1997 SEMIANNUAL REPORT
IDS
Tax-Exempt
Bond Fund
(icon of) shield with Greek column
The goal of IDS Tax-Exempt Bond Fund, a part of IDS Tax-Exempt Bond Fund, Inc.
is to earn as much current income exempt from federal income taxes as possible
with only modest risk to the shareholder's investment by investing primarily in
investment grade bonds and other debt securities.
Distributed by American Express Financial Advisors Inc.
<PAGE>
(icon of) shield with Greek column
Double-barreled benefit
Most of the public facilities that we take for granted -- schools, water and
sewer systems, highways, government buildings -- are, in effect, largely funded
by loans from citizens. These loans take the form of state and local government
bonds (called "municipals"), which are bought by investors, including Tax-Exempt
Bond Fund. The government gets the funding it needs, while the bond-buyers,
including Fund shareholders, get ongoing interest income. But there's another,
bigger benefit with municipals: Investors pay no federal taxes on the income
they generate and potentially no state taxes. A portion of the income may be
subject to the Alternative Minimum Tax.
Contents
From the president 3
From the portfolio manager 3
The Fund's ten largest holdings 5
Financial statements 6
Notes to financial statements 9
Investments in securities 18
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 Tax-Exempt Bond Fund weathered an up-and-down bond market to post
positive results during the first half of the fiscal year. For investors
in the Fund's Class A shares, the total return (which includes net asset
value change and dividends) was 1.8% from December 1996 through May 1997.
Throughout much of the past winter, reports of stronger-than-expected
economic growth had many investors worried that higher inflation - bonds'
ongoing enemy was just around the corner. Consequently, a wave of selling
came over the market that drove up long-term interest rates and, aside
from a brief respite in early February, continued into mid-April.
Ironically, during that time the inflation data remained unthreatening.
What's more, it wasn't until late March that the Federal Reserve Board
decided that the inflation potential was probably strong enough for it to
raise short-term interest rates slightly. By that time, most of the damage
to bond prices had already been done.
A spring renewal
The final weeks of the period brought improvement, however. Reassured by
still-tame inflation reports and encouraged by an announcement that
Congress and the President had agreed to bring the federal budget into
balance, investors began wading back into the bond market, driving down
long-term interest rates and driving up bond prices in the process.
Ultimately, by the end of May, the bond market had recovered most of its
lost ground.
As for municipal bonds in particular, they performed better than their
taxable counterparts, U.S. Treasury bonds, for the six months as a whole
and did so with less volatility. Although the Fund's net asset value did
fluctuate a fair amount, volatility was limited by the close-to-neutral
duration of the portfolio. (Duration, a function of the average maturity
of the portfolio's investments, determines how sensitive the net asset
value is to changes in interest rates. The longer the duration, the
greater the sensitivity.)
Barbell pays off
Also affecting performance was a continuation of the "barbell" investment
approach I've employed for some time. This involves concentrating
investments in two quality categories - AAA and BBB. While both are in the
investment-grade, or high-quality group, the higher yields offered by the
BBB holdings provide a good complement to the superior quality of the AAA
securities. In addition, over the past six months, prices of BBB
securities held up better than higher-rated securities when interest rates
rose. The end result of this strategy is an enhanced dividend with little
sacrifice in overall portfolio quality.
Looking ahead, I expect to shorten the duration somewhat more in
anticipation of higher interest rates during the rest of 1997. If that
scenario plays out, the shorter duration will help shore up the net asset
value. In addition, at this writing (in mid-June), I have also begun to
raise the level of cash reserves a bit higher, again to provide a buffer
if rates head higher.
Terry L. Seierstad
(picture of) Terry Seierstad
Terry L. Seierstad
Portfolio manager
<PAGE>
To our shareholders
Class A
6-month performance
(All figures per share)
Net asset value (NAV)
May 31, 1997 $ 3.98
Nov. 30, 1996 $ 4.01
Decrease $ 0.03
Distributions
Dec. 1, 1996 - May 31, 1997
From income $ 0.10
From capital gains $ --
Total distributions $ 0.10
Total return* 1.8%**
Class B
6-month performance
(All figures per share)
Net asset value (NAV)
May 31, 1997 $ 3.98
Nov. 30, 1996 $ 4.01
Decrease $ 0.03
Distributions
Dec. 1, 1996 - May 31, 1997
From income $ 0.09
From capital gains $ --
Total distributions $ 0.09
Total return* 1.4%**
Class Y
6-month performance
(All figures per share)
Net asset value (NAV)
May 31, 1997 $ 3.98
Nov, 30, 1996 $ 4.01
Decrease $ 0.03
Distributions
Dec. 1, 1996 - May 31, 1997
From income $ 0.11
From capital gains $ --
Total distributions $ 0.11
Total return* 1.9%**
*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)
New York State Urban Development Correctional Capital
Facility Revenue Bonds Series 4
5.375% 2023 3.03% $30,943,430
San Antonio Texas Electric & Gas Systems Refunding
Revenue Bonds Series 1989-1989A 2.68 27,362,475
6.50% 2012
San Antonio Texas Water Refunding Revenue Bonds
6.40% 2007 2.63 26,927,000
Delaware County Pennsylvania Industrial Development
