AXP(SM) Blue Chip
Advantage
Fund
1999 SEMIANNUAL REPORT
The goal of AXP Blue Chip Advantage Fund is to achieve a long-term total return
exceeding that of the U.S. stock market.
(icon of) magnifying glass
Distributed by American Express Financial Advisors Inc.
AMERICAN EXPRESS Financial Advisors
<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 Managers 3
Fund Facts 5
The 10 Largest Holdings 6
Financial Statements 7
Notes to Financial Statements 10
Investments in Securities 18
<PAGE>
(picture of) Arne H. Carlson
Arne H. Carlson
Chairman of the board
From the Chairman
American Express (R) Funds held shareholder meetings in June 1999. Shareholders
approved all of the proposals advanced by management. Among the proposals were:
o The election of Board members and the selection of KPMG LLP as independent
auditors.
o Change in the Fund name from "IDS" to "AXP."
o A new shareholder service and distribution plan.
o A change in the investment management services agreement.
No other business was presented at the meeting, which was concluded by a report
to shareholders from the Investment Department of American Express Financial
Corporation.
Thanks to all of you for your effort in reviewing the proxy material and voting
your proxies.
Arne H. Carlson
(picture of) Keith Tufte
Keith Tufte
Portfolio manager
(picture of) Jim Johnson
Jim Johnson
Portfolio manager
From the Portfolio Managers
It was an up-and-down six months for the stock market and AXP Blue Chip
Advantage Fund, as rising interest rates kept stocks off balance part of the
time. Still, in the end, the Fund's Class A shares produced a gain of 2.81% for
the first half of the fiscal year -- February through July 1999.
The struggle against long-term interest rates, which had been at historical lows
for several months, began at the outset of the period. Although inflation had
yet to show signs of a meaningful increase, investors were concerned that the
surprising strength of the economy would soon push prices higher. During
February, that concern prompted them to sell bonds, which in turn drove up
interest rates and ultimately put pressure on stocks.
But, in another display of the remarkable resilience they've shown in recent
years, stocks racked up gains in three of the following four months. However, in
late June, the Federal Reserve grew worried enough about a potential run-up in
inflation that it raised short-term interest rates slightly. That spawned
another spike in long-term rates and a slump in stocks during July.
DIVERSIFICATION HELPS
For one of the few times in the past several years, large-capitalization stocks
- -- the focus of the Fund -- had to share the spotlight with small-cap stocks
over the six months. While this "broadening out" of the market periodically came
at the expense of several large-cap bellwether stocks, particularly in the
technology sector, the Fund's diversified portfolio allowed it to fare
reasonably well. Major areas of investment included technology, food/beverage,
retailing, pharmaceuticals, financial services and utilities. Among the larger
holdings were Microsoft, General Electric, Intel, Wal-Mart, Bristol Myers
Squibb, Lucent and IBM.
As for changes to the portfolio, we reduced health care holdings, which struck
us as vulnerable to decline in a shift away from large-cap growth stocks, and we
added to basic materials stocks such as paper and chemicals, which appeared
attractive given the improving prospects for cyclical (economically sensitive)
stocks.
Looking toward the current fiscal year, the investment environment has changed
somewhat. Although corporate profits are still generally good, the economy
remains healthy and inflation has yet to pick up in a meaningful way, long-term
interest rates are considerably higher than they were several months ago. While
that doesn't guarantee trouble for stocks in the months ahead, it could make
gains more difficult to come by.
