AXP (SM)
Equity Select
Fund
2000 SEMIANNUAL REPORT
American
Express(R)
Funds
(icon of) ruler
AXPEquity Select Fund seeks to provide shareholders with growth of capital.
AMERICAN
EXPRESS
(R)
<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 AXPEquity 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 Managers 4
Fund Facts 6
The 10 Largest Holdings 7
Financial Statements 8
Notes to Financial Statements 11
Investments in Securities 19
<PAGE>
(picture of) Arne H. Carlson
Arne H. Carlson
Chairman of the board
From the Chairman
The financial markets have always had their ups and downs, but in recent months
volatility has become more frequent and intense. While no one can say with
certainty what the markets will do, American Express Financial Corporation, the
Fund's investment manager, expects economic growth to continue this year,
accompanied by a modest rise in long-term interest rates. But no matter what
transpires, this is a great time to take a close look at your goals and
investments. We encourage you to:
o Consult a professional investment advisor who can help you cut through
mountains of data.
o Set financial goals that extend beyond those achievable through retirement
plans of your employer.
o Learn as much as you can about your current investments.
The portfolio managers' letter that follows provides a review of the Fund's
investment strategies and performance. The semiannual report contains other
valuable information as well. The Fund's prospectus describes its investment
objectives and how it intends to achieve those objectives. As experienced
investors know, information is vital to making good investment decisions.
So, take a moment and decide again whether the Fund's investment objectives and
management style fit with your other investments to help you reach your
financial goals. And make it a practice on a regular basis to assess your
investment options.
On behalf of the Board,
Arne H. Carlson
<PAGE>
(picture of) Duncan J. Evered
(picture of) Paul A. Rokosz
Duncan J. Evered
Paul A. Rokosz
Portfolio Managers
From the Portfolio Managers
The past six months proved to be a roller-coaster ride for the stock market, as
investors' spirits soared over the winter only to sink in the spring. Still, AXP
Equity Select Fund did produce positive results, as its Class A shares realized
a total return of 4.50% (excluding the sales charge) over the first half of the
fiscal year -- December 1999 through May 2000.
Things could hardly have been better at the outset of the period. The economy
was humming along, corporate profits were generally robust, inflation was
well-behaved, and increasing excitement about the potential of the Internet was
fueling a spectacular stock rally, particularly among technology-related issues.
Reflecting the positive environment, the Fund gained nearly 16% in December.
After a modest retreat in January, the market got back on track in February --
another strong month for the Fund, as it was up more than 12%.
AN ABOUT FACE
But within two weeks, everything changed. With the economy still charging ahead,
investors became worried about the possibility of a run-up in inflation. It was
a concern also shared by the Federal Reserve, which had already raised
short-term interest rates several times to cool off the economy and thereby
avoid an inflation spike. Compounding the situation was the growing belief that
many technology-related stocks had reached unsustainable price levels, a worry
which was soon followed by the federal government's announcement that technology
bellwether Microsoft should be broken up.
The stock market responded by backtracking for the next several weeks. Not
surprisingly, technology stocks were especially upset by the turn of events, as
they went into a steep decline. Finally, for the Fund, the result was a loss of
about 20% during April and May. On the "bright" side, however, the sell-off did
allow us to buy some attractive stocks at much-lower prices.
In the face of all the market activity, beginning in mid-February, when we
became the new managers of the Fund, we spent considerable effort revamping the
portfolio. Much of it centered on selling a number of
large-capitalization stocks and replacing them with mid-cap stocks, the goal
being to position the Fund more clearly in the mid-cap category. Most of the
additions came from the technology, health care, consumer products and energy
sectors.
Our stock selection was, and will continue to be, centered on owning
fast-growing companies that are the leaders in their respective businesses. We
also plan to run a more concentrated portfolio -- fewer stocks overall and a
greater emphasis on the largest holdings. Ultimately, we think that will result
in a more aggressively positioned portfolio that, while subject to inherent
volatility, has the potential to generate higher returns over the long run.
As the second half of the fiscal year begins, we're quite optimistic about the
prospects for mid-cap stocks, particularly technology issues, which make up the
largest area of investment for the Fund and continue to generate much of the
greatest earnings growth in the American economy. And while the going won't be
entirely smooth, we think the potential for reward will increase as the year
progresses.
