<PAGE>
PAGE 1
1996 ANNUAL REPORT
IDS Intermediate Tax-Exempt Fund
(Icon of) shield with a tree enclosed
The goal of IDS Intermediate 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.
AMERICAN
EXPRESS
Financial
Advisors
Distributed by American Express Financial Advisors Inc.
<PAGE>
PAGE 2
(Icon of) shield with a tree enclosed
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.
<PAGE>
PAGE 3
Contents
(Icon of) One open book inside of another.
The purpose of this annual report is to tell investors how the Fund
performed.
1996 annual report
From the president 4
From the portfolio manager 4
Ten largest holdings 6
Making the most of the Fund 7
Long-term performance 8
Independent auditors' report 9
Financial statements 10
Notes to financial statements 13
Investments in securities 23
IDS mutual funds 26
Federal income tax information 30
<PAGE>
PAGE 4
To our shareholders
(Photo of) William R. Pearce, President of the Fund
(Photo of) Terry Fettig, Portfolio manager
From the president
If you're an experienced investor, you know that the past two years
have been unusually strong ones in many worldwide 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
From the portfolio manager
Because of the brief reporting period involved (approximately two
weeks), IDS Intermediate Tax-Exempt Fund's initial investment
results were negligible. From Nov. 13, 1996 - the first day assets
began to be invested - through the end of the period on Nov. 30,
1996, the return for Class A shares was 1.0%..
This Fund is designed for relatively conservative investors who
want to earn regular income. But unlike most investments, the
income the Fund provides is free from federal taxes. (It is not,
however, exempt from state and local taxes.) The higher an
investor's income level, the greater this tax advantage becomes.
(Because the Fund had been in existence for only two weeks as of
Nov. 30, 1996, the Fund did not meet certain IRS requirements.
Therefore, the dividend paid on that date was taxable. In the
future, the Fund expects to distribute dividends exempt from
federal income tax.)
Municipal bonds' tax advantage
The fund's return is exempt from federal taxes because it invests
in municipal bonds, which are issued by state and local governments
and their agencies to fund a wide range of public projects -
hospitals, highways, water works, etc. The interest those bonds
pay is free from federal taxes.
The great majority of the bonds the fund will own will be in the
"investment-grade" category. But to enhance the Fund's return, it
will own a relatively small amount (up to 20%) of below investment-
grade, or lower quality bonds. Over the long run, I expect this
mix to provide an attractive return with little sacrifice in
overall quality.
<PAGE>
PAGE 5
We expect the other key characteristic of this Fund will be its
comparatively small interest-rate risk. As you may know, a rise in
interest rates drives down the value of existing bonds, which in
turn depresses the net asset value of bond mutual funds. A decline
in rates, on the other hand, has a positive effect.
Less fluctuation
This is where the maturity factor comes in; the longer a bond's
maturity (principal-payment date), the more its value is affected
by interest rate swings. We anticipate the majority of this Fund's
investments will be in bonds with maturities of two to ten years,
which are in the intermediate maturity range. Therefore, the
Fund's net asset value, while it will still be influenced somewhat
by changes in interest rates, shouldn't fluctuate as much as those
of funds that invest in longer-maturity bonds.
As of this writing (mid-December), I'm taking a cautious approach
to investing the Fund's assets, given my expectation of a somewhat
volatile bond market in 1997. In the meantime, look for an update
on the Fund's progress a few months from now.
