IDS SELECTIVE FUND INC
N-30D, 1998-08-05
Previous: INTERPUBLIC GROUP OF COMPANIES INC, 8-K, 1998-08-05
Next: IONICS INC, 424B3, 1998-08-05




<PAGE>

1998 ANNUAL REPORT

IDS
Selective
Fund
(prospectus enclosed)

(icon of) skyline

The goals of IDS Selective Fund, Inc. are current income and the preservation 
of capital by investing in investment-grade bonds.

(This annual report  includes a prospectus  that  describes in detail the Fund's
objective,  investment policies, risks, sales charges, fees and other matters of
interest. Please read the prospectus carefully before you invest or send money.)

      American Express Financial Advisors

      Distributed by American Express Financial Advisors Inc.


<PAGE>

(icon of) Skyline

A quest for quality

Not all bonds are created equal. A bond's quality  depends on the ability of its
issuers to make the interest and principal payments owed to the bondholders. The
quality is  determined by  independent  rating  agencies,  which assign a credit
rating (in the form of a letter grade) to each bond.

Since its establishment in 1945, Selective Fund has concentrated its investments
in the four highest investment  grades.  Along the way, investors have enjoyed a
steady stream of interest income with minimum risk to their principal.

<PAGE>

 Contents


                1998 annual report

                From the chairman                                        4
                From the portfolio manager                               4
                The Portfolio's ten largest holdings                     6
                Making the most of the Fund                              7
                The Fund's long-term performance                         8
                Independent auditors' report (Fund)                      9
                Financial statements (Fund)                             10
                Notes to financial statements (Fund)                    13
                Independent auditors' report (Portfolio)                22
                Financial statements (Portfolio)                        23
                Notes to financial statements (Portfolio)               26
                Investments in securities                               32
                IDS mutual funds                                        41
                Federal income tax information                          45

                1998 prospectus

                The Fund in brief                                       3p

                Goals                                                   3p
                Investment policies and risks                           3p
                Structure of the Fund                                   4p
                Manager and distributor                                 4p
                Portfolio manager                                       4p
                Alternative purchase arrangements                       4p

                Sales charge and Fund expenses                          5p

                Performance                                             7p
                Financial highlights                                    7p
                Total returns                                           9p
                Yield                                                  11p

                Investment policies and risks                          12p
                Facts about investments and their risks                12p
                Valuing Fund shares                                    16p

                How to purchase, exchange or redeem shares             17p
                Alternative purchase arrangements                      17p
                How to purchase shares                                 20p
                How to exchange shares                                 22p
                How to redeem shares                                   22p
                Reductions and waivers of the sales charge             27p

                Special shareholder services                           31p
                Services                                               31p
                Quick telephone reference                              31p

                Distributions and taxes                                32p
                Dividend and capital gain distributions                32p
                Reinvestments                                          33p
                Taxes                                                  34p
                How to determine the correct TIN                       36p

                How the Fund and Portfolio are organized               37p
                Shares                                                 37p
                Voting rights                                          37p
                Shareholder meetings                                   37p
                Special considerations regarding
                     master/feeder structure                           37p
                Board members and officers                             39p
                Investment manager                                     41p
                Administrator and transfer agent                       41p
                Distributor                                            42p

                About American Express Financial Corporation           43p
                General information                                    43p
                Year 2000                                              44p

                Appendices                                             45p
                Description of investment-grade corporate bond ratings 45p
                Descriptions of derivative instruments                 46p


      (icon of) One book inside of another

      The  purpose  of this  annual  report  is to tell  investors  how the Fund
      performed.

      The  prospectus,  which is bound  into the middle of this  annual  report,
      describes the Fund in detail.

      (This annual report is not part of the prospectus.)

<PAGE>

 To our shareholders

      From the chairman

      If you're an experienced  investor,  you know that the past few years have
      been  unusually  strong  in  many  financial  markets.   Perhaps  just  as
      important,  history  shows that bull markets  don't last  forever.  Though
      they're  often  unpredictable,   declines  --  whether  they're  brief  or
      long-lasting,  moderate or substantial -- are always a possibility. We saw
      evidence of that last  October,  when  declines in certain  Asian  markets
      spawned a sharp drop in several financial markets worldwide, including the
      U.S.

