1998 SEMIANNUAL REPORT
IDS
Equity Select
Fund
The goals of IDS Equity Select Fund, Inc. are growth of capital and income. The
Fund invests primarily in moderate growth stocks, that generally pay dividends
and debt securities.
(icon of) three pine trees
American Express Financial Advisors
Distributed by American Express Financial Advisors Inc.
<PAGE>
(icon of) three pine trees
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 chairman 3
From the portfolio manager 3
The Fund's 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 chairman
If you're an experienced investor, you know that the past few years have
been unusually strong in many financial markets. Perhaps just as
important, history shows that bull markets don't last forever. Though
they're often unpredictable, declines -- whether they're brief or
long-lasting, moderate or substantial -- are always a possibility. We saw
evidence of that last October, when declines in certain Asian markets
spawned a sharp drop in several financial markets worldwide, including the
U.S.
The potential for such volatility reinforces the need for investors to
review periodically their long-term goals and examine whether their
investment program remains on track to achieving them. Your quarterly
investment statements are one part of that monitoring process. The other
is a meeting with your American Express financial advisor. That becomes
even more important if there's a major change in your financial situation
or in the financial markets.
William R. Pearce
(picture of) William R. Pearce
William R. Pearce
Chairman of the board
<PAGE>
From the portfolio manager
A generally good environment for U.S. stocks provided the foundation for a
double-digit gain by IDS Equity Select Fund during the past six months.
For the first half of the Fund's fiscal year -- December 1997 through May
1998 -- investors in the Fund's Class A shares realized a total return of
10.4%. (A substantial portion of the return came in the form of a capital
gain, which was paid to shareholders in December 1997 and reduced the
Fund's net asset value by the same amount at that time.)
The period began on an uncertain note, as investors continued to sort out
the potential longer-term effects of the meltdown in Asian financial
markets that had taken place only weeks earlier. By February, though, they
evidently had decided that the U.S. market would weather the storm
relatively well, and, with support from ongoing reports of subdued
inflation and a growing economy, they sent stocks soaring through March.
At that point, the rally stalled as concerns about the possibility of
higher interest rates and weaker corporate profits held stocks back over
the final two months of the period.
Carrying on the tradition of recent years, large-capitalization stocks
remained at the forefront of the market's advances, a reflection of
investors' preference for the more-predictable earnings patterns of
large-cap issues. For the Fund, this continued to be a half-a-loaf
situation, as its portfolio contained a blend of large- and mid-cap
stocks. Overall, the mid-cap issues, while they made a positive
contribution to performance, simply couldn't keep pace with their bigger
brethren.
Big names, big winners
Most productive for the Fund were its holdings among pharmaceutical,
retailing, grocery, insurance, telecommunications and brokerage stocks,
with large-caps names such as General Electric, Gillette, Coca-Cola,
Travelers, Carnival Cruise Lines and Federated Department Stores
registering some of the greatest gains. Technology, another fairly
substantial area of investment for the Fund, proved to be a mixed bag.
Although several holdings performed well overall, steep drops in a few
stocks negated much of those gains. Working to the Fund's benefit during
the six months was my decision to maintain a low level of cash reserves,
generally less than 5% of portfolio assets.
As I have believed for some time, I think consistent earnings growth will
continue to be the key to making money in the stock market during the rest
of the year. As the longer-term effects of the Asian situation play out
and the Federal Reserve considers the inflation data and weighs the merit
of an adjustment in short-term interest rates, companies that fail to meet
investors' earnings expectations will most likely suffer severe
stock-price declines. Therefore, I plan to keep the Fund invested in a
broad range of companies that appear able to deliver solid earnings growth
and whose stock prices offer relatively good investment value.
