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AMERICAN EXPRESS
Financial Direct
Strategist Growth and Income Fund, Inc.
1997 Annual Report
Strategist Balanced Fund
Strategist Equity Fund
Strategist Equity Income Fund
Strategist Total Return Fund
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Table of contents
From the portfolio managers 1
The Fund's long-term performance 9
Independent auditors' report 13
Financial statements (Strategist Growth and Income Fund, Inc.) 14
Notes to financial statements (Strategist Growth and Income Fund, Inc.) 22
Federal income tax information 29
Independent auditors' report (Balanced Portfolio) 31
Financial statements (Balanced Portfolio) 32
Notes to financial statements (Balanced Portfolio) 35
Investments in securities (Balanced Portfolio) 40
Independent auditors' report (Equity Portfolio) 58
Financial statements (Equity Portfolio) 59
Notes to financial statements (Equity Portfolio) 62
Investments in securities (Equity Portfolio) 67
Independent auditors' report (Equity Income Portfolio) 79
Financial statements (Equity Income Portfolio) 80
Notes to financial statements (Equity Income Portfolio) 83
Investments in securities (Equity Income Portfolio) 87
Independent auditors' report (Total Return Portfolio) 98
Financial statements (Total Return Portfolio) 99
Notes to financial statements (Total Return Portfolio) 102
Investments in securities (Total Return Portfolio) 108
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From the portfolio managers
(picture of) Thomas W. Medcalf
Portfolio manager
(picture of) Thomas W. Medcalf
Portfolio manager
Strategist Balanced Fund
Stocks and bonds enjoyed a largely favorable environment during much of the past
12 months, leading to a productive period for Strategist Balanced Fund. The
Fund's fiscal year, October 1996 through September 1997 realized a total return
of 27.4%.
The factors that have propelled the stock market in recent years -- low
inflation, generally low long-term interest rates, solid economic growth and
healthy corporate profits -- remained in place as the period began last fall.
Stocks responded with a powerful rally that, aside from moderate dips last
spring and again in August, continued throughout the 12 months.
Like stocks, bonds enjoyed a substantial run-up in the
fall of 1996. But by late winter hints of a strengthening economy soon began
fueling inflation fears, which in turn drove long-term interest rates up and
bond prices down. The bond market was subsequently reassured by tame inflation
reports over the spring and summer, allowing long-term rates to come back down
and bonds to recover much of their lost ground.
Banks, insurance top performers
Consistent with their history, value stocks were less volatile than the broad
stock market. Stocks of banks and insurance companies, a substantial exposure
for the portfolio for some time, led the way during the 12 months. They were
complemented by certain consumer stocks, including the drug, health care and
food/beverage sectors, which also gave the portfolio overall positive results.
As for changes to the stock side of the portfolio, we gradually moved more money
into "defensive" issues such as utility stocks and real estate investment trusts
to cushion the Fund's net asset value in the event of a stock market downturn.
In addition, we allowed the cash position in the portfolio to rise to about 14%
by period-end. This strategy paid off well during stocks' decline last August,
when the portfolio held up much better than the market as a whole.
We also employed a conservative strategy with the bond portion of the portfolio.
This included shifting some money out of U.S. Treasury bonds, which are
penalized most by rising interest rates, and keeping a neutral duration among
the bond holdings, also to lessen the negative effect of an increase in interest
rates.
Given the stock market's run-up in 1997, it's become increasingly difficult to
find stocks that offer good investment value. Therefore, as of this writing
(mid-October), we continue to hold an above-average cash level and maintain a
conservative structure in the bond holdings.
Thomas W. Medcalf
Edward Labenski
Strategist Growth and Income Fund, Inc.
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From the portfolio manager
(picture of) Richard H. Warden
Portfolio manager
Strategist Equity Fund
A soaring stock market helped propel Strategist Equity Fund to a highly
rewarding fiscal year, which ran from October 1996 through September 1997. For
investors, the total return was 28.3%.
For most of the 12 months, stocks enjoyed a virtually ideal environment,
highlighted by low inflation, healthy corporate earnings, solid economic growth
and generally low long-term interest rates. In fact, the market experienced only
two setbacks worth noting -- one last spring and another this past August, both
caused by a temporary run-up in interest rates.
The strength of the market was largely confined to big, blue-chip companies with
robust earnings -- a condition that fits relatively well with this portfolio's
investment focus. More specifically, the portfolio's holdings in the financial
services (especially banks and insurance stocks), health care and
technology/telecommunications were the biggest contributors to its success,
while investments in aerospace and chemicals were comparatively weak.
Interestingly, as strong as the U.S. market was, the Fund's investments in
foreign stocks (up to 20% of portfolio assets at times) actually outperformed
the domestic holdings.
