AXP(SM)
Equity Select
Fund
1999 SEMIANNUAL REPORT
(picture of) magnifying glass
The goal of AXP Equity Select Fund is growth of capital.
AMERICAN EXPRESS Financial Advisors
Distributed by American Express Financial Advisors Inc.
<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 Chairman 3
From the Portfolio Manager 4
Fund Facts 5
The 10 Largest Holdings 6
Financial Statements 7
Notes to Financial Statements 10
Investments in Securities 18
<PAGE>
(picture of) Arne H. Carlson
Arne H. Carlson
Chairman of the board
From the Chairman
American Express(R) Funds held shareholder meetings in June 1999. Shareholders
approved all of the proposals advanced by management. Among the proposals were:
o The election of members to the board of directors and the selection of KPMG
LLP as independent auditor.
o A change in the Fund's name from "IDS" to "AXP."
o A new shareholder service and distribution plan.
o A change in the investment management services agreement.
o Changes with respect to fundamental investment policies.
No other business was presented at the meeting, which was concluded by a report
to shareholders from the Investment Department of American Express Financial
Corporation.
Thanks to all of you for your effort in reviewing the proxy material and voting
your proxies.
Arne H. Carlson
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(picture of) Betty J. Tebault
Betty J. Tebault
Portfolio manager
From the Portfolio Manager
AXP Equity Select Fund had a productive first half of its fiscal year, as it
took advantage of a rebounding stock market. For the six months -- December 1998
through May 1999 -- the total return for the Fund's Class A shares was 15.59%.
(A portion of the return came in the form of a capital gain, which was paid to
shareholders in December 1998 and reduced the Fund's net asset value by the same
amount at that time. It did not, however affect the total return.)
The period could hardly have gotten off to a better start. Buoyed by three
reductions in short-term interest rates by the Federal Reserve during the fall,
as well as ongoing economic strength and continued reports of low inflation, the
stock market responded with a December surge that saw the Fund gain nearly 12%.
The rest of the winter, however, was a different story, as stocks reversed
direction in the face of rising long-term interest rates. But the market and the
Fund got back on track in the spring to finish the period on a positive note.
LARGE-CAPS LEAD
For the most part, the market's gains were once again driven by a relatively
small number of large-capitalization growth stocks. While that generally worked
to the disadvantage of the Fund, whose main emphasis is mid-cap stocks, the
portfolio did include some large-cap names such as Cisco Systems, America Online
and Safeway that made healthy contributions to performance.
As for changes to the holdings, I did a fair amount of stock-trading in order to
bring the Fund more firmly into the mid-cap category. This re-positioning effort
included the addition of some biotechnology, electronics and Internet-related
stocks, sectors that were previously under-represented in the portfolio. Looking
at sector exposures at period-end, the largest were multi-industry, health care
and technology. But there were several other sectors with substantial
investments as well, including telecommunications equipment, retailing and
media. All in all, the mix represented quite a well-diversified group of
holdings.
In addition to focusing mainly on mid-cap issues, I tried to bring a somewhat
more industrial flavor to the portfolio. This effort is based on my expectation
that the remarkable strength of the U.S. economy will continue and that foreign
economies, particularly in the developing countries, will begin to recover.
Ultimately, this should lead to improved business for industrial companies. At
this writing (mid-June), the stock market has already begun to acknowledge this
possibility by broadening out -- that is, bidding up prices on a wider variety
of stocks beyond the high-flying large-cap names that have been the darlings of
recent years. I think that's a healthy trend, and one that could work in the
Fund's favor during the rest of the fiscal year.
