IDS
Selective
Fund
1998 SEMIANNUAL REPORT
(icon of) clock
The goals of IDS Selective Fund, Inc.
are current income and the preservation
of capital by investing in investment
grade bonds.
Distributed by American Express Financial Advisors Inc.
AMERICAN EXPRESS Financial Advisors
<PAGE>
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.
CONTENTS
From the Chairman 3
From the Portfolio Manager 3
Fund Facts 5
The 10 Largest Holdings 6
Financial Statements (Fund) 7
Notes to Financial Statements (Fund) 10
Financial Statements (Portfolio) 16
Notes to Financial Statements (Portfolio) 19
Investments in Securities 24
IDS SELECTIVE FUND
<PAGE>
From the Chairman
(picture of) William R. Pearce
William R. Pearce
Chairman of the board
If you're an experienced investor, you know that the past six months was a
highly volatile period in many financial markets. But history tells us that
substantial market moves are nothing new. Though they're often unpredictable,
declines -- whether they're brief or long-lasting, moderate or substantial --
are always a possibility.
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
From the Portfolio Manager
(picture of) Ray Goodner
Ray Goodner
Portfolio manager
Long-term interest rates declined during the past six months, providing solid
support for the U.S. bond market and IDS Selective Fund. For the first half of
the fiscal year -- June through November 1998 -- the Fund's Class A shares
generated a total return, which includes net asset value change and interest
income, of 4.15%.
The low rate of inflation that has dominated the investment environment in
recent years remained in place during the period, providing reassurance for the
bond market. But this time the market got an additional boost from another
outbreak of the so-called "Asian flu," the financial malady that first struck
Asia in the fall of 1997. This past summer it was Russia and Latin America that
became infected. The result was a flood of money into the U.S. Treasury bonds,
largely from investors who were seeking what they believed to be a safe haven
for investment. The buying resulting from this "flight to quality" drove down
long-term interest rates until mid-September.
The major beneficiaries of this trend were long-term U.S. Treasury bonds, which
experienced a sharp price increase thanks to their high sensitivity to changes
in interest rates. (Falling rates inflate bond values, while rising rates
depress them.) Performance among all other bond sectors, including corporate and
mortgage-backed issues, lagged well behind until late in the period, as
investors largely ignored them in their pursuit of the safety and liquidity
offered by Treasuries.
A BOOST FROM TREASURIES
Because Treasuries comprised its largest area of investment, the Fund got its
strongest performance from that sector. Holdings among mortgage-backed bonds
issued by government agencies and investment-grade, or high-quality, corporate
bonds also performed positively, but contributed more to the Fund's interest
income than its net asset value gain. Foreign bonds, a relatively small area of
investment for the Fund (about 10% of assets for most of the period) and all
denominated in U.S. dollars, suffered price declines in the late-summer turmoil
overseas. They recovered rapidly in the fall, however.
Because I thought interest rates were likely to decline during the period, I
positioned the portfolio with a relatively long 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 maintained a low level of cash reserves;
instead, I kept the great majority of assets in bonds, which provided a better
return than cash.
Looking to the rest of the fiscal year, the low-inflation trend that bonds have
enjoyed for some time is still in place. In addition, the Federal Reserve has
shown a willingness to reduce short-term interest rates if it appears that the
economy may be about to undergo a meaningful slowdown. In light of those
favorable factors, I think bond investors have reason to remain optimistic.
Ray Goodner
IDS SELECTIVE FUND
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Fund Facts
Class A -- 6-month performance
(All figures per share)
Net asset value (NAV)
Nov. 30, 1998 $9.34
May 31, 1998 $9.23
Increase $0.11
Distributions -- June 1, 1998 - Nov. 30, 1998
From income $0.27
From capital gains $ --
Total distributions $0.27
Total return* +4.15%**
Class B -- 6-month performance
(All figures per share)
Net asset value (NAV)
Nov. 30, 1998 $9.34
May 31, 1998 $9.23
Increase $0.11
Distributions -- June 1, 1998 - Nov. 30, 1998
From income $0.24
From capital gains $ --
Total distributions $0.24
Total return* +3.75%**
Class Y-- 6-month performance
(All figures per share)
Net asset value (NAV)
Nov. 30, 1998 $9.34
May 31, 1998 $9.23
Increase $0.11
Distributions -- June 1, 1998 - Nov. 30, 1998
From income $0.28
From capital gains $ --
Total distributions $0.28
Total return* +4.19%**
*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.
SEMIANNUAL REPORT -- 1998
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<TABLE>
<CAPTION>
The 10 Largest Holdings
Percent Value
(of net assets) (as of Nov. 30, 1998)
Dayton Hudson
<S> <C> <C> <C>
7.88% 2023 1.24% $20,535,233
Tyco Intl Group
6.38% 2005 1.03 17,140,342
New York Telephone
9.38% 2031 .96 15,908,011
Daimler-Benz North America
7.38% 2006 .94 15,632,929
Service Corp Intl
6.50% 2008 .94 15,626,156
PDV America
7.88% 2003 .93 15,487,908
SAFECO Capital
8.07% 2037 .93 15,456,299
Greenpoint Bank
6.70% 2002 .92 15,319,651
ARAMARK Services
6.75% 2004 .91 15,075,045
Time Warner Entertainment
8.38% 2033 .90 14,904,427
Excludes U.S. Treasury and government agencies holdings.
For further detail about these holdings, please refer to the section entitled
"Investments in securities" herein.
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The 10 holdings listed here
make up 9.70% of net assets
IDS SELECTIVE FUND
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<CAPTION>
Financial Statements
Statement of assets and liabilities
IDS Selective Fund, Inc.
