1998 SEMIANNUAL REPORT
IDS
Blue Chip
Advantage
Fund
(icon of) ribbon
The goal of IDS Blue Chip Advantage Fund, a part of IDS Market Advantage Series,
Inc., is to achieve a long-term total return exceeding that of the U.S. stock
market. The Fund invests in common stocks that are includedin a broad market
index.
American Express Financial Advisors
Distributed by American Express Financial Advisors Inc.
<PAGE>
Making the most
of the market
If you were compiling a who's who of corporate America, a good place to
start would be the Standard & Poor's Index. Composed of 500 stocks
representing a wide range of prominent companies, "the S&P" is recognized
as a good measure of overall stock market performance. Of course, some of
those stocks will fare better than others. Blue Chip Advantage tries to
identify and build its portfolioaround these stocks. Objective: a fund
that's like the S&P...only better.
Contents
From the chairman 3
From the portfolio manager 3
The Fund's ten largest holdings 5
Financial statements 6
Notes to financial statements 9
Investments in securities 24
Board members and officers 27
IDS mutual funds 28
<PAGE>
To our shareholders
From the chairman
If you're an experienced investor, you know that the past few years have
been unusually strong ones in many financial markets. Perhaps just as
important, history shows that bull markets don't last forever. Though
they're often unpredictable, declines -- whether they're brief or
long-lasting, moderate or substantial -- are always a possibility. We saw
evidence of that last October, when financial turmoil in Southeast Asia
sparked a sharp decline in worldwide stock markets, including the U.S.
The potential for such volatility reinforces the need for investors to
review periodically their long-term goals and examine whether their
investment program remains on track to achieving them. Your quarterly
investment statements are one part of that monitoring process. The other is
a meeting with your American Express financial advisor. That becomes even
more important if there's a major change in your financial situation or in
the financial markets.
William R. Pearce
(picture of) William R. Pearce
William R. Pearce
Chairman of the board
<PAGE>
From the portfolio manager
IDS Blue Chip Advantage Fund enjoyed a strong six months, as it was well
positioned in several market-leading stocks. For the first half of the
fiscal year -- February through July 1998 -- the Fund's Class A shares
produced a total return of 12.6%.
After a sluggish winter, the stock market hit its stride at the beginning
of the period. Supported by reports of still-tame inflation, ongoing
economic growth and good corporate profits, stocks went on a two-month run
that resulted in the Fund gaining more than 11%.
The following four months, however, were something of a struggle. Although
the domestic investment environment remained favorable, concerns stemming
from a financial crisis in Asia cast doubt on American companies' ability
to sustain solid profit growth. The result was a highly volatile stock
market that could gain only a little ground through the end of the period.
Big names, big returns
The key to making money during the six months was to concentrate on the
relatively small group of large-capitalization, blue-chip stocks that have
led the market for some time. To the Fund's benefit, several of those
stocks were in the portfolio for much of the period. The most prominent
names included General Electric, Coca-Cola, Bristol Myers Squibb, Intel,
Microsoft, Merck, Ford and Wal-Mart.
As for the portfolio mix, the greatest area of investment was in
"non-cyclical" stocks, including consumer products, food, beverages and
health care, specifically pharmaceuticals. They proved to be the most
consistent contributors. The next-highest exposure was to technology
stocks, which were terrifically volatile in light of the Asian crisis. On
the whole, though, they provided positive results. Financial services
comprised another substantial weighting in the portfolio, and, thanks to a
decline in long-term interest rates, generated good overall results. Among
the "cyclical" holdings, stocks of large retailers also enhanced
performance.
As of this writing (mid-August), the favorable economic environment --
highlighted by low inflation, low long-term interest rates and solid growth
-- remains intact. On the other hand, concerns about the effect of the
Asian situation on strength of future corporate earnings have yet to be
resolved. Therefore, I expect the volatility that has characterized the
stock market in recent years will stay with us. Given that outlook, I plan
to continue the Fund's emphasis on top-quality large companies that appear
most likely to deliver consistent earnings growth.
Guru Baliga
(picture of) Guru Baliga
Guru Baliga
Portfolio manager
<PAGE>
To our shareholders
Class A
6-month performance
(All figures per share)
Net asset value (NAV)
July 31, 1998 $ 10.65
Jan. 31, 1998 $ 9.49
Increase $ 1.16
Distributions
Feb. 1, 1998 - July 31, 1998
From income $ 0.04
From capital gains $ --
Total distributions$ 0.04
Total return* +12.6%**
Class B
6-month performance
(All figures per share)
Net asset value (NAV)
July 31, 1998 $ 10.58
Jan. 31, 1998 $ 9.43
Increase $ 1.15
Distributions
Feb. 1, 1998 - July 31, 1998
From income $ --
From capital gains $ --
Total distributions$ --
Total return* +12.2%**
Class Y
6-month performance
(All figures per share)
Net asset value (NAV)
July 31, 1998 $ 10.66
Jan. 31, 1998 $ 9.50
Increase $ 1.16
Distributions
Feb. 1, 1998 - July 31, 1998
From income $ 0.04
From capital gains $ --
Total distributions$ 0.04
Total return* +12.7%**
*The prospectus discusses the effect of sales charges, if any, on the
various classes.
**The total return is a hypothetical investment in the Fund with all
distributions reinvested.