      The potential  for such  volatility  reinforces  the need for investors to
      review  periodically  their  long-term  goals and  examine  whether  their
      investment  program  remains on track to achieving  them.  Your  quarterly
      investment  statements are one part of that monitoring process.  The other
      is a meeting with your American Express  financial  advisor.  That becomes
      even more important if there's a major change in your financial  situation
      or in the financial markets.



      William R. Pearce
     (picture of) William R. Pearce
      William R. Pearce
      Chairman of the board

      From the portfolio manager

      A decline in long-term  interest  rates provided the foundation for a very
      productive  fiscal year for IDS Selective  Fund. For the 12 months -- June
      1997  through  May 1998 -- the  Fund's  Class A shares  generated  a total
      return, which includes net asset value change and dividends, of 10.2%.

      Despite a  continuation  of solid  economic  growth and rising  employment
      figures -- two  factors  that  typically  put upward  pressure on consumer
      prices -- inflation remained  remarkably tame throughout the period.  That
      fact,  complemented  by an appreciation in the dollar's value versus major
      foreign  currencies  and  an  ongoing  decline  in  the  federal  deficit,
      persuaded the Federal Reserve to hold off on raising  short-term  interest
      rates.

      Rates come down

      Against that  positive  backdrop,  long-term  interest  rates  followed an
      overall downward path through early January, driving up bond values in the
      process.  From that point,  the market  fluctuated in a narrow  range,  as

(This annual report is not part of the prospectus.)

<PAGE>

      investors  weighed the conflicting  factors of a still-strong  economy and
      low  unemployment  versus ongoing  reports of low inflation and a possible
      economic downturn related to the Asian financial crisis.

      As for the Fund's performance, its two largest areas of investment -- U.S.
      government  and  investment-grade,  or  high-quality,  corporate  bonds --
      performed  well  during the 12  months.  This was  especially  true of its
      investments in long-term Treasury bonds, whose values are highly sensitive
      to  interest-rate  fluctuations.  Holdings  among  mortgage-  backed bonds
      issued by government agencies also performed  positively,  but contributed
      more to the Fund's dividend than its net asset value gain.  Foreign bonds,
      a relatively  small area of investment for the Fund and all denominated in
      U.S. dollars, were hurt during last fall's financial crisis overseas,  but
      rebounded during the spring.

      Longer duration

      As for changes to the portfolio,  to take  advantage of the  interest-rate
      decline, I lengthened its duration. (A function of the average maturity of
      the bonds in the portfolio,  duration  determines how sensitive the Fund's
      net asset value is to interest-rate  changes. The longer the duration, the
      greater  the  sensitivity.)  Therefore,  when rates  came  down,  the Fund
      responded quite positively.  I also reduced the portfolio's cash reserves,
      putting the proceeds into bonds, which provided a far better return.

      My  positive  outlook has  changed  little from six months ago.  Inflation
      remains low; the federal budget deficit continues to be under control; the
      dollar is still strong versus major foreign  currencies;  and the problems
      in Asia may  well  restrain  economic  growth  here at home.  All of those
      factors  work in bonds'  favor by keeping  long-term  interest  rates in a
      stable-to-declining pattern, which in turn helps bond prices and the Fund.





      Ray Goodner
     (picture of) Ray Goodner
      Ray Goodner
      Portfolio Manager

<PAGE>

Class A
 12-month performance

(All figures per share)

Net asset value (NAV)

May 31, 1998          $9.23

May 31, 1997          $9.00

Increase              $0.23


Distributions
June 1, 1997 - May 31, 1998


From income           $0.62

From capital gains    $0.03

Total distributions   $0.65

Total return*        +10.2%**

Class B
 12-month performance

(All figures per share)

Net asset value (NAV)

May 31, 1998          $9.23

May 31, 1997          $9.00

Increase              $0.23


Distributions
June 1, 1997 - May 31, 1998


From income           $0.55

From capital gains    $0.03

Total distributions   $0.58

Total return*         +9.3%**

Class Y
 12-month performance

(All figures per share)

Net asset value (NAV)

May 31, 1998          $9.23

May 31, 1997          $9.00

Increase              $0.23


Distributions
June 1, 1997 - May 31, 1998


From income           $0.63

From capital gains    $0.03

Total distributions   $0.66

Total return*        +10.2%**



      * The  prospectus  discusses the effect of sales  charges,  if any, on the
      various classes.
      ** The total  return  is a  hypothetical  investment  in the Fund with all
      distributions reinvested.


