AXP(SM) Blue Chip
Advantage
Fund
2000 SEMIANNUAL REPORT
American
Express(R)
Funds
(icon of) magnifying glass
AXPBlue Chip Advantage Fund seeks to provide shareholders with a long-term total
return exceeding that of the U.S. stock market.
AMERICAN
EXPRESS
(R)
<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. AXP Blue Chip Advantage tries to identify and build its
portfolioaround these stocks.
CONTENTS
From the Chairman 3
From the Portfolio Managers 3
Fund Facts 5
The 10 Largest Holdings 7
Financial Statements 8
Notes to Financial Statements 11
Investments in Securities 22
<PAGE>
(picture of) Arne H. Carlson
Arne H. Carlson
Chairman of the board
From the Chairman
The financial markets have always had their ups and downs, but in recent months
volatility has become more frequent and intense. While no one can say with
certainty what the markets will do, American Express Financial Corporation, the
Fund's investment manager, expects economic growth to continue this year,
accompanied by a modest rise in long-term interest rates. But no matter what
transpires, this is a great time to take a close look at your goals and
investments. We encourage you to:
o Consult a professional investment advisor who can help you cut through
mountains of data.
o Set financial goals that extend beyond those achievable through
retirement plans of your employer.
o Learn as much as you can about your current investments.
The portfolio managers' letter that follows provides a review of the Fund's
investment strategies and performance. The semiannual report contains other
valuable information as well. The Fund's prospectus describes its investment
objectives and how it intends to achieve those objectives. As experienced
investors know, information is vital to making good investment decisions.
So, take a moment and decide again whether the Fund's investment objectives and
management style fit with your other investments to help you reach your
financial goals. And make it a practice on a regular basis to assess your
investment options.
On behalf of the Board,
Arne H. Carlson
<PAGE>
(picture of) Keith Tufte
Keith Tufte
Portfolio Manager
(picture of) James M Johnson, Jr.
James M Johnson, Jr.
Portfolio Manger
From the Portfolio Managers
An unsettled investment environment kept the stock market off balance for much
of the past six months. Still, AXP Blue Chip Advantage Fund's Class A shares
managed to generate a positive, if modest, return of 2.03% (excluding the sales
charge) for the period -- February through July 2000, the first half of the
Fund's fiscal year.
The period began well enough, as the stock market, after slipping in
February, climbed to an all-time high in mid-March. But the rise was accompanied
by an increase in concerns regarding the possibility of higher inflation,
additional interest-rate increases by the Federal Reserve, the strength of
corporate profits and the sustainability of sky-high prices for many stocks.
A SLUGGISH SUMMER
Against that backdrop, the market spent the rest of the period struggling to
hold its ground. Despite some periodic good news on inflation and profits, as
well as a decline in long-term interest rates, the negative forces ultimately
won out, and stocks were forced to retreat from their spring peak.
As has been the case in recent years, the market was driven by the fortunes of
technology-related stocks, which experienced a sharp sell-off from mid-March to
mid-April, followed by a moderate rebound. For the Fund, technology had a major
effect on performance as it was the largest area of investment (about a third of
the portfolio). Overall, our holdings generated modestly positive results. Along
with big winners such as EMC, Nortel Networks, Oracle, Intel and Cisco Systems,
there were notable losers such as Novell, BMC, Microsoft, Lucent and Motorola.
Looking at other stock groups, transportation, financial services, capital goods
and health care all provided good-to-strong gains, while telecommunications and
basic materials were especially weak. Top Fund performers regardless of industry
included Lehman Brothers, Capital One Financial, American International Group,
Southwest Airlines, Best Food and Best Buy. We changed the composition of the
portfolio only modestly during the six months. Most prominent was a reduction in
telecommunications holdings and an increase in the health care area.
As the new fiscal year begins, the stock market remains confronted by
uncertainty regarding inflation, the Federal Reserve's actions on interest
rates, corporate profits and the presidential election. But, and probably most
important, the economy appears to remain on solid ground. Therefore, as the year
progresses, we think that holding stocks of high-quality companies with
relatively consistent profits will prove rewarding for the Fund.
Keith Tufte
James M. Johnson, Jr.
