-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, MfvBenXG53cJ86qO2M0TGWiDwO4LmaWQ1bv27CH4IuGqx6DPdv3uQ+v0N4jHYU0v vEtTPAArh7ZGqzQ5Zrxw0g== 0000820027-98-000505.txt : 19980806 0000820027-98-000505.hdr.sgml : 19980806 ACCESSION NUMBER: 0000820027-98-000505 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19980531 FILED AS OF DATE: 19980805 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: IDS SELECTIVE FUND INC CENTRAL INDEX KEY: 0000052407 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] IRS NUMBER: 410839316 STATE OF INCORPORATION: MN FISCAL YEAR END: 1130 FILING VALUES: FORM TYPE: N-30D SEC ACT: SEC FILE NUMBER: 811-00499 FILM NUMBER: 98677528 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 IDS SELECTIVE FUND, INC. 1998 ANNUAL REPORT IDS Selective Fund (prospectus enclosed) (icon of) skyline The goals of IDS Selective Fund, Inc. are current income and the preservation of capital by investing in investment-grade bonds. (This annual report includes a prospectus that describes in detail the Fund's objective, investment policies, risks, sales charges, fees and other matters of interest. Please read the prospectus carefully before you invest or send money.) American Express Financial Advisors Distributed by American Express Financial Advisors Inc. (icon of) Skyline A quest for quality Not all bonds are created equal. A bond's quality depends on the ability of its issuers 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 minimum risk to their principal. Contents 1998 annual report From the chairman 4 From the portfolio manager 4 The Portfolio's ten largest holdings 6 Making the most of the Fund 7 The Fund's long-term performance 8 Independent auditors' report (Fund) 9 Financial statements (Fund) 10 Notes to financial statements (Fund) 13 Independent auditors' report (Portfolio) 22 Financial statements (Portfolio) 23 Notes to financial statements (Portfolio) 26 Investments in securities 32 IDS mutual funds 41 Federal income tax information 45 1998 prospectus The Fund in brief 3p Goals 3p Investment policies and risks 3p Structure of the Fund 4p Manager and distributor 4p Portfolio manager 4p Alternative purchase arrangements 4p Sales charge and Fund expenses 5p Performance 7p Financial highlights 7p Total returns 9p Yield 11p Investment policies and risks 12p Facts about investments and their risks 12p Valuing Fund shares 16p How to purchase, exchange or redeem shares 17p Alternative purchase arrangements 17p How to purchase shares 20p How to exchange shares 22p How to redeem shares 22p Reductions and waivers of the sales charge 27p Special shareholder services 31p Services 31p Quick telephone reference 31p Distributions and taxes 32p Dividend and capital gain distributions 32p Reinvestments 33p Taxes 34p How to determine the correct TIN 36p How the Fund and Portfolio are organized 37p Shares 37p Voting rights 37p Shareholder meetings 37p Special considerations regarding master/feeder structure 37p Board members and officers 39p Investment manager 41p Administrator and transfer agent 41p Distributor 42p About American Express Financial Corporation 43p General information 43p Year 2000 44p Appendices 45p Description of investment-grade corporate bond ratings 45p Descriptions of derivative instruments 46p (icon of) One book inside of another The purpose of this annual report is to tell investors how the Fund performed. The prospectus, which is bound into the middle of this annual report, describes the Fund in detail. (This annual report is not part of the prospectus.) To our shareholders From the chairman If you're an experienced investor, you know that the past few years have been unusually strong in many financial markets. Perhaps just as important, history shows that bull markets don't last forever. Though they're often unpredictable, declines -- whether they're brief or long-lasting, moderate or substantial -- are always a possibility. We saw evidence of that last October, when declines in certain Asian markets spawned a sharp drop in several financial markets worldwide, including the U.S. The potential for such volatility reinforces the need for investors to review periodically their long-term goals and examine whether their investment program remains on track to achieving them. Your quarterly investment statements are one part of that monitoring process. The other is a meeting with your American Express financial advisor. That becomes even more important if there's a major change in your financial situation or in the financial markets. William R. Pearce (picture of) William R. Pearce William R. Pearce Chairman of the board From the portfolio manager A decline in long-term interest rates