      (This annual report is not part of the prospectus.)

<PAGE>

 The Portfolio's ten largest holdings


                                              Percent               Value
                          (of Portfolio's net assets)      (as of May 31, 1998)

       Japan Finance                            1.63%         $26,217,544
       9.25% 1998

       Dayton Hudson                            1.26           20,177,983
       7.875% 2023

       PDV America                              1.05           16,931,970
       7.875% 2003

       SBC Communications                       1.05           16,823,550
       8.50% 2031

       Bell Atlantic                            1.00           16,133,180
       9.375% 2031

       SAFECO Capital                           1.00           16,037,700
       8.07% 2037

       Service Corp Intl                         .96           15,402,958
       6.50% 2008

       Daimler-Benz North America                .94           15,088,780
       7.375% 2006

       GMAC                                      .90           14,541,098
       7.00% 2000

       Time Warner Entertainment                 .88           14,181,120
       8.375% 2033

       Excludes U.S. Treasury and government agencies holdings.

      For further  detail  about  these  holdings,  please  refer to the section
      entitled "Investments in securities" herein.

      (icon of) pie chart

      The ten holdings listed here make up 10.67% of the Portfolio's net assets

      (This annual report is not part of the prospectus.)

<PAGE>

      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.

      Using this strategy does not ensure a profit or avoid a loss if the market
      declines,  and requires that you be able to keep on investing on a regular
      basis,  even when the price of your shares  falls or the market  declines.
      Investing in this manner can be an effective way to  accumulate  shares to
      meet your long-term goals.

How dollar-cost averaging works

Month       Amount       Per-share      Number of shares purchased
            invested     market price
Jan         $100         $20            5.00   XXXXX
Feb          100          18            5.56   XXXXXx
March        100          17            5.88   XXXXXx
April        100          15            6.67   XXXXXXx
May          100          16            6.25   XXXXXXx
June         100          18            5.56   XXXXXx
July         100          17            5.88   XXXXXx
Aug          100          19            5.26   XXXXXx
Sept         100          21            4.76   XXXXx
Oct          100          20            5.00   XXXXX

(footnotes to table) By investing an equal number of dollars each
month...

(arrow in table  pointing to April) you  automatically  buy more shares when the
per share market price is low...

(arrow in table  pointing  to  September)  and fewer  shares  when the per share
market price is high.

      You have  paid an  average  price of only  $17.91  per  share  over the 10
      months, while the average market price actually was $18.10.


      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. And you potentially can increase your
      investment if, like most investors,  you  reinvest  your  dividends  and
      capital gain distributions to buy additional shares of the Fund or another
      fund.


      (This annual report is not part of the prospectus.)

<PAGE>

      The Fund's long-term performance

      Assumes:  
      o Holding period from 6/1/88 to 5/31/98. o Returns do not reflect taxes 
        payable on  distributions. o Reinvestment of all income and capital gain
        distributions for the Fund, with a value of $12,564. Also see 
       "Performance" in the Fund's current prospectus.

      The  Lehman  Aggregate  Bond  Index  is an  unmanaged  index  made up of a
      representative   list  of  government  and  corporate  bonds  as  well  as
      asset-backed  securities  and  mortgage-backed  securities.  The  index is
      frequently used as a general measure of bond market performance.  However,
      the securities  used to create the indexmay not be  representative  of the
      bonds held in the Portfolio.

