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AXP(SM) Blue Chip
Advantage
Fund
2000 ANNUAL REPORT
(PROSPECTUS ENCLOSED)
American
Express(R)
Funds
AMERICAN EXPRESS Financial Advisors (logo)
(icon of) magnifying glass
AXP Blue Chip Advantage Fund seeks to provide shareholders with a long-term
total return exceeding that of the stock market.
(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.)
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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 AXP Blue Chip Advantage Fund tries to
identify and build its portfolio around.
AXP BLUE CHIP ADVANTAGE FUND(This annual report is not part of tahe prospectus.)
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Table of Contents
2000 ANNUAL REPORT
The purpose of this annual report is to tell investors how the Fund performed.
From the Chairman 4
From the Portfolio Managers 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 11
Financial Statements 12
Notes to Financial Statements 15
Investments in Securities 22
Federal Income Tax Information 30
2000 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 10p
Valuing Fund Shares 10p
Investment Options 11p
Purchasing Shares 12p
Transactions through Third Parties 15p
Sales Charges 15p
Exchanging/Selling Shares 19p
Distributions and Taxes 24p
Other Information 26p
Financial Highlights 27p
(This annual report is not part of the prospectus.) ANNUAL REPORT - 2000
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(picture of) Arne H. Carlson
Carlson H. Carlson
Chairman of the board
From the Chairman
We are in an extraordinary period for investing in financial assets, with many
stocks at their all-time highs. Looking at year 2000, American Express Financial
Corporation, the Fund's investment manager, expects the economy to continue to
grow and long-term interest rates to rise only slightly. This is a great time to
take a close look at your goals and investments. We encourage you to:
o Consult a professional investment adviser 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 manager's letter that follows provides a review of the Fund's
investment strategies and performance. The annual 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
(picture of) Keith Tufte
Keith Tufte
Portfolio manager
From the Portfolio Managers
It was an up-and-down 12 months but, in the end, a productive period for AXP
Blue Chip Advantage Fund. Its Class A shares produced a total return of 9.30%
(excluding the sales charge) for the past fiscal year -- February 1999 through
January 2000.
The period got off to a poor start as a rise in interest rates, something that
would prove to be a periodic problem throughout the fiscal year, sent the stock
market into retreat. But, as has been its hallmark in recent years, the market
mounted a fresh advance that took it to an all-time high by mid-summer.
AXP BLUE CHIP ADVANTAGE FUND (This annual report is not part of the prospectus.)
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(picture of) James M. Johnson, Jr.
James M. Johnson, Jr.
Portfolio manager
By that time, the Federal Reserve Board, concerned about the potential for
higher inflation, had instituted the first of what would be three increases in
short-term interest rates in 1999. Not surprisingly, the result was a stock
slump, which lasted into the fall and put the Fund in negative territory for the
first eight months of the fiscal year.
The market had another comeback left, though, as it rallied furiously from
October through December. During that time, the Fund more than made up for the
previously lost ground by advancing just over 15%. The fiscal year went out like
a lamb, however, as interest-rate worries resurfaced in January, causing the
market and the Fund to give back some of its gain.
As has been the case in recent years, large-capitalization stocks -- the focus
of the Fund -- were overall strong performers during the 12 months, although
they sometimes had to share the spotlight with small- and mid-cap issues.
Looking at industry sectors, technology-related stocks were clearly the big
winners, thanks in large part to a spectacular run-up in the fourth quarter of
1999.
Technology's strength worked to the Fund's advantage, as that sector comprised
its greatest area of investment. Other substantial investment sectors were
consumer cyclicals (including retailing), financial services and utilities.
Prominent holdings included IBM, Microsoft, Cisco Systems, Intel, Oracle, EMC,
Wal-Mart, General Electric, MCI WorldCom, Bristol-Meyers Squibb and Medtronic.
As for changes to the portfolio, we reduced health-care holdings early in the
period, then built them back up later. We also increased the exposure to
basic-materials stocks such as paper and chemicals.