Authority Pollution Control Refunding Revenue Bonds
Philadelphia Electric Company
7.375% 2021 2.48 25,393,775
Illinois Public Building Commission of Chicago
Building Revenue Bonds Board of Education of Chicago
Series 1990A
6.50% 2018 2.41 24,651,500
Georgia Municipal Electric Authority
Special Obligation Bonds Project #1
4th Crossover Series X
6.50% 2020 2.15 21,977,719
Eastern North Carolina Municipal Power Agency System
Refunding Revenue Bonds Series 1989A
6.50% 2024 1.97 20,129,800
Washington Issaquah School District #411 King County
Unlimited Tax General Obligation Refunding Bonds 1992
6.375% 2008 1.80 18,431,378
New York Dormitory Authority New York City
Court Facility Lease Revenue Bonds Series 1993A
5.25% 2021 1.75 17,942,400
New York State Mortgage Agency Homeowner
Mortgage Revenue Bonds Series TT
7.50% 2015 1.67 17,034,362
The ten holdings listed here make up 22.57% of the Fund's net assets
<PAGE>
<TABLE>
Financial statements
Statement of assets and liabilities
IDS Tax-Exempt Bond Fund
May 31, 1997
Assets
<CAPTION>
(Unaudited)
Investments in securities, at value (Note 1)
<S> <C>
(identified cost $913,144,495) $1,005,432,891
Accrued interest receivable 16,955,067
Receivable for investment securities sold 973,637
-------
Total assets 1,023,361,595
-------------
Liabilities
Disbursements in excess of cash on demand deposit 645,054
Dividends payable to shareholders 274,802
Accrued investment management services fee 12,541
Accrued distribution fee 435
Accrued service fee 4,882
Accrued transfer agency fee 4,822
Accrued administrative services fee 1,113
Other accrued expenses 60,979
------
Total liabilities 1,004,628
---------
Net assets applicable to outstanding capital stock $1,022,356,967
--------------
Represented by
Capital stock-- $.01 par value (Note 1) $ 2,570,655
Additional paid-in capital 968,505,318
Undistributed net investment income 149,214
Accumulated net realized loss (Notes 1 and 5) (41,156,616)
Unrealized appreciation 92,288,396
----------
Total-- representing net assets applicable to outstanding capital stock $1,022,356,967
==============
Net assets applicable to outstanding shares: Class A $1,001,099,394
Class B $ 21,247,765
Class Y $ 9,808
Net asset value per share of outstanding capital stock: Class A shares 251,721,344 $ 3.98
Class B shares 5,341,724 $ 3.98
Class Y shares 2,466 $ 3.98
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
Statement of operations
IDS Tax-Exempt Bond Fund
Six months ended May 31, 1997
Investment income
<CAPTION>
(Unaudited)
Income:
<S> <C>
Interest $31,342,760
-----------
Expenses (Note 2):
Investment management services fee 2,335,893
Distribution fee -- Class B 75,802
Transfer agency fee 234,957
Incremental transfer agency fee-- Class B 531
Service fee
Class A 874,905
Class B 17,550
Class Y 1
Administrative services fees and expenses 215,090
Compensation of board members 8,990
Compensation of officers 804
Custodian fees 33,993
Postage 48,205
Registration fees 47,370
Reports to shareholders 12,899
Audit fees 17,500
Other 2,788
-----
Total expenses 3,927,278
Earnings credits on cash balances (Note 2) (53,539)
-------
Total net expenses 3,873,739
---------
Investment income -- net 27,469,021
----------
Realized and unrealized gain (loss) -- net
Net realized gain on security transactions (Note 3) 3,257,311
Net realized loss on financial futures contracts (3,865,475)
----------
Net realized loss on investments (608,164)
Net change in unrealized appreciation or depreciation (9,172,680)
----------
Net loss on investments (9,780,844)
----------
Net increase in net assets resulting from operations $17,688,177
===========
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
Financial statements
Statements of changes in net assets
IDS Tax-Exempt Bond Fund
<CAPTION>
Operations and distributions May 31, 1997 Nov. 30, 1996
Six months ended Year ended
(Unaudited)
<S> <C> <C>
Investment income-- net $ 27,469,021 $ 57,320,335
Net realized gain (loss) on investments (608,164) 3,923,552
Net change in unrealized appreciation or depreciation (9,172,680) (19,137,045)
---------- -----------
Net increase in net assets resulting from operations 17,688,177 42,106,842
---------- ----------
Distributions to shareholders from:
Net investment income
Class A (26,950,531) (56,736,844)
Class B (456,439) (763,420)
Class Y (261) (493)
---- ----
Total distributions (27,407,231) (57,500,757)
----------- -----------
Capital share transactions (Note 4)
Proceeds from sales
Class A shares (Note 2) 24,657,625 83,652,708
Class B shares 3,228,716 8,693,815
Reinvestment of distributions at net asset value
Class A shares 18,454,811 38,617,746
Class B shares 385,568 649,236
Class Y shares 261 493
Payments for redemptions
Class A shares (99,916,636) (201,981,153)
Class B shares (Note 2) (2,022,638) (3,055,212)
---------- ----------
Decrease in net assets from capital share transactions (55,212,293) (73,422,367)
----------- -----------
Total decrease in net assets (64,931,347) (88,816,282)
Net assets at beginning of period 1,087,288,314 1,176,104,596
------------- -------------
Net assets at end of period
(including undistributed net investment income of
$149,214 and $87,424) $1,022,356,967 $1,087,288,314
============== ==============
See accompanying notes to financial statements.
</TABLE>
<PAGE>
Notes to financial statements
IDS Tax-Exempt Bond Fund
(Unaudited as to May 31, 1997)
1
Summary of
significant
accounting policies
IDS Tax-Exempt Bond 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. The Fund
invests primarily in investment-grade bonds and other debt securities
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.