                How your $10,000 has grown in IDS Selective Fund
      


                                                            x
                                                   
                                                         $23,081
                                                  Selective Fund
$20,000                                                  Class A

       
                                     x
       
                                 Lehman Aggregate
                                       Bond Index
       
       

x
   
   $9,500           
                    
                    

'88   '89   '90   '91   '92   '93   '94   '95   '96   '97   '98

      Average annual total return
      (as of May 31, 1998)
                            1 year        Since        5 years     10 years
                                          inception*
       Class A              +4.64%           --%     +6.08%           +8.72%
       Class B              +5.32%        +7.69%        --%              --%
       Class Y              +10.22%       +9.44%        --%              --%

      *Inception date was March 20, 1995.

      On the graph above you can see how the Fund's total  return  compared to a
      widely  cited  performance  index,  the Lehman  Aggregate  Bond Index.  In
      comparing  Selective  Fund (Class A) to this  index,  you should take into
      account the fact that the Fund's  performance  reflects the maximum  sales
      charge of 5%, while such charges are not reflected in the  performance  of
      the index.

      Your  investment  and return  values  fluctuate so that your shares,  when
      redeemed, may be worth more or less than the original cost. Average annual
      total return figures reflect the impact of the applicable  sales charge up
      to a  maximum  of 5%.  This was a period of  widely  fluctuating  security
      prices. Past performance is no guarantee of future results.


      (This annual report is not part of the prospectus.)

<PAGE>

The  financial   statements   contained  in  Post-Effective   Amendment  #86  to
Registration  Statement  No.  2-10700  filed on or  about  July  29,  1998,  are
incorporated herein by reference.


<PAGE>


IDS mutual funds

Global/International funds

Funds in this group seek capital growth and/or income by investing primarily in
foreign securities. Foreign investments may be subject to currency fluctuations
and political and economic risks of the countries in which the investments are
made. They are high risk mutual funds with a potential for high reward.

IDS Emerging Markets Fund

Invests in a Portfolio comprised primarily of stocks of companies in developing
countries throughout the world that are believed to offer growth potential.
Seeks to provide long-term growth of capital.

(icon of) world with countries

IDS Global Growth Fund

Invests in a Portfolio comprised primarily of stocks of companies throughout the
world that are positioned to meet market needs in a changing world economy.
These companies offer above-average potential for long-term growth.

(icon of) world

IDS International Fund

Invests primarily in common stocks of foreign companies that offer potential for
superior growth. The Fund may invest up to 20% of its assets in the U.S. market.

(icon of) three flags

IDS Global Balanced Fund

Invests in stocks and bonds in, for the most part, major markets throughout the
world, including the U.S. Seeks to provide a balance of growth of capital and
current income.

(icon of) scale of globes

IDS Global Bond Fund

Invests in a Portfolio comprised primarily of debt securities of U.S. and
foreign issuers to seek high total return through income and growth of capital.

(icon of) globe

Growth funds

Funds in this group seek capital growth, primarily from common stocks. They are
high risk mutual funds with a potential for high reward.

IDS Precious Metals Fund

Invests primarily in the securities of foreign or domestic companies that
explore for, mine and process or distribute gold and other precious metals. A
highly aggressive and speculative fund that seeks long-term growth of capital.

(icon of) cart of precious gems

IDS Discovery Fund

Invests in small- and medium-size, growth-oriented companies emphasizing
technological innovation and productivity enhancement. Buys and holds larger
growth-oriented stocks.

(icon of) ship

IDS Small Company Index Fund

Invests in all or a representative group of the equity securities comprising the
S&P SmallCap 600 Index, as it strives to provide long-term capital appreciation.

(icon of) building

IDS Strategy Aggressive Fund

Invests primarily in common stocks of companies that are selected for their
potential for above-average growth. Above-average means that their growth
potential is better, in the opinion of the portfolio's investment manager, than
the Standard & Poor's Corporation (S&P) 500 Stock Index.

(icon of) chess piece

IDS Research Opportunities Fund

Invests in a Portfolio comprised primarily of equity securities of companies
included in the S&P 500 Index that are believed to have strong growth potential.
The Portfolio is managed using a research methodology by the Research Department
of AEFC. Goal is long-term appreciation.

