1998 SEMIANNUAL REPORT
IDS
Tax-Exempt
Bond Fund
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.
AMERICAN EXPRESS Financial Advisors
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.
Contents
From the chairman 3
From the portfolio manager 3
The Fund's ten largest holdings 5
Financial statements 6
Notes to financial statements 9
Investments in securities 22
Board members and officers 35
IDS mutual funds 36
<PAGE>
To our shareholders
From the chairman
If you're an experienced investor, you know that the past few years have
been unusually strong in many financial markets. Perhaps just as
important, history shows that bull markets don't last forever. Though
they're often unpredictable, declines -- whether they're brief or
long-lasting, moderate or substantial -- are always a possibility. We saw
evidence of that last October, when declines in certain Asian markets
spawned a sharp drop in several financial markets worldwide, including the
U.S.
The potential for such volatility reinforces the need for investors to
review periodically their long-term goals and examine whether their
investment program remains on track to achieving them. Your quarterly
investment statements are one part of that monitoring process. The other
is a meeting with your American Express financial advisor. That becomes
even more important if there's a major change in your financial situation
or in the financial markets.
William R. Pearce
(picture of) William R. Pearce
William R. Pearce
Chairman of the board
<PAGE>
From the portfolio manager
A largely positive bond environment led to a productive six months for IDS
Tax-Exempt Bond Fund. Investors in the Fund's Class A shares realized a
total return (net asset value change and dividends) of 3.5% from December
1997 through May 1998 -- the first half of the Fund's fiscal year. Most of
the return came in the form of dividends.
The period got off to a strong start, as interest rates declined through
early January, boosting bond values along the way. The rate drop was
initially spawned by last fall's meltdown in Asian financial markets, a
far-reaching phenomenon that caused investors to anticipate slower
economic growth in the U.S. and, ultimately, downward pressure on domestic
inflation. In addition, global investors quickly began moving money out of
smaller foreign markets as a whole in favor of the perceived safe haven
offered by the U.S. bond market. The result was a rally and several-week
decline in interest rates.
Weathering the flu
Soon, though, investors reassessed the situation and decided that the U.S.
economy might experience little ill effect from the "Asian flu" and, in
fact, might be growing rapidly enough to light a fire under inflation and
prompt the Federal Reserve to raise interest rates. Investors wrestled
with that possibility over the ensuing months, causing long-term rates to
bounce up and down and keeping the bond market off balance for most of the
final four months of the period.
As for municipal bonds in particular, their performance was restrained by
a heavy supply of new issues and weak cash flow into the municipal market,
the latter largely a result of the more attractive returns being generated
by the stock market. In fact, by the end of the period, municipals had
reached a very low value in relation to taxable bonds, including corporate
and U.S Treasury securities.
Higher quality
I made only minor changes to the portfolio during the six months. They
included lengthening the duration a bit last spring and gradually
upgrading the overall credit quality. (Duration is a function of the
average maturity of the portfolio's investments that determines how
sensitive the Fund's net asset value is to changes in interest rates. The
longer the duration, the greater the sensitivity.) As for the quality
upgrade, because the yields on lower-quality issues were only slightly
greater than those of top-quality bonds, I felt the modest reward wasn't
worth the potential risk. The upgrading resulted in AAA-rated bonds going
from 41% of assets to 47% by period-end.
At this writing (mid-June), I think the municipal market may be headed for
up-and-down performance the rest of the year. The key to the market's
direction will likely be how the Asian situation ultimately unfolds. If it
proves to be a substantial drag on the U.S. economy, interest rates may
well come down and lift the market. If the drag is brief and mild, rates
could rise again before the year is out. Therefore, my current plan is to
keep a neutral duration until there appears to be a clear trend in the
market.
Terry L. Seierstad
(picture of) Terry L. Seierstad
Terry L. Seierstad
Portfolio manager
<PAGE>
Class A
6-month performance
(All figures per share)
Net asset value (NAV)
May 31, 1998 $ 4.14
Nov. 30, 1997 $ 4.11
Increase $ 0.03
Distributions
Dec. 1, 1997 - May 31, 1998
From income $ 0.10
From capital gains $ --
Total distribution $ 0.10
Total return* +3.5%**
Class B
6-month performance
(All figures per share)
Net asset value (NAV)
May 31, 1998 $ 4.14
Nov. 30, 1997 $ 4.11
Increase $ 0.03
Distributions
Dec. 1, 1997 - May 31, 1998
From income $ 0.09
From capital gains $ --
Total distribution $ 0.09
Total return* +3.1%**
Class Y
6-month performance
(All figures per share)
Net asset value (NAV)
May 31, 1998 $ 4.14
Nov. 30, 1997 $ 4.11
Increase $ 0.03
Distributions
Dec. 1, 1997 - May 31, 1998
From income $ 0.11
From capital gains $ --
Total distribution $ 0.11
Total return* +3.5%**
*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, 1998)
San Antonio Texas Water Refunding Revenue Bonds
6.40% 2007 2.69% $27,334,500
San Antonio Texas Electric & Gas Systems
Refunding Revenue Bonds Series 1989A
6.50% 2012 2.66 27,035,925
Delaware County Pennsylvania Industrial Development
Authority Pollution Control Refunding Revenue Bonds
Philadelphia Electric Series 1991A
7.375% 2021 2.51 25,520,655
Chicago Illinois Public Building Commission
Building Revenue Bonds Chicago Board of Education
Series 1990A Escrowed to Maturity
6.50% 2018 2.40 24,387,360
New York State Urban Development Correctional Capital
Facilities Revenue Bonds Series 4
5.375% 2023 2.35 23,865,250
Georgia Municipal Electric Authority Special Obligation
Bonds Project 1 4th Crossover Series 1997X
6.50% 2020 2.30 23,379,845
Eastern North Carolina Municipal Power Agency
Power System Refunding Revenue Bonds Series 1989A
6.50% 2024 1.98 20,182,400
New York State Dormitory Authority State Court Facility
Lease Revenue Bonds Series 1993A
5.25% 2021 1.94 19,763,000
Issaquah Washington School District 411 King County
Unlimited Tax General Obligation Bonds Series 1992
6.375% 2008 1.90 19,269,630
New York State Mortgage Agency Homeowner Mortgage
Revenue Bonds Series 1991TT
7.50% 2015 1.68 17,127,162
For further detail about these holdings, please refer to the section entitled
"Investments in securities" herein.