Nov. 30, 1998 (Unaudited)
Assets
<S> <C>
Investments in Quality Income Portfolio (Note 1) $1,655,938,943
Other receivables 5
-
Total assets 1,655,938,948
-------------
Liabilities
Dividends payable to shareholders 1,602,885
Accrued distribution fee 11,102
Accrued service fee 22,167
Accrued transfer agency fee 14,130
Accrued administrative services fee 6,489
Other accrued expenses 31,805
------
Total liabilities 1,688,578
---------
Net assets applicable to outstanding capital stock $1,654,250,370
==============
Represented by
Capital stock-- $.01 par value (Note 1) $ 1,771,584
Additional paid-in capital 1,553,175,708
Undistributed net investment income 299,175
Accumulated net realized gain (loss) 1,772,211
Unrealized appreciation (depreciation) on investments and on translation
of assets and liabilities in foreign currencies 97,231,692
----------
Total-- representing net assets applicable to outstanding capital stock $1,654,250,370
==============
Net assets applicable to outstanding shares: Class A $1,233,788,906
Class B $ 181,468,865
Class Y $ 238,992,599
Net asset value per share of outstanding capital stock: Class A shares 132,130,335 $ 9.34
Class B shares 19,434,649 $ 9.34
Class Y shares 25,593,382 $ 9.34
See accompanying notes to financial statements.
SEMIANNUAL REPORT -- 1998
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<TABLE>
<CAPTION>
Statement of operations
IDS Selective Fund, Inc.
Six months ended Nov. 30, 1998 (Unaudited)
Investment income
Income:
<S> <C>
Dividends $ 403,573
Interest 55,091,924
----------
Total income 55,495,497
----------
Expenses (Note 2):
Expenses allocated from Quality Income Portfolio 4,263,186
Distribution fee-- Class B 623,166
Transfer agency fee 859,986
Incremental transfer agency fee-- Class B 5,697
Service fee
Class A 1,067,700
Class B 144,139
Class Y 114,706
Administrative services fees and expenses 400,185
Compensation of board members 4,619
Postage 103,841
Registration fees 84,683
Report to shareholders 16,026
Audit fees 5,000
Other expenses 953
---
Total expenses. 7,693,887
Earnings credits on cash balances (Note 2) (32,153)
-------
Total net expenses 7,661,734
---------
Investment income (loss) -- net 47,833,763
----------
Realized and unrealized gain (loss) -- net Net realized gain (loss) on:
Security transactions 9,053,428
Financial futures contracts (713,899)
Options contracts written 342,370
-------
Net realized gain (loss) on investments 8,681,899
Net change in unrealized appreciation (depreciation) on investments
and on translation of assets and liabilities in foreign currencies 9,630,764
---------
Net gain (loss) on investments and foreign currencies 18,312,663
----------
Net increase (decrease) in net assets resulting from operations $66,146,426
===========
See accompanying notes to financial statements.
IDS SELECTIVE FUND
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<TABLE>
<CAPTION>
Statements of changes in net assets
IDS Selective Fund, Inc.
Nov. 30, 1998 May 31, 1998
Six months ended Year ended
(Unaudited)
Operations and distributions
<S> <C> <C>
Investment income (loss)-- net $ 47,833,763 $ 99,041,120
Net realized gain (loss) on investments 8,681,899 (2,534,220)
Net change in unrealized appreciation (depreciation) on investments
and on translation of assets and liabilities in foreign currencies 9,630,764 59,144,624
--------- ----------
Net increase (decrease) in net assets resulting from operations 66,146,426 155,651,524
---------- -----------
Distributions to shareholders from:
Net investment income
Class A (36,785,737) (79,639,635)
Class B (4,300,113) (7,660,457)
Class Y (6,886,145) (13,462,696)
Net realized gain
Class A -- (10,132,709)
Class B -- (1,113,787)
Class Y -- (1,708,554)
---- ----------
Total distributions (47,971,995) (113,717,838)
----------- ------------
Capital share transactions (Note 3)
Proceeds from sales
Class A shares (Note 2) 83,846,741 98,775,364
Class B shares 46,765,982 53,704,727
Class Y shares 55,164,774 79,769,239
Reinvestment of distributions at net asset value
Class A shares 26,529,831 67,101,318
Class B shares 3,758,967 7,945,814
Class Y shares 6,726,461 15,166,571
Payments for redemptions
Class A shares (121,674,653) (253,795,109)
Class B shares (Note 2) (24,045,818) (38,380,085)
Class Y shares (46,661,623) (80,758,805)
----------- -----------
Increase (decrease) in net assets from capital share transactions 30,410,662 (50,470,966)
---------- -----------
Total increase (decrease) in net assets 48,585,093 (8,537,280)
Net assets at beginning of period 1,605,665,277 1,614,202,557
------------- -------------
Net assets at end of period $1,654,250,370 $1,605,665,277
============== ==============
Undistributed net investment income $ 299,175 $ 437,407
-------------- --------------
See accompanying notes to financial statements.
SEMIANNUAL REPORT -- 1998
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<PAGE>
Notes to Financial Statements
IDS Selective Fund, Inc.
(Unaudited as to Nov. 30, 1998)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Fund is registered under the Investment Company Act of 1940 (as amended) as
a diversified, open-end management investment company. The Fund has 10 billion
authorized shares of capital stock.
The Fund offers Class A, Class B and Class Y shares.
o Class A shares are sold with a front-end sales charge.
o Class B shares may be subject to a contingent deferred sales charge and
automatically convert to Class A shares during the ninth calendar year of
ownership.
o Class Y shares have no sales charge and are offered only to qualifying
institutional investors.
All classes of shares have identical voting, dividend and liquidation rights.
The distribution fee, transfer agency fee and service fee (class specific
expenses) differs among classes. Income, expenses (other than class specific
expenses) and realized and unrealized gains or losses on investments are
allocated to each class of shares based upon its relative net assets.
Investment in Quality Income Portfolio
The Fund invests all of its assets in Quality Income Portfolio (the Portfolio),
a series of Income Trust, an open-end investment company that has the same
objectives as the Fund. This was accomplished by transferring the Fund's assets
to the Portfolio in return for a proportionate ownership interest in the
Portfolio. The Portfolio invests primarily in investment-grade bonds.
The Fund records daily its share of the Portfolio's income, expenses and
realized and unrealized gains and losses. The financial statements of the
Portfolio are included elsewhere in this report and should be read in
conjunction with the Fund's financial statements.
The Fund records its investment in the Portfolio at the value that is equal to
the Fund's proportionate ownership interest in the Portfolio's net assets. The
percentage of the Portfolio owned by the Fund at Nov. 30, 1998 was 99.95%.
Valuation of securities held by the Portfolio is discussed in Note 1 of the
Portfolio's "Notes to financial statements" (included elsewhere in this report).
Use of estimates
Preparing financial statements that conform to generally accepted accounting
principles requires management to make estimates (e.g., on assets and
liabilities) that could differ from actual results.