(icon of) magnifying glass

(This annual report is not part of the prospectus.)

<PAGE>

IDS Growth Fund

Invests in a Portfolio comprised primarily of companies that have above-average
potential for long-term growth as a result of new management, marketing
opportunities or technological superiority.

(icon of) trees

IDS New Dimensions Fund

Invests in a Portfolio comprised primarily of companies with
significant growth potential due to superiority in
technology, marketing or management. The Fund frequently
changes its industry mix.

(icon of) dimension

IDS Progressive Fund

Invests primarily in undervalued common stocks. The Fund holds stocks for the
long term with the goal of capital growth.

(icon of) shooting star

Growth & income funds

These funds focus on securities of medium to large,  well-established  companies
that offer long-term growth of capital and reasonable  income from dividends and
interest.  Foreign  investments  may be subject  to  currency  fluctuations  and
political and economic risks of the countries in which the investments are made.


IDS Equity Select Fund

Invests primarily in a combination of moderate growth stocks, higher-yielding
equities and bonds. Seeks growth of capital and income.

(icon of) three pine trees

IDS Blue Chip Advantage Fund

Invests in selected stocks from a major market index. Securities purchased are
those recommended by our research analysts as the best from each industry
represented on the index. Offers potential for long-term growth as well as
dividend income.

(icon of) ribbon

IDS Managed Allocation Fund

Invests in a Portfolio comprised primarily of U.S. equity securities, U.S. and
foreign debt securities, foreign equity securities and money market instruments.
The Fund provides diversification among these major investment categories and
has a target mix that represents the way the Fund's investments will be
allocated over the long term. Seeks maximum total return.

(icon of) gyroscope

IDS Stock Fund

Invests  in a  Portfolio  comprised  primarily  of  common  stock  of  companies
representing  many sectors of the economy.  Seeks  current  income and growth of
capital.

(icon of) building with columns

IDS Equity Value Fund

Invests primarily in undervalued common stocks that offer potential for growth
of capital and income.

(icon of) three growing flowers

IDS Utilities Income Fund

Invests primarily in the stocks of public utility companies to seek high current
income and growth of income and capital with reduced volatility.

(icon of) light bulb

IDS Diversified Equity Income Fund

Invests in a Portfolio comprised primarily in high-yielding common stocks to
seek high current income and, secondarily, to benefit from the growth potential
offered by stock investments.

(icon of) two puzzle pieces

IDS Mutual

Invests in a Portfolio which seeks to balance between common stocks and senior
securities (preferred stocks and bonds). Seeks a balance of growth of capital
and current income.

(icon of) scale of justice

(This annual report is not part of the prospectus.)

<PAGE>

Income funds

The funds in this group invest their assets primarily in corporate bonds or
government securities to seek interest income. Secondary objective is capital
growth. Risk varies by bond quality.

IDS Extra Income Fund

Invests in a Portfolio comprised mainly of long-term, high-yielding corporate
fixed-income securities in the lower rated, higher risk bond categories to seek
high current income. Secondary objective is capital growth.

(icon of) two coins

IDS Bond Fund

Invests mainly in corporate bonds, at least 50% in the higher rated, lower risk
bond categories, or the equivalent, and in government bonds.

(icon of) Greek column

IDS Selective Fund

Invests in a Portfolio comprised primarily of high-quality corporate bonds and
other highly rated debt instruments including government securities and
short-term investments. Seeks current income and preservation of capital.

(icon of) skyline

IDS Federal Income Fund

Invests in a Portfolio comprised primarily of securities issued or guaranteed as
to the timely payment of principal and interest by the U.S. government, its
agencies and instrumentalities. Seeks a high level of current income and safety
of principal consistent with its type of investments.

(icon of) shield with eagle head

Tax-exempt income funds

These funds provide tax-free income by investing in municipal bonds. The income
is generally free from federal income tax, but a portion of the income may be
subject to state and local taxes. Risk varies by bond quality.

IDS Tax-Exempt Bond Fund

Invests mainly in bonds and notes of state or local government units, with at
least 75% in the four highest rated, lowest risk bond categories.

