<PAGE>
PAGE 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No.
Post-Effective Amendment No. 22 (File No. 33-5102) X
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 25 (File No. 811-4647) X
IDS SPECIAL TAX-EXEMPT SERIES TRUST
IDS Tower 10, Minneapolis, Minnesota 55440-0534
(612) 330-9283
Leslie L. Ogg - 901 Marquette Avenue South
Minneapolis, MN 55402-3268
Approximate Date of Proposed Public Offering:
It is proposed that this filing will become effective (check
appropriate box)
immediately upon filing pursuant to paragraph (b)
X on Aug. 29, 1994 pursuant to paragraph (b)
60 days after filing pursuant to paragraph (a)
on (date) pursuant to paragraph (a) of rule (485)
The registrant has registered an indefinite number or amount of
securities under the Securities Act of 1933 pursuant to section
24f-2 of the Investment Company Act of 1940. Rule 24f-2 Notice for
its most recent fiscal year will be filed on or about Aug. 31,
1994.
<PAGE>
PAGE 2
Documentation within this Post-Effective Amendment No. 22 to
Registration Statement No. 33-5102 appears in the following order:
PART A
Prospectus for IDS California, Massachusetts, Michigan, Minnesota,
New York and Ohio Tax-Exempt Funds
Prospectus for IDS Insured Tax-Exempt Fund
PART B
Statement of Additional Information for IDS California,
Massachusetts, Michigan, Minnesota, New York and Ohio Tax-Exempt
Funds
Statement of Additional Information for IDS Insured Tax-Exempt Fund
PART C
Other Information
Exhibits
Financials
The Signatures
<PAGE>
PAGE 3
<TABLE>
<CAPTION>
Cross reference sheet for IDS California, Massachusetts, Cross reference sheet for the IDS Insured Tax-Exempt Fund
Michigan, Minnesota, New York and Ohio Tax-Exempt Funds showing location in the prospectus and the Statement of
prospectus and the Statement of Additional Information of Additional Information of the information called for by
the information called for by the items enumerated in the items enumerated in Part A and Part B of Form N-1A.
Part A and Part B of Form N-1A.
Negative answers omitted from Part A or Part B are Negative answers omitted from Part A or Part B
so indicated. are so indicated.
PART A PART B PART A PART B
Page Number Page Number
Page Number in Statement of Page Number in Statement of
Item No. in Prospectus Item No. Additional Information Item No. in Prospectus Item No. Additional Information
<C> <C> <C> <C> <C> <C> <C> <C>
1 4 10 78 1 52 10 125
2 6-7 11 79 2 54-55 11 126
3(a) 7-13 12 NA 3(a) 56 12 NA
(b) NA (b) NA
(c) 6-16 13(a) 80-82;102-123 (c) 56-59 13(a) 127-129;148-162
(d) 6-7 (b) 80-82 (d) 56 (b) 127-129
(c) 81 (c) 128
4(a) 6;16-21;31-34 (d) 84 4(a) 54;59-62;71-74 (d) 131
(b) 16-21 (b) 59-62
(c) 16-21 14(a) 32-33**;97-100 (c) 59-62 14(a) 72-73**;144-146
(b) 97-100 (b) 144-146
5(a) 32-33 (c) 100 5(a) 72-73 (c) 146
(b) 32-35 (b) 72-75
(b)(i) 34-35 15(a) NA (b)(i) 74-75 15(a) NA
(b)(ii) 33 (b) NA (b)(ii) 73-74 (b) NA
(b)(iii) 33 (c) 100 (b)(iii) 73-74 (c) 146
(c) 6 (c) 54
(d) 6 16(a)(i) 31-35** (d) 54 16(a)(i) 71-75**
(e) 33 (a)(ii) 94-95;97 (e) 73-74 (a)(ii) 141-143
(f) 33-34 (a)(iii) 94-95 (f) 74 (a)(iii) 141-142
(g) 33 (b) 94-95;97 (g) 73-74 (b) 141-143
(c) NA (c) NA
5A(a) * (d) None 5A(a) * (d) None
(b) * (e) NA (b) * (e) NA
(f) 96-97 (f) 142-143
6(a) 31 (g) NA 6(a) 71-72 (g) NA
(b) NA (h) 100-101 (b) NA (h) 146-147
(c) NA (i) 95-96;100 (c) NA (i) 142;146
(d) NA (d) NA
(e) 4 17(a) 82-84 (e) 52 17(a) 129-131
(f) 28-29 (b) NA (f) 69 (b) NA
(g) 29-31 (c) 82-84 (g) 69-71 (c) 129-131
(d) 83 (d) 130
7(a) 33-34 (e) 83 7(a) 74 (e) 131
(b) 16 (b) 58-59
(c) 25-27 18(a) 31** (c) 66-68 18(a) 71-72**
(d) 22-23 (b) NA (d) 63 (b) NA
(e) NA (e) NA
(f) 33-34 19(a) 87-90 (f) 74 19(a) 134-137
(b) 86-90 (b) 133-137
8(a) 23-24 (c) NA 8(a) 64-65 (c) NA
(b) NA (b) NA
(c) 23 20 93-94 (c) 63 20 140-141
(d) 25 (d) 65-66
21(a) 96 21(a) 142
9 None (b) 96 9 None (b) 142
(c) NA (c) NA
22(a) NA 22(a) NA
(b) 84-85 (b) 131-132
23 101 23 147
* Designates information is located in annual report.
**Designates page number in prospectus.
</TABLE>
<PAGE>
PAGE 4
IDS California Tax-Exempt Trust
California Tax-Exempt Fund
IDS Special Tax-Exempt Series Trust
Massachusetts Tax-Exempt Fund
Michigan Tax-Exempt Fund
Minnesota Tax-Exempt Fund
New York Tax-Exempt Fund
Ohio Tax-Exempt Fund
Prospectus
August 29, 1994
Each fund's goal is to provide a high level of income generally
exempt from federal income tax as well as from the respective state
and local income tax. A portion of each fund's assets may be
invested in bonds whose interest is subject to the alternative
minimum tax computation.
This prospectus contains facts that can help you decide if one of
the funds is the right investment for you. Read it before you
invest and keep it for future reference.
Additional facts about the funds are in a Statement of Additional
Information (SAI), filed with the Securities and Exchange
Commission. The SAI, dated Aug. 29, 1994, is incorporated here by
reference. For a free copy contact IDS Shareholder Service.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
SHARES IN THE FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR
GUARANTEED OR ENDORSED BY, ANY BANK, AND SHARES ARE NOT FEDERALLY
INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL
RESERVE BOARD, OR ANY OTHER AGENCY.
IDS Shareholder Service
P.O. Box 534
Minneapolis, MN
55440-0534
612-671-3733
TTY: 800-846-4852
<PAGE>
PAGE 5
Table of contents
The funds in brief
Goals
Types of fund investments
Manager and distributor
Portfolio manager
Sales charge and fund expenses
Sales charge
Operating expenses
Performance
Financial highlights
Total returns
Yield
Key terms
Investment policies and risks
Facts about investments and their risks
Valuing assets
How to buy, exchange or sell shares
How to buy shares
How to exchange shares
How to sell shares
Reductions of the sales charge
Waivers of the sales charge
Special shareholder services
Services
Quick telephone reference
Distributions and taxes
Dividend and capital gain distributions
Reinvestments
Taxes
How the funds are organized
Shares
Voting rights
Shareholder meetings
Trustees and officers
Investment manager and transfer agent
Distributor
About IDS
General information
Appendix
Tax-exempt income vs. taxable income
1994 State tax information
<PAGE>
PAGE 6
The funds in brief
Goals
Each fund seeks to provide shareholders a high level of income
generally exempt from federal income tax as well as from the
respective state and local income tax. Because any investment
involves risk, achieving these goals cannot be guaranteed. Only
shareholders can change the goals.
Types of fund investments
Each fund is a non-diversified mutual fund that invests primarily
in high- or medium-grade municipal securities that are generally
exempt from federal income tax as well as from the respective state
and local income tax. A portion of each fund's assets may be
invested in bonds subject to the alternative minimum tax
computation.
Each of the funds may invest in lower-quality securities that tend
to be more price volatile than higher-quality securities. Funds
that concentrate their investments in a single state or invest more
than 5% of their assets in a single issuer may have more market
risk than funds that have broader diversification.
Manager and distributor
The funds are managed by IDS Financial Corporation (IDS), a
provider of financial services since 1894. IDS currently manages
more than $36 billion in assets for the IDS MUTUAL FUND GROUP.
Shares of the funds are sold through IDS Financial Services Inc., a
wholly owned subsidiary of IDS.
Portfolio manager
Paul B. Hylle joined IDS in 1993 and serves as portfolio manager.
He also is portfolio manager of IDS Insured Tax-Exempt Fund. Prior
to joining IDS, he had been a portfolio manager at Lutheran
Brotherhood, a Minnesota based fraternal benefit society offering
financial services to Lutherans.
Sales charge and fund expenses
Sales charge
When you buy shares, you pay a maximum sales charge of 5% of the
public offering price. This charge can be reduced, depending on
your total investments in IDS funds. See "Reductions of the sales
charge."
Shareholder transaction expenses
Maximum sales charge on purchases (as a percent of offering price)
<TABLE>
<CAPTION>
California Massachusetts Michigan Minnesota New York Ohio
<C> <C> <C> <C> <C> <C>
5% 5% 5% 5% 5% 5%
</TABLE>
<PAGE>
PAGE 7
Operating expenses
Each fund pays certain expenses out of its assets; the expenses
are reflected in each fund's daily share price and dividends, and
are not charged directly to shareholder accounts. The following
chart gives a projection of these expenses -- based on historical
expenses.
Annual fund operating expenses
(% of average daily net assets):
<TABLE>
<CAPTION>
California Massachusetts Michigan Minnesota New York Ohio
<S> <C> <C> <C> <C> <C> <C>
Management fee 0.53% 0.53% 0.53% 0.53% 0.53% 0.53%
12b-1 fee 0.02% 0.03% 0.02% 0.02% 0.02% 0.02%
Other expenses 0.06% 0.13% 0.10% 0.11% 0.10% 0.11%
Total 0.61% 0.69% 0.65% 0.66% 0.65% 0.66%
</TABLE>
Example: Suppose for each year for the next ten years, fund
expenses are as above and annual return is 5%. If you sold your
shares at the end of the following years, for each $1,000 invested,
you would pay total expenses of:
<TABLE>
<CAPTION>
California Massachusetts Michigan Minnesota New York Ohio
<S> <C> <C> <C> <C> <C> <C>
1 year $ 56 $ 57 $ 56 $ 56 $ 56 $ 56
3 years $ 69 $ 71 $ 70 $ 70 $ 70 $ 70
5 years $ 82 $ 87 $ 84 $ 85 $ 84 $ 85
10 years $123 $132 $127 $128 $127 $128
</TABLE>
This example does not represent actual expenses, past or future.
Actual expenses may be higher or lower than those shown. Because a
fund pays annual distribution fees, shareholders who stay in a fund
for more than 20 years may indirectly pay an equivalent of more
than a 7.25% sales charge, the maximum permitted by the National
Association of Securities Dealers.
Fund expenses include fees paid to IDS for:
o managing its portfolio, providing investment research and
administrative services
o distribution (known as 12b-1 fees, after the federal rule that
authorizes them)
o transfer agent services, including handling shareholder accounts
and records.
Performance
Financial highlights
The information in these tables has been audited by KPMG Peat
Marwick, independent auditors. The independent auditors' report
and additional information about the performance of each fund are
contained in the funds' annual report which, if not included with
this prospectus, may be obtained without charge.<PAGE>
PAGE 8
<TABLE>
<CAPTION>
IDS California Tax-Exempt Trust
IDS California Tax-Exempt Fund
Performance
Financial highlights
Fiscal period ended June 30,
Per share income and capital changes*
1994 1993 1992 1991 1990 1989** 1988*** 1987*** 1986+
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, $5.41 $5.18 $4.94 $4.89 $4.97 $4.82 $4.66 $5.07 $5.00
beginning of period
Income from investment operations:
Net investment income .31 .30 .31 .32 .32 .16 .32 .32 .11
Net gains (losses) on (.28) .23 .24 .05 (.08) .15 .16 (.41) .07
securities (both realized
and unrealized)
Total from investment .03 .53 .55 .37 .24 .31 .48 (.09) .18
operations
Less distributions:
Dividends from net (.31) (.30) (.31) (.32) (.32) (.16) (.32) (.32) (.11)
investment income
Net asset value, $5.13 $5.41 $5.18 $4.94 $4.89 $4.97 $4.82 $4.66 $5.07
end of period
Ratios/supplemental data
1994 1993 1992 1991 1990 1989** 1988*** 1987*** 1986+
Net assets, end of period $255 $261 $222 $185 $142 $95 $63 $40 $21
(in millions)
Ratio of expenses to .61% .63% .64% .60% .62% .64%**** .72% .78% .75%****++
average daily net assets
Ratio of net income to 5.67% 5.78% 6.16% 6.51% 6.53% 6.67%**** 6.61% 6.74% 6.44%****++
average daily net assets
Portfolio turnover rate 27% 5% 7% 23% 20% 6% 13% 16% 0%
(excluding short-term
securities)
Total return+++ 0.4% 10.8% 11.4% 7.7% 5.0% 6.5%++++ 10.5% (1.6%) 3.5%++++
*For a share outstanding throughout the period. Rounded to the nearest cent.
**Six months ended June 30, 1989. The fund's fiscal year end was changed from Dec. 31, to June 30, effective 1989.
***Fiscal years ended Dec. 31, 1987 and Dec. 31, 1988.
****Adjusted to an annual basis.
+Commencement of operations. Period from Aug. 18, 1986 to Dec. 31, 1986.
++During this period, IDS voluntarily reimbursed the fund for expenses in excess of 0.75% of its average daily net assets, on an
annual basis. Had IDS not done so, the ratio of expenses and ratio of net investment income would have been 0.93% and 6.26%,
respectively.
+++Total return does not reflect payment of a sales charge.
++++For the fiscal periods ended Dec. 31, 1986 and June 30, 1989, the annualized total returns are 13.0% and 13.6%, respectively.
<PAGE>
PAGE 9
IDS Special Tax-Exempt Series Trust
IDS Massachusetts Tax-Exempt Fund
Performance
Financial highlights
Fiscal year ended June 30,
Per share income and capital changes*
1994 1993 1992 1991 1990 1989 1988
Net asset value, $5.49 $5.20 $4.96 $4.88 $5.01 $4.91 $5.00
beginning of year
Income from investment operations:
Net investment income .30 .30 .31 .32 .32 .32 .31
Net gains (losses) on (.25) .29 .24 .08 (.12) .12 (.06)
securities (both realized
and unrealized)
Total from investment .05 .59 .55 .40 .20 .44 .25
operations
Less distributions:
Dividends from net (.30) (.30) (.31) (.32) (.32) (.32) (.31)
investment income
Distributions from -- -- -- -- (.01) (.02) (.03)
realized gains
Total distributions (.30) (.30) (.31) (.32) (.33) (.34) (.34)
Net asset value, $5.24 $5.49 $5.20 $4.96 $4.88 $5.01 $4.91
end of year
Ratios/supplemental data
1994 1993 1992 1991 1990 1989 1988
Net assets, end of year $72 $64 $44 $27 $19 $13 $4
(in millions)
Ratio of expenses to .69% .72% .72% .69% .70% .84% .93%+
average daily net assets
Ratio of net income to 5.40% 5.57% 6.05% 6.53% 6.59% 6.55% 6.40%+
average daily net assets
Portfolio turnover rate 6% 0% 2% 16% 36% 25% 34%
(excluding short-term
securities)
Total return** 0.9% 11.5% 11.4% 8.5% 4.2% 9.2% 5.3%
*For a share outstanding throughout the year. Rounded to the nearest cent.
**Total return does not reflect payment of a sales charge.
+During the period from July 2, 1987 to March 31, 1988, IDS voluntarily reimbursed the fund for expenses in excess of 0.75% of its
average daily net assets, on an annual basis. Had IDS not done so, the ratio of expenses and ratio of net investment income would
have been 1.30% and 6.03%, respectively.
<PAGE>
PAGE 10
IDS Special Tax-Exempt Series Trust
IDS Michigan Tax-Exempt Fund
Performance
Financial highlights
Fiscal year ended June 30,
Per share income and capital changes*
1994 1993 1992 1991 1990 1989 1988
Net asset value, $5.60 $5.31 $5.04 $4.96 $5.08 $4.85 $5.00
beginning of year
Income from investment operations:
Net investment income .31 .31 .32 .32 .32 .32 .31
Net gains (losses) on (.25) .29 .27 .08 (.12) .23 (.11)
securities (both realized
and unrealized)
Total from investment .06 .60 .59 .40 .20 .55 .20
operations
Less distributions:
Dividends from net (.31) (.31) (.32) (.32) (.32) (.32) (.31)
investment income
Distributions from -- -- -- -- -- -- (.04)
realized gains
Total distributions (.31) (.31) (.32) (.32) (.32) (.32) (.35)
Net asset value, $5.35 $5.60 $5.31 $5.04 $4.96 $5.08 $4.85
end of year
Ratios/supplemental data
1994 1993 1992 1991 1990 1989 1988
Net assets, end of year $77 $72 $55 $41 $29 $16 $8
(in millions)
Ratio of expenses to .65% .68% .67% .67% .71% .81% .87%+
average daily net assets
Ratio of net income to 5.43% 5.64% 6.18% 6.45% 6.47% 6.50% 6.56%+
average daily net assets
Portfolio turnover rate 16% 2% 0% 3% 5% 10% 14%
(excluding short-term
securities)
Total return** 1.0% 11.6% 12.0% 8.3% 4.1% 11.7% 4.4%
*For a share outstanding throughout the year. Rounded to the nearest cent.
**Total return does not reflect payment of a sales charge.
+During the period from July 2, 1987 to March 31, 1988, IDS voluntarily reimbursed the fund for expenses in excess of 0.75% of its
average daily net assets, on an annual basis. Had IDS not done so, the ratio of expenses and ratio of net investment income would
have been 1.09% and 6.34%, respectively.
<PAGE>
PAGE 11
IDS Special Tax-Exempt Series Trust
IDS Minnesota Tax-Exempt Fund
Performance
Financial highlights
Fiscal period ended June 30,
Per share income and capital changes*
1994 1993 1992 1991 1990 1989** 1988*** 1987*** 1986+
Net asset value, $5.44 $5.22 $5.01 $4.95 $5.05 $4.86 $4.76 $5.18 $5.00
beginning of period
Income from investment operations:
Net investment income .31 .31 .33 .33 .32 .16 .33 .33 .12
Net gains (losses) on (.28) .22 .21 .06 (.10) .19 .10 (.42) .19
securities (both realized
and unrealized)
Total from investment .03 .53 .54 .39 .22 .35 .43 (.09) .31
operations
Less distributions:
Dividends from net (.31) (.31) (.33) (.33) (.32) (.16) (.33) (.33) (.12)
investment income
Distributions from -- -- -- -- -- -- -- -- (.01)
realized gains
Total distributions (.31) (.31) (.33) (.33) (.32) (.16) (.33) (.33) (.13)
Net asset value, $5.16 $5.44 $5.22 $5.01 $4.95 $5.05 $4.86 $4.76 $5.18
end of period
Ratios/supplemental data
1994 1993 1992 1991 1990 1989** 1988*** 1987*** 1986+
Net assets, end of period $408 $402 $313 $233 $181 $121 $82 $50 $32
(in millions)
Ratio of expenses to .66% .67% .66% .63% .64% .65%**** .65% .78% .75%****++
average daily net assets
Ratio of net income to 5.73% 5.91% 6.43% 6.67% 6.62% 6.84%**** 6.73% 6.83% 6.85%****++
average daily net assets
Portfolio turnover rate 13% 2% 7% 10% 8% 0% 14% 40% 27%
(excluding short-term
securities)
Total return+++ 0.4% 10.5% 11.0% 8.2% 4.8% 7.4%++++ 9.3% (1.4%) 6.1%++++
*For a share outstanding throughout the period. Rounded to the nearest cent.
**Six months ended June 30, 1989. The fund's fiscal year end was changed from Dec. 31 to June 30, effective 1989.
***Fiscal years ended Dec. 31, 1987 and Dec. 31, 1988.
****Adjusted to an annual basis.
+Commencement of operations. Period from Aug. 18, 1986 to Dec. 31, 1986.
++During this period IDS voluntarily reimbursed the fund for expenses in excess of 0.75% of its average daily net assets, on an
annual basis. Had IDS not so, the ratio of expenses and ratio of net investment income would have been 0.88% and 6.72%,
respectively.
+++Total return does not reflect payment of a sales charge.
++++For the fiscal periods ended Dec. 31, 1986 and June 30, 1989, the annualized total returns are 16.7% and 15.5%, respectively.
<PAGE>
PAGE 12
IDS Special Tax-Exempt Series
IDS New York Tax-Exempt Fund
Performance
Financial highlights
Fiscal year ended June 30,
Per share income and capital changes*
1994 1993 1992 1991 1990 1989** 1988*** 1987*** 1986+
Net asset value, $5.41 $5.13 $4.86 $4.80 $4.87 $4.73 $4.58 $5.07 $5.00
beginning of period
Income from investment operations:
Net investment income .30 .30 .31 .31 .31 .16 .31 .31 .11
Net gains (losses) on (.29) .28 .27 .06 (.07) .14 .15 (.49) .07
securities (both realized
and unrealized)
Total from investment .01 .58 .58 .37 .24 .30 .46 (.18) .18
operations
Less distributions:
Dividends from net (.30) (.30) (.31) (.31) (.31) (.16) (.31) (.31) (.11)
investment income
Net asset value, $5.12 $5.41 $5.13 $4.86 $4.80 $4.87 $4.73 $4.58 $5.07
end of period
Ratios/supplemental data
1994 1993 1992 1991 1990 1989** 1988*** 1987*** 1986+
Net assets, end of period $120 $117 $95 $79 $68 $49 $34 $21 $13
(in millions)
Ratio of expenses to .65% .67% .67% .65% .65% .66%**** .71% .88% .75%****++
average daily net assets
Ratio of net income to 5.61% 5.79% 6.26% 6.53% 6.57% 6.78%**** 6.61% 6.79% 6.52%****++
average daily net assets
Portfolio turnover rate 10% 0% 8% 17% 8% 1% 6% 20% 3%
(excluding short-term
securities)
Total return+++ 0.1% 11.6% 12.3% 8.2% 5.0% 6.5%++++ 10.3% (3.4%) 3.6%++++
*For a share outstanding throughout the period. Rounded to the nearest cent.
**Six months ended June 30, 1989. The fund's fiscal year end was changed from Dec. 31, to June 30, effective 1989.
***Fiscal years ended Dec. 31, 1987 and Dec. 31, 1988.
****Adjusted to an annual basis.
+Commencement of operations. Period from Aug. 18, 1986 to Dec. 31, 1986.
++During this period, IDS voluntarily reimbursed the fund for expenses in excess of 0.75% of its average daily net assets, on an
annual basis. Had IDS not done so, the ratio of expenses and ratio of net investment income would have been 1.11% and 6.16%,
respectively.
+++Total return does not reflect payment of a sales charge.
++++For the fiscal periods ended Dec. 31, 1986 and June 30, 1989, the annualized total returns are 12.1% and 13.6%, respectively.
<PAGE>
PAGE 13
IDS Special Tax-Exempt Series
IDS Ohio Tax-Exempt Fund
Performance
Financial highlights
Fiscal year ended June 30,
Per share income and capital changes*
1994 1993 1992 1991 1990 1989 1988
Net asset value, $5.58 $5.28 $5.01 $4.94 $5.04 $4.87 $5.00
beginning of year
Income from investment operations:
Net investment income .30 .30 .31 .32 .31 .31 .32
Net gains (losses) on (.32) .31 .27 .07 (.09) .18 (.10)
securities (both realized
and unrealized)
Total from investment (.02) .61 .58 .39 .22 .49 .22
operations
Less distributions:
Dividends from net (.30) (.30) (.31) (.32) (.31) (.31) (.32)
investment income
Distributions from -- (.01) -- -- (.01) (.01) (.03)
realized gains
Total distributions (.30) (.31) (.31) (.32) (.32) (.32) (.35)
Net asset value, $5.26 $5.58 $5.28 $5.01 $4.94 $5.04 $4.87
end of year
Ratios/supplemental data
1994 1993 1992 1991 1990 1989 1988
Net assets, end of year $72 $65 $47 $33 $25 $16 $8
(in millions)
Ratio of expenses to .66% .67% .70% .68% .70% .82% .86%+
average daily net assets
Ratio of net income 5.44% 5.65% 6.14% 6.41% 6.43% 6.40% 6.64%+
to average daily net assets
Portfolio turnover rate 11% 0% 5% 2% 6% 10% 0%
(excluding short-term
securities)
Total return** (0.5%) 12.1% 11.9% 8.1% 4.6% 10.5% 4.7%
*For a share outstanding throughout the year. Rounded to the nearest cent.
**Total return does not reflect payment of a sales charge.
+During the period from July 2, 1987 to March 31, 1988, IDS voluntarily reimbursed the fund for expenses in excess of 0.75% of its
average daily net assets, on an annual basis. Had IDS not done so, the ratio of expenses and ratio of net investment income would
have been 1.09% and 6.41%, respectively.
The information on these tables have been audited by KPMG Peat Marwick, independent auditors. The independent auditors' report and
additional information about the performance of each fund are contained in the funds' annual report which, if not included with
this prospectus, may be obtained without charge.
</TABLE>
<PAGE>
PAGE 14
Average annual total returns as of June 30, 1994
Purchase 1 year 5 years Since
made ago ago inception*
California Fund - 4.6% + 5.9% + 6.1%
Massachusetts Fund - 4.2 + 6.1 + 6.4
Michigan Fund - 4.0 + 6.2 + 6.7
Minnesota Fund - 4.6 + 5.8 + 6.4
New York Fund - 4.9 + 6.3 + 6.1
Ohio Fund - 5.5 + 6.0 + 6.5
Lehman Brothers
Municipal Bond
Index + 0.2 + 7.9 +7.81 +8.02
*1Since 8/18/86 for California, Minnesota and New York. 2Since
7/2/87 for Massachusetts, Michigan and Ohio.
Cumulative total returns as of June 30, 1994
Purchase 1 year 5 years Since
made ago ago inception*
California Fund - 4.6% +33.2% +59.6%
Massachusetts Fund - 4.2 +34.4 +54.5
Michigan Fund - 4.0 +35.2 +57.6
Minnesota Fund - 4.6 +32.7 +62.5
New York Fund - 4.9 +35.5 +59.3
Ohio Fund - 5.5 +34.1 +55.1
Lehman Brothers
Municipal Bond
Index + 0.2 +46.5 +80.61 +71.72
*1Since 8/18/86 for California, Minnesota and New York. 2Since
7/2/87 for Massachusetts, Michigan and Ohio.
These examples show total returns from hypothetical investments in
each fund. These returns are compared to those of a popular index
for the same period.
For purposes of calculation, information about each fund assumes a
sales charge of 5%, makes no adjustments for taxes an investor may
have paid on the reinvested income and capital gains, and covers a
period of widely fluctuating securities prices. Returns shown
should not be considered a representation of a fund's future
performance.
<PAGE>
PAGE 15
The fund's investments may be different from those in the index.
The index reflects reinvestment of all distributions and changes in
market prices, but excludes brokerage commissions or other fees.
Lehman Brothers Municipal Bond Index is made up of a representative
list of general obligation, revenue, insured and pre-refunded
bonds.
The index is frequently used as a general measure of tax-exempt
bond market performance. However, the securities used to create
the index may not be representative of the bonds held in a fund.
Yield
SEC standardized yield for the 30-day period ended June 30, 1994
was 4.97% for California Fund, 5.03% for Massachusetts Fund, 4.73%
for Michigan Fund, 5.10% for Minnesota Fund, 4.77% for New York
Fund and 5.04% for Ohio Fund.
Each fund calculates this 30-day SEC standardized yield by
dividing:
o net investment income per share deemed earned during a 30-day
period by
o the public offering price per share on the last day of the
period, and
o converting the result to a yearly equivalent figure.
Non-standardized yield (distribution yield) for the same 30-day
period ended June 30, 1994 was 5.42% for California Fund, 5.24% for
Massachusetts Fund, 5.36% for Michigan Fund, 5.53% for Minnesota
Fund, 5.39% for New York Fund and 5.26% for Ohio Fund.
Each fund computes distribution yield by dividing:
o the total dividends paid over the 30-day period by
o the sum of each day's public offering price for that period,
and
o converting the result to a yearly equivalent figure.
A fund also may calculate a tax equivalent yield by dividing the
tax-exempt portion of its yield by one minus a stated income tax
rate. A tax equivalent yield demonstrates the taxable yield
necessary to produce an after-tax yield equivalent to that of a
fund that invests in exempt obligations.
A fund's yield varies from day to day, mainly because share values
and offering prices (which are calculated daily) vary in response
to changes in interest rates. Net investment income normally
changes much less in the short run. Thus, when interest rates rise
and share values fall, yield tends to rise. When interest rates
fall, yield tends to follow.
Past yields should not be an indicator of future yields.
<PAGE>
PAGE 16
Key terms
Net asset value (NAV) - Value of a single fund share. It is the
total market value of all of a fund's investments and other assets,
less any liabilities, divided by the number of shares outstanding.
The NAV is the price you receive when you sell your shares. It
usually changes from day to day, and is calculated at the close of
business, normally 3 p.m. Central time, each business day (any day
the New York Stock Exchange is open). NAV generally declines as
interest rates increase and rises as interest rates decline.
Public offering price - Price at which you buy shares. It is the
NAV plus the sales charge. NAVs and public offering prices of IDS
funds are listed each day in major newspapers and financial
publications.
Investment income - Dividends and interest earned on securities
held by the fund.
Capital gains or losses - Increase or decrease in value of the
securities the fund holds. Gains or losses are realized when
securities that have increased or decreased in value are sold. A
fund also may have unrealized gains or losses when securities
increase or decrease in value but are not sold.
Distributions - Payments to shareholders of two types: investment
income (dividends) and realized net long-term capital gains
(capital gains distributions).
Total return - Sum of all of your returns for a given period,
assuming you reinvest all distributions. Calculated by taking the
total value of shares you own at the end of the period (including
shares acquired by reinvestment), less the price of shares you
purchased at the beginning of the period.
Average annual total return - The annually compounded rate of
return over a given time period (usually two or more years) --
total return for the period converted to an equivalent annual
figure.
Yield - Net investment income earned per share for a specified time
period, divided by the offering price at the end of the period.
Investment policies and risks
Under normal market conditions, California, Massachusetts,
Michigan, Minnesota, New York and Ohio Funds will invest at least
80% of their net assets in bonds, notes and commercial paper issued
by or on behalf of its respective state or local governmental units
whose interest, in the opinion of bond counsel for the issuer, is
exempt from federal, state and local (if applicable) income tax in
their respective states.
<PAGE>
PAGE 17
In addition, a portion of each fund's assets may be invested in
bonds whose interest is subject to the alternative minimum tax
computation. As long as the staff of the SEC maintains its current
position that a fund calling itself a "tax-exempt" fund may not
invest more than 20% of its net assets in these bonds, each fund
will limit its investments in these bonds to 20% of its net assets.
The various types of investments the portfolio manager uses to
achieve investment performance are described in more detail in the
next section and in the SAI.
Facts about investments and their risks
Bonds and other debt securities exempt from federal, state and
local income taxes: The price of an investment grade bond
fluctuates as interest rates change or if its credit rating is
upgraded or downgraded. At least 75% of each fund's investments
will be in investment grade securities, that is securities given
the four highest ratings by Moody's Investors Service, Inc.
(Moody's) and Standard & Poor's Corporation (S&P) or in non-rated
securities of equivalent investment quality in the judgment of the
fund's investment manager. The other 25% may be in securties rated
Ba or B by Moody's or B by S&P or the equivalent (commonly known as
"junk bonds").
Debt securities below investment grade: The price of these bonds
may react more to the ability of a company to pay interest and
principal when due than to changes in interest rates. They have
greater price fluctuations, are more likely to experience a
default, and sometimes are referred to as "junk bonds." Reduced
market liquidity for these bonds may occasionally make it more
difficult to value them. In valuing bonds, the fund relies both on
independent rating agencies and the investment manager's credit
analysis. Securities that are subsequently downgraded in quality
may continue to be held and will be sold only when the fund's
investment manager believes it is advantageous to do so.
Bond ratings and holdings for fiscal 1994
for California Tax-Exempt Fund
<TABLE>
<CAPTION>
IDS'
S&P Rating Protection of assessment
Percent of (or Moody's principal and of unrated
net assets equivalent) interest securities
<C> <C> <C> <C>
37.93% AAA Highest quality 12.34%
24.75 AA High quality --
16.76 A Upper medium grade 0.17
3.34 BBB Medium grade 0.11
-- BB Moderately speculative 1.63
-- B Speculative 0.09
-- CCC Highly speculative --
-- CC Poor quality --
-- C Lowest quality --
-- D In default --
15.26 Unrated Unrated securities 0.92
<PAGE>
PAGE 18
Bond ratings and holdings for fiscal 1994 for
Massachusetts Tax-Exempt Fund
IDS'
S&P Rating Protection of assessment
Percent of (or Moody's principal and of unrated
net assets equivalent) interest securities
55.91% AAA Highest quality 1.67%
10.78 AA High quality --
16.91 A Upper medium grade --
7.38 BBB Medium grade --
0.19 BB Moderately speculative 2.49
-- B Speculative --
-- CCC Highly speculative --
-- CC Poor quality --
-- C Lowest quality --
-- D In default --
4.38 Unrated Unrated securities 0.22
Bond ratings and holdings for fiscal 1994
for Michigan Tax-Exempt Fund
IDS'
S&P Rating Protection of assessment
Percent of (or Moody's principal and of unrated
net assets equivalent) interest securities
39.87% AAA Highest quality 10.08%
32.35 AA High quality --
11.50 A Upper medium grade --
2.52 BBB Medium grade 0.43
-- BB Moderately speculative --
-- B Speculative --
-- CCC Highly speculative --
-- CC Poor quality --
-- C Lowest quality --
-- D In default --
11.40 Unrated Unrated securities 0.89
Bond ratings and holdings for fiscal 1994
for Minnesota Tax-Exempt Fund
IDS'
S&P Rating Protection of assessment
Percent of (or Moody's principal and of unrated
net assets equivalent) interest securities
27.55% AAA Highest quality 5.60%
23.96 AA High quality 4.01
22.52 A Upper medium grade 0.20
0.57 BBB Medium grade 5.16
0.59 BB Moderately speculative 2.61
-- B Speculative 1.78
-- CCC Highly speculative --
-- CC Poor quality --
-- C Lowest quality --
1.12 D In default --
21.13 Unrated Unrated securities 0.70
<PAGE>
PAGE 19
Bond ratings and holdings for fiscal 1994
for New York Tax-Exempt Fund
IDS'
S&P Rating Protection of assessment
Percent of (or Moody's principal and of unrated
net assets equivalent) interest securities
29.73% AAA Highest quality 5.60%
34.95 AA High quality --
13.09 A Upper medium grade --
13.79 BBB Medium grade --
-- BB Moderately speculative --
-- B Speculative --
-- CCC Highly speculative --
-- CC Poor quality --
-- C Lowest quality --
-- D In default --
5.60 Unrated Unrated securities --
Bond ratings and holdings for fiscal 1994
for Ohio Tax-Exempt Fund
IDS'
S&P Rating Protection of assessment
Percent of (or Moody's principal and of unrated
net assets equivalent) interest securities
50.94% AAA Highest quality 4.41%
14.50 AA High quality --
17.76 A Upper medium grade --
6.22 BBB Medium grade --
0.04 BB Moderately speculative 1.99
-- B Speculative 1.42
-- CCC Highly speculative 0.25
-- CC Poor quality --
-- C Lowest quality --
-- D In default --
8.27 Unrated Unrated securities 0.20
</TABLE>
See Appendix to this prospectus for further information regarding
ratings.
Debt securities sold at a deep discount: Some bonds are sold at
deep discounts because they do not pay interest until maturity.
They include zero coupon bonds and PIK (pay-in-kind) bonds. To
comply with tax laws, the fund has to recognize a computed amount
of interest income and pay dividends to shareholders even though no
cash has been received. In some instances, the fund may have to
sell securities to have sufficient cash to pay the dividends.
Concentration: Each of the funds concentrates its investments in
the securities of its respective state. In addition, each fund may
invest more than 25% of its total assets in a particular segment of
the municipal securities market, such as electric revenue bonds,
hospital revenue bonds, housing agency bonds, industrial
development bonds, airport bonds, or in securities the interest
upon which is paid from revenues of a similar type of project. In
such circumstances, economic, business, political or other change
affecting one bond (such as proposed legislation affecting the
financing of a project, shortages or price increases of needed
materials, or declining markets or needs of the projects) might
also affect other bonds in the same segment. This could increase
market risk. <PAGE>
PAGE 20
Each fund may invest more than 25% of its total assets in
industrial revenue bonds, but does not intend to invest more than
25% of its total assets in industrial revenue bonds issued for
companies in the same industry. As the similarity in issuers
increases, the potential for fluctuation in the net asset value of
each fund's shares also increases.
Economic conditions in each respective state affect both the total
amount of taxes each state collects and the personal income growth
within each state. In the recent past each state has experienced
financial difficulty when budgeted expenses outpaced revenue
collections. Budgetary shortfalls were managed either by short-
term borrowing (in the case of California, New york, and
Massachusetts) or use of reserve funds (in the case of Michigan,
Minnesota and Ohio). Current state budgets are assumed to be based
on conservative economic forecasts and reduced spending levels.
Budgetary shortfalls may result in reductions in credit ratings for
securities issued by the states. This may cause an increase in the
yield and a decrease in the price of a security issued by a
particular state. Furthermore, because local finances are
dependent upon the fiscal integrity of the state and upon the same
financial factors that influence state government, the credit
ratings of state agencies, authorities and municipalities may be
similarly affected. See the SAI for more information concerning
each state.
Taxable investments: If, in the opinion of the investment manager,
appropriate tax-exempt securities are not available, each fund may
invest up to 20% of its net assets, or more on a temporary
defensive basis, in investments the income from which is subject to
federal, state or local income tax, as described more fully in the
SAI.
Derivative instruments: The portfolio manager may use derivative
instruments in addition to securities to achieve investment
performance. Derivative instruments include futures, options and
forward contracts. Such instruments may be used to maintain cash
reserves while remaining fully invested, to offset anticipated
declines in values of investments, to facilitate trading, to reduce
transaction costs, or to pursue higher investment returns.
Derivative instruments are characterized by requiring little or no
initial payment and a daily change in price based on or derived
from a security, a currency, a group of securities or currencies,
or an index. A number of strategies or combination of instruments
can be used to achieve the desired investment performance
characteristics. A small change in the value of the underlying
security, currency or index will cause a sizable gain or loss in
the price of the derivative instrument. Derivative instruments
allow the portfolio manager to change the investment performance
characteristics very quickly and at lower costs. Risks include
losses of premiums, rapid changes in prices, defaults by other
parties, and inability to close such instruments. The fund will
use derivative instruments only to achieve the same investment
performance characteristics it could achieve by directly holding
those securities and currencies permitted under the investment
policies. The fund will designate cash or appropriate liquid
<PAGE>
PAGE 21
assets to cover its portfolio obligations. The use of derivative
instruments may produce taxable income. No more than 5% of the
fund's net assets can be used at any one time for good faith
deposits on futures and premiums for options on futures that do not
offset existing investment positions. For further information, see
the options and futures appendix in the SAI.
Inverse floaters: Inverse floaters are derivatives created by
underwriters using the interest payments on securities. A portion
of the interest received is paid to holders of instruments based on
current interest rates for short-term securities. What is left
over, less a servicing fee, is paid to holders of the inverse
floaters. As interest rates go down, the holders of the inverse
floaters receive more income and an increase in the price for the
inverse floaters. As interest rates go up, the holders of the
inverse floaters receive less income and a decrease in the price
for the inverse floaters. No more than 10% of the fund's assets
will be held in inverse floaters.
Securities and derivative instruments that are illiquid: Illiquid
means the security or derivative instrument cannot be sold quickly
in the normal course of business. Some investments cannot be
resold to the U.S. public because of their terms or government
regulations. All securities and derivative instruments, however,
can be sold in private sales, and many may be sold to other
institutions and qualified buyers or on foreign markets. The
portfolio manager will follow guidelines established by the
trustees and consider relevant factors such as the nature of the
security and the number of likely buyers when determining whether a
security is illiquid. No more than 10% of each fund's net assets
will be held in securities and derivative instruments that are
illiquid.
The investment policies described above, except for the policies
concerning the type and amount of tax-exempt investments, may be
changed by the trustees.
Lending portfolio securities: The fund may lend its securities to
earn income so long as borrowers provide collateral equal to the
market value of the loans. The risks are that borrowers will not
provide collateral when required or return securities when due.
Unless shareholders approve otherwise, loans may not exceed 30% of
the fund's net assets.
Valuing assets
o Bonds and assets without readily available market values are
valued at fair value according to methods selected in good
faith by the board of trustees.
o Securities maturing in 60 days or less are valued at amortized
cost.
o Securities (except bonds) and assets with available market
values are valued on that basis.
<PAGE>
PAGE 22
How to buy, exchange or sell shares
How to buy shares
If you're investing in one of the funds for the first time, you'll
need to set up an account. Your financial planner will help you
fill out and submit an application. Once your account is set up,
you can choose among several convenient ways to invest.
Important: When opening an account, you must provide IDS with your
correct Taxpayer Identification Number (Social Security or Employer
Identification number). See "Distributions and taxes."
When you buy shares for a new or existing account, the price you
pay per share is determined at the close of business on the day
your investment is received and accepted at the Minneapolis
headquarters.
Purchase policies
o Investments must be received and accepted in the Minneapolis
headquarters on a business day before 3 p.m. Central time to
be included in your account that day and to receive that day's
share price. Otherwise your purchase will be processed the
next business day and you will pay the next day's share price.
o The minimums allowed for investment may change from time to
time.
o Wire orders can be accepted only on days when your bank, IDS,
the funds and Norwest Bank Minneapolis are open for business.
o Wire purchases are completed when wired payment is received
and the fund accepts the purchase.
o IDS and the funds are not responsible for any delays that
occur in wiring funds, including delays in processing by the
bank.
o You must pay any fee the bank charges for wiring.
o Each fund reserves the right to reject any application for any
reason.
Three ways to invest
<TABLE>
<CAPTION>
<S> <C> <C>
1
By regular account Send your check and application Minimum amounts
(or your name and account number Initial investment
if you have an established account) per fund: $2,000
to: Additional
IDS Financial Services Inc. investments per
P.O. Box 74 fund: $ 100
Minneapolis, MN 55440-0074 Account balances
per fund: $ 300*
Your financial planner will help
you with this process.
<PAGE>
PAGE 23
2
By scheduled Contact your financial planner Minimum amounts
investment plan to set up one of the following Initial investment:$ 100
scheduled plans: Additional
investments: $100/mo
o automatic payroll deduction Account balances: none
(on active plans
o bank authorization of monthly payments)
o direct deposit of
Social Security check
o other plan approved by the Fund
3
By wire If you have an established account, If this information is not
you may wire money to: included, the order may be
rejected and all money
Norwest Bank Minneapolis received by the fund, less
Routing No. 091000019 any costs the fund or IDS
Minneapolis, MN incurs, will be returned
Attn: Domestic Wire Dept. promptly.
Give these instructions: Minimum amounts:
Credit IDS Account #00-30-015 Each wire investment:
for personal account # (your $1,000**
account number) for (your name).
*If your account balance falls below $300, IDS will ask you in writing to bring it up to $300 or establish a scheduled
investment plan. If you don't do so within 30 days, your shares can be redeemed and the proceeds mailed to you.
**The money sent by a single wire can be invested only in one fund.
</TABLE>
How to exchange shares
You can exchange your shares of the fund at no charge for shares of
any other publicly offered fund in the IDS MUTUAL FUND GROUP
available in your state. For complete information, including fees
and expenses, read the prospectus carefully before exchanging into
a new fund.
If your exchange request arrives at the Minneapolis headquarters
before the close of business, your shares will be redeemed at the
net asset value set for that day. The proceeds will be used to
purchase new fund shares the same day. Otherwise, your exchange
will take place the next business day at that day's net asset
value.
For tax purposes, an exchange represents a sale and purchase and
may result in a gain or loss. However, you cannot create a tax
loss (or reduce a taxable gain) by exchanging from the fund within
91 days of your purchase. For further explanation, see the SAI.
How to sell shares
You can sell (redeem) your shares at any time. IDS Shareholder
Service will mail payment within seven days after receiving your
request.
When you sell shares, the amount you receive may be more or less
than the amount you invested. Your shares will be redeemed at net
asset value at the close of business on the day your request is
accepted at the Minneapolis headquarters. If your request arrives
after the close of business, the price per share will be the net
asset value at the close of business on the next business day.
<PAGE>
PAGE 24
A redemption is a taxable transaction. If the fund's net asset
value when you sell shares is more or less than the cost of your
shares, you will have a gain or loss, which can affect your tax
liability.
Two ways to request an exchange or sale of shares
<TABLE>
<CAPTION>
<S> <C>
1
By letter Include in your letter:
o the name of the fund(s)
o your account number(s) (for exchanges, both funds
must be registered in the same ownership)
Regular mail: o you Taxpayer Identification Number (TIN)
IDS Shareholder Service o the dollar amount or number of shares you want
Attn: Redemptions to exchange or sell
P.O. Box 534 o signature of all registered account owners
Minneapolis, MN o for redemptions, indicate how you want your
55440-0534 sales proceeds delivered to you
o any paper certificates of shares you hold
Express mail:
IDS Shareholder Service
Attn: Redemptions
733 Marquette Ave.
Minneapolis, MN 55402
2
By phone
IDS Telephone Transaction o The fund and IDS will honor any telephone
800-437-3133 or or redemption request believed to be authentic and
612-671-3800 will use reasonable procedures to confirm that they are. This includes asking identifying
questions and tape recording calls. So long as reasonable procedures are followed, neither
the fund nor IDS will be liable for any loss resulting from fraudulent requests.
o Phone exchange and redemption privileges automatically apply to all accounts except
custodial, corporate or qualified retirement accounts unless you request these privileges
NOT apply by writing IDS Shareholder Service. Each registered owner must sign the request.
o IDS answers phone requests promptly, but you may experience delays when call volume is
high. If you are unable to get through, use mail procedure as an alternative.
o Phone privileges may be modified or discontinued at any time.
Minimum amount
Redemption: $100
Maximum amount
Redemption: $50,000
</TABLE>
Exchange policies:
o You may make up to three exchanges within any 30-day period,
with each limited to $300,000. These limits do not apply to
scheduled exchange programs and certain employee benefit plans or
other arrangements through which one shareholder represents the
interests of several. Exceptions may be allowed with pre-approval
of the fund.
o If your exchange creates a new account, it must satisfy the
minimum investment amount for new purchases.
o Once we receive your exchange request, you cannot cancel it.
o Shares of the new fund may not be used on the same day for
another exchange.
o If your shares are pledged as collateral, the exchange will be
delayed until written approval is obtained from the secured party.<PAGE>
PAGE 25
o IDS and the fund reserve the right to reject any exchange, limit
the amount, or modify or discontinue the exchange privilege, to
prevent abuse or adverse effects on the fund and its shareholders.
For example, if exchanges are too numerous or too large, they may
disrupt the fund's investment strategies or increase its costs.
Redemption policies:
o A "change of mind" option allows you to change your mind after
requesting a redemption and to use all or part of the proceeds to
buy new shares in the same account at the net asset value, rather
than the offering price on the date of a new purchase. To do so,
send a written request within 30 days of the date your redemption
request was received. Include your account number and mention this
option. This privilege may be limited or withdrawn at any time,
and it may have tax consequences.
o A telephone redemption request will not be allowed within 30
days of a phoned-in address change.
Important: If you request a redemption of shares you recently
purchased by a check or money order that is not guaranteed, the
fund will wait for your check to clear. Please expect a minimum of
10 days from the date of purchase before IDS mails a check to you.
(A check may be mailed earlier if your bank provides evidence
satisfactory to the fund and IDS that your check has cleared.)
Three ways to receive payment when you sell shares
<TABLE>
<CAPTION>
<S> <C>
1
By regular or express mail o Mailed to the address on record.
o Payable to names listed on the account.
NOTE: The express mail delivery charges
you pay will vary depending on the
courier you select.
2
By wire o Minimum wire redemption: $1,000.
o Request that money be wired to your bank.
o Bank account must be in the same
ownership as the IDS account.
