AXP(R)
Blue Chip
Advantage
Fund
AXP Blue Chip Advantage Fund seeks to provide shareholders with a long-term
total return exceeding that of the U.S. stock market.
Prospectus
March 31, 2004
Please note that this Fund:
o is not a bank deposit
o is not federally insured
o is not endorsed by any bank or government agency
o is not guaranteed to achieve its goal
Like all mutual funds, the Securities and Exchange Commission has not approved
or disapproved these securities or passed upon the adequacy of this prospectus.
Any representation to the contrary is a criminal offense.
(logo) (logo)
American AMERICAN
Express(R) EXPRESS
Funds (R)
Table of Contents
TAKE A CLOSER LOOK AT:
The Fund 3p
Goal 3p
Principal Investment Strategies 3p
Principal Risks 4p
Past Performance 5p
Fees and Expenses 7p
Investment Manager 8p
Other Securities and
Investment Strategies 9p
Buying and Selling Shares 9p
Valuing Fund Shares 9p
Investment Options 10p
Purchasing Shares 11p
Transactions Through Third Parties 14p
Sales Charges 14p
Exchanging/Selling Shares 17p
Distributions and Taxes 21p
Financial Highlights 23p
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2p -- AXP BLUE CHIP ADVANTAGE FUND -- 2004 PROSPECTUS
The Fund
GOAL
AXP Blue Chip Advantage Fund (the Fund) seeks to provide shareholders with a
long-term total return exceeding that of the U.S. stock market. Because any
investment involves risk, achieving this goal cannot be guaranteed.
PRINCIPAL INVESTMENT STRATEGIES
Under normal market conditions, at least 80% of the Fund's net assets are
invested in blue chip stocks. Blue chip stocks are issued by companies with a
market capitalization of at least $1 billion, an established management, a
history of consistent earnings and a leading position within their respective
industries. A common measure of blue chip stocks is the S&P 500 Index. The S&P
500 Index is an unmanaged market index used to measure the total return of the
U.S. stock market (the Fund may change this market index from time to time).
While the Fund invests in stocks included in the S&P 500 Index, it is not an
index fund, it may own companies not included in the index, and its results will
likely differ from the index. Selecting blue chip stocks is the primary decision
in building the investment portfolio. The Fund will provide shareholders with at
least 60 days' notice of any change in the 80% policy.
In pursuit of the Fund's goal, American Express Financial Corporation (AEFC),
the Fund's investment manager, chooses equity investments by:
o Identifying companies with:
o attractive valuations,
o financial strength,
o strong, sustainable earnings growth, and
o improving growth dynamics.
o Buying a diversified portfolio of securities.
o Buying equity securities not included in the S&P 500 Index if those
securities meet the standards described above.
In evaluating whether to sell a security, AEFC considers, among other factors,
whether:
o The security is overvalued relative to alternative investments.
o Political, economic, or other events could affect the company's
performance.
o Potential losses can be minimized (i.e., in a market down-turn).
o A more attractive opportunity exists.
o The company or the security continues to meet the other standards described
above.
Unusual Market Conditions
During unusual market conditions, the Fund may invest more of its assets in
money market securities. Although the Fund primarily will invest in these
securities to avoid losses, this type of investing also could prevent the Fund
from achieving its investment objective. During these times, AEFC may make
frequent securities trades that could result in increased fees, expenses, and
taxes.
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3p -- AXP BLUE CHIP ADVANTAGE FUND -- 2004 PROSPECTUS
PRINCIPAL RISKS
This Fund is designed for investors with above-average risk tolerance. Please
remember that with any mutual fund investment you may lose money. Principal
risks associated with an investment in the Fund include:
Market Risk
Issuer Risk
Style Risk
Market Risk
The market may drop and you may lose money. Market risk may affect a single
issuer, sector of the economy, industry, or the market as a whole. The market
value of all securities may move up and down, sometimes rapidly and
unpredictably.
Issuer Risk
The risk that an issuer, or the value of its stocks or bonds, will perform
poorly. Poor performance may be caused by poor management decisions, competitive
pressures, breakthroughs in technology, reliance on suppliers, labor problems or
shortages, corporate restructurings, fraudulent disclosures or other factors.
Style Risk
The objective of the Fund is to provide shareholders with a long-term return
exceeding that of the U.S. stock market. Currently, the S&P 500 Index is the
market index used to measure total return of the U.S. stock market. However,
unlike the unmanaged index, the Fund's performance is affected by factors such
as the size of the Fund's portfolio, transaction costs, management fees and
expenses, brokerage commissions and fees, the extent and timing of cash flows in
and out of the Fund, stock selection, sector weightings, and other such factors.
As a result, once these factors are accounted for, the Fund may under-perform
the market index.
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4p -- AXP BLUE CHIP ADVANTAGE FUND -- 2004 PROSPECTUS
PAST PERFORMANCE
The following bar chart and table indicate the risks and variability of
investing in the Fund by showing:
o how the Fund's performance has varied for each full calendar year shown on
the chart below, and
o how the Fund's average annual total returns compare to recognized indexes.
How the Fund has performed in the past does not indicate how the Fund will
perform in the future.
(bar chart)
CLASS A PERFORMANCE
(based on calendar years)
40%
+36.57%
30%
+26.18% +27.37%
20% +21.43% +22.91% +20.42%
10%
+1.27%
0%
- -10% -11.52%
-17.03%
- -20% -22.77%
- -30%
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003
During the period shown in the bar chart, the highest return for a calendar
quarter was +20.14% (quarter ending December 1998) and the lowest return for a
calendar quarter was -18.02% (quarter ending September 2002).
The 5.75% sales charge applicable to Class A shares of the Fund is not reflected
in the bar chart; if reflected, returns would be lower than those shown. The
performance of Class B, Class C and Class Y may vary from that shown above
because of differences in expenses.
The Fund's Class A year to date return as of Dec. 31, 2003 was +27.37%.