(icon of) shield with Greek column

IDS Insured Tax-Exempt Fund

Invests primarily in municipal securities that are insured as to the timely
payment of principal and interest. The insurance feature minimizes credit risk
of the Fund but does not guarantee the market value of the Fund's shares.

(icon of) shield with star

IDS State Tax-Exempt Funds
(CA, MA, MI, MN, NY, OH)

Invests primarily in high- and medium-grade municipal securities to provide
income to residents of each respective state that is exempt from federal, state
and local income taxes. (New York is the only state that is exempt at the local
level.)

(icon of) shield with U.S. enclosed

IDS High Yield Tax-Exempt Fund

Invests in a Portfolio comprised primarily of medium- and lower-quality
municipal bonds and notes. Lower-quality securities generally involve greater
risk of principal and income.

(icon of) shield with basket of apples enclosed

IDS Intermediate Tax-Exempt Fund

Invests in mainly investment-grade bonds and other debt securities with
intermediate-term maturities issued by state and local government units. Goal is
to seek a high level of current income exempt from federal taxes.

(icon of) shield with tree enclosed

(This annual report is not part of the prospectus.)

<PAGE>

Money market funds

These  money  market  funds have  three main  goals:  conservation  of  capital,
constant liquidity and the highest possible current income consistent with these
objectives.  An investment in these funds is neither  insured nor  guaranteed by
the U.S. government, and there can be no assurance that these funds will be able
to maintain a stable net asset value of $1.00 per share. Very limited risk.

IDS Cash Management Fund

Invests in such money market securities as high quality commercial paper,
bankers' acceptances, certificates of deposit (CDs) and other bank securities.

(icon of) piggy bank

IDS Tax-Free Money Fund

Invests primarily in short-term bonds and notes issued by state and local
governments to seek high current income exempt from federal income taxes.

(icon of) shield with piggy bank enclosed

For more complete information about any of these funds, including charges and   
expenses, you can obtain a prospectus by contacting your financial advisor or
writing to American Express Shareholder Service, P.O. Box 534, Minneapolis, MN
55440-0534. Read it carefully before you invest or send money.

(This annual report is not part of the prospectus.)

<PAGE>

      Federal income tax information


      IDS Selective Fund, Inc.

      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. Some of the dividends  listed below were reported to you on a
      Form 1099-DIV,  Dividends and Distributions,  last January. Dividends paid
      to you  since  the  end of last  year  will  be  reported  to you on a tax
      statement sent next January.  Shareholders should consult a tax advisor on
      how to report distributions for state and local purposes.

      IDS Selective Fund, Inc.
      Fiscal year ended May 31, 1998

      Class A

      Income distributions
 
      taxable as dividend income,0.81% qualifying for deduction by corporations.
     
      Payable date                                            Per share
      June 26, 1997                                            $0.04898
      July 25, 1997                                             0.04800
      Aug. 27, 1997                                             0.05153
      Sept. 25, 1997                                            0.04400
      Oct. 28, 1997                                             0.04962
      Nov. 25, 1997                                             0.04276
      Dec. 26, 1997                                             0.09580
      Jan. 28, 1998                                             0.05096
      Feb. 26, 1998                                             0.04681
      March 26, 1998                                            0.04604
      April 28, 1998                                            0.05449
      May 27, 1998                                              0.04803
      Total                                                    $0.62702

      Capital gain distribution
      taxable as long-term capital gain.

      Payable date                                            Per share
      Dec. 26, 1997                                            $0.02588

      Total distributions                                      $0.65290

      The distribution of $0.12168 per share,  payable Dec. 26, 1997,  consisted
      of  $0.04731  derived  from  net  investment  income,  $0.04849  from  net
      short-term  capital gains (a total of $0.09580 taxable as dividend income)
      and $0.02588 from net long-term capital gains.

      The  long-term  capital  gains  distribution  is  divided  into  two  rate
      categories: 28% - $0.02588 and 20% - $0.00000.


      (This annual report is not part of the prospectus.)

<PAGE>

Federal income tax information

IDS Selective Fund, Inc.

