-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, rJkDLF/t2mUYZa3IRGP1VpibCQLb7MRxm9PLlVyEIij3i6A2tg0v+SazPUqUVBsA KDpiaR1jxHsV8isNG0YD4A== 0000820027-94-000332.txt : 19940722 0000820027-94-000332.hdr.sgml : 19940722 ACCESSION NUMBER: 0000820027-94-000332 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19940531 FILED AS OF DATE: 19940721 FILER: COMPANY DATA: COMPANY CONFORMED NAME: IDS SELECTIVE FUND INC CENTRAL INDEX KEY: 0000052407 STANDARD INDUSTRIAL CLASSIFICATION: 0000 IRS NUMBER: 410839316 STATE OF INCORPORATION: MN FISCAL YEAR END: 1130 FILING VALUES: FORM TYPE: N-30D SEC ACT: 1940 Act SEC FILE NUMBER: 811-00499 FILM NUMBER: 94539566 BUSINESS ADDRESS: STREET 1: 80 SOUTH 8TH STREET STREET 2: T33/52 CITY: MINNEAPOLIS STATE: MN ZIP: 55440 BUSINESS PHONE: 6123722772 FORMER COMPANY: FORMER CONFORMED NAME: INVESTORS SELECTIVE FUND INC DATE OF NAME CHANGE: 19841002 N-30D 1 SELECTIVE MAY 1994 SEMIANNUAL REPORT PAGE IDS Selective Fund 1994 semiannual report (icon of) skyline The goals of IDS Selective Fund, Inc. are current income and the preservation of capital by investing in investment grade bonds. Distributed by IDS Financial Services Inc. IDS An American Express company AMERICAN EXPRESS PAGE A quest for quality Not all bonds are created equal. A bond's quality depends on the ability of its issuer to make the interest and principal payments owed to the bondholders. The quality is determined by independent rating agencies, which assign a credit rating (in the form of a letter grade) to each bond. Since its establishment in 1945, Selective Fund has concentrated its investments in the four highest investment grades. Along the way, investors have enjoyed a steady stream of interest income with minimal risk to their principal. Contents From the president 3 From the portfolio manager 3 Ten largest holdings 5 Financial statements 6 Notes to financial statements 9 Investments in securities 16 Directors and officers 24 IDS mutual funds 25 PAGE To our shareholders (Photo of William R. Pearce) William R. Pearce President of the fund (Photo of Ray Goodner) Ray Goodner Portfolio manager From the president As you read this semiannual report, you'll find that it complements the newly designed annual report you received six months ago. We hope the substantial changes we've made to the design and organization will help make information easier to find and understand. A good place to begin is with the portfolio manager's letter, which describes the events and investment strategies that most influenced the fund's performance during the past period. For a broader financial perspective, please consult your IDS planner, who can help you make sure your investment and protection strategies continue to meet the objectives in your financial plan. William R. Pearce From the portfolio manager Interest rates abruptly reversed direction and rose substantially during the past six months, causing a sharp drop in the bond market. Although this development had little effect on the fund's dividend, the decline in bond values resulted in a negative total return for the fund. At the beginning of the period, there were mixed signs of an impending interest rate rise for the bond market. During December and January, the first two months of the period, the economy was moving solidly forward, but inflation, the key determinant of long-term interest-rate levels, remained in a downtrend. As it had for some time, the fund responded well to these conditions, generating gains in both months. The Fed raises rates The investment environment changed markedly in early February, however. The Federal Reserve Board, in an effort to cool down the economy from its torrid growth in the fourth quarter of 1993 and head off an increase in inflation, began to push short-term interest PAGE To our shareholders rates higher. By the end of April, the Fed raised rates twice more. (It should be noted that the Fed's moves regarding short-term rates don't directly affect rates on long-term bonds; long-term rates are still determined by inflation expectations and the supply/demand situation within the bond market.) The market reacted immediately to the Fed's action, driving down bond prices on the fear that inflation, contrary to the data at the time, would soon soar. The sell-off became contagious, and bond prices spiraled down from February through early May. Defensive tactics To counter the effect of this trend, we reduced the average maturity of the portfolio (the longer the average maturity level, the more sensitive a portfolio is to interest-rate changes) by reducing our holdings of U.S. Treasury notes (intermediate-term investments) and raising our level of cash reserves. These moves helped temper the downturn. But we also added to our investments in U.S. dollar-denominated Asian bonds, where we believe robust economies will make for good returns in the future. Though still volatile on a day-to-day basis, the bond market was able to hold its ground during the final weeks of the period and, in fact, rallied briefly at one point. We view this as an indication that the worst of the storm may have passed and that some positive fundamentals are beginning to be appreciated. These include: the Clinton administration's support of the Federal Reserve's inflation-fighting tactics, disinflationary conditions internationally and a less- threatening federal deficit. In light of those factors, we think it's reasonable to expect bonds to improve on their first-half performance, although the upside potential remains modest. Ray Goodner 6-month performance (All figures per share) Net asset value (NAV) May 31, 1994 $8.89 Nov. 30, 1993 $9.77 Decrease ($0.88) Distributions Dec. 1, 1993 - May 31, 1994 From income $0.35 From capital gains $0.11 Total distributions $0.46 Total return* (4.51%) * If you purchased shares in the fund during this period, your return also would have been affected by the sales charge, as described in the prospectus. PAGE IDS Selective Fund, Inc. Your fund's ten largest holdings
Percent Value (of fund's net assets) (as of May 31, 1994) Japan Finance 1.82% $28,220,625 9.25% 1998 Province of Quebec 1.25 19,339,625 11% 2015 Tokyo Electric Power Euro 1.25 19,323,125 6.125% 2003 United Kingdom Treasury 8% 2003 1.07 16,524,555 Federal Paper Board 1.06 16,381,781 10% 2011 General Electric Capital 1.01 15,656,250 8.65% Reset Note 1996 Malaysia Government 1.01 15,637,875 9.875% 2000 Williams Companies .98 15,225,000 7.50% 1999 GTE South .97 14,988,187 9.375% 1st Mortgage 2030 First Security .94 14,568,750 7.50% Sub Notes 2002 (Pie chart) The ten holdings listed here make up 11.36% of the fund's net assets Excludes U.S. Treasury and government agencies holdings that total 25.7% of the fund's net assets. /TABLE PAGE Financial statements Statement of assets and liabilities IDS Selective Fund, Inc. May 31, 1994
