AMERICAN EXPRESS Financial Direct
Strategist Growth and Income Fund, Inc.
1999 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 2
The Fund's Long-term Performance 10
Independent Auditors' Report 18
Financial Statements (Strategist Growth and Income Fund, Inc.) 19
Notes to Financial Statements (Strategist Growth and Income Fund, Inc.) 27
Federal Income Tax Information 35
Independent Auditors' Report (Balanced Portfolio) 38
Financial Statements (Balanced Portfolio) 39
Notes to Financial Statements (Balanced Portfolio) 42
Investments in Securities (Balanced Portfolio) 47
Independent Auditors' Report (Equity Portfolio) 62
Financial Statements (Equity Portfolio) 63
Notes to Financial Statements (Equity Portfolio) 66
Investments in Securities (Equity Portfolio) 71
Independent Auditors' Report (Equity Income Portfolio) 81
Financial Statements (Equity Income Portfolio) 82
Notes to Financial Statements (Equity Income Portfolio) 85
Investments in Securities (Equity Income Portfolio) 90
Independent Auditors' Report (Total Return Portfolio) 97
Financial Statements (Total Return Portfolio) 98
Notes to Financial Statements (Total Return Portfolio) 101
Investments in Securities (Total Return Portfolio) 106
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(picture of) Kurt Winters
Kurt Winters
Portfolio manager
(picture of) Brad Stone
Brad Stone
Portfolio manager
From the Portfolio Managers
Strategist Balanced Fund
The past 12 months was a volatile but ultimately rewarding period for financial
assets. For Strategist Balanced Fund, the result was a total return of 10.42%
during the fiscal year -- October 1998 through September 1999. (A portion of the
return came in the form of a capital gain, which was paid to shareholders in
December 1998 and reduced the Fund's net asset value by the same amount at that
time.)
The period began with U.S. stocks trying to shake off the effects of a sharp
decline in the late summer of 1998. But, in another display of the remarkable
resilience it has shown in recent years, the market was soon on its way to
making up the lost ground. Supported by three reductions in short-term interest
rates by the Federal Reserve, the tentative advance quickly turned into a
roaring rally that lasted through most of the winter.
After retreating in February, stocks made another nice advance that eventually
stalled in mid-summer. By that time, long-term interest rates were up markedly
since the start of 1999, and concern about potentially higher inflation had
re-surfaced. The result was a sustained retreat by stocks over the final three
months.
On the fixed-income side of the portfolio, a rebound by corporate bonds had a
positive effect early in the fiscal year. But for most of 1999, the
rising-interest-rate trend penalized the Fund's holdings, which also included
mortgage-backed and U.S. Treasury bonds. We emphasized higher-quality bonds
throughout the period. Among our investment strategies was the purchase of a
modest amount of derivatives, including futures and options.
As for the asset mix, we kept between 55% and 65% of the assets in stocks, with
almost all the rest in bonds. The largest sector exposure was to financial
services issues, including those of banks and insurance companies. Technology
and utilities securities made up the next two largest weightings. Although a
comparatively small
STRATEGIST GROWTH AND INCOME FUND, INC.
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area of investment, energy-related stocks enjoyed a strong
comeback and made a solid contribution to performance.
Changes to the portfolio were relatively modest. We lowered the technology
exposure somewhat and increased the financial services holdings during the
period. We also reduced the duration of the bond side of the portfolio to make
it less vulnerable to a potential rise in interest rates, and lowered the
exposure to mortgage-backed bonds.
As the new fiscal year begins, it's encouraging that the value stocks this Fund
focuses on made something of a comeback at times during the past 12 months. But
that doesn't alter the fact that the stock market as a whole is facing several
conflicting factors: an economy that appears to remain quite strong, the
possibility of higher inflation and higher interest rates, concerns about the
strength of corporate profits, a depreciating U.S. dollar, and the ultimate
effect of the Y2K computer situation. In light of the uncertainty, we plan to
maintain a somewhat defensive investment approach with both stocks and bonds.