Federal taxes
The Fund's policy is to comply with all sections of the Internal Revenue Code
that apply to regulated investment companies and to distribute all of its
taxable income to the shareholders. No provision for income or excise taxes is
thus required.
Net investment income (loss) and net realized gains (losses) may differ for
financial statement and tax purposes primarily because of deferred losses on
certain futures contracts, the recognition of certain foreign currency gains
(losses) as ordinary income (loss) for tax purposes, and losses deferred due to
"wash sale" transactions. The character of distributions made during the year
from net investment income or net realized gains may differ from their ultimate
characterization for federal income tax purposes. Also, due to the timing of
dividend distributions, the fiscal year in which amounts are distributed may
differ from the year that the income or realized gains (losses) were recorded by
the Fund.
Dividends to shareholders
Dividends from net investment income, declared daily and payable monthly, are
reinvested in additional shares of the Fund at net asset value or payable in
cash. Capital gains, when available, are distributed along with the last income
dividend of the calendar year.
2. EXPENSES AND SALES CHARGES
In addition to the expenses allocated from the Portfolio, the Fund accrues its
own expenses as follows:
Effective March 20, 1995, the Fund entered into an agreement with American
Express Financial Corporation (AEFC) to provide administrative services. Under
its Administrative Services Agreement, the Fund pays AEFC a fee for
administration and accounting services at a percentage of the Fund's average
daily net assets in reducing percentages from 0.05% to 0.025% annually.
Additional administrative service expenses paid by the Fund are office expenses,
consultants' fees and compensation of officers and employees. Under this
agreement, the Fund also pays taxes, audit and certain legal fees, registration
fees for shares, compensation of board members, corporate filing fees and any
other expenses properly payable by the Fund and approved by the board.
Under a separate Transfer Agency Agreement, American Express Client Service
Corporation (AECSC) maintains shareholder accounts and records. The Fund pays
AECSC an annual fee per shareholder account for this service as follows:
o Class A $15.50
o Class B $16.50
o Class Y $15.50
Also effective March 20, 1995, the Fund entered into agreements with American
Express Financial Advisors Inc. for distribution and shareholder services. Under
a Plan and Agreement of Distribution, the Fund pays a distribution fee at an
annual rate of 0.75% of the Fund's average daily net assets attributable to
Class B shares for distribution services.
Under a Shareholder Service Agreement, the Fund pays a fee for service provided
to shareholders by financial advisors and other servicing agents. The fee is
calculated at a rate of 0.175% of the Fund's average daily net assets
attributable to Class A and Class B shares and 0.10% of the Fund's average daily
net assets attributable to Class Y shares.
Sales charges received by American Express Financial Advisors Inc. for
distributing Fund shares were $1,181,774 for Class A and $79,212 for Class B for
the six months ended Nov. 30, 1998.
During the six months ended Nov. 30, 1998, the Fund's transfer agency fees were
reduced by $32,153 as a result of earnings credits from overnight cash balances.
<PAGE>
<TABLE>
<CAPTION>
3. CAPITAL SHARE TRANSACTIONS
Transactions in shares of capital stock for the periods indicated are as
follows:
Six months ended Nov. 30, 1998
Class A Class B Class Y
<S> <C> <C> <C>
Sold 9,043,393 5,046,455 5,949,901
Issued for reinvested distributions 2,867,886 406,340 727,057
Redeemed (13,148,480) (2,600,424) (5,039,139)
----------- ---------- ----------
Net increase (decrease) (1,237,201) 2,852,371 1,637,819
Year ended May 31, 1998
Class A Class B Class Y
Sold 10,726,249 5,833,712 8,657,520
Issued for reinvested distributions 7,309,134 865,445 1,651,867
Redeemed (27,574,808) (4,171,964) (8,780,164)
----------- ---------- ----------
Net increase (decrease) (9,539,425) 2,527,193 1,529,223
4. BANK BORROWINGS
The Fund entered into a revolving credit agreement with U.S. Bank, N.A., whereby
the Fund is permitted to have bank borrowings for temporary or emergency
purposes to fund shareholder redemptions. The Fund must have asset coverage for
borrowings not to exceed the aggregate of 333% of advances equal to or less than
5 business days plus 367% of advances over 5 business days. The agreement, which
enables the Fund to participate with other IDS Funds, permits borrowings up $200
million, collectively. Interest is charged to each Fund based on its borrowings
at a rate equal to the Federal Funds Rate plus 0.30% or the Eurodollar Rate
(Reserve Adjusted) plus 0.20%. Borrowings are payable up to 90 days after such
loan is executed. The Fund also pays a commitment fee equal to its pro rata
share of the amount of the credit facility at a rate of 0.05% per annum. The
Fund had no borrowings outstanding during the six months ended Nov. 30, 1998.
SEMIANNUAL REPORT -- 1998
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<TABLE>
<CAPTION>
5. FINANCIAL HIGHLIGHTS
The tables below show certain important financial information for evaluating the
Fund's results.
Fiscal period ended May 31,
Per share income and capital changesa
Class A
1998c 1998 1997 1996b 1995
Net asset value,
<S> <C> <C> <C> <C> <C>
beginning of period $9.23 $9.00 $9.00 $9.53 $8.57
Income from investment operations:
Net investment income (loss) .27 .57 .59 .33 .59
Net gains (losses)
(both realized and unrealized) .11 .31 .12 (.52) 1.08
Total from investment operations .38 .88 .71 (.19) 1.67
Less distributions:
Dividends from
net investment income (.27) (.58) (.58) (.31) (.58)
Distributions from realized gains -- (.07) (.13) (.03) (.13)
Total distributions (.27) (.65) (.71) (.34) (.71)
Net asset value, end of period $9.34 $9.23 $9.00 $9.00 $9.53
Ratios/supplemental data
Class A
1998c 1998 1997 1996b 1995
Net assets, end of period
(in millions) $1,234 $1,231 $1,286 $1,408 $1,490
Ratio of expenses to
average daily net assetsd .87%e .86% .88% .89%e .85%
Ratio of net investment income (loss)
to average daily net assets 5.91%e 6.20% 6.36% 6.27%e 6.59%
Portfolio turnover rate
(excluding short-term securities) 12% 20% 31% 18% 26%
Total returnf 4.15% 10.15% 8.08% (2.03%) 20.25%
a For a share outstanding throughout the period. Rounded to the nearest cent.
b The Fund's fiscal year-end was changed from Nov. 30 to May 31, effective 1996.
c Six months ended Nov. 30, 1998 (Unaudited).
d Effective fiscal year 1996, expense ratio is based on total expenses of the
Fund before reduction of earning credits on cash balances.
e Adjusted to an annual basis.
f Total return does not reflect payment of a sales charge.