provided the foundation for a very productive fiscal year for IDS Selective Fund. For the 12 months -- June 1997 through May 1998 -- the Fund's Class A shares generated a total return, which includes net asset value change and dividends, of 10.2%. Despite a continuation of solid economic growth and rising employment figures -- two factors that typically put upward pressure on consumer prices -- inflation remained remarkably tame throughout the period. That fact, complemented by an appreciation in the dollar's value versus major foreign currencies and an ongoing decline in the federal deficit, persuaded the Federal Reserve to hold off on raising short-term interest rates. Rates come down Against that positive backdrop, long-term interest rates followed an overall downward path through early January, driving up bond values in the process. From that point, the market fluctuated in a narrow range, as (This annual report is not part of the prospectus.) investors weighed the conflicting factors of a still-strong economy and low unemployment versus ongoing reports of low inflation and a possible economic downturn related to the Asian financial crisis. As for the Fund's performance, its two largest areas of investment -- U.S. government and investment-grade, or high-quality, corporate bonds -- performed well during the 12 months. This was especially true of its investments in long-term Treasury bonds, whose values are highly sensitive to interest-rate fluctuations. Holdings among mortgage- backed bonds issued by government agencies also performed positively, but contributed more to the Fund's dividend than its net asset value gain. Foreign bonds, a relatively small area of investment for the Fund and all denominated in U.S. dollars, were hurt during last fall's financial crisis overseas, but rebounded during the spring. Longer duration As for changes to the portfolio, to take advantage of the interest-rate decline, I lengthened its duration. (A function of the average maturity of the bonds in the portfolio, duration determines how sensitive the Fund's net asset value is to interest-rate changes. The longer the duration, the greater the sensitivity.) Therefore, when rates came down, the Fund responded quite positively. I also reduced the portfolio's cash reserves, putting the proceeds into bonds, which provided a far better return. My positive outlook has changed little from six months ago. Inflation remains low; the federal budget deficit continues to be under control; the dollar is still strong versus major foreign currencies; and the problems in Asia may well restrain economic growth here at home. All of those factors work in bonds' favor by keeping long-term interest rates in a stable-to-declining pattern, which in turn helps bond prices and the Fund. Ray Goodner (picture of) Ray Goodner Ray Goodner Portfolio Manager Class A 12-month performance (All figures per share) Net asset value (NAV) May 31, 1998 $9.23 May 31, 1997 $9.00 Increase $0.23 Distributions June 1, 1997 - May 31, 1998 From income $0.62 From capital gains $0.03 Total distributions $0.65 Total return* +10.2%** Class B 12-month performance (All figures per share) Net asset value (NAV) May 31, 1998 $9.23 May 31, 1997 $9.00 Increase $0.23 Distributions June 1, 1997 - May 31, 1998 From income $0.55 From capital gains $0.03 Total distributions $0.58 Total return* +9.3%** Class Y 12-month performance (All figures per share) Net asset value (NAV) May 31, 1998 $9.23 May 31, 1997 $9.00 Increase $0.23 Distributions June 1, 1997 - May 31, 1998 From income $0.63 From capital gains $0.03 Total distributions $0.66 Total return* +10.2%** * 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. (This annual report is not part of the prospectus.) The Portfolio's ten largest holdings Percent Value (of Portfolio's net assets) (as of May 31, 1998) Japan Finance 1.63% $26,217,544 9.25% 1998 Dayton Hudson 1.26 20,177,983 7.875% 2023 PDV America 1.05 16,931,970 7.875% 2003 SBC Communications 1.05 16,823,550 8.50% 2031 Bell Atlantic 1.00 16,133,180 9.375% 2031 SAFECO Capital 1.00 16,037,700 8.07% 2037 Service Corp Intl .96 15,402,958 6.50% 2008 Daimler-Benz North America .94 15,088,780 7.375% 2006 GMAC .90 14,541,098 7.00% 2000 Time Warner Entertainment .88 14,181,120 8.375% 2033 Excludes U.S. Treasury and government agencies holdings. For further detail about these holdings, please refer to the section entitled "Investments in securities" herein. (icon of) pie chart The ten holdings listed here make up 10.67% of the Portfolio's net assets (This annual report is not part of the prospectus.) Making the most of the Fund Build your assets systematically One of the best ways to invest