NOTE: Pre-authorization required. For
instructions, contact your financial
planner or IDS Shareholder Service.
3
By scheduled payout plan o Minimum payment: $50.
o Contact your financial planner or IDS
Shareholder Service to set up regular
payments to you on a monthly, bimonthly,
quarterly, semiannual or annual basis.
o Buying new shares while under a payout
plan may be disadvantageous because of the
sales charges.
</TABLE>
Reductions of the sales charge
You pay a 5% sales charge on the first $50,000 of your total
investment and less on investments after the first $50,000:
<PAGE>
PAGE 26
Total investment Sales charge as a
percent of:*
Public Net
offering amount
price invested
Up to $50,000 5.0% 5.26%
Next $50,000 4.5 4.71
Next $150,000 4.0 4.17
Next $250,000 3.0 3.09
Next $500,000 2.0 2.04
Next $2,000,000 1.0 1.01
More than $3,000,000 0.5 0.50
* To calculate the actual sales charge on an investment greater
than $50,000, amounts for each applicable increment must be
totaled. See the SAI.
Your sales charge may be reduced, depending on the totals of:
o the amount you are investing in this fund now,
o the amount of your existing investment in this fund, if any, and
o the amount you and your immediate family (spouse or unmarried
children under 21) are investing or have in other funds in the IDS
MUTUAL FUND GROUP that carry a sales charge.
Other policies that affect your sales charge:
o IDS Cash Management Fund and IDS Tax-Free Money Fund do not
carry sales charges. However, you may count investments in these
funds if you acquired shares in them by exchanging shares from IDS
funds that carry sales charges.
o IRA purchases or other employee benefit plan purchases made
through a payroll deduction plan or through a plan sponsored by an
employer, association of employers, employee organization or other
similar entity, may be added together to reduce sales charges for
all shares purchased through that plan.
For more details, see the SAI.
Waivers of the sales charge
Sales charges do not apply to:
o Current or retired trustees, directors, officers or employees of
the fund or IDS or its subsidiaries, their spouses and unmarried
children under 21.
o Current or retired IDS planners, their spouses and unmarried
children under 21.
o Qualified employee benefit plans* if the plan:
- has at least $1 million invested in funds of the IDS MUTUAL
FUND GROUP; or
<PAGE>
PAGE 27
- has 500 or more participants; or
- uses a daily transfer recordkeeping service offering
participants daily access to IDS funds.
(Participants in certain qualified plans for which the initial
sales charge is waived may be subject to a deferred sales charge of
up to 4% on certain redemptions. For more information, see the
SAI.)
o Trust companies or similar institutions, and charitable
organizations that meet the definition in Section 501(c)(3) of the
Internal Revenue Code.* These must have at least $1 million
invested in funds of the IDS MUTUAL FUND GROUP.
o Purchases made within 30 days after certain redemptions. A
waiver applies up to the amount redeemed from:
- an IDS product in a qualified plan subject to a deferred sales
charge; or
- a qualified plan where IDS Trust Company acts as trustee
and/or
recordkeeper; or
- IDS Strategy Fund.
Send the fund a written request along with your payment, indicating
the amount of the redemption and the date on which it occurred.
o Purchases made with dividend or capital gain distributions from
another fund in the IDS MUTUAL FUND GROUP that has a sales charge.
*Eligibility must be determined in advance by IDS. To do so,
contact your financial planner.
Special shareholder services
Services
To help you track and evaluate the performance of your investments,
IDS provides these services:
Quarterly statements listing all of your holdings and transactions
during the previous three months.
Yearly tax statements featuring average-cost-basis reporting of
capital gains or losses if you redeem your shares along with
distribution information - which simplifies tax calculations.
A personalized mutual fund progress report detailing returns on
your initial investment and cash-flow activity in your account. It
calculates a total return to reflect your individual history in
owning fund shares. This report is available from your financial
planner.
<PAGE>
PAGE 28
Quick telephone reference
IDS Telephone Transaction Service
Redemptions and exchanges, dividend payments or reinvestments and
automatic payment arrangements
National/Minnesota: 800-437-3133
Mpls./St. Paul area: 671-3800
IDS Shareholder Service
Fund performance, objectives and account inquiries
612-671-3733
TTY Service
For the hearing impaired
800-846-4852
IDS Infoline
Automated account information (TouchToneR phones only), including
current fund prices and performance, account values and recent
account transactions
National/Minnesota: 800-272-4445
Mpls./St. Paul area: 671-1630
Distributions and taxes
The fund distributes to shareholders investment income and net
capital gains. It does so to qualify as a regulated investment
company and to avoid paying corporate income and excise taxes.
Dividend and capital gains distributions will have tax consequences
you should know about.
Dividend and capital gain distributions
Each fund distributes its net investment income (dividends and
interest earned on securities held by the fund, less operating
expenses) to shareholders of record monthly. Short-term capital
gains distributed are included in net investment income. Net
realized capital gains, if any, from selling securities are
distributed at the end of the calendar year. Before they're
distributed, net capital gains are included in the value of each
share. After they're distributed, the value of each share drops by
the per-share amount of the distribution. (If your distributions
are reinvested, the total value of your holdings will not change.)
Reinvestments
Dividends and capital gain distributions are automatically
reinvested in additional shares of the fund, unless:
o you request the fund in writing or by phone to pay
distributions to you in cash, or
o you direct the fund to invest your distributions in any
publicly available IDS fund for which you've previously opened
an account.
<PAGE>
PAGE 29
You pay no sales charge on shares purchased through reinvestment
from this fund into any IDS fund. The reinvestment price is the
net asset value at close of business on the day the distribution is
paid. (Your quarterly statement from IDS will confirm the amount
invested and the number of shares purchased.)
If you choose cash distributions, you will receive only those
declared after your request has been processed.
If the U.S. Postal Service cannot deliver the checks for the cash
distributions, we will reinvest the checks into your account at the
then-current net asset value and make future distributions in the
form of additional shares.
Taxes
Dividends distributed from interest earned by each fund on tax-
exempt securities (exempt-interest dividends) are exempt from
federal income taxes but may be subject to state and local taxes.
Dividends distributed from other income earned by each fund and
capital gain distributions are not exempt from federal income
taxes. Distributions are taxable in the year a fund pays them
regardless of whether you take them in cash or reinvest them.
Each January, IDS sends you a statement showing the kinds and total
amount of all distributions you received during the previous year.
You must report all distributions on your tax returns, even if they
are reinvested in additional shares.
Interest on certain private activity bonds is a preference item for
purposes of the individual and corporate alternative minimum taxes.
To the extent a fund earns such income, it will flow through to its
shareholders and may be taxable to those shareholders who are
subject to the alternative minimum tax.
Because interest on municipal bonds and notes is tax-exempt for
federal income tax purposes, any interest on borrowed money used
directly or indirectly to purchase fund shares is not deductible on
your federal income tax return. You should consult a tax adviser
regarding its deductibility for state and local income tax
purposes.
"Buying a dividend" creates a tax liability. This means buying
shares shortly before a net investment income or a capital gain
distribution. You pay the full pre-distribution price for the
shares, then receive a portion of your investment back as a
distribution, which is taxable.
Redemptions and exchanges subject you to a tax on any capital gain.
If you sell shares for more than their cost, the difference is a
capital gain. Your gain may be either short term (for shares held
for one year or less) or long term (for shares held for more than
one year).
<PAGE>
PAGE 30
Your Taxpayer Identification Number (TIN) is important. As with
any financial account you open, you must list your current and
correct Taxpayer Identification Number (TIN) -- either your Social
Security or Employer Identification number. The TIN must be
certified under penalties of perjury on your application when you
open an account at IDS.
If you don't provide the TIN to IDS, or the TIN you report is
incorrect, you could be subject to backup withholding of 31% of
taxable distributions and proceeds from certain sales and
exchanges. You also could also be subject to further penalties,
such as:
o a $50 penalty for each failure to supply your correct TIN
o a civil penalty of $500 if you make a false statement that
results in no backup withholding
o criminal penalties for falsifying information
You also could be subject to backup withholding because you failed
to report interest or dividends on your tax return as required.
How to determine the correct TIN
Use the Social Security or
Employer Identification
For this type of account: number of:
Individual or joint account The individual or first person
listed on the account
Custodian account of a minor The minor
(Uniform Gift/Transfer to
Minors Act)
A living trust The grantor-trustee (the person
who puts the money into the
trust)
An irrevocable trust, pension The legal entity (not the
trust or estate personal representative or
trustee, unless no legal entity
is designated in the account
title)
Sole proprietorship or The owner or partnership
partnership
Corporate The corporation
Association, club or The organization
tax-exempt organization
For details on TIN requirements, ask your financial planner or
local IDS office for federal Form W-9, "Request for Taxpayer
Identification Number and Certification."
<PAGE>
PAGE 31
Important: This information is a brief and selective summary of
certain federal tax rules that apply to each fund. Tax matters are
highly individual and complex, and you should consult a qualified
tax adviser about your personal situation.
How the funds are organized
IDS Special Tax-Exempt Series Trust, of which IDS Massachusetts
Tax-Exempt Fund, IDS Michigan Tax-Exempt Fund, IDS Minnesota Tax-
Exempt Fund, IDS New York Tax-Exempt Fund and IDS Ohio Tax-Exempt
Fund are a part, is an open-end management investment company, as
defined in the Investment Company Act of 1940. It was organized as
a Massachusetts business trust on April 7, 1986. IDS California
Tax-Exempt Trust, of which IDS California Tax-Exempt Fund is a
part, was organized as a Massachusetts business trust on April 7,
1986. The funds' headquarters are at 901 S. Marquette Ave., Suite
2810, Minneapolis, MN 55402-3268.
The trustees have considered that the use of a combined prospectus
for six funds makes each fund responsible for disclosure contained
in the prospectus regardless of the particular fund to which it
pertains and have concluded that the cost savings available to
shareholders support the use of a combined prospectus.
Shares
IDS Special Tax-Exempt Series Trust currently is composed of six
funds and IDS California Tax-Exempt Trust currently is composed of
one fund. Each fund issues its own shares of capital stock. Each
fund is owned by its shareholders. All shares issued by each fund
are of the same class -- capital stock. Par value is 1 cent per
share. Both full and fractional shares can be issued.
The shares of each fund represent an interest in that fund's assets
only (and profits or losses), and, in the event of liquidation,
each share of a fund would have the same rights to dividends and
assets as every other share of that fund.
The trustees may from time to time issue other funds of the Series
Trust, the assets and liabilities of which will likewise be
separate and distinct from any other fund.
The funds no longer issue stock certificates.
Voting rights
As a shareholder, you have voting rights over the fund's management
and fundamental policies. You are entitled to one vote for each
share you own.
Shareholder meetings
The funds do not hold annual shareholder meetings. However, the
directors may call meetings at their discretion, or on demand by
holders of 10% or more of the outstanding shares, to elect or
remove directors.
<PAGE>
PAGE 32
Trustees and officers
Shareholders elect the trustees who oversee the operations of the
fund and choose its officers. Its officers are responsible for
day-to-day business decisions based on policies set by the
trustees. The trustees have named an executive committee that has
authority to act on its behalf between meetings. The trustees also
serve on the boards of all of the other funds in the IDS MUTUAL
FUND GROUP, except for Mr. Dudley, who is a director of all
publicly offered funds.
Trustees and officers of the funds
President and interested trustee
William R. Pearce
President of all funds in the IDS MUTUAL FUND GROUP.
Independent trustees
Lynne V. Cheney
Distinguished fellow, American Enterprise Institute for Public
Policy Research.
Robert F. Froehlke
Former president of all funds in the IDS MUTUAL FUND GROUP.
Donald M. Kendall
Former chairman and chief executive officer, PepsiCo, Inc.
Melvin R. Laird
Senior counsellor for national and international affairs, The
Reader's Digest Association, Inc.
Lewis W. Lehr
Former chairman and chief executive officer, Minnesota Mining and
Manufacturing Company (3M).
Edson W. Spencer
Former chairman and chief executive officer, Honeywell, Inc.
Wheelock Whitney
Chairman, Whitney Management Company.
Interested trustee who is a partner in a law firm that has
represented an IDS subsidiary
Anne P. Jones
Partner, law firm of Sutherland, Asbill & Brennan.
Interested trustees who are officers and/or employees of IDS
William H. Dudley
Executive vice president, IDS.
David R. Hubers
President and chief executive officer, IDS.
<PAGE>
PAGE 33
John R. Thomas
Senior vice president, IDS.
Other officer
Leslie L. Ogg
Vice president of all funds in the IDS MUTUAL FUND GROUP and
general counsel and treasurer of the publicly offered funds.
Refer to the SAI for the trustees' and officers' biographies.
Investment manager and transfer agent
The funds pay IDS for managing their portfolios, providing
administrative services and serving as transfer agent (handling
shareholder accounts).
Under its Investment Management and Services Agreement, IDS
determines which securities will be purchased, held or sold
(subject to the direction and control of each fund's trustees).
For these services each fund pays IDS a two-part fee.
The first part is based on the combined average daily net assets of
all funds in the IDS MUTUAL FUND GROUP, as follows:
Net assets of
IDS MUTUAL Annual
FUND GROUP* fee
First $5 billion 0.46%
Each additional Decreasing
$5 billion percentages
More than $50 billion 0.32%
*Includes all funds except the money market funds.
The second part is calculated separately for each fund and is equal
to 0.13% of each fund's average daily net assets during the fiscal
year.
For the fiscal year ended June 30, 1994, each fund paid IDS total
investment management fees of 0.53% of its average daily net
assets. Under the Agreement, each fund also pays taxes, brokerage
commissions and nonadvisory expenses.
In addition, under a separate Transfer Agency Agreement, IDS
maintains shareholder accounts and records. Each fund pays IDS an
annual fee of $15.50 per shareholder account for this service.
Distributor
The funds sell shares through IDS Financial Services Inc., a wholly
owned subsidiary of IDS, under a Distribution Agreement. Financial
planners representing IDS Financial Services Inc. provide
information to investors about individual investment programs, the
<PAGE>
PAGE 34
funds and their operations, new account applications, exchange and
redemption requests. The cost of these services is paid partially
by the funds' sales charge.
Portions of sales charges may be paid to securities dealers who
have sold the funds' shares, or to banks and other financial
institutions. The proceeds paid to others range from 0.8% to 4% of
each fund's offering price depending on the monthly sales volume.
To help defray costs not covered by sales charges, including costs
for marketing, sales administration, training, overhead, direct
marketing programs, advertising and related functions, each fund
pays IDS a 12b-1 fee. This fee is paid under a Plan and
Supplemental Agreement of Distribution that follows the terms of
Rule 12b-1 of the Investment Company Act of 1940 (and a Securities
and Exchange Commission order). Under this Agreement, each fund
pays IDS $6 per shareholder account per year.
Total 12b-1 fees paid were 0.02% of average daily net assets for
California, 0.03% for Massachusetts, 0.02% for Michigan, 0.02% for
Minnesota, 0.02% for New York and 0.02% for Ohio Fund for the
fiscal year ended June 30, 1994. These fees will not cover all of
the costs incurred by IDS.
Total management and distribution fees and expenses paid by each
fund amounted to 0.61% of average daily net assets for California,
0.69% for Massachusetts, 0.65% for Michigan, 0.66% for Minnesota,
0.65% for New York and 0.66% for Ohio Fund for the fiscal year
ended June 30, 1994.
Total fees and expenses (excluding taxes and brokerage commissions)
cannot exceed the most restrictive applicable state expense
limitation.
About IDS
General information
The IDS family of companies offers not only mutual funds but also
insurance, annuities, investment certificates and a broad range of
financial management services.
Besides managing investments for all publicly offered funds in the
IDS MUTUAL FUND GROUP, IDS also manages investments for itself and
its subsidiaries, IDS Certificate Company and IDS Life Insurance
Company. Total assets under management on June 30, 1994 were more
than $100 billion.
IDS Financial Services Inc. serves individuals and businesses
through its nationwide network of more than 175 offices and more
than 7800 planners.
Other IDS subsidiaries provide investment management and related
services for pension, profit sharing, employee savings and
endowment funds of businesses and institutions.
<PAGE>
PAGE 35
IDS is located at IDS Tower 10, Minneapolis, MN 55440-0010. It is
a wholly owned subsidiary of American Express Company, a financial
services company with headquarters at American Express Tower, World
Financial Center, New York, NY 10285. The fund may pay brokerage
commissions to broker-dealer affiliates of American Express and
IDS.
<PAGE>
PAGE 36
Appendix A
Tax-exempt income vs. taxable income
1994 California Tax-Exempt and Taxable Equivalent Yield Calculation
These tables will help you determine your combined federal and
state taxable yields equivalents for given rates of tax-exempt
income.
STEP 1: CALCULATING YOUR MARGINAL TAX RATES.
Using your Taxable Income and Adjusted Gross Income figures as
guides you can locate your Marginal Tax Rate in the table below.
First locate your Taxable Income in a filing status and income
range in the left-hand column. Then, locate your Adjusted Gross
Income at the top of the chart. At the point where your Taxable
Income line meets your Adjusted Gross Income column the percentage
indicated is an approximation of your Marginal Tax Rate. For
example: Let's assume you are married filing jointly, your
taxable income is $138,000 and your adjusted gross income is
$175,000.
Under Taxable Income married filing jointly status, $138,000 is in
the $91,850-$140,000 range. Under Adjusted Gross Income, $175,000
is in the $167,700 to $290,200 column. The Taxable
Income line and Adjusted Gross Income column meet at 38.26 percent.
This is the rate you'll use in Step 2.
<TABLE>
<CAPTION>
ADJUSTED GROSS INCOME*
________________________________________________________
TAXABLE INCOME** $ 0 $ 111,800 $ 167,700 OVER
to to to
$111,800(1) $167,700(2) $290,200(3) $290,200(2)
<S> <C> <C> <C> <C>
Married Filing Jointly
$ 0 - $ 9,332 15.85%
9,332 - 22,118 16.70
22,118 - 34,906 18.40
34,906 - 38,000 20.10
38,000 - 48,456 32.32
48,456 - 61,240 33.76
61,240 - 91,850 34.70
91,850 - 140,000 37.42 38.26% 38.26%
140,000 - 212,380 41.95 42.93 44.21
212,380 - 250,000 42.40 44.64 43.37%
250,000 - 424,760 45.64 48.11*** 46.71
424,760 + 46.24 47.30
<PAGE>
PAGE 37
$ 0 $ 111,800 OVER
to to
$111,800(1) $234,300(3) $234,300(2)
Single
$ 0 - $ 4,666 15.85%
4,666 - 11,059 16.70
11,059 - 17,453 18.40
17,453 - 22,750 20.10
22,750 - 24,228 32.32
24,228 - 30,620 33.76
30,620 - 55,100 34.70
55,100 - 106,190 37.42 38.81%
106,190 - 115,000 37.90 39.28
115,000 - 212,380 42.40 44.01
212,380 - 250,000 43.04 44.63 44.00
250,000 + 46.24 47.30
*Gross income with certain adjustments before taking itemized deductions and personal exemptions.
**Amount subject to federal income tax after itemized deduction and personal exemptions.
***This rate is applicable only in the limited case where your adjusted gross income is less than
$290,200 and your taxable income exceeds $250,000.
(1) No Phase-out -- Assumes no phase-out of itemized deductions or personal exemptions.
(2) Itemized Deductions Phase-out -- Assumes a single taxpayer has one personal exemption and joint taxpayers have two
personal exemptions.
(3) Itemized Deductions and Personal Exemption Phase-outs -- Assumes a single taxpayer has one personal exemption, joint
taxpayers have two personal exemptions and itemized deductions continue to phase-out.
</TABLE>
Federal taxes are not deductible on the California state tax
return.
The combined federal/California tax brackets are based on state tax
rates in effect on Dec. 31, 1993. These rates may change if
California tax rates change in 1994. If state tax rates change
equivalent rates may be higher than those shown.
If these assumptions do not apply to you, it will be necessary to
construct your own personalized tax equivalency table.
<PAGE>
PAGE 38
STEP 2: DETERMINING YOUR COMBINED FEDERAL AND CALIFORNIA STATE
TAXABLE YIELD EQUIVALENTS.
Using 38.26 percent, you may determine that a tax-exempt yield of 4
percent is equivalent to earning a taxable 6.48 percent yield.
<TABLE>
<CAPTION>
For these Tax-Exempt Rates:
___________________________________________________________________________
4.00% 4.50% 5.00% 5.50% 6.00% 6.50% 7.00% 7.50%
___________________________________________________________________________
Marginal Tax Rates Equal the Taxable Rates shown below:
________________________________________________________________________________________________________
<C> <C> <C> <C> <C> <C> <C> <C> <C>
15.85% 4.75 5.35 5.94 6.54 7.13 7.72 8.32 8.91
16.70% 4.80 5.40 6.00 6.60 7.20 7.80 8.40 9.00
18.40% 4.90 5.51 6.13 6.74 7.35 7.97 8.58 9.19
20.10% 5.01 5.63 6.26 6.88 7.51 8.14 8.76 9.39
32.32% 5.91 6.65 7.39 8.13 8.87 9.60 10.34 11.08
33.76% 6.04 6.79 7.55 8.30 9.06 9.81 10.57 11.32
34.70% 6.13 6.89 7.66 8.42 9.19 9.95 10.72 11.49
37.42% 6.39 7.19 7.99 8.79 9.59 10.39 11.19 11.98
37.90% 6.44 7.25 8.05 8.86 9.66 10.47 11.27 12.08
38.26% 6.48 7.29 8.10 8.91 9.72 10.53 11.34 12.15
38.74% 6.53 7.35 8.16 8.98 9.79 10.61 11.43 12.24
38.81% 6.54 7.35 8.17 8.99 9.81 10.62 11.44 12.26
39.28% 6.59 7.41 8.23 9.06 9.88 10.70 11.53 12.35
41.95% 6.89 7.75 8.61 9.47 10.34 11.20 12.06 12.92
42.40% 6.94 7.81 8.68 9.55 10.42 11.28 12.15 13.02
42.93% 7.01 7.89 8.76 9.64 10.51 11.39 12.27 13.14
43.04% 7.02 7.90 8.78 9.66 10.53 11.41 12.29 13.17
43.37% 7.06 7.95 8.83 9.71 10.60 11.48 12.36 13.24
44.00% 7.14 8.04 8.93 9.82 10.71 11.61 12.50 13.39
44.01% 7.14 8.04 8.93 9.82 10.71 11.61 12.50 13.39
44.21% 7.17 8.07 8.96 9.86 10.75 11.65 12.55 13.44
44.63% 7.22 8.13 9.03 9.93 10.84 11.74 12.64 13.55
44.64% 7.23 8.13 9.03 9.93 10.84 11.74 12.64 13.55
45.64% 7.36 8.28 9.20 10.12 11.04 11.96 12.88 13.80
46.24% 7.44 8.37 9.30 10.23 11.16 12.09 13.02 13.95
46.71% 7.51 8.44 9.38 10.32 11.26 12.20 13.14 14.07
47.30% 7.59 8.54 9.49 10.44 11.39 12.33 13.28 14.23
47.99% 7.69 8.65 9.61 10.57 11.54 12.50 13.46 14.42
48.11% 7.71 8.67 9.64 10.60 11.56 12.53 13.49 14.45
48.68% 7.71 8.67 9.64 10.60 11.56 12.53 13.49 14.45
________________________________________________________________________________________________________
</TABLE>
<PAGE>
PAGE 39
Appendix A
1994 Massachusetts Tax-Exempt and Taxable Equivalent Yield
Calculation
These tables will help you determine your combined federal and
state taxable yields equivalents for given rates of tax-exempt
income.
STEP 1: CALCULATING YOUR MARGINAL TAX RATES.
Using your Taxable Income and Adjusted Gross Income figures as
guides you can locate your Marginal Tax Rate in the table below.
First locate your Taxable Income in a filing status and income
range in the left-hand column. Then, locate your Adjusted Gross
Income at the top of the chart. At the point where your Taxable
Income line meets your Adjusted Gross Income column the percentage
indicated is an approximation of your Marginal Tax Rate. For
example: Let's assume you are married filing jointly, your
taxable income is $138,000 and your adjusted gross income is
$175,000.
Under Taxable Income married filing jointly status, $138,000 is in
the $91,850-$140,000 range. Under Adjusted Gross Income, $175,000
is in the $167,700 to $290,200 column. The Taxable Income line and
Adjusted Gross Income column meet at 40.10 percent. This is the
rate you'll use in Step 2.
<TABLE>
<CAPTION>
ADJUSTED GROSS INCOME*
________________________________________________________
TAXABLE INCOME** $ 0 $ 111,800 $ 167,700 OVER
to to to
$111,800(1) $167,700(2) $290,200(3) $290,200(2)
___________________________________________________________________________________________
<S> <C> <C> <C> <C>
Married Filing Jointly
$ 12,000 - $ 38,000 25.20%
38,000 - 91,850 36.64 36.64%
91,850 - 140,000 39.28 40.10 40.10%
140,000 - 250,000 43.68 44.63 45.87
250,000 + 46.85 49.26*** 47.89%
___________________________________________________________________________________________
$ 0 $ 111,800 OVER
to to
$111,800(1) $234,300(3) $234,300(2)
___________________________________________________________________________________________
Single
$ 8,000 - $ 22,750 25.20%
22,750 - 55,100 36.64
55,100 - 115,000 39.28 40.63%
115,000 - 250,000 43.68 45.25 44.63%
250,000 + 46.85 47.89
__________________________________________________________________________________________
*Gross income with certain adjustments before taking itemized deductions and personal exemptions.
**Amount subject to federal income tax after itemized deduction and personal exemptions.
***This rate is applicable only in the limited case where your adjusted gross income is less than
$290,200 and your taxable income exceeds $250,000.
(1) No Phase-out -- Assumes no phase-out of itemized deductions or personal exemptions.
(2) Itemized Deductions Phase-out -- Assumes a single taxpayer has one personal exemption and joint
taxpayers have two personal exemptions.
(3) Itemized Deductions and Personal Exemption Phase-outs -- Assumes a single taxpayer has one personal
exemption, joint taxpayers have two personal exemptions and itemized deductions continue to phase-out.
</TABLE>
<PAGE>
PAGE 40
Federal taxes are not deductible on the Massachusetts state tax
return.
The combined federal/Massachusetts tax brackets are based on state
tax rates in effect on Jan. 1, 1994. These rates may change if
Massachusetts tax rates change in 1994. If state tax rates change
equivalent rates may be higher than those shown.
If these assumptions do not apply to you, it will be necessary to
construct your own personalized tax equivalency table.
STEP 2: DETERMINING YOUR COMBINED FEDERAL AND MASSACHUSETTS STATE
TAXABLE YIELD EQUIVALENTS.
Using 40.10 percent, you may determine that a tax-exempt yield of 4
percent is equivalent to earning a taxable 6.68 percent yield.
<TABLE>
<CAPTION>
For these Tax-Exempt Rates:
___________________________________________________________________________
4.00% 4.50% 5.00% 5.50% 6.00% 6.50% 7.00% 7.50%
___________________________________________________________________________
Marginal Tax Rates Equal the Taxable Rates shown below:
________________________________________________________________________________________________________
<C> <C> <C> <C> <C> <C> <C> <C> <C>
25.20% 5.35 6.02 6.68 7.35 8.02 8.69 9.36 10.03
36.64% 6.31 7.10 7.89 8.68 9.47 10.26 11.05 11.84
39.28% 6.59 7.41 8.23 9.06 9.88 10.70 11.53 12.35
40.10% 6.68 7.51 8.35 9.18 10.02 10.85 11.69 12.52
40.63% 6.74 7.58 8.42 9.26 10.11 10.95 11.79 12.63
43.68% 7.10 7.99 8.88 9.77 10.65 11.54 12.43 13.32
44.63% 7.22 8.13 9.03 9.93 10.84 11.74 12.64 13.55
45.25% 7.31 8.22 9.13 10.05 10.96 11.87 12.79 13.70
45.87% 7.39 8.31 9.24 10.16 11.08 12.01 12.93 13.86
46.85% 7.53 8.47 9.41 10.35 11.29 12.23 13.17 14.11
47.89% 7.68 8.64 9.60 10.55 11.51 12.47 13.43 14.39
48.58% 7.78 8.75 9.72 10.70 11.67 12.64 13.61 14.59
49.26% 7.88 8.87 9.85 10.84 11.82 12.81 13.80 14.78
________________________________________________________________________________________________________
</TABLE>
<PAGE>
PAGE 41
Appendix A
1994 Michigan Tax-Exempt and Taxable Equivalent Yield Calculation
These tables will help you determine your combined federal and
state taxable yields equivalents for given rates of tax-exempt
income.
STEP 1: CALCULATING YOUR MARGINAL TAX RATES.
Using your Taxable Income and Adjusted Gross Income figures as
guides you can locate your Marginal Tax Rate in the table below.
First locate your Taxable Income in a filing status and income
range in the left-hand column. Then, locate your Adjusted Gross
Income at the top of the chart. At the point where your Taxable
Income line meets your Adjusted Gross Income column the percentage
indicated is an approximation of your Marginal Tax Rate. For
example: Let's assume you are married filing jointly, your
taxable income is $138,000 and your adjusted gross income is
$175,000.
Under Taxable Income married filing jointly status, $138,000 is in
the $91,850-$140,000 range. Under Adjusted Gross Income, $175,000
is in the $167,700 to $290,200 column. The Taxable Income line and
Adjusted Gross Income column meet at 34.93 percent. This is the
rate you'll use in Step 2.
<TABLE>
<CAPTION>
ADJUSTED GROSS INCOME*
________________________________________________________
TAXABLE INCOME** $ 0 $ 111,800 $ 167,700 OVER
to to to
$111,800(1) $167,700(2) $290,200(3) $290,200(2)
___________________________________________________________________________________________
<S> <C> <C> <C> <C>
Married Filing Jointly
$ 0 - $ 38,000 18.74%
38,000 - 91,850 31.17 31.17%
91,850 - 140,000 34.04 34.93 34.93%
140,000 - 250,000 38.82 39.85 41.20
250,000 + 42.26 44.88*** 43.39%
___________________________________________________________________________________________
$ 0 $ 111,800 OVER
to to
$111,800(1) $234,300(3) $234,300(2)
___________________________________________________________________________________________
Single
$ 0 - $ 22,750 18.74%
22,750 - 55,100 31.17
55,100 - 115,000 34.04 35.51%
115,000 - 250,000 38.82 40.52 39.85%
250,000 + 42.26 43.39
___________________________________________________________________________________________
*Gross income with certain adjustments before taking itemized deductions and personal exemptions.
**Amount subject to federal income tax after itemized deduction and personal exemptions.
***This rate is applicable only in the limited case where your adjusted gross income is less than $290,200
and your taxable income exceeds $250,000.
(1) No Phase-out -- Assumes no phase-out of itemized deductions or personal exemptions.
(2) Itemized Deductions Phase-out -- Assumes a single taxpayer has one personal exemption and joint
taxpayers have two personal exemptions.
(3) Itemized Deductions and Personal Exemption Phase-outs -- Assumes a single taxpayer has one personal
exemption, joint taxpayers have two personal exemptions and itemized deductions continue to phase-out.
</TABLE>
<PAGE>
PAGE 42
Federal taxes are not deductible on the Michigan state tax return.
The combined federal/Michigan tax brackets are based on state tax
rates in effect on May 1, 1994. These rates may change if Michigan
tax rates change in 1994. If state tax rates change equivalent
rates may be higher than those shown.
If these assumptions do not apply to you, it will be necessary to
construct your own personalized tax equivalency table.
STEP 2: DETERMINING YOUR COMBINED FEDERAL AND MICHIGAN STATE
TAXABLE YIELD EQUIVALENTS.
Using 34.93 percent, you may determine that a tax-exempt yield of 4
percent is equivalent to earning a taxable 6.15 percent yield.
<TABLE>
<CAPTION>
For these Tax-Exempt Rates:
___________________________________________________________________________
4.00% 4.50% 5.00% 5.50% 6.00% 6.50% 7.00% 7.50%
___________________________________________________________________________
Marginal Tax Rates Equal the Taxable Rates shown below:
________________________________________________________________________________________________________
<C> <C> <C> <C> <C> <C> <C> <C> <C>
18.74% 4.92 5.54 6.15 6.77 7.38 8.00 8.61 9.23
31.17% 5.81 6.54 7.26 7.99 8.72 9.44 10.17 10.90
34.04% 6.06 6.82 7.58 8.34 9.10 9.85 10.61 11.37
34.93% 6.15 6.92 7.68 8.45 9.22 9.99 10.76 11.53
35.51% 6.20 6.98 7.75 8.53 9.30 10.08 10.85 11.63
38.82% 6.54 7.36 8.17 8.99 9.81 10.62 11.44 12.26
39.85% 6.65 7.48 8.31 9.14 9.98 10.81 11.64 12.47
40.52% 6.72 7.57 8.41 9.25 10.09 10.93 11.77 12.61
41.20% 6.80 7.65 8.50 9.35 10.20 11.05 11.90 12.76
42.26% 6.93 7.79 8.66 9.53 10.39 11.26 12.12 12.99
43.39% 7.07 7.95 8.83 9.72 10.60 11.48 12.37 13.25
44.14% 7.16 8.06 8.95 9.85 10.74 11.64 12.53 13.43
44.88% 7.26 8.16 9.07 9.98 10.89 11.79 12.70 13.61
________________________________________________________________________________________________________
</TABLE>
<PAGE>
PAGE 43
Appendix A
1994 Minnesota Tax-Exempt and Taxable Equivalent Yield Calculation
These tables will help you determine your combined federal and
state taxable yields equivalents for given rates of tax-exempt
income.
STEP 1: CALCULATING YOUR MARGINAL TAX RATES.
Using your Taxable Income and Adjusted Gross Income figures as
guides you can locate your Marginal Tax Rate in the table below.
First locate your Taxable Income in a filing status and income
range in the left-hand column. Then, locate your Adjusted Gross
Income at the top of the chart. At the point where your Taxable
Income line meets your Adjusted Gross Income column the percentage
indicated is an approximation of your Marginal Tax Rate. For
example: Let's assume you are married filing jointly, your
taxable income is $138,000 and your adjusted gross income is
$175,000.
Under Taxable Income married filing jointly status, $138,000 is in
the $91,850-$140,000 range. Under Adjusted Gross Income, $175,000
is in the $167,700 to $290,200 column. The Taxable Income line and
Adjusted Gross Income column meet at 37.72 percent. This is the
rate you'll use in Step 2.
<TABLE>
<CAPTION>
ADJUSTED GROSS INCOME*
________________________________________________________
TAXABLE INCOME** $ 0 $ 111,800 $ 167,700 OVER
to to to
$111,800(1) $167,700(2) $290,200(3) $290,200(2)
___________________________________________________________________________________________
<S> <C> <C> <C> <C>
Married Filing Jointly
$ 0 - $ 22,260 20.10%
22,260 - 38,000 21.80
38,000 - 88,460 33.76 33.76%
88,460 - 91,850 34.12 34.12 34.12%
91,850 - 140,000 36.87 37.72 37.72
140,000 - 250,000 41.44 42.43 43.72
250,000 + 44.73 47.24*** 45.82%
___________________________________________________________________________________________
$ 0 $ 111,800 OVER
to to
$111,800(1) $234,300(3) $234,300(2)
Single
$ 0 - $ 15,230 20.10%
15,230 - 22,750 21.80
22,750 - 50,030 33.76
50,030 - 55,100 34.12
55,100 - 115,000 36.87 38.27%
115,000 - 250,000 41.44 43.07 42.43%
250,000 + 44.73 45.82
*Gross income with certain adjustments before taking itemized deductions and personal exemptions.
**Amount subject to federal income tax after itemized deduction and personal exemptions.
***This rate is applicable only in the limited case where your adjusted gross income is less than
$290,200 and your taxable income exceeds $250,000.
(1) No Phase-out -- Assumes no phase-out of itemized deductions or personal exemptions.
(2) Itemized Deductions Phase-out -- Assumes a single taxpayer has one personal exemption and joint
taxpayers have two personal exemptions.
(3) Itemized Deductions and Personal Exemption Phase-outs -- Assumes a single taxpayer has one personal
exemption, joint taxpayers have two personal exemptions and itemized deductions continue to phase-out.
</TABLE>
<PAGE>
PAGE 44
Federal taxes are not deductible on the Minnesota state tax return.
The combined federal/Minnesota tax brackets are based on state tax
rates in effect on Jan. 1, 1994. These rates may change if
Minnesota tax rates change in 1994. If state tax rates change
equivalent rates may be higher than those shown.
If these assumptions do not apply to you, it will be necessary to
construct your own personalized tax equivalency table.
STEP 2: DETERMINING YOUR COMBINED FEDERAL AND MINNESOTA STATE
TAXABLE YIELD EQUIVALENTS.
Using 37.72 percent, you may determine that a tax-exempt yield of 4
percent is equivalent to earning a taxable 6.42 percent yield.
<TABLE>
<CAPTION>
For these Tax-Exempt Rates:
___________________________________________________________________________
4.00% 4.50% 5.00% 5.50% 6.00% 6.50% 7.00% 7.50%
___________________________________________________________________________
Marginal Tax Rates Equal the Taxable Rates shown below:
________________________________________________________________________________________________________
<C> <C> <C> <C> <C> <C> <C> <C> <C>
20.10% 5.01 5.63 6.26 6.88 7.51 8.14 8.76 9.39
21.80% 5.12 5.75 6.39 7.03 7.67 8.31 8.95 9.59
33.76% 6.04 6.79 7.55 8.30 9.06 9.81 10.57 11.32
34.12% 6.07 6.83 7.59 8.35 9.11 9.87 10.63 11.38
36.87% 6.34 7.13 7.92 8.71 9.50 10.30 11.09 11.88
37.72% 6.42 7.23 8.03 8.83 9.63 10.44 11.24 12.04
38.27% 6.48 7.29 8.10 8.91 9.72 10.53 11.34 12.15
41.44% 6.83 7.68 8.54 9.39 10.25 11.10 11.95 12.81
42.43% 6.95 7.82 8.69 9.55 10.42 11.29 12.16 13.03
43.07% 7.03 7.90 8.78 9.66 10.54 11.42 12.30 13.17
43.72% 7.11 8.00 8.88 9.77 10.66 11.55 12.44 13.33
44.73% 7.24 8.14 9.05 9.95 10.86 11.76 12.67 13.57
45.82% 7.38 8.31 9.23 10.15 11.07 12.00 12.92 13.84
46.53% 7.48 8.42 9.35 10.29 11.22 12.16 13.09 14.03
47.24% 7.58 8.53 9.48 10.42 11.37 12.32 13.27 14.22
________________________________________________________________________________________________________
</TABLE>
<PAGE>
PAGE 45
Appendix A
1994 New York State Tax-Exempt and Taxable Equivalent Yield
Calculation
These tables will help you determine your combined federal and
state taxable yields equivalents for given rates of tax-exempt
income.
STEP 1: CALCULATING YOUR MARGINAL TAX RATES.
Using your Taxable Income and Adjusted Gross Income figures as
guides you can locate your Marginal Tax Rate in the table below.
First locate your Taxable Income in a filing status and income
range in the left-hand column. Then, locate your Adjusted Gross
Income at the top of the chart. At the point where your Taxable
Income line meets your Adjusted Gross Income column the percentage
indicated is an approximation of your Marginal Tax Rate. For
example: Let's assume you are married filing jointly, your
taxable income is $138,000 and your adjusted gross income is
$175,000.
Under Taxable Income married filing jointly status, $138,000 is in
the $91,850-$140,000 range. Under Adjusted Gross Income, $175,000
is in the $167,700 to $290,200 column. The Taxable Income line and
Adjusted Gross Income column meet at 38.22 percent. This is the
rate you'll use in Step 2.
<TABLE>
<CAPTION>
ADJUSTED GROSS INCOME*
______________________________________________________________________
TAXABLE INCOME** $ 0 $ 111,800 $ 150,000 $ 167,700 OVER
to to to to
$111,800(1) $150,000(2) $167,700(3) $290,200(4) $290,200(3)
_________________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C>
Married Filing Jointly
$ 0 - $ 13,000 18.87%
13,000 - 19,000 19.72
19,000 - 25,000 20.57
25,000 - 38,000 21.45
38,000 - 91,850 33.47
91,850 - 140,000 36.24 38.08% 37.10% 38.22%
140,000 - 250,000 40.86 42.76 41.86 43.16
250,000 + 44.19 46.72*** 47.55%
_________________________________________________________________________________________________________
$ 0 $ 111,800 $ 150,000 OVER
to to to
$111,800(1) $150,000(5) $234,300(4) $234,300(3)
_________________________________________________________________________________________________________
Single
$ 0 - $ 6,500 18.87%
6,500 - 9,500 19.72
9,500 - 12,500 20.57
12,500 - 22,750 21.45
22,750 - 55,100 33.47
55,100 - 115,000 36.24 37.59%
115,000 - 250,000 40.86 42.31 42.51% 42.96%
250,000 + 44.19 46.42
_________________________________________________________________________________________________________
*Gross income with certain adjustments before taking itemized deductions and personal exemptions.
**Amount subject to federal income tax after itemized deduction and personal exemptions.
***This rate is applicable only in the limited case where your adjusted gross income is less than $290,200
and your taxable income exceeds $250,000.
<PAGE>
PAGE 46
(1) No Phase-out or recapture of personal income tax -- Assumes no phase-out of itemized deductions or personal
exemptions and does not reflect the state recapture of personal income tax.
(2) Itemized Deductions Phase-out and Recapture of Personal Income Tax -- Assumes a single taxpayer has one personal
exemption, joint taxpayers have two personal exemptions and reflects the state AGI recapture of personal income tax
beginning at $100,000 ending at $150,000.
(3) Itemized Deductions Phase-out -- Assumes a single taxpayer has one personal exemption and joint taxpayers have two
personal exemptions.
(4) Deductions and Personal Exemption Phase-outs -- Assumes a single taxpayer has one personal exemption, joint taxpayers
have two personal exemptions and itemized deductions continue to phase-out.
(5) Deductions and Personal Exemption Phase-outs and Recapture of Personal Income Tax -- Assumes a single taxpayer has one
personal exemption, joint taxpayers have two personal exemptions, itemized deductions continue to phase-out and reflects the
state AGI recapture of personal income tax beginning at $100,000 ending at $150,000.
</TABLE>
Federal taxes are not deductible on the New York state tax return.
The combined federal/New York state tax brackets are based on state
tax rates in effect on Jan. 1, 1994. These rates may change if New
York state tax rates change in 1994. If state tax rates change
equivalent rates may be higher than those shown.
This table does not refelect the state itemized deduction
adjustment.
If these assumptions do not apply to you, it will be necessary to
construct your own personalized tax equivalency table.
STEP 2: DETERMINING YOUR COMBINED FEDERAL AND NEW YORK STATE
TAXABLE YIELD EQUIVALENTS.
Using 38.22 percent, you may determine that a tax-exempt yield of 4
percent is equivalent to earning a taxable 6.47 percent yield.
<TABLE>
<CAPTION>
For these Tax-Exempt Rates:
4.00% 4.50% 5.00% 5.50% 6.00% 6.50% 7.00% 7.50%
Marginal Tax Rates Equal the Taxable Rates shown below:
<C> <C> <C> <C> <C> <C> <C> <C> <C>
18.87% 4.93 5.55 6.16 6.78 7.40 8.01 8.63 9.24
19.72% 4.98 5.61 6.23 6.85 7.47 8.10 8.72 9.34
20.57% 5.04 5.67 6.29 6.92 7.55 8.18 8.81 9.44
21.45% 5.09 5.73 6.37 7.00 7.64 8.27 8.91 9.55
31.93% 5.88 6.61 7.35 8.08 8.81 9.55 10.28 11.02
32.54% 5.93 6.67 7.41 8.15 8.89 9.64 10.38 11.12
33.15% 5.98 6.73 7.48 8.23 8.98 9.72 10.47 11.22
33.47% 6.01 6.76 7.52 8.27 9.02 9.77 10.52 11.27
36.24% 6.27 7.06 7.84 8.63 9.41 10.19 10.98 11.76
37.10% 6.36 7.15 7.95 8.74 9.54 10.33 11.13 11.92
37.59% 6.41 7.21 8.01 8.81 9.61 10.41 11.22 12.02
37.66% 6.42 7.22 8.02 8.82 9.62 10.43 11.23 12.03
38.08% 6.46 7.27 8.07 8.88 9.69 10.50 11.30 12.11
38.14% 6.47 7.27 8.08 8.89 9.70 10.51 11.32 12.12
38.22% 6.47 7.28 8.09 8.90 9.71 10.52 11.33 12.14
39.18% 6.58 7.40 8.22 9.04 9.87 10.69 11.51 12.33
40.86% 6.76 7.61 8.45 9.30 10.15 10.99 11.84 12.68
41.86% 6.88 7.74 8.60 9.46 10.32 11.18 12.04 12.90
42.31% 6.93 7.80 8.67 9.53 10.40 11.27 12.13 13.00
42.51% 6.96 7.83 8.70 9.57 10.44 11.31 12.18 13.05
42.76% 6.99 7.86 8.74 9.61 10.48 11.36 12.23 13.10
42.96% 7.01 7.89 8.77 9.64 10.52 11.40 12.27 13.15
43.16% 7.04 7.92 8.80 9.68 10.56 11.44 12.32 13.19
44.04% 7.15 8.04 8.93 9.83 10.72 11.62 12.51 13.40
44.19% 7.17 8.06 8.96 9.85 10.75 11.65 12.54 13.44
45.28% 7.31 8.22 9.14 10.05 10.96 11.88 12.79 13.71
45.71% 7.37 8.29 9.21 10.13 11.05 11.97 12.89 13.81
46.00% 7.41 8.33 9.26 10.19 11.11 12.04 12.96 13.89
46.13% 7.43 8.35 9.28 10.21 11.14 12.07 12.99 13.92
46.42% 7.47 8.40 9.33 10.27 11.20 12.13 13.06 14.00
46.72% 7.51 8.45 9.38 10.32 11.26 12.20 13.14 14.08
47.55% 7.63 8.58 9.53 10.49 11.44 12.39 13.35 14.30
/TABLE
<PAGE>
PAGE 47
Appendix A
1994 New York State and New York City Tax-Exempt and Taxable
Equivalent Yield Calculation
These tables will help you determine your combined federal and
state taxable yields equivalents for given rates of tax-exempt
income.
STEP 1: CALCULATING YOUR MARGINAL TAX RATES.
Using your Taxable Income and Adjusted Gross Income figures as
guides you can locate your Marginal Tax Rate in the table below.
First locate your Taxable Income in a filing status and income
range in the left-hand column. Then, locate your Adjusted Gross
Income at the top of the chart. At the point where your Taxable
Income line meets your Adjusted Gross Income column the percentage
indicated is an approximation of your Marginal Tax Rate. For
example: Let's assume you are married filing jointly, your
taxable income is $138,000 and your adjusted gross income is
$175,000.
Under Taxable Income married filing jointly status, $138,000 is in
the $108,000-$140,000 range. Under Adjusted Gross Income, $175,000
is in the $167,700 to $290,200 column. The Taxable Income line and
Adjusted Gross Income column meet at 40.13 percent. This is the
rate you'll use in Step 2.
<TABLE>
<CAPTION>
ADJUSTED GROSS INCOME*
______________________________________________________________________
TAXABLE INCOME** $ 0 $ 111,800 $ 150,000 $ 167,700 OVER
to to to to
$111,800(1) $150,000(2) $167,700(3) $290,200(4) $290,200(3)
_________________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C>
Married Filing Jointly
$ 0 - $ 13,000 21.05%
13,000 - 14,400 21.90
14,400 - 19,000 22.97
19,000 - 25,000 23.82
25,000 - 27,000 24.71
27,000 - 38,000 25.19
38,000 - 45,000 36.63
45,000 - 91,850 36.64
91,850 - 108,000 39.28
108,000 - 140,000 39.32 41.11% 40.13% 40.13%
140,000 - 250,000 43.71 45.57 44.66 45.90
250,000 + 46.88 49.29*** 50.12%
_________________________________________________________________________________________________________
$ 0 $ 111,800 $ 150,000 OVER
to to to
$111,800(1) $150,000(5) $234,300(4) $234,300(3)
_________________________________________________________________________________________________________
Single
$ 0 - $ 6,500 21.05%
6,500 - 8,400 21.90
8,400 - 9,500 22.97
9,500 - 12,500 23.82
12,500 - 15,000 24.71
15,000 - 22,750 25.19
22,750 - 25,000 36.63
25,000 - 55,100 36.64
55,100 - 60,000 39.28
60,000 - 115,000 39.32 41.15%
115,000 - 250,000 43.71 45.73 45.28% 44.66%
250,000 + 46.88 47.92
_________________________________________________________________________________________________________
<PAGE>
PAGE 48
*Gross income with certain adjustments before taking itemized deductions and personal exemptions.