Keith Tufte
Jim Johnson
<PAGE>
Fund Facts
Class A -- 6-month performance
(All figures per share)
Net asset value (NAV)
July 31, 1999 $12.20
Jan. 31, 1999 $11.88
Increase $ 0.32
Distributions -- Feb. 1, 1999 - July 31, 1999
From income $ 0.02
From capital gains $ --
Total distributions $ 0.02
Total return* +2.81%**
Class B -- 6-month performance
(All figures per share)
Net asset value (NAV)
July 31, 1999 $12.07
Jan. 31, 1999 $11.79
Increase $ 0.28
Distributions -- Feb. 1, 1999 - July 31, 1999
From income $ --
From capital gains $ --
Total distributions $ --
Total return* +2.42%**
Class Y -- 6-month performance
(All figures per share)
Net asset value (NAV)
July 31, 1999 $12.21
Jan. 31, 1999 $11.89
Increase $ 0.32
Distributions -- Feb. 1, 1999 - July 31, 1999
From income $ 0.02
From capital gains $ --
Total distributions $ 0.02
Total return* +2.86%**
*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 10 Largest Holdings
Percent Value
(of net assets) (as of July 31, 1999)
General Electric 3.96% $152,600,000
Microsoft 3.54 136,579,174
Bristol-Myers Squibb 2.82 108,747,449
Intl Business Machines 2.53 97,722,030
Lucent Technologies 2.21 85,197,392
Cisco Systems 2.11 81,439,662
Coca-Cola 2.10 80,854,938
AT&T 2.01 77,633,110
Wal-Mart Stores 1.97 75,952,825
Mobil 1.96 75,450,274
For further detail about these holdings, please refer to the section entitled
"Investments in Securities."
(picture of) icon
The 10 holdings listed here
make up 25.21% of net assets
<PAGE>
<TABLE>
<CAPTION>
Financial Statements
Statement of assets and liabilities
AXP Blue Chip Advantage Fund
July 31, 1999 (Unaudited)
Assets
Investments in securities, at value (Note 1)
<S> <C>
(identified cost $3,299,324,296) $3,860,617,822
Cash in bank on demand deposit 6,023,815
Dividends and accrued interest receivable 4,042,346
Receivable for investment securities sold 16,646,280
----------
Total assets $3,887,330,263
--------------
Liabilities
Payable for investment securities purchased 19,990,039
Payable upon return of securities loaned (Note 4) 9,600,000
Accrued investment management services fee 47,071
Accrued distribution fee 52,785
Accrued service fee 1,003
Accrued transfer agency fee 9,545
Accrued administrative services fee 2,513
Other accrued expenses 272,759
-------
Total liabilities 29,975,715
----------
Net assets applicable to outstanding capital stock $3,857,354,548
==============
Represented by
Capital stock-- $.01 par value (Note 1) $ 3,173,554
Additional paid-in capital 2,965,068,374
Undistributed net investment income 1,213,378
Accumulated net realized gain (loss) 327,639,608
Unrealized appreciation (depreciation) on investments (Note 5) 560,259,634
-----------
Total -- representing net assets applicable to outstanding capital stock $3,857,354,548
==============
Net assets applicable to outstanding shares: Class A $2,165,688,488
Class B $1,335,509,618
Class Y $ 356,156,442
Net asset value per share of outstanding capital stock: Class A shares 177,544,031 $ 12.20
Class B shares 110,635,933 $ 12.07
Class Y shares 29,175,468 $ 12.21
---------- --------------
See accompanying notes to financial statements.
</TABLE>
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<TABLE>
<CAPTION>
Statement of operations
AXP Blue Chip Advantage Fund
Six months ended July 31, 1999 (Unaudited)
Investment income
Income:
<S> <C>
Dividends $ 20,208,018
Interest 2,593,847
Less foreign taxes withheld (2,612)
------
Total income 22,799,253
----------
Expenses (Note 2):
Investment management services fee 6,695,657
Distribution fee
Class A 462,724
Class B 4,910,290
Transfer agency fee 2,300,910
Incremental transfer agency fee
Class A 185,116
Class B 180,346
Service fee
Class A 1,437,215
Class B 877,426
Class Y 171,716
Administrative services fees and expenses 443,325
Compensation of board members 8,867
Custodian fees 95,513
Postage 398,162
Registration fees 203,339
Reports to shareholders 50,552
Audit fees 11,375
Other 8,186
-----
Total expenses 18,440,719
Earnings credits on cash balances (Note 2) (50,154)
-------
Total net expenses 18,390,565
----------
Investment income (loss) -- net 4,408,688
---------
Realized and unrealized gain (loss) -- net
Net realized gain (loss) on:
Security transactions (Note 3) 199,092,507
Financial futures contracts 9,892,812
Options contracts written (Note 7) (322,896)
--------
Net realized gain (loss) on investments 208,662,423
Net change in unrealized appreciation (depreciation) on investments (122,766,574)
------------
Net gain (loss) on investments 85,895,849
----------
Net increase (decrease) in net assets resulting from operations $ 90,304,537
==============
See accompanying notes to financial statements.