in the Fund is by dollar-cost averaging -- a time-tested strategy that can make market fluctuations work for you. To dollar-cost average, simply invest a fixed amount of money regularly. You'll automatically buy more shares when the Fund's share price is low, fewer shares when it is high. Using this strategy does not ensure a profit or avoid a loss if the market declines, and requires that you be able to keep on investing on a regular basis, even when the price of your shares falls or the market declines. Investing in this manner can be an effective way to accumulate shares to meet your long-term goals. How dollar-cost averaging works Month Amount Per-share Number of shares purchased invested market price Jan $100 $20 5.00 XXXXX Feb 100 18 5.56 XXXXXx March 100 17 5.88 XXXXXx April 100 15 6.67 XXXXXXx May 100 16 6.25 XXXXXXx June 100 18 5.56 XXXXXx July 100 17 5.88 XXXXXx Aug 100 19 5.26 XXXXXx Sept 100 21 4.76 XXXXx Oct 100 20 5.00 XXXXX (footnotes to table) By investing an equal number of dollars each month... (arrow in table pointing to April) you automatically buy more shares when the per share market price is low... (arrow in table pointing to September) and fewer shares when the per share market price is high. You have paid an average price of only $17.91 per share over the 10 months, while the average market price actually was $18.10. Three ways to benefit from a mutual fund: o your shares increase in value when the Fund's investments do well o you receive capital gains when the gains on investments sold by the Fund exceed losses o you receive income when the Fund's stock dividends, interest and short-term gains exceed its expenses. All three make up your total return. And you potentially can increase your investment if, like most investors, you reinvest your dividends and capital gain distributions to buy additional shares of the Fund or another fund. (This annual report is not part of the prospectus.) The Fund's long-term performance Assumes: o Holding period from 6/1/88 to 5/31/98. o Returns do not reflect taxes payable on distributions. o Reinvestment of all income and capital gain distributions for the Fund, with a value of $12,564. Also see "Performance" in the Fund's current prospectus. The Lehman Aggregate Bond Index is an unmanaged index made up of a representative list of government and corporate bonds as well as asset-backed securities and mortgage-backed securities. The index is frequently used as a general measure of bond market performance. However, the securities used to create the indexmay not be representative of the bonds held in the Portfolio. How your $10,000 has grown in IDS Selective Fund x $23,081 Selective Fund $20,000 Class A x Lehman Aggregate Bond Index x $9,500 '88 '89 '90 '91 '92 '93 '94 '95 '96 '97 '98 Average annual total return (as of May 31, 1998) 1 year Since 5 years 10 years inception* Class A +4.64% --% +6.08% +8.72% Class B +5.32% +7.69% --% --% Class Y +10.22% +9.44% --% --% *Inception date was March 20, 1995. On the graph above you can see how the Fund's total return compared to a widely cited performance index, the Lehman Aggregate Bond Index. In comparing Selective Fund (Class A) to this index, you should take into account the fact that the Fund's performance reflects the maximum sales charge of 5%, while such charges are not reflected in the performance of the index. Your investment and return values fluctuate so that your shares, when redeemed, may be worth more or less than the original cost. Average annual total return figures reflect the impact of the applicable sales charge up to a maximum of 5%. This was a period of widely fluctuating security prices. Past performance is no guarantee of future results. (This annual report is not part of the prospectus.) The financial statements contained in Post-Effective Amendment #86 to Registration Statement No. 2-10700 filed on or about July 29, 1998, are incorporated herein by reference. IDS mutual funds Global/International funds Funds in this group seek capital growth and/or income by investing primarily in foreign securities. Foreign investments may be subject to currency fluctuations and political and economic risks of the countries in which the investments are made. They are high risk mutual funds with a potential for high reward. IDS Emerging Markets Fund Invests in a Portfolio comprised primarily of stocks of companies in developing countries throughout the world that are believed to offer growth potential. Seeks to provide long-term growth of capital. (icon of) world with countries IDS Global Growth Fund Invests in a Portfolio comprised primarily of stocks of companies throughout the world that are positioned to