1997 SEMIANNUAL REPORT
IDS
Intermediate
Tax-Exempt
Fund
(icon of) shield with tree enclosed
The goal of IDSIntermediate Tax-Exempt Fund, a part of IDS Tax-Exempt Bond Fund,
Inc., is to seek a high level of current income exempt from federal taxes.
Distributed by American Express Financial Advisors Inc. Member SIPC.
<PAGE>
Why suffer from a `lack of interest'?
If you're looking for a higher yield than a typical tax-free money market fund
with less price volatility than a typical tax-exempt bond fund, this fund is
designed for you. Its yield is generally free from federal taxes, but not
necessarily state and local taxes.
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 19
Board members and officers 27
IDS mutual funds 28
<PAGE>
To our shareholders
From the president
If you're an experienced investor, you know that the past two years have
been unusually strong ones in many financial markets. Perhaps just as
important, you also know that 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.
That fact reinforces the need for investors to periodically review 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 Pearce
William R. Pearce
President of the Fund
From the portfolio manager
IDS Intermediate Tax-Exempt Fund provided positive performance during the
first half of the fiscal year, although the return was hampered by
often-difficult conditions in the bond market. For the period from Dec. 1,
1996, through May 31, 1997, the Fund's Class A shares generated a total
return of 1.1%.
The bond market struggled for much of the period, as fears that stronger
economic growth would soon spawn higher inflation pervaded the market.
Despite ongoing reports indicating that inflation was not on the rise,
many investors moved out of bonds, causing an increase in long-term
interest rates and depressing bond prices. In fact, by the time the
Federal Reserve Board actually took a pre-emptive strike against inflation
by raising short-term interest rates in late March, most of the erosion in
the bond market had already taken place. Some of the lost ground was
recovered in the final weeks of the period, however, as the bond market
rallied modestly.
For the entire fiscal period, municipal bonds performed somewhat better
than taxable U.S. Treasury bonds.
Playing defense
To combat the rising-rate trend, I took a "defensive" approach to
structuring the portfolio. This centered on keeping a relatively short
duration - a function of the average maturity of the investments that
determines how sensitive the Fund's net asset value is to changes in
interest rates. The longer the duration, the greater the sensitivity.
Therefore, when interest rates were rising, the Fund experienced somewhat
less of a decline than it would have with a longer duration.
Little has changed in the investment environment in recent months; the
economy continues to grow, and inflation has yet to reach a threatening
level. Still, with the Federal Reserve on the inflation watch, I think
it's likely that interest rates will trend higher, or at least fluctuate
enough to keep the bond market off balance.
Given that outlook, I plan to stay with a somewhat defensive portfolio
structure, and concentrate on maintaining the Fund's tax-free yield.
Terry Fettig
(picture of) Terry Fettig
Terry Fettig
Portfolio manager
<PAGE>
To our shareholders
Class A
6-months performance
(All figures per share)
Net asset value (NAV)
May 31, 1997 $ 5.01
Nov. 30, 1996 $ 5.04
Decrease $ 0.03
Distributions
Dec 1, 1996 - May 31, 1997
From income $ 0.09
From capital gains $ --
Total distributions $ 0.09
Total return* +1.1%
Class B
6-months performance
(All figures per share)
Net asset value (NAV)
May 31, 1997 $ 5.01
Nov. 30, 1996 $ 5.04
Decrease $ 0.03
Distributions
Dec 1, 1996 - May 31, 1997
From income $ 0.07
From capital gains $ --
Total distributions $ 0.07
Total return* +0.8%
Class Y
6-months performance
(All figures per share)
Net asset value (NAV)
May 31, 1997 $ 5.01
Nov. 30, 1996 $ 5.04
Decrease $ 0.03
Distributions
Dec. 1, 1996 - May 31, 1997
From income $ 0.09
From capital gains $ --
Total distributions $ 0.09
Total return* +1.2%
* 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.
<PAGE>
The Fund's ten largest holdings
Percent Value
(of Fund's net assets) (as of May 31, 1997)
Chicago Illinois Unlimited Tax General Obligation Refunding Bonds
Series 1996B
6.00% 2002 2.90% $546,042
Houston Texas Water & Sewer System Prior Lien
Refunding Revenue Bonds Series 1992B
5.75% 2002 2.79 524,705
Delaware County Industrial Development Authority Pollution Control
Refunding Revenue Bonds Series 1997
5.30% 2001 2.68 503,705
Denver Colorado City & County Airport Revenue Bonds
Series 1996 A.M.T.
4.80% 2000 2.67 502,105
Hawaii General Obligation Bonds Series 1997
4.265% 2001 2.66 500,350
New York Dormitory Authority Health Care Revenue Bonds
Series 1997
5.00% 2001 2.65 499,055
Long Beach California Harbor Revenue Bonds Series 1993 A.M.T.