</TABLE>
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<TABLE>
<CAPTION>
Statements of changes in net assets
AXP Blue Chip Advantage Fund
July 31, 1999 Jan. 31, 1999
Six months ended Year ended
(Unaudited)
Operations and distributions
<S> <C> <C>
Investment income (loss) -- net $ 4,408,688 $ 11,656,610
Net realized gain (loss) on investments 208,662,423 125,597,202
Net change in unrealized appreciation (depreciation) on investments (122,766,574) 513,693,695
------------ -----------
Net increase (decrease) in net assets resulting from operations 90,304,537 650,947,507
---------- -----------
Distributions to shareholders from:
Net investment income
Class A (2,851,321) (9,676,304)
Class B -- (226,279)
Class Y (625,523) (1,941,731)
Net realized gain
Class A -- (23,694,693)
Class B -- (14,096,805)
Class Y -- (4,007,760)
----- ----------
Total distributions (3,476,844) (53,643,572)
---------- -----------
Capital share transactions (Note 6)
Proceeds from sales
Class A shares (Note 2) 440,656,973 601,112,516
Class B shares 278,451,140 360,571,798
Class Y shares 83,486,156 141,092,219
Reinvestment of distributions at net asset value
Class A shares 2,663,291 31,264,700
Class B shares -- 14,214,476
Class Y shares 625,523 5,949,491
Payments for redemptions
Class A shares (191,096,556) (313,174,627)
Class B shares (Note 2) (79,092,674) (105,895,017)
Class Y shares (59,727,044) (122,848,077)
----------- ------------
Increase (decrease) in net assets from capital share transactions 475,966,809 612,287,479
----------- -----------
Total increase (decrease) in net assets 562,794,502 1,209,591,414
Net assets at beginning of period 3,294,560,046 2,084,968,632
------------- -------------
Net assets at end of period $3,857,354,548 $3,294,560,046
============== ==============
Undistributed net investment income $ 1,213,378 $ 281,534
-------------- --------------
See accompanying notes to financial statements.
</TABLE>
<PAGE>
Notes to Financial Statements
AXP Blue Chip Advantage Fund
(Unaudited as to July 31, 1999)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Fund is a series of AXP Market Advantage Series, Inc. and is registered
under the Investment Company Act of 1940 (as amended) as a diversified, open-end
management investment company. AXP 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.
o Class A shares are sold with a front-end sales charge.
o Class B shares may be subject to a contingent deferred sales charge and
automatically convert to Class A shares during the ninth calendar year of
ownership.
o Class Y shares have no sales charge and are offered only to qualifying
institutional investors.
All classes of shares have identical voting, dividend and liquidation rights.
The distribution fee, incremental 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.
The Fund's significant accounting policies are summarized below:
Use of estimates
Preparing financial statements that conform to generally accepted accounting
principles requires management to make estimates (e.g., on assets and
liabilities) that could differ from actual results.
Valuation of securities
All securities are valued at the close of each business day. Securities traded
on national securities exchanges or included in national market systems are
valued at the last quoted sales price. Debt securities are generally traded in
the over-the-counter market and are valued at a price that reflects fair value
as quoted by dealers in these securities or by an independent pricing service.
Securities for which market quotations are not readily available are valued at
fair value according to methods selected in good faith by the board. Short-term
securities maturing in more than 60 days from the valuation date are valued at
the market price or approximate market value based on current interest rates;
those maturing in 60 days or less are valued at amortized cost.
Option transactions
To produce incremental earnings, protect gains and facilitate buying and selling
of securities for investments, the Fund may buy and write covered call options
traded on any U.S. or foreign exchange or in the over-the-counter market where
completing the obligation depends upon the credit standing of the other party.
The risk in buying an option is that the Fund pays a premium whether or not the
option is exercised. The risk in writing a call option is that the Fund gives up
the opportunity for profit if the market price of the security increases. The
Fund also has the additional risk of being unable to enter into a closing
transaction if a liquid secondary market does not exist.
