Prospectus Supplement
Dated July 27, 2005*
AXP Stock Fund (Nov. 29, 2004) S-6351-99 Y
The Fund's Board of Directors has approved in principle the merger of the Fund
into AXP Quantitative Large Cap Equity Fund, a fund that seeks to provide
shareholders with long-term capital growth. Unlike AXP Stock Fund, AXP
Quantitative Large Cap Equity Fund has a policy to invest at least 80% of its
net assets in equity securities of companies listed on the U.S. exchanges with
market capitalizations greater than $5 billion at the time of purchase.
Completion of the merger is subject to a number of conditions, including final
approval by the Fund's Directors and approval by shareholders of the Fund. It is
currently anticipated that, pending final approval from the Fund's Directors,
proxy materials regarding the merger will be distributed to shareholders during
the fourth quarter of 2005, and that a meeting of shareholders to consider the
merger will be scheduled for the first quarter of 2006. It is anticipated that
the Fund will be closed to new investors in the first quarter of 2006.
For more information about AXP Quantitative Large Cap Equity Fund, please call
(800) 862-7919 for a prospectus.
Effective on Aug. 1, 2005:
The Principal Investment Strategies section for AXP Stock Fund is revised as
follows:
PRINCIPAL INVESTMENT STRATEGIES
The Fund's assets primarily are invested in common stocks and securities
convertible into common stocks. Under normal market conditions, at least 80% of
the Fund's net assets are invested in these securities. In pursuit of its income
objective, the Fund will invest in income-producing equity securities (such as
convertible securities and preferred stocks) and short-term debt instruments
(such as commercial paper). 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, the investment manager uses two different
approaches to the selection of equity investments.
With respect to approximately 50% of the Fund's portfolio, the investment
manager uses a traditional stock selection methodology and chooses investments
by:
o Considering opportunities and risks by reviewing overall market conditions
and industry outlook.
o Identifying market trends that the investment manager believes will lead to
good long-term growth potential.
o Identifying companies with strong, sustainable earnings growth based on:
o effective management, as demonstrated by overall performance,
o competitive market position, and
o financial strength.
o Focusing on those companies that the investment manager considers to be blue
chips. 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.
o Identifying investments that contribute to portfolio diversification.
o Identifying income-producing securities.
In evaluating whether to sell a security, the investment manager considers,
among other factors, whether:
o The security is overvalued relative to other potential investments.
o The security has reached the investment manager's price objective.
o The company has met the investment manager's earnings and/or growth
expectations.
o Political, economic or other events could affect the company's performance.
S-6351-2 A (7/05)
* Valid until next prospectus update.
With respect to approximately 50% of the Fund's portfolio, the investment
manager uses proprietary quantitative methods based on sophisticated statistical
analysis and chooses investments by:
The universe of stocks from which the investment manager selects the Fund's
investments will be those included in the Fund's benchmark, the Standard &
Poor's 500 Index (S&P 500 Index). Through extensive analysis of the domestic
equity markets, the investment manager has identified characteristics of certain
stocks that have historically outperformed their benchmarks. The Fund will hold
both growth and value stocks. Characteristics used to select stocks for the Fund
include:
o Superior growth characteristics such as:
o strong earnings growth,
o positive earnings that exceed expectations published by third-party
business analysts,
o consistency of earnings, and
o strong positive price trend.
o Superior value characteristics based on analysis of current stock prices
relative to estimates of future prices.
In selecting the stocks from the S&P 500 Index for the Fund's portfolio, the
investment manager employs a rigorous process for evaluating the relationship
between the risk associated with each security and its potential for positive
returns. This process includes factors such as:
o Limits on positions relative to the benchmark through overweighting or
underweighting.
o Limits on sector and industry allocations relative to the benchmark.
o Limits on size of holdings relative to market liquidity.
The rest of this section remains unchanged.
The Investment Manager section for AXP Stock Fund is revised as follows:
INVESTMENT MANAGER
The Fund's assets are invested in Equity Portfolio (the Portfolio), which is
managed by AEFC.
Dimitris J. Bertsimas, Senior Portfolio Manager
o Managed the Portfolio since 2004.
o Joined AEFC as a portfolio manager in 2002.
o Co-founded Dynamic Ideas, LLC, a consulting firm specializing in the
development of quantitative tools for the asset management industry, where he
served as Managing Partner, 1999 to 2002. Currently, Boeing Professor of
Operations Research, Sloan School of Management and the Operations Research
Center, MIT.
o Began investment career as a consultant to asset managers in 1993; became
portfolio manager in 2002.
o MS and Ph.D., MIT.
Gina K. Mourtzinou, Portfolio Manager
o Managed the Portfolio since 2004.
o Joined AEFC as a portfolio manager in 2002.
o Co-founded Dynamic Ideas, LLC, a consulting firm specializing in the
development of quantitative tools for the asset management industry, where
she served as Vice President of Research and Analytics, 1999 to 2002.
o Began investment career as a consultant to asset managers in 1996; became
portfolio manager in 2002.
o Ph.D., MIT.
Scott Mullinix, CFA, Associate Portfolio Manager
o Managed the Portfolio since 2004.
o Rejoined AEFC in 2004, having previously spent time with AEFC as portfolio
manager, 2001 to 2002 and as an associate portfolio manager, 1999 to 2001.
o Analyst, Deephaven Capital LLC, a domestic-based hedge fund firm, May 2002 to
May 2004.
o Began investment career in 1989.
o MBA, University of Minnesota.
Mr. Mullinix provides direct day-to-day management of the portion of the Fund
based on traditional stock selection methodology, and Mr. Bertsimas and Ms.
Mourtzinou provide direct day-to-day management of the portion of the Fund based
on proprietary quantitative methods.
The rest of this section remains unchanged.