Terry Fettig
Class A
Nov. 13, 1996* - Nov. 30, 1996
(All figures per share)
Net asset value (NAV)
_______________________________
Nov. 30, 1996 $5.04
_______________________________
Nov. 13, 1996* $5.00
_______________________________
Increase $0.04
_______________________________
Distributions
Nov. 13, 1996* - Nov. 30, 1996
_______________________________
From income $0.004
_______________________________
From capital gains $ --
_______________________________
Total distributions $0.004
_______________________________
Total return** +1.0%***
_______________________________
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PAGE 6
Class B
Nov. 13, 1996* - Nov. 30, 1996
(All figures per share)
Net asset value (NAV)
_______________________________
Nov. 30, 1996 $5.04
_______________________________
Nov. 13, 1996* $5.00
_______________________________
Increase $0.04
_______________________________
Distributions
Nov. 13, 1996* - Nov. 30, 1996
_______________________________
From income $0.003
_______________________________
From capital gains $ --
_______________________________
Total distributions $0.003
_______________________________
Total return** +0.9%***
_______________________________
Class Y
Nov. 13, 1999* - Nov. 30, 1996
(All figures per share)
Net asset value (NAV)
________________________________
Nov. 30, 1996 $5.04
________________________________
Nov. 13, 1996* $5.00
________________________________
Increase $0.04
________________________________
Distributions
Nov. 13, 1996* - Nov. 30, 1996
________________________________
From income $0.004
________________________________
From capital gains $ --
________________________________
Total distributions $0.004
________________________________
Total return** +1.0%***
*Inception date.
**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>
PAGE 7
<TABLE>
<CAPTION>
IDS Intermediate Tax-Exempt Fund
The Fund's ten largest holdings
_____________________________________________________________________________________
Picture of pie chart: The ten holdings listed here make up 27.89% of the Fund's
net assets
Percent Value
(of Fund's net assets) (as of Nov. 30, 1996)
_____________________________________________________________________________________
<S> <C> <C>
Arizona Transportation Board Highway Sales Tax
Refunding Revenue Bonds Series 1993
4.25% 1998 4.29% $85,673
South Carolina Pickens County School District Unlimited
General Obligation Bonds Series 1996A
4.90% 2006 3.54 70,703
Philadelphia Pennsylvania Independent Development
Authority Lease Revenue Bonds Series 1996A
4.45% 2001 3.51 70,071
Salt River Arizona Agricultural Improvement
& Power District Electric Refunding Revenue
Bonds Series 1993C
4.25% 2001 3.50 70,050
Florida Unlimited General Obligation Bonds
Series 1991
5.40% 1998 2.55 50,892
Phoenix Arizona Water System Refunding Revenue Bonds
Series 1993
4.40% 1999 2.51 50,253
Philadelphia Pennsylvania Intergovernmental
Cooperation Authority Special Tax Revenue
Bonds Series 1992
6.00% 2002 2.15 43,077
Arkansas Finance Authority Revolving Loan
Refunding Revenue Bonds Series 1993B
4.80% 2004 2.03 40,630
University of Texas Permanant Fund College
Refunding Revenue Bonds Series 1996
4.50% 1999 2.02 40,476
North Texas Municipal District Solid Waste
Disposal Systems Revenue Bonds Series 1996
4.90% 2004 1.79 35,699
</TABLE>
<PAGE>
PAGE 8
Making the most of the Fund
Average annual total return
(as of Nov. 30, 1996)
*Since inception
Class A -4.03%
Class B* -4.08%
Class Y* +0.97%
*Inception date was Nov. 13, 1996.
The performance of Class B and Class Y will vary from the
performance of Class A based on differences in sales charges and
fees.
Your investment and return values fluctuate so that your shares,
when redeemed, may be worth more or less than the original cost.
Figures for Class A reflect the effect of the maximum 5% sales
charge and figures for Class B reflect the applicable contingent
deferred sales charge. Past performance is no guarantee of future
results.
Build your assets systematically
One of the best ways to invest in the Fund is by dollar-cost
averaging - a time-tested strategy that can make market
fluctuations work for you. To dollar-cost average, simply invest a
fixed amount of money regularly. You'll automatically buy more
shares when the Fund's share price is low, fewer shares when it is
high.
This does not ensure a profit or avoid a loss if the market
declines. But, if you can continue to invest regularly through
changing market conditions, it can be an effective way to
accumulate shares to meet your long-term goals.
How dollar-cost averaging works
Month Amount Per-share Number of shares purchased
invested market price
Jan $100 $20 5.00 XXXXX
Feb 100 18 5.56 XXXXXx
March 100 17 5.88 XXXXXx
April 100 15 6.67 XXXXXXx
May 100 16 6.25 XXXXXXx
June 100 18 5.56 XXXXXx
July 100 17 5.88 XXXXXx
Aug 100 19 5.26 XXXXXx
Sept 100 21 4.76 XXXXx
Oct 100 20 5.00 XXXXX
(footnotes to table) By investing an equal number of dollars each
month...