      Class B

      Income distributions

      taxable as dividend income,0.81% qualifying for deduction by corporations.

      June 26, 1997                                               $0.04353
      July 25, 1997                                                0.04247
      Aug. 27, 1997                                                0.04522
      Sept. 25, 1997                                               0.03850
      Oct. 28, 1997                                                0.04327
      Nov. 25, 1997                                                0.03736
      Dec. 26, 1997                                                0.08984
      Jan. 28, 1998                                                0.04462
      Feb. 26, 1998                                                0.04124
      March 26, 1998                                               0.04069
      April 28, 1998                                               0.04818
      May 27, 1998                                                 0.04247
      Total                                                       $0.55739

      Capital gain distribution taxable as long-term capital gain.

      Payable date                                               Per share
      Dec. 26, 1997                                               $0.02588

      Total distributions                                         $0.58327

      The distribution of $0.11572 per share,  payable Dec. 26, 1997,  consisted
      of  $0.04135  derived  from  net  investment  income,  $0.04849  from  net
      short-term  capital gains (a total of $0.08984 taxable as dividend income)
      and $0.02588 from net long-term capital gains.

      The  long-term  capital  gains  distribution  is  divided  into  two  rate
      categories: 28% - $0.02588 and 20% - $0.00000.

      (This annual report is not part of the prospectus.)

<PAGE>

     Class Y
     Income distributions

     taxable as dividend income, 0.81% qualifying for deduction by corporations.
     
     June 26, 1997                                             $0.04950
     July 25, 1997                                              0.04853
     Aug. 27, 1997                                              0.05212
     Sept. 25, 1997                                             0.04453
     Oct. 28, 1997                                              0.05022
     Nov. 25, 1997                                              0.04326
     Dec. 26, 1997                                              0.09637
     Jan. 28, 1998                                              0.05157
     Feb. 26, 1998                                              0.04733
     March 26, 1998                                             0.04655
     April 28, 1998                                             0.05512
     May 27, 1998                                               0.04853
     Total                                                     $0.63363

     Capital gain distribution taxable as long-term capital gain.

     Payable date                                             Per share
     Dec. 26, 1997                                             $0.02588

     Total distributions                                       $0.65951

      The distribution of $0.12225 per share,  payable Dec. 26, 1997,  consisted
      of  $0.04788  derived  from  net  investment  income,  $0.04849  from  net
      short-term  capital gains (a total of $0.09637 taxable as dividend income)
      and $0.02588 from net long-term capital gains.

      The  long-term  capital  gains  distribution  is  divided  into  two  rate
      categories: 28% - $0.02588 and 20% - $0.00000.

      (This annual report is not part of the prospectus.)

<PAGE>

Quick telephone reference

American Express            Redemptions and exchanges,       National/Minnesota 
Financial Advisors          dividend payments or                   800-437-3133
Telephone Transaction       reinvestments and automatic
Service                     payment arrangements           Mpls./St. Paul area:
                                                                       671-3800


TTY Service                 For the hearing impaired               800-846-4852




American Express            Automated account information          800-862-7919
Financial Advisors          (TouchTone(R) phones only),           
Easy Access Line            including current fund prices
                            and performance, account values 
                            and recent account transactions           



AMERICAN EXPRESS Financial Advisors


IDS Selective Fund
IDS Tower 10
Minneapolis, MN 55440-0010


<PAGE>

STATEMENT OF DIFFERENCES

Difference                                       Description

1)   The layout is different                     1)  Some of the layout in the
     throughout the annual report.                   annual report to
                                                     shareholders is in two
                                                     columns.

2)   Headings.                                   2)  The headings in the
                                                     annual report are
                                                     placed in a blue strip
                                                     at the top of the page.

3)   There are pictures, icons                   3)  Each picture, icon and
     and graphs throughout the                       graph is described in
     annual report.                                  parentheses.

4)   Footnotes for charts and                    4)  The footnotes for each
     graphs are described at                         chart or graph are typed
     the left margin.                                below the description of
                                                     the chart or graph.



© 2022 IncJournal is not affiliated with or endorsed by the U.S. Securities and Exchange Commission