AXP(SM)
Intermediate
Tax-Exempt Fund
1999 SEMIANNUAL REPORT
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The goal of AXP Intermediate Tax-Exempt Fund is to seek a high level of current
income exempt from federal taxes.
Distributed by American Express Financial Advisors Inc.
AMERICAN EXPRESS Financial Advisors
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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
Fund Facts...............................5
The 10 Largest Holdings..................6
Financial Statements.....................7
Notes to Financial Statements...........10
Investments in Securities...............16
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(icon of) Arne H. Carlson
Arne H. Carlson
Chairman of the board
From the Chairman
American Express(R) Funds held shareholder meetings in June 1999. Shareholders
approved all of the proposals advanced by management. Among the proposals were:
o The election of members to the board of directors and the selection of KPMG
LLP as independent auditor.
o A change in the Fund's name from "IDS" to "AXP."
o A new shareholder service and distribution plan.
No other business was presented at the meeting, which was concluded by a report
to shareholders from the investment department of American Express Financial
Corporation.
Thanks to all of you for reviewing the proxy material and voting your proxies.
Aren H. Carlson
(picture of) Terry Fettig
Terry Fettig
Portfolio manager
From the Portfolio Manager
Municipal bonds experienced a relatively productive six months, although a rise
in interest rates late in the period tempered their performance somewhat. For
the Fund, the result was a total return (net asset value change and interest
income) of 1.25% for the Fund's Class A shares in the first half of the fiscal
year -- December 1998 through May 1999.
Despite ongoing reports of remarkably low inflation, a continuation of strong
economic growth in the U.S. kept fixed-income investors on edge throughout most
of the six months. (In fact, the only negative inflation news didn't surface
until May, when the consumer price index came in higher than expected and the
Federal Reserve Board said it was leaning toward raising short-term interest
rates at some point.) Their concern led them to sell bonds, which in turn drove
long-term interest rates up and bond prices down.
Compared with U.S. Treasury issues, the selling pressure on municipal bonds was
far less, especially in the shorter-maturity issues this Fund concentrates on.
Thus, in the end, the effect on the Fund's net asset value was minor -- a loss
of 3 cents over the six months.
A NEUTRAL DURATION
As for the structure of the portfolio, I kept its duration close to neutral.
(Duration, a function of the average maturity of the bonds in the portfolio,
determines how sensitive the Fund's value is to changes in interest rates. The
longer the duration, the greater the sensitivity.) Therefore, fluctuations in
the net asset value were relatively small.
To enhance the Fund's yield, I added to the holdings of non-rated bonds, which
are below-investment-grade issues that pay comparatively higher interest. I also
increased the exposure to BBB-rated bonds (at the low end of the
investment-grade scale), chiefly healthcare-related issues that, again, offered
relatively attractive yields.
Looking to the rest of the fiscal year, I think that investors' concerns about
higher inflation is likely to continue, as the U.S. economy has yet to show
signs of slowing down. Therefore, I expect modest upward pressure on interest
rates in the months ahead. If that scenario plays out, for the Fund it would
likely result in performance not unlike the first half of the period.
Terry Fettig
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Fund Facts
Class A -- 6-month performance
(All figures per share)
Net asset value (NAV)
May 31, 1999 $5.11
Nov. 30, 1998 $5.14
Decrease $0.03
Distributions -- Dec. 1, 1998 - May 31, 1999
From income $0.10
From capital gains $ --
Total distributions $0.10
Total return* +1.25%**
Class B -- 6-month performance
(All figures per share)
Net asset value (NAV)
May 31, 1999 $5.10
Nov. 30, 1998 $5.14
Decrease $0.04
Distributions -- Dec. 1, 1998 - May 31, 1999
From income $0.08
From capital gains $ --
Total distributions $0.08
Total return* +0.87%**
Class Y -- 6-month performance
(All figures per share)
Net asset value (NAV)
May 31, 1999 $5.10
Nov. 30, 1998 $5.13
Decrease $0.03
Distributions -- Dec. 1, 1998 - May 31, 1999
From income $0.11
From capital gains $ --
Total distributions $0.11
Total return* +1.45%**
*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.
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The 10 Largest Holdings
Percent Value
(of net assets) (as of May 31, 1999)
Alaska Industrial Development & Exploration Authority
Electric Power Revenue
Bonds Upper Lynn Canal Regional Power Series 1997 A.M.T.
<S> <C> <C>
5.00% 2002 2.18% $701,439
Sandoval County New Mexico Multi-family Housing
Refunding Revenue Bonds Meadowlark Apartments
Series 1998B A.M.T.