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 the
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 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 may 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.
2
Expenses and
sales charges
Effective March 20, 1995, the Fund entered into agreements with American
Express Financial Corporation (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:
o Class A $15.50
o Class B $16.50
o Class Y $15.50
Also effective March 20, 1995, 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 Fund's
average daily net assets attributable to Class Y shares.
Sales charges by American Express Financial Advisors Inc. for distributing
Fund shares were $388,022 for Class A and $17,831 for Class B for the six
months ended May 31, 1997.
During the six months ended May 31, 1997, the Fund's custodian and
transfer agency fees were reduced by $53,539 as a result of earnings
credits from overnight cash balances.
3
Securities
transactions
Cost of purchases and proceeds from sales of securities (other than
short-term obligations) aggregated $81,782,295 and $128,200,341,
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 as follows:
Six months ended May 31, 1997
Class A Class B Class Y
Sold 6,233,365 815,749 --
Issued for reinvested 4,672,554 97,615 66
distributions
Redeemed (25,248,961) (510,983) --
----------- --------
Net increase (decrease) (14,343,042) 402,381 66
=========== ======= ==
Year ended Nov. 30, 1996
Class A Class B Class Y
Sold 21,003,086 2,184,310 --
Issued for reinvested 9,722,609 163,650 125
distributions
Redeemed (50,899,679) (771,956) --
----------- --------
Net increase (decrease) (20,173,984) 1,576,004 125
=========== ========= ===
5
Capital loss
carryover
For federal income tax purposes, the Fund has a capital loss carryover of
$20,006,606 at Nov. 30, 1996, that will expire in 2002 if not offset by
subsequent capital gains. It is unlikely the board will authorize a
distribution of any realized capital gains until the available capital
loss carryover has been offset or expires.
<PAGE>
<TABLE>
6
Financial
highlights
The tables below show certain important financial information for evaluating the
Fund's results.
Fiscal period ended Nov. 30,
Per share income and capital changesa
Class A
<CAPTION>
1997c 1996 1995 1994 1993 1992 1991b1 1990 1989 1988
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, $4.01 $4.06 $3.54 $4.19 $3.98 $3.93 $3.88 $3.98 $3.96 $3.93
beginning of period
Income from investment operations:
Net investment income .10 .20 .21 .23 .22 .22 .22 .26 .28 .28
Net gains (losses) (.03) (.05) .52 (.56) .23 .11 .05 (.01) .17 .03
(both realized
and unrealized)
Total from investment .07 .15 .73 (.33) .45 .33 .27 .25 .45 .31
operations
Less distributions:
Dividends from net (.10) (.20) (.21) (.23) (.22) (.22) (.22) (.26) (.28) (.28)
investment income
Distributions from -- -- -- (.09) (.02) (.06) -- (.09) (.15) --
realized gains
Total distributions (.10) (.20) (.21) (.32) (.24) (.28) (.22) (.35) (.43) (.28)
Net asset value, $3.98 $4.01 $4.06 $3.54 $4.19 $3.98 $3.93 $3.88 $3.98 $3.96
end of period
Ratios/supplemental data
Class A
1997c 1996 1995 1994 1993 1992 1991b 1990 1989 1988
Net assets, end of $1,001 $1,067 $1,162 $1,054 $1,291 $1,273 $1,188 $1,094 $1,010 $927
period (in millions)
Ratio of expenses to .74%e .73% .71% .61% .63% .64% .60%e .61% .61% .60%
average daily net assetsd
Ratio of net income 5.29%e 5.15% 5.52% 5.82% 5.54% 5.68% 6.11%e 6.61% 6.90% 7.16%
to average daily
net assets
Portfolio turnover rate 8% 62% 54% 66% 43% 63% 69% 112% 96% 54%
(excluding short-term
securities)
Total returnf 1.8% 4.0% 21.1% (8.3%) 11.7% 8.7% 8.3%e 6.1% 12.1% 9.6%
a For a share outstanding throughout the period. Rounded to nearest cent.
b The Fund's fiscal year-end was changed from Dec. 31 to Nov. 30,
effective 1991.
c Six months ended May 31, 1997 (Unaudited).
d Effective fiscal year 1996, expense ratio is based on total expenses of
the Fund before reduction of earnings credits on cash balances.
e Adjusted to an annual basis.
f Total return does not reflect payment of a sales charge.
</TABLE>
<PAGE>
<TABLE>
Fiscal period ended Nov. 30,
<CAPTION>
Per share income and capital changesa
Class B Class Y
1997c 1996 1995b 1997c 1996 1995b
<S> <C> <C> <C> <C> <C> <C>
Net asset value, $4.01 $4.06 $3.88 $4.01 $4.06 $3.88
beginning of period
Income from investment operations:
Net investment income .09 .17 .14 .11 .21 .16
Net gains (losses) (both (.03) (.05) .18 (.03) (.05) .18
realized and unrealized)
Total from investment .06 .12 .32 .08 .16 .34
operations
Less distributions:
Dividends from net (.09) (.17) (.14) (.11) (.21) (.16)
investment income
Net asset value, $3.98 $4.01 $4.06 $3.98 $4.01 $4.06
end of period
Ratios/supplemental data
Class B Class Y
1997c 1996 1995b 1997c 1996 1995b
Net assets, end of $21 $20 $14 $-- $-- $--
period (in millions)
Ratio of expenses to 1.50%e 1.49% 1.52%e .57% .55% .58%e
average daily net assetsd
Ratio of net income to 4.53%e 4.40% 4.55%e 5.47% 5.33% 5.52%e
average daily net assets
Portfolio turnover rate 8% 62% 54% 8% 62% 54%
(excluding short-term
securities)
Total returnf 1.4% 3.2% 8.6% 1.9% 4.2% 9.2%
a For a share outstanding throughout the period. Rounded to the nearest
cent.
b Inception date was March 20, 1995.
c Six months ended May 31, 1997 (Unaudited).
d Effective fiscal year 1996, expense ratio is based on total expenses of
the Fund before reduction of earnings credits on cash balances.
e Adjusted to an annual basis.
f Total return does not reflect payment of a sales charge.