<PAGE>
Fund Facts
Class A -- 6-month performance
(All figures per share)
Net asset value (NAV)
July 31, 2000 $12.04
Jan. 31, 2000 $11.80
Increase $ 0.24
Distributions -- Feb. 1, 2000 - July 31, 2000
From income $ --
From capital gains $ --
Total distributions $ --
Total return** +2.03%***
Class B -- 6-month performance
(All figures per share)
Net asset value (NAV)
July 31, 2000 $11.83
Jan. 31, 2000 $11.63
Increase $ 0.20
Distributions --Feb. 1, 2000 - July 31, 2000
From income $ --
From capital gains $ --
Total distributions $ --
Total return** +1.72%***
<PAGE>
Class C -- June 26, 2000* - July 31, 2000
(All figures per share)
Net asset value (NAV)
July 31, 2000 $11.83
June 26, 2000* $11.99
Decrease $ 0.16
Distributions -- June 26, 2000* - July 31, 2000
From income $ --
From capital gains $ --
Total distributions $ --
Total return** -1.33%***
Class Y -- 6-month performance
(All figures per share)
Net asset value (NAV)
July 31, 2000 $12.06
Jan. 31, 2000 $11.81
Increase $ 0.25
Distributions -- Feb. 1, 2000 - July 31, 2000
From income $ --
From capital gains $ --
Total distributions $ --
Total return** +2.12%***
* Inception date.
** Returns do not include sales load. 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, 2000)
Cisco Systems 4.02% $183,067,949
Intel 3.53 160,413,599
Pfizer 3.09 140,375,756
Microsoft 2.71 123,281,894
General Electric 2.59 117,853,600
Exxon Mobil 2.35 106,989,599
EMC 1.91 87,066,872
Oracle 1.91 86,969,381
Wal-Mart Stores 1.77 80,675,718
American Intl Group 1.70 77,494,924
For further detail about these holdings, please refer to the section entitled
"Investments in Securities."
The 10 holdings listed here make up 25.58% of net assets
(icon of) pie chart
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<TABLE>
<CAPTION>
Financial Statements
Statement of assets and liabilities
AXP Blue Chip Advantage Fund
July 31, 2000 (Unaudited)
Assets
Investments in securities, at value (Note 1)
<S> <C> <C>
(identified cost $4,066,481,344) $4,550,329,315
Dividends and accrued interest receivable 2,795,479
Receivable for investment securities sold 2,718,600
---------
Total assets 4,555,843,394
-------------
Liabilities
Capital shares payable 24,368
Payable for investment securities purchased 18,200
Payable upon return of securities loaned (Note 4) 5,500,000
Disbursement in excess of cash on demand deposit 239,307
Accrued investment management services fee 161,492
Accrued distribution fee 190,917
Accrued service fee 3,045
Accrued transfer agency fee 53,031
Accrued administrative services fee 8,607
Other accrued expenses 165,434
Total liabilities 6,364,401
---------
Net assets applicable to outstanding capital stock $4,549,478,993
--------------
Represented by
Capital stock-- $.01 par value (Note 1) $ 3,802,714
Additional paid-in capital 3,723,162,275
Undistributed net investment income 1,641,057
Accumulated net realized gain (loss) 360,415,819
Unrealized appreciation (depreciation) on investments (Note 5) 460,457,128
-----------
Total -- representing net assets applicable to outstanding capital stock $4,549,478,993
==============
Net assets applicable to outstanding shares: Class A $2,523,291,314
Class B $1,659,900,052
Class C $ 643,960
Class Y $ 365,643,667
Net asset value per share of outstanding capital stock:
Class A shares 209,538,165 $ 12.04
Class B shares 140,367,465 $ 11.83
Class C shares 54,437 $ 11.83
Class Y shares 30,311,360 $ 12.06
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, 2000 (Unaudited)
Investment income
Income:
<S> <C>
Dividends $ 20,108,597
Interest 6,906,081
Less foreign taxes withheld (4,946)
------
Total income 27,009,732
----------
Expenses (Note 2):
Investment management services fee 9,534,298
Distribution fee
Class A 3,162,966
Class B 8,362,318
Class C 332
Transfer agency fee 2,830,134
Incremental transfer agency fee
Class A 169,234
Class B 187,166
Class C 11
Service fee-- Class Y 186,940
Administrative services fees and expenses 542,045
Compensation of board members 10,444
Custodian fees 122,721
Printing and postage 156,209
Registration fees 204,463
Audit fees 24,250
Other 38,286
------
Total expenses 25,531,817
Earnings credits on cash balances (Note 2) (163,142)
