1997 SEMIANNUAL REPORT
IDS
Equity Select
Fund
(icon of) three pine trees
The goals of IDS Equity Select Fund, Inc. are growth of capital and income. The
Fund invests primarily in moderate growth stocks, higher yielding equities and
debt securities.
Distributed by American Express Financial Advisors Inc. Member SIPC.
<PAGE>
Budding blue chips
When most people think of stocks, they tend to focus on the notable names in
American business -- the blue chips, as they're known. But there's another group
of companies that though smaller and less well-known, boast impressive business
histories. These mid-sized companies, which we call "budding blue chips," are
the foundation of Equity Select Fund. Often, they enjoy a dominant position in
their business. For an investor, this means an opportunity to participate in the
growth that's likely for these companies and the potential for rising stock
prices.
Contents
From the president 3
From the portfolio manager 3
Ten largest holdings 5
Financial statements 6
Notes to financial statements 9
Investments in securities 23
Board members and officers 27
IDS mutual funds 28
<PAGE>
To our shareholders
From the president
If you're an experienced investor, you know that the past two years have
been unusually strong ones in many financial markets. Perhaps just as
important, you also know that 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.
That fact reinforces the need for investors to periodically review 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.
I also want to tell you that this Fund has a new portfolio manager. Betty
J. Tebault, who assumed that role last January, has 20 years of experience
as a securities analyst and portfolio manager, the last 12 of which have
been at American Express Financial Corporation. Her review of the past six
months begins on this page.
William R. Pearce
(picture of) William Pearce
William R. Pearce
President of the Fund
From the portfolio manager
It was an up-and-down six months for the stock market and IDS Equity
Select Fund. Fortunately, the gains easily exceeded the losses, and the
Fund finished well into positive territory for the period. From December
1996 through May 1997, the first half of the Fund's fiscal year, the total
return for investors in Class A shares was 8.5%. (A substantial portion of
the return came in the form of a capital gain, which was paid to
shareholders last December and reduced the Fund's net asset value by the
same amount at that time.)
Stocks got off to a poor start, as a rise in
long-term interest rates took a toll on the market last December. But by
January, buoyed by benign inflation data and encouraging corporate profit
reports, stocks were again gaining ground. Another interest-rate rise sent
them into retreat from early March to mid-April, but, with the remarkable
resilience they've shown in recent years, stocks more than made up for the
downturn with a rally that lasted through the end of the period. During
the six months, the Fund's performance pattern roughly tracked that of the
broad market.
Less cyclical, more growth
Since I took over this Fund last January, I have made some moderate
changes to its holdings. These include reducing the number of "cyclical"
stocks (those of companies whose fortunes tend to follow the direction of
the economy) in favor of growth stocks (those of companies with more
consistent, above-average earnings histories). In many cases, this
approach has led me toward more consumer-product companies, as opposed to
the industrial businesses that have long been a staple of this Fund. Good
examples of the type of holding that has been added to the portfolio are
Avon Products, a provider of personal-care products, and Service
Corporation, an operator of funeral homes and cemeteries. In addition,
financial services is now a bigger area of investment for the Fund.
On a broader scale, I also have added more stocks of larger companies.
Prior to my becoming manager of the Fund, the overriding emphasis was on
stocks of mid-size companies - "budding blue chips," so named because of
their potential to become dominant players in their respective businesses.
The portfolio is now split about evenly between stocks of mid-size and
large, well-established companies.
No clear trend ahead
As we move into the second half of the fiscal year, I don't have a strong
feeling about prospects for the stock market. On the positive side,
inflation still appears to be under control, while the economy continues
to chug along. On the potentially negative side, corporate profits may
have already seen their peak for some time, and interest rates, with
expected prompting by the Federal Reserve Board, are likely to head higher
this year. Against that backdrop, I think the key will be employing
thorough securities research to find investments that can fare relatively
well in whatever market environment we encounter.