Betty J. Tebault
<PAGE>
Fund Facts
Class A -- 6-month performance
(All figures per share)
Net asset value (NAV)
May 31, 1999 $15.18
Nov. 30, 1998 $14.59
Increase $ 0.59
Distributions -- Dec. 1, 1998 - May 31, 1999
From income $ 0.01
From capital gains $ 1.51
Total distribution $ 1.52
Total return* +15.59%**
Class B -- 6-month performance
(All figures per share)
Net asset value (NAV)
May 31, 1999 $14.84
Nov. 30, 1998 $14.34
Increase $ 0.50
Distributions -- Dec. 1, 1998 - May 31, 1999
From income $ 0.00
From capital gains $ 1.51
Total distribution $ 1.51
Total return* +15.15%**
Class Y -- 6-month performance
(All figures per share)
Net asset value (NAV)
May 31, 1999 $15.20
Nov. 30, 1998 $14.60
Increase $ 0.60
Distributions -- Dec. 1, 1998 - May 31, 1999
From income $ 0.01
From capital gains $ 1.51
Total distribution $ 1.52
Total return* +15.63%**
* 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 10 Largest Holdings
Percent Value
(of net assets) (as of May 31, 1999)
Tyco Intl 6.82% $87,733,237
Immunex 4.44 57,039,374
America Online 3.77 48,466,249
Martin Marietta Materials 2.40 30,912,688
Comcast Special Cl A 2.09 26,949,999
Estee Lauder Cl A 2.09 26,873,125
Starbucks 2.04 26,202,313
Cisco Systems 1.99 25,585,624
Tower Automotive 1.97 25,368,375
Danaher 1.94 24,900,250
For further detail about these holdings, please refer to the section entitled
"Investments in Securities."
(icon of)pie chart
The 10 holdings listed here
make up 29.55% of net assets
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<CAPTION>
Financial Statements
Statement of assets and liabilities
AXP Equity Select Fund, Inc.
May 31, 1999 (Unaudited)
Assets
Investments in securities, at value (Note 1)
<S> <C>
(identified cost $933,534,549) $1,335,126,192
Cash in bank on demand deposit 103,630
Dividends and accrued interest receivable 310,000
Receivable for investment securities sold 8,850,069
U.S. government securities held as collateral (Note 4) 933,032
-------
Total assets 1,345,322,923
-------------
Liabilities
Payable for investment securities purchased 10,569,878
Payable upon return of securities loaned (Note 4) 48,766,232
Accrued investment management services fee 17,864
Accrued distribution fee 2,201
Accrued service fee 6,135
Accrued transfer agency fee 3,061
Accrued administrative services fee 1,258
Other accrued expenses 52,355
------
Total liabilities 59,418,984
----------
Net assets applicable to outstanding capital stock $1,285,903,939
==============
Represented by
Capital stock-- $.01 par value (Note 1) $ 848,802
Additional paid-in capital 831,065,244
Investment loss-- net (1,577,409)
Accumulated net realized gain (loss) 51,327,674
Unrealized appreciation (depreciation) on investments (Note 6) 404,239,628
-----------
Total-- representing net assets applicable to outstanding capital stock $1,285,903,939
==============
Net assets applicable to outstanding shares: Class A $1,175,836,805
Class B $ 108,641,063
Class Y $ 1,426,071
Net asset value per share of outstanding capital stock: Class A shares 77,467,124 $ 15.18
Class B shares 7,319,201 $ 14.84
Class Y shares 93,843 $ 15.20
See accompanying notes to financial statements.
</TABLE>
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<TABLE>
<CAPTION>
Statement of operations
AXP Equity Select Fund, Inc.
Six months ended May 31, 1999 (Unaudited)
Investment income
Income:
<S> <C>
Dividends $ 1,847,661
Interest 2,396,863
---------
Total income 4,244,524
---------
Expenses (Note 2):
Investment management services fee $ 3,210,149
Distribution fee-- Class B 345,893
Transfer agency fee 431,080
Incremental transfer agency fee
Class A 44,610
Class B 13,680
Service fee
Class A 962,398
Class B 80,417
Class Y 312
Administrative services fees and expenses 227,902
Compensation of board members 5,793
Custodian fees 59,152
Printing and postage 106,321
Registration fees 65,414
Audit fees 13,125
Other 10,954
------
Total expenses 5,577,200
Earnings credits on cash balances (Note 2) (19,705)
-------
Total net expenses 5,557,495
---------
Investment income (loss) -- net (1,312,971)
----------
Realized and unrealized gain (loss) -- net
Net realized gain (loss): on security transactions (Note 3)
Security transaction (Note 3) 48,673,310
Financial futures contracts 7,690,932
---------
Net realized gain (loss) on investments 56,364,242
Net change in unrealized appreciation (depreciation) on investments 119,195,415
-----------
Net gain (loss) on investments 175,559,657
-----------
Net increase (decrease) in net assets resulting from operations $174,246,686
============
See accompanying notes to financial statements.
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<CAPTION>
Statements of changes in net assets
AXP Equity Select Fund, Inc.