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5p -- AXP BLUE CHIP ADVANTAGE FUND -- 2004 PROSPECTUS
Average Annual Total Returns (as of Dec. 31, 2003)
Since Since
1 year 5 years 10 years inception (B&Y) inception (C)
Blue Chip Advantage:
Class A
Return before taxes +20.04% -3.90% +7.88% N/A N/A
Return after taxes on distributions +19.93% -4.98% +5.73% N/A N/A
Return after taxes on distributions
and sale of fund shares +13.16% -3.59% +5.67% N/A N/A
Class B
Return before taxes +22.45% -3.65% N/A +7.88%(a) N/A
Class C
Return before taxes +26.54% N/A N/A N/A -9.07%(c)
Class Y
Return before taxes +27.69% -2.59% N/A +8.87%(a) N/A
S&P 500 Index +28.68% -0.57% +11.07% +11.39%(b) -5.97%(d)
Lipper Large-Cap Core Funds Index +24.80% -1.08% +9.27% +9.85%(b) -6.89%(d)
(a) Inception date was March 20, 1995.
(b) Measurement period started April 1, 1995.
(c) Inception date was June 26, 2000.
(d) Measurement period started July 1, 2000.
Before-Tax Returns
This table shows total returns from hypothetical investments in Class A, Class
B, Class C and Class Y shares of the Fund. These returns are compared to the
indexes shown for the same periods. The performance of different classes varies
because of differences in sales charges and fees. Past performance for Class Y
for the periods prior to March 20, 1995 may be calculated based on the
performance of Class A, adjusted to reflect differences in sales charges,
although not for other differences in expenses.
After-Tax Returns
After-tax returns are shown only for Class A shares. After-tax returns for the
other classes will vary. After-tax returns are calculated using the highest
historical individual federal marginal income tax rate and do not reflect the
impact of state and local taxes. Actual after-tax returns will depend on your
tax situation and most likely will differ from the returns shown in the table.
If you hold your shares in a tax-deferred account, such as a 401(k) plan or an
IRA, the after-tax returns do not apply to you since you will not incur taxes
until you begin to withdraw from your account.
The Return After Taxes on Distributions for a period may be the same as the
Return Before Taxes for the same period if there are no distributions or if the
distributions are small. The Return After Taxes on Distributions and Sale of
Fund Shares for a period may be greater than the Return Before Taxes for the
same period if there was a tax loss realized on sale of Fund shares. The benefit
of the tax loss (since it can be used to offset other gains) may result in a
higher return.
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6p -- AXP BLUE CHIP ADVANTAGE FUND -- 2004 PROSPECTUS
For purposes of this calculation we assumed:
o the maximum sales charge for Class A shares,
o sales at the end of the period and deduction of the applicable contingent
deferred sales charge (CDSC) for Class B shares,
o no sales charge for Class C shares,
o no sales charge for Class Y shares, and
o no adjustments for taxes paid by an investor on the reinvested income and
capital gains.
Standard & Poor's 500 Index (S&P 500 Index), an unmanaged index 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.
The Lipper Large-Cap Core Funds Index, published by Lipper Inc., includes the 30
largest funds that are generally similar to the Fund, although some funds in the
index may have somewhat different investment policies or objectives.
FEES AND EXPENSES
Fund investors pay various expenses. The table below describes the fees and
expenses that you may pay if you buy and hold shares of the Fund.
Shareholder Fees (fees paid directly from your investment)
Class A Class B Class C Class Y
Maximum sales charge (load) imposed on purchases(a)
(as a percentage of offering price) 5.75% none none none
Maximum deferred sales charge (load) imposed on sales
(as a percentage of offering price at time of purchase) none(b) 5% 1%(c) none
Annual Fund operating expenses (expenses that are deducted from Fund assets)
As a percentage of average daily net assets: Class A Class B Class C Class Y
Management fees(d) 0.48% 0.48% 0.48% 0.48%
Distribution (12b-1) fees 0.25% 1.00% 1.00% 0.00%
Other expenses(e) 0.33% 0.35% 0.36% 0.41%
Total 1.06% 1.83% 1.84% 0.89%
(a) This charge may be reduced depending on the value of your total investments
in American Express mutual funds. See "Sales Charges."
(b) For Class A purchases over $1,000,000 on which no sales charge is assessed,
a 1% sales charge applies if you sell your shares less than one year after
purchase.
(c) For Class C purchases, a 1% sales charge applies if you sell your shares
less than one year after purchase.
(d) Includes the impact of a performance incentive adjustment fee that
increased the management fee by 0.004% for the most recent fiscal year.
(e) Other expenses include an administrative services fee, a shareholder
services fee for Class Y, a transfer agency fee and other nonadvisory
expenses. Effective May 2003, the Fund's transfer agency fee increased. The
percentages above reflect the increase.
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7p -- AXP BLUE CHIP ADVANTAGE FUND -- 2004 PROSPECTUS
Examples
These examples are intended to help you compare the cost of investing in the
Fund with the cost of investing in other mutual funds.
Assume you invest $10,000 and the Fund earns a 5% annual return each year. The
operating expenses remain the same each year. You would pay the following
expenses if you redeem all of your shares at the end of the time periods
indicated:
1 year 3 years 5 years 10 years
Class A(a) $677 $893 $1,127 $1,799
Class B $586(b) $876(b) $1,091(b) $1,950(c)
Class C $187 $579 $ 996 $2,164
Class Y $ 91 $284 $ 494 $1,100
(a) Includes a 5.75% sales charge.
(b) Includes the applicable CDSC.
(c) Based on conversion of Class B shares to Class A shares in the ninth year
of ownership.
You would pay the following expenses if you did not redeem your shares:
1 year 3 years 5 years 10 years
Class A(a) $677 $893 $1,127 $1,799
Class B $186 $576 $ 991 $1,950(b)
Class C $187 $579 $ 996 $2,164
Class Y $ 91 $284 $ 494 $1,100
(a) Includes a 5.75% sales charge.