6.38% 2001 1.87 600,535
Chicago Illinois Unlimited Tax General Obligation
Refunding Bonds Series 1996B
6.00% 2002 1.70 545,340
Houston Texas Water & Sewer System Prior Lien
Refunding Revenue Bonds Series 1992B
5.75% 2002 1.65 529,379
New York State Dormitory Authority Health Care
Revenue Bonds Mental Health Services Facilities Series 1997B
5.00% 2002 1.60 513,844
Massachusetts State Health & Education Facilities Authority
Hospital Revenue Bonds Caritas Christi Obligation Group
Series 1999A
5.25% 2004 1.59 511,030
Denver Colorado City & County Airport Revenue Bonds
Series 1996 A.M.T.
4.80% 2000 1.58 508,620
Knox County Tennessee Unlimited Tax General
Obligation Bonds Series 1997
4.45% 2003 1.58 508,520
Long Beach Harbor California Revenue Bonds
Series 1993 A.M.T.
4.50% 2002 1.58 508,176
North Springs Florida Improvement Special Assessment
District Revenue Bonds Parkland Isles Series 1997B
6.25% 2005 1.58 508,040
Note: Investment income from certain securities 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."
(icon of) pie chart
The 10 holdings listed here
make up 16.91% of net assets
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Financial Statements
Statement of assets and liabilities
AXP Intermediate Tax-Exempt Fund
May 31, 1999 (Unaudited)
Assets
Investments in securities, at value (Note 1)
<S> <C>
(identified cost $32,094,208) $32,374,029
Cash in bank on demand deposit 22,484
Expense receivable from AEFC 133
Accrued interest receivable 436,412
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Total assets $32,833,058
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Liabilities
Dividends payable to shareholders 3,147
Payable for investment securities purchased 645,398
Accrued investment management services fee 394
Accrued distribution fee 159
Accrued service fee 153
Accrued transfer agency fee 60
Accrued administrative services fee 35
Other accrued expenses 27,717
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Total liabilities 677,063
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Net assets applicable to outstanding capital stock $32,155,995
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Represented by
Capital stock-- $.01 par value (Note 1) $ 62,984
Additional paid-in capital 31,835,217
Undistributed net investment income 1
Accumulated net realized gain (loss) (Note 5) (22,028)
Unrealized appreciation (depreciation) on investments 279,821
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Total -- representing net assets applicable to outstanding capital stock $32,155,995
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Net assets applicable to outstanding shares: Class A $24,228,625
Class B $ 7,926,247
Class Y $ 1,123
Net asset value per share of outstanding capital stock: Class A shares 4,745,498 $ 5.11
Class B shares 1,552,716 $ 5.10
Class Y shares 220 $ 5.10
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See accompanying notes to financial statements.
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Statement of operations
AXP Intermediate Tax-Exempt Fund
Six months ended May 31, 1999 (Unaudited)
Investment income
Income:
<S> <C>
Interest $720,086
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Expenses (Note 2):
Investment management services fee 69,774
Distribution fee-- Class B 27,807
Transfer agency fee 8,783
Incremental transfer agency fee
Class A 738
Class B 480
Service fee
Class A 20,574
Class B 6,469
Administrative services fees and expenses 6,704
Compensation of board members 4,018
Custodian fees 4,287
Printing and postage 6,259
Registration fees 12,279
Audit fees 6,750
Other 3,790
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Total expenses 178,712
Less expenses voluntarily reimbursed by AEFC (Note 2) (7,945)
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170,767
Earnings credits on cash balances (Note 2) (1,131)
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Total net expenses 169,636
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Investment income (loss) -- net 550,450
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Realized and unrealized gain (loss) -- net
Net realized gain (loss) on security transactions (Note 3) 16,404
Net change in unrealized appreciation (depreciation) on investments (226,289)
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Net gain (loss) on investments (209,885)
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Net increase (decrease) in net assets resulting from operations $340,565
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See accompanying notes to financial statements.
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Statements of changes in net assets
AXP Intermediate Tax-Exempt Fund
May 31, 1999 Nov. 30, 1998
Six months ended Year ended
(Unaudited)
Operations and distributions
<S> <C> <C>
Investment income (loss) -- net $ 550,450 $ 913,715
Net realized gain (loss) on security transactions 16,404 111
Net change in unrealized appreciation (depreciation) on investments (226,289) 260,381
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Net increase (decrease) in net assets resulting from operations 340,565 1,174,207
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Distributions to shareholders from:
Net investment income
Class A (442,646) (722,204)
Class B (110,853) (191,469)
Class Y (21) (43)
--- ---
Total distributions (553,520) (913,716)
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Capital share transactions (Note 4)
Proceeds from sales
Class A shares (Note 2) 11,626,542 17,789,645
Class B shares 3,165,203 4,471,658
Reinvestment of distributions at net asset value
Class A shares 348,311 559,558
Class B shares 103,372 177,771
Class Y shares 23 43
Payments for redemptions
Class A shares (8,239,056) (14,921,647)
Class B shares (Note 2) (2,312,109) (3,249,556)
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Increase (decrease) in net assets from capital share transactions 4,692,286 4,827,472
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Total increase (decrease) in net assets 4,479,331 5,087,963
Net assets at beginning of period 27,676,664 22,588,701
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Net assets at end of period $32,155,995 $27,676,664
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Undistributed net investment income $ 1 $ 3,071
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See accompanying notes to financial statements.