Betty J. Tebault
(picture of) Betty J. 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, 1998 $ 14.65
Nov. 30, 1997 $ 15.76
Decrease $ 1.11
Distributions
Dec. 1, 1997 - May 31, 1998
From income $ 0.08
From capital gains $ 2.40
Total distribution $ 2.48
Total return* +10.4%**
Class B
6-month performance
(All figures per share)
Net asset value (NAV)
May 31, 1998 $ 14.45
Nov. 30, 1997 $ 15.60
Decrease $ 1.15
Distributions
Dec. 1, 1997 - May 31, 1998
From income $ 0.06
From capital gains $ 2.40
Total distribution $ 2.46
Total return* +9.9%**
Class Y
6-month performance
(All figures per share)
Net asset value (NAV)
May 31, 1998 $ 14.66
Nov. 30, 1997 $ 15.77
Decrease $ 1.11
Distributions
Dec. 1, 1997 - May 31, 1998
From income $ 0.09
From capital gains $ 2.40
Total distribution $ 2.49
Total return* +10.4%**
*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, 1998)
Tyco Intl 4.19% $47,018,912
Safeway 2.08 23,320,000
Kohl's 2.08 23,305,625
USA Waste Services 1.91 21,470,312
Thermo Electron 1.89 21,250,625
Martin Marietta Materials 1.87 20,925,400
Washington Mutual 1.79 20,128,125
Tenet Healthcare 1.78 19,950,000
Illinois Tool Works 1.71 19,140,000
Travelers Group 1.67 18,788,000
For further detail about these holdings, please refer to the section
entitled "Investments in securities" herein.
(icon of) pie chart
The ten holdings listed here make up 20.97% of the Fund's net assets
<PAGE>
<TABLE>
<CAPTION>
Financial statements
Statement of assets and liabilities
IDS Equity Select Fund, Inc.
May 31, 1998
Assets
(Unaudited)
<S> <C>
Investments in securities, at value (Note 1) (identified cost $779,193,352) $1,129,436,721
Dividends and accrued interest receivable 768,035
Receivable for investment securities sold 11,900,785
----------
Total assets 1,142,105,541
-------------
Liabilities
Disbursements in excess of cash on demand deposit 12,031,562
Payable upon return of securities loaned (Note 4) 7,992,600
Accrued investment management services fee 15,733
Accrued distribution fee 1,285
Accrued service fee 5,360
Accrued transfer agency fee 2,140
Accrued administrative services fee 1,125
Other accrued expenses 23,444
------
Total liabilities 20,073,249
----------
Net assets applicable to outstanding capital stock $1,122,032,292
==============
Represented by
Capital stock-- $.01 par value (Note 1) $ 766,472
Additional paid-in capital 720,729,576
Undistributed net investment income 63,621
Accumulated net realized gain (loss) 50,229,254
Unrealized appreciation (depreciation) on investments 350,243,369
-----------
Total-- representing net assets applicable to outstanding capital stock $1,122,032,292
==============
Net assets applicable to outstanding shares: Class A $1,058,835,428
Class B $ 62,675,607
Class Y $ 521,257
Net asset value per share of outstanding capital stock: Class A shares 72,272,838 $ 14.65
Class B shares 4,338,820 $ 14.45
Class Y shares 35,551 $ 14.66
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Statement of operations
IDS Equity Select Fund, Inc.
Six months ended May 31, 1998
Investment income
(Unaudited)
Income:
<S> <C>
Dividends $ 4,329,923
Interest 1,466,742
---------
Total income 5,796,665
---------
Expenses (Note 2):
Investment management services fee 2,873,371
Distribution fee -- Class B 194,228
Transfer agency fee 364,215
Incremental transfer agency fee-- Class B 2,645
Service fee
Class A 886,650
Class B 45,136
Class Y 215
Administrative services fees and expenses 208,341
Compensation of board members 6,035
Custodian fees 45,433
Postage 14,195
Registration fees 56,704
Reports to shareholders 1,454
Audit fees 12,750
Other 4,406
-----
Total expenses 4,715,778
Earnings credits on cash balances (Note 2) (40,018)
-------
Total net expenses 4,675,760
---------
Investment income (loss) -- net 1,120,905
---------
Realized and unrealized gain (loss) -- net
Net realized gain (loss) on security transactions (Note 3) 50,233,275
Net change in unrealized appreciation (depreciation) on investments 53,133,353
----------
Net gain (loss) on investments 103,366,628
-----------
Net increase (decrease) in net assets resulting from operations $104,487,533
============
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Financial statements
Statements of changes in net assets
IDS Equity Select Fund, Inc.