</TABLE>
<PAGE>
<TABLE>
Investments in securities (Percentages represent
value of investments
IDS Tax-Exempt Bond Fund compared to net assets)
May 31, 1997 (Unaudited)
Municipal bonds (93.5%)
<CAPTION>
Name of issuer and Coupon Maturity Principal Value(a)
title of issue (b,c) rate year amount
Alabama (0.4%)
Mobile Industrial Development Board Solid Waste
Refunding Revenue Bonds
<S> <C> <C> <C> <C>
Mobile Energy Services 6.95 % 2020 $ 3,750,000 $ 3,990,825
Alaska (0.6%)
North Slope Borough General Obligation Bonds
Series 1994B Zero Coupon (CGIC Insured) 7.05 2004 3,000,000(d) 2,092,650
North Slope Borough General Obligation Bonds
Series 1994B Zero Coupon (CGIC Insured) 7.15 2005 3,000,000(d) 1,976,430
State Housing Finance Veterans Mortgage Corporation
Collateralized Bonds Series 1990 7.50 2030 3,205,000 2,663,292
Total 6,732,372
Arizona (3.8%)
Maricopa County Arizona Industrial Development Authority
Multi-family Housing Revenue Bonds Series A 6.625 2026 2,500,000 2,553,950
Phoenix Arizona Industrial Development Authority
Refunding Revenue Bonds Christian Care Apartments 6.25 2016 2,000,000 2,013,860
Phoenix Industrial Development Authority
Single Family Mortgage
Revenue Capital Appreciation Bonds
Escrowed to Maturity Zero Coupon 6.74 2014 39,000,000(d) 14,410,500
Phoenix Junior Lien Street & Highway User
Refunding Revenue Bonds Series 1992 6.25 2011 10,350,000 10,998,635
Tucson Street & Highway User Revenue Bonds
Series 1991B 6.25 2010 8,250,000 8,740,545
Total 38,717,490
California (9.1%)
Foothill/Eastern Transportation Corridor Agency
Toll Road Revenue Bonds Series 1995A 5.00 2035 12,000,000 10,122,960
Los Angeles County Certificate of Participation
Inverse Floater 6.71 2015 3,600,000(e) 3,706,956
Orange County Certificate of Participation Civic Center Facility
Capital Appreciation Refunding Bonds
Zero Coupon (AMBAC Insured) 6.75 2018 13,795,000(d) 4,026,071
Regional Airports Improvement Corporation
Lease Refunding Revenue Bonds 6.35 2025 5,000,000 5,137,200
Sacramento Cogeneration Authority Revenue Bonds
Proctor & Gamble Series 1995 6.50 2014 5,000,000 5,225,300
Sacramento Power Cogeneration Authority
Revenue Bonds Series 1995 6.00 2022 2,700,000 2,717,199
San Francisco City & County Redevelopment Financing Authority
Tax Allocation Refunding Bonds Series B 5.25 2021 16,660,000 15,414,498
San Jose Redevelopment Agency Merged Area
Tax Allocation Bonds Series 1993 (MBIA Insured) 4.75 2024 9,000,000 7,703,730
Southern California Public Power Authority Revenue Bonds
Mead Adelanto Series A (AMBAC Insured) 4.875 2020 6,590,000 5,811,853
State Public Works Board California Community Colleges
Lease Revenue Bonds Series 1994B 7.00 2019 3,900,000 4,475,406
State Public Works Board University of California
Lease Refunding Revenue Bonds
Series A (AMBAC Insured) 5.00 2023 6,000,000 5,322,840
State Public Works Board University of California
Lease Refunding Revenue Bonds
Series A (AMBAC Insured) 5.50 2014 7,275,000 7,259,068
Statewide Community Development Authority
Insurance Certificate of Participation
Childrens Hospital of Los Angeles Revenue Bonds
(MBIA Insured) 4.75 2021 5,250,000 4,480,140
Ukiah Unified School District Building Mendocino County
Certificate of Participation Series 1993 6.00 2010 3,790,000 3,833,964
Upland Certificate of Participation
San Antonio Community Hospital 5.00 2018 2,745,000 2,437,670
West Covina Redevelopment Agency Community Facilities
District Special Tax Refunding Bonds Series 1996 6.00 2017 5,000,000 5,147,900
Total 92,822,755
Colorado (1.6%)
Arapahoe County Public Highway Authority Capital
Improvement Trust Fund Highway Revenue Bonds 7.00 2026 5,685,000 6,096,367
Castle Rock Ranch Improvement Public Facility Revenue Bonds
Series 1996 6.375 2011 5,750,000 6,085,742
Colorado Health Facility Authority
Hospital Improvement Refunding Revenue Bonds
Parkview Episcopal Medical Center Series 1995 6.00 2016 4,000,000 3,976,080
Total 16,158,189
Connecticut (0.8%)
State General Obligation Bonds Series 1992A 6.40 2006 8,000,000 8,679,680
Delaware (0.2%)
State University Revenue Bonds Series 1989 6.00 2014 2,000,000 2,024,060
District of Columbia (2.1%)
District of Columbia Redevelopment Limited Agency
Special Tax Revenue Bonds 5.625 2010 1,890,000 1,852,446
General Obligation Bonds Series 1994B Zero Coupon
(MBIA Insured) 6.59 2013 23,945,000(d) 9,635,707
General Obligation Bonds Series 1994B Zero Coupon
(MBIA Insured) 6.64 2014 26,415,000(d) 10,008,644
Total 21,496,797
Florida (3.3%)
Duvall County Housing Authority Single Family Mortgage
Refunding Revenue Bonds Series 1991 (FGIC Insured)7.35 2024 3,430,000 3,653,533