4.50% 2002 2.62 492,145
Knox County Tennessee Unlimited Tax General Obligation Bonds
Series 1997
4.45% 2003 2.61 490,790
Anchorage Alaska Unlimited Tax General Obligation Bonds
Series 1992
5.85% 2001 2.36 444,095
Southern California College of Optometry Educational Facilities
Authority College Revenue Bonds Series 1997B
4.90% 1999 1.81 341,044
Note:Certain of the Fund's investment income may be subject to the
Alternative Minimum Tax (A.M.T)
(icon of) pie chart
The ten holdings listed here make up 25.75% of the Fund's net assets
<PAGE>
<TABLE>
Financial statements
Statement of assets and liabilities
IDS Intermediate Tax-Exempt Fund
May 31, 1997
Assets
<CAPTION>
(Unaudited)
Investments in securities, at value (Note 1)
<S> <C>
(identified cost $18,636,013) $18,602,999
Accrued interest receivable 263,508
Organizational cost 98
--
Total assets 18,866,605
----------
Liabilities
Disbursements in excess of cash on demand deposit 20,036
Dividends payable to shareholders 3,714
Accrued investment management services fee 232
Accrued distribution fee 98
Accrued service fee 90
Accrued transfer agency fee 7
Accrued administrative services fee 21
Other accrued expenses 32,542
------
Total liabilities 56,740
------
Net assets applicable to outstanding capital stock $18,809,865
===========
Represented by
Capital stock-- $.01 par value (Note 1) $ 37,511
Additional paid-in capital 18,853,296
Undistributed net investment income 2,122
Accumulated net realized loss (Note 1) (50,050)
Unrealized depreciation (33,014)
-------
Total-- representing net assets applicable to outstanding capital stock $18,809,865
===========
Net assets applicable to outstanding shares: Class A $14,043,394
Class B $ 4,765,448
Class Y $ 1,023
Net asset value per share of outstanding capital stock: Class A shares 2,800,494 $ 5.01
Class B shares 950,387 $ 5.01
Class Y shares 204 $ 5.01
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
Statement of operations
IDS Intermediate Tax-Exempt Fund
Six months ended May 31, 1997
Investment income
<CAPTION>
(Unaudited)
Income:
<S> <C>
Interest $309,610
Expenses (Note 2):
Investment management services fee 30,572
Distribution fee -- Class B 10,980
Transfer agency fee 3,524
Incremental transfer agency fee-- Class B 63
Service fee
Class A 9,326
Class B 2,562
Administrative services fees and expenses 4,094
Compensation of officers 2,837
Custodian fees 4,968
Postage 4,505
Registration fees 65,270
Reports to shareholders 2,719
Audit fees 7,500
Other 1,156
-----
Total expenses 150,076
Less expenses voluntarily reimbursed by AEFC (Note 2) (76,858)
-------
73,218
Earnings credits on cash balances (Note 2) (1,039)
------
Total net expenses 72,179
------
Investment income-- net 237,431
-------
Realized and unrealized gain (loss) -- net
Net realized loss on security transactions (Note 3) (50,050)
Net change in unrealized appreciation or depreciation (39,580)
-------
Net loss on investments (89,630)
Net increase in net assets resulting from operations $147,801
========
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
Financial statements
Statements of changes in net assets
IDS Intermediate Tax-Exempt Fund
Operations and distributions
<CAPTION>
May 31, 1997 For the period
Six months ended from Nov. 13, 1996*
(Unaudited) to Nov. 30, 1996
<S> <C> <C>
Investment income-- net $ 237,431 $ 936
Net realized loss on investments (50,050) --
Net change in unrealized appreciation or depreciation (39,580) 6,566
------- -----
Net increase in net assets resulting from operations 147,801 7,502
------- -----
Distributions to shareholders from:
Net investment income
Class A (192,417) (787)
Class B (42,874) (148)
Class Y (18) (1)
--- --
Total distributions (235,309) (936)
-------- ----
Capital share transactions (Note 4)
Proceeds from sales
Class A shares (Note 2) 21,024,154 1,554,812
Class B shares 5,628,535 450,691
Reinvestment of distributions at net asset value
Class A shares 168,298 474
Class B shares 39,389 103
Class Y shares 18 1
Payments for redemptions
Class A shares (8,618,677) (16,159)
Class B shares (Note 2) (1,343,282) (550)
---------- ----
Increase in net assets from capital share transactions 16,898,435 1,989,372
---------- ---------
Total increase in net assets 16,810,927 1,995,938
Net assets at beginning of period 1,998,938 3,000
--------- -----
Net assets at end of period (Note 1)
(including undistributed net investment income of
$2,122 and $0) $18,809,865 $1,998,938
=========== ==========
*Commencement of operations.
See accompanying notes to financial statements.
</TABLE>
<PAGE>
Notes to financial statements
IDS Intermediate Tax-Exempt Fund
(Unaudited as to May 31, 1997)
1. Summary of significant accounting policies
IDS Intermediate Tax-Exempt Fund (a series of IDS Tax-Exempt Bond Fund,
Inc.) is registered under the Investment Company Act of 1940 (as amended)
as a diversified, open-end management investment company. IDS Tax-Exempt
Bond Fund, Inc. has 10 billion authorized shares of capital stock that can
be allocated among the separate series as designated by the board. On Nov.
12, 1996, American Express Financial Corporation (AEFC) invested $3,000 in
the Fund which represented 200 shares for Class A, Class B and Class Y,
respectively.
The Fund invests primarily in investment-grade bonds and other debt
securities issued by or on behalf of state or local governmental units
whose interest is exempt from federal income tax. The Fund offers Class A,
Class B and Class Y shares. Class A shares are sold with a front-end sales
charge. Class B shares may be subject to a contingent deferred sales
charge and such shares automatically convert to Class A after eight years.
Class Y shares have no sales charge and are offered only to qualifying
institutional investors.
All classes of shares have identical voting, dividend, liquidation and
other rights, and the same terms and conditions, except that the level of
distribution fee, transfer agency fee and service fee (class specific
expenses) differs among classes. Income, expenses (other than class
specific expenses) and realized and unrealized gains or losses on
investments are allocated to each class of shares based upon its relative
net assets.
Significant accounting policies followed by the Fund are summarized below:
Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of increase and decrease in
net assets from operations during the period. Actual results could differ
from those estimates.
Valuation of securities
All securities are valued at the close of each business day. Securities
for which market quotations are not readily available are valued at fair
value according to methods selected in good faith by the board.