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Notes to Financial Statements
AXP Intermediate Tax-Exempt Fund
(Unaudited as to May 31, 1999)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
AXP Intermediate Tax-Exempt Fund (a series of AXP Tax-Exempt Series, Inc.) is
registered under the Investment Company Act of 1940 (as amended) as a
diversified, open-end management investment company. AXP Tax-Exempt Series, 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
bonds and other debt obligations.
The Fund offers Class A, Class B and Class Y shares.
o Class A shares are sold with a front-end sales charge.
o Class B shares may be subject to a contingent deferred sales charge and
automatically convert to Class A shares during the ninth calendar year of
ownership.
o Class Y shares have no sales charge and are offered only to qualifying
institutional investors.
All classes of shares have identical voting, dividend and liquidation rights.
The 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.
The Fund's significant accounting policies are summarized below:
Use of estimates
Preparing financial statements that conform to generally accepted accounting
principles requires management to make estimates (e.g., on assets and
liabilities) that could differ from actual results.
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 that reflects fair value
as quoted by dealers 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
To produce incremental earnings, protect gains, and facilitate buying and
selling of securities for investments, the Fund may write over-the-counter
options where completing the obligation depends upon the credit standing of the
other party. The Fund also may buy and sell put and call options and write
covered call options on portfolio securities as well as write cash-secured put
options. The risk in writing a call option is that the Fund gives up the
opportunity for 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 being unable to enter into a closing transaction
if a liquid secondary market does not exist.
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 when the option transaction expires or closes. 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
To gain exposure to or protect itself from market changes, the Fund may buy and
sell financial futures contracts. Risks of entering into futures contracts and
related options include the possibility of 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
The Fund's policy is to comply with all sections of the Internal Revenue Code
that apply to regulated investment companies and to distribute all of its
taxable income to share-holders. No provision for income or excise taxes is thus
required.
Net investment income (loss) and net realized gains (losses) may differ for
financial statement and tax purposes primarily because of deferred 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
The Fund has agreements with American Express Financial Corporation (AEFC) to
manage its portfolio and provide administrative services. Under an Investment
Management Services Agreement, AEFC determines which securities will be
purchased, held or sold. The management fee is a percentage of the Fund's
average daily net assets in reducing percentages from 0.45% to 0.35% annually.
Under an Administrative Services Agreement, the Fund pays AEFC 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 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 $19.50
o Class B $20.50
o Class Y $17.50
Under terms of a prior agreement that ended Jan. 31, 1999, the Fund paid a
transfer agency fee at an annual rate per shareholder account of $15.50 for
Class A and $16.50 for Class B. Under terms of a prior agreement that ended
March 31, 1999, the Fund paid a transfer agency fee at an annual rate per
shareholder account of $15.50 for Class Y.
The Fund has agreements with American Express Financial Advisors Inc. for
distribution and shareholder 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. Effective July
1, 1999, the Fund will pay a distribution fee at an annual rate up to 0.25% of
the Fund's average daily net assets attributable to Class A shares and up to
1.00% of the Fund's average daily net assets attributable to Class B shares.
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. Effective July 1, 1999, the Fund will
convert the Shareholder Service Agreement with respect to Class A and Class B
shares into the Plan and Agreement of Distribution discussed above.
Sales charges received by American Express Financial Advisors Inc. for
distributing Fund shares were $119,835 for Class A and $5,257 for Class B for
the six months ended May 31, 1999.
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, 1999, the Fund's custodian and transfer
agency fees were reduced by $1,131 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 $6,790,120 and $1,957,485, respectively, for the six
months ended May 31, 1999. 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, 1999
Class A Class B Class Y
Sold 2,263,037 616,426 --
Issued for reinvested distributions 67,881 20,150 4
Redeemed (1,605,062) (450,167) --
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Net increase (decrease) 725,856 186,409 4
Year ended Nov. 30, 1998
Class A Class B Class Y
Sold 3,481,871 874,848 --
Issued for reinvested distributions 109,456 34,779 9
Redeemed (2,919,889) (635,720) --
---------- -------- -----
Net increase (decrease) 671,438 273,907 9
5. CAPITAL LOSS CARRYOVER
For federal income tax purposes, the Fund has a capital loss carryover of
$38,432 as of Nov. 30, 1998, 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.