--------
Total net expenses 25,368,675
----------
Investment income (loss) -- net 1,641,057
---------
Realized and unrealized gain (loss) -- net Net realized gain (loss) on:
Security transactions (Note 3) 169,299,722
Futures contracts (10,717,474)
Options contracts written (Note 7) 2,150,583
- ---------
Net realized gain (loss) on investments 160,732,831
Net change in unrealized appreciation (depreciation) on investments (78,179,084)
-----------
Net gain (loss) on investments 82,553,747
----------
Net increase (decrease) in net assets resulting from operations $ 84,194,804
============
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, 2000 Jan. 31, 2000
Six months ended Year ended
(Unaudited)
Operations and distributions
<S> <C> <C>
Investment income (loss) -- net $ 1,641,057 $ 5,771,753
Net realized gain (loss) on investments 160,732,831 481,709,577
Net change in unrealized appreciation (depreciation)
on investments (78,179,084) (144,389,996)
----------- ------------
Net increase (decrease) in net assets resulting
from operations 84,194,804 343,091,334
---------- -----------
Distributions to shareholders from:
Net investment income
Class A -- (4,865,443)
Class B -- (13,635)
Class Y -- (1,174,209)
Excess distribution of net investment income
Class A -- (505,418)
Class B -- (1,264)
Class Y -- (125,091)
Net realized gain
Class A -- (222,300,020)
Class B -- (144,513,386)
Class Y -- (34,190,368)
-----------
Total distributions -- (407,688,834)
------------
Capital share transactions (Note 6)
Proceeds from sales
Class A shares (Note 2) 396,272,591 858,316,297
Class B shares 223,499,673 537,708,369
Class C shares 659,652 --
Class Y shares 76,792,818 154,754,757
Reinvestment of distributions at net asset value
Class A shares 23,900 214,088,382
Class B shares 5,778 143,309,158
Class Y shares -- 35,489,668
Payments for redemptions
Class A shares (377,634,615) (450,445,991)
Class B shares (Note 2) (178,514,973) (170,000,172)
Class Y shares (88,397,014) (140,606,635)
----------- ------------
Increase (decrease) in net assets from capital
share transactions 52,707,810 1,182,613,833
---------- -------------
Total increase (decrease) in net assets 136,902,614 1,118,016,333
Net assets at beginning of period 4,412,576,379 3,294,560,046
------------- -------------
Net assets at end of period $4,549,478,993 $4,412,576,379
============== ==============
Undistributed net investment income $ 1,641,057 $ --
-------------- --------------
See accompanying notes to financial statements.
</TABLE>
<PAGE>
Notes to Financial Statements
AXP Blue Chip Advantage Fund
Unaudited as to July 31, 2000)
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.
Class C shares of the Fund were offered to the public on June 26, 2000. Prior to
this date, American Express Financial Corporation (AEFC) purchased 164 shares of
capital stock, which represented the initial capital in Class C at $12.23 per
share.
The Fund offers Class A, Class B Class C 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 (CDSC)
and automatically convert to Class A shares during the ninth calendar year of
ownership.
o Class C shares may be subject to a CDSC.
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) differ 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 accounting principles generally
accepted in the United States of America 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 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 also may 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 substantially 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,
when available, 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 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. The fee may be adjusted upward or downward by a
performance incentive adjustment based on a comparison of the performance of
Class A shares of AXP Blue Chip Advantage Fund to the Lipper Large-Cap Core
Index. The maximum adjustment is 0.08% of the Fund's average daily net assets
after deducting 1% from the performance difference. If the difference is less
than 1%, the adjustment will be zero. The adjustment decreased the fee by
$218,283 for the six months ended July 31, 2000.