Jacksonville Excise Taxes Refunding Revenue Bonds
Series 1992 (AMBAC Insured) 6.50 2008 5,000,000 5,460,800
St. John's River Water Management District Land Acquisition
Revenue Bonds Series 1989 (AMBAC Insured) 6.00 2009 7,000,000 7,236,110
State Board of Education Administration Capital Outlay
Public Education Bonds Series 1991C 6.50 2008-09 11,225,000 12,252,649
Village Center Community Development District
Recreational Revenue Bonds Antic Notes 6.50 2000 4,945,000 4,957,362
Total 33,560,454
Georgia (2.6%)
Municipal Electric Authority Refunding Revenue Bonds
Series 1989T 6.50 2025 5,000,000 5,172,100
Municipal Electric Authority Special Obligation Bonds
Project #1 4th Crossover Series X
(Secondary MBIA Insured) 6.50 2020 19,550,000 21,977,719
Total 27,149,819
Hawaii (0.6%)
City & County of Honolulu General Obligation Bonds
Series 1992A 6.30 2006 5,880,000 6,338,993
Idaho (0.3%)
Health Facilities Authority Revenue Bonds
Bannock Regional Medical Center Series 1995 6.125 2025 2,250,000 2,250,383
Health Facilities Authority Revenue Bonds
Bannock Regional Medical Center Series 1995 6.375 2017 1,450,000 1,481,711
Total 3,732,094
Illinois (8.3%)
Alton Madison County Hospital Facility
Refunding Revenue Bonds St. Anthony's Health Center
Series 1996 6.00 2010-14 4,740,000 4,663,848
Cook & Will Counties TWP High School District #206
Capital Appreciation Bonds
Series 1994C Zero Coupon (AMBAC Insured) 6.55 2010 2,605,000(d) 1,232,503
Cook County School District #170 Chicago Heights
Capital Appreciation Bonds
Series 1994C Zero Coupon (AMBAC Insured) 6.50 2009 2,155,000(d) 1,109,631
Cook County School District #170 Chicago Heights
Capital Appreciation Bonds
Series 1994C Zero Coupon (AMBAC Insured) 6.55 2010 2,155,000(d) 1,039,874
Cook County Unlimited Tax General Obligation
Bonds Series 1989 6.50 2009 5,800,000 6,085,882
Educational Facilities Authority Revenue Bonds
Lewis University Series 1996 6.10 2016 2,005,000 2,014,564
Educational Facilities Revenue Bonds
Columbian College 6.125 2018 3,015,000 2,977,765
Educational Facilities Revenue Bonds
Columbian College 6.875 2017 2,760,000 2,882,185
Health Facilities Authority Refunding Revenue Bonds
Edwards Hospital Series 1993A 6.00 2019 3,055,000 3,050,998
Health Facilities Authority Refunding Revenue Bonds
Masonic Medical Center Series 1993 5.50 2019 5,000,000 4,723,500
Health Facilities Authority
Sarah Bush Lincoln Health Center
Hospital Refunding Revenue Bonds Series 1996B 5.50 2016 5,490,000 5,212,865
Metropolitan Pier & Exposition Authority
Dedicated State Tax Capital Appreciation Revenue Bonds
McCormick Place Expansion
Series A Zero Coupon (FGIC Insured) 6.55 2021 5,000,000(d) 1,228,900
Metropolitan Pier & Exposition Authority McCormick Place
Expansion Bonds Series A Zero Coupon
(FGIC Insured) 6.64 2010 11,000,000(d) 5,339,180
Metropolitan Pier & Exposition Authority McCormick Place
Expansion Bonds Series A Zero Coupon
(FGIC Insured) 6.80 2016 9,000,000(d) 3,018,690
Public Building Commission of Chicago Building Revenue Bonds
Board of Education of Chicago Series 1990A
Escrowed to Maturity (MBIA Insured) 6.50 2018 23,500,000 24,651,500
Public Building Commission of Chicago Building Revenue Bonds
State Development Finance Authority
Power Refunding Bonds Series 1991A 7.375 2021 10,000,000 11,169,500
State Development Finance Authority Regency Park
Retirement Housing Revenue Bonds Series 1991B
Zero Coupon Escrowed to Maturity 6.50 2025 10,000,000(d) 1,416,900
State Development Finance Authority Regency Park
Retirement Housing Revenue Bonds Zero Coupon 7.75 2020 13,745,000(d) 2,792,434
Total 84,610,719
Indiana (2.7%)
Health Facilities Financial Authority
Hospital Revenue Bonds Series 1996 6.00 2010 3,260,000 3,267,042
Municipal Power Agency Power Supply System Refunding
Revenue Bonds Series 1989A (AMBAC Insured) 6.50 2016 8,800,000 9,267,632
Seymour Economic Development Revenue Bonds
Union Camp Series 1992 6.25 2012 2,870,000 3,079,395
Transportation Finance Authority Highway Revenue Bonds
Series 1990A 7.25 2015 10,000,000 11,945,300
Total 27,559,369
Iowa (0.4%)
State Finance Authority Single Family Mortgage-Backed
Securities Program Bonds Series 1991A 7.25 2016 3,655,000 3,853,759
Kentucky (0.7%)
Muhlenberg County Hospital Refunding Revenue Bonds
Series 1996 6.75 2010 3,985,000 4,033,059
Owensboro Electric Light & Power Refunding Revenue Bonds
Series B Zero Coupon (AMBAC Insured) 6.68 2015 9,125,000(d) 3,413,571
Total 7,446,630
Louisiana (2.3%)
Industrial Development Board of Bastrop Percent Pollution Control
Refunding Revenue Bonds International Paper Company
Series 1992A 6.90 2007 6,875,000 7,473,744