IDS SELECTIVE FUND
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Fiscal period ended May 31,
Per share income and capital changesa
Class B Class Y
1998d 1998 1997 1996c 1995b 1998d 1998 1997 1996c 1995b
Net asset value,
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
beginning of period $9.23 $9.00 $9.00 $9.53 $8.78 $9.23 $9.00 $9.00 $9.53 $8.78
Income from investment operations:
Net investment income (loss) .24 .50 .52 .30 .40 .28 .58 .60 .34 .46
Net gains (losses)
(both realized and unrealized) .11 .31 .12 (.52) .75 .11 .31 .12 (.52) .75
Total from investment Operations .35 .81 .64 (.22) 1.15 .39 .89 .72 (.18) 1.21
Less distributions:
Dividends from
net investment income (.24) (.51) (.51) (.28) (.40) (.28) (.59) (.59) (.32) (.46)
Distributions from realized gains -- (.07) (.13) (.03) -- -- (.07) (.13) (.03) --
Total distributions (.24) (.58) (.64) (.31) (.40) (.28) (.66) (.72) (.35) (.46)
Net asset value, end of period $9.34 $9.23 $9.00 $9.00 $9.53 $9.34 $9.23 $9.00 $9.00 $9.53
Ratios/supplemental data
Class B Class Y
1998d 1998 1997 1996c 1995b 1998d 1998 1997 1996c 1995b
Net assets, end of period
(in millions) $181 $153 $126 $108 $72 $239 $221 $202 $212 $142
Ratio of expenses to
average daily net assetse 1.63%f 1.62% 1.64% 1.63%f 1.67%f .80%f .79% .72% .70%f .73%f
Ratio of net invesment income
(loss) to average daily net assets 5.16%f 5.44% 6.40% 5.56%f 5.68%f 5.99%f 6.27% 7.02% 6.51%f 6.64%f
Portfolio turnover rate
(excluding short-term securities) 12% 20% 31% 18% 26% 12% 20% 31% 18% 26%
Total returng 3.75% 9.32% 7.26% (2.40%) 13.37% 4.19% 10.21% 8.27% (1.96%) 14.09%
a For a share outstanding throughout the period. Rounded to the nearest cent.
b Inception date was March 20, 1995.
c The Fund's fiscal year-end was changed from Nov. 30 to May 31, effective 1996.
d Six months ended Nov. 30, 1998 (Unaudited).
e Effective fiscal year 1996, expense ratio is based on total expenses of the
Fund before reduction of earning credits on cash balances.
f Adjusted to an annual basis.
g Total return does not reflect payment of a sales charge.
SEMIANNUAL REPORT -- 1998
</TABLE>
<PAGE>
Financial Statements
Statement of assets and liabilities
Quality Income Portfolio
Nov. 30, 1998 (Unaudited)
Assets
Investments in securities, at value (Note 1)
(identified cost $1,516,912,022) $1,614,439,961
Dividends and accrued interest receivable 23,308,184
Receivable for investment securities sold 21,072,424
----------
Total assets 1,658,820,569
-------------
Liabilities
Disbursements in excess of cash on demand deposit 327,736
Accrued investment management services fee 68,980
Other accrued expenses 49,369
Options contracts written, at value
(premium received $1,427,252) (Note 4) 1,686,000
---------
Total liabilities 2,132,085
---------
Net assets $1,656,688,484
==============
See accompanying notes to financial statements.
IDS SELCTIVE FUND
<PAGE>
<TABLE>
<CAPTION>
Statement of operations
Quality Income Portfolio
Six months ended Nov. 30, 1998 (Unaudited)
Investment income
Income:
<S> <C>
Dividends $ 403,750
Interest 55,119,268
----------
Total income 55,523,018
----------
Expenses (Note 2):
Investment management services fee 4,188,850
Compensation of board members 5,846
Custodian fees 46,051
Audit fees 15,000
Other 10,748
------
Total expenses 4,266,495
Earnings credits on cash balances (Note 2) (1,406)
------
Total net expenses 4,265,089
---------
Investment income (loss) -- net 51,257,929
----------
Realized and unrealized gain (loss) -- net
Net realized gain (loss) on:
Security transactions (Note 3) 9,056,819
Financial futures contracts (714,219)
Options contacts written 342,500
-------
Net realized gain (loss) on investments 8,685,100
Net change in unrealized appreciation (depreciation) on investments
and on translation of assets and liabilities in foreign currencies 9,636,060
---------
Net gain (loss) on investments and foreign currencies 18,321,160
----------
Net increase (decrease) in net assets resulting from operations $69,579,089
===========
See accompanying notes to financial statements.
SEMIANNUAL REPORT -- 1998
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<PAGE>
<TABLE>
<CAPTION>
Statements of changes in net assets
Quality Income Portfolio
Nov. 30, 1998 May 31, 1998
Six months ended Year ended
(Unaudited)
Operations
<S> <C> <C>
Investment income (loss)-- net $ 51,257,929 $ 105,079,943
Net realized gain (loss) on investments 8,685,100 (2,535,432)
Net change in unrealized appreciation (depreciation) on investments
and on translation of assets and liabilities in foreign currencies 9,636,060 59,167,525
--------- ----------
Net increase (decrease) in net assets resulting from operations 69,579,089 161,712,036
Net contributions (withdrawals) from partners (19,807,045) (170,449,665)
----------- ------------
Total increase (decrease) in net assets 49,772,044 (8,737,629)
Net assets at beginning of period (Note 1) 1,606,916,440 1,615,654,069
------------- -------------
Net assets at end of period $1,656,688,484 $1,606,916,440
============== ==============
See accompanying notes to financial statements.