(b) Based on conversion of Class B shares to Class A shares in the ninth year
of ownership.
These examples do not represent actual expenses, past or future. Actual expenses
may be higher or lower than those shown.
INVESTMENT MANAGER
Doug Chase, Portfolio Manager
o Joined AEFC in 2002 as a portfolio manager.
o Began investment career in 1992 as an analyst and also served as a
Portfolio Manager for Fidelity Investments.
o MBA, University of Michigan.
The Fund pays AEFC a fee for managing its assets. Under the Investment
Management Services Agreement, the fee for the most recent fiscal year was 0.48%
of the Fund's average daily net assets, including an adjustment under the terms
of a performance incentive arrangement. The maximum monthly adjustment (increase
or decrease) will be 0.12% of the Fund's average net assets on an annual basis.
Under the agreement, the Fund also pays taxes, brokerage commissions, and
nonadvisory expenses. AEFC or an affiliate may make payments from its own
resources, which include profits from management fees paid by the Fund, to
compensate broker-dealers or other persons for providing distribution
assistance. AEFC, located at 200 AXP Financial Center, Minneapolis, Minnesota
55474, is a wholly-owned subsidiary of American Express Company, a financial
services company with headquarters at American Express Tower, World Financial
Center, New York, New York 10285.
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8p -- AXP BLUE CHIP ADVANTAGE FUND -- 2004 PROSPECTUS
The Fund operates under an order from the Securities and Exchange Commission
that permits AEFC, subject to the approval of the Board of Directors, to appoint
a subadviser or change the terms of a subadvisory agreement for the Fund without
first obtaining shareholder approval. The order permits the Fund to add or
change unaffiliated subadvisers or the fees paid to subadvisers from time to
time without the expense and delays associated with obtaining shareholder
approval of the change.
OTHER SECURITIES AND INVESTMENT STRATEGIES
The Fund may invest in other securities and may employ other investment
strategies that are not principal investment strategies. The Fund's policies
permit investment in other instruments such as money market securities.
Additionally, the Fund may use derivative instruments such as futures, options
and forward contracts to produce incremental earnings, to hedge existing
positions, and to increase flexibility. Even though the Fund's policies permit
the use of derivatives in this manner, the portfolio manager is not required to
use derivatives.
For more information on strategies and holdings, see the Fund's Statement of
Additional Information (SAI) and its annual and semiannual reports.
Buying and Selling Shares
The public offering price for Class A shares of the Fund is the net asset value
(NAV) plus a sales charge, and for Class B, C, and Y shares, the NAV. In
addition to buying and selling shares through the Fund's distributor, American
Express Financial Advisors Inc., you may buy or sell shares through third
parties, including 401(k) plans, banks, brokers, and investment advisers. Where
authorized by the Fund, orders in good form are priced using the NAV next
determined after your order is placed with the third party. If you buy or redeem
shares through a third party, consult that firm to determine whether your order
will be priced at the time it is placed with the third party or at the time it
is placed with the Fund. The third party may charge a fee for its services.
VALUING FUND SHARES
The NAV is the value of a single share of the Fund. The NAV is determined by
dividing the value of the Fund's assets, minus any liabilities, by the number of
shares outstanding. AEFC calculates the NAV as of the close of business on the
New York Stock Exchange (NYSE), normally 4:00 p.m. Eastern time, on each day
that the NYSE is open.
The Fund's securities are valued primarily on the basis of market quotations.
However, securities will be valued at fair value if reliable quotations are not
readily available. Securities also will be valued at fair value if their value
has been materially affected by events after the close of the primary exchanges
or markets on which they trade and before the NAV is calculated. This occurs
most commonly with foreign securities, but may occur in other cases. The fair
value of a security is likely to be different from the quoted or published
price. Fair value procedures are approved by the Fund's Board of Directors.
Certain short-term securities are valued at amortized cost. Foreign investments
are valued in U.S. dollars.
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9p -- AXP BLUE CHIP ADVANTAGE FUND -- 2004 PROSPECTUS
INVESTMENT OPTIONS
1. Class A shares are sold to the public with a sales charge at the time of
purchase and an annual distribution (12b-1) fee of 0.25%.
2. Class B shares are sold to the public with a contingent deferred sales
charge (CDSC) and an annual distribution fee of 1.00%.
3. Class C shares are sold to the public without a sales charge at the time of
purchase and with an annual distribution fee of 1.00% (may be subject to a
CDSC).
4. Class Y shares are sold to qualifying institutional investors without a
sales charge or distribution fee. Please see the SAI for information on
eligibility to purchase Class Y shares.
Investment options summary
The Fund offers different classes of shares. There are differences among the
fees and expenses for each class. Not everyone is eligible to buy every class.
After determining which classes you are eligible to buy, decide which class best
suits your needs. Your financial advisor can help you with this decision.
The following table shows the key features of each class:
- ---------------- -------------- ---------------- ------------ ---------------
Class A Class B Class C Class Y
- ---------------- -------------- ---------------- ------------ ---------------
Availability Available to Available to Available Limited to
all all investors. to all qualifying
investors. investors. institutional
investors.
- ---------------- -------------- ---------------- ------------ ---------------
Initial Sales Yes. Payable No. Entire No. Entire No. Entire
Charge at time of purchase price purchase purchase
purchase. is invested in price is price is
Lower sales shares of the invested invested in
charge for Fund. in shares shares of the
larger of the Fund.
investments. Fund.
- ---------------- -------------- ---------------- ------------ ---------------
Deferred Sales On purchases Maximum 5% 1% CDSC None.
Charge over CDSC during applies if
$1,000,000, the first year you sell
1% CDSC decreasing to your
applies if 0% after six shares
you sell years. less than
your shares one year
less than after
one year purchase.
after
purchase.