Kurt Winters
Brad Stone
ANNUAL REPORT - 1999
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(picture of) Michael Kennedy
Michael Kennedy
Portfolio manager
From the Portfolio Manager
Strategist Equity Fund
The past 12 months was a volatile but overall positive period for U.S. stocks,
allowing Strategist Equity Fund to generate a gain of 16.95% for the October
1998 through September 1999 fiscal year. (A portion of the return came in the
form of a capital gain, which was paid to shareholders in December 1998 and
reduced the Fund's net asset value by the same amount at that time.)
At the outset of the period, the stock market was still licking its wounds
suffered in a steep decline that began in the late summer of 1998. But with the
remarkable resilience that has been its hallmark in recent years, the market
gathered itself and began to move forward. Supported by three reductions in
short-term interest rates by the Federal Reserve Board during the fall, stocks
quickly turned a tentative advance into a roaring rally that, despite a slump in
February, ultimately took the market and the Fund to an all-time high in
mid-summer.
By that time, long-term interest rates had risen from the beginning of 1999, and
so had concern about a possible run-up in inflation. That was enough to send
stocks into retreat over the final three months of the period and, in the
process, erode some of the Fund's gain earned during the first nine months.
`LARGE-CAPS' LEAD
Consistent with the trend of recent years, the market's advances were most often
driven by large-capitalization stocks. Because of the Fund's emphasis on
large-cap issues, that trend worked to the Fund's advantage. More specifically,
the Fund's largest areas of investment were technology, financial services,
retailing, utilities, consumer products and health care. Looking at individual
stocks, several of the Fund's largest holdings were also among its best
performers. They included General Electric, IBM, Wal-Mart, Microsoft and Intel.
STRATEGIST GROWTH AND INCOME FUND, INC.
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As for changes to the portfolio, I added to the technology exposure about
mid-period and reduced the level of cash reserves (from about 14% in the fall of
1998 to about 5% at period-end). Also, in light of the interest-rate rise, I
reduced holdings among rate-sensitive stocks such as banks and credit card
companies, as well as retailing and housing-related businesses. In addition, I
decreased the exposure to pharmaceuticals, given the possibility of reform in
healthcare. Those moves allowed me to shift more assets into commodities and
companies with a strong international presence, which I felt would benefit from
a recovering world economy.
Looking toward the current fiscal year, while I expect the global economic
recovery to continue, I think the volatility in the U.S. stock market may
actually increase. Therefore, I plan to maintain a portfolio that is well
diversified and structured on the conservative side.
Michael Kennedy
ANNUAL REPORT - 1999
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(picture of) Kurt Winters
Kurt Winters
Portfolio manager
From the Portfolio Manager
Strategist Equity Income Fund
Strategist Equity Income Fund enjoyed a productive 12 months, though a stock
market slump late in the period tempered its performance. For the fiscal year --
October 1998 through September 1999 -- the Fund's total return was 17.34%. (This
figure includes a substantial capital gain that was paid to shareholders in
December 1998 and lowered the Fund's net asset value by the same amount at that
time.)
At the outset of the period, the stock market was trying to shake off the
effects of a decline that had driven it down by nearly 20%. But with the
remarkable resilience they've shown in recent years, stocks not only righted
themselves during the autumn of 1998 but also began to regain some lost ground.
Supported by three reductions in short-term interest rates by the Federal
Reserve and ongoing strength of the economy, the advance turned into a
spectacular rally that lasted through January.
After a setback in February, stocks got back on the positive track during the
spring. But by mid-summer, a rise in long-term interest rates had made investors
increasingly nervous. As a result, the market steadily retreated during the
final three months of the period, eroding a good part of the Fund's gain.
`VALUE' COMES BACK
The Fund's performance pattern generally followed that of the broad market, but
its ups and downs were less dramatic -- a reflection of the higher-than-average
yields of the Fund's holdings, which helped mute fluctuations in the net asset
value. While large-capitalization growth stocks continued their reign as the
market's overall leader, it was both interesting and encouraging to note that,
during the spring, the value stocks that this Fund focuses on did enjoy
something of a resurgence. Whether we'll see more of that in the months ahead
will largely determine the Fund's performance.
STRATEGIST GROWTH AND INCOME FUND, INC.