May 31, 1999 Nov. 30, 1998
Six months ended Year ended
(Unaudited)
Operations and distributions
<S> <C> <C>
Investment income (loss)-- net $ (1,312,971) $ 2,203,311
Net realized gain (loss) on security transactions 56,364,242 111,333,675
Net change in unrealized appreciation (depreciation) on investments 119,195,415 (12,065,803)
----------- -----------
Net increase (decrease) in net assets resulting from operations 174,246,686 101,471,183
----------- -----------
Distributions to shareholders from:
Net investment income
Class A (818,451) (2,213,891)
Class B (2,958) --
Class Y (222) (1,333)
Net realized gain
Class A (107,848,773) (151,902,168)
Class B (8,474,927) (6,721,184)
Class Y (28,019) (59,447)
------- -------
Total distributions (117,173,350) (160,898,023)
------------ ------------
Capital share transactions (Note 5)
Proceeds from sales
Class A shares (Note 2) 359,791,438 446,090,799
Class B shares 25,382,266 42,854,833
Class Y shares 1,179,953 221,131
Reinvestment of distributions at net asset value
Class A shares 100,503,589 144,067,046
Class B shares 8,388,600 6,675,867
Class Y shares 28,241 60,781
Payments for redemptions
Class A shares (380,930,448) (465,714,055)
Class B shares (Note 2) (8,905,784) (8,948,681)
Class Y shares (222,136) (250,873)
-------- --------
Increase (decrease) in net assets from capital share transactions 105,215,719 165,056,848
----------- -----------
Total increase (decrease) in net assets 162,289,055 105,630,008
Net assets at beginning of period 1,123,614,884 1,017,984,876
------------- -------------
Net assets at end of period $1,285,903,939 $1,123,614,884
============== ==============
Undistributed (excess of distributions over) net investment income $ (1,577,409) $ 557,193
-------------- --------------
See accompanying notes to financial statements.
</TABLE>
<PAGE>
Notes to Financial Statements
AXP Equity Select Fund, Inc.
(Unaudited as to May 31, 1999)
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.
The Fund offers Class A, Class B and Class Y shares.
o Class A shares are sold with a front-end sales charge.
o Class B shares may be subject to a contingent deferred sales charge and
automatically convert to Class A shares during the ninth calendar year
of ownership.
o Class Y shares have no sales charge and are offered only to qualifying
institutional investors. All classes of shares have identical voting,
dividend and liquidation rights. The distribution fee, transfer agency fee
and service fee (class specific expenses) differs among classes. Income,
expenses (other than class specific expenses) and realized and unrealized
gains or losses on investments are allocated to each class of shares based
upon its relative net assets.
The Fund's significant accounting policies are summarized below:
Use of estimates
Preparing financial statements that conform to generally accepted accounting
principles requires management to make estimates (e.g., on assets and
liabilities) that could differ from actual results.
Valuation of securities
All securities are valued at the close of each business day. Securities traded
on national securities exchanges or included in national market systems are
valued at the last quoted sales price. Debt securities are generally traded in
the over-the-counter market and are valued at a price that reflects fair value
as quoted by dealers in these securities or by an independent pricing service.
Securities for which market quotations are not readily available are valued at
fair value according to methods selected in good faith by the board. Short-term
securities maturing in more than 60 days from the valuation date are valued at
the market price or approximate market value based on current interest rates;
those maturing in 60 days or less are valued at amortized cost.
Option transactions
To produce incremental earnings, protect gains, and facilitate buying and
selling of securities for investments, the Fund may buy and write options traded
on any U.S. or foreign exchange or in the over-the-counter market where
completing the obligation depends upon the credit standing of the other party.
The Fund also may buy and sell put and call options and write covered call
options on portfolio securities as well as write cash-secured put options. The
risk in writing a call option is that the Fund gives up the opportunity for
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 being unable to enter into a closing transaction if a
liquid secondary market does not exist.
Option contracts are valued daily at the closing prices on their primary
exchanges and unrealized appreciation or depreciation is recorded. The Fund will
realize a gain or loss when the option transaction expires or closes. 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
To gain exposure to or protect itself from market changes 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 of an illiquid market and that a change in the value of the contract
or option may not correlate with changes in the value of the underlying
securities.
Upon entering into a futures contract, the 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,
if any, may arise from sales of foreign currency, closed forward contracts,
exchange gains or losses realized between the trade date and settlement date on
securities transactions, and other translation gains or losses on dividends,
interest income and foreign withholding taxes.
The 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 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 its contract obligations.