6. BANK BORROWINGS
The Fund has a revolving credit agreement with U.S. Bank, N.A., whereby the Fund
is permitted to have bank borrowings for temporary or emergency purposes to fund
shareholder redemptions. The Fund must have asset coverage for borrowings not to
exceed the aggregate of 333% of advances equal to or less than five business
days plus 367% of advances over five business days. The agreement, which enables
the Fund to participate with other American Express funds, permits borrowings up
to $200 million, collectively. Interest is charged to each Fund based on its
borrowings at a rate equal to the Federal Funds Rate plus 0.30% or the
Eurodollar Rate (Reserve Adjusted) plus 0.20%. Borrowings are payable up to 90
days after such loan is executed. The Fund also pays a commitment fee equal to
its pro rata share of the amount of the credit facility at a rate of 0.05% per
annum. The Fund had no borrowings outstanding during the six months ended May
31, 1999.
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7. FINANCIAL HIGHLIGHTS
The table below shows certain important financial information for evaluating the
Fund's results.
Fiscal period ended Nov 30,
Per share income and capital changesa
Class A Class B Class Y
1999c 1998 1997 1996b 1999c 1998 1997 1996b 1999c 1998 1997 1996b
Net asset value,
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
beginning of period $5.14 $5.09 $5.04 $5.00 $5.14 $5.09 $5.04 $5.00 $5.13 $5.09 $5.04 $5.00
Income from investment operations:
Net investment
income (loss) .10 .19 .18 -- .08 .15 .14 -- .11 .19 .18 --
Net gains (losses) (both
realized and unrealized) (.03) .05 .05 .04 (.04) .05 .05 .04 (.03) .05 .05 .04
Total from investment
operations .07 .24 .23 .04 .04 .20 .19 .04 .08 .24 .23 .04
Less distributions:
Dividends from net
investment income (.10) (.19) (.18) -- (.08) (.15) (.14) -- (.11) (.20) (.18) --
Net asset value,
end of period $5.11 $5.14 $5.09 $5.04 $5.10 $5.14 $5.09 $5.04 $5.10 $5.13 $5.09 $5.04
Ratios/supplemental data
Net assets, end of period
(in millions) $24 $21 $17 $2 $8 $7 $6 $-- $-- $-- $-- $--
Ratio of expenses to
average daily net assetsd .92%e,f .92%e .93%e .90%e,f 1.68%e,f 1.67%e 1.68%e 1.66%e,f .91%e,f .78%e .80%e .73%e,f
Ratio of net investment
income (loss) to average
daily net assets 3.73%f 3.76% 3.60% 3.19%f 2.97%f 3.01% 2.87% 2.04%f 3.89%f 3.83% 3.84% 2.32%f
Portfolio turnover rate
(excluding short-term
securities) 6% 7% 24% -- 6% 7% 24% -- 6% 7% 24% --
Total returng 1.25% 4.85% 4.44% .96% .87% 4.07% 3.67% .92% 1.45% 4.78% 4.57% 97%
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, 1999 (Unaudited).
d Expense ratio is based on total expenses of the Fund before reduction of
earnings credits on cash balances. 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 0.97%, 0.96%, 1.49% and 48.94% for
Class A, 1.73%, 1.71%, 2.17% and 55.07% for Class B and 0.97%, 0.88%, 1.70% and
83.81% for Class Y for the periods ended 1999, 1998, 1997, and 1996,
respectively.
f Adjusted to an annual basis.
g Total return does not reflect payment of a sales charge.
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<CAPTION>
Investments in Securities
AXP Intermediate Tax-Exempt Fund
May 31, 1999 (Unaudited)
(Percentages represent value of investments compared to net assets)
Municipal bonds (98.2%)
Name of issuer and Coupon Principal Value(a)
title of issue(b,c) rate amount
Alabama (1.2%)
Special Care Facilities Finance Authority
Revenue Bonds Lanier Memorial Hospital
Series 1997A
<S> <C> <C> <C>
11-01-01 5.50% $390,000 $401,723
Alaska (3.9%)
Anchorage Light & Power Senior Lien
Electric Utilities Refunding Revenue Bonds
Series 1996C (AMBAC Insured)
12-01-99 4.10 100,000 100,447
Anchorage Unlimited Tax General Obligation Bonds
Series 1992 (MBIA Insured)
08-01-01 5.85 425,000 443,267
Industrial Development & Exploration Authority
Electric Power Revenue Bonds
Upper Lynn Canal Regional Power
Series 1997 A.M.T.
01-01-02 5.00 705,000 701,439
Total 1,245,153
California (2.9%)
Lake Elsinore School Financing Authority
Revenue Bonds Series 1997
09-01-02 5.10 205,000 211,244
09-01-03 5.20 220,000 228,309
Long Beach Harbor Revenue Bonds Series 1993 A.M.T.