Operations and distributions
May 31, 1998 Nov. 30, 1997
Six months ended Year ended
(Unaudited)
<S> <C> <C>
Investment income (loss)-- net $ 1,120,905 $ 3,391,493
Net realized gain (loss) on security transactions 50,233,275 158,662,690
Net change in unrealized appreciation (depreciation) on investments 53,133,353 33,083,694
---------- ----------
Net increase (decrease) in net assets resulting from operations 104,487,533 195,137,877
----------- -----------
Distributions to shareholders from:
Net investment income
Class A (1,628,854) (3,486,817)
Class B (1,392) --
Class Y (844) (8,283)
Net realized gain
Class A (151,885,350) (105,561,837)
Class B (6,718,805) (2,509,090)
Class Y (59,441) (423,403)
------- --------
Total distributions (160,294,686) (111,989,430)
------------ ------------
Capital share transactions (Note 5)
Proceeds from sales
Class A shares (Note 2) 92,836,275 48,203,493
Class B shares 20,030,150 20,583,946
Class Y shares 196,440 240,961
Reinvestment of distributions at net asset value
Class A shares 143,512,861 102,820,314
Class B shares 6,674,880 2,497,834
Class Y shares 60,285 431,686
Payments for redemptions
Class A shares (100,310,592) (86,725,639)
Class B shares (Note 2) (3,046,109) (3,679,610)
Class Y shares (99,621) (3,496,216)
------- ----------
Increase (decrease) in net assets from capital share transactions 159,854,569 80,876,769
----------- ----------
Total increase (decrease) in net assets 104,047,416 164,025,216
Net assets at beginning of period 1,017,984,876 853,959,660
------------- -----------
Net assets at end of period $1,122,032,292 $1,017,984,876
============== ==============
Undistributed net investment income $ 63,621 $ 573,806
-------------- --------------
See accompanying notes to financial statements.
</TABLE>
<PAGE>
Notes to financial statements
IDS Equity Select Fund, Inc.
(Unaudited as to May 31, 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 invests
primarily in moderate growth stocks that generally pay dividends 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 shares during the ninth calendar year of
ownership. 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. Debt securities are
generally traded in the over-the-counter market and are valued at a price
deemed best to reflect fair value as quoted by dealers who make markets 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
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 and
providing administrative services. 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 twelve-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 $80,550 for the six months ended May 31,
1998.
<PAGE>
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 0.04% 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 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
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 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 $756,013 for Class A and $17,847 for Class B
for the six months ended May 31, 1998. The Fund also pays custodian fees
to American Express Trust Company, an affiliate of AEFC.
During the six months ended May 31, 1998, the Fund's custodian and
transfer agency fees were reduced by $40,018 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 $320,643,784 and $311,816,056,
respectively, for the six months ended May 31, 1998. Realized gains and
losses are determined on an identified cost basis.
Brokerage commissions paid to brokers affiliated with AEFC were $33,450
for the six months ended May 31, 1998.
4
Lending of
portfolio securities
At May 31, 1998, securities valued at $7,583,766 were on loan to brokers.
For collateral, the Fund received $7,992,600 in cash. Income from
securities lending amounted to $123,308 for the six months ended May 31,
1998. The risks to the Fund of securities lending are that the borrower
may not provide additional collateral when required or return the
securities when due.
5
Capital share
transactions
Transactions in shares of capital stock for the periods indicated are as
follows:
Six months ended May 31, 1998
Class A Class B Class Y
Sold 6,300,243 1,389,233 13,143
Issued for reinvested 10,809,133 508,950 4,536
distributions
Redeemed (6,786,246) (209,443) (6,543)
Net increase (decrease) 10,323,130 1,688,740 11,136
Year ended Nov. 30, 1997
Class A Class B Class Y