Betty J. Tebault
(picture of) Betty Tebault
Betty J. Tebault
Portfolio Manager
<PAGE>
To our shareholders
Class A
6-month performance
(All figures per share)
Net asset value (NAV)
May 31, 1997 $ 13.87
Nov. 30, 1996 $ 14.71
Decrease $ 0.84
Distributions
Dec. 1, 1996 - May 31, 1997
From income $ 0.32
From capital gains $ 1.58
Total distribution $ 1.90
Total return* +8.5%
Class B
6-month performance
(All figures per share)
Net asset value (NAV)
May 31, 1997 $ 13.76
Nov. 30, 1996 $ 14.63
Decrease $ 0.87
Distributions
Dec. 1, 1996 - May 31, 1997
From income $ 0.29
From capital gains $ 1.58
Total distribution $ 1.87
Total return* +8.1%
Class Y
6-month performance
(All figures per share)
Net asset value (NAV)
May 31, 1997 $ 13.87
Nov. 30, 1996 $ 14.72
Decrease $ 0.85
Distributions
Dec. 1, 1996 - May 31, 1997
From income $ 0.33
From capital gains $ 1.58
Total distribution $ 1.91
Total return* +8.6%
*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.
<PAGE>
The Fund's ten largest holdings
Percent Value
(of Fund's net assets) (as of May 31, 1997)
Tyco Intl 2.67% $24,130,000
SmithKline Beecham ADR 2.18 19,687,500
Sherwin-Williams 1.73 15,600,000
Washington Mutual 1.73 15,575,000
BellSouth 1.68 15,200,625
Service Corp Intl 1.66 15,016,500
USA Waste Service 1.65 14,862,500
Kohl's 1.64 14,815,625
Compaq Computer 1.62 14,613,750
Safeway 1.60 14,400,000
(icon of) pie chart
The ten holdings listed here make up 18.16% of the Fund's net assets
<PAGE>
<TABLE>
Financial statements
Statement of assets and liabilities
IDS Equity Select Fund, Inc.
May 31, 1997
Assets
<CAPTION>
(Unaudited)
Investments in securities, at value (Note 1)
<S> <C>
(identified cost $672,574,128) $910,532,080
Cash in bank on demand deposit 495,247
Dividends and accrued interest receivable 955,240
Receivable for investment securities sold 3,262,990
U.S. government securities held as collateral (Note 4) 6,794,270
---------
Total assets 922,039,827
Liabilities
Payable for investment securities purchased 2,423,165
Payable upon return of securities loaned (Note 4) 17,045,270
Accrued investment management services fee 12,762
Accrued distribution fee 589
Accrued service fee 4,301
Accrued transfer agency fee 1,868
Accrued administrative services fee 929
Other accrued expenses 58,154
------
Total liabilities 19,547,038
----------
Net assets applicable to outstanding capital stock $902,492,789
============
Represented by
Capital stock-- authorized 10,000,000,000 shares of $.01 par value $ 650,930
Additional paid-in capital 567,953,101
Undistributed net investment income 753,360
Accumulated net realized gain (Note 1) 95,177,446
Unrealized appreciation of investments 237,957,952
-----------
Total-- representing net assets applicable to outstanding capital stock $902,492,789
============
Net assets applicable to outstanding shares: Class A $872,209,660
Class B $ 28,842,100
Class Y $ 1,441,029
Net asset value per share of outstanding capital stock: Class A shares 62,892,350 $ 13.87
Class B shares 2,096,816 $ 13.76
Class Y shares 103,875 $ 13.87
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
Statement of operations
IDS Equity Select Fund, Inc.
Six months ended May 31, 1997
Investment income
<CAPTION>
(Unaudited)
Income:
<S> <C>
Dividends $ 4,327,259
Interest 1,094,887
---------
Total income 5,422,146
---------
Expenses (Note 2):
Investment management services fee 2,232,623
Distribution fee -- Class B 85,221
Transfer agency fee 334,718
Incremental transfer agency fee-- Class B 1,296
Service fee
Class A 699,937
Class B 19,796
Class Y 85
Administrative services fees and expenses 166,609
Compensation of board members 8,341
Compensation of officers 56
Custodian fees 31,325
Postage20,546
Registration fees 41,022
Reports to shareholders 14,889
Audit fees 12,500
Other 8,878
-----
Total expenses 3,677,842
Earnings credits on cash balances (Note 2) (25,749)
- -------
Total net expenses 3,652,093
---------
Investment income -- net 1,770,053
---------
Realized and unrealized gain -- net
Net realized gain on security and foreign currency transactions
(including loss of $994 from foreign currency transactions) (Note 3) 95,184,540
Net change in unrealized appreciation or depreciation of investments and on
translation of assets and liabilities in foreign currencies (26,068,370)
-----------
Net gain on investments and foreign currencies 69,116,170
----------
Net increase in net assets resulting from operations $70,886,223
===========
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
Financial statements
Statements of changes in net assets
IDS Equity Select Fund, Inc.