meet market needs in a changing world economy. These companies offer above-average potential for long-term growth. (icon of) world IDS International Fund Invests primarily in common stocks of foreign companies that offer potential for superior growth. The Fund may invest up to 20% of its assets in the U.S. market. (icon of) three flags IDS Global Balanced Fund Invests in stocks and bonds in, for the most part, major markets throughout the world, including the U.S. Seeks to provide a balance of growth of capital and current income. (icon of) scale of globes IDS Global Bond Fund Invests in a Portfolio comprised primarily of debt securities of U.S. and foreign issuers to seek high total return through income and growth of capital. (icon of) globe Growth funds Funds in this group seek capital growth, primarily from common stocks. They are high risk mutual funds with a potential for high reward. IDS Precious Metals Fund Invests primarily in the securities of foreign or domestic companies that explore for, mine and process or distribute gold and other precious metals. A highly aggressive and speculative fund that seeks long-term growth of capital. (icon of) cart of precious gems IDS Discovery Fund Invests in small- and medium-size, growth-oriented companies emphasizing technological innovation and productivity enhancement. Buys and holds larger growth-oriented stocks. (icon of) ship IDS Small Company Index Fund Invests in all or a representative group of the equity securities comprising the S&P SmallCap 600 Index, as it strives to provide long-term capital appreciation. (icon of) building IDS Strategy Aggressive Fund Invests primarily in common stocks of companies that are selected for their potential for above-average growth. Above-average means that their growth potential is better, in the opinion of the portfolio's investment manager, than the Standard & Poor's Corporation (S&P) 500 Stock Index. (icon of) chess piece IDS Research Opportunities Fund Invests in a Portfolio comprised primarily of equity securities of companies included in the S&P 500 Index that are believed to have strong growth potential. The Portfolio is managed using a research methodology by the Research Department of AEFC. Goal is long-term appreciation. (icon of) magnifying glass (This annual report is not part of the prospectus.) IDS Growth Fund Invests in a Portfolio comprised primarily of companies that have above-average potential for long-term growth as a result of new management, marketing opportunities or technological superiority. (icon of) trees IDS New Dimensions Fund Invests in a Portfolio comprised primarily of companies with significant growth potential due to superiority in technology, marketing or management. The Fund frequently changes its industry mix. (icon of) dimension IDS Progressive Fund Invests primarily in undervalued common stocks. The Fund holds stocks for the long term with the goal of capital growth. (icon of) shooting star Growth & income funds These funds focus on securities of medium to large, well-established companies that offer long-term growth of capital and reasonable income from dividends and interest. Foreign investments may be subject to currency fluctuations and political and economic risks of the countries in which the investments are made. IDS Equity Select Fund Invests primarily in a combination of moderate growth stocks, higher-yielding equities and bonds. Seeks growth of capital and income. (icon of) three pine trees IDS Blue Chip Advantage Fund Invests in selected stocks from a major market index. Securities purchased are those recommended by our research analysts as the best from each industry represented on the index. Offers potential for long-term growth as well as dividend income. (icon of) ribbon IDS Managed Allocation Fund Invests in a Portfolio comprised primarily of U.S. equity securities, U.S. and foreign debt securities, foreign equity securities and money market instruments. The Fund provides diversification among these major investment categories and has a target mix that represents the way the Fund's investments will be allocated over the long term. Seeks maximum total return. (icon of) gyroscope IDS Stock Fund Invests in a Portfolio comprised primarily of common stock of companies representing many sectors of the economy. Seeks current income and growth of capital. (icon of) building with columns IDS Equity Value Fund Invests primarily in undervalued common stocks that offer potential for growth of capital and income. (icon of) three growing flowers IDS Utilities Income Fund Invests primarily in the stocks of public utility companies to seek high current income and growth of income and capital