the Exchange):
'Securities, except bonds other than convertibles, traded on a
securities exchange for which a last-quoted sales price is readily
available are valued at the last-quoted sales price on the exchange
where such security is primarily traded.
'Securities traded on a securities exchange for which a last-quoted
sales price is not readily available are valued at the mean of the
closing bid and asked prices, looking first to the bid and asked
prices on the exchange where the security is primarily traded and,
if none exist, to the over-the-counter market.
'Securities included in the NASDAQ National Market System are
valued at the last-quoted sales price in this market.
'Securities included in the NASDAQ National Market System for which
a last-quoted sales price is not readily available, and other
securities traded over-the-counter but not included in the NASDAQ
National Market System are valued at the mean of the closing bid
and asked prices.
'Futures and options traded on major exchanges are valued at the
last-quoted sales price on their primary exchange.
'Foreign securities traded outside the United States are generally
valued as of the time their trading is complete, which is usually
different from the close of the Exchange. Foreign securities
quoted in foreign currencies are translated into U.S. dollars at
the current rate of exchange. Occasionally, events affecting the
value of such securities may occur between such times and the close
<PAGE>
PAGE 61
of the Exchange that will not be reflected in the computation of a
Portfolio's net asset value. If events materially affecting the
value of such securities occur during such period, these securities
will be valued at their fair value according to procedures decided
upon in good faith by the board.
'Short-term securities maturing more than 60 days from the
valuation date are valued at the readily available market price or
approximate market value based on current interest rates. Short-
term securities maturing in 60 days or less that originally had
maturities of more than 60 days at acquisition date are valued at
amortized cost using the market value on the 61st day before
maturity. Short-term securities maturing in 60 days or less at
acquisition date are valued at amortized cost. Amortized cost is
an approximation of market value determined by systematically
increasing the carrying value of a security if acquired at a
discount, or reducing the carrying value if acquired at a premium,
so that the carrying value is equal to maturity value on the
maturity date.
'Securities without a readily available market price, bonds other
than convertibles and other assets are valued at fair value as
determined in good faith by the board. The board is responsible
for selecting methods it believes provide fair value. When
possible, bonds are valued by a pricing service independent from
the Portfolio. If a valuation of a bond is not available from a
pricing service, the bond will be valued by a dealer knowledgeable
about the bond if such a dealer is available.
The Exchange, the Advisor and each of the Funds will be closed on
the following holidays: New Year's Day, Memorial Day, Independence
Day, Labor Day, Thanksgiving Day and Christmas Day.
INVESTING IN THE FUNDS
A Fund's minimum initial investment requirement is $2,000 ($1,000
for Custodial Accounts, Individual Retirement Accounts and certain
other retirement plans). Subsequent investments of $100 or more
may be made. These minimum investment requirements may be changed
at any time and are not applicable to certain types of investors.
The Securities Investor Protection Corporation (SIPC) will provide
account protection, in an amount up to $500,000, for securities
including Fund shares (up to $100,000 protection for cash), held in
an Investment Management Account maintained with the Advisor. Of
course, SIPC account protection does not protect shareholders from
share price fluctuations.
<PAGE>
PAGE 62
REDEEMING SHARES
You have a right to redeem your shares at any time. For an
explanation of redemption procedures, please see the prospectus.
During an emergency, the board can suspend the computation of net
asset value, stop accepting payments for purchase of shares or
suspend the duty of the Funds to redeem shares for more than seven
days. Such emergency situations would occur if:
'The Exchange closes for reasons other than the usual weekend and
holiday closings or trading on the Exchange is restricted, or
'Disposal of a Portfolio's securities is not reasonably practicable
or it is not reasonably practicable for a Fund to determine the
fair value of its net assets, or
'The SEC, under the provisions of the 1940 Act, as amended,
declares a period of emergency to exist.
Should a Fund stop selling shares, the board members may make a
deduction from the value of the assets held by the Fund to cover
the cost of future liquidations of the assets so as to distribute
fairly these costs among all shareholders.
Redemptions by a Fund
A Fund reserves the right to redeem, involuntarily, the shares of
any shareholder whose account has a value of less than a minimum
amount but only where the value of such account has been reduced by
voluntary redemption of shares. Until further notice, it is the
policy of a Fund not to exercise this right with respect to any
shareholder whose account has a value of $1,000 or more ($500 in
the case of Custodial accounts, IRA's and other retirement plans).
In any event, before a Fund redeems such shares and sends the
proceeds to the shareholder, it will notify the shareholder that
the value of the shares in the account is less than the minimum
amount and allow the shareholder 30 days to make an additional
investment in an amount which will increase the value of the
accounts to at least $1,000.
Redemptions in Kind
The Company has elected to be governed by Rule 18f-1 under the 1940
Act, which obligates a Fund to redeem shares in cash, with respect
to any one shareholder during any 90-day period, up to the lesser
of $250,000 or 1% of the net assets of a Fund at the beginning of
such period. Although redemptions in excess of this limitation
would normally be paid in cash, a Fund reserves the right to make
payments in whole or in part in securities or other assets in case <PAGE>
PAGE 63
of an emergency, or if the payment of such redemption in cash would
be detrimental to the existing shareholders of a Fund as determined
by the board. In such circumstances, the securities distributed
would be valued as set forth in the Prospectus. Should a Fund
distribute securities, a shareholder may incur brokerage fees or
other transaction costs in converting the securities to cash.
PAY-OUT PLANS
You can use any of several pay-out plans to redeem your investment
in regular installments at no extra cost. While the plans differ
on how the pay-out is figured, they all are based on the redemption
of your investment. Net investment income dividends and any
capital gain distributions will automatically be reinvested, unless
you elect to receive them in cash. If you are redeeming a tax-
qualified plan account for which American Express Trust Company
acts as custodian, you can elect to receive your dividends and
other distributions in cash when permitted by law. If you redeem
an IRA or a qualified retirement account, certain restrictions,
federal tax penalties and special federal income tax reporting
requirements may apply. You should consult your tax advisor about
this complex area of the tax law.
To start any of these plans, please submit an authorization form
supplied by American Express Financial Direct. For a copy, write
or call American Express Financial Direct, 1-800-AXP-SERV (TTY: 1-
800-710-5260), P.O. Box 59196, Minneapolis, MN 55459-0196. Your
authorization must be received in the Minneapolis headquarters at
least five days before the date you want your payments to begin.
The initial payment must be at least $50. Payments will be made on
a monthly, bimonthly, quarterly, semiannual or annual basis. Your
choice is effective until you change or cancel it.
The following pay-out plans are designed to take care of the needs
of most shareholders. If you need a more irregular schedule of
payments, it may be necessary for you to make a series of
individual redemptions, in which case you will have to send in a
separate redemption request for each pay-out. The Funds reserve
the right to change or stop any pay-out plan and to stop making
such plans available.
Plan #1: Pay-out for a fixed period of time
If you choose this plan, a varying number of shares will be
redeemed at net asset value at regular intervals during the time
period you choose. This plan is designed to end in complete re-
demption of all shares in your account with the Fund by the end of
the fixed period.
<PAGE>
PAGE 64
Plan #2: Redemption of a fixed number of shares
If you choose this plan, a fixed number of shares will be redeemed
at net asset value for each payment and that amount will be sent to
you. The length of time these payments continue is based on the
number of shares in your account with the Fund.
Plan #3: Redemption of a fixed dollar amount
If you decide on a fixed dollar amount, whatever number of shares
is necessary to make the payment will be redeemed in regular
installments until your account with the Fund is closed.
Plan #4: Redemption of a percentage of net asset value
Payments are made based on a fixed percentage of the net asset
value of the shares in the account computed on the day of each
payment. Percentages range from 0.25% to 0.75%. For example, if
you are on this plan and arrange to take 0.5% each month, you will
get $50 if the value of your account with the Fund is $10,000 on
the payment date.
CAPITAL LOSS CARRYOVER
For federal income tax purposes, Balanced Fund, Equity Fund, Equity
Income Fund and Total Return Fund had total capital loss carryovers
of $6,824, $28,844, $9,584, and $15,381, respectively, at Sept. 30,
1996, that if not offset by subsequent capital gains will expire in
2004.
It is unlikely that the board will authorize a distribution of any
net realized capital gains until the available capital loss
carryover has been offset or has expired except as required by
Internal Revenue Service rules.
TAXES
Dividends received should be treated as dividend income for federal
income tax purposes. Corporate shareholders are generally entitled
to a deduction equal to 70% of that portion of a Fund's dividend
that is attributable to dividends a Fund received from domestic <PAGE>
PAGE 65
(U.S.) securities. For the fiscal period from May 13, 1996, to
Sept. 30, 1996, 59.29% of Balanced Fund's net investment income
dividends, 100% of Equity Fund's net investment income dividends,
100% of Equity Income Fund's net investment income dividends and
100% of Total Return Fund's net investment income dividends
qualified for the corporate deduction.
Capital gain distributions, if any, received by individual and
corporate shareholders, should be treated as long-term capital
gains regardless of how long they owned their shares. Short-term
capital gains earned by a Fund are paid to shareholders as part of
their ordinary income dividend and are taxable as ordinary income,
not capital gain.
You may be able to defer taxes on current income from a Fund by
investing through an IRA, 401(k) plan account or other qualified
retirement account. If you move all or part of a non-qualified
investment in one of the above-mentioned Funds to a qualified
account, this type of exchange is considered a sale of shares. You
pay no sales charge, but the exchange may result in a gain or loss
for tax purposes, or excess contributions under IRA or qualified
plan regulations.
Under federal tax law, by the end of a calendar year a Fund must
declare and pay dividends representing 98% of ordinary income for
that calendar year and 98% of net capital gains (both long-term and
short-term) for the 12-month period ending Oct. 31 of that calendar
year. A Fund is subject to an excise tax equal to 4% of the
excess, if any, of the amount required to be distributed over the
amount actually distributed. A Fund intends to comply with federal
tax law and avoid any excise tax.
A Fund may be subject to U.S. taxes resulting from holdings in a
passive foreign investment company (PFIC). A foreign corporation
is a PFIC when 75% or more of its gross income for the taxable year
is passive income or if 50% or more of the average value of its
assets consists of assets that produce or could produce passive
income.
This is a brief summary that relates to federal income taxation
only. Shareholders should consult their tax advisor as to the
application of federal, state and local income tax laws to a Fund's
distributions.
<PAGE>
PAGE 66
AGREEMENTS
Investment Management Services Agreement
The Trust, on behalf of each Portfolio, has an Investment
Management Services Agreement with the Advisor. For its services,
the Advisor is paid a fee from the assets of each Portfolio, based
upon the following schedule:
Equity Portfolio
Equity Income Portfolio
Balanced Portfolio Total Return Portfolio
Assets Annual rate at Assets Annual rate at
(billions) each asset level (billions) each asset level
First $1.0 0.530% First $0.50 0.530%
Next 1.0 0.505 Next 0.50 0.505
Next 1.0 0.480 Next 1.0 0.480
Next 3.0 0.455 Next 1.0 0.455
Over 6.0 0.430 Next 3.0 0.430
Over 6.0 0.400
On Sept. 30, 1996, the daily rates applied to the Portfolio's net
assets on an annual basis were equal to 0.530% for Balanced
Portfolio, 0.528% for Equity Portfolio, 0.528% for Equity Income
Portfolio and 0.529% for Total Return Portfolio. The fee is
calculated for each calendar day on the basis of net assets at the
close of business two days prior to the day for which the
calculation is made.
Before the fee based on the asset charge is paid for Balanced,
Total Return and Equity Portfolios, it is increased or decreased
based on investment performance compared to the Index. For
Balanced Portfolio, the Index is the Lipper Balanced Fund Index.
For Equity Portfolio, the Index is the Lipper Growth and Income
Fund Index. For Total Return Portfolio, the Index is the Lipper
Flexible Portfolio Funds Index. Solely for purposes of calculating
the performance incentive adjustment, the Index is compared to the
performance of Class A shares of another fund that invests in the
Portfolio (the comparison fund). For Balanced Portfolio, the
comparison fund is IDS Mutual, for Total Return and Equity
Portfolios, the comparison funds are IDS Managed Retirement Fund
and IDS Stock Fund. The adjustment, determined monthly, will be
calculated using the percentage point difference between the change
in the net asset value of one share of the comparison fund and the
change in the Index. The performance of the comparison fund is
measured by computing the percentage difference between the opening
and closing net asset value of one share, as of the last business
day of the period selected for comparison, adjusted for dividend or
capital gain distributions which are treated as reinvested at the
end of the month during which the distribution was made. The<PAGE>
PAGE 67
performance of the Index for the same period is established by
measuring the percentage difference between the beginning and
ending Index for the comparison period. The performance is
adjusted for dividend or capital gain distributions (on the
securities which comprise the Index), which are treated as
reinvested at the end of the month during which the distribution
was made. One percentage point will be subtracted from the
calculation to help assure that incentive adjustments are
attributable to the Advisor's management abilities rather than
random fluctuations and the result multiplied by 0.01%. That
number will be multiplied times the Portfolio's average net assets
for the comparison period and then divided by the number of months
in the comparison period to determine the monthly adjustment.
Where the comparison fund's performance exceeds that of the Index,
the base fee will be increased. Where the performance of the Index
exceeds the performance of the comparison fund, the base fee will
be decreased. The maximum monthly increase or decrease will be
0.08% of average net assets on an annual basis.
The 12 month comparison period rolls over with each succeeding
month, so that it always equals 12 months, ending with the month
for which the performance adjustment is being computed. For the
fiscal period from May 13, 1996 to Sept. 30, 1996, the adjustment
decreased the fee by $37,226 for Balanced Portfolio, by $153,555
for Equity Portfolio, and by $979,878 for Total Return Portfolio.
The amounts are allocated among the funds investing in the
Portfolios.
The management fee is paid monthly. For the fiscal period from May
13, 1996 to Sept. 30, 1996, the total amount paid was $7,488,292
for Balanced Portfolio, $5,772,345 for Equity Portfolio, $2,737,194
for Equity Income Portfolio and $4,327,857 for Total Return
Portfolio.
Under the agreement, each Portfolio also pays taxes, brokerage
commissions and nonadvisory expenses, which include custodian fees;
audit and certain legal fees; fidelity bond premiums; registration
fees for units; portfolio office expenses; consultants' fees;
compensation of board members, officers and employees; corporate
filing fees; organizational expenses; expenses incurred in
connection with lending portfolio securities; and expenses properly
payable by each Portfolio, approved by the board. For the fiscal
period from May 13, 1996 to Sept. 30, 1996, the Portfolios and
Funds nonadvisory expenses of $263,420 for Balanced Portfolio and
Balanced Fund, $55,974 for Equity Portfolio and Equity Fund,
$65,943 for Equity Income Portfolio and Equity Income Fund and
$385,758 for Total Return Portfolio and Total Return Fund.
<PAGE>
PAGE 68
Administrative Services Agreement
The Company, on behalf of each Fund, has an Administrative Services
Agreement with the Advisor. Under this agreement, each Fund pays
the Advisor for providing administration and accounting services.
The fee is payable from the assets of each Fund and is calculated
as follows:
Equity Fund
Equity Income Fund
Balanced Fund Total Return Fund
Assets Annual rate at Assets Annual rate at
(billions) each asset level (billions) each asset level
First $1 0.040% First $0.50 0.040%
Next 1 0.035 Next 0.50 0.035
Next 1 0.030 Next 1 0.030
Next 3 0.025 Next 1 0.025
Over 6 0.020 Next 3 0.020
Over 6 0.020
On Sept. 30, 1996, the daily rates applied to the Funds' net assets
on an annual basis were equal to 0.040% for Balanced Fund, 0.040%
for Equity Fund, 0.040% for Equity Income Fund and 0.040% for Total
Return Fund. The fee is calculated for each calendar day on the
basis of net assets as of the close of business two business days
prior to the day for which the calculation is made. For the fiscal
period from May 13, 1996, to Sept. 30, 1996 the Fund paid fees of
$48 for Balanced Fund, $47 for Equity Fund, $48 for Equity Income
Fund and $48 for Total Return Fund.
Under the agreement, each Fund also pays taxes; audit and certain
legal fees; registration fees for shares; office expenses;
consultant's fees; compensation of board members; officers and
employees; corporate filing fees; organizational expenses; and
expenses properly payable by each Fund approved by the board.
Transfer Agency Agreement
The Company, on behalf of each Fund, has a Transfer Agency
Agreement with the Advisor. This agreement governs the
responsibility for administering and/or performing transfer agent
functions, for acting as service agent in connection with dividend
and distribution functions and for performing shareholder account
administration agent functions in connection with the issuance,
exchange and redemption or repurchase of the Fund's shares. The
fee is determined by multiplying the number of shareholder accounts
at the end of the day by a rate of $20 per year and dividing by the
number of days in the year. The fees paid to the Advisor may be
changed from time to time upon agreement of the parties without <PAGE>
PAGE 69
shareholder approval. For the fiscal period from May 13, 1996 to
Sept. 30, 1996, the Funds paid fees of $24 for Balanced Fund, $17
for Equity Fund, $18 for Equity Income Fund and $21 for Total
Return Fund.
Plan and Agreement of Distribution/Distribution Agreement
To help the Distributor defray the costs of distribution and
servicing, the Company and the Distributor have entered into a Plan
and Agreement of Distribution (Plan). These costs cover almost all
aspects of distributing Fund shares. Under the Plan, the
Distributor is paid a fee at an annual rate of 0.25% of a Fund's
average daily net assets.
The Plan must be approved annually by the board, including a
majority of the disinterested board members, if it is to continue
for more than a year. At least quarterly, the board must review
written reports concerning the amounts expended under the Plan and
the purposes for which the expenditures were made. The Plan and
any agreement related to it may be terminated at any time with
respect to a Fund by vote of a majority of board members who are
not interested persons of the Company and have no direct or
indirect financial interest in the operation of the Plan or in any
agreement related to the Plan, by vote of a majority of the
outstanding voting securities of a Fund or by the Distributor. The
Plan (or any agreement related to it) will terminate in the event
of its assignment, as that term is defined in the 1940 Act, as
amended. The Plan may not be amended to increase the amount to be
spent for distribution without shareholder approval, and all
material amendments to the Plan must be approved by a majority of
the board members, including a majority of the board members who
are not interested persons of the Company and who do not have a
financial interest in the operation of the Plan or any agreement
related to it. The selection and nomination of such disinterested
board members is the responsibility of such disinterested board
members. No board member who is not an interested person has any
direct or indirect financial interest in the operation of the Plan
or any related agreement. For the fiscal period from May 13, 1996
to Sept. 30, 1996, the Funds paid fees of $299 for Balanced Fund,
$296 for Equity Fund, $299 for Equity Income Fund and $297 for
Total Return Fund. The Funds began operations on May 13, 1996.