Option contracts are valued daily at the closing prices on their primary
exchanges and unrealized appreciation or depreciation is recorded. The Fund will
realize a gain or loss when the option transaction expires or closes. When an
option is exercised, the proceeds on sales for a written call option, and the
cost of a security for a purchased call option is adjusted by the amount of
premium received or paid.
Futures transactions
To gain exposure to or protect itself from market changes, the Fund may buy
financial futures contracts and may also buy call options on these future
contracts. Risks of entering into futures contracts include the possibility of
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
The Fund's policy is to comply with all sections of the Internal Revenue Code
that apply to regulated investment companies and to distribute all of its
taxable income to shareholders. No provision for income or excise taxes is thus
required.
Net investment income (loss) and net realized gains (losses) may differ for
financial statement and tax purposes primarily because of deferred losses on
certain futures contracts, the recognition of certain foreign currency gains
(losses) as ordinary income (loss) for tax purposes and losses deferred due to
"wash sale" transactions. The character of distributions made during the year
from net investment income or net realized gains may differ from their ultimate
characterization for federal income tax purposes. Also, due to the timing of
dividend distributions, the fiscal year in which amounts are distributed may
differ from the year that the income or realized gains (losses) were recorded by
the 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
The Fund has agreements with American Express Financial Corporation (AEFC) to
manage its portfolio and provide 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 0.54% to 0.35% annually.
Under terms of a prior agreement that ended June 30, 1999, the management fee
was a percentage of the Fund's average daily net assets in reducing percentages
from 0.44% to 0.34% annually. Effective with the new Investment Management
Services Agreement, the fee will be adjusted upward or downward by a performance
incentive adjustment based on the Fund's average daily net assets over a rolling
12-month period as measured against the change in the Lipper Growth and Income
Fund Index. The maximum adjustment is 0.08% of the Fund's average daily net
assets after deducting 1% from the performance difference. If the performance
difference is less than 1%, the adjustment will be zero. The first adjustment
will be made on Jan. 1, 2000 and will cover the six-month period beginning July
1, 1999.
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 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 $19
o Class B $20
o Class Y $17
Under terms of a prior agreement that ended Jan. 31, 1999, the Fund paid a
transfer agency fee at an annual rate per shareholder account of $15 for Class A
and $16 for Class B. Under terms of a prior agreement that ended March 31, 1999,
the Fund paid a transfer agency fee at an annual rate per shareholder account of
$15 for Class Y.
The Fund has agreements with American Express Financial Advisors Inc. for
distribution and shareholder services. Under a Plan and Agreement of
Distribution (the Plan), the Fund pays a distribution fee at an annual rate up
to 0.25% of the Fund's average daily net assets attributable to Class A shares
and up to 1.00% for Class B shares. The Plan went into effect July 1, 1999.
Under terms of a prior Plan and Agreement of Distribution (the Prior Plan) that
ended June 30, 1999, the Fund paid a distribution fee for Class B shares at an
annual rate up to 0.75% of average daily net assets. The Prior Plan was not
effective with respect to Class A shares.
Under a Shareholder Service Agreement, the Fund's Class Y shares pay a fee for
service provided to shareholders by financial advisors and other servicing
agents. The fee is calculated at a rate of 0.10% of the Fund's average daily net
assets attributable to Class Y shares. Under terms of a prior agreeement that
ended June 30, 1999, the Fund paid a shareholder service fee for Class A and
Class B shares at a rate of 0.175% of average daily net assets. Effective July
1, 1999, the agreement for Class A and Class B shares were converted to the Plan
and Agreement of Distribution discussed above.
Sales charges received by American Express Financial Advisors Inc. for
distributing Fund shares were $5,975,688 for Class A and $472,335 for Class B
for the six months ended July 31, 1999.
During the six months ended July 31, 1999, the Fund's custodian and transfer
agency fees were reduced by $50,154 as a result of earnings credits from
overnight cash balances. The Fund also pays custodian fees to American Express
Trust Company, an affiliate of AEFC.