05-15-02 4.50 500,000 508,176
Total 947,729
Colorado (2.9%)
Arvada Urban Renewal Authority
Tax Allocation Refunding Revenue Bonds
Series 1997A (MBIA Insured)
09-01-02 5.25 200,000 207,492
Denver City & County Airport Revenue Bonds
Series 1996 (MBIA Insured) A.M.T.
11-15-00 4.80 500,000 508,620
Highlands Ranch District 3 Douglas County
(ACA Insured)
12-01-01 4.30 200,000 201,000
Total 917,112
Connecticut (1.0%)
State Development Authority Refunding Revenue Bonds
Church Homes Incorporated 1st Mortgage
Gross Health Care Series 1997
04-01-00 4.65 200,000 201,122
State Unlimited General Obligation Bonds Series 1995A
03-15-00 5.00 130,000 131,906
Total 333,028
District of Columbia (1.5%)
Fixed Rate Revenue Bonds
National Academy of Sciences
Series 1999A (AMBAC Insured)
01-01-05 4.00 500,000 490,165
Florida (8.0%)
Grand Haven Community Development District
Special Assessment Bonds Flagler County
Series 1997A
05-01-02 6.30 300,000 305,715
Heritage Palms Community Development District
Capital Improvement Revenue Bonds
Series 1998
11-01-03 5.40 400,000 395,960
Hillsborough County Industrial Development Authority
Health Facilities Revenue Bonds
University Community Hospital Series 1999A
08-15-03 4.50 500,000 497,470
Lakewood Ranch Community Development District 1
Manatec County Benefit Special Assessment Bonds
Series 1998
05-01-17 7.30 250,000 254,495
North Springs Improvement Special Assessment
District Revenue Bonds Parkland Isles Series 1997B
05-01-05 6.25 500,000 508,040
State Ports Financing Commission Port District
Revenue Bonds Series 1996 (MBIA Insured) A.M.T.
06-01-03 4.60 100,000 102,001
Stoneybrook Community Development District
Capital Improvement Revenue Bonds
Lee County Series 1998B
05-01-08 5.70 500,000 496,185
Total 2,559,866
Georgia (0.9%)
Clarke County Hospital Authority Hospital Revenue
Certificates Series 1996 (MBIA Insured)
01-01-01 5.00 150,000 152,889
Dalton Development Authority Revenue Certificates
Series 1996 (MBIA Insured)
08-15-04 4.63 125,000 127,810
Total 280,699
Hawaii (0.6%)
State Housing Finance & Development
Single Family Mortgage Revenue Bonds
Series 1998A A.M.T.
07-01-01 4.25 200,000 199,598
Illinois (6.4%)
Chicago Unlimited General Obligation
Refunding Bonds Series 1996B (FGIC Insured)
01-01-00 5.00 130,000 131,326
Chicago Unlimited Tax General Obligation
Refunding Bonds Series 1996B (FGIC Insured)
01-01-02 6.00 520,000 545,340
Dundee Township Open Space General Obligation Bonds
Series 1997 (FSA Insured)
12-01-02 4.40 250,000 252,948
Health Facility Authority Nursing Home
Refunding Revenue Bonds
Covenant Retirement Communities Series 1998
12-01-00 4.20 415,000 416,390
McDonough County Hospital District
Hospital Facility Refunding Revenue Bonds
Series 1998
07-01-01 4.35 200,000 200,508
North Chicago Unlimited General Obligation
Refunding Bonds Series 1996 (FGIC Insured)
01-01-01 4.60 200,000 202,492
State Educational Facilities Authority Revenue Bonds
Lewis University Series 1996
10-01-03 5.10 140,000 144,313
State Health Facilities Authority Hospital
Refunding Revenue Bonds Series 1996A
08-15-03 5.00 125,000 128,129
Total 2,021,446
Indiana (1.7%)
Ball State University Board of Trustees
Refunding Revenue Bonds
Student Fee Series 1999 (FGIC Insured)
07-01-04 4.00 320,000 317,085
Health Facility Finance Authority
Hospital Revenue Bonds
Jackson County Schneck Memorial Hospital
Series 1998
02-15-00 4.15 100,000 100,137
State Transportation Finance Authority Airport
Facility Lease Refunding Revenue Bonds
Series 1996A (AMBAC Insured)
11-01-03 4.50 125,000 127,559
Total 544,781
Iowa (0.6%)
Higher Education Loan Authority Refunding Revenue
Bonds Luther College Series 1997
09-01-99 4.40 200,000 200,258
Kansas (0.6%)
State Development Finance Authority
Health Facilities Revenue Bonds Hays Medical Center
Series 1997B (MBIA Insured)
11-15-00 5.00 200,000 204,466
Louisiana (1.8%)
Jefferson Parish Home Mortgage Authority Single Family
Revenue Bonds Series 1997A
(GNMA & FNMA Insured) A.M.T.