Total fees and expenses
Total combined fees and nonadvisory expenses of both the Fund and
the Portfolio cannot exceed the most restrictive applicable state
limitation. Currently, the most restrictive applicable state
expense limitation, subject to exclusion of certain expenses, is
2.5% of the first $30 million of each Fund's average daily net
assets, 2% of the next $70 million and 1.5% of average daily net <PAGE>
PAGE 70
assets over $100 million, on an annual basis. At the end of each
month, if the fees and expenses of a Fund exceed this limitation
for each Fund's fiscal year in progress, the Advisor will assume
all expenses in excess of the limitation. The Advisor then may
bill the Fund for such expenses in subsequent months up to the end
of that fiscal period, but not after that date. No interest
charges are assessed by the Advisor for expenses it assumes. For
the fiscal period from May 13, 1996 to Sept. 30, 1996, the Funds
paid total fees and nonadvisory expenses of $1,905 for Balanced
Fund, $1,472 for Equity Fund, $1,494 for Equity Income Fund and
$1,393 for Total Return Fund. The Funds began operations on May
13, 1996. The Advisor and the Distributor have agreed to waive
certain fees and to absorb certain other Fund expenses until Sept.
30, 1997. Under this agreement, Balanced, Equity, and Equity
Income Fund's total expenses will not exceed 1.25% and Total Return
Fund's total expenses will not exceed 1.30%.
Organizational Information
Each Fund is a series of Strategist Growth and Income Fund, Inc.,
an open-end management investment company, as defined in the
Investment Company Act of 1940. The Company was incorporated on
Sept. 1, 1995 in Minnesota. The Company's headquarters are at IDS
Tower 10, Minneapolis, MN 55440-0010.
BOARD MEMBERS AND OFFICERS
The following is a list of the Company's board members and
officers, who are board members and officers of all 15 funds in the
Strategist Fund Group. All shares of the Funds have cumulative
voting rights with respect to the election of board members.
Directors and officers of Strategist Fund Group
Rodney P. Burwell
Born in 1939
Xerxes Corporation
7901 Xerxes Ave. S.
Minneapolis, MN
Chairman, Xerxes Corporation (fiberglass storage tanks). Director,
Children's Broadcasting Network, Vaughn Communications, Sunbelt
Nursery Group, Fairview Corporation.
William J. Heron Jr.*
Born in 1941
American Express Company
World Financial Center
New York, NY
Vice president of all funds in the Strategist Fund Group.
President of American Express Financial Direct since 1995. Chief
executive officer, Swig Investment Company from 1993 to 1995.
Group executive, Citicorp/Citibank from 1985 to 1993.
<PAGE>
PAGE 71
Jean B. Keffeler
Born in 1945
The Keffeler Company
3033 Excelsior Blvd.
Minneapolis, MN
President, The Keffeler Company (management advisory services).
Director, National Computer Systems, American Paging Systems, Inc.
Thomas R. McBurney
Born in 1938
McBurney Management Advisors
1800 International Centre
900 2nd Ave. S.
Minneapolis, MN
President, McBurney Management Advisors. Director, The Valspar
Corporation (paints), Wenger Corporation, Security American
Financial Enterprises, Allina, Space Center Enterprises,
Greenspring Corporation.
James A. Mitchell*
Born in 1941
2900 IDS Tower
Minneapolis, MN
President of all funds in the Strategist Fund Group. Executive
vice president and director of the Advisor. Chairman of the board
and chief executive officer of IDS Life Insurance Company.
Director, IDS Life Funds.
*Interested person of the company by reason of being an officer,
board member, employee and/or shareholder of the Advisor or
American Express.
In addition to Mr. Mitchell, who is president, and Mr. Heron, who
is vice president, the Funds' other officers are:
Eileen J. Newhouse
Born in 1955
IDS Tower 10
Minneapolis, MN
Secretary of all funds in the Stratgist Fund Group. Counsel of the
Advisor.
<PAGE>
PAGE 72
Melinda S. Urion
Born in 1953
IDS Tower 10
Minneapolis, MN
Treasurer of all funds in the Strategist Fund Group. Director,
senior vice president and chief financial officer of the Advisor.
Director and executive vice president and controller of IDS Life
Insurance Company.
Members of the board who are not officers of the Advisor or an
affiliate receive an annual fee of $1,000 for Balanced Fund, $1,000
for Equity Fund, $1,000 for Equity Income Fund and $1,000 for Total
Return Fund. Once the assets of all funds in the Strategist Fund
Group reach $100 million, members of the board who are not officers
of the Advisor or an affiliate also will receive a fee of $1,000
for attendance at board meetings. Board members serving more than
one fund will receive an aggregate of $1,000 whether attending one
or more meetings held on the same day. The cost of the fee will be
shared by the funds served by the director.
During the fiscal period from May 13, 1996, to Sept. 30, 1996 the
members of the board received $0. On Sept. 30, 1996, the Funds'
board members and officers as a group owned less than 1% of the
outstanding shares of each Fund.
The following is a list of the Trust's board members and officers,
who are board members and officers of all five Trusts in the
Preferred Master Trust Group and, except for Mr. Dudley, all 47
funds in the IDS MUTUAL FUND GROUP. Mr. Dudley is a board member
of all IDS funds except the nine life funds. All units have
cumulative voting rights with respect to the election of board
members.
Trustees and officers of the Preferred Master Trust Group
H. Brewster Atwater, Jr.
Born in 1931
4900 IDS Tower
Minneapolis, MN
Former chairman and chief executive officer, General Mills, Inc.
Director, Merck & Co., Inc. and Darden Restaurants, Inc.
<PAGE>
PAGE 73
Lynne V. Cheney'
Born in 1941
American Enterprise Institute
for Public Policy Research (AEI)
1150 17th St., N.W.
Washington, D.C.
Distinguished Fellow AEI. Former Chair of National Endowment of
the Humanities. Director, The Reader's Digest Association Inc.,
Lockheed-Martin, the Interpublic Group of Companies, Inc.
(advertising) and FPL Group, Inc. (holding company for Florida
Power and Light).
William H. Dudley**
Born in 1932
2900 IDS Tower
Minneapolis, MN
Executive vice president and director of the Advisor.
Robert F. Froehlke+
Born in 1922
1201 Yale Place
Minneapolis, MN
Former president of all funds in the IDS MUTUAL FUND GROUP.
Director, the ICI Mutual Insurance Co., Institute for Defense
Analyses, Marshall Erdman and Associates, Inc. (architectural
engineering) and Public Oversight Board of the American Institute
of Certified Public Accountants.
David R. Hubers+**
Born in 1943
2900 IDS Tower
Minneapolis, MN
President, chief executive officer and director of the Advisor.
Previously, senior vice president, finance and chief financial
officer of the Advisor.
Heinz F. Hutter+'
Born in 1929
P.O. Box 2187
Minneapolis, MN
Former president and chief operating officer, Cargill, Incorporated
(commodity merchants and processors).
<PAGE>
PAGE 74
Anne P. Jones
Born in 1935
5716 Bent Branch Rd.
Bethesda, MD
Attorney and telecommunications consultant. Former partner, law
firm of Sutherland, Asbill & Brennan. Director, Motorola, Inc. and
C-Cor Electronics, Inc.
Melvin R. Laird
Born in 1922
Reader's Digest Association, Inc.
1730 Rhode Island Ave., N.W.
Washington, D.C.
Senior counsellor for national and international affairs, The
Reader's Digest Association, Inc. Former nine-term congressman,
secretary of defense and presidential counsellor. Director, Martin
Marietta Corp., Metropolitan Life Insurance Co., The Reader's
Digest Association, Inc., Science Applications International Corp.,
Wallace Reader's Digest Funds and Public Oversight Board (SEC
Practice Section, American Institute of Certified Public
Accountants).
William R. Pearce+*
Born in 1927
901 S. Marquette Ave.
Minneapolis, MN
President of all Trusts in the Preferred Master Trust Group since
April 1996 and president of all funds in the IDS MUTUAL FUND GROUP
since June 1993. Former vice chairman of the board, Cargill,
Incorporated (commodity merchants and processors).
Edson W. Spencer+
Born in 1926
4900 IDS Center
80 S. 8th St.
Minneapolis, MN
President, Spencer Associates Inc. (consulting). Former chairman
of the board and chief executive officer, Honeywell Inc. Director,
Boise Cascade Corporation (forest products). Member of
International Advisory Council of NEC (Japan).
<PAGE>
PAGE 75
John R. Thomas**
Born in 1937
2900 IDS Tower
Minneapolis, MN
Senior vice president and director of the Advisor.
Wheelock Whitney+
Born in 1926
1900 Foshay Tower
821 Marquette Ave.
Minneapolis, MN
Chairman, Whitney Management Company (manages family assets).
C. Angus Wurtele'
Born in 1934
Valspar Corporation
Suite 1700
Foshay Tower
Minneapolis, MN
Chairman of the board and retired chief executive officer, The
Valspar Corporation (paints). Director, Bemis Corporation
(packaging), Donaldson Company (air cleaners & mufflers) and
General Mills, Inc. (consumer foods).
+ Member of executive committee.
' Member of joint audit committee.
* Interested person of the Trust by reason of being an officer and
employee of the Trust.
**Interested person of the Trust by reason of being an officer,
board member, employee and/or shareholder of the Advisor or
American Express.
The board also has appointed officers who are responsible for day-
to-day business decisions based on policies it has established.
In addition to Mr. Pearce, who is president, the Trust's other
officers are:
Leslie L. Ogg
Born in 1938
901 S. Marquette Ave.
Minneapolis, MN
Vice president, general counsel and secretary of all Trusts in the
Preferred Master Trust Group and of all funds in the IDS MUTUAL
FUND GROUP.
Officers who are also officers and/or employees of the Advisor:
<PAGE>
PAGE 76
Peter J. Anderson
Born in 1942
IDS Tower 10
Minneapolis, MN
Vice president-investments of all Trusts in the Preferred Master
Trust Group. Director and senior vice president-investments of the
Advisor.
Melinda S. Urion
Born in 1953
IDS Tower 10
Minneapolis, MN
Treasurer of all Trusts in the Preferred Master Trust Group.
Director, senior vice president and chief financial officer of the
Advisor. Director and executive vice president and controller of
IDS Life Insurance Company.
Members of the board who are not officers of a Portfolio or of the
Advisor receive an annual fee of $2,400 for Balanced Portfolio,
$1,800 for Equity Portfolio, $600 for Equity Income Portfolio and
$1,800 for Total Return Portfolio. They also receive attendance
and other fees. These fees include for each day in attendance at
meetings of the board, $50; for meetings of the Contracts and
Investment Review Committees, $50; meetings of the Audit Committee,
$25; for traveling from out-of-state, $66; and as Chair of the
Contracts Committee, $90. Expenses for attending meetings are
reimbursed.
During the fiscal period from May 13, 1996 to Sept. 30, 1996, the
members of the board, for attending up to 23 meetings, received the
following compensation, in total, from all Portfolios in the
Preferred Master Trust Group:
<PAGE>
PAGE 77
<TABLE><CAPTION>
Compensation Table
for Balanced Portfolio
Pension or Estimated Total cash
Aggregate Retirement annual comepensation
compensation benefits benefit from the Preferred
from the accrued as upon Master Trust Group and
Board member Portfolio Portfolio expenses retirement IDS MUTUAL FUND GROUP
<S> <C> <C> <C> <C>
Lynne V. Cheney $613 $0 $0 $69,300
Robert F. Froehlke 615 0 0 69,100
Heinz F. Hutter 593 0 0 69,300
Anne P. Jones 613 0 0 70,800
Melvin R. Laird 625 0 0 72,900
Edson W. Spencer 635 0 0 75,100
Wheelock Whitney 635 0 0 70,300
C. Angus Wurtele 603 0 0 66,800
<CAPTION>
Compensation Table
for Equity Portfolio
Pension or Estimated Total cash
Aggregate Retirement annual compensation
compensation benefits benefit from the Preferred
from the accrued as upon Master Trust Group and
Board member Portfolio Portfolio expenses retirement IDS MUTUAL FUND GROUP
<S> <C> <C> <C> <C>
Lynne V. Cheney $513 $0 $0 $69,300
Robert F. Froehlke 515 0 0 69,100
Heinz F. Hutter 493 0 0 69,300
Anne P. Jones 513 0 0 70,800
Melvin R. Laird 525 0 0 72,900
Edson W. Spencer 535 0 0 75,100
Wheelock Whitney 535 0 0 70,300
C. Angus Wurtele 503 0 0 66,800
<CAPTION>
Compensation Table
for Equity Income Portfolio
Pension or Estimated Total cash
Aggregate Retirement annual compensation
compensation benefits benefit from the Preferred
from the accrued as upon Master Trust Group and
Board member Portfolio Portfolio expenses retirement IDS MUTUAL FUND GROUP
<S> <C> <C> <C> <C>
Lynne V. Cheney $230 $0 $0 $69,300
Robert F. Froehlke 232 0 0 69,100
Heinz F. Hutter 210 0 0 69,300
Anne P. Jones 230 0 0 70,800
Melvin R. Laird 242 0 0 72,900
Edson W. Spencer 252 0 0 75,100
Wheelock Whitney 252 0 0 70,300
C. Angus Wurtele 220 0 0 66,800
<CAPTION>
Compensation Table
for Total Return Portfolio
Pension or Estimated Total cash
Aggregate Retirement annual compensation
compensation benefits benefit from the Preferred
from the accrued as upon Master Trust Group and
Board member Portfolio Portfolio expenses retirement IDS MUTUAL FUND GROUP
<S> <C> <C> <C> <C>
Lynne V. Cheney $513 $0 $0 $69,300
Robert F. Froehlke 515 0 0 69,100
Heinz F. Hutter 493 0 0 69,300
Anne P. Jones 513 0 0 70,800
Melvin R. Laird 525 0 0 72,900
Edson W. Spencer 535 0 0 75,100
Wheelock Whitney 535 0 0 70,300
C. Angus Wurtele 503 0 0 66,800
/TABLE
<PAGE>
PAGE 78
During the fiscal period from May 13, 1996 to Sept. 30, 1996, no
board member or officer earned more than $60,000 from the Balanced
Portfolio, Equity Portfolio, Equity Income Portfolio and Total
Return Portfolio, respectively. All board members and officers as
a group earned $140,836 from Balanced Portfolio, $4,500 from Equity
Portfolio, $3,125 from Equity Income Portfolio, and $4,915 from
Total Return Portfolio.
CUSTODIAN
The Trust's securities and cash are held by American Express Trust
Company, 1200 Northstar Center West, 625 Marquette Ave.,
Minneapolis, MN 55402-2307, through a custodian agreement. Each
Fund also retains the custodian pursuant to a custodian agreement.
The custodian is permitted to deposit some or all of its securities
in central depository systems as allowed by federal law. For its
services, the Portfolios pay the custodian a maintenance charge per
Portfolio and a charge per transaction in addition to reimbursing
the custodian's out-of-pocket expenses.
INDEPENDENT AUDITORS
The Funds' and corresponding Portfolios' financial statements
contained in its Annual Report to shareholders for the fiscal
period ended September 30, 1996 were audited by independent
auditors, KPMG Peat Marwick LLP, 4200 Norwest Center, 90 S. Seventh
St., Minneapolis, MN 55402-3900. The independent auditors also
provide other accounting and tax-related services as requested by
the Funds.
FINANCIAL STATEMENTS
The Independent Auditors' Report and the Financial Statements,
including Notes to the Financial Statements and the Schedule of
Investments in Securities, contained in the Annual Report to
shareholders, pursuant to Section 30(d) of the 1940 Act, as
amended, are hereby incorporated in this SAI by reference. No
other portion of the Annual Report, however, is incorporated by
reference.
PROSPECTUS
The prospectus dated Nov. 29, 1996, is hereby incorporated in this
SAI by reference.
<PAGE>
PAGE 79
Appendix A
ADDITIONAL INFORMATION ON INVESTMENT POLICIES
Definitions of Zero-Coupon and Pay-In-Kind Securities
A zero-coupon security is a security that is sold at a deep
discount from its face value and makes no periodic interest
payments. The buyer of such a security receives a rate of return
by gradual appreciation of the security, which is redeemed at face
value on the maturity date.
A pay-in-kind security is a security in which the issuer has the
option to make interest payments in cash or in additional
securities. The securities issued as interest usually have the
same terms, including maturity date, as the pay-in-kind securities.
Non-rated securities will be considered for investment when they
possess a risk comparable to that of rated securities consistent
with the Portfolio's objectives and policies. When assessing the
risk involved in each non-rated security, the Portfolio will
consider the financial condition of the issuer or the protection
afforded by the terms of the security.
<PAGE>
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Appendix B
FOREIGN CURRENCY TRANSACTIONS
Since investments in foreign countries usually involve currencies
of foreign countries, and since a Portfolio may hold cash and cash-
equivalent investments in foreign currencies, the value of a
Portfolio's assets as measured in U.S. dollars may be affected
favorably or unfavorably by changes in currency exchange rates and
exchange control regulations. Also, a Portfolio may incur costs in
connection with conversions between various currencies.
Spot Rates and Forward Contracts. A Portfolio conducts its foreign
currency exchange transactions either at the spot (cash) rate
prevailing in the foreign currency exchange market or by entering
into forward currency exchange contracts (forward contracts) as a
hedge against fluctuations in future foreign exchange rates. A
forward contract involves an obligation to buy or sell a specific
currency at a future date, which may be any fixed number of days
from the contract date, at a price set at the time of the contract.
These contracts are traded in the interbank market conducted
directly between currency traders (usually large commercial banks)
and their customers. A forward contract generally has no deposit
requirements. No commissions are charged at any stage for trades.
A Portfolio may enter into forward contracts to settle a security
transaction or handle dividend and interest collection. When a
Portfolio enters into a contract for the purchase or sale of a
security denominated in a foreign currency or has been notified of
a dividend or interest payment, it may desire to lock in the price
of the security or the amount of the payment in dollars. By
entering into a forward contract, a Portfolio will be able to
protect itself against a possible loss resulting from an adverse
change in the relationship between different currencies from the
date the security is purchased or sold to the date on which payment
is made or received or when the dividend or interest is actually
received.
A Portfolio also may enter into forward contracts when management
of a Portfolio believes the currency of a particular foreign
country may suffer a substantial decline against another currency.
It may enter into a forward contract to sell, for a fixed amount of
dollars, the amount of foreign currency approximating the value of
some or all securities denominated in such foreign currency. The
precise matching of forward contract amounts and the value of
securities involved generally will not be possible since the future
value of such securities in foreign currencies more than likely
will change between the date the forward contract is entered into
and the date it matures. The projection of short-term currency
market movements is extremely difficult and successful execution of
a short-term hedging strategy is highly uncertain. A Portfolio <PAGE>
PAGE 81
will not enter into such forward contracts or maintain a net
exposure to such contracts when consummating the contracts would
obligate a Portfolio to deliver an amount of foreign currency in
excess of the value of a Portfolio's securities or other assets
denominated in that currency.
A Portfolio will designate cash or securities in an amount equal to
the value of a Portfolio's total assets committed to consummating
forward contracts entered into under the second circumstance set
forth above. If the value of the securities declines, additional
cash or securities will be designated on a daily basis so that the
value of the cash or securities will equal the amount of a
Portfolio's commitments on such contracts.
