1998 SEMIANNUAL REPORT
IDS
Intermediate
Tax-Exempt
Fund
(icon of) shield with 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>
(icon of) shield with 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.
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 19
Board members and officers 31
IDS mutual funds 32
<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
Thanks to ongoing low inflation, interest rates remained subdued during
the past six months. For IDS Intermediate Tax-Exempt Fund, the result was
a 2.2% total return (Class A shares) for the first half of the fiscal year
-- December 1997 through May 1998. Most of the return came in the form of
dividends.
At the outset of the period, financial markets throughout the world were
still trying to sort out the potential implications of the financial
meltdown that occurred in Asia last October. In the U.S., the prevailing
view was that economic growth would suffer at least a modest slowdown,
further easing upward pressure on inflation and, thus, interest rates. The
result was a sharp rally by the bond market through January. From that
point, bonds basically treaded water, as investors waited for evidence of
just how much impact the Asian situation might ultimately have on the U.S.
economy.
Substantial supply
Looking at municipal bonds in particular, while demand remained reasonably
healthy, a tremendous supply of new issues kept a lid on prices. In
addition, the ongoing strong performance of the stock market continued to
attract a heavy influx of money, some of which might otherwise have gone
into the municipal market.
As for the structure of the Fund's portfolio, I reduced its duration
somewhat during the period. (Duration, a function of the average maturity
of the investments, determines how sensitive the Fund's value is to
changes in interest rates. The longer the duration, the greater the
sensitivity.) The reason for this strategy was my belief that rates were
more likely to rise than fall, and I wanted to protect investors' capital
from the negative effect of that possibility.
Yield enhancement
To help shore up the Fund's dividend, I kept a modest exposure to
below-investment-grade, or lower-quality, bonds. They comprised about 10%
of assets, a figure that I expect to maintain over the long term. Because
interest rates have followed an overall downward path in recent years,
municipals, like all bonds, have experienced a commensurate decline in
yields. Ultimately, that trend reduces the Fund's dividend payout.
At this point (mid-June), we still haven't seen enough evidence to
accurately determine the full impact of the Asian situation on economic
growth and, in turn, inflation and interest rates in this country.
Therefore, I plan to keep the portfolio in a neutral structure until
conditions warrant a change.
Terry Fettig
(picture of) Terry Fettig
Terry Fettig
Portfolio Manager
<PAGE>
To our shareholders
Class A
6-month performance
(All figures per share)
Net asset value (NAV)
May 31, 1998 $ 5.10
Nov. 30, 1997 $ 5.09
Increase $ 0.01
Distributions
Dec. 1, 1997 - May 31, 1998
From income $ 0.10
From capital gains $ --
Total distributions $ 0.10
Total return* +2.2%**
Class B
6-month performance
(All figures per share)
Net asset value (NAV)
May 31, 1998 $ 5.10
Nov. 30, 1997 $ 5.09
Increase $ 0.01
Distributions
Dec. 1, 1997 - May 31, 1998
From income $ 0.08
From capital gains $ --
Total distributions $ 0.08
Total return* +1.8%**
Class Y
6-month performance
(All figures per share)
Net asset value (NAV)
May 31, 1998 $ 5.10
Nov. 30, 1997 $ 5.09
Increase $ 0.01
Distributions
Dec. 1, 1997 - May 31, 1998
From income $ 0.10
From capital gains $ --
Total distributions $ 0.10
Total return* +2.3%**
*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)
Alaska Industrial Development & Exploration Authority
Electric Power Revenue Bonds
Upper Lynn Canal Regional Power Series 1997 A.M.T.
5.00% 2002 2.81% $703,914
Chicago Illinois Unlimited Tax General Obligation
Refunding Revenue Bonds Series 1996B
6.00% 2002 2.21 551,569
Houston Texas Water & Sewer System Prior Lien
Refunding Revenue Bonds Series 1992B
5.75% 2002 2.13 532,145
New York State Dormitory Authority Health Care Revenue
Bonds Mental Health Services Facilities Series 1997B
5.00% 2002 2.05 512,930
Delaware County Pennsylvania Industrial Development
Authority Pollution Control Refunding Revenue Bonds
Series 1997A
5.30% 2001 2.05 511,860
North Springs Florida Improvement Special Assessment
District Revenue Bonds Parkland Isles Series 1997B
6.25% 2005 2.04 509,345
Denver Colorado City & County Airport Revenue Bonds
Series 1996 A.M.T.
4.80% 2000 2.03 508,575
Knox County Tennessee Unlimited Tax General
Obligation Bonds Series 1997
4.45% 2003 2.03 506,710
Long Beach California Harbor Revenue Bonds
Series 1993 A.M.T.