IDS SELECTIVE FUND
</TABLE>
<PAGE>
Notes to Financial Statements
Quality Income Portfolio
(Unaudited as to Nov. 30, 1998)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Quality Income Portfolio (the Portfolio) is a series of Income Trust (the Trust)
and is registered under the Investment Company Act of 1940 (as amended) as a
diversified, open-end management investment company. Quality Income Portfolio
invests primarily in investment-grade bonds. The Declaration of Trust permits
the Trustees to issue non-transferable interests in the Portfolio.
The Portfolio's significant accounting policies are summarized below:
Use of estimates
Preparing financial statements that conform to generally accepted accounting
principles requires management to make estimates (e.g., on assets and
liabilities) that could differ from actual results.
Valuation of securities
All securities are valued at the close of each business day. Securities traded
on national securities exchanges or included in national market systems are
valued at the last quoted sales price. Debt securities are generally traded in
the over-the-counter market and are valued at a price that reflects fair value
as quoted by dealers in these securities or by an independent pricing service.
Securities for which market quotations are not readily available are valued at
fair value according to methods selected in good faith by the board. Short-term
securities maturing in more than 60 days from the valuation date are valued at
the market price or approximate market value based on current interest rates;
those maturing in 60 days or less are valued at amortized cost.
Option transactions
To produce incremental earnings, protect gains and facilitate buying and selling
of securities for investments the Portfolio may buy and write options traded on
any U.S. or foreign exchange or in the over-the-counter market where completing
the obligation depends upon the credit standing of the other party. The
Portfolio also may buy and sell put and call options and write covered call
options on portfolio securities as well as write cash-secured put options. The
risk in writing a call option is that the Portfolio gives up the opportunity for
profit if the market price of the security increases. The risk in writing a put
option is that the Portfolio may incur a loss if the market price of the
security decreases and the option is exercised. The risk in buying an option is
that the Portfolio pays a premium whether or not the option is exercised. The
Portfolio also has the additional risk of being unable to enter into a closing
transaction if a liquid secondary market does not exist.
Option contracts are valued daily at the closing prices on their primary
exchanges and unrealized appreciation or depreciation is recorded. The Portfolio
will realize a gain or loss when the option transaction expires or closes. When
options on debt securities or futures are exercised, the Portfolio will realize
a gain or loss. When other options are exercised, the proceeds on sales for a
written call option, the purchase cost for a written put option or the cost of a
security for a purchased put or call option is adjusted by the amount of premium
received or paid.
Futures transactions
To gain exposure to or protect itself from market changes, the Portfolio may buy
and sell financial futures contracts traded on any U.S. or foreign exchange. The
Portfolio also may buy and write put and call options on these futures
contracts. Risks of entering into futures contracts and related options include
the possibility of an illiquid market and that a change in the value of the
contract or option may not correlate with changes in the value of the underlying
securities.
Upon entering into a futures contract, the Portfolio is required to deposit
either cash or securities in an amount (initial margin) equal to a certain
percentage of the contract value. Subsequent payments (variation margin) are
made or received by the Portfolio each day. The variation margin payments are
equal to the daily changes in the contract value and are recorded as unrealized
gains and losses. The Portfolio recognizes a realized gain or loss when the
contract is closed or expires.
Foreign currency translations and foreign currency contracts
Securities and other assets and liabilities denominated in foreign currencies
are translated daily into U.S. dollars at the closing rate of exchange. Foreign
currency amounts related to the purchase or sale of securities and income and
expenses are translated at the exchange rate on the transaction date. The effect
of changes in foreign exchange rates on realized and unrealized security gains
or losses is reflected as a component of such gains or losses. In the statement
of operations, net realized gains or losses from foreign currency transactions,
if any, may arise from sales of foreign currency, closed forward contracts,
exchange gains or losses realized between the trade date and settlement date on
securities transactions, and other translation gains or losses on dividends,
interest income and foreign withholding taxes.
The Portfolio may enter into forward foreign currency exchange contracts for
operational purposes and to protect against adverse exchange rate fluctuation.
The net U.S. dollar value of foreign currency underlying all contractual
commitments held by the Portfolio and the resulting unrealized appreciation or
depreciation are determined using foreign currency exchange rates from an
independent pricing service. The Portfolio is subject to the credit risk that
the other party will not complete its contract obligations.
Illiquid securities
As of Nov. 30, 1998, investments in securities included issues that are illiquid
which the Portfolio currently limits to 10% of net assets, at market value, at
the time of purchase. The aggregate value of such securities at Nov. 30, 1998
was $12,260,769 representing 0.74% of net assets. According to board guidelines,
certain unregistered securities are determined to be liquid and are not included
within the 10% limitation specified above.
Federal taxes
For federal income tax purposes the Portfolio qualifies as a partnership and
each investor in the Portfolio is treated as the owner of its proportionate
share of the net assets, income, expenses and realized and unrealized gains and
losses of the Portfolio. As a "pass-through" entity, the Portfolio therefore
does not pay any income dividends or capital gain distributions.
Other
Security transactions are accounted for on the date securities are purchased or
sold. Dividend income is recognized on the ex-dividend date. For U.S. dollar
denominated bonds, interest income includes level-yield amortization of premium
and discount. For foreign bonds, except for original issue discount, the
Portfolio does not amortize premium and discount. Interest income, including
level-yield amortization of premium and discount, is accrued daily.
2. FEES AND EXPENSES
The Trust, on behalf of the Portfolio, has entered into an Investment Management
Services Agreement with AEFC for managing its portfolio. Under this agreement,
AEFC determines which securities will be purchased, held or sold. The management
fee is a percentage of the Portfolio's average daily net assets in reducing
percentages from 0.52% to 0.395% annually.
Under the agreement, the Trust also pays taxes, brokerage commissions and
nonadvisory expenses, which include custodian fees, audit and certain legal
fees, fidelity bond premiums, registration fees for units, office expenses,
consultants' fees, compensation of trustees, corporate filing fees, expenses
incurred in connection with lending securities of the Portfolio and any other
expenses properly payable by the Trust or Portfolio and approved by the board.
During the six months ended Nov. 30, 1998, the Portfolio's custodian fees were
reduced by $1,406 as a result of earnings credit from overnight cash balances.
According to a Placement Agency Agreement, American Express Financial Advisors
Inc. acts as placement agent of the Trust's units.