At maturity of a forward contract, a Portfolio may either sell the
security and make delivery of the foreign currency or retain the
security and terminate its contractual obligation to deliver the
foreign currency by purchasing an offsetting contract with the same
currency trader obligating it to buy, on the same maturity date,
the same amount of foreign currency.
If a Portfolio retains the security and engages in an offsetting
transaction, a Portfolio will incur a gain or a loss (as described
below) to the extent there has been movement in forward contract
prices. If a Portfolio engages in an offsetting transaction, it
may subsequently enter into a new forward contract to sell the
foreign currency. Should forward prices decline between the date a
Portfolio enters into a forward contract for selling foreign
currency and the date it enters into an offsetting contract for
purchasing the foreign currency, a Portfolio will realize a gain to
the extent that the price of the currency it has agreed to sell
exceeds the price of the currency it has agreed to buy. Should
forward prices increase, a Portfolio will suffer a loss to the
extent the price of the currency it has agreed to buy exceeds the
price of the currency it has agreed to sell.
It is impossible to forecast what the market value of securities
will be at the expiration of a contract. Accordingly, it may be
necessary for a Portfolio to buy additional foreign currency on the
spot market (and bear the expense of such purchase) if the market
value of the security is less than the amount of foreign currency a
Portfolio is obligated to deliver and a decision is made to sell
the security and make delivery of the foreign currency.
Conversely, it may be necessary to sell on the spot market some of
the foreign currency received on the sale of the security if its
market value exceeds the amount of foreign currency a Portfolio is
obligated to deliver.
<PAGE>
PAGE 82
A Portfolio's dealing in forward contracts will be limited to the
transactions described above. This method of protecting the value
of securities against a decline in the value of a currency does not
eliminate fluctuations in the underlying prices of the securities.
It simply establishes a rate of exchange that can be achieved at
some point in time. Although such forward contracts tend to
minimize the risk of loss due to a decline in value of hedged
currency, they tend to limit any potential gain that might result
should the value of such currency increase.
Although a Portfolio values its assets each business day in terms
of U.S. dollars, it does not intend to convert its foreign
currencies into U.S. dollars on a daily basis. It will do so from
time to time, and unitholders should be aware of currency
conversion costs. Although foreign exchange dealers do not charge
a fee for conversion, they do realize a profit based on the
difference (spread) between the prices at which they are buying and
selling various currencies. Thus, a dealer may offer to sell a
foreign currency to a Portfolio at one rate, while offering a
lesser rate of exchange should a Portfolio desire to resell that
currency to the dealer.
Options on Foreign Currencies. A Portfolio may buy put and write
covered call options on foreign currencies for hedging purposes.
For example, a decline in the dollar value of a foreign currency in
which securities are denominated will reduce the dollar value of
such securities, even if their value in the foreign currency
remains constant. In order to protect against such diminutions in
the value of securities, a Portfolio may buy put options on the
foreign currency. If the value of the currency does decline, its
portfolio will have the right to sell such currency for a fixed
amount in dollars and will thereby offset, in whole or in part, the
adverse effect on its Portfolio which otherwise would have
resulted.
As in the case of other types of options, however, the benefit to a
Portfolio derived from purchases of foreign currency options will
be reduced by the amount of the premium and related transaction
costs. In addition, where currency exchange rates do not move in
the direction or to the extent anticipated, a Portfolio could
sustain losses on transactions in foreign currency options which
would require it to forego a portion or all of the benefits of
advantageous changes in such rates.
A Portfolio may write options on foreign currencies for the same
types of hedging purposes. For example, when a Portfolio
anticipates a decline in the dollar value of foreign-denominated
securities due to adverse fluctuations in exchange rates, it could,
instead of purchasing a put option, write a call option on the
relevant currency. If the expected decline occurs, the option will
most likely not be exercised and the diminution in value of
securities will be fully or partially offset by the amount of the
premium received.
<PAGE>
PAGE 83
As in the case of other types of options, however, the writing of a
foreign currency option will constitute only a partial hedge up to
the amount of the premium, and only if rates move in the expected
direction. If this does not occur, the option may be exercised and
a Portfolio would be required to buy or sell the underlying
currency at a loss which may not be offset by the amount of the
premium. Through the writing of options on foreign currencies, a
Portfolio also may be required to forego all or a portion of the
benefits which might otherwise have been obtained from favorable
movements on exchange rates.
All options written on foreign currencies will be covered. An
option written on foreign currencies is covered if a Portfolio
holds currency sufficient to cover the option or has an absolute
and immediate right to acquire that currency without additional
cash consideration upon conversion of assets denominated in that
currency or exchange of other currency held in a Portfolio. An
option writer could lose amounts substantially in excess of its
initial investments, due to the margin and collateral requirements
associated with such positions.
Options on foreign currencies are traded through financial
institutions acting as market-makers, although foreign currency
options also are traded on certain national securities exchanges,
such as the Philadelphia Stock Exchange and the Chicago Board
Options Exchange, subject to SEC regulation. In an over-the-
counter trading environment, many of the protections afforded to
exchange participants will not be available. For example, there
are no daily price fluctuation limits, and adverse market movements
could therefore continue to an unlimited extent over a period of
time. Although the purchaser of an option cannot lose more than
the amount of the premium plus related transaction costs, this
entire amount could be lost.
Foreign currency option positions entered into on a national
securities exchange are cleared and guaranteed by the Options
Clearing Corporation (OCC), thereby reducing the risk of
counterparty default. Further, a liquid secondary market in
options traded on a national securities exchange may be more
readily available than in the over-the-counter market, potentially
permitting a Portfolio to liquidate open positions at a profit
prior to exercise or expiration, or to limit losses in the event of
adverse market movements.
The purchase and sale of exchange-traded foreign currency options,
however, is subject to the risks of availability of a liquid
secondary market described above, as well as the risks regarding
adverse market movements, margining of options written, the nature
of the foreign currency market, possible intervention by
governmental authorities and the effects of other political and <PAGE>
PAGE 84
economic events. In addition, exchange-traded options on foreign
currencies involve certain risks not presented by the over-the-
counter market. For example, exercise and settlement of such
options must be made exclusively through the OCC, which has
established banking relationships in certain foreign countries for
the purpose. As a result, the OCC may, if it determines that
foreign governmental restrictions or taxes would prevent the
orderly settlement of foreign currency option exercises, or would
result in undue burdens on OCC or its clearing member, impose
special procedures on exercise and settlement, such as technical
changes in the mechanics of delivery of currency, the fixing of
dollar settlement prices or prohibitions on exercise.
Foreign Currency Futures and Related Options. A Portfolio may
enter into currency futures contracts to sell currencies. It also
may buy put and write covered call options on currency futures.
Currency futures contracts are similar to currency forward
contracts, except that they are traded on exchanges (and have
margin requirements) and are standardized as to contract size and
delivery date. Most currency futures call for payment of delivery
in U.S. dollars. A Portfolio may use currency futures for the same
purposes as currency forward contracts, subject to Commodity
Futures Trading Commission (CFTC) limitations, including the
limitation on the percentage of assets that may be used, described
in the prospectus. All futures contracts are aggregated for
purposes of the percentage limitations.
Currency futures and options on futures values can be expected to
correlate with exchange rates, but will not reflect other factors
that may affect the values of a Portfolio's investments. A
currency hedge, for example, should protect a Yen-denominated bond
against a decline in the Yen, but will not protect a Portfolio
against price decline if the issuer's creditworthiness
deteriorates. Because the value of a Portfolio's investments
denominated in foreign currency will change in response to many
factors other than exchange rates, it may not be possible to match
the amount of a forward contract to the value of a Portfolio's
investments denominated in that currency over time.
A Portfolio will hold securities or other options or futures
positions whose values are expected to offset its obligations. A
Portfolio will not enter into an option or futures position that
exposes a Portfolio to an obligation to another party unless it
owns either (i) an offsetting position in securities or (ii) cash,
receivables and short-term debt securities with a value sufficient
to cover its potential obligations.
<PAGE>
PAGE 85
Appendix C
OPTIONS AND FUTURES CONTRACTS
Each Portfolio may buy or write options traded on any U.S. or
foreign exchange or in the over-the-counter market. Balanced
Portfolio, Equity Income Portfolio and Total Return Portfolio may
enter into interest rate futures contracts and stock index futures
contracts traded on any U.S. or foreign exchange and may buy or
write put and call options on these futures and on stock indexes.
Equity Portfolio may enter into stock index futures contracts
traded on any U.S. or foreign exchange and may buy or write put and
call options on these futures and on stock indexes. Options in the
over-the-counter market will be purchased only when the investment
manager believes a liquid secondary market exists for the options
and only from dealers and institutions the investment manager
believes present a minimal credit risk. Some options are
exercisable only on a specific date. In that case, or if a liquid
secondary market does not exist, a Portfolio could be required to
buy or sell securities at disadvantageous prices, thereby incurring
losses.
OPTIONS. An option is a contract. A person who buys a call option
for a security has the right to buy the security at a set price for
the length of the contract. A person who sells a call option is
called a writer. The writer of a call option agrees to sell the
security at the set price when the buyer wants to exercise the
option, no matter what the market price of the security is at that
time. A person who buys a put option has the right to sell a
security at a set price for the length of the contract. A person
who writes a put option agrees to buy the security at the set price
if the purchaser wants to exercise the option, no matter what the
market price of the security is at that time. An option is covered
if the writer owns the security (in the case of a call) or sets
aside the cash or securities of equivalent value (in the case of a
put) that would be required upon exercise.
The price paid by the buyer for an option is called a premium. In
addition, the buyer generally pays a broker a commission. The
writer receives a premium, less another commission, at the time the
option is written. The cash received is retained by the writer
whether or not the option is exercised. A writer of a call option
may have to sell the security for a below-market price if the
market price rises above the exercise price. A writer of a put
option may have to pay an above-market price for the security if
its market price decreases below the exercise price. The risk of
the writer is potentially unlimited, unless the option is covered.
Options can be used to produce incremental earnings, protect gains
and facilitate buying and selling securities for investment
purposes. The use of options and futures contracts may benefit a
Portfolio and its unitholders by improving a Portfolio's liquidity
and by helping to stabilize the value of its net assets.
<PAGE>
PAGE 86
Buying options. Put and call options may be used as a trading
technique to facilitate buying and selling securities for
investment reasons. Options are used as a trading technique to
take advantage of any disparity between the price of the underlying
security in the securities market and its price on the options
market. It is anticipated the trading technique will be utilized
only to effect a transaction when the price of the security plus
the option price will be as good or better than the price at which
the security could be bought or sold directly. When the option is
purchased, a Portfolio pays a premium and a commission. It then
pays a second commission on the purchase or sale of the underlying
security when the option is exercised. For record keeping and tax
purposes, the price obtained on the purchase of the underlying
security will be the combination of the exercise price, the premium
and both commissions. When using options as a trading technique,
commissions on the option will be set as if only the underlying
securities were traded.
Put and call options also may be held by a Portfolio for investment
purposes. Options permit a Portfolio to experience the change in
the value of a security with a relatively small initial cash
investment.
The risk a Portfolio assumes when it buys an option is the loss of
the premium. To be beneficial to a Portfolio, the price of the
underlying security must change within the time set by the option
contract. Furthermore, the change must be sufficient to cover the
premium paid, the commissions paid both in the acquisition of the
option and in a closing transaction or in the exercise of the
option and subsequent sale (in the case of a call) or purchase (in
the case of a put) of the underlying security. Even then, the
price change in the underlying security does not ensure a profit
since prices in the option market may not reflect such a change.
Writing covered options. A Portfolio will write covered options
when it feels it is appropriate and will follow these guidelines:
'Underlying securities will continue to be bought or sold solely on
the basis of investment considerations consistent with a
Portfolio's goals.
'All options written by a Portfolio will be covered. For covered
call options, if a decision is made to sell the security, or for
put options if a decision is made to buy the security, a Portfolio
will attempt to terminate the option contract through a closing
purchase transaction.
'A Portfolio will write options only as permitted under federal or
state laws or regulations, such as those that limit the amount of
total assets subject to the options. While no limit has been set
by a Portfolio, it will conform to the requirements of those
states. California limits the writing of options to 50% of the
assets of a Portfolio.
<PAGE>
PAGE 87
Net premiums on call options closed or premiums on expired call
options are treated as short-term capital gains. Since a Portfolio
is taxed as a regulated investment company under the Internal
Revenue Code, any gains on options and other securities held less
than three months must be limited to less than 30% of its annual
gross income.
If a covered call option is exercised, the security is sold by a
Portfolio. The premium received upon writing the option is added
to the proceeds received from the sale of the security. A
Portfolio will recognize a capital gain or loss based upon the
difference between the proceeds and the security's basis. Premiums
received from writing outstanding options are included as a
deferred credit in the Statement of Assets and Liabilities and
adjusted daily to the current market value.
Options on many securities are listed on options exchanges. If the
fund writes listed options, it will follow the rules of the options
exchange. Options are valued at the close of the New York Stock
Exchange. An option listed on a national exchange, CBOE or NASDAQ
will be valued at the last quoted sales price or, if such a price
is not readily available, at the mean of the last bid and ask
prices.
Options on certain securities are not actively traded on any
exchange, but may be entered into directly with a dealer. When a
Portfolio writes such an option, the Custodian will segregate
assets as appropriate to cover the option. These options may be
more difficult to close. If a Portfolio is unable to effect a
closing purchase transaction, it will not be able to sell the
underlying security until the call written by a Portfolio expires
or is exercised.
FUTURES CONTRACTS. A futures contract is an agreement between two
parties to buy and sell a security for a set price on a future
date. Futures contracts are commodity contracts listed on
commodity exchanges. Futures contracts trade in a manner similar
to the way a stock trades on a stock exchange and the commodity
exchanges, through their clearing corporations, guarantee
performance of the contracts. They include contracts based on U.S.
Treasury bonds and on Standard and Poor's 500 Index (S&P 500
Index). In the case of S&P 500 Index futures contracts, the
specified multiple is $500. Thus, if the value of the S&P 500
Index were 150, the value of one contract would be $75,000 (150 x
$500).
<PAGE>
PAGE 88
Unlike other futures contracts, a stock index futures contract
specifies that no delivery of the actual stocks making up the index
will take place. Instead, settlement in cash must occur upon the
termination of the contract. For example, excluding any
transaction costs, if a Portfolio enters into one futures contract
to buy the S&P 500 Index at a specified future date at a contract
value of 150 and the S&P 500 Index is at 154 on that future date, a
Portfolio will gain $500 x (154-150) or $2,000. If a Portfolio
enters into one futures contract to sell the S&P 500 Index at a
specified future date at a contract value of 150 and the S&P 500
Index is at 152 on that future date, a Portfolio will lose $500 x
(152-150) or $1,000.
Generally, a futures contract is terminated by entering into an
offsetting transaction. An offsetting transaction is effected by a
Portfolio taking an opposite position. At the time a futures
contract is made, a good faith deposit called initial margin is set
up within a segregated account at a Portfolio's custodian bank.
Daily thereafter, the futures contract is valued and the payment
of variation margin is required so that each day a Portfolio would
pay out cash in an amount equal to any decline in the contract's
value or receive cash equal to any increase. At the time a futures
contract is closed out, a nominal commission is paid, which is
generally lower than the commission on a comparable transaction in
the cash markets.
The purpose of a futures contract is to allow a Portfolio to gain
rapid exposure to or protect itself from changes in the market
without actually buying or selling securities. For example, if a
Portfolio owned long-term bonds and interest rates were expected to
increase, it might enter into futures contracts to sell securities
which would have much the same effect as selling some of the long-
term bonds it owned. If interest rates did increase, the value of
the debt securities in a portfolio would decline, but the value of
a Portfolio's futures contracts would increase at approximately the
same rate, thereby keeping the net asset value of a Portfolio from
declining as much as it otherwise would have. If, on the other
hand, a Portfolio held cash reserves and interest rates were
expected to decline, a Portfolio might enter into interest rate
futures contracts for the purchase of securities. If short-term
rates were higher than long-term rates, the ability to continue
holding these cash reserves would have a very beneficial impact on
a Portfolio's earnings. Even if short-term rates were not higher,
a Portfolio would still benefit from the income earned by holding
these short-term investments. At the same time, by entering into
futures contracts for the purchase of securities, a Portfolio could
take advantage of the anticipated rise in the value of long-term
bonds without actually buying them until the market had stabilized.
At that time, the futures contracts could be liquidated and a <PAGE>
PAGE 89
Portfolio's cash reserves could then be used to buy long-term bonds
on the cash market. A Portfolio could accomplish similar results
by selling bonds with long maturities and investing in bonds with
short maturities when interest rates are expected to increase or by
buying bonds with long maturities and selling bonds with short
maturities when interest rates are expected to decline. But by
using futures contracts as an investment tool, given the greater
liquidity in the futures market than in the cash market, it might
be possible to accomplish the same result more easily and more
quickly.
Risks of Transactions in Futures Contracts
A Portfolio may elect to close some or all of its contracts prior
to expiration. Although a Portfolio intends to enter into futures
contracts only on exchanges or boards of trade where there appears
to be an active secondary market, there is no assurance that a
liquid secondary market will exist for any particular contract at
any particular time. In such event, it may not be possible to
close a futures contract position, and in the event of adverse
price movements, a Portfolio would have to make daily cash payments
of variation margin. Such price movements, however, will be offset
all or in part by the price movements of the securities owned by a
Portfolio. Of course, there is no guarantee the price of the
securities will correlate with the price movements in the futures
contract and thus provide an offset to losses on a futures
contract.
Another risk in employing futures contracts to protect against the
price volatility of securities is that the prices of securities
subject to futures contracts may not correlate perfectly with the
behavior of the cash prices of a Portfolio's securities. The
correlation may be distorted because the futures market is
dominated by short-term traders seeking to profit from the
difference between a contract or security price and their cost of
borrowed funds. Such distortions are generally minor and would
diminish as the contract approached maturity.
In addition, a Portfolio's investment manager could be incorrect in
its expectations as to the direction or extent of various interest
rate or market movements or the time span within which the
movements take place. For example, if a Portfolio sold futures
contracts for the sale of securities in anticipation of an increase
in interest rates, and interest rates declined instead, a Portfolio
would lose money on the sale.
<PAGE>
PAGE 90
OPTIONS ON FUTURES CONTRACTS. Options give the holder a right to
buy or sell futures contracts in the future. Unlike a futures
contract, which requires the parties to the contract to buy and
sell a security on a set date, an option on a futures contract
merely entitles its holder to decide on or before a future date
(within nine months of the date of issue) whether to enter into
such a contract. If the holder decides not to enter into the
contract, all that is lost is the amount (premium) paid for the
option. Further, because the value of the option is fixed at the
point of sale, there are no daily payments of cash to reflect the
change in the value of the underlying contract. However, since an
option gives the buyer the right to enter into a contract at a set
price for a fixed period of time, its value does change daily and
that change is reflected in the net asset value of a Portfolio.