4.50% 2002 2.02 505,415
Sandusky County Ohio Hospital Facilities Refunding
Revenue Bonds Memorial Hospital
4.40% 2000 2.00 499,980
Note: Certain of the Fund's investment income may be subject to the
Alternative Minimum Tax (A.M.T.)
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 21.37% of the Fund's net assets
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<TABLE>
<CAPTION>
Financial statements
Statement of assets and liabilities
IDS Intermediate Tax-Exempt Fund
May 31, 1998
Assets
<S> <C>
(Unaudited)
Investments in securities, at value (Note 1)
(identified cost $24,886,474) $25,208,535
Cash in bank on demand deposit 84,779
Accrued interest receivable 354,730
-------
Total assets 25,648,044
----------
Liabilities
Dividends payable 4,647
Payable for investment securities purchased 606,813
Accrued investment management services fee 307
Accrued distribution fee 135
Accrued service fee 119
Accrued transfer agency fee 42
Accrued administrative services fee 27
Other accrued expenses 31,775
------
Total liabilities 643,865
-------
Net assets applicable to outstanding capital stock $25,004,179
===========
Represented by
Capital stock-- $.01 par value (Note 1) $ 48,991
Additional paid-in capital 24,667,983
Undistributed net investment income 2,900
Accumulated net realized gain (loss) (Note 5) (37,756)
Unrealized appreciation (depreciation) on investments 322,061
-------
Total-- representing net assets applicable to outstanding capital stock $25,004,179
===========
Net assets applicable to outstanding shares: Class A $18,377,749
Class B $ 6,625,348
Class Y $ 1,082
Net asset value per share of outstanding capital stock: Class A shares 3,600,657 $ 5.10
Class B shares 1,298,226 $ 5.10
Class Y shares 212 $ 5.10
See accompanying notes to financial statements.
</TABLE>
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<TABLE>
<CAPTION>
Statement of operations
IDS Intermediate Tax-Exempt Fund
Six months ended May 31, 1998
Investment income
(Unaudited)
Income:
<S> <C>
Interest $565,515
--------
Expenses (Note 2):
Investment management services fee 54,935
Distribution fee-- Class B 22,858
Transfer agency fee 7,167
Incremental transfer agency fee-- Class B 146
Service fee
Class A 15,912
Class B 5,333
Administrative services fees and expenses 5,061
Compensation of board members 3,985
Custodian fees 4,424
Postage 990
Registration fees 13,963
Audit fees 6,000
Other 3,074
-----
Total expenses 143,848
Less expenses voluntarily reimbursed by AEFC (Note 2) (6,743)
------
137,105
Earnings credits on cash balances (Note 2) (5,775)
------
Total net expenses 131,330
-------
Investment income (loss)-- net 434,185
-------
Realized and unrealized gain (loss) -- net
Net realized gain (loss) on security transactions (Note 3) 787
Net change in unrealized appreciation (depreciation) on investments 76,332
------
Net gain (loss) on investments 77,119
------
Net increase (decrease) in net assets resulting from operations $511,304
========
See accompanying notes to financial statements.
</TABLE>
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<TABLE>
<CAPTION>
Financial statements
Statements of changes in net assets
IDS Intermediate Tax-Exempt Fund
Operations and distributions
May 31, 1998 Nov. 30, 1997
Six months ended Year ended
(Unaudited)
<S> <C> <C>
Investment income (loss)-- net $ 434,185 $ 590,855
Net realized gain (loss) on security transactions 787 (38,543)
Net change in unrealized appreciation (depreciation) on investments 76,332 239,163
------ -------
Net increase (decrease) in net assets resulting from operations 511,304 791,475
------- -------
Distributions to shareholders from:
Net investment income
Class A (340,684) (465,805)
Class B (90,579) (125,014)
Class Y (20) (38)
--- ---
Total distributions (431,283) (590,857)
-------- --------
Capital share transactions (Note 4)
Proceeds from sales
Class A shares (Note 2) 9,336,850 29,600,212
Class B shares 2,427,521 8,114,669
Reinvestment of distributions at net asset value
Class A shares 270,201 401,413
Class B shares 85,396 115,617
Class Y shares 20 38
Payments for redemptions
Class A shares (8,321,006) (14,648,786)
Class B shares (Note 2) (1,463,525) (3,194,018)
---------- ----------
Increase (decrease) in net assets from capital share transactions 2,335,457 20,389,145
--------- ----------
Total increase (decrease) in net assets 2,415,478 20,589,763
Net assets at beginning of period 22,588,701 1,998,938
---------- ---------
Net assets at end of period $25,004,179 $22,588,701
=========== ===========
Undistributed (excess of distributions over) net investment income $ 2,900 $ (2)
----------- -----------
See accompanying notes to financial statements.