**Amount subject to federal income tax after itemized deduction and personal exemptions.
***This rate is applicable only in the limited case where your adjusted gross income is less than $290,200
and your taxable income exceeds $250,000.
(1) No Phase-out -- Assumes no phase-out of itemized deductions or personal exemptions.
(2) Itemized Deductions Phase-out and Recapture of Personal Income Tax -- Assumes a single taxpayer has one personal
exemption, joint taxpayers have two personal exemptions and reflects the state AGI recapture of personal income tax beginning
at $100,000 ending at $150,000.
(3) Itemized Deductions Phase-out -- Assumes a single taxpayer has one personal exemption and joint taxpayers have two
personal exemptions.
(4) Deductions and Personal Exemption Phase-outs -- Assumes a single taxpayer has one personal exemption, joint taxpayers have
two personal exemptions and itemized deductions continue to phase-out.
(5) Deductions and Personal Exemption Phase-outs and Recapture of Personal Income Tax -- Assumes a single taxpayer has one
personal exemption, joint taxpayers have two personal exemptions, itemized deductions continue to phase-out and reflects the
state AGI recapture of personal income tax beginning at $100,000 ending at $150,000.
</TABLE>
Federal taxes are not deductible on the New York state tax return.
The combined federal/New York state and city tax brackets are based
on state and city tax rates in effect on Jan. 1, 1994. These rates
may change if New York state or city tax rates change in 1994. If
state or city tax rates change equivalent rates may be higher than
those shown.
This table does not reflect the state itemized deduction
adjustment.
If these assumptions do not apply to you, it will be necessary to
construct your own personalized tax equivalency table.
<PAGE>
PAGE 49
STEP 2: DETERMINING YOUR COMBINED FEDERAL, NEW YORK STATE AND NEW
YORK CITY TAXABLE YIELD EQUIVALENTS.
Using 39.32 percent, you may determine that a tax-exempt yield of 4
percent is equivalent to earning a taxable 6.59 percent yield.
<TABLE>
<CAPTION>
For these Tax-Exempt Rates:
4.00% 4.50% 5.00% 5.50% 6.00% 6.50% 7.00% 7.50%
Marginal Tax Rates Equal the Taxable Rates shown below:
<C> <C> <C> <C> <C> <C> <C> <C> <C>
21.05% 5.07 5.70 6.33 6.97 7.60 8.23 8.87 9.50
21.90% 5.12 5.76 6.40 7.04 7.68 8.32 8.96 9.60
22.97% 5.19 5.84 6.49 7.14 7.79 8.44 9.09 9.74
23.82% 5.25 5.91 6.56 7.22 7.88 8.53 9.19 9.85
24.71% 5.31 5.98 6.64 7.31 7.97 8.63 9.30 9.96
25.19% 5.35 6.02 6.68 7.35 8.02 8.69 9.36 10.03
36.63% 6.31 7.10 7.89 8.68 9.47 10.26 11.05 11.84
36.64% 6.31 7.10 7.89 8.68 9.47 10.26 11.05 11.84
39.28% 6.59 7.41 8.23 9.06 9.88 10.70 11.53 12.35
39.32% 6.59 7.42 8.24 9.06 9.89 10.71 11.54 12.36
40.09% 6.68 7.51 8.35 9.18 10.02 10.85 11.68 12.52
40.13% 6.68 7.52 8.35 9.19 10.02 10.86 11.69 12.53
40.62% 6.74 7.58 8.42 9.26 10.10 10.95 11.79 12.63
40.67% 6.74 7.58 8.43 9.27 10.11 10.96 11.80 12.64
41.11% 6.79 7.64 8.49 9.34 10.19 11.04 11.89 12.74
41.15% 6.80 7.65 8.50 9.35 10.20 11.05 11.89 12.74
43.71% 7.11 7.99 8.88 9.77 10.66 11.55 12.44 13.32
44.66% 7.23 8.13 9.04 9.94 10.84 11.75 12.65 13.55
45.11% 7.29 8.20 9.11 10.02 10.93 11.84 12.75 13.66
45.28% 7.31 8.22 9.14 10.05 10.96 11.88 12.79 13.71
45.57% 7.35 8.27 9.19 10.10 11.02 11.94 12.86 13.78
45.73% 7.37 8.29 9.21 10.13 11.06 11.98 12.90 13.82
45.90% 7.39 8.32 9.24 10.17 11.09 12.01 12.94 13.86
46.79% 7.52 8.46 9.40 10.34 11.28 12.22 13.16 14.10
46.88% 7.53 8.47 9.41 10.35 11.30 12.24 13.18 14.12
47.92% 7.68 8.64 9.60 10.56 11.52 12.48 13.44 14.40
48.35% 7.74 8.71 9.68 10.65 11.62 12.58 13.55 14.52
48.61% 7.78 8.76 9.73 10.70 11.68 12.65 13.62 14.59
48.77% 7.81 8.78 9.76 10.74 11.71 12.69 13.66 14.64
49.03% 7.85 8.83 9.81 10.79 11.77 12.75 13.73 14.71
49.29% 7.89 8.87 9.86 10.85 11.83 12.82 13.80 14.79
50.12% 8.02 9.02 10.02 11.03 12.03 13.03 14.03 15.04
</TABLE>
<PAGE>
PAGE 50
Appendix A
1994 Ohio Tax-Exempt and Taxable Equivalent Yield Calculation
These tables will help you determine your combined federal and
state taxable yields equivalents for given rates of tax-exempt
income.
STEP 1: CALCULATING YOUR MARGINAL TAX RATES.
Using your Taxable Income and Adjusted Gross Income figures as
guides you can locate your Marginal Tax Rate in the table below.
First locate your Taxable Income in a filing status and income
range in the left-hand column. Then, locate your Adjusted Gross
Income at the top of the chart. At the point where your Taxable
Income line meets your Adjusted Gross Income column the percentage
indicated is an approximation of your Marginal Tax Rate. For
example: Let's assume you are married filing jointly, your
taxable income is $138,000 and your adjusted gross income is
$175,000.
Under Taxable Income married filing jointly status, $138,000 is in
the $100,000-$140,000 range. Under Adjusted Gross Income, $175,000
is in the $167,700 to $290,200 column. The Taxable Income line and
Adjusted Gross Income column meet at 42.74 percent. This is the
rate you'll use in Step 2.
<TABLE>
<CAPTION>
ADJUSTED GROSS INCOME*
________________________________________________________
TAXABLE INCOME** $ 0 $ 111,800 $ 167,700 OVER
to to to
$111,800(1) $167,700(2) $290,200(3) $290,200(2)
<S> <C> <C> <C> <C>
Married Filing Jointly
$ 0 - $ 5,000 15.63%
5,000 - 10,000 16.27
10,000 - 15,000 17.52
15,000 - 20,000 18.16
20,000 - 38,000 18.79
38,000 - 40,000 31.21
40,000 - 80,000 31.74 31.74%
80,000 - 91,850 32.28 32.28
91,850 - 100,000 35.10 35.10
100,000 - 140,000 35.76 36.63 42.74%
140,000 - 200,000 40.42 41.42 43.10
200,000 - 250,000 40.80 46.66*** 41.80%
250,000 + 44.13 45.23
$ 0 $ 111,800 OVER
to to
$111,800(1) $234,300(3) $234,300(2)
___________________________________________________________________________________________
Single
$ 0 - $ 5,000 15.63%
5,000 - 10,000 16.27
10,000 - 15,000 17.52
15,000 - 20,000 18.16
20,200 - 22,750 18.79
22,750 - 40,000 31.21
40,000 - 55,100 31.74
55,100 - 80,000 34.59
80,000 - 100,000 35.10
100,000 - 115,000 35.76 37.19%
115,000 - 200,000 40.42 42.08 41.42%
200,000 - 250,000 40.80 42.45 41.80
250,000 + 44.13 45.23
<PAGE>
PAGE 51
*Gross income with certain adjustments before taking itemized deductions and personal exemptions.
**Amount subject to federal income tax after itemized deduction and personal exemptions.
***This rate is applicable only in the limited case where your adjusted gross income is less than $290,200 and your taxable
income exceeds $250,000.
(1) No Phase-out -- Assumes no phase-out of itemized deductions or personal exemptions.
(2) Itemized Deductions Phase-out -- Assumes a single taxpayer has one personal exemption and joint taxpayers have two
personal exemptions.
(3) Itemized Deductions and Personal Exemption Phase-outs -- Assumes a single taxpayer has one personal exemption, joint
taxpayers have two personal exemptions and the itemized deductions continue to phase-out.
</TABLE>
Federal taxes are not deductible on the Ohio state tax return.
The combined federal/Ohio tax brackets are based on state tax rates
in effect on Dec. 31, 1993. These rates may change if Ohio tax
rates change in 1994. If state tax rates change equivalent rates
may be higher than those shown.
This table does not reflect the state joint filing credit
If these assumptions do not apply to you, it will be necessary to
construct your own personalized tax equivalency table.
STEP 2: DETERMINING YOUR COMBINED FEDERAL AND OHIO STATE TAXABLE
YIELD EQUIVALENTS.
Using 42.74 percent, you may determine that a tax-exempt yield of 4
percent is equivalent to earning a taxable 6.99 percent yield.
<TABLE>
<CAPTION>
For these Tax-Exempt Rates:
___________________________________________________________________________
4.00% 4.50% 5.00% 5.50% 6.00% 6.50% 7.00% 7.50%
___________________________________________________________________________
Marginal Tax Rates Equal the Taxable Rates shown below:
________________________________________________________________________________________________________
<C> <C> <C> <C> <C> <C> <C> <C> <C>
15.63% 4.74 5.33 5.93 6.52 7.11 7.70 8.30 8.89
16.26% 4.78 5.37 5.97 6.57 7.17 7.76 8.36 8.96
17.53% 4.85 5.46 6.06 6.67 7.28 7.88 8.49 9.09
18.16% 4.89 5.50 6.11 6.72 7.33 7.94 8.55 9.16
18.79% 4.93 5.54 6.16 6.77 7.39 8.00 8.62 9.24
31.21% 5.81 6.54 7.27 8.00 8.72 9.45 10.18 10.90
31.74% 5.86 6.59 7.32 8.06 8.79 9.52 10.25 10.99
32.28% 5.91 6.65 7.38 8.12 8.86 9.60 10.34 11.08
34.59% 6.12 6.88 7.64 8.41 9.17 9.94 10.70 11.47
35.10% 6.16 6.93 7.70 8.47 9.24 10.02 10.79 11.56
35.76% 6.23 7.00 7.78 8.56 9.34 10.12 10.90 11.67
36.63% 6.31 7.10 7.89 8.68 9.47 10.26 11.05 11.84
37.19% 6.37 7.16 7.96 8.76 9.55 10.35 11.14 11.94
40.42% 6.71 7.55 8.39 9.23 10.07 10.91 11.75 12.59
40.80% 6.76 7.60 8.45 9.29 10.14 10.98 11.82 12.67
41.42% 6.83 7.68 8.54 9.39 10.24 11.10 11.95 12.80
41.80% 6.87 7.73 8.59 9.45 10.31 11.17 12.03 12.89
42.08% 6.91 7.77 8.63 9.50 10.36 11.22 12.09 12.95
42.45% 6.95 7.82 8.69 9.56 10.43 11.29 12.16 13.03
42.74% 6.99 7.86 8.73 9.61 10.48 11.35 12.22 13.10
43.10% 7.03 7.91 8.79 9.67 10.54 11.42 12.30 13.18
44.13% 7.16 8.05 8.95 9.84 10.74 11.63 12.53 13.42
45.23% 7.30 8.22 9.13 10.04 10.95 11.87 12.78 13.69
45.95% 7.40 8.33 9.25 10.18 11.10 12.03 12.95 13.88
46.66% 7.50 8.44 9.37 10.31 11.25 12.19 13.12 14.06
________________________________________________________________________________________________________
</TABLE>
<PAGE>
PAGE 52
IDS Insured Tax-Exempt Fund
Prospectus
Aug. 29, 1994
The goals of IDS Insured Tax-Exempt Fund, a part of IDS Special
Tax-Exempt Series Trust, are to provide a high level of income
generally exempt from federal income tax and preservation of
shareholders' capital. The fund invests primarily in securities
that are insured as to their scheduled payment of principal and
interest for at least as long as the securities are held in the
fund. Insured securities fluctuate in market value as interest
rates change.
This prospectus contains facts that can help you decide if the fund
is the right investment for you. Read it before you invest and
keep it for future reference.
Additional facts about the fund are in a Statement of Additional
Information (SAI), filed with the Securities and Exchange
Commission. The SAI, dated Aug. 29, 1994, is incorporated here by
reference. For a free copy contact IDS Shareholder Service.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
SHARES IN THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR
GUARANTEED OR ENDORSED BY, ANY BANK, AND SHARES ARE NOT FEDERALLY
INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL
RESERVE BOARD, OR ANY OTHER AGENCY.
IDS Shareholder Service
P.O. Box 534
Minneapolis, MN
55440-0534
612-671-3733
TTY: 800-846-4852
<PAGE>
PAGE 53
Table of contents
The fund in brief
Goals
Types of fund investments
Manager and distributor
Portfolio manager
Sales charge and fund expenses
Sales charge
Operating expenses
Performance
Financial highlights
Total returns
Yield
Key terms
Investment policies and risks
Facts about investments and their risks
Valuing assets
How to buy, exchange or sell shares
How to buy shares
How to exchange shares
How to sell shares
Reductions of the sales charge
Waivers of the sales charge
Special shareholder services
Services
Quick telephone reference
Distributions and taxes
Dividend and capital gain distributions
Reinvestments
Taxes
How the fund is organized
Shares
Voting rights
Shareholder meetings
Trustees and officers
Investment manager and transfer agent
Distributor
About IDS
General information
Appendix
Tax-exempt income vs. taxable income
<PAGE>
PAGE 54
The fund in brief
Goals
IDS Insured Tax-Exempt Fund seeks to provide shareholders with a
high level of income generally exempt from federal income tax and
preservation of shareholders' capital. Because any investment
involves risk, achieving these goals cannot be guaranteed. Only
shareholders can change the goals.
Types of fund investments
The fund is a diversified mutual fund that invests primarily in a
diversified portfolio of securities exempt from federal income tax,
with principal and interest either fully insured by private
insurers or guaranteed by an agency or instrumentality of the U.S.
government. At least 65% of the fund's total assets will be
privately insured. The fund may hold short-term tax-exempt
securities that are not insured. A portion of the assets may be
invested in bonds subject to the alternative minimum tax
computation.
Shares of the fund held by an investor are not insured or
guaranteed and their net asset value fluctuates as the value of the
portfolio securities changes.
Manager and distributor
The fund is managed by IDS Financial Corporation (IDS), a provider
of financial services since 1894. IDS currently manages more than
$36 billion in assets for the IDS MUTUAL FUND GROUP. Shares of the
fund are sold through IDS Financial Services Inc., a wholly owned
subsidiary of IDS.
Portfolio manager
Paul B. Hylle joined IDS in 1993 and serves as portfolio manager.
He also is portfolio manager of IDS California Tax-Exempt Fund, IDS
Massachusetts Tax-Exempt Fund, IDS Michigan Tax-Exempt Fund, IDS
Minnesota Tax-Exempt Fund, IDS New York Tax-Exempt Fund and IDS
Ohio Tax-Exempt Fund. Prior to joining IDS, he had been a
portfolio manager at Lutheran Brotherhood, a Minnesota based
fraternal benefit society offering financial services to Lutherans.
Sales charge and fund expenses
Sales charge
When you buy shares, you pay a maximum sales charge of 5% of the
public offering price. This charge can be reduced, depending on
your total investments in IDS funds. See "Reductions of the sales
charge."
Shareholder transaction expenses
Maximum sales charge on purchases
(as a percent of offering price).................5%
<PAGE>
PAGE 55
Operating expenses
The fund pays certain expenses out of its assets; the expenses are
reflected in the fund's daily share price and dividends, and are
not charged directly to shareholder accounts. The following chart
gives a projection of these expenses -- based on historical
expenses.
Annual fund operating expenses
(% of average daily net assets):
Management fee 0.53%
12b-1 fee 0.02%
Other expenses 0.10%
Total 0.65%
Example: Suppose for each year for the next 10 years, fund
expenses are as above and annual return is 5%. If you sold your
shares at the end of the following years, for each $1,000 invested,
you would pay total expenses of:
1 year 3 years 5 years 10 years
$56 $70 $84 $127
This example does not represent actual expenses, past or future.
Actual expenses may be higher or lower than those shown. Because
the fund pays annual distribution fees, shareholders who stay in
the fund for more than 20 years may indirectly pay an equivalent
of more than a 7.25% sales charge, the maximum permitted by the
National Association of Securities Dealers.
Fund expenses include fees paid to IDS for:
o managing its portfolio, providing investment research and
administrative services
o distribution (known as 12b-1 fees, after the federal rule that
authorizes them)
o transfer agent services, including handling shareholder
accounts and records.
Performance
Financial highlights
The information in this table has been audited by KPMG Peat
Marwick, independent auditors. The independent auditor's report
and additional information about the performance of the fund are
contained in the fund's annual report which, if not included with
this prospectus, may be obtained without charge.
<PAGE>
PAGE 56
<TABLE>
<CAPTION>
IDS Insured Tax-Exempt Fund
Performance
Financial highlights
Fiscal period ended June 30,
Per share income and capital changes*
1994 1993 1992 1991 1990 1989** 1988 1987 1986+
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, $5.63 $5.33 $5.04 $4.96 $5.00 $4.86 $4.73 $5.07 $5.00
beginning of period
Income from investment operations:
Net investment income .30 .30 .31 .32 .31 .16 .31 .32 .11
Net gains (losses) on (.28) .30 .29 .08 (.04) .14 .14 (.34) .07
securities (both realized
and unrealized)
Total from investment .02 .60 .60 .40 .27 .30 .45 (.02) .18
operations
Less distributions:
Dividends from net (.30) (.30) (.31) (.32) (.31) (.16) (.32) (.32) (.11)
investment income
Net asset value, $5.35 $5.63 $5.33 $5.04 $4.96 $5.00 $4.86 $4.73 $5.07
end of period
Ratios/supplemental data
1994 1993 1992 1991 1990 1989** 1988 1987 1986+
Net assets, end of period $525 $464 $308 $195 $133 $79 $55 $37 $25
(in millions)
Ratio of expenses to .65% .65% .67% .67% .69% .72%*** .77% .88% .75%***++
average daily net assets
Ratio of net income to 5.32% 5.53% 6.06% 6.36% 6.44% 6.60%*** 6.55% 6.77% 6.52%***++
average daily net assets
Portfolio turnover rate 37% 5% 11% 8% 24% 19% 33% 29% 0%
(excluding short-term
securities)
Total return+++ 0.3% 11.7% 12.3% 8.1% 5.6% 6.4%++++ 9.7% (0.2)% 3.5%++++
*For a share outstanding throughout the period. Rounded to the nearest cent.
**The fund's fiscal year-end was changed from Dec. 31 to June 30, effective 1989.
***Adjusted to an annual basis.
+Commencement of operations. Period from Aug. 18, 1986 to Dec. 31, 1986.
++During the period from Aug. 18, 1986 to Dec. 31, 1986, IDS voluntarily reimbursed the fund for expenses in excess of
0.75% of its average daily net assets, on an annual basis. Had IDS not done so, the ratio of expenses and ratio of net
investment income would have been 1.05% and 6.22%, respectively.
+++Total return does not reflect payment of a sales charge.
++++For the fiscal period ended Dec. 31, 1986 and June 31, 1989, the annualized total return is 9.5% and 13.3%, respectively.
</TABLE>
<PAGE>
PAGE 57
Total returns
Average annual total returns as of June 30, 1994
Purchase 1 year 5 years 10 years
made ago ago ago
Insured Tax-Exempt -4.7 +6.4 +6.5
Lehman Brothers +0.2 +7.9 +7.8
Municipal Bond
Index
Cumulative total returns as of June 30, 1994
Purchase 1 year 5 years 10 years
made ago ago ago
Insured Tax-Exempt -4.7 +36.6 +64.6
Lehman Brothers +0.2 +46.5 +80.6
Municipal Bond
Index
These examples show total returns from hypothetical investments in
the fund. These returns are compared to those of a popular index
for the same periods.
For purposes of calculation, information about the fund assumes a
sales charge of 5%, makes no adjustments for taxes an investor may
have paid on the reinvested income and capital gains, and covers a
period of widely fluctuating securities prices. Returns shown
should not be considered a representation of the fund's future
performance.
The fund invests primarily in debt securities that may be different
from those in the index. The index reflects reinvestment of all
distributions and changes in market prices, but excludes brokerage
commissions or other fees.
Lehman Brothers Municipal Bond Index is made up of a representative
list of general obligation, revenue, insured and pre-refunded
bonds. The index is frequently used as a general measure of tax-
exempt bond market performance. However, the securities used to
create the index may not be representative of the bonds held in the
fund.
Yield
The fund's SEC standardized yield for the 30-day period ended June
30, 1994, was 4.91%.
The fund calculates this 30-day SEC standardized yield by dividing:
o net investment income per share deemed earned during a 30-day
period by
<PAGE>
PAGE 58
o the public offering price per share on the last day of the
period, and
o converting the result to a yearly equivalent figure.
The fund's non-standardized yield (distribution yield) was 5.23%
for the same 30-day period ended June 30, 1994.
The fund computes distribution yield by dividing:
o the total dividends paid over the 30-day period by
o the sum of each day's public offering price for that period,
and
o converting the result to a yearly equivalent figure.
The fund may also calculate a tax equivalent yield by dividing the
tax-exempt portion of its yield by one minus a stated income tax
rate. A tax equivalent yield demonstrates the taxable yield
necessary to produce an after-tax yield equivalent to that of a
fund that invests in exempt obligations.
The fund's yield varies from day to day, mainly because share
values and offering prices (which are calculated daily) vary in
response to changes in interest rates. Net investment income
normally changes much less in the short run. Thus, when interest
rates rise and share values fall, yield tends to rise. When
interest rates fall, yield tends to follow.
Past yields should not be considered an indicator of future yields.
Key terms
Net asset value (NAV) - Value of a single fund share. It is the
total market value of all of a fund's investments and other assets,
less any liabilities, divided by the number of shares outstanding.
The NAV is the price you receive when you sell your shares. It
usually changes from day to day, and is calculated at the close of
business, normally 3 p.m. Central time, each business day (any day
the New York Stock Exchange is open). NAV generally declines as
interest rates increase and rises as interest rates decline.
Public offering price - Price at which you buy shares. It is the
NAV plus the sales charge. NAVs and public offering prices of IDS
funds are listed each day in major newspapers and financial
publications.
Investment income - Dividends and interest earned on securities
held by the fund.
Capital gains or losses - Increase or decrease in value of the
securities the fund holds. Gains or losses are realized when
securities that have increased or decreased in value are sold.
A fund also may have unrealized gains or losses when securities
increase or decrease in value but are not sold.
<PAGE>
PAGE 59
Distributions - Payments to shareholders of two types: investment
income (dividends) and realized net long-term capital gains
(capital gains distributions).
Total return - Sum of all of your returns for a given period,
assuming you reinvest all distributions. Calculated by taking the
total value of shares you own at the end of the period (including
shares acquired by reinvestment), less the price of shares you
purchased at the beginning of the period.
Average annual total return - The annually compounded rate of
return over a given time period (usually two or more years) --
total return for the period converted to an equivalent annual
figure.
Yield - Net investment income earned per share for a specified time
period, divided by the offering price at the end of the period.
Investment policies and risks
Under normal market conditions, the fund will invest at least 80%
of its net assets in securities issued by or on behalf of state or
local governmental units whose interest, in the opinion of counsel
for the issuer, is exempt from federal income tax.
Under normal market conditions, at least 65% of the fund's total
assets will be invested in securities that are insured and have a
maturity of more than one year.
In addition, a portion of the fund's assets may be invested in
bonds whose interest is subject to the alternative minimum tax
computation. As long as the staff of the SEC maintains its current
position that a fund calling itself a "tax-exempt" fund may not
invest more than 20% of its net assets in these bonds, the fund
will limit its investments in these bonds to 20% of its net assets.
The various types of investments the portfolio manager uses to
achieve investment performance are described in more detail in the
next section and in the SAI.
Facts about investments and their risks
Bonds and other debt securities exempt from federal income taxes:
The price of a bond fluctuates as interest rates change or if its
credit rating is upgraded or downgraded. The fund may purchase
securities rated Aaa by Moody's Investors Service, Inc. (Moody's)
or AAA by Standard & Poor's Corporation (S&P) without regard to
their rating, provided these securities are insured. In addition,
the fund may purchase securities rated lower than Aaa by Moody's or
AAA by S&P without regard to their rating, provided these
securities are insured. These securities generally provide a
higher yield than securities with the highest ratings. The
increased yield will be offset to a certain extent by the premium
paid to insure the securities. In purchasing these securities the
fund hopes to achieve a higher yield while at the same time
providing the same level of safety available by the purchase of AAA
rated securities.
<PAGE>
PAGE 60
Concentration: The fund may invest more than 25% of its total
assets in a particular segment of the municipal securities market,
such as electric revenue bonds, hospital revenue bonds, housing
agency bonds, industrial development bonds, airport bonds, or in
securities the interest upon which is paid from revenues of a
similar type of project. In such circumstances, economic,
business, political or other changes affecting one bond (such as
proposed legislation affecting the financing of a project,
shortages or price increases of needed materials, or declining
market or needs of the projects) might also affect other bonds in
the same segment. This could increase market risk.
The fund may invest more than 25% of its total assets in industrial
revenue bonds, but it does not intend to invest more than 25% of
its total assets in industrial revenue bonds issued for companies
in the same industry or state. As the similarity in issuers
increases, the potential for fluctuation in the net asset value of
the fund's shares also increases.
Taxable investments: If, in the opinion of the investment manager,
appropriate tax-exempt securities are not available, the fund may
invest up to 20% of its net assets, or more on a temporary
defensive basis, in taxable investments, as described more fully in
the SAI.
Derivative instruments: The portfolio manager may use derivative
instruments in addition to securities to achieve investment
performance. Derivative instruments include futures, options and
forward contracts. Such instruments may be used to maintain cash
reserves while remaining fully invested, to offset anticipated
declines in values of investments, to facilitate trading, to reduce
transaction costs, or to pursue higher investment returns.
Derivative instruments are characterized by requiring little or no
initial payment and a daily change in price based on or derived
from a security, a currency, a group of securities or currencies,
or an index. A number of strategies or combination of instruments
can be used to achieve the desired investment performance
characteristics. A small change in the value of the underlying
security, currency or index will cause a sizable gain or loss in
the price of the derivative instrument. Derivative instruments
allow the portfolio manager to change the investment performance
characteristics very quickly and at lower costs. Risks include
losses of premiums, rapid changes in prices, defaults by other
parties, and inability to close such instruments. The fund will
use derivative instruments only to achieve the same investment
performance characteristics it could achieve by directly holding
those securities and currencies permitted under the investment
policies. The fund will designate cash or appropriate liquid
assets to cover its portfolio obligations. The use of derivative
instruments may produce taxable income. No more than 5% of the
fund's net assets can be used at any one time for good faith
deposits on futures and premiums for options on futures that do not
offset existing investment positions. For further information, see
the options and futures appendix in the SAI.
<PAGE>
PAGE 61
Securities and derivative instruments that are illiquid: Illiquid
means the security or derivative instrument cannot be sold quickly
in the normal course of business. Some investments cannot be
resold to the U.S. public because of their terms or government
regulations. All securities and derivative instruments, however,
can be sold in private sales, and many may be sold to other
institutions and qualified buyers or on foreign markets. The
portfolio manager will follow guidelines established by the board
of directors and consider relevant factors such as the nature of
the security and the number of likely buyers when determining
whether a security is illiquid. No more than 10% of the fund's net
assets will be held in securities and derivative instruments that
are illiquid.
Inverse floaters: Inverse floaters are created by underwriters
using the interest payments on securities. A portion of the
interest received is paid to holders of instruments based on
current interest rates for short-term securities. What is left
over, less a servicing fee, is paid to holders of the inverse
floaters. As interest rates go down, the holders of the inverse
floaters receive more income and an increase in the price for the
inverse floaters. As interest rates go up, the holders of the
inverse floaters receive less income and a decrease in the price
for the inverse floaters. No more than 10% of the fund's assets
will be held in inverse floaters.
Tax-exempt money market instruments: Pending investment in
municipal securities maturing in more than one year, or as a
temporary defensive position, the fund may hold up to 35% of its
total assets in short-term tax-exempt instruments that are not
insured or guaranteed. The fund will purchase these instruments
only if they are rated MIG-1 by Moody's or SP-1 or better by S&P or
if the long-term debt of such issuers is rated Aaa by Moody's or
AAA by S&P.
Insurance on tax-exempt securities: Payment of principal and
interest on tax-exempt securities which have a maturity of more
than one year will be either fully insured by private insurers or
guaranteed by an agency or instrumentality of the U.S. government.
These agencies include the Federal National Mortgage Association
and the Federal Housing Administration. Insurance or guarantee
features minimize the risks to the fund and its shareholders
associated with defaults in the securities owned by the fund.
Insurance or guarantees do not guarantee the market value of the
municipal securities or the value of the shares of the fund.
Insurance premiums are paid from the assets of the fund and will
reduce the fund's current yield.
Except for securities guaranteed by the U.S. government or an
agency thereof, and the short-term securities described above, each
tax-exempt security purchased by the fund will be insured either by
a New Issue Insurance Policy or by a Portfolio Insurance Policy
issued by Financial Guaranty Insurance Company or a comparable
insurer as long as that insurer is rated Aaa by Moody's or AAA by
S&P. The dollar amount of premium paid was .0001% of the fund's
assets for the fiscal year ended June 30, 1994.
<PAGE>
PAGE 62
Except for the investment policies concerning the type and amount
of tax-exempt investments, the investment policies described above
may be changed by the trustees.
Lending portfolio securities: The fund may lend its securities to
earn income so long as borrowers provide collateral equal to the
market value of the loans. The risks are that borrowers will not
provide collateral when required or return securities when due.
Unless shareholders approve otherwise, loans may not exceed 30% of
the fund's net assets.
The various types of investments the portfolio manager uses to
achieve investment performance are described in more detail in the
next section and in the SAI.
Facts about investments and their risks
Valuing assets
o Bonds and assets without readily available market values are
valued at fair value according to methods selected in good
faith by the board of trustees.
o Securities maturing in 60 days or less are valued at amortized
cost.
o Securities (except bonds) and assets with available market
values are valued on that basis.
How to buy, exchange or sell shares
How to buy shares
If you're investing in one of the funds for the first time, you'll
need to set up an account. Your financial planner will help you
fill out and submit an application. Once your account is set up,
you can choose among several convenient ways to invest.
Important: When opening an account, you must provide IDS with your
correct Taxpayer Identification Number (Social Security or Employer
Identification number). See "Distributions and taxes."
When you buy shares for a new or existing account, the price you
pay per share is determined at the close of business on the day
your investment is received and accepted at the Minneapolis
headquarters.
Purchase policies
o Investments must be received and accepted in the Minneapolis
headquarters on a business day before 3 p.m. Central time to
be included in your account that day and to receive that day's
share price. Otherwise your purchase will be processed the
next business day and you will pay the next day's share price.
o The minimums allowed for investment may change from time to
time.
<PAGE>
PAGE 63
o Wire orders can be accepted only on days when your bank, IDS,
the fund and Norwest Bank Minneapolis are open for business.
o Wire purchases are completed when wired payment is received
and the fund accepts the purchase.
o IDS and the fund are not responsible for any delays that occur
in wiring funds, including delays in processing by the bank.
o You must pay any fee the bank charges for wiring.
o The fund reserves the right to reject any application for any
reason.
Three ways to invest
<TABLE>
<CAPTION>
<S> <C> <C>
1
By regular account Send your check and application Minimum amounts
(or your name and account number Initial investment: $2,000
if you have an established account) Additional
to: investments: $ 100
IDS Financial Services Inc. Account balances: $ 300*
P.O. Box 74
Minneapolis, MN 55440-0074
Your financial planner will help
you with this process.
2
By scheduled Contact your financial planner Minimum amounts
investment plan to set up one of the following Initial investment: $100
scheduled plans: Additional
investments: $100/mo
o automatic payroll deduction Account balances: none
(on active plans of
o bank authorization monthly payments)
o direct deposit of
Social Security check
o other plan approved by the fund
3
By wire If you have an established account, If this information is not
you may wire money to: included, the order may be
rejected and all money
Norwest Bank Minneapolis received by the fund, less
Routing No. 091000019 any costs the fund or IDS
Minneapolis, MN incurs, will be returned
Attn: Domestic Wire Dept. promptly.
Give these instructions: Minimum amounts
Credit IDS Account #00-30-015 Each wire investment: $1,000
for personal account # (your
account number) for (your name).
*If your account balance falls below $300, IDS will ask you in writing to bring it up to $300 or establish a scheduled
investment plan. If you don't do so within 30 days, your shares can be redeemed and the proceeds mailed to you.
</TABLE>
How to exchange shares
You can exchange your shares of the fund at no charge for shares of
any other publicly offered fund in the IDS MUTUAL FUND GROUP
available in your state. For complete information, including fees
and expenses, read the prospectus carefully before exchanging into
a new fund.
<PAGE>
PAGE 64
If your exchange request arrives at the Minneapolis headquarters
before the close of business, your shares will be redeemed at the
net asset value set for that day. The proceeds will be used to
purchase new fund shares the same day. Otherwise, your exchange
will take place the next business day at that day's net asset
value.
For tax purposes, an exchange represents a sale and purchase and
may result in a gain or loss. However, you cannot create a tax
loss (or reduce a taxable gain) by exchanging from the fund within
91 days of your purchase. For further explanation, see the SAI.
How to sell shares
You can sell (redeem) your shares at any time. IDS Shareholder
Service will mail payment within seven days after receiving your
request.
When you sell shares, the amount you receive may be more or less
than the amount you invested. Your shares will be redeemed at net
asset value at the close of business on the day your request is
accepted at the Minneapolis headquarters. If your request arrives
after the close of business, the price per share will be the net
asset value at the close of business on the next business day.
A redemption is a taxable transaction. If the fund's net asset
value when you sell shares is more or less than the cost of your
shares, you will have a gain or loss, which can affect your tax
liability.
Two ways to request an exchange or sale of shares
<TABLE>
<CAPTION>
<S> <C>
1
By letter Include in your letter:
o the name of the fund(s)
o your account number(s) (for exchanges, both funds must
Regular mail: be registered in the same ownership)
IDS Shareholder Service o your Taxpayer Identification Number (TIN)
Attn: Redemptions o the dollar amount or number of shares you want to
P.O. Box 534 exchange or sell
Minneapolis, MN o signature of all registered account owners
55440-0534 o for redemptions, indicate how you want your sales proceeds delivered to you
o any paper certificates of shares you hold
Express mail:
IDS Shareholder Service
Attn: Redemptions
733 Marquette Ave.
Minneapolis, MN 55402
2
By phone
IDS Telephone Transaction o The fund and IDS will honor any telephone exchange
Service: or redemption request believed to be authentic and will
800-437-3133 or use reasonable procedures to confirm that they are. This
612-671-3800 includes asking identifying questions and tape recording calls. So long as reasonable
procedures are followed, neither the fund nor IDS will be liable for any loss resulting
from fraudulent requests.
o Phone exchange and redemption privileges automatically apply to all accounts except
custodial, corporate or qualified retirement accounts unless you request these privileges
NOT apply by writing IDS Shareholder Service. Each registered owner must sign the request.
o IDS answers phone requests promptly, but you may experience delays when call volume is
high. If you are unable to get through, use mail procedure as an alternative.
o Phone privileges may be modified or discontinued at any time.
<PAGE>
PAGE 65
Minimum amount
Redemption: $100
Maximum amount
Redemption: $50,000
</TABLE>
Exchange policies:
o You may make up to three exchanges within any 30-day period,
with each limited to $300,000. These limits do not apply to
scheduled exchange programs and certain employee benefit plans or
other arrangements through which one shareholder represents the
interests of several. Exceptions may be allowed with pre-approval
of the fund.
o If your exchange creates a new account, it must satisfy the
minimum investment amount for new purchases.
o Once we receive your exchange request, you cannot cancel it.
o Shares of the new fund may not be used on the same day for
another exchange.
o If your shares are pledged as collateral, the exchange will be
delayed until written approval is obtained from the secured party.
o IDS and the fund reserve the right to reject any exchange, limit
the amount, or modify or discontinue the exchange privilege, to
prevent abuse or adverse effects on the fund and its shareholders.
For example, if exchanges are too numerous or too large, they may
disrupt the fund's investment strategies or increase its costs.
Redemption policies:
o A "change of mind" option allows you to change your mind after
requesting a redemption and to use all or part of the proceeds to
buy new shares in the same account at the net asset value, rather
than the offering price on the date of a new purchase. To do so,
send a written request within 30 days of the date your redemption
request was received. Include your account number and mention this
option. This privilege may be limited or withdrawn at any time,
and it may have tax consequences.
o A telephone redemption request will not be allowed within 30
days of a phoned-in address change.
Important: If you request a redemption of shares you recently
purchased by a check or money order that is not guaranteed, the
fund will wait for your check to clear. Please expect a minimum of
10 days from the date of purchase before IDS mails a check to you.
(A check may be mailed earlier if your bank provides evidence
satisfactory to the fund and IDS that your check has cleared.)
<PAGE>
PAGE 66
Three ways to receive payment when you sell shares
<TABLE>
<CAPTION>
<S> <C>
1
By regular or express mail o Mailed to the address on record.
o Payable to names listed on the account.
NOTE: The express mail delivery charges
you pay will vary depending on the
courier you select.
2
By wire o Minimum wire redemption: $1,000.
o Request that money be wired to your bank.
o Bank account must be in the same
ownership as the IDS account.
NOTE: Pre-authorization required. For
instructions, contact your financial
planner or IDS Shareholder Service.
3
By scheduled payout plan o Minimum payment: $50.
o Contact your financial planner or IDS
Shareholder Service to set up regular
payments to you on a monthly, bimonthly,
quarterly, semiannual or annual basis.
o Buying new shares while under a payout
plan may be disavantageous because of
sales charges.
</TABLE>
Reductions of the sales charge
You pay a 5% sales charge on the first $50,000 of your total
investment and less on investments after the first $50,000:
Total investment Sales charge as a
percent of:*
Public Net
offering amount
price invested
Up to $50,000 5.0% 5.26%
Next $50,000 4.5 4.71
Next $150,000 4.0 4.17
Next $250,000 3.0 3.09
Next $500,000 2.0 2.04
Next $2,000,000 1.0 1.01
More than $3,000,000 0.5 0.50
* To calculate the actual sales charge on an investment greater
than $50,000, amounts for each applicable increment must be
totaled. See the SAI.
Your sales charge may be reduced, depending on the totals of:
o the amount you are investing in this fund now,
o the amount of your existing investment in this fund, if any, and
o the amount you and your immediate family (spouse or unmarried
children under 21) are investing or have in other funds in the IDS
MUTUAL FUND GROUP that carry a sales charge.
<PAGE>
PAGE 67
Other policies that affect your sales charge:
o IDS Cash Management Fund and IDS Tax-Free Money Fund do not
carry sales charges. However, you may count investments in these
funds if you acquired shares in them by exchanging shares from IDS
funds that carry sales charges.
o Employee benefit plan purchases made through a payroll deduction
plan or through a plan sponsored by an employer, association of
employers, employee organization or other similar entity, may be
added together to reduce sales charges for all shares purchased
through that plan.
For more details, see the SAI.
Waivers of the sales charge
Sales charges do not apply to:
o Current or retired trustees, directors, officers or employees of
the fund or IDS or its subsidiaries, their spouses and unmarried
children under 21.
o Current or retired IDS planners, their spouses and unmarried
children under 21.
o Qualified employee benefit plans* if the plan:
- has at least $1 million invested in funds of the IDS MUTUAL
FUND GROUP; or
- has 500 or more participants; or
- uses a daily transfer recordkeeping service offering
participants daily access to IDS funds.
(Participants in certain qualified plans for which the initial
sales charge is waived may be subject to a deferred sales charge of
up to 4% on certain redemptions. For more information, see the
SAI.)
o Trust companies or similar institutions, and charitable
organizations that meet the definition in Section 501(c)(3) of the
Internal Revenue Code.* These must have at least $1 million
invested in funds of the IDS MUTUAL FUND GROUP.
o Purchases made within 30 days after certain redemptions. A
waiver applies up to the amount redeemed from:
- of an IDS product in a qualified plan subject to a deferred
sales charge; or
- a qualified plan where IDS Trust acts as trustee and/or
recordkeeper; or
- IDS Strategy Fund.
Send the fund a written request along with your payment, indicating
the amount of the redemption and the date on which it occurred.
<PAGE>
PAGE 68
o Purchases made with dividend or capital gain distributions from
another fund in the IDS MUTUAL FUND GROUP that has a sales charge.
*Eligibility must be determined in advance by IDS. To do so,
contact your financial planner.
Special shareholder services
Services
To help you track and evaluate the performance of your investments,
IDS provides these services:
Quarterly statements listing all of your holdings and transactions
during the previous three months.
Yearly tax statements featuring average-cost-basis reporting of
capital gains or losses if you redeem your shares along with
distribution information - which simplifies tax calculations.
A personalized mutual fund progress report detailing returns on
your initial investment and cash-flow activity in your account. It
calculates a total return to reflect your individual history in
owning fund shares. This report is available from your financial
planner.
Quick telephone reference
IDS Telephone Transaction Service
Redemptions and exchanges, dividend payments or reinvestments and
automatic payment arrangements
National/Minnesota: 800-437-3133
Mpls./St. Paul area: 671-3800
IDS Shareholder Service
Fund performance, objectives and account inquiries
612-671-3733
TTY Service
For the hearing impaired
800-846-4852
IDS Infoline
Automated account information (TouchToneR phones only), including
current fund prices and performance, account values and recent
account transactions
National/Minnesota: 800-272-4445
Mpls./St. Paul area: 671-1630
Distributions and taxes
The fund distributes to shareholders investment income and net
capital gains. It does so to qualify as a regulated investment
company and to avoid paying corporate income and excise taxes.
Dividend and capital gains distributions will have tax consequences
you should know about.
<PAGE>
PAGE 69
Dividend and capital gain distributions
The fund distributes its net investment income (dividends and
interest earned on securities held by the fund, less operating
expenses) to shareholders of record monthly. Short-term capital
gains distributed are included in net investment income. Net
realized capital gains, if any, from selling securities are
distributed at the end of the calendar year. Before they're
distributed, net capital gains are included in the value of each
share. After they're distributed, the value of each share drops by
the per-share amount of the distribution. (If your distributions
are reinvested, the total value of your holdings will not change.)
Reinvestments
Dividends and capital gain distributions are automatically
reinvested in additional shares of the fund, unless:
o you request the fund in writing or by phone to pay
distributions to you in cash, or
o you direct the fund to invest your distributions in any
publicly available IDS fund for which you've previously opened
an account.
You pay no sales charge on shares purchased through reinvestment
from this fund into any IDS fund. The reinvestment price is the
net asset value at close of business on the day the distribution is
paid. (Your quarterly statement from IDS will confirm the amount
invested and the number of shares purchased.)
If you choose cash distributions, you will receive only those
declared after your request has been processed.
If the U.S. Postal Service cannot deliver the checks for the cash
distributions, we will reinvest the checks into your account at the
then-current net asset value and make future distributions in the
form of additional shares.
Taxes
Dividends distributed from interest earned on tax-exempt securities
(exempt-interest dividends) are exempt from federal income taxes
but may be subject to state and local taxes. Dividends distributed
from other income earned and capital gain distributions are not
exempt from federal income taxes. Distributions are taxable in the
year the fund pays them regardless of whether you take them in cash
or reinvest them.
Each January, IDS sends you a statement showing the kinds and total
amount of all distributions you received during the previous year.
You must report all distributions on your tax returns, even if they
are reinvested in additional shares.
<PAGE>
PAGE 70
Interest on certain private activity bonds is a preference item for
purposes of the individual and corporate alternative minimum taxes.
To the extent a fund earns such income, it will flow through to its
shareholders and may be taxable to those shareholders who are
subject to the alternative minimum tax.
Because interest on municipal bonds and notes is tax-exempt for
federal income tax purposes, any interest on borrowed money used
directly or indirectly to purchase fund shares is not deductible on
your federal income tax return. You should consult a tax adviser
regarding its deductibility for state and local income tax
purposes.
"Buying a dividend" creates a tax liability. This means buying
shares shortly before a net investment income or a capital gain
distribution. You pay the full pre-distribution price for the
shares, then receive a portion of your investment back as a
distribution, which is taxable.
Redemptions and exchanges subject you to a tax on any capital gain.
If you sell shares for more than their cost, the difference is a
capital gain. Your gain may be either short-term (for shares held
for one year or less) or long-term (for shares held for more than
one year).
Your Taxpayer Identification Number (TIN) is important. As with
any financial account you open, you must list your current and
correct Taxpayer Identification Number (TIN) -- either your Social
Security or Employer Identification number. The TIN must be
certified under penalties of perjury on your application when you
open an account at IDS.
If you don't provide the TIN to IDS, or the TIN you report is
incorrect, you could be subject to backup withholding of 31% of
taxable distributions and proceeds from certain sales and
exchanges. You also could be subject to further penalties, such
as:
o a $50 penalty for each failure to supply your correct TIN
o a civil penalty of $500 if you make a false statement that
results in no backup withholding
o criminal penalties for falsifying information
You also could be subject to backup withholding because you failed
to report interest or dividends on your tax return as required.
How to determine the correct TIN
Use the Social Security or
Employer Identification number
For this type of account: of:
Individual or joint accounts The individual or first person
listed on the account
<PAGE>
PAGE 71
Custodian account of a minor The minor
(Uniform Gift/Transfer to Minors
Act)
A living trust The grantor-trustee (the person
who puts the money into the
trust)
An irrevocable trust, pension The legal entity (not the
trust or estate personal representative or
trustee, unless no legal entity
is designated in the account
title)
Sole proprietorship or The owner or partnership
partnership
Corporate The corporation
Association, club or The organization
tax-exempt organization
For details on TIN requirements, ask your financial planner or
local IDS office for federal Form W-9, "Request for Taxpayer
Identification Number and Certification."
Important: This information is a brief and selective summary of
certain federal tax rules that apply to this fund. Tax matters are
highly individual and complex, and you should consult a qualified
tax adviser about your personal situation.
How the fund is organized
IDS Special Tax-Exempt Series Trust, of which IDS Insured Tax-
Exempt Fund is a part, is an open-end management company, as
defined in the Investment Company Act of 1940. It was organized as
a Massachusetts business trust on April 7, 1986. The fund
headquarters are at 901 S. Marquette Ave., Suite 2810, Minneapolis,
MN 55402-3268.
Shares
IDS Special Tax-Exempt Series Trust currently is composed of six
funds, each issuing its own series of capital stock. Each fund is
owned by its shareholders. All shares issued by each fund are of
the same class -- capital stock. Par value is 1 cent per share.
Both full and fractional shares can be issued.
The shares of each fund represent an interest in that fund's assets
only (and profits or losses), and, in the event of liquidation,
each share of a fund would have the same rights to dividends and
assets as every other share of that fund.
The trustees may from time to time issue other funds of the Trust,
the assets and liabilities of which will likewise be separate and
distinct from this fund.
<PAGE>
PAGE 72
The fund no longer issues stock certificates.
Voting rights
As a shareholder, you have voting rights over the fund's management
and fundamental policies. You are entitled to one vote for each
share you own.
Shareholder meetings
The fund does not hold annual shareholder meetings. However, the
directors may call meetings at their discretion, or on demand by
holders of 10% or more of the outstanding shares, to elect or
remove directors.
Trustees and officers
Shareholders elect the trustees who oversee the operations of the
fund and choose its officers. Its officers are responsible for
day-to-day business decisions based on policies set by the
trustees. The trustees have named an executive committee that has
authority to act on its behalf between meetings. The trustees also
serve on the boards of all of the other funds in the IDS MUTUAL
FUND GROUP, except for Mr. Dudley, who is a director of all
publicly offered funds.
Trustees and officers of the fund
President and interested trustee
William R. Pearce
President of all funds in the IDS MUTUAL FUND GROUP.
Independent trustees
Lynne V. Cheney
Distinguished fellow, American Enterprise Institute for Public
Policy Research.
Robert F. Froehlke
Former president of all funds in the IDS MUTUAL FUND GROUP.