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.
Organizational costs
The Fund incurred organizational expenses in connection with the Start up
and initial registration of the Fund. The costs will be amortized over 60
months on a straight-line basis beginning with the commencement of
operations. If any or all of the shares held by AEFCrepresenting initial
capital of the Fund are redeemed during the amortization period, the
redemption proceeds will be reduced by the pro rata portion of the
unamortized organizational cost balance.
Option transactions
In order to produce incremental earnings, protect gains, and facilitate
buying and selling of securities for investment purposes, the Fund may buy
and sell put and call options and write covered call options on portfolio
securities and may write cash-secured put options. The risk in writing a
call option is that the Fund gives up the opportunity of profit if the
market price of the security increases. The risk in writing a put option
is that the Fund may incur a loss if the market price of the security
decreases and the option is exercised. The risk in buying an option is
that the Fund pays a premium whether or not the option is exercised. The
Fund also has the additional risk of not being able to enter into a
closing transaction if a liquid secondary market does not exist. The Fund
also may write over-the-counter options where the completion of the
obligation is dependent upon the credit standing of the other party.
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 options on debt securities or futures are exercised, the
Fund will realize a gain or loss. When other options are exercised, the
proceeds on sales for a written call option, the purchase cost for a
written put option or the cost of a security for a purchased put or call
option is adjusted by the amount of premium received or paid.
Futures transactions
In order to gain exposure to or protect itself from changes in the market,
the Fund may buy and sell financial futures contracts. 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.
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 and losses deferred due to "wash
sale" transactions. The character of distributions made during the year
from net investment income or net realized gains may differ from their
ultimate characterization for federal income tax purposes. Also, due to
the timing of dividend distributions, the fiscal year in which amounts are
distributed may differ from the year that the income or realized gains
(losses) were recorded by the Fund.
Dividends to shareholders
Dividends from net investment income, declared 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. Interest income, including level-yield amortization of
premium and discount, is accrued daily.
At May 31, 1997, AEFC owned 204 Class Y shares.
The Fund entered into agreements with AEFC for managing its portfolio,
providing administrative services and serving as transfer agent.
Under its Investment Management Services Agreement, AEFC determines which
securities will be purchased, held or sold. The management fee is a
percentage of the Fund's average daily net assets in reducing percentages
from 0.45% to 0.35% annually.
Under its Administrative Services Agreement, the Fund pays AEFC a fee for
administration and accounting services at a percentage of the Fund's
average daily net assets in reducing percentages from 0.04% to 0.02%
annually. Additional administrative service expenses paid by the Fund are
office expenses, consultants' fees and compensation of officers and
employees. Under this agreement, the Fund also pays taxes, audit and
certain legal fees, registration fees for shares, compensation of board
members, corporate filing fees, organizational expenses, and any other
expenses properly payable by the Fund approved by the board.
Under a separate Transfer Agency Agreement, AEFC maintains shareholder
accounts and records. The Fund pays AEFC an annual fee per shareholder
account for this service as follows:
oClass A $15.50
oClass B $16.50
oClass Y $15.50
2. Expenses and sales charges
The Fund entered into agreements with American Express Financial Advisors
Inc. for distribution and shareholder servicing-related services. Under a
Plan and Agreement of Distribution, the Fund pays a distribution fee at an
annual rate of 0.75% of the Fund's average daily net assets attributable
to Class B shares for distribution-related services.
Under a Shareholder Service Agreement, the Fund pays a fee for service
provided to shareholders by financial advisors and other servicing agents.
The fee is calculated at a rate of 0.175% of the Fund's average daily net
assets attributable to Class A and Class B shares and 0.10% of the Funds
average daily net assets attributable to Class Y shares.
Sales charges received by American Express Financial Advisors Inc. for
distributing Fund shares were $301,428 for Class A and $322 for Class B
for the six months ended May 31, 1997.
AEFC has agreed to waive certain fees and to absorb certain other of the
Fund's expenses until Nov. 30, 1997. Under this agreement, the Fund's
total expenses will not exceed 0.90% for Class A, 1.66% for Class B and
0.73% for Class Y of the Fund's average daily net assets.
During the six months ended May 31, 1997 the Fund's custodian and transfer
agency fees were reduced by $1,039 as a result of earning credits from
overnight cash balances.
3. Securities transactions
Cost of purchases of securities and proceeds from sales (other than
short-term obligations) aggregated $18,373,457 and $2,598,678 respectively
for the six months ended May 31, 1997. Realized gains and losses are
determined on an identified cost basis.
4. Capital share transactions
Transactions in shares of capital stock for the periods indicated are as
follows:
Six months ended May 31, 1997
Class A Class B Class Y
Sold 4,183,360 1,120,576 --
Issued for reinvested 33,607 7,864 4
distributions
Redeemed (1,722,870) (267,798) --
---------- --------
Net increase 2,494,097 860,642 4
Period ended Nov. 30, 1996*
Class A Class B Class Y
Sold 309,309 89,635 --
Issued for reinvested 94 20 --
distributions
Redeemed (3,206) (110) --
------ ----
Net increase 306,197 89,545 --
* Inception date was Nov. 13, 1996.
<PAGE>
<TABLE>
5. Financial highlights
The table below shows certain important financial information for
evaluating the Funds results.