</TABLE>
<PAGE>
Notes to financial statements
IDS Intermediate Tax-Exempt Fund
(Unaudited as to May 31, 1998)
1
Summary of
significant
accounting policies
IDS Intermediate Tax-Exempt Fund (a series of IDS Tax-Exempt Bond Fund,
Inc.) is registered under the Investment Company Act of 1940 (as amended)
as a diversified, open-end management investment company. IDS Tax-Exempt
Bond Fund, Inc. has 10 billion authorized shares of capital stock that can
be allocated among the separate series as designated by the board.
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 shares 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 portfolio
securities and may write cash-secured put options. The risk in writing a
call option is that the Fund gives up the opportunity of profit if the
market price of the security increases. The risk in writing a put option
is that the Fund may incur a loss if the market price of the security
decreases and the option is exercised. The risk in buying an option is
that the Fund pays a premium whether or not the option is exercised. The
Fund also has the additional risk of not being able to enter into a
closing transaction if a liquid secondary market does not exist. The Fund
also may write over-the-counter options where the completion of the
obligation is dependent upon the credit standing of the other party.
Option contracts are valued daily at the closing prices on their primary
exchanges and unrealized appreciation or depreciation is recorded. The
Fund will realize a gain or loss upon expiration or closing of the option
transaction. When options on debt securities or futures are exercised, the
Fund will realize a gain or loss. When other options are exercised, the
proceeds on sales for a written call option, the purchase cost for a
written put option or the cost of a security for a purchased put or call
option is adjusted by the amount of premium received or paid.
Futures transactions
In order to gain exposure to or protect itself from changes in the market,
the Fund may buy and sell financial futures contracts. Risks of entering
into futures contracts and related options include the possibility that
there may be an illiquid market and that a change in the value of the
contract or option may not correlate with changes in the value of the
underlying securities.
Upon entering into a futures contract, the Fund is required to deposit
either cash or securities in an amount (initial margin) equal to a certain
percentage of the contract value. Subsequent payments (variation margin)
are made or received by the Fund each day. The variation margin payments
are equal to the daily changes in the contract value and are recorded as
unrealized gains and losses. The Fund recognizes a realized gain or loss
when the contract is closed or expires.
Federal taxes
Since the Fund's policy is to comply with all sections of the Internal
Revenue Code applicable to regulated investment companies and to
distribute all of its taxable income to shareholders, no provision for
income or excise taxes is required.
Net investment income (loss) and net realized gains (losses) may differ
for financial statement and tax purposes primarily because of the deferral
of losses on certain futures contracts and losses deferred due to "wash
sale" transactions. The character of distributions made during the year
from net investment income or net realized gains may differ from their
ultimate characterization for federal income tax purposes. Also, due to
the timing of dividend distributions, the fiscal year in which amounts are
distributed may differ from the year that the income or realized gains
(losses) were recorded by the Fund.
Dividends to shareholders
Dividends from net investment income, declared daily and payable monthly,
are reinvested in additional shares of the Fund at net asset value or
payable in cash. Capital gains, when available, are distributed along with
the last income dividend of the calendar year.
Other
Security transactions are accounted for on the date securities are
purchased or sold. Interest income, including level-yield amortization of
premium and discount, is accrued daily.
At May 31, 1998, AEFC owned 212 Class Y shares.
2
Expenses and
sales charges
The Fund entered into agreements with 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:
oClass A $15.50
oClass B $16.50
oClass Y $15.50
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 received by American Express Financial Advisors Inc. for
distributing Fund shares were $182,845 for Class A and $1,672 for Class B
for the six months ended May 31, 1998.
AEFC agreed to waive certain fees and to absorb certain other of the
Fund's expenses. Under this agreement, the Fund's total expenses, net of
earnings credits, could not exceed 0.90% for Class A, 1.66% for Class B
and 0.83% for Class Y of the Fund's average daily net assets.
During the six months ended May 31, 1998, the Fund's custodian and
transfer agency fees were reduced by $5,775 as a result of earnings
credits from overnight cash balances.
3
Securities
transactions
Cost of purchases of securities and proceeds from sales (other than
short-term obligations) aggregated $6,683,312 and $1,463,807,
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 1,830,086 475,885 --
Issued for reinvested 52,981 16,748 5
distributions
Redeemed (1,630,614) (286,807) --
Net increase (decrease) 252,453 205,826 5
Year ended Nov. 30, 1997
Class A Class B Class Y
Sold 5,874,257 1,612,479 --
Issued for reinvested 79,549 22,888 7
distributions
Redeemed (2,911,999) (632,712) --
Net increase (decrease) 3,041,807 1,002,655 7
5
Capital loss
carryover
For federal income tax purposes, the Fund had a capital loss carryover of
$39,411 at Nov. 30, 1997, that if not offset by subsequent capital gains,
will expire in 2005. It is unlikely the board will authorize a
distribution of any net realized gain for the Fund until its capital loss
carryover has been offset or expires.