Donald M. Kendall
Former chairman and chief executive officer, PepsiCo, Inc.
Melvin R. Laird
Senior counsellor for national and international affairs, The
Reader's Digest Association, Inc.
Lewis W. Lehr
Former chairman and chief executive officer, Minnesota Mining and
Manufacturing Company (3M).
Edson W. Spencer
Former chairman and chief executive officer, Honeywell, Inc.
Wheelock Whitney
Chairman, Whitney Management Company.
<PAGE>
PAGE 73
Interested trustee who is a partner in a law firm that has
represented an IDS subsidiary
Anne P. Jones
Partner, law firm of Sutherland, Asbill & Brennan.
Interested trustees who are officers and/or employees of IDS
William H. Dudley
Executive vice president, IDS.
David R. Hubers
President and chief executive officer, IDS.
John R. Thomas
Senior vice president, IDS.
Other officer
Leslie L. Ogg
Vice president of all funds in the IDS MUTUAL FUND GROUP and
general counsel and treasurer of the publicly offered funds.
Refer to the SAI for the directors' and officers' biographies.
Investment manager and transfer agent
The fund pays IDS for managing its portfolio, providing
administrative services and serving as transfer agent (handling
shareholder accounts).
Under its Investment Management and Services Agreement, IDS
determines which securities will be purchased, held or sold
(subject to the direction and control of the fund's trustees). For
these services the fund pays IDS a two-part fee.
The first part is based on the combined average daily net assets of
all funds in the IDS MUTUAL FUND GROUP, as follows:
Net assets of
IDS MUTUAL Annual
FUND GROUP* fee
First $5 billion 0.46%
Each additional Decreasing
$5 billion percentages
More than $50 billion 0.32%
*Includes all funds except the money market funds.
The second part is equal to 0.13% of the fund's average daily net
assets during the fiscal year.
For the fiscal year ended June 30, 1994, the fund paid IDS a total
investment management fee of 0.53% of its average daily net assets.
Under the Agreement, the fund also pays taxes, brokerage
commissions and nonadvisory expenses.
<PAGE>
PAGE 74
In addition, under a separate Transfer Agency Agreement, IDS
maintains shareholder accounts and records. The fund pays IDS an
annual fee of $15.50 per shareholder account for this service.
Distributor
The fund sells shares through IDS Financial Services Inc., a wholly
owned subsidiary of IDS, under a Distribution Agreement. Financial
planners representing IDS Financial Services Inc. provide
information to investors about individual investment programs, the
fund and its operations, new account applications, exchange and
redemption requests. The cost of these services is paid partially
by the fund's sales charge.
Portions of sales charges may be paid to securities dealers who
have sold the fund's shares, or to banks and other financial
institutions. The proceeds paid to others range from 0.8% to 4% of
the fund's offering price depending on the monthly sales volume.
To help defray costs not covered by sales charges, including costs
for marketing, sales administration, training, overhead, direct
marketing programs, advertising and related functions, the fund
pays IDS a 12b-1 fee. This fee is paid under a Plan and
Supplemental Agreement of Distribution that follows the terms of
Rule 12b-1 of the Investment Company Act of 1940 (and a Securities
and Exchange Commission order). Under this Agreement, the fund
pays IDS $6 per shareholder account per year. The total 12b-1 fee
paid by the fund for the fiscal year ended June 30, 1994 was 0.02%
of its average daily net assets. This fee will not cover all of
the costs incurred by IDS.
Total management and distribution fees and expenses paid by the
fund in the fiscal year ended June 30, 1994 were 0.65% of its
average daily net assets.
Total fees and expenses (excluding taxes and brokerage commissions)
cannot exceed the most restrictive applicable state expense
limitation.
About IDS
General information
The IDS family of companies offers not only mutual funds but also
insurance, annuities, investment certificates and a broad range of
financial management services.
Besides managing investments for all publicly offered funds in the
IDS MUTUAL FUND GROUP, IDS also manages investments for itself and
its subsidiaries, IDS Certificate Company and IDS Life Insurance
Company. Total assets under management on June 30, 1994 were more
than $100 billion.
IDS Financial Services Inc. serves individuals and businesses
through its nationwide network of more than 175 offices and more
than 7,800 planners.
<PAGE>
PAGE 75
Other IDS subsidiaries provide investment management and related
services for pension, profit sharing, employee savings and
endowment funds of businesses and institutions.
IDS is located at IDS Tower 10, Minneapolis, MN 55440-0010. It is
a wholly owned subsidiary of American Express Company, a financial
services company with headquarters at American Express Tower, World
Financial Center, New York, NY 10285. The fund may pay brokerage
commissions to broker-dealer affiliates of American Express and
IDS.
<PAGE>
PAGE 76
Appendix A
1994 Federal Tax-Exempt and Taxable Equivalent Yield Calculation
These tables will help you determine your federal taxable yields
equivalents for given rates of tax-exempt income.
STEP 1: CALCULATING YOUR MARGINAL TAX RATE.
Using your Taxable Income and Adjusted Gross Income figures as
guides you can locate your Marginal Tax Rate in the table below.
First locate your Taxable Income in a filing status and income
range in the left-hand column. Then, locate your Adjusted Gross
Income at the top of the chart. At the point where your Taxable
Income line meets your Adjusted Gross Income column the percentage
indicated is an approximation of your Marginal Tax Rate. For
example: Let's assume you are married filing jointly, your taxable
income is $138,000 and your adjustable gross income is $175,000.
Under Taxable Income married filing jointly status, $138,000 is in
the $91,850-$140,000 range. Under Adjusted Gross Income, $175,000
is in the $167,700 to $290,200 column. The Taxable Income line and
Adjusted Gross Income column meet at 33.15 percent. This is the
rate you'll use in Step 2.
<TABLE>
<CAPTION>
ADJUSTED GROSS INCOME*
_________________________________________________________
<S> <C> <C> <C> <C>
TAXABLE INCOME** $ 0 $ 111,800 $ 167,700 OVER
to to to
$111,800(1) $167,700(2) $290,200(3) $290,200(2)
___________________________________________________________________________________________
Married Filing Jointly
$ 0 - $ 38,000 15.00%
38,000 - 91,850 28.00 28.84%
91,850 - 140,000 31.00 31.93 33.15%
140,000 - 250,000 36.00 37.08 38.49 37.08%
250,000 + 39.60 42.34*** 40.79
___________________________________________________________________________________________
$ 0 $111,800 OVER
to to
$111,800(1) $234,300(3) $234,300(2)
___________________________________________________________________________________________
Single
$ 0 - $ 22,750 15.00%
22,750 - 55,100 28.00
55,100 - 115,000 31.00 32.54%
115,000 - 250,000 36.00 37.79 37.08%
250,000 + 39.60 40.79
*Gross income with certain adjustments before taking itemized deductions and personal exemptions.
**Amount subject to federal income tax after itemized deductions and personal exemptions.
***This rate is applicable only in the limited case where your adjusted gross income is less than
$290,200 and your taxable income exceeds $250,000.
(1) No Phase-out -- Assumes no phase-out of itemized deductions or personal exemptions.
(2) Itemized Deductions Phase-out -- Assumes a single taxpayer has one personal exemption and joint
taxpayers have two personal exemptions.
(3) Itemized Deductions and Personal Exemption Phase-outs -- Assumes a single taxpayer has one personal
exemption, joint taxpayers have two personal exemptions and itemized deductions continue to phase-out.
If these assumptions do not apply to you, it will be necessary to construct your own personalized tax
equivalency table.
/TABLE
<PAGE>
PAGE 77
STEP 2: DETERMINING YOUR FEDERAL TAXABLE YIELD EQUIVALENTS
Using 33.15 percent, you may determine that a tax-exempt yield of 4
percent is equivalent to earning a taxable 5.98 percent yield.
<TABLE>
<CAPTION>
For these Tax-Exempt Rates:
___________________________________________________________________________
4.00% 4.50% 5.00% 5.50% 6.00% 6.50% 7.00% 7.50%
___________________________________________________________________________
Marginal Tax Rates Equal the Taxable Rates shown below:
________________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C> <C> <C> <C>
15.00% 4.71 5.29 5.88 6.47 7.06 7.65 8.24 8.82
28.00% 5.56 6.25 6.94 7.64 8.33 9.03 9.72 10.42
28.84% 5.62 6.32 7.03 7.73 8.43 9.13 9.84 10.54
31.00% 5.80 6.52 7.25 7.97 8.70 9.42 10.14 10.87
31.93% 5.88 6.61 7.35 8.08 8.81 9.55 10.28 11.02
32.54% 5.93 6.67 7.41 8.15 8.89 9.64 10.38 11.12
33.15% 5.98 6.73 7.48 8.23 8.98 9.72 10.47 11.22
36.00% 6.25 7.03 7.81 8.59 9.38 10.16 10.94 11.72
37.08% 6.36 7.15 7.95 8.74 9.54 10.33 11.13 11.92
37.79% 6.43 7.23 8.04 8.84 9.64 10.45 11.25 12.06
38.49% 6.50 7.32 8.13 8.94 9.75 10.57 11.38 12.19
39.60% 6.62 7.45 8.28 9.11 9.93 10.76 11.59 12.42
40.79% 6.76 7.60 8.44 9.29 10.13 10.98 11.82 12.67
41.56% 6.84 7.70 8.56 9.41 10.27 11.12 11.98 12.83
42.34% 6.94 7.80 8.67 9.54 10.41 11.27 12.14 13.01
________________________________________________________________________________________________________
</TABLE>
<PAGE>
PAGE 78
IDS SPECIAL TAX-EXEMPT SERIES TRUST
STATEMENT OF ADDITIONAL INFORMATION
FOR
IDS CALIFORNIA TAX-EXEMPT FUND
IDS MASSACHUSETTS TAX-EXEMPT FUND
IDS MICHIGAN TAX-EXEMPT FUND
IDS MINNESOTA TAX-EXEMPT FUND
IDS NEW YORK TAX-EXEMPT FUND
IDS OHIO TAX-EXEMPT FUND
Aug. 29, 1994
This Statement of Additional Information (SAI) is not a prospectus.
It should be read together with the funds' prospectus and the
financial statements contained in the funds' Annual Report which
may be obtained from your IDS personal financial planner or by
writing to IDS Shareholder Service, P.O. Box 534, Minneapolis, MN
55440-0534.
This SAI is dated Aug. 29, 1994 and it is to be used with the
funds' prospectus dated Aug. 29, 1994 and the funds' Annual Report
for the year ended June 30, 1994.
<PAGE>
PAGE 79
TABLE OF CONTENTS
Goals and Investment Policies........................See Prospectus
Additional Investment Policies................................p. 3
Portfolio Transactions........................................p. 5
Performance Information.......................................p. 7
Valuing Each Fund's Shares....................................p. 9
Investing in a Fund...........................................p. 10
Redeeming Shares..............................................p. 13
Pay-out Plans.................................................p. 14
Exchanges.....................................................p. 15
Capital Loss Carryover........................................p. 15
Taxes.........................................................p. 16
Agreements....................................................p. 17
Trustees and Officers.........................................p. 20
The Trusts....................................................p. 23
Custodian.....................................................p. 23
Independent Auditors..........................................p. 24
Financial Statements.............................See Annual Report
Prospectus....................................................p. 24
Appendix A: Description of Ratings of Tax-Exempt Securities
and Short-term Securities........................p. 25
Appendix B: Options and Interest Rate Futures Contracts......p. 29
Appendix C: State Risk Factors...............................p. 35
Appendix D: Dollar-Cost Averaging............................p. 47
<PAGE>
PAGE 80
ADDITIONAL INVESTMENT POLICIES
These are investment policies in addition to those presented in the
prospectus. Unless holders of a majority of the outstanding shares
agree to make the change each fund will not:
'Pledge or mortgage its assets beyond 15 percent of the cost of its
total assets. If a Fund were ever to do so, valuation of the
pledged or mortgaged assets would be based on market values. For
purposes of this restriction, collateral arrangements for margin
deposits on interest rate futures contracts are not deemed to be a
pledge of assets.
'Borrow money or property, except as a temporary measure for
extraordinary or emergency purposes, in an amount not exceeding
one-third of the market value of its total assets (including
borrowings) less liabilities (other than borrowings) immediately
after the borrowing. No Fund has borrowed in the past and does not
have any present intention to borrow.
'Make cash loans. Each Fund, however, may make short-term
investments up to 10 percent of its net assets in debt securities
where the sellers agree to repurchase the securities at cost plus
an agreed-upon interest rate within a specified time. No Fund
intends to invest more than 5 percent of its assets in repurchase
agreements.
'Invest in real estate, but it may invest in municipal bonds and
notes that are secured by real estate.
'Act as an underwriter (sell securities for others). However,
under the securities laws, a Fund may be deemed to be an
underwriter when it purchases securities directly from the issuer
and later resells them.
'Buy on margin or sell short, but it may enter into interest rate
futures contracts.
'Buy or sell commodities or commodity contracts, except it may
enter into interest rate futures contracts and make margin deposits
on such contracts.
'Invest in voting securities, securities of investment companies or
exploration or development programs, such as oil, gas or mineral
programs.
'Purchase securities of an issuer if the trustees and officers of a
fund or the directors and officers of IDS Financial Corporation
(IDS), hold more than a certain percentage of the issuer's
outstanding securities. The rule is this: the holdings of all
trustees and officers of a fund and the holdings of all directors
and officers of IDS who own more than 0.5 percent of an issuer's
securities are added together, and if in total they own more than 5
percent, the fund will not purchase securities of that issuer.
<PAGE>
PAGE 81
'Invest more than 5 percent of its total assets, at cost, in
securities whose issuer or guarantor of principal and interest,
including any predecessors, has been in operation for less than
three years.
'Make a loan of any part of its assets to IDS, to the directors and
officers of IDS or to its own trustees and officers.
'Lend portfolio securities in excess of 30% of its net assets, at
market value. This is a fundamental policy that may not be changed
without shareholder approval. The current policy of each fund's
trustees is to make these loans, either long- or short-term, to
broker-dealers. In making such loans the fund receives the market
price in cash, U.S. government securities, letters of credit or
such other collateral as permitted by regulatory agencies and
approved by the trustees. If a fund receives cash as collateral, a
fund will invest the cash collateral in short-term debt securities.
A fund reviews the market value of the loaned securities daily and
will get additional collateral if this value goes up. The risks
are the borrower may not provide additional collateral when
required or return the securities when due.
Unless changed by the trustees, each fund will not:
'Invest more than 10% of its net assets in securities and
derivative instruments that are illiquid. In determining the
liquidity of municipal lease obligations, the investment manager,
under guidelines established by the trustees, will consider the
essential nature of the lease property, the likelihood that the
municipality will continue appropriating funding for the leased
property, and other relevant factors related to the general credit
quality of the municipality and the marketability of the municipal
lease obligation.
In determining the liquidity of commercial paper issued in
transactions not involving a public offering under Section 4(2) of
the Securities Act of 1933, the investment manager, under
guidelines established by the trustees, will evaluate relevant
factors such as the issuer and the size and nature of its
commercial paper programs, the willingness and ability of the
issuer or dealer to repurchase the paper, and the nature of the
clearance and settlement procedures for the paper.
Each fund may invest up to 20% of its net assets in certain taxable
investments for temporary defensive purposes. It may purchase
short-term U.S. and Canadian government securities. It may invest
in bank obligations including negotiable certificates of deposit,
non-negotiable fixed time deposits, bankers' acceptances and
letters of credit. The issuing bank or savings and loan generally
must have capital, surplus and undivided profits (as of the date of
its most recently published annual financial statements) in excess
of $100 million (or the equivalent in the instance of a foreign
branch of a U.S. bank) at the date of investment. Each fund may
purchase short-term corporate notes and obligations rated in the
top two classifications by Moody's Investors Service, Inc.
<PAGE>
PAGE 82
(Moody's) or Standard & Poor's Corporation (S&P) or the equivalent.
It also may use repurchase agreements with broker-dealers
registered under the Securities Exchange Act of 1934 and with
commercial banks. Repurchase agreements involve investments in
debt securities where the seller (broker-dealer or bank) agrees to
repurchase the securities from a fund at cost plus an agreed to
interest rate within a specified time. A risk of a repurchase
agreement is that if the seller seeks the protection of the
bankruptcy laws, the fund's ability to liquidate the security
involved could be impaired, and it might subsequently incur a loss
if the value of the security declines or if the other party to a
repurchase agreement defaults on its obligation.
Each fund may purchase debt securities on a when-issued basis,
which means that it may take as long as 45 days after the purchase
before the securities are delivered to the fund. Payment and
interest terms, however, are fixed at the time the purchaser enters
into a commitment. Under normal market conditions, the fund does
not intend to commit more than 5% of its total assets to these
practices. A fund does not pay for the securities or start
earning interest on them until the contractual settlement date.
When-issued securities are subject to market fluctuations and they
may affect the fund's total assets the same as owned securities.
Each fund relies both on ratings assigned by credit agencies and on
the investment manager's credit analysis because credit agencies
may fail to reflect subsequent events on a timely basis and because
credit ratings do not evaluate market risk. With lower rated
securities, the achievement of each fund's investment objective may
be more dependent upon the investment manager's credit analysis
than is the case for higher quality securities.
For a description of ratings of tax-exempt securities and short-
term securities, see Appendix A. For a discussion on options and
interest rate futures contracts see Appendix B. See Appendix C for
a discussion of state risk factors.
PORTFOLIO TRANSACTIONS
Subject to policies set by the trustees, IDS is authorized to
determine, consistent with each fund's investment goal and
policies, which securities will be purchased, held or sold. In
determining where the buy and sell orders are to be placed, IDS has
been directed to use its best efforts to obtain the best available
price and the most favorable execution except where otherwise
authorized by the Trustees.
Normally, the funds' securities are traded on a principal rather
than an agency basis. In other words, IDS will trade directly with
the issuer or with a dealer who buys or sells for its own account,
rather than acting on behalf of another client. IDS does not pay
the dealer commissions. Instead, the dealer's profit, if any, is
the difference, or spread, between the dealer's purchase and sale
price for the security.
<PAGE>
PAGE 83
Each investment decision made for each fund is made independently
from any decision made for another fund in the IDS MUTUAL FUND
GROUP or other account advised by IDS or any IDS subsidiary. When
a fund buys or sells the same security as another fund or account,
IDS carries out the purchase or sale in a way the fund agrees in
advance is fair. Although sharing in large transactions may
adversely affect the price or volume purchased or sold by a fund,
the fund hopes to gain an overall advantage in execution.
On occasion, it may be desirable to compensate a broker for
research services or for brokerage services by paying a commission
that might not otherwise be charged or a commission in excess of
the amount another broker might charge. The board of Trustees has
adopted a policy authorizing IDS to do so to the extent authorized
by law, if IDS determines, in good faith, that such commission is
reasonable in relation to the value of the brokerage or research
services provided by a broker or dealer, viewed either in the light
of that transaction or IDS' overall responsibilities to the funds
in the IDS MUTUAL FUND GROUP.
Research provided by brokers supplements IDS' own research
activities. Such services include economic data on, and analysis
of, U.S. and foreign economies; information on specific industries;
information about specific companies, including earnings estimates;
purchase recommendations for stocks and bonds; portfolio strategy
services; political, economic, business and industry trend
assessments; historical statistical information; market data
services providing information on specific issues and prices; and
technical analysis of various aspects of the securities markets,
including technical charts. Research services may take the form of
written reports, computer software or personal contact by telephone
or at seminars or other meetings. IDS has obtained, and in the
future may obtain, computer hardware from brokers, including but
not limited to personal computers that will be used exclusively for
investment decision-making purposes, which include the research,
portfolio management and trading functions and other services to
the extent permitted under an interpretation by the Securities and
Exchange Commission.
For the fiscal years ending June 30, the Funds paid the following
brokerage commissions on financial futures contracts.
CA MA MI MN NY OH
1994 $-0- $-0- $-0- $3,850 $1,260 $-0-
1993 -0- -0- -0- -0- -0- -0-
1992 1,442 210 322 1,848 630 280
The Funds acquired no securities of their regular brokers or
dealers or of the parents of those brokers or dealers that derived
more than 15 percent of gross revenue from securities-related
activities during the fiscal year ended June 30, 1994.
<PAGE>
PAGE 84
The portfolio turnover rates for the fiscal years ended June 30
were as follows:
CA MA MI MN NY OH
1994 27% 6% 16% 13% 10% 11%
1993 5 0 2 2 0 0
PERFORMANCE INFORMATION
Each fund may quote various performance figures to illustrate past
performance. Average annual total return and current yield
quotations used by a fund are based on standardized methods of
computing performance as required by the SEC. An explanation of
the methods used by the fund to compute performance follows below.
Average annual total return
Each fund may calculate average annual total return for certain
periods by finding the average annual compounded rates of return
over the period that would equate the initial amount invested to
the ending redeemable value, according to the following formula:
P(1+T)n = ERV
where: P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $1,000
payment, made at the beginning of a period, at the
end of the period (or fractional portion thereof)
Aggregate total return
Each fund may calculate aggregate total return for certain periods
representing the cumulative change in the value of an investment in
the fund over a specified period of time according to the following
formula:
ERV - P
P
where: P = a hypothetical initial payment of $1,000
ERV = ending redeemable value of a hypothetical $1,000
payment, made at the beginning of a period, at the
end of the period (or fractional portion thereof)
Annualized yield
Each fund may calculate an annualized yield by dividing the net
investment income per share deemed earned during a 30-day period by
the public offering price per share (including the maximum sales
charge) on the last day of the period and annualizing the results.
<PAGE>
PAGE 85
Yield is calculated according to the following formula:
Yield = 2[(a-b + 1)6 - 1]
cd
where: a = dividends and interest earned during the period
b = expenses accrued for the period (net of
reimbursements)
c = the average daily number of shares outstanding
during the period that were entitled to receive
dividends
d = the maximum offering price per share on the last
day of the period
The following table gives an annualized yield quotation for each of
the funds:
30-Day Period
Fund Ended June 30, 1994 Yield
California 4.97%
Massachusetts 5.03
Michigan 4.73
Minnesota 5.10
New York 4.77
Ohio 5.04
___________________________________________________________________
Tax-Equivalent yield
Tax-equivalent yield is calculated by dividing that portion of the
yield (as calculated above) which is tax-exempt by one minus a
stated income tax rate and adding the result to that portion, if
any, of the yield that is not tax-exempt. The following table
shows the tax equivalent yield, based on federal but not state tax
rates, for the funds listed:
<TABLE>
<CAPTION>
Marginal
Income Tax Tax-Equivalent Yield
Bracket for 30-Day Period Ended June 30, 1994
California Massachusetts Michigan Minnesota New York Ohio
<C> <C> <C> <C> <C> <C> <C>
15.0% 5.85% 5.92% 5.56% 6.00% 5.61% 5.93%
28.0% 6.90 6.99 6.57 7.08 6.63 7.00
33.0% 7.42 7.51 7.06 7.61 7.12 7.52
</TABLE>
In its sales material and other communications, each fund may
quote, compare or refer to rankings, yields or returns as published
by independent statistical services or publishers and publications
such as The Bank Rate Monitor National Index, Barron's, Business
Week, Donoghue's Money Market Fund Report, Financial Services Week,
Financial Times, Financial World, Forbes, Fortune, Global Investor,
Institutional Investor, Investor's Daily, Kiplinger's Personal
Finance, Lipper Analytical Services, Money, Mutual Fund Forecaster,
Newsweek, The New York Times, Personal Investor, Stanger Report,
<PAGE>
PAGE 86
Sylvia Porter's Personal Finance, USA Today, U.S. News and World
Report, The Wall Street Journal and Wiesenberger Investment
Companies Service.
VALUING FUND SHARES
The value of an individual share is determined by using the net
asset value before shareholder transactions for the day. On July
1, 1994, the first business day following the end of the year, the
computation looked like this:
<TABLE>
<CAPTION>
Net assets before Shares outstanding Net asset value
Fund shareholder transactions at end of previous day of one share
<S> <C> <C> <C> <C> <C>
California $255,560,404 divided by 49,714,953 equals $5.13
Massachusetts 72,071,218 13,749,968 5.24
Michigan 76,682,318 14,320,277 5.36
Minnesota 408,801,729 79,123,225 5.16
New York 120,156,154 23,481,717 5.12
Ohio 71,835,655 13,661,035 5.26
</TABLE>
In determining net assets before shareholder transactions, each
fund's portfolio securities are valued as follows as of the close
of business of the New York Stock Exchange:
'Securities, except bonds, other than convertibles traded on a
securities exchange for which a last-quoted sales price is readily
available are valued at the last-quoted sales price on the exchange
where such security is primarily traded.
'Securities other than convertibles traded on a securities exchange
for which a last-quoted sales price is not readily available are
valued at the mean of the closing bid and asked prices, looking
first to the bid and asked prices on the exchange where the
security is primarily traded, and if none exists, to the over-the-
counter market.
'Securities included in the NASDAQ National Market System are
valued at the last-quoted sales price in this market.
'Securities included in the NASDAQ National Market System for which
a last-quoted sales price is not readily available, and other
securities traded over-the-counter but not included in the NASDAQ
National Market System are valued at the mean of the closing bid
and asked prices.
'Futures and options traded on major exchanges are valued at their
last-quoted sales price on their primary exchange.
'Short-term securities maturing more than 60 days from the
valuation date are valued at the readily available market price or
approximate market value based on current interest rates. Short-
term securities maturing in 60 days or less that originally had
maturities of more than 60 days at acquisition date are valued at
amortized cost using the market value on the 61st day before
maturity. Short-term securities maturing in 60 days or less at
acquisition date are valued at amortized cost. Amortized cost is
an approximation of market value determined by systematically <PAGE>
PAGE 87
increasing the carrying value of a security if acquired at a
discount, or systematically reducing the carrying value if acquired
at a premium, so that the carrying value is equal to the maturity
value on maturity date.
'Securities without a readily available market price, bonds other
than convertibles and other assets are valued at fair value, as
determined in good faith by the Trustees. The Trustees are
responsible for selecting methods they believe provide fair value.
When possible bonds are valued by a pricing service independent
from a fund. If a valuation of a bond is not available from a
pricing service, the bond will be valued by a dealer knowledgeable
about the bond if such a dealer is available.
The New York Stock Exchange, IDS and each of the funds will be
closed on the following holidays: New Year's Day, Presidents' Day,
Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day.
INVESTING IN A FUND
Sales Charge
Shares of the fund are sold at the public offering price determined
at the close of business on the day an application is accepted.
The public offering price is the net asset value of one share plus
a sales charge. The public offering price for an investment of
less than $50,000, made July 1, 1994, was determined as follows:
Net asset Divided by (1.00 Public
value of -0.05) for a offering
Fund one share sales charge price
California 5.13 / 0.95 = $5.40
Massachusetts 5.24 / 0.95 = 5.52
Michigan 5.36 / 0.95 = 5.64
Minnesota 5.16 / 0.95 = 5.43
New York 5.12 / 0.95 = 5.39
Ohio 5.26 / 0.95 = 5.53
The sales charge is paid to IDS Financial Services Inc. by the
person buying the shares.
<PAGE>
PAGE 88
Calculation of the Sales Charge
Sales charges are determined as follows:
<TABLE>
<CAPTION>
Within each increment,
sales charge as a
percentage of:
Public Net
Amount of Investment Offering Price Amount Invested
<S> <C> <C>
First $ 50,000 5.0% 5.26%
Next 50,000 4.5 4.71
Next 150,000 4.0 4.17
Next 250,000 3.0 3.09
Next 500,000 2.0 2.04
Next 2,000,000 1.0 1.01
More than 3,000,000 0.5 0.50
</TABLE>
Sales charges on an investment greater than $50,000 are calculated
for each increment separately and then totaled. The resulting
total sales charge, expressed as a percentage of the public
offering price and of the net amount invested, will vary depending
on the proportion of the investment at different sales charge
levels.
For example, compare an investment of $60,000 with an investment of
$85,000. The $60,000 investment is composed of $50,000 that incurs
a sales charge of $2,500 (5.0% x $50,000) and $10,000 that incurs a
sales charge of $450 (4.5% x $10,000). The total sales charge of
$2,950 is 4.92% of the public offering price and 5.17% of the net
amount invested.
In the case of the $85,000 investment, the first $50,000 also
incurs a sales charge of $2,500 (5.0% x $50,000) and $35,000 incurs
a sales charge of $1,575 (4.5% x $35,000). The total sales charge
of $4,075 is 4.79% of the public offering price and 5.04% of the
net amount invested.
The following table shows the range of sales charges as a
percentage of the public offering price and of the net amount
invested on total investments at each applicable level.
<TABLE>
<CAPTION>
On total investment, sales
charge as a percentage of
Public Net
Offering Price Amount Invested
Amount of Investment ranges from:
<S> <C> <C>
First $ 50,000 5.00% 5.26%
More than 50,000 to 100,000 5.00-4.75 5.26-4.99
More than 100,000 to 250,000 4.75-4.30 4.99-4.49
More than 250,000 to 500,000 4.30-3.65 4.49-3.79
More than 500,000 to 1,000,000 3.65-2.83 3.79-2.91
More than 1,000,000 to 3,000,000 2.83-1.61 2.91-1.63
More than 3,000,000 1.61-0.50 1.63-0.50
/TABLE
<PAGE>
PAGE 89
Reducing the Sales Charge
Sales charges are based on the total amount of your investments in
any of these funds. The amount of all prior investments plus any
new purchase is referred to as your "total amount invested." For
example, suppose you have made an investment of $20,000 and later
decide to invest $40,000 more. Your total amount invested would be
$60,000. As a result, $10,000 of your $40,000 investment qualifies
for the lower 4.5% sales charge that applies to investments of more
than $50,000 to $100,000.
The total amount invested includes any shares held in any of these
funds in the name of a member of your immediate family (spouse and
unmarried children under 21). For instance, if your spouse already
has invested $20,000 and you want to invest $40,000, your total
amount invested will be $60,000 and therefore you will pay the
lower charge of 4.5% on $10,000 of the $40,000.
Until a spouse remarries, the sales charge is waived for spouses
and unmarried children under 21 of deceased trustees, directors,
officers or employees of the fund or IDS or its subsidiaries and
deceased planners.
The total amount invested also includes any investment you or your
immediate family already have in the other publicly offered funds
in the IDS MUTUAL FUND GROUP where the investment is subject to a
sales charge. For example, suppose you already have a direct
investment of $25,000 in IDS Stock Fund and $5,000 in one of these
funds (IDS California Tax-Exempt Fund, IDS Massachusetts Tax-Exempt
Fund, IDS Michigan Tax-Exempt Fund, IDS Minnesota Tax-Exempt Fund,
IDS New York Tax-Exempt Fund or IDS Ohio Tax-Exempt Fund). If you
invest $40,000 more in one of these funds, your total amount
invested in the funds will be $70,000 and therefore $20,000 of your
$40,000 investment will incur a 4.5% sales charge.
Systematic Investment Programs
After you make your investment of $2,000 or more in a fund, you can
arrange to make additional payments of $100 or more in that fund on
a regular basis. These minimums do not apply to all systematic
investment programs. You decide how often you want to make
payments - monthly, quarterly or semiannually. You are not
obligated to make any payments. You can omit payments, or
discontinue the investment program altogether. A fund also can
change the program or end it at any time. If there is no
obligation, why do it? Putting money aside is an important part of
financial planning. With a systematic investment program, you have
a goal to work for.
How does this work? When you send in your payment, you money is
invested at the public offering price. Your regular investment
amount will purchase more shares when the net asset value per share
decreases, and fewer shares when the net asset value per share
increases. Each purchase is a separate transaction. After each
purchase your new shares will be added to your account. Shares
<PAGE>
PAGE 90
bought through these programs are exactly the same as any other
fund shares. They can be bought and sold at any time. A
systematic investment program is not an option or an absolute right
to buy shares.
The systematic investment program itself cannot ensure a profit,
nor can it protect against a loss in a declining market. If you
decide to discontinue the program and redeem your shares when their
net asset value is less than what you paid for them, you will incur
a loss.
For a discussion on dollar-cost averaging, see Appendix D.
Automatic Directed Dividends
Dividend and capital gain distributions, paid by another fund in
the IDS MUTUAL FUND GROUP subject to a sales charge may be used to
automatically purchase shares of any of these funds without paying
a sales charge. Dividends may be directed to existing accounts
only. Dividends declared by a fund are exchanged to one of these
funds the following day. Dividends can be exchanged into one fund
but cannot be split to make purchases in two or more funds.
Automatic directed dividends are available between accounts of any
ownership except:
'Between a non-custodial account and an IRA, or 401(k) plan account
or other qualified retirement account of which IDS Trust Company
acts as custodian;
'Between two IDS Trust Company custodial accounts with different
owners (for example, you may not exchange dividends from your IRA
to the IRA of your spouse);
'Between different kinds of custodial accounts with the same
ownership (for example, you may not exchange dividends from your
IRA to your 401(k) plan account, although you may exchange
dividends from one IRA to another IRA).
Moreover, dividends may be directed from accounts established under
the Uniform Gifts to Minors Act (UGMA) or Uniform Transfers to
Minors Act (UTMA) only into other UGMA or UTMA accounts with
identical ownership.
Each fund has a different investment goal described in its
prospectus along with other information, including fees and expense
ratios. Before exchanging dividends into another fund, you should
read its prospectus. You will receive a confirmation that the
automatic directed dividend service has been set up for your
account.
REDEEMING SHARES
You have a right to redeem your shares at any time. For an
explanation of redemption procedures, please see the prospectus.
<PAGE>
PAGE 91
During an emergency, the Trustees can suspend the computation of
net asset value, stop accepting payments for purchase of shares or
suspend the duty of a fund to redeem shares for more than seven
days. Such emergency situations would occur if:
'The New York Stock Exchange closes for reasons other than the
usual weekend and holiday closings or trading on the Exchange is
restricted, or
'Disposal of a fund's securities is not reasonably practicable or
it is not reasonably practicable for that fund to determine the
fair value of its net assets, or
'The Securities and Exchange Commission, under the provisions of
the Investment Company Act of 1940, as amended, declares a period
of emergency to exist.
Should a fund stop selling shares, the Trustees may make a
deduction from the value of the assets held by that fund to cover
the cost of future liquidations of the assets so as to distribute
fairly these costs among all shareholders.
PAY-OUT PLANS
You can use any of several pay-out plans to redeem your investment
in regular installments at no extra cost. While the plans differ
on how the pay-out is figured, they all are based on the redemption
of your investment. Net investment income dividends and any
capital gain distributions will automatically be reinvested, unless
you elect to receive them in cash.
IDS normally will not accept an application for a systematic
investment in any fund in the IDS MUTUAL FUND GROUP subject to a
sales charge while a pay-out plan for any of those funds is in
effect. Occasional investments, however, may be accepted.
To start any of these plans, submit an authorization form supplied
by IDS Shareholder Service. For a copy, write or call IDS
Shareholder Service, P.O. Box 534, Minneapolis, MN 55440-0534,
612-671-3733. Your authorization must be received in the
Minneapolis headquarters at least five days before the date you
want your payments to begin. The initial payment must be at least
$50. Payments will be made on a monthly, bimonthly, quarterly,
semiannual or annual basis. Your choice is effective until you
change or cancel it.
The following pay-out plans are designed to take care of the needs
of most shareholders in a way IDS can handle efficiently and at a
reasonable cost. If you need a more irregular schedule of
payments, it may be necessary for you to make a series of
individual redemptions, in which case you will have to send in a
separate redemption request for each pay-out. Each fund reserves
the right to change or stop any pay-out plan and to stop making
such plans available.
<PAGE>
PAGE 92
Plan #1: Pay-out for a fixed period of time
If you choose this plan, a varying number of shares will be
redeemed at net asset value at regular intervals during the time
period you choose. This plan is designed to end in complete
redemption of all shares in your account by the end of the fixed
period.
Plan #2: Redemption of a fixed number of shares
If you choose this plan, a fixed number of shares will be redeemed
at net asset value for each payment and that amount will be sent to
you. The length of time these payments continue is based on the
number of shares in the account.
Plan #3: Redemption of a fixed dollar amount
If you decide on a fixed dollar amount, whatever number of shares
is necessary to make the payment will be redeemed in regular
installments until your account is closed.
Plan #4: Redemption of a percentage of net asset value
Payments are made based on a fixed percentage of the net asset
value of the shares in your account computed on the day of each
payment. Percentages range from 0.25% to 0.75%. For example, if
you are on this plan and arrange to take 0.5% each month, you will
get $50 if the value of your account is $10,000 on the payment
date.
EXCHANGES
If you buy shares in one of the funds and then exchange into
another fund, it is considered a sale and subsequent purchase of
shares. Under tax laws, if this exchange is done within 91 days,
any sales charge waived on a subsequent purchase of shares applies
to the new shares acquired in the exchange. Therefore, you cannot
create a tax loss or reduce a tax gain attributable to the sales
charge when exchanging shares within 91 days.
CAPITAL LOSS CARRYOVER
For federal income tax purposes, IDS California, Massachusetts,
Michigan, Minnesota, New York and Ohio Tax-Exempt Fund's had total
capital loss carryovers of $3,420,653, $199,063, $156,952,
$2,753,600, $1,267,843, and $185,465, respectively, at June 30,
1994, that if not offset by subsequent capital gains will expire as
set-out below:
Fund 1996 1997 1998 1999
California $311,803 $ 29,089
Massachusetts $133,727
Michigan
Minnesota 764,634
New York 284,215 106,387
Ohio
<PAGE>
PAGE 93
Fund 2000 2001 2002
California $3,079,761
Massachusetts $ 6,932 $ 25,326 33,078
Michigan 156,952
Minnesota 361,841 1,627,125
New York 32,265 22,639 822,337
Ohio 185,465
It is unlikely that the board of directors will authorize a
distribution of any net realized capital gains until the available
capital loss carryover has been offset or has expired except as
required by Internal Revenue Service rules.
TAXES
All distributions of net investment income during the year will
have the same percentage designated as tax-exempt. This annual
percentage is expected to be substantially the same as the
percentage of tax-exempt income actually earned during any
particular distribution period.
For the fiscal year ended June 30, 1994, 100% of the income
distributions for California, Massachusetts, Michigan, Minnesota,
New York and Ohio were designated as exempt from federal income
tax. In addition 100% of exempt interest distributions were
derived from interest on municipal securities for California,
Massachusetts, Minnesota, New York and Ohio whereas Michigan had
99% of exempt interest distributed on municipal securities.
State law determines whether interest income on a particular
municipal bond is tax-exempt for state tax purposes. Each fund
will tell you the percentage of interest income from municipal
bonds it received during the year.
Each shareholder should consult a tax adviser about reporting
income for local tax purposes.
Capital gain distributions received by individual and corporate
shareholders should be treated as long-term capital gains
regardless of how long they owned their shares. Short-term capital
gains earned by the fund are paid to shareholders as part of their
ordinary income dividend and are taxable.
If you are a "substantial user" (or related person) of facilities
financed by industrial development bonds, you should consult your
tax adviser before investing. The income from such bonds may not
be tax-exempt for you.
Interest on private activity bonds generally issued after August
1986 is a preference item for purposes on the individual and
corporate alternative minimum taxes. "Private-activity" (non-
governmental purpose) municipal bonds include industrial revenue
bonds, student loan bonds and multi-and single-family housing
bonds. An exception is made for private-activity bonds issued for
qualified--501(c)(3)--organizations, including non-profit colleges,
<PAGE>
PAGE 94
universities and hospitals. These bonds will continue to be tax-
exempt and will not be subject to the alternative minimum tax for
individuals. To the extent a fund earns income subject to the
alternative minimum tax, it will flow through to that fund's
shareholders and may subject some shareholders, depending on their
tax status, to the alternative minimum tax. Each fund reports the
percentage of income earned from these bonds to shareholders with
their other tax information.
Under federal tax law, and an election made by each fund under
federal tax rules, by the end of a calendar year each fund must
declare and pay dividends representing, 98% of ordinary income
through Dec. 31 and 98% of net capital gains (both long-term and
short-term) for the 12-month period ending Oct. 31 of that calendar
year. Each fund is subject to an excise tax equal to 4% of the
excess, if any, of the amount required to be distributed over the
amount actually distributed. Each fund intends to comply with
federal tax law and avoid any excise tax.
This is a brief summary that relates to federal income taxation
only. Shareholders should consult their tax adviser for more
complete information as the application of federal, state and local
income tax laws to fund distributions.
AGREEMENTS
Investment Management and Services Agreement
The funds have an Investment and Management and Services Agreement
with IDS. For its services, IDS is paid a fee composed of an asset
charge in two parts. The first part, the group asset charge, is
based on the combined daily net assets of all funds in the IDS
MUTUAL FUND GROUP, except the money market funds, including any new
fund that may be organized in the future. The daily rate of the
group asset charge is based on the following schedule:
Group Asset Charge
Group assets Annual rate at Effective
(billions) each asset level annual rate
First $5 0.460% 0.460%
Next $5 0.440 0.450
Next $5 0.420 0.440
Next $5 0.400 0.430
Next $5 0.390 0.422
Next $5 0.380 0.415
Next $5 0.360 0.407
Next $5 0.350 0.400
Next $5 0.340 0.393
Next $5 0.330 0.387
Over $50 0.320
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PAGE 95
The aggregate net assets of all non-money market funds in the IDS
MUTUAL FUND GROUP were $43,022,106,256 on June 30, 1994, and the
daily rate applied to the funds' assets was equal to approximately
0.40% on an annual basis.
The second part of the asset charge is calculated at an annual rate
of 0.13% and is based on the unique characteristics of each of
these funds alone, including each fund's use of services provided
by IDS in the areas of investment research, portfolio management,
investment services and fund accounting. The total fee is
calculated for each calendar day on the basis of net assets as of
the close of business two business days prior to the day for which
the calculation is made.
The management fee is paid monthly. The table below shows the
total amount paid by each fund over the past three fiscal years.
Fiscal Year Ended June 30,
Fund 1992 1993 1994
California $1,114,190 $1,292,626 $1,418,804
Massachusetts 189,795 288,822 377,077
Michigan 258,584 334,048 405,578
Minnesota 1,478,887 1,913,496 2,227,969
New York 472,912 567,263 648,514
Ohio 215,667 294,453 381,106
Under the current Agreement, the funds also pay taxes, brokerage
commissions and nonadvisory expenses that include custodian fees;
audit and certain legal fees; cost of prospectuses, proxies and
reports sent to shareholders; fidelity bond premiums; registration
fees for shares; fund office expenses; consultants' fees;
compensation of Trustees, officers and employees; corporate filing
fees; organizational expenses; Investment Company Institute dues;
expenses incurred in connection with lending portfolio securities
of the funds; and expenses properly payable by the funds, approved
by the Trustees. The table below shows total nonadvisory expenses
paid by each fund over the past three fiscal years.
Fiscal Year Ended June 30,
Fund 1992 1993 1994
California $ 97,528 $ 87,327 $ 82,545
Massachusetts 33,042 45,673 52,628
Michigan 26,931 43,191 40,366
Minnesota 91,681 172,869 229,572
New York 36,400 46,905 51,629
Ohio 32,498 30,732 40,747
Transfer Agency Agreement
The Funds have a Transfer Agency Agreement with IDS. This
agreement governs IDS' responsibility for administering and/or
performing transfer agent functions, for acting as service agent in
connection with dividend and distribution functions and for
performing shareholder account administration agent functions in
connection with the issuance, exchange and redemption or repurchase
<PAGE>
PAGE 96
of each Fund's shares. Under the agreement, IDS will earn a fee
from each Fund determined by multiplying the number of shareholder
accounts at the end of the day by a rate of $15.50 per year and
dividing by the number of days in the year. The fees paid to IDS
may be changed from time to time upon agreement of the parties
without shareholder approval. The Funds paid the following fees
for the fiscal year ended June 30, 1994:
California $104,864
Massachusetts 47,474
Michigan 41,235
Minnesota 248,181
New York 72,277
Ohio 40,107
Distribution Agreement
Under a Distribution Agreement, sales charges deducted for
distributing Fund shares are paid to IDS Financial Services Inc.
daily. Line one of the following table shows total sales charges
collected. Line two shows the amounts retained by IDS Financial
Services Inc. for the past three fiscal years ending June 30.
<TABLE>
<CAPTION>
Year California Massachusetts Michigan Minnesota New York Ohio
<S> <C> <C> <C> <C> <C> <C>
1992 (1) $1,453,718 $672,533 $493,246 $2,906,844 $638,700 $450,254
(2) 513,760 233,749 173,551 1,023,870 227,161 158,439
1993 (1) 1,429,331 915,161 610,586 3,248,432 820,465 620,667
(2) 501,684 328,492 213,345 1,145,154 283,310 214,778
1994 (1) 1,177,341 867,225 560,739 2,458,058 728,241 593,137
(2) 414,319 271,784 194,612 863,376 260,045 205,291
</TABLE>
Additional information about commissions and compensation for the
fiscal year ended June 30, 1994, is contained in the following
table:
<TABLE>
<CAPTION>
(1) (2) (3) (4) (5)
Net Compensation
Name of Underwriting on Redemption
Principal Discounts and and Brokerage Other
Fund Underwriter Commissions Repurchases Commissions Compensation*
<S> <C> <C> <C> <C> <C>
California IDS Financial
Services Inc. $1,177,341 None None $41,568
Massachusetts IDS Financial
Services Inc. 867,225 None None 18,719
Michigan IDS Financial
Services Inc. 560,739 None None 16,271
Minnesota IDS Financial
Services Inc. 2,458,058 $1,968 None 97,718
New York IDS Financial
Services Inc. 728,241 None None 29,229
Ohio IDS Financial
Services Inc. 593,137 None None 15,702
</TABLE>
<PAGE>
PAGE 97
*Distribution fees paid pursuant to the Plan and Supplemental
Agreement of Distribution.
Plan and Supplemental Agreement of Distribution
To help IDS defray the cost of distribution and servicing, not
covered by sales charges received under the Distribution Agreement,
the Funds and IDS entered into a Plan and Supplemental Agreement of
Distribution (Plan). These costs relate to most aspects of
distributing each Fund's shares including IDS' overhead expenses.
These costs do not include compensation to the sales force. A
substantial portion of the costs are not specifically identified to
any one fund in the IDS MUTUAL FUND GROUP. Under the Plan, IDS is
paid a fee determined by multiplying the number of shareholder
accounts at the end of each day by a rate of $6 per year and
dividing by the number of days in the year.
The Plan must be approved annually by the Trustees including a
majority of the disinterested Trustees, if it is to continue for
more than a year. At least quarterly, the Trustees must review
written reports concerning the amounts expended under the Plan and
the purposes for which such expenditures were made. The Plan and
any agreement related to it may be terminated at any time by vote
of a majority of Trustees who are not interested persons of the
Trusts and have no direct or indirect financial interest in the
operation of the Plan or in any agreement related to the Plan, or
by vote of a majority of the outstanding voting securities of the
Funds or by IDS.
The Plan (or any agreement related to it) shall terminate in the
event of its assignment as that term is defined in the Investment
Company Act of 1940, as amended. The Plan may not be amended to
increase the amount to be spent for distribution without
shareholders' approval, and all material amendments to the Plan
must be approved by a majority of Trustees, including a majority of
Trustees who are not interested persons of the Trusts and who do
not have a financial interest in the operation of the Plan or any
agreement related to it. The selection and nomination of such
disinterested Trustees is the responsibility of such disinterested
Trustees. No interested person of the Trusts, and no Trustee who
is not an interested person, has any direct or indirect financial
interest in the operation of the Plan or any related agreement.
TRUSTEES AND OFFICERS
The following is a list of the fund's trustees who, except for Mr.
Dudley, are directors of all other funds in the IDS MUTUAL FUND
GROUP. Mr. Dudley is a director of all publicly offered funds.
All shares have cumulative voting rights when voting on the
election of directors.
<PAGE>
PAGE 98
Lynne V. Cheney'
American Enterprise Institute
for Public Policy Research (AEI)
1150 17th St., N.W.
Washington, D.C.
Distinguished Fellow AEI. Former Chair of National Endowment of
the Humanities. Director, The Reader's Digest Association Inc.,
Lockhead Corporation, and the Interpublic Group of Companies, Inc.
(advertising).
William H. Dudley+**
2900 IDS Tower
Minneapolis, MN
Executive vice president and director of IDS.
Robert F. Froehlke+
901 S. Marquette Ave.
Minneapolis, MN
Former president of all funds in the IDS MUTUAL FUND GROUP.
Director, the ICI Mutual Insurance Co., Institute for Defense
Analyses, Marshall Erdman and Associates, Inc. (architectual
engineering) and Public Oversight Board of the American Institute
of Certified Public Accountants.
David R. Hubers**
2900 IDS Tower
Minneapolis, MN
President, chief executive officer and director of IDS.