<CAPTION>
Operations and distributions May 31, 1997 Nov. 30, 1996
Six months ended Year Ended
(Unaudited)
<S> <C> <C>
Investment income-- net $ 1,770,053 $ 3,891,516
Net realized gain on investments and foreign currencies 95,184,540 108,411,004
Net change in unrealized appreciation or depreciation of investments
and on translation of assets and liabilities in foreign currencies (26,068,370) 84,207,057
Net increase in net assets resulting from operations 70,886,223 196,509,577
Distributions to shareholders from:
Net investment income
Class A (1,692,099) (3,834,204)
Class B -- (226)
Class Y (5,986) (20,808)
Net realized gain
Class A (105,561,837) (51,429,889)
Class B (2,509,090) (273,902)
Class Y (423,403) (215,425)
Total distributions (110,192,415) (55,774,454)
Capital share transactions (Note 5)
Proceeds from sales
Class A shares (Note 2) 23,089,715 33,397,264
Class B shares 10,079,629 13,301,146
Class Y shares 191,181 463,955
Reinvestment of distributions at net asset value
Class A shares 101,153,403 52,201,141
Class B shares 2,497,834 272,845
Class Y shares 429,389 236,233
Payments for redemptions
Class A shares (45,782,522) (65,523,965)
Class B shares (Note 2) (1,597,781) (737,685)
Class Y shares (2,221,527) (928,668)
Increase in net assets from capital share transactions 87,839,321 32,682,266
Total increase in net assets 48,533,129 173,417,389
Net assets at beginning of period 853,959,660 680,542,271
Net assets at end of period
(including undistributed net investment income of
$753,360 and $681,392) $902,492,789 $853,959,660
See accompanying notes to financial statements.
</TABLE>
Notes to financial statements
IDS Equity Select Fund, Inc.
(Unaudited as to May 31, 1997)
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 invests primarily in moderate growth stocks, higher yielding equities
and debt securities. The Fund offers Class A, Class B and Class Y shares.
Class A shares are sold with a front-end sales charge. Class B shares may
be subject to a contingent deferred sales charge and such shares
automatically convert to Class A after eight years. Class Y shares have no
sales charge and are offered only to qualifying institutional investors.
All classes of shares have identical voting, dividend, liquidation and
other rights, and the same terms and conditions, except that the level of
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.
Significant accounting policies followed by the Fund are summarized below:
Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of increase and decrease in
net assets from operations during the period. Actual results could differ
from those estimates.
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; securities for which
market quotations are not readily available are valued at fair value
according to methods selected in good faith by the board. Determination of
fair value involves, among other things, reference to market indexes,
matrixes and data from independent brokers. 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
In order to produce incremental earnings, protect gains, and facilitate
buying and selling of securities for investment purposes, the Fund may buy
and write options traded on any U.S. or foreign exchange or in the
over-the-counter market where the completion of the obligation is
dependent upon the credit standing of the other party. The Fund also may
buy and sell put and call options and write covered call options on
portfolio securities and may write cash-secured put options. The risk in
writing a call option is that the Fund gives up the opportunity of profit
if the market price of the security increases. The risk in writing a put
option is that the Fund 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 Fund pays a premium whether or not the option is
exercised. The Fund also has the additional risk of not being able 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
Fund will realize a gain or loss upon expiration or closing of the option
transaction. When an option is 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
In order to gain exposure to or protect itself from changes in the market,
the Fund may buy and sell financial futures contracts traded on any U.S.
or foreign exchange. The Fund 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 that there may be 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 Fund 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 Fund 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 Fund 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 may arise from
sales of foreign currency, closed forward contracts, exchange gains or
losses realized between the trade date and settlement dates on securities
transactions, and other translation gains or losses on dividends, interest
income and foreign withholding taxes.