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. A minor
portion of additional administrative service expenses paid by the Fund are
consultants' fees and fund office expenses. 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 $19.00
o Class B $20.00
o Class C $19.50
o Class Y $17.00
The Fund has agreements with American Express Financial Advisors Inc. (the
Distributor) for distribution and shareholder services. Under a Plan and
Agreement of Distribution, 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 and Class C 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.
Sales charges received by the Distributor for distributing Fund shares were
$9,119,814 for Class A and $1,450,539 for Class B for the six months ended July
31, 2000. During the six months ended July 31, 2000, the Fund's custodian and
transfer agency fees were reduced by $163,142 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 $1,453,137,899 and $1,890,105,719, respectively, for the
six months ended July 31, 2000. Realized gains and losses are determined on an
identified cost basis.
Brokerage commissions paid to brokers affiliated with AEFC were $39,453 for the
six months ended July 31, 2000.
4. LENDING OF PORTFOLIO SECURITIES
As of July 31, 2000, securities valued at $5,525,000 were on loan to brokers.
For collateral, the Fund received $5,500,000 in cash. As of July 31, 2000, due
to fluctuating market conditions, the Fund requested additional collateral which
was received on Aug. 2, 2000. Income from securities lending amounted to
$168,854 for the six months ended July 31, 2000. The risks to the Fund of
securities lending are that the borrower may not provide additional collateral
when required of return the securities when due.
5. STOCK INDEX FUTURES CONTRACTS
As of July 31, 2000, investments in securities included securities valued at
$46,648,826 that were pledged as collateral to cover initial margin deposits on
1,576 open purchase contracts. The market value of the open purchase contracts
as of July 31, 2000 was $566,926,600 with a net unrealized loss of $23,390,843.
See "Summary of significant accounting policies."
<PAGE>
<TABLE>
<CAPTION>
6. CAPITAL SHARE TRANSACTIONS
Transactions in shares of capital stock for the periods indicated are as
follows:
Six months ended July 31, 2000
Class A Class B Class C* Class Y
<S> <C> <C> <C> <C>
Sold 32,477,357 18,688,493 54,437 6,286,510
Issued for reinvested distributions 1,977 494 -- --
Redeemed (30,946,698) (14,836,738) -- (7,244,746)
----------- ----------- --------- ----------
Net increase (decrease) 1,532,636 3,852,249 54,437 (958,236)
* Inception date was June 26, 2000.
Year ended Jan. 31, 2000
Class A Class B Class C Class Y
Sold 70,306,873 44,520,338 N/A 12,651,836
Issued for reinvested distributions17,613,425 11,947,993 N/A 2,919,894
Redeemed (36,683,617) (14,036,097) N/A (11,465,349)
----------- ----------- -------- -----------
Net increase (decrease) 51,236,681 42,432,234 N/A 4,106,381
</TABLE>
<PAGE>
7. OPTIONS CONTRACTS WRITTEN
Contracts and premium amounts associated with options contracts written are as
follows:
Six months ended July 31, 2000
Calls
Contracts Premium
Balance Jan. 31, 2000 -- $--
Opened 21,478 2,913,843
Closed (12,933) (1,527,742)
Exercised (3,445) (492,056)
Expired (5,100) (894,045)
Balance July 31, 2000 -- $--
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 mutual 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, 2000.
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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 July 31,
Per share income and capital changesa
Class A
<S> <C> <C> <C> <C> <C>
2000b 2000 1999 1998 1997
Net asset value, beginning of period $11.80 $11.88 $9.49 $8.97 $7.62
Income from investment operations:
Net investment income (loss) .02 .03 .06 .10 .09
Net gains (losses)
(both realized and unrealized) .22 1.11 2.55 1.67 1.69
Total from investment operations .24 1.14 2.61 1.77 1.78
Less distributions:
Dividends from net investment income -- (.03) (.06) (.10) (.09)
Distributions from realized gains -- (1.19) (.16) (1.15) (.34)
Total distributions -- (1.22) (.22) (1.25) (.43)
Net asset value, end of period $12.04 $11.80 $11.88 $9.49 $8.97
Ratios/supplemental data
Net assets, end of period (in millions) $2,523 $2,455 $1,863 $1,202 $687
Ratio of expenses to average
daily net assetsc .85%d .83% .73% .78% .89%
Ratio of net investment income (loss)
to average daily net assets .34%d .40% .69% 1.03% 1.18%
Portfolio turnover rate
(excluding short-term securities) 34% 81% 105% 145% 128%
Total returne 2.03% 9.30% 27.71% 20.22% 23.79%
a For a share outstanding throughout the period. Rounded to the nearest cent.