New Orleans Capital Appreciation Refunding Revenue Bonds
Zero Coupon (AMBAC Insured) 6.62 2012 6,250,000(d) 2,663,875
New Orleans Home Mortgage Authority Special Obligation
Refunding Bonds Series 1992 Escrowed to Maturity 6.25 2011 9,000,000 9,721,440
Public Facilities Authority College Revenue Bonds
Series 1997 5.90 2017 1,000,000 985,040
Public Facilities Authority Multi-family Housing
Windsor Housing Foundation Revenue Bonds
Series 1996A 6.125 2015 3,385,000 3,158,983
Total 24,003,082
Maryland (2.6%)
Health & Educational Facility Authority Revenue Bonds
Frederick Memorial Hospital Series 1993
(FGIC Insured) 5.00 2028 10,000,000 8,985,400
State Community Development Administration
Department of Housing & Community Development
Single Family Program Bonds Series 1991-1 7.30 2017 10,500,000 11,041,485
State Health & Higher Educational Facility Authority
Revenue Bonds Anne Arndel Medical Center
(AMBAC Insured) 5.00 2023 7,000,000 6,356,070
Total 26,382,955
Massachusetts (1.6%)
Health & Educational Facilities Authority Revenue Bonds
Valley Regional Health System Series C
(Connie Lee Insured) 5.75 2018 3,500,000 3,487,085
Health & Educational Facilities Authority Revenue Bonds
Melrose - Wakefield Hospital Series 1992B 6.375 2016 1,430,000 1,477,976
State Municipal Wholesale Electric Power Supply System
Pre-Refunded Revenue Bonds Series 1992B 6.75 2017 10,000,000 11,113,700
Total 16,078,761
Michigan (2.4%)
Battle Creek Calhoun County Downtown Development
Authority Bonds Series 1994 7.65 2022 3,750,000 4,306,912
Detroit Downtown Development Authority
Junior Lien Tax Increment Bonds 6.50 2025 6,000,000 6,166,560
Detroit Water Supply System Refunding Revenue Bonds
Series 1992 (FGIC Insured) 6.25 2007 2,000,000 2,142,060
State Hospital Finance Authority Refunding Revenue Bonds
Presbyterian Villages Obligated Group Series 1995 6.40 2015 1,000,000 1,004,960
State Hospital Finance Authority Refunding Revenue Bonds
Presbyterian Villages Obligated Group Series 1995 6.50 2025 1,000,000 1,009,290
State Hospital Finance Authority Refunding Revenue Bonds
Central Michigan Community Hospital 6.25 2016 2,225,000 2,239,129
State Hospital Finance Authority Refunding Revenue Bonds
Series 1997 6.375 2015 400,000 400,460
State Hospital Finance Authority Refunding Revenue Bonds
Sinai Hospital of Greater Detroit Series 1995 6.625 2016 2,000,000 2,077,700
State Strategic Fund Percent Limited Obligation
Refunding Revenue Bonds Ford Motor Company
Series 1991A 7.10 2006 5,000,000 5,734,700
Total 25,081,771
Minnesota (2.9%)
Minneapolis & St. Paul Housing & Redevelopment Authority
Health Care System Series 1990A 7.40 2005 4,500,000 4,920,930
Rochester Health Care Facility Revenue Bonds
Mayo Foundation Series A 4.95 2019 15,000,000 13,377,750
State Housing Finance Agency Single Family
Mortgage Bonds Series 1990C (FHA Insured) 7.70 2014 2,205,000 2,322,791
State Housing Finance Agency Single Family
Mortgage Revenue Bonds Series 1988E 7.65 2014 7,365,000 6,481,692
Washington County Housing Redevelopment Authority
Woodbury Multi-Family Housing Refunding Revenue Bonds
Series 1996 6.95 2023 2,495,000 2,491,981
Total 29,595,144
Missouri (1.0%)
St. Louis Region Convention & Sports Complex Authority
Series 1991C 7.90 2021 8,500,000 9,840,025
Nevada (0.4%)
Clark County Special Improvement District 108
Local Improvement Bonds Series 1997 6.50 2012 4,440,000 4,514,192
New Jersey (1.6%)
Turnpike Authority Revenue Bonds Series 1991C 6.50 2005 16,000,000 16,936,000
New Mexico (0.1%)
Santa Fe Education Facilities
College Improvement Refunding Revenue Bonds
Series 1997 5.875 2021 1,000,000 962,990
New York (12.1%)
Dormitory Authority New York City Court Facility Lease
Revenue Bonds Series 1993A 5.25 2021 20,000,000 17,942,400
Dormitory Authority New York City University System
Consolidated 2nd General Revenue Bonds Series A 5.75 2018 5,500,000 5,479,705
Dormitory Authority New York State Department of Health
Refunding Revenue Bonds 5.50 2020 3,060,000 2,855,500
New York City General Obligation Bonds Series B 6.75 2017 11,150,000 11,741,842
New York City General Obligation Bonds Series 1995B 7.00 2016 8,850,000 9,596,675
New York City General Obligation Bonds Series 1996I 5.875 2018 3,000,000 2,962,470
New York City General Obligation Bonds Series 1996F 5.75 2015 3,000,000 2,937,870
New York City General Obligation Bonds Series 1996G 5.75 2017 3,500,000 3,415,195
New York City Municipal Water Financial Authority
Water & Sewer System Revenue Bonds
Series 1997B 5.75 2026 7,000,000 6,902,560
State Medical Care Facility Finance Agency
Mental Health Services Facility Improvement
Refunding Revenue Bonds Series 1993F 5.375 2014 7,510,000 7,040,926