<PAGE>
The Fund's ten largest holdings
Percent Value
(of Fund's net assets) (as of July 31, 1998)
General Electric 4.25% $113,150,006
Coca-Cola 2.86 76,273,894
Bristol-Myers Squibb 2.36 62,973,255
Wal-Mart Stores 2.36 62,910,374
Intl Business Machines 2.16 57,465,266
Travelers Group 2.01 53,646,833
Royal Dutch Petroleum 1.99 52,917,600
Intel 1.92 51,101,575
NationsBank 1.84 49,022,324
Ford Motor 1.80 47,827,500
For further detail about these holdings, please refer to the section
entitled "Investments in securities" herein.
(icon of) pie chart
The ten holdings listed here make up 23.55% of the Fund's net assets
<PAGE>
<TABLE>
<CAPTION>
Financial statements
Statement of assets and liabilities
IDS Blue Chip Advantage Fund
July 31, 1998
Assets
(Unaudited)
Investments in securities, at value (Note 1)
<S> <C>
(identified cost $2,326,311,228) $2,662,004,437
Cash in bank on demand deposit 2,217,771
Dividends and accrued interest receivable 2,535,620
Receivable for investment securities sold 59,417,707
----------
Total assets $2,726,175,535
--------------
Liabilities
Payable for investment securities purchased 62,622,422
Accrued investment management services fee 26,575
Accrued distribution fee 17,619
Accrued service fee 12,184
Accrued transfer agency fee 1,899
Accrued administrative services fee 1,805
Other accrued expenses 207,649
-------
Total liabilities 62,890,153
----------
Net assets applicable to outstanding capital stock $2,663,285,382
--------------
Represented by
Capital stock-- of $.01 par value (Note 1) $ 2,505,452
Additional paid-in capital 2,196,827,079
Undistributed net investment income 559,472
Accumulated net realized gain (loss) 127,821,126
Unrealized appreciation (depreciation) on investments (Note 4) 335,572,253
-----------
Total-- representing net assets applicable to outstanding capital stock $2,663,285,382
==============
Net assets applicable to outstanding shares: Class A $1,521,275,221
Class B $ 856,641,058
Class Y $ 285,369,103
Net asset value per share of outstanding capital stock: Class A shares 142,798,633 $ 10.65
Class B shares 80,975,637 $ 10.58
Class Y shares 26,770,968 $ 10.66
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Statement of operations
IDS Blue Chip Advantage Fund
Six months ended July 31, 1998
Investment income
(Unaudited)
Income:
<S> <C>
Dividends $17,837,719
Interest 826,380
Less foreign taxes withheld (165,961)
--------
Total income 18,498,138
----------
Expenses (Note 2):
Investment management services fee 4,491,642
Distribution fee -- Class B 2,915,041
Transfer agency fee 1,557,756
Incremental transfer agency fee-- Class B 35,768
Service fee
Class A 1,220,701
Class B 676,866
Class Y 136,440
Administrative services fees and expenses 322,941
Compensation of board members 7,642
Custodian fees 83,453
Postage 87,092
Registration fees 297,328
Reports to shareholders 8,671
Audit fees 10,750
Other 4,471
-----
Total expenses 11,856,562
Earnings credits on cash balances (Note 2) (40,600)
-------
Total net expenses 11,815,962
----------
Investment income (loss) -- net 6,682,176
---------
Realized and unrealized gain (loss) -- net
Net realized gain (loss) on:
Security transactions (Note 3) 88,998,000
Financial futures contracts 3,643,885
---------
Net realized gain (loss) on investments 92,641,885
Net change in unrealized appreciation (depreciation) on investments 166,239,740
-----------
Net gain (loss) on investments 258,881,625
-----------
Net increase (decrease) in net assets resulting from operations $265,563,801
============
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Financial statements
Statements of changes in net assets
IDS Blue Chip Advantage Fund
Operations and distributions
July 31, 1998 Jan. 31, 1998
Six months ended Year ended
(Unaudited)
<S> <C> <C>
Investment income (loss)-- net $ 6,682,176 $ 12,575,697
Net realized gain (loss) on investments 92,641,885 194,519,596
Net change in unrealized appreciation (depreciation) on investments 166,239,740 60,226,086
----------- ----------
Net increase (decrease) in net assets resulting from operations 265,563,801 267,321,379
----------- -----------
Distributions to shareholders from:
Net investment income
Class A (5,263,574) (9,530,732)
Class B (222,179) (1,407,230)
Class Y (1,106,189) (1,412,952)
Net realized gain
Class A -- (126,459,942)
Class B -- (67,409,896)
Class Y -- (20,060,243)
-----------
Total distributions (6,591,942) (226,280,995)
---------- ------------
Capital share transactions (Note 5)
Proceeds from sales
Class A shares (Note 2) 329,276,394 798,030,015
Class B shares 175,855,135 313,187,632
Class Y shares 62,506,801 187,457,450
Reinvestment of distributions at net asset value
Class A shares 4,921,717 128,577,777
Class B shares 222,027 68,351,842
Class Y shares 1,106,189 21,473,195
Payments for redemptions
Class A shares (163,927,482) (442,501,316)
Class B shares (Note 2) (44,432,936) (47,783,649)
Class Y shares (46,182,954) (48,925,596)
----------- -----------
Increase (decrease) in net assets from capital share transactions 319,344,891 977,867,350
----------- -----------
Total increase (decrease) in net assets 578,316,750 1,018,907,734
Net assets at beginning of period 2,084,968,632 1,066,060,898
------------- -------------
Net assets at end of period $2,663,285,382 $2,084,968,632
============== ==============
Undistributed net investment income $ 559,472 $ 469,238
-------------- --------------
See accompanying notes to financial statements.