3. SECURITIES TRANSACTIONS
Cost of purchases and proceeds from sales of securities (other than short-term
obligations) aggregated $1,842,155,348 and $1,355,034,675, respectively, for the
six months ended July 31, 1999. Realized gains and losses are determined on an
identified cost basis.
Brokerage commissions paid to brokers affiliated with AEFC were $100,751 for the
six months ended July 31, 1999.
4. LENDING OF PORTFOLIO SECURITIES
As of July 31, 1999, securities valued at $10,344,000 were on loan to brokers.
For collateral, the Fund received $9,600,000 in cash. Income from securities
lending amounted to $30,586 for the six months ended July 31, 1999. 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.
5. STOCK INDEX FUTURES CONTRACTS
As of July 31, 1999, investments in securities included securities valued at
$21,610,500 that were pledged as collateral to cover initial margin deposits on
57 open purchase contracts. The market value of the open purchase contracts as
of July 31, 1999 was $18,978,150 with a net unrealized loss of $1,033,892.
6. CAPITAL SHARE TRANSACTIONS
Transactions in shares of capital stock for the periods indicated are as
follows:
Six months ended July 31, 1999
Class A Class B Class Y
Sold 36,202,247 23,114,927 6,846,374
Issued for reinvested distributions 220,145 215 51,724
Redeemed (15,647,209) (6,562,191) (4,885,845)
----------- ---------- ----------
Net increase (decrease) 20,775,183 16,552,951 2,012,253
Year ended Jan. 31, 1999
Class A Class B Class Y
Sold 57,329,603 34,676,763 13,370,022
Issued for reinvested distributions 2,859,070 1,291,423 544,664
Redeemed (30,000,871) (10,217,534) (11,862,710)
----------- ----------- -----------
Net increase (decrease) 30,187,802 25,750,652 2,051,976
7. OPTIONS CONTRACTS WRITTEN
Contracts and premium amounts associated with options contracts written are as
follows:
Six months ended July 31, 1999
Calls
Contracts Premium
Balance Jan. 31, 1999 -- $ --
Opened 2,250 611,979
Closed (2,250) (611,979)
------ --------
Balance July 31, 1999 -- $ --
See "Summary of significant accounting policies."
8. BANK BORROWINGS
The Fund has a revolving credit agreement with U.S. Bank, N.A., whereby the Fund
is permitted to have bank borrowings for temporary or emergency purposes to fund
shareholder redemptions. The Fund must have asset coverage for borrowings not to
exceed the aggregate of 333% of advances equal to or less than five business
days plus 367% of advances over five business days. The agreement, which enables
the Fund to participate with other American Express funds, permits borrowings up
to $200 million, collectively. Interest is charged to each Fund based on its
borrowings at a rate equal to the Federal Funds Rate plus 0.30% or the
Eurodollar Rate (Reserve Adjusted) plus 0.20%. Borrowings are payable up to 90
days after such loan is executed. The Fund also pays a commitment fee equal to
its pro rata share of the amount of the credit facility at a rate of 0.05% per
annum. The Fund had no borrowings outstanding during the six months ended July
31, 1999.
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<TABLE>
<CAPTION>
9. 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
1999b 1999 1998 1997 1996
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $11.88 $9.49 $8.97 $7.62 $5.97
Income from investment operations:
Net investment income (loss) .02 .06 .10 .09 .11
Net gains (losses) (both realized and unrealized) .32 2.55 1.67 1.69 2.18
Total from investment operations .34 2.61 1.77 1.78 2.29
Less distributions:
Dividends from net investment income (.02) (.06) (.10) (.09) (.11)
Distributions from realized gains -- (.16) (1.15) (.34) (.53)
Total distributions (.02) (.22) (1.25) (.43) (.64)
Net asset value, end of period $12.20 $11.88 $9.49 $8.97 $7.62
Ratios/supplemental data
Net assets, end of period (in millions) $2,166 $1,863 $1,202 $687 $247
Ratio of expenses to average daily net assetsc .77%d .73% .78% .89% .96%
Ratio of net investment income (loss)
to average daily net assets .50%d .69% 1.03% 1.18% 1.68%
Portfolio turnover rate
(excluding short-term securities) 39% 105% 145% 128% 126%
Total returne 2.81% 27.71% 20.22% 23.79% 39.01%
a For a share outstanding throughout the period. Rounded to the nearest cent.
b Six months ended July 31, 1999 (Unaudited).
c Effective fiscal year 1996, expense ratio is based on total expenses of the
Fund before reduction of earnings credits on cash balances.
d Adjusted to an annual basis.
e Total return does not reflect payment of a sales charge.