_____________________________________________________________________________________________________________ Assets _____________________________________________________________________________________________________________ (Unaudited) Investments in securities, at value (Note 1) (identified cost $1,556,046,112) $1,560,823,113 Dividends and accrued interest receivable 24,452,011 U.S. government securities held as collateral (Note 5) 38,376,207 _____________________________________________________________________________________________________________ Total assets 1,623,651,331 _____________________________________________________________________________________________________________ Liabilities _____________________________________________________________________________________________________________ Disbursements in excess of cash on demand deposit 922,399 Dividends payable to shareholders 1,678,924 Payable for investments securities purchased 10,983,361 Payable upon return of securities loaned (Note 5) 60,135,857 Accrued investment management and services fee 717,975 Accrued distribution fee 60,017 Accrued transfer agency fee 154,350 Other accrued expenses 304,440 _____________________________________________________________________________________________________________ Total liabilities 74,957,323 _____________________________________________________________________________________________________________ Net assets applicable to outstanding capital stock $1,548,694,008 _____________________________________________________________________________________________________________ Represented by _____________________________________________________________________________________________________________ Capital stock -- authorized 10,000,000,000 shares of $.01 par value; outstanding 174,199,663 shares $ 1,741,997 Additional paid-in capital 1,517,423,342 Undistributed net investment income 300,383 Accumulated net realized gain (Note 1) 24,916,910 Unrealized appreciation (Note 6) 4,311,376 _____________________________________________________________________________________________________________ Total -- representing net assets applicable to outstanding capital stock $1,548,694,008 _____________________________________________________________________________________________________________ Net asset value per share of outstanding capital stock $ 8.89 _____________________________________________________________________________________________________________ See accompanying notes to financial statements. PAGE Financial statements Statement of operations IDS Selective Fund, Inc. Six months ended May 31, 1994 _____________________________________________________________________________________________________________ Investment income _____________________________________________________________________________________________________________ (Unaudited) Income: Interest $ 58,992,508 Dividends 210,975 _____________________________________________________________________________________________________________ Total income 59,203,483 _____________________________________________________________________________________________________________ Expenses (Note 2): Investment management and services fee 4,348,519 Distribution fee 342,834 Transfer agency fee 871,815 Compensation of directors 22,929 Compensation of officers 9,903 Custodian fees 74,002 Postage 104,264 Registration fees 66,102 Reports to shareholders 13,524 Audit fees 16,000 Administrative 15,121 Other 20,116 _____________________________________________________________________________________________________________ Total expenses 5,905,129 _____________________________________________________________________________________________________________ Investment income -- net 53,298,354 _____________________________________________________________________________________________________________ Realized and unrealized gain (loss) -- net _____________________________________________________________________________________________________________ Net realized gain on security and foreign currency transactions (Note 3) 25,620,452 Net realized loss on closed interest rate futures contracts (1,002,819) Net realized gain on options written (Note 4) 240,950 _____________________________________________________________________________________________________________ Net realized gain on investments and foreign currency 24,858,583 Net change in unrealized appreciation or depreciation (152,931,848) _____________________________________________________________________________________________________________ Net loss on investments and foreign currency (128,073,265) _____________________________________________________________________________________________________________ Net decrease in net assets resulting from operations $(74,774,911) _____________________________________________________________________________________________________________ See accompanying notes to financial statements. PAGE Financial statements Statements of changes in net assets IDS Selective Fund, Inc. _____________________________________________________________________________________________________________ Operations and distributions May 31, 1994 Nov. 30, 1993 _____________________________________________________________________________________________________________ Six months ended Year ended (Unaudited) Investment income -- net $ 53,298,354 $ 109,885,488 Net realized gain on investments and foreign currency 24,858,583 27,637,411 Net change in unrealized appreciation or depreciation (152,931,848) 89,408,374 _____________________________________________________________________________________________________________ Net increase (decrease) in net assets resulting from operations (74,774,911) 226,931,273 _____________________________________________________________________________________________________________ Distributions to shareholders from: Net investment income (53,068,688) (110,889,838) Net realized gains on investments (26,487,582) (18,273,614) Excess distribution of realized gain (Note 1) (506,499) (473,077) _____________________________________________________________________________________________________________ Total distributions (80,062,769) (129,636,529) _____________________________________________________________________________________________________________ Capital share transactions _____________________________________________________________________________________________________________ Proceeds from sales of 12,675,343 and 29,056,630 shares (Note 2) 118,567,652 280,546,936 Net asset value of 6,552,979 and 10,006,921 shares issued in reinvestment of distributions 61,873,076 95,735,511 Payments for redemptions of 22,830,599 and 28,767,588 shares (213,500,175) (277,656,557) _____________________________________________________________________________________________________________ Increase (decrease) in net assets from capital share transactions representing net reduction of 3,602,277 and net addition of 10,295,963 shares (33,059,447) 98,625,890 _____________________________________________________________________________________________________________ Total increase (decrease) in net assets (187,897,127) 195,920,634 Net assets at beginning of period 1,736,591,135 1,540,670,501 _____________________________________________________________________________________________________________ Net assets at end of period (including undistributed net investment income of $300,383 and $70,717) $1,548,694,008 $1,736,591,135 _____________________________________________________________________________________________________________ See accompanying notes to financial statements. /TABLE PAGE Notes to financial statements IDS Selective Fund, Inc. (Unaudited as to May 31, 1994) ______________________________________________________________________________ 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. Significant accounting policies followed by the fund are summarized below: Valuation of securities All securities are valued at the close of each business day. Securities traded on national securities exchanges or included in national market systems are valued at the last quoted sales price; securities for which market quotations are not readily available are valued at fair value according to methods selected in good faith by the board of directors. Determination of fair value involves, among other things, reference to market indexes, matrixes and data from independent brokers. Short-term securities maturing in more than 60 days from the valuation date are valued at the market price or approximate market value based on current interest rates; those maturing in 60 days or less are valued at amortized cost. Options transactions In order to produce incremental earnings, protect gains, and facilitate buying and selling of securities for investment purposes, the fund may buy or 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 in 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. PAGE Notes to financial statements IDS Selective Fund, Inc. ______________________________________________________________________________ 1. Summary of significant accounting policies 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 interest rate futures contracts traded on any U.S. or foreign exchange. The fund also may buy or 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. Notes to financial statements IDS Selective Fund, Inc. ______________________________________________________________________________ 1. Summary of significant accounting policies Foreign currency translations and forward 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. It is not practicable to identify that portion of realized and unrealized gain (loss) arising from changes in the exchange rates from the portion arising from changes in the market value of investments. 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 the obligations of the contract. PAGE Notes to financial statements IDS Selective Fund, Inc. ______________________________________________________________________________ 1. Summary of significant accounting policies 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. The effect on dividend distributions of certain book-to-tax differences is presented as "excess distributions" in the statement of changes in net assets. 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. Notes to financial statements IDS Selective Fund, Inc. ______________________________________________________________________________ 1. Summary of significant accounting policies Dividends to shareholders Dividends from net investment income, declared daily and payable monthly, are reinvested in additional shares of the fund at net asset value or payable in cash. Capital gains, when available, are distributed along with the last income dividend of the calendar year. Other Security transactions are accounted for on the date securities are purchased or sold. Dividend income is recognized on the ex-dividend date. For U.S. dollar denominated bonds, interest income includes level-yield amortization of premium and discount. For foreign bonds, except for original issue discount, the fund does not amortize premium and discount. ______________________________________________________________________________ 2. Expenses and sales charges Under terms of an agreement dated Nov. 14, 1991, the fund pays IDS Financial Corporation (IDS) a fee for managing its investments, recordkeeping and other specified services. The fee is a percentage of the fund's average daily net assets consisting of a group asset charge in reducing percentages from 0.46% to 0.32% annually on the combined net assets of all non-money market funds in the IDS MUTUAL FUND GROUP and an individual annual asset charge of 0.13% of average daily net assets. Notes to financial statements IDS Selective Fund, Inc. ______________________________________________________________________________ 2. Expenses and sales charges The fund also pays IDS a distribution fee at an annual rate of $6 per shareholder account and a transfer agency fee at an annual rate of $15.50 per shareholder account. The transfer agency fee is reduced by earnings on monies pending shareholder redemptions. IDS will assume and pay any expenses (except taxes and brokerage commissions) that exceed the most restrictive applicable state expense limitation. Sales charges by IDS Financial Services Inc. for distributing fund shares were $2,522,964 for the six months ended May 31, 1994. The fund has a retirement plan for its independent directors. Upon retirement, directors receive monthly payments equal to one-half of the retainer fee for as many months as they served as directors up to 120 months. There are no death benefits. The plan is not funded but the fund recognizes the cost of payments during the time the directors serve on the board. The retirement plan expense amounted to $8,317 for the six months ended May 31, 1994. ______________________________________________________________________________ 3. Securities transactions Cost of purchases and proceeds from sales of securities (other than short-term obligations) aggregated $169,080,028 and $421,963,023, respectively, for the six months ended May 31, 1994. Realized gains and losses are determined on an identified cost basis. PAGE Notes to financial statements IDS Selective Fund, Inc. _____________________________________________________________________________ 4. Option contracts written
The number of contracts and premium amounts associated with put option contracts written is as follows: Six months ended May 31, 1994 _____________________________ Contracts Premium ____________________________________________________ Balance Nov. 30, 1993 -- $ -- Opened 400 240,950 Expired (400) (240,950) ____________________________________________________ Balance May 31, 1994 -- $ -- ____________________________________________________