</TABLE>
<PAGE>
Notes to financial statements
IDS Blue Chip Advantage Fund
(Unaudited as to July 31, 1998)
1
Summary of
significant
accounting policies
The Fund is a series of IDS Market Advantage Series, Inc. and is registered
under the Investment Company Act of 1940 (as amended) as a diversified,
open-end management investment company. IDS Market Advantage Series has 10
billion authorized shares of capital stock that can be allocated among the
separate series as designated by the board. The Fund invests in common
stocks that are included in a broad market index. The Fund offers Class A,
Class B and Class Y shares. Class A shares are sold with a front-end sales
charge. Class B shares may be subject to a contingent deferred sales charge
and such shares automatically convert to Class A shares during the ninth
calendar year of ownership. Class Y shares have no sales charge and are
offered only to qualifying institutional investors.
All classes of shares have identical voting, dividend, liquidation and
other rights, and the same terms and conditions, except that the level of
distribution fee, transfer agency fee and service fee (class specific
expenses) differs among classes. Income, expenses (other than class
specific expenses) and realized and unrealized gains or losses on
investments are allocated to each class of shares based upon its relative
net assets.
Significant accounting policies followed by the Fund are summarized below:
Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of increase and decrease in
net assets from operations during the period. Actual results could differ
from those estimates.
Valuation of securities
All securities are valued at the close of each business day. Securities
traded on national securities exchanges or included in national market
systems are valued at the last quoted sales price. Debt securities are
generally traded in the over-the-counter market and are valued at a price
deemed best to reflect fair value as quoted by dealers who make markets in
these securities or by an independent pricing service. Securities for which
market quotations are not readily available are valued at fair value
according to methods selected in good faith by the board. Short-term
securities maturing in more than 60 days from the valuation date are valued
at the market price or approximate market value based on current interest
rates; those maturing in 60 days or less are valued at amortized cost.
Futures transactions
In order to gain exposure to or protect itself from changes in the market,
the Fund may buy financial futures contracts. Risks of entering into
futures contracts include the possibility that there may be an illiquid
market and that a change in the value of the contract may not correlate
with changes in the value of the underlying securities.
Upon entering into a futures contract, the Fund is required to deposit
either cash or securities in an amount (initial margin) equal to a certain
percentage of the contract value. Subsequent payments (variation margin)
are made or received by the Fund each day. The variation margin payments
are equal to the daily changes in the contract value and are recorded as
unrealized gains and losses. The Fund recognizes a realized gain or loss
when the contract is closed or expires.
Federal taxes
Since the Fund's policy is to comply with all sections of the Internal
Revenue Code applicable to regulated investment companies and to distribute
all of its taxable income to shareholders, no provision for income or
excise taxes is required.
Net investment income (loss) and net realized gains (losses) may differ for
financial statement and tax purposes primarily because of the deferral of
losses on certain futures contracts, the recognition of certain foreign
currency gains (losses) as ordinary income (loss) for tax purposes and
losses deferred due to "wash sale" transactions. The character of
distributions made during the year from net investment income or net
realized gains may differ from their ultimate characterization for federal
income tax purposes. Also, due to the timing of dividend distributions, the
fiscal year in which amounts are distributed may differ from the year that
the income or realized gains (losses) were recorded by the Fund.
Dividends to shareholders
Dividends from net investment income, declared and paid each calendar
quarter, are reinvested in additional shares of the Fund at net asset value
or payable in cash. Capital gains, when available, are distributed along
with the last income dividend of the calendar year.
Other
Security transactions are accounted for on the date securities are
purchased or sold. Dividend income is recognized on the ex-dividend date
and interest income, including level-yield amortization of premium and
discount, is accrued daily.
2
Expenses and
sales charges
Effective March 20, 1995, the Fund entered into agreements with American
Express Financial Corporation (AEFC) for managing its portfolio and
providing administrative services. Under an Investment Management Services
Agreement, AEFC determines which securities will be purchased, held or
sold. The management fee is a percentage of the Fund's average daily net
assets in reducing percentages from 0.44% to 0.34% annually.
Under an Administrative Services Agreement, the Fund pays AEFC a fee for
administration and accounting services at a percentage of the Fund's
average daily net assets in reducing percentages from 0.04% to 0.02%
annually. Additional administrative service expenses paid by the Fund are
office expenses, consultants' fees and compensation of officers and
employees. Under this agreement, the Fund also pays taxes, audit and
certain legal fees, registration fees for shares, compensation of board
members, corporate filing fees, organizational expenses and any other
expenses properly payable by the Fund and approved by the board.
Under a separate Transfer Agency Agreement, American Express Client Service
Corporation (AECSC) maintains shareholder accounts and records. The Fund
pays AECSC an annual fee per shareholder account for this service as
follows:
o Class A $15
o Class B $16
o Class Y $15
Also effective March 20, 1995, the Fund entered into agreements with
American Express Financial Advisors Inc. for distribution and shareholder
servicing-related services. Under a Plan and Agreement of Distribution, the
Fund pays a distribution fee at an annual rate of 0.75% of the Fund's
average daily net assets attributable to Class B shares for
distribution-related services.
Under a Shareholder Service Agreement, the Fund pays a fee for service
provided to shareholders by financial advisors and other servicing agents.