Previously, senior vice president, finance and chief financial
officer of IDS.
Anne P. Jones***
Sutherland, Asbill & Brennan
1275 Pennsylvania Ave., N.W.
Washington, D.C.
Partner, law firm of Sutherland, Asbill & Brennan. Director,
Motorola, Inc. and C-Cor Electronics, Inc.
Donald M. Kendall'
PepsiCo, Inc.
Purchase, NY
Former chairman and chief executive officer, PepsiCo, Inc.
<PAGE>
PAGE 99
Melvin R. Laird
Reader's Digest Association, Inc.
1730 Rhode Island Ave., N.W.
Washington, D.C.
Senior counsellor for national and international affairs, The
Reader's Digest Association, Inc. Chairman of the board, COMSAT
Corporation, former nine-term congressman, secretary of defense and
presidential counsellor. Director, Martin Marietta Corp.,
Metropolitan Life Insurance Co., The Reader's Digest Association,
Inc., Science Applications International Corp., Wallace Reader's
Digest funds and Public Oversight Board (SEC Practice Section,
American Institute of Certified Public Accountants).
Lewis W. Lehr'
3050 Minnesota World Trade Center
30 E. Seventh St.
St. Paul, MN
Former chairman of the board and chief executive officer, Minnesota
Mining and Manufacturing Company (3M). Director, Jack Eckerd
Corporation (drugstores). Advisory Director, Peregrine Inc.
(microelectronics).
William R. Pearce+*
901 S. Marquette Ave.
Minneapolis, MN
President of all funds in the IDS MUTUAL FUND GROUP since June
1993. Former vice chairman of the board, Cargill, Incorporated
(commodity merchants and processors).
Edson W. Spencer+'
840 TCF Tower
Minneapolis, MN
President, Spencer Associates Inc. (consulting). Chairman of the
board, Mayo Foundation (healthcare). Former chairman of the board
and chief executive officer, Honeywell Inc. Director, Boise
Cascade Corporation (forest products) and CBS Inc. Member of
International Advisory Councils, Robert Bosch (Germany) and NEC
(Japan).
John R. Thomas**
2900 IDS Tower
Minneapolis, MN
Senior vice president and director of IDS.
Wheelock Whitney+
1900 Foshay Tower
821 Marquette Ave.
Minneapolis, MN
Chairman, Whitney Management Company (manages family assets).
<PAGE>
PAGE 100
+ Member of executive committee.
' Member of joint audit committee.
* Interested person by reason of being an officer and employee of
the fund.
**Interested person by reason of being an officer,
director/trustee, employee and/or shareholder of IDS or American
Express.
***Interested person by reason of being a partner in a law firm
that has represented IDS or its subsidiaries.
The board also has appointed officers who are responsible for day-
to-day business decisions based on policies it has established.
Besides Mr. Pearce, who is president, the fund's other officer is:
Leslie L. Ogg
901 S. Marquette Ave.
Minneapolis, MN
Vice president of all funds in the IDS MUTUAL FUND GROUP and
general counsel and treasurer of the publicly offered funds.
On June 30, 1994, the fund's trustees and officers as a group owned
less than 1% of the outstanding shares of each fund. During the
fiscal year ended June 30, 1994, no trustee or officer earned more
than $60,000 from the California, Massachusetts, Michigan,
Minnesota, New York and Ohio funds, respectively. Column A
illustrates the amount all trustees and officers as a group earned
from each fund; column B details their retirement plan expenses.
A B
California $ 8,683 $2,243
Massachusetts 4,288 1,640
Michigan 6,427 1,800
Minnesota 13,711 3,928
New York 7,262 1,800
Ohio 6,902 1,800
THE TRUSTS
The Trusts are entities of the type commonly known as Massachusetts
business trusts. Under Massachusetts law, shareholders of such a
trust may, under certain circumstances, be held personally liable
as partners for its obligations. However, the risk of a
shareholder incurring financial loss on account of shareholder
liability is limited to circumstances in which the Trust itself is
unable to meet its obligations.
CUSTODIAN
The fund's securities and cash are held by First Bank National
Association, 180 E. Fifth St., St. Paul, MN 55101-1631, through a
custodian agreement. The custodian is permitted to deposit some or
all of its securities in central depository systems as allowed by
federal law.
<PAGE>
PAGE 101
INDEPENDENT AUDITORS
The funds' financial statements contained in their Annual Report to
shareholders, for the fiscal year ended June 30, 1994, were audited
by independent auditors, KPMG Peat Marwick, 4200 Norwest Center, 90
S. Seventh St., Minneapolis, MN 55402-3900. The independent
auditors also provide other accounting and tax-related services as
requested by the funds.
FINANCIAL STATEMENTS
The Auditors' Report and the Financial Statements, including Notes
to the Financial Statements and the Schedule of Investments in
Securities, contained in the 1994 Annual Reports to IDS California
Tax-Exempt Fund, IDS Massachusetts Tax-Exempt Fund, IDS Michigan
Tax-Exempt Fund, IDS Minnesota Tax-Exempt Fund, IDS New York Tax-
Exempt Fund and IDS Ohio Tax-Exempt Fund shareholders, pursuant to
Section 30(d) of the Investment Company Act of 1940, as amended,
are hereby incorporated in this SAI by reference. No other portion
of the Annual Report, however, is incorporated by reference.
PROSPECTUS
The prospectus dated Aug. 29, 1994, is hereby incorporated in this
SAI by reference.
<PAGE>
PAGE 102
APPENDIX A
DESCRIPTION OF RATINGS OF TAX-EXEMPT SECURITIES AND SHORT-TERM
SECURITIES
Tax-Exempt Securities
Tax-exempt securities are used to raise money for various public
purposes, such as constructing public facilities and making loans
to public institutions. Certain types of tax-exempt bonds are
issued to obtain funding for privately operated facilities. There
are two principal classifications of municipal securities: notes
and bonds. Notes are used generally to provide for short-term
capital needs and generally have a maturity of up to one year.
These include tax anticipation notes, revenue anticipation notes,
bond anticipation notes, construction loan notes, variable rate
demand notes and tax-exempt commercial paper (also known as
municipal paper). Bonds, which meet longer-term capital needs,
generally have maturities of more than one year and fall into one
of two categories. General obligation bonds are backed by the
taxing power of the issuing municipality and are considered the
safest type of municipal bond. Revenue bonds are payable only from
the revenues of a particular project or facility and are generally
dependent solely on a specific revenue source. Industrial
development bonds are a specific type of revenue bond backed by the
credit and security of a private user.
The ratings concern the quality of the issuer. They are not an
opinion of the market value of the security. Such ratings are
opinions on whether the principal and interest will be repaid when
due. A security's rating may change which could affect its price.
Ratings by Moody's Investors Service, Inc. (Moody's) are Aaa, Aa,
A, Baa, Ba, B, Caa, Ca, C and D. Standard & Poor's Corporation
(S&P) ratings are AAA, AA, A, BBB, BB, B, CCC, CC, C and D.
Securities rated Aaa and AAA are judged to be of the best quality.
Interest and principal are secure. Prices are responsive only to
interest rate fluctuations.
Securities rated Aa and AA also are judged to be high-grade
although margins of protection for interest and principal may not
be quite as good as Aaa or AAA rated securities. Long-term risk
may appear greater than the Aaa or AAA group. Prices are primarily
responsive to interest rate fluctuations.
Securities rated A are considered upper-medium grade. Protection
for interest and principal are deemed adequate but susceptible to
future impairment. The market prices of such obligations move
primarily with interest rate fluctuations but also with changing
economic or trade conditions.
Securities rated Baa and BBB are considered upper-medium-grade
obligations. Protection for interest and principal is adequate
over the short term; however, these obligations have certain
speculative characteristics. They are susceptible to changing
<PAGE>
PAGE 103
economic conditions and require constant review. Such bonds are
more responsive to business and trade conditions than to interest
rate fluctuations.
Securities rated Ba and BB are considered to have speculative
elements. Their future cannot be considered well assured. The
protection of interest and principal payments may be very moderate
and not well safeguarded during future good and bad times.
Uncertainty of position characterizes these bonds.
Securities rated B or lower lack characteristics of more desirable
investments. There may be small assurance over any long period of
time of the payment of interest and principal or of the maintenance
of other contract terms. Some of these bonds are of poor standing
and may be in default or have other marked shortcomings.
Bonds rated Caa and CCC are of poor standing. Such issues may be
in default or there may be elements of danger with respect to
principal or interest.
Bonds rated Ca and CC represent obligations that are highly
speculative. Such issues are often in default or have other marked
shortcomings.
Bonds rated C are obligations with a higher degree of speculation.
These securities have major risk exposures to default.
Bonds rated D are in payment default. The D rating is used when
interest payments or principal payments are not made on the due
date.
Non-rated securities will be considered for investment when they
possess a risk comparable to that of rated securities consistent
with fund objectives and policies. When assessing the risk
involved in each nonrated security, the funds will consider the
financial condition of the issuer or the protection afforded by the
terms of the security.
Short-term Tax-exempt Securities
A portion of each fund's assets are in cash and short-term
securities for day-to-day operating purposes. The investments will
usually be in short-term municipal bonds and notes. These include:
(1) Tax anticipation notes sold to finance working capital needs
of municipalities in anticipation of receiving taxes on a future
date.
(2) Bond anticipation notes sold on an interim basis in
anticipation of a municipality issuing a longer term bond in the
future.
(3) Revenue anticipation notes issued in anticipation of revenues
from sources other than taxes, such as federal revenues available
under the Federal Revenue Sharing Program.
<PAGE>
PAGE 104
(4) Tax and revenue anticipation notes issued in anticipation of
revenues from taxes and other sources of revenue, except bond
placements.
(5) Construction loan notes insured by the Federal Housing
Administration which remain outstanding until permanent financing
by the Federal National Mortgage Association (FNMA) or the
Government National Mortgage Association (GNMA) at the end of the
project construction period.
(6) Tax-exempt commercial paper with a stated maturity of 365 days
or less issued by agencies of state and local governments to
finance seasonal working capital needs or as short-term financing
in anticipation of longer-term financing.
(7) Variable rate demand notes, on which the yield is adjusted at
periodic intervals not exceeding 31 days and on which the principal
may be repaid after not more than seven days' notice, are
considered short-term regardless of the stated maturity.
Short-term municipal bonds and notes are rated by Moody's and by
S&P. The ratings reflect the liquidity concerns and market access
risks unique to notes.
Moody's MIG 1/VMIG 1 indicates the best quality. There is present
strong protection by established cash flows, superior liquidity
support or demonstrated broad-based access to the market for
refinancing.
Moody's MIG 2/VMIG 2 indicates high quality. Margins of protection
are ample although not so large as in the preceding group.
Moody's MIG 3/VMIG 3 indicates favorable quality. All security
elements are accounted for but there is lacking the undeniable
strength of the preceding grades. Liquidity and cash flow
protection may be narrow and market access for refinancing is
likely to be less well established.
Moody's MIG 4/VMIG 4 indicates adequate quality. Protection
commonly regarded as required of an investment security is present
and although not distinctly or predominantly speculative, there is
specific risk.
Standard & Poor's rating SP-1 indicates very strong or strong
capacity to pay principal and interest. Those issues determined to
possess overwhelming safety characteristics will be given a plus
(+) designation.
Standard & Poor's rating SP-2 indicates satisfactory capacity to
pay principal and interest.
Standard & Poor's rating SP-3 indicates speculative capacity to pay
principal and interest.
<PAGE>
PAGE 105
Short-term Taxable Securities and Repurchase Agreements
Depending on market conditions, a portion of each fund's
investments may be in short-term taxable securities. These
include:
(1) Obligations of the U.S. government, its agencies and
instrumentalities resulting principally from lending programs of
the U.S. government;
(2) U.S. Treasury bills with maturities up to one year. The
difference between the purchase price and the maturity value or
resale price is the interest income to the fund;
(3) Certificates of deposit or receipts with fixed interest rates
issued by banks in exchange for deposit of funds;
(4) Bankers' acceptances arising from short-term credit
arrangements designed to enable businesses to obtain funds to
finance commercial transactions;
(5) Letters of credit which are short-term notes issued in bearer
form with a bank letter of credit obligating the bank to pay the
bearer the amount of the note;
(6) Commercial paper rated in the two highest grades by Moody's or
S&P. Commercial paper is generally defined as unsecured short-term
notes issued in bearer form by large well-known corporations and
finance companies. These ratings reflect a review of management,
economic evaluation of the industry competition, liquidity, long-
term debt and ten-year earning trends;
Moody's rating Prime-1 (P-1) and Standard & Poor's rating A-1
indicate that the degree of safety regarding timely payment of
short-term promissory obligations is either overwhelming or very
strong.
Moody's rating Prime-2 (P-2) and Standard & Poor's rating A-2
indicate that capacity for timely payment of short-term promissory
obligations with this designation is strong.
(7) Repurchase agreements involving acquisition of securities by a
fund with a concurrent agreement by the seller, usually a bank or
securities dealer, to reacquire the securities at cost plus
interest within a specified time. From this investment, a fund
receives a fixed rate of return that is insulated from market rate
changes while it holds the security.
<PAGE>
PAGE 106
APPENDIX B
OPTIONS AND INTEREST RATE FUTURES CONTRACTS
Each fund may buy or write options traded on any U.S. exchange or
in the over-the-counter market. Each fund may enter into interest
rate futures contracts traded on any U.S. exchange. Each fund also
may buy or write put and call options on these futures. Bond
options in the over-the-counter market will be purchased only when
the investment manager believes a liquid secondary market exists
for the options and only from dealers and institutions the
investment manager believes present a minimal credit risk. Some
options are exercisable only on a specific date. In that case, or
if a liquid secondary market does not exist, a fund could be
required to buy or sell securities at disadvantageous prices,
thereby incurring losses. There is no limit on the use of
derivatives.
OPTIONS. An option is a contract. A person who buys a call option
for a security has the right to buy the security at a set price for
the length of the contract. A person who sells a call option is
called a writer. The writer of a call option agrees to sell the
security at the set price when the buyer wants to exercise the
option, no matter what the market price of the security is at that
time. A person who buys a put option has the right to sell a stock
at a set price for the length of the contract. A person who writes
a put option agrees to buy the security at the set price if the
purchaser wants to exercise the option, no matter what the market
price of the security is at that time. An option is covered if the
writer owns the security (in the case of a call) or sets aside the
cash (in the case of a put) that would be required upon exercise.
The price paid by the buyer for an option is called a premium. In
addition the buyer generally pays a broker a commission. The
writer receives a premium, less a commission, at the time the
option is written. The cash received is retained by the writer
whether or not the option is exercised. A writer of a call option
may have to sell the security for less than the market price if the
market price rises above the exercise price. A writer of a put
option may have to pay an above-market price for the security if
the market price decreases below the exercise price.
Options can be used to produce incremental earnings, protect gains
and facilitate buying and selling securities for investment
reasons. The use of options and futures contracts may benefit a
fund and its shareholders by improving the fund's liquidity and by
helping to stabilize the value of its net assets.
Buying options. Put and call options may be used as a trading
technique to facilitate buying and selling securities for
investment reasons. They also may be used for investment. Options
are used as a trading technique to take advantage of any disparity
between the price of the underlying security in the security market
and its price on the options market. It is anticipated the trading
<PAGE>
PAGE 107
technique will be utilized only to effect a security transaction
when the price of the security plus the option price will be as
good or better than the price at which the stock could be bought or
sold directly. When the option is purchased, a fund pays a premium
and a commission. It then pays a second commission on the purchase
or sale of the underlying security when the option is exercised.
For record keeping and tax purposes, the price obtained on the
purchase of the underlying security will be the combination of the
exercise price, the premium and both commissions. When using
options as a trading technique, commissions on the option will be
set as if only the underlying securities were traded.
Put and call options also may be held by a fund for investment
purposes. Options permit a fund to experience the change in the
value of a security with a relatively small initial cash
investment. The risk a fund assumes when it buys an option is the
loss of the premium. To be beneficial to a fund, the price of the
underlying security must change within the time set by the option
contract. Furthermore, the change must be sufficient to cover the
premium paid, the commissions paid both in the acquisition of the
option and in a closing transaction or in the exercise of the
option and subsequent sale (in the case of a call) or purchase (in
the case of a put) of the underlying security. Even then the price
change in the underlying security does not ensure a profit since
prices in the option market may not reflect such a change.
Writing covered options. Each fund will write covered options when
it feels it is appropriate and will follow these guidelines:
'Underlying securities will continue to be bought or sold solely on
the basis of investment considerations consistent with that fund's
goal.
'All options written by a fund will be covered. For covered call
options if a decision is made to sell the security, that fund will
attempt to terminate the option contract through a closing purchase
transaction.
'Each fund will write options only as permitted under federal or
state laws or regulations, such as those that limit the amount of
total assets subject to the options. While no limit has been set
by the funds, it will conform to the requirements of those states.
For example, California limits the writing of options to 50% of the
assets of a fund. Some regulations also affect the Custodian.
When a covered call option is written, the Custodian segregates the
underlying securities and issues a receipt. These are certain
rules regarding banks issuing such receipts that may restrict the
amount of covered call options written. Furthermore, each fund is
limited to pledging not more than 15% of the cost of its total
assets.
Net premiums on call options closed or premiums on expired call
options are treated as short-term capital gains. Since each fund
is taxed as a regulated investment company under the Internal
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Revenue Code, any gains on options and other securities held less
than three months must be limited to less than 30% of its annual
gross income.
If a covered call option is exercised, the security is sold by that
fund. The fund will recognize a capital gain or loss based upon
the difference between the proceeds and the security's basis.
Options on many securities are listed on options exchanges. If a
fund writes listed options, it will follow the rules of the options
exchange. Options are valued at the close of the New York Stock
Exchange. An option listed on a national exchange or NASDAQ will
be valued at the last quoted sales price or, if such a price is not
readily available, at the mean of the last bid and asked prices.
FUTURES CONTRACTS. A futures contract is an agreement between two
parties to buy and sell a security for a set price on a future
date. They have been established by boards of trade which have
been designated contracts markets by the Commodity Futures Trading
Commission (CFTC). Futures contracts trade on these markets in a
manner similar to the way a stock trades on a stock exchange, and
the boards of trade, through their clearing corporations, guarantee
performance of the contracts. Currently, there are futures
contracts based on such debt securities as long-term U.S. Treasury
bonds, Treasury notes, GNMA modified pass-through mortgage-backed
securities, three-month U.S. Treasury bills and bank certificates
of deposit. While futures contracts based on debt securities do
provide for the delivery and acceptance of securities, such
deliveries and acceptances are very seldom made. Generally, the
futures contract is terminated by entering into an offsetting
transaction. An offsetting transaction for a futures contract sale
is effected by each fund entering into a futures contract purchase
for the same aggregate amount of the specific type of financial
instrument and same delivery date. If the price in the sale
exceeds the price in the offsetting purchase, that fund immediately
is paid the difference and realizes a gain. If the offsetting
purchase price exceeds the sale price, the fund pays the difference
and realizes a loss. Similarly, closing out a futures contract
purchase is effected by the fund entering into a futures contract
sale. If the offsetting sale price exceeds the purchase price, the
fund realizes a gain, and if the offsetting sale price is less than
the purchase price, the fund realizes a loss. At the time a
futures contract is made, a good-faith deposit called initial
margin is set up within a segregated account at the fund's
custodian bank. The initial margin deposit is approximately 1.5%
of a contract's face value. Daily thereafter, the futures contract
is valued and the payment of variation margin is required so that
each day the fund would pay out cash in an amount equal to any
decline in the contract's value or receive cash equal to any
increase. At the time a futures contract is closed out, a nominal
commission is paid, which is generally lower than the commission on
a comparable transaction in the cash markets.
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The purpose of a futures contract, in the case of a portfolio
holding long-term debt securities, is to gain the benefit of
changes in interest rates without actually buying or selling long-
term debt securities. For example, if a fund owned long-term bonds
and interest rates were expected to increase, it might enter into
futures contracts to sell securities which would have much the same
effect as selling some of the long-term bonds it owned. Futures
contracts are based on types of debt securities referred to above,
which have historically reacted to an increase or decline in
interest rates in a fashion similar to the debt securities a fund
owns. If interest rates did increase, the value of the debt
securities in the portfolio would decline, but the value of a
fund's futures contracts would increase at approximately the same
rate, thereby keeping the net asset value of a fund from declining
as much as it otherwise would have. If, on the other hand, a fund
held cash reserves and interest rates were expected to decline, it
might enter into interest rate futures contracts for the purchase
of securities. If short-term rates were higher than long-term
rates, the ability to continue holding these cash reserves would
have a very beneficial impact on a fund's earnings. Even if short-
term rates were not higher, a fund would still benefit from the
income earned by holding these short-term investments. At the same
time, by entering into futures contracts for the purchase of
securities, a fund could take advantage of the anticipated rise in
the value of long-term bonds without actually buying them until the
market had stabilized. At that time, the futures contracts could
be liquidated and a fund's cash reserves could then be used to buy
long-term bonds on the cash market. A fund could accomplish
similar results by selling bonds with long maturities and investing
in bonds with short maturities when interest rates are expected to
increase or by buying bonds with long maturities and selling bonds
with short maturities when interest rates are expected to decline.
But by using futures contracts as an investment tool, given the
greater liquidity in the futures market than in the cash market, it
might be possible to accomplish the same result more easily and
more quickly. Successful use of futures contracts depends on the
investment manager's ability to predict the future direction of
interest rates. If the investment manager's prediction is
incorrect, a fund would have been better off had it not entered
into futures contracts.
In addition to the requirement that futures contracts be offset by
assets of a fund and not used for speculation, the Trustees have
adopted two restrictions on the use of futures contracts. The
first is that each fund may not commit more than 5% of its total
assets to initial margin deposits. The second restriction is that
the aggregate market value of the futures contracts the fund holds
may not exceed 30% of the market value of its total assets.
Neither of the restrictions would be changed by the Trustees
without considering the concerns of the various federal and state
regulatory agencies.
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OPTIONS ON FUTURES CONTRACTS. Options give the holder a right to
buy or sell futures contracts in the future. Unlike a futures
contract, which requires the parties to the contract to buy and
sell a security on a set date, an option on a futures contract
merely entitles its holder to decide on or before a future date
(within nine months of the date of issue) whether to enter into
such a contract. If the holder decides not to enter into the
contract, all that is lost is the amount (premium) paid for the
option. Furthermore, because the value of the option is fixed at
the point of sale, there are no daily payments of cash to reflect
the change in the value of the underlying contract. However, since
an option gives the buyer the right to enter into a contract at a
set price for a fixed period of time, its value does change daily
and that change is reflected in the net asset value of that fund.
RISKS. There are risks in engaging in each of the management tools
described above. The risk each fund assumes when it buys an option
is the loss of the premium paid for the option. Purchasing options
also limits the use of monies that might otherwise be available for
long-term investments.
The risk involved in writing options on futures contracts a fund
owns, or on securities held in its portfolio, is that there could
be an increase in the market value of such contracts or securities.
If that occurred, the option would be exercised and the asset sold
at a lower price than the cash market price. To some extent, the
risk of not realizing a gain could be reduced by entering into a
closing transaction. A fund could enter into a closing transaction
by purchasing an option with the same terms as the one it had
previously sold. The cost to close the option and terminate a
fund's obligation, however, might be more or less than the premium
received when it originally wrote the option. Furthermore, a fund
might not be able to close the option because of insufficient
activity in the options market.
A risk in employing futures contracts to protect against the price
volatility of portfolio securities is that the prices of securities
subject to futures contracts may not correlate perfectly with the
behavior of the cash prices of that fund's portfolio securities.
The correlation may be distorted because the futures market is
dominated by short-term traders seeking to profit from the
difference between a contract or security price and their cost of
borrowed funds. Such distortions are generally minor and would
diminish as the contract approached maturity.
Another risk is a fund's investment manager could be incorrect in
anticipating as to the direction or extent of various interest rate
movements or the time span within which the movements take place.
For example, if a fund sold futures contracts for the sale of
securities in anticipation of an increase in interest rates, and
interest rates declined instead, it would lose money on the sale.
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TAX TREATMENT. As permitted under federal income tax laws, each
fund intends to identify futures contracts as mixed straddles and
not mark them to market, that is, not treat them as having been
sold at the end of the year at market value. Such an election may
result in a fund being required to defer recognizing losses
incurred by entering into futures contracts and losses on
underlying securities identified as being hedged against.
Federal income tax treatment of gains or losses from transactions
in options on futures contracts and indexes is currently unclear,
although each fund's tax adviser currently believes marking to
market is not required. Depending on developments, and although no
assurance is given, a fund may seek Internal Revenue Service (IRS)
rulings clarifying questions concerning such treatment. Certain
provisions of the Internal Revenue Code may also limit a fund's
ability to engage in futures contracts and related options
transactions. For example, at the close of each quarter of a
fund's taxable year, at least 50% of the value of its assets must
consist of cash, government securities and other securities,
subject to certain diversification requirements. Less than 30% of
its gross income must be derived from sales of securities held less
than three months.
The IRS has ruled publicly that an exchange-traded call option is a
security for purposes of the 50-percent-of-assets test and that its
issuer is the issuer of the underlying security, not the writer of
the option, for purposes of the diversification requirements. In
order to avoid realizing a gain within a three-month period, a fund
may be required to defer closing out a contract beyond the time
when it might otherwise be advantageous to do so. Each fund also
may be restricted in purchasing put options for the purpose of
hedging underlying securities because of applying the short sale
holding period rules with respect to such underlying securities.
Accounting for futures contracts will be according to generally
accepted accounting principles. Initial margin deposits will be
recognized as assets due from a broker (a fund's agent in acquiring
the futures position). During the period the futures contract is
open, changes in value of the contract will be recognized as
unrealized gains or losses by marking to market on a daily basis to
reflect the market value of the contract at the end of each day's
trading. Variation margin payments will be made or received
depending upon whether gains or losses are incurred. All contracts
and options will be valued at the last-quoted sales price on their
primary exchange.
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APPENDIX C
STATE RISK FACTORS
Each Fund's ability to achieve its investment objective is
dependent upon the ability of the issuers of state tax-exempt bonds
to meet their continuing obligation for the payment of principal
and interest.
The following information highlights certain legal, financial,
political and economic affairs for California, Massachusetts,
Michigan, Minnesota, New York and Ohio and their political
subdivisions and is based on official statements and public
information. No Fund has acquired direct knowledge of this
information, however, the Funds are not aware of any facts which
would render the information inaccurate. The matters discussed
below constitute only a brief summary of financial information and
do not purport to be a complete description.
Although revenue obligations of any state or its political
subdivisions may be payable from a specific project or source,
there can be no assurance that past, current or future economic
difficulties, and the resulting impact on state and local
governmental finances will not adversely affect the market value of
municipal obligations held in a fund or the ability of the
respective issuers to make required payments on the obligations.
FACTORS AFFECTING CALIFORNIA
Financial stability continues to elude California's administration.
Current budget difficulty is attributed to reduction of the
aerospace and defense industries, closing of military bases and the
federal government's failure to follow through on a promise of
disaster funds.
Several years of economic stress have strained both revenues and
expenses. This has caused state general fund operating results to
fall significantly under budget. Past budgets thought to have been
balanced had unrealistic economic expectations.
California's 1994 budget makes progress toward balancing its budget
with recurring revenues and expenditures. Governor Wilson's
January budget for fiscal year 1995 projects a $2.5 billion
operating surplus and a pay down of the accumulated budgetary basis
deficit by the end of fiscal year 1995. The deficit will be funded
through short-term borrowing.
Current credit agency ratings on general obligation debt is in the
A+ to AA range. These ratings reflect continuing significant
economic stress, moderate growth and the accumulation of a deficit.
Certain California constitutional amendments, legislative measures,
executive orders, civil actions and voter initiatives could
adversely affect the ability of issuers of California state and
municipal securities to obtain sufficient revenue to pay their bond
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obligations. Prior to 1977, revenues of the state government
experienced significant growth primarily as a result of inflation
and continuous expansion of the tax base of the state. In 1978,
California voters approved an amendment to the California
constitution known as Proposition 13, which added Article XIIIA to
the state Constitution. Article XIIIA reduced ad valorem
(according to value) taxes on real property, and restricted the
ability of taxing entities to increase real property tax revenues.
In addition, Article XIIIA provides that additional taxes may be
levied by cities, counties and special districts only upon approval
of not less than a two-thirds vote of the "qualified electors" of
such district and requires not less than a two-thirds vote of each
of the two houses of the state legislature to enact any changes in
state taxes for purposes of increasing revenues, whether by
increased rate or changes in methods of computation.
In 1986 Proposition 62, an initiative statute enacted in
California, placed further limits on the ability of local
governments to levy taxes other than ad valorem property taxes,
except with voter approval. Legislation enacted subsequent to
Article XIIIA provided for the redistribution of California's
general fund surplus to local agencies, the reallocation of certain
state revenues to local agencies and the assumption of certain
local obligations by the state so as to help California municipal
issuers raise revenues to pay their bond obligations.
Primarily as a result of the reductions in local property tax
revenues received by local governments following the passage of
Proposition 13, the legislature undertook to provide assistance to
such governments by substantially increasing expenditures from the
general fund for that purpose beginning in the 1978-1979 fiscal
year. In past years, in addition to such increased expenditures,
the indexing of personal income tax rates (to adjust such rates for
the effects of inflation), the elimination of certain inheritance
and gift taxes, and the increase of exemption levels for certain
other such taxes had a moderating impact on the growth in state
revenues. In addition, the state has increased expenditures by
providing a variety of tax credits, senior citizens' credits and
energy credits.
In 1979, the voters of California passed an initiative adding
Article XIIIB to the California Constitution. Article XIIIB
prohibits the state from spending "appropriations subject to
limitation" in excess of the appropriations limit imposed.
"Appropriations subject to limitations" are authorizations to spend
"proceeds of taxes" which consist of tax revenues and certain other
funds. One of the exclusions from these limitations is "debt
service" (defined as "appropriations required to pay the cost of
interest and redemption charges, including the funding of any
reserve or sinking fund required in connection therewith, on
indebtedness on existing or legally authorized as of Jan. 1, 1979,
or on bonded indebtedness thereafter approved" by voters). In
addition, appropriations required to comply with mandates of courts
or the Federal government are not included as appropriations
subject to limitation.
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The state's appropriations limit is adjusted annually to reflect
change in cost of living and population and transfer of financial
responsibility from one governmental unit to another. Revenues in
any fiscal year which exceed the amount which may be appropriated
in compliance with Article XIIIB must be returned to taxpayers by a
revision of tax rates or fee schedules within the two subsequent
fiscal years.
In November 1988, voters approved an initiative call Proposition 98
which substantially modified Article XIIIB, by providing that a
substantial amount (up to $600 million per year currently) of any
excess state revenues would, instead of being returned to
taxpayers, be paid to public schools and community college
districts.
In the years immediately after enactment of Article XIIIB, very few
California government entities neared their appropriations limits.
To the extent the state remains constrained by its appropriations
limit, the absolute level, or the rate of growth, of assistance to
local governments may be reduced.
Because of the complex nature of Articles XIIIA and XIIIB, the
ambiguities and possible inconsistencies in their terms and the
applicability of their exemptions and exceptions and impossibility
of predicting future appropriations or changes in population and
cost of living, it is not currently possible to determine the
impact of Article XIIIA or Article XIIIB or any related legislation
on the securities held in the Fund or the ability of state or local
governments to pay interest on or repay the principal of such
securities. With a limited exception, to date the California
courts have either upheld the constitutionality of Article XIIIA
and its implementing and related legislation or have interpreted
them in such a manner as to avoid the necessity for direct
determination of constitutional issues. Article XIIIA and XIIIB
and their respective implementing and related legislation will most
probably be subject to continuing or future legal challenges. It
is not presently possible to predict the outcome of any such
legislation with respect to the ultimate scope, impact or
constitutionality of either Article XIIIA or Article XIIIB, or
their respective related legislation; or the impact of any
determinations upon state agencies or local government, or upon the
abilities of such entities to pay the interest on, or repay the
principal of, the securities held by the Fund.
FACTORS AFFECTING MASSACHUSETTS
Massachusetts administration continues to demonstrate spending
discipline, reduce reliance on short-term borrowing and non-
recurring revenues, and balance general fund operations and make
reasonable budget projections. Continuing success is primarily
attributed to a better working relationship between the legislative
and executive branches of government. The government collected $7
million more in taxes at June 30 fiscal year end than anticipated.
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The commonwealth's finances continue to stabilize. Following
several years in which revenue fell short of estimates and resulted
in two deficits, the general fund closed two fiscal years in
balance and more revenue than anticipated. The governor's proposed
1994-1995 budget contemplates eliminating a personal income tax
cut, $10 million reduction in state fees, overhaul of the welfare
system and $125 million in revenue from gambling venues.
The Massachusetts constitution requires that a balanced budget be
provided for each year. In addition, the commonwealth adopted
certain budgetary and fiscal controls to eliminate the
possibilities of expenditures exceeding available revenues and
funds. The general fund, the local aid fund and the highway fund
are the three principal operating funds of the commonwealth and the
condition of these funds is generally regarded as the principal
indicator of whether the commonwealth's operating revenues and
expenses are balanced.
The commonwealth had and may continue to have unfunded general
liabilities of its retirement systems and a program to fund these
liabilities. In 1978, the commonwealth began assuming full
financial responsibility for all costs of the administration of
justice within the state, and Medicaid expenditures which have
increased each year. It also raised aggregate aid to cities,
towns schools and other districts and transit authorities. In the
past the commonwealth signed constant decrees to improve mental
health care and programs for the mentally retarded to meet federal
standards including those governing federal reimbursements under
various programs.
All of the 351 cities and towns in Massachusetts have achieved a
property tax level of no more than 2.5 percent of full property
values. Legislation that effected this leveling is Proposition 2
1/2. Under Proposition 2 1/2, cities and towns may increase the
property tax levy annually. In most cases property taxes can
increase by 2.5 percent of the prior year's tax levy plus 2.5
percent of the value of new properties and of significant
improvements to property.
The reductions in local revenues and reductions in local personnel
and services resulting from Proposition 2 1/2 created a strong
demand for substantial increases in state-funded
local aid, with increases in fiscal years 1982 through 1987. The
effect of this increase in local aid was to shift a major part of
the impact of Proposition 2 1/2 to the commonwealth. Legislation
had been enacted providing for certain local option taxes.
Efforts to limit and reduce the levels of taxation in Massachusetts
have been underway for several years. Chapter 62F of the
Massachusetts General Laws establishes a state tax revenue growth
limit and does not exclude principal and interest payments on
commonwealth debt obligations from the scope of the limit.
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Lawsuits filed against the commonwealth or its authorities may
affect its future fiscal condition. Among the more significant of
these suits are suits regarding the clean up of pollution in Boston
Harbor, services to be provided at state schools for the retarded
and at a state mental hospital, the governor's authority to reduce
allotments of appropriated funds and Medicaid reimbursement levels.
There have also been actions filed in which recipients of human
service benefits seek expanded levels of services and benefits and
in which providers of such services or benefits challenge the rate
at which they are reimbursed by the commonwealth. Any lawsuits
that result in judgments requiring the commonwealth to provide
expanded services or benefits, to pay increased rates or to take
other remedial measures, operating capital expenditures might be
needed to implement such judgements.
FACTORS AFFECTING MICHIGAN
Michigan continues to recover from the effect of the national
recession problems it faced in the early 1980's and weak economic
performance in fiscal years 1991 and 1992. The current challenge
is rebuilding the general and budget stabilization reserves which
had been depleted. The state had managed to balance its general
fund operations through the use of reserves, changes in accounting
practices, severe cuts in public assistance, and a state employee
wage freeze. As of February 1994 Michigan's general obligation
debt rated AA.
Michigan's low debt position helped it to weather recent difficult
economic times. Financial operations remained solvent through
budget adjustments, spending cuts and use of non-recurring items.
Previous budget problems arose from revenue estimates falling below
expectation and increased spending levels. This caused deficits in
the general fund budget for fiscal years ended 1990 and 1991.
The principal sectors of Michigan's economy are manufacturing of
durable goods (including automobiles and office equipment), tourism
and agriculture. As of August 1987, manufacturing represented 25.8
percent of total employment in the state. Income derived from
manufacturing exceeded 35 percent of total state income from all
employment sectors. Because of the emphasis on durable goods,
however, economic activity in the state has tended to be more
cyclical than in the nation as a whole. Moreover, this domination
left the state's economy more susceptible to upward and downward
cycles. The manufacturer sector has benefited from significant
private investmennt and improved international competitiveness.
The current low interest rate environment should continue to help
strengthen business investment.
The state's economy has improved over the years, primarily due to
diversification of the economic base, yet it remains vulnerable.
Service industry employment continues to replace manufacturing as
primary employment.
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The declining trend of personal income has placed a strain on the
state as income taxes are a primary source of income. Other
factors that could strain the state's budget are property tax-
relief proposals (which are expected to reduce assessments by 30
percent over five years), and a requirement that the state
government appropriate 42 percent of its expenditures to local
government to insulate them from decreased state aid.
Budget pressure could occur if voters pass any property tax reform
legislation. Such reform will cause the state administration to
have to aid school districts affected by loss of property tax
revenue.
FACTORS AFFECTING MINNESOTA
The governor's 1994-1995 biennium budget is based on conservative
economic forecasts and a restraint on spending. The governor's
supplemental budget carried a recommendation to bring the state's
budget reserve to $680 million by June 1995. The recommendation is
founded on a forecast of slower economic growth in the next
biennium.
Economic weakness has tested Minnesota's historically strong
financial management. The rainy day fund established in the mid-
1980's totaled $550 million as of fiscal 1990. To address budget
gaps in 1991 and the 1992-1993 biennium, the reserve was drawn down
to $240 million as of June, 1992. The state operates on a cash
basis in its accounting general fund and ended fiscal year 1991
with a $555 million fund balance, including the budgetary reserve
and $42 million reserved for appropriations carried forward to
fiscal 1992.
As of March 1994, the state's general obligation bonds carried a
AAA rating. Because most Minnesota tax-exempt bonds are revenue or
general obligations of local governments or authorities, rather
than general obligations of the state of Minnesota itself, ratings
on Minnesota tax-exempt bonds in the Trust's portfolio may be
different from the ratings given to the general obligation bonds of
the state.
The unemployment rate, growth rates and income trends in Minnesota
compare favorably with national averages, but the economy is
cyclically sensitive. Minnesota's employment and population are
forecasted to continue to grow at rates near the national average.
Total employment in the state is expected to grow at an average
annual rate of 1.3 percent a year through 2005, slightly below the
projected national growth rate of 1.5 percent annually. During the
recessionary period from 1980 to 1983, economic conditions in the
agricultural and iron mining industries, which are two of the
leading sectors of Minnesota's economy, were poor. However, mining
is a less significant factor in the state economy than it once was
while the manufacture of durable and non-durable goods is
relatively more important to the economy. The state relies heavily
on a progressive individual income tax for revenue, which results
in a fiscal system unusually sensitive to economic conditions.
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There can be no assurances, however, that Minnesota's economy and
fiscal situation will continue to improve or that further
difficulties will not occur.
FACTORS AFFECTING NEW YORK
The financial health of New York state showed more signs of
improvement. Over the past few years, the state's administration
has: adopted accurate and conservative economic assumptions,
balanced operations, eliminated its operating deficit and closed
the past two years with an operating surplus. The 1994-1995 budget
may continue the trend.
The state used the past two year's general fund operating surpluses
to eliminate leftover deficit notes cover tax refunds.
As of March 1994 New York's general obligation debt carried an
agency rating of A-.
The state has historically been one of the wealthiest in the
nation. For decades, however, the state economy has grown more
slowly than that of the nation as a whole, resulting in a gradual
erosion of its relative economic affluence. The causes of this
decline are varied and complex, in many cases involving national
and international developments beyond the state's control. Part of
the reason for the long-term relative decline in the state economy
has been attributed to the combined state and local tax burden,
which is among the highest in the nation. The existence of this
tax burden limits the state's ability to impose higher taxes in the
event of future financial difficulties.
The financial condition of the state may be affected by various
financial, social, economic and political factors. Those factors
can be very complex, may vary from fiscal year to fiscal year, and
are frequently the result of actions taken not only by the state
and its authorities and municipalities but also entities that are
not under control by the state. The fiscal stability of the state
is related to the fiscal stability of New York City and the
authorities (which generally finance, construct and operate
revenue-producing public benefit facilities). The state's
experience has been that if New York City or any of the authorities
suffer serious financial difficulties, the ability of the state,
New York City, the state's political subdivisions and the
authorities to obtain financing in the public credit markets is
adversely affected. This results in part from the expectation that
to the extent that any authority or local government experiences
financial difficulty, it will seek and receive state financial
assistance. Moreover, New York City accounts for approximately 40
percent of the state's population and tax receipts, so New York
City's financial integrity affects the state directly.
Accordingly, if there should be a default by New York City or any
of the authorities, the market value and marketability of all New
York tax-exempt securities could be adversely affected.
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Since the enactment of the Federal Tax Reform Act of 1986, the
state has found it difficult to accurately estimate tax receipts.
In the 1988-89 fiscal year, the state overestimated tax receipts of
$1.9 billion. After implementing various deficit-reduction
measures, the state completed its 1988-89 fiscal year with a cash-
basis operating deficit of $529 million. The state faced a
potential budget gap for the 1989-90 fiscal year of approximately
$2.8 billion, but took measures to close that gap through a
combination of tax and fee increases and spending cuts, including a
reduction of financial aid to localities.
New York state adopted a balanced 1992-1993 budget based on
realistic economic assumptions. Quick adoption of the budget also
afforded administrators more time to implement their plan and be
proactive instead of reactive to economic changes. The budget
maintained essential revenue-raising features including a deferral
of any cut in state's personal income tax rate, increases in energy
taxes and deferral of a scheduled reduction in business taxes.
Past fiscal problems have left the state's economy in a weak
position. Issues that affect the state's budget are: freezing
personal and business tax rates, escalating social service costs,
and costs associated with civil service employee collective
bargaining.
While principal and interest payments on outstanding authority
obligations are normally paid from revenues generated by the
projects of the authorities, in recent years New York has had to
appropriate large amounts to enable certain authorities to meet
their financial obligations and in some cases to prevent default.
Further assistance may be required in the future. In particular,
the New York State Urban Development Corporation (UDC), the New
York State Housing Finance Agency (HFA), and the Metropolitan
Transportation Authority (MTA) may require substantial amounts of
assistance from the state.
The HFA provides financing for multifamily housing, state
university construction, hospital and nursing home development and
other programs. HFA depends upon mortgagors in each of its
programs to generate sufficient funds from rental income, subsidies
and other payments to meet their respective mortgage repayment
obligations to HFA as well as to meet the operating and maintenance
costs of the project. On several occasions in the past, in
fulfillment of its moral obligation commitment, New York
appropriated funds on behalf of HFA to replenish its debt service
reserve funds. There can be no assurance that the state will not
be called upon to provide further assistance in the future. Any
litigation decided against HFA also may have an adverse effect on
the financial condition of HFA morgages.
The MTA oversees the operations of the city's bus and subway system
by the New York City Transit Authority and the Manhattan and Bronx
Surface Operating Authority (collectively, the TA) and, through
subsidiaries, operates certain commuter rail lines. The MTA has
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depended and will continue to depend upon federal, state and local
government support to operate the transit system because fare
revenues are insufficient.
The TA and New York City had damage claims filed against it from
deaths and injuries sustained during a Dec. 1990 subway fire and an
Aug. 1991 train derailment. Law suits could have an adverse
financial impact on TA.
Beginning in 1975 (in part as a result of the New York City and UDC
financial crises), various localities of New York began
experiencing difficulty in marketing their securities. As a
result, certain localities, in addition to New York City, have
experienced financial problems leading to requests for state
assistance. If future financial problems cause agencies or
localities to seek special state assistance, this could adversely
affect New York's ability to pay its obligations. Similarly, if
financial difficulties of the state result in the inability to meet
its regular aid commitments or to provide further emergency
financing, issuers may default on their outstanding obligations,
which would affect the marketability of debt obligations of the
state, its agencies and municipalities, such as the New York tax-
exempt bonds in the Fund's portfolio.
Reductions in federal spending could materially and adversely
affect the financial condition and budget projections of New York's
localities. Should localities be adversely affected by federal
cutbacks, they may seek additional assistance from the state that
might, in turn, have an adverse impact on New York's ability to
maintain a balanced budget.
The Long Island Lighting Company (LILCO) is the investor-owned
utility which supplies gas service and substantially all electric
service in Nassau and Suffolk Counties and a small portion of
Queens County and New York City. In early 1984, LILCO reported
that it faced serious cash-flow and other financial difficulties
that were attributable to, among other things, construction
problems on its 809-megawatt Shoreham Nuclear Power Facility.
LILCO is the largest single real property taxpayer in both Suffolk
and Nassau Counties and if its financial problems continue, there
could be severe financial difficulties for the affected localities,
particularly in Suffolk County. State legislation was enacted in
1986 creating the Long Island Power Authority (LIPA), a public
benefit corporation that has the power to acquire LILCO if it
determines that to do so would result in lower electric rates for
LILCO customers. The legislation requires that, with certain
exceptions, if LILCO property is acquired by LIPA and is therefore
removed from the tax rolls, LIPA is to make payments in lieu of
most state and local taxes that would otherwise have been paid by
LILCO. LIPA made and subsequently amended an offer to the Board of
Directors of LILCO for a negotiated acquisition of LILCO by LIPA.
The New York State comptroller recently reached a preliminary
conclusion that the issuance of tax-exempt bonds by LIPA to acquire
LILCO may create a temporary oversupply in the market for new and
outstanding issues of New York tax-exempt bonds.
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In February 1989, the Governor and LILCO reached an agreement
pursuant to which LILCO would sell Shorham to the New York Power
Authority for $1 (which would then decommission Shoreham) in return
for a schedule of rate increases which have since been approved by
the State Public Service Commission (the PSC). The agreement has
been approved by the New York Power Authority and LIPA. The
agreement and PSC rate increases have enabled LILCO to reenter the
public credit markets. It is difficult to predict the ultimate
fiscal and economic impact on the state or on local governments on
Long Island of any litigation to which LILCO is or may become a
party, or of any bankruptcy by or takeover of LILCO.
New York City and Municipal Assistance Corporation. In 1975, New
York City encountered severe financial difficulties that impaired
the borrowing ability of the city, the state and the authorities.
As a result, New York City lost access to public credit markets and
was not able to sell debt to the public until 1979. MAC was
organized in 1975 to provide financing assistance for New York City
and to exercise certain oversight and review functions with respect
to the city's financing. Prior to 1985, MAC had the authority to
issue bonds and notes and to pay or lend the proceeds to the city.
Since 1985, MAC has been authorized to issue bonds and notes only
to refund its outstanding bonds and notes. MAC also has the
authority to exchange its obligations for New York City
obligations. MAC bonds are payable from appropriations of certain
state sales and use taxes imposed by New York City, the state stock
transfer tax and per capita state aid to New York City. The state
is not, however, obligated to continue these taxes, to continue to
appropriate revenue from these taxes or to continue the
appropriation of per capita state aid to pay MAC obligations. MAC
does not have taxing powers and its bonds are not obligations
enforceable against either New York City or New York.
New York City has maintained a balanced budget for several fiscal
years and has retired all of its federally guaranteed debt. As a
result, certain restrictions imposed on New York City by the New
York State Financial Control Board (the Control Board), which was
created in response to New York City's 1975 fiscal crisis, have
been suspended. Those restrictions, including the Control Board's
power to approve or disapprove certain contracts, long-term and
short-term borrowings and the four-year financial plan of the City,
will remain suspended unless and until, among other things, there
is a substantial threat of or an actual failure by the City to pay
debt service on its notes and bonds or to keep its annual operating
deficits below $100 million. The City's four-year financial plan
for fiscal years 1989 through 1992 was submitted to the Control
Board on July 5, 1988 and had been subsequently modified by the
City. As modified it projects a balanced budget for the 1989
fiscal year, and budget gaps of $661 million, $945 million and $818
million for the 1990, 1991, and 1992 fiscal years, respectively,
before implementation of gap closing programs.
The ability of New York City to balance its future budgets as
provided in its financial plans depend on various actions the City
expects will be taken but are not within its control. If expected
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federal and state aid is not forthcoming, if economic conditions
significantly further reduce revenue derived from economically
sensitive taxes or increase expenditure for public assistance, or
if other uncertainties materialize which reduce expected revenues
or increase projected expenditures, then, to avoid operating
deficits, it is likely that New York City would make demands upon
the state for substantial additional financial assistance.