State Mortgage Agency Homeowner
Mortgage Revenue Bonds Series TT 7.50 2015 15,945,000 17,034,362
State Urban Development Corporation Correctional
Capital Facilities Refunding Revenue Bonds
Series 1993A 5.25 2021 5,000,000 4,494,900
State Urban Development Correctional Capital Facility
Revenue Bonds Series 4 5.375 2023 33,815,000 30,943,430
Total 123,347,835
North Carolina (3.8%)
Eastern Municipal Power Agency System
Refunding Revenue Bonds Series 1989A 6.50 2024 20,000,000 20,129,800
Eastern Municipal Power Agency System Revenue Bonds
Series D 5.60 2016 6,500,000 6,134,310
Eastern Municipal Power Agency System Revenue Bonds
Series G 5.75 2016 12,750,000 12,244,972
Total 38,509,082
North Dakota (0.4%)
Ward County Health Care Facilities Refunding Revenue Bonds
Series 1996B 6.25 2021 4,365,000 4,380,496
Ohio (0.9%)
Columbus Sewerage System Refunding Revenue Bonds
Series 1992 6.30 2005 3,500,000 3,771,320
State Air Quality Development Authority Edison
Pollution Control Refunding Revenue Bonds Series A5.95 2029 5,000,000 4,933,650
Water & Air Quality Development Authority
Collateralized Pollution Control Refunding Revenue Bonds
Cleveland Electric Series 1995 7.70 2025 300,000 326,697
Total 9,031,667
Oklahoma (0.4%)
Stillwater Medical Center Authority
Hospital Revenue Bonds Series 1997B 6.35 2012 1,000,000 1,003,290
Valley View Hospital Authority
Refunding Revenue Bonds Series 1996 6.00 2014 2,695,000 2,637,596
Total 3,640,886
Pennsylvania (3.8%)
Allegheny County Industrial Development Authority
Environmental Improvement Refunding Revenue Bonds
Series 1996 6.00 2014 3,500,000 3,536,505
Delaware County Industrial Development Authority
Pollution Control Refunding Revenue Bonds Philadelphia
Electric Company 7.375 2021 23,540,000 25,393,775
Delaware County Industrial Development Authority
Pollution Control Refunding Revenue Bonds
Series 1997A 6.10 2013 4,000,000 4,060,160
Higher Education Facilities Authority
College Revenue Bonds Series 1997 5.85 2017 1,480,000 1,471,386
Montgomery County Industrial Development Authority
Retirement Community Revenue Bonds Series 1996B 5.625 2012 4,000,000 3,897,240
Total 38,359,066
Rhode Island (0.2%)
Providence Special Tax Increment Obligation Bonds
Series D 6.65 2016 1,500,000 1,552,050
South Carolina (0.4%)
Horry County Hospital Refunding Revenue Bonds
Conway Hospital Series 1992 6.75 2012 4,000,000 4,142,400
Texas (12.9%)
Austin Utility System Capital Appreciation
Refunding Revenue Bonds Zero Coupon
(AMBAC Insured) 6.51 2010 5,055,000(d) 2,413,308
Austin Utility System Capital Appreciation
Refunding Revenue Bonds Zero Coupon (MBIA Insured)6.65 2010 16,000,000(d) 7,638,560
Austin Utility System Combined Utility
Refunding Revenue Bonds Series 1992
(AMBAC Insured) 6.25 2006 10,500,000 11,290,755
Coastal Water Authority Water Conveyance System
Refunding Revenue Bonds Series 1991
(AMBAC Insured) 6.25 2017 5,000,000 5,312,050
Cypress-Fairbanks Independent School District Harris County
Unlimited Tax Schoolhouse Bonds
Series 1990 (FGIC Insured) 6.50 2008 1,500,000 1,589,850
Harris County Health Facilities Development Hermann Hospital
Revenue Bonds (MBIA Insured) 6.375 2024 8,820,000 9,279,169
Houston Water & Sewer System Junior Lien
Refunding Revenue Bonds
Series C Zero Coupon (AMBAC Insured) 6.60 2008 8,000,000(d) 4,339,040
Municipal Power Agency Bonds (BIG Insured) 6.25 2010 7,000,000 7,182,770
Municipal Power Agency Capital Appreciation
Refunding Revenue Bonds
Zero Coupon (AMBAC Insured) 7.02 2009 18,000,000(d) 9,269,820
Northwest Independent School District
Unlimited Tax General Obligation Capital Appreciation
Refunding Revenue Bonds Permanent School Fund Guarantee
Series 1997 Zero Coupon 6.23 2017 3,000,000(d) 893,250
San Antonio Electric & Gas Systems Refunding Revenue Bonds
Series 1989 6.00 2014 6,000,000 6,111,660
San Antonio Electric & Gas Systems Refunding Revenue Bonds
Series 1989-89A 6.50 2012 26,250,000 27,362,475
San Antonio Water Refunding Revenue Bonds
(FGIC Insured) 6.40 2007 25,000,000 26,927,000
State Turnpike Authority Revenue Bonds 6.00 2020 10,000,000 10,269,900
State Public Property Financial Corporation
Lease Revenue Bonds Series 1996 6.20 2016 2,340,000 2,352,519
Total 132,232,126
Virginia (0.3%)
Augusta County Industrial Development Authority Hospital
Refunding Revenue Bonds Augusta Hospital
Series 1993 (AMBAC Insured) 5.125 2021 3,600,000 3,289,788
Washington (4.5%)
Auburn School District #408 King County Unlimited Tax
General Obligation Bonds Series 1992A 6.375 2006 8,000,000 8,789,120
Issaquah School District #411 King County Unlimited Tax