<PAGE>
<TABLE>
<CAPTION>
Notes to financial statements
IDS Intermediate Tax-Exempt Fund
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 changes(a)
Class A Class B Class Y
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1998(c) 1997 1996(b) 1998(c) 1997 1996(b) 1998(c) 1997 1996(b)
Net asset value,
beginning of period $5.09 $5.04 $5.00 $5.09 $5.04 $5.00 $5.09 $5.04 $5.00
Income from investment operations:
Net investment income (loss) .10 .18 -- .08 .14 -- .10 .18 --
Net gains (losses)
(both realized and .01 .05 .04 .01 .05 .04 .01 .05 .04
unrealized)
Total from investment .11 .23 .04 .09 .19 .04 .11 .23 .04
operations
Less distributions:
Dividends from net (.10) (.18) -- (.08) (.14) -- (.10) (.18) --
investment income
Net asset value, $5.10 $5.09 $5.04 $5.10 $5.09 $5.04 $5.10 $5.09 $5.04
end of period
Ratios/supplemental data
Class A Class B Class Y
1998(c) 1997 1996(b) 1998(c) 1997 1996(b) 1998(c) 1997 1996(b)
Net assets, end of $18 $17 $2 $7 $6 -- $-- $-- $--
period (in millions)
Ratio of expenses to .93%d,e .93%e .90%d,e 1.69%d,e 1.68%e 1.66%d,e .58%d,e .80%e .73%d,e
average daily net assets(f)
Ratio of net income (loss) 3.74%d 3.60% 3.19%d 3.00%d 2.87% 2.04%d 3.93%d 3.84% 2.32%d
to average daily net assets
Portfolio turnover rate 6% 24% -- 6% 24% -- 6% 24% --
(excluding short-term
securities)
Total return(g) 2.2% 4.4% 1.0% 1.8% 3.7% .9% 2.3% 4.6% 1.0%
a For a share outstanding throughout the period. Rounded to the nearest cent.
b Inception date was Nov. 13, 1996.
c Six months ended May 31, 1998 (Unaudited).
d Adjusted to an annual basis.
e AEFC voluntarily limited total operating expenses, net of earnings credits,
for the Fund. Had AEFC not done so, the annual ratios of expenses would have
been .99% for Class A, 1.74% for Class B, and .64% for Class Y for the six
months ended May 31, 1998, and 1.49% and 48.94% for Class A, 2.17% and 55.07%
for Class B and 1.70% and 83.81% for Class Y for the periods ended Nov. 30, 1997
and 1996, respectively.
f Expense ratio is based on total expenses of the Fund before reduction of
earnings credits on cash balances.
g Total return does not reflect payment of a sales charge.
</TABLE>
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<TABLE>
<CAPTION>
Investments in securities
IDS Intermediate
Tax-Exempt Fund
May 31, 1998 (Unaudited)
(Percentages represent
value of investments
compared to net assets)
Municipal bonds (96.4%)
Name of issuer and Coupon Principal Value(a)
title of issue (b,c,d) rate amount
Alabama (1.6%)
Special Care Facilities Finance Authority
Revenue Bonds
Lanier Memorial Hospital
Series 1997A
<S> <C> <C> <C>
11-01-01 5.50% $390,000 $400,237
Alaska (5.0%)
Anchorage Light & Power Senior Lien
Electric Utilities Refunding Revenue Bonds
Series 1996C (AMBAC Insured)
12-01-99 4.10 100,000 100,362
Anchorage Unlimited Tax General Obligation Bonds
Series 1992 (MBIA Insured)
08-01-01 5.85 425,000 447,274
Industrial Development & Exploration Authority
Electric Power Revenue Bonds
Upper Lynn Canal Regional Power
Series 1997 A.M.T.
01-01-02 5.00 705,000 703,914
Total 1,251,550
Arizona (0.6%)
Phoenix Water System Refunding Revenue Bonds
Series 1993
07-01-99 4.40 75,000 75,521
Salt River Agricultural Improvement & Power
District Electric Refunding Revenue Bonds
Series 1993C
01-01-01 4.25 70,000 70,441
Total 145,962
Arkansas (0.2%)
State Finance Authority Revolving Loan
Refunding Revenue Bonds
Series 1993B (MBIA Insured)
06-01-04 4.80 40,000 41,262
California (5.1%)
Lake Elsinore School Financing Authority
Revenue Bonds Series 1997
09-01-02 5.10 205,000 211,062
09-01-03 5.20 220,000 228,162
Long Beach Harbor Revenue Bonds Series 1993 A.M.T.