with reduced volatility. (icon of) light bulb IDS Diversified Equity Income Fund Invests in a Portfolio comprised primarily in high-yielding common stocks to seek high current income and, secondarily, to benefit from the growth potential offered by stock investments. (icon of) two puzzle pieces IDS Mutual Invests in a Portfolio which seeks to balance between common stocks and senior securities (preferred stocks and bonds). Seeks a balance of growth of capital and current income. (icon of) scale of justice (This annual report is not part of the prospectus.) Income funds The funds in this group invest their assets primarily in corporate bonds or government securities to seek interest income. Secondary objective is capital growth. Risk varies by bond quality. IDS Extra Income Fund Invests in a Portfolio comprised mainly of long-term, high-yielding corporate fixed-income securities in the lower rated, higher risk bond categories to seek high current income. Secondary objective is capital growth. (icon of) two coins IDS Bond Fund Invests mainly in corporate bonds, at least 50% in the higher rated, lower risk bond categories, or the equivalent, and in government bonds. (icon of) Greek column IDS Selective Fund Invests in a Portfolio comprised primarily of high-quality corporate bonds and other highly rated debt instruments including government securities and short-term investments. Seeks current income and preservation of capital. (icon of) skyline IDS Federal Income Fund Invests in a Portfolio comprised primarily of securities issued or guaranteed as to the timely payment of principal and interest by the U.S. government, its agencies and instrumentalities. Seeks a high level of current income and safety of principal consistent with its type of investments. (icon of) shield with eagle head Tax-exempt income funds These funds provide tax-free income by investing in municipal bonds. The income is generally free from federal income tax, but a portion of the income may be subject to state and local taxes. Risk varies by bond quality. IDS Tax-Exempt Bond Fund Invests mainly in bonds and notes of state or local government units, with at least 75% in the four highest rated, lowest risk bond categories. (icon of) shield with Greek column IDS Insured Tax-Exempt Fund Invests primarily in municipal securities that are insured as to the timely payment of principal and interest. The insurance feature minimizes credit risk of the Fund but does not guarantee the market value of the Fund's shares. (icon of) shield with star IDS State Tax-Exempt Funds (CA, MA, MI, MN, NY, OH) Invests primarily in high- and medium-grade municipal securities to provide income to residents of each respective state that is exempt from federal, state and local income taxes. (New York is the only state that is exempt at the local level.) (icon of) shield with U.S. enclosed IDS High Yield Tax-Exempt Fund Invests in a Portfolio comprised primarily of medium- and lower-quality municipal bonds and notes. Lower-quality securities generally involve greater risk of principal and income. (icon of) shield with basket of apples enclosed IDS Intermediate Tax-Exempt Fund Invests in mainly investment-grade bonds and other debt securities with intermediate-term maturities issued by state and local government units. Goal is to seek a high level of current income exempt from federal taxes. (icon of) shield with tree enclosed (This annual report is not part of the prospectus.) Money market funds These money market funds have three main goals: conservation of capital, constant liquidity and the highest possible current income consistent with these objectives. An investment in these funds is neither insured nor guaranteed by the U.S. government, and there can be no assurance that these funds will be able to maintain a stable net asset value of $1.00 per share. Very limited risk. IDS Cash Management Fund Invests in such money market securities as high quality commercial paper, bankers' acceptances, certificates of deposit (CDs) and other bank securities. (icon of) piggy bank IDS Tax-Free Money Fund Invests primarily in short-term bonds and notes issued by state and local governments to seek high current income exempt from federal income taxes. (icon of) shield with piggy bank enclosed For more complete information about any of these funds, including charges and expenses, you can obtain a prospectus by contacting your financial advisor or writing to American Express Shareholder Service, P.O. Box 534, Minneapolis, MN 55440-0534. Read it carefully before you invest or send money. (This annual report is not part of the prospectus.) Federal income tax information IDS Selective