The risk a Portfolio assumes when it buys an option is the loss of
the premium paid for the option. The risk involved in writing
options on futures contracts a Portfolio owns, or on securities
held in a Portfolio, is that there could be an increase in the
market value of such contracts or securities. If that occurred,
the option would be exercised and the asset sold at a lower price
than the cash market price. To some extent, the risk of not
realizing a gain could be reduced by entering into a closing
transaction. A Portfolio could enter into a closing transaction by
purchasing an option with the same terms as the one it had
previously sold. The cost to close the option and terminate a
Portfolio's obligation, however, might be more or less than the
premium received when it originally wrote the option. Further, a
Portfolio might not be able to close the option because of
insufficient activity in the options market. Purchasing options
also limits the use of monies that might otherwise be available for
long-term investments.
OPTIONS ON STOCK INDEXES. Options on stock indexes are securities
traded on national securities exchanges. An option on a stock
index is similar to an option on a futures contract except all
settlements are in cash. A Portfolio exercising a put, for
example, would receive the difference between the exercise price
and the current index level. Such options would be used in the
same manner as options on futures contracts.
TAX TREATMENT. As permitted under federal income tax laws, a
Portfolio intends to identify futures contracts as mixed straddles
and not mark them to market, that is, not treat them as having been
sold at the end of the year at market value. Such an election may
result in a Portfolio being required to defer recognizing losses
incurred by entering into futures contracts and losses on
underlying securities identified as being hedged against.
<PAGE>
PAGE 91
Federal income tax treatment of gains or losses from transactions
in options on futures contracts and indexes will depend on whether
such option is a section 1256 contract. If the option is a non-
equity option, a Portfolio will either make a 1256(d) election and
treat the option as a mixed straddle or mark to market the option
at fiscal year end and treat the gain/loss as 40% short-term and
60% long-term. Certain provisions of the Internal Revenue Code may
also limit a Portfolio's ability to engage in futures contracts and
related options transactions. For example, at the close of each
quarter of a Portfolio's taxable year, at least 50% of the value of
its assets must consist of cash, government securities and other
securities, subject to certain diversification requirements. Less
than 30% of its gross income must be derived from sales of
securities held less than three months.
The IRS has ruled publicly that an exchange-traded call option is a
security for purposes of the 50%-of-assets test and that its issuer
is the issuer of the underlying security, not the writer of the
option, for purposes of the diversification requirements. In order
to avoid realizing a gain within the three-month period, a
Portfolio may be required to defer closing out a contract beyond
the time when it might otherwise be advantageous to do so. A
Portfolio also may be restricted in purchasing put options for the
purpose of hedging underlying securities because of applying the
short sale holding period rules with respect to such underlying
securities.
Accounting for futures contracts will be according to generally
accepted accounting principles. Initial margin deposits will be
recognized as assets due from a broker (a Portfolio's agent in
acquiring the futures position). During the period the futures
contract is open, changes in value of the contract will be
recognized as unrealized gains or losses by marking to market on a
daily basis to reflect the market value of the contract at the end
of each day's trading. Variation margin payments will be made or
received depending upon whether gains or losses are incurred. All
contracts and options will be valued at the last-quoted sales price
on their primary exchange.
<PAGE>
PAGE 92
Appendix D
MORTGAGE-BACKED SECURITIES
A mortgage pass through certificate is one that represents an
interest in a pool, or group, of mortgage loans assembled by the
Government National Mortgage Association (GNMA), Federal Home Loan
Mortgage Corporation (FHLMC), Federal National Mortgage Association
(FNMA) or non-governmental entities. In pass-through certificates,
both principal and interest payments, including prepayments, are
passed through to the holder of the certificate. Prepayments on
underlying mortgages result in a loss of anticipated interest, and
the actual yield (or total return) to the Portfolio, which is
influenced by both stated interest rates and market conditions, may
be different than the quoted yield on certificates. Some U.S.
government securities may be purchased on a when-issued basis,
which means that it may take as long as 45 days after the purchase
before the securities are delivered to the Portfolio.
Stripped Mortgage-Backed Securities. The Portfolio may invest in
stripped mortgage-backed securities. Generally, there are two
classes of stripped mortgage-backed securities: Interest Only (IO)
and Principal Only (PO). IOs entitle the holder to receive
distributions consisting of all or a portion of the interest on the
underlying pool of mortgage loans or mortgage-backed securities.
POs entitle the holder to receive distributions consisting of all
or a portion of the principal of the underlying pool of mortgage
loans or mortgage-backed securities. The cash flows and yields on
IOs and POs are extremely sensitive to the rate of principal
payments (including prepayments) on the underlying mortgage loans
or mortgage-backed securities. A rapid rate of principal payments
may adversely affect the yield to maturity of IOs. A slow rate of
principal payments may adversely affect the yield to maturity of
POs. On an IO, if prepayments of principal are greater than
anticipated, an investor may incur substantial losses. If
prepayments of principal are slower than anticipated, the yield on
a PO will be affected more severely than would be the case with a
traditional mortgage-backed security.
Mortgage-Backed Security Spread Options. The Portfolio may
purchase mortgage-backed security (MBS) put spread options and
write covered MBS call spread options. MBS spread options are
based upon the changes in the price spread between a specified
mortgage-backed security and a like-duration Treasury security.
MBS spread options are traded in the OTC market and are of short
duration, typically one to two months. The Portfolio would buy or
sell covered MBS call spread options in situations where mortgage-
backed securities are expected to underperform like-duration
Treasury securities.
<PAGE>
PAGE 93
Appendix E
DOLLAR-COST AVERAGING
A technique that works well for many investors is one that
eliminates random buy and sell decisions. One such system is
dollar-cost averaging. Dollar-cost averaging involves building a
portfolio through the investment of fixed amounts of money on a
regular basis regardless of the price or market condition. This
may enable an investor to smooth out the effects of the volatility
of the financial markets. By using this strategy, more shares will
be purchased when the price is low and less when the price is high.
As the accompanying chart illustrates, dollar-cost averaging tends
to keep the average price paid for the shares lower than the
average market price of shares purchased, although there is no
guarantee.
While this does not ensure a profit and does not protect against a
loss if the market declines, it is an effective way for many
shareholders who can continue investing through changing market
conditions to accumulate shares in a Fund to meet long-term goals.
Dollar-cost averaging
___________________________________________________________________
Regular Market Price Shares
Investment of a Share Acquired
$100 $6.00 16.7
100 4.00 25.0
100 4.00 25.0
100 6.00 16.7
100 5.00 20.0
$500 $25.00 103.4
Average market price of a share over 5 periods:
$5.00 ($25.00 divided by 5).
The average price you paid for each share:
$4.84 ($500 divided by 103.4).<PAGE>
PAGE 94
<PAGE>
PAGE 95
PART C. OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) FINANCIAL STATEMENTS:
Financial Statements filed as part of this post-effective
amendment:
Strategist Growth and Income Fund, Inc.:
Independent Auditor's Report dated November 1, 1996
Statement of assets and liabilities, September 30, 1996
Statement of operations, for the period from May 13, 1996 to
September 30, 1996
Statement of changes in net assets, for the period from May
13, 1996 to September 30, 1996
Notes to financial statements
Balanced Portfolio:
Independent Auditor's Report dated November 1, 1996
Statement of assets and liabilities, September 30, 1996
Statement of operations, for the period from May 13, 1996 to
September 30, 1996
Statement of changes in net assets, for the period from May
13, 1996 to September 30, 1996
Notes to financial statements
Investments in securities, September 30, 1996
Notes to investments in securities
Equity Portfolio:
Independent Auditor's Report dated November 1, 1996
Statement of assets and liabilities, September 30, 1996
Statement of operations, for the period from May 13, 1996 to
September 30, 1996
Statement of changes in net assets, for the period from May
13, 1996 to September 30, 1996
Notes to financial statements
Investments in securities, September 30, 1996
Notes to investments in securities
Equity Income Portfolio:
Independent Auditor's Report dated November 1, 1996
Statement of assets and liabilities, September 30, 1996
Statement of operations, for the period from May 13, 1996 to
September 30, 1996
Statement of changes in net assets, for the period from May
13, 1996 to September 30, 1996
Notes to financial statements
Investments in securities, September 30, 1996
Notes to investments in securities
<PAGE>
PAGE 96
Total Return Portfolio:
Independent Auditor's Report dated November 1, 1996
Statement of assets and liabilities, September 30, 1996
Statement of operations, for the period from May 13, 1996 to
September 30, 1996
Statement of changes in net assets, for the period from May
13, 1996 to September 30, 1996
Notes to financial statements
Investments in securities, September 30, 1996
Notes to investments in securities
Strategist Growth and Income Fund, Inc.
* Statement of assets and liabilities, Oct. 31, 1996
* Statement of operations, for the month ended Oct. 31, 1996
* Statement of changes in net assets, for the month ended
Oct. 31, 1996
(b) EXHIBITS:
1.(a) Articles of Incorporation, dated Sept. 1, 1995, filed
electronically on or about Nov. 1, 1995 as Exhibit 1 to
Registrant's initial registration statement are incorporated
herein by reference.
1.(b) Articles of Amendment, dated April 4, 1996, filed
electronically on or about April 17, 1996 as Exhibit 1(b).
2. Form of By-laws filed electronically on or about April 17,
1996 as Exhibit 2.
3. Not Applicable.
4. Not Applicable.
5. Not Applicable.
6. Copy of Distribution Agreement, dated May 13, 1996, is filed
electronically herewith as Exhibit 6.
7. Not Applicable.
8.(a) Copy of Custodian Agreement, dated May 13, 1996, is filed
electronically herewith as Exhibit 8(a).
8.(b) Copy of Addendum to Custodian Agreement, dated May 13, 1996
is filed electronically herewith as Exhibit 8(b).
9.(a) Copy of Transfer Agency Agreement, dated May 13, 1996, is
filed electronically herewith as Exhibit 9(a).
9.(b) Copy of Administrative Services Agreement, dated May 13,
1996, is filed electronically herewith as Exhibit 9(b).
9.(c) Copy of Agreement and Declaration of Unitholders, between
Strategist Equity Income Fund and IDS Diversified Equity
Income Fund, is filed electronically herewith as Exhibit
9(c).
<PAGE>
PAGE 97
9.(d) Copy of Agreement and Declaration of Unitholders, between
Strategist Balanced Fund and IDS Mutual, is filed
electronically herewith as Exhibit 9(d).
9.(e) Copy of Agreement and Declaration of Unitholders, between
Strategist Equity Fund and IDS Stock Fund, Inc., is filed
electronically herewith as Exhibit 9(e).
9.(f) Copy of Agreement and Declaration of Unitholders, between
Strategist Total Return Fund and IDS Managed Retirement Fund,
Inc., is filed electronically herewith as Exhibit 9(f).
10. Opinion and consent of counsel as to the legality of the
securities being registered is filed with Registrant's most
recent 24f-2 notice.
11. Independent auditors consent is filed electronically herewith
as Exhibit 11.
12. Not Applicable.
13. Copy of Share Purchase Agreement filed electronically as
Exhibit 13 to Registrant's Pre-Effective Amendment No. 2, is
incorporated herein by reference.
14. Not Applicable.
15. Copy of Plan and Agreement of Distribution, dated May 13,
1996, is filed electronically herewith as Exhibit 15.
16. Copy of schedule for computation of each performance
quotation provided in the Registration Statement in response
to Item 22(b), filed on or about April 17, 1996 as Exhibit 16
to Registrant's Pre-Effective Amendment No. 2, is
incorporated herein by reference.
17. Financial data schedules are filed electronically herewith.
18. Not Applicable.
19(a) Director's Power of Attorney to sign Amendments to this
Registration Statement, dated April 24, 1996, is filed
electronically herewith.
19(b) Officer's Power of Attorney to sign Amendments to this
Registration Statement, dated April 24, 1996, filed
electronically herewith.
19(c) Trustees Power of Attorney to sign Amendments to Registration
Statement, dated April 11, 1996, filed as Exhibit 19(a) to
Registrant's Pre-Effective Amendment No. 2, is incorporated
herein by reference.
19(d) Officers' Power of Attorney to sign Amendments to
Registration Statement, dated April 11, 1996, filed
electronically as Exhibit 19(b) to Registrant's Pre-Effective
Amendment No. 2, is incorporated herein by reference.
<PAGE>
PAGE 98
Item 25. Persons Controlled by or Under Common Control with
Registrant
None.
Item 26. Number of Holders of Securities
(1) (2)
Number of Record
Holders as of
Title of Class Nov. 7, 1996
Common Stock
Strategist Balanced Fund 9
Strategist Equity Fund 5
Strategist Equity Income Fund 11
Strategist Total Return Fund 6
Item 27. Indemnification
Reference is hereby made to Article IV of Registrant's Articles of
Incorporation filed electronically on or about Nov. 1, 1995 as
Exhibit 1 to Registrant's initial registration statement and
Article X of Registrant's By-laws filed electronically on or about
April 17, 1996 as Exhibit 2 to Registrant's Pre-Effective Amendment
No. 2.<PAGE>
PAGE 99
<PAGE>
PAGE 1
American Express Financial Corporation is the investment advisor of
the Portfolios of the Trust.
<PAGE>
Item 29(c). Not applicable.
Item 30. Location of Accounts and Records
American Express Financial Corporation
IDS Tower 10
Minneapolis, MN 55440
Item 31. Management Services
Not Applicable.
Item 32. Undertakings
(a) Not Applicable.
(b) Not Applicable.
(c) The Registrant undertakes to furnish each person to whom a
prospectus is delivered with a copy of the Registrant's
latest annual report to shareholders, upon request and
without charge.
<PAGE>
PAGE 100
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant, Strategist Growth
and Income Fund, Inc., certifies that it meets the requirements for
the effectiveness of this Amendment to its Registration Statement
pursuant to Rule 485(b) under the Securities Act of 1933 and has
duly caused this Amendment to its Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized
in the City of Minneapolis and State of Minnesota on the 26th day
of November, 1996.
STRATEGIST GROWTH AND INCOME FUND, INC.
By /s/ James A. Mitchell*
James A. Mitchell
President
By /s/ Melinda S. Urion
Melinda S. Urion
Treasurer
Pursuant to the requirements of the Securities Act of 1933, this
Amendment to its Registration Statement has been signed below by
the following persons in the capacities indicated on the 26th day
of November, 1996.
Signature Title
By /s/ Rodney P. Burwell** Director
Rodney P. Burwell
By /s/ Wiliam J. Heron Jr.** Director
William J. Heron
By /s/ Jean B. Keffeler** Director
Jean B. Keffeler
By /s/ Thomas R. McBurney** Director
Thomas R. McBurney
By /s/ James A. Mitchell** Director
James A. Mitchell
* Signed pursuant to Officer's Power of Attorney dated April 24,
1996, filed electronically herewith by:
Eileen J. Newhouse
** Signed pursuant to Director's Power of Attorney dated April 24,
1996 filed electronically herewith by:
Eileen J. Newhouse<PAGE>
PAGE 101
Signatures
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, GROWTH AND INCOME TRUST consents to
the filing of this Amendment to the Registration Statement signed
on its behalf by the undersigned, thereunto duly authorized, in the
City of Minneapolis and State of Minnesota on the 26th day of
November, 1996.
GROWTH AND INCOME TRUST
By /s/ William R. Pearce**
William R. Pearce
President
By /s/ Melinda S. Urion
Melinda S. Urion
Treasurer
Pursuant to the requirements of the Securities Act of 1933, this
Amendment to the Registration Statement has been signed below by
the following persons in the capacities indicated on the 26th day
of November, 1996.
Signatures Capacity
/s/ William R. Pearce* Trustee
William R. Pearce
Trustee
H. Brewster Atwater, Jr.
/s/ Lynne V. Cheney* Trustee
Lynne V. Cheney
/s/ William H. Dudley* Trustee
William H. Dudley
/s/ Robert F. Froehlke* Trustee
Robert F. Froehlke
/s/ David R. Hubers* Trustee
David R. Hubers
/s/ Heinz F. Hutter* Trustee
Heinz F. Hutter
/s/ Anne P. Jones* Trustee
Anne P. Jones
/s/ Melvin R. Laird* Trustee
Melvin R. Laird
<PAGE>
PAGE 102
Signatures Capacity
Trustee
Edson W. Spencer
/s/ John R. Thomas* Trustee
John R. Thomas
Trustee
Wheelock Whitney
/s/ C. Angus Wurtele* Trustee
C. Angus Wurtele
* Signed pursuant to Trustees Power of Attorney dated April 11,
1996, filed electronically as Exhibit 19(a) to Registrant's Pre-
Effective Amendment No. 2, by:
___________________________________
Leslie L. Ogg
** Signed pursuant to Officers' Power of Attorney dated April 11,
1996, filed electronically as Exhibit 19(b) to Registrant's Pre-
Effective Amendment No. 2, by:
___________________________________
Leslie L. Ogg
<PAGE>
PAGE 103
CONTENTS OF THIS POST-EFFECTIVE AMENDMENT NO. 1 TO REGISTRATION
STATEMENT NO. 33-63907
This Amendment to the Registration Statement comprises the
following papers and documents:
The facing sheet.
Cross reference sheet.
Part A.
The prospectus.
Part B.
Statement of Additional Information.
Financial Statements.
Part C.
Other Information.
The signatures.
<PAGE>
PAGE 1
EXHIBIT INDEX
Exhibit 6 : Copy of Distribution Agreement, dated May 13, 1996
Exhibit 8(a) : Copy of Custodian Agreement, dated May 13, 1996
Exhibit 8(b) : Copy of Addendum to Custodian Agreement, dated May
13, 1996
Exhibit 9(a) : Copy of Transfer Agency Agreement, dated May 13,
1996
Exhibit 9(b) : Copy of Administrative Services Agreement, dated May
13, 1996
Exhibit 9(c) : Copy of Agreement and Declaration of Unitholders,
between Strategist Equity Income Fund and IDS
Diversified Equity Income Fund.
Exhibit 9(d) : Copy of Agreement and Declaration of Unitholders,
between Strategist Balanced Fund and IDS Mutual.
Exhibit 9(e) : Copy of Agreement and Declaration of Unitholders,
between Strategist Equity Fund and IDS Stock Fund,
Inc.
Exhibit 9(f) : Copy of Agreement and Declaration of Unitholders,
between Strategist Total Return Fund and IDS Managed
Retirement Fund, Inc.
Exhibit 11 : Consent of Independent Auditors.
Exhibit 15 : Copy of Plan and Agreement of Distribution, dated
May 13, 1996.
Exhibit 17 : Financial data schedules.
Exhibit 19(a): Director's Power of Attorney to sign Amendments to
this Registration Statement, dated April 24, 1996.
Exhibit 19(b): Officer's Power of Attorney to sign Amendments to
this Registration Statement, dated April 24, 1996.
<PAGE>
PAGE 1
DISTRIBUTION AGREEMENT
Agreement made as of the 13th day of May, 1996, by and between
Strategist Growth and Income Fund, Inc. (the "Company"), a
Minnesota corporation, on behalf of each class of its underlying
series funds, and American Express Service Corporation (AESC), a
Delaware corporation.
Part One: DISTRIBUTION OF SECURITIES
(1) The Company covenants and agrees that, during the term of
this agreement and any renewal or extension, AESC shall have the
exclusive right to act as principal underwriter for the Company and
to offer for sale and to distribute either directly or through any
affiliated or unaffiliated entity any and all shares of each class
of capital stock issued or to be issued by the Company.