The fee is calculated at a rate of 0.175% of the Fund's average daily net
assets attributable to Class A and Class B shares and 0.10% of the Fund's
average daily net assets attributable to Class Y shares.
Sales charges received by American Express Financial Advisors Inc. for
distributing Fund shares were $4,987,368 for Class A and $290,846 for Class
B for the six months ended July 31, 1998.
The Fund also pays custodian fees to American Express Trust Company, an
affiliate of AEFC.
During the six months ended July 31, 1998, the Fund's custodian and
transfer agency fees were reduced by $40,600 as a result of earnings
credits from overnight cash balances.
3
Securities
transactions
Cost of purchases and proceeds from sales of securities (other than
short-term obligations) aggregated $1,672,010,295 and $1,326,820,012,
respectively, for the six months ended July 31, 1998. Realized gains and
losses are determined on an identified cost basis.
Brokerage commissions paid to brokers affiliated with AEFC were $94,398 for
the six months ended July 31, 1998.
Income from securities lending amounted to $3,409 for the six months ended
July 31, 1998. The risks to the Fund of securities lending are that the
borrower may not provide additional collateral when required or return the
securities when due.
4
Financial futures
contracts
Investments in securities at July 31, 1998, included securities valued at
$24,592,437 that were pledged as collateral to cover initial margin
deposits on 16 open purchase contracts. The market value of the open
purchase contracts at July 31, 1998, was $4,492,000 with a net unrealized
loss of $120,956.
5
Capital share
transactions
Transactions in shares of capital stock for the periods indicated are as
follows:
Six months ended July 31, 1998
Class A Class B Class Y
Sold 31,280,247 16,846,316 5,933,901
Issued for reinvested 462,353 21,203 103,840
distributions
Redeemed (15,525,013) (4,224,212) (4,378,012)
Net increase (decrease) 16,217,587 12,643,307 1,659,729
Year ended Jan. 31, 1998
Class A Class B Class Y
Sold 81,047,186 31,894,665 19,205,312
Issued for reinvested 13,851,152 7,422,304 2,312,625
distributions
Redeemed (44,911,144) (4,846,317) (4,957,569)
Net increase (decrease) 49,987,194 34,470,652 16,560,368
<PAGE>
<TABLE>
<CAPTION>
Notes to financial statements
IDS Blue Chip Advantage Fund
6
Financial
highlights
The tables below show certain important financial information for
evaluating the Fund's results.
Fiscal period ended Jan. 31,
Per share income and capital changesa
Class A
1998c 1998 1997 1996 1995 1994 1993 1992 1991b
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, $9.49 $8.97 $7.62 $5.97 $6.58 $6.20 $5.96 $5.25 $5.00
beginning of period
Income from investment operations:
Net investment .04 0.10 .09 .11 .11 .10 .10 .12 .10
income (loss)
Net gains (losses) (both 1.16 1.67 1.69 2.18 (.13) .79 .50 .96 .25
realized and unrealized)
Total from investment 1.20 1.77 1.78 2.29 (.02) .89 .60 1.08 .35
operations
Less distributions:
Dividends from net (.04) (.10) (.09) (.11) (.11) (.10) (.09) (.12) (.10)
investment income
Distributions from -- (1.15) (.34) (.53) (.48) (.41) (.27) (.25) --
realized gains
Total distributions (.04) (1.25) (.43) (.64) (.59) (.51) (.36) (.37) (.10)
Net asset value, $10.65 $9.49 $8.97 $7.62 $5.97 $6.58 $6.20 $5.96 $5.25
end of period
Ratios/supplemental data
Class A
1998c 1998 1997 1996 1995 1994 1993 1992 1991b
Net assets, end of period $1,521 $1,202 $687 $247 $151 $148 $124 $85 $36
(in millions)
Ratio of expenses to .73%f .78% .89% .96% .89% 1.03% 1.10% 1.11%d .85%f
average daily net assetse
Ratio of net income (loss) .78%f 1.03% 1.18% 1.68% 1.77% 1.59% 1.63% 2.01%d 2.93%d,f
to average daily net assets
Portfolio turnover rate 55% 145% 128% 126% 122% 156% 202% 154% 103%
(excluding short-term
securities)
Total returng 12.6% 20.2% 23.8% 39.0% (0.2%) 14.7% 10.2% 21.2% 7.0%
Average brokerage
commission rateh $.0544 $.0512 $.0388 -- -- -- -- -- --
a For a share outstanding throughout the period. Rounded to the nearest
cent.
b Inception date. Period from March 5, 1990 to Jan. 31, 1991.
c Six months ended July 31, 1998 (Unaudited).
d During portions of the fiscal periods ended Jan. 31, 1992 and 1991,
AEFC voluntarily reimbursed the Fund for certain expenses. Had AEFC
not done so, the annual ratios of expenses and net investment income
would have been 1.17% and 1.95% in 1992 and 1.35% and 2.39% in 1991.
e Effective fiscal year 1996, expense ratio is based on total expenses
of the Fund before reduction of earnings credits on cash balances.
f Adjusted to an annual basis.
g Total return does not reflect payment of a sales charge.