b Six months ended July 31, 2000 (Unaudited).
c 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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<TABLE>
<CAPTION>
Fiscal period ended July 31,
Per share income and capital changesa
Class B
<S> <C> <C> <C> <C> <C>
2000b 2000 1999 1998 1997
Net asset value, beginning of period $11.63 $11.79 $9.43 $8.92 $7.59
Income from investment operations:
Net investment income (loss) (.03) -- -- .03 .04
Net gains (losses)
(both realized and unrealized) .23 1.03 2.52 1.66 1.67
Total from investment operations .20 1.03 2.52 1.69 1.71
Less distributions:
Dividends from net investment income -- -- -- (.03) (.04)
Distributions from realized gains -- (1.19) (.16) (1.15) (.34)
Total distributions -- (1.19) (.16) (1.18) (.38)
Net asset value, end of period $11.83 $11.63 $11.79 $9.43 $8.92
Ratios/supplemental data
Net assets, end of period (in millions) $1,660 $1,588 $1,109 $645 $302
Ratio of expenses to average
daily net assetsc 1.61%d 1.59% 1.49% 1.54% 1.65%
Ratio of net investment income (loss)
to average daily net assets (.42%)d (.36%) (.07%) .26% .39%
Portfolio turnover rate
(excluding short-term securities) 34% 81% 105% 145% 128%
Total returne 1.72% 8.45% 26.75% 19.32% 22.86%
a For a share outstanding throughout the period. Rounded to the nearest cent.
b Six months ended July 31, 2000 (Unaudited).
c 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>
<PAGE>
Fiscal period ended July 31,
Per share income and capital changesa
Class C
2000b
Net asset value, beginning of period $11.99
Income from investment operations:
Net investment income (loss) .04
Net gains (losses)
(both realized and unrealized) (.20)
Total from investment operations (.16)
Less distributions:
Dividends from net investment income --
Distributions from realized gains --
Total distributions --
Net asset value, end of period $11.83
Ratios/supplemental data
Net assets, end of period (in millions) $1
Ratio of expenses to average
daily net assetsc 1.68%d
Ratio of net investment income (loss)
to average daily net assets (.18%)d
Portfolio turnover rate
(excluding short-term securities) 34%
Total returne (1.33%)
a For a share outstanding throughout the period. Rounded to the nearest cent.
b Inception date was June 26, 2000.
c 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.
<PAGE>
<TABLE>
<CAPTION>
Fiscal period ended July 31,
Per share income and capital changesa
Class Y
<S> <C> <C> <C> <C> <C>
2000b 2000 1999 1998 1997
Net asset value, beginning of period $11.81 $11.89 $9.50 $8.97 $7.62
Income from investment operations:
Net investment income (loss) .03 .04 .07 .11 .10
Net gains (losses)
(both realized and unrealized) .22 1.11 2.55 1.68 1.69
Total from investment operations .25 1.15 2.62 1.79 1.79
Less distributions:
Dividends from net investment income -- (.04) (.07) (.11) (.10)
Distributions from realized gains -- (1.19) (.16) (1.15) (.34)
Total distributions -- (1.23) (.23) (1.26) (.44)
Net asset value, end of period $12.06 $11.81 $11.89 $9.50 $8.97
Ratios/supplemental data
Net assets, end of period (in millions) $366 $369 $323 $239 $77
Ratio of expenses to
average daily net assetsc .69%d .69% .66% .69% .72%
Ratio of net investment income (loss)
to average daily net assets .50%d .54% .77% 1.10% 1.33%
Portfolio turnover rate
(excluding short-term securities) 34% 81% 105% 145% 128%
Total returne 2.12% 9.44% 27.82% 20.35% 24.00%
a For a share outstanding throughout the period. Rounded to the nearest cent.
b Six months ended July 31, 2000 (Unaudited).