Fiscal period ended Nov. 30,
Per share income and capital changesa
Class A Class B Class Y
<CAPTION>
1997c 1996b 1997c 1996b 1997c 1996b
Net asset value,
<S> <C> <C> <C> <C> <C> <C>
beginning of period $5.04 $5.00 $5.04 $5.00 $5.04 $5.00
Income from investment operations:
Net investment income .09 -- .07 -- .09 --
Net gains (losses) (both .01 .04 .01 .04 .01 .04
realized and unrealized)
Total from investment .10 .04 .08 .04 .10 .04
operations
Less distributions:
Dividends from net (.09) -- (.07) -- (.09) --
investment income
Net asset value, $5.01 $5.04 $5.01 $5.04 $5.01 $5.04
end of period
Ratios/supplemental data
Class A Class B Class Y
1997c 1996b 1997c 1996b 1997c 1996b
Net assets, end of $14 $2 $5 $-- $-- $--
period (in millions)
Ratio of expenses to .90%d,e .90%d,e 1.65%d,e 1.66%d,e .40%d,e .73%d,e
average daily net assetsg
Ratio of net income to 3.64%d 3.19%d 2.97%d 2.04%d 3.91%d 2.32%d
average daily net assets
Portfolio turnover rate 22% -- 22% -- 22% --
(excluding short-term
securities)
Total returnf 1.1% 1.0% .8% .9% 1.2% 1.0%
aFor a share outstanding throughout the period. Rounded to the nearest cent.
bInception date was Nov. 13, 1996.
cSix months ended May 31, 1997 (Unaudited).
dAdjusted to an annual basis.
eAEFC voluntarily linited total operating expenses for the Fund. Had AEFC not done so, The annual ratio
of expenses to average daily net assets would have been 2.05% and 48.94% for Class A, 2.80% and
55.07 for Class B and 2.07% and 83.81% for Class Y
for the periods ended 1997 and 1996, respectively.
gExpense ratio is based on total expenses of the Fund before reduction of earnings credits on cash balances.
</TABLE>
<PAGE>
<TABLE>
Investments in securities
IDS Intermediate
Tax-Exempt Fund
May 31, 1997 (Unaudited)
(Percentages represent
value of investments
compared to net assets)
Municipal bonds (88.3%)
<CAPTION>
Name of issuer and title of issue (b,c,e) Coupon Maturity Principal Value(a)
rate year amount
Alaska (2.9%)
Ancorage Light & Power Senior Lien
Electric Utilities Refunding Revenue Bonds
<S> <C> <C> <C> <C>
Series 1996C (AMBAC Insured) 4.10% 1999 $100,000 $ 99,175
Anchorage Unlimited Tax General Obligation Bonds
Series 1992 (MBIA Insured) 5.85 2001 425,000 444,095
Total 543,270
Arizona (1.4 %)
Phoenix Water System Refunding Revenue Bonds
Series 1993 4.40 1999 75,000 75,113
Salt River Agricultural Improvement & Power
District Electric Refunding Revenue Bonds
Series 1993C 4.25 2001 70,000 69,219
State Health Facility Authority Hospital
Refunding Revenue Bonds Samaritan Health Systems
Series A (MBIA Insured) 5.10 2002 25,000 25,407
State Transportation Board Highway Sales Tax
Refunding Revenue Bonds
Series 1993 4.25 1998 85,000 85,419
Total 255,158
Arkansas (0.2 %)
State Finance Authority Revolving Loan
Refunding Revenue Bonds
Series 1993B (MBIA Insured) 4.80 2004 40,000 40,033
California (6.7 %)
Lake Elsinore School Financing Authority
Revenue Bonds Series 1997 5.10 2002 205,000 204,145
Lake Elsinore School Financing Authority
Revenue Bonds Series 1997 5.20 2003 220,000 218,592
Long Beach Harbor Revenue Bonds
Series 1993 A.M.T. 4.50 2002 500,000 492,145
Southern California College of Optometry
Educational Facilities Authority College
Revenue Bonds Series 1997B 4.90 1999 340,000 341,044
Total 1,255,926
Colorado (5.5 %)
Arvada Urban Renewal Authority
Tax Allocation Refunding Revenue Bonds
Series 1997A (MBIA Insured) 5.00 2004 300,000 301,062
Arvada Urban Renewal Authority
Tax Allocation Refunding Revenue Bonds
Series 1997A (MBIA Insured) 5.25 2002 200,000 204,306
Denver City & County Airport Revenue Bonds
Series 1996 (MBIA Insured) A.M.T. 4.80 2000 500,000 502,105
Denver City & County School District #1 Facility
Certificate of Participation
Series 1996 (AMBAC Insured) 5.00 2005 30,000 30,124
Total 1,037,597
Connecticut (0.7 %)
State Unlimited General Obligation Bonds
Series 1995A 5.00 2000 130,000 131,907
Florida (0.9%)
State Ports Financing Commission
Port District Revenue Bonds
Series 1996 (MBIA Insured) A.M.T. 4.60 2003 100,000 98,283
State Unlimited General Obligation Bonds
Series 1991 5.40 1998 65,000 65,654
Total 163,937
Georgia (1.5 %)
Clarke County Hospital Authority
Hospital Revenue Certificates
Series 1996 (MBIA Insured) 5.00 2001 150,000 151,809
Dalton Development Authority
Revenue Certificates
Series 1996 (MBIA Insured) 4.625 2004 125,000 122,814
Total 274,623
Hawaii (2.7%)
State General Obligation Bonds
Series 1997 (FGIC Insured) 4.625 2001 500,000 500,350
Illinois (7.5 %)
Chicago Unlimited General Obligation
Refunding Bonds Series 1996B (FGIC Insured) 5.00 2000 130,000 131,406
Chicago Unlimited Tax General Obligation
Refunding Bonds Series 1996B (FGIC Insured) 6.00 2002 520,000 546,042
Dundee Township Open Space General Obligation Bonds