Looking toward the new fiscal year, we expect an unsettled market, especially
for the first few months. The chances for a sustained advance should improve as
the year progresses, assuming the economy stays on the growth track and
corporate profits remain reasonably strong.
Keith Tufte
James M. Johnson, Jr.
(This annual report is not part of the prospectus.) ANNUAL REPORT - 2000
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Fund Facts
Class A -- 12-month performance
(All figures per share)
Net asset value (NAV)
Jan. 31, 2000 $11.80
Jan. 31, 1999 $11.88
Decrease $ 0.08
Distributions -- Feb. 1, 1999 - Jan. 31, 2000
From income $ 0.61
From capital gains $ 0.61
Total distributions $ 1.22
Total return* +9.30%**
Class B --12-month performance
(All figures per share)
Net asset value (NAV)
Jan. 31, 2000 $11.63
Jan. 31, 1999 $11.79
Decrease $ 0.16
Distributions -- Feb. 1, 1999 - Jan. 31, 2000
From income $ 0.58
From capital gains $ 0.61
Total distributions $ 1.19
Total return* +8.45%**
Class Y -- 12-month performance
(All figures per share)
Net asset value (NAV)
Jan. 31, 2000 $11.81
Jan. 31, 1999 $11.89
Decrease $ 0.08
Distributions -- Feb. 1, 1999 - Jan. 31, 2000
From income $ 0.62
From capital gains $ 0.61
Total distributions $ 1.23
Total return* +9.44%**
*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.
AXP BLUE CHIP ADVANTAGE FUND (This annual report is not part of the prospectus.)
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The 10 Largest Holdings
Percent Value
(of net assets) (as of Jan. 31, 2000)
Microsoft 4.77% $210,636,787
General Electric 3.25 143,618,201
Intel 3.07 135,297,030
Cisco Systems 2.89 127,687,949
Exxon Mobil 2.22 97,926,295
Bristol-Myers Squibb 1.89 83,410,799
SBC Communications 1.87 82,391,303
Wal-Mart Stores 1.82 80,400,374
Coca-Cola 1.80 79,550,938
AT&T 1.79 78,863,413
For further detail about these holdings, please refer to the section entitled
"Investments in Securities."
(icon of) pie chart
The 10 holdings listed here make up 25.37% of net assets
(This annual report is not part of the prosectus.) ANNUAL REPORT - 2000
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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.
AXP BLUE CHIP ADVANTAGE FUND (This annual report is not part of the prospectus.)
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The Fund's Long-term Performance
$60,000
$50,000
X
$44,908
$40,000 S&P 500 Index AXP Blue Chip
X Advantage Fund
Class A
$30,000
X
$20,000 Lipper Large-Cap Core Index
$9,500
4/1/90 '91 '92 '93 '94 '95 '96 '97 '98 '99 '00
Average annual total returns (as of Jan. 31, 2000)
1 year Since inception (B&Y) 5 years Since inception(A)
Class A +3.84% --% +22.37% +16.37%**
Class B +4.51% +21.96%* --% --%
Class Y +9.44% +23.14%* --% --%
*Inception date was March 20, 1995.
**Inception date was March 5, 1990.
Assumes: Holding period from 4/1/90 to 1/31/00. Returns do not reflect taxes
payable on distributions. Reinvestment of all income and capital gain
distributions for the Fund has a value of $23,676. Also see "Past Performance"
in the Fund's current prospectus.
On the graph above you can see how the Fund's total return compared to two
widely cited performance indexes, the Standard & Poor's 500 Index (S&P 500) and
the Lipper Large-Cap Core Index. In comparing AXP Blue Chip Advantage Fund
(Class A) to the two indexes, you should take into account the fact that the
Fund's performance reflects the maximum sales charge of 5% (effective March 20,
2000 the sales charge increased to 5.75%), while such charges are not reflected
in the performance of the indexes.