</TABLE>
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<CAPTION>
Fiscal period ended Jan. 31,
Per share income and capital changesa
Class B Class Y
1999c 1999 1998 1997 1996b 1999c 1999 1998 1997 1996b
Net asset value,
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
beginning of period $11.79 $9.43 $8.92 $7.59 $6.30 $11.89 $9.50 $8.97 $7.62 $6.30
Income from investment operations:
Net investment
income (loss) -- -- .03 .04 .07 .03 .07 .11 .10 .11
Net gains (losses) (both
realized and unrealized) .28 2.52 1.66 1.67 1.83 .31 2.55 1.68 1.69 1.86
Total from investment
operations .28 2.52 1.69 1.71 1.90 .34 2.62 1.79 1.79 1.97
Less distributions:
Dividends from net
investment income -- -- (.03) (.04) (.08) (.02) (.07) (.11) (.10) (.12)
Distributions from
realized gains -- (.16) (1.15) (.34) (.53) -- (.16) (1.15) (.34) (.53)
Total distributions -- (.16) (1.18) (.38) (.61) (.02) (.23) (1.26) (.44) (.65)
Net asset value,
end of period $12.07 $11.79 $9.43 $8.92 $7.59 $12.21 $11.89 $9.50 $8.97 $7.62
Ratios/supplemental data
Net assets, end of
period (in millions) $1,336 $1,109 $645 $302 $42 $356 $323 $239 $77 $28
Ratio of expenses to
average daily net assetsd 1.53%e 1.49% 1.54% 1.65% 1.74%e .67%e .66% .69% .72% .80%e
Ratio of net investment
income (loss) to average
daily net assets (.27%)e (.07%) .26% .39% .81%e .60%e .77% 1.10% 1.33% 1.75%e
Portfolio turnover rate
(excluding short-term
securities) 39% 105% 145% 128% 126% 39% 105% 145% 128% 126%
Total returnf 2.42% 26.75% 19.32% 22.86% 30.93% 2.86% 27.82% 20.35% 24.00% 31.98%
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, 1999 (Unaudited).
d Effective fiscal year 1996, expense ratio is based on total expenses 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.
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<CAPTION>
Investments in Securities
AXP Blue Chip Advantage Fund July 31, 1999 (Unaudited)
(Percentages represent value of investments compared to net assets)
Common stocks (99.3%)
Issuer Shares Value(a)
Aerospace & defense (0.8%)
<S> <C> <C>
AlliedSignal 464,300 $30,034,406
Airlines (0.4%)
Southwest Airlines 878,550 16,253,175
Automotive & related (2.4%)
Dana 324,200 13,535,350
Delphi Automotive Systems 488,772 8,797,896
Ford Motor 748,800 36,410,400
General Motors 563,600 34,344,375
Total 93,088,021
Banks and savings & loans (7.8%)
Bank of America 1,045,824 69,416,568
Bank of New York 770,900 28,475,119
Bank One 977,196 53,318,257
BankBoston 402,400 18,887,650
Fleet Financial Group 523,000 21,181,500
Mellon Bank 533,300 17,998,875
Wachovia 401,750 31,361,609
Washington Mutual 622,900 21,373,256
Wells Fargo 956,900 37,319,100
Total 299,331,934
Beverages & tobacco (2.3%)
Coca-Cola 1,340,600 80,854,938
PepsiCo 210,800 8,247,550
Total 89,102,488
Building materials & construction (0.2%)
Fluor 155,600 6,233,725
Chemicals (1.8%)
Air Products & Chemicals 174,900 5,848,219
Du Pont (EI) de Nemours 217,600 15,680,800
Great Lakes Chemical 128,200 5,672,850
Monsanto 792,400 31,002,650
Waste Management 503,705 12,875,959
Total 71,080,478
Communications equipment & services (3.9%)
Lucent Technologies 1,309,470 85,197,392
Motorola 412,800 37,668,000