05-15-02 4.50 500,000 505,415
Southern California College of Optometry
Educational Facilities Authority College
Revenue Bonds Series 1997B
04-01-99 4.90 340,000 343,043
Total 1,287,682
Colorado (3.8%)
Arvada Urban Renewal Authority
Tax Allocation Refunding Revenue Bonds
Series 1997A (MBIA Insured)
09-01-02 5.25 200,000 208,014
Denver City & County Airport Revenue Bonds Series 1996 (MBIA Insured) A.M.T.
11-15-00 4.80 500,000 508,575
Denver City & County School District 1 Facility
Certificate of Participation
Series 1996 (AMBAC Insured)
12-15-05 5.00 30,000 31,222
Highlands Ranch District 3 Douglas County
(ACA Insured)
12-01-01 4.30 200,000 199,806
Total 947,617
Connecticut (1.3%)
State Development Authority Refunding Revenue Bonds
Church Homes Incorporated 1st Mortgage
Gross Health Care Series 1997
04-01-00 4.65 200,000 201,214
State Unlimited General Obligation Bonds Series 1995A
03-15-00 5.00 130,000 132,561
Total 333,775
Florida (4.7%)
Grand Haven Community Development District
Special Assessment Bonds Flagler County Series 1997A
05-01-02 6.30 300,000 307,764
Lakewood Ranch Community Development District 1
Manatec County Benefit Special Assessment Bonds
Series 1998
05-01-17 7.30 250,000 249,978
North Springs Improvement Special Assessment
District Revenue Bonds Parkland Isles Series 1997B
05-01-05 6.25 500,000 509,345
State Ports Financing Commission Port District Revenue Bonds Series 1996 (MBIA
Insured) A.M.T.
06-01-03 4.60 100,000 101,789
Total 1,168,876
Georgia (1.1%)
Clarke County Hospital Authority Hospital Revenue Certificates
Series 1996 (MBIA Insured)
01-01-01 5.00 150,000 153,539
Dalton Development Authority Revenue Certificates
Series 1996 (MBIA Insured)
08-15-04 4.625 125,000 127,734
Total 281,273
Illinois (8.1%)
Chicago Unlimited General Obligation
Refunding Bonds Series 1996B (FGIC Insured)
01-01-00 5.00 130,000 132,058
Chicago Unlimited Tax General Obligation
Refunding Bonds Series 1996B (FGIC Insured)
01-01-02 6.00 520,000 551,569
Dundee Township Open Space General Obligation Bonds
Series 1997 (FSA Insured)
12-01-02 4.40 250,000 251,930
Health Facility Authority Nursing Home
Refunding Revenue Bonds
Covenant Retirement Communities Series 1998
12-01-00 4.20 415,000 413,535
McDonough County Hospital District
Hospital Facility Refunding Revenue Bonds
Series 1998
07-01-01 4.35 200,000 199,274
North Chicago Unlimited General Obligation
Refunding Bonds Series 1996 (FGIC Insured)
01-01-01 4.60 200,000 202,572
State Educational Facilities Authority Revenue Bonds
Lewis University Series 1996
10-01-03 5.10 140,000 144,262
State Health Facilities Authority Hospital
Refunding Revenue Bonds Series 1996A
08-15-03 5.00 125,000 128,216
Total 2,023,416
Indiana (1.6%)
Health Facility Finance Authority
Hospital Revenue Bonds
Jackson County Schneck Memorial Hospital
Series 1998
02-15-00 4.15 100,000 99,523
State Bank Revenue Bonds Series 1995B
02-01-99 5.00 160,000 161,250
State Transportation Finance Authority Airport
Facility Lease Refunding Revenue Bonds
Series 1996A (AMBAC Insured)
11-01-03 4.50 125,000 126,859
Total 387,632
Iowa (0.8%)
Higher Education Loan Authority Refunding Revenue Bonds
Luther College Series 1997
09-01-99 4.40 200,000 200,084
Kansas (0.8%)
State Development Finance Authority
Health Facilities Revenue Bonds Hays Medical Center
Series 1997B (MBIA Insured)
11-15-00 5.00 200,000 204,924
Louisiana (2.5%)
Jefferson Parish Home Mortgage Authority Single Family
Revenue Bonds Series 1997A
(GNMA & FNMA Insured) A.M.T.