Duncan J. Evered
Paul A. Rokosz
<PAGE>
Fund Facts
Class A -- 6-month performance
(All figures per share)
Net asset value (NAV)
May 31, 2000 $16.44
Nov. 30, 1999 $16.90
Decrease $ 0.46
Distributions -- Dec. 1, 1999 - May 31, 2000
From income $ --
From capital gains $ 1.29
Total distribution $ 1.29
Total return* +4.50%**
Class B -- 6-month performance
(All figures per share)
Net asset value (NAV)
May 31, 2000 $15.92
Nov. 30, 1999 $16.46
Decrease $ 0.54
Distributions -- Dec. 1, 1999 - May 31, 2000
From income $ --
From capital gains $ 1.29
Total distribution $ 1.29
Total return* +4.11%**
Class Y -- 6-month performance
(All figures per share)
Net asset value (NAV)
May 31, 2000 $16.49
Nov. 30, 1999 $16.94
Decrease $ 0.45
Distributions -- Dec. 1, 1999 - May 31, 2000
From income $ --
From capital gains $ 1.29
Total distribution $ 1.29
Total return* +4.55%**
*Returns do not include sales load. 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, 2000)
Maxim Integrated Products 3.00% $50,115,624
Paychex 2.83 47,250,000
Teva Pharmaceutical Inds ADR 2.77 46,332,500
ALZA 2.58 43,190,625
MedImmune 2.23 37,290,000
Univision Communications Cl A 2.19 36,565,000
Mettler-Toledo Intl 1.99 33,309,375
Fiserv 1.96 32,725,000
Xilinx 1.84 30,830,625
JDS Uniphase 1.84 30,800,000
For further detail about these holdings, please refer to the section entitled
"Investments in Securities."
(icon of) piechart
The 10 holdings listed here make up 23.23% of net assets
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<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Financial Statements
Statement of assets and liabilities
AXP Equity Select Fund, Inc.
May 31, 2000 (Unaudited)
Assets
Investments in securities, at value (Note 1)
<S> <C> <C>
(identified cost $1,360,652,963) $1,696,299,803
Cash in bank on demand deposit 512,628
Dividends and accrued interest receivable 289,086
Receivable for investment securities sold 9,868,034
---------
Total assets 1,706,969,551
-------------
Liabilities
Payable for investment securities purchased 15,309,722
Payable upon return of securities loaned (Note 4) 20,340,000
Accrued investment management services fee 25,324
Accrued distribution fee 15,102
Accrued service fee 18
Accrued transfer agency fee 4,317
Accrued administrative services fee 2,065
Other accrued expenses 172,523
-------
Total liabilities 35,869,071
----------
Net assets applicable to outstanding capital stock $1,671,100,480
==============
Represented by
Capital stock-- $.01 par value (Note 1) $ 1,020,913
Additional paid-in capital 1,124,391,033
Net operating loss (5,228,067)
Accumulated net realized gain (loss) 215,269,761
Unrealized appreciation (depreciation) on investments 335,646,840
-----------
Total -- representing net assets applicable to outstanding capital stock $1,671,100,480
==============
Net assets applicable to outstanding shares: Class A $1,433,878,726
Class B $ 230,269,473
Class Y $ 6,952,281
Net asset value per share of outstanding capital stock: Class A shares 87,208,553 $ 16.44
Class B shares 14,461,062 $ 15.92
Class Y shares 421,710 $ 16.49
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, 2000 (Unaudited)
Investment income
Income:
<S> <C>
Dividends $ 1,570,713
Interest 2,162,823
---------
Total income 3,733,536
---------
Expenses (Note 2):
Investment management services fee 4,827,465
Distribution fee
Class A 1,906,925
Class B 1,034,558
Transfer agency fee 608,529
Incremental transfer agency fee
Class A 54,390
Class B 24,938
Service fee-- Class Y 3,595
Administrative services fees and expenses 329,282
Compensation of board members 5,772
Custodian fees 39,210
Printing and postage 80,236
Registration fees 40,836
Audit fees 13,625
Other 30,882
------
Total expenses 9,000,243
Earnings credits on cash balances (Note 2) (38,640)
-------
Total net expenses 8,961,603
---------
Investment income (loss) -- net (5,228,067)
----------
Realized and unrealized gain (loss) -- net Net realized gain (loss) on:
Security transactions (Note 3) 216,126,409
Financial futures contracts 740,791
-------
Net realized gain (loss) on investments 216,867,200
Net change in unrealized appreciation (depreciation) on investments (161,422,299)
------------
Net gain (loss) on investments 55,444,901
----------
Net increase (decrease) in net assets resulting from operations $ 50,216,834
==============
See accompanying notes to financial statements.