The Fund 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 Fund and the resulting unrealized
appreciation and/or depreciation are determined using foreign currency
exchange rates from an independent pricing service. The Fund is subject to
the credit risk that the other party will not complete the obligations of
the contract.
Federal taxes
Since the Fund's policy is to comply with all sections of the Internal
Revenue Code applicable to regulated investment companies and to
distribute all of its taxable income to shareholders, no provision for
income or excise taxes is required.
Net investment income (loss) and net realized gains (losses) may differ
for financial statement and tax purposes primarily because of the deferral
of 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 and paid each calendar
quarter, 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.
Other
Security transactions are accounted for on the date securities are
purchased or sold. Dividend income is recognized on the ex-dividend date
and interest income, including level-yield amortization of premium and
discount, is accrued daily.
2. Expenses and sales charges
Effective March 20, 1995, the Fund entered into agreements with American
Express Financial Corporation (AEFC) for managing its portfolio, providing
administrative services and serving as transfer agent.
Under its Investment Management Services Agreement, AEFC determines which
securities will be purchased, held or sold. The management fee is a
percentage of the Fund's average daily net assets in reducing percentages
from 0.53% to 0.40% annually. The fee is adjusted upward or downward by a
performance incentive adjustment based on the Fund's average daily net
assets over a rolling 12-month period as measured against the change in
the Lipper Growth and Income Fund Index. The maximum adjustment is 0.08%
of the Fund's average daily net assets after deducting 1% from the
performance difference. If the performance difference is less than 1%, the
adjustment will be zero. The adjustment increased the fee by $31,606 for
the six months ended May 31, 1997.
Under an Administration Services Agreement, the Fund pays AEFC for
administration and accounting services at a percentage of the Fund's
average daily net assets in reducing percentages from 0.04% to 0.02%
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, organizational expenses, and any other
expenses properly payable by the Fund approved by the board.
Under a separate Transfer Agency Agreement, AEFC maintains shareholder
accounts and records. The Fund pays AEFC an annual fee per shareholder
account for this service as follows:
o Class A $15
o Class B $16
o Class Y $15
Also effective March 20, 1995, the Fund entered into agreements with
American Express Financial Advisors Inc. for distribution and shareholder
servicing-related 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-related 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 for Class A and Class B shares and 0.10% of the Fund's average
daily net assets for Class Y shares.
Sales charges received by American Express Financial Advisors Inc. for
distributing Fund shares were $405,225 for Class A and $6,151 for Class B
for the six months ended May 31, 1997. The Fund also pays custodian fees
to American Express Trust Company, an affiliate of AEFC.
During the six months ended May 31, 1997, the Fund's custodian and
transfer agency fees were reduced by $25,749 as a result of earnings
credits from overnight cash balances.
3. Securities transactions
Cost of purchases and proceeds from sales of securities (other than
short-term obligations) aggregated $281,575,857 and $331,288,186,
respectively, for the six months ended May 31, 1997. Realized gains and
losses are determined on an identified cost basis.
Brokerage commissions paid to brokers affiliated with AEFC were $60,936
for the six months ended May 31, 1997.
At May 31, 1997, securities valued at $17,154,250 were on loan to brokers.
For collateral, the Fund received $10,251,000 in cash and U.S. government
securities valued at $6,794,270. Income from securities lending amounted
to $152,368 for the six months ended May 31, 1997. The risks to the Fund
of securities lending are that the borrower may not provide additional
collateral when required or return securities when due.
4. Lending of portfolio securities
5. Capital share transactions
Transactions in shares of capital stock for the periods indicated are as
follows:
Six months ended May 31, 1997
Class A Class B Class Y
Sold 1,757,182 770,708 14,426
Issued for reinvested 8,046,753 199,990 34,157
distributions
Redeemed (3,481,081) (122,259) (170,741)
---------- -------- --------
Net increase (decrease) 6,322,854 848,439 (122,158)
Year ended Nov. 30, 1996
Class A Class B Class Y
Sold 2,598,052 1,025,364 36,969
Issued for reinvested 4,499,539 23,715 20,329
distributions
Redeemed (5,154,984) (57,140) (73,661)
---------- ------- -------
Net increase (decrease) 1,942,607 991,939 (16,363)
<PAGE>
<TABLE>
6. Financial highlights
The tables below show certain important financial information for evaluating
the Fund's results.