Federal taxes
The Fund's policy is to comply with all sections of the Internal Revenue Code
that apply to regulated investment companies and to distribute all of its
taxable income to shareholders. No provision for income or excise taxes is thus
required.
Net investment income (loss) and net realized gains (losses) may differ for
financial statement and tax purposes primarily because of deferred losses on
certain futures contracts, the recognition of certain foreign currency gains
(losses) as ordinary income (loss) for tax purposes, and losses deferred due to
"wash sale" transactions. The character of distributions made during the year
from net investment income or net realized gains may differ from their ultimate
characterization for federal income tax purposes. Also, due to the timing of
dividend distributions, the fiscal year in which amounts are distributed may
differ from the year that the income or realized gains (losses) were recorded by
the Fund.
Dividends to shareholders
Dividends from net investment income, declared 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
The Fund has agreements with American Express Financial Corporation (AEFC) to
manage its portfolio and provide administrative services. Under an 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.
Effective July 1, 1999, the management fee will increase to 0.60% to 0.48%
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 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 $125,347 for the six months ended May 31, 1999.
Under an 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 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 $19
o Class B $20
o Class Y $17
Under terms of a prior agreement that ended Jan. 31, 1999, the Fund paid a
transfer agency fee at an annual rate per shareholder account of $15 for Class A
and $16 for Class B. Under terms of a prior agreement that ended March 31, 1999,
the Fund paid a transfer agency fee at an annual rate per shareholder account of
$15 For Class Y.
The Fund has agreements with American Express Financial Advisors Inc. for
distribution and shareholder services. Under a Plan and Agreement of
Distribution, the Fund pays a distribution fee at an annual rate of 0.75% of the
Fund's average daily net assets attributable to Class B shares. Effective July
1, 1999, the Fund will pay a distribution fee at an annual rate up to 0.25% of
the Fund's average daily net assets attributable to Class A shares and up to
1.00% of the Fund's average daily net assets attributable to Class B shares.
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. Effective July 1, 1999, the Fund will
convert the Shareholder Service Agreement with respect to Class A and Class B
shares into the Plan and Agreement of Distribution discussed above.
Sales charges received by American Express Financial Advisors Inc. for
distributing Fund shares were $784,676 for Class A and $44,187 for Class B for
the six months ended May 31, 1999. The Fund also pays custodian fees to American
Express Trust Company, an affiliate of AEFC.
During the six months ended May 31, 1999, the Fund's custodian and transfer
agency fees were reduced by $19,705 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 $594,697,596 and $545,577,600, respectively, for the six
months ended May 31, 1999. Realized gains and losses are determined on an
identified cost basis.
Brokerage commissions paid to brokers affiliated with AEFC were $121,560 for the
six months ended May 31, 1999.
4. LENDING OF PORTFOLIO SECURITIES
As of May 31, 1999, securities valued at $47,100,816 were on loan to brokers.
For collateral, the Fund received $47,833,200 in cash and U.S. government
securities valued at $933,032. Income from securities lending amounted to
$102,406 for the six months ended May 31, 1999. 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.
<PAGE>
<TABLE>
<CAPTION>
5. CAPITAL SHARE TRANSACTIONS
Transactions in shares of capital stock for the periods indicated are as
follows:
Six months ended May 31, 1999
Class A Class B Class Y
<S> <C> <C> <C>
Sold 24,490,599 1,755,543 80,740
Issued for reinvested distributions 7,325,335 623,180 2,057
Redeemed (25,876,440) (618,564) (14,945)
----------- -------- -------
Net increase (decrease) 5,939,494 1,760,159 67,852
--------- --------- ------
Year ended Nov. 30, 1998
Class A Class B Class Y
Sold 31,574,234 3,044,961 14,841
Issued for reinvested distributions 10,847,994 509,025 4,572
Redeemed (32,844,306) (645,024) (17,837)
----------- -------- -------
Net increase (decrease) 9,577,922 2,908,962 1,576
--------- --------- -----
</TABLE>
<PAGE>
6. STOCK INDEX FUTURES CONTRACTS
As of May 31, 1999, investments in securities included securities valued at
$17,738,563 that were pledged as collateral to cover initial margin deposits on
194 open purchase contracts. The market value of the open purchase contracts as
of May 31, 1999 was $38,460,500 with a net unrealized gain of $2,647,986. See
"Summary of significant accounting policies."