Nortel Networks 132,300(c) 11,725,088
QUALCOMM 39,300(b) 6,130,800
Tellabs 143,700(b) 8,846,531
Total 149,567,811
Computers & office equipment (16.6%)
3Com 495,300(b) 11,949,113
America Online 482,850(b) 45,931,105
BMC Software 285,500(b,e) 15,381,313
Cisco Systems 1,310,900(b) 81,439,662
Computer Sciences 234,500(b) 15,095,938
Dell Computer 230,100(b) 9,405,338
Electronic Data Systems 547,000 32,990,937
EMC 513,400(b) 31,092,788
First Data 557,400 27,626,138
Hewlett-Packard 520,800 54,521,249
Intl Business Machines 777,500 97,722,030
Microsoft 1,591,600(b) 136,579,174
Novell 687,800(b) 17,710,850
Oracle 369,500(b) 14,064,094
Pitney Bowes 196,700 12,515,038
Solectron 244,600(b) 15,761,413
Sun Microsystems 88,100(b) 5,979,788
Unisys 384,800(b) 15,704,650
Total 641,470,618
Electronics (3.6%)
Applied Materials 92,000(b,f) 6,618,250
Corning 320,960 22,467,200
Intel 923,000 63,687,000
KLA-Tencor 189,600(b) 12,845,400
LSI Logic 275,370(b) 13,854,553
Natl Semiconductor 465,860(b) 11,530,035
Texas Instruments 65,200 9,388,800
Total 140,391,238
Energy (6.3%)
Apache 318,700 13,524,831
Chevron 784,800 71,613,000
Exxon 253,300 20,105,688
FirstEnergy 348,600(f) 9,956,888
Mobil 737,900 75,450,274
Texaco 835,100 52,037,169
Total 242,687,850
Energy equipment & services (0.6%)
Halliburton 476,900 21,997,013
Financial services (3.4%)
Associates First Capital Cl A 267,600 10,252,425
Capital One Financial 319,700 14,826,088
Citigroup 853,850 38,049,690
Lehman Brothers Holdings 105,700 5,681,375
MBNA 842,250 24,004,125
Merrill Lynch & Co 133,400 9,079,538
Morgan Stanley, Dean Witter, Discover & Co 165,600 14,924,700
Providian Financial 174,800 15,906,800
Total 132,724,741
Food (3.1%)
Bestfoods 577,500 28,153,125
General Mills 424,600 35,162,187
Sara Lee 1,171,000 25,762,000
SUPERVALU 246,100 5,598,775
Sysco 791,300 25,865,619
Total 120,541,706
Health care (9.3%)
American Home Products 1,072,500 54,697,500
Amgen 194,800(b) 14,975,250
Bausch & Lomb 344,500 24,739,406
Baxter Intl 209,600 14,396,900
Boston Scientific 519,600(b) 21,076,275
Bristol-Myers Squibb 1,635,300 108,747,449
Guidant 148,700 8,708,244
Medtronic 691,200 49,809,600
Pfizer 170,140 5,774,126
Schering-Plough 1,114,600 54,615,400
Total 357,540,150
Health care services (0.9%)
Cardinal Health 375,700 25,641,525
Columbia/HCA Healthcare 332,700 7,402,575
Total 33,044,100
Household products (1.7%)
Colgate-Palmolive 950,300 46,921,063
Kimberly-Clark 286,300 17,464,300
Total 64,385,363
Industrial equipment & services (0.7%)
Illinois Tool Works 149,500 11,109,719
Parker-Hannifin 346,200 16,336,312
Total 27,446,031
Insurance (3.6%)
Allstate 328,700 11,668,850
American General 435,700 33,712,288
American Intl Group 522,300 60,652,087
Lincoln Natl 526,100 26,305,000
MBIA 98,100 5,616,225
Total 137,954,450
Leisure time & entertainment (2.2%)
Disney (Walt) 1,664,900 45,992,863
Harrah's Entertainment 459,300(b) 9,788,831
Time Warner 386,400 27,820,800
Total 83,602,494
Media (2.0%)
Comcast Special Cl A 697,200 26,842,200
MediaOne Group 488,700(b) 35,369,662
New York Times Cl A 371,800 14,616,388
Total 76,828,250
Multi-industry conglomerates (5.7%)
General Electric 1,400,000 152,600,000
Grainger (WW) 109,800 5,188,050