3. SECURITIES TRANSACTIONS
Cost of purchases and proceeds from sales of securities (other than short-term
obligations) aggregated $187,464,335 and $223,205,768, respectively, for the six
months ended Nov. 30, 1998. For the same period, the portfolio turnover rate was
12%. Realized gains and losses are determined on an identified cost basis.
Income from securities lending amounted to $30,661 for the six months ended Nov.
30, 1998. The risks to the Portfolio of securities lending are that the borrower
may not provide additional collateral when required or return the securities
when due.
4. OPTIONS CONTRACTS WRITTEN
Contracts and premium amounts associated with options contracts written are as
follows:
Six months ended Nov. 30, 1998
Calls
Contracts Premium
Balance May 31, 1998 -- $ --
Opened 1,050 1,769,752
Expired (250) (342,500)
---- --------
Balance Nov. 30, 1998 800 $1,427,252
See "Summary of significant accounting policies."
SEMIANNUAL REPORT -- 1998
<PAGE>
<TABLE>
<CAPTION>
Investments in Securities
Quality Income Portfolio
Nov. 30, 1998 (Unaudited)
(Percentages represent value of investments compared to net assets)
Bonds (92.3%)
Issuer Coupon Principal Value(a)
rate amount
Government obligations (34.4%)
Overseas Private Investment
U.S. Govt Guaranty Series 1996A
<S> <C> <C> <C> <C>
01-15-09 6.99% $10,000,000 $10,591,300
People's Republic of China
(U.S. Dollar)
01-15-96 9.00 10,000,000(b) 10,686,941
Resolution Funding Corp
Zero Coupon
01-15-06 8.94 25,000,000(c) 17,498,953
10-15-06 8.95 68,000,000(c) 46,019,374
01-15-14 8.21 48,000,000(c) 20,635,555
07-15-14 8.27 10,000,000(c) 4,180,758
04-15-16 8.05 47,000,000(c) 17,492,972
U.S. Treasury
07-31-99 6.88 60,000,000 60,844,253
02-15-00 5.88 25,000,000 25,356,210
08-15-00 6.00 11,400,000 11,656,267
11-15-01 7.50 109,000,000 117,546,058
02-15-04 5.88 8,000,000 8,474,460
05-15-04 7.25 25,000,000 28,035,908
08-15-04 7.25 26,800,000 30,154,818
11-15-16 7.50 105,395,000 132,037,644
11-15-21 8.00 15,000,000(j) 20,242,638
TIPS
01-15-07 3.38 8,050,000(l) 8,092,538
Total 569,546,647
Mortgage-backed securities (8.9%)
Federal Home Loan Mtge Corp
07-01-16 8.00 436 452
01-01-17 8.00 4,877 5,057
03-01-17 8.50 133,624 140,346
06-01-17 8.50 108,270 113,987
04-01-20 9.00 1,893,044 2,000,115
04-01-21 9.00 1,243,454 1,316,892
03-01-22 8.50 2,960,149 3,118,340
08-01-22 8.50 2,681,251 2,809,441
06-01-24 7.50 11,277,571 11,591,200
02-01-25 8.00 5,515,131 5,711,580
Collateralized Mtge Obligation
09-01-19 8.50 186,487 196,102
Federal Housing Admin
01-01-24 7.43 8,826,851 9,342,671
Federal Natl Mtge Assn
11-01-02 10.00 97 101
10-01-23 6.50 9,668,282 9,737,797
11-01-26 8.00 8,676,297 8,982,657
04-01-27 7.50 10,427,629 10,717,620
06-01-27 7.50 12,922,432 13,281,805
07-01-27 8.00 9,583,283 9,923,028
08-01-27 7.50 57,622 59,225
09-01-28 6.00 14,847,201 14,652,405
Collateralized Mtge Obligation
10-25-19 8.50 1,448,659 1,590,622
01-25-21 8.00 614,815 612,909
Principal Only
09-01-18 9.50 653,532(e) 580,607
01-25-20 9.89 789,961(e) 766,813
Trust Series Z
02-25-24 6.00 22,477,520(d) 20,968,603
Govt Natl Mtge Assn
07-15-24 8.00 393,204 409,424
10-15-24 9.00 91,090 97,153
02-15-25 9.00 458 489
05-15-26 7.50 15,200,625 15,699,357
Prudential Bache
Collateralized Mtge Obligation
04-01-19 7.97 2,631,060 2,708,567
Total 147,135,365
Automotive & related (1.4%)
Daimler-Benz North America
Company Guaranty Medium-term Nts Series A
09-15-06 7.38 14,000,000 15,632,929
General Motors
05-15-03 8.88 7,050,000 7,965,758
Total 23,598,687
Banks and savings & loans (9.5%)
ABN-Amro Bank
(U.S. Dollar) Sub Nts Series B
05-15-23 7.75 12,000,000(b) 13,016,186
Banco General
(U.S. Dollar)
08-01-02 7.70 6,400,000(b,g) 6,182,499
BankAmerica
Sub Nts Series B
12-31-26 7.70 5,000,000(g) 5,349,738
BankBoston Capital
Company Guaranty Series B
12-15-26 8.25 5,000,000 5,362,343
Bayerische Landesbank
(U.S. Dollar) Deposit Nts
02-26-01 5.63 13,750,000(b) 13,896,297
Cullen/Frost Capital
Series A
02-01-27 8.42 10,000,000 10,785,420
Dao Heng Bank
(U.S. Dollar) Sub Nts
01-24-07 7.75 7,000,000(b,g) 5,591,250
First Chicago
Sr Sub Nts
06-15-99 9.00 7,900,000 8,056,888
Firstar Capital
Company Guaranty Series B
12-15-26 8.32 10,000,000 11,119,059
Greenpoint Bank
Sr Nts
07-15-02 6.70 15,000,000 15,319,651
Korea Development Bank
(U.S. Dollar)
05-15-06 7.25 4,600,000(b) 3,913,908
Morgan (JP)
Sr Sub Medium-term Nts Series A
02-15-12 4.00 9,350,000(h) 8,369,279
NationsBank
Sub Nts
11-01-01 9.25 8,950,000 9,919,392
NCNB
Sub Nts
10-15-01 9.13 10,000,000 11,073,876
Swiss Bank
Sub Deb
09-01-26 7.75 11,369,000 12,831,275
US Bancorp
Sub Nts
09-15-07 6.88 8,550,000 9,156,375
Washington Mutual Capital
Company Guaranty
06-01-27 8.38 5,800,000(g) 6,528,109
Total 156,471,545
Building materials & construction (1.0%)
Tyco Intl Group
(U.S. Dollar) Company Guaranty
06-15-05 6.38 17,000,000(b) 17,140,342
Chemicals (1.6%)