(2) AESC hereby covenants and agrees to act as the principal
underwriter of each class of capital shares issued and to be issued
by the Company during the period of this agreement and agrees
during such period to offer for sale such shares as long as such
shares remain available for sale, unless AESC is unable or
unwilling to make such offer for sale or sales or solicitations
therefor legally because of any federal, state, provincial or
governmental law, rule or agency or for any financial reason.
(3) With respect to the offering for sale and sale of shares of
each class to be issued by the Company, it is mutually understood
and agreed that such shares are to be sold on the following terms:
(a) All sales shall be made by means of an application, and
every application shall be subject to acceptance or rejection by
the Company at its principal place of business. Shares are to be
sold for cash, payable at the time the application and payment for
such shares are received at the principal place of business of the
Company.
(b) No shares shall be sold at less than the net asset value
(computed in the manner provided by the currently effective
prospectus or Statement of Additional Information and the
Investment Company Act of 1940, and rules thereunder). The number
of shares or fractional shares to be acquired by each applicant
shall be determined by dividing the amount of each accepted
application by the public offering price of one share of the
capital stock of the appropriate class as of the close of business
on the day when the application, together with payment, is received
by the Company at its principal place of business. The computation
as to the number of shares and fractional shares shall be carried
to three decimal points of one share with the computation being
carried to the nearest 1/1000th of a share. If the day of receipt
of the application and payment is not a full business day, then the
asset value of the share for use in such computation shall be
determined as of the close of business on the next succeeding full
business day. In the event of a period of emergency, the
computation of the asset value for the purpose of determining the
number of shares or fractional shares to be acquired by the<PAGE>
PAGE 2
applicant may be deferred until the close of business on the first
full business day following the termination of the period of
emergency. A period of emergency shall have the definition given
thereto in the Investment Company Act of 1940, and rules
thereunder.
(4) The Company agrees to make prompt and reasonable effort to
do any and all things necessary, in the opinion of AESC to have and
to keep the Company and the shares properly registered or qualified
in all appropriate jurisdictions and, as to shares, in such amounts
as AESC may from time to time designate in order that the Company's
shares may be offered or sold in such jurisdictions.
(5) The Company agrees that it will furnish AESC with information
with respect to the affairs and accounts of the Company, and in
such form, as AESC may from time to time reasonably require and
further agrees that AESC, at all reasonable times, shall be
permitted to inspect the books and records of the Company.
(6) AESC or its agents may prepare or cause to be prepared from
time to time circulars, sales literature, broadcast material,
publicity data and other advertising material to be used in the
sales of shares issued by the Company, including material which may
be deemed to be a prospectus under rules promulgated by the
Securities and Exchange Commission (each separate promotional piece
is referred to as an "Item of Soliciting Material"). At its
option, AESC may submit any Item of Soliciting Material to the
Company for its prior approval. Unless a particular Item of
Soliciting Material is approved in writing by the Company prior to
its use, AESC agrees to indemnify the Company and its directors and
officers against any and all claims, demands, liabilities and
expenses which the Company or such persons may incur arising out of
or based upon the use of any Item of Soliciting Material. The term
"expenses" includes amounts paid in satisfaction of judgments or in
settlements. The foregoing right of indemnification shall be in
addition to any other rights to which the Company or any director
or officer may be entitled as a matter of law. Notwithstanding the
foregoing, such indemnification shall not be deemed to abrogate or
diminish in any way any right or claim AESC may have against the
Company or its officers or directors in connection with the
Company's registration statement, prospectus, Statement of
Additional Information or other information furnished by or caused
to be furnished by the Company.
(7) AESC agrees to submit to the Company each application for
shares immediately after the receipt of such application and
payment therefor by AESC at its principal place or business.
(8) AESC agrees to cause to be delivered to each person
submitting an application a prospectus to be furnished by the
Company in the form required by the applicable federal laws or by
the acts or statutes of any applicable state, province or country.
(9) The Company shall have the right to extend to shareholders of
each class the right to use the proceeds of any cash dividend paid
by the Company to that shareholder to purchase shares of the same<PAGE>
PAGE 3
class at the net asset value at the close of business upon the day
of purchase, to the extent set forth in the currently effective
prospectus or Statement of Additional Information.
(10) Shares of each class issued by the Company may be offered
and sold at their net asset value to the shareholders of the same
class of other companies in the Strategist Fund Group who wish to
exchange their investments in shares of the other funds in the
Strategist Fund Group to investments in shares of the Company, to
the extent set forth in the currently effective prospectus or
Statement of Additional Information, such net asset value to be
computed as of the close of business on the day of sale of such
shares of the Company.
(11) AESC and the Company agree to use their best efforts to
conform with all applicable state and federal laws and regulations
relating to any rights or obligations under the term of this
agreement.
Part Two: ALLOCATION OF EXPENSES
Except as provided by any other agreements between the parties,
AESC covenants and agrees that during the period of this agreement
it will pay or cause or be paid all expenses incurred by AESC or
any of its affiliates, in the offering for sale or sale of each
class of the Company's shares.
Part Three: COMPENSATION
(1) It is covenanted and agreed that AESC shall be paid:
(i) for a class of shares imposing a front-end sales charge,
by the purchasers of Company shares in an amount equal to the
difference between the total amount received upon each sale of
shares issued by the Company and the net asset value of such shares
at the time of such sale; and
(ii) for a class of shares imposing a deferred sales charge,
by owners of Company shares at the time the sales charge is imposed
in an amount equal to any deferred sales charge, as described in
the Company's prospectus.
Such sums as are received by the Company shall be received as Agent
for AESC and shall be remitted to AESC daily as soon as practicable
after receipt.
(2) The net asset value of any share of each class of the Company
shall be determined in the manner provided by the classes'
currently effective prospectus and Statement of Additional
Information and the Investment Company Act of 1940, and rules
thereunder.
<PAGE>
PAGE 4
Part Four: MISCELLANEOUS
(1) AESC shall be deemed to be an independent contractor and,
except as expressly provided or authorized in this agreement, shall
have no authority to act for or represent the Company.
(2) AESC shall be free to render to others services similar to
those rendered under this agreement.
(3) Neither this agreement nor any transaction had pursuant
hereto shall be invalidated or in any way affected by the fact that
directors, officers, agents and/or shareholders of the Company are
or may be interested in AESC as directors, officers, shareholders
or otherwise; that directors, officers, shareholders or agents of
AESC are or may be interested in the Company as directors,
officers, shareholders or otherwise; or that AESC is or may be
interested in the Company as shareholder or otherwise; provided,
however, that neither AESC nor any officer or director of AESC or
any officers or directors of the Company shall sell to or buy from
the Company any property or security other than a security issued
by the Company, except in accordance with a rule, regulation or
order of the federal Securities and Exchange Commission.
(4) For the purposes of this agreement, a "business day" shall
have the same meaning as is given to the term in the By-laws of the
Company.
(5) Any notice under this agreement shall be given in writing,
addressed and delivered, or mailed postpaid, to the parties to this
agreement at each company's principal place of business in
Minneapolis, Minnesota, or to such other address as either party
may designate in writing mailed to the other.
(6) AESC agrees that no officer, director or employee of AESC
will deal for or on behalf of the Company with himself as principal
or agent, or with any corporation or partnership in which he may
have a financial interest, except that this shall not prohibit:
(a) Officers, directors and employees of AESC from having a
financial interest in the Company or in AESC.
(b) The purchase of securities for the Company, or the sale
of securities owned by the Company, through a security broker or
dealer, one or more of whose partners, officers, directors or
employees is an officer, director or employee of AESC provided such
transactions are handled in the capacity of broker only and
provided commissions charged do not exceed customary brokerage
charges for such services.
(c) Transactions with the Company by a broker-dealer
affiliate of AESC if allowed by rule or order of the Securities and
Exchange Commission and if made pursuant to procedures adopted by
the Company's Board of Directors (the "Board").
(7) AESC agrees that, except as otherwise provided in this
agreement, or as may be permitted consistent with the use of a
broker-dealer affiliate of AESC under applicable provisions of the<PAGE>
PAGE 5
federal securities laws, neither it nor any of its officers,
directors or employees shall at any time during the period of this
agreement make, accept or receive, directly or indirectly, any
fees, profits or emoluments of any character in connection with the
purchase or sale of securities (except securities issued by the
Company) or other assets by or for the Company.
Part Five: TERMINATION
(1) This agreement shall continue from year to year unless and
until terminated by AESC or the Company, except that such
continuance shall be specifically approved at least annually by a
vote of a majority of the Board who are not parties to this
agreement or interested persons of any such party, cast in person
at a meeting called for the purpose of voting on such approval, and
by a majority of the Board or by vote of a majority of the
outstanding voting securities of the Company. As used in this
paragraph, the term "interested person" shall have the meaning as
set forth in the Investment Company Act of 1940, as amended.
(2) This agreement may be terminated by AESC or the Company at
any time by giving the other party sixty (60) days written notice
of such intention to terminate.
(3) This agreement shall terminate in the event of its
assignment, the term "assignment" for this purpose having the same
meaning as set forth in the Investment Company Act of 1940, as
amended.
IN WITNESS WHEREOF, The parties hereto have executed the foregoing
agreement on the date and year first above written.
STRATEGIST GROWTH AND INCOME FUND, INC.
Strategist Balanced Fund
Strategist Equity Income Fund
Strategist Total Return Fund
Strategist Equity Fund
By __/s/ James A. Mitchell______________
James A. Mitchell
President
AMERICAN EXPRESS SERVICE CORPORATION
By __/s/ Richard W. Kling_______________
Richard W. Kling
Vice President
<PAGE>
PAGE 1
CUSTODIAN AGREEMENT
THIS CUSTODIAN AGREEMENT dated May 13, 1996, between Strategist
Growth and Income Fund, Inc. (the Company), a Minnesota
corporation, on behalf of its underlying series funds, and American
Express Trust Company, a corporation organized under the laws of
the State of Minnesota with its principal place of business at
Minneapolis, Minnesota (the "Custodian").
WHEREAS, the Company desires that its securities and cash be
hereafter held and administered by Custodian pursuant to the terms
of this Agreement.
NOW, THEREFORE, in consideration of the mutual agreements herein
made, the Company and the Custodian agree as follows:
Section 1. Definitions
The word "securities" as used herein shall be construed to include,
without being limited to, shares, stocks, treasury stocks,
including any stocks of this Company, notes, bonds, debentures,
evidences of indebtedness, options to buy or sell stocks or stock
indexes, certificates of interest or participation in any profit-
sharing agreements, collateral trust certificates, preorganization
certificates or subscriptions, transferable shares, investment
contracts, voting trust certificates, certificates of deposit for a
security, fractional or undivided interests in oil, gas or other
mineral rights, or any certificates of interest or participation
in, temporary or interim certificates for, receipts for, guarantees
of, or warrants or rights to subscribe to or purchase any of the
foregoing, acceptances and other obligations and any evidence of
any right or interest in or to any cash, property or assets and any
interest or instrument commonly known as a security. In addition,
for the purpose of this Custodian Agreement, the word "securities"
also shall include other instruments in which the Company may
invest including currency forward contracts and commodities such as
interest rate or index futures contracts, margin deposits on such
contracts or options on such contracts.
The words "custodian order" shall mean a request or direction,
including a computer printout, directed to the Custodian and signed
in the name of the Company by any two individuals designated in the
current certified list referred to in Section 2.
The word "facsimile" shall mean an exact copy or likeness which is
electronically transmitted for instant reproduction.
<PAGE>
PAGE 2
Section 2. Names, Titles and Signatures of Authorized Persons
The Company will certify to the Custodian the names and signatures
of its present officers and other designated persons authorized on
behalf of the Company to direct the Custodian by custodian order as
herein before defined. The Company agrees that whenever any change
occurs in this list it will file with the Custodian a copy of a
resolution certified by the Secretary or an Assistant Secretary of
the Company as having been duly adopted by the board of directors
(the "board") or the Executive Committee of the board designating
those persons currently authorized on behalf of the Company to
direct the Custodian by custodian order, as herein before defined,
and upon such filing (to be accompanied by the filing of specimen
signatures of the designated persons) the persons so designated in
said resolution shall constitute the current certified list. The
Custodian is authorized to rely and act upon the names and
signatures of the individuals as they appear in the most recent
certified list from the Company which has been delivered to the
Custodian as herein above provided.
Section 3. Use of Subcustodians
The Custodian may make arrangements, where appropriate, with other
banks having not less than two million dollars aggregate capital,
surplus and undivided profits for the custody of securities. Any
such bank selected by the Custodian to act as subcustodian shall be
deemed to be the agent of the Custodian.
The Custodian also may enter into arrangements for the custody of
securities entrusted to its care through foreign branches of United
States banks; through foreign banks, banking institutions or trust
companies; through foreign subsidiaries of United States banks or
bank holding companies, or through foreign securities depositories
or clearing agencies (hereinafter also called, collectively, the
"Foreign Subcustodian" or indirectly through an agent, established
under the first paragraph of this section, if and to the extent
permitted by Section 17(f) of the Investment Company Act of 1940
and the rules promulgated by the Securities and Exchange Commission
thereunder, any order issued by the Securities and Exchange
Commission, or any "no-action" letter received from the staff of
the Securities and Exchange Commission. To the extent the existing
provisions of the Custodian Agreement are consistent with the
requirements of such Section, rules, order or no-action letter,
they shall apply to all such foreign custodianships. To the extent
such provisions are inconsistent with or additional requirements
are established by such Section, rules, order or no-action letter,
the requirements of such Section, rules, order or no-action letter
will prevail and the parties will adhere to such requirements;
provided, however, in the absence of notification from the Company
of any changes or additions to such requirements, the Custodian
shall have no duty or responsibility to inquire as to any such
changes or additions.
<PAGE>
PAGE 3
Section 4. Receipt and Disbursement of Money
(1) The Custodian shall open and maintain a separate account or
accounts in the name of the Company or cause its agent to open and
maintain such account or accounts subject only to checks, drafts or
directives by the Custodian pursuant to the terms of this
Agreement. The Custodian or its agent shall hold in such account
or accounts, subject to the provisions hereof, all cash received by
it from or for the account of the Company. The Custodian or its
agent shall make payments of cash to or for the account of the
Company from such cash only:
(a) for the purchase of securities for the portfolio of the
Company upon the receipt of such securities by the Custodian or its
agent unless otherwise instructed on behalf of the Company;
(b) for the purchase or redemption of shares of capital stock of
the Company;
(c) for the payment of interest, dividends, taxes, management
fees, or operating expenses (including, without limitation thereto,
fees for legal, accounting and auditing services);
(d) for payment of distribution fees, commissions, or redemption
fees, if any;
(e) for payments in connection with the conversion, exchange or
surrender of securities owned or subscribed to by the Company held
by or to be delivered to the Custodian;
(f) for payments in connection with the return of securities
loaned by the Company upon receipt of such securities or the
reduction of collateral upon receipt of proper notice;
(g) for payments for other proper corporate purposes;
(h) or upon the termination of this Agreement.
Before making any such payment for the purposes permitted under the
terms of items (a), (b), (c), (d), (e), (f) or (g) of paragraph (1)
of this section, the Custodian shall receive and may rely upon a
custodian order directing such payment and stating that the payment
is for such a purpose permitted under these items (a), (b), (c),
(d), (e), (f) or (g) and that in respect to item (g), a copy of a
resolution of the board or of the Executive Committee of the board
signed by an officer of the Company and certified by its Secretary
or an Assistant Secretary, specifying the amount of such payment,
setting forth the purpose to be a proper corporate purpose, and
naming the person or persons to whom such payment is made.
Notwithstanding the above, for the purposes permitted under items
(a) or (f) of paragraph (1) of this section, the Custodian may rely
upon a facsimile order.
<PAGE>
PAGE 4
(2) The Custodian is hereby appointed the attorney-in-fact of the
Company to endorse and collect all checks, drafts or other orders
for the payment of money received by the Custodian for the account
of the Company and drawn on or to the order of the Company and to
deposit same to the account of the Company pursuant to this
Agreement.
Section 5. Receipt of Securities
Except as permitted by the second paragraph of this section, the
Custodian or its agent shall hold in a separate account or
accounts, and physically segregated at all times from those of any
other persons, firms or corporations, pursuant to the provisions
hereof, all securities received by it for the account of the
Company. The Custodian shall record and maintain a record of all
certificate numbers. Securities so received shall be held in the
name of the Company, in the name of an exclusive nominee duly
appointed by the Custodian or in bearer form, as appropriate.
Subject to such rules, regulations or guidelines as the Securities
and Exchange Commission may adopt, the Custodian may deposit all or
any part of the securities owned by the Company in a securities
depository which includes any system for the central handling of
securities established by a national securities exchange or a
national securities association registered with the Securities and
Exchange Commission under the Securities Exchange Act of 1934, or
such other person as may be permitted by the Commission, pursuant
to which system all securities of any particular class or series of
any issuer deposited within the system are treated as fungible and
may be transferred or pledged by bookkeeping entry without physical
delivery of such securities.
All securities are to be held or disposed of by the Custodian for,
and subject at all times to the instructions of, the Company
pursuant to the terms of this Agreement. The Custodian shall have
no power or authority to assign, hypothecate, pledge or otherwise
dispose of any such securities, except pursuant to the directive of
the Company and only for the account of the Company as set forth in
Section 6 of this Agreement.
Section 6. Transfer Exchange, Delivery, etc. of Securities
The Custodian shall have sole power to release or deliver any
securities of the Company held by it pursuant to this Agreement.
The Custodian agrees to transfer, exchange or deliver securities
held by it or its agent hereunder only:
(a) for sales of such securities for the account of the Company,
upon receipt of payment therefor;
(b) when such securities are called, redeemed, retired or
otherwise become payable;
<PAGE>
PAGE 5
(c) for examination upon the sale of any such securities in
accordance with "street delivery" custom which would include
delivery against interim receipts or other proper delivery
receipts;
(d) in exchange for or upon conversion into other securities alone
or other securities and cash whether pursuant to any plan of
(e) merger, consolidation, reorganization, recapitalization or
readjustment, or otherwise;
(f) for the purpose of exchanging interim receipts or temporary
certificates for permanent certificates;
(g) upon conversion of such securities pursuant to their terms
into other securities;
(h) upon exercise of subscription, purchase or other similar
rights represented by such securities; for loans of such securities
by the Company receipt of collateral; or
(i) for other proper corporate purposes.
As to any deliveries made by the Custodian pursuant to items (a),
(b), (c), (d), (e), (f), (g) and (h), securities or cash received
in exchange therefore shall be delivered to the Custodian, its
agent, or to a securities depository. Before making any such
transfer, exchange or delivery, the Custodian shall receive a
custodian order or a facsimile from the Company requesting such
transfer, exchange or delivery and stating that it is for a purpose
permitted under Section 6 (whenever a facsimile is utilized, the
Company will also deliver an original signed custodian order) and,
in respect to item (i), a copy of a resolution of the board or of
the Executive Committee of the board signed by an officer of the
Company and certified by its Secretary or an Assistant Secretary,
specifying the securities, setting forth the purpose for which such
payment, transfer, exchange or delivery is to be made, declaring
such purpose to be a proper corporate purpose, and naming the
person or persons to whom such transfer, exchange or delivery of
such securities shall be made.