Tyco Intl 537,100(c) 52,467,956
Xerox 220,200 10,734,750
Total 220,990,756
Paper & packaging (1.4%)
Intl Paper 931,100 47,602,488
Mead 174,300 7,146,300
Total 54,748,788
Restaurants & lodging (0.7%)
Marriott Intl Cl A 182,300 6,391,894
Wendy's Intl 688,400 20,006,625
Total 26,398,519
Retail (7.6%)
Albertson's 579,828 28,810,204
Best Buy 135,720(b) 10,128,105
Circuit City Stores 234,800 11,094,300
Costco Companies 222,900(b) 16,661,775
CVS 394,600 19,631,350
Dayton Hudson 344,100(f) 22,258,969
Dollar General 323,900 8,563,106
Home Depot 661,900 42,237,494
Kroger 999,600(b) 26,301,975
Safeway 385,400(b) 20,763,425
TJX Companies 343,300 11,350,356
Wal-Mart Stores 1,797,700 75,952,825
Total 293,753,884
Transportation (0.5%)
Kansas City Southern Inds 322,000 17,790,500
Utilities -- electric (1.3%)
Carolina Power & Light 306,200 12,592,475
Cinergy 317,800 9,514,138
DTE Energy 345,100 13,502,037
Edison Intl 223,800 5,664,938
Southern Co 365,500 9,662,906
Total 50,936,494
Utilities -- telephone (8.5%)
Ameritech 745,800 54,629,850
AT&T 1,494,741 77,633,110
Bell Atlantic 917,500 58,490,625
BellSouth 224,082(f) 10,755,936
MCI WorldCom 790,650(b) 65,228,624
SBC Communications 350,200 20,027,063
U S WEST Communications Group 741,900 42,520,144
Total 329,285,352
Total common stocks
(Cost: $3,267,916,522) $3,829,210,335
See accompanying notes to investments in securities.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Short-term securities (0.8%)
Issuer Annualized Amount Value(a)
yield on date payable at
of purchase maturity
U.S. government agencies (0.3%)
Federal Home Loan Mtge Corp Disc Nts
<S> <C> <C> <C>
09-16-99 4.99% $3,100,000 $3,079,926
09-23-99 5.01 5,400,000 5,359,744
Federal Natl Mtge Assn Disc Nts
08-13-99 4.93 900,000 898,123
08-25-99 4.91 2,400,000 2,391,850
Total 11,729,643
Commercial paper (0.5%)
BMW US Capital
08-03-99 4.90 8,100,000 8,096,712
Ciesco LP
08-02-99 4.96 5,300,000 5,298,548
Falcon Asset
08-12-99 5.23 1,300,000(d) 1,297,747
Salomon Smith Barney
09-03-99 5.14 500,000 497,587
Toyota Motor Credit
08-20-99 5.13 4,500,000 4,487,250
Total 19,677,844
Total short-term securities
(Cost: $31,407,774) $31,407,487
Total investments in securities
(Cost: $3,299,324,296)(g) $3,860,617,822
See accompanying notes to investments in securities.
</TABLE>
<PAGE>
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. As of July 31, 1999, the
value of foreign securities represented 1.66% of net assets.
(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) Security is partially or fully on loan. See Note 4 to the financial
statements.
(f) Partially pledged as initial margin deposit on the following open stock
index futures purchase contracts (see Note 5 to the financial statements):
Type of security Contracts
S&P 500 Index, Sept. 1999 57
(g) At July 31, 1999, the cost of securities for federal income tax purposes was
approximately $3,299,324,000 and the approximate aggregate gross unrealized
appreciation and depreciation based on that cost was:
Unrealized appreciation $642,469,000
Unrealized depreciation (81,175,000)
-----------
Net unrealized appreciation $561,294,000
<PAGE>
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