(arrow in table pointing to April) you automatically buy more
shares when the per share market price is low...
<PAGE>
PAGE 9
(arrow in table pointing to September) and fewer shares when the
per share market price is high.
You have paid an average price of only $17.91 per share over the 10
months, while the average market price actually was $18.10.
<PAGE>
PAGE 10
The Fund's long-term performance
Three ways to benefit from a mutual fund:
o your shares increase in value when the Fund's investments do
well
o you receive capital gains when the gains on investments sold
by the Fund exceed losses
o you receive income when the Fund's stock dividends, interest
and short-term gains exceed its expenses.
All three make up your total return. And you potentially can
increase your investment if, like most investors, you reinvest your
dividends and capital gain distributions to buy additional shares
of the Fund or another fund.
<PAGE>
<PAGE>
Independent auditors' report
_____________________________________________________
The board and shareholders
IDS Tax-Exempt Bond Fund, Inc.:
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments in securities, of IDS Intermediate Tax-Exempt Fund
(a series of IDS Tax-Exempt Bond Fund, Inc.) as of November 30, 1996, and the
related statement of operations,statement of changes in net assets and the
financial highlights for the period from November 13, 1996, (commencement of
operations), to November 30, 1996. These financial statements and the financial
highlights are the responsibility of fund management. Our responsibility is to
express an opinion on these financial statements and the financial highlights
based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and the financial highlights
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
Investment securities held in custody are confirmed to us by the custodian. As
to securities purchased but not received, we request confirmations from brokers,
and where replies are not received, we carry out other appropriate auditing
procedures. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of IDS Intermediate Tax-Exempt
Fund at November 30, 1996, and the results of its operations, the changes in its
net assets, and the financial highlights for the period stated in the first
paragraph above, in conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
Minneapolis, Minnesota
January 3, 1997
<PAGE>
Financial statements
Statement of assets and liabilities
IDS Intermediate Tax-Exempt Fund
Nov. 30, 1996
Assets
Investments in securities, at value (Note 1)
(identified cost $911,284) $ 917,850
Accrued interest receivable 14,550
Cash in bank on demand deposit 1,133,853
---------
Total assets $2,066,253
Liabilities
Dividends payable to shareholders 349
Payable for investment securities purchased 51,161
Accrued investment management services fee 43
Accrued distribution fee 12
Accrued service fee 17
Accrued transfer agency fee 7
Accrued administrative services fee 4
Other accrued expenses 15,722
Total liabilities 67,315
Net assets applicable to outstanding capital stock $1,998,938
Represented by
Capital stock -- $.01 par value (Note 1) $ 3,963
Additional paid-in-capital 1,988,409
Unrealized appreciation on investments 6,566
Total -- representing net assets applicable to outstanding shares $1,998,938
Net assets applicable to outstanding shares: Class A $1,545,320
Class B $ 452,610
Class Y $ 1,008
Net asset value per share of outstanding shares:
Class A shares 306,397 $ 5.04
Class B shares 89,745 $ 5.04
Class Y shares 200 $ 5.04
See accompanying notes to financial statements.
<PAGE>
Statement of operations
IDS Intermediate Tax-Exempt Fund
For the period from Nov. 13, 1996
(commencement of operations) to Nov. 30, 1996
Investment income
Income:
Interest $ 1,275
Expenses (Note 2):
Investment management services fee 143
Distribution fee -- Class B 52
Transfer agency fee 32
Service fee
Class A 43
Class B 12
Administrative services fee 13
Compensation of officers 31
Custodian fees 423
Postage 1,150
Registration fees 9,600
Reports to shareholders 775
Audit fees 3,575
Administrative 72
Other 97
Total expenses 16,018
Expenses voluntarily reimbursed by AEFC (Note 2) (15,679)
Total net expenses 339
Investment income -- net 936
Unrealized gain -- net
Net change in unrealized appreciation or depreciation 6,566
Net gain on investments 6,566
Net increase in net assets resulting from operations $ 7,502
See accompanying notes to financial statements.