_____________________________________________________________________________ 5. Lending of portfolio securities At May 31, 1994, securities valued at $57,747,809 were on loan to brokers. For collateral, the fund received $21,759,650 in cash and U.S. government securities valued at $38,376,207. Income from securities lending amounted to $110,053 for the six months ended May 31, 1994. 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. ______________________________________________________________________________ 6. Interest rate futures contracts At May 31, 1994, investments in securities included securities valued at $2,098,700 that were pledged as collateral to cover initial margin deposit on 100 purchase contracts. The market value of the open contracts at May 31, 1994, was $9,143,750 with a net unrealized loss of $465,625. PAGE Notes to financial statements IDS Selective Fund, Inc. _____________________________________________________________________________ 7. Financial highlights The table below shows certain important financial information for evaluating the fund's results. Fiscal year ended Nov. 30, Per share income and capital changes*
1994** 1993 1992 1991 1990 1989 Net asset value, beginning of period $9.77 $9.20 $8.93 $8.41 $8.69 $8.44 Income from investment operations: Net investment income .30 .63 .66 .69 .70 .72 Net gains (losses) on securities (both realized and unrealized) (.72) .69 .27 .52 (.30) .27 Total from investment operations (.42) 1.32 .93 1.21 .40 .99 Less distributions: Dividends from net investment income (.31) (.64) (.66) (.69) (.68) (.74) Distributions from realized gains (.15) (.11) -- -- -- -- Total distributions (.46) (.75) (.66) (.69) (.68) (.74) Net asset value, end of period $8.89 $9.77 $9.20 $8.93 $8.41 $8.69 Ratios/supplemental data 1994** 1993 1992 1991 1990 1989 Net assets, end of period (in millions) $1,549 $1,737 $1,541 $1,403 $1,196 $1,167 Ratio of expenses to average daily net assets .71%*** .72% .74% .77% .76% .77% Ratio of net income to average daily net assets 6.44%*** 6.57% 7.32% 7.94% 8.58% 8.42% Portfolio turnover rate (excluding short-term securities) 11% 30% 62% 59% 54% 79% Total return+ (4.5%)++ 14.8% 10.8% 15.0% 4.8% 12.3% *For a share outstanding throughout the period. Rounded to the nearest cent. **Six months ended May 31, 1994 (Unaudited). ***Adjusted to an annual basis. +Total return does not reflect payment of a sales charge. ++For the fiscal period ended May 31, 1994, the annualized return is (8.8%). /TABLE PAGE Investments in securities IDS Selective Fund, Inc. (Percentages represent value of May 31, 1994 (Unaudited) investments compared to net assets)
_____________________________________________________________________________________________________________________________ Bonds (79.9%) _____________________________________________________________________________________________________________________________ Issuer Coupon Maturity Principal Value(a) rate year amount _____________________________________________________________________________________________________________________________ U.S. government obligations (18.4%) U.S. Treasury 8.00 % 2021 $35,000,000 (j) $ 36,727,250 8.625 1995-97 85,745,000 (b) 89,692,135 10.375 2012 18,210,000 22,686,016 Resolution Funding Corp Zero Coupon 7.60 2017 79,000,000 (c) 13,309,912 Zero Coupon 7.89 2016 85,900,000 (b,c) 15,819,335 Zero Coupon 7.98 2016 32,000,000 (c) 5,791,034 Zero Coupon 8.11 2016 35,073,000 (c) 6,104,101 Zero Coupon 8.12 2004 7,899,000 (c) 3,741,519 Zero Coupon 8.18 2005 13,000,000 (c) 5,523,439 Zero Coupon 8.19 2014 48,000,000 (c) 10,356,960 Zero Coupon 8.20 2005 38,048,000 (b,c) 16,997,940 Zero Coupon 8.27 2014 10,000,000 (c) 2,070,999 Zero Coupon 8.35 2006 48,000,000 (c) 19,685,755 Zero Coupon 8.94 2006 25,000,000 (c) 10,459,000 Zero Coupon 8.95 2006 68,000,000 (c) 26,701,560 _____________ Total 285,666,955 _____________________________________________________________________________________________________________________________ Mortgage-backed securities (7.9%) Federal Home Loan Mtge Corp 5.787 1994-22 7,600,477 7,706,428 8.00 1994-17 15,815 15,691 8.50 1994-22 15,613,741 15,878,871 9.00 1994-21 9,883,433 10,177,243 Collateralized Mtge Obligation 8.50 2019 12,000,000 12,281,520 Federal Housing Admin 7.43 1994-24 9,537,274 8,786,213 Federal Natl Mtge Assn 6.50 1994-23 14,743,234 13,526,917 10.00 1994-02 168 180 Collateralized Mtge Obligation 6.50 2020 9,202,836 8,941,568 8.00 2021 11,728,879 11,497,703 8.50 2019 8,305,000 8,456,898 Collateralized Mtge Obligation Trust Series Z 6.00 2024 17,256,277 (d) 11,380,170 Principal Only 9.50 2018 2,291,819 (e) 1,719,025 Principal Only 9.89 2020 2,752,295 (e) 2,054,368 See accompanying notes to investments in securities. PAGE Investments in securities IDS Selective Fund, Inc. (Percentages represent value of May 31, 1994 (Unaudited) investments compared to net assets) _____________________________________________________________________________________________________________________________ Bonds (continued) _____________________________________________________________________________________________________________________________ Issuer Coupon Maturity Principal Value(a) rate year amount _____________________________________________________________________________________________________________________________ Mortgage-backed securities (cont'd) Prudential Bache Collateralized Mtge Obligation 7.965% 2019 $ 4,635,922 $ 4,521,878 Salomon Brothers GNMA Collateralized Mtge Obligation 7.75 2012 4,343,852 4,391,461 WestAm Collateralized Mtge Obligation 8.95 2018 438,215 416,725 ______________ Total 121,752,859 _____________________________________________________________________________________________________________________________ Financial (11.4%) Banks and savings & loans (3.4%) BankAmerica Sub Nts 7.50 2002 8,810,000 8,600,763 Boatmen's Bancshares Sub Nts 9.25 2001 8,950,000 9,688,375 First Chicago Sr Nts 9.00 1999 7,900,000 8,393,750 First Security Sub Nts 7.50 2002 15,000,000 14,568,750 NCNB Sub Nts 9.125 2001 10,000,000 10,587,500 ______________ Total 51,839,138 _____________________________________________________________________________________________________________________________ Financial services (7.3%) Amer General Finance 6.35 1995 9,500,000 9,559,375 Aristar Sr Deb 8.875 1998 10,520,000 11,046,000 Sr Deb 14.25 1994 6,000,000 6,120,000 Beneficial 9.125 1998 10,000,000 10,712,500 See accompanying notes to investments in securities. PAGE Investments in securities IDS Selective Fund, Inc. (Percentages represent value of May 31, 1994 (Unaudited) investments compared to net