As for changes to the investment mix, as the period progressed, I shifted more
assets into relatively defensive stocks such as those in the food/beverage and
household-product sectors, as well as utilities, which provided above-average
yields. In addition, I cut back on investments in technology-related stocks,
many of which had been strong performers but also had reached what I believed
were vulnerable price levels. This conservative strategy worked well during the
stock market's weak periods, which, as it turned out, were few.
While I don't see any immediate obstacles for the stock market at this point
(mid-October), I won't be surprised if stocks undergo a correction, or moderate
downturn, before too long. Should that happen, I would view it as a healthy
development for the market, allowing it to gather itself for another sustained
advance. Given that outlook, I continue to emphasize common stocks of blue-chip
companies in comparatively stable economic sectors, augmented by high-yielding,
convertible preferred stocks and convertible bonds.
Richard H. Warden
Strategist Growth and Income Fund, Inc.
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From the portfolio manager
(picture of) Keith Tufte
Portfolio manager
Strategist Equity Income Fund
Strategist Equity Income Fund generated a substantial return during the past
fiscal year, as it participated in the stock market's advances while holding up
well during its declines. For the 12 months -- October 1996 through September
1997 -- the Fund recorded a total return of 29.4%.
Stocks began to gather forward momentum last fall, as low inflation, decent
economic growth, strong corporate earnings and low interest rates provided
plenty of support. By the time the period started in October, the market was in
the middle of a robust rally that, apart from moderate downturns last spring and
this past August, continued throughout the fiscal year.
Less volatile than the market
Consistent with its relatively conservative nature, the portfolio followed suit
with the advances of the broad market (as measured by the Standard & Poor's
500), but to a lesser degree. On the other hand, when the market stumbled, the
portfolio's above-average yield allowed it to hold its ground better than the
market.
The bulk of the portfolio's best-performing stocks came from the banking,
insurance and food sectors, with health care also making a solid contribution.
Among the laggards were investments in real estate investment trusts, energy and
utility stocks. The utility stocks, which included electric and telephone
providers, did provide the Fund with a healthy yield, however.
Defensive measures
As the period progressed, I grew more cautious on the stock market, and I took
some measures to cushion the Fund against a possible downturn. These included
beefing up the bond portion of the portfolio late in 1996 and culling out some
stocks that had reached unacceptably high valuation levels. This past summer, I
sold most of the bonds and built up the level of cash reserves. While the
increased cash helped cushion the portfolio during the August decline, it did
temper performance in the previous two months, when the market advanced sharply.
As of this writing in mid-October, my outlook for the stock market remains on
the cautious side. While fundamentals such as good economic growth and low
inflation continue to work in the market's favor, I think the potential for
higher stock prices has diminished. Therefore, I am staying with a conservative
investment strategy, which continues to include higher-than-usual cash reserves.
Keith Tufte
Strategist Growth and Income Fund, Inc.
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From the portfolio manager
(picture of) Steven Merrell
Portfolio team member
Strategist Total Return Fund
A largely positive period for the U.S. stock and bond markets, as well as
selected foreign stock markets, led to a productive fiscal year for Strategist
Total Return Fund. For the 12 months -- October 1996 through September 1997 --
the Fund's gain was 21.4%.
For most of the year, the U.S. stock market enjoyed an environment characterized
by a low inflation rate, generally low long-term interest rates, solid economic
growth and robust corporate profits. With those fundamentals providing support,
the market staged an impressive rally that was interrupted by just two moderate
downturns -- one last spring and another last August, both spawned by a run-up
in long-term interest rates.
The U.S. bond market, on the other hand, was considerably more volatile, as
periodic concerns about greater economic growth causing a spike in inflation
kept it off balance much of the time. Still, on the whole, bonds did manage to
gain some ground over the 12 months.
A more conservative tack
We continued to keep the portfolio well-diversified during the period, but we
did make some shifts during the winter based on our belief that financial
assets, especially U.S. stocks, had become more vulnerable to a downturn. Those
moves included reducing the U.S. stock exposure and putting the extra money
created by the reductions into cash reserves. That resulted in a mix of
approximately 40% U.S. stocks, 20% foreign stocks, 25% cash equivalents, 12%
U.S. bonds and 3% foreign bonds, which we maintained through the end of the
fiscal year.
In addition, to avoid the negative effect of a potential interest-rate rise in
the U.S., we shortened the duration of our U.S. bond holdings and focused our
investments in emerging foreign markets on securities that are unaffected by
rate changes in the U.S. Finally, last spring we increased our stock holdings in
emerging markets such as Russia, Mexico and Argentina, a shift that paid off
well for the Fund as those markets rallied sharply.