06-01-07 4.90 300,000 303,705
State Public Facilities Authority College Revenue Bonds
Series 1997
02-01-03 5.10 100,000 102,709
State Unlimited Tax General Obligation
Refunding Bonds Series 1996A
08-01-02 6.00 200,000 213,790
Total 620,204
Maine (0.4%)
State Technical College System Certificates of Participation
Series 1997 (MBIA Insured)
01-01-02 4.80 100,000 102,076
Massachusetts (1.2%)
State Health & Educational Facility Authority
Hospital Revenue Bonds
Milford-Whitinsville Regional Hospital
Series 1998C
07-15-01 5.00 300,000 303,792
Michigan (4.0%)
Chippewa County Finance Authority
Hospital Refunding Revenue Bonds
Chippewa County War Memorial Hospital
Series 1997B
11-01-01 4.75 200,000 202,132
Detroit Sewer Disposal Refunding Revenue Bonds
Series 1993A (FGIC Insured)
07-01-05 5.25 25,000 26,359
Garden City Hospital Finance Authority
Hospital Revenue Bonds Series 1998
09-01-03 5.375 200,000 199,304
State Hospital Finance Authority
Refunding Revenue Bonds
Chelsea Community Hospital
Series 1998
05-15-01 4.50 200,000 200,000
State Hospital Finance Authority Revenue Bonds
Series 1997
01-01-99 5.40 125,000 125,735
01-01-00 5.60 135,000 136,916
State Trunk Line Fuel Sales Tax
Refunding Revenue Bonds 1st Series 1992B
10-01-99 5.10 100,000 101,663
Total 992,109
Minnesota (3.6%)
Crow Finance Authority Tribal Purpose
Revenue Bonds Series 1998
10-01-02 5.00 315,000 321,250
Minneapolis Community Development Agency
Limited Tax Supported Development Revenue Common
Fund Bonds Series 1997
06-01-99 4.70 160,000 161,187
Minneapolis Community Development Agency
Limited Tax Supported Development Revenue Common
Fund Bonds Series 1997 A.M.T.
06-01-99 4.90 205,000 206,962
06-01-00 5.10 215,000 218,932
Total 908,331
Mississippi (1.2%)
Jackson Airport Authority Revenue Bonds
(AMBAC Insured) A.M.T.
12-01-01 6.25 135,000 143,934
12-01-02 6.25 145,000 156,346
Total 300,280
Missouri (2.1%)
Kansas City Water Revenue Bonds Series 1996B
12-01-99 5.75 100,000 102,842
State Health & Educational Facility Authority
Hospital Revenue Bonds Series 1993A
05-15-02 4.50 125,000 126,581
West Plains Industrial Development Authority
Hospital Revenue Bonds
Ozarks Medical Center
11-15-01 4.60 290,000 289,443
Total 518,866
Nevada (1.2%)
Clark County Special Improvement District 108
Local Improvement Bonds Series 1997
02-01-99 4.90 200,000 201,244
Washoe County Limited General Obligation
Refunding Bonds Series 1993B (AMBAC Insured)
09-01-00 4.80 100,000 101,811
Total 303,055
New Hampshire (0.4%)
State Business Finance Authority Resource
Recovery Revenue Bonds (MBIA Insured)
07-01-01 4.65 100,000 101,490
New Mexico (2.0%)
Santa Fe Educational Facilities College
Improvement Refunding Revenue Bonds Series 1997
10-01-03 5.20 235,000 243,053
10-01-04 5.30 245,000 255,415
Total 498,468
New York (6.2%)
New York City Industrial Development Agency
Civilian Facilities Revenue Bonds Young Men's
Christian Association Greater New York
10-15-00 5.00 100,000 101,969
10-15-02 5.00 200,000 205,202
New York City Unlimited General Obligation Bonds
Series 1996E
08-01-02 5.10 20,000 20,573
New York City Unlimited General Obligation Bonds
Series 1997G
08-01-02 5.00 300,000 305,286
State Dormitory Authority Federal Housing
Authority Insured Hospital Revenue Bonds
Series 1996 (AMBAC Insured)
02-01-01 5.00 125,000 127,931
State Dormitory Authority Health Care Revenue Bonds
Mental Health Services Facilities Series 1997B
08-15-02 5.00 500,000 512,930
State Environmental Facilities Corporation
Special Obligation Lease Refunding Revenue Bonds
Series 1996 (AMBAC Insured)
04-01-01 4.60 200,000 203,020
State Urban Development Corporation Lease Revenue Bonds
Series 1996-97
01-01-04 5.00 70,000 71,640
Total 1,548,551
North Carolina (0.4%)
Union City Unlimited General Obligation Bonds
Series 1996B (MBIA Insured)
05-01-01 5.25 100,000 103,468
North Dakota (2.3%)
State Housing Finance Agency Home Mortgage Finance
Revenue Bonds Single Family Housing
Series 1998A A.M.T.