assets) _____________________________________________________________________________________________________________________________ Bonds (continued) _____________________________________________________________________________________________________________________________ Issuer Coupon Maturity Principal Value(a) rate year amount _____________________________________________________________________________________________________________________________ Financial (cont'd) Financial services (cont'd) General Electric Capital Reset Nt 8.65 % 1996 $15,000,000 (f) $ 15,656,250 General Motors Acceptance 5.95 1998 8,000,000 7,570,000 7.00 2000 14,300,000 13,906,750 8.20 1994 9,000,000 9,045,000 Goldman Sachs Group LP 7.125 2003 12,000,000 (g) 11,430,000 Greyhound Financial 7.95 1999 9,600,000 9,804,000 SunAmerica 9.95 2012 8,000,000 8,780,000 ______________ Total 113,629,875 _____________________________________________________________________________________________________________________________ Insurance (0.7%) Berkley (WR) 8.70 2022 10,000,000 10,162,500 USLICO Cv 8.50 2014 600,000 609,000 _____________ Total 10,771,500 _____________________________________________________________________________________________________________________________ Industrial (10.9%) Aerospace & defense (0.7%) United Technologies 8.875 2019 10,000,000 10,625,000 _____________________________________________________________________________________________________________________________ Automotive & related (1.1%) Ford Capital B.V. Gtd Nts 9.00 1996 9,700,000 10,112,250 General Motors 8.875 2003 7,050,000 7,473,000 ____________ Total 17,585,250 _____________________________________________________________________________________________________________________________ Beverages & tobacco (0.7%) Philip Morris 8.10 1996 10,000,000 10,325,000 _____________________________________________________________________________________________________________________________ Chemicals (0.7%) Dow Chemical 8.85 2021 10,000,000 10,712,500 _____________________________________________________________________________________________________________________________ See accompanying notes to investments in securities. PAGE Investments in securities IDS Selective Fund, Inc. (Percentages represent value of May 31, 1994 (Unaudited) investments compared to net assets) _____________________________________________________________________________________________________________________________ Bonds (continued) _____________________________________________________________________________________________________________________________ Issuer Coupon Maturity Principal Value(a) rate year amount _____________________________________________________________________________________________________________________________ Industrial (cont'd) Ecological services & equipment (0.5%) Browning-Ferris Inds 9.25 % 2021 $ 7,000,000 $ 7,638,750 _____________________________________________________________________________________________________________________________ Electronics (0.3%) Harris 10.375 2018 3,900,000 4,304,625 _____________________________________________________________________________________________________________________________ Energy (3.0%) PDV Amer 7.875 2003 16,500,000 14,066,250 Texaco Capital Gtd Deb 7.50 2043 12,000,000 10,770,000 Union Oil of California 9.25 2003 7,500,000 8,090,625 USX 9.125 2013 5,000,000 4,912,500 9.375 2022 9,200,000 9,154,000 ______________ Total 46,993,375 _____________________________________________________________________________________________________________________________ Health care (0.8%) Schering-Plough Zero Coupon 7.31 1996 15,000,000 (c,g) 12,806,250 _____________________________________________________________________________________________________________________________ Industrial equipment & services (0.7%) Deere 8.95 2019 10,000,000 10,900,000 _____________________________________________________________________________________________________________________________ Media (0.7%) Time Warner Entertainment 8.375 2033 12,000,000 10,185,000 _____________________________________________________________________________________________________________________________ See accompanying notes to investments in securities. PAGE Investments in securities IDS Selective Fund, Inc. (Percentages represent value of May 31, 1994 (Unaudited) investments compared to net assets) _____________________________________________________________________________________________________________________________ Bonds (continued) _____________________________________________________________________________________________________________________________ Issuer Coupon Maturity Principal Value(a) rate year amount _____________________________________________________________________________________________________________________________ Industrial (cont'd) Paper & packaging (1.7%) Federal Paper Board 10.00 % 2011 $14,775,000 $ 16,381,781 Georgia-Pacific Credit Sensitive Nts 9.85 1997 10,000,000 10,562,500 ______________ Total 26,944,281 _____________________________________________________________________________________________________________________________ Municipal (0.6%) Washington Public Power Supply System Bonneville Nuclear Project #1 Refunding Revenue Bonds Series 1993C 5.375 2015 10,000,000 8,801,100 _____________________________________________________________________________________________________________________________ Transportation (1.0%) AMR 9.75 2021 2,500,000 2,443,750 10.00 2021 8,000,000 8,010,000 10.20 2020 5,000,000 5,093,750 ______________ Total 15,547,500 _____________________________________________________________________________________________________________________________ Utilities (11.0%) Electric (7.5%) Arizona Public Service 1st Mtge 8.75 2024 5,000,000 5,100,000 Sale Lease-Backed Obligation 8.00 2015 9,000,000 8,516,250 Cajun Electric Power Cooperative Mtge Trust 8.92 2019 4,960,000 5,586,200 Cleveland Toledo Consolidated Mansfield Funds Sale Lease-Backed Obligation 10.25 2003 1,500,000 1,417,500 Commonwealth Edison 6.50 2000 9,000,000 8,358,750 Long Island Lighting 9.625 2024 4,600,000 4,255,000 Ohio Edison 8.75 2022 11,000,000 11,990,000 Ohio Power Scherer Funding 9.70 2011 6,000,000 6,165,000 Public Service Electric & Gas 1st Mtge 8.50 2022 13,859,000 13,910,971 See accompanying notes to investments in securities. PAGE Investments in securities IDS Selective Fund, Inc. (Percentages represent value of May 31, 1994 (Unaudited) investments compared to net assets) _____________________________________________________________________________________________________________________________ Bonds (continued) _____________________________________________________________________________________________________________________________ Issuer Coupon Maturity Principal