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The largest area of investment during the 12 months was in financial services
stocks, including those of banks, insurance and brokerage companies. They got
off to a good start before tailing off late in the period under the pressure of
higher interest rates. The rest of the portfolio was divided in roughly equal
amounts among utility, technology and energy-related stocks. The latter two
groups were especially strong and made a substantial contribution to the Fund's
gain.
As the new fiscal year begins, the stock market is wrestling with a variety of
often-conflicting factors: an economy that appears to remain strong, the
possibility of higher inflation and higher interest rates, concerns about the
strength of corporate profits, a depreciating U.S. dollar, and the ultimate
effect of the Y2K computer situation. In light of the uncertainty, I plan to
maintain a somewhat defensive investment approach that centers on stock sectors
that have the potential to fare relatively well should the market find it
difficult to make progress.
Kurt Winters
ANNUAL REPORT - 1999
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(picture of) Steven Merrell
Steven Merrell
Portfolio manager
From the Portfolio Manager
Strategist Total Return Fund
It was a volatile 12 months for financial assets, but in the end it proved to be
an overall productive period for Strategist Total Return Fund. For the fiscal
year -- October 1998 through September 1999 -- the Fund generated a total return
of 13.10%. (A portion of the return came in the form of a capital gain that was
paid to shareholders in December 1998 and reduced the Fund's net asset value by
the same amount at that time.)
The period began with U.S. stocks trying to shake off the effects of a sharp
decline in the late summer of 1998. But soon, in another display of the
remarkable resilience it has shown in recent years, the market was on its way to
making up the lost ground. Supported by three reductions in short-term interest
rates by the Federal Reserve and ongoing strength of the economy, the advance
turned into a powerful rally that sent the market to an all-time high by the
middle of the summer. Over the final three months, though, stocks lost ground
under pressure from a rise in long-term interest rates and concern about
potentially higher inflation.
On the fixed-income side, a sharp rebound in U.S. corporate and emerging-market
bonds had a positive effect early in the fiscal year. But from that point, a
steady rise in interest rates here at home took a toll on the portfolio's
holdings among U.S. Treasury and corporate issues. To provide a buffer against
that trend, we raised the cash reserves during the second half of the period.
BIG U.S. STOCKS ARE HIGHEST EXPOSURE
Looking at the composition of the portfolio, U.S. stocks made up about 59% of
assets, the bulk of that in large-capitalization stocks. Most of the remainder
was allocated to bonds, chiefly U.S. corporate, Treasury and mortgage-backed
issues. Foreign holdings, including major- and emerging-market securities,
comprised less than 10% during the year.
We made a few asset shifts of note over the period. We brought the level of cash
reserves down from about 10% to 1% in the opening months, moving most of that
money into U.S. stocks. Late in the period, we reversed that process, bringing
the cash up to about 11% (excluding cash used to cover open futures contracts).
Also, about mid-period, we reduced the foreign
STRATEGIST GROWTH AND INCOME FUND, INC.
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exposure to about 4%, virtually eliminating holdings in emerging markets. At
period-end, the overall portfolio mix was 90% investment-grade securities, 10%
below investment grade.
As we enter the new fiscal year, the higher cash level in the portfolio reflects
our view that greater uncertainty among investors could make it difficult for
stocks and bonds to make meaningful headway over the near term. Therefore, we
plan to stick with a somewhat defensive structure until we see indications,
particularly on the interest-rate front, that the investment environment is
turning more positive.
Steven Merrell
ANNUAL REPORT - 1999
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The Fund's Long-term Performance
How your $10,000 has grown in Strategist Balanced Fund
$20,000
S&P 500
Index
$14,518
Strategist
Balanced
Fund
Lipper Balanced
Fund Index
$10,000
6/1/96 9/96 9/97 9/98 9/99
Average Annual Total Return (as of Sept. 30, 1999)
1 year 5 years 10 years
+10.42% +12.98% +10.81%
Assumes: Holding period from 6/1/96 to 9/30/99. Returns do not reflect taxes
payable on distributions. Reinvestment of all income and capital gain
distributions for the Fund, with a value of $1,395. Also see "Past Performance"
in the Fund's current prospectus.