Fiscal period ended Nov. 30,
Per share income and capital changesa
Class A
<CAPTION>
1997 c 1996 1995 1994b 1993 1992 1991 1990 1989 1988
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, $14.71 $12.35 $10.31 $12.04 $11.19 $10.18 $8.82 $10.01 $8.09 $7.38
beginning of period
Income from investment operations:
Net investment income .03 .07 .10 .10 .11 .13 .18 .26 .34 .24
Net gains (losses) 1.03 3.30 2.55 (.64) 1.31 1.69 1.75 (.55) 1.89 .94
(both realized
and unrealized)
Total from investment 1.06 3.37 2.65 (.54) 1.42 1.82 1.93 (.29) 2.23 1.18
operations
Less distributions:
Dividends from net (.03) (.06) (.12) (.09) (.11) (.14) (.20) (.27) (.31) (.23)
investment income
Distributions from (1.87) (.95) (.49) (1.10) (.46) (.67) (.37) (.63) -- (.24)
realized gains
Total distributions (1.90) (1.01) (.61) (1.19) (.57) (.81) (.57) (.90) (.31) (.47)
Net asset value, $13.87 $14.71 $12.35 $10.31 $12.04 $11.19 $10.18 $8.82 $10.01 $8.09
end of period
Ratios/supplemental data
Class A
1997 c 1996 1995 1994b 1993 1992 1991 1990 1989 1988
Net assets, end of $872 $832 $674 $581 $617 $475 $400 $348 $392 $357
period (in millions)
Ratio of expenses to .85%e .87% .84% .71% .77% .74% .67% .63% .57% .68%
average daily net assetsd
Ratio of net income to .44% e .53% .94% .90% 1.00% 1.22% 1.82% 2.78% 3.58% 2.80%
average daily net assets
Portfolio turnover rate 34% 64% 62% 46% 41% 42% 46% 55% 49% 81%
(excluding short-term
securities)
Total returnf 8.5% 29.5% 27.1% (5.3%) 13.2% 19.2% 22.9% (3.3%) 27.9% 16.0%
Average brokerage $.0529 $.0557 -- -- -- -- -- -- -- --
commission rateg
aFor a share outstanding throughout the period. Rounded to the nearest cent.
bOn Nov. 10, 1994, the Fund's name changed from IDS Equity Plus Fund, Inc. to IDS Equity Select Fund, Inc.
cSix months ended May 31, 1997 (Unaudited).
dEffective fiscal year 1996, expense ratio is based on total expenses of the Fund before reduction of earnings credits on cash
balances.
eAdjusted to an annual basis.
fTotal return does not reflect payment of a sales charge.
g Effective fiscal year 1996, the Fund is required to disclose an average brokerage commission rate per share for security trades
on which commissions are charged. The comparability of this information may be affected by the fact that commission rates per
share vary significantly among foreign countries.