- ---------------- -------------- ---------------- ------------ ---------------
Distribution Yes.* 0.25% Yes.* 1.00% Yes.* Yes. 0.10%
and/or 1.00%
Shareholder
Service Fee
- ---------------- -------------- ---------------- ------------ ---------------
Conversion to N/A Yes, No. No.
Class A automatically
in ninth
calendar year
of ownership.
- ---------------- -------------- ---------------- ------------ ---------------
* The Fund has adopted a plan under Rule 12b-1 of the Investment Company Act
of 1940 that allows it to pay distribution and servicing-related expenses
for the sale of Class A, Class B and Class C shares. Because these fees are
paid out of the Fund's assets on an on-going basis, the fees may cost
long-term shareholders more than paying other types of sales charges
imposed by some mutual funds.
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10p -- AXP BLUE CHIP ADVANTAGE FUND -- 2004 PROSPECTUS
Should you purchase Class A, Class B or Class C shares?
If your investments in American Express mutual funds total $100,000 or more,
Class A shares may be the better option because the sales charge is reduced for
larger purchases. If you qualify for a waiver of the sales charge, Class A
shares will be the best option.
If you invest less than $100,000, consider how long you plan to hold your
shares. Class B shares have a higher annual distribution fee than Class A shares
and a CDSC for six years. Class B shares convert to Class A shares in the ninth
calendar year of ownership. Class B shares purchased through reinvested
dividends and distributions also will convert to Class A shares in the same
proportion as the other Class B shares.
Class C shares also have a higher annual distribution fee than Class A shares.
Class C shares have no sales charge if you hold the shares for one year or
longer. Unlike Class B shares, Class C shares do not convert to Class A. As a
result, you will pay a 1% distribution fee for as long as you hold Class C
shares. If you choose a deferred sales charge option (Class B or Class C),
generally you should consider Class B shares if you intend to hold your shares
for more than six years. Consider Class C shares if you intend to hold your
shares less than six years. To help you determine what investment is best for
you, consult your financial advisor.
PURCHASING SHARES
To purchase shares through entities other than American Express Financial
Advisors Inc. (the Distributor), please consult your selling agent. The
following section explains how you can purchase shares from the Distributor.
If you do not have an existing American Express mutual fund account, you will
need to establish a brokerage account. Your financial advisor will help you fill
out and submit an application. Once your account is set up, you can choose among
several convenient ways to invest.
When you purchase, your order will be priced at the next NAV calculated after
your order is accepted by the Fund. If your application does not specify which
class of shares you are purchasing, we will assume you are investing in Class A
shares.
Important: When you open an account, you must provide your correct Taxpayer
Identification Number (TIN), which is either your Social Security or Employer
Identification number.
If you do not provide and certify the correct TIN, you could be subject to
backup withholding of 28% of taxable distributions and proceeds from certain
sales and exchanges. You also could be subject to further penalties, such as:
o a $50 penalty for each failure to supply your correct TIN,
o a civil penalty of $500 if you make a false statement that results in no
backup withholding, and
o criminal penalties for falsifying information.
You also could be subject to backup withholding, if the IRS notifies us to do
so, because you failed to report required interest or dividends on your tax
return.
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11p -- AXP BLUE CHIP ADVANTAGE FUND -- 2004 PROSPECTUS
How to determine the correct TIN
For this type of account: Use the Social Security or Employer
Identification number of:
- ----------------------------------- --------------------------------------
Individual or joint account The individual or one of the owners
listed on the joint account
- ----------------------------------- --------------------------------------
Custodian account of a minor The minor
(Uniform Gifts/Transfers to
Minors Act)
- ----------------------------------- --------------------------------------
A revocable living trust The grantor-trustee (the person who
puts the money into the trust)
- ----------------------------------- --------------------------------------
An irrevocable trust, pension The legal entity (not the personal
trust or estate representative or trustee, unless no
legal entity is designated in the
account title)
- ----------------------------------- --------------------------------------
Sole proprietorship or The owner
single-owner LLC
- ----------------------------------- --------------------------------------
Partnership or multi-member LLC The partnership
- ----------------------------------- --------------------------------------
Corporate or LLC electing The corporation
corporate status on Form 8837
- ----------------------------------- --------------------------------------
Association, club or tax-exempt The organization
organization
- ----------------------------------- --------------------------------------
For details on TIN requirements, contact your financial advisor to obtain a copy
of federal Form W-9, "Request for Taxpayer Identification Number and
Certification." You also may obtain the form on the Internet at (www.irs.gov).
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12p -- AXP BLUE CHIP ADVANTAGE FUND -- 2004 PROSPECTUS
Methods of purchasing shares
By mail
Once your account has been established, send your check to:
American Express Funds
70200 AXP Financial Center
Minneapolis, MN 55474
Minimum amounts
Initial investment: $2,000*
Additional investments: $500**
Account balances: $300
Qualified account balances: none
If your Fund account balance falls below $300 for any reason, including a market
decline, you will be asked to increase it to $300 or establish a scheduled
investment plan. If you do not do so within 30 days, your shares can be sold and
the proceeds mailed to you.
* $1,000 for tax qualified accounts.
** $100 minimum add-on for existing mutual fund accounts outside of a
brokerage account (direct at fund accounts).
By scheduled investment plan
Minimum amounts
Initial investment: $2,000*
Additional investments: $100**
Account balances: none (on a scheduled investment plan with monthly
payments)
If your Fund account balance is below $2,000, you must make payments at least
monthly.
* $100 for direct at fund accounts.
** $50 minimum per payment for qualified accounts in a direct at fund account.
By wire or electronic funds transfer
Please contact your financial advisor or selling agent for specific
instructions.
Minimum wire purchase amount: $1,000 or new account minimum, as applicable.
By telephone
If you have a brokerage account, you may use the money in your account to make
initial and subsequent purchases.