<PAGE>
Statement of changes in net assets
IDS Intermediate Tax-Exempt Fund
For the period from Nov. 13, 1996
(commencement of operations) to Nov. 30, 1996
Operations and distributions 1996
Investment income -- net $ 936
Net change in unrealized appreciation or depreciation 6,566
Net increase in net assets resulting from operations 7,502
Distributions to shareholders from:
Net investment income
Class A (787)
Class B (148)
Class Y (1)
Total distributions (936)
Capital share transactions (Note 4)
Proceeds from sales
Class A shares (Note 2) 1,554,812
Class B shares 450,691
Reinvestment of distributions at net asset value
Class A shares 474
Class B shares 103
Class Y shares 1
Payments for redemptions
Class A shares (16,159)
Class B shares (Note 2) (550)
Increase in net assets from share transactions 1,989,372
Total increase in net assets 1,995,938
Net assets at beginning of period 3,000
Net assets at end of period $1,998,938
See accompanying notes to financial statements.
<PAGE>
Notes to financial statements
IDS Intermediate Tax-Exempt Fund
- --------------------------------------------------------
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
diversifed, 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:
<PAGE>
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.
<PAGE>
Option transactions
In order to produce incremental earnings, protect gains, and facilitate buying
and selling of securities for investment purposes, the Fund may buy or 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.
<PAGE>
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.
<PAGE>
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.
<PAGE>
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 Nov. 30, 1996, American Express Financial Corporation (AEFC) owned 200 shares
for Class A, Class B and Class Y, respectively.
<PAGE>
- --------------------------------------------------------
2. Expenses and sales charges
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 an Administrative Services Agreement, the Fund pays AEFC 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.
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
<PAGE>
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.
Sales charges received by American Express Financial Advisors Inc. for
distributing Fund shares were $45,672 for Class A for the period ended
Nov. 30, 1996.
AEFC has agreed to waive certain fees and to absorb certain other of the Funds'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.
<PAGE>
- --------------------------------------------------------
3. Securities transactions
Cost of purchases of securities (other than short-term obligations) aggregated
$911,284 for the period ended
Nov. 30, 1996. Realized gains and losses are determined on an identified cost
basis.
- --------------------------------------------------------
4. Capital share transactions
Transactions in shares of capital stock for the period indicated is as follows:
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>
- ---------------------------------------------------------------------------
5. Financial highlights
The table below shows certain important financial information for evaluating the
Fund's results.
Fiscal period ended Nov. 30, 1996
Per share income and capital changes*
Class A Class B Class Y
1996** 1996** 1996**
Net asset value, $5.00 $5.00 $5.00
beginning of period
Income from investment operations:
Net investment income -- -- --
Net gains (losses) .04 .04 .04
(both realized and
unrealized)
Total from investment .04 .04 .04
operations
Less distributions:
Dividends from net
investment income -- -- --
Net asset value, 5.04 5.04 5.04
end of period
Ratios/supplemental data
Class A Class B Class Y
1996** 1996** 1996**
Net assets, end of period 2 -- --
(in millions)
Ratio of expenses to .90%#+ 1.66%#+ .32%#+
average daily net assets
Ratio of net income to 3.19%+ 2.04%+ 2.32%+
average daily net assets
Portfolio turnover rate -- -- --
(excluding short-term
securities)
Total return*** 1.0% 0.9% 1.0%
*For a share outstanding throughout the period.
Rounded to the nearest cent.
**Inception date was Nov. 13, 1996
***Total return does not reflect payment of a sales charge.
+Adjusted to an annual basis.
#During the period from Nov. 13, 1996 to Nov. 30, 1996, American Express
Financial Corporation (AEFC) reimbursed the Fund for certain expenses. Has AEFC
not done so, the annual ratios of expenses would have been 48.94%, 55.07% and
83.81% for Class A,B,and Y, respectively.