Series 1997 (FSA Insured) 4.40 2002 250,000 244,035
North Chicago Unlimited General Obligation
Refunding Bonds Series 1996 (FGIC Insured) 4.60 2001 200,000 199,536
State Educational Facilities Authority Revenue Bonds
Lewis University Series 1996 5.10 2003 140,000 138,250
State Health Facilities Authority Hospital
Refunding Revenue Bonds Series 1996A 5.00 2003 125,000 124,227
State Health Facilities Authority Hospital
Riverside Health Systems Refunding Revenue Bonds
Series 1996A (MBIA Insured) 5.00 2004 25,000 25,046
Total 1,408,542
Indiana (1.5%)
State Bank Revenue Bonds
Series B 5.00 1999 160,000 161,522
State Transportation Finance Authority Airport
Facility Lease Refunding Revenue Bonds
Series 1996A (AMBAC Insured) 4.50 2003 125,000 122,270
Total 283,792
Kansas (1.1%)
State Development Finance Authority
Health Facilities Revenue Bonds Hays Medical Center
Series B (MBIA Insured) 5.00 2000 200,000 203,242
Louisiana (1.7%)
State Public Facilities Authority College Revenue Bonds
Series 1997 5.10 2003 100,000 99,265
State Unlimited Tax General Obligation
Refunding Bonds Series 1996A 6.00 2002 200,000 211,982
Total 311,247
Maine (0.5%)
State Technical College System
Certificates of Participation
Series 1997 (MBIA Insured) 4.80 2002 100,000 100,175
Michigan (2.1%)
Detroit Sewer Disposal Refunding Revenue Bonds
Series 1993A (FGIC Insured) 5.25 2005 25,000 25,494
State Hospital Finance Authority Revenue Bonds
Series 1997 5.40 1999 125,000 124,943
State Hospital Finance Authority Revenue Bonds
Series 1997 5.60 2000 135,000 134,672
State Trunk Line Fuel Sales Tax
Refunding Revenue Bonds Series 1992B-1 5.10 1999 100,000 101,687
Total 386,796
Minnesota (3.9%)
Minneapolis Community Development Agency
Limited Tax Supported Development Revenue Common
Fund Bonds Series 1997 4.70 1999 160,000 159,909
Minneapolis Community Development Agency
Limited Tax Supported Development Revenue Common
Fund Bonds Series 1997 A.M.T. 4.90 1999 205,000 205,852
Minneapolis Community Development Agency
Limited Tax Supported Developmet Revenue Common
Funds Bonds Series 1997 A.M.T. 5.10 2000 215,000 216,395
State Unlimited General Obligation Refunding Bonds
Series 1993 4.80 1998 150,000 151,590
Total 733,746
Mississippi (1.6%)
Jackson Airport Authority Revenue Bonds
(AMBAC Insured) A.M.T. 6.25 2001-02 280,000 296,293
Missouri (1.2%)
Kansas City Water Revenue Bonds
Series 1996B 5.75 1999 100,000 103,430
State Health & Educational Facility Authority
Hospital Revenue Bonds Series 1993A 4.50 2002 125,000 123,306
Total 226,736
Nevada (1.6 %)
Clark County Special Improvement District No. 108
Local Improvement Bonds Series 1997 4.90 1999 200,000 199,970
Washoe County Limited General Obligation
Refunding Bonds Series 1993B (AMBAC Insured) 4.80 2000 100,000 100,850
Total 300,820
New Hampshire (0.5%)
State Business Finance Authority Resource
Recovery Revenue Bonds (MBIA Insured) 4.65% 2001 $100,000 $ 99,706
New Mexico (2.5%)
Santa Fe Educational Facilities College Revenue
Improvement Refunding Bonds
Series 1997 5.20 2003 235,000 233,357
Santa Fe Educational Facilities College Revenue
Improvement Refunding Bonds
Series 1997 5.30 2004 245,000 243,366
Total 476,723
New York (8.2%)
New York City Individual Development Agency
Civilian Facilities Revenue Bonds Young Men's
Christian Association Greater New York 5.00 2002 300,000 298,092
New York City Unlimited General Obligation Bonds
Series 1996E 5.10 2002 20,000 19,963
New York City Unlimited General Obligation Bonds
Series 1997G 5.00 2000-2 300,000 298,922
State Dormitory Authority Federal Housing
Authority Insured Hospital Revenue Bonds
Series 1996 (AMBAC Insured) 5.00 2001 125,000 126,452
State Dormitory Authority Health Care Revenue Bonds
Series 1997 5.00 2002 500,000 499,055
State Environmental Facilities Corporation
Special Obligation Lease Refunding Revenue Bonds
Series 1996 (AMBAC Insured) 4.60 2001 200,000 199,850
State Urban Development Corporation Lease Revenue Bonds
Series 1996-7 5.00 2004 70,000 69,071
State Urban Development Correctional Facility
Sub Lien Revenue Bonds Series 1996 5.25 2002 30,000 30,629
Total 1,542,034
North Carolina (0.7%)
State Medical Care Community Hospital Revenue Bonds
Duke University Hospital
Series 1996C 4.75 2004 30,000 29,911
Union City Unlimited General Obligation Bonds
Series 1996B (MBIA Insured) 5.25 2001 100,000 102,591
Total 132,502
North Dakota (0.5%)
Ward County Health Care Facility Revenue Bonds
Series 1996A 5.40 2003 100,000 99,331
Ohio (1.6%)
Cleveland Cuyahoga County Port Authority
Refunding Revenue Bonds
Sub Rock & Roll Hall of Fame 5.10 2002 300,000 298,581
Oklahoma (1.5%)
Enid Municipal Authority Sales Tax & Utility
Refunding Revenue Bonds
Series 1996 (AMBAC Insured) 4.50 2000 250,000 249,792
Norman Hospital Authority Refunding Revenue Bonds