To place your order, call:
(800) 872-4377 for brokerage accounts
(800) 967-4377 for wrap accounts
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13p -- AXP BLUE CHIP ADVANTAGE FUND -- 2004 PROSPECTUS
TRANSACTIONS THROUGH THIRD PARTIES
You may buy or sell shares through certain 401(k) plans, banks, broker-dealers,
financial advisors or other investment professionals. These organizations may
charge you a fee for this service and may have different policies. Some policy
differences may include different minimum investment amounts, exchange
privileges, fund choices and cutoff times for investments. The Fund and the
Distributor are not responsible for the failure of one of these organizations to
carry out its obligations to its customers. Some organizations may receive
compensation from the Distributor or its affiliates for shareholder
recordkeeping and similar services. Where authorized by the Fund, some
organizations may designate selected agents to accept purchase or sale orders on
the Fund's behalf. To buy or sell shares through third parties or to determine
if there are policy differences, please consult your selling agent. For other
pertinent information related to buying or selling shares, please refer to the
appropriate section in the prospectus.
SALES CHARGES
Class A -- initial sales charge alternative
When you purchase Class A shares, you pay a sales charge as shown in the
following table:
Sales charge as percentage of:
Total market value Public offering price* Net amount invested
Up to $49,999 5.75% 6.10%
$50,000-$99,999 4.75 4.99
$100,000-$249,999 3.50 3.63
$250,000-$499,999 2.50 2.56
$500,000-$999,999 2.00 2.04
$1,000,000 or more 0.00 0.00
* Offering price includes the sales charge.
The sales charge on Class A shares may be lower than 5.75%, based on the
combined market value of:
o your current investment in this Fund,
o your previous investment in this Fund, and
o investments you and your primary household group have made in other
American Express mutual funds where you have paid a sales charge. (The
primary household group consists of accounts in any ownership for spouses
or domestic partners and their unmarried children under 21. For purposes of
this policy, domestic partners are individuals who maintain a shared
primary residence and have joint property or other insurable interests.)
AXP Tax-Free Money Fund and Class A shares of AXP Cash Management Fund do
not have sales charges and are excluded from the total. If you or any
member of your primary household group elects to split the primary
household group into individual household groups (for example, by asking
that account statements be sent to separate addresses), assets will no
longer be combined for purposes of reducing the sales charge.
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14p -- AXP BLUE CHIP ADVANTAGE FUND -- 2004 PROSPECTUS
Other Class A sales charge policies
o IRA purchases or other employee benefit plan purchases made through a
payroll deduction plan or through a plan sponsored by an employer,
association of employers, employee organization or other similar group, may
be added together to reduce sales charges for all shares purchased through
that plan provided that the plan uses the Distributor's group billing
services, and
o if you intend to invest more than $50,000 over a period of 13 months, you
can reduce the sales charges in Class A by filing a letter of intent. If
purchasing shares in a brokerage account or through a third party, you must
request the reduced sales charge when you buy shares. For more details,
please contact your financial advisor or see the SAI.
Waivers of the sales charge for Class A shares
Sales charges do not apply to:
o current or retired board members, officers or employees of the Fund or AEFC
or its subsidiaries, their spouses or domestic partners, children and
parents.
o current or retired American Express financial advisors, employees of
financial advisors, their spouses or domestic partners, children and
parents.
o registered representatives and other employees of brokers, dealers or other
financial institutions having a sales agreement with the Distributor,
including their spouses, domestic partners, children and parents.
o investors who have a business relationship with a newly associated
financial advisor who joined the Distributor from another investment firm
provided that (1) the purchase is made within six months of the advisor's
appointment date with the Distributor, (2) the purchase is made with
proceeds of shares sold that were sponsored by the financial advisor's
previous broker-dealer, and (3) the proceeds are the result of a sale of an
equal or greater value where a sales load was assessed.
o qualified employee benefit plans offering participants daily access to
American Express mutual funds. Eligibility must be determined in advance.
For assistance, please contact your financial advisor. Participants in
certain qualified plans where the initial sales charge is waived may be
subject to a deferred sales charge of up to 4%.
o shareholders who have at least $1 million in American Express mutual funds.
If the investment is sold less than one year after purchase, a CDSC of 1%
will be charged. During that year, the CDSC will be waived only in the
circumstances described for waivers for Class B and Class C shares.
o purchases made within 90 days after a sale of American Express Fund shares
(up to the amount sold). Send the Fund a written request along with your
payment, indicating the account number, the date and the amount of the
sale.
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15p -- AXP BLUE CHIP ADVANTAGE FUND -- 2004 PROSPECTUS
o purchases made:
o with dividend or capital gain distributions from this Fund or from the
same class of another American Express mutual fund,
o through or under a wrap fee product or other investment product
sponsored by the Distributor or another authorized broker-dealer,
investment advisor, bank or investment professional,
o within the University of Texas System ORP,
o within a segregated separate account offered by Nationwide Life
Insurance Company or Nationwide Life and Annuity Insurance Company,
o within the University of Massachusetts After-Tax Savings Program, or
o through or under a subsidiary of AEFC offering Personal Trust Services'
Asset-Based pricing alternative.
o shareholders whose original purchase was in a Strategist fund merged into
an American Express fund in 2000.
Class B and Class C -- contingent deferred sales charge (CDSC) alternative
For Class B, the CDSC is based on the sale amount and the number of calendar
years -- including the year of purchase -- between purchase and sale. The
following table shows how CDSC percentages on sales decline after a purchase:
If the sale is made during the: The CDSC percentage rate is:
First year 5%
Second year 4%
Third year 4%
Fourth year 3%
Fifth year 2%
Sixth year 1%
Seventh year 0%
For Class C, a 1% CDSC is charged if you sell your shares less than one year
after purchase.
For both Class B and Class C, if the amount you are selling causes the value of
your investment to fall below the cost of the shares you have purchased, the
CDSC is based on the lower of the cost of those shares purchased or market
value. Because the CDSC is imposed only on sales that reduce your total purchase
payments, you never have to pay a CDSC on any amount that represents
appreciation in the value of your shares, income earned by your shares, or
capital gains.