c 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>
<PAGE>
<TABLE>
<CAPTION>
Investments in Securities
AXP Blue Chip Advantage Fund
July 31, 2000 (Unaudited)
(Percentages represent value of investments compared to net assets)
Common stocks (87.4%)
Issuer Shares Value(a)
Aerospace & defense (0.7%)
<S> <C> <C>
Boeing 294,300 $14,420,699
Goodrich (BF) 173,400 6,188,213
United Technologies 217,700 12,708,238
Total 33,317,150
Airlines (0.6%)
Southwest Airlines 1,005,650 23,758,481
US Airways Group 139,300(b) 5,467,525
Total 29,226,006
Automotive & related (0.7%)
Delphi Automotive Systems 916,072 13,569,317
Ford Motor 398,400(f) 18,550,499
Visteon 52,164 730,292
Total 32,850,108
Banks and savings & loans (4.6%)
Bank of America 818,124 38,758,625
Bank of New York 1,301,200 60,912,424
FleetBoston Financial 607,967 21,772,818
Mellon Financial 308,600 11,630,363
SLM Holding 244,700 10,537,394
Wells Fargo 1,637,000 67,628,562
Total 211,240,186
Beverages & tobacco (0.8%)
Coca-Cola 451,300 27,670,331
Philip Morris 287,100 7,249,275
Total 34,919,606
Chemicals (0.2%)
Air Products & Chemicals 109,400 3,651,225
Praxair 183,200 7,247,850
Total 10,899,075
Communications equipment & services (6.0%)
Corning 140,300 32,821,431
JDS Uniphase 357,600(b) 42,241,500
Lucent Technologies 1,508,070 65,978,063
Motorola 1,225,500 40,518,094
Nortel Networks 912,100(c) 67,837,437
Tellabs 362,800(b) 23,582,000
Total 272,978,525
Computer software & services (4.7%)
BMC Software 214,100(b) 4,041,138
Microsoft 1,765,900(b) 123,281,894
Oracle 1,156,700(b) 86,969,381
Total 214,292,413
Computers & office equipment (14.4%)
3Com 353,000(b,f) 4,787,563
America Online 546,700(b) 29,145,944
Automatic Data Processing 468,400 23,215,075
Cisco Systems 2,797,600(b) 183,067,949
Compaq Computer 1,048,600 29,426,338
Computer Sciences 267,800(b) 16,737,500
Dell Computer 1,378,300(b,f) 60,559,056
EMC 1,022,812(b) 87,066,872
First Data 576,300 26,545,819
Hewlett-Packard 511,600 55,860,325
Palm 523,573(b) 20,419,336
Solectron 588,600(b) 23,727,938
Sun Microsystems 300,100(b) 31,641,794
Veritas Software 243,500(b) 24,821,781
Yahoo! 273,500(b) 35,196,031
Total 652,219,321
Electronics (5.2%)
Advanced Micro Devices 119,800(b) 8,618,113
Agilent Technologies 195,124(b) 7,951,303
Altera 85,600(b) 8,404,850
Analog Devices 10,400(b) 695,500
Conexant Systems 97,900(b) 3,132,800
Intel 2,403,200 160,413,599
Linear Technology 155,700(f) 8,602,425
LSI Logic 222,640(b) 7,541,930
Natl Semiconductor 170,860(b) 6,182,996
Texas Instruments 424,200 24,895,238
Total 236,438,754
Energy (4.0%)
Apache 92,900 4,621,775
Chevron 655,900 51,816,100
Conoco Cl B 261,100 6,021,619
Exxon Mobil 1,337,370 106,989,599
Kerr-McGee 133,900 7,347,763
Tosco 239,800 6,354,700
Total 183,151,556
Energy equipment & services (0.2%)
Halliburton 208,400 9,612,450
Financial services (6.2%)
Capital One Financial 496,600 29,113,175
Citigroup 996,950 70,347,284
Fannie Mae 684,700 34,149,413
Lehman Brothers Holdings 219,000 24,610,125
MBNA 1,254,550 41,870,606
Morgan Stanley, Dean Witter, Discover & Co 521,500 47,586,875
Providian Financial 273,200 27,849,325