<PAGE>
<TABLE>
Investments in securities
IDS Intermediate Tax-Exempt Fund (Percentages represent value of
Nov. 30, 1996 investments compared to net assets)
- --------------------------------------------------------------------------------
Municipal bonds (45.9%)
- -------------------------------------------------------------------------------------------------------------
<CAPTION>
Name of issuer and title of issue (b,c) Coupon Maturity Principal Value(a)
rate year amount
- -------------------------------------------------------------------------------------------------------------
Arizona (11.6%)
Phoenix Water System Refunding Revenue Bonds
<S> <C> <C> <C> <C>
Series 1993 4.40% 1999 50,000 $ 50,253
Salt River Agricultural Improvement & Power
District Electric
Refunding Revenue Bonds
Series 1993C 4.25 2001 70,000 70,050
State Health Facility Authority Hospital
Refunding Revenue Bonds Samaritan Health Systems
Series A (MBIA Insured) 5.10 2002 25,000 25,730
State Transportation Board Highway Sales Tax
Refunding Revenue Bonds
Series 1993 4.25 1998 85,000 85,673
-------------
Total 231,706
- -------------------------------------------------------------------------------------------------------------
Arkansas (2.0%)
State Finance Authority Revolving Loan
Refunding Revenue Bonds Series 1993B
(MBIA Insured) 4.80 2004 40,000 40,630
- -------------------------------------------------------------------------------------------------------------
Colorado (1.5%)
Denver City & County School District #1 Facility
Certificate of Participation
Series 1996 (AMBAC Insured) 5.00 2005 30,000 30,545
- -------------------------------------------------------------------------------------------------------------
Florida (2.5%)
State Unlimited General Obligation Bonds
Series 1991 5.40 1998 50,000 50,892
- -------------------------------------------------------------------------------------------------------------
Illinois (1.3%)
State Health Facilities Authority Hospital
Riverside Health Systems Refunding Revenue Bonds
Series 1996A (MBIA Insured) 5.00 2004 25,000 25,393
- -------------------------------------------------------------------------------------------------------------
Michigan (1.3%)
Detroit Sewer Disposal Refunding Revenue Bonds
Series 1993A (FGIC Insured) 5.25 2005 25,000 25,872
- -------------------------------------------------------------------------------------------------------------
New York (2.5%)
New York City Unlimited General Obligation Bonds
Series 1996E 5.10 2002 20,000 20,051
State Urban Development Correctional Facility
Sub Lein Revenue Bonds Series 1996 5.25 2002 30,000 31,048
-------------
Total 51,099
- -------------------------------------------------------------------------------------------------------------
North Carolina (1.5%)
State Medical Care Community Hospital Revenue Bonds
Duke University Hospital
Series 1996C 4.75 2004 30,000 29,981
- -------------------------------------------------------------------------------------------------------------
Oklahoma (1.5%)
Norman Hospital Authority Refunding Revenue Bonds
Series 1996A (MBIA Insured) 5.00 2004 30,000 30,305
- -------------------------------------------------------------------------------------------------------------
Oregon (1.5%)
Health Sciences University College Revenue Bonds
Series 1995A (MBIA Insured) 4.38 2002 30,000 29,852
- -------------------------------------------------------------------------------------------------------------
Pennsylvania (5.7%)
Philadelphia Independent Development
Authority Lease Revenue Bonds Series 1996A
(MBIA Insured) 4.45 2001 70,000 70,071
Philadelphia Intergovernmental Cooperation
Authority
Special Tax Revenue Bonds
Series 1992 6.00 2002 40,000 43,077
-------------
Total 113,148
- -------------------------------------------------------------------------------------------------------------
South Carolina (3.5%)
Pickens County School District Unlimited
General Obligation Bonds Series 1996A
(FGIC Insured) 4.90 2006 70,000 70,703
- -------------------------------------------------------------------------------------------------------------
Tennessee (1.3%)
Memphis Unlimited General Obligation Bonds
Series 1992 4.80 1998 25,000 25,282
- -------------------------------------------------------------------------------------------------------------
Texas (5.1%)
North Municipal Water District Solid Waste
Disposal Systems Revenue Bonds Series 1996
(AMBAC Insured) 4.90 2004 35,000 35,699
Trinity River Authority Wastewater System
Refunding Revenue Bonds Series A 5.10 2001 25,000 25,805
University of Texas Permanent Fund College
Refunding Revenue Bonds Series 1996 4.50 1999 40,000 40,476
-------------
Total 101,980
- -------------------------------------------------------------------------------------------------------------