06-01-07 4.90 260,000 263,957
State Public Facilities Authority
College Revenue Bonds Series 1997
02-01-03 5.10 100,000 102,618
State Unlimited Tax General Obligation
Refunding Bonds Series 1996A
08-01-02 6.00 200,000 212,170
Total 578,745
Maine (0.3%)
State Technical College System Certificates of Participation
Series 1997 (MBIA Insured)
01-01-02 4.80 100,000 101,923
Massachusetts (4.1%)
State Education Finance Authority
Student Loan Refunding Revenue Bonds
Issue E Series 1999A A.M.T.
07-01-05 4.10 500,000 491,520
State Health & Education Facilities Authority
Hospital Revenue Bonds
Caritas Christi Obligation Group
Series 1999A
07-01-04 5.25 500,000 511,030
State Health & Education Facilities Authority
Hospital Revenue Bonds
Milford-Whitinsville Regional Hospital
Series 1998C
07-15-01 5.00 300,000 304,614
Total 1,307,164
Michigan (6.5%)
Chippewa County Finance Authority
Hospital Refunding Revenue Bonds
Chippewa County War Memorial Hospital
Series 1997B
11-01-01 4.75 200,000 202,128
Concord Academy Certificate of Participation Series 1998
10-01-03 5.70 175,000 173,528
Countryside Charter School
Full Term Certificates of Participation
Berrien County Series 1999
04-01-04 5.70 145,000 144,443
Garden City Hospital Finance Authority
Hospital Revenue Bonds Series 1998
09-01-03 5.38 200,000 200,676
Livingston Developmental Agency
Certificates of Participation Series 1999
05-01-05 5.70 145,000 144,920
State Hospital Finance Authority
Refunding Revenue Bonds
Chelsea Community Hospital
Series 1998
05-15-01 4.50 200,000 200,978
State Hospital Finance Authority
Revenue Bonds Series 1997
01-01-00 5.60 135,000 136,197
State Trunk Line Fuel Sales Tax
Refunding Revenue Bonds 1st Series 1992B
10-01-99 5.10 100,000 100,616
Summit Academy Certificates of Participation
Junior High School Facility Series 1999
09-01-04 5.70 260,000 258,578
Summit Academy Certificates of Participation
Series 1998
09-01-04 5.70 500,000 497,266
Total 2,059,330
Minnesota (5.2%)
Crow Finance Authority Tribal Purpose
Revenue Bonds Series 1998
10-01-02 5.00 315,000 321,580
Hastings Healthcare Tax-Exempt Nursing Home
Revenue Bonds Regina Medical Center (ACA Insured)
09-15-03 4.30 285,000 284,498
Minneapolis Community Development Agency
Limited Tax Supported Development Revenue
Common Fund Bonds Series 1997
06-01-99 4.70 160,000 160,026
Minneapolis Community Development Agency
Limited Tax Supported Development Revenue
Common Fund Bonds Series 1997 A.M.T.
06-01-99 4.90 205,000 205,038
06-01-00 5.10 215,000 218,294
State Higher Education Facilities Authority
Mortgage Revenue Bonds
Augsburg College Series 1999 4-Y
10-01-04 4.40 250,000 247,713
10-01-05 4.40 250,000 245,940
Total 1,683,089
Mississippi (0.9%)
Jackson Airport Authority Revenue Bonds
(AMBAC Insured) A.M.T.
12-01-01 6.25 135,000 142,154
12-01-02 6.25 145,000 154,748
Total 296,902
Missouri (1.6%)
Kansas City Water Revenue Bonds Series 1996B
12-01-99 5.75 100,000 101,272
State Health & Educational Facility Authority
Hospital Revenue Bonds Series 1993A
05-15-02 4.50 125,000 126,538
West Plains Industrial Development Authority
Hospital Revenue Bonds Ozarks Medical Center
11-15-01 4.60 290,000 292,473
Total 520,283
Nevada (0.3%)
Washoe County Limited General Obligation
Refunding Bonds Series 1993B (AMBAC Insured)
09-01-00 4.80 100,000 101,791
New Hampshire (0.3%)
State Business Finance Authority Resource
Recovery Revenue Bonds (MBIA Insured)
07-01-01 4.65 100,000 101,578
New Mexico (4.0%)
Sandoval County Multi-family Housing
Refunding Revenue Bonds Meadowlark Apartments
Series 1998B A.M.T.