Litigation. Certain litigation pending against the state, its
subdivisions and their officers and employees could have a
substantial and long-term adverse effect on state finances. In
addition, New York City is a defendant in a significant number of
lawsuits pertaining to material matters, including those claims
asserted that are incidental to performing routine governmental and
other functions.
FACTORS AFFECTING OHIO
Ohio's general obligation bonds had AA ratings as of February,
1994. Ohio's financial operations continue to demonstrate
significant improvements in recent years. Increased employment
opportunities led by services and trade sectors has helped
diversify the state's economy and give greater stability through
the current recession. As with other states, Ohio has experienced
economic weakness in some revenue areas. This and other factors,
led to budget short-falls in 1991-1992. However, these short-falls
were effectively managed through a draw-down on the state's budget
stabilization fund and an executive order to reduce state spending
by $196 million. Fiscal year 1993 ended with a budgetary fund
balance of $111 million. The 1994-1995 biennial budget appears
balanced, with reasonable economic and revenue assumptions.
In the early 1980s, Ohio's financial operations continued a trend
of vulnerability to economic cycles. Spending reductions coupled
with tax increases were implemented as a method of maintaining
control during recessionary periods. Ohio may face similar
scenarios in future years. However, the effects of economic cycles
should be less severe because the state's economic base is more
diversified than it has been in the two previous decades.
Constitutional and statutory provisions require the state to close
each fiscal year with a positive general fund balance, in
conjunction with Ohio's advantageous current budgetary practice
should help future financial performance.
Ohio benefits from a diversified revenue structure and a relatively
low tax burden. The state carries out most of its operations
through the general revenue fund which receives general state
revenues not otherwise dedicated. General fund revenues are
derived mainly from personal income, sales, corporate and franchise
taxes. General fund operations historically have paralleled
economic trends, as evidenced by the performance in recent
recessionary periods.
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While diversifying more into the service area, Ohio's economy
continues to rely in part on durable-goods and manufacturing. This
reliance is largely concentrated in motor vehicles and equipment,
steel, rubber products and household appliances. As a result,
economic activity in Ohio, as in many other industrially developed
states, tends to be more cyclical than in some other states and in
the nation as a whole. However, the manufacturing industry is
stronger after downsizing and restructuring in the 1980's and has
performed reasonably well through the current recession. The
state's export activity also has been stabilizing during the
current recession. Agriculture also is an important segment of the
economy. The state has instituted several programs to provide
financial assistance to farmers.
A number of local Ohio communities and school districts have faced
significant financial problems. The state has established
procedures for municipal fiscal emergencies, under which joint
state and local commissions are established to monitor the fiscal
affairs of a financially troubled municipality the municipality
must develop a financial plan to eliminate deficits and cure any
defaults. Since their adoption in 1979, these procedures have been
applied to approximately twenty cities and villages, including the
City of Cleveland; in a majority of these communities, the fiscal
situation has been resolved and the procedures terminated.
Local school districts in Ohio receive a major portion of their
operational funds from state subsidies, but are dependent upon
local taxes for significant portions of their budgets. Local
school districts are authorized to submit for voter approval an
income tax on the district income of individuals and estates. A
small number of local school districts have required emergency
advances from the state in order to prevent year-end deficits. The
number of districts applying for aid has fluctuated over the years.
Legislation (with enhanced provision for individual district
borrowing) has replaced the emergency advance loan program.
Ohio's current economic recovery reflects both a turnaround in the
manufacturing sector and economic restructuring that has shifted
employment from manufacturing to the wholesale and retail trade and
services sectors. Manufacturing employment in 1990 accounted for
22.7 percent of total employment, down from 28.9 percent in 1980.
Despite its decreasing prominence, manufacturing remains Ohio's
major employment and earnings sector. Services and trade follow
closely as second and third largest employment sectors. Since
1980, Ohio has experienced an unemployment rate generally higher
than the United States average. Income levels are slightly below
the national average, but show a stable to positive trend.
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APPENDIX D
DOLLAR-COST AVERAGING
A technique that works well for many investors is one that
eliminates random buy and sell decisions. One such system is
dollar-cost averaging. Dollar-cost averaging involves building a
portfolio through the investment of fixed amounts of money on a
regular basis regardless of the price or market condition. This
may enable an investor to smooth out the effects of the volatility
of the financial markets. By using this strategy, more shares will
be purchased when the price is low and less when the price is high.
As the accompanying chart illustrates, dollar-cost averaging tends
to keep the average price paid for the shares lower than the
average market price of shares purchased, although there is no
guarantee.
While this does not ensure a profit and does not protect against a
loss if the market declines, it is an effective way for many
shareholders who can continue investing through changing market
conditions to accumulate shares in a fund to meet long term goals.
Dollar-cost averaging
Regular Market Price Shares
Investment of a Share Acquired
$100 $ 6.00 16.7
100 4.00 25.0
100 4.00 25.0
100 6.00 16.7
100 5.00 20.0
$500 $25.00 103.4
Average market price of a share over 5 periods:
$5.00 ($25.00 divided by 5).
The average price you paid for each share:
$4.84 ($500 divided by 103.4).
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PAGE 125
IDS SPECIAL TAX-EXEMPT SERIES TRUST
STATEMENT OF ADDITIONAL INFORMATION
FOR
IDS INSURED TAX-EXEMPT FUND
Aug. 29, 1994
This Statement of Additional Information (SAI) is not a prospectus.
It should be read together with the fund's prospectus and the
financial statements contained in the fund's Annual Report which
may be obtained from your IDS personal financial planner or by
writing to IDS Shareholder Service, P.O. Box 534, Minneapolis, MN
55440-0534.
This SAI is dated Aug. 29, 1994, and it is to be used with the
fund's prospectus dated Aug. 29, 1994, and the fund's Annual Report
for the year ended June 30, 1994.
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PAGE 126
TABLE OF CONTENTS
Goal and Investment Policies.........................See Prospectus
Additional Investment Policies................................p. 3
Portfolio Transactions........................................p. 5
Performance Information.......................................p. 7
Valuing Fund Shares...........................................p. 9
Investing in the Fund.........................................p. 10
Redeeming Shares..............................................p. 13
Pay-out Plans.................................................p. 14
Exchanges.....................................................p. 15
Capital Loss Carryover........................................p. 15
Taxes.........................................................p. 16
Agreements....................................................p. 17
Trustees and Officers.........................................p. 20
The Trust.....................................................p. 22
Custodian.....................................................p. 22
Independent Auditors..........................................p. 23
Financial Statements..............................See Annual Report
Prospectus....................................................p. 23
Appendix A: Description of Ratings of Tax-Exempt Securities
and Short-term Securities........................p. 24
Appendix B: Options and Interest Rate Futures Contracts......p. 28
Appendix C: Insured Fund.....................................p. 35
Appendix D: Dollar-Cost Averaging............................p. 40
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PAGE 127
ADDITIONAL INVESTMENT POLICIES
These are investment policies in addition to those presented in the
prospectus. Unless holders of a majority of the outstanding shares
agree to make the change the fund will not:
'Pledge or mortgage its assets beyond 15% of the cost of its total
assets. If the fund were ever to do so, valuation of the pledged
or mortgaged assets would be based on market values. For purposes
of this restriction, collateral arrangements for margin deposits on
interest rate futures contracts are not deemed to be a pledge of
assets.
'Borrow money or property, except as a temporary measure for
extraordinary or emergency purposes, in an amount not exceeding
one-third of the market value of its total assets (including
borrowings) less liabilities (other than borrowings) immediately
after the borrowing. The fund has not borrowed in the past and has
no present intention to borrow.
'Make cash loans. The fund, however, may make short-term
investments up to 10% of its net assets in debt securities where
the sellers agree to repurchase the securities at cost plus an
agreed-upon interest rate within a specified time. The fund does
not intend to invest more than 5% of its assets in repurchase
agreements.
'Invest in real estate, but it may invest in municipal bonds and
notes that are secured by real estate.
'Act as an underwriter (sell securities for others). However,
under the securities laws, the fund may be deemed to be an
underwriter when it purchases securities directly from the issuer
and later resells them.
'Buy on margin or sell short, but it may enter into interest rate
futures contracts.
'Buy or sell commodities or commodity contracts, except it may
enter into interest rate futures contracts and make margin deposits
on such contracts.
'Invest in voting securities, securities of investment companies or
exploration or development programs, such as oil, gas or mineral
programs.
'Purchase securities of an issuer if the trustees and officers of
the fund or the directors and officers of IDS Financial Corporation
(IDS) hold more than a certain percentage of the issuer's
outstanding securities. The rule is this: the holdings of all
trustees and officers of the fund and the holdings of all directors
and officers of IDS who own more than 0.5% of an issuer's
securities are added together, and if in total they own more than
5%, the fund will not purchase securities of that issuer.
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PAGE 128
'Invest more than 5% of its total assets, at cost, in securities
whose issuer or guarantor of principal and interest, including any
predecessors, has been in operation for less than three years.
'Make a loan of any part of its assets to IDS, to the directors and
officers of IDS or to its own trustees and officers.
'Invest more than 5% of its total assets, at market value, in
securities of any one company, government or political subdivision
thereof, except the limitation will not apply to investments in
securities issued by the U.S. government, its agencies or
instrumentalities, and except that up to 25% of the fund's total
assets may be invested without regard to this 5% limitation.
'Lend portfolio securities in excess of 30% of its net assets, at
market value. This is a fundamental policy that may not be changed
without shareholder approval. The current policy of the fund's
board of trustees is to make these loans, either long- or short-
term, to broker-dealers. In making such loans, the fund receives
the market price in cash, U.S. government securities, letters of
credit or such other collateral as permitted by regulatory agencies
and approved by the board of trustees. If the fund receives cash
as collateral, the fund will invest the cash collateral in short-
term debt securities. The fund will receive a fee based on the
value of the loan. The fund reviews the market value of the loaned
securities daily and will get additional collateral if this value
goes up. The risks are the borrower may not provide additional
collateral when required or return the securities when due.
Unless changed by the trustees, the fund will not:
'Invest more than 10% of the fund's assets in securities and
derivative instruments that are illiquid. In determining the
liquidity of municipal lease obligations, the investment manager,
under guidelines established by the board of trustees, will
consider the essential nature of the lease property, the likelihood
that the municipality will continue appropriating funding for the
leased property, and other relevant factors related to the general
credit quality of the municipality and the marketability of the
municipal lease obligation.
In determining the liquidity of commercial paper issued in
transactions not involving a public offering under Section 4(2) of
the Securities Act of 1933, the investment manager, under
guidelines established by the board of trustees, will evaluate
relevant factors such as the issuer and the size and nature of its
commercial paper programs, the willingness and ability of the
issuer or dealer to repurchase the paper, and the nature of the
clearance and settlement procedures for the paper.
The fund may purchase debt securities on a when-issued basis, which
means that it may take as long as 45 days after the purchase before
the securities are delivered to the fund. Payment and interest
terms, however, are fixed at the time the purchaser enters into the
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PAGE 129
commitment. Under normal market conditions, the fund does not
intend to commit more than 5% of its total assets to these
practices. The fund does not pay for the securities or start
earning interest on them until the contractual settlement date.
When-issued securities are subject to market fluctuations and they
may affect the fund's total assets the same as owned securities.
The fund may invest up to 20% of its net assets in certain taxable
investments for temporary defensive purposes. It may purchase
short-term U.S. and Canadian government securities. No more than
5% of these assets may be invested in Canadian issues. It may
invest in bank obligations including negotiable certificates of
deposit, non-negotiable fixed time deposits, bankers' acceptances
and letters of credit. The issuing bank or savings and loan
generally must have capital, surplus and undivided profits (as of
the date of its most recently published annual financial
statements) in excess of $100 million (or the equivalent in the
instance of a foreign branch of a U.S. bank) at the date of
investment.
The fund may purchase short-term corporate notes and obligations
rated in the top two classifications by Moody's Investors Service,
Inc. (Moody's) or Standard & Poor's Corporation (S&P) or the
equivalent. It also may use repurchase agreements with broker-
dealers registered under the Securities Exchange Act of 1934 and
with commercial banks. Repurchase agreements involve investments
in debt securities where the seller (broker-dealer or bank) agrees
to repurchase the securities from the fund at cost plus an agreed
to interest rate within a specified time. A risk of a repurchase
agreement is that if the seller seeks the protection of the
bankruptcy laws, the fund's ability to liquidate the security
involved could be impaired, and it might subsequently incur a loss
if the value of the security declines or if the other party to a
repurchase agreement defaults on its obligation.
For a description of ratings of tax-exempt securities and short-
term securities, see Appendix A. For a discussion on options and
interest rate futures contracts see Appendix B. For a discussion
on Insurance see Appendix C.
PORTFOLIO TRANSACTIONS
Subject to policies set by the trustees, IDS is authorized to
determine, consistent with the fund's investment goal and policies,
which securities will be purchased, held or sold. In determining
where the buy and sell orders are to be placed, IDS has been
directed to use its best efforts to obtain the best available price
and the most favorable execution except where otherwise authorized
by the trustees.
Normally, the fund's securities are traded on a principal rather
than an agency basis. In other words, IDS will trade directly with
the issuer or with a dealer who buys or sells for its own account,
rather than acting on behalf of another client. IDS does not pay
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PAGE 130
the dealer commissions. Instead, the dealer's profit, if any, is
the difference, or spread, between the dealer's purchase and sale
price for the security.
Each investment decision made for the fund is made independently
from any decision made for another fund in the IDS MUTUAL FUND
GROUP or other account advised by IDS or any IDS subsidiary. When
the fund buys or sells the same security as another fund or
account, IDS carries out the purchase or sale in a way the fund
agrees in advance is fair. Although sharing in large transactions
may adversely affect the price or volume purchased or sold by the
fund, the fund hopes to gain an overall advantage in execution.
On occasion, it may be desirable to compensate a broker for
research services or for brokerage services by paying a commission
that might not otherwise be charged or a commission in excess of
the amount another broker might charge. The board of trustees has
adopted a policy authorizing IDS to do so to the extent authorized
by law, if IDS determines, in good faith, that such commission is
reasonable in relation to the value of the brokerage or research
services provided by a broker or dealer, viewed either in the light
of that transaction or IDS' overall responsibilities to the funds
in the IDS MUTUAL FUND GROUP.
Research provided by brokers supplements IDS' own research
activities. Such services include economic data on, and analysis
of, U.S. and foreign economies; information on specific industries;
information about specific companies, including earnings estimates;
purchase recommendations for stocks and bonds; portfolio strategy
services; political, economic, business and industry trend
assessments; historical statistical information; market data
services providing information on specific issues and prices; and
technical analysis of various aspects of the securities markets,
including technical charts. Research services may take the form of
written reports, computer software or personal contact by telephone
or at seminars or other meetings. IDS has obtained, and in the
future may obtain, computer hardware from brokers, including but
not limited to personal computers that will be used exclusively for
investment decision-making purposes, which include the research,
portfolio management and trading functions and other services to
the extent permitted under an interpretation by the Securities and
Exchange Commission.
The fund paid total brokerage commissions of $1,568 for the fiscal
year ended June 30, 1992, $0 for fiscal year 1993, and $7,000 for
fiscal year 1994 on financial futures contracts. Substantially all
firms through whom transactions were executed provide research
services.
No transactions were directed to brokers because of research
services they provided to the fund.
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The fund acquired no securities of its regular brokers or dealers
or of the parents of those brokers or dealers that derived more
than 15% of gross revenue from securities-related activities during
the fiscal year ended June 30, 1994.
The portfolio turnover rate was 5% in the fiscal year ended June
30, 1993, and 37% in fiscal year 1994.
PERFORMANCE INFORMATION
The fund may quote various performance figures to illustrate past
performance. An explanation of the methods used by the fund to
compute performance follows below.
Average annual total return
The fund may calculate average annual total return for certain
periods by finding the average annual compounded rates of return
over the period that would equate the initial amount invested to
the ending redeemable value, according to the following formula:
P(1+T)n = ERV
where: P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $1,000
payment, made at the beginning of a period, at the
end of the period (or fractional portion thereof)
Aggregate total return
The fund may calculate aggregate total return for certain periods
representing the cumulative change in the value of an investment in
the fund over a specified period of time according to the following
formula:
ERV - P
P
where: P = a hypothetical initial payment of $1,000
ERV = ending redeemable value of a hypothetical $1,000
payment, made at the beginning of a period, at the
end of the period (or fractional portion thereof)
Annualized yield
The fund may calculate an annualized yield by dividing the net
investment income per share deemed earned during a 30-day period by
the public offering price per share (including the maximum sales
charge) on the last day of the period and annualizing the results.
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PAGE 132
Yield is calculated according to the following formula:
Yield = 2[(a-b + 1)6 - 1]
cd
where: a = dividends and interest earned during the period
b = expenses accrued for the period (net of
reimbursements)
c = the average daily number of shares outstanding
during the period that were entitled to receive
dividends
d = the maximum offering price per share on the last
day of the period
The fund's annualized yield was 4.91% for the 30-day period ended
June 30, 1994.
Distribution yield
Distribution yield is calculated according to the following
formula:
D divided by POP F equals DY
30 30
where: D = sum of dividends for 30 day period
POP = sum of public offering price for 30 day period
F = annualizing factor
DY = distribution yield
The fund's distribution yield was 5.23%, respectively, for the 30-
day period ended June 30, 1994.
Tax-Equivalent Yield
Tax-equivalent yield is calculated by dividing that portion of the
yield (as calculated above) which is tax-exempt by one minus a
stated income tax rate and adding the result to that portion, if
any, of the yield that is not tax-exempt. The following table
shows the fund's tax equivalent yield, based on federal but not
state tax rates, for the 30-day period ended June 30, 1994.
Marginal
Income Tax Tax-Equivalent Yield
Bracket Distribution Annualized
15.0% 6.15% 5.78%
28.0% 7.26 6.82
33.0% 7.81 7.33
In its sales material and other communications, the fund may quote,
compare or refer to rankings, yields or returns as published by
independent statistical services or publishers and publications
such as The Bank Rate Monitor National Index, Barron's, Business
Week, Donoghue's Money Market Fund Report, Financial Services Week,
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PAGE 133
Financial Times, Financial World, Forbes, Fortune, Global Investor,
Institutional Investor, Investor's Daily, Kiplinger's Personal
Finance, Lipper Analytical Services, Money, Mutual Fund Forecaster,
Newsweek, The New York Times, Personal Investor, Stanger Report,
Sylvia Porter's Personal Finance, USA Today, U.S. News and World
Report, The Wall Street Journal and Wiesenberger Investment
Companies Service.
VALUING FUND SHARES
The value of an individual share is determined by using the net
asset value before shareholder transactions for the day. On July
1, 1994, the first business day following the end of the fiscal
year, the computation looked like this:
<TABLE>
<CAPTION>
Net assets before Shares outstanding Net asset value
shareholder transactions at end of previous day of one share
<C> <C> <C> <C> <C>
$525,349,319 divided by 98,163,126 equals $5.35
</TABLE>
In determining net assets before shareholder transactions, the
fund's portfolio securities are valued as follows as of the close
of business of the New York Stock Exchange:
'Securities, except bonds, other than convertibles traded on a
securities exchange for which a last-quoted sales price is readily
available are valued at the last-quoted sales price on the exchange
where such security is primarily traded.
'Securities other than convertibles traded on a securities exchange
for which a last-quoted sales price is not readily available are
valued at the mean of the closing bid and asked prices, looking
first to the bid and asked prices on the exchange where the
security is primarily traded, and if none exists, to the over-the-
counter market.
'Securities included in the NASDAQ National Market System are
valued at the last-quoted sales price in this market.
'Securities included in the NASDAQ National Market System for which
a last-quoted sales price is not readily available, and other
securities traded over-the-counter but not included in the NASDAQ
National Market System are valued at the mean of the closing bid
and asked prices.
'Futures and options traded on major exchanges are valued at their
last-quoted sales price on their primary exchange.
'Short-term securities maturing more than 60 days from the
valuation date are valued at the readily available market price or
approximate market value based on current interest rates. Short-
term securities maturing in 60 days or less that originally had
maturities of more than 60 days at acquisition date are valued at
amortized cost using the market value on the 61st day before
maturity. Short-term securities maturing in 60 days or less at
<PAGE>
PAGE 134
acquisition date are valued at amortized cost. Amortized cost is
an approximation of market value determined by systematically
increasing the carrying value of a security if acquired at a
discount, or systematically reducing the carrying value if acquired
at a premium, so that the carrying value is equal to the maturity
value on maturity date.
'Securities without a readily available market price, bonds other
than convertibles and other assets are valued at fair value, as
determined in good faith by the trustees. The trustees are
responsible for selecting methods they believe provide fair value.
When possible, bonds are valued by a pricing service independent
from the fund. If a valuation of a bond is not available from a
pricing service, the bond will be valued by a dealer knowledgeable
about the bond if such a dealer is available.
'In valuing securities subject to Portfolio Insurance, the trust
will use the greater of (a) the value of the security with timely
payments of principal and interest guaranteed, less the
predetermined premiums for Secondary Market Insurance, or (b) the
uninsured value of the security.
The New York Stock Exchange, IDS and the fund will be closed on the
following holidays: New Year's Day, Presidents' Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas Day.
INVESTING IN THE FUND
Sales Charge
Shares of the fund are sold at the public offering price determined
at the close of business on the day an application is accepted.
The public offering price is the net asset value of one share plus
a sales charge. The public offering price for an investment of
less than $50,000, made July 1, 1994, was determined by dividing
the net asset value of one share, $5.35, by 0.95 (1.00-0.05 for a
maximum 5% sales charge) for a public offering price of $5.63. The
sales charge is paid to IDS Financial Services Inc. by the person
buying the shares.
<PAGE>
PAGE 135
Calculation of the Sales Charge
Sales charges are determined as follows:
<TABLE>
<CAPTION>
Within each increment,
sales charge as a
percentage of:
Public Net
Amount of Investment Offering Price Amount Invested
<S> <C> <C>
First $ 50,000 5.0% 5.26%
Next 50,000 4.5 4.71
Next 150,000 4.0 4.17
Next 250,000 3.0 3.09
Next 500,000 2.0 2.04
Next 2,000,000 1.0 1.01
More than 3,000,000 0.5 0.50
</TABLE>
Sales charges on an investment greater than $50,000 are calculated
for each increment separately and then totaled. The resulting
total sales charge, expressed as a percentage of the public
offering price and of the net amount invested, will vary depending
on the proportion of the investment at different sales charge
levels.
For example, compare an investment of $60,000 with an investment of
$85,000. The $60,000 investment is composed of $50,000 that incurs
a sales charge of $2,500 (5.0% x $50,000) and $10,000 that incurs a
sales charge of $450 (4.5% x $10,000). The total sales charge of
$2,950 is 4.92% of the public offering price and 5.17% of the net
amount invested.
In the case of the $85,000 investment, the first $50,000 also
incurs a sales charge of $2,500 (5.0% x $50,000) and $35,000 incurs
a sales charge of $1,575 (4.5% x $35,000). The total sales charge
of $4,075 is 4.79% of the public offering price and 5.04% of the
net amount invested.
The following table shows the range of sales charges as a
percentage of the public offering price and of the net amount
invested on total investments at each applicable level.
<TABLE>
<CAPTION>
On total investment, sales
charge as a percentage of
Public Net
Offering Price Amount Invested
Amount of Investment ranges from:
<S> <C> <C>
First $ 50,000 5.00% 5.26%
More than 50,000 to 100,000 5.00-4.75 5.26-4.99
More than 100,000 to 250,000 4.75-4.30 4.99-4.49
More than 250,000 to 500,000 4.30-3.65 4.49-3.79
More than 500,000 to 1,000,000 3.65-2.83 3.79-2.91
More than 1,000,000 to 3,000,000 2.83-1.61 2.91-1.63
More than 3,000,000 1.61-0.50 1.63-0.50
/TABLE
<PAGE>
PAGE 136
Reducing the Sales Charge
Sales charges are based on the total amount of your investments in
the fund. The amount of all prior investments plus any new
purchase is referred to as your "total amount invested." For
example, suppose you have made an investment of $20,000 and later
decide to invest $40,000 more. Your total amount invested would be
$60,000. As a result, $10,000 of your $40,000 investment qualifies
for the lower 4.5% sales charge that applies to investments of more
than $50,000 to $100,000.
The total amount invested includes any shares held in the fund in
the name of a member of your immediate family (spouse and unmarried
children under 21). For instance, if your spouse already has
invested $20,000 and you want to invest $40,000, your total amount
invested will be $60,000 and therefore you will pay the lower
charge of 4.5% on $10,000 of the $40,000.
Until a spouse remarries, the sales charge is waived for spouses
and unmarried children under 21 of deceased trustees, directors,
officers or employees of the fund or IDS or its subsidiaries and
deceased planners.
The total amount invested also includes any investment you or your
immediate family already have in the other publicly offered funds
in the IDS MUTUAL FUND GROUP where the investment is subject to a
sales charge. For example, suppose you already have an investment
of $25,000 in IDS Stock Fund and $5,000 in this fund. If you
invest $40,000 more in this fund, your total amount invested in the
funds will be $70,000 and therefore $20,000 of your $40,000
investment will incur a 4.5% sales charge.
Systematic Investment Programs
After you make your investment of $2,000 or more, you can arrange
to make additional payments of $100 or more on a regular basis.
These minimums do not apply to all systematic investment programs.
You decide how often you want to make payments - monthly, quarterly
or semiannually. You are not obligated to make any payments. You
can omit payments or discontinue the investment program alto-
gether. The fund also can change the program or end it at any
time. If there is no obligation, why do it? Putting money aside
is an important part of financial planning. With a systematic
investment program, you have a goal to work for.
How does this work? When you send in your payment, your money is
invested at the public offering price. Your regular investment
amount will purchase more shares when the net asset value per share
decreases, and fewer shares when the net asset value per share
increases. Each purchase is a separate transaction. After each
purchase your new shares will be added to your account. Shares
bought through these programs are exactly the same as any other
fund shares. They can be bought and sold at any time. A
systematic investment program is not an option or an absolute right
to buy shares.
<PAGE>
PAGE 137
The systematic investment program itself cannot ensure a profit,
nor can it protect against a loss in a declining market. If you
decide to discontinue the program and redeem your shares when their
net asset value is less than what you paid for them, you will incur
a loss.
For a discussion on dollar-cost averaging, see Appendix D.
Automatic Directed Dividends
Dividends, including capital gain distributions, paid by another
fund in the IDS MUTUAL FUND GROUP subject to a sales charge, may be
used to automatically purchase shares of this fund without paying a
sales charge. Dividends may be directed to existing accounts only.
Dividends declared by a fund are exchanged to this fund the
following day. Dividends can be exchanged into one fund but cannot
be split to make purchases in two or more funds. Automatic
directed dividends are available between accounts of any ownership
except:
'Between a non-custodial account and an IRA, or 401(k) plan account
or other qualified retirement account of which IDS Trust Company
acts as custodian;
'Between two IDS Trust Company custodial accounts with different
owners (for example, you may not exchange dividends from your IRA
to the IRA of your spouse);
'Between different kinds of custodial accounts with the same
ownership (for example, you may not exchange dividends from your
IRA to your 401(k) plan account, although you may exchange
dividends from one IRA to another IRA).
Moreover, dividends may be directed from accounts established under
the Uniform Gifts to Minors Act (UGMA) or Uniform Transfers to
Minors Act (UTMA) only into other UGMA or UTMA accounts with
identical ownership.
Each fund has a different investment goal described in its
prospectus along with other information, including fees and expense
ratios. Before exchanging dividends into another fund, you should
read its prospectus. You will receive a confirmation that the
automatic directed dividend service has been set up for your
account.
REDEEMING SHARES
You have a right to redeem your shares at any time. For an
explanation of redemption procedures, please see the prospectus.
During an emergency, the trustees can suspend the computation of
net asset value, stop accepting payments for purchase of shares or
suspend the duty of the fund to redeem shares for more than seven
days. Such emergency situations would occur if:
<PAGE>
PAGE 138
'The New York Stock Exchange closes for reasons other than the
usual weekend and holiday closings or trading on the Exchange is
restricted, or
'Disposal of the fund's securities is not reasonably practicable or
it is not reasonably practicable for the fund to determine the fair
value of its net assets, or
'The Securities and Exchange Commission, under the provisions of
the Investment Company Act of 1940, as amended, declares a period
of emergency to exist.
Should the fund stop selling shares, the trustees may make a
deduction from the value of the assets held by the fund to cover
the cost of future liquidations of the assets so as to distribute
fairly these costs among all shareholders.
PAY-OUT PLANS
You can use any of several pay-out plans to redeem your investment
in regular installments at no extra cost. While the plans differ
on how the pay-out is figured, they all are based on the redemption
of your investment. Net investment income dividends and any
capital gain distributions will automatically be reinvested, unless
you elect to receive them in cash.
IDS normally will not accept an application for a systematic
investment in any fund in the IDS MUTUAL FUND GROUP subject to a
sales charge while a pay-out plan for any of those funds is in
effect. Occasional investments, however, may be accepted.
To start any of these plans, submit an authorization form supplied
by IDS Shareholder Service. For a copy, write or call IDS
Shareholder Service, P.O. Box 534, Minneapolis, MN 55440-0534,
612-671-3733. Your authorization must be received in the
Minneapolis headquarters at least five days before the date you
want your payments to begin. The initial payment must be at least
$50. Payments will be made on a monthly, bimonthly, quarterly,
semiannual or annual basis. Your choice is effective until you
change or cancel it.
The following pay-out plans are designed to take care of the needs
of most shareholders in a way IDS can handle efficiently and at a
reasonable cost. If you need a more irregular schedule of
payments, it may be necessary for you to make a series of
individual redemptions, in which case you will have to send in a
separate redemption request for each pay-out. The fund reserves
the right to change or stop any pay-out plan and to stop making
such plans available.
<PAGE>
PAGE 139
Plan #1: Pay-out for a fixed period of time
If you choose this plan, a varying number of shares will be
redeemed at net asset value at regular intervals during the time
period you choose. This plan is designed to end in complete re-
demption of all shares in your account by the end of the fixed
period.
Plan #2: Redemption of a fixed number of shares
If you choose this plan, a fixed number of shares will be redeemed
at net asset value for each payment and that amount will be sent to
you. The length of time these payments continue is based on the
number of shares in the account.
Plan #3: Redemption of a fixed dollar amount
If you decide on a fixed dollar amount, whatever number of shares
is necessary to make the payment will be redeemed in regular
installments until your account is closed.
Plan #4: Redemption of a percentage of net asset value
Payments are made based on a fixed percentage of the net asset
value of the shares in your account computed on the day of each
payment. Percentages range from 0.25% to 0.75%. For example, if
you are on this plan and arrange to take 0.5% each month, you will
get $50 if the value of your account is $10,000 on the payment
date.
EXCHANGES
If you buy shares in one of the funds and then exchange into
another fund, it is considered a sale and subsequent purchase of
shares. Under tax laws, if this exchange is done within 91 days,
any sales charge waived on a subsequent purchase of shares applies
to the new shares acquired in the exchange. Therefore, you cannot
create a tax loss or reduce a tax gain attributable to the sales
charge when exchanging shares within 91 days.
CAPITAL LOSS CARRYOVER
For federal income tax purposes, the fund had a capital loss
carryover of $2,130,102 at June 30, 1994, that will expire in 2002.
It is unlikely that the board of directors will authorize a
distribution of any net realized capital gains until the available
capital loss carryover has been offset or has expired except as
required by Internal Revenue Service rules.
<PAGE>
PAGE 140
TAXES
All distributions of net investment income during the year will
have the same percentage designated as tax-exempt. This annual
percentage is expected to be substantially the same as the
percentage of tax-exempt income actually earned during any
particular distribution period. For the fiscal year ended June 30,
1994, 100% of the income distribution was designated as exempt from
federal income taxes.
Capital gain distributions received by individual and corporate
shareholders should be treated as long-term capital gains
regardless of how long they owned their shares. Short-term capital
gains earned by the fund are paid to shareholders as part of their
ordinary income dividend and are taxable.
If you are a "substantial user" (or related person) of facilities
financed by industrial development bonds, you should consult your
tax adviser before investing. The income from such bonds may not
be tax-exempt for you.
Interest on private activity bonds generally issued after August
1986 is a preference item for purposes of the individual and
corporate alternative minimum taxes. "Private-activity" (non-
governmental purpose) municipal bonds include industrial revenue
bonds, student-loan bonds and multi- and single-family housing
bonds. An exception is made for private-activity bonds issued for
qualified--501(c)(3)--organizations, including non-profit colleges,
universities and hospitals. These bonds will continue to be tax-
exempt and will not be subject to the alternative minimum tax for
individuals. To the extent a fund earns income subject to the
alternative minimum tax, it will flow through to that fund's
shareholders and may subject some shareholders, depending on their
tax status, to the alternative minimum tax. The fund reports the
percentage of its income earned from these bonds to shareholders
with their other tax information.
State law determines whether interest income on a particular
municipal bond is tax-exempt for state tax purposes. It also
determines the tax treatment of those bonds when earned by a mutual
fund and paid to the fund's shareholders. The fund will tell you
the percentage of interest income from municipal bonds it received
during the year on a state-by-state basis. Your tax adviser should
help you report this income for state tax purposes.
Under federal tax law and an election made by the fund under
federal tax rules, by the end of a calendar year the fund must
declare and pay dividends representing 98% of ordinary income
through Dec. 31 and 98% of net capital gains (both long-term and
short-term) for the 12-month period ending Oct. 31 of that calendar
year. The fund is subject to an excise tax equal to 4% of the
excess, if any, of the amount required to be distributed over the
amount actually distributed. The fund intends to comply with
federal tax law and avoid any excise tax.
<PAGE>
PAGE 141
This is a brief summary that relates to federal income taxation
only. Shareholders should consult their tax adviser for more
complete information as to the application of federal, state and
local income tax laws to fund distributions.
AGREEMENTS
Investment Management and Services Agreement
The fund has an Investment Management and Services Agreement with
IDS. For its services, IDS is paid a fee composed of an asset
charge in two parts. The first part, the group asset charge, is
based on the combined daily net assets of all funds in the IDS
MUTUAL FUND GROUP, except the money market funds, including any new
fund that may be organized in the future. The daily rate of the
group asset charge is based upon the following schedule:
Group Asset Charge
Group assets Annual rate at Effective
(billions) each asset level annual rate
First $5 0.460% 0.460%
Next $5 0.440 0.450
Next $5 0.420 0.440
Next $5 0.400 0.430
Next $5 0.390 0.422
Next $5 0.380 0.415
Next $5 0.360 0.407
Next $5 0.350 0.400
Next $5 0.340 0.393
Next $5 0.330 0.387
Over $50 0.320
The aggregate net assets of all non-money market funds in the IDS
MUTUAL FUND GROUP were $43,022,106,256 on June 30, 1994, and the
daily rate applied to the fund's assets was equal to approximately
0.40% on an annual basis.
The second part of the asset charge is calculated at an annual rate
of 0.13 percent and is based on the unique characteristics of the
fund, including the fund's use of services provided by IDS in the
areas of investment research, portfolio management, investment
services and fund accounting. The total fee is calculated for each
calendar day on the basis of net assets as of the close of business
two business days prior to the day for which the calculation is
made.
The management fee is paid monthly. The total amount paid was
$1,344,880 for the fiscal year ended June 30, 1992, $2,057,249 for
fiscal year 1993, and $2,772,357 for fiscal year 1994.
Under the current Agreement, the fund also pays taxes, brokerage
commissions and nonadvisory expenses, that include custodian fees;
audit and certain legal fees; fidelity bond premiums; registration
<PAGE>
PAGE 142
fees for shares; fund office expenses; consultants' fees;
compensation of directors, officers and employees; corporate filing
fees; Investment Company Institute dues; organizational expenses;
expenses incurred in connection with lending portfolio securities
of the fund; and expenses properly payable by the fund, approved by
the board of trustees. The fund paid nonadvisory expenses of
$149,830 for the fiscal year ended June 30, 1992, $155,547 for
fiscal year 1993, and $252,625 for fiscal year 1994.
Transfer Agency Agreement
The fund has a Transfer Agency Agreement with IDS. This agreement
governs IDS' responsibility for administering and/or performing
transfer agent functions, for acting as service agent in connection
with dividend and distribution functions and for performing
shareholder account administration agent functions in connection
with the issuance, exchange and redemption or repurchase of the
fund's shares. Under the agreement, IDS will earn a fee from the
fund determined by multiplying the number of shareholder accounts
at the end of the day by a rate of $15.50 per year and dividing by
the number of days in the year. The fees paid to IDS may be
changed from time to time upon agreement of the parties without
shareholder approval. The fund paid fees of $261,820 for the
fiscal year ended June 30, 1994.
Distribution Agreement
Under a Distribution Agreement, sales charges deducted for
distributing fund shares are paid to IDS Financial Services Inc.
daily. These charges amounted to $4,319,598, for the fiscal year
ended June 30, 1992. After paying commissions to personal
financial planners, and other expenses, the amount retained was
$1,507,341. The amounts were $6,198,137 and $2,164,091 for the
fiscal year ended June 30, 1993 and $5,617,954 and $1,955,455 for
the fiscal year end June 30, 1994.
Additional information about commissions and compensation for the
fiscal year ended June 30, 1994, is contained in the following
table:
<TABLE>
<CAPTION>
(1) (2) (3) (4) (5)
Net Compensation
Name of Underwriting on Redemption
Principal Discounts and and Brokerage Other
Underwriter Commissions Repurchases Commissions Compensation
<S> <C> <C> <C> <C>
IDS Financial
Services Inc. $5,617,954 None None $103,301*
</TABLE>
*Distribution fees paid pursuant to the Plan and Supplemental
Agreement of Distribution.
<PAGE>
PAGE 143
Plan and Supplemental Agreement of Distribution
To help IDS defray the cost of distribution and servicing, not
covered by sales charges received under the Distribution Agreement,
the fund and IDS entered into a Plan and Supplemental Agreement of
Distribution (Plan). These costs relate to most aspects of
distributing the fund shares, including IDS' overhead expenses.
These costs do not include compensation to the sales force. A
substantial portion of the costs are not specifically identified to
any one fund in the IDS MUTUAL FUND GROUP. Under the Plan, IDS is
paid a fee determined by multiplying the number of shareholder
accounts at the end of each day by a rate of $6 per year and
dividing by the number of days in the year.
The Plan must be approved annually by the trustees including a
majority of the disinterested trustees, if it is to continue for
more than a year. At least quarterly, the trustees must review
written reports concerning the amounts expended under the Plan and
the purposes for which such expenditures were made. The Plan and
any agreement related to it may be terminated at any time by vote
of a majority of trustees who are not interested persons of the
trusts and have no direct or indirect financial interest in the
operation of the Plan or in any agreement related to the Plan, or
by vote of a majority of the outstanding voting securities of the
fund or by IDS. The Plan (or any agreement related to it) shall
terminate in the event of its assignment as that term is defined in
the Investment Company Act of 1940, as amended. The Plan may not
be amended to increase the amount to be spent for distribution
without shareholders' approval, and all material amendments to the
Plan must be approved by a majority of trustees, including a
majority of trustees who are not interested persons of the trusts
and who do not have a financial interest in the operation of the
Plan or any agreement related to it. The selection and nomination
of such disinterested trustees is the responsibility of such
disinterested trustees. No interested person of the trusts, and no
trustee who is not an interested person, has any direct or indirect
financial interest in the operation of the Plan or any related
agreement.
Total fees and nonadvisory expenses cannot exceed the most
restrictive applicable state limitation. Currently, the most
restrictive applicable state expense limitation, subject to
exclusion of certain expenses, is 2.5% of the first $30 million of
the fund's average daily net assets, 2% of the next $70 million and
1.5% of average daily net assets over $100 million, on an annual
basis. At the end of each month, if the fees and expenses of the
fund exceed this limitation for the fund's fiscal year in progress,
IDS will assume all expenses in excess of the limitation. IDS then
may bill the fund for such expenses in subsequent months up to the
end of that fiscal year, but not after that date. No interest
charges are assessed by IDS for expenses it assumes.
<PAGE>
PAGE 144
TRUSTEES AND OFFICERS
The following is a list of the fund's trustees who, except for Mr.
Dudley, also are directors of all other funds in the IDS MUTUAL
FUND GROUP. Mr. Dudley is a director of all publicly offered
funds. All shares have cumulative voting rights when voting on the
election of trustees.
Lynne V. Cheney'
American Enterprise Institute
for Public Policy Research (AEI)
1150 17th St., N.W.
Washington, D.C.
Distinguished Fellow AEI. Former Chair of National Endowment of
the Humanities. Director, The Reader's Digest Association Inc.,
Lockhead Corporation, and the Interpublic Group of Companies, Inc.
(advertising).
William H. Dudley+**
2900 IDS Tower
Minneapolis, MN
Executive vice president and director of IDS.
Robert F. Froehlke+
901 S. Marquette Ave.
Minneapolis, MN
Former president of all funds in the IDS MUTUAL FUND GROUP.
Director, the ICI Mutual Insurance Co., Institute for Defense
Analyses, Marshall Erdman and Associates, Inc. (architectual
engineering) and Public Oversight Board of the American Institute
of Certified Public Accountants.
David R. Hubers**
2900 IDS Tower
Minneapolis, MN
President, chief executive officer and director of IDS.
Previously, senior vice president, finance and chief financial
officer of IDS.
Anne P. Jones***
Sutherland, Asbill & Brennan
1275 Pennsylvania Ave., N.W.
Washington, D.C.
Partner, law firm of Sutherland, Asbill & Brennan. Director,
Motorola, Inc. and C-Cor Electronics, Inc.
<PAGE>
PAGE 145
Donald M. Kendall'
PepsiCo, Inc.
Purchase, NY
Former chairman and chief executive officer, PepsiCo, Inc.
Melvin R. Laird
Reader's Digest Association, Inc.
1730 Rhode Island Ave., N.W.
Washington, D.C.
Senior counsellor for national and international affairs, The
Reader's Digest Association, Inc. Chairman of the board, COMSAT
Corporation, former nine-term congressman, secretary of defense and
presidential counsellor. Director, Martin Marietta Corp.,
Metropolitan Life Insurance Co., The Reader's Digest Association,
Inc., Science Applications International Corp., Wallace Reader's
Digest funds and Public Oversight Board (SEC Practice Section,
American Institute of Certified Public Accountants).
Lewis W. Lehr'
3050 Minnesota World Trade Center
30 E. Seventh St.
St. Paul, MN
Former chairman of the board and chief executive officer, Minnesota
Mining and Manufacturing Company (3M). Director, Jack Eckerd
Corporation (drugstores). Advisory Director, Peregrine Inc.
(microelectronics).
William R. Pearce+*
901 S. Marquette Ave.
Minneapolis, MN
President of all funds in the IDS MUTUAL FUND GROUP since June
1993. Former vice chairman of the board, Cargill, Incorporated
(commodity merchants and processors).
Edson W. Spencer+'
840 TCF Tower
Minneapolis, MN
President, Spencer Associates Inc. (consulting). Chairman of the
board, Mayo Foundation (healthcare). Former chairman of the board
and chief executive officer, Honeywell Inc. Director, Boise
Cascade Corporation (forest products) and CBS Inc. Member of
International Advisory Councils, Robert Bosch (Germany) and NEC
(Japan).
John R. Thomas**
2900 IDS Tower
Minneapolis, MN
Senior vice president and director of IDS.
<PAGE>
PAGE 146
Wheelock Whitney+
1900 Foshay Tower
821 Marquette Ave.
Minneapolis, MN
Chairman, Whitney Management Company (manages family assets).
+ Member of executive committee.
' Member of joint audit committee.
* Interested person by reason of being an officer and employee of
the fund.
**Interested person by reason of being an officer, director,
employee and/or shareholder of IDS or American Express.
***Interested person by reason of being a partner in a law firm
that has represented IDS or its subsidiaries.
The board also has appointed officers who are responsible for day-
to-day business decisions based on policies it has established.
Besides Mr. Pearce, who is president, the fund's other officer is:
Leslie L. Ogg
901 S. Marquette Ave.
Minneapolis, MN
Vice president of all funds in the IDS MUTUAL FUND GROUP and
general counsel and treasurer of the publicly offered funds.
On June 30, 1994, the fund's trustees and officers as a group owned
less than 1% of the outstanding shares. During the fiscal year
ended June 30, 1994, no trustee or officer earned more than $60,000
from this fund. All trustees and officers as a group earned
$15,188, including $6,057 of retirement plan expense, from this
fund.
THE TRUST
The Trust is an entity of the type commonly known as a
Massachusetts business trust. Under Massachusetts law,
shareholders of such a trust may, under certain circumstances, be
held personally liable as partners for its obligations. However,
the risk of a shareholder incurring financial loss on account of
shareholder liability is limited to circumstances in which both
inadequate insurance existed and the Trust itself was unable to
meet its obligations.
CUSTODIAN
The fund's securities and cash are held by First Bank National
Association, 180 E. Fifth St., St. Paul, MN 55101-1631, through a
custodian agreement. The custodian is permitted to deposit some or
all of its securities in central depository systems as allowed by
federal law.
<PAGE>
PAGE 147
INDEPENDENT AUDITORS
The fund's financial statements contained in its Annual Report to
shareholders, for the fiscal year ended June 30, 1994, were audited
by independent auditors, KPMG Peat Marwick, 4200 Norwest Center, 90
S. Seventh St., Minneapolis, MN 55402-3900. The independent
auditors also provide other accounting and tax-related services as
requested by the fund.
FINANCIAL STATEMENTS
The Independent Auditors' Report and the Financial Statements,
including Notes to the Financial Statements and the Schedule of
Investments in Securities, contained in the 1994 Annual Report to
IDS Insured Tax-Exempt Fund, shareholders, pursuant to Section
30(d) of the Investment Company Act of 1940, as amended, are hereby
incorporated in this SAI by reference. No other portion of the
Annual Report however, is incorporated by reference.
PROSPECTUS
The prospectus dated Aug. 29, 1994, is hereby incorporated in this
SAI by reference.
<PAGE>
PAGE 148
APPENDIX A
DESCRIPTION OF RATINGS OF TAX-EXEMPT SECURITIES AND SHORT-TERM
SECURITIES
Tax-Exempt Securities
Tax-exempt securities are used to raise money for various public
purposes, such as constructing public facilities and making loans
to public institutions. Certain types of tax-exempt bonds are
issued to obtain funding for privately operated facilities. There
are two principal classifications of municipal securities: notes
and bonds. Notes are used generally to provide for short-term
capital needs and generally have a maturity of up to one year.
These include tax anticipation notes, revenue anticipation notes,
bond anticipation notes, construction loan notes, variable rate
demand notes and tax-exempt commercial paper (also known as
municipal paper). Bonds, which meet longer-term capital needs,
generally have maturities of more than one year and fall into one
of two categories. General obligation bonds are backed by the
taxing power of the issuing municipality and are considered the
safest type of municipal bond. Revenue bonds are payable only from
the revenues of a particular project or facility and are generally
dependent solely on a specific revenue source. Industrial
development bonds are a specific type of revenue bond backed by the
credit and security of a private user.
The ratings concern the quality of the issuer. They are not an
opinion of the market value of the security. Such ratings are
opinions on whether the principal and interest will be repaid when
due. A security's rating may change which could affect its price.
Ratings by Moody's Investors Service, Inc. (Moody's) are Aaa, Aa,
A, Baa, Ba, B, Caa, Ca, C and D. Standard & Poor's Corporation
(S&P) ratings are AAA, AA, A, BBB, BB, B, CCC, CC, C and D.
Securities rated Aaa and AAA are judged to be of the best quality.
Interest and principal are secure. Prices are responsive only to
interest rate fluctuations.
Securities rated Aa and AA also are judged to be high-grade
although margins of protection for interest and principal may not
be quite as good as Aaa or AAA rated securities. Long-term risk
may appear greater than the Aaa or AAA group. Prices are primarily
responsive to interest rate fluctuations.
Securities rated A are considered upper-medium grade. Protection
for interest and principal are deemed adequate but susceptible to
future impairment. The market prices of such obligations move
primarily with interest rate fluctuations but also with changing
economic or trade conditions.
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Securities rated Baa and BBB are considered upper-medium-grade
obligations. Protection for interest and principal is adequate
over the short term; however, these obligations have certain
speculative characteristics. They are susceptible to changing
economic conditions and require constant review. Such bonds are
more responsive to business and trade conditions than to interest
rate fluctuations.
Securities rated Ba and BB are considered to have speculative
elements. Their future cannot be considered well assured. The
protection of interest and principal payments may be very moderate
and not well safeguarded during future good and bad times.
Uncertainty of position characterizes these bonds.
Securities rated B or lower lack characteristics of more desirable
investments. There may be small assurance over any long period of
time of the payment of interest and principal or of the maintenance
of other contract terms. Some of these bonds are of poor standing
and may be in default or have other marked shortcomings.