7. BANK BORROWINGS
The Fund has a revolving credit agreement with U.S. Bank, N.A., whereby the Fund
is permitted to have bank borrowings for temporary or emergency purposes to fund
shareholder redemptions. The Fund must have asset coverage for borrowings not to
exceed the aggregate of 333% of advances equal to or less than five business
days plus 367% of advances over five business days. The agreement, which enables
the Fund to participate with other American Express funds, permits borrowings up
to $200 million, collectively. Interest is charged to each Fund based on its
borrowings at a rate equal to the Federal Funds Rate plus 0.30% or the
Eurodollar Rate (Reserve Adjusted) plus 0.20%. Borrowings are payable up to 90
days after such loan is executed. The Fund also pays a commitment fee equal to
its pro rata share of the amount of the credit facility at a rate of 0.05% per
annum. The Fund had no borrowings outstanding during the six months ended May
31, 1999.
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<TABLE>
<CAPTION>
8. 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
1999d 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $14.59 $15.76 $14.71 $12.35 $10.31
Income from investment operations:
Net investment income (loss) (.01) .03 .05 .07 .10
Net gains (losses) (both realized and unrealized) 2.12 1.29 2.93 3.30 2.55
Total from investment operations 2.11 1.32 2.98 3.37 2.65
Less distributions:
Dividends from net investment income (.01) (.03) (.06) (.06) (.12)
Distributions from realized gains (1.51) (2.46) (1.87) (.95) (.49)
Total distributions (1.52) (2.49) (1.93) (1.01) (.61)
Net asset value, end of period $15.18 $14.59 $15.76 $14.71 $12.35
Ratios/supplemental data
Net assets, end of period (in millions) $1,176 $1,044 $976 $832 $674
Ratio of expenses to average daily net assetsb .86%e .82% .83% .87% .84%
Ratio of net investment income (loss)
to average daily net assets (.16%)e .24% .39% .53% .94%
Portfolio turnover rate
(excluding short-term securities) 48% 80% 63% 64% 62%
Total returnc 15.59% 9.96% 23.56% 29.62% 27.12%
a For a share outstanding throughout the period. Rounded to the nearest cent.
b Effective fiscal year 1996, expense ratio is based on total expenses of the
Fund before reduction of earnings credits on cash balances.
c Total return does not reflect payment of a sales charge.
d Six months ended May 31, 1999 (Unaudited).
e Adjusted to an annual basis.
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<CAPTION>
Fiscal period ended Nov. 30,
Per share income and capital changesa
Class B Class Y
1999d 1998 1997 1996 1995b 1999d 1998 1997 1996 1995b
Net asset value,
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
beginning of period $14.34 $15.60 $14.63 $12.31 $10.37 $14.60 $15.77 $14.72 $12.35 $10.37
Income from investment operations:
Net investment income (loss) (.06) (.01) (.01) (.03) .05 -- .04 .06 .10 .08
Net gains (losses) (both
realized and unrealized) 2.07 1.21 2.85 3.30 1.95 2.12 1.29 2.93 3.30 2.00
Total from investment
operations 2.01 1.20 2.84 3.27 2.00 2.12 1.33 2.99 3.40 2.08
Less distributions:
Dividends from net
investment income -- -- -- -- (.06) (.01) (.04) (.07) (.08) (.10)
Distributions from
realized gains (1.51) (2.46) (1.87) (.95) -- (1.51) (2.46) (1.87) (.95) --
Total distributions (1.51) (2.46) (1.87) (.95) (.06) (1.52) (2.50) (1.94) (1.03) (.10)
Net asset value,
end of period $14.84 $14.34 $15.60 $14.63 $12.31 $15.20 $14.60 $15.77 $14.72 $12.35
Ratios/supplemental data
Net assets, end of
period (in millions) $109 $80 $41 $18 $3 $1 $-- $-- $3 $3
Ratio of expenses to
average daily net assetsc 1.64%f 1.58% 1.59% 1.63% 1.68%f .82%f .75% .70% .70% .70%f
Ratio of net investment
income (loss) to average
daily net assets (.94%)f (.52%) (.35%) (.21%) .08%f (.18%)f .31% .54% .69% 1.08%f
Portfolio turnover
rate (excluding
short-term securities) 48% 80% 63% 64% 62% 48% 80% 63% 64% 62%
Total returne 15.15% 9.12% 22.62% 28.64% 19.36% 15.63% 10.03% 23.68% 29.84% 20.13%
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 Six months ended May 31, 1999 (Unaudited).
e Total return does not reflect payment of a sales charge.
f Adjusted to an annual basis.