</TABLE>
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<TABLE>
<CAPTION>
Statements of changes in net assets
AXP Equity Select Fund, Inc.
May 31, 2000 Nov. 30, 1999
Six months ended Year ended
(Unaudited)
Operations and distributions
<S> <C> <C>
Investment income (loss) -- net $ (5,228,067) $(4,210,974)
Net realized gain (loss) on investments 216,867,200 116,378,112
Net change in unrealized appreciation (depreciation)
on investments (161,422,299) 212,024,926
------------ -----------
Net increase (decrease) in net assets
resulting from operations 50,216,834 324,192,064
---------- -----------
Distributions to shareholders from:
Excess distributions of net investment income
Class A -- (826,475)
Class Y -- (222)
Net realized gain
Class A (100,498,802) (107,848,773)
Class B (12,104,060) (8,474,927)
Class Y (336,121) (28,019)
-------- -------
Total distributions (112,938,983) (117,178,416)
------------ ------------
Capital share transactions (Note 5)
Proceeds from sales
Class A shares (Note 2) 453,634,111 746,105,543
Class B shares 95,549,790 61,358,412
Class Y shares 6,984,338 4,076,217
Reinvestment of distributions at net asset value
Class A shares 92,913,479 100,504,310
Class B shares 11,999,397 8,392,944
Class Y shares 336,121 28,241
Payments for redemptions
Class A shares (382,873,240) (760,530,623)
Class B shares (Note 2) (13,507,569) (16,958,756)
Class Y shares (4,443,044) (375,574)
---------- --------
Increase (decrease) in net assets from
capital share transactions 260,593,383 142,600,714
----------- -----------
Total increase (decrease) in net assets 197,871,234 349,614,362
Net assets at beginning of period 1,473,229,246 1,123,614,884
------------- -------------
Net assets at end of period $1,671,100,480 $1,473,229,246
============== ==============
See accompanying notes to financial statements.
</TABLE>
<PAGE>
Notes to Financial Statements
AXP Equity Select Fund, Inc.
(Unaudited as to May 31, 2000)
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 growth stocks
of medium-sized companies.
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 (CDSC)
and automatically convert to Class A shares during the ninth calendar year of
ownership.
o Class C shares which may be subject to a CDSC will be offered effective
June 26, 2000.
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, incremental transfer agency fee and service fee (class
specific expenses) differ 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 accounting principles generally
accepted in the United States of America 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. 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 substantially 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, when available, 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 0.60% to 0.48% annually.
The fee may be adjusted upward or downward by a performance incentive adjustment
based on a comparison of the performance of Class A shares of AXP Equity Select
Fund to the Lipper Multi-Cap Growth Fund Index. The maximum adjustment is 0.12%
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 decreased the fee by $298,753 for the six months ended
May 31, 2000.
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. A minor
portion of additional administrative service expenses paid by the Fund are
consultants' fees and fund office expenses. 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
The Fund has agreements with American Express Financial Advisors Inc. (the
Distributor) for distribution and shareholder services. Under a Plan and
Agreement of Distribution, the Fund pays 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% for Class B shares.
Under a Shareholder Service Agreement, the Fund's Class Y
shares pay a fee for service provided to shareholders by financial advisors and
other servicing agents. The fee is calculated at a rate of 0.10% of the Fund's
average daily net assets attributable to Class Y shares. Sales charges received
by the Distributor for distributing Fund shares were $1,548,558 for Class A and
$69,712 for Class B for the six months ended May 31, 2000.
During the six months ended May 31, 2000, the Fund's custodian and transfer
agency fees were reduced by $38,640 as a result of earnings credits from
overnight cash balances. The Fund also pays custodian fees to American Express
Trust Company, an affiliate of AEFC.
3. SECURITIES TRANSACTIONS
Cost of purchases and proceeds from sales of securities (other than short-term
obligations) aggregated $1,029,020,244 and $895,568,325, respectively, for the
six months ended May 31, 2000. Realized gains and losses are determined on an
identified cost basis.
Brokerage commissions paid to brokers affiliated with AEFC were $139,621 for the
six months ended May 31, 2000.
4. LENDING OF PORTFOLIO SECURITIES
As of May 31, 2000, securities valued at $19,900,478 were on loan to brokers.