h Effective fiscal year 1997, the Fund is required to disclose an
average brokerage commission rate per share for security trades on
which commissions are charged. The comparability of this information
may be affected by the fact that commission rates per share vary
significantly among foreign countries.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Fiscal period ended Jan. 31,
Per share income and capital changes(a)
Class B Class Y
1998(c) 1998 1997 1996(b) 1998(c) 1998 1997 1996(b)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, $9.43 $8.92 $7.59 $6.30 $9.50 $8.97 $7.62 $6.30
beginning of period
Net investment -- .03 .04 .07 .04 .11 .10 .11
income (loss)
Net gains (losses) 1.15 1.66 1.67 1.83 1.16 1.68 1.69 1.86
(both realized and unrealized)
Total from investment 1.15 1.69 1.71 1.90 1.20 1.79 1.79 1.97
operations
Distributions from net -- (.03) (.04) (.08) (.04) (.11) (.10) (.12)
investment income
Distributions from -- (1.15) (.34) (.53) -- (1.15) (.34) (.53)
realized gains
Total distributions -- (1.18) (.38) (.61) (.04) (1.26) (.44) (.65)
Net asset value, $10.58 $9.43 $8.92 $7.59 $10.66 $9.50 $8.97 $7.62
end of period
Ratios/supplemental data
Class B Class Y
1998(c) 1998 1997 1996(b) 1998(c) 1998 1997 1996(b)
Net assets, end of $857 $645 $302 $42 $285 $239 $77 $28
period (in millions)
Ratio of expenses to 1.49%e 1.54% 1.65% 1.74%e .66%e .69% .72% .80%e
average daily net assets(d)
Ratio of net income (loss) .01%e .26% .39% .81%e .85%e 1.10% 1.33% 1.75%e
to average daily net assets
Portfolio turnover rate 55% 145% 128% 126% 55% 145% 128% 126%
(excluding short-term
securities)
Total return(f) 12.2% 19.3% 22.9% 30.3% 12.7% 20.4% 24.0% 31.3%
Average brokerage commission rate(g) $.0544 $.0512 $.0388 -- $.0544 $.0512 $.0388 --
a For a share outstanding throughout the period. Rounded to the nearest
cent.
b Inception date was March 20, 1995.
c Six months ended July 31, 1998 (Unaudited).
d Effective fiscal year 1996, expense ratio is based on total expense of
the Fund before reduction of earnings credits on cash balances.
e Adjusted to an annual basis.
f Total return does not reflect payment of a sales charge.
g Effective fiscal year 1997, the Fund is required to disclose an average
brokerage commission rate per share for security trades on which
commissions are charged. The comparability of this information may be
affected by the fact that commission rates per share vary significantly
among foreign countries.
</TABLE>
<PAGE>
Investments in securities
IDS Blue Chip Advantage Fund
July 31, 1998 (Unaudited)
(Percentages represent
value of investments
compared to net assets)
Common stocks (99.4%)
Issuer Shares Value(a)
Aerospace & defense (1.5%)
AlliedSignal 468,100 $20,362,350
Goodrich (BF) 163,600 6,636,025
Lockheed Martin 67,000 6,679,063
Raytheon Cl B 118,800 6,571,125
Total 40,248,563
Airlines (0.5%)
AMR 199,000(b) 14,216,063
Automotive & related (3.9%)
Dana 303,900 15,119,025
Ford Motor 840,000 47,827,500
General Motors 458,800 33,176,975
TRW 122,900 6,659,644
Total 102,783,144
Banks and savings & loans (9.6%)
Banc One 702,700 36,320,806
BankAmerica 525,800 47,190,550
First Chicago NBD 400,800 33,592,050
NationsBank 614,700 49,022,324
Norwest 934,400 33,580,000
Wachovia 468,550 40,119,594
Washington Mutual 481,050 19,211,934
Total 259,037,258
Beverages & tobacco (2.9%)
Coca-Cola 945,300 76,273,894
Chemicals (2.9%)
Du Pont (EI) de Nemours 658,200 40,808,400
Monsanto 363,200 20,566,200
Waste Management 268,105(b) 14,779,288
Total 76,153,888
Communications equipment & services (2.8%)
Ascend Communications 127,900(b) 5,687,553
Lucent Technologies 329,600 30,467,400
Motorola 415,400 21,704,650
Tellabs 207,200(b) 15,598,275
Total 73,457,878
Computers & office equipment (8.9%)
3Com 281,000(b) 6,954,750
Automatic Data Processing 383,400 25,951,388
Bay Networks 310,900(b) 10,706,619
Cisco Systems 372,100(b) 35,628,574
Compaq Computer 675,600 22,210,350
Computer Sciences 266,800 17,075,200
EMC 282,100 13,822,900
Hewlett-Packard 488,400 27,106,200
Intl Business Machines 433,700 57,465,266
Parametric Technology 412,700(b) 5,623,038
Sun Microsystems 280,900(b) 13,272,525
Total 235,816,810
Electronics (1.9%)
Intel 605,200 $51,101,575
Energy (1.6%)
Exxon 508,800 35,679,600
Mobil 115,000 8,021,250
Total 43,700,850
Energy equipment & services (0.5%)
Dresser Inds 188,200 6,645,813
Halliburton 200,000 7,262,500
Total 13,908,313
Financial services (4.5%)