</TABLE>
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<TABLE>
<CAPTION>
Investments in Securities
AXP Equity Select Fund, Inc.
May 31, 1999 (Unaudited)
(Percentages represent value of investments compared to net assets)
Common stocks (95.0%)
Issuer Shares Value(a)
Automotive & related (2.5%)
<S> <C> <C>
American Axle & Mfg Holdings 427,700(b) $6,495,694
Tower Automotive 1,109,000(b) 25,368,375
Total 31,864,069
Banks and savings & loans (3.7%)
First Tennessee Natl 170,000 7,001,875
Mercantile Bancorp 190,000(f) 11,103,125
Washington Mutual 412,500 15,752,344
Zions Bancorp 208,000 13,260,000
Total 47,117,344
Building materials & construction (2.6%)
Louisiana-Pacific 150,000 3,037,500
Martin Marietta Materials 509,900 30,912,688
Total 33,950,188
Chemicals (1.6%)
Waste Management 385,000(b) 20,356,875
Commercial finance (1.2%)
Finova Group 328,305 15,697,083
Communications equipment & services (--%)
Time Warner Telecom Cl A 21,900(b) 561,188
Computers & office equipment (13.9%)
Adaptec 310,000(b) 9,571,250
America Online 406,000 48,466,249
Brocade Communications Systems 4,900(b) 316,050
Cisco Systems 235,000(b) 25,585,624
Extreme Networks 15,500(b) 660,688
Fiserv 410,550(b) 15,395,625
iVillage 10,100(b) 483,538
Lexmark Intl Group Cl A 105,000(b) 14,293,125
Microsoft 162,600(b) 13,119,788
Solectron 433,000(b) 23,706,750
SunGard Data Systems 484,800(b) 16,968,000
TheStreet.com 24,600(b,d) 879,450
Yahoo! 62,000(b) 9,176,000
Total 178,622,137
Electronics (5.0%)
Intel 220,000 11,893,750
LSI Logic 540,000(b) 20,013,750
Maxim Integrated Products 340,000(b) 18,168,750
Molex 240,000 7,350,000
Uniphase 50,000(b) 6,700,000
Total 64,126,250
Financial services (3.4%)
Associates First Capital Cl A 415,000 17,014,999
Goldman Sachs Group 21,400(b) 1,453,863
MarketWatch.com 5,100(b) 264,563
MBNA 520,000 14,365,000
Morgan Stanley, Dean Witter, Discover & Co 107,000(f) 10,325,500
Total 43,423,925
Food (2.0%)
Flowers Inds 700,000 15,575,000
U.S. Foodservice 242,100(b) 10,773,450
Total 26,348,450
Furniture & appliances (1.5%)
Ethan Allen Interiors 622,500 19,842,188
Health care (11.3%)
Bausch & Lomb 150,000 11,456,250
Biomet 400,000 15,975,000
Boston Scientific 270,000(b) 10,243,125
Guidant 125,000 6,250,000
Immunex 435,000(b) 57,039,374
MedImmune 210,000(b) 13,361,250
Medtronic 241,686 17,159,706
Sybron Intl 536,400(b) 13,477,050
Total 144,961,755
Health care services (1.8%)
Sunrise Assisted Living 623,000(b,d) 23,051,000
Household products (2.6%)
Estee Lauder Cl A 294,500 26,873,125
Newell Rubbermaid 170,000 6,885,000
Total 33,758,125
Industrial equipment & services (2.2%)
Illinois Tool Works 290,000 22,257,500
Parker-Hannifin 135,000 5,897,813
Total 28,155,313
Insurance (0.7%)
AFLAC 183,000 9,333,000
Media (11.0%)
Adelphia Communications Cl A 160,000(b,d) 12,080,000
Chancellor Media 145,000(b) 7,367,813
Comcast Cl A 60,000 2,163,750
Comcast Special Cl A 700,000 26,949,999
Infinity Broadcasting Cl A 790,630(b,d) 20,210,479
Lamar Advertising 650,000(b) 22,181,249
MediaOne Group 170,600(b) 12,603,075
Univision Communications Cl A 349,100(b) 20,705,994
Value America 87,600(b) 1,631,550
Young & Rubicam 389,200 14,886,900
Ziff-Davis - ZDNet 25,700(b) 536,488
Total 141,317,297
Miscellaneous (--%)
Inet Technologies 1,600(b) $27,300
Multi-industry conglomerates (11.0%)
Danaher 412,000 24,900,250
Mettler-Toledo Intl 962,000(b) 23,809,500