Sold 3,394,107 1,462,440 17,921
Issued for reinvested 8,158,272 199,990 34,316
distributions
Redeemed (6,172,167) (260,727) (253,855)
Net increase (decrease) 5,380,212 1,401,703 (201,618)
<PAGE>
<TABLE>
<CAPTION>
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 changes(a)
Class A
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1998(f) 1997 1996 1995 1994(b) 1993 1992 1991 1990 1989
Net asset value, $15.76 $14.71 $12.35 $10.31 $12.04 $11.19 $10.18 $8.82 $10.01 $8.09
beginning of period
Income from investment operations:
Net investment
income (loss) .02 .05 .07 .10 .10 .11 .13 .18 .26 .34
Net gains (losses) 1.35 2.93 3.30 2.55 (.64) 1.31 1.69 1.75 (.55) 1.89
(both realized
and unrealized)
Total from investment 1.37 2.98 3.37 2.65 (.54) 1.42 1.82 1.93 (.29) 2.23
operations
Less distributions:
Dividends from net (.02) (.06) (.06) (.12) (.09) (.11) (.14) (.20) (.27) (.31)
investment income
Distributions from (2.46) (1.87) (.95) (.49) (1.10) (.46) (.67) (.37) (.63) --
realized gains
Total distributions (2.48) (1.93) (1.01) (.61) (1.19) (.57) (.81) (.57) (.90) (.31)
Net asset value, $14.65 $15.76 $14.71 $12.35 $10.31 $12.04 $11.19 $10.18 $8.82 $10.01
end of period
Ratios/supplemental data
Class A
1998(f) 1997 1996 1995 1994(b) 1993 1992 1991 1990 1989
Net assets, end of $1,059 $976 $832 $674 $581 $617 $475 $400 $348 $392
period (in millions)
Ratio of expenses to .83%g .83% .87% .84% .71% .77% .74% .67% .63% .57%
average daily net assets(c)
Ratio of net income (loss) .24%g .39% .53% .94% .90% 1.00% 1.22% 1.82% 2.78% 3.58%
to average daily net assets
Portfolio turnover rate 30% 63% 64% 62% 46% 41% 42% 46% 55% 49%
(excluding short-term
securities)
Total return(d) 10.4% 23.6% 29.5% 27.1% (5.3%) 13.2% 19.2% 22.9% (3.3%) 27.9%
Average brokerage $.0596 $.0498 $.0557 -- -- -- -- -- -- --
commission rate(e)
a For a share outstanding throughout the period. Rounded to the nearest cent.
b On Nov. 10, 1994, the Fund's name changed from IDS Equity Plus Fund, Inc. to
IDS Equity Select Fund, Inc.
c Effective fiscal year 1996, expense ratio is based on total expenses of the
Fund before reduction of earnings credits on cash balances.
d Total return does not reflect payment of a sales charge.
e 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.
f Six months ended May 31, 1998 (Unaudited).
g Adjusted to an annual basis.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Fiscal period ended Nov. 30,
Per share income and capital changes(a)
Class B Class Y
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1998(g) 1997 1996 1995(b) 1998(g) 1997 1996 1995(b)
Net asset value, $15.60 $14.63 $12.31 $10.37 $15.77 $14.72 $12.35 $10.37
beginning of period
Income from investment operations:
Net investment
income (loss) -- (.01) (.03) .05 .02 .06 .10 .08
Net gains (losses) 1.31 2.85 3.30 1.95 1.36 2.93 3.30 2.00
(both realized and unrealized)
Total from investment operations 1.31 2.84 3.27 2.00 1.38 2.99 3.40 2.08
Less distributions:
Dividends from net investment income -- -- -- (.06) (.03) (.07) (.08) (.10)
Distributions from realized gains (2.46) (1.87) (.95) -- (2.46) (1.87) (.95) --
Total distributions (2.46) (1.87) (.95) (.06) (2.49) (1.94) (1.03) (.10)
Net asset value, end of period $14.45 $15.60 $14.63 $12.31 $14.66 $15.77 $14.72 $12.35
Ratios/supplemental data
Class B Class Y
1998(g) 1997 1996 1995(b) 1998(g) 1997 1996 1995(b)
Net assets, end of $63 $41 $18 $3 $1 $-- $3 $3
period (in millions)
Ratio of expenses to 1.60%d 1.59% 1.63% 1.68%d .76%d .70% .70% .70%d
average daily net assets(c)
Ratio of net income (loss) (.52%)d (.35%) (.21%) .08%d .30%d .54% .69% 1.08%d
to average daily net assets
Portfolio turnover 30% 63% 64% 62% 30% 63% 64% 62%
rate (excluding short-term
securities)
Total return(e) 9.9% 22.6% 28.6% 19.3% 10.4% 23.7% 29.8% 20.0%
Average brokerage commission rate(f) $.0596 $ .0498 $.0557 -- $.0596 $.0498 $.0557 --
a For a share outstanding throughout the period. Rounded to the nearest cent.
b Inception date was March 20, 1995.
c Effective fiscal year 1996, expense ratio is based on total expenses of the
Fund before reduction of earnings credits on cash balances.
d Adjusted to an annual basis.
e Total return does not reflect payment of a sales charge.
f 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.
g Six months ended May 31, 1998 (Unaudited).