Section 7. Custodian's Acts Without Instructions
Unless and until the Custodian receives a contrary custodian order
from the Company, the Custodian shall or shall cause its agent to:
(a) present for payment all coupons and other income items held by
the Custodian or its agent for the account of the Company which
call for payment upon presentation and hold all cash received by it
upon such payment for the account of the Company;
(b) present for payment all securities held by it or its agent
which mature or when called, redeemed, retired or otherwise become
payable;
<PAGE>
PAGE 6
(c) ascertain all stock dividends, rights and similar securities
to be issued with respect to any securities held by the Custodian
or its agent hereunder, and to collect and hold for the account of
the Company all such securities; and
(d) ascertain all interest and cash dividends to be paid to
security holders with respect to any securities held by the
Custodian or its agent, and to collect and hold such interest and
cash dividends for the account of the Company.
Section 8. Voting and Other Action
Neither the Custodian nor any nominee of the Custodian shall vote
any of the securities held hereunder by or for the account of the
Company. The Custodian shall promptly deliver to the Company all
notices, proxies and proxy soliciting materials with relation to
such securities, such proxies to be executed by the registered
holder of such securities (if registered otherwise than in the name
of the Company), but without indicating the manner in which such
proxies are to be voted.
Custodian shall transmit promptly to the Company all written
information (including, without limitation, pendency of calls and
maturities of securities and expirations of rights in connection
therewith) received by the Custodian from issuers of the securities
being held for the Company. With respect to tender or exchange
offers, the Custodian shall transmit promptly to the Company all
written information received by the Custodian from issuers of the
securities whose tender or exchange is sought and from the party
(or his agents) making the tender or exchange offer.
Section 9. Transfer Taxes
The Company shall pay or reimburse the Custodian for any transfer
taxes payable upon transfers of securities made hereunder,
including transfers resulting from the termination of this
Agreement. The Custodian shall execute such certificates in
connection with securities delivered to it under this Agreement as
may be required, under any applicable law or regulation, to exempt
from taxation any transfers and/or deliveries of any such
securities which may be entitled to such exemption.
Section 10. Custodian's Reports
The Custodian shall furnish the Company as of the close of business
each day a statement showing all transactions and entries for the
account of the Company. The books and records of the Custodian
pertaining to its actions as Custodian under this Agreement and
securities held hereunder by the Custodian shall be open to
inspection and audit by officers of the Company, internal auditors
employed by the Company's investment advisor, and independent <PAGE>
PAGE 7
auditors employed by the Company. The Custodian shall furnish the
Company in such form as may reasonably be requested by the Company
a report, including a list of the securities held by it in custody
for the account of the Company, identification of any subcustodian,
and identification of such securities held by such subcustodian, as
of the close of business of the last business day of each month,
which shall be certified by a duly authorized officer of the
Custodian. It is further understood that additional reports may
from time to time be requested by the Company. Should any report
ever be filed with any governmental authority pertaining to lost or
stolen securities, the Custodian will concurrently provide the
Company with a copy of that report.
The Custodian also shall furnish such reports on its systems of
internal accounting control as the Company may reasonably request
from time to time.
Section 11. Concerning Custodian
For its services hereunder the Custodian shall be paid such
compensation at such times as may from time to time be agreed on in
writing by the parties hereto in a Custodian Fee Agreement.
The Custodian shall not be liable for any action taken in good
faith upon any custodian order or facsimile herein described or
certified copy of any resolution of the board or of the Executive
Committee of the board, and may rely on the genuineness of any such
document which it may in good faith believe to have been validly
executed.
The Company agrees to indemnify and hold harmless Custodian and its
nominee from all taxes, charges, expenses, assessments, claims and
liabilities (including counsel fees) incurred or assessed against
it or its nominee in connection with the performance of this
Agreement, except such as may arise from the Custodian's or its
nominee's own negligent action, negligent failure to act or willful
misconduct. Custodian is authorized to charge any account of the
Company for such items. In the event of any advance of cash for
any purpose made by Custodian resulting from orders or instructions
of the Company, or in the event that Custodian or its nominee shall
incur or be assessed any taxes, charges, expenses, assessments,
claims or liabilities in connection with the performance of this
Agreement, except such as may arise from its or its nominee's own
negligent action, negligent failure to act or willful misconduct,
any property at any time held for the account of the Company shall
be security therefor.
The Custodian shall maintain a standard of care equivalent to that
which would be required of a bailee for hire and shall not be
liable for any loss or damage to the Company resulting from
participation in a securities depository unless such loss or damage
arises by reason of any negligence, misfeasance, or willful <PAGE>
PAGE 8
misconduct of officers or employees of the Custodian, or from its
failure to enforce effectively such rights as it may have against
any securities depository or from use of an agent, unless such loss
or damage arises by reason of any negligence, misfeasance, or
willful misconduct of officers or employees of the Custodian, or
from its failure to enforce effectively such rights as it may have
against any agent.
Section 12. Termination and Amendment of Agreement
The Company and the Custodian mutually may agree from time to time
in writing to amend, to add to, or to delete from any provision of
this Agreement.
The Custodian may terminate this Agreement by giving the Company
ninety days' written notice of such termination by registered mail
addressed to the Company at its principal place of business.
The Company may terminate this Agreement at any time by written
notice thereof delivered, together with a copy of the resolution of
the board authorizing such termination and certified by the
Secretary of the Company, by registered mail to the Custodian.
Upon such termination of this Agreement, assets of the Company held
by the Custodian shall be delivered by the Custodian to a successor
custodian, if one has been appointed by the Company, upon receipt
by the Custodian of a copy of the resolution of the board certified
by the Secretary, showing appointment of the successor custodian,
and provided that such successor custodian is a bank or trust
company, organized under the laws of the United States or of any
State of the United States, having not less than two million
dollars aggregate capital, surplus and undivided profits. Upon the
termination of this Agreement as a part of the transfer of assets,
either to a successor custodian or otherwise, the Custodian will
deliver securities held by it hereunder, when so authorized and
directed by resolution of the board, to a duly appointed agent of
the successor custodian or to the appropriate transfer agents for
transfer of registration and delivery as directed. Delivery of
assets on termination of this Agreement shall be effected in a
reasonable, expeditious and orderly manner; and in order to
accomplish an orderly transition from the Custodian to the
successor custodian, the Custodian shall continue to act as such
under this Agreement as to assets in its possession or control.
Termination as to each security shall become effective upon
delivery to the successor custodian, its agent, or to a transfer
agent for a specific security for the account of the successor
custodian, and such delivery shall constitute effective delivery by
the Custodian to the successor under this Agreement.
In addition to the means of termination herein before authorized,
this Agreement may be terminated at any time by the vote of a
majority of the outstanding shares of the Company and after written
notice of such action to the Custodian.
<PAGE>
PAGE 9
Section 13. General
Nothing expressed or mentioned in or to be implied from any
provision of this Agreement is intended to, or shall be construed
to give any person or corporation other than the parties hereto,
any legal or equitable right, remedy or claim under or in respect
of this Agreement, or any covenant, condition or provision herein
contained, this Agreement and all of the covenants, conditions and
provisions hereof being intended to be and being for the sole and
exclusive benefit of the parties hereto and their respective
successors and assigns.
This Agreement shall be governed by the laws of the State of
Minnesota.
STRATEGIST GROWTH AND INCOME FUND, INC.
Strategist Balanced Fund
Strategist Equity Income Fund
Strategist Total Return Fund
Strategist Equity Fund
By: /s/ James A. Mitchell
James A. Mitchell
President
AMERICAN EXPRESS TRUST COMPANY
By: /s/ Chandrakant A. Patel
Chandrakant A. Patel
Vice President
<PAGE>
PAGE 1
ADDENDUM TO THE CUSTODIAN AGREEMENT
THIS ADDENDUM TO THE CUSTODIAN AGREEMENT dated May 13, 1996 between
Strategist Growth and Income Fund, Inc. (the Company) on behalf of
its underlying series funds (the Funds) and American Express Trust
Company (the Custodian) is made pursuant to Section 12 of the
Agreement to reflect the Corporation's arrangement of investing all
of the Fund's assets in corresponding portfolios of a master trust.
American Express Financial Corporation (AEFC) serves as
administrator for the Company and for the master trust in which the
Funds invest.
The Company, the Custodian and AEFC agree as follows:
The parties to this Agreement acknowledge that, so long as the
Funds invest all of their assets in corresponding portfolios of a
master trust, the only assets held by the Funds will be units of
the corresponding portfolios of the master trust. The parties
agree that the Custodian is entitled to rely upon AEFC for an
accounting of the number of units held, purchased or redeemed by
the Company and to delegate to AEFC responsibility for all
reporting to the Company. AEFC agrees to indemnify and hold
harmless the Custodian from all claims and liabilities incurred or
assessed against the Custodian in connection with the accounting
for and reporting to the Company by AEFC.
IN WITNESS WHEREOF, the Company, the Custodian and AEFC have caused
this addendum to the Custodian Agreement to be executed on May 13,
1996 which shall remain in effect until terminated by one of the
parties on written notice to the other parties to this Addendum.
STRATEGIST GROWTH AND INCOME FUND, INC.
Strategist Balanced Fund
Strategist Equity Income Fund
Strategist Total Return Fund
Strategist Equity Fund
By /s/ James A. Mitchell
James A. Mitchell
President
AMERICAN EXPRESS TRUST COMPANY
By /s/ Chandrakant A. Patel
Chandrakant A. Patel
Vice President
AMERICAN EXPRESS FINANCIAL CORPORATION
By /s/ Richard W. Kling
Richard W. Kling
Senior Vice President
<PAGE>
PAGE 1
TRANSFER AGENCY AGREEMENT
AGREEMENT dated as of May 13, 1996, between Strategist Growth and
Income Fund, Inc. (the "Company"), a Minnesota corporation, on
behalf of its underlying series funds, and American Express
Financial Corporation (the "Transfer Agent"), a Delaware
corporation.
In consideration of the mutual promises set forth below, the
Company and the Transfer Agent agree as follows:
1. Appointment of the Transfer Agent. The Company hereby appoints
the Transfer Agent, as transfer agent for its shares and as
shareholder servicing agent for the Company, and the Transfer Agent
accepts such appointment and agrees to perform the duties set forth
below.
2. Compensation. The Company will compensate the Transfer Agent for
the performance of its obligations as set forth in Schedule A.
Schedule A does not include out-of-pocket disbursements of the
Transfer Agent for which the Transfer Agent shall be entitled to
bill the Company separately.
The Transfer Agent will bill the Company monthly. The fee provided
for hereunder shall be paid in cash by the Company to the Transfer
Agent within five (5) business days after the last day of each
month.
Out-of-pocket disbursements shall include, but shall not be limited
to, the items specified in Schedule B. Reimbursement by the
Company for expenses incurred by the Transfer Agent in any month
shall be made as soon as practicable after the receipt of an
itemized bill from the Transfer Agent.
Any compensation jointly agreed to hereunder may be adjusted from
time to time by attaching to this Agreement a revised Schedule A,
dated and signed by an officer of each party.
3. Documents. The Company will furnish from time to time such
certificates, documents or opinions as the Transfer Agent deems to
be appropriate or necessary for the proper performance of its
duties.
4. Representations of the Company and the Transfer Agent.
(a) The Company represents to the Transfer Agent that all
outstanding shares are validly issued, fully paid and
non-assessable by the Company. When shares are hereafter issued in
accordance with the terms of the Company's Articles of
Incorporation and its prospectus, such shares shall be validly
issued, fully paid and non-assessable by the Company.
(b) The Transfer Agent represents that it is registered under
Section 17A(c) of the Securities Exchange Act of 1934. The
Transfer Agent agrees to maintain the necessary facilities,
equipment and personnel to perform its duties and obligations under
this agreement and to comply with all applicable laws.<PAGE>
PAGE 2
5. Duties of the Transfer Agent. The Transfer Agent shall be
responsible, separately and through its subsidiaries or affiliates,
for the following functions:
(a) Sale of Company Shares.
(1) On receipt of an application and payment, wired instructions
and payment, or payment identified as being for the account of a
shareholder, the Transfer Agent will deposit the payment, prepare
and present the necessary report to the Custodian and record the
purchase of shares in a timely fashion in accordance with the terms
of the prospectus. All shares shall be held in book entry form and
no certificate shall be issued unless the Company is permitted to
do so by the prospectus and the purchaser so requests.
(2) On receipt of notice that payment was dishonored, the Transfer
Agent shall stop redemptions of all shares owned by the purchaser
related to that payment, place a stop payment on any checks that
have been issued to redeem shares of the purchaser and take such
other action as it deems appropriate.
(b) Redemption of Company Shares. On receipt of instructions to
redeem shares in accordance with the terms of the Company's
prospectus, the Transfer Agent will record the redemption of shares
of the Company, prepare and present the necessary report to the
Custodian and pay the proceeds of the redemption to the
shareholder, an authorized agent or legal representative upon the
receipt of the monies from the Custodian.
(c) Transfer or Other Change Pertaining to Company Shares. On
receipt of instructions or forms acceptable to the Transfer Agent
to transfer the shares to the name of a new owner, change the name
or address of the present owner or take other legal action, the
Transfer Agent will take such action as is requested.
(d) Exchange of Company Shares. On receipt of instructions to
exchange the shares of the Company for the shares of another fund
in the Strategist Fund Group or other American Express Financial
Corporation product in accordance with the terms of the prospectus,
the Transfer Agent will process the exchange in the same manner as
a redemption and sale of shares.
(e) Right to Seek Assurance. The Transfer Agent may refuse to
transfer, exchange or redeem shares of the Company or take any
action requested by a shareholder until it is satisfied that the
requested transaction or action is legally authorized or until it
is satisfied there is no basis for any claims adverse to the
transaction or action. It may rely on the provisions of the
Uniform Act for the Simplification of Fiduciary Security Transfers
or the Uniform Commercial Code. The Company shall indemnify the
Transfer Agent for any act done or omitted to be done in reliance
on such laws or for refusing to transfer, exchange or redeem shares
or taking any requested action if it acts on a good faith belief
that the transaction or action is illegal or unauthorized.
(f) Shareholder Records, Reports and Services.
<PAGE>
PAGE 3
(1) The Transfer Agent shall maintain all shareholder accounts,
which shall contain all required tax, legally imposed and
regulatory information; shall provide shareholders, and file with
federal and state agencies, all required tax and other reports
pertaining to shareholder accounts; shall prepare shareholder
mailing lists; shall cause to be printed and mailed all required
prospectuses, annual reports, semiannual reports, statements of
additional information (upon request), proxies and other mailings
to shareholders; and shall cause proxies to be tabulated.
(2) The Transfer Agent shall respond to all valid inquiries related
to its duties under this Agreement.
(3) The Transfer Agent shall create and maintain all records in
accordance with all applicable laws, rules and regulations,
including, but not limited to, the records required by Section
31(a) of the Investment Company Act of 1940.
(g) Dividends and Distributions. The Transfer Agent shall prepare
and present the necessary report to the Custodian and shall cause
to be prepared and transmitted the payment of income dividends and
capital gains distributions or cause to be recorded the investment
of such dividends and distributions in additional shares of the
Corporation or as directed by instructions or forms acceptable to
the Transfer Agent.
(h) Confirmations and Statements. The Transfer Agent shall confirm
each transaction either at the time of the transaction or through
periodic reports as may be legally permitted.
(i) Lost or Stolen Checks. The Transfer Agent will replace lost or
stolen checks issued to shareholders upon receipt of proper
notification and will maintain any stop payment orders against the
lost or stolen checks as it is economically desirable to do.
(j) Reports to Company. The Transfer Agent will provide reports
pertaining to the services provided under this Agreement as the
Company may request to ascertain the quality and level of services
being provided or as required by law.
(k) Other Duties. The Transfer Agent may perform other duties for
additional compensation if agreed to in writing by the parties to
this Agreement.
6. Ownership and Confidentiality of Records. The Transfer Agent
agrees that all records prepared or maintained by it relating to
the services to be performed by it under the terms of this
Agreement are the property of the Company and may be inspected by
the Company or any person retained by the Company at reasonable
times. The Company and Transfer Agent agree to protect the
confidentiality of those records.
7. Action by Board and Opinion of Company's Counsel. The Transfer
Agent may rely on resolutions of the Board of Directors (the
"Board") or the Executive Committee of the Board and on opinion of
counsel for the Company.
<PAGE>
PAGE 4
8. Duty of Care. It is understood and agreed that, in furnishing
the Company with the services as herein provided, neither the
Transfer Agent, nor any officer, director or agent thereof shall be
held liable for any loss arising out of or in connection with their
actions under this Agreement so long as they act in good faith and
with due diligence, and are not negligent or guilty of any willful
misconduct. It is further understood and agreed that the Transfer
Agent may rely upon information furnished to it reasonably believed
to be accurate and reliable. In the event the Transfer Agent is
unable to perform its obligations under the terms of this Agreement
because of an act of God, strike or equipment or transmission
failure reasonably beyond its control, the Transfer Agent shall not
be liable for any damages resulting from such failure.
9. Term and Termination. This Agreement shall become effective on
the date first set forth above (the "Effective Date") and shall
continue in effect from year to year thereafter as the parties may
mutually agree; provided that either party may terminate this
Agreement by giving the other party notice in writing specifying
the date of such termination, which shall be not less than 60 days
after the date of receipt of such notice. In the event such notice
is given by the Company, it shall be accompanied by a vote of the
Board, certified by the Secretary, electing to terminate this
Agreement and designating a successor transfer agent or transfer
agents. Upon such termination and at the expense of the Company,
the Transfer Agent will deliver to such successor a certified list
of shareholders of the Company (with name, address and taxpayer
identification or Social Security number), a historical record of
the account of each shareholder and the status thereof, and all
other relevant books, records, correspondence, and other data
established or maintained by the Transfer Agent under this
Agreement in the form reasonably acceptable to the Company, and
will cooperate in the transfer of such duties and responsibilities,
including provisions for assistance from the Transfer Agent's
personnel in the establishment of books, records and other data by
such successor or successors.
10. Amendment. This Agreement may not be amended or modified in any
manner except by a written agreement executed by both parties.
11. Subcontracting. The Company agrees that the Transfer Agent may
subcontract for certain of the services described under this
Agreement with the understanding that there shall be no diminution
in the quality or level of the services and that the Transfer Agent
remains fully responsible for the services. Except for
out-of-pocket expenses identified in Schedule B, the Transfer Agent
shall bear the cost of subcontracting such services, unless
otherwise agreed by the parties.
12. Miscellaneous.
(a) This Agreement shall extend to and shall be binding upon the
parties hereto, and their respective successors and assigns;
provided, however, that this Agreement shall not be assignable
without the written consent of the other party.
<PAGE>
PAGE 5
(b) This Agreement shall be governed by the laws of the State of
Minnesota.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be executed by their respective officers as of the day and year
written above.
STRATEGIST GROWTH AND INCOME FUND, INC.