In addition, the CDSC on your sale, if any, will be based on your oldest
purchase payment. The CDSC on the next amount sold will be based on the next
oldest purchase payment.
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16p -- AXP BLUE CHIP ADVANTAGE FUND -- 2004 PROSPECTUS
Example
Assume you had invested $10,000 in Class B shares and that your investment had
appreciated in value to $12,000 after 3 1/2 years, including reinvested
dividends and capital gain distributions. You could sell up to $2,000 worth of
shares without paying a CDSC ($12,000 current value less $10,000 purchase
amount). If you sold $2,500 worth of shares, the CDSC would apply to the $500
representing part of your original purchase price. The CDSC rate would be 3%
because the sale was made during the fourth year after the purchase.
Waivers of the sales charge for Class B and Class C shares
The CDSC will be waived on sales of shares:
o in the event of the shareholder's death,
o held in trust for an employee benefit plan, or
o held in IRAs or certain qualified plans if American Express Trust Company
is the custodian, such as Keogh plans, tax-sheltered custodial accounts or
corporate pension plans, provided that the shareholder is:
o at least 59 1/2 years old AND
o taking a retirement distribution (if the sale is part of a transfer to
an IRA or qualified plan, or a custodian-to-custodian transfer, the
CDSC will not be waived) OR
o selling under an approved substantially equal periodic payment
arrangement.
EXCHANGING/SELLING SHARES
Exchanges
You may exchange your Fund shares at no charge for shares of the same class of
any other publicly offered American Express mutual fund. Exchanges into AXP
Tax-Free Money Fund may only be made from Class A shares. For complete
information on the other fund, including fees and expenses, read that fund's
prospectus carefully. Your exchange will be priced at the next NAV calculated
after we receive your transaction request in good order.
The Fund seeks to prevent market timing. Do not invest in the Fund if you are a
market timer. Market timing is a trading practice designed to take advantage of
short-term market movements or price fluctuations. Because market timing can
impact the Fund's performance and its shareholders, the Fund seeks to protect
the best interests of the Fund's shareholders as follows:
o Because the Distributor tries to distinguish market timing from trading
that it believes is not harmful, such as periodic rebalancing for purposes
of asset allocation or dollar cost averaging, there is no set number of
exchanges an investor can make without being identified as a market timer.
Accounts under common control may be counted together for these purposes.
o When the Distributor identifies an investor whose trading activity, in its
sole judgment, constitutes market timing, it may impose restrictions on the
investor's exchange privileges or may reject the investor's purchases or
exchanges, or both.
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17p -- AXP BLUE CHIP ADVANTAGE FUND -- 2004 PROSPECTUS
o The Distributor reserves the right to reject any purchase or exchange
orders, limit the amount of orders, or modify or discontinue the exchange
privilege for any person or group, including orders accepted by a
retirement plan or financial intermediary, if it determines, in its sole
judgment, that the purchase or exchange may be harmful to existing
shareholders or the Fund.
o Although the Distributor does not knowingly permit market timing, it cannot
guarantee that it will be able to identify and restrict all short-term
trading activity. The Distributor receives purchase and sale orders through
various financial intermediaries and retirement plans, and may not always
detect market timing through intermediaries and plans.
Other exchange policies:
o Exchanges must be made into the same class of shares of the new fund.
o If your exchange creates a new account, it must satisfy the minimum
investment amount for new purchases.
o Once we receive your exchange request, you cannot cancel it.
o Shares of the new fund may not be used on the same day for another
exchange.
o If your shares are pledged as collateral, the exchange will be delayed
until written approval is received from the secured party.
Selling Shares
You may sell your shares at any time. The payment will be mailed within seven
days after your request is received in good order.
When you sell shares, the amount you receive may be more or less than the amount
you invested. Your sale price will be the next NAV calculated after your request
is received in good order by the Fund, minus any applicable CDSC.
You can change your mind after requesting a sale and use all or part of the
proceeds to purchase new shares in the same account from which you sold. If you
reinvest in Class A, you will purchase the new shares at NAV rather than the
offering price on the date of a new purchase. If you reinvest in Class B or
Class C, any CDSC you paid on the amount you are reinvesting also will be
reinvested. To take advantage of this option, send a written request within 90
days of the date your sale request was received and include your account number.
This privilege may be limited or withdrawn at any time and use of this option
may have tax consequences.
The Fund reserves the right to redeem in kind.
For more details and a description of other sales policies, please see the SAI.
To sell or exchange shares held with entities other than the Distributor, please
consult your selling agent. The following section explains how you can exchange
or sell shares held with the Distributor.
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18p -- AXP BLUE CHIP ADVANTAGE FUND -- 2004 PROSPECTUS
If you decide to sell your shares within 30 days of a telephoned-in address
change, a written request is required.
Important: If you request a sale of shares you recently purchased by a check or
money order that is not guaranteed, the Fund will wait for your check to clear.
It may take up to 10 days from the date of purchase before payment is made.
Payment may be made earlier if your bank provides evidence satisfactory to the
Fund and the Distributor that your check has cleared.
Ways to request an exchange or sale of shares
By regular or express mail
American Express Funds
70100 AXP Financial Center
Minneapolis, MN 55474
Include in your letter:
o your account number
o the name of the fund(s)
o the class of shares to be exchanged or sold
o your Social Security number or Employer Identification number
o the dollar amount or number of shares you want to exchange or sell
o specific instructions regarding delivery or exchange destination
o signature(s) of registered account owner(s) (All signatures may be
required. Contact your financial advisor for more information.)
o delivery instructions, if applicable
o any paper certificates of shares you hold
Payment will be mailed to the address of record and made payable to the names
listed on the account, unless your request specifies differently and is signed
by all owners.
The express mail delivery charges you pay will vary depending on domestic or
international delivery instructions.