(icon of) pie chart
The ten holdings listed here make up 22.41% of the Fund's net assets
<PAGE>
<TABLE>
<CAPTION>
Financial statements
Statement of assets and liabilities
IDS Tax-Exempt Bond Fund
May 31, 1998
Assets
(Unaudited)
Investments in securities, at value (Note 1)
<S> <C>
(identified cost $849,044,711) $ 974,524,274
Accrued interest receivable 15,591,864
Receivable for investment securities sold 27,318,191
----------
Total assets 1,017,434,329
=============
Liabilities
Dividends payable to shareholders 270,089
Disbursement in excess of cash on demand deposit 157,803
Accrued investment management services fee 12,520
Accrued distribution fee 610
Accrued service fee 4,873
Accrued administrative services fee 1,112
-----
Total liabilities 447,007
-------
Net assets applicable to outstanding capital stock $1,016,987,322
==============
Represented by
Capital stock-- $.01 par value (Note 1) $ 2,454,672
Additional paid-in capital 921,174,503
Undistributed net investment income 292,558
Accumulated net realized gain (loss) (32,413,974)
Unrealized appreciation (depreciation) on investments 125,479,563
-----------
Total-- representing net assets applicable to outstanding capital stock $1,016,987,322
==============
Net assets applicable to outstanding shares: Class A $ 987,181,323
Class B $ 29,795,243
Class Y $ 10,756
Net asset value per share of outstanding capital stock: Class A shares 238,274,271 $ 4.14
Class B shares 7,190,372 $ 4.14
Class Y shares 2,596 $ 4.14
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Statement of operations
IDS Tax-Exempt Bond Fund
Six months ended May 31, 1998
Investment income
(Unaudited)
Income:
<S> <C>
Interest $29,292,198
-----------
Expenses (Note 2):
Investment management services fee 2,291,651
Distribution fee-- Class B 101,075
Transfer agency fee 213,899
Incremental transfer agency fee-- Class B 622
Service fee
Class A 853,605
Class B 23,469
Class Y 5
Administrative services fees and expenses 211,627
Compensation of board members 6,168
Custodian fees 29,458
Postage 23,018
Registration fees 28,944
Reports to shareholders 1,384
Audit fees 17,500
Other 9,033
-----
Total expenses 3,811,458
Earnings credits on cash balances (Note 2) (78,109)
-------
Total net expenses 3,733,349
---------
Investment income (loss) -- net 25,558,849
----------
Realized and unrealized gain (loss) -- net
Net realized gain (loss) on security transactions (Note 3) 3,501,537
Net change in unrealized appreciation (depreciation) on investments 5,894,038
---------
Net gain (loss) on investments 9,395,575
---------
Net increase (decrease) in net assets resulting from operations $34,954,424
===========
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Financial statements
Statements of changes in net assets
IDS Tax-Exempt Bond Fund
Operations and distributions
May 31, 1998 Nov. 30, 1997
Six months ended Year ended
(Unaudited)
<S> <C> <C>
Investment income (loss)-- net $ 25,558,849 $ 53,372,146
Net realized gain (loss) on security transactions 3,501,537 4,908,245
Net change in unrealized appreciation (depreciation) on investments 5,894,038 18,124,449
--------- ----------
Net increase (decrease) in net assets resulting from operations 34,954,424 76,404,840
---------- ----------
Distributions to shareholders from:
Net investment income
Class A (24,873,359) (52,470,173)
Class B (575,416) (952,585)
Class Y (269) (522)
Net realized gain
Class A (125,668) --
Class B (3,171) --
Class Y (2) --
--
Total distributions (25,577,885) (53,423,280)
----------- -----------
Capital share transactions (Note 5)
Proceeds from sales
Class A shares (Note 2) 34,624,347 52,223,529
Class B shares 6,473,205 7,592,260
Reinvestment of distributions at net asset value
Class A shares 17,114,022 35,670,478
Class B shares 486,561 796,513
Class Y shares 271 522
Payments for redemptions
Class A shares (71,342,541) (180,159,766)
Class B shares (Note 2) (1,950,832) (4,187,660)
---------- ----------
Increase (decrease) in net assets from capital share transactions (14,594,967) (88,064,124)
----------- -----------
Total increase (decrease) in net assets (5,218,428) (65,082,564)
Net assets at beginning of period 1,022,205,750 1,087,288,314
------------- -------------
Net assets at end of period $1,016,987,322 $1,022,205,750
============== ==============
Undistributed net investment income $ 292,558 $ 182,753
-------------- --------------
See accompanying notes to financial statements.
</TABLE>
<PAGE>
Notes to financial statements
IDS Tax-Exempt Bond Fund
(Unaudited as to May 31, 1998)
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 during the ninth
calendar year of ownership. 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
traded on national securities exchanges or included in national market
systems are valued at the last quoted sales price. Debt securities are
generally traded in the over-the-counter market and are valued at a price
deemed best to reflect fair value as quoted by dealers who make markets in
these securities or by an independent pricing service. Securities for
which market quotations are not readily available are valued at fair value
according to methods selected in good faith by the board. 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 and
providing administrative services. 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 and approved by the board.
Under a separate Transfer Agency Agreement, American Express Client
Service Corporation (AECSC) maintains shareholder accounts and records.
The Fund pays AECSC 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 $667,706 for Class A and $17,472 for Class B for the six
months ended May 31, 1998.
During the six months ended May 31, 1998, the Fund's custodian and
transfer agency fees were reduced by $78,109 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 $96,752,496 and $97,674,793,
respectively, for the six months ended May 31, 1998. Realized gains and
losses are determined on an identified cost basis.