Strategist Balanced Fund
Strategist Equity Income Fund
Strategist Total Return Fund
Strategist Equity Fund
By: /s/ James A. Mitchell
James A. Mitchell
President
AMERICAN EXPRESS FINANCIAL CORPORATION
By: /s/ Richard W. Kling
Richard W. Kling
Vice President
<PAGE>
PAGE 6
Schedule A
STRATEGIST GROWTH AND INCOME FUND, INC.
FEE
Effective the 13th day of May, 1996, the annual fee for
services under this agreement is as follows:
$20 per account
Until September 30, 1997, AEFC has agreed to waive fees and to
absorb fund expenses under this Agreement. If, at the end of any
month, the fees and expenses of the Fund under this Agreement and
any other agreement between the Fund and AEFC exceed 1.25% for
Equity Income Fund, 1.3% for Total Return Fund, 1.25% for Equity
Fund or 1.25% for Balanced Fund, the Fund shall not pay fees and
expenses under this Agreement to the extent necessary to keep the
Equity Income, Total Return, Equity, and Balanced Funds' expense
ratio from exceeding the limitation.
<PAGE>
PAGE 7
Schedule B
OUT-OF-POCKET EXPENSES
The Company shall reimburse the Transfer Agent monthly for the
following out-of-pocket expenses:
o typesetting, printing, paper, envelopes, postage and return
postage for proxy soliciting material, and proxy tabulation costs
o printing, paper, envelopes and postage for dividend notices,
dividend checks, records of account, purchase confirmations,
exchange confirmations and exchange prospectuses, redemption
confirmations, redemption checks, confirmations on changes of
address and any other communication required to be sent to
shareholders
o typesetting, printing, paper, envelopes and postage for
prospectuses, annual and semiannual reports, statements of
additional information, supplements for prospectuses and statements
of additional information and other required mailings to
shareholders
o stop orders
o outgoing wire charges
o other expenses incurred at the request or with the consent of the
Company
<PAGE>
PAGE 1
ADMINISTRATIVE SERVICES AGREEMENT
AGREEMENT made the 13th day of May, 1996, by and between Strategist
Growth and Income Fund, Inc. (the "Company"), a Minnesota
corporation, on behalf of its underlying series funds, and American
Express Financial Corporation (the "Corporation"), a Delaware
corporation.
Part One: SERVICES
(1) The Company hereby retains the Corporation, and the Corporation
hereby agrees, for the period of this Agreement and under the terms
and conditions hereinafter set forth, to furnish the Company
continuously with all administrative, accounting, clerical,
statistical, correspondence, corporate and all other services of
whatever nature required in connection with the administration of
the Company as provided under this Agreement; and to pay such
expenses as may be provided for in Part Three hereof; subject
always to the direction and control of the Board of Directors (the
"Board"), the Executive Committee and the authorized officers of
the Company. The Corporation agrees to maintain an adequate
organization of competent persons to provide the services and to
perform the functions herein mentioned. The Corporation agrees to
meet with any persons at such times as the Board deems appropriate
for the purpose of reviewing the Corporation's performance under
this Agreement.
(2) The Company agrees that it will furnish to the Corporation any
information that the latter may reasonably request with respect to
the services performed or to be performed by the Corporation under
this Agreement.
(3) It is understood and agreed that in furnishing the Company with
the services as herein provided, neither the Corporation, nor any
officer, director or agent thereof shall be held liable to the
Company or its creditors or shareholders for errors of judgment or
for anything except willful misfeasance, bad faith, or gross
negligence in the performance of its duties, or reckless disregard
of its obligations and duties under the terms of this Agreement. It
is further understood and agreed that the Corporation may rely upon
information furnished to it reasonably believed to be accurate and
reliable.
Part Two: COMPENSATION FOR SERVICES
(1) The Company agrees to pay to the Corporation, and the
Corporation covenants and agrees to accept from the Company in full
payment for the services furnished, based on the net assets of the
Company as set forth in the following table:
<PAGE>
PAGE 2
Assets Annual rate at Assets Annual rate at
(billions) each asset level (billions) each asset level
Strategist Equity Income Fund Strategist Balanced Fund
Strategist Total Return Fund First $1 0.040%
Strategist Equity Fund Next 1 0.035
First $0.50 0.040% Next 1 0.030
Next 0.50 0.035 Next 3 0.025
Next 1 0.030 Over 6 0.020
Next 1 0.025
Next 3 0.020
Over 6 0.020
The administrative fee for each calendar day of each year shall be
equal to 1/365th (1/366th in each leap year) on the total amount
computed. The computation shall be made for each such day on the
basis of net assets as of the close of business on the full
business day two (2) business days prior to the day for which the
computation is being made. In the case of the suspension of the
computation of net asset value, the administrative fee for each day
during such suspension shall be computed as of the close of
business on the last full business day on which the net assets were
computed. As used herein, "net assets" as of the close of a full
business day shall include all transactions in shares of the
Company recorded on the books of the Company for that day.
(2) The administrative fee shall be paid on a monthly basis and, in
the event of the termination of this Agreement, the administrative
fee accrued shall be prorated on the basis of the number of days
that this Agreement is in effect during the month with respect to
which such payment is made.
(3) The administrative fee provided for hereunder shall be paid in
cash by the Company to the Corporation within five (5) business
days after the last day of each month.
(4) Until September 30, 1997, AEFC has agreed to waive fees and to
absorb fund expenses under this Agreement. If, at the end of any
month, the fees and expenses of the Fund under this Agreement and
any other agreement between the Fund and AEFC exceed 1.25% for
Equity Income Fund, 1.3% for Total Return Fund, 1.25% for Equity
Fund or 1.25% for Balanced Fund, the Fund shall not pay fees and
expenses under this Agreement to the extent necessary to keep the
Equity Income, Total Return, Equity and Balanced Funds' expense
ratio from exceeding the limitation.
Part Three: ALLOCATION OF EXPENSES
(1) The Company agrees to pay:
(a) Administrative fees payable to the Corporation for its services
under the terms of this Agreement.
(b) Taxes.
<PAGE>
PAGE 3
(c) Fees and charges of its independent certified public
accountants for services the Company requests.
(d) Fees and expenses of attorneys for services the company
requests.
(e) Fees paid for the qualification and registration for public
sale of the securities of the Company under the laws of the United
States and of the several states in which such securities shall be
offered for sale.
(f) Office expenses which shall include a charge for occupancy,
insurance on the premises, furniture and equipment, telephone,
telegraph, electronic information services, books, periodicals,
published services, and office supplies used by the Company, equal
to the cost of such incurred by American Express Financial
Corporation.
(g) Fees of consultants employed by the Company.
(h) Directors, officers and employees expenses which shall include
fees, salaries, memberships, dues, travel, seminars, pension,
profit sharing, and all other benefits paid to or provided for
directors, officers and employees, directors and officers liability
insurance, errors and omissions liability insurance, worker's
compensation insurance and other expenses applicable to the
directors, officers and employees, except the Company will not pay
any fees or expenses of any person who is an officer or employee of
the Corporation or its affiliates.
(i) Filing fees and charges incurred by the Company in connection
with filing any amendment to its articles of incorporation, or
incurred in filing any other document with the State of Minnesota
or its political subdivisions.
(j) Organizational expenses of the Company.
(k) One-half of the Investment Company Institute membership dues
charged jointly to the Preferred Master Trust Group and the
Corporation.
(l) Expenses properly payable by the Company, approved by the
Board.
(2) The Corporation agrees to pay all expenses associated with the
services it provides under the terms of this Agreement. Further,
the Corporation agrees that if, at the end of any month, the
expenses of the Company under this Agreement and any other
agreement between the Company and the Corporation, but excluding
those expenses set forth in (1)(b) of this Part Three, exceed the
most restrictive applicable state expenses limitation, the Company
shall not pay those expenses set forth in (1)(a) and (c) through
(m) of this Part Three to the extent necessary to keep the
Company's expenses from exceeding the limitation, it being <PAGE>
PAGE 4
understood that the Corporation will assume all unpaid expenses and
bill the Company for them in subsequent months but in no event can
the accumulation of unpaid expenses or billing be carried past the
end of the Company's fiscal year.
Part Four: MISCELLANEOUS
(1) The Corporation shall be deemed to be an independent contractor
and, except as expressly provided or authorized in this Agreement,
shall have no authority to act for or represent the Company.
(2) A "full business day" shall be as defined in the By- laws.
(3) The Company recognizes that the Corporation now renders and may
continue to render investment advice and other services to other
investment companies and persons which may or may not have
investment policies and investments similar to those of the Company
and that the Corporation manages its own investments and/or those
of its subsidiaries. The Corporation shall be free to render such
investment advice and other services and the Company hereby
consents thereto.
(4) Neither this Agreement nor any transaction had pursuant hereto
shall be invalidated or in anyway affected by the fact that
directors, officers, agents and/or shareholders of the Company are
or may be interested in the Corporation or any successor or
assignee thereof, as directors, officers, stockholders or
otherwise; that directors, officers, stockholders or agents of the
Corporation are or may be interested in the Company as directors,
officers, shareholders, or otherwise; or that the Corporation or
any successor or assignee, is or may be interested in the Company
as shareholder or otherwise, provided, however, that neither the
Corporation, nor any officer, director or employee thereof or of
the Corporation, shall sell to or buy from the Company any property
or security other than shares issued by the Company, except in
accordance with applicable regulations or orders of the United
States Securities and Exchange Commission.
(5) Any notice under this Agreement shall be given in writing,
addressed, and delivered, or mailed postpaid, to the party to this
Agreement entitled to receive such, at such party's principal place
of business in Minneapolis, Minnesota, or to such other address as
either party may designate in writing mailed to the other.
(6) The Corporation agrees that no officer, director or employee of
the Corporation will deal for or on behalf of the Company with
himself as principal or agent, or with any corporation or
partnership in which he may have a financial interest, except that
this shall not prohibit officers, directors or employees of the
Corporation from having a financial interest in the Company or in
the Corporation.
(7) The Company agrees that the Corporation may subcontract for
certain of the services described under this Agreement with the
understanding that there shall be no diminution in the quality or
level of the services and that the Corporation remains fully
responsible for the services.<PAGE>
PAGE 5
(8) This Agreement shall extend to and shall be binding upon the
parties hereto, and their respective successors and assigns;
provided, however, that this Agreement shall not be assignable
without the written consent of the other party. This Agreement
shall be governed by the laws of the State of Minnesota.
Part Five: RENEWAL AND TERMINATION
(1) This Agreement shall become effective on the date first set
forth above (the "Effective Date") and shall continue in effect
from year to year thereafter as the parties may mutually agree;
provided that either party may terminate this Agreement by giving
the other party notice in writing specifying the date of such
termination, which shall be not less than 60 days after the date of
receipt of such notice.
(2) This Agreement may not be amended or modified in any manner
except by a written agreement executed by both parties.
IN WITNESS THEREOF, the parties hereto have executed the foregoing
Agreement as of the day and year first above written.
STRATEGIST GROWTH AND INCOME FUND, INC.
Strategist Balanced Fund
Strategist Equity Income Fund
Strategist Total Return Fund
Strategist Equity Fund
By: /s/ James A. Mitchell
James A. Mitchell
President
AMERICAN EXPRESS FINANCIAL CORPORATION
By: /s/ Richard W. Kling
Richard W. Kling
Senior Vice President
<PAGE>
PAGE 1
BALANCED PORTFOLIO
AGREEMENT AND DECLARATION OF UNITHOLDERS
This AGREEMENT AND DECLARATION OF UNITHOLDERS is made at
Minneapolis, Minnesota, as of this 13th day of May, 1996 by the
holders of beneficial interest of Balanced Portfolio, a separate
series of Growth and Income Trust.
WITNESS that
WHEREAS, the Declaration of Trust for Growth and Income Trust
provides for no restrictions on the transfer of units therein; and
WHEREAS, the holders of units in Balanced Portfolio desire to
restrict the transfer of their units in Balanced Portfolio;
NOW, THEREFORE, the undersigned hereby declare that they will not
transfer any units in Balanced Portfolio held by them without the
prior written consent of the other unitholders holding at least two
thirds of the Balanced Portfolio's units outstanding (excluding the
units of the holder seeking to effect the transfer) and that any
attempted transfer in violation of this agreement shall be null and
void. This agreement shall not affect the rights of any unitholder
to redeem units in Balanced Portfolio as provided for in the
Declaration of Trust. The undersigned also acknowledge that the
remedy of damages for the violation of this agreement would be
inadequate and therefore further agree that this agreement shall be
enforceable solely by the remedy of specific performance.
IDS INVESTMENT SERIES, INC.
IDS Mutual
/s/ Leslie L. Ogg
Leslie L. Ogg
Vice President and General Counsel
STRATEGIST GROWTH AND INCOME FUND, INC.
Strategist Balanced Fund
/s/ James A. Mitchell
James A. Mitchell
President
<PAGE>
PAGE 1
EQUITY PORTFOLIO
AGREEMENT AND DECLARATION OF UNITHOLDERS
This AGREEMENT AND DECLARATION OF UNITHOLDERS is made at
Minneapolis, Minnesota, as of this 13th day of May, 1996 by the
holders of beneficial interest of Equity Portfolio, a separate
series of Growth and Income Trust.
WITNESS that
WHEREAS, the Declaration of Trust for Growth and Income Trust
provides for no restrictions on the transfer of units therein; and
WHEREAS, the holders of units in Equity Portfolio desire to
restrict the transfer of their units in Equity Portfolio;
NOW, THEREFORE, the undersigned hereby declare that they will not
transfer any units in Equity Portfolio held by them without the
prior written consent of the other unitholders holding at least two
thirds of the Equity Portfolio's units outstanding (excluding the
units of the holder seeking to effect the transfer) and that any
attempted transfer in violation of this agreement shall be null and
void. This agreement shall not affect the rights of any unitholder
to redeem units in Equity Portfolio as provided for in the
Declaration of Trust. The undersigned also acknowledge that the
remedy of damages for the violation of this agreement would be
inadequate and therefore further agree that this agreement shall be
enforceable solely by the remedy of specific performance.
IDS STOCK FUND, INC.
/s/Leslie L. Ogg
Leslie L. Ogg
Vice President and General Counsel
STRATEGIST GROWTH AND INCOME FUND, INC.
Strategist Equity Fund
/s/James A. Mitchell
James A. Mitchell
President
<PAGE>
PAGE 1
EQUITY INCOME PORTFOLIO
AGREEMENT AND DECLARATION OF UNITHOLDERS
This AGREEMENT AND DECLARATION OF UNITHOLDERS is made at
Minneapolis, Minnesota, as of this 13th day of May, 1996 by the
holders of beneficial interest of Equity Income Portfolio, a
separate series of Growth and Income Trust.
WITNESS that
WHEREAS, the Declaration of Trust for Growth and Income Trust
provides for no restrictions on the transfer of units therein; and
WHEREAS, the holders of units in Equity Income Portfolio desire to
restrict the transfer of their units in Equity Income Portfolio;
NOW, THEREFORE, the undersigned hereby declare that they will not
transfer any units in Equity Income Portfolio held by them without
the prior written consent of the other unitholders holding at least
two thirds of the Equity Income Portfolio's units outstanding
(excluding the units of the holder seeking to effect the transfer)
and that any attempted transfer in violation of this agreement
shall be null and void. This agreement shall not affect the rights
of any unitholder to redeem units in Equity Income Portfolio as
provided for in the Declaration of Trust. The undersigned also
acknowledge that the remedy of damages for the violation of this
agreement would be inadequate and therefore further agree that this
agreement shall be enforceable solely by the remedy of specific
performance.
IDS INVESTMENT SERIES, INC.
IDS Diversified Equity Income Fund
/s/ Leslie L. Ogg
Leslie L. Ogg
Vice President and General Counsel
STRATEGIST GROWTH AND INCOME FUND, INC.
Strategist Equity Income Fund
/s/ James A. Mitchell
James A. Mitchell
President
<PAGE>
PAGE 1
TOTAL RETURN PORTFOLIO
AGREEMENT AND DECLARATION OF UNITHOLDERS
This AGREEMENT AND DECLARATION OF UNITHOLDERS is made at
Minneapolis, Minnesota, as of this 13th day of May, 1996 by the
holders of beneficial interest of Total Return Portfolio, a
separate series of Growth and Income Trust.
WITNESS that
WHEREAS, the Declaration of Trust for Growth and Income Trust
provides for no restrictions on the transfer of units therein; and
WHEREAS, the holders of units in Total Return Portfolio desire to
restrict the transfer of their units in Total Return Portfolio;
NOW, THEREFORE, the undersigned hereby declare that they will not
transfer any units in Total Return Portfolio held by them without
the prior written consent of the other unitholders holding at least
two thirds of the Total Return Portfolio's units outstanding
(excluding the units of the holder seeking to effect the transfer)
and that any attempted transfer in violation of this agreement
shall be null and void. This agreement shall not affect the rights
of any unitholder to redeem units in Total Return Portfolio as
provided for in the Declaration of Trust. The undersigned also
acknowledge that the remedy of damages for the violation of this
agreement would be inadequate and therefore further agree that this
agreement shall be enforceable solely by the remedy of specific
performance.
IDS MANAGED RETIREMENT FUND, INC.
/s/ Leslie L. Ogg
Leslie L. Ogg
Vice President and General Counsel
STRATEGIST GROWTH AND INCOME FUND, INC.
Strategist Total Return Fund
/s/ James A. Mitchell
James A. Mitchell
President
<PAGE>
PAGE 1
Independent auditor's consent
The Board and Shareholders
Strategist Growth and Income Fund, Inc.:
We consent to the use of our reports incorporated herein by
reference and to the references to our Firm under the headings
"Financial highlights" in Part A and "INDEPENDENT AUDITORS" in Part
B of the Registration Statement.
KPMG Peat Marwick LLP
Minneapolis, Minnesota
November , 1996
<PAGE>
PAGE 1
Plan and Agreement of Distribution
This plan and agreement is made by and between Strategist Growth
and Income Fund, Inc. (the "Company") on behalf of its underlying
series funds, and American Express Service Corporation ("AESC"),
the principal underwriter of the Company, for distribution services
to the Company.
The Plan and Agreement has been approved by members of the Board of
Directors (the "Board") of the Company who are not interested
persons of the Company and have no direct or indirect financial
interest in the operation of the plan or any related agreement, and
all of the members of the Board, in person, at a meeting called for
the purpose of voting on the plan and agreement.
The Plan and Agreement provides that:
1. The Company will reimburse AESC for all sales and
promotional expenses attributable to the sale of the
Company's shares, including sales commissions, business
and employee expenses charged to distribution of
shares, and corporate overhead appropriately allocated
to the sale of shares.