For collateral, the Fund received $20,340,000 in cash. Income from securities
lending amounted to $397,579 for the six months ended May 31, 2000. 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, 2000
Class A Class B Class Y
<S> <C> <C> <C>
Sold 24,748,368 5,342,644 389,179
Issued for reinvested distributions 5,339,558 710,788 19,306
Redeemed (20,843,450) (761,571) (250,119)
----------- -------- --------
Net increase (decrease) 9,244,476 5,291,861 158,366
--------- --------- -------
Year ended Nov. 30, 1999
Class A Class B Class Y
Sold 49,351,025 4,136,539 260,437
Issued for reinvested distributions 7,325,388 623,502 2,057
Redeemed (50,239,966) (1,149,882) (25,141)
----------- ---------- -------
Net increase (decrease) 6,436,447 3,610,159 237,353
--------- --------- -------
</TABLE>
<PAGE>
6. 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 mutual 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, 2000.
<TABLE>
<CAPTION>
7. 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
2000b 1999 1998 1997 1996
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $16.90 $14.59 $15.76 $14.71 $12.35
Income from investment operations:
Net investment income (loss) (.04) (.04) .03 .05 .07
Net gains (losses)
(both realized and unrealized) .87 3.87 1.29 2.93 3.30
Total from investment operations .83 3.83 1.32 2.98 3.37
Less distributions:
Dividends from net investment income -- -- (.03) (.06) (.06)
Excess distributions from net investment income -- (.01) -- -- --
Distributions from realized gains (1.29) (1.51) (2.46) (1.87) (.95)
Total distributions (1.29) (1.52) (2.49) (1.93) (1.01)
Net asset value, end of period $16.44 $16.90 $14.59 $15.76 $14.71
Ratios/supplemental data
Net assets, end of period (in millions) $1,434 $1,318 $1,044 $976 $832
Ratio of expenses to average daily net assetsc .94%d .93% .82% .83% .87%
Ratio of net investment income (loss)
to average daily net assets (.51%)d (.26%) .24% .39% .53%
Portfolio turnover rate
(excluding short-term securities) 53% 78% 80% 63% 64%
Total returne 4.50% 28.70% 9.96% 23.56% 29.62%
a For a share outstanding throughout the period. Rounded to the nearest cent.
b Six months ended May 31, 2000 (Unaudited).
c 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.
</TABLE>
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<TABLE>
<CAPTION>
Fiscal period ended Nov. 30,
Per share income and capital changesa
Class B Class Y
2000b 1999 1998 1997 1996 2000b 1999 1998 1997 1996
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $16.46 $14.34 $15.60 $14.63 $12.31 $16.94 $14.60 $15.77 $14.72 $12.35
Income from investment operations:
Net investment income (loss) (.09) (.12) (.01) (.01) (.03) (.03) (.01) .04 .06 .10
Net gains (losses)
(both realized and unrealized) .84 3.75 1.21 2.85 3.30 .87 3.87 1.29 2.93 3.30
Total from investment operations .75 3.63 1.20 2.84 3.27 .84 3.86 1.33 2.99 3.40
Less distributions:
Dividends from net investment income -- -- -- -- -- -- -- (.04) (.07) (.08)
Excess distributions
from net investment income -- -- -- -- -- -- (.01) -- -- --
Distributions from realized gains (1.29) (1.51) (2.46) (1.87) (.95) (1.29) (1.51) (2.46) (1.87) (.95)
Total distributions (1.29) (1.51) (2.46) (1.87) (.95) (1.29) (1.52) (2.50) (1.94) (1.03)
Net asset value, end of period $15.92 $16.46 $14.34 $15.60 $14.63 $16.49 $16.94 $14.60 $15.77 $14.72
Ratios/supplemental data
Net assets, end of period
(in millions) $230 $151 $80 $41 $18 $7 $4 $-- $-- $3
Ratio of expenses to
average daily net assetsc 1.71%d 1.71% 1.58% 1.59% 1.63% .78%d .85% .75% .70% .70%
Ratio of net investment
income (loss) to average
daily net assets (1.27%)d(1.04%) (.52%) (.35%) (.21%) (.34%)d (.21%) .31% .54% .69%
Portfolio turnover rate
(excluding short-term securities) 53% 78% 80% 63% 64% 53% 78% 80% 63% 64%
Total returne 4.11% 27.69% 9.12% 22.62% 28.64% 4.55% 28.90% 10.03% 23.68% 29.84%
a For a share outstanding throughout the period. Rounded to the nearest cent.
b Six months ended May 31, 2000 (Unaudited).
c 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.