4
Capital share
transactions
Transactions in shares of capital stock for the periods indicated are as
follows:
Six months ended May 31, 1998
Class A Class B Class Y
Sold 8,348,512 1,561,202 --
Issued for reinvested 4,134,228 117,542 66
distributions
Redeemed (17,196,181) (470,934) --
----------- -------- ---
Net increase (decrease) (4,713,441) 1,207,810 66
Year ended Nov. 30, 1997
Class A Class B Class Y
Sold 13,009,697 1,888,443 --
Issued for reinvested 8,904,140 198,576 130
distributions
Redeemed (44,990,511) (1,043,800) --
----------- ---------- ---
Net increase (decrease) (23,076,674) 1,043,219 130
5
Capital loss
carryover
For federal income tax purposes, the Fund has a capital loss carryover of
$12,085,373 at Nov. 30, 1997 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>
<CAPTION>
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
1998c 1997 1996 1995 1994 1993 1992 1991b1 1990 1989 1988
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, $4.11 $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 .21 .20 .21 .23 .22 .22 .22 .26 .28 .28
(loss)
Net gains (losses) .03 .10 (.05) .52 (.56) .23 .11 .05 (.01) .17 .03
(both realized
and unrealized)
Total from investment .13 .31 .15 .73 (.33) .45 .33 .27 .25 .45 .31
operations
Less distributions:
Dividends from net (.10) (.21) (.20) (.21) (.23) (.22) (.22) (.22) (.26) (.28) (.28)
investment income
Distributions from -- -- -- -- (.09) (.02) (.06) -- (.09) (.15) --
realized gains
Total distributions (.10) (.21) (.20) (.21) (.32) (.24) (.28) (.22) (.35) (.43) (.28)
Net asset value, $4.14 $4.11 $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
1998c 1997 1996 1995 1994 1993 1992 1991b 1990 1989 1988
Net assets, end of $987 $998 $1,067 $1,162 $1,054 $1,291 $1,273 $1,188 $1,094$1,010 $927
period (in millions)
Ratio of expenses to .73%e .73% .73% .71% .61% .63% .64% .60%e .61% .61% .60%
average daily net
assetsd
Ratio of net income 5.03%e 5.19% 5.15% 5.52% 5.82% 5.54% 5.68% 6.11%e 6.61% 6.90% 7.16%
(loss) to average
daily
net assets
Portfolio turnover 10% 19% 62% 54% 66% 43% 63% 69% 112% 96% 54%
rate
(excluding short-term
securities)
Total returnf 3.5% 7.8% 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 the 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, 1998 (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>
<CAPTION>
Fiscal period ended Nov. 30,
Per share income and capital changesa
Class B Class Y
1998c 1997 1996 1995b 1998c 1997 1996 1995b
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, $4.11 $4.01 $4.06 $3.88 $4.11 $4.01 $4.06 $3.88
beginning of period
Income from investment operations:
Net investment income .09 .18 .17 .14 .11 .21 .21 .16
(loss)
Net gains (losses) .03 .10 (.05) .18 .03 .10 (.05) .18
(both
realized and
unrealized)
Total from investment .12 .28 .12 .32 .14 .31 .16 .34
operations
Less distributions:
Dividends from net (.09) (.18) (.17) (.14) (.11) (.21) (.21) (.16)
investment income
Net asset value, $4.14 $4.11 $4.01 $4.06 $4.14 $4.11 $4.01 $4.06
end of period
Ratios/supplemental data
Class B Class Y
1998c 1997 1996 1995b 1998c 1997 1996 1995b
Net assets, end of $30 $25 $20 $14 $-- $-- $-- $--
period (in millions)
Ratio of expenses to 1.49%e 1.49% 1.49% 1.52%e .63%e .60% .55% .58%e
average daily net
assetsd
Ratio of net income 4.29%e 4.43% 4.40% 4.55%e 5.13%e 5.34% 5.33% 5.52%e
(loss)
to average daily net
assets
Portfolio turnover 10% 19% 62% 54% 10% 19% 62% 54%
rate
(excluding short-term
securities)
Total returnf 3.1% 6.9% 3.2% 8.6% 3.5% 7.9% 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, 1998 (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>
<CAPTION>
Investments in securities
IDS Tax-Exempt Bond Fund
May 31, 1998 (Unaudited)
(Percentages represent
value of investments
compared to net assets)
Municipal bonds (95.6%)
Name of issuer and Coupon Principal Value(a)
title of issue (b,c,f) rate amount
Alabama (0.3%)
Mobile Industrial Development Board Solid Waste
Refunding Revenue Bonds Mobile Energy Services
<S> <C> <C> <C>
01-01-20 6.95% $4,750,000 $2,945,000
Alaska (0.6%)
North Slope Borough General Obligation Bonds
Zero Coupon Series 1994B (CGIC Insured)
06-30-04 7.05 3,000,000(d) 2,289,570
06-30-05 7.15 3,000,000(d) 2,175,030
State Housing Finance Veterans Mortgage
Corporation Collateralized Bonds 1st Series
(GNMA & FNMA Insured)
12-01-30 7.50 1,985,000 2,095,088
Total 6,559,688
Arizona (4.1%)
Maricopa County Industrial Development Authority
Multi-family Housing Revenue Bonds Series 1996A
07-01-26 6.625 2,500,000 2,900,750
Phoenix Industrial Development Authority Refunding
Revenue Bonds Christian Care Apartments
01-01-16 6.25 2,000,000 2,109,300
Phoenix Industrial Development Authority Single
Family Mortgage Revenue Capital Appreciation
Bonds Zero Coupon Escrowed to Maturity
12-01-14 6.69 39,000,000(d) 17,067,180
Phoenix Street & Highway User Junior Lien
Refunding Revenue Bonds Series 1992
07-01-11 6.25 10,350,000 11,252,520
Tucson Street & Highway User Pre-refunded
Revenue Bonds Series 1991B
07-01-10 6.25 8,250,000 8,700,862
Total 42,030,612
California (9.7%)
Anaheim Public Finance Authority Capital
Appreciation Improvement Revenue Bonds
Zero Coupon Series 1997C (FSA Insured)
09-01-17 5.72 9,195,000(d) 3,421,827
09-01-23 5.32 15,865,000(d) 4,270,065
09-01-24 5.32 25,885,000(d) 6,610,511
09-01-25 5.32 5,000,000(d) 1,211,600
Bakersfield Certificates of Participation Zero Coupon
Escrowed to Maturity
04-15-21 5.25 18,000,000(d) 5,355,000
Foothill/Eastern Transportation Corridor Agency
Toll Road Revenue Bonds Series 1995A
01-01-35 5.00 12,000,000 11,383,320
Los Angeles County Pre-refunded Certificate of
Participation
05-01-15 6.71 3,600,000 3,929,400
Los Angeles International Airport Regional Airports
Improvement Corporation Refunding
Revenue Bonds Delta Airlines
11-01-25 6.35 5,000,000 5,472,050
Orange County Certificate of Participation
Civic Center Facility Capital Appreciation
Refunding Bonds Zero Coupon (AMBAC Insured)
12-01-18 6.90 13,795,000(d) 4,738,169
Sacramento Cogeneration Authority Revenue Bonds
Procter & Gamble Series 1995
07-01-14 6.50 5,000,000 5,488,050