Value(a) rate year amount _____________________________________________________________________________________________________________________________ Utilities (cont'd) Electric (cont'd) RGS Funding Sale Lease-Backed Obligation 9.82 % 2022 $ 9,943,030 $ 11,024,335 San Diego Gas & Electric 1st Mtge 9.625 2020 9,950,000 11,405,188 Southern California Edison 1st Mtge 8.875 2023 13,000,000 13,845,000 Texas Utilities Electric 10.35 2018 1,500,000 1,640,625 1st Mtge 9.75 2021 7,000,000 7,490,000 1st Mtge 9.875 2019 6,000,000 6,472,500 ______________ Total 117,177,319 _____________________________________________________________________________________________________________________________ Gas (1.0%) Williams Companies 7.50 1999 15,000,000 15,225,000 _____________________________________________________________________________________________________________________________ Telephone (2.5%) GTE 10.25 2020 2,000,000 2,337,500 GTE South 1st Mtge 9.375 2030 13,975,000 14,988,187 New York Tel 9.375 2031 7,000,000 7,525,000 U S WEST Communications 8.875 2031 12,660,000 13,467,075 ______________ Total 38,317,762 _____________________________________________________________________________________________________________________________ Foreign (18.7%)(h) ABN Amro Bank (U.S. Dollar) 7.125 2093 8,200,000 6,990,500 (U.S. Dollar) 7.75 2023 3,800,000 3,619,500 Alcan Aluminium (U.S. Dollar) 8.875 2022 9,600,000 9,888,000 Austria Republic Euro (U.S. Dollar) 10.00 1998 5,000,000 5,521,875 Banca Comm Italia (U.S. Dollar) 8.25 2007 5,000,000 4,962,500 Euratom Euro (U.S. Dollar) 7.75 1997 6,100,000 6,189,853 Govt of Canada (Canadian Dollar) 10.50 2001 17,000,000 13,447,714 Guang Dong Enterprise (U.S. Dollar) 8.75 2003 15,000,000 (g) 13,725,000 See accompanying notes to investments in securities. PAGE Investments in securities IDS Selective Fund, Inc. (Percentages represent value of May 31, 1994 (Unaudited) investments compared to net assets) _____________________________________________________________________________________________________________________________ Bonds (continued) _____________________________________________________________________________________________________________________________ Issuer Coupon Maturity Principal Value(a) rate year amount _____________________________________________________________________________________________________________________________ Foreign (cont'd) Hanson Inds Cv (British Pound) 9.50 % 2006 $ 3,000,000 $ 5,128,380 Hydro-Quebec (Canadian Dollar) 9.50 2030 10,000,000 10,887,500 Intl Finance Euro (U.S. Dollar) 8.25 1996 8,000,000 8,265,000 Intl Bank Reconstruction & Development (U.S. Dollar) 12.375 2002 6,000,000 7,920,000 Japan Finance (U.S. Dollar) 9.25 1998 25,950,000 28,220,625 KFW Intl Finance (U.S. Dollar) 8.50 1999 10,000,000 10,600,000 Kingdom of Denmark Euro (U.S. Dollar) 7.25 1996 8,000,000 8,160,000 Korea Development Bank (U.S. Dollar) 8.90 1996 9,000,000 9,360,000 Korea Electric Power (U.S. Dollar) 8.00 2002 9,000,000 8,865,000 Korea Telecom (U.S. Dollar) 7.40 1999 6,700,000 6,607,875 Malaysia Govt (U.S. Dollar) 9.875 2000 14,025,000 15,637,875 People's Republic of China (U.S. Dollar) 6.50 2004 16,000,000 (b) 13,900,000 Province of Ontario (U.S. Dollar) 7.375 2003 5,000,000 4,881,250 Province of Quebec (U.S. Dollar) 11.00 2015 16,150,000 19,339,625 Republic of Columbia (U.S. Dollar) 7.25 2004 8,400,000 7,455,000 Republic of Italy (U.S. Dollar) 6.875 2023 17,000,000 14,195,000 Roche Holdings (U.S. Dollar) 2.75 2000 12,000,000 9,412,440 Tokyo Electric Power Euro (U.S. Dollar) 6.125 2003 21,500,000 19,323,125 United Kingdom Treasury (British Pound) 8.00 2003 11,300,000 16,524,555 ______________ Total 289,028,192 _____________________________________________________________________________________________________________________________ Total bonds (Cost: $1,232,112,964) $1,236,777,231 _____________________________________________________________________________________________________________________________ See accompanying notes to investments in securities. PAGE Investments in securities IDS Selective Fund, Inc. (Percentages represent value of May 31, 1994 (Unaudited) investments compared to net assets) _____________________________________________________________________________________________________________________________ Preferred stocks (0.5%) _____________________________________________________________________________________________________________________________ Issuer Shares Value(a) _____________________________________________________________________________________________________________________________ First Chicago 2.875% Cm Cv 60,000 $ 3,285,000 Occidental Petroleum 3.875% Cm Cv 41,000 (g) 2,019,250 Sonoco Products 2.25% Cv 51,200 2,419,200 _____________________________________________________________________________________________________________________________ Total preferred stocks (Cost: $7,609,300) $ 7,723,450 _____________________________________________________________________________________________________________________________ See accompanying notes to investments in securities. PAGE Investments in securities IDS Selective Fund, Inc. (Percentages represent value of May 31, 1994 (Unaudited) investments compared to net assets) _____________________________________________________________________________________________________________________________ Short-term securities (20.4%) _____________________________________________________________________________________________________________________________ Issuer Annualized Amount Value(a) yield on payable date of at purchase maturity _____________________________________________________________________________________________________________________________ U.S. government agencies (1.7%) Federal Home Loan Bank Disc Note 06-09-94 4.24% $ 2,700,000 $ 2,697,468 06-21-94 4.18 3,300,000 3,292,355 Federal Home Loan Mtge Corp Disc Note 06-02-94 3.85 2,900,000 2,899,691 06-17-94 4.22 3,100,000 3,094,213 07-01-94 4.30 3,100,000 3,088,943 Federal Natl Mtge Assn Disc Note 06-13-94 4.20 2,700,000 2,696,238 06-22-94 4.19 8,200,000 8,180,054 ______________ Total 25,948,962 _____________________________________________________________________________________________________________________________ Certificate of deposit (0.3%) Natl Bank of Detroit 06-23-94 4.26 4,000,000 4,000,000 _____________________________________________________________________________________________________________________________ Commercial paper (17.3%) ABB Treasury Center 06-20-94 4.24 1,000,000 (i) 997,768 AIG Funding 06-03-94 3.86 7,980,000 7,978,293 Amer Cyanamid 06-13-94 4.32 4,300,000 4,293,837 Amer General Investment 06-09-94 3.92 5,900,000 (i) 5,894,887 06-17-94 4.30 9,400,000 (i) 9,382,119 Associates Corp of North Amer 07-13-94 4.39 5,000,000 4,974,508 Becton Dickinson & Co. 06-14-94 