</TABLE>
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<TABLE>
<CAPTION>
Investments in Securities
AXP Equity Select Fund, Inc.
May 31, 2000 (Unaudited)
(Percentages represent value of investments compared to net assets)
Common stocks (95.2%)
Issuer Shares Value(a)
Banks and savings & loans (0.8%)
<S> <C> <C>
Firstar 550,000 $14,059,375
Building materials & construction (1.6%)
Martin Marietta Materials 540,900 26,470,294
Communications equipment & services (7.4%)
ArrowPoint Communications 160,000(b) 19,200,000
CIENA 150,000(b) 17,953,125
JDS Uniphase 350,000(b) 30,800,000
Nokia ADR Cl A 200,000(c) 10,400,000
RF Micro Devices 150,000(b) 15,750,000
Sonus Networks 15,000(b) 1,094,063
Sycamore Networks 230,000(b) 19,233,750
Time Warner Telecom Cl A 175,000(b) 9,800,000
Total 124,230,938
Computer software & services (1.7%)
Ariba 250,000(b) 13,031,250
i2 Technologies 150,000(b) 15,956,250
Total 28,987,500
Computers & office equipment (12.3%)
Automatic Data Processing 250,000 13,734,375
Cisco Systems 400,000(b) 22,800,000
Comverse Technology 150,000(b) 13,706,250
Exodus Communications 200,000(b) 14,112,500
Fiserv 700,000(b) 32,725,000
Juniper Networks 20,000(b) 3,570,000
Lexmark Intl Group Cl A 50,000(b) 3,487,500
Mercury Interactive 100,000(b) 8,475,000
Network Appliance 300,000(b) 19,368,750
Sanmina 400,000(b) $25,450,000
Solectron 150,000(b) 4,959,375
VeriSign 150,000(b) 20,306,250
Veritas Software 200,000(b) 23,300,000
Total 205,995,000
Electronics (17.4%)
American Power Conversion 350,000(b) 12,403,125
ASM Lithography Holding 300,000(b,c) 10,668,750
Broadcom Cl A 150,000(b) 19,509,375
Dallas Semiconductor 400,000 16,000,000
Flextronics Intl 400,000(b,c) 21,775,000
Intel 180,000 22,432,500
LSI Logic 500,000(b) 26,343,750
Maxim Integrated Products 790,000(b) 50,115,624
Novellus Systems 300,000(b) 14,456,250
PMC-Sierra 140,000(b,c) 21,455,000
Teradyne 150,000(b) 12,900,000
Vitesse Semiconductor 175,000(b) 8,859,375
Waters 230,000(b) 21,735,000
Xilinx 405,000(b) 30,830,625
Total 289,484,374
Energy (4.4%)
Apache 100,000 6,087,500
Barrett Resources 225,000(b) 8,901,563
Devon Energy 250,000 14,953,125
EOG Resources 350,000 11,375,000
Murphy Oil 150,000 9,731,250
Newfield Exploration 300,000(b) 12,562,500
Tosco 300,000 9,187,500
Total 72,798,438
Energy equipment & services (2.4%)
ENSCO Intl 350,000 12,228,125
Halliburton 540,000 27,540,000
Total 39,768,125
Financial services (4.9%)
Kansas City Southern Inds 252,000 $16,947,000
Morgan Stanley, Dean Witter, Discover & Co 250,000 17,984,375
Paychex 1,350,000 47,250,000
Total 82,181,375
Health care (14.2%)
ALZA 850,000(b) 43,190,625
Biogen 100,000(b) 5,450,000
Biomet 500,000 18,031,250
Biovail 175,000(b,d) 8,268,750
Genentech 100,000(b) 10,737,500
Guidant 250,000(b) 12,656,250
Immunex 850,000(b) 21,993,750
MedImmune 240,000(b) 37,290,000
Medtronic 250,000 12,906,250
Sybron Intl 600,000(b) 19,012,500
Teva Pharmaceutical Inds ADR 860,000(c) 46,332,500
Total 235,869,375
Health care services (0.3%)
Omnicare 350,000 5,775,000
Household products (1.3%)
Estee Lauder Cl A 500,000(d) 22,406,250
Industrial equipment & services (4.2%)
Cintas 500,000 22,000,000
Fastenal 250,000 15,781,250
Illinois Tool Works 250,000 14,515,625
Parker-Hannifin 445,000 18,550,938