Washington (1.3%)
State Unlimited General Obligation Bonds
Series 1995C 5.50 1997 25,000 25,279
- -------------------------------------------------------------------------------------------------------------
Wisconsin (1.8%)
State Unlimited General Obligation Bonds
Series 1996F 4.50 2002 35,000 35,183
- -------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------
Total investment in securities
(Cost: $911,284) (d) $917,850
- -------------------------------------------------------------------------------------------------------------
</TABLE>
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 11-30-96
AAA 36%
AA 29
A 30
BBB 3
BB and Below 2
Non-rated
--
- ---------------------------------------------------------------
Total 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 Guaranty Insurance Corporation
MBIA -- Municipal Bond Investors Assurance
(d) At Nov. 30, 1996, the cost of securities for
federal income tax purposes was $911,284 and the
aggregage gross unrealized appreciation and depreciation
based on that cost was :
Unrealized appreciation $6,566
Unrealized depreation
--
Net unrealized appreciation $6,566
<PAGE>
PAGE 11
IDS mutual funds
Global/International funds
Funds in this group seek capital growth and/or income by investing
primarily in foreign securities. Foreign investments may be
subject to currency fluctuations and political and economic risks
of the countries in which the investments are made. They are high
risk mutual funds with a potential for high reward.
IDS Emerging Markets Fund
Invests in a Portfolio comprised primarily of stocks of companies
in developing countries throughout the world that are believed to
offer growth potential. Seeks to provide long-term growth of
capital.
(icon of) world with countries
IDS Global Growth Fund
Invests in a Portfolio comprised primarily of stocks of companies
throughout the world that are positioned to meet market needs in a
changing world economy. These companies offer above-average
potential for long-term growth.
(icon of) world
IDS International Fund
Invests primarily in common stocks of foreign companies that offer
potential for superior growth. The Fund may invest up to 20% of
its assets in the U.S. market.
(icon of) three flags
IDS Global Balanced Fund
Invests in stocks and bonds in, for the most part, major markets
throughout the world, including the U.S. Seeks to provide a
balance of growth of capital and current income.
(icon of) scale holding two worlds
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.
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PAGE 12
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) office 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) trees
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PAGE 13
IDS New Dimensions Fund
Invests in a Portfolio comprised primarily of companies with
significant growth potential due to superiority in technology,
marketing or management. The Fund frequently changes its industry
mix.
(icon of) dimension
IDS Progressive Fund
Invests primarily in undervalued common stocks. The Fund holds
stocks for the long term with the goal of capital growth.
(icon of) shooting star
Growth & income funds
These funds focus on securities of medium to large, well-
established companies that offer long-term growth of capital and
reasonable income from dividends and interest.
IDS Equity Select Fund
Invests primarily in a combination of moderate growth stocks,
higher-yielding equities and bonds. Seeks growth of capital and
income.
(icon of) three pine trees
IDS Blue Chip Advantage Fund
Invests in selected stocks from a major market index. Securities
purchased are those recommended by our research analysts as the
best from each industry represented on the index. Offers potential
for long-term growth as well as dividend income.
(icon of) ribbon
IDS Managed Allocation Fund
Invests in a Portfolio comprised primarily of U.S. equity
securities, U.S. and foreign debt securities, foreign equity
securities and money market instruments. The Fund provides
diversification among these major investment categories and has a
target mix that represents the way the Fund's investments will be
allocated over the long term. Seeks maximum total return.
(icon of) gyroscope
IDS Stock Fund
Invests in a Portfolio comprised primarily of common stock of
companies representing many sectors of the economy. Seeks current
income and growth of capital.
(icon of) building with columns
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PAGE 14
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 of 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 of long-term, high-yielding
corporate fixed-income securities in the lower rated, higher risk
bond categories to seek high current income. Secondary objective
is capital growth.