07-01-01 6.38 600,000 600,535
Santa Fe County Lifecare Revenue Bonds
El Castillo Retirement Series 1998A
05-15-04 5.00 200,000 199,996
Santa Fe Educational Facilities College
Improvement Refunding Revenue Bonds Series 1997
10-01-03 5.20 235,000 242,905
10-01-04 5.30 245,000 255,025
Total 1,298,461
New York (7.7%)
New York City Unlimited General Obligation Bonds
Series 1997G
10-15-00 5.00 100,000 102,130
08-01-02 5.00 300,000 304,569
10-15-02 5.00 200,000 206,781
New York City Unlimited Tax
General Obligation Bonds Series 1999F
08-01-04 4.00 500,000 493,540
State Dormitory Authority Federal Housing
Authority Insured Hospital Revenue Bonds
Series 1996 (AMBAC Insured)
02-01-01 5.00 125,000 127,501
State Dormitory Authority Health Care Revenue Bonds
Mental Health Services Facilities Series 1997B
08-15-02 5.00 500,000 513,844
State Environmental Facilities Corporation
Special Obligation Lease Refunding Revenue Bonds
Series 1996 (AMBAC Insured)
04-01-01 4.60 200,000 203,282
State Mortgage Agency Single Family Housing
Revenue Bonds Series 1998 A.M.T.
04-01-01 4.15 500,000 501,895
Total 2,453,542
North Carolina (0.3%)
Union City Unlimited General Obligation Bonds
Series 1996B (MBIA Insured)
05-01-01 5.25 100,000 102,883
North Dakota (1.8%)
State Housing Finance Agency Home Mortgage Finance
Revenue Bonds Single Family Housing
Series 1998A A.M.T.
01-01-01 4.20 200,000 200,066
07-01-01 4.20 275,000 275,121
Ward County Health Care Facilities
Revenue Bonds Series 1996A
07-01-03 5.40 100,000 103,483
Total 578,670
Ohio (4.8%)
Akron Bath Copley Joint Township Hospital District
Revenue Bonds Summa Hospital
Series 1998A
11-15-03 4.50 500,000 496,720
Carroll Water & Sewer District
Unlimited Tax General Obligation Bonds
12-01-10 6.25 235,000 246,343
Cleveland Cuyahoga County Port Authority
Refunding Revenue Bonds
Sub Rock & Roll Hall of Fame
12-01-02 5.10 300,000 306,504
Sandusky County Hospital Facilities Refunding
Revenue Bonds Memorial Hospital
01-01-00 4.40 500,000 501,545
Total 1,551,112
Oklahoma (0.8%)
Enid Municipal Authority Sales Tax & Utility
Refunding Revenue Bonds
Series 1996 (AMBAC Insured)
02-01-00 4.50 250,000 252,123
Pennsylvania (5.8%)
Clarion County Hospital Authority
Hospital Refunding Revenue Bonds
Clarion Hospital Series 1997
07-01-00 4.60 200,000 200,892
07-01-01 4.75 200,000 201,238
Commonwealth of Pennsylvania Unlimited General
Obligation Bonds 3rd Series 1993
09-01-00 4.50 150,000 152,100
Cumberland County Municipal Authority
Nursing Home Revenue Bonds Series 1996
12-01-03 5.35 125,000 127,283
Delaware County Industrial Development Authority
Pollution Control Refunding Revenue Bonds Series 1997A
01-01-01 5.30 500,000 504,374
New Wilmington Municipal Authority
College Revenue Bonds
Westminster College Series 1998
03-01-00 4.30 190,000 190,808
State Higher Educational Facilities Authority
Revenue Bonds UPMC Health System
Series 1999A
08-01-05 4.05 500,000 488,855
Total 1,865,550
Rhode Island (0.6%)
State Refunding Certificates of Participation
Series 1997 (MBIA Insured)
10-01-02 4.70 200,000 204,028
South Dakota (1.1%)
Sioux Falls Health Facilities
Hospital Revenue Bonds
Evangelical Lutheran Good Samaritan Society
Series 1998B (AMBAC Insured)
06-01-01 4.45 200,000 200,494
Sioux Falls Sales Tax Revenue Bonds
Series 1996A (AMBAC Insured)
11-15-04 5.00 150,000 156,248
Total 356,742
Tennessee (1.6%)
Knox County Unlimited Tax General
Obligation Bonds Series 1997
02-01-03 4.45 500,000 508,520
Texas (7.8%)
Denison Hospital Authority Revenue Bonds Series 1997
08-15-02 5.45 255,000 260,936
Harris County Municipal Utilities District 196
Water & Sewer Revenue Bonds Series 1998
09-01-03 4.40 140,000 139,486
09-01-05 4.50 155,000 154,202
Harris County Municipal Utilities District 230
Unlimited Tax General Obligation Bonds
Series 1999
09-01-03 4.20 140,000 138,477
09-01-04 4.30 150,000 147,924
09-01-05 4.40 160,000 157,294
Houston Water & Sewer System Junior Lien
Refunding Revenue Bonds Series 1992C (MBIA Insured)
12-01-99 5.10 100,000 100,923
Houston Water & Sewer System Prior Lien
Refunding Revenue Bonds Series 1992B (MBIA Insured)