Associates First Capital Cl A343,300 26,670,119
Fannie Mae 123,000 7,626,000
Household Intl 550,800 27,402,300
Schwab (Charles) 149,600 5,610,000
Travelers Group 800,699 53,646,833
Total 120,955,252
Food (2.7%)
Bestfoods 561,500 31,233,437
General Mills 316,500 19,603,219
Sara Lee 442,200 22,165,275
Total 73,001,931
Foreign (4.3%)(c)
Northern Telecom 274,900 16,150,375
Royal Dutch Petroleum 1,037,600 52,917,600
Schlumberger 286,100 17,326,931
Tyco Intl 443,400 27,463,088
Total 113,857,994
Health care (12.8%)
ALZA 153,100(b) 5,951,763
American Home Products 228,000 11,742,000
Amgen 224,200(b) 16,464,688
Baxter Intl 526,600 31,464,350
Boston Scientific 179,600(b) 13,761,850
Bristol-Myers Squibb 552,700 62,973,255
Guidant 153,100 11,377,244
Johnson & Johnson 427,200(e) 33,001,200
Medtronic 215,700 13,359,919
Merck & Co 265,100 32,690,144
Pfizer 313,900 34,528,999
Pharmacia & Upjohn 178,100 8,437,488
Schering-Plough 386,300 37,374,524
Warner-Lambert 396,600 29,968,088
Total 343,095,512
Health care services (1.2%)
Service Corp Intl 297,600 11,271,600
Tenet Healthcare 390,400(b) 11,687,600
United Healthcare 148,800 8,407,200
Total 31,366,400
Household products (2.6%)
Colgate-Palmolive 298,900 $27,629,569
Gillette 777,800 40,737,275
Total 68,366,844
Insurance (3.8%)
Allstate 71,800 3,047,013
American General 471,200 32,188,849
American Intl Group 179,000 26,995,437
SunAmerica 298,500 18,339,094
UNUM 380,600 20,052,863
Total 100,623,256
Leisure time & entertainment (1.3%)
Disney (Walt) 540,900 18,627,244
Mattel 385,300 14,809,969
Total 33,437,213
Media (2.6%)
CBS 841,100(e) 28,544,831
Clear Channel
Communications 369,000(b) 20,733,188
Time Warner 220,300 19,840,769
Total 69,118,788
Metals (0.7%)
Aluminum Co of America 123,600 8,567,025
Reynolds Metals 172,900 9,077,250
Total 17,644,275
Multi-industry conglomerates (5.3%)
Emerson Electric 456,000 27,103,500
General Electric 1,266,900(e) 113,150,006
Total 140,253,506
Paper & packaging (0.3%)
Owens-Illinois 185,000(b) 8,163,125
Retail (7.8%)
Albertson's 310,000 14,899,375
Consolidated Stores 137,700(b) 4,630,163
CVS283,800 11,635,800
Dayton Hudson 449,600(e) 21,496,500
Home Depot 700,000 29,312,500
K mart 104,300(b) 1,701,394
Kroger 404,000(b) 19,114,250
Meyer (Fred) 440,100(b) 19,391,906
Rite Aid 331,000 13,074,500
Wal-Mart Stores 996,600 62,910,374
Walgreen 197,300 8,520,894
Total 206,687,656
Textiles & apparel (0.4%)
Nike Cl B 246,100 10,951,450
Transportation (0.6%)
Burlington Northern
Santa Fe 160,000 16,470,000
Utilities -- electric (1.3%)
Baltimore Gas & Electric 313,700 9,489,425
Carolina Power & Light 209,400 8,519,963
Duke Energy 152,100 8,688,712
PECO Energy 300,000 8,981,250
Total 35,679,350
Utilities -- gas (1.3%)
Enron 676,300 35,801,631
Utilities -- telephone (8.9%)
AirTouch Communications 572,400(b) 33,664,275
Ameritech 787,400 38,730,237
BellSouth 193,041(e) 13,187,113
Frontier 201,600 6,766,200
GTE 244,900 13,316,438
MCI Communications 483,600 31,313,100
SBC Communications 507,200 20,731,800
US West Communications
Group 847,700 45,245,987
WorldCom 633,600(b) 33,501,600
Total 236,456,750
Total common stocks
(Cost: $2,312,935,960) $2,648,629,169
Short-term securities (0.5%)
Issuer Annualized Amount Value(a)
yield on payable at
date of maturity
purchase
U.S. government agency (--%)
Federal Home Loan Mtge Disc Nt
09-04-98 5.49% $900,000 $895,359
Commercial paper (0.5%)
BBV Finance (Delaware)
08-13-98 5.53 4,300,000 4,292,102
BellSouth Capital Funding
08-05-98 5.53 1,100,000(d) 1,099,327
Delaware Funding
08-31-98 5.57 1,400,000(d) 1,393,537
Deutsche Bank Financial
08-06-98 5.55 1,600,000 1,598,771
Dresdner US Finance
08-21-98 5.54 300,000 299,080
Ford Motor Credit
08-06-98 5.53 3,800,000 3,797,092
Total 12,479,909
Total short-term securities
(Cost: $13,375,268) $13,375,268
Total investments in securities
(Cost: $2,326,311,228)(f) $2,662,004,437
See accompanying notes to investments in securities.
Notes to investments in securities
(a) Securities are valued by procedures described in Note 1 to the financial
statements.
(b) Non-income producing.
(c) Foreign security values are stated in U.S. dollars.
(d) Commercial paper sold within terms of a private placement memorandum, exempt
from registration under Section 4(2) of the Securities Act of 1933, as amended,
and may be sold only to dealers in that program or other "accredited investors."
This security has been determined to be liquid under guidelines established by
the board.