2. The amount of the reimbursement shall be equal on an
annual basis to 0.25% of the average daily net assets
of the Company. The amount so determined shall be paid
to AESC in cash within five (5) business days after the
last day of each month. AESC agrees that if, at the
end of any month, the expenses of the Company,
including fees under this agreement and any other
agreement between the Company and AESC or American
Express Financial Corporation, but excluding taxes,
brokerage commissions and charges in connection with
the purchase and sale of assets, exceed the most
restrictive applicable state expense limitation for the
Company's current fiscal year, the Company shall not
pay fees and expenses under this agreement to the
extent necessary to keep the Company's expenses from
exceeding the limitation, it being understood that AESC
will assume all unpaid expenses and bill the Company
for them in subsequent months, but in no event can the
accumulation of unpaid expenses or billing be carried
past the end of the Company's fiscal year.
Until September 30, 1997, AESC has agreed to waive fees
and to absorb fund expenses under this Agreement. If,
at the end of any month, the fees and expenses of the
Fund under this Agreement and any other agreement
between the Fund and AESC exceed 1.25% for Equity
Income Fund, 1.3% for Total Return Fund, 1.25% for
Equity Fund or 1.25% for Balanced Fund, the Fund shall
not pay fees and expenses under this Agreement to the
extent necessary to keep the Equity Income, Total
Return, Equity and Balanced Funds' expense ratio from
exceeding the limitation.
<PAGE>
PAGE 2
3. AESC agrees to provide at least quarterly an analysis
of distribution expenses and to meet with
representatives of the Company as reasonably requested
to provide additional information.
4. The Plan and Agreement shall continue in effect for a
period of more than one year provided it is reapproved
at least annually in the same manner in which it was
initially approved.
5. The Plan and Agreement may not be amended to increase
materially the amount that may be paid by the Company
without the approval of at least a majority of the
Company's outstanding shares.
6. This agreement may be terminated at any time without
payment of any penalty by a vote of a majority of the
members of the Board who are not interested persons of
the Company and have no financial interest in the
operation of the plan and agreement, or by vote of a
majority of the Company's outstanding shares, or by
AESC. The Plan and Agreement will terminate
automatically in the event of its assignment as that
term is defined in the Investment Company Act of 1940.
Approved this 13th day of May, 1996.
STRATEGIST GROWTH AND INCOME FUND, INC.
Strategist Balanced Fund
Strategist Equity Income Fund
Strategist Total Return Fund
Strategist Equity Fund
By /s/ James A. Mitchell
James A. Mitchell
President
AMERICAN EXPRESS SERVICE CORPORATION
By /s/ Richard W. Kling
Richard W. Kling
Vice President
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 1
<NAME> STRATEGIST BALANCED FUND
<PERIOD-TYPE> 4-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> MAY-13-1996
<PERIOD-END> SEP-30-1996
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 0
<RECEIVABLES> 1204
<ASSETS-OTHER> 575360
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 576564
<PAYABLE-FOR-SECURITIES> 13906
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 37841
<TOTAL-LIABILITIES> 51747
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 507850
<SHARES-COMMON-STOCK> 38633
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 681
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (6824)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 23110
<NET-ASSETS> 524817
<DIVIDEND-INCOME> 2901
<INTEREST-INCOME> 3296
<OTHER-INCOME> 0
<EXPENSES-NET> 1500
<NET-INVESTMENT-INCOME> 4697
<REALIZED-GAINS-CURRENT> (7479)
<APPREC-INCREASE-CURRENT> 23110
<NET-CHANGE-FROM-OPS> 20328
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (3398)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 36541
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 251
<NET-CHANGE-IN-ASSETS> 499817
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 40922
<AVERAGE-NET-ASSETS> 313433
<PER-SHARE-NAV-BEGIN> 13.36
<PER-SHARE-NII> .18
<PER-SHARE-GAIN-APPREC> .17
<PER-SHARE-DIVIDEND> (.14)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 13.57
<EXPENSE-RATIO> 1.25
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<PAGE>
<ARTICLE> 6
<SERIES>
[NUMBER] 1
<NAME> STRATEGIST EQUITY INCOME FUND
<PERIOD-TYPE> 4-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> MAY-13-1996
<PERIOD-END> SEP-30-1996
[INVESTMENTS-AT-COST] 0
[INVESTMENTS-AT-VALUE] 0
[RECEIVABLES] 480
[ASSETS-OTHER] 572616
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 573096
[PAYABLE-FOR-SECURITIES] 13906
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 25680
[TOTAL-LIABILITIES] 39586
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 509245
[SHARES-COMMON-STOCK] 59838
[SHARES-COMMON-PRIOR] 0
[ACCUMULATED-NII-CURRENT] 361
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] (9653)
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 33557
[NET-ASSETS] 533510
[DIVIDEND-INCOME] 4604
[INTEREST-INCOME] 1096
[OTHER-INCOME] 0
[EXPENSES-NET] 1494
[NET-INVESTMENT-INCOME] 4206
[REALIZED-GAINS-CURRENT] (9676)
[APPREC-INCREASE-CURRENT] 33557
[NET-CHANGE-FROM-OPS] 28087
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] (3953)
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 56644
[NUMBER-OF-SHARES-REDEEMED] 0
[SHARES-REINVESTED] 427
[NET-CHANGE-IN-ASSETS] 508510
[ACCUMULATED-NII-PRIOR] 0
[ACCUMULATED-GAINS-PRIOR] 0
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 0
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 29080
[AVERAGE-NET-ASSETS] 312535
[PER-SHARE-NAV-BEGIN] 8.68
[PER-SHARE-NII] .13
[PER-SHARE-GAIN-APPREC] .23
[PER-SHARE-DIVIDEND] (.12)
[PER-SHARE-DISTRIBUTIONS] 0
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 8.92
[EXPENSE-RATIO] 1.25
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0<PAGE>
<ARTICLE> 6
<SERIES>
[NUMBER] 1
<NAME> STRATEGIST TOTAL RETURN INCOME FUND
<PERIOD-TYPE> 4-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> MAY-13-1996
<PERIOD-END> SEP-30-1996
[INVESTMENTS-AT-COST] 0
[INVESTMENTS-AT-VALUE] 0
[RECEIVABLES] 248
[ASSETS-OTHER] 576536
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 576784
[PAYABLE-FOR-SECURITIES] 13906
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 34157
[TOTAL-LIABILITIES] 48063
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 503853
[SHARES-COMMON-STOCK] 43259
[SHARES-COMMON-PRIOR] 0
[ACCUMULATED-NII-CURRENT] (230)
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] (15045)
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 40143
[NET-ASSETS] 528721
[DIVIDEND-INCOME] 983
[INTEREST-INCOME] 1704
[OTHER-INCOME] 0
[EXPENSES-NET] 1548
[NET-INVESTMENT-INCOME] 1139
[REALIZED-GAINS-CURRENT] (16662)
[APPREC-INCREASE-CURRENT] 40143
[NET-CHANGE-FROM-OPS] 24620
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] (3398)
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 41149
[NUMBER-OF-SHARES-REDEEMED] 0
[SHARES-REINVESTED] 7
[NET-CHANGE-IN-ASSETS] 503721
[ACCUMULATED-NII-PRIOR] 0
[ACCUMULATED-GAINS-PRIOR] 0
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 0
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 37627
[AVERAGE-NET-ASSETS] 310471
[PER-SHARE-NAV-BEGIN] 11.89
[PER-SHARE-NII] .06
[PER-SHARE-GAIN-APPREC] .31
[PER-SHARE-DIVIDEND] (.04)
[PER-SHARE-DISTRIBUTIONS] 0
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 12.22
[EXPENSE-RATIO] 1.30
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0<PAGE>
<ARTICLE> 6
<SERIES>
[NUMBER] 1
<NAME> STRATEGIST EQUITY FUND
<PERIOD-TYPE> 4-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> MAY-13-1996
<PERIOD-END> SEP-30-1996
[INVESTMENTS-AT-COST] 0
[INVESTMENTS-AT-VALUE] 0
[RECEIVABLES] 818
[ASSETS-OTHER] 584324
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 585142
[PAYABLE-FOR-SECURITIES] 13906
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 37120
[TOTAL-LIABILITIES] 51026
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON]
[SHARES-COMMON-STOCK] 23845
[SHARES-COMMON-PRIOR] 0
[ACCUMULATED-NII-CURRENT] 1327
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] (28929)
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 53902
[NET-ASSETS] 534116
[DIVIDEND-INCOME] 4412
[INTEREST-INCOME] 708
[OTHER-INCOME] 0
[EXPENSES-NET] 1484
[NET-INVESTMENT-INCOME] 3636
[REALIZED-GAINS-CURRENT] (28922)
[APPREC-INCREASE-CURRENT] 53902
[NET-CHANGE-FROM-OPS] 28616
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] (3953)
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 22586
[NUMBER-OF-SHARES-REDEEMED] 0
[SHARES-REINVESTED] 109
[NET-CHANGE-IN-ASSETS] 509116
[ACCUMULATED-NII-PRIOR] 0
[ACCUMULATED-GAINS-PRIOR] 0
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 0
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 40640
[AVERAGE-NET-ASSETS] 309704
[PER-SHARE-NAV-BEGIN] 21.73
[PER-SHARE-NII] .21
[PER-SHARE-GAIN-APPREC] .62
[PER-SHARE-DIVIDEND] (.16)
[PER-SHARE-DISTRIBUTIONS] 0
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 22.40
[EXPENSE-RATIO] 1.25
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0<PAGE>
<ARTICLE> 6
<NAME> BALANCED PORTFOLIO
<PERIOD-TYPE> 4-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> MAY-13-1996
<PERIOD-END> SEP-30-1996
[INVESTMENTS-AT-COST] 3700449612
[INVESTMENTS-AT-VALUE] 4063475830
[RECEIVABLES] 29367074
[ASSETS-OTHER] 155892116
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 4248735030
[PAYABLE-FOR-SECURITIES] 45820736
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 184821522
[TOTAL-LIABILITIES] 230642258
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 0
[SHARES-COMMON-STOCK] 0
[SHARES-COMMON-PRIOR] 0
[ACCUMULATED-NII-CURRENT] 0
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] 0
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 0
[NET-ASSETS] 4018092772
[DIVIDEND-INCOME] 36661206
[INTEREST-INCOME] 40340578
[OTHER-INCOME] 0
[EXPENSES-NET] 7750583
[NET-INVESTMENT-INCOME] 69251201
[REALIZED-GAINS-CURRENT] 58304995
[APPREC-INCREASE-CURRENT] 26384443
[NET-CHANGE-FROM-OPS] 153940639
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 0
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 0
[NUMBER-OF-SHARES-REDEEMED] 0
[SHARES-REINVESTED] 0
[NET-CHANGE-IN-ASSETS] 4018067772
[ACCUMULATED-NII-PRIOR] 0
[ACCUMULATED-GAINS-PRIOR] 0
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 7488292
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 7750583
[AVERAGE-NET-ASSETS] 3848662941
[PER-SHARE-NAV-BEGIN] 0
[PER-SHARE-NII] 0
[PER-SHARE-GAIN-APPREC] 0
[PER-SHARE-DIVIDEND] 0
[PER-SHARE-DISTRIBUTIONS] 0
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 0
[EXPENSE-RATIO] 0
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0<PAGE>
<ARTICLE> 6
<NAME> EQUITY INCOME PORTFOLIO
<PERIOD-TYPE> 4-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> MAY-13-1996
<PERIOD-END> SEP-30-1996
[INVESTMENTS-AT-COST] 1288544391
[INVESTMENTS-AT-VALUE] 1447675951
[RECEIVABLES] 14145979
[ASSETS-OTHER] 0
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 1461821930
[PAYABLE-FOR-SECURITIES] 4967278
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 700280
[TOTAL-LIABILITIES] 5667558
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 0
[SHARES-COMMON-STOCK] 0
[SHARES-COMMON-PRIOR] 0
[ACCUMULATED-NII-CURRENT] 0
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] 0
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 0
[NET-ASSETS] 1456154372
[DIVIDEND-INCOME] 20331540
[INTEREST-INCOME] 4643319
[OTHER-INCOME] 0
[EXPENSES-NET] 2792039
[NET-INVESTMENT-INCOME] 22182820
[REALIZED-GAINS-CURRENT] 16088401
[APPREC-INCREASE-CURRENT] 40690701
[NET-CHANGE-FROM-OPS] 78961922
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 0
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 0
[NUMBER-OF-SHARES-REDEEMED] 0
[SHARES-REINVESTED] 0
[NET-CHANGE-IN-ASSETS] 1456129372
[ACCUMULATED-NII-PRIOR] 0
[ACCUMULATED-GAINS-PRIOR] 0
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 2737194
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 2797265
[AVERAGE-NET-ASSETS] 1295122732
[PER-SHARE-NAV-BEGIN] 0
[PER-SHARE-NII] 0
[PER-SHARE-GAIN-APPREC] 0
[PER-SHARE-DIVIDEND] 0
[PER-SHARE-DISTRIBUTIONS] 0
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 0
[EXPENSE-RATIO] 0
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0<PAGE>
<ARTICLE> 6
<NAME> EQUITY PORTFOLIO
<PERIOD-TYPE> 4-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> MAY-13-1996
<PERIOD-END> SEP-30-1996
[INVESTMENTS-AT-COST] 2689414898
[INVESTMENTS-AT-VALUE] 3336846402
[RECEIVABLES] 18242796
[ASSETS-OTHER] 60475431
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 3415564629
[PAYABLE-FOR-SECURITIES] 51858331
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 78658203
[TOTAL-LIABILITIES] 130516534
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 0
[SHARES-COMMON-STOCK] 0
[SHARES-COMMON-PRIOR] 0
[ACCUMULATED-NII-CURRENT] 0
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] 0
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 0
[NET-ASSETS] 3285048095
[DIVIDEND-INCOME] 37820029
[INTEREST-INCOME] 626784
[OTHER-INCOME] 0
[EXPENSES-NET] 5837164
[NET-INVESTMENT-INCOME] 38250649
[REALIZED-GAINS-CURRENT] (4205188)
[APPREC-INCREASE-CURRENT] 140669806
[NET-CHANGE-FROM-OPS] 174715267
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 0
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 0
[NUMBER-OF-SHARES-REDEEMED] 0
[SHARES-REINVESTED] 0
[NET-CHANGE-IN-ASSETS] 3285023095
[ACCUMULATED-NII-PRIOR] 0
[ACCUMULATED-GAINS-PRIOR] 0
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 5772345
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 5842452
[AVERAGE-NET-ASSETS] 3021206280
[PER-SHARE-NAV-BEGIN] 0
[PER-SHARE-NII] 0
[PER-SHARE-GAIN-APPREC] 0
[PER-SHARE-DIVIDEND] 0
[PER-SHARE-DISTRIBUTIONS] 0
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 0
[EXPENSE-RATIO] 0
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0<PAGE>
<ARTICLE> 6
<NAME> TOTAL RETURN PORTFOLIO
<PERIOD-TYPE> 4-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> MAY-13-1996
<PERIOD-END> SEP-30-1996
[INVESTMENTS-AT-COST] 2616865050
[INVESTMENTS-AT-VALUE] 2838262532
[RECEIVABLES] 12121713
[ASSETS-OTHER] 31338366
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 2881722611
[PAYABLE-FOR-SECURITIES] 27715903
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 54816843
[TOTAL-LIABILITIES] 82532746
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 0
[SHARES-COMMON-STOCK] 0
[SHARES-COMMON-PRIOR] 0
[ACCUMULATED-NII-CURRENT] 0
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] 0
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 0
[NET-ASSETS] 2799189865
[DIVIDEND-INCOME] 16652461
[INTEREST-INCOME] 19235249
[OTHER-INCOME] 0
[EXPENSES-NET] 4712433
[NET-INVESTMENT-INCOME] 31175277
[REALIZED-GAINS-CURRENT] 26015535
[APPREC-INCREASE-CURRENT] 75342945
[NET-CHANGE-FROM-OPS] 132533757
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 0
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 0
[NUMBER-OF-SHARES-REDEEMED] 0
[SHARES-REINVESTED] 0
[NET-CHANGE-IN-ASSETS] 2799164865
[ACCUMULATED-NII-PRIOR] 0
[ACCUMULATED-GAINS-PRIOR] 0
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 4327857
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 4716546
[AVERAGE-NET-ASSETS] 2787207211
[PER-SHARE-NAV-BEGIN] 0
[PER-SHARE-NII] 0
[PER-SHARE-GAIN-APPREC] 0
[PER-SHARE-DIVIDEND] 0
[PER-SHARE-DISTRIBUTIONS] 0
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 0
[EXPENSE-RATIO] 0
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
<PAGE>
PAGE 1
DIRECTORS POWER OF ATTORNEY
City of Minneapolis
State of Minnesota
Each of the undersigned, as directors of the below listed
open-end management investment companies that previously have filed
registration statements and amendments thereto pursuant to the
requirements of the Securities Act of 1933 and the Investment
Company Act of 1940 with the Securities and Exchange Commission:
1933 Act 1940 Act
Reg. Number Reg. Number
Strategist Growth Fund, Inc. 33-63905 811-7401
Strategist Growth and Income Fund, Inc. 33-63907 811-7403
Strategist Income Fund, Inc. 33-60323 811-7305
Strategist Tax-Free Fund, Inc. 33-63909 811-7407
Strategist World Fund, Inc. 33-63951 811-7405
hereby constitutes and appoints James A. Mitchell or Eileen J.
Newhouse as her or his attorney-in-fact and agent, to sign for her
or him in her or his name, place and stead any and all further
amendments to said registration statements filed pursuant to said
Acts and any rules and regulations thereunder, and to file such
amendments with all exhibits thereto and other documents in
connection therewith with the Securities and Exchange Commission,
granting to either of them the full power and authority to do and
perform each and every act required and necessary to be done in
connection therewith.
Dated this 24th day of April, 1996.
/s/ Rodney P. Burwell
Rodney P. Burwell
/s/ William J. Heron
William J. Heron
/s/ Jean B. Keffeler
Jean B. Keffeler
/s/ Thomas R. McBurney
Thomas R. McBurney
/s/ James A. Mitchell
James A. Mitchell
<PAGE>
PAGE 1
OFFICERS' POWER OF ATTORNEY
City of Minneapolis
State of Minnesota
Each of the undersigned, as officers of the below listed
open-end management investment companies that previously have filed
registration statements and amendments thereto pursuant to the
requirements of the Securities Act of 1933 and the Investment
Company Act of 1940 with the Securities and Exchange Commission:
1933 Act 1940 Act
Reg. Number Reg. Number
Strategist Growth Fund, Inc. 33-63905 811-7401
Strategist Growth and Income Fund, Inc. 33-63907 811-7403
Strategist Income Fund, Inc. 33-60323 811-7305
Strategist Tax-Free Fund, Inc. 33-63909 811-7407
Strategist World Fund, Inc. 33-63951 811-7405
hereby constitutes and appoints James A. Mitchell or Eileen J.
Newhouse as her or his attorney-in-fact and agent, to sign for her
or him in her or his name, place and stead any and all further
amendments to said registration statements filed pursuant to said
Acts and any rules and regulations thereunder, and to file such
amendments with all exhibits thereto and other documents in
connection therewith with the Securities and Exchange Commission,
granting to either of them the full power and authority to do and
perform each and every act required and necessary to be done in
connection therewith.
Dated this 24th day of April, 1996.
/s/ James A. Mitchell
James A. Mitchell
/s/ Melinda Urion
Melinda Urion