</TABLE>
<PAGE>
<TABLE>
Fiscal period ended Nov. 30,
Per share income and capital changesa
Class B Class Y
<CAPTION>
1997 c 1996 1995b 1997 c 1996 1995b
<S> <C> <C> <C> <C> <C> <C>
Net asset value, $14.63 $12.31 $10.37 $14.72 $12.35 $10.37
beginning of period
Income from investment operations:
Net investment income (.01) (.03) .05 .04 .10 .08
Net gains (both 1.01 3.30 1.95 1.02 3.30 2.00
realized and unrealized)
Total from investment operations 1.00 3.27 2.00 1.06 3.40 2.08
Less distributions:
Dividends from net investment income -- -- (.06) (.04) (.08) (.10)
Distributions from realized gains (1.87) (.95) -- (1.87) (.95) --
Total distributions (1.87) (.95) (.06) (1.91) (1.03) (.10)
Net asset value, end of period $13.76 $14.63 $12.31 $13.87 $14.72 $12.35
Ratios/supplemental data
Class B Class Y
1997 c 1996 1995b 1997 c 1996 1995b
Net assets, end of $29 $18 $3 $1 $3 $3
period (in millions)
Ratio of expenses to 1.62% e 1.63% 1.68% e .68%e .70% .70%e
average daily net assetsd
Ratio of net income to (.28%) e (.21%) .08% e .59%e .69% 1.08% e
average daily net assets
Portfolio turnover 34% 64% 62% 34% 64% 62%
rate (excluding short-term
securities)
Total returnf 8.1% 28.6% 19.3% 8.6% 29.8% 20.0%
Average brokerage commission rateg $.0529 $.0557 -- $.0529 $.0557 --
aFor a share outstanding throughout the period. Rounded to the nearest cent.
b Inception date was March 20, 1995.
c Six months ended May 31, 1997 (Unaudited).
dEffective fiscal year 1996, expense ratio is based on total expenses of the
Fund before reduction of earnings credits on cash balances.
e Adjusted to an annual basis.
fTotal return does not reflect payment of a sales charge.
gEffective fiscal year 1996, the Fund is required to disclose an average
brokerage commission rate per share for security trades on which commissions are
charged. The comparability of this information may be affected by the fact that
commission rates per share vary significantly among foreign countries.
</TABLE>
Investments in securities
IDS Equity Select Fund, Inc.
May 31, 1997 (Unaudited)
(Percentages represent
value of investments
compared to net assets)
Common stocks (94.5%)
Issuer Shares Value(a)
Aerospace & defense (3.0%)
Boeing 60,000 $ 6,315,000
Precision Castparts 100,000 6,250,000
Thiokol 100,000 7,187,500
United Technologies 90,000 7,233,750
Total 26,986,250
Automotive & related (1.2%)
Danaher 225,000 10,912,500
Banks and savings & loans (6.0%)
Barnett Banks 162,300(d) 8,541,037
First Union 115,000 9,875,625
KeyCorp 235,000 12,778,125
Norwest 140,800 7,532,800
Washington Mutual 280,000(d) 15,575,000
Total 54,302,587
Beverages & tobacco (2.9%)
Anheuser-Busch 210,000 9,003,750
Coca-Cola 105,000 7,166,250
Philip Morris 220,000 9,680,000
Total 25,850,000
Building materials & construction (6.4%)
Lennar 155,000 4,068,750
Martin Marietta Materials 500,000 14,375,000
Sherwin-Williams 520,000 15,600,000
Tyco Intl 380,000 24,130,000
Total 58,173,750
Chemicals (5.2%)
Betz Laboratories 225,000 14,343,750
Culligan Water Technology 120,000(b) 5,340,000
Praxair 235,000 12,366,875
USA Waste Service 410,000(b) 14,862,500
Total 46,913,125
Communications equipment & services (0.9%)
ADC Telecommunications 235,000(b) 8,048,750
Computers & office equipment (9.2%)
Adaptec 295,000(b) 10,841,250
Cisco Systems 140,000(b) 9,485,000
Compaq Computer 135,000(b) 14,613,750
Computer Associates Intl 110,000 6,022,500
First Data 156,100 6,244,000
Hewlett-Packard 125,000 6,437,500
Ikon Office Solutions 215,000 6,235,000
Parametric Technology 200,000(b) 8,975,000
Solectron 225,000(b) 14,062,500
Total 82,916,500
Electronics (1.1%)
Intel 65,000 9,847,500
Energy (2.0%)
Mobil 40,000 5,595,000
Tosco 386,700 12,616,087
Total 18,211,087
Energy equipment & services (2.6%)
Schlumberger 100,000 11,912,500
Transocean Offshore 170,000 11,730,000