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19p -- AXP BLUE CHIP ADVANTAGE FUND -- 2004 PROSPECTUS
By telephone
(800) 872-4377 for brokerage accounts
(800) 862-7919 for direct at fund accounts
(800) 967-4377 for wrap accounts
o The Fund and the Distributor will use reasonable procedures to confirm
authenticity of telephone exchange or sale requests.
o Telephone exchange and sale privileges automatically apply to all accounts
except custodial, corporate or qualified retirement accounts. You may
request that these privileges NOT apply by writing the Distributor. Each
registered owner must sign the request.
o Acting on your instructions, your financial advisor may conduct telephone
transactions on your behalf.
o Telephone privileges may be modified or discontinued at any time.
Minimum sale amount: $100
Maximum sale amount: $100,000
By wire
You can wire money from your account to your bank account. Contact your
financial advisor or the Distributor at the above numbers for additional
information.
o Minimum amount: $1,000
o Pre-authorization is required.
o A service fee may be charged against your account for each wire sent.
By scheduled payout plan
o Minimum payment: $100*.
o Contact your financial advisor or the Distributor to set up regular
payments.
o Purchasing new shares while under a payout plan may be disadvantageous
because of the sales charges.
* Minimum is $50 in a direct at fund account.
Electronic transactions
The ability to initiate transactions via the internet may be unavailable or
delayed at certain times (for example, during periods of unusual market
activity). The Fund and the Distributor are not responsible for any losses
associated with unexecuted transactions. In addition, the Fund and the
Distributor are not responsible for any losses resulting from unauthorized
transactions if reasonable security measures are followed to validate the
investor's identity. The Fund may modify or discontinue electronic privileges at
any time.
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20p -- AXP BLUE CHIP ADVANTAGE FUND -- 2004 PROSPECTUS
Distributions and Taxes
As a shareholder you are entitled to your share of the Fund's net income and net
gains. The Fund distributes dividends and capital gains to qualify as a
regulated investment company and to avoid paying corporate income and excise
taxes.
DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS
The Fund's net investment income is distributed to you as dividends. Dividends
may be composed of qualifying dividend income, which is eligible for
preferential tax rates under current tax law, as well as other ordinary dividend
income, which may include non-qualifying dividends, interest income and
short-term capital gains. Capital gains are realized when a security is sold for
a higher price than was paid for it. Each realized capital gain or loss is
long-term or short-term depending on the length of time the Fund held the
security. Realized capital gains and losses offset each other. The Fund offsets
any net realized capital gains by any available capital loss carryovers. Net
short-term capital gains are included in net investment income. Net realized
long-term capital gains, if any, are distributed by the end of the calendar year
as capital gain distributions.
REINVESTMENTS
Dividends and capital gain distributions are automatically reinvested in
additional shares in the same class of the Fund, unless:
o you request distributions in cash, or
o you direct the Fund to invest your distributions in the same class of any
publicly offered American Express mutual fund for which you have previously
opened an account.
We reinvest the distributions for you at the next calculated NAV after the
distribution is paid.
If you choose cash distributions, you will receive cash only for distributions
declared after your request has been processed.
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21p -- AXP BLUE CHIP ADVANTAGE FUND -- 2004 PROSPECTUS
TAXES
Distributions are subject to federal income tax and may be subject to state and
local taxes in the year they are declared. You must report distributions on your
tax returns, even if they are reinvested in additional shares.
If you buy shares shortly before the record date of a distribution, you may pay
taxes on money earned by the Fund before you were a shareholder. You will pay
the full pre-distribution price for the shares, then receive a portion of your
investment back as a distribution, which may be taxable.
For tax purposes, an exchange is considered a sale and purchase, and may result
in a gain or loss. A sale is a taxable transaction. If you sell shares for less
than their cost, the difference is a capital loss. If you sell shares for more
than their cost, the difference is a capital gain. Your gain may be short term
(for shares held for one year or less) or long term (for shares held for more
than one year).
If you buy Class A shares and within 91 days exchange into another fund, you may
not include the sales charge in your calculation of tax gain or loss on the sale
of the first fund you purchased. The sales charge may be included in the
calculation of your tax gain or loss on a subsequent sale of the second fund you
purchased.
Selling shares held in an IRA or qualified retirement account may subject you to
federal taxes, penalties and reporting requirements. Please consult your tax
advisor.
Important: This information is a brief and selective summary of some of the tax
rules that apply to this Fund. Because tax matters are highly individual and
complex, you should consult a qualified tax advisor.
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22p -- AXP BLUE CHIP ADVANTAGE FUND -- 2004 PROSPECTUS
Financial Highlights
The financial highlights tables are intended to help you understand the Fund's
financial performance. Certain information reflects financial results for a
single Fund share. The total returns in the tables represent the rate that an
investor would have earned or lost on an investment in the Fund (assuming
reinvestment of all dividends and distributions). This information has been
audited by KPMG LLP, whose report, along with the Fund's financial statements,
is included in the annual report which, if not included with this prospectus, is
available upon request.
Class A
Per share income and capital changes(a)
Fiscal period ended Jan. 31, 2004 2003 2002 2001 2000
Net asset value, beginning of period $6.03 $ 7.94 $ 9.92 $11.80 $11.88
Income from investment operations:
Net investment income (loss) .04 .04 .03 .05 .03
Net gains (losses) (both realized and unrealized) 1.84 (1.92) (1.95) (.76) 1.11
Total from investment operations 1.88 (1.88) (1.92) (.71) 1.14
Less distributions:
Dividends from net investment income (.05) (.03) (.04) (.04) (.03)
Distributions from realized gains -- -- (.02) (1.13) (1.19)
Total distributions (.05) (.03) (.06) (1.17) (1.22)
Net asset value, end of period $7.86 $ 6.03 $ 7.94 $ 9.92 $11.80
Ratios/supplemental data
Net assets, end of period (in millions) $913 $852 $1,533 $2,247 $2,455
Ratio of expenses to average daily net assets(c) 1.06% 1.00% .89% .85% .83%
Ratio of net investment income (loss) to average daily net assets .67% .61% .54% .50% .40%
Portfolio turnover rate (excluding short-term securities) 149% 104% 135% 140% 81%
Total return(e) 31.20% (23.70%) (19.38%) (5.34%) 9.30%
See accompanying notes to financial highlights.