</TABLE>
<PAGE>
Investments in securities
IDS Equity Select Fund, Inc.
May 31, 1998 (Unaudited)
(Percentages represent
value of investments
compared to net assets)
Common stocks (96.2%)
Issuer Shares Value(a)
Aerospace & defense (2.4%)
General Motors Cl H 185,000 $9,157,500
Howmet Intl 330,000(b) 4,991,250
Precision Castparts 230,000 13,253,750
Total 27,402,500
Automotive & related (1.1%)
Danaher 173,500 12,546,219
Banks and savings & loans (7.8%)
BankAmerica 110,000 9,095,625
BankBoston 60,000 6,322,500
First Chicago NBD 135,000 11,804,063
First Union 280,000 15,487,500
Norwest 449,200 17,462,650
Wachovia 93,700 7,501,856
Washington Mutual 285,000 20,128,125
Total 87,802,319
Beverages & tobacco (1.2%)
Coca-Cola 170,000 13,323,750
Building materials & construction (6.1%)
Martin Marietta Materials 454,900 20,925,400
Tyco Intl 849,100 47,018,912
Total 67,944,312
Chemicals (1.9%)
USA Waste Services 455,000(b) 21,470,312
Commercial finance (0.7%)
Finova Group 143,305 7,926,558
Communications equipment & services (0.9%)
ADC Telecommunications 345,000(b) 9,703,125
Computers & office equipment (6.1%)
BMC Software 140,000(b) 6,448,750
Cisco Systems 210,000(b) 15,881,250
Compaq Computer 505,000 13,792,812
Parametric Technology 355,800(b) 10,907,494
PeopleSoft 235,000(b) 10,266,563
Solectron 260,000(b) 10,757,500
Total 68,054,369
Electronics (0.8%)
Intel 130,000 9,286,875
Energy (1.6%)
Mobil 120,000 9,360,000
Tosco 266,700 8,467,725
Total 17,827,725
Energy equipment & services (1.0%)
Transocean Offshore 235,000 11,588,437
Financial services (5.4%)
CIT Group Cl A 271,800 8,561,700
Franklin Resources 190,000 9,286,250
Household Intl 102,000 13,801,875
Morgan Stanley, Dean
Witter, Discover & Co 132,000 10,304,250
Travelers Group 308,000 18,788,000
Total 60,742,075
Food (2.9%)
Flowers Inds 529,000 10,910,625
General Mills 175,000 11,943,750
Sara Lee 160,200 9,431,775
Total 32,286,150
Foreign (5.0%)(c)
ACE 510,000 18,168,750
Schlumberger 125,000 9,757,812
SmithKline Beecham ADR 219,100 11,790,319
Telecomunicacoes
Brasileiras-Telebras ADR 149,500 15,940,438
Total 55,657,319
Health care (9.0%)
ALZA 249,000(b) 12,045,375
American Home Products 260,000 12,561,250
Baxter Intl 245,000 14,010,937
Guidant 240,000 15,465,000
Immunex 225,000(b) 13,893,750
Johnson & Johnson 110,000 7,596,875
Merck & Co 82,000 9,599,125
Sybron Intl 650,000(b) 15,559,375
Total 100,731,687
Health care services (3.2%)
Service Corp Intl 386,000 15,777,750
Tenet Healthcare 570,000(b) 19,950,000
Total 35,727,750
Household products (3.6%)
Gillette 140,000 16,397,500
Newell 290,000 13,992,500
ServiceMaster 300,000 9,918,750
Total 40,308,750
Industrial equipment & services (4.4%)
Deere & Co 165,000 8,559,375
Illinois Tool Works 290,000 19,140,000
Thermo Electron 605,000(b) 21,250,625
Total 48,950,000
Insurance (1.0%)
UNUM 204,800 11,379,200
Leisure time & entertainment (0.9%)
Carnival Cl A 150,000 10,162,500
Media (7.1%)
Belo (AH) Cl A 205,000 10,557,500
CBS570,000 18,097,500
Chancellor Media 440,000(b) 18,397,500
Comcast Cl A 60,000 2,025,000
Comcast Special Cl A 320,000 10,970,000
Gannett 130,000 8,571,875
Univision Communications
Cl A 290,000(b) 10,077,500
Young & Rubicam 54,200(b) 1,517,600
Total 80,214,475
Metals (0.4%)
Aluminum Co of America 69,000 4,786,875
Multi-industry conglomerates (3.2%)
Baldor Electric 231,600 6,036,075
Cendant 390,620(b) 8,471,571