4.30 6,500,000 6,489,954 BellSouth Capital Funding 06-02-94 3.96 5,300,000 5,299,418 See accompanying notes to investments in securities. PAGE Investments in securities IDS Selective Fund, Inc. (Percentages represent value of May 31, 1994 (Unaudited) investments compared to net assets) _____________________________________________________________________________________________________________________________ Short-term securities (cont'd) _____________________________________________________________________________________________________________________________ Issuer Annualized Amount Value(a) yield on payable date of at purchase maturity _____________________________________________________________________________________________________________________________ Cafco 06-10-94 4.34% $9,000,000 $ 8,990,280 Ciesco LP 07-21-94 4.38 6,500,000 6,460,729 Colgate Palmolive 06-02-94 3.96 6,010,000 (i) 6,009,341 06-03-94 4.33 7,700,000 (i) 7,698,152 Columbia Fuels 06-15-94 4.31 6,498,000 6,487,159 07-25-94 4.40 7,234,000 7,185,791 Eiger Capital 06-29-94 4.27 9,700,000 (i) 9,667,936 Fleet Funding 06-02-94 3.77 4,459,000 (i) 4,458,536 Gateway Fuel 07-01-94 4.27 6,615,000 6,591,572 Goldman Sachs Group LP 07-11-94 4.37 11,300,000 11,245,383 Kredietbank North Amer Finance 06-03-94 3.97 4,700,000 4,698,966 07-18-94 4.39 2,100,000 2,088,046 08-19-94 4.55 5,000,000 4,950,000 Lincoln Natl 06-15-94 4.34 4,900,000 (i) 4,891,768 06-20-94 4.32 8,700,000 (i) 8,680,256 06-23-94 4.25 5,700,000 (i) 5,685,265 MetLife Funding 06-08-94 4.02 4,200,000 4,196,733 Mobil Australia Finance (Delaware) 06-09-94 4.34 6,700,000 (i) 6,693,568 Morgan Bank of Canada Schedule B 06-20-94 4.32 5,000,000 4,988,653 Norfolk Southern 06-02-94 3.82 2,900,000 (i) 2,899,694 06-16-94 4.34 4,600,000 (i) 4,591,720 See accompanying notes to investments in securities. PAGE Investments in securities IDS Selective Fund, Inc. (Percentages represent value of May 31, 1994 (Unaudited) investments compared to net assets) _____________________________________________________________________________________________________________________________ Short-term securities (continued) _____________________________________________________________________________________________________________________________ Issuer Annualized Amount Value(a) yield on payable date of at purchase maturity _____________________________________________________________________________________________________________________________ Commercial paper (cont'd) Pacific Energy Fuels 06-02-94 3.72% $3,800,000 $ 3,799,609 Penney (JC) Funding 06-06-94 3.94 8,500,000 8,495,372 07-06-94 4.32 7,500,000 7,468,646 Pennsylvania Power & Light Energy Trust 06-13-94 4.34 7,000,000 6,989,920 Sandoz 06-01-94 3.86 4,200,000 4,200,000 Sara Lee 07-21-94 4.38 3,200,000 3,180,667 SBT Funding 06-20-94 4.30 6,168,000 (i) 6,154,067 Southern California Gas 06-16-94 4.37 9,843,000 (i) 9,825,159 St. Paul Companies 06-14-94 4.13 15,000,000 (i) 14,977,737 06-21-94 4.31 3,900,000 (i) 3,890,705 06-22-94 4.30 7,500,000 (i) 7,481,275 Toyota Motor Credit 06-24-94 4.27 10,000,000 9,972,847 USAA Capital 06-07-94 3.94 7,300,000 7,295,231 ______________ Total 268,201,567 _____________________________________________________________________________________________________________________________ Letters of credit (1.1%) Bank of New York- River Fuel 06-03-94 3.90 6,792,000 (i) 6,790,536 NationsBank North Carolina- Comdisco 06-01-94 3.84 5,400,000 5,400,000 06-27-94 4.32 6,000,000 5,981,367 ______________ Total 18,171,903 _____________________________________________________________________________________________________________________________ Total short-term securities (Cost: $316,323,848) $ 316,322,432 _____________________________________________________________________________________________________________________________ Total investments in securities (Cost: $1,556,046,112)(k) $1,560,823,113 _____________________________________________________________________________________________________________________________ See accompanying notes to investments in securities. PAGE Investments in securities IDS Selective Fund, Inc. May 31, 1994 (Unaudited) _____________________________________________________________________________________________________________________________ Notes to investments in securities _____________________________________________________________________________________________________________________________ (a) Securities are valued by procedures described in Note 1 to the financial statements. (b) Security is partially or fully on loan. See Note 5 to the financial statements. (c) For zero coupon bonds, the interest rate disclosed represents the annualized effective yield on the date of acquisition. (d) This security is a collateralized mortgage obligation whose payment of principal has been deferred until payment of previous series within the trust have been paid off. (e) Principal Only-interest rate disclosed for these securities represent current yields based upon estimated future cash flows. (f) Interest rate varies, rate shown is the effective rate on May 31, 1994. (g) Represents a security sold under Rule 144A which is exempt from registration under the Securities Act of 1933, as amended. This security has been determined to be liquid under guidelines established by the board of directors. (h) Foreign security values are stated in U.S. dollars. For bonds principal amounts are denominated in the currency indicated. (i) Commercial paper sold within terms of a private placement memorandum, exempt from registration under Section 4(2) of the Securities Act of 1933, as amended, and may be sold only to dealers in that program or other "accredited investors". This security has been determined to be liquid under guidelines established by the board of directors. (j) Partially pledged as initial deposit on the following open interest rate futures purchase contracts (see Note 6 to the financial statements): Type of security Par value ________________________________________________________ Municipal Bond, June 1994 $10,000,000 ________________________________________________________ (k) On May 31, 1994, the cost of securities for federal income tax purposes was approximately $1,554,473,000 and the approximate aggregate gross unrealized appreciation and depreciation based on that cost was: Unrealized appreciation $43,662,000 Unrealized depreciation (37,312,000) ____________________________________________________________________________________________ Net unrealized appreciation $ 6,350,000 ____________________________________________________________________________________________
PAGE Directors and officers Directors and officers of the fund _____________________________________________________________________ President and interested director William R. Pearce President of all funds