Provant 290,000(b) 4,531,250
Tyco Intl 1,004,100(c) 87,733,237
Total 140,974,237
Restaurants & lodging (3.1%)
Starbucks 704,600(b) 26,202,313
Wendy's Intl 505,000 13,761,250
Total 39,963,563
Retail (10.9%)
Bed Bath & Beyond 400,000(b) 13,675,000
Costco Companies 295,000(b) 21,387,499
CVS 187,600 8,629,600
eToys 19,000(b,d) 1,153,063
Family Dollar Stores 850,000 18,965,625
Hollywood Entertainment 370,000(b) 9,527,500
Kohl's 240,000(b) 16,365,000
Linens 'N Things 265,000(b) 10,566,875
Safeway 310,000(b) 14,415,000
Tiffany & Co 188,400 15,613,650
Whole Foods Market 230,000(b) 9,545,000
Total 139,843,812
Transportation (0.9%)
Werner Enterprises 605,000 11,684,063
Utilities -- telephone (2.1%)
Allegiance Telecom 211,900(b) 7,840,300
MCI WorldCom 220,000(b) 19,002,500
Total 26,842,800
Total common stocks
(Cost: $820,211,800) $1,221,821,962
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Short-term securities (8.8%)
Issuer Annualized Amount Value(a)
yield on date payable at
of purchase maturity
U.S. government agencies (7.0%)
Federal Home Loan Bank Disc Nts
<S> <C> <C> <C>
06-30-99 4.72% $18,600,000 $18,516,454
07-02-99 4.74 6,800,000 6,768,795
07-16-99 4.79 14,300,000 14,207,352
Federal Home Loan Mtge Corp Disc Nts
06-15-99 4.72 15,700,000 15,663,026
06-16-99 4.73 900,000 897,677
07-12-99 4.75 13,500,000 13,420,315
07-22-99 4.84 12,200,000 12,110,533
Federal Natl Mtge Assn Disc Nts
06-03-99 4.75 8,500,000 8,493,270
Total 90,077,422
Commercial paper (1.3%)
Ciesco LP
07-07-99 4.87 1,300,000 1,293,009
Delaware Funding
07-07-99 4.84 5,900,000(e) 5,868,468
Fleet Funding
06-03-99 4.80 4,200,000(e) 4,196,640
General Electric Capital
06-01-99 4.93 3,000,000 2,998,357
Sheffield Receivables
06-14-99 4.84 1,800,000(e) 1,795,894
Total 16,152,368
Letter of credit (0.5%)
Bank of America-
AES Hawaii
06-24-99 4.82 7,100,000 7,074,440
Total short-term securities
(Cost: $113,322,749) $113,304,230
Total investments in securities
(Cost: $933,534,549)(g) $1,335,126,192
==============
</TABLE>
<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. As of May 31, 1999, the
value of foreign securities represented 6.82% of net assets.
(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) Partially pledged as initial margin deposit on the following open stock
index futures purchase contracts (see Note 6 to the financial statements):
Type of security Contracts
S&P Midcap 400 Index, June 1999 194
(g) At May 31, 1999, the cost of securities for federal income tax purposes was
approximately $933,535,000 and the approximate aggregate gross unrealized
appreciation and depreciation based on that cost was:
Unrealized appreciation $415,491,000
Unrealized depreciation (13,900,000)
-----------
Net unrealized appreciation $401,591,000
Quick telephone reference
AMERICAN EXPRESS FINANCIAL ADVISORS TELEPHONE TRANSACTION SERVICE
Sales and exchanges, dividend payments or reinvestments and automatic
payment arrangements: 800-437-3133
AMERICAN EXPRESS CLIENT SERVICE CORPORATION
Fund performance, fund prices, account values, recent account transactions
and account inquiries: 800-862-7919
TTY SERVICE
For the hearing impaired: 800-846-4852
TICKER SYMBOL
Class A: INVPX Class B: IDQBX Class Y: IESYX
S-6435 N (7/99)
BULK RATE
U.S. POSTAGE
PAID
PERMIT NO. 85
SPENCER, IA
AXP Equity Select Fund
IDS Tower 10
Minneapolis, MN 55440-0010
AMERICAN EXPRESS Financial Advisors