San Joaquin Hills Transportation Corridor Agency
Toll Road Capital Appreciation Refunding Revenue
Bonds Zero Coupon Series 1997A (MBIA Insured)
01-15-26 5.55 9,000,000(d) 2,138,490
01-15-31 5.23 10,500,000(d) 1,917,405
San Jose Redevelopment Agency Merged Area
Redevelopment Tax Allocation Bonds Series 1993
(MBIA Insured)
08-01-24 4.75 9,000,000 8,485,110
Southern California Public Power Authority
Revenue Bonds Mead Adelanto Series 1994A
(AMBAC Insured)
07-01-20 4.875 6,590,000 6,360,668
State Public Works Board California Community
Colleges Lease Pre-refunded Revenue Bonds
Series 1994B
03-01-19 7.00 3,900,000 4,529,499
State Public Works Board University of California
Lease Refunding Revenue Bonds Series 1993A
(AMBAC Insured)
06-01-14 5.50 7,275,000 7,788,761
06-01-23 5.00 6,000,000 5,800,560
Ukiah Unified School District Mendocino County
Certificate of Participation Series 1993
09-01-10 6.00 3,790,000 3,978,666
West Covina Redevelopment Agency Community
Facilities District Special Tax Refunding Bonds
Series 1996
09-01-17 6.00 5,000,000 5,495,350
Total 98,374,501
Colorado (2.2%)
Arapahoe County Public Highway Authority Capital
Improvement Trust Fund E-470 Highway
Pre-refunded Revenue Bonds
08-31-26 7.00 5,685,000 6,777,202
Castle Rock Ranch Improvement Public Facility
Revenue Bonds Series 1996
12-01-11 6.375 5,750,000 6,605,312
E-470 Highway Revenue Bonds Zero Coupon
Series 1997B (MBIA Insured)
09-01-22 5.34 6,000,000(d) 1,693,800
State Health Facility Authority Hospital
Improvement Refunding Revenue Bonds
Parkview Episcopal Medical Center Series 1995
09-01-16 6.00 4,000,000 4,196,400
State Health Facility Authority Revenue Bonds
Liberty Heights Zero Coupon Escrowed to Maturity
07-15-22 5.54 10,475,000(d) 2,882,511
Total 22,155,225
Connecticut (0.9%)
State General Obligation Bonds Series 1992A
03-15-06 6.40 8,000,000 8,732,640
Delaware (0.2%)
State University Revenue Bonds Series 1989
11-01-14 6.00 2,000,000 2,038,860
District of Columbia (2.5%)
District Unlimited Tax General Obligation Refunding
Bonds Series 1998B (MBIA Insured)
06-01-17 6.00 2,000,000 2,214,820
General Obligation Bonds Zero Coupon
Series 1994B (MBIA Insured)
06-01-13 6.63 23,945,000(d) 11,213,683
06-01-14 6.64 26,415,000(d) 11,669,354
Total 25,097,857
Florida (3.3%)
Duvall County Housing Authority Single Family
Mortgage Refunding Revenue Bonds Series 1991
(FGIC Insured)
07-01-24 7.35 3,430,000 3,653,156
Jacksonville Excise Tax Refunding Revenue Bonds
Series 1992 (AMBAC Insured)
10-01-08 6.50 5,000,000 5,534,950
State Board of Education Administration Capital
Outlay Pre-refunded Public Education Bonds
Series 1991C
06-01-08 6.50 5,025,000 5,512,928
06-01-09 6.50 6,200,000 6,802,020
St. John's River Waste Management District Land
Acquisition Pre-refunded Revenue Bonds
Series 1989 (AMBAC Insured)
07-01-09 6.00 7,000,000 7,168,490
Village Center Community Development District 2
Lake County Recreational Pre-refunded R.A.N.
Series 1996
11-01-00 6.50 4,945,000 5,000,186
Total 33,671,730
Georgia (3.0%)
Municipal Electric Authority Pre-refunded Revenue
Bonds Series 1989T
01-01-25 6.50 5,000,000 5,080,300
Municipal Electric Authority Special Obligation
Bonds Project 1 4th Crossover Series 1997X
(Secondary MBIA Insured)
01-01-20 6.50 19,550,000 23,379,845
Richmond County Development Authority Revenue
Bonds Zero Coupon Escrowed to Maturity
12-01-21 5.74 7,880,000(d) 2,267,628
Total 30,727,773
Hawaii (0.6%)
City & County of Honolulu Pre-refunded General
Obligation Bonds Series 1992A
03-01-06 6.30 5,880,000 6,419,431
Idaho (0.4%)
Health Facilities Authority Revenue Bonds
Bannock Regional Medical Center Series 1995
05-01-17 6.375 1,450,000 1,560,882
05-01-25 6.125 2,250,000 2,379,240
Total 3,940,122
Illinois (8.8%)
Alton Madison County Hospital Facility Refunding
Revenue Bonds St. Anthony's Health Center
Series 1996
09-01-10 6.00 2,975,000 3,116,253
09-01-14 6.00 1,765,000 1,848,802
Chicago Public Building Commission Building
Revenue Bonds Chicago Board of Education
Series 1990A Escrowed to Maturity (MBIA Insured)
01-01-18 6.50 23,500,000 24,387,360
Cook & Will Counties TWP High School
District 206 Capital Appreciation Bonds
Zero Coupon Series 1994C (AMBAC Insured)
12-01-10 6.55 2,605,000(d) 1,423,711
Cook County School District 170 Chicago Heights
Capital Appreciation Bonds Zero Coupon
Series 1994C (AMBAC Insured)
12-01-09 6.50 2,155,000(d) 1,259,899
12-01-10 6.55 2,155,000(d) 1,195,163
Cook County Unlimited Tax General Pre-refunded
Obligation Bonds Series 1989
11-01-09 6.50 5,800,000 6,013,788
Development Finance Authority Pollution Control
Refunding Revenue Bonds Illinois Power
Series 1991A
07-01-21 7.375 10,000,000 11,617,700
Development Finance Authority Retirement Housing
Revenue Bonds Zero Coupon Escrowed to Maturity
04-15-20 7.75 13,745,000(d) 4,220,815
Educational Facilities Authority Medium-term
College Revenue Bonds Northwestern University
Series 1997
11-01-32 5.20 3,500,000 3,601,080
Educational Facilities Authority Revenue Bonds
Lewis University Series 1996
10-01-16 6.10 2,005,000 2,110,042
Educational Facilities Revenue Bonds
Columbia College
12-01-17 6.875 2,760,000 3,044,390
12-01-18 6.125 3,015,000 3,107,199
Health Facilities Authority Refunding Revenue Bonds
Edwards Hospital Series 1993A
02-15-19 6.00 3,055,000 3,172,984
Health Facilities Authority Refunding Revenue Bonds
Masonic Medical Center Series 1993
10-01-19 5.50 5,000,000 5,084,050
Metropolitan Pier & Exposition Authority
Dedicated State Tax Capital Appreciation
Refunding Revenue Bonds McCormick Place
Zero Coupon (MBIA Insured)
06-15-20 5.70 3,070,000(d) 971,102
Metropolitan Pier & Exposition Authority
Dedicated State Tax Capital Appreciation
Revenue Bonds McCormick Place Expansion
Zero Coupon Series 1993A (FGIC Insured)
06-15-10 6.64 11,000,000(d) 6,147,240
06-15-16 6.80 9,000,000(d) 3,526,650
Metropolitan Pier & Exposition Authority
Dedicated State Tax Capital Appreciation
Revenue Bonds Zero Coupon Series 1993A
(FGIC Insured)
06-15-21 6.54 5,000,000(d) 1,497,450
State Development Finance Authority Regency Park
Retirement Housing Revenue Bonds Zero Coupon