Bonds rated Caa and CCC are of poor standing. Such issues may be
in default or there may be elements of danger with respect to
principal or interest.
Bonds rated Ca and CC represent obligations that are highly
speculative. Such issues are often in default or have other marked
shortcomings.
Bonds rated C are obligations with a higher degree of speculation.
These securities have major risk exposures to default.
Bonds rated D are in payment default. The D rating is used when
interest payments or principal payments are not made on the due
date.
Non-rated securities will be considered for investment when they
possess a risk comparable to that of rated securities consistent
with fund objectives and policies. When assessing the risk
involved in each nonrated security, the funds will consider the
financial condition of the issuer or the protection afforded by the
terms of the security.
Short-term Tax-exempt Securities
A portion of each fund's assets are in cash and short-term
securities for day-to-day operating purposes. The investments will
usually be in short-term municipal bonds and notes. These include:
(1) Tax anticipation notes sold to finance working capital needs
of municipalities in anticipation of receiving taxes on a future
date.
(2) Bond anticipation notes sold on an interim basis in
anticipation of a municipality issuing a longer term bond in the
future.
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(3) Revenue anticipation notes issued in anticipation of revenues
from sources other than taxes, such as federal revenues available
under the Federal Revenue Sharing Program.
(4) Tax and revenue anticipation notes issued in anticipation of
revenues from taxes and other sources of revenue, except bond
placements.
(5) Construction loan notes insured by the Federal Housing
Administration which remain outstanding until permanent financing
by the Federal National Mortgage Association (FNMA) or the
Government National Mortgage Association (GNMA) at the end of the
project construction period.
(6) Tax-exempt commercial paper with a stated maturity of 365 days
or less issued by agencies of state and local governments to
finance seasonal working capital needs or as short-term financing
in anticipation of longer-term financing.
(7) Variable rate demand notes, on which the yield is adjusted at
periodic intervals not exceeding 31 days and on which the principal
may be repaid after not more than seven days' notice, are
considered short-term regardless of the stated maturity.
Short-term municipal bonds and notes are rated by Moody's and by
S&P. The ratings reflect the liquidity concerns and market access
risks unique to notes.
Moody's MIG 1/VMIG 1 indicates the best quality. There is present
strong protection by established cash flows, superior liquidity
support or demonstrated broad-based access to the market for
refinancing.
Moody's MIG 2/VMIG 2 indicates high quality. Margins of protection
are ample although not so large as in the preceding group.
Moody's MIG 3/VMIG 3 indicates favorable quality. All security
elements are accounted for but there is lacking the undeniable
strength of the preceding grades. Liquidity and cash flow
protection may be narrow and market access for refinancing is
likely to be less well established.
Moody's MIG 4/VMIG 4 indicates adequate quality. Protection
commonly regarded as required of an investment security is present
and although not distinctly or predominantly speculative, there is
specific risk.
Standard & Poor's rating SP-1 indicates very strong or strong
capacity to pay principal and interest. Those issues determined to
possess overwhelming safety characteristics will be given a plus
(+) designation.
Standard & Poor's rating SP-2 indicates satisfactory capacity to
pay principal and interest.
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Standard & Poor's rating SP-3 indicates speculative capacity to pay
principal and interest.
Short-term Taxable Securities and Repurchase Agreements
Depending on market conditions, a portion of each fund's
investments may be in short-term taxable securities. These
include:
(1) Obligations of the U.S. government, its agencies and
instrumentalities resulting principally from lending programs of
the U.S. government;
(2) U.S. Treasury bills with maturities up to one year. The
difference between the purchase price and the maturity value or
resale price is the interest income to the fund;
(3) Certificates of deposit or receipts with fixed interest rates
issued by banks in exchange for deposit of funds;
(4) Bankers' acceptances arising from short-term credit
arrangements designed to enable businesses to obtain funds to
finance commercial transactions;
(5) Letters of credit which are short-term notes issued in bearer
form with a bank letter of credit obligating the bank to pay the
bearer the amount of the note;
(6) Commercial paper rated in the two highest grades by Moody's or
S&P. Commercial paper is generally defined as unsecured short-term
notes issued in bearer form by large well-known corporations and
finance companies. These ratings reflect a review of management,
economic evaluation of the industry competition, liquidity, long-
term debt and ten-year earning trends;
Moody's rating Prime-1 (P-1) and Standard & Poor's rating A-1
indicate that the degree of safety regarding timely payment of
short-term promissory obligations is either overwhelming or very
strong.
Moody's rating Prime-2 (P-2) and Standard & Poor's rating A-2
indicate that capacity for timely payment of short-term promissory
obligations with this designation is strong.
(7) Repurchase agreements involving acquisition of securities by a
fund with a concurrent agreement by the seller, usually a bank or
securities dealer, to reacquire the securities at cost plus
interest within a specified time. From this investment, a fund
receives a fixed rate of return that is insulated from market rate
changes while it holds the security.
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APPENDIX B
OPTIONS AND INTEREST RATE FUTURES CONTRACTS AND ADDITIONAL
INFORMATION ON INVESTMENT POLICIES
The fund may buy or write options traded on any U.S. or foreign
exchange or in the over-the-counter market. The fund may enter
into interest rate futures contracts traded on any U.S. or foreign
exchange. The fund also may buy or write put and call options on
these futures. Options in the over-the-counter market will be
purchased only when the investment manager believes a liquid
secondary market exists for the options and only from dealers and
institutions the investment manager believes present a minimal
credit risk. Some options are exercisable only on a specific date.
In that case, or if a liquid secondary market does not exist, the
fund could be required to buy or sell securities at disadvantageous
prices, thereby incurring losses. There is no limit on the use of
derivatives.
OPTIONS. An option is a contract. A person who buys a call option
for a security has the right to buy the security at a set price for
the length of the contract. A person who sells a call option is
called a writer. The writer of a call option agrees to sell the
security at the set price when the buyer wants to exercise the
option, no matter what the market price of the security is at that
time. A person who buys a put option has the right to sell a
security at a set price for the length of the contract. A person
who writes a put option agrees to buy the security at the set price
if the purchaser wants to exercise the option, no matter what the
market price of the security is at that time. An option is covered
if the writer owns the security (in the case of a call) or sets
aside the cash (in the case of a put) that would be required upon
exercise.
The price paid by the buyer for an option is called a premium. In
addition the buyer generally pays a broker a commission. The
writer receives a premium, less a commission, at the time the
option is written. The cash received is retained by the writer
whether or not the option is exercised. A writer of a call option
may have to sell the security for a below-market price if the
market price rises above the exercise price. A writer of a put
option may have to pay an above-market price for the security if
its market price decreases below the exercise price.
Options can be used to produce incremental earnings, protect gains
and facilitate buying and selling securities for investment
purposes. The use of options and futures contracts may benefit the
fund and its shareholders by improving the fund's liquidity and by
helping to stabilize the value of its net assets.
Buying options. Put and call options may be used as a trading
technique to facilitate buying and selling securities for
investment reasons. They also may be used for investment. Options
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are used as a trading technique to take advantage of any disparity
between the price of the underlying security in the securities
market and its price on the options market. It is anticipated the
trading technique will be utilized only to effect a transaction
when the price of the security plus the option price will be as
good or better than the price at which the security could be bought
or sold directly. When the option is purchased, the fund pays a
premium and a commission. It then pays a second commission on the
purchase or sale of the underlying security when the option is
exercised. For record-keeping and tax purposes, the price obtained
on the purchase of the underlying security will be the combination
of the exercise price, the premium and both commissions. When
using options as a trading technique, commissions on the option
will be set as if only the underlying securities were traded.
Put and call options also may be held by the fund for investment
purposes. Options permit the fund to experience the change in the
value of a security with a relatively small initial cash
investment. The risk the fund assumes when it buys an option is
the loss of the premium. To be beneficial to the fund, the price
of the underlying security must change within the time set by the
option contract. Furthermore, the change must be sufficient to
cover the premium paid, the commissions paid both in the
acquisition of the option and in a closing transaction or in the
exercise of the option and subsequent sale (in the case of a call)
or purchase (in the case of a put) of the underlying security.
Even then the price change in the underlying security does not
ensure a profit since prices in the option market may not reflect
such a change.
Writing covered options. The fund will write covered options when
it feels it is appropriate and will follow these guidelines:
'Underlying securities will continue to be bought or sold solely on
the basis of investment considerations consistent with the fund's
goal.
'All options written by the fund will be covered. For covered call
options if a decision is made to sell the security, the fund will
attempt to terminate the option contract through a closing purchase
transaction.
'The fund will write options only as permitted under federal or
state laws or regulations, such as those that limit the amount of
total assets subject to the options. While no limit has been set
by the fund, it will conform to the requirements of those states.
For example, California limits the writing of options to 50% of the
assets of a fund. Some regulations also affect the Custodian.
When a covered call option is written, the Custodian segregates the
underlying securities and issues a receipt. There are certain
rules regarding banks issuing such receipts that may restrict the
amount of covered call options written. Furthermore, the fund is
limited to pledging not more than 15% of the cost of its total
assets.
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Net premiums on call options closed or premiums on expired call
options are treated as short-term capital gains. Since the fund is
taxed as a regulated investment company under the Internal Revenue
Code, any gains on options and other securities held less than
three months must be limited to less than 30% of its annual gross
income.
If a covered call option is exercised, the security is sold by the
fund. The fund will recognize a capital gain or loss based upon
the difference between the proceeds and the security's basis.
Options on many securities are listed on options exchanges. If the
fund writes listed options, it will follow the rules of the options
exchange. Options are valued at the close of the New York Stock
Exchange. An option listed on a national exchange, CBOE or NASDAQ
will be valued at the last quoted sales price or, if such a price
is not readily available, at the mean of the last bid and asked
prices.
FUTURES CONTRACTS. A futures contract is an agreement between two
parties to buy and sell a security for a set price on a future
date. They have been established by boards of trade which have
been designated contracts markets by the Commodity Futures Trading
Commission (CFTC). Futures contracts trade on these markets in a
manner similar to the way a stock trades on a stock exchange, and
the boards of trade, through their clearing corporations, guarantee
performance of the contracts. Currently, there are futures
contracts based on such debt securities as long-term U.S. Treasury
bonds, Treasury notes, GNMA modified pass-through mortgate-backed
securities, three-month U.S. Treasury bills and bank certificates
of deposit. While futures contracts based on debt securities do
provide for the delivery and acceptance of securities, such
deliveries and acceptances are very seldom made. Generally, the
futures contract is terminated by entering into an offsetting
transaction. An offsetting transaction for a futures contract sale
is effected by the fund entering into a futures contract purchase
for the same aggregate amount of the specific type of financial
instrument and same delivery date. If the price in the sale
exceeds the price in the offsetting purchase, the fund immediately
is paid the difference and realizes a gain. If the offsetting
purchase price exceeds the sale price, the fund pays the difference
and realizes a loss. Similarly, closing out a futures contract
purchase is effected by the fund entering into a futures contract
sale. If the offsetting sale price exceeds the purchase price, the
fund realizes a gain, and if the offsetting sale price is less than
the purchase price, the fund realizes a loss. At the time a
futures contract is made, a good-faith deposit called initial
margin is set up within a segregated account at the fund's
custodian bank. The initial margin deposit is approximately 1.5%
of a contract's face value. Daily thereafter, the futures contract
is valued and the payment of variation margin is required so that
each day the fund would pay out cash in an amount equal to any
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decline in the contract's value or receive cash equal to any
increase. At the time a futures contract is closed out, a nominal
commission is paid, which is generally lower than the commission on
a comparable transaction in the cash markets.
The purpose of a futures contract, in the case of a portfolio
holding long-term debt securities, is to gain the benefit of
changes in interest rates without actually buying or selling long-
term debt securities. For example, if the fund owned long-term
bonds and interest rates were expected to increase, it might enter
into futures contracts to sell securities which would have much the
same effect as selling some of the long-term bonds it owned.
Futures contracts are based on types of debt securities referred to
above, which have historically reacted to an increase or decline in
interest rates in a fashion similar to the debt securities the fund
owns. If interest rates did increase, the value of the debt
securities in the portfolio would decline, but the value of the
fund's futures contracts would increase at approximately the same
rate, thereby keeping the net asset value of the fund from
declining as much as it otherwise would have. If, on the other
hand, the fund held cash reserves and interest rates were expected
to decline, the fund might enter into interest rate futures
contracts for the purchase of securities. If short-term rates were
higher than long-term rates, the ability to continue holding these
cash reserves would have a very beneficial impact on the fund's
earnings. Even if short-term rates were not higher, the fund would
still benefit from the income earned by holding these short-term
investments. At the same time, by entering into futures contracts
for the purchase of securities, the fund could take advantage of
the anticipated rise in the value of long-term bonds without
actually buying them until the market had stabilized. At that
time, the futures contracts could be liquidated and the fund's cash
reserves could then be used to buy long-term bonds on the cash
market. The fund could accomplish similar results by selling bonds
with long maturities and investing in bonds with short maturities
when interest rates are expected to increase or by buying bonds
with long maturities and selling bonds with short maturities when
interest rates are expected to decline. But by using futures
contracts as an investment tool, given the greater liquidity in the
futures market than in the cash market, it might be possible to
accomplish the same result more easily and more quickly.
Successful use of futures contracts depends on the investment
manager's ability to predict the future direction of interest
rates. If the investment manager's prediction is incorrect, the
fund would have been better off had it not entered into futures
contracts.
OPTIONS ON FUTURES CONTRACTS. Options give the holder a right to
buy or sell futures contracts in the future. Unlike a futures
contract, which requires the parties to the contract to buy and
sell a security on a set date, an option on a futures contract
merely entitles its holder to decide on or before a future date
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(within nine months of the date of issue) whether to enter into
such a contract. If the holder decides not to enter into the
contract, all that is lost is the amount (premium) paid for the
option. Furthermore, because the value of the option is fixed at
the point of sale, there are no daily payments of cash to reflect
the change in the value of the underlying contract. However, since
an option gives the buyer the right to enter into a contract at a
set price for a fixed period of time, its value does change daily
and that change is reflected in the net asset value of the fund.
RISKS. There are risks in engaging in each of the management tools
described above. The risk the fund assumes when it buys an option
is the loss of the premium paid for the option. Purchasing options
also limits the use of monies that might otherwise be available for
long-term investments.
The risk involved in writing options on futures contracts the fund
owns, or on securities held in its portfolio, is that there could
be an increase in the market value of such contracts or securities.
If that occurred, the option would be exercised and the asset sold
at a lower price than the cash market price. To some extent, the
risk of not realizing a gain could be reduced by entering into a
closing transaction. The fund could enter into a closing
transaction by purchasing an option with the same terms as the one
it had previously sold. The cost to close the option and terminate
the fund's obligation, however, might be more or less than the
premium received when it originally wrote the option. Furthermore,
the fund might not be able to close the option because of
insufficient activity in the options market.
A risk in employing futures contracts to protect against the price
volatility of portfolio securities is that the prices of securities
subject to futures contracts may not correlate perfectly with the
behavior of the cash prices of the fund's portfolio securities.
The correlation may be distorted because the futures market is
dominated by short-term traders seeking to profit from the
difference between a contract or security price and their cost of
borrowed funds. Such distortions are generally minor and would
diminish as the contract approached maturity.
Another risk is that the fund's investment manager could be
incorrect in anticipating as to the direction or extent of various
interest rate movements or the time span within which the movements
take place. For example, if the fund sold futures contracts for
the sale of securities in anticipation of an increase in interest
rates, and interest rates declined instead, the fund would lose
money on the sale.
TAX TREATMENT. As permitted under federal income tax laws, the
fund intends to identify futures contracts as mixed straddles and
not mark them to market, that is, not treat them as having been
sold at the end of the year at market value. Such an election may
result in the fund being required to defer recognizing losses
incurred by entering into futures contracts and losses on
underlying securities identified as being hedged against.
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Federal income-tax treatment of gains or losses from transactions
in options on futures contracts and indexes is presently unclear,
although the fund's tax advisers currently believe marking to
market is not required. Depending on developments, and although no
assurance is given, the fund may seek Internal Revenue Service
(IRS) rulings clarifying questions concerning such treatment.
Certain provisions of the Internal Revenue Code may also limit the
fund's ability to engage in futures contracts and related options
transactions. For example, at the close of each quarter of the
fund's taxable year, at least 50% of the value of its assets must
consist of cash, government securities and other securities,
subject to certain diversification requirements. Less than 30% of
its gross income must be derived from sales of securities held less
than three months.
The IRS has ruled publicly that an exchange-traded call option is a
security for purposes of the 50-percent-of-assets test and that its
issuer is the issuer of the underlying security, not the writer of
the option, for purposes of the diversification requirements. In
order to avoid realizing a gain within the three-month period, the
fund may be required to defer closing out a contract beyond the
time when it might otherwise be advantageous to do so. The fund
also may be restricted in purchasing put options for the purpose of
hedging underlying securities because of applying the short sale
holding period rules with respect to such underlying securities.
Accounting for futures contracts will be according to generally
accepted accounting principles. Initial margin deposits will be
recognized as assets due from a broker (the fund's agent in
acquiring the futures position). During the period the futures
contract is open, changes in value of the contract will be
recognized as unrealized gains or losses by marking to market on a
daily basis to reflect the market value of the contract at the end
of each day's trading. Variation margin payments will be made or
received depending upon whether gains or losses are incurred. All
contracts and options will be valued at the last-quoted sales price
on their primary exchange.
When-Issued Securities
The fund may purchase some securities in advance of when they are
issued. Price and rate of interest are set on the date the
commitments are given but no payment is made or interest earned
until the date the securities are issued, usually within two
months, but other terms may be negotiated. The commitment requires
the fund to buy the security when it is issued so the commitment is
valued daily the same way as owning a security would be valued.
The fund designates cash or liquid high-grade debt securities to at
least equal the amount of its commitment. Under normal market
conditions, the fund does not intend to commit more than 5% of its
total assets to these practices. The fund may sell the commitment
just like it can sell a security. Frequently, the fund has the
opportunity to sell the commitment back to the institution.
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APPENDIX C
INSURED FUND
Insurance
The fund's entire portfolio of municipal obligations will at all
times be fully insured as to the scheduled payment of all
installments of principal and interest thereon, except as noted
below. This insurance feature minimizes the risks to the fund and
its shareholders associated with any defaults in the municipal
obligations owned by the fund.
Each insured municipal obligation in the fund's portfolio will be
covered by either a mutual fund Portfolio Insurance Policy issued
by Financial Guaranty Insurance Company (Financial Guaranty) or a
New Issue Insurance Policy obtained by the issuer of the obligation
at the time of its original issuance. If a municipal obligation is
already covered by a New Issue Insurance Policy then the obligation
is not required to be additionally insured under a Portfolio
Insurance Policy. A New Issue Insurance Policy may have been
written by Financial Guaranty or other insurers. Based upon the
expected composition of the fund's portfolio, its investment
manager estimates that the annual premiums for the Portfolio
Insurance Policy will range from .059% to .508%, with an average
annual premium rate of approximately .10% to .25% of the fund's
assets. Premiums are paid from the fund's assets, and will reduce
the current yield on its portfolio by the amount thereof.
Both types of policies discussed above insure the scheduled payment
of all principal and interest on the municipal obligations as they
fall due. The insurance does not guarantee the market value of the
municipal obligations nor the value of the shares of the fund and,
except as described above, has no effect on the net asset value or
redemption price of the shares of the fund. The insurance of
principal refers to the face or par value of the municipal
obligation, and is not affected by the price paid by the fund or by
the market value.
The fund may purchase municipal obligations on which the payment of
interest and principal is guaranteed by an agency or
instrumentality of the U.S. government or which are rated Aaa, MIG-
1 or Prime-1 by Moody's or AAA, A-1 or SP-1 by S&P, in either case
without being required to insure the municipal obligations under
the Portfolio Insurance Policy.
New Issue Insurance. The New Issue Insurance Policies, if any,
have been obtained by the respective issuers or underwriters of the
municipal obligations and all premiums respecting the securities
have been paid in advance by the issuers or underwriters. The
policies are noncancelable and will continue in force so long as
the municipal obligations are outstanding and the respective
insurers remain in business. Since New Issue Insurance remains in
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effect as long as the insured municipal obligations are
outstanding, the insurance may have an effect on the resale value
of municipal obligations so insured in the fund's portfolio.
Therefore, New Issue Insurance may be considered to represent an
element of market value in regard to municipal obligations thus
insured, but the exact effect, if any, of this insurance on market
value cannot be estimated. The fund will acquire municipal
obligations subject to New Issue Insurance Policies only where the
insurer is rated Aaa by Moody's or AAA by S&P.
Portfolio Insurance. The Portfolio Insurance Policy to be obtained
by the fund from Financial Guaranty will be effective only so long
as the fund is in existence, Financial Guaranty is still in
business, and the municipal obligations described in the Portfolio
Insurance Policy continue to be held by the fund. In the event of
a sale of any municipal obligation by the fund or payment prior to
maturity, the Portfolio Insurance Policy terminates as to that
municipal obligation.
The Portfolio Insurance Policy obtained by the fund is
noncancelable except for failure to pay the premiums. Nonpayment
of premiums on the Policy also will permit Financial Guaranty to
take action against the fund to recover premium payments due it.
Premium rates for each issue of municipal obligations covered by
the Portfolio Insurance Policy are fixed for the period of time the
securities are owned by the fund. The insurance premiums are
payable monthly by the fund and are adjusted for purchases and
sales of covered municipal obligations during the month. The fund
has reserved the right (a) to cancel the Portfolio Insurance Policy
upon 60 days' prior written notice to Financial Guaranty and (b) to
discontinue insuring newly-acquired municipal obligations under the
Portfolio Insurance Policy upon 30 days' prior written notice to
Financial Guaranty.
Under the provisions of the Portfolio Insurance Policy, Financial
Guaranty unconditionally and irrevocably agrees to pay to Citibank,
N.A., or its successor, as its agent (the Fiscal Agent), that
portion of the principal of and interest on the municipal
obligations which shall become due for payment but shall be unpaid
by reason of nonpayment by the issuer. Financial Guaranty will
make these payments to the Fiscal Agent on the date the principal
or interest becomes due for payment or on the business day next
following the day on which Financial Guaranty receives notice of
nonpayment, whichever is later. The Fiscal Agent will disburse to
the fund the face amount of principal and interest which is then
due for payment but is unpaid by reason of nonpayment by the
issuer, but only upon receipt by the Fiscal Agent of (i) evidence
of the fund's right to receive payment of the principal or interest
due for payment and (ii) evidence, including any appropriate
instruments of assignment, that all of the rights to payment of
principal or interest due for payment shall thereupon vest in
Financial Guaranty. Upon disbursement, Financial Guaranty shall
become the owner of the municipal obligation, appurtenant coupon or
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right to payment of principal or interest on the obligation and
shall be fully subrogated to all of the fund's rights thereunder,
including the right to payment thereof.
In determining whether to insure any municipal obligation,
Financial Guaranty applies its own standards, which are not
necessarily the same as the criteria used in regard to the
selection of municipal obligations by the fund's investment
adviser. Financial Guaranty's decision is made prior to the fund's
purchase of the municipal obligations. Contracts to purchase
municipal obligations are not covered by the Portfolio Insurance
Policy although municipal obligations underlying the contracts are
covered by this insurance upon their physical delivery to the fund
or its Custodian.
Secondary Market Insurance. The fund may at any time purchase from
Financial Guaranty a secondary market insurance policy (Secondary
Market Policy) on any municipal obligation currently covered by the
Portfolio Insurance Policy. The coverage and obligation to pay
monthly premiums under the Portfolio Insurance Policy would cease
with the purchase by the fund of a Secondary Market Policy.
By purchasing a Secondary Market Policy, the fund would, upon
payment of a single premium, obtain insurance against nonpayment of
scheduled principal and interest for the remaining term of the
municipal obligation, regardless of whether the fund then owned the
obligation. This insurance coverage would be noncancelable and
would continue in force so long as the municipal obligations so
insured are outstanding. The purpose of acquiring such a Policy
would be to enable the fund to sell a municipal obligation to a
third party as a Aaa/AAA rated insured obligation at a market price
higher than what otherwise might be obtainable if the obligation
were sold without the insurance coverage. This rating is not
automatic, however, and must specifically be requested for each
obligation. Any difference between the excess of an obligation's
market value as a Aaa/AAA rated security over its market value
without this rating and the single premium payment would inure to
the fund in determining the net capital gain or loss realized by
the fund upon the sale of the obligation.
Since the fund has the right to purchase a Secondary Market Policy
for an eligible municipal obligation even if the obligation is
currently in default as to any payments by the issuer, the fund
would have the opportunity to sell the obligation rather than be
obligated to hold it in its portfolio in order to continue the
Portfolio Insurance Policy in force.
Because coverage under the Portfolio Insurance Policy terminates
upon sale of a municipal obligation insured thereunder, the
insurance does not have an effect on the resale value of the
obligation. Therefore, it is the intention of the fund to retain
any insured municipal obligations which are in default or in
significant risk of default, and to place a value on the insurance
which will be equal to the difference between the market value of
<PAGE>
PAGE 161
similar obligations which are not in default. Because of this
policy, the fund's investment manager may be unable to manage the
fund's portfolio to the extent that it holds defaulted municipal
obligations, which may limit its ability in certain circumstances
to purchase other municipal obligations. While a defaulted
municipal obligation is held in the fund's portfolio, the fund
continues to pay the insurance premium but also collects interest
payments from the insurer and retains the right to collect the full
amount of principal from the insurer when the municipal obligation
comes due. This would not be applicable if the fund elected to
purchase a Secondary Market Policy discussed above with respect to
a municipal obligation.
Financial Guaranty Insurance Company. Financial Guaranty is a
wholly owned subsidiary of FGIC Corporation (the Corporation) a
Delaware holding company. Financial Guaranty, domiciled in the
State of New York, commenced its business of providing insurance
and financial guaranties for a variety of investment instruments in
January 1984. The Corporation is a wholly-owned subsidiary of
General Electric Capital Corporation.
In addition to providing insurance for the payment of interest on
and principal of municipal bonds and notes held in unit investment
trust and mutual fund portfolios, Financial Guaranty provides
insurance for new and secondary market issues of municipal bonds
and notes and for portions of new and secondary market issues of
municipal bonds and notes. Financial Guaranty expects to provide
other forms of financial guaranties in the future. It also is
authorized to write certain types of fidelity and surety insurance.
As of June 30, 1994, the total capital and surplus of Financial
Guaranty was approximately $850.5 million, as reported to the State
of New York Insurance Department. Moody's, Standard & Poor's have
and Fitch Investors Service, Inc. rated the claims-paying ability
of Financial Guaranty Aaa, AAA and AAA, respectively.
Financial Guaranty is currently licensed to provide insurance in 48
states and the District of Columbia. It files reports with state
insurance regulatory agencies and is subject to audit and review by
these authorities. Financial Guaranty is also subject to
regulation by the State of New York Insurance Department. This
regulation, however, is no guarantee that Financial Guaranty will
be able to perform on its contracts of insurance in the event a
claim should be made thereunder at some time in the future.
The information relating to Financial Guaranty contained above has
been furnished by the corporation. The financial information with
respect to the corporation is unaudited but appears in reports or
other materials filed with state insurance regulatory authorities
and is subject to audit and review by these authorities. No
representation is made as to the accuracy or adequacy of this
information or as to the absence of material adverse changes in the
information subsequent to the date thereof.
<PAGE>
PAGE 162
The policy of insurance obtained by the fund from Financial
Guaranty and the agreement and negotiations in respect thereof
represent the only relationship between Financial Guaranty and the
fund. Otherwise, neither Financial Guaranty nor its parent, FGIC
Corporation, has any significant relationship, direct or indirect,
with the fund.
Government Securities
The fund may invest in securities guaranteed by an agency or
instrumentality of the United States government. These agencies
include Federal National Mortgage Assocation and Federal Housing
Administration (FHA). In the case of a default on a FHA security,
the outstanding balance is subject to an assignment fee and
interest payments may be delayed. This will reduce the return to
the fund.
<PAGE>
PAGE 163
APPENDIX D
DOLLAR-COST AVERAGING
A technique that works well for many investors is one that
eliminates random buy and sell decisions. One such system is
dollar-cost averaging. Dollar-cost averaging involves building a
portfolio through the investment of fixed amounts of money on a
regular basis regardless of the price or market condition. This
may enable an investor to smooth out the effects of the volatility
of the financial markets. By using this strategy, more shares will
be purchased when the price is low and less when the price is high.
As the accompanying chart illustrates, dollar-cost averaging tends
to keep the average price paid for the shares lower than the
average market price of shares purchased, although there is no
guarantee.
While this does not ensure a profit and does not protect against a
loss if the market declines, it is an effective way for many
shareholders who can continue investing through changing market
conditions to accumulate shares in a fund to meet long term goals.
Dollar-cost averaging
Regular Market Price Shares
Investment of a Share Acquired
$100 $ 6.00 16.7
100 4.00 25.0
100 4.00 25.0
100 6.00 16.7
100 5.00 20.0
$500 $25.00 103.4
Average market price of a share over 5 periods:
$5.00 ($25.00 divided by 5).
The average price you paid for each share:
$4.84 ($500 divided by 103.4).
<PAGE>
PAGE 164
___________________________________________________________________
Independent auditors' report
The board of trustees and shareholders
IDS California Tax-Exempt Trust
IDS Special Tax-Exempt Series Trust:
We have audited the accompanying statements of assets and
liabilities, including the schedules of investments in securities,
of IDS California Tax-Exempt Fund (a fund within IDS California
Tax-Exempt Trust), and IDS Massachusetts Tax-Exempt Fund, IDS
Michigan Tax-Exempt Fund, IDS Minnesota Tax-Exempt Fund, IDS New
York Tax-Exempt Fund and IDS Ohio Tax-Exempt Fund (funds within IDS
Special Tax-Exempt Series Trust) as of June 30, 1994, and the
related statements of operations for the year then ended, the
statements of changes in net assets for each of the years in the
two-year period ended June 30, 1994, the financial highlights for
each of the years in the five-year period ended June 30, 1994, the
six months ended June 30, 1989, each of the years in the two-year
period ended December 31, 1988, and the period from August 18, 1986
(commencement of operations), to December 31, 1986, of IDS
California Tax-Exempt Fund, IDS Minnesota Tax-Exempt Fund and IDS
New York Tax-Exempt Fund; and the financial highlights for each of
the years in the seven-year period ended June 30, 1994, of IDS
Massachusetts Tax-Exempt Fund, IDS Michigan Tax-Exempt Fund and IDS
Ohio Tax-Exempt Fund. These financial statements and the financial
highlights are the responsibility of fund management. Our
responsibility is to express an opinion on these financial
statements and the financial highlights based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements and the financial highlights are free of
material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the
financial statements. Investment securities held in custody are
confirmed to us by the custodian. As to securities purchased and
sold but not received or delivered, we request confirmations from
brokers, and where replies are not received, we carry out other
appropriate auditing procedures. An audit also includes assessing
the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis
for our opinion.
<PAGE>
PAGE 165
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of IDS
California Tax-Exempt Fund, IDS Massachusetts Tax-Exempt Fund, IDS
Michigan Tax-Exempt Fund, IDS Minnesota Tax-Exempt Fund, IDS New
York Tax-Exempt Fund and IDS Ohio Tax-Exempt Fund at June 30, 1994,
and the results of their operations for the year then ended, the
changes in their net assets for each of the years in the two-year
period ended June 30, 1994, and the financial highlights for the
periods stated in the first paragraph above, in conformity with
generally accepted accounting principles.
KPMG Peat Marwick
Minneapolis, Minnesota
August 5, 1994
<PAGE>
PAGE 166
<TABLE>
<CAPTION>
Financial statements
Statements of assets and liabilities
IDS California Tax-Exempt Trust
IDS Special Tax-Exempt Series Trust
June 30, 1994
_____________________________________________________________________________________________________________________________
Assets
_____________________________________________________________________________________________________________________________
California Massachusetts Michigan
Tax-Exempt Tax-Exempt Tax-Exempt
Fund Fund Fund
_____________________________________________________________________________________________________________________________
<S> <C> <C> <C>
Investments in securities, at value (Note 1)
(identified cost $238,921,908, $68,569,018 and
$72,083,775) $250,756,406 $ 70,150,034 $75,396,329
Cash in bank on demand deposit 16,912 348,034 418,827
Accrued interest receivable 4,989,483 1,649,762 1,334,666
Receivable for investment securities sold -- -- 2,221,242
_____________________________________________________________________________________________________________________________
Total assets 255,762,801 72,147,830 79,371,064
_____________________________________________________________________________________________________________________________
Liabilities
_____________________________________________________________________________________________________________________________
Dividends payable to shareholders 129,639 35,115 36,782
Payable for investment securities purchased 262,500 -- 2,593,349
Accrued investment management and services fee 112,274 31,505 33,498
Accrued distribution fee 3,421 1,602 1,409
Accrued transfer agency fee 8,708 4,107 3,617
Other accrued expenses 49,503 26,919 19,595
_____________________________________________________________________________________________________________________________
Total liabilities 566,045 99,248 2,688,250
_____________________________________________________________________________________________________________________________
Net assets applicable to outstanding shares $255,196,756 $ 72,048,582 $76,682,814
_____________________________________________________________________________________________________________________________
Represented by
_____________________________________________________________________________________________________________________________
Shares of beneficial interest - $.01 par value, unlimited
number of shares authorized; outstanding 49,714,953; 13,749,968
and 14,320,277 shares $ 497,150 $ 137,500 $ 143,203
Additional paid-in capital 246,797,727 70,634,128 73,515,716
Undistributed net investment income 35 -- --
Accumulated net realized loss (Notes 1 and 6) (3,252,279) (304,062) (288,659)
Unrealized appreciation (Note 5) 11,154,123 1,581,016 3,312,554
_____________________________________________________________________________________________________________________________
Total -- representing net assets applicable to outstanding shares $255,196,756 $ 72,048,582 $76,682,814
_____________________________________________________________________________________________________________________________
Net asset value per share $ 5.13 $ 5.24 $ 5.35
_____________________________________________________________________________________________________________________________
See accompanying notes to financial statements.
<PAGE>
PAGE 167
Financial statements
Statements of assets and liabilities
IDS California Tax-Exempt Trust
IDS Special Tax-Exempt Series Trust
June 30, 1994
_____________________________________________________________________________________________________________________________
Assets
_____________________________________________________________________________________________________________________________
Minnesota New York Ohio
Tax-Exempt Tax-Exempt Tax-Exempt
Fund Fund Fund
_____________________________________________________________________________________________________________________________
Investments in securities, at value (Note 1)
(identified cost $392,601,640, $112,351,032
and $68,841,082) $400,662,645 $117,798,265 $70,538,749
Cash in bank on demand deposit 4,885,147 77,025 346,514
Accrued interest receivable 9,254,717 2,549,320 1,044,978
Receivable for investment securities sold 345,000 -- --
_____________________________________________________________________________________________________________________________
Total assets 415,147,509 120,424,610 71,930,241
_____________________________________________________________________________________________________________________________
Liabilities
_____________________________________________________________________________________________________________________________
Dividends payable to shareholders 202,557 58,755 34,189
Payable for investment securities purchased 6,241,965 118,125 --
Accrued investment management and services fee 178,143 52,348 31,452
Accrued distribution fee 8,090 2,437 1,358
Accrued transfer agency fee 20,766 6,247 3,486
Other accrued expenses 105,357 28,066 24,821
_____________________________________________________________________________________________________________________________
Total liabilities 6,756,878 265,978 95,306
_____________________________________________________________________________________________________________________________
Net assets applicable to outstanding shares $408,390,631 $120,158,632 $71,834,935
_____________________________________________________________________________________________________________________________
Represented by
_____________________________________________________________________________________________________________________________
Shares of beneficial interest - $.01 par value, unlimited
shares authorized; outstanding 79,123,225; 23,481,717
and 13,661,035 shares $ 791,232 $ 234,817 $ 136,610
Additional paid-in capital 402,653,683 115,982,775 70,304,997
Accumulated net realized loss (Notes 1 and 6) (2,179,071) (1,200,068) (304,339)
Unrealized appreciation (Note 5) 7,124,787 5,141,108 1,697,667
_____________________________________________________________________________________________________________________________
Total -- representing net assets applicable to outstanding shares $408,390,631 $120,158,632 $71,834,935
_____________________________________________________________________________________________________________________________
Net asset value per share $ 5.16 $ 5.12 $ 5.26
_____________________________________________________________________________________________________________________________
See accompanying notes to financial statements.
<PAGE>
PAGE 168
Financial statements
Statements of operations
IDS California Tax-Exempt Trust
IDS Special Tax-Exempt Series Trust
Year ended ended June 30, 1994
_____________________________________________________________________________________________________________________________
Investment income
_____________________________________________________________________________________________________________________________
California Massachusetts Michigan
Tax-Exempt Tax-Exempt Tax-Exempt
Fund Fund Fund
_____________________________________________________________________________________________________________________________
Income:
Interest $16,884,415 $ 4,357,924 $ 4,674,907
_____________________________________________________________________________________________________________________________
Expenses (Note 2):
Investment management and services fee 1,418,804 377,077 405,578
Distribution fee 41,568 18,719 16,271
Transfer agency fee 104,864 47,474 41,235
Compensation of trustees 6,710 3,547 5,804
Compensation of officers 1,973 741 623
Custodian fees 2 9 386
Postage 20,647 8,610 4,518
Registration fees 11,274 9,517 6,879
Reports to shareholders 15,146 2,574 1,033
Audit fees 14,750 13,000 13,000
Administrative 4,697 3,239 2,958
Other 7,346 11,391 5,165
_____________________________________________________________________________________________________________________________
Total expenses 1,647,781 495,898 503,450
_____________________________________________________________________________________________________________________________
Investment income -- net 15,236,634 3,862,026 4,171,457
_____________________________________________________________________________________________________________________________
Realized and unrealized loss -- net
_____________________________________________________________________________________________________________________________
Net realized loss on security transactions (Note 3) (959,173) (29,934) (72,444)
Net realized loss on closed interest rate futures contracts (1,416,331) -- --
_____________________________________________________________________________________________________________________________
Net realized loss on investments (2,375,504) (29,934) (72,444)
Net change in unrealized appreciation or depreciation (11,906,345) (3,499,662) (3,496,616)
_____________________________________________________________________________________________________________________________
Net loss on investments (14,281,849) (3,529,596) (3,569,060)
_____________________________________________________________________________________________________________________________
Net increase in net assets resulting from operations $ 954,785 $ 332,430 $ 602,397
_____________________________________________________________________________________________________________________________
See accompanying notes to financial statements.
<PAGE>
PAGE 169
Financial statements
Statements of operations
IDS California Tax-Exempt Trust
IDS Special Tax-Exempt Series Trust
Year ended June 30, 1994
_____________________________________________________________________________________________________________________________
Investment income
_____________________________________________________________________________________________________________________________
Minnesota New York Ohio
Tax-Exempt Tax-Exempt Tax-Exempt
Fund Fund Fund
_____________________________________________________________________________________________________________________________
Income:
Interest $ 27,008,972 $ 7,698,991 $ 4,405,508
_____________________________________________________________________________________________________________________________
Expenses (Note 2):
Investment management and services fee 2,227,969 648,514 381,106
Distribution fee 97,718 29,229 15,702
Transfer agency fee 248,181 74,277 40,107
Compensation of trustees 8,690 6,381 6,160
Compensation of officers 5,021 881 742
Custodian fees 50 -- --
Postage 45,706 11,886 6,640
Registration fees 108,888 8,623 8,797
Reports to shareholders 24,711 5,591 2,389
Audit fees 15,500 14,250 13,000
Administrative 5,280 2,454 1,406
Other 15,726 1,563 1,613
_____________________________________________________________________________________________________________________________
Total expenses 2,803,440 803,649 477,662
_____________________________________________________________________________________________________________________________
Investment income -- net 24,205,532 6,895,342 3,927,846
_____________________________________________________________________________________________________________________________
Realized and unrealized gain (loss) -- net
_____________________________________________________________________________________________________________________________
Net realized gain (loss) on security transactions (Note 3) 1,590,129 134,546 (177,991)
Net realized loss on closed interest rate futures contracts (1,941,413) (639,604) --
______________________________________________________________________________________________________________________________
Net realized loss on investments (351,284) (505,058) (177,991)
Net change in unrealized appreciation or depreciation (22,689,828) (6,437,361) (4,272,974)
_____________________________________________________________________________________________________________________________
Net loss on investments (23,041,112) (6,942,419) (4,450,965)
_____________________________________________________________________________________________________________________________
Net increase (decrease) in net assets resulting from operations $ 1,164,420 $ (47,077) $ (523,119)
_____________________________________________________________________________________________________________________________
See accompanying notes to financial statements.
</TABLE>
<PAGE>
PAGE 170
<TABLE>
<CAPTION>
Financial statements
Statements of changes in net assets
IDS California Tax-Exempt Trust
IDS Special Tax-Exempt Series Trust
Year ended June 30,
_____________________________________________________________________________________________________________________________
Operations and distributions 1994 1993 1994 1993
_____________________________________________________________________________________________________________________________
California Tax-Exempt Fund Massachusetts Tax-Exempt Fund
_____________________________________________________________________________________________________________________________
<S> <C> <C> <C> <C>
Investment income -- net $ 15,236,634 $ 13,860,607 $ 3,862,026 $ 2,982,897
Net realized gain (loss) on investments (2,375,504) 170,092 (29,934) (479)
Net change in unrealized appreciation or (11,906,345) 10,595,516 (3,499,662) 2,842,517
depreciation
_____________________________________________________________________________________________________________________________
Net increase in net assets resulting
from operations 954,785 24,626,215 332,430 5,824,935
_____________________________________________________________________________________________________________________________
Distributions to shareholders from:
Net investment income (15,235,348) (13,861,943) (3,862,035) (2,982,956)
_____________________________________________________________________________________________________________________________
Share transactions (Note 4)
_____________________________________________________________________________________________________________________________
Proceeds from sales (Note 2) 35,683,408 43,318,047 22,403,265 22,543,737
Reinvestment of distributions 10,573,864 9,387,295 3,055,527 2,340,831
Payments for redemptions (37,967,003) (24,496,269) (14,032,861) (7,383,168)
_____________________________________________________________________________________________________________________________
Increase in net assets from share transactions 8,290,269 28,209,073 11,425,931 17,501,400
_____________________________________________________________________________________________________________________________
Total increase (decrease) in net assets (5,990,294) 38,973,345 7,896,326 20,343,379
Net assets at beginning of year 261,187,050 222,213,705 64,152,256 43,808,877
_____________________________________________________________________________________________________________________________
Net assets at end of year
(including undistributed net investment income
for IDS California of $35 for 1994
and IDS Massachusetts of $9 for 1993) $255,196,756 $261,187,050 $ 72,048,582 $ 64,152,256
_____________________________________________________________________________________________________________________________
See accompanying notes to financial statements.
<PAGE>
PAGE 171
Financial statements
Statements of changes in net assets
IDS California Tax-Exempt Trust
IDS Special Tax-Exempt Series
Year ended June 30,
_____________________________________________________________________________________________________________________________
Operations and distributions 1994 1993 1994 1993
_____________________________________________________________________________________________________________________________
Michigan Tax-Exempt Fund Minnesota Tax-Exempt Fund
_____________________________________________________________________________________________________________________________
Investment income -- net $ 4,171,457 $ 3,490,946 $ 24,205,532 $ 20,972,865
Net realized gain (loss) on investments (72,444) 25,065 (351,284) 114,873
Net change in unrealized appreciation or (3,496,616) 3,377,911 (22,689,828) 14,751,768
depreciation
_____________________________________________________________________________________________________________________________
Net increase in net assets resulting from operations 602,397 6,893,922 1,164,420 35,839,506
_____________________________________________________________________________________________________________________________
Distributions to shareholders from:
Net investment income (4,171,489) (3,491,044) (24,204,281) (20,974,210)
Net realized gain on investments (68,841) -- -- --
_____________________________________________________________________________________________________________________________
Total distributions (4,240,330) (3,491,044) (24,204,281) (20,974,210)
_____________________________________________________________________________________________________________________________
Share transactions (Note 4)
_____________________________________________________________________________________________________________________________
Proceeds from sales (Note 2) 15,113,866 17,163,359 81,250,235 96,570,778
Reinvestment of distributions 3,148,115 2,459,045 19,448,232 16,613,955
Payments for redemptions (9,715,456) (5,905,586) (70,952,363) (39,837,405)
_____________________________________________________________________________________________________________________________
Increase in net assets from share transactions 8,546,525 13,716,818 29,746,104 73,347,328
______________________________________________________________________________________________________________________________
Total increase in net assets 4,908,592 17,119,696 6,706,243 88,212,624
Net assets at beginning of year 71,774,222 54,654,526 401,684,388 313,471,764
_____________________________________________________________________________________________________________________________
Net assets at end of year
(including undistributed net investment income
for IDS Michigan of $32 for 1993) $ 76,682,814 $ 71,774,222 $408,390,631 $401,684,388
_____________________________________________________________________________________________________________________________
See accompanying notes to financial statements.
<PAGE>
PAGE 172
Financial statements
Statements of changes in net assets
IDS California Tax-Exempt Trust
IDS Special Tax-Exempt Series Trust
Year ended June 30,
_____________________________________________________________________________________________________________________________
Operations and distributions 1994 1993 1994 1993
_____________________________________________________________________________________________________________________________
New York Tax-Exempt Fund Ohio Tax-Exempt Fund
_____________________________________________________________________________________________________________________________
Investment income -- net $ 6,895,342 $ 6,091,422 $ 3,927,846 $ 3,083,675
Net realized gain (loss) on investments (505,058) (4,095) (177,991) 38,778
Net change in unrealized appreciation or (6,437,361) 5,557,017 (4,272,974) 3,216,945
depreciation
_____________________________________________________________________________________________________________________________
Net increase (decrease) in net assets
resulting from operations (47,077) 11,644,344 (523,119) 6,339,398
_____________________________________________________________________________________________________________________________
Distributions to shareholders from:
Net investment income (6,894,339) (6,092,439) (3,927,883) (3,083,897)
Net realized gain on investments -- -- (786) (78,831)
_____________________________________________________________________________________________________________________________
Total distributions (6,894,339) (6,092,439) (3,928,669) (3,162,728)
_____________________________________________________________________________________________________________________________
Share transactions (Note 4)
_____________________________________________________________________________________________________________________________
Proceeds from sales (Note 2) 21,355,340 22,014,933 17,974,999 18,759,240
Reinvestment of distributions 5,365,427 4,602,258 3,100,875 2,456,447
Payments for redemptions (16,789,123) (10,260,106) (9,646,507) (6,171,189)
_____________________________________________________________________________________________________________________________
Increase in net assets from share transactions 9,931,644 16,357,085 11,429,367 15,044,498
_____________________________________________________________________________________________________________________________
Total increase in net assets 2,990,228 21,908,990 6,977,579 18,221,168
Net assets at beginning of year 117,168,404 95,259,414 64,857,356 46,636,188
_____________________________________________________________________________________________________________________________
Net assets at end of year
(including undistributed net investment income
for IDS Ohio of $37 for 1993) $120,158,632 $117,168,404 $ 71,834,935 $ 64,857,356
_____________________________________________________________________________________________________________________________
See accompanying notes to financial statements.
</TABLE>
<PAGE>
PAGE 173
Notes to financial statements
IDS California Tax-Exempt Trust
IDS Special Tax-Exempt Series Trust
___________________________________________________________________
1. Summary of significant accounting policies
IDS California Tax-Exempt Trust and IDS Special Tax-Exempt Series
Trust were organized as Massachusetts business trusts. IDS
California Tax-Exempt Trust includes only IDS California Tax-Exempt
Fund. IDS Special Tax-Exempt Series Trust is a "series fund" that
is presently comprised of six individual funds, including IDS
Massachusetts Tax-Exempt Fund, IDS Michigan Tax-Exempt Fund, IDS
Minnesota Tax-Exempt Fund, IDS New York Tax-Exempt Fund and IDS
Ohio Tax-Exempt Fund (the funds). The funds are non-diversified,
open-end management investment companies as defined in the
Investment Company Act of 1940 (as amended). The funds concentrate
their investments in a single state and therefore may have more
credit risk related to the economic conditions of the respective
state than funds that have a broader geographical diversification.
Significant accounting policies followed by the funds are
summarized below:
Valuation of securities
All securities are valued at the close of each business day.
Securities for which market quotations are not readily available
are valued at fair value according to methods selected in good
faith by the board of trustees. Determination of fair value
involves, among other things, reference to market indexes, matrixes
and data from independent brokers. Short-term securities maturing
in more than 60 days from the valuation date are valued at the
market price or approximate market value based on current interest
rates; those maturing in 60 days or less are valued at amortized
cost.