Total 23,642,500
Financial services (1.9%)
Franklin Resources 120,000 7,770,000
Morgan Stanley 80,000 5,400,000
Travelers Group 70,000 3,841,250
Total 17,011,250
Food (2.6%)
ConAgra 145,000 8,718,125
Pioneer Hi-Bred Intl 105,000 7,323,750
Quaker Oats 190,000 7,837,500
Total 23,879,375
Health care (8.6%)
ALZA 314,000(b) 9,263,000
American Home Products 150,000 11,437,500
Amgen 160,000(b) 10,700,000
Baxter Intl 200,000 10,550,000
Guidant 165,000 12,808,125
Johnson & Johnson 100,000 5,987,500
Merck 70,000 6,291,250
Sybron Intl 295,000(b) 10,656,875
Total 77,694,250
Health care services (3.2%)
Service Corp Intl 426,000 15,016,500
Tenet Healthcare 500,000(b) 13,750,000
Total 28,766,500
Household products (2.7%)
Avon Products 140,000 8,925,000
Gillette 90,000 7,998,750
Samsonite 158,000(b) 7,090,250
Total 24,014,000
Industrial equipment & services (4.6%)
AGCO 240,000 7,650,000
Deere & Co 165,000 8,435,625
Illinois Tool Works 290,000 14,391,250
Thermo Electron 320,000 11,040,000
Total 41,516,875
Insurance (2.2%)
Progressive Corp Ohio 115,000 9,099,375
UNUM 137,400 10,871,775
Total 19,971,150
Leisure time & entertainment (2.2%)
Carnival Cl A 225,000 8,550,000
Marriot Intl 197,000 11,376,750
Total 19,926,750
Media (2.0%)
Belo (AH) Cl A 225,000 8,662,500
Gannett 65,000 6,012,500
Scholastic 126,000(b) 3,748,500
Total 18,423,500
Metals (1.1%)
UCAR Intl 200,000(b) 9,600,000
Multi-industry conglomerates (2.3%)
Emerson Electric 235,000 12,690,000
Westinghouse Electric 420,000 8,505,000
Total 21,195,000
Paper & packaging (1.5%)
Crown Cork & Seal 235,000 13,688,750
Restaurants & lodging (1.1%)
HFS125,000(b) 6,734,375
La Quinta Inns 120,000 2,760,000
Total 9,494,375
Retail (7.0%)
American Stores 225,000 10,237,500
Dollar General 140,000 4,707,500
Federated Dept Stores 330,000(b) 12,210,000
Kohl's 275,000(b) 14,815,625
Rite Aid 140,000 6,510,000
Safeway 320,000(b) 14,400,000
Total 62,880,625
Textiles & apparel (1.7%)
Tommy Hilfiger 165,100(b) 7,346,950
Unifi 235,000 7,578,750
Total 14,925,700
Transportation (0.1%)
Wisconsin Central 25,000(b) 903,125
Utilities - telephone (1.7%)
BellSouth 335,000 15,200,625
Foreign (7.5%) (c)
ACE 180,000 11,520,000
Baan 150,000(b,d) 9,037,500
Renaissance Energy 351,000(b) 11,014,405
SmithKline Beecham ADR 225,000 19,687,500
Telecommunicacoes Brasileiras-
Telebras ADR 94,500 12,981,938
Unibanco ADR 114,500(b) 3,950,250
Total 68,191,593
Total common stocks
(Cost: $615,130,040) $853,087,992
Short-term securities (6.4%)
Issuer Annualized Amount Value(a)
yield on payable at
date of maturity
purchase
U.S. government agency (0.1%)
Federal Home Loan Bank Disc Nt
06-12-97 5.43% $1,100,000 $1,098,016
Commercial paper (6.1%)
ABB Treasury Center USA
06-19-97 5.64 1,100,000(e) 1,096,737
Associates Corp North America
06-18-97 5.51 1,300,000 1,296,425
BHP Finance
07-07-97 5.56 1,600,000 1,590,906
Ciesco LP
06-17-97 5.55 4,700,000 4,687,749
Clorox
06-05-97 5.54 3,100,000 3,097,623
Gannett
06-12-97 5.54 2,000,000(e) 1,996,320
Harris Trust
06-27-97 5.55 4,500,000 4,500,000
Kellogg
07-03-97 5.55 8,900,000 8,854,966
Kredietbank North America Finance
06-06-97 5.55 700,000 699,355
06-13-97 5.57 800,000 798,397
Metlife Funding
06-27-97 5.53 2,400,000 2,390,082
Northern States Power
06-26-97 5.52 5,300,000 5,278,947
SBC Communications Capital
06-10-97 5.56 3,900,000(e) 3,893,998
Toyota Motor Credit
06-25-97 5.52 5,000,000 4,980,903
UBS Finance (Delaware)
06-13-97 5.57 4,700,000 4,690,581
Unilever Capital
06-02-97 5.56 5,000,000(e) 4,998,467
Total 54,851,456
Letter of credit (0.2%)
First Chicago-
Commed Fuel
06-06-97 5.58 1,496,000 1,494,616
Total short-term securities
(Cost: $57,444,088) $ 57,444,088
Total investments in securities
(Cost: $672,574,128) (f) $910,532,080
============
See accompanying notes to investments in securities.