Series 1991B Escrowed to Maturity
07-15-25 6.50 10,000,000(d) 2,294,900
Total 89,640,578
Indiana (2.4%)
Municipal Power Agency Power Supply System
Pre-refunded Revenue Bonds Series 1989A
(AMBAC Insured)
01-01-16 6.50 8,800,000 9,113,544
Seymour Economic Development Revenue Bonds
Union Camp Series 1992
07-01-12 6.25 2,870,000 3,235,753
Transportation Finance Authority Highway Revenue
Bonds Series 1990A
06-01-15 7.25 10,000,000 12,543,700
Total 24,892,997
Iowa (0.3%)
State Finance Authority Single Family
Mortgage-backed Securities Program Bonds
Series 1991A
07-01-16 7.25 3,220,000 3,404,055
Kentucky (0.8%)
Muhlenberg County Hospital Refunding Revenue
Bonds Muhlenberg Community Hospital Series 1996
07-01-10 6.75 3,985,000 4,191,224
Owensboro Electric Light & Power Refunding
Revenue Bonds Zero Coupon Series 1991B
(AMBAC Insured)
01-01-15 6.65 9,125,000(d) 3,970,196
Total 8,161,420
Louisiana (2.4%)
Bastrop Industrial Development Board Percent
Pollution Control Refunding Revenue Bonds
International Paper Company Series 1992A
03-01-07 6.90 6,875,000 7,572,606
New Orleans Capital Appreciation General Obligation
Refunding Revenue Bonds Zero Coupon
(AMBAC Insured)
09-01-12 6.63 6,250,000(d) 3,112,813
New Orleans Home Mortgage Authority Special
Obligation Refunding Bonds Series 1992
Escrowed to Maturity
01-15-11 6.25 9,000,000 10,215,360
Public Facilities Authority Centenary College
Revenue Bonds Series 1997
02-01-17 6.10 1,000,000 1,040,890
Public Facilities Authority Revenue Bonds
Windsor Multi-family Housing Foundation
Series 1996A
01-01-15 6.125 3,385,000(e) 2,538,750
Total 24,480,419
Maryland (2.7%)
Health & Educational Facility Authority Revenue
Bonds Frederick Memorial Hospital Series 1993
(FGIC Insured)
07-01-28 5.00 10,000,000 9,756,400
State Community Development Administration
Department of Housing & Community Development
Single Family Program Bonds 1st Series 1991
04-01-17 7.30 10,500,000 11,095,560
State Health & Higher Educational Facility Authority
Revenue Bonds Anne Arundel Medical Center
(AMBAC Insured)
07-01-23 5.00 7,000,000 6,843,060
Total 27,695,020
Massachusetts (1.6%)
Health & Educational Facilities Authority
Pre-refunded Revenue Bonds Melrose-Wakefield
Hospital Series 1992B
07-01-16 6.375 1,430,000 1,595,508
Health & Educational Facilities Authority Revenue
Bonds Valley Regional Health System Series 1994C
(Connie Lee Insured)
07-01-18 5.75 3,500,000 3,653,790
Municipal Wholesale Electric Power Supply System
Pre-refunded Revenue Bonds Series 1992B
07-01-17 6.75 10,000,000 11,157,200
Total 16,406,498
Michigan (2.6%)
Battle Creek Calhoun County Downtown
Development Authority Pre-refunded Bonds
Series 1994
05-01-22 7.65 3,750,000 4,454,438
Detroit Downtown Development Authority Area
Project 1 Junior Lien Tax Increment Refunding
Bonds Series 1996D
07-01-25 6.50 6,000,000 6,449,880
Detroit Water Supply System Refunding Revenue
Bonds Series 1992 (FGIC Insured)
07-01-07 6.25 2,000,000 2,179,900
State Hospital Finance Authority Refunding Revenue
Bonds Central Michigan Community Hospital
10-01-16 6.25 2,225,000 2,400,597
State Hospital Finance Authority Refunding Revenue
Bonds Sinai Hospital of Greater Detroit Series 1995
01-01-16 6.625 2,000,000 2,221,140
State Hospital Finance Authority Revenue Bonds
Presbyterian Villages of Michigan Obligated Group
Series 1995
01-01-15 6.40 1,000,000 1,068,620
01-01-25 6.50 1,000,000 1,072,150
State Hospital Finance Authority Revenue Bonds
Presbyterian Villages of Michigan Obligated Group
Series 1997
01-01-15 6.375 400,000 428,780
State Strategic Fund Limited Tax Obligation
Refunding Revenue Bonds Ford Motor Series 1991A
02-01-06 7.10 5,000,000 5,859,200
Total 26,134,705
Minnesota (2.9%)
Minneapolis & St. Paul Housing & Redevelopment
Authority Health Care System Series 1990A
(MBIA Insured)
08-15-05 7.40 4,500,000 4,893,255
Rochester Health Care Facility Revenue Bonds
Mayo Foundation Series 1992A
11-15-19 4.95 15,000,000 14,482,500
State Housing Finance Agency Single Family
Mortgage Bonds Series 1990C (FHA Insured)
07-01-14 7.70 2,080,000 2,182,585
State Housing Finance Agency Single Family
Mortgage Revenue Bonds Series 1988E
02-01-14 7.65 5,515,000 5,681,057
Washington County Housing & Redevelopment
Authority Refunding Revenue Bonds Woodbury
Multi-family Housing Series 1996
12-01-23 6.95 2,475,000 2,537,989
Total 29,777,386
Mississippi (0.3%)
Medical Center Educational Building Hospital
Refunding Revenue Bonds University of Mississippi
Medical Center Series 1998B (AMBAC Insured)
12-01-23 5.50 3,000,000 3,187,920
Missouri (1.0%)
St. Louis Regional Convention & Sports Complex
Authority Pre-refunded Revenue Bonds
Series 1991C
08-15-21 7.90 8,105,000 9,511,299
St. Louis Regional Convention & Sports Complex
Authority Revenue Bonds Series 1991C
08-15-21 7.90 395,000 440,804
Total 9,952,103
Nevada (0.5%)
Clark County Special Improvement District 108
Local Improvement Bonds Summerline Series 1997
02-01-12 6.50 4,440,000 4,580,570
New Hampshire (0.1%)
Higher Education & Health Facilities Authority
College Revenue Bonds New Hampshire College
Series 1997
01-01-27 6.375 1,000,000 1,069,460
New Jersey (1.7%)
Turnpike Authority Revenue Bonds Series 1991C
01-01-05 6.50 16,000,000 17,023,200
New York (9.8%)
Dormitory Authority New York City University
System Consolidated 2nd Generation Resource
Revenue Bonds Series 1994A
07-01-18 5.75 5,500,000 5,924,160
Dormitory Authority State Court Facility Lease
Revenue Bonds Series 1993A
05-15-21 5.25 20,000,000 19,763,000
Dormitory Authority State Department of Health
Refunding Revenue Bonds
07-01-20 5.50 3,060,000 3,085,673
New York City General Obligation Bonds
Series 1992B
10-01-17 6.75 11,150,000 12,210,365
New York City Unlimited General Pre-refunded
Obligation Bonds Series 1994B-1
08-15-16 7.00 1,510,000 1,753,276
New York City Un-refunded Balance Unlimited
General Obligation Bonds Series 1994B-1
08-15-16 7.00 7,340,000 8,496,344
State Medical Care Facility Finance Agency
Mental Health Services Facility Improvement
Refunding Revenue Bonds Series 1993F
02-15-14 5.375 7,510,000 7,592,009
State Mortgage Agency Homeowner Mortgage