Total 70,847,813
Media (7.8%)
Adelphia Communications Cl A 150,000(b) 6,356,250
AMFM 100,000(b) 6,775,000
Comcast Special Cl A 250,000(b) 9,468,750
Emmis Communications Cl A 300,000(b) 10,237,500
Fox Entertainment Group Cl A 300,000(b) 7,837,500
Infinity Broadcasting Cl A 450,000(b) 14,231,250
Lamar Advertising 500,000(b) 20,062,500
Univision Communications Cl A 355,000(b) 36,565,000
Young & Rubicam 400,000 19,100,000
Total 130,633,750
Multi-industry conglomerates (7.4%)
Danaher 500,000 $24,093,750
Electronics for Imaging 300,000(b) 11,043,750
Mettler-Toledo Intl 850,000(b) 33,309,375
Robert Half Intl 450,000(b) 26,718,750
Tyco Intl 600,000(c) 28,237,500
Total 123,403,125
Restaurants & lodging (1.9%)
Brinker Intl 400,000(b) 11,325,000
Starbucks 600,000(b) 20,400,000
Total 31,725,000
Retail (3.5%)
Costco Wholesale 250,000(b) 7,984,375
Kohl's 250,000(b) 12,937,500
Tiffany 300,000 18,281,250
Whole Foods Market 200,000(b) 6,950,000
Williams-Sonoma 400,000(b) 12,825,000
Total 58,978,125
Utilities -- telephone (1.6%)
Allegiance Telecom 300,000(b) 15,862,500
Infonet Services Cl B 101,400(b) 1,166,100
Intermedia Communications 400,000(b) 10,000,000
Total 27,028,600
Total common stocks
(Cost: $1,254,956,881) $1,590,642,457
Short-term securities (6.3%)
Issuer Annualized Amount Value(a)
yield on date payable at
of purchase maturity
U.S. government agencies (4.1%)
Federal Home Loan Bank Disc Nts
06-09-00 5.95% $5,300,000 $5,292,130
06-16-00 5.99 2,600,000 2,592,875
Federal Home Loan Mtge Corp Disc Nts
06-01-00 5.92 3,100,000 3,099,456
06-13-00 6.36 11,200,000 11,174,338
06-22-00 6.03 13,500,000 13,447,427
07-27-00 6.44 3,500,000 3,462,656
Federal Natl Mtge Assn Disc Nts
06-29-00 6.03 14,500,000 14,425,680
07-13-00 6.23 7,200,000 7,142,572
08-03-00 6.57 8,500,000 8,399,511
Total 69,036,645
Commercial paper (2.2%)
Alcoa
06-02-00 6.05 6,700,000 6,697,748
06-15-00 6.10 7,500,000 7,481,000
CXC
07-07-00 6.25 7,000,000(e) 6,951,479
Morgan Stanley, Dean Witter, Discover & Co.
07-14-00 6.52 1,300,000 1,289,219
Motorola
06-20-00 6.08 2,300,000 2,292,256
Northern States Power
07-12-00 6.55 12,000,000 11,908,999
Total 36,620,701
Total short-term securities
(Cost: $105,696,082) $105,657,346
Total investments in securities
(Cost: $1,360,652,963)(f) $1,696,299,803
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<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, 2000, the
value of foreign securities represented 8.31% 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) At May 31, 2000, the cost of securities for federal income tax purposes was
approximately $1,360,653,000 and the approximate aggregate gross unrealized
appreciation and depreciation based on that cost was:
Unrealized appreciation $397,102,000
Unrealized depreciation (61,455,000)
-----------
Net unrealized appreciation $335,647,000
<PAGE>
American
Express(R)
Funds PRSRT STD AUTO
U.S. POSTAGE
PAID
AMERICAN
EXPRESS
AXP Equity Select Fund
200 AXP Financial Center
Minneapolis, MN 55474
TICKER SYMBOL
Class A: INVPX Class B: IDQBX Class C: N/A Class Y: IESYX
S-6435 P (7/00)
Distributed by American Express Financial Advisors Inc. Member NASD.
American Express Company is separate from American Express Financial Advisors
Inc. and is not a broker-dealer.