Dow Chemical
09-15-21 8.85 10,000,000 12,786,032
USA Waste Services
Sr Nts
10-01-07 7.13 11,900,000 12,907,625
Total 25,693,657
Communications equipment & services (1.7%)
BellSouth Telecommunications
12-01-95 7.00 10,000,000 11,161,295
TCI Telecommunications
Sr Nts
02-15-28 7.13 10,000,000 10,928,370
Telekom Malaysia
(U.S. Dollar)
08-01-25 7.88 10,000,000(b,g) 6,874,300
Total 28,963,965
Computers & office equipment (0.3%)
Hewlett-Packard
Zero Coupon Cv Sub Nts
10-15-17 3.13 10,000,000(c,g) 5,425,000
Electronics (0.7%)
Harris
12-01-18 10.38 3,900,000 4,113,771
Hyundai Semiconductor
(U.S. Dollar) Sr Nts
05-15-07 8.63 10,800,000(b,g) 7,742,825
Total 11,856,596
Energy (3.9%)
PDV America
Sr Nts
08-01-03 7.88 16,500,000 15,487,908
Perez Companc
(U.S. Dollar)
07-15-07 8.13 5,000,000(b,g) 4,476,861
Petronas
(U.S. Dollar)
08-15-15 7.75 10,000,000(b) 7,586,299
Phillips Petroleum
03-15-28 7.13 12,000,000 12,617,083
Texaco Capital
Gtd Deb
03-01-43 7.50 12,000,000 13,638,127
USX-Marathon Group
05-15-22 9.38 9,200,000 10,939,877
Total 64,746,155
Energy equipment & services (0.4%)
Foster Wheeler
11-15-05 6.75 5,850,000 5,859,327
Financial services (3.2%)
GMAC
Medium-term Nts
03-01-00 7.00 14,300,000 14,561,553
Greyhound Financial
Medium-term Nts Series A
07-02-99 7.95 9,600,000 9,740,701
KFW Intl Finance
(U.S. Dollar) Medium-term Nts
12-15-99 8.50 10,000,000(b) 10,307,187
Railcar Leasing
01-15-13 7.13 12,150,000(g) 13,292,991
Salomon
Sr Nts
05-15-00 7.75 5,000,000 5,143,999
Total 53,046,431
Food (0.1%)
Gruma
(U.S. Dollar) Sr Nts
10-15-07 7.63 2,000,000(b) 1,830,693
Health care (1.6%)
Baxter Intl
02-15-28 6.63 12,000,000 12,516,380
Lilly (Eli)
01-01-36 6.77 13,300,000 14,353,770
Total 26,870,150
Health care services (2.7%)
AETNA Services
08-15-03 6.38 13,650,000 14,084,257
HEALTHSOUTH
06-15-08 7.00 15,000,000 14,233,275
Service Corp Intl
03-15-08 6.50 15,350,000 15,626,156
Total 43,943,688
Industrial equipment & services (1.6%)
ARAMARK Services
08-01-04 6.75 15,000,000 15,075,045
Deere & Co
06-15-19 8.95 10,000,000 12,232,682
Total 27,307,727
Insurance (4.7%)
American United Life Insurance
03-30-26 7.75 11,175,000(k) 12,260,769
Arkwright CSN Trust
08-15-26 9.63 11,000,000(g) 13,161,402
Conseco Financing Trust
Company Guaranty
11-15-26 8.70 6,600,000 6,870,035
Equitable Life Assurance
12-01-15 7.70 5,000,000(g) 5,386,187
Nationwide CSN Trust
02-15-25 9.88 11,500,000(g) 14,343,346
SAFECO Capital
Company Guaranty
07-15-37 8.07 15,000,000 15,456,299
SunAmerica
02-01-12 9.95 8,000,000 10,431,869
Total 77,909,907
Media (0.9%)
Time Warner Entertainment
Sr Nts
07-15-33 8.38 12,000,000 14,904,427
Metals (0.6%)
Alcan Aluminum
(U.S. Dollar)
01-15-22 8.88 9,600,000(b) 10,675,063
Miscellaneous (0.7%)
Jasmine Submarine Telecom
(U.S. Dollar) Sr Nts
05-30-11 8.48 3,022,740(b,g) 2,176,373
Provident Companies
Sr Nts
03-15-28 7.25 10,027,000 10,061,817
Total 12,238,190
Multi-industry conglomerates (0.7%)
Hutchison Whampoa Finance
(U.S. Dollar) Company Guaranty
08-01-27 7.50 14,025,000(b,g) 11,724,499
Retail (1.9%)
Dayton Hudson
06-15-23 7.88 18,850,000 20,535,233
Wal-Mart CRAVE Trust
07-17-06 7.00 10,280,161(g) 10,675,845
Total 31,211,078
Transportation (1.2%)
Burlington Northern Santa Fe
12-15-25 7.00 10,000,000 10,308,455
Enterprise Rent-A-Car USA Finance
02-15-08 6.80 10,000,000 9,818,000
Total 20,126,455
Utilities -- electric (4.6%)
AEP Generating
Series F
12-07-22 9.82 4,968,432 5,341,950
Arizona Public Service
1st Mtge Sale Lease-backed Obligation
12-30-15 8.00 9,000,000 10,300,981
Cajun Electric Power
Mtge Trust
03-15-19 8.92 4,960,000 5,253,962
Commonwealth Edison
1st Mtge
04-15-00 6.50 9,000,000 9,163,602
Indiana & Michigan Power
Sale Lease-backed Obligation Series F
12-07-22 9.82 4,968,426 5,341,944
Israel Electric
(U.S. Dollar) Sr Nts
12-15-26 7.88 9,000,000(b,g) 9,098,190
Korea Electric Power
(U.S. Dollar)
07-01-02 8.00 9,000,000(b) 8,205,230
(U.S. Dollar) Zero Coupon
04-01-16 10.07 35,000,000 (b,f) 3,382,719
Salton Sea Funding
Series C
05-30-10 7.84 10,000,000 11,115,897
Wisconsin Electric Power
12-01-95 6.88 8,000,000 8,499,684
Total 75,704,159
Utilities -- telephone (4.0%)
AT&T
01-15-25 8.35 5,000,000 5,790,366
12-01-31 8.63 10,000,000 11,211,080
GTE
11-01-20 10.25 6,050,000 6,739,168
GTE Florida
02-01-28 6.86 12,450,000 13,426,500
New York Telephone
07-15-31 9.38 14,000,000 15,908,011
WorldCom
Sr Nts
08-15-28 6.95 12,000,000 12,921,365
Total 65,996,490
Total bonds
(Cost: $1,432,950,804) $1,529,926,243
Preferred stock (0.5%)
Issuer Shares Value(a)
Salomon Income Financing Trust
2.38% 2026 340,000 $9,052,500
Total preferred stock
(Cost: $8,500,000) $9,052,500
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Short-term securities (4.6%)
Issuer Annualized Amount Value(a)
yield on date payable at
of purchase maturity
U.S. government agencies (1.8%)
Federal Home Loan Mtge Corp Disc Nts