Total 275,526,803
Food (0.7%)
General Mills 590,100 20,284,688
SUPERVALU 663,500 11,735,656
Total 32,020,344
Health care (9.5%)
ALZA 222,400(b) 14,400,400
American Home Products 165,600(f) 8,787,150
Amgen 655,200(b,f) 42,547,050
Baxter Intl 468,100 36,394,775
Biomet 320,300 14,333,425
Bristol-Myers Squibb 689,200 34,201,550
Johnson & Johnson 141,000 13,121,813
Medtronic 978,100 49,944,231
Pfizer 3,255,090 140,375,756
Pharmacia 780,746 42,745,844
Schering-Plough 534,800 23,096,675
Watson Pharmaceuticals 114,000(b) 6,298,500
Total 426,247,169
Health care services (0.5%)
Cardinal Health 164,000 12,054,000
HCA-The Healthcare Co 362,400 12,321,600
Total 24,375,600
Household products (1.6%)
Colgate-Palmolive 786,400 43,792,650
Kimberly-Clark 490,300 28,161,606
Total 71,954,256
Industrial equipment & services (0.2%)
Illinois Tool Works 88,200 5,049,450
Ingersoll-Rand 120,700 4,737,475
Total 9,786,925
Insurance (2.8%)
American Intl Group 883,762 77,494,924
CIGNA 115,700 11,555,538
Marsh & McLennan 318,600 38,869,200
Total 127,919,662
Leisure time & entertainment (1.3%)
Disney (Walt) 637,000 24,643,938
Viacom Cl B 551,051(b) 36,541,569
Total 61,185,507
Media (0.8%)
Comcast Special Cl A 822,300(b) 27,971,048
Deluxe 320,000 6,880,000
Total 34,851,048
Metals (0.6%)
Alcoa 776,800 23,498,200
Nucor 129,100 4,873,525
Total 28,371,725
Miscellaneous (0.7%)
Stilwell Financial 721,600(b) 31,795,500
Multi-industry conglomerates (4.4%)
Danaher 314,700 16,030,031
General Electric 2,291,200 117,853,600
Tyco Intl 1,259,300(c) 67,372,550
Total 201,256,181
Paper & packaging (0.4%)
Intl Paper 556,100 18,907,400
Restaurants & lodging (0.3%)
Wendy's Intl 782,900 13,260,369
Retail (5.5%)
Best Buy 223,000(b) 16,223,250
Circuit City Stores-Circuit City Group 255,300 5,855,944
CVS 463,600 18,283,225
Gap 429,200 15,370,725
Home Depot 462,150 23,916,263
Kroger 1,341,100(b) 27,744,006
Lowe's Companies 349,300 14,736,094
Safeway 737,700(b) 33,242,606
Target 182,000 5,278,000
TJX Companies 627,700 10,513,975
Wal-Mart Stores 1,468,500 80,675,718
Total 251,839,806
Transportation (0.3%)
Burlington Northern Santa Fe 491,200 12,003,700
Union Pacific 58,300 2,517,831
Total 14,521,531
Utilities -- electric (1.1%)
AES 203,200(b) 10,858,500
Duke Energy 664,700 41,003,681
Total 51,862,181
Utilities -- gas (0.8%)
Enron 513,000 37,769,626
Utilities -- telephone (7.6%)
AT&T 2,438,057 75,427,377
BellSouth 165,582(f) 6,592,233
Global Crossing 571,800(b,c) 13,901,888
Qwest Communications Intl 1,039,148(b) 48,775,009
SBC Communications 1,347,223 57,341,179
Sprint 225,100 8,019,188
Sprint PCS 223,100(b,e) 12,326,275
Verizon 1,078,900 50,708,300
WorldCom 1,729,825(b) 67,571,289
Total 340,662,738
Total common stocks
(Cost: $3,491,231,211) $3,975,259,521
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Short-term securities (12.6%)
Issuer Annualized Amount Value(a)
yield on date payable at
of purchase maturity
U.S. government agencies (7.1%)
Federal Home Loan Bank Disc Nt
<S> <C> <C> <C> <C>
10-20-00 6.53% $30,500,000 $30,046,389
Federal Home Loan Mtge Corp Disc Nts
08-01-00 6.44 2,700,000 2,699,517