in the IDS MUTUAL FUND GROUP. _____________________________________________________________________ Independent directors Lynne V. Cheney Distinguished fellow, American Enterprise Institute for Public Policy Research. Robert F. Froehlke Former president of all funds in the IDS MUTUAL FUND GROUP. Donald M. Kendall Former chairman and chief executive officer, PepsiCo, Inc. Melvin R. Laird Senior counsellor for national and international affairs, The Reader's Digest Association, Inc. Lewis W. Lehr Former chairman and chief executive officer, Minnesota Mining and Manufacturing Company (3M). Edson W. Spencer Former chairman and chief executive officer, Honeywell, Inc. Wheelock Whitney Chairman, Whitney Management Company. _____________________________________________________________________ Interested director who is a partner in a law firm that has represented an IDS subsidiary Anne P. Jones Partner, law firm of Sutherland, Asbill & Brennan. _____________________________________________________________________ Interested directors who are officers and/or employees of IDS William H. Dudley Executive vice president, IDS. David R. Hubers President and chief executive officer, IDS. John R. Thomas Senior vice president, IDS. _____________________________________________________________________ Other officer Leslie L. Ogg Vice president of all funds in the IDS MUTUAL FUND GROUP and general counsel and treasurer of the publicly offered funds. PAGE IDS mutual funds Cash equivalent investments These money market funds have three main goals: conservation of capital, constant liquidity and the highest possible current income consistent with these objectives. 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 Income investments 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 Global Bond Fund Invests primarily in debt securities of U.S. and foreign issuers to seek high total return through income and growth of capital. (icon of) globe IDS Extra Income Fund Invests mainly in long-term, high-yielding corporate fixed income securities in the lower rated, higher risk bond categories to seek high current income. Secondary objective is capital growth. (icon of) cornucopia PAGE 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 Strategy, Income Fund Invests primarily in corporate and government bonds to seek high current income while conserving capital. Also may seek capital appreciation when consistent with its primary goals. (icon of) chess piece IDS Selective Fund Invests in 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 primarily in 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) federal building IDS Strategy, Short-Term Income Fund Invests primarily in short-term and intermediate-term bonds and notes to seek a high level of current income. (icon of) chess piece Tax-exempt income investments These funds provide tax-free income by investing in municipal bonds. The income is generally free from federal income tax. Risk varies by bond quality. IDS High Yield Tax-Exempt Fund Invests primarily in 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 PAGE 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 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 eagle head Growth and income investments 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. Moderate risk. 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 Strategy, Worldwide Growth Fund Invests primarily in common stocks of companies throughout the world that offer potential for superior growth. Holdings may range from small- to large- capitalization stocks, including those of companies involved in areas of rapid economic growth. (icon of) chess piece IDS Managed Retirement Fund Invests in a combination of common stocks, fixed-income investments and money market securities to seek a maximum total return through a combination of growth of capital and current income. (icon of) bird in a nest PAGE IDS Equity Plus Fund Invests primarily in a combination of moderate growth stocks, higher-yielding equities and bonds. Seeks growth of capital and income. (icon of) three apple trees IDS Blue Chip Advantage Fund Invests in selected stocks from a major market index. Securities purchased are those recommended by IDS 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 Stock Fund Invests in common stocks of companies representing many sectors of the economy. Seeks current income and growth of capital. (icon of) building with columns IDS Strategy, Equity Fund Invests primarily in undervalued common stocks that offer potential for growth of capital and income. (icon of) chess piece 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) electrical cord IDS Diversified Equity Income Fund Invests 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) four puzzle pieces IDS Mutual Invests in a 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 PAGE Growth investments Funds in this group seek capital growth, primarily from common stocks. They are high risk mutual funds with a potential for high reward. 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 Strategy, Aggressive Equity 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 Growth Fund Invests primarily in companies that have above-average potential for long-term growth as a result of new management, marketing opportunities or technological superiority. (icon of) flower IDS Global Growth Fund Invests in 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 New Dimensions Fund Invests primarily in 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 PAGE Specialty growth investment This fund aggressively seeks capital growth as a hedge against inflation. 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. This is the most aggressive and most speculative IDS mutual fund. (icon of) cart of precious gems For more complete information about any of these funds, including charges and expenses, you can obtain a prospectus by contacting your financial planner or writing to IDS Shareholder Service, P.O. Box 534, Minneapolis, MN 55440-0534. Read it carefully before you invest or send money. PAGE Quick telephone reference IDS Telephone Transaction Service Redemptions and exchanges, dividend payments or reinvestments and automatic payment arrangements National/Minnesota: 800-437-3133 Mpls./St. Paul area: 671-3800 IDS Shareholder Service Fund performance, objectives and account inquiries 612-671-3733 TTY Service For the hearing impaired 800-846-4852 IDS Infoline Automated account information (TouchTone phones only), including current fund prices and performance, account values and recent account transactions National/Minnesota: 800-272-4445 Mpls./St. Paul area: 671-1630 Your IDS financial planner AN AMERICAN EXPRESS COMPANY 1894 IDS 1994 A CENTURY OF INVESTING IN THE FUTURE IDS Selective Fund, Inc. IDS Tower 10 Minneapolis, MN 55440-0010 -----END PRIVACY-ENHANCED MESSAGE-----