On the graph above you can see how the Fund's total return compared to two
widely cited performance indexes, the Standard & Poor's 500 Index (S&P 500
Index) 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.
STRATEGIST GROWTH AND INCOME FUND, INC.
<PAGE>
S&P 500 Index, an unmanaged list of common stocks, is frequently used as a
general measure of market performance. The index reflects reinvestment of all
distributions and changes in market prices, but excludes brokerage commissions
or other fees. However, the S&P 500 companies are generally larger than those in
which the Fund invests.
Lipper 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.
ANNUAL REPORT - 1999
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The Fund's Long-term Performance
How your $10,000 has grown in Strategist Equity Fund
$20,000
Lipper Growth & Income
Fund Index
S&P 500
Index
$15,966
Strategist
Equity
Fund
$10,000
6/1/96 9/96 9/97 9/98 9/99
Average Annual Total Return (as of Sept. 30, 1999)
1 year 5 years 10 years
+16.95% +16.19% +13.56%
Assumes: Holding period from 6/1/96 to 9/30/99. Returns do not reflect taxes
payable on distributions. Reinvestment of all income and capital gain
distributions for the Fund, with a value of $595. Also see "Past Performance" in
the Fund's current prospectus.
On the graph above you can see how the Fund's total return compared to two
widely cited performance indexes, the S&P 500 Index and the Lipper Growth and
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.
STRATEGIST GROWTH AND INCOME FUND, INC.
<PAGE>
S&P 500 Index, an unmanaged list of common stocks, is frequently used as a
general measure of market performance. The index reflects reinvestment of all
distributions and changes in market prices, but excludes brokerage commissions
or other fees. However, the S&P 500 companies are generally larger than those in
which the Fund invests.
Lipper Growth and 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.
ANNUAL REPORT - 1999
<PAGE>
The Fund's Long-term Performance
How your $10,000 has grown in Strategist Equity Income Fund
$20,000
S&P 500
Index
Lipper Equity Income
Fund Index
$15,376
Strategist
Equity Income
Fund
$10,000
6/1/96 9/96 9/97 9/98 9/99
Average Annual Total Return (as of Sept. 30, 1999)
1 year 5 years Since inception*
+17.34% +13.96% +15.76%
* Inception date was Oct. 15, 1990.
Assumes: Holding period from 6/1/96 to 9/30/99. Returns do not reflect taxes
payable on distributions. Reinvestment of all income and capital gain
distributions for the Fund, with a value of $985. Also see "Past Performance" in
the Fund's current prospectus.
On the graph above you can see how the Fund's total return compared to two
widely cited performance indexes, the S&P 500 Index 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.
STRATEGIST GROWTH AND INCOME FUND, INC.
<PAGE>
S&P 500 Index, an unmanaged list of common stocks, is frequently used as a
general measure of market performance. The index reflects reinvestment of all
distributions and changes in market prices, but excludes brokerage commissions
or other fees. However, the S&P 500 companies are generally larger than those in
which the Fund invests.
Lipper 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.
ANNUAL REPORT - 1999
<PAGE>
The Fund's Long-term Performance
How your $10,000 has grown in Strategist Total Return Fund
$20,000
S&P 500
Index
Lipper Flexible Portfolio
Fund Index
$13,446
Strategist
Total Return
Fund
$10,000
6/1/96 9/96 9/97 9/98 9/99
Average Annual Total Return (as of Sept. 30, 1999)
1 year 5 years 10 years
+13.10% +9.57% +11.33%
Assumes: Holding period from 6/1/96 to 9/30/99. Returns do not reflect taxes
payable on distributions. Reinvestment of all income and capital gain
distributions for the Fund, with a value of $970. Also see "Past Performance" in
the Fund's current prospectus.
On the graph above you can see how the Fund's total return compared to two
widely cited performance indexes, the S&P 500 Index 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.
STRATEGIST GROWTH AND INCOME FUND, INC.