Emerson Electric 125,000 7,593,750
General Electric 163,500 13,631,813
Total 35,733,209
Paper & packaging (1.6%)
Fort James 285,000 13,626,562
Owens-Illinois 105,000 4,718,438
Total 18,345,000
Real estate investment trust (0.8%)
CCA Prison 280,000(d) 8,767,500
Restaurants & lodging (1.8%)
Marriott Intl Cl A 234,000 8,131,500
Wendy's Intl 500,000 12,343,750
Total 20,475,250
Retail (11.5%)
Consolidated Stores 300,000(b) 11,456,250
Costco Cos 210,000(b) 12,153,750
CVS83,800 5,881,712
Dollar General 250,000 9,531,250
Federated Depart Stores 285,000(b) 14,766,563
Home Depot 150,000 11,784,375
Kohl's 490,000(b) 23,305,625
Rite Aid 480,000 17,190,000
Safeway 640,000(b) 23,320,000
Total 129,389,525
Utilities -- telephone (2.8%)
BellSouth 270,000 17,415,000
WorldCom 300,000(b) 13,650,000
Total 31,065,000
Total common stocks
(Cost: $729,355,397) $1,079,598,766
Short-term securities (4.4%)
Issuer Annualized Amount Value(a)
yield on payable at
date of maturity
purchase
U.S. government agencies (2.6%)
Federal Home Loan Bank Disc Nt
06-03-98 5.39% $900,000 $899,463
Federal Home Loan Mtge Corp Disc Nts
06-05-98 5.44 2,300,000 2,297,924
06-16-98 5.44 4,600,000 4,588,227
06-26-98 5.46 9,500,000 9,461,240
06-29-98 5.45 4,700,000 4,678,733
Federal Natl Mtge Assn Disc Nts
06-12-98 5.42 5,000,000 4,990,250
06-22-98 5.45 2,100,000 2,092,701
Total 29,008,538
Commercial paper (1.8%)
Ameritech Capital Funding
06-22-98 5.51 4,700,000(e)4,683,545
Fleet Funding
06-03-98 5.54 3,600,000(e)3,597,796
07-08-98 5.58 3,700,000(e)3,677,754
Glaxo Wellcome
06-08-98 5.53 800,000(e) 798,898
06-26-98 5.54 700,000(e) 697,107
Paccar Financial
06-09-98 5.54 900,000 898,617
Sysco
06-23-98 5.53 3,600,000(e)3,586,776
Xerox
06-24-98 5.52 2,900,000 2,888,924
Total 20,829,417
Total short-term securities
(Cost: $49,837,955) $49,837,955
Total investments in securities
(Cost: $779,193,352)(f) $1,129,436,721
See accompanying notes to investments in securities.
<PAGE>
Investments in securities
IDS Equity Select Fund, Inc.
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 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.
(f) At May 31, 1998, the cost of securities for federal income tax purposes was
approximately $779,193,000 and the approximate aggregate gross unrealized
appreciation and depreciation based on that cost was:
Unrealized appreciation.........................................$360,632,000
Unrealized depreciation..........................................(10,388,000)
Net unrealized appreciation.....................................$350,244,000
<PAGE>
Board members and officers
Independent board members and officers
Chairman William R. Pearce*
of the board 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).
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.
Heinz F. Hutter
Former president and chief operating officer, Cargill, Inc.
Anne P. Jones
Attorney and telecommunications consultant.
Alan K. Simpson
Former United States senator for Wyoming.
Edson W. Spencer
Retired chairman and chief executive officer, Honeywell, Inc.
Wheelock Whitney
Chairman, Whitney Management Company.
C. Angus Wurtele
Chairman of the board, The Valspar Corporation.
Officer
Vice president, Leslie L. Ogg*
general counsel President of Board Services Corporation.
and secretary
Board members and officers associated with AEFC
President John R. Thomas*
Senior vice president, AEFC.