Fund, Inc. The Fund is required by the Internal Revenue Code of 1986 to tell its shareholders about the tax treatment of the dividends it pays during its fiscal year. Some of the dividends listed below were reported to you on a Form 1099-DIV, Dividends and Distributions, last January. Dividends paid to you since the end of last year will be reported to you on a tax statement sent next January. Shareholders should consult a tax advisor on how to report distributions for state and local purposes. IDS Selective Fund, Inc. Fiscal year ended May 31, 1998 Class A Income distributions taxable as dividend income,0.81% qualifying for deduction by corporations. Payable date Per share June 26, 1997 $0.04898 July 25, 1997 0.04800 Aug. 27, 1997 0.05153 Sept. 25, 1997 0.04400 Oct. 28, 1997 0.04962 Nov. 25, 1997 0.04276 Dec. 26, 1997 0.09580 Jan. 28, 1998 0.05096 Feb. 26, 1998 0.04681 March 26, 1998 0.04604 April 28, 1998 0.05449 May 27, 1998 0.04803 Total $0.62702 Capital gain distribution taxable as long-term capital gain. Payable date Per share Dec. 26, 1997 $0.02588 Total distributions $0.65290 The distribution of $0.12168 per share, payable Dec. 26, 1997, consisted of $0.04731 derived from net investment income, $0.04849 from net short-term capital gains (a total of $0.09580 taxable as dividend income) and $0.02588 from net long-term capital gains. The long-term capital gains distribution is divided into two rate categories: 28% - $0.02588 and 20% - $0.00000. (This annual report is not part of the prospectus.) Federal income tax information IDS Selective Fund, Inc. Class B Income distributions taxable as dividend income,0.81% qualifying for deduction by corporations. June 26, 1997 $0.04353 July 25, 1997 0.04247 Aug. 27, 1997 0.04522 Sept. 25, 1997 0.03850 Oct. 28, 1997 0.04327 Nov. 25, 1997 0.03736 Dec. 26, 1997 0.08984 Jan. 28, 1998 0.04462 Feb. 26, 1998 0.04124 March 26, 1998 0.04069 April 28, 1998 0.04818 May 27, 1998 0.04247 Total $0.55739 Capital gain distribution taxable as long-term capital gain. Payable date Per share Dec. 26, 1997 $0.02588 Total distributions $0.58327 The distribution of $0.11572 per share, payable Dec. 26, 1997, consisted of $0.04135 derived from net investment income, $0.04849 from net short-term capital gains (a total of $0.08984 taxable as dividend income) and $0.02588 from net long-term capital gains. The long-term capital gains distribution is divided into two rate categories: 28% - $0.02588 and 20% - $0.00000. (This annual report is not part of the prospectus.) Class Y Income distributions taxable as dividend income, 0.81% qualifying for deduction by corporations. June 26, 1997 $0.04950 July 25, 1997 0.04853 Aug. 27, 1997 0.05212 Sept. 25, 1997 0.04453 Oct. 28, 1997 0.05022 Nov. 25, 1997 0.04326 Dec. 26, 1997 0.09637 Jan. 28, 1998 0.05157 Feb. 26, 1998 0.04733 March 26, 1998 0.04655 April 28, 1998 0.05512 May 27, 1998 0.04853 Total $0.63363 Capital gain distribution taxable as long-term capital gain. Payable date Per share Dec. 26, 1997 $0.02588 Total distributions $0.65951 The distribution of $0.12225 per share, payable Dec. 26, 1997, consisted of $0.04788 derived from net investment income, $0.04849 from net short-term capital gains (a total of $0.09637 taxable as dividend income) and $0.02588 from net long-term capital gains. The long-term capital gains distribution is divided into two rate categories: 28% - $0.02588 and 20% - $0.00000. (This annual report is not part of the prospectus.) Quick telephone reference American Express Redemptions and exchanges, National/Minnesota Financial Advisors dividend payments or 800-437-3133 Telephone Transaction reinvestments and automatic Service payment arrangements Mpls./St. Paul area: 671-3800 TTY Service For the hearing impaired 800-846-4852 American Express Automated account information 800-862-7919 Financial Advisors (TouchTone(R) phones only), Easy Access Line including current fund prices and performance, account values and recent account transactions AMERICAN EXPRESS Financial Advisors IDS Selective Fund IDS Tower 10 Minneapolis, MN 55440-0010 STATEMENT OF DIFFERENCES Difference Description 1) The layout is different 1) Some of the layout in the throughout the annual report. annual report to shareholders is in two columns. 2) Headings. 2) The headings in the annual report are placed in a blue strip at the top of the page. 3) There are pictures, icons 3) Each picture, icon and and graphs throughout the graph is described in annual report. parentheses. 4) Footnotes for charts and 4) The footnotes for each graphs are described at chart or graph are typed the left margin. below the description of the chart or graph. -----END PRIVACY-ENHANCED MESSAGE-----