(e) Partially pledged as initial margin deposit on the following open stock
index futures purchase contracts (see Note 4 to the financial statements):
Type of security Contracts
Standard & Poor's 500 Stock Index, Sept. 1998 16
(f) At July 31, 1998, the cost of securities for federal income tax purposes was
approximately $2,326,311,000 and the approximate aggregate gross unrealized
appreciation and depreciation based on that cost was:
Unrealized appreciation..........................................$410,568,000
Unrealized depreciation...........................................(74,875,000)
Net unrealized appreciation......................................$335,693,000
<PAGE>
Board members and officers
Independent board members and officers
Chairman William R. Pearce*
of the board Chairman of the board, Board Services Corporation (provides
administrative services to boards including the boards of the
IDS and IDSLife funds and Master Trust portfolios).
H. Brewster Atwater, Jr.
Former chairman and chief executive officer, General Mills,
Inc.
Lynne V. Cheney
Distinguished fellow, American Enterprise Institute for Public
Policy Research.
Heinz F. Hutter
Former president and chief operating officer, Cargill, Inc.
Anne P. Jones
Attorney and telecommunications consultant.
Alan K. Simpson
Former United States senator for Wyoming.
Edson W. Spencer
Retired chairman and chief executive officer, Honeywell, Inc.
Wheelock Whitney
Chairman, Whitney Management Company.
C. Angus Wurtele
Chairman of the board, The Valspar Corporation.
Officer
Vice president, Leslie L. Ogg*
general counsel President of Board Services Corporation.
and secretary
Board members and officers associated with AEFC
President John R. Thomas*
Senior vice president, AEFC.
William H. Dudley*
Senior advisor to the chief executive officer, AEFC.
David R. Hubers*
President and chief executive officer, AEFC.
Officers associated with AEFC
Vice president Peter J. Anderson*
Senior vice president, AEFC
Vice president Frederick C. Quirsfeld*
Vice president, AEFC
Treasurer Matthew N. Karstetter*
Vice president, AEFC
* Interested person as defined by the Investment Company Act of 1940.
<PAGE>
IDS mutual funds
Global/International funds
Funds in this group seek capital growth and/or income by investing primarily in
foreign securities. Foreign investments may be subject to currency fluctuations
and political and economic risks of the countries in which the investments are
made. They are high risk mutual funds with a potential for high reward.
IDS Emerging Markets Fund
Invests in a Portfolio comprised primarily of stocks of companies in developing
countries throughout the world that are believed to offer growth potential.
Seeks to provide long-term growth of capital.
(icon of) world with countries
IDS Global Growth Fund
Invests in a Portfolio comprised primarily of stocks of companies throughout the
world that are positioned to meet market needs in a changing world economy.
These companies offer above-average potential for long-term growth.
(icon of) world
IDS International Fund
Invests primarily in common stocks of foreign companies that offer potential for
superior growth. The Fund may invest up to 20% of its assets in the U.S. market.
(icon of) three flags
IDS Global Balanced Fund
Invests in stocks and bonds in, for the most part, major markets throughout the
world, including the U.S. Seeks to provide a balance of growth of capital and
current income.
(icon of) scale of globes
IDS Global Bond Fund
Invests in a Portfolio comprised primarily of debt securities of U.S. and
foreign issuers to seek high total return through income and growth of capital.
(icon of) globe
Growth funds
Funds in this group seek capital growth, primarily from common stocks. They are
high risk mutual funds with a potential for high reward.
IDS Precious Metals Fund
Invests primarily in the securities of foreign or domestic companies that
explore for, mine and process or distribute gold and other precious metals. A
highly aggressive and speculative fund that seeks long-term growth of capital.
(icon of) cart of precious gems
IDS Discovery Fund
Invests in small- and medium-size, growth-oriented companies emphasizing
technological innovation and productivity enhancement. Buys and holds larger
growth-oriented stocks.
(icon of) ship
IDS Small Company Index Fund
Invests in all or a representative group of the equity securities comprising the
S&P SmallCap 600 Index, as it strives to provide long-term capital appreciation.
(icon of) building
IDS Strategy Aggressive Fund
Invests primarily in common stocks of companies that are selected for their
potential for above-average growth. Above-average means that their growth
potential is better, in the opinion of the portfolio's investment manager, than
the S&P 500 Stock Index.
(icon of) chess piece
IDS Research Opportunities Fund
Invests in a Portfolio comprised primarily of equity securities of companies
included in the S&P 500 Stock Index that are believed to have strong growth
potential. The Portfolio is managed using a research methodology by the Research
Department of AEFC. Goal is long-term appreciation.
(icon of) magnifying glass
IDS Growth Fund
Invests in a Portfolio comprised primarily of companies that have above-average
potential for long-term growth as a result of new management, marketing
opportunities or technological superiority.
(icon of) trees
IDS New Dimensions Fund
Invests in a Portfolio comprised primarily of companies with
significant growth potential due to superiority in
technology, marketing or management. The Fund frequently
changes its industry mix.
(icon of) dimension
IDS Progressive Fund
Invests primarily in undervalued common stocks. The Fund holds stocks for the
long term with the goal of capital growth.
(icon of) shooting star
Growth & income funds
These funds focus on securities of medium to large, well-established companies
that offer long-term growth of capital and reasonable income from dividends and
interest. Foreign investments may be subject to currency fluctuations and
political and economic risks of the countries in which the investments are made.
IDS Equity Select Fund
Invests primarily in a combination of moderate growth stocks that generaly pay
dividends and bonds. Seeks growth of capital and income.
(icon of) three pine trees
IDS Blue Chip Advantage Fund
Invests in selected stocks from a major market index. Securities purchased are
those recommended by our research analysts as the best from each industry
represented on the index. Offers potential for long-term growth as well as
dividend income.