09-05-00 6.43 22,700,000 22,554,947
09-12-00 6.46 30,000,000 29,770,306
10-12-00 6.52 3,100,000 3,058,449
Federal Natl Mtge Assn Disc Nts
08-09-00 6.42 25,000,000 24,958,562
08-14-00 6.44 47,000,000 46,882,652
08-16-00 6.44 33,400,000 33,301,281
08-16-00 6.45 3,700,000 3,689,426
08-17-00 6.44 2,700,000 2,691,382
08-23-00 6.45 24,000,000 23,898,338
08-24-00 6.45 12,900,000 12,842,046
08-28-00 6.45 9,100,000 9,052,719
08-31-00 6.47 7,500,000 7,456,019
09-20-00 6.45 50,000,000 49,531,081
09-26-00 6.44 24,000,000 23,748,820
Total 326,181,934
Commercial paper (5.5%)
Bayer
09-19-00 6.56 10,000,000(d) 9,908,194
Bell Atlantic Finance Services
09-08-00 6.55 8,600,000 8,539,441
09-18-00 6.56 10,000,000 9,910,031
BellSouth Capital Funding
09-06-00 6.55 7,300,000(d) 7,250,331
BellSouth Telecommunications
08-02-00 6.53 1,100,000 1,099,601
09-08-00 6.55 19,000,000 18,866,207
Coca-Cola
08-21-00 6.56 14,300,000 14,244,778
Commerzbank U.S. Finance
08-21-00 6.57 10,700,000 10,659,179
Corporate Receivables
08-04-00 6.58 10,000,000(d) 9,992,689
CXC
09-11-00 6.57 1,700,000(d) 1,686,870
Duke Energy
09-07-00 6.53 13,500,000 13,407,516
Falcon Asset
08-08-00 6.58% 2,000,000(d) 1,997,080
Fleet Funding
09-19-00 6.56 5,000,000(d) 4,954,861
Gannett
09-15-00 6.54 7,400,000(d) 7,335,351
09-26-00 6.56 8,400,000(d) 8,312,088
09-26-00 6.57 6,600,000(d) 6,530,925
Kimberly-Clark
08-17-00 6.57 12,800,000(d) 12,759,759
Lucent Technologies
08-07-00 6.53 7,600,000 7,590,364
Morgan Stanley, Dean Witter, Discover & Co
08-29-00 6.59 22,100,000 21,980,720
09-18-00 6.56 20,000,000 19,820,061
Northern States Power
08-07-00 6.54 10,500,000 10,486,668
Procter & Gamble
08-30-00 6.56 4,800,000 4,773,920
SBC Communications
08-28-00 6.60 6,000,000(d) 5,968,826
Sheffield Receivables
08-16-00 6.62 1,300,000(d) 1,296,158
Societe Generale North America
09-21-00 6.57 13,000,000 12,875,751
Variable Funding Capital
09-25-00 6.58 5,000,000(d) 4,948,822
Wal-Mart Stores
09-19-00 6.56 11,800,000(d) 11,691,669
Total 248,887,860
Total short-term securities
(Cost: $575,250,133) $575,069,794
Total investments in securities
(Cost: $4,066,481,344)(g) $4,550,329,315
</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, 2000, the
value of foreign securities represented 3.28% 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. 2000 1,576
(g) At July 31, 2000, the cost of securities for federal income tax purposes was
approximately $4,066,481,000 and the approximate aggregate gross unrealized
appreciation and depreciation based on that cost was:
Unrealized appreciation $703,083,000
Unrealized depreciation (219,235,000)
------------
Net unrealized appreciation $483,848,000
<PAGE>
American
Express(R)
Funds
AXP Blue Chip Advantage Fund TICKER SYMBOL
70100 AXP Financial Center Class A: IBLUX Class B: IDBCX
Minneapolis, MN 55474 Class C: N/A Class Y: IBCYX
PRSRT STD AUTO
U.S. POSTAGE
PAID
AMERICAN
EXPRESS
Distributed by American Express Financial Advisors Inc. Member NASD. American
Express Company is separate from American Express Financial Advisors Inc. and
is not a broker-dealer.
AMERICAN
EXPRESS
(R)
S-6338 L (9/00)