01-01-01 4.20 200,000 199,964
07-01-01 4.20 275,000 274,945
Ward County Health Care Facility Revenue Bonds
Series 1996A
07-01-03 5.40 100,000 103,772
Total 578,681
Ohio (4.2%)
Carroll Water & Sewer District Unlimited Tax
General Obligation Bonds
12-01-10 6.25 250,000 249,163
Cleveland Cuyahoga County Port Authority
Refunding Revenue Bonds
Sub Rock & Roll Hall of Fame
12-01-02 5.10 300,000 308,499
Sandusky County Hospital Facilities Refunding
Revenue Bonds Memorial Hospital
01-01-00 4.40 500,000 499,980
Total 1,057,642
Oklahoma (1.1%)
Enid Municipal Authority Sales Tax & Utility
Refunding Revenue Bonds
Series 1996 (AMBAC Insured)
02-01-00 4.50 250,000 252,070
Norman Hospital Authority Refunding Revenue Bonds
Series 1996A (MBIA Insured)
09-01-04 5.00 30,000 31,106
Total 283,176
Oregon (0.2%)
Health Sciences University College Revenue Bonds
Series 1995A (MBIA Insured)
07-01-02 4.375 60,000 60,568
Pennsylvania (6.0%)
Clarion County Hospital Authority
Hospital Refunding Revenue Bonds
Clarion Hospital Series 1997
07-01-00 4.60 200,000 200,704
07-01-01 4.75 200,000 201,132
Commonwealth of Pennsylvania Unlimited General
Obligation Bonds 3rd Series 1993
09-01-00 4.50 150,000 151,886
Cumberland County Municipal Authority
Nursing Home Revenue Bonds Series 1996
12-01-03 5.35 125,000 127,516
Delaware County Industrial Development Authority
Pollution Control Refunding Revenue Bonds Series 1997A
01-01-01 5.30 500,000 511,860
New Wilmington Municipal Authority
College Revenue Bonds
Westminster College Series 1998
03-01-00 4.30 190,000 190,139
Philadelphia Industrial Development Authority Lease
Revenue Bonds Series 1996A (MBIA Insured)
02-15-01 4.45 70,000 70,574
Philadelphia Intergovernmental Cooperation Authority
Special Tax Revenue Bonds Series 1992
06-15-02 6.00 40,000 42,259
Total 1,496,070
Rhode Island (0.8%)
State Refunding Certificates of Participation
Series 1997 (MBIA Insured)
10-01-02 4.70 200,000 203,760
South Carolina (0.3%)
Pickens County School District Unlimited General
Obligation Bonds Series 1996A (FGIC Insured)
05-01-06 4.90 70,000 72,238
South Dakota (1.4%)
Sioux Falls Health Facilities
Hospital Revenue Bonds
Evangelical Lutheran Good Samaritan Society
Series 1998B (AMBAC Insured)
06-01-01 4.45 200,000 200,722
Sioux Falls Sales Tax Revenue Bonds
Series 1996A (AMBAC Insured)
11-15-04 5.00 150,000 156,210
Total 356,932
Tennessee (2.0%)
Knox County Unlimited Tax General
Obligation Bonds Series 1997
02-01-03 4.45 500,000 506,710
Texas (8.7%)
Austin Utility System Refunding Revenue Bonds
Series 1993
05-15-99 5.00 300,000 303,378
Denison Hospital Authority Revenue Bonds Series 1997
08-15-02 5.45 255,000 264,279
Houston Water & Sewer System Junior Lien
Refunding Revenue Bonds Series 1992C (MBIA Insured)
12-01-99 5.10 100,000 101,797
Houston Water & Sewer System Prior Lien
Refunding Revenue Bonds Series 1992B (MBIA Insured)
12-01-02 5.75 500,000 532,145
Houston Water & Sewer System Refunding Revenue Bonds
Series 1992B
12-01-99 5.25 250,000 254,900
Hutto Independent School District Unlimited Tax
School Building & Refunding Bonds
Series 1997 Permanent School Fund Guarantee
02-01-00 4.40 100,000 100,716
North Municipal Water District Solid Waste
Disposal Systems Revenue Bonds Series 1996
(AMBAC Insured)
09-01-04 4.90 35,000 36,255
Trinity River Authority Wastewater System
Refunding Revenue Bonds Series 1993A (AMBAC Insured)
08-01-01 5.10 25,000 25,773
Tyler Health Facility Development Hospital Revenue Bonds
Mother Frances Hospital Series 1997A
07-01-99 5.00 200,000 201,530
University of Texas Permanent Fund College
Refunding Revenue Bonds Series 1996
07-01-99 4.50 40,000 40,329
Webb County Certificates of Participation
Series 1997A Asset Guaranty
10-01-00 4.45 300,000 302,172
Total 2,163,274
Utah (2.6%)
Granger & Hunter Improvement District
Water & Sewer Refunding Revenue Bonds
Series 1998 (FSA Insured)
03-01-00 4.00 300,000 300,087
Salt Lake City College Revenue Bonds
Westminster College Series 1997
10-01-00 4.50 185,000 184,787
Salt Lake City School District Unlimited General
Obligation Bonds Series 1995A
03-01-01 5.25 150,000 154,928
Total 639,802
Virginia (0.4%)
Chesapeake Individual Development Authority Public Facility
Lease Revenue Bonds Series 1996 (MBIA Insured)
06-01-03 4.80 100,000 102,774
Washington (2.9%)
State Higher Education Facilities Authority
Refunding Revenue Bonds
University of Puget Sound
10-01-01 5.00 200,000 204,988
State Housing Finance Commission
Single Family Program Bonds
(FNMA Insured) A.M.T.