Series 1996A (MBIA Insured) 5.00 2004 30,000 30,161
Total 279,953
Oregon (0.3%)
Health Sciences University College Revenue Bonds
Series 1995A (MBIA Insured) 4.375 2002 60,000 58,899
Pennsylvania (4.7%)
Commonwealth of Pennsylvania Unlimited General
Obligation Bonds 3rd Series 1993 4.50 2000 150,000 149,838
Cumberland County Municipal Authority
Nursing Home Revenue Bonds
Series 1996 5.35 2003 125,000 123,992
Delaware County Industrial Development Authority
Pollution Control Refunding Revenue Bonds
Series 1997 5.30 2001 500,000 503,705
Philadelphia Independent Development
Authority Lease Revenue Bonds Series 1996A
(MBIA Insured) 4.45 2001 70,000 69,313
Philadelphia Intergovernmental Cooperation Authority
Special Tax Revenue Bonds
Series 1992 6.00 2002 40,000 42,383
Total 889,231
Rhode Island (1.1 %)
State Refunding Certificates of Participation
Series 1997 (MBIA Insured) 4.70 2002 200,000 198,758
South Carolina (0.4%)
Pickens County School District Unlimited
General Obligation Bonds Series 1996A
(FGIC Insured) 4.90 2006 70,000 70,055
South Dakota (0.8%)
Sioux Falls Sales Tax Revenue Bonds
Series 1996A (AMBAC Insured) 5.00 2004 150,000 150,924
Tennessee (2.7%)
Knox County Unlimited Tax General
Obligation Bonds Series 1997 4.45 2003 500,000 490,790
Memphis Unlimited General Obligation Bonds
Series 1992 4.80 1998 25,000 25,163
Total 515,953
Texas (8.9%)
Arlington Independent School District Unlimited
General Obligation Refunding & Improvement Bonds
Series 1995 Permanent School Fund Guarantee 6.50 2004 25,000 27,381
Austin Utility System Refunding Revenue Bonds
Series 1993 5.00 1999 300,000 303,336
Denison Hospital Authority Revenue Bonds
Series 1997 5.45 2002 255,000 255,551
Houston Water & Sewer System Jr. Lien Refunding
Revenue Bonds Series 1992C (MBIA Insured) 5.10 1999 100,000 101,760
Houston Water & Sewer System Prior Lien Refunding
Revenue Bonds Series 1992B (MBIA Insured) 5.75 2002 500,000 524,705
Houston Water & Sewer System Refunding Revenue Bonds
Series 1992B 5.25 1999 250,000 254,687
Hutto Independent School District Unlimited Tax
School Building & Refunding Bonds
Series 1997 Permanent School Fund Guarantee 4.40 2000 100,000 99,748
North Municipal Water District Solid Waste
Disposal Systems Revenue Bonds Series 1996
(AMBAC Insured) 4.90 2004 35,000 35,146
Trinity River Authority Wastewater System
Refunding Revenue Bonds Series A 5.10 2001 25,000 25,496
University of Texas Permanent Fund College
Refunding Revenue Bonds Series 1996 4.50 1999 40,000 40,228
Total 1,668,038
Utah (2.1%)
St. George Excise Tax Revenue Bonds
Series 1996 (AMBAC Insured) 4.05 1998 250,000 249,935
Salt Lake City School District Unlimited General
Obligation Bonds Series 1995A 5.25 2001 150,000 153,678
Total 403,613
Virginia (1.6%)
Chesapeake Individual Development Authority
Public Facility Lease Revenue Bonds
Series 1996 (MBIA Insured) 4.80 2003 100,000 100,155
State College Building Authority Educational
Facilities Revenue 21st Century College Program 5.00 1998 200,000 202,570
Total 302,725
Washington (1.7%)
State Public Power Supply System Nuclear Project #3
Refunding Revenue Bonds Series 1993B 5.15 2002 300,000 302,856
State Unlimited General Obligation Bonds
Series 1995C 5.50 1997 25,000 25,037
Total 327,893
West Virginia (0.5%)
State Facility Authority Community Building
Series A (MBIA Insured) 5.00 2002 100,000 101,384
Wisconsin ( 2.8%)
Mequon Bond Anticipation Note
Series 1996 4.10 1998 150,000 149,832
State Health & Educational Facilities Authority
Revenue Bonds
Series 1996 (MBIA Insured) 4.75 2004 150,000 148,046
State Health & Educational Facilities Authority
Revenue Bonds Meriter Hospital Series 1996 4.45 1998 100,000 100,105
State Health & Educational Facilities Authority
Revenue Bonds Meriter Hospital Series 1996 4.65 1999 100,000 99,841
State Unlimited General Obligation Bonds
Series 1996F 4.50 2002 35,000 34,682
Total 532,506
Total municipal bonds
(Cost: $ 16,636,013) $16,602,999
Short-term securities (10.6%)
Issuer (d,e) Effective Amount Value(a)
yield payable at
maturity
Municipal notes
Columbia Alabama Industrial Development Pollution
Control Revenue Bonds Series C V.R.D.B. 10-01-22 4.15% $200,000 $200,000
New York General Obligation Bonds Series B 10-01-20 4.20 200,000 200,000
Ohio State Air Quality Development Authority Revenue Bonds
Cincinnati G&E Series 1985 V.R.D.B. 12-01-15 4.20 500,000 500,000
Port Arthur Naval District of Jefferson Texas Pollution
Control Revenue Bonds Texaco 10-01-024 4.15 600,000 600,000
Putnam County Georgia Development Authority
Pollution Control Revenue Bonds 04-01-32 4.15 500,000 500,000
Total short-term securities
(Cost: $2,000,000) $ 2,000,000
Total investment in securities
(Cost: $18,636,013) (e) $18,602,999
See accompanying notes to investments in securities.