(icon of) ribbon
IDS Managed Allocation Fund
Invests in a Portfolio comprised primarily of U.S. equity securities, U.S. and
foreign debt securities, foreign equity securities and money market instruments.
The Fund provides diversification among these major investment categories and
has a target mix that represents the way the Fund's investments will be
allocated over the long term. Seeks maximum total return.
(icon of) gyroscope
IDS Stock Fund
Invests in a Portfolio comprised primarily of common stock of companies
representing many sectors of the economy. Seeks current income and growth of
capital.
(icon of) building with columns
IDS Equity Value Fund
Invests primarily in undervalued common stocks that offer potential for growth
of capital and income.
(icon of) three growing flowers
IDS Utilities Income Fund
Invests primarily in the stocks of public utility companies to seek high current
income and growth of income and capital with reduced volatility.
(icon of) light bulb
IDS Diversified Equity Income Fund
Invests in a Portfolio comprised primarily in high-yielding common stocks to
seek high current income and, secondarily, to benefit from the growth potential
offered by stock investments.
(icon of) two puzzle pieces
IDS Mutual
Invests in a Portfolio that seeks to balance between common stocks and senior
securities (preferred stocks and bonds). Seeks a balance of growth of capital
and current income.
(icon of) scale of justice
Income funds
The funds in this group invest their assets primarily in corporate bonds or
government securities to seek interest income. Secondary objective is capital
growth. Risk varies by bond quality.
IDS Extra Income Fund
Invests in a Portfolio comprised mainly of long-term, high-yielding corporate
fixed-income securities in the lower rated, higher risk bond categories to seek
high current income. Secondary objective is capital growth.
(icon of) two coins
IDS Bond Fund
Invests mainly in corporate bonds, at least 50% in the higher rated, lower risk
bond categories, or the equivalent, and in government bonds.
(icon of) Greek column
IDS Selective Fund
Invests in a Portfolio comprised primarily of high-quality corporate bonds and
other highly rated debt instruments including government securities and
short-term investments. Seeks current income and preservation of capital.
(icon of) skyline
IDS Federal Income Fund
Invests in a Portfolio comprised primarily of securities issued or guaranteed as
to the timely payment of principal and interest by the U.S. government, its
agencies and instrumentalities. Seeks a high level of current income and safety
of principal consistent with its type of investments.
(icon of) shield with eagle head
Tax-exempt income funds
These funds provide tax-free income by investing in municipal bonds. The income
is generally free from federal income tax, but a portion of the income may be
subject to state and local taxes. Risk varies by bond quality.
IDS Tax-Exempt Bond Fund
Invests mainly in bonds and notes of state or local government units, with at
least 75% in the four highest rated, lowest risk bond categories.
(icon of) shield with Greek column
IDS Insured Tax-Exempt Fund
Invests primarily in municipal securities that are insured as to the timely
payment of principal and interest. The insurance feature minimizes credit risk
of the Fund but does not guarantee the market value of the Fund's shares.
(icon of) shield with star
IDS State Tax-Exempt Funds
(CA, MA, MI, MN, NY, OH)
Invests primarily in high- and medium-grade municipal securities to provide
income to residents of each respective state that is exempt from federal, state
and local income taxes. (New York is the only state that is exempt at the local
level.)
(icon of) shield with U.S. enclosed
IDS High Yield Tax-Exempt Fund
Invests in a Portfolio comprised primarily of medium- and lower-quality
municipal bonds and notes. Lower-quality securities generally involve greater
risk of principal and income.
(icon of) shield with basket of apples enclosed
IDS Intermediate Tax-Exempt Fund
Invests in mainly investment-grade bonds and other debt securities with
intermediate-term maturities issued by state and local government units. Goal is
to seek a high level of current income exempt from federal taxes.
(icon of) shield with tree enclosed
Money market funds
These money market funds have three main goals: conservation of capital,
constant liquidity and the highest possible current income consistent with these
objectives. An investment in these funds is neither insured nor guaranteed by
the U.S. government, and there can be no assurance that these funds will be able
to maintain a stable net asset value of $1.00 per share. Very limited risk.
IDS Cash Management Fund
Invests in such money market securities as high quality commercial paper,
bankers' acceptances, certificates of deposit (CDs) and other bank securities.
(icon of) piggy bank
IDS Tax-Free Money Fund
Invests primarily in short-term bonds and notes issued by state and local
governments to seek high current income exempt from federal income taxes.
(icon of) shield with piggy bank enclosed
For more complete information about any of these funds, including charges and
expenses, you can obtain a prospectus by contacting your financial advisor or
writing to American Express Shareholder Service, P.O. Box 534, Minneapolis, MN
55440-0534. Read it carefully before you invest or send money.
<PAGE>
Quick telephone reference
American Express Redemptions and exchanges, National/Minnesota
Financial Advisors dividend payments or 800-437-3133
Telephone Transaction reinvestments and automatic
Service payment arrangements Mpls./St. Paul area:
671-3800
TTY Service For the hearing impaired 800-846-4852
American Express Automated account information 800-862-7919
Financial Advisors (TouchTone(R) phones only),
Easy Access Line including current fund prices
and performance, account values
and recent account transactions
You may experience delays when call volumes are high.
<PAGE>
AMERICAN EXPRESS Financial Advisors
IDS Blue Chip Advantage Fund
IDS Tower 10
Minneapolis, MN 55440-0010