William H. Dudley*
Senior advisor to the chief executive officer, AEFC.
David R. Hubers*
President and chief executive officer, AEFC.
Officers associated with AEFC
Vice president Peter J. Anderson*
Senior vice president, AEFC
Vice president Frederick C. Quirsfeld*
Vice president, AEFC
Treasurer Matthew N. Karstetter*
Vice president, AEFC
* Interested person as defined by the Investment Company Act of 1940.
<PAGE>
IDS mutual funds
Global/International funds
Funds in this group seek capital growth and/or income by investing primarily in
foreign securities. Foreign investments may be subject to currency fluctuations
and political and economic risks of the countries in which the investments are
made. They are high risk mutual funds with a potential for high reward.
IDS Emerging Markets Fund
Invests in a Portfolio comprised primarily of stocks of companies in developing
countries throughout the world that are believed to offer growth potential.
Seeks to provide long-term growth of capital.
(icon of) world with countries
IDS Global Growth Fund
Invests in a Portfolio comprised primarily of stocks of companies throughout the
world that are positioned to meet market needs in a changing world economy.
These companies offer above-average potential for long-term growth.
(icon of) world
IDS International Fund
Invests primarily in common stocks of foreign companies that offer potential for
superior growth. The Fund may invest up to 20% of its assets in the U.S. market.
(icon of) three flags
IDS Global Balanced Fund
Invests in stocks and bonds in, for the most part, major markets throughout the
world, including the U.S. Seeks to provide a balance of growth of capital and
current income.
(icon of) scale of globes
IDS Global Bond Fund
Invests in a Portfolio comprised primarily of debt securities of U.S. and
foreign issuers to seek high total return through income and growth of capital.
(icon of) globe
Growth funds
Funds in this group seek capital growth, primarily from common stocks. They are
high risk mutual funds with a potential for high reward.
IDS Precious Metals Fund
Invests primarily in the securities of foreign or domestic companies that
explore for, mine and process or distribute gold and other precious metals. A
highly aggressive and speculative fund that seeks long-term growth of capital.
(icon of) cart of precious gems
IDS Discovery Fund
Invests in small- and medium-size, growth-oriented companies emphasizing
technological innovation and productivity enhancement. Buys and holds larger
growth-oriented stocks.
(icon of) ship
IDS Small Company Index Fund
Invests in all or a representative group of the equity securities comprising the
S&P SmallCap 600 Index, as it strives to provide long-term capital appreciation.
(icon of) building
IDS Strategy Aggressive Fund
Invests primarily in common stocks of companies that are selected for their
potential for above-average growth. Above-average means that their growth
potential is better, in the opinion of the portfolio's investment manager, than
the Standard & Poor's Corporation (S&P) 500 Stock Index.
(icon of) chess piece
IDS Research Opportunities Fund
Invests in a Portfolio comprised primarily of equity securities of companies
included in the S&P 500 Index that are believed to have strong growth potential.
The Portfolio is managed using a research methodology by the Research Department
of AEFC. Goal is long-term appreciation.
(icon of) magnifying glass
IDS Growth Fund
Invests in a Portfolio comprised primarily of companies that have above-average
potential for long-term growth as a result of new management, marketing
opportunities or technological superiority.
(icon of) trees
IDS New Dimensions Fund
Invests in a Portfolio comprised primarily of companies with
significant growth potential due to superiority in
technology, marketing or management. The Fund frequently
changes its industry mix.
(icon of) dimension
IDS Progressive Fund
Invests primarily in undervalued common stocks. The Fund holds stocks for the
long term with the goal of capital growth.
(icon of) shooting star
Growth & income funds
These funds focus on securities of medium to large, well-established companies
that offer long-term growth of capital and reasonable income from dividends and
interest. Foreign investments may be subject to currency fluctuations and
political and economic risks of the countries in which the investments are made.
IDS Equity Select Fund
Invests primarily in a combination of moderate growth stocks, higher-yielding
equities and bonds. Seeks growth of capital and income.
(icon of) three pine trees
IDS Blue Chip Advantage Fund
Invests in selected stocks from a major market index. Securities purchased are
those recommended by our research analysts as the best from each industry
represented on the index. Offers potential for long-term growth as well as
dividend income.