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23p -- AXP BLUE CHIP ADVANTAGE FUND -- 2004 PROSPECTUS
Class B
Per share income and capital changes(a)
Fiscal period ended Jan. 31, 2004 2003 2002 2001 2000
Net asset value, beginning of period $5.87 $ 7.76 $ 9.72 $11.63 $11.79
Income from investment operations:
Net gains (losses) (both realized and unrealized) 1.78 (1.89) (1.94) (.78) 1.03
Less distributions:
Distributions from realized gains -- -- (.02) (1.13) (1.19)
Net asset value, end of period $7.65 $ 5.87 $ 7.76 $ 9.72 $11.63
Ratios/supplemental data
Net assets, end of period (in millions) $568 $568 $1,047 $1,530 $1,588
Ratio of expenses to average daily net assets(c) 1.83% 1.77% 1.65% 1.60% 1.59%
Ratio of net investment income (loss) to average daily net assets (.09%) (.16%) (.22%) (.25%) (.36%)
Portfolio turnover rate (excluding short-term securities) 149% 104% 135% 140% 81%
Total return(e) 30.36% (24.36%) (19.98%) (6.01%) 8.45%
Class C
Per share income and capital changes(a)
Fiscal period ended Jan. 31, 2004 2003 2002 2001(b)
Net asset value, beginning of period $5.86 $ 7.74 $ 9.70 $11.99
Income from investment operations:
Net investment income (loss) -- -- -- .03
Net gains (losses) (both realized and unrealized) 1.76 (1.88) (1.94) (1.16)
Total from investment operations 1.76 (1.88) (1.94) (1.13)
Less distributions:
Dividends from net investment income -- -- -- (.03)
Distributions from realized gains -- -- (.02) (1.13)
Total distributions -- -- (.02) (1.16)
Net asset value, end of period $7.62 $ 5.86 $ 7.74 $ 9.70
Ratios/supplemental data
Net assets, end of period (in millions) $5 $4 $5 $4
Ratio of expenses to average daily net assets(c) 1.84% 1.79% 1.67% 1.60%(d)
Ratio of net investment income (loss) to average daily net assets (.10%) (.16%) (.26%) .04%(d)
Portfolio turnover rate (excluding short-term securities) 149% 104% 135% 140%
Total return(e) 30.07% (24.29%) (19.98%) (8.79%)(f)
See accompanying notes to financial highlights.
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24p -- AXP BLUE CHIP ADVANTAGE FUND -- 2004 PROSPECTUS
Class Y
Per share income and capital changes(a)
Fiscal period ended Jan. 31, 2004 2003 2002 2001 2000
Net asset value, beginning of period $6.04 $ 7.96 $ 9.94 $11.81 $11.89
Income from investment operations:
Net investment income (loss) .05 .05 .04 .06 .04
Net gains (losses) (both realized and unrealized) 1.85 (1.93) (1.95) (.75) 1.11
Total from investment operations 1.90 (1.88) (1.91) (.69) 1.15
Less distributions:
Dividends from net investment income (.06) (.04) (.05) (.05) (.04)
Distributions from realized gains -- -- (.02) (1.13) (1.19)
Total distributions (.06) (.04) (.07) (1.18) (1.23)
Net asset value, end of period $7.88 $ 6.04 $ 7.96 $ 9.94 $11.81
Ratios/supplemental data
Net assets, end of period (in millions) $99 $124 $291 $362 $369
Ratio of expenses to average daily net assets(c) .89% .82% .72% .68% .69%
Ratio of net investment income (loss) to average daily net assets .86% .76% .70% .67% .54%
Portfolio turnover rate (excluding short-term securities) 149% 104% 135% 140% 81%
Total return(e) 31.53% (23.63%) (19.23%) (5.16%) 9.44%
Notes to financial highlights
(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.
(f) Not annualized.
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25p -- AXP BLUE CHIP ADVANTAGE FUND -- 2004 PROSPECTUS
This Fund, along with the other American Express mutual funds, is distributed by
American Express Financial Advisors Inc. and can be purchased from an American
Express financial advisor or from other authorized broker-dealers or third
parties. The Funds can be found under the "Amer Express" banner in most mutual
fund quotations.
Additional information about the Fund and its investments is available in the
Fund's Statement of Additional Information (SAI), annual and semiannual reports
to shareholders. In the Fund's annual report, you will find a discussion of
market conditions and investment strategies that significantly affected the Fund
during its last fiscal year. The SAI is incorporated by reference in this
prospectus. For a free copy of the SAI, the annual report or the semiannual
report, contact your selling agent or American Express Client Service
Corporation.
American Express Funds
70100 AXP Financial Center
Minneapolis, MN 55474
(800) 862-7919
TTY: (800) 846-4852
Web site address:
americanexpress.com/funds
You may review and copy information about the Fund, including the SAI, at the
Securities and Exchange Commission's (Commission) Public Reference Room in
Washington, D.C. (for information about the public reference room call
1-202-942-8090). Reports and other information about the Fund are available on
the EDGAR Database on the Commission's Internet site at (http://www.sec.gov).
Copies of this information may be obtained, after paying a duplicating fee, by
electronic request at the following E-mail address: publicinfo@sec.gov, or by
writing to the Public Reference Section of the Commission, Washington, D.C.
20549-0102.
Investment Company Act File #811-5897
Ticker Symbol
Class A: IBLUX Class B:IDBCX
Class C: AXACX Class Y:IBCYX
(logo)
AMERICAN
EXPRESS
(R)
American Express Funds
70100 AXP Financial Center
Minneapolis, MN 55474
S-6025-99 W (3/04)