<PAGE>
S&P 500 Index, an unmanaged list of common stocks, is frequently used as a
general measure of market performance. The index reflects reinvestment of all
distributions and changes in market prices, but excludes brokerage commissions
or other fees. However, the S&P 500 companies are generally larger than those in
which the Fund invests.
Lipper 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.
ANNUAL REPORT - 1999
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The financial statements containted in Post-Effective Amendment #5 to
Registration Statement No. 33-63907 filed on or about November 24, 1999, are
incorporated herein by reference.
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Federal Income Tax Information
(Unaudited)
The Funds are required by the Internal Revenue Code of 1986 to tell its
shareholders about the tax treatment the dividends it pays during its fiscal
year. The dividends listed below are reported to you on Form 1099-DIV, Dividends
and Distributions. Shareholders should consult a tax advisor on how to report
distributions for state and local tax purposes.
Strategist Balanced Fund
Fiscal year ended Sept. 30, 1999
Income distribution taxable as dividend income, 36.14% qualifying for deduction
by corporations.
Payable date Per share
Dec. 22, 1998 $0.13704
March 25, 1999 0.09353
June 24, 1999 0.10000
Sept. 23, 1999 0.05820
Total $0.38877
Capital gain distribution taxable as long-term capital gain.
Payable date Per share
Dec. 22, 1998 $0.96243
Total distributions $1.3512
The distribution of $1.09947 per share, payable Dec. 22, 1998, consisted of
$0.13000 derived from net investment income, $0.00704 from net short-term
capital gains (a total of $0.13704 taxable as dividend income) and $0.96243 from
net long-term capital gains.
Strategist Equity Fund
Fiscal year ended Sept. 30, 1999
Income distribution taxable as dividend income, 100% qualifying for deduction by
corporations.
Payable date Per share
Dec. 22, 1998 $0.23666
March 25, 1999 0.07515
June 24, 1999 0.18997
Sept. 23, 1999 0.01381
Total $0.51559
Capital gain distribution taxable as long-term capital gain.
Payable date Per share
Dec. 22, 1998 $1.38254
Total distributions $1.89813
The distribution of $1.61920 per share, payable Dec. 22, 1998, consisted of
$0.20498 derived from net investment income, $0.03168 from net short-term
capital gains (a total of $0.23666 taxable as dividend income) and $1.38254 from
net long-term capital gains.
Strategist Equity Income Fund
Fiscal year ended Sept. 30, 1999
Income distribution taxable as dividend income, 100% qualifying for deduction by
corporations.
Payable date Per share
Dec. 22, 1998 $0.19715
March 24, 1999 0.03881
June 23, 1999 0.02398
Sept. 22, 1999 0.00181
Total distributions $0.26175
Capital gain distribution taxable as long-term capital gains.
Payable date Per share
Dec. 22, 1998 $0.83378
Total distributions $1.09553
The distribution of $1.03093 per share, payable Dec. 22, 1998, consisted of
$0.03700 derived from net investment income, $0.16015 from net short-term
capital gains (a total of $0.19715 taxable as dividend income) and $0.83378 from
net long-term capital gains.
Strategist Total Return Fund
Fiscal year ended Sept. 30, 1999
Income distribution taxable as dividend income, 16.06% qualifying for deduction
by corporations.
Payable date Per share
Dec. 22, 1998 $0.19753
March 25, 1999 0.05843
June 24, 1999 0.05720
Sept. 23, 1999 0.06999
Total $0.38315
Capital gain distribution taxable as long-term capital gain.
Payable date Per share
Dec. 22, 1998 $0.87428
Total distributions $1.25743
The distribution of $1.07181 per share, payable Dec. 22, 1998, consisted of
$0.13899 derived from net investment income, $0.05854 from net short-term
capital gains (a total of $0.19753 taxable as dividend income) and $0.87428 from
net long-term capital gains.
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American Express Financial Advisors, Inc., Distributor
S-6136 E (11/99)
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STATEMENT OF DIFFERENCES
Difference Description
1) The layout is different 1) Some of the layout in the
throughout the annual report. annual report to
shareholders is in two
columns.
2) There are pictures, icons 2) Each picture, icon and
and graphs throughout the graph is described in
annual report. parentheses.