</TABLE>
<PAGE>
Investments in securities
Notes to investments in securities
(a) Securities are valued by procedures described in Note 1 to the financial
statements.
(b) Investments in bonds, by rating category as a percentage of total bonds,
are as follows:
Rating (Unaudited)
Rating 5-31-97 11-30-96
AAA 48% 36%
AA 15 29
A 15 30
BBB 21 3
BB and below 1 2
Non-rated -- --
Total 100% 100%
(c) The following abbreviations are used in portfolio descriptions to identify
the insurer of the issue:
AMBAC -- American Municipal Bond Association Corporation
FGIC -- Financial Guarantee Insurance Corporation
MBIA -- Municipal Bond Investors Assurance
(d) The Fund is entitled to receive principal amount from issuer or corporate
guarantor, if indicated in parenthesis, after a day or week's notice. The
maturity date disclosed represents the final maturity.Interest rate varies to
reflect current market conditions; rate shown are effective rates on May 31,
1997.
(e) The following abbreviation are used in the portfolio descriptions:
A.M.T. - Alternative Minimum Tax - As of May 31, 1997, the value of securities
subject to alternative minimum tax represented 9.6% of net assets.
V.R.D.B. - Variable Rate Demand Bond
(f) At May 31, 1997, the cost of securities for federal income tax purposes was
approximately $18,636,000 a and the approximate aggregate gross unrealized
appreciation and depreciation based on that cost was:
Unrealized appreciation $21,000
Unrealized depreciation 54,000
------
Net unrealized depreciation ($33,000)
<PAGE>
Board members and officers of the Fund
President and interested
board member
William R. Pearce
Chairman of the board, Board Services Corporation (provides
administrative services to boards including the boards of the IDS and
IDSLife funds and Master Trust portfolios).
Independent
board members
H. Brewster Atwater, Jr.
Former chairman and chief executive officer, General Mills, Inc.
Lynne V. Cheney
Distinguished fellow, American Enterprise Institute for Public Policy
Research.
Robert F. Froehlke
Former president of all funds in the IDS MUTUAL FUND GROUP.
Heinz F. Hutter
Former president and chief operating officer, Cargill, Inc.
Anne P. Jones
Attorney and telecommunications consultant.
Melvin R. Laird
Senior counsellor for national and international affairs,
The Reader's Digest Association, Inc.
Alan K. Simpson
Former United States senator for Wyoming.
Edson W. Spencer
Former chairman and chief executive officer,
Honeywell, Inc.
Wheelock Whitney
Chairman, Whitney Management Company.
C. Angus Wurtele
Chairman of the board, The Valspar Corporation.
Interested board
members who are
officers and/or
employees of AEFC
William H. Dudley
Senior advisor to the chief executive officer, AEFC.
David R. Hubers
President and chief executive officer, AEFC.
John R. Thomas
Senior vice president, AEFC.
Officers who also
are officers and/or
employees of AEFC
Peter J. Anderson
Senior vice president, AEFC. Vice president - Investments for the Fund.
Melinda S. Urion
Senior vice president and chief financial officer, AEFC. Treasurer for the
Fund.
Other officer
Leslie L. Ogg
President, treasurer and corporate secretary of Board Services
Corporation. Vice president, general counsel and secretary for the Fund.
Refer to the SAI for the board members' and officers' biographies.
<PAGE>
IDS mutual funds
Global/International funds
Funds in this group seek capital growth and/or income by investing primarily in
foreign securities. Foreign investments may be subject to currency fluctuations
and political and economic risks of the countries in which the investments are
made. They are high risk mutual funds with a potential for high reward.
IDS Emerging Markets Fund
Invests in a Portfolio comprised primarily of stocks of companies in developing
countries throughout the world that are believed to offer growth potential.
Seeks to provide long-term growth of capital.
(icon of) world globe
IDS Global Growth Fund
Invests in a Portfolio comprised primarily of stocks of companies throughout the
world that are positioned to meet market needs in a changing world economy.
These companies offer above-average potential for long-term growth.
(icon of) world
IDS International Fund
Invests primarily in common stocks of foreign companies that offer potential for
superior growth. The Fund may invest up to 20% of its assets in the U.S. market.
(icon of) three flags
IDS Global Balanced Fund
Invests in stocks-and bonds in, for the most part, major markets throughout the
world, including the U.S. Seeks to provide a balance of growth of capital and
current income.
(icon of) scale of globes
IDS Global Bond Fund
Invests in a Portfolio comprised primarily of debt securities of U.S. and
foreign issuers to seek high total return through income and growth of capital.
(icon of) globe
Growth funds
Funds in this group seek capital growth, primarily from common stocks. They are
high risk mutual funds with a potential for high reward.
IDS Precious Metals Fund
Invests primarily in the securities of foreign or domestic companies that
explore for, mine and process or distribute gold and other precious metals. A
highly aggressive and speculative fund that seeks long-term growth of capital.
(icon of) cart of precious gems
IDS Discovery Fund
Invests in small- and medium-size, growth-oriented companies emphasizing
technological innovation and productivity enhancement. Buys and holds larger
growth-oriented stocks.
(icon of) ship
IDS Small Company Index Fund
Invests in all or a representative group of the equity securities comprising the
S&P SmallCap 600 Index, as it strives to provide long-term capital appreciation.