06-01-01 4.30 205,000 204,543
State Public Power Supply System Nuclear Project 3
Refunding Revenue Bonds Series 1993B
07-01-02 5.15 300,000 309,003
Total 718,534
West Virginia (0.4%)
State Facility Authority Community Building
Series 1997A (MBIA Insured)
07-01-02 5.00 100,000 103,087
Wisconsin (2.4%)
State Health & Education Facility Authority
College Revenue Bonds
Carroll College Series 1998
10-01-00 4.30 200,000 199,770
State Health & Education Facility Authority
Nursing Home Revenue Bonds
St. John's Home of Milwaukee & Sunrise Care Center
Series 1997
12-15-01 4.70 100,000 100,386
State Health & Educational Facilities Authority
Revenue Bonds Meriter Hospital Series 1996
12-01-99 4.65 100,000 100,952
State Health & Educational Facilities Authority
Revenue Bonds Series 1996 (MBIA Insured)
12-01-04 4.75 150,000 153,368
State Unlimited General Obligation Bonds Series 1996F
11-15-02 4.50 35,000 35,551
Total 590,027
Wyoming (0.8%)
Teton County School District 1 Public Facilities
Joint Powers
06-01-01 4.20 200,000 200,280
Total municipal bonds
(Cost: $23,786,474) $24,108,535
Short-term securities (4.4%)
Issuer (d,e) Effective Amount Value(a)
yield payable at
maturity
Burke County Georgia Development Authority Pollution Control
Revenue Bonds Georgia Power Plant Vogtle V.R.
04-01-25 3.95% $100,000 $100,000
Burke County Georgia Development Authority Pollution Control
Revenue Bonds Georgia Power Plant Vogtle V.R.
Series 2
07-01-24 3.95 100,000 100,000
Cohasset Minnesota Power & Light
Series A V.R.D.N.
06-01-20 4.00 300,000 300,000
Massachusetts State Health & Educational Facility
Capital Asset V.R.
01-01-35 3.95 100,000 100,000
New York State Energy Research & Development Authority
Pollution Control Revenue Bonds
Mohawk Power V.R.
12-01-25 4.05 200,000 200,000
Ohio State Air Quality Development
Cincinnati Gas & Electric
Series A V.R.
09-01-30 3.95 100,000 100,000
Royal Oak Michigan
William Beaumont Hospitals
Series 1996L V.R.
01-01-03 4.00 100,000 100,000
University of Michigan Refunding Revenue Bonds
Hospital Series 1995A V.R.
12-01-27 4.00 100,000 100,000
Total short-term securities
(Cost: $1,100,000) $1,100,000
Total investments in securities
(Cost: $24,886,474)(f) $25,208,535
See accompanying notes to investments in securities.
</TABLE>
<PAGE>
Investments in securities
IDS Intermediate
Tax-Exempt 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 33% 41%
AA 13 15
A 13 11
BBB 31 26
BB and below 8 2
Non-rated 2 5
Total 100% 100%
(c) The following abbreviations may be used in portfolio descriptions to
identify the insurer of the issue:
ACA -- ACA Financial Guaranty Corporation
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) The following abbreviations may be used in portfolio descriptions:
A.M.T. -- Alternative Minimum Tax-- As of May 31, 1998, the
value of securities subject to alternative minimum tax
represented 14.11% of net assets.
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
(e) The Fund is entitled to receive principal amount from issuer or corporate
guarantor, if indicated in parentheses, after a day or 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.
(f) At May 31, 1998, the cost of securities for federal income tax purposes was
approximately $24,886,000 and the approximate aggregate gross unrealized
appreciation and depreciation based on the cost was:
Unrealized appreciation.............................................$329,000
Unrealized depreciation...............................................(6,000)
Net unrealized appreciation.........................................$323,000
<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 IDSLife 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
Former 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, treasurer and corporate secretary of Board Services
and secretary Corporation.
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 Intermediate tax-Exempt Fund
IDS Tower 10
Minneapolis, MN 55440-0010