(icon of) 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
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PAGE 15
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 enclosed
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 enclosed
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 enclosed
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
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PAGE 16
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 a 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
<PAGE>
PAGE 17
Federal income tax information
IDS Intermediate Tax-Exempt Fund
__________________________________________________________________
The Fund is required by the Internal Revenue Code of 1986 to tell
its shareholders about the tax treatment of the dividends it pays
during its fiscal year. The dividends listed below will be reported
to you on a Form 1099-DIV, Dividends and Distributions, next
January.
IDS Intermediate Tax-Exempt Fund
Period ended Nov. 30, 1996
Class A
Interest dividends -- taxable status explained below.
Payable date Per share
Nov. 26, 1996 $0.00415
Class B
Interest dividends -- taxable status explained below.
Payable date Per share
Nov. 26, 1996 $0.003000
Class Y
Interest dividends -- taxable status explained below.
Payable date Per share
Nov. 26, 1996 $0.00440
Source of distributions
Distributions during the period ended Nov. 30, 1996, were derived
exclusively from interest on tax-exempt securities. For dividends
paid by the Fund to be tax-exempt the Fund must have at least 50%
of its assets in tax-exempt obligations at the end of each fiscal
quarter. Due to the short time period of the fiscal year, Nov. 13,
1996 to Nov. 30, 1996, and the relatively low level of total assets
invested, the Fund has less than 50% of its total assets invested
in tax-exempt obligations at Nov. 30, 1996. As a result, the
dividends paid by the Fund are not considered tax-exempt for
federal income tax purposes.
It is intended that for subsequent years, the Fund will have at
least 50% of its total assets invested in tax-exempt obligations
and will accordingly distribute dividends exempt from federal
income taxes.
<PAGE>
PAGE 18
Federal taxation
Exempt-interest dividends are exempt from federal income taxes and
should not be included in shareholders' gross income.
Other taxation
Exempt-interest dividends may be subject to state and local taxes.
Each shareholder should consult a tax advisor about reporting this
income for state and local tax purposes.
Source of income by state
Percentages of income from municipal securities earned by the Fund
from various states during the period ended Nov. 30, 1996 are
listed below.
Arizona 6.371%
Arkansas 1.225
California 2.394
Colorado 1.595
Florida 0.574
Georgia 11.293
Illinois 5.828
Michigan 3.336
Mississippi 7.612
Missouri 7.696
Nebraska 3.252
New York 10.772
North Carolina 1.212
Ohio 6.326
Oklahoma 1.595
Oregon 1.117
Pennsylvania 2.193
South Carolina 0.729
Tennessee 0.765
Texas 13.807
Virginia 6.964
Washington 2.339
Wisconsin 1.005
<PAGE>
PAGE 19
Quick telephone reference
American Express Telephone Transaction Service
Redemptions and exchanges, dividend payments or reinvestments and
automatic payment arrangements
National/Minnesota: 800-437-3133
Mpls./St. Paul area: 671-3800
American Express Shareholder Service
Fund performance, objectives and account inquiries
612-671-3733
TTY Service
For the hearing impaired
800-846-4852
American Express Infoline
Automated account information (TouchToneR phones only), including
current fund prices and performance, account values and recent
account transactions
National/Minnesota: 800-272-4445
Mpls./St. Paul area: 671-1630
AMERICAN
EXPRESS
Financial
Advisors
IDS Intermediate Tax-Exempt Fund
IDS Tower 10
Minneapolis, MN 55440-0010
<PAGE>
PAGE 20
STATEMENT OF DIFFERENCES
Difference Description
1) The layout is different 1) Some of the layout in the
throughout the annual report. annual report to
shareholders is in two
columns.
2) Headings. 2) The headings in the
annual report are
placed in a blue strip
at the top of the page.
3) There are pictures, icons 3) Each picture, icon and
and graphs throughout the graph is described in
annual report. parentheses.
4) Footnotes for charts and 4) The footnotes for each
graphs are described at chart or graph are typed
the left margin. below the description of
the chart or graph.