Little has changed in the investment environment as we begin a new fiscal year;
at this point (mid-October), the fundamentals remain largely favorable. While
that's encouraging, we continue to think a relatively conservative approach is
the prudent one. Should the financial markets, especially the U.S. stock market,
manage another strong advance in the months ahead, the portfolio remains
structured to participate, but to a lesser degree than the broad market. If,
however, stocks and bonds should encounter trouble, we expect the Fund to fare
comparatively well.
Steven Merrell
Strategist Growth and Income Fund, Inc.
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The Funds' long-term performance
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<CAPTION>
<S> <C> <C> <C>
How your $10,000 has grown in Strategist Balanced Fund
$20,000
S&P 500
Stock Index
$13,053
Strategist Balanced
Fund
Lipper Balanced
Fund Index
$10,000
5/96 6/96 7/9 8/96 9/96 10/96 11/9 12/96 1/97 2/97 3/97 4/97 5/97 6/97 7/97 8/97 9/97
</TABLE>
Average annual total return
(as of Sept. 30, 1997)
1 year 5 years 10 years
+27.43% +14.03% +11.62%
Assumes:
-Holding period from 5/31/96 to 9/30/97.
-Returns do not reflect taxes payable on distributions.
-Reinvestment of all income and capital gain distributions for the Fund, with a
value of $669. Also see "Performance" in the Fund's current prospectus.
On the graph above you can see how the Fund's total return compared to two
widely cited performance indexes, the Standard & Poor's 500 Stock Index (S&P
500) and the Lipper Balanced Fund Index. Your investment and return values
fluctuate so that your shares, when redeemed, may be worth more or less than the
original cost. This was a period of widely fluctuating security prices. Past
performance is no guarantee of future results.
On May 13, 1996, IDS Mutual Fund (the predecessor fund) converted to a
master/feeder structure and transferred all of its assets to Balanced Portfolio.
The performance information in the total return table, other than the 1 year
average annual total return, represents performance of the predecessor fund
prior to March 20, 1995 and of Class A shares of the predecessor fund from March
20, 1995 through May 13, 1996, adjusted to reflect the absence of sales charges
on shares of the Fund. The historical performance has not been adjusted for any
difference between the estimated aggregate fees and expenses of the Fund and
historical fees and expenses of the predecessor fund.
S&P 500, an unmanaged list of common stocks, is frequently used as a general
measure of market performance. However, the S&P 500 companies are generally
larger than those in which the Portfolio invests.
Lipper Balanced Fund Index, an unmanaged index published by Lipper Analytical
Services, Inc., includes 30 funds that are generally similar to the Fund,
although some funds in the index may have somewhat different investment policies
or objectives.
Strategist Growth Fund, Inc.
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<TABLE>
<CAPTION>
<S> <C> <C> <C>
How your $10,000 has grown in Strategist Equity Fund
$20,000
S&P 500
Stock Index
Lipper Growth and Income
Fund Index
$13,521
Strategist Equity
$10,000 Fund
5/96 6/96 7/9 8/96 9/96 10/96 11/9 12/96 1/97 2/97 3/97 4/97 5/97 6/97 7/97 8/97 9/97
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Average annual total return
(as of Sept. 30, 1997)
1 year 5 years 10 years
+28.28% +17.23% +13.19%
Assumes:
-Holding period from 5/31/96 to 9/30/97.
-Returns do not reflect taxes payable on distributions.
-Reinvestment of all income and capital gain distributions for the Fund, with a
value of $341. Also see "Performance" in the Fund's current prospectus.
On the graph above you can see how the Fund's total return compared to two
widely cited performance indexes, the Standard & Poor's 500 Stock Index (S&P
500) and the Lipper Growth & Income Fund Index. Your investment and return
values fluctuate so that your shares, when redeemed, may be worth more or less
than the original cost. This was a period of widely fluctuating security prices.
Past performance is no guarantee of future results.
On May 13, 1996, IDS Stock Fund (the predecessor fund) converted to a
master/feeder structure and transferred all of its assets to Equity Portfolio.
The performance information in the total return table, other than the 1 year
average annual total return, represents performance of the predecessor fund
prior to March 20, 1995 and of Class A shares of the predecessor fund from March
20, 1995 through May 13, 1996, adjusted to reflect the absence of sales charges
on shares of the Fund. The historical performance has not been adjusted for any
difference between the estimated aggregate fees and expenses of the Fund and
historical fees and expenses of the predecessor fund.
S&P 500, an unmanaged list of common stocks, is frequently used as a general
measure of market performance. However, the S&P 500 companies are generally
larger than those in which the Portfolio invests.
Lipper Growth & Income Fund Index, an unmanaged index published by Lipper
Analytical Services, Inc., includes 30 funds that are generally similar to the
Fund, although some funds in the index may have somewhat different investment
policies or objectives.
