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IDS Blue Chip
Advantage
Fund
1999 ANNUAL REPORT
(PROSPECTUS ENCLOSED)
(icon of) magnifying glass
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 included in a broad market
index.
(This annual report includes a prospectus that describes in detail the Fund's
objective, investment strategy, risks, sales charges, fees and other matters of
interest. Please read the prospectus carefully before you invest or send money.)
Distributed by American Express Financial Advisors Inc.
AMERICAN EXPRESS Financial Advisors
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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. They're the ones that Blue Chip Advantage Fund tries to
identify and build its portfolio around.
(This annual report is not part of the prospectus.)
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Table of Contents
1999 ANNUAL REPORT
The purpose of this annual report is to tell investors how the Fund performed.
From the Chairman 4
From the Portfolio Manager 4
Fund Facts 6
The 10 Largest Holdings 7
Making the Most of the Fund 8
The Fund's Long-term Performance 9
Independent Auditors' Report 10
Financial Statements 11
Notes to Financial Statements 14
Investments in Securities 20
Federal Income Tax Information 28
1999 PROSPECTUS
The prospectus, which is bound into the middle of this annual report, describes
the Fund in detail.
The Fund 3p
Goal 3p
Investment Strategy 3p
Risks 5p
Past Performance 6p
Fees and Expenses 8p
Management 9p
Buying and Selling Shares 9p
Valuing Fund Shares 9p
Investment Options 10p
Purchasing Shares 11p
Sales Charges 14p
Exchanging/Selling Shares 18p
Distributions and Taxes 23p
Personalized Shareholder
Information 25p
About the Company 26p
Quick Telephone Reference 28p
Financial Highlights 29p
(This annual report is not part of the prospectus.)
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From the Chairman
(picture of) Arne H. Carlson
Arne H. Carlson
Chairman of the board
It is an honor for me to join the IDS Mutual Fund Group as chairman of the board
and chief executive officer for each of the funds. I have served for the past
eight years as governor of Minnesota and also for the past 20 years as a
constitutional officer responsible for the pension investments made on behalf of
governmental employees. My responsibility in the coming years is to serve your
interests.
By law, half the members of a mutual fund board must be independent of their
investment manager and distributor. I am one of those persons. I am not an
employee of American Express Financial Corporation, nor do I own stock in
American Express Company. Both are fine companies, but the law clearly states
that to fully represent your interests I must be independent.
Having said that, I have a great deal of respect for the capabilities of
American Express Financial Corporation and for the services it provides
investors. Your financial advisor assists you in financial planning, conducts
regular investment reviews, and responds to your questions and needs. This is a
very personal service that makes AEFC a partner in your financial future. I know
that AEFC has an investment focus on the long-term performance of our economy.
AEFC wants you to participate in that growth. Our board is here to serve you and
to represent your interests in a professional manner.
Arne H. Carlson
From the Portfolio Manager
(picture of) Keith Tufte
Keith Tufte
Portfolio manager
Despite taking a mid-period tumble, the stock market powered its way to a record
high during the past fiscal year. IDS Blue Chip Advantage Fund was well
positioned for the run-up, as its Class A shares generated a total return of
27.71% for the 12 months -- February 1998 through January 1999.
(This annual report is not part of the prospectus.)
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Supported by reports of still-tame inflation, ongoing economic growth and good
corporate profits, stocks got off to a strong start before slacking off in the
spring. But in mid-summer, the environment changed dramatically. By then, the
economic plague known as the "Asian flu" had made its way to Russia and Latin
America, re-igniting fear that American companies' profits would decline as a
result of reduced business from overseas markets. The result was widespread
stock-selling that drove the market down nearly 20% by early September.
But, with still another display of the remarkable resilience it has shown in
recent years, the market quickly righted itself and began a resolute advance.
Over each of the next five months, the market racked up solid gains that not
only made up for the summer swoon but put it far into positive territory for the
fiscal year as a whole.
LARGE-CAPS LEAD
The Fund's performance roughly tracked that of the broad market over the period.
Working in the Fund's favor was the ongoing strength of large-capitalization
growth stocks, which comprised the bulk of the portfolio. The greatest area of
investment was in "non-cyclical" stocks, including consumer products, food,
beverages and health care, specifically pharmaceuticals. Among the prominent
contributors were General Electric, Coca-Cola, Pfizer, Kroger and Walgreen.
The next-highest exposure was to technology stocks, which were terrifically
volatile in light of the crises in foreign markets. On the whole, though, they
provided positive results, with Intel, Microsoft and IBM among the leading
examples.