General Obligation Refunding Bonds 1992 6.375 2008 16,675,000 18,431,378
King County Housing Authority Pooled Housing
Refunding Revenue Bonds Series 1995A 6.80 2026 2,500,000 2,604,525
Public Power Supply System Nuclear Project #1
Revenue Bonds Series 1989A 6.00 2017 12,130,000 12,131,577
Public Power Supply System Nuclear Project #3
Capital Appreciation Refunding Revenue Bonds
Series B Zero Coupon (MBIA Insured) 6.61 2013 10,360,000(d) 4,116,960
Total 46,073,560
West Virginia (1.0%)
School Building Authority Capital Improvement
Revenue Bonds Series 1990B (MBIA Insured) 6.00 2020 9,730,000 9,805,505
Wyoming (0.4%)
Community Development Authority Single Family Mortgage Bonds
Federally Insured or Guaranteed Mortgage Loan 7.40 2031 3,510,000 3,699,505
Total municipal bonds
(Cost: $864,044,495) $956,332,891
See accompanying notes to investments in securities.
</TABLE>
Short-term securities (4.8%)
Issuer Effective Amount Value(a)
(c,f) yield payable at
maturity
Municipal notes
Missouri Health & Education Facilities Authority
Washington University Series A (MBIA Insured)
09-01-30 4.15% $ 8,300,000 $ 8,300,000
Missouri Health & Education Facilities Authority
Washington University Series B V. R.
09-01-30 4.15 1,600,000 1,600,000
New York City Municipal Water Finance Authority
Series 1994C
06-15-23 4.05 1,300,000 1,300,000
New York City Municipal Water Finance Authority
Series G V. R. (FGIC Insured)
06-15-24 4.00 1,200,000 1,200,000
New York City Municipal Water Finance Authority
Water & Sewer System Revenue Bonds
06-15-22 4.05 17,500,000 17,500,000
New York City Municipal Water Finance Authority
Water & Sewer System Revenue Bonds
06-15-25 4.20 10,000,000 10,000,000
Ohio Air Quality Development Authority Revenue
Series 1985B V.R.
12-01-15 4.20 600,00 600,000
Putnam County Development Authority
Pollution Control
04-01-32 4.15 8,100,000 8,100,000
Sabine River Authority
Pollution Control Revenue Bonds Series A
03-01-26 4.15 500,000 500,000
Total short-term securities
(Cost: $49,100,000) $ 49,100,000
Total investments in securities
(Cost: $913,144,495)(g) $1,005,432,891
See accompanying notes to investments in securities.
<PAGE>
Investments in securities
IDS Tax-Exempt Bond Fund
May 31, 1997 (Unaudited)
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:
(Unaudited)
Rating 05-31-97 11-30-96
AAA 38% 36%
AA 15 15
A 13 13
BBB 34 36
BB and below -- --
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
BIG -- Bond Investors Guarantee
CGIC -- Capital Guaranty Insurance Company
FGIC -- Financial Guarantee Insurance Corporation
FHA -- Federal Housing Authority
MBIA -- Municipal Bond Investors Assurance
(d) For zero coupon bonds, the interest rate disclosed represents the annualized
effective yield on the date of acquisition.
(e) Inverse floaters represent securities that pay interest at a rate that
increases (decreases) in the same magnitude as, or in a multiple of, a decline
(increase) in market short-term rates. Interest rate disclosed is the rate in
effect on May 31, 1997. Inverse floaters in the aggregate represent 0.4% of the
Fund's net assets as of May 31, 1997.
(f) The Fund is entitled to receive principal amount from issuer or corporate
guarantor, if indicated in parenthesis, after a day or a week's notice. The
maturity date disclosed represents the final maturity. Interest rate varies to
reflect current market conditions; rates shown are the effective rates on May
31, 1997. The following abbreviation is used in the portfolio description:
V.R. -- Variable Rate
(g) At May 31, 1997, the cost of securities for federal income tax purposes was
approximately $911,914,000 and the approximate aggregate gross unrealized
appreciation and depreciation based on that cost was:
Unrealized appreciation..........................................$93,922,000
Unrealized depreciation.............................................(403,000)
Net unrealized appreciation......................................$93,519,000
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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.)
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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.
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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.
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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.
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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.
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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 Tax-Exempt Bond Fund
IDS Tower 10
Minneapolis, MN 55440-0010