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<TABLE>
<CAPTION>
<S> <C> <C> <C>
How your $10,000 has grown in Strategist Equity Income Fund
$20,000
S&P 500
Stock Index
Lipper Equity Income
Fund Index
$13,453
Strategist Equity
Income Fund
$10,000
5/96 6/96 7/9 8/96 9/96 10/96 11/9 12/96 1/97 2/97 3/97 4/97 5/97 6/97 7/97 8/97 9/97
</TABLE>
Average annual total return
(as of Sept. 30, 1997)
1 year 5 years Since inception*
+29.44% +17.45% +18.43%
*Inception date was Oct. 15, 1990
Assumes:
-Holding period from 5/31/96 to 9/30/97.
-Returns do not reflect taxes payable on distributions.
-Reinvestment of all income and capital gain distributions for the Fund, with a
value of $626. Also see "Performance" in the Fund's current prospectus.
On the graph above you can see how the Fund's total return compared to two
widely cited performance indexes, the Standard & Poor's 500 Stock Index (S&P
500) and the Lipper Equity Income Fund Index. Your investment and return values
fluctuate so that your shares, when redeemed, may be worth more or less than the
original cost. This was a period of widely fluctuating security prices. Past
performance is no guarantee of future results.
On May 13, 1996, IDS Diversified Equity Income Fund (the predecessor fund)
converted to a master/feeder structure and transferred all of its assets to
Equity Income Portfolio. The performance information in the total return table,
other than the 1 year average annual total return, represents performance of the
predecessor fund prior to March 20, 1995 and of Class A shares of the
predecessor fund from March 20, 1995 through May 13, 1996, adjusted to reflect
the absence of sales charges on shares of the Fund. The historical performance
has not been adjusted for any difference between the estimated aggregate fees
and expenses of the Fund and historical fees and expenses of the predecessor
fund.
S&P 500, an unmanaged list of common stocks, is frequently used as a general
measure of market performance. However, the S&P 500 companies are generally
larger than those in which the Portfolio invests.
Lipper Equity Income Fund Index, an unmanaged index published by Lipper
Analytical Services, Inc., includes 30 funds that are generally similar to the
Fund, although some funds in the index may have somewhat different investment
policies or objectives.
Strategist Growth Fund, Inc.
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How your $10,000 has grown in Strategist Total Return Fund
<TABLE>
<CAPTION>
<S> <C> <C> <C>
$20,000
S&P 500
Stock Index
Lipper Flexible
Portfolio Fund Index
$12,396
Strategist Total
$10,000 Return Fund
5/96 6/96 7/9 8/96 9/96 10/96 11/9 12/96 1/97 2/97 3/97 4/97 5/97 6/97 7/97 8/97 9/97
</TABLE>
Average annual total return
(as of Sept. 30, 1997)
1 year 5 years 10 years
+21.35% +12.66% +11.86%
Assumes:
-Holding period from 5/31/96 to 9/30/97.
-Returns do not reflect taxes payable on distributions.
-Reinvestment of all income and capital gain distributions for the Fund, with a
value of $298. Also see "Performance" in the Fund's current prospectus.
On the graph above you can see how the Fund's total return compared to two
widely cited performance indexes, the Standard & Poor's 500 Stock Index (S&P
500) and the Lipper Flexible Portfolio Fund Index. Your investment and return
values fluctuate so that your shares, when redeemed, may be worth more or less
than the original cost. This was a period of widely fluctuating security prices.
Past performance is no guarantee of future results.
On May 13, 1996, IDS Managed Allocation Fund (the predecessor fund) converted to
a master/feeder structure and transferred all of its assets to Total Return
Portfolio. The performance information in the total return table, other than the
1 year average annual total return, represents performance of the predecessor
fund prior to March 20, 1995 and of Class A shares of the predecessor fund from
March 20, 1995 throughMay 13, 1996, adjusted to reflect the absence of sales
charges on shares of the Fund. The historical performance has not been adjusted
for any difference between the estimated aggregate fees and expenses of the Fund
and historical fees and expenses of the predecessor fund.
S&P 500, an unmanaged list of common stocks, is frequently used as a general
measure of market performance. However, the S&P 500 companies are generally
larger than those in which the Portfolio invests.
Lipper Flexible Portfolio Fund Index, an unmanaged index published by Lipper
Analytical Services, Inc., includes 30 funds that are generally similar to the
Fund, although some funds in the index may have somewhat different investment
policies or objectives.
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The financial statements contained in Post-Effective Amendment #2 to
Registration statement No. 33-63907 filed on or about Nov. 26, 1997, are
incorporated herein by reference
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American Express Service Corporation, Distributor
Printed on recycled paper with a minimum of 10% post-consumer waste
S-6136 C (11/97)