(icon of) building
IDS Strategy Aggressive Fund
Invests primarily in common stocks of companies that are selected for their
potential for above-average growth. Above-average means that their growth
potential is better, in the opinion of the portfolio's investment manager, than
the Standard & Poor's Corporation (S&P) 500 Stock Index.
(icon of) chess piece
IDS Research Opportunities Fund
Invests in a Portfolio comprised primarily of equity securities of companies
included in the S&P 500 Index that are believed to have strong growth potential.
The Portfolio is managed using a research methodology by the Research Department
of AEFC. Goal is long-term appreciation.
(icon of) magnifying glass
IDS Growth Fund
Invests in a Portfolio comprised primarily of companies that have above-average
potential for long-term growth as a result of new management, marketing
opportunities or technological superiority.
(icon of) flower
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 and 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.
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) spinning toy
IDS Stock Fund
Invests in a Portfolio comprised primarily of common stocks of companies
representing many sectors of the economy. Seeks current income and growth of
capital.
(icon of) building with columns
IDS Equity Value Fund
Invests primarily in undervalued common stocks that offer potential for growth
of capital and income.
(icon of) three growing flowers
IDS Utilities Income Fund
Invests primarily in the stocks of public utility companies to seek high current
income and growth of income and capital with reduced volatility.
(icon of) light bulb
IDS Diversified Equity Income Fund
Invests in a Portfolio comprised primarily in high-yielding common stocks to
seek high current income and, secondarily, to benefit from the growth potential
offered by stock investments.
(icon of) two puzzle pieces
IDS Mutual
Invests in a Portfolio which seeks to balance between common stocks and senior
securities (preferred stocks and bonds). Seeks a balance of growth of capital
and current income.
(icon of) scale of justice
Income funds
The funds in this group invest their assets primarily in corporate bonds or
government securities to seek interest income. Secondary objective is capital
growth.
Risk varies by bond quality.
IDS Extra Income Fund
Invests in a Portfolio comprised mainly 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) two coins
IDS Bond Fund
Invests mainly in corporate bonds, at least 50% in the higher rated, lower risk
bond categories, or the equivalent, and in government bonds.
(icon of) Greek column
IDS Selective Fund
Invests in a Portfolio comprised primarily of high-quality corporate bonds and
other highly rated debt instruments including government securities and
short-term investments. Seeks current income and preservation of capital.
(icon of) skyline
IDS Federal Income Fund
Invests in a Portfolio comprised primarily of securities issued or guaranteed as
to the timely payment of principal and interest by the U.S. government, its
agencies and instrumentalities. Seeks a high level of current income and safety
of principal consistent with its type of investments.
(icon of) shield with eagle head
Tax-exempt income funds
These funds provide tax-free income by investing in municipal bonds. The income
is generally free from federal income tax, but a portion of the income may be
subject to state and local taxes. Risk varies by bond quality.
IDS Tax-Exempt Bond Fund
Invests mainly in bonds and notes of state or local government units, with at
least 75% in the four highest rated, lowest risk bond categories.
(icon of) shield with Greek column
IDS Insured Tax-Exempt Fund
Invests primarily in municipal securities that are insured as to the timely
payment of principal and interest. The insurance feature minimizes credit risk
of the Fund but does not guarantee the market value of the Fund's shares.
(icon of) shield with star
IDS State Tax-Exempt Funds
(CA, MA, MI, MN, NY, OH)
Invests primarily in high- and medium-grade municipal securities to provide
income to residents of each respective state that is exempt from federal, state
and local income taxes. (New York is the only state that is exempt at the local
level.)
(icon of) shield with U.S. enclosed
IDS High Yield Tax-Exempt Fund
Invests in a Portfolio comprised primarily of medium- and lower-quality
municipal bonds and notes. Lower-quality securities generally involve greater
risk of principal and income.
(icon of) shield with basket of apples enclosed
IDS Intermediate Tax-Exempt Fund
Invests in mainly investment-grade bonds and other debt securities with
intermediate-term maturities issued by state and local government units. Goal is
to seek a high level of current income exempt from federal taxes.
(icon of) shield with tree enclosed
Money market funds
These money market funds have three main goals: conservation of
capital, constant liquidity and the highest possible current
income consistent with these objectives. An investment in
these funds is neither insured nor guaranteed by the U.S. government,
and there can be no assurance that these funds
will be able to maintain a stable net asset value of $1.00
per share. Very limited risk.
IDS Cash Management Fund
Invests in such money market securities as high quality commercial paper,
bankers' acceptances, certificates of deposit (CDs) and other bank securities.
(icon of) piggy bank
IDS Tax-Free Money Fund
Invests primarily in short-term bonds and notes issued by state and local
governments to seek high current income exempt from federal income taxes.
(icon of) shield with piggy bank enclosed
For more complete information about any of these funds, including charges and
expenses, you can obtain a prospectus by contacting your financial advisor or
writing to American Express Shareholder Service, P.O. Box 534, Minneapolis, MN
55440-0534. Read it carefully before you invest or send money.
<PAGE>
Quick telephone reference
American Express Redemptions and exchanges, National/Minnesota
Financial Advisors dividend payments or 800-437-3133
Telephone Transaction reinvestments and automatic
Service payment arrangements Mpls./St. Paul area:
671-3800
TTY Service For the hearing impaired 800-846-4852
American Express Automated account information 800-862-7919
Financial Advisors (TouchTone(R) phones only),
Easy Access Line including current fund prices
and performance, account values
and recent account transactions
<PAGE>
AMERICAN EXPRESS FINANCIAL ADVISORS
IDS Intermediate Tax-Exempt Fund
IDS Tower 10
Minneapolis, MN 55440-0010