Revenue Bonds Series 1991TT
04-01-15 7.50 15,945,000 17,127,162
State Urban Development Correctional Capital
Facilities Revenue Bonds Series 4
01-01-23 5.375 23,815,000 23,865,250
Total 99,817,239
North Carolina (3.9%)
Eastern Municipal Power Agency Power System
Refunding Revenue Bonds Series 1989A
01-01-24 6.50 20,000,000 20,182,400
Eastern Municipal Power Agency System Revenue
Bonds Series 1985G
12-01-16 5.75 12,750,000 13,076,527
Eastern Municipal Power Agency System Revenue
Bonds Series 1993D
01-01-16 5.60 6,500,000 6,535,165
Total 39,794,092
North Dakota (0.5%)
Ward County Health Care Facilities Refunding
Revenue Bonds Trinity Obligated Group
Series 1996B
07-01-21 6.25 4,365,000 4,661,864
Ohio (1.0%)
Air Quality Development Authority Pollution Control
Refunding Revenue Bonds Ohio Edison
Series 1993A
05-15-29 5.95 5,000,000 5,174,350
Carroll Water & Sewer District Unlimited Tax
General Obligation Bonds
12-01-10 6.25 1,000,000 996,650
Columbus Sewerage System Refunding Revenue
Bonds Series 1992
06-01-05 6.30 3,500,000 3,821,265
State Water & Air Quality Development Authority
Pollution Control Refunding Revenue Bonds
Cleveland Electric Illuminating Series 1995
08-01-25 7.70 300,000 344,451
Total 10,336,716
Oklahoma (0.4%)
Stillwater Medical Center Authority Hospital Revenue
Bonds Series 1997B
05-15-12 6.35 1,000,000 1,070,530
Valley View Hospital Authority Refunding Revenue
Bonds Series 1996
08-15-14 6.00 2,695,000 2,826,866
Total 3,897,396
Pennsylvania (3.4%)
Delaware County Industrial Development Authority
Pollution Control Refunding Revenue Bonds
Philadelphia Electric Series 1991A
04-01-21 7.375 23,540,000 25,520,655
Delaware County Industrial Development Authority
Pollution Control Refunding Revenue Bonds
Series 1997A
07-01-13 6.10 4,000,000 4,357,160
Philadelphia Hospital & Higher Education Facility
Authority Hospital Revenue Bonds Friends Hospital
Series 1993
05-01-11 6.20 2,500,000 2,615,575
Pittsburgh Water & Sewer Authority Water & Sewer
System 1st Lien Capital Appreciation Revenue
Bonds Series 1998B Zero Coupon (FGIC Insured)
09-01-24 5.25 4,160,000(d) 1,056,973
09-01-25 5.25 4,160,000(d) 1,002,685
Total 34,553,048
Rhode Island (0.2%)
Providence Special Tax Increment Obligation Bonds
Series 1996D
06-01-16 6.65 1,500,000 1,639,125
South Carolina (0.4%)
Horry County Hospital Refunding Revenue Bonds
Conway Hospital Series 1992
07-01-12 6.75 4,000,000 4,341,240
Tennessee (0.2%)
Nashville & Davidson Counties Health & Education
Facilities Board Revenue Bonds Zero Coupon
Escrowed to Maturity
06-01-21 5.71 7,500,000(d) 2,201,400
Texas (12.7%)
Austin Utility System Capital Appreciation Refunding
Revenue Bonds Zero Coupon (AMBAC Insured)
11-15-10 6.51 5,055,000(d) 2,782,171
Austin Utility System Capital Appreciation Refunding
Revenue Bonds Zero Coupon Series 1992A
(MBIA Insured)
11-15-10 6.59 16,000,000(d) 8,806,080
Austin Utility System Combined Utility Refunding
Revenue Bonds Series 1992 (AMBAC Insured)
11-15-06 6.25 10,500,000 11,505,585
Coastal Water Authority Water Conveyance System
Refunding Revenue Bonds Series 1991
Escrowed to Maturity (AMBAC Insured)
12-15-17 6.25 5,000,000 5,530,850
Cypress-Fairbanks Independent School District
Harris County Schoolhouse Unlimited Tax
Pre-refunded Bonds Series 1990 (FGIC Insured)
08-01-08 6.50 1,500,000 1,579,635
Harris County Health Facilities Development
Hermann Hospital Revenue Bonds (MBIA Insured)
10-01-24 6.375 8,820,000 9,929,380
Houston Water & Sewer System Junior Lien
Refunding Revenue Bonds Zero Coupon
Series 1991C (AMBAC Insured)
12-01-08 6.60 8,000,000(d) 4,920,640
Municipal Power Agency Capital Appreciation
Refunding Revenue Bonds Zero Coupon
(AMBAC Insured)
09-01-09 6.90 18,000,000(d) 10,611,900
Northwest Independent School District Unlimited Tax
General Obligation Capital Appreciation Refunding
Revenue Bonds Permanent School Fund Guarantee
Zero Coupon
08-15-17 6.23 3,000,000(d) 1,003,380
San Antonio Electric & Gas Systems Refunding
Revenue Bonds Series 1989
02-01-14 6.00 6,000,000 6,149,880
San Antonio Electric & Gas Systems Refunding
Revenue Bonds Series 1989A
02-01-12 6.50 26,250,000 27,035,925
San Antonio Water Refunding Revenue Bonds
(FGIC Insured)
05-15-07 6.40 25,000,000 27,334,500
State Public Property Financial Corporation Texas
Mental Health Lease Revenue Bonds Series 1996
09-01-16 6.20 2,340,000 2,495,914
Turnpike Authority Dallas North Tollway
Pre-refunded Revenue Bonds Series 1990
(AMBAC Insured)
01-01-20 6.00 10,000,000 10,131,800
Total 129,817,640
Virginia (0.7%)
Augusta County Industrial Development Authority
Hospital Refunding Revenue Bonds Augusta
Hospital Series 1993 (AMBAC Insured)
09-01-21 5.125 3,600,000 3,534,912
Fairfax County Water Authority Refunding Revenue
Bonds Series 1997
04-01-21 5.00 3,750,000 3,754,838
Total 7,289,750
Washington (5.1%)
Auburn School District 408 King County Unlimited
Tax General Obligation Bonds Series 1992A
12-01-06 6.375 8,000,000 9,044,320
Issaquah School District 411 King County Unlimited
Tax General Obligation Bonds Series 1992
12-01-08 6.375 16,675,000 19,269,630
King County Housing Authority Pooled Housing
Refunding Revenue Bonds Series 1995A
03-01-26 6.80 2,500,000 2,667,675
Public Hospital District 1 King County Washington
Valley Medical Center Hospital Facility Refunding
Revenue Bonds
09-01-20 5.75 3,000,000 3,274,290
Public Power Supply System Nuclear Power
Project 1 Pre-refunded Revenue Bonds Series 1989A
07-01-17 6.00 12,130,000 12,411,537
Public Power Supply System Nuclear Power
Project 3 Capital Appreciation Refunding Revenue
Bonds Zero Coupon Series 1989B (MBIA Insured)
07-01-13 6.61 10,360,000(d) 4,753,790
Total 51,421,242
West Virginia (1.0%)
School Building Authority Capital Improvement
Pre-refunded Revenue Bonds Series 1990B
(MBIA Insured)
07-01-20 6.00 9,730,000 10,131,752
Wyoming (0.4%)
Community Development Authority Single Family
Mortgage Bonds Federally Insured or Guaranteed
Mortgage Loan Series 1991B
06-01-31 7.40 3,510,000 3,712,000
Total municipal bonds
(Cost: $847,234,711) $972,714,274
See accompanying notes to investments in securities.