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%
(effective March 20, 2000 the sales charge increased to 5.75%). This was a
period of widely fluctuating security prices. Past performance is no guarantee
of future results.
(This annual report is not part of the prospectus.) ANNUAL REPORT - 2000
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S&P 500 Index, an unmanaged list of common stocks, is frequently used as a
general measure of market performance. The index reflects reinvestment of all
distributions and changes in market prices, but excludes brokerage commissions
or other fees. However, the S&P 500 companies may be generally larger than those
in which the Fund invests.
Lipper Large-Cap Core Index, an unmanaged index published by Lipper Inc.,
includes 30 funds that are generally similar to the Fund, although some funds in
the index may have somewhat different investment policies or objectives.
AXP BLUE CHIP ADVANTAGE FUND (This annual report is not part of the prospectus.)
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The financial statements contained in Post-Effective Amendment #24 to
Registration Statement No. 33-30770 filed on or about March 31st, 2000, are
incorporated herein by reference.
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Federal Income Tax Information
(Unaudited)
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 are reported to you on Form 1099-DIV, Dividends
and Distributions. Shareholders should consult a tax advisor on how to report
distributions for state and local tax purposes.
AXP Blue Chip Advantage Fund
Fiscal year ended Jan. 31, 2000
Class A
Income distributions -- taxable as dividend income, 26.86% qualifying for
deduction by corporations.
Payable date Per share
March 25, 1999 $0.00808
June 24, 1999 0.00884
Sept. 23, 1999 0.00598
Dec. 22, 1999 0.58902
Total $0.61192
Capital gain distribution -- taxable as long-term capital gain.
Payable date Per share
Dec. 22, 1999 $0.60673
Total distributions $1.21865
The distribution of $1.19575 per share, payable Dec. 22, 1999, consisted of
$0.00768 derived from net investment income, $0.58134 from net short-term
capital gains (a total of $0.58902 taxable as dividend income) and $0.60673 from
net long-term capital gains.
AXP BLUE CHIP ADVANTAGE FUND (This annual report is not part of the prospectus.)
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Class B
Income distributions -- taxable as dividend income, 26.86% qualifying for
deduction by corporations.
Payable date Per share
Dec. 22, 1999 $0.58134
Capital gain distribution -- taxable as long-term capital gain.
Payable date Per share
Dec. 22, 1999 $0.60673
Total distributions $1.18807
The distribution of $1.18807 per share, payable Dec. 22, 1999, consisted of
$0.58134 from net short-term capital gains (a total of $0.58134 taxable as
dividend income) and $0.60673 from net long-term capital gains.
Class Y
Income distributions -- taxable as dividend income, 26.86% qualifying for
deduction by corporations.
Payable date Per share
March 25, 1999 $0.01063
June 24, 1999 0.01143
Sept. 23, 1999 0.01069
Dec. 22, 1999 0.59396
Total $0.62671
Capital gain distribution -- taxable as long-term capital gain.
Payable date Per share
Dec. 22, 1999 $0.60673
Total distributions $1.23344
The distribution of $1.20069 per share, payable Dec. 22, 1999, consisted of
$0.01262 derived from net investment income, $0.58134 from net short-term
capital gains (a total of $0.59396 taxable as dividend income) and $0.60673 from
net long-term capital gains.
(This annual report is not part of the prospectus.) ANNUAL REPORT - 2000
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American
Express(R)
Funds
AXP Blue Chip Advantage Fund
200 AXP Financial Center
Minneapolis, MN 55474
PRSRT STD AUTO
U.S. POSTAGE
PAID
SPENCER, IA
PERMIT NO. 85
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 Financial Advisors (logo)
S-6025 P (3./00)
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STATEMENT OF DIFFERENCES
Difference Description
1) The layout is different 1) Some of the layout in the
throughout the annual report. annual report to
shareholders is in two
columns.
2) There are pictures, icons 2) Each picture, icon and
and graphs throughout the graph is described in
annual report. parentheses.