Financial services comprised another substantial weighting in the portfolio,
and, thanks to a decline in long-term interest rates, generated good overall
results. Holdings included Charles Schwab, MBNA and Sunamerica. Among the
"cyclical" holdings, stocks such as Ford, Wal-Mart and Home Depot also enhanced
performance.
As for the current fiscal year, I think the key to performance will continue to
be finding companies that can consistently deliver solid earnings growth. In
that respect, I think the large, well-established companies that this Fund
focuses on remain in the best position. But in any event, given the stock
market's tremendous run in recent years, investors may have to settle for
less-generous returns, at least over the near term.
Keith Tufte
(This annual report is not part of the prospectus.)
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Fund Facts
Class A -- 12-month performance
(All figures per share)
Net asset value (NAV)
Jan. 31, 1999 $ 11.88
Jan. 31, 1998 $ 9.49
Increase $ 2.39
Distributions -- Feb. 1, 1998 - Jan. 31, 1999
From income $ 0.12
From capital gains $ 0.10
Total distributions $ 0.22
Total return* +27.71%**
Class B -- 12-month performance
(All figures per share)
Net asset value (NAV)
Jan. 31, 1999 $ 11.79
Jan. 31, 1998 $ 9.43
Increase $ 2.36
Distributions -- Feb. 1, 1998 - Jan. 31, 1998
From income $ 0.06
From capital gains $ 0.10
Total distributions $ 0.16
Total return* +26.75%**
Class Y -- 12-month performance
(All figures per share)
Net asset value (NAV)
Jan. 31, 1999 $11.89
Jan. 31, 1998 $ 9.50
Increase $ 2.39
Distributions -- Feb. 1, 1998 - Jan. 31, 1999
From income $ 0.13
From capital gains $ 0.10
Total distributions $ 0.23
Total return* +27.82%**
*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.
(This annual report is not part of the prospectus.)
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<TABLE>
<CAPTION>
The 10 Largest Holdings
Percent Value
(of net assets) (as of Jan. 31, 1999)
<S> <C> <C>
Microsoft 3.90% $128,519,999
General Electric 3.09 101,928,012
Intel 2.53 83,294,062
Intl Business Machines 2.15 70,972,724
AT&T 2.11 69,478,200
Pfizer 2.05 67,553,850
Cisco Systems 1.94 63,942,046
Wal-Mart Stores 1.94 63,760,400
Coca-Cola 1.92 63,336,956
Bristol-Myers Squibb 1.86 61,273,625
For further detail about these holdings, please refer to the section entitled
"Investments in Securities" herein.
(icon of) pie chart
The 10 holdings listed here
make up 23.49% of net assets
</TABLE>
(This annual report is not part of the prospectus.)
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Making the Most of the Fund
BUILD YOUR ASSETS SYSTEMATICALLY
One of the best ways to invest in the Fund is by dollar-cost averaging -- a
time-tested strategy that can make market fluctuations work for you. To
dollar-cost average, simply invest a fixed amount of money regularly. You'll
automatically buy more shares when the Fund's share price is low, fewer shares
when it is high. The chart below shows how dollar-cost averaging works. In these
three hypothetical scenarios, you will see six months of share price
fluctuations.
This strategy does not ensure a profit or avoid a loss if the market declines.
But, if you can continue to invest regularly through changing market conditions
even when the price of your shares fall or the market declines, it can be an
effective way to accumulate shares to meet your long-term goals.
How dollar-cost averaging works
Jan Feb Mar Apr May Jun
$15 $16 $18 $20
$10 $10 $12 $14
$ 5
Accumulated shares* Average market Your average
price per share cost per share
42.25 $15 $14.20
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Jan Feb Mar Apr May Jun
$15
$10 $10 $8 $8 $10
$ 5 $5 $5
Accumulated shares* Average market Your average
price per share cost per share
85.0 $7.66 $7.05
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Jan Feb Mar Apr May Jun
$15
$10 $10 $8 $6 $7
$ 5 $4 $4
Accumulated shares* Average market Your average
price per share cost per share
103.5 $6.50 $5.80
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$100 invested per month. Total invested: $600
*Shares purchased is determined by dividing the amount invested per month by the
current share price.
THREE WAYS TO BENEFIT FROM A MUTUAL FUND:
o your shares increase in value when the Fund's investments do well
o you receive capital gains when the gains on investments sold by the Fund
exceed losses
o you receive income when the Fund's stock dividends, interest and
short-term gains exceed its expenses.
All three make up your total return. You potentially can increase your
investment if, like most investors, you reinvest your dividends and capital gain
distributions to buy additional shares of the Fund or another fund.
(This annual report is not part of the prospectus.)