<PAGE>
Notes to investments in securities
(a) Securities are valued by procedures described in Note 1 to the financial
statements.
(b) Non-income producing.
(c) Foreign security values are stated in U.S. dollars.
(d) Security is partially or fully on loan. See Note 4 to the financial
statements.
(e) Commercial paper sold within terms of 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.
(f) At May 31, 1997, the cost of securities for federal income tax purposes was
approximately $672,574,000 and the aggregate gross unrealized appreciation and
depreciation based on that cost was:
Unrealized appreciation.........................................$246,888,000
Unrealized depreciation...........................................(8,930,000)
----------
Net unrealized appreciation.....................................$237,958,000
<PAGE>
Board members and officers of the Fund
President and interested
board member
William R. Pearce
Chairman of the board, Board Services Corporation (provides
administrative services to boards including the boards of the IDS and
IDSLife funds and Master Trust portfolios).
Independent
board members
H. Brewster Atwater Jr.
Former chairman and chief executive officer, General Mills, Inc.
Lynne V. Cheney
Distinguished fellow, American Enterprise Institute for Public Policy
Research.
Robert F. Froehlke
Former president of all funds in the IDS MUTUAL FUND GROUP.
Heinz F. Hutter
Former president and chief operating officer, Cargill, Inc.
Anne P. Jones
Attorney and telecommunications consultant.
Melvin R. Laird
Senior counsellor for national and international affairs,
The Reader's Digest Association, Inc.
Alan K. Simpson
Former United States senator for Wyoming.
Edson W. Spencer
Former chairman and chief executive officer,
Honeywell, Inc.
Wheelock Whitney
Chairman, Whitney Management Company.
C. Angus Wurtele
Chairman of the board, The Valspar Corporation.
Interested board
members who are
officers and/or
employees of AEFC
William H. Dudley
Senior advisor to the chief executive officer, AEFC.
David R. Hubers
President and chief executive officer, AEFC.
John R. Thomas
Senior vice president, AEFC.
Officers who also
are officers and/or
employees of AEFC
Peter J. Anderson
Senior vice president, AEFC. Vice president - Investments for the Fund.
Melinda S. Urion
Senior vice president and chief financial officer, AEFC. Treasurer for the
Fund.
Other officer
Leslie L. Ogg
President, treasurer and corporate secretary of Board Services
Corporation. Vice president, general counsel and secretary for the Fund.
Refer to the SAI for the board members' and officers' biographies.
<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 globe
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
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) flower
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 and 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.
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) spinning toy
IDS Stock Fund
Invests in a Portfolio comprised primarily of common stocks 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
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 in 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
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.
<PAGE>
Quick telephone reference
American Express Financial Advisors Telephone Transaction Service
Redemptions and exchanges, dividend payments or reinvestments and
automatic payment arrangements
National/Minnesota:
800-437-3133
Mpls./St. Paul area:
671-3800
TTY Service
For the hearing impaired
800-846-4852
American Express Financial Advisors Easy Access Line
Automated account information (TouchTone(R) phones only), including current fund
prices and performance, account values and recent account transactions
800-862-7919
<PAGE>
AMERICAN EXPRESS FINANCIAL ADVISORS
IDS Equity Select Fund
IDS Tower 10
Minneapolis, MN 55440-0010