(icon of) ribbon
IDS Managed Allocation Fund
Invests in a Portfolio comprised primarily of U.S. equity securities, U.S. and
foreign debt securities, foreign equity securities and money market instruments.
The Fund provides diversification among these major investment categories and
has a target mix that represents the way the Fund's investments will be
allocated over the long term. Seeks maximum total return.
(icon of) gyroscope
IDS Stock Fund
Invests in a Portfolio comprised primarily of common stock of companies
representing many sectors of the economy. Seeks current income and growth of
capital.
(icon of) building with columns
IDS Equity Value Fund
Invests primarily in undervalued common stocks that offer potential for growth
of capital and income.
(icon of) three growing flowers
IDS Utilities Income Fund
Invests primarily in the stocks of public utility companies to seek high current
income and growth of income and capital with reduced volatility.
(icon of) light bulb
IDS Diversified Equity Income Fund
Invests in a Portfolio comprised primarily in high-yielding common stocks to
seek high current income and, secondarily, to benefit from the growth potential
offered by stock investments.
(icon of) two puzzle pieces
IDS Mutual
Invests in a Portfolio which seeks to balance between common stocks and senior
securities (preferred stocks and bonds). Seeks a balance of growth of capital
and current income.
(icon of) scale of justice
Income funds
The funds in this group invest their assets primarily in corporate bonds or
government securities to seek interest income. Secondary objective is capital
growth. Risk varies by bond quality.
IDS Extra Income Fund
Invests in a Portfolio comprised mainly of long-term, high-yielding corporate
fixed-income securities in the lower rated, higher risk bond categories to seek
high current income. Secondary objective is capital growth.
(icon of) two coins
IDS Bond Fund
Invests mainly in corporate bonds, at least 50% in the higher rated, lower risk
bond categories, or the equivalent, and in government bonds.
(icon of) Greek column
IDS Selective Fund
Invests in a Portfolio comprised primarily of high-quality corporate bonds and
other highly rated debt instruments including government securities and
short-term investments. Seeks current income and preservation of capital.
(icon of) skyline
IDS Federal Income Fund
Invests in a Portfolio comprised primarily of securities issued or guaranteed as
to the timely payment of principal and interest by the U.S. government, its
agencies and instrumentalities. Seeks a high level of current income and safety
of principal consistent with its type of investments.
(icon of) shield with eagle head
Tax-exempt income funds
These funds provide tax-free income by investing in municipal bonds. The income
is generally free from federal income tax, but a portion of the income may be
subject to state and local taxes. Risk varies by bond quality.
IDS Tax-Exempt Bond Fund
Invests mainly in bonds and notes of state or local government units, with at
least 75% in the four highest rated, lowest risk bond categories.
(icon of) shield with Greek column
IDS Insured Tax-Exempt Fund
Invests primarily in municipal securities that are insured as to the timely
payment of principal and interest. The insurance feature minimizes credit risk
of the Fund but does not guarantee the market value of the Fund's shares.
(icon of) shield with star
IDS State Tax-Exempt Funds
(CA, MA, MI, MN, NY, OH)
Invests primarily in high- and medium-grade municipal securities to provide
income to residents of each respective state that is exempt from federal, state
and local income taxes. (New York is the only state that is exempt at the local
level.)
(icon of) shield with U.S. enclosed
IDS High Yield Tax-Exempt Fund
Invests in a Portfolio comprised primarily of medium- and lower-quality
municipal bonds and notes. Lower-quality securities generally involve greater
risk of principal and income.
(icon of) shield with basket of apples enclosed
IDS Intermediate Tax-Exempt Fund
Invests in mainly investment-grade bonds and other debt securities with
intermediate-term maturities issued by state and local government units. Goal is
to seek a high level of current income exempt from federal taxes.
(icon of) shield with tree enclosed
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 Redemptions and exchanges, National/Minnesota
Financial Advisors dividend payments or 800-437-3133
Telephone Transaction reinvestments and automatic
Service payment arrangements Mpls./St. Paul area:
671-3800
TTY Service For the hearing impaired 800-846-4852
American Express Automated account information 800-862-7919
Financial Advisors (TouchTone(R) phones only),
Easy Access Line including current fund prices
and performance, account values
and recent account transactions
AMERICAN EXPRESS Financial Advisors
IDS Equity Select Fund
IDS Tower 10
Minneapolis, MN 55440-0010