<S> <C> <C> <C> <C>
12-10-98 4.83% $8,800,000 $8,789,418
12-17-98 5.07 8,900,000 8,880,024
12-22-98 4.82 7,400,000 7,379,237
Federal Natl Mtge Assn Disc Nt
12-18-98 5.01 3,400,000 3,392,004
Total 28,440,683
Commercial paper (2.8%)
BMW US Capital
12-18-98 4.88 3,800,000 3,791,261
CAFCO
12-30-98 4.92 2,100,000(i) 2,091,711
Ciesco LP
12-08-98 5.11 5,200,000 5,194,863
Daimler-Benz
12-02-98 5.15 7,000,000 6,999,003
Natl Rural Utilities
12-08-98 5.05 6,300,000 6,293,838
NBD Bank Canada
12-30-98 4.91 3,800,000 3,785,031
Paccar Financial
12-03-98 5.17 2,200,000 2,199,371
Pioneer Hi-Bred
12-02-98 5.21 500,000 499,928
12-08-98 5.21 4,400,000 4,395,551
Reed Elsevier
12-07-98 5.15 1,900,000(i) 1,898,376
12-15-98 5.17 4,400,000(i) 4,391,187
Sysco
12-18-98 5.10 1,600,000(i) 1,596,177
Xerox
12-31-98 4.87 3,900,000 3,884,238
Total 47,020,535
Total short-term securities
(Cost: $75,461,218) $75,461,218
Total investments in securities
(Cost: $1,516,912,022)(m) $1,614,439,961
See accompanying notes to investments in securities.
IDS SELECTIVE FUND
</TABLE>
<PAGE>
Notes to investments in securities
(a) Securities are valued by procedures described in Note 1 to the financial
statements.
(b) Foreign security values are stated in U.S. dollars. For debt securities,
principal amounts are denominated in the currency indicated. As of Nov. 30,
1998, the value of foreign securities represented 9.33% of net assets.
(c) For zero coupon bonds, the interest rate disclosed represents the annualized
effective yield on the date of acquisition.
(d) This security is a collateralized mortgage obligation that pays no interest
or principal during its initial accrual period until payment of a previous
series within the trust have been paid off. Interest is accrued at an effective
yield; similar to a zero coupon bond.
(e) Principal-only represents securities that entitle holders to receive only
principal payments on the underlying mortgages. The yield to maturity of a
principal-only is sensitive to the rate of principal payments on the underlying
mortgage assets. A slow (rapid) rate of principal repayments may have an adverse
(positive) effect on yield to maturity. Interest rate disclosed represents
current yield based upon the current cost basis and estimated timing of future
cash flows.
(f) For those zero coupon bonds that become coupon paying at a future date, the
interest rate disclosed represents the annualized effective yield from the date
of acquisition to interest reset date disclosed.
(g) Represents a security sold under Rule 144A, which is exempt from
registration under the Securities Act of 1933, as amended. This security has
been determined to be liquid under guidelines established by the board.
(h) Interest rate varies either based on a predetermined schedule or to reflect
current market conditions; rate shown is the effective rate on Nov. 30, 1998.
(i) Commercial paper sold within terms of a private placement memorandum, exempt
from registration under Section 4(2) of the Securities Act of 1933, as amended,
and may be sold only to dealers in that program or other "accredited investors."
This security has been determined to be liquid under guidelines established by
the board.
<PAGE>
<TABLE>
<CAPTION>
(j) At Nov. 30, 1998, securities valued at $13,495,092 were held to cover open
call options written as follows:
Issuer Shares Exercise Expiration Value(a)
price date
<S> <C> <C> <C> <C>
U.S. Treasury Bond Nov. 98 30,000 $130 Feb. 1999 $607,875
U.S. Treasury Bond Nov. 98 50,000 130 Feb. 1999 1,078,125
Total $1,686,000
(k) Identifies issues considered to be illiquid as to their marketability (see
Note 1 to the financial statements). Information concerning such security
holdings at Nov. 30, 1998, is as follows:
Security Acquisition date Cost
American United Life Insurance*
7.75% 2026 02-13-96 thru 11-05-98 $11,314,931
*Represents a security sold under Rule 144A, which is exempt from registration
under the Securities Act of 1933, as amended.
(l) U.S. Treasury inflation-protection securities (TIPS) are securities in which
the principal amount is adjusted for inflation and the semiannual interest
payments equal a fixed percentage of the inflation-adjusted principal amount.
(m) At Nov. 30, 1998, the cost of securities for federal income tax purposes was
approximately $1,516,715,000 and the approximate aggregate gross unrealized
appreciation and depreciation based on that cost was:
Unrealized appreciation..........................................$117,901,000
Unrealized depreciation...........................................(20,176,000)
Net unrealized appreciation.......................................$97,725,000
IDS SELECTIVE FUND
</TABLE>
<PAGE>
BULK RATE
U.S. POSTAGE
PAID
Permit No. 85
Spencer, IA
S-6385 M (1/99)
IDS Selective Fund
IDS Tower 10
Minneapolis, MN 55440-0010
AMERICAN EXPRESS Financial Advisors