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<TABLE>
<CAPTION>
The Fund's Long-term Performance
How $10,000 has grown in IDS Blue Chip Advantage Fund
$50,000
$40,166
$40,000 IDS Blue Chip
Advantage Fund
Class A
$30,000
S&P 500
$20,000 Index
$9,500
4/1/90 '91 '92 '93 '94 '95 '96 '97 '98 '99
Average annual total return (as of Jan. 31, 1999):
1 year Since inception 5 years Since inception
<S> <C> <C> <C> <C>
Class A +21.33% --% +20.17% +17.18%
Class B +22.75% +25.55% --% --%
Class Y +27.82% +26.93% --% --%
Assumes: Holding period from 4/1/90 to 1/31/99. Returns do not reflect taxes
payable on distributions. Reinvestment of all income and capital gain
distributions for the Fund, with a value of $18,100. Also see "Past Performance"
in the Fund's current prospectus.
</TABLE>
On the graph above you can see how the Fund's total return compared to a widely
cited performance index, the S&P 500 Index. In comparing Blue Chip Advantage
Fund (Class A) to this index, you should take into account the fact that the
Fund's performance reflects the maximum sales charge of 5%, while such charges
are not reflected in the performance of the index.
Your investment and return values fluctuate so that your shares, when redeemed,
may be worth more or less than the original cost. Average annual total return
figures reflect the impact of the applicable sales charge up to a maximum of 5%.
This was a period of widely fluctuating security prices. Past performance is no
guarantee of future results.
Standard & Poor's 500 Index (S&P 500), an unmanaged list of common stocks, is
frequently used as a general measure of market performance.
(This annual report is not part of the prospectus.)
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The financial statements contained in Post-Effective Amendment #19 to
Registration Statement No. 33-30770 filed on or about March 30th, 1999, are
incorporated herein by reference.
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Federal Income Tax Information
The Fund is required by the Internal Revenue Code of 1986 to tell its
shareholders about the tax treatment of the dividends it pays during its fiscal
year. The dividends listed below were 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 purposes.
IDS Blue Chip Advantage Fund
Fiscal year ended Jan. 31, 1999
Class A
Income distributions -- taxable as dividend income, 72.90% qualifying for
deduction by corporations.
Payable date Per share
March 27, 1998 $0.01913
June 26, 1998 0.01961
Sept. 25, 1998 0.01471
Dec. 22, 1998 0.06786
Total $0.12131
Capital gain distribution -- taxable as long-term capital gain.
Payable date Per share
Dec. 22, 1998 $0.10344
Total distributions $0.22475
The distribution of $0.17130 per share, payable Dec. 22, 1998, consisted of
$0.01487 derived from net investment income, $0.05299 from net short-term
capital gains (a total of $0.06786 taxable as dividend income) and $0.10344 from
net long-term capital gains.
(This annual report is not part of the prospectus.)
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Class B
Income distributions -- taxable as dividend income, 72.90% qualifying
for deduction by corporations.
Payable date Per share
March 27, 1998 $0.00225
June 26, 1998 0.00066
Sept. 25, 1998 0.00000
Dec. 22, 1998 0.05299
Total $0.05590
Capital gain distribution -- taxable as long-term capital gain.
Payable date Per share
Dec. 22, 1998 $0.10344
Total distributions $0.15934
The distribution of $0.15643 per share, payable Dec. 22, 1998, consisted of
$0.05299 from net short-term capital gains (a total of $0.05299 taxable as
dividend income) and $0.10344 from net long-term capital gains.
Class Y
Income distributions -- taxable as dividend income, 72.90% qualifying for
deduction by corporations.
Payable date Per share
March 27, 1998 $0.02082
June 26, 1998 0.02145
Sept. 25, 1998 0.01633
Dec. 22, 1998 0.06960
Total $0.12820
Capital gain distribution -- taxable as long-term capital gain.
Payable date Per share
Dec. 22, 1998 $0.10344
Total distributions $0.23164
The distribution of $0.17304 per share, payable Dec. 22, 1998, consisted of
$0.01661 derived from net investment income, $0.05299 from net short-term
capital gains (a total of $0.06960 taxable as dividend income) and $0.10344 from
net long-term capital gains.
(This annual report is not part of the prospectus.)
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IDS Blue Chip Advantage Fund
IDS Tower 10
Minneapolis, MN 55440-0010
AMERICAN EXPRESS Financial Advisors
S-6025 M (3/99)
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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) Headings. 2) The headings in the
annual report are
placed in a blue strip
at the top of the page.
3) There are pictures, icons 3) Each picture, icon and
and graphs throughout the graph is described in
annual report. parentheses.
4) Footnotes for charts and 4) The footnotes for each
graphs are described at chart or graph are typed
the left margin. below the description of
the chart or graph.