12-01-02 5.75 500,000 529,379
Houston Water & Sewer System Refunding Revenue Bonds
Series 1992B
12-01-99 5.25 250,000 252,418
Hutto Independent School District Unlimited Tax
School Building & Refunding Bonds
Series 1997 (Permanent School Fund Guarantee)
02-01-00 4.40 100,000 100,794
Tyler Health Facility Development Hospital Revenue Bonds
Mother Frances Hospital Series 1997A
07-01-99 5.00 200,000 200,264
Webb County Certificates of Participation
Series 1997A (Asset Guaranty)
10-01-00 4.45 300,000 303,279
Total 2,485,376
Utah (2.0%)
Granger & Hunter Improvement District
Water & Sewer Refunding Revenue Bonds
Series 1998 (FSA Insured)
03-01-00 4.00 300,000 301,623
Salt Lake City College Revenue Bonds
Westminster College Series 1997
10-01-00 4.50 185,000 186,719
Salt Lake City School District Unlimited General
Obligation Bonds Series 1995A
03-01-01 5.25 150,000 154,050
Total 642,392
Virginia (0.3%)
Chesapeake Individual Development Authority
Public Facility Lease Revenue Bonds
Series 1996 (MBIA Insured)
06-01-03 4.80 100,000 102,563
Washington (3.8%)
Spokane County Airport Revenue Bonds
Passenger Facilities Charge
Series 1999A (AMBAC Insured)
10-01-04 4.00 500,000 495,475
State Higher Education Facilities Authority
Refunding Revenue Bonds
University of Puget Sound
10-01-01 5.00 200,000 204,710
State Housing Finance Commission
Single Family Program Bonds
(FNMA Insured) A.M.T.
06-01-01 4.35 205,000 204,469
State Public Power Supply System Nuclear Project 3
Refunding Revenue Bonds Series 1993B
07-01-02 5.15 300,000 309,576
Total 1,214,230
West Virginia (0.3%)
State Facility Authority Community Building
Series 1997A (MBIA Insured)
07-01-02 5.00 100,000 103,142
Wisconsin (1.7%)
State Health & Educational Facilities Authority
College Revenue Bonds
Carroll College Series 1998
10-01-00 4.30 200,000 200,962
State Health & Educational Facilities Authority
Nursing Home Revenue Bonds
St. John's Home of Milwaukee & Sunrise Care Center
Series 1997
12-15-01 4.70 100,000 101,122
State Health & Educational Facilities Authority
Revenue Bonds Meriter Hospital Series 1996
12-01-99 4.65 100,000 100,657
State Health & Educational Facilities Authority
Revenue Bonds Series 1996 (MBIA Insured)
12-01-04 4.75 150,000 153,797
Total 556,538
Wyoming (0.6%)
Teton County School District 1 Public Facilities
Joint Powers
06-01-01 4.20 200,000 201,328
Total municipal bonds
(Cost: $31,294,208) $31,574,029
Municipal notes (2.5%)
Issuer(c,d) Effective Amount Value(a)
yield payable at
maturity
New York City Series 1994B2
08-15-11 3.30% $100,000 $100,000
Texas Gulf Coast Waste Disposal Authority
(Amoco) Pollution Control Refunding Revenue Bonds
Series 1992
10-01-17 3.30 100,000 100,000
University of Michigan Refunding Revenue Bonds
Hospital Series 1992A V.R.
12-01-19 3.30 400,000 400,000
University of Michigan Refunding Revenue Bonds
Hospital Series 1995A V.R.
12-01-27 3.30 100,000 100,000
Valdez Alaska Marine Terminal
(Exxon Pipeline) Series 1985 V.R.
10-01-25 3.30 100,000 100,000
Total municipal notes
(Cost: $800,000) $800,000
Total investments in securities
(Cost: $32,094,208)(e) $32,374,029
See accompanying notes to investments in securities.
</TABLE>
<PAGE>
Notes to investments in securities
(a) Securities are valued by procedures described in Note 1 to the financial
statements.
(b) 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
(c) The following abbreviations may be used in the portfolio descriptions:
A.M.T. -- Alternative Minimum Tax -- As of May 31, 1999, the value of
securities subject to alternative minimum tax represented 16.41%
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
(d) 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; rate shown is the effective rate on May 31,
1999.
(e) At May 31, 1999, the cost of securities for federal income tax purposes was
approximately $32,094,000 and the approximate aggregate gross unrealized
appreciation and depreciation based on that cost was:
Unrealized appreciation $343,000
Unrealized depreciation (63,000)
-------
Net unrealized appreciation $280,000
<PAGE>
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