</TABLE>
<PAGE>
Short-term securities (0.2%)
Issuer (f,g) Effective Amount Value(a)
yield payable at
maturity
Municipal notes
Cohasset Minnesota Power & Light Series 1997B
V.R.D.N.
06-01-13 4.00% $500,000 $500,000
Farmington New Mexico Pollution Control
Revenue Bonds Arizona Public Service
Series 1994B V.R.
05-01-24 3.95 100,000 100,000
Jackson County Mississippi Port Facility
Chevron USA V.R.
06-01-23 4.05 510,000 510,000
Jasper County Indiana Pollution Control Revenue
Bonds North Indiana Public Service V.R.
06-01-13 4.00 200,000 200,000
Maricopa County Arizona Industrial Development
Agency Hospital Facilities
Revenue Bonds Samaritan Health Service Hospital
Series 1985B-2 V.R.
12-01-08 3.95 100,000 100,000
Valdez Alaska Marine Terminal Exxon Pipeline
Company Series 1985 V.R.
10-01-25 4.00 200,000 200,000
Valdez Alaska Marine Terminal Revenue Bonds
Exxon Pipeline Company Series 1993A V.R.
12-01-33 4.00 200,000 200,000
Total short-term securities
(Cost: $1,810,000) $1,810,000
Total investments in securities
(Cost: $849,044,711)(h) $974,524,274
See accompanying notes to investments in securities.
<PAGE>
Investments in securities
IDS Tax-Exempt Bond Fund
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 05-31-98 11-30-97
AAA 48% 44%
AA 15 15
A 9 10
BBB 27 31
BB and below 1 --
Non-rated -- --
Total 100% 100%
(c) The following abbreviations may be 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
FNMA -- Federal National Mortgage Association
FSA -- Financial Security Assurance
GNMA -- Government National Mortgage Association
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) Non-income producing. Items identified are in default as to payment of
interest and/or principal.
(f) The following abbreviations are used in the portfolio descriptions:
A.M.T. -- Alternative Minimum Tax
B.A.N. -- Bond Anticipation Note
C.P. -- Commercial Paper
R.A.N. -- Revenue Anticipation Note
T.A.N. -- Tax Anticipation Note
T.R.A.N. -- Tax & Revenue Anticipation Note
V.R. -- Variable Rate
V.R.D.B. -- Variable Rate Demand Bond
V.R.D.N. -- Variable Rate Demand Note
(g) The Fund is entitled to receive principal amount from issuer or corporate
guarantor, if indicated in parentheses, 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, 1998.
(h) At May 31, 1998, the cost of securities for federal income tax purposes was
approximately $847,455,000 and the approximate aggregate gross unrealized
appreciation and depreciation based on that cost was:
Unrealized appreciation.........................................$129,516,000
Unrealized depreciation...........................................(2,447,000)
----------
Net unrealized appreciation.....................................$127,069,000
<PAGE>
Board members and officers
Independent board members and officers
Chairman William R. Pearce*
of the board Chairman of the board, Board Services Corporation (provides
administrative services to boards including the boards of the
IDS and IDS Life funds and Master Trust portfolios).
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.
Heinz F. Hutter
Former president and chief operating officer, Cargill, Inc.
Anne P. Jones
Attorney and telecommunications consultant.
Alan K. Simpson
Former United States senator for Wyoming.
Edson W. Spencer
Retired chairman and chief executive officer, Honeywell, Inc.
Wheelock Whitney
Chairman, Whitney Management Company.
C. Angus Wurtele
Chairman of the board, The Valspar Corporation.
Officer
Vice president, Leslie L. Ogg*
general counsel President of Board Services Corporation.
and secretary
Board members and officers associated with AEFC
President John R. Thomas*
Senior vice president, AEFC.
William H. Dudley*
Senior advisor to the chief executive officer, AEFC.
David R. Hubers*
President and chief executive officer, AEFC.
Officers associated with AEFC
Vice president Peter J. Anderson*
Senior vice president, AEFC
Vice president Frederick C. Quirsfeld*
Vice president, AEFC
Treasurer Matthew N. Karstetter*
Vice president, AEFC
* Interested person as defined by the Investment Company Act of 1940.
<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 with countries
IDS Global Growth Fund
Invests in a Portfolio comprised primarily of stocks of companies throughout the
world that are positioned to meet market needs in a changing world economy.
These companies offer above-average potential for long-term growth.
(icon of) world
IDS International Fund
Invests primarily in common stocks of foreign companies that offer potential for
superior growth. The Fund may invest up to 20% of its assets in the U.S. market.
(icon of) three flags
IDS Global Balanced Fund
Invests in stocks and bonds in, for the most part, major markets throughout the
world, including the U.S. Seeks to provide a balance of growth of capital and
current income.
(icon of) scale of globes
IDS Global Bond Fund
Invests in a Portfolio comprised primarily of debt securities of U.S. and
foreign issuers to seek high total return through income and growth of capital.
(icon of) globe
Growth funds
Funds in this group seek capital growth, primarily from common stocks. They are
high risk mutual funds with a potential for high reward.
IDS Precious Metals Fund
Invests primarily in the securities of foreign or domestic companies that
explore for, mine and process or distribute gold and other precious metals. A
highly aggressive and speculative fund that seeks long-term growth of capital.
(icon of) cart of precious gems
IDS Discovery Fund
Invests in small- and medium-size, growth-oriented companies emphasizing
technological innovation and productivity enhancement. Buys and holds larger
growth-oriented stocks.
(icon of) ship
IDS Small Company Index Fund
Invests in all or a representative group of the equity securities comprising the
S&P SmallCap 600 Index, as it strives to provide long-term capital appreciation.
(icon of) building
IDS Strategy Aggressive Fund
Invests primarily in common stocks of companies that are selected for their
potential for above-average growth. Above-average means that their growth
potential is better, in the opinion of the portfolio's investment manager, than
the Standard & Poor's Corporation (S&P) 500 Stock Index.
(icon of) chess piece
IDS Research Opportunities Fund
Invests in a Portfolio comprised primarily of equity securities of companies
included in the S&P 500 Index that are believed to have strong growth potential.
The Portfolio is managed using a research methodology by the Research Department
of AEFC. Goal is long-term appreciation.
(icon of) magnifying glass
IDS Growth Fund
Invests in a Portfolio comprised primarily of companies that have above-average
potential for long-term growth as a result of new management, marketing
opportunities or technological superiority.
(icon of) trees
IDS New Dimensions Fund
Invests in a Portfolio comprised primarily of companies with
significant growth potential due to superiority in
technology, marketing or management. The Fund frequently
changes its industry mix.
(icon of) dimension
IDS Progressive Fund
Invests primarily in undervalued common stocks. The Fund holds stocks for the
long term with the goal of capital growth.
(icon of) shooting star
Growth & income funds
These funds focus on securities of medium to large, well-established companies
that offer long-term growth of capital and reasonable income from dividends and
interest. Foreign investments may be subject to currency fluctuations and
political and economic risks of the countries in which the investments are made.
IDS Equity Select Fund
Invests primarily in a combination of moderate growth stocks, higher-yielding
equities and bonds. Seeks growth of capital and income.
(icon of) three pine trees
IDS Blue Chip Advantage Fund
Invests in selected stocks from a major market index. Securities purchased are
those recommended by our research analysts as the best from each industry
represented on the index. Offers potential for long-term growth as well as
dividend income.
(icon of) ribbon
IDS Managed Allocation Fund
Invests in a Portfolio comprised primarily of U.S. equity securities, U.S. and
foreign debt securities, foreign equity securities and money market instruments.
The Fund provides diversification among these major investment categories and
has a target mix that represents the way the Fund's investments will be
allocated over the long term. Seeks maximum total return.
(icon of) gyroscope
IDS Stock Fund
Invests in a Portfolio comprised primarily of common stock of companies
representing many sectors of the economy. Seeks current income and growth of
capital.
(icon of) building with columns
IDS Equity Value Fund
Invests primarily in undervalued common stocks that offer potential for growth
of capital and income.
(icon of) three growing flowers
IDS Utilities Income Fund
Invests primarily in the stocks of public utility companies to seek high current
income and growth of income and capital with reduced volatility.
(icon of) light bulb
IDS Diversified Equity Income Fund
Invests in a Portfolio comprised primarily in high-yielding common stocks to
seek high current income and, secondarily, to benefit from the growth potential
offered by stock investments.
(icon of) two puzzle pieces
IDS Mutual
Invests in a Portfolio which seeks to balance between common stocks and senior
securities (preferred stocks and bonds). Seeks a balance of growth of capital
and current income.
(icon of) scale of justice
Income funds
The funds in this group invest their assets primarily in corporate bonds or
government securities to seek interest income. Secondary objective is capital
growth. Risk varies by bond quality.
IDS Extra Income Fund
Invests in a Portfolio comprised mainly of long-term, high-yielding corporate
fixed-income securities in the lower rated, higher risk bond categories to seek
high current income. Secondary objective is capital growth.
(icon of) two coins
IDS Bond Fund
Invests mainly in corporate bonds, at least 50% in the higher rated, lower risk
bond categories, or the equivalent, and in government bonds.
(icon of) Greek column
IDS Selective Fund
Invests in a Portfolio comprised primarily of high-quality corporate bonds and
other highly rated debt instruments including government securities and
short-term investments. Seeks current income and preservation of capital.
(icon of) skyline
IDS Federal Income Fund
Invests in a Portfolio comprised primarily of securities issued or guaranteed as
to the timely payment of principal and interest by the U.S. government, its
agencies and instrumentalities. Seeks a high level of current income and safety
of principal consistent with its type of investments.
(icon of) shield with eagle head
Tax-exempt income funds
These funds provide tax-free income by investing in municipal bonds. The income
is generally free from federal income tax, but a portion of the income may be
subject to state and local taxes. Risk varies by bond quality.
IDS Tax-Exempt Bond Fund
Invests mainly in bonds and notes of state or local government units, with at
least 75% in the four highest rated, lowest risk bond categories.
(icon of) shield with Greek column
IDS Insured Tax-Exempt Fund
Invests primarily in municipal securities that are insured as to the timely
payment of principal and interest. The insurance feature minimizes credit risk
of the Fund but does not guarantee the market value of the Fund's shares.
(icon of) shield with star
IDS State Tax-Exempt Funds
(CA, MA, MI, MN, NY, OH)
Invests primarily in high- and medium-grade municipal securities to provide
income to residents of each respective state that is exempt from federal, state
and local income taxes. (New York is the only state that is exempt at the local
level.)
(icon of) shield with U.S. enclosed
IDS High Yield Tax-Exempt Fund
Invests in a Portfolio comprised primarily of medium- and lower-quality
municipal bonds and notes. Lower-quality securities generally involve greater
risk of principal and income.
(icon of) shield with basket of apples enclosed
IDS Intermediate Tax-Exempt Fund
Invests in mainly investment-grade bonds and other debt securities with
intermediate-term maturities issued by state and local government units. Goal is
to seek a high level of current income exempt from federal taxes.
(icon of) shield with tree enclosed
Money market funds
These money market funds have three main goals: conservation of capital,
constant liquidity and the highest possible current income consistent with these
objectives. An investment in these funds is neither insured nor guaranteed by
the U.S. government, and there can be no assurance that these funds will be able
to maintain a stable net asset value of $1.00 per share. Very limited risk.
IDS Cash Management Fund
Invests in such money market securities as high quality commercial paper,
bankers' acceptances, certificates of deposit (CDs) and other bank securities.
(icon of) piggy bank
IDS Tax-Free Money Fund
Invests primarily in short-term bonds and notes issued by state and local
governments to seek high current income exempt from federal income taxes.
(icon of) shield with piggy bank enclosed
For more complete information about any of these funds, including charges and
expenses, you can obtain a prospectus by contacting your financial advisor or
writing to American Express Shareholder Service, P.O. Box 534, Minneapolis, MN
55440-0534. Read it carefully before you invest or send money.
<PAGE>
Quick telephone reference
American Express Redemptions and exchanges, National/Minnesota
Financial Advisors dividend payments or 800-437-3133
Telephone Transaction reinvestments and automatic
Service payment arrangements Mpls./St. Paul area:
671-3800
TTY Service For the hearing impaired 800-846-4852
American Express Automated account information 800-862-7919
Financial Advisors (TouchTone(R) phones only),
Easy Access Line including current fund prices
and performance, account values
and recent account transactions
AMERICAN EXPRESS Financial Advisors
IDS Tax-Exempt Bond Fund
IDS Tower 10
Minneapolis, MN 55440-0010