Futures transactions
In order to gain exposure to or protect itself from changes in the
market, each fund may buy and sell interest rate 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, each 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 each 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. Each fund recognizes a realized gain or loss when the
contract is closed or expires.
<PAGE>
PAGE 174
Notes to financial statements
IDS California Tax-Exempt Trust
IDS Special Tax-Exempt Series Trust
___________________________________________________________________
1. Summary of significant accounting policies (continued)
Federal taxes
Since each 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, the
recognition of certain foreign currency gains (losses) as ordinary
income (loss) for tax purposes, 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 paid
monthly, are reinvested in additional shares of each fund at net
asset value or payable in cash. Capital gains, when available, are
distributed along with the last income dividend at the end 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
Under terms of an agreement dated Nov. 14, 1991, each fund pays IDS
Financial Corporation (IDS) a fee for managing its investments,
recordkeeping and other specified services. The fee is a percentage
of each fund's average daily net assets consisting of a group asset
charge in reducing percentages from 0.46% to 0.32% annually on the
combined net assets of all non-money market funds in the IDS MUTUAL
FUND GROUP and an individual annual asset charge of 0.13% of
average daily net assets for each fund.
Each fund also pays IDS a distribution fee at an annual rate of $6
per shareholder account and a transfer agency fee at an annual rate
of $15.50 per shareholder account. The transfer agency fee is
reduced by earnings on monies pending shareholder redemptions.
<PAGE>
PAGE 175
Notes to financial statements
IDS California Tax-Exempt Trust
IDS Special Tax-Exempt Series Trust
___________________________________________________________________
2. Expenses and sales charges (continued)
IDS will assume and pay any expenses (except taxes and brokerage
commissions) that exceed the most restrictive applicable state
expense limitation.
Sales charges by IDS Financial Services Inc. for distributing the
funds' shares were $1,177,341 for IDS California, $867,225 for IDS
Massachusetts, $560,739 for IDS Michigan, $2,458,058 for IDS
Minnesota, $728,241 for IDS New York and $593,137 for IDS Ohio
Tax-Exempt Funds for the year ended June 30, 1994.
Each fund also has a retirement plan for its independent trustees.
Upon retirement, trustees receive monthly payments equal to
one-half of the retainer fee for as many months as they served as
trustees up to 120 months. There are no death benefits. The plan is
not funded but each fund recognizes the cost of payments during the
time the trustees serve on the board. The retirement plan expense
amounted to $2,243 for IDS California, $1,640 for IDS
Massachusetts, $3,928 for IDS Minnesota, $1,800 each for IDS
Michigan, IDS New York and IDS Ohio Tax-Exempt Funds for the year
ended June 30, 1994.
___________________________________________________________________
3. Securities transactions
For the year ended June 30, 1994, cost of purchases and proceeds
from sales (other than short-term obligations) aggregated
$82,551,185 and $71,318,373 for IDS California, $16,693,428 and
$4,406,310 for IDS Massachusetts, $20,950,381 and $11,646,528 for
IDS Michigan, $85,238,653 and $55,076,357 for IDS Minnesota,
$22,253,738 and $11,722,684 for IDS New York and $19,654,275 and
$7,444,006 for IDS Ohio Tax-Exempt Funds. Realized gains and losses
are determined on an identified cost basis.
<PAGE>
PAGE 176
Notes to financial statements
IDS California Tax-Exempt Trust
IDS Special Tax-Exempt Series Trust
___________________________________________________________________
4. Share transactions
Transactions in shares of each fund for the years indicated are as
follows:
Number of shares:
<TABLE>
<CAPTION>
________________________________________________________________________________________________________________________
California Tax-Exempt Fund Massachusetts Tax-Exempt Fund Michigan Tax-Exempt Fund
_____________________________ ______________________________ ______________________________
Year ended June 30, Year ended June 30, Year ended June 30,
1994 1993 1994 1993 1994 1993
________________________________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C> <C>
Sold 6,578,766 8,197,569 4,061,994 4,217,029 2,687,659 3,154,702
Issued for reinvested
distributions 1,962,600 1,777,866 558,167 438,573 562,683 451,734
Redeemed (7,091,287) (4,641,462) (2,564,761) (1,380,830) (1,739,752) (1,088,585)
________________________________________________________________________________________________________________________
Net increase 1,450,079 5,333,973 2,055,400 3,274,772 1,510,590 2,517,851
________________________________________________________________________________________________________________________
Number of shares:
________________________________________________________________________________________________________________________
Minnesota Tax-Exempt Fund New-York Tax-Exempt Fund Ohio Tax-Exempt Fund
_____________________________ ______________________________ ______________________________
Year ended June 30, Year ended June 30, Year ended June 30,
1994 1993 1994 1993 1994 1993
________________________________________________________________________________________________________________________
Sold 14,961,095 18,162,534 3,952,327 4,171,087 3,231,719 3,465,518
Issued for reinvested
distributions 3,599,781 3,126,057 999,332 872,831 562,446 454,076
Redeemed (13,233,479) (7,491,955) (3,127,657) (1,944,622) (1,753,354) (1,139,720)
________________________________________________________________________________________________________________________
Net increase 5,327,397 13,796,636 1,824,002 3,099,296 2,040,811 2,779,874
________________________________________________________________________________________________________________________
</TABLE>
___________________________________________________________________
5. Interest rate futures contracts
Investments in securities at June 30, 1994, included securities
valued at $1,067,400 for IDS California, $1,011,840 for IDS
Minnesota and $958,820 for IDS New York Tax-Exempt Funds that were
pledged as collateral to cover initial margin deposits on 200, 275
and 90 purchase contracts, respectively. The market value of the
open contracts at June 30, 1994, was $20,243,750 for IDS
California, $27,835,156 for IDS Minnesota and $9,109,688 for IDS
New York Tax-Exempt Funds with a net unrealized loss of $680,375
for IDS California, $936,218 for IDS Minnesota and $306,125 for
IDS New York Tax-Exempt Funds.
<PAGE>
PAGE 177
Notes to financial statements
IDS California Tax-Exempt Trust
IDS Special Tax-Exempt Series Trust
___________________________________________________________________
6. Capital loss carryover
For federal income tax purposes, capital loss carryovers were
$3,420,653 for IDS California, $199,063 for IDS Massachusetts,
$2,753,600 for IDS Minnesota, $1,267,843 for IDS New York and
$185,465 for IDS Ohio Tax-Exempt Funds at June 30, 1994. These
capital loss carryovers will expire in 1996 through 2002 if not
offset by subsequent capital gains.
___________________________________________________________________
7. Financial highlights
"Financial highlights" showing per share data and selected
information are presented on pages 5-10 of the prospectus.
<PAGE>
PAGE 178
<TABLE>
<CAPTION>
Investments in securities
IDS California Tax-Exempt Fund
(Percentage represents value of
June 30, 1994 investments compared to net assets)
_____________________________________________________________________________________________________________________________
Municipal bonds (98.3%)
_____________________________________________________________________________________________________________________________
Name of issuer and Coupon Maturity Principal Value(a)
title of issue (b,c,f) rate amount
_____________________________________________________________________________________________________________________________
<S> <C> <C> <C> <C>
Adelanto Improvement Agency Tax Allocation Refunding Bonds
Series B (FGIC Insured) 5.50% 2023 $3,000,000 $ 2,647,650
Aliso Viejo Orange County District Community Facilities District #88-1
Special Tax Bonds Series 1992A 7.35 2018 3,000,000 3,451,590
Burbank Redevelopment Agency Tax Allocation Bonds Golden State Series 1992A 6.00 2013 1,500,000 1,414,665
Chapman College Educational Facilities Authority Revenue Bonds
Series 1989B 7.50 2018 500,000 518,400
Chico Walker Senior Housing Insured Revenue Bonds The Lodge Series 1993A 5.70 2023 1,500,000 1,284,585
Clearlake Redevelopment Agency Highlands Park Community Development
Tax Allocation Bonds Series 1993 6.40 2023 1,420,000 1,293,947
Eastern Municipal Water District Riverside County Water & Sewer
Revenue Certificates of Participation Series 1991 6.00 2023 1,000,000 914,510
Eastern Municipal Water District Riverside County Water & Sewer
Pre-Refunded Revenue Certificates of Participation Series 1991
(FGIC Insured) 6.50 2020 3,000,000 3,277,650
Eden Township Hospital District Insured Health Facility Refunding Revenue
Certificate of Participation Series 1993 (California Mortgage Insured) 5.75 2012 3,000,000 2,707,380
El Camino Hospital District Hospital Pre-Refunded Revenue
Certificate of Participation Series A 8.50 2017 1,500,000 1,691,895
Fontana Redevelopment Agency Refunding Certificate of Participation
Police Facility Series 1993 5.625 2016 1,750,000 1,541,400
Foothill-De Anza Community College Santa Clara County Refunding
Certificate of Participation Series 1993 (Connie Lee Insured) 5.25 2021 1,675,000 1,403,801
Gilroy Las Animas Technology Park Refunding Bonds District #2 Series 1988-1 8.40 2006-07 500,000 518,611
Indian Wells Improvement Bonds Assessment District #13 7.50 2008 430,000 442,431
Lancaster Redevelopment Agency Tax Allocation Bonds (MBIA Insured) 5.80 2023 2,500,000 2,293,750
Long Beach Harbor Revenue Bonds AMT Series 1989A 7.25 2019 7,000,000 (e) 7,471,800
Los Angeles Convention & Exhibition Center Pre-Refunded
Certificate of Participation Series 1989A 7.00 2020 5,000,000 5,517,150
Los Angeles Convention & Exhibition Center Pre-Refunded
Certificate of Participation Series 1989A 7.30 2009 1,000,000 1,112,500
Los Angeles Convention & Exhibition Center Pre-Refunded
Certificate of Participation Series 1989A 7.375 2018 2,900,000 3,235,965
Los Angeles County Transportation Commission Sales Tax Refunded
Revenue Bonds
Series A 7.00 2019 4,150,000 4,284,003
Los Angeles County Transportation Commission Sales Tax Pre-Refunded
Revenue Bonds
Series A 8.00 2016 2,000,000 2,217,760
Los Angeles County Transportation Commission Sales Tax Pre-Refunding
Revenue Bonds
Series 1988A 7.875 2008 500,000 562,715
Los Angeles County Transportation Commission Sales Tax Refunding
Revenue Bonds
Series 1989A 7.40 2015 2,000,000 2,170,000
_____________________________________________________________________________________________________________________________
See accompanying notes to investments in securities.
<PAGE>
PAGE 179
Investments in securities
IDS California Tax-Exempt Fund
(Percentage represents value of
June 30, 1994 investments compared to net assets)
_____________________________________________________________________________________________________________________________
Municipal bonds (continued)
_____________________________________________________________________________________________________________________________
Name of issuer and Coupon Maturity Principal Value(a)
title of issue (b,c,f) rate amount
_____________________________________________________________________________________________________________________________
Los Angeles County Transportation Commission Sales Tax Pre-Refunded
Revenue Bonds
Series A 7.60% 2012 $ 640,000 $ 690,630
Los Angeles Department of Water & Power Electric Plant Revenue Bonds
Series 1990 7.125 2030 6,500,000 7,173,270
Los Angeles Department of Water & Power Waterworks Refunding Revenue Bonds 5.80 2024 2,900,000 2,633,780
Los Angeles Multi-family Housing Revenue Bonds AMT (FHA Insured) 7.85 2029 130,000 138,272
Los Angeles Multi-family Housing Revenue Bonds AMT Park Parthenia
Series 1986A
(GNMA Insured) 7.40 2022 1,000,000 1,041,470
Los Angeles Single Family Home Mortgage Revenue Bonds AMT Series 1991A
(GNMA & FNMA Insured) 6.875 2025 5,700,000 5,721,033
Los Angeles State Building Authority Lease Pre-Refunded Revenue Bonds
State Department of General Services Lease Series 1988A 7.25 2006 3,000,000 3,285,150
Los Angeles State Building Authority Lease Pre-Refunded Revenue Bonds
State Department of General Services Lease Series 1988A 7.50 2011 1,500,000 1,657,245
Los Angeles State Harbor Revenue Bonds Escrowed to Maturity 7.60 2018 1,000,000 1,137,200
Los Angeles USD Refunding Certficate of Participation (FSA Insured) 5.50 2010 1,000,000 921,880
Los Angeles Wastewater System Refunding Revenue Bonds Series A
(MBIA Insured) 5.70 2020 5,775,000 5,246,067
Los Angeles Wastewater System Refunding Revenue Bonds Series A
(MBIA Insured) 5.80 2021 4,250,000 3,909,107
Los Angeles Wastewater System Pre-Refunded Revenue Bonds Series 1987 8.125 2017 1,000,000 1,121,720
Marin County Municipal Water District Revenue Bonds Series 1993 5.65 2023 3,500,000 3,085,005
Mayer Memorial Hospital District Insured Health Facility Revenue Bonds
(California Mortgage Insured) 5.50 2013 950,000 834,223
Modesto Certificate of Participation Pre-Refunded Bonds Community Center 8.10 2015 1,000,000 1,120,960
Modesto Irrigation Certificate of Participation 7.25 2015 2,000,000 2,134,720
Mount Diablo Hospital District Hospital Pre-Refunded Revenue Bonds
Series 1990A (AMBAC Insured) 7.00 2017 3,000,000 3,360,840
Northern California Public Power Authority Power Pre-Refunded Revenue Bonds
Hydroelectric Series 1986B-3 8.00 2024 2,000,000 2,226,840
Northern California Public Power Authority Power Pre-Refunded Revenue Bonds
Hydroelectric #1 Series 1986B-1 8.00 2024 2,100,000 2,338,182
Northern California Public Power Authority Refunding Revenue Bonds
Geothermal #3 Series 1985A 7.00 2010 830,000 839,645
Northern California Public Power Authority Refunding Revenue Bonds
Geothermal #3 Series 1987A 7.00 2007 6,825,000 7,099,229
Northern California Transmission Agency California-Oregon Transmission
Pre-Refunded Revenue Bonds Series 1990A (MBIA Insured) 7.00 2024 2,000,000 2,217,320
Pittsburg Public Financing Authority Wastewater
Refunding Bonds Series 1994A (FGIC Insured) 5.125 2015 1,000,000 853,020
Pleasanton Joint Powers Financing Authority Reassessment Revenue Bonds
Series 1993A 6.15 2012 1,960,000 1,826,054
Port of Oakland Revenue Bonds AMT Series 1989A (BIG Insured) 7.60 2016 500,000 542,340
_____________________________________________________________________________________________________________________________
See accompanying notes to investments in securities.
<PAGE>
PAGE 180
Investments in securities
IDS California Tax-Exempt Fund
(Percentage represents value of
June 30, 1994 investments compared to net assets)
_____________________________________________________________________________________________________________________________
Municipal bonds (continued)
_____________________________________________________________________________________________________________________________
Name of issuer and Coupon Maturity Principal Value(a)
title of issue (b,c,f) rate amount
_____________________________________________________________________________________________________________________________
Rancho Cucamonga Redevelopment Agency 1990 Tax Allocation Bonds
(MBIA Insured) 7.125% 2019 $3,460,000 $ 3,724,586
Rancho Cucamonga Redevelopment Agency 1990 Tax Allocation Pre-Refunded Bonds
(MBIA Insured) 7.125 2019 3,540,000 3,942,180
Rancho Mirage Joint Powers Finance Authority Certificate of Participation
Eisenhower Memorial Hospital 7.00 2022 4,250,000 4,314,897
Riverside County Transportation Commission Sales Tax Revenue Bonds
Series 1993A (AMBAC Insured) 5.75 2009 1,750,000 1,710,520
Riverside Electric Revenue Bonds Series 1991 6.00 2015 6,530,000 6,246,206
Sacramento Municipal Utility District Series R 6.00 2015-17 7,500,000 7,057,770
Sacramento Municipal Utility District Pre-Refunded Series R 7.125 2013 3,000,000 3,228,420
Sacramento Municipal Utility District Pre-Refunded Series V 7.50 2018 2,775,000 3,046,867
Sacramento Municipal Utility District Pre-Refunded Series W 7.50 2018 1,980,000 2,173,981
Sacramento Municipal Utility District Pre-Refunded Series Y (MBIA Insured) 6.75 2019 3,400,000 3,769,682
Sacramento Redevelopment Agency Tax Allocation Bonds Series 1990A
(MBIA Insured) 6.50 2013 3,500,000 3,546,725
San Diego County Capital Asset Lease Certificate of Participation
Series 1993 Inverse Floater (AMBAC Insured) 7.82 2007 3,200,000 (d) 2,992,000
San Diego Industrial Development Revenue Bonds San Diego Gas & Electric
Series A 7.625 2021 1,000,000 1,058,890
San Diego Regional Transportation Commission Sales Tax
Pre-Refunded Revenue Bonds Limited Tax Series 1989A 6.25 2008 5,030,000 5,303,582
San Francisco Redevelopment Financing Authority Tax Allocation
Refunding Bonds Series B (FGIC Insured) 5.25 2017 1,500,000 1,282,095
San Joaquin County Pre-Refunded Certificate of Participation
Human Services Facility Series 1989 (BIG Insured) 6.70 2009 3,500,000 3,817,450
San Joaquin County Certificate of Participation
Jail & Sheriffs Operation Center (MBIA Insured) 6.75 2015 2,000,000 2,198,760
San Jose Redevelopment Agency Merged Area Tax Allocation Bonds
Series 1993 Inverse Floater (MBIA Insured) 7.448 2014 3,000,000 (d) 2,385,000
San Mateo County Transit District Limited Tax Pre-Refunded Bonds
Series 1990A (MBIA Insured) 6.50 2020 2,500,000 2,662,900
Santa Clara County Pre-Refunded Certificates of Participation
Housing Authority Office 7.875 2017 630,000 668,209
Santa Clara County Transit District Sales Tax Revenue Bonds Series 1991A 6.25 2021 9,980,000 9,512,038
Santa Cruz Certificate of Participation 8.375 2007 1,220,000 1,243,570
Santa Rosa Sonoma County Wastewater Service Facility District
Pre-Refunded Improvement Bonds Series 1989 7.80 2015 1,000,000 1,103,410
Sonoma County Community Redevelopment Agency Tax Allocation Bonds
Windsor Redevelopment Series C 7.90 2014 415,000 422,943
Southern California Home Financing Authority Single Family Mortgage
Revenue Bonds AMT 1990B (GNMA Insured) 7.75 2024 665,000 683,879
_____________________________________________________________________________________________________________________________
See accompanying notes to investments in securities.
<PAGE>
PAGE 181
Investments in securities
IDS California Tax-Exempt Fund
(Percentage represents value of
June 30, 1994 investments compared to net assets)
_____________________________________________________________________________________________________________________________
Municipal bonds (continued)
_____________________________________________________________________________________________________________________________
Name of issuer and Coupon Maturity Principal Value(a)
title of issue (b,c,f) rate amount
_____________________________________________________________________________________________________________________________
Southern California Public Power Authority Pre-Refunded Revenue Bonds
Palo Verde Series B 7.125% 2015 $5,000,000 $ 5,350,450
Southern California Public Power Authority Transmission Pre-Refunded
Revenue Bonds
Series 1986A 7.875 2018 1,500,000 1,640,250
Southern California Public Power Authority Transmission Pre-Refunded
Revenue Bonds
Series 1986B 7.00 2022 5,000,000 5,363,600
Southern California Public Power Authority Transmission Revenue Bonds
Series 1986B 7.00 2022 1,760,000 1,855,410
Southern California Public Power Authority Transportation Bonds Series B 7.375 2021 400,000 430,132
State Department of Water Resources Water System Pre-Refunded Revenue Bonds
Central Valley Series D 7.70 2024 2,400,000 2,655,720
State Educational Facilities Authority Revenue Bonds Stanford University
Series J 6.00 2016 7,275,000 7,082,358
State Health Facilities Finance Authority Revenue Bonds Kaiser Permanente
Series 1989A 7.00 2018 2,000,000 2,100,360
State Health Facility Finance Authority Pre-Refunded Revenue Bonds
St. Joseph Health System Series 1989A 6.90 2014 3,500,000 3,840,900
State Housing Finance Agency Home Mortgage Revenue Bonds Series 1986B 6.90 2016 1,990,000 2,004,547
State Housing Finance Agency Home Single Family Mortgage Revenue Bonds
Series 1991A 7.375 2017 2,315,000 2,337,409
State Pollution Control Finance Authority Pollution Control Revenue
Bonds AMT
Southern California Edison Series 1988A 6.90 2006 2,000,000 2,066,900
State Public Works Board University of California Lease Pre-Refunded
Revenue Bonds
Series 1990A 7.00 2015 2,250,000 2,513,048
State Public Works Board Various Community Colleges Lease Revenue Bonds
Series 1992A (AMBAC Insured) 6.00 2017 1,465,000 1,397,669
State University Parking System Revenue Bonds 7.70 2009 225,000 244,780
State University Revenue Bonds San Jose State University Student Union
Series B 7.60 2007 150,000 161,348
Statewide Community Development Authority Health Facilities Revenue Bonds
Unihealth America Series 1993A Inverse Floater (AMBAC Insured) 8.03 2011 5,000,000 (d) 4,368,750
Stockton Refunding Wastewater System Certificate of Participation
(AMBAC Insured) 5.50 2015 1,250,000 1,127,088
Stockton Single Family Mortgage Revenue Bonds AMT Series 1990A 7.50 2023 145,000 153,147
(GNMA Insured)
Suisun City Redevelopment Agency Tax Allocation Refunded Bonds
(MBIA Insured) 5.50 2023 1,000,000 877,960
Turlock Irrigation District Pre-Refunded Bonds Series 1986A 7.75 2018 1,000,000 1,070,050
University of Southern California Educational Facilities Authority
Pre-Refunded Revenue Bonds Series 1989B 6.75 2015 5,000,000 5,152,100
_____________________________________________________________________________________________________________________________
See accompany notes to investments in securities.
<PAGE>
PAGE 182
Investments in securities
IDS California Tax-Exempt Fund
(Percentage represents value of
June 30, 1994 investments compared to net assets)
_____________________________________________________________________________________________________________________________
Municipal bonds (continued)
_____________________________________________________________________________________________________________________________
Name of issuer and Coupon Maturity Principal Value(a)
title of issue (b,c,f) rate amount
_____________________________________________________________________________________________________________________________
Vacaville Limited Obligation Improvement Bonds
Water Rights Assessment District 8.00% 2007 $ 925,000 $ 952,694
Walnut Valley Unified School District Unlimited Tax General
Obligation Bonds
(MBIA Insured) 6.00 2014-15 2,870,000 2,783,816
_____________________________________________________________________________________________________________________________
Total municipal bonds
(Cost: $238,921,908) $250,756,406
_____________________________________________________________________________________________________________________________
Total investments in securities
(Cost: $238,921,908)(g) $250,756,406
_____________________________________________________________________________________________________________________________
See accompanying notes to investments in securities.
<PAGE>
PAGE 183
Investments in securities
IDS California Tax-Exempt Fund
June 30, 1994
___________________________________________________________________
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 6-30-94 6-30-93
___________________________________________________________________
AAA 63% 38%
AA 18 35
A 16 19
BBB and below 3 3
Non-rated -- 5
Total 100% 100%
___________________________________________________________________
(c) The following abbreviations are used in portfolio descriptions
to identify the insurer of the issue:
AMBAC -- American Municipal Bond Association Corporation
BIG -- Bond Investors Guarantee
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) Inverse Floaters represents securities which pay interest at a
rate that increases (decreases) based on (decreases) increases
of market short-term rates. Interest rate disclosed is the rate
in effect on June 30, 1994.
(e) Partially pledged as inital deposit on the following open
interest rate futures purchase contracts (see Note 5 to the
financial statements):
Type of security Par Value
U.S. Treasury Bond, Sept. 1994 $20,000,000
(f) The following abbreviation is used in portfolio descriptions:
AMT -- Alternative Minimum Tax
(g) At June 30, 1994, the cost of securities for federal income tax
purposes was $238,863,654 and the aggregate gross unrealized
appreciation and depreciation based on that cost was:
Unrealized appreciation $15,609,964
Unrealized depreciation (3,717,212)
Net unrealized appreciation $11,892,752
<PAGE>
PAGE 184
</TABLE>
<TABLE>
<CAPTION>
Investments in securities
IDS Massachusetts Tax-Exempt Fund
(Percentages represent
June 30, 1994 value of investments
compared to net assets)
_____________________________________________________________________________________________________________________________
Municipal bonds (96.8%)
_____________________________________________________________________________________________________________________________
Name of issuer and Coupon Maturity Principal Value(a)
title of issue (b,c,d) rate amount
_____________________________________________________________________________________________________________________________
<S> <C> <C> <C> <C>
Ashburnham-Westminister Regional School District Unlimited Tax
General Obligation School Bonds (MBIA Insured) 6.00% 2013 $1,000,000 $ 978,630
Bay Transit Authority Series A (Secondary FGIC Insured) 5.75 2022 1,000,000 922,160
Bay Transportation Authority General Transportation System
Refunding Bonds Series 1992B 6.20 2016 1,500,000 1,478,730
Boston City Hospital Refunding Revenue Bonds Series B (FHA Insured) 5.75 2023 3,000,000 2,701,890
Boston City Hospital Pre-Refunded Revenue Bonds Series A (FHA Insured) 7.625 2021 1,000,000 1,142,590
Boston General Obligation Bonds Series 1991A (MBIA Insured) 6.75 2011 500,000 550,740
Boston General Obligation Refunding Bonds Series 1993A (AMBAC Insured) 5.65 2009 1,500,000 1,445,115
Boston Industrial Development Financing Authority Revenue Bonds
Massachusetts College of Pharmacy Series 1993A (Connie Lee Insured) 5.25 2026 1,000,000 837,850
Boston Water & Sewer Commission General Pre-Refunded Revenue Bonds Senior
Pre-Refunded Series 1991A (FGIC Insured) 7.00 2018 1,000,000 1,119,640
Boston Water & Sewer Commission General Subordinate Revenue Bonds Series A
(BIG Insured) 6.00 2008 500,000 502,785
Boston Water & Sewer Commission Senior Revenue Bonds Series A 7.875 2013 365,000 396,186
Boston Water & Sewer Commission Senior Pre-Refunded Revenue Bonds Series A 7.875 2013 210,000 229,364
Commonwealth General Obligation Consolidated Loan Pre-Refunded Bonds
Series 1990A (FGIC Insured) 7.25 2009 500,000 558,592
Greater Lawrence Sanitary District North Andover General Obligation Bonds 8.50 2005 625,000 656,362
Health & Educational Facilities Authority Pre-Refunded Bonds
Bentley College Series G 8.125 2017 400,000 423,952
Health & Educational Facilities Authority Refunding Revenue Bonds
Beth Israel Hospital Series 1989E 7.00 2009-14 550,000 577,468
Health & Educational Facilities Authority Revenue Bonds
Berkshire Health Systems Series A (MBIA Insured) 7.50 2008 500,000 549,335
Health & Educational Facilities Authority Revenue Bonds
Berkshire Health Systems Series C 5.90 2011 1,000,000 888,840
Health & Educational Facilities Authority Pre-Refunded Revenue Bonds
Beverly Hospital Series D (MBIA Insured) 7.30 2019 400,000 444,660
Health & Educational Facilities Authority Revenue Bonds
Boston College Series J (FGIC Insured) 6.625 2021 2,000,000 2,037,260
Health & Educational Facilities Authority Revenue Bonds
Boston College Series K 5.25 2023 1,000,000 850,460
Health & Educational Facilities Authority Revenue Bonds
Brigham & Women's Hospital Series C 6.75 2021 500,000 506,285
_____________________________________________________________________________________________________________________________
See accompanying notes to investments in securities.
<PAGE>
PAGE 185
Investments in securities
IDS Massachusetts Tax-Exempt Fund
(Percentages represent
June 30, 1994 value of investments
compared to net assets)
_____________________________________________________________________________________________________________________________
Municipal bonds (continued)
_____________________________________________________________________________________________________________________________
Name of issuer and Coupon Maturity Principal Value(a)
title of issue (b,c,d) rate amount
_____________________________________________________________________________________________________________________________
Health & Educational Facilities Authority Revenue Bonds
Brigham & Women's Hospital Series 1991D 6.75% 2024 $1,000,000 $ 1,016,820
Health & Educational Facilities Authority Revenue Bonds
Charlton Memorial Hospital Series 1991B 7.25 2013 1,750,000 1,819,037
Health & Educational Facilities Authority Pre-Refunded Revenue Bonds
Children's Hospital Series D 7.75 2018 500,000 556,405
Health & Educational Facilities Authority Revenue Bonds
Holyoke Hospital Series B 6.50 2015 500,000 471,650
Health & Educational Facilities Authority Pre-Refunded Revenue Bonds
Lahey Clinic Medical Center Series A (MBIA Insured) 7.625 2018 500,000 555,090
Health & Educational Facilities Authority Revenue Bonds
Lahey Clinic Medical Center Series B (MBIA Insured) 5.625 2015 1,500,000 1,379,685
Health & Educational Facilities Authority Revenue Bonds
Lahey Clinic Medical Center Series B (MBIA Insured) 5.375 2023 1,000,000 859,770
Health & Educational Facilities Authority Revenue Bonds
Melrose-Wakefield Hospital Series 1992B 6.375 2016 1,000,000 951,840
Health & Educational Facilities Authority Revenue Bonds
McLean Hospital Series 1992C (FGIC Insured) 6.625 2015 1,250,000 1,279,800
Health & Educational Facilities Authority Revenue Bonds
Morton Hospital & Medical Center Series B (Connie Lee Insured) 5.25 2014 1,000,000 873,300
Health & Educational Facilities Authority Revenue Bonds
Mount Auburn Hospital Series A (MBIA Insured) 7.875 2018 205,000 227,060
Health & Educational Facilities Authority Revenue Bonds
New England Deaconess Hospital Series 1992D 6.625 2012 1,000,000 992,140
Health & Educational Facilities Authority Revenue Bonds
Newton Wellesley Hospital Series 1991D (MBIA Insured) 7.00 2015 1,000,000 1,071,640
Health & Educational Facilities Authority Pre-Refunded Revenue Bonds
Northeastern University Series 1989C (AMBAC Insured) 7.10 2006 1,000,000 1,088,000
Health & Educational Facilities Authority Pre-Refunded Revenue Bonds
Northeastern University Series E (MBIA Insured) 6.55 2022 1,000,000 1,014,010
Health & Educational Facilities Authority Revenue Bonds
South Shore Hospital Series 1992D (MBIA Insured) 6.50 2022 1,000,000 1,010,240
_____________________________________________________________________________________________________________________________
See accompanying notes to investments in securities.
<PAGE>
PAGE 186
Investments in securities
IDS Massachusetts Tax-Exempt Fund
(Percentages represent
June 30, 1994 value of investments
compared to net assets)
_____________________________________________________________________________________________________________________________
Municipal bonds (continued)
_____________________________________________________________________________________________________________________________
Name of issuer and Coupon Maturity Principal Value(a)
title of issue (b,c,d) rate amount
_____________________________________________________________________________________________________________________________
Health & Educational Facilities Authority Pre-Refunded Revenue Bonds
Stonehill College Series 1990D (AMBAC Insured) 7.70% 2020 $1,000,000 $ 1,145,540
Health & Educational Facilities Authority Revenue Bonds
Suffolk University Series B (Connie Lee Insured) 6.35 2022 2,495,000 2,459,621
Health & Educational Facilities Authority Pre-Refunded Revenue Bonds
Wentworth Institute of Technology Series A (AMBAC Insured) 7.40 2010 750,000 843,810
Health & Educational Facilities Authority Revenue Bonds
Wentworth Institute of Technology Series B (Connie Lee Insured) 5.50 2023 1,500,000 1,304,580
Holyoke Unlimited Tax General Obligation Municipal Purpose Loans
Series 1993B (FSA Insured) 6.125 2013 1,100,000 1,089,550
Industrial Finance Agency 1st Mortgage Pre-Refunded Revenue Bonds
Berkshire Retirement Community at Lennox 9.875 2018 200,000 227,394
Industrial Finance Agency Pollution Control Refunding Revenue Bonds
Eastern Edison Series 1993 5.875 2008 1,500,000 1,402,440
Industrial Finance Agency Resource Recovery Revenue Bonds AMT
Ogden Haverhill Series 1986A (AMBAC Insured) 7.375 2011 175,000 188,454
Industrial Finance Agency Resource Recovery Revenue Bonds
SEMASS Series 1991A 9.00 2015 1,500,000 1,635,660
Industrial Finance Agency Revenue Bonds Brandeis University (MBIA Insured) 6.80 2019 700,000 721,665
Industrial Finance Agency Revenue Bonds Museum of Science Series 1989
(FSA Insured) 7.30 2009 1,000,000 1,119,830
Leominster General Obligation Bonds (MBIA Insured) 7.50 2009 1,000,000 1,101,580
Lowell Limited Tax General Obligation State Qualified Refunding Bonds
Series A (FSA Insured) 5.50 2010 800,000 747,640
Mansfield General Obligation Bonds (AMBAC Insured) 6.70 2011 1,000,000 1,038,480
Municipal Wholesale Electric Power Supply System Revenue Bonds Series A 6.00 2018 1,500,000 1,402,545
Municipal Wholesale Electric Power Supply System Pre-Refunded Revenue Bonds
Series 1992B 6.75 2017 1,395,000 1,540,038
Municipal Wholesale Electric Power Supply System Revenue Bonds Series 1992B 6.75 2017 605,000 618,667
Nantucket General Obligation Bonds 6.80 2011 1,000,000 1,071,710
North Andover General Obligation Bonds (MBIA Insured) 7.35 2008 310,000 342,091
Port Authority Pre-Refunded Revenue Bonds AMT Series 1988A 7.75 2018 485,000 512,640
Port Authority Revenue Bonds AMT Series 1988A 7.75 2018 515,000 539,566
_____________________________________________________________________________________________________________________________
See accompanying notes to investments in securities.
<PAGE>
PAGE 187
Investments in securities
IDS Massachusetts Tax-Exempt Fund
(Percentages represent
June 30, 1994 value of investments
compared to net assets)
_____________________________________________________________________________________________________________________________
Municipal bonds (continued)
_____________________________________________________________________________________________________________________________
Name of issuer and Coupon Maturity Principal Value(a)
title of issue (b,c,d) rate amount
_____________________________________________________________________________________________________________________________
Port Authority Revenue Bonds AMT Series 1990A (FGIC Insured) 7.50% 2020 $1,000,000 $ 1,089,230
Quincy Pre-Refunded Revenue Bonds Quincy City Hospital (FHA Insured) 7.875 2016 1,000,000 1,085,820
Quincy Refunding Revenue Bonds Quincy Hospital Issue Series 1993
(FSA Insured) 5.25 2016 1,000,000 878,170
Southeastern University Building Authority Refunding Revenue Bonds
Series 1986A 7.80 2016 100,000 106,214
Southeastern University Building Revenue Bonds 7.80 2011 325,000 345,195
Southern Berkshire Regional School District Unlimited Tax
General Obligation Pre-Refunded Bonds (AMBAC Insured) 7.55 2010 1,000,000 1,133,120
Springfield Limited Tax General Obligation Municipal Purpose Loan Bonds
Series 1993B (MBIA Insured) 6.00 2013 750,000 731,963
State College Building Authority Refunding Revenue Bonds Series 1986A 7.125 2006 150,000 157,572
State College Building Authority Refunding Revenue Bonds Series 1986A 7.25 2016 250,000 263,160
State General Obligation Consolidated Loan Bonds Series 1991A
(FGIC Insured) 6.00 2011 1,095,000 1,073,297
State Housing Finance Agency Housing Revenue Rental Bonds Series 1
(AMBAC Insured) 7.20 2026 850,000 861,653
State Housing Finance Agency Single Family Housing Revenue Bonds AMT
Series 13 7.95 2023 500,000 516,210
State Housing Finance Authority Residential Development Bonds Series 1992A
(FNMA Insured) 6.875 2011 1,000,000 1,037,230
State Housing Finance Authority Single Family Mortgage Housing
Revenue Bonds Series 4 7.375 2014 475,000 492,447
State Housing Finance Authority Single Family Mortgage Housing
Revenue Bonds AMT Series 7 8.10 2020 265,000 272,460
University of Lowell Building Authority Facilities Revenue Bonds
4th Series A 7.40 2007 125,000 133,589
University of Lowell Building Authority Facilities Revenue Bonds
4th Series A 7.60 2012 50,000 53,735
University of Massachusetts Building Authority Revenue Bonds Series A
(FSA Insured) 7.50 2014 500,000 547,505
_____________________________________________________________________________________________________________________________
See accompanying notes to investments in securities.
<PAGE>
PAGE 188
Investments in securities
IDS Massachusetts Tax-Exempt Fund
(Percentages represent
June 30, 1994 value of investments
compared to net assets)
_____________________________________________________________________________________________________________________________
Municipal bonds (continued)
_____________________________________________________________________________________________________________________________
Name of issuer and Coupon Maturity Principal Value(a)
title of issue (b,c,d) rate amount
_____________________________________________________________________________________________________________________________
University of Massachusetts Building Authority Revenue Bonds Series A
Escrowed to Maturity 7.50% 2011 $ 120,000 $ 135,467
Water Resource Authority General Pre-Refunded Revenue Bonds Series 1990A 7.625 2014 500,000 567,805
Water Resource Authority General Pre-Refunded Revenue Bonds Series 1991A 6.50 2019 1,000,000 1,086,980
Water Resource Authority General Revenue Bonds Series 1993C 5.25 2020 1,400,000 1,161,258
_____________________________________________________________________________________________________________________________
Total municipal bonds
(Cost: $68,167,340) $ 69,748,962
_____________________________________________________________________________________________________________________________
See accompanying notes to investments in securities.
(Percentages represent
value of investments
compared to net assets)
_____________________________________________________________________________________________________________________________
Short-term security (0.6%)
_____________________________________________________________________________________________________________________________
Issuer Annualized Amount Value(a)
yield on date payable at
of purchase maturity
_____________________________________________________________________________________________________________________________
Municipal note
Massachusetts Bay Transit Authority
03-01-95 3.10% $400,000 $ 401,072
_____________________________________________________________________________________________________________________________
Total short-term security
(Cost: $401,678) $ 401,072
_____________________________________________________________________________________________________________________________
Total investments in securities
(Cost: $68,569,018)(e) $ 70,150,034
_____________________________________________________________________________________________________________________________
See accompanying notes to investments in securities.
</TABLE>
<PAGE>
PAGE 189
Investments in securities
IDS Massachusetts Tax-Exempt Fund
June 30, 1994
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 06-30-94 06-30-93
___________________________________________________________________
AAA 64% 54%
AA 12 15
A 17 20
BBB and below 7 8
Non-rated -- 3
Total 100% 100%
___________________________________________________________________
(c) The following abbreviations are used in portfolio descriptions
to identify the insurer of the issue:
AMBAC -- American Municipal Bond Association Corporation
BIG -- Bond Investors Guarantee
FGIC -- Financial Guarantee Insurance Corporation
FHA -- Federal Housing Authority
FNMA -- Federal National Mortgage Association
FSA -- Financial Security Assurance
MBIA -- Municipal Bond Investors Assurance
(d) The following abbreviation is used in the portfolio
descriptions:
AMT -- Alternative Minimum Tax
(e) At June 30, 1994, the cost of securities for federal income tax
purposes was $68,596,143 and the aggregate gross unrealized
appreciation and depreciation based on that cost was:
Unrealized appreciation $3,213,492
Unrealized depreciation (1,659,601)
___________________________________________________________________
Net unrealized appreciation $1,553,891
___________________________________________________________________
<PAGE>
PAGE 190
<TABLE>
<CAPTION>
Investments in securities
IDS Michigan Tax-Exempt Fund (Percentages represent value of
June 30, 1994 investments compared to net assets)
_____________________________________________________________________________________________________________________________
Municipal bonds (97.7%)
_____________________________________________________________________________________________________________________________
Name of issuer and Coupon Maturity Principal Value(a)
title of issue (b,c,d) rate amount
_____________________________________________________________________________________________________________________________
<S> <C> <C> <C> <C>
Alpena County Limited Tax Hospital Improvement Pre-Refunded Bonds
Series B (AMBAC Insured) 8.75% 2002 $ 150,000 $ 159,464
Auburn Hills Limited Tax General Obligation Street Improvement Bonds 6.00 2004 200,000 205,894
Battle Creek Water Supply System Pre-Refunded Revenue Bonds Series 1990B 6.375 2008-10 1,640,000 1,752,373
Buena Vista School District Saginaw County School Building & Site
Unlimited Tax General Obligation Pre-Refunded Bonds Series 1991 7.20 2016 1,500,000 1,675,140
Caledonia Community School Unlimited Tax General Obligation
Refunding Revenue Bonds (AMBAC Insured) 5.50 2022 2,000,000 1,793,420
Central Michigan University Board of Trustees
General Pre-Refunded Revenue Bonds Series 1987 (MBIA Insured) 7.90 2015 250,000 277,017
Chassell Township Schools County of Houghton Refunding Unlimited Tax
General Obligation Bonds Qualified School Bond Loan Fund 5.25 2020 1,045,000 891,657
Chelsea General Obligation Bonds (BIG Insured) 8.20 2006 145,000 163,205
Chippewa Valley School Macomb County Qualified School Building Loan Fund
Unlimited Tax General Obligation Bonds (FGIC Insured) 5.00 2021 1,000,000 828,130
Comstock Park Public School Kent County Unlimited Tax
General Obligation Pre-Refunded Bonds Series 1989 6.00 2016 400,000 422,732
Comstock Park Public School Kent County Unlimited Tax
General Obligation Pre-Refunded Bonds Series 1989 6.875 2010 260,000 284,079
Detroit General Obligation Pre-Refunded Bonds Distributable State Aid
Series 1989 (AMBAC Insured) 7.20 2009 1,000,000 1,105,490
Detroit Sewer Disposal Pre-Refunded Revenue Bonds 8.00 2008 500,000 552,320
Detroit Unlimited Tax General Obligation Bonds Series A 7.25 2009 1,000,000 1,029,320
Detroit Unlimited Tax General Obligation Bonds Series A 8.625 2007 100,000 109,725
Detroit Unlimited Tax General Obligation Bonds Series 1988A 7.875 2008 700,000 752,913
Detroit Water Supply System Pre-Refunded Revenue Bonds
Series 1988 (MBIA Insured) 7.875 2008 400,000 447,656
Detroit Water Supply System Refunding Revenue Bonds
Series 1993 (FGIC Insured) 5.00 2023 1,000,000 817,550
Dexter Community Schools Building Site & Refunding Unlimited Tax
General Obligation Bonds 5.00 2017 1,500,000 1,240,230
East Lansing School District School Building & Site Unlimited Tax
General Obligation Bonds Series 1991 6.625 2014 1,000,000 1,029,140
Eastern Michigan University Pre-Refunded Revenue Bonds Residence Hall 7.80 2006 205,000 221,035
Farmington Hills Hospital Finance Authority Revenue Bonds
Botsford General Hospital Series 1992A (MBIA Insured) 6.50 2022 1,500,000 1,510,485
Forest Hills School District Unlimited Tax General Obligation
Pre-Refunded Bonds 7.375 2015 1,000,000 1,117,190
Frenchtown Resort Drainage District Monroe County Drain
Pre-Refunded Bonds Series 1987 7.50 2011-12 615,000 687,976
_____________________________________________________________________________________________________________________________
See accompanying notes to investments in securities.
<PAGE>
PAGE 191
Investments in securities
IDS Michigan Tax-Exempt Fund (Percentages represent value of
June 30, 1994 investments compared to net assets)
_____________________________________________________________________________________________________________________________
Municipal Bonds (continued)
_____________________________________________________________________________________________________________________________
Name of issuer and Coupon Maturity Principal Value(a)
title of issue (b,c,d) rate amount
_____________________________________________________________________________________________________________________________
Garden City School District Authority Pre-Refunded Revenue Bonds 7.80% 2010 $ 305,000 $ 336,357
Grand Haven Electrical Pre-Refunded Revenue Bonds 6.75 2016 1,000,000 1,037,630
Grand Rapids Water Supply System Improvement
Pre-Refunded Revenue Bonds Series 1988 7.875 2018 700,000 777,861
Grand Rapids Water Supply System Improvement Pre-Refunded Revenue Bonds
Series 1990 (FGIC Insured) 7.25 2020 1,250,000 1,393,925
Grand Rapids Water Supply System Refunding Revenue Bonds Series 1991
(FGIC Insured) 5.75 2018 500,000 465,920
Holland School District Unlimited Tax General Obligation Bonds
Counties of Ottawa & Allegan 1989 School Building & Site Boards 7.375 2019 1,000,000 1,090,140
Inkster School District Unlimited Tax General Obligation
Pre-Refunded Bonds (AMBAC Insured) 7.00 2018 450,000 496,237
Isoco County Water Supply System Limited Tax General Obligation Bonds
(AMBAC Insured) 5.50 2008-10 575,000 553,610
Jackson County Unlimited Tax General Obligation Refunding Bonds
Series 1987 6.75 2011 150,000 160,197
Kalamazoo Hospital Financial Authorization Bronson Methodist Hospital
Pre-Refunded Bonds 9.375 2016 150,000 159,456
Kent County Hospital Pre-Refunded Revenue Bonds Butterworth Hospital
Series 1989A 7.00 2019 500,000 546,660
Kent County Hospital Pre-Refunded Revenue Bonds Butterworth Hospital
Series 1989A 7.25 2013 500,000 551,675
Kent County Refuse Disposal System Limited Tax
General Obligation Refunding Bonds Series 1987 8.40 2010 150,000 164,946
Laingsburg Community Schools Unlimited Tax General Obligation Bonds 6.375 2021 1,500,000 1,485,555
Lincoln Consolidated School District Refunding Revenue Bonds (FGIC Insured) 5.80 2014 1,000,000 942,640
Lincoln Consolidated School District Refunding Revenue Bonds (FGIC Insured) 5.85 2021 500,000 470,380
Marquette Hospital Finance Authority Refunding Revenue Bonds
Marquette General Hospital Series 1989C 7.50 2007-19 825,000 877,280
Monroe County Pollution Control Revenue Bonds AMT Detroit Edison
Fermi Plants Series 1990I (FGIC Insured) 7.65 2020 1,000,000 1,100,520
Monroe County Pollution Control Revenue Bonds AMT Detroit Edison
Fermi 2 Plants Series CC (AMBAC Insured) 7.50 2019 1,750,000 1,940,207
Muskegon Hospital Finance Authority Refunding Revenue Bonds Hackley Hospital
Series 1988A 8.00 2008 400,000 437,192
Northville Public Schools Unlimited Tax General Obligation Bonds
Series 1991B 7.00 2008 1,500,000 1,603,650
Oak Park School District Unlimited Tax General Obligation
Pre-Refunded Bonds 7.15 2009 705,000 765,461
Plymouth-Canton Community School District Series 1992C 6.50 2016 1,000,000 1,035,870
River Rouge School District #19 Unlimited Tax General Obligation Bonds
(FSA Insured) 5.50 2009 1,185,000 1,113,367
Rochester Hill Unlimited Tax General Obligation Bonds Series 1990A 6.00 2009-10 735,000 726,017
_____________________________________________________________________________________________________________________________
See accompanying notes to investments in securities.
<PAGE>
PAGE 192
Investments in securities
IDS Michigan Tax-Exempt Fund (Percentages represent value of
June 30, 1994 investments compared to net assets)
_____________________________________________________________________________________________________________________________
Municipal Bonds (continued)
_____________________________________________________________________________________________________________________________
Name of issuer and Coupon Maturity Principal Value(a)
title of issue (b,c,d) rate amount
_____________________________________________________________________________________________________________________________
Rockford Public Schools Kent County Unlimited Tax
General Obligation Pre-Refunded Bonds 7.375% 2019 $1,000,000 $ 1,117,190
Rockford Public Schools Unlimited Tax General Obligation Bonds
Qualified School Bond Loan Fund 5.875 2019 1,500,000 1,390,260
Southfield Public Schools Building & Site Unlimited Tax
General Obligation Bonds 5.875 2022 1,975,000 1,836,000
South Lake District Unlimited Tax General Obligation Bonds 6.80 2010 355,000 374,046
State Building Authority Refunding Revenue Bonds Series 1991I 6.25 2020 2,200,000 2,138,950
State Comprehensive Transportation Pre-Refunded Bonds Series 1986II 7.75 2011 135,000 144,669
State Hospital Finance Authority Hospital Pre-Refunded Revenue Bonds
Detroit Medical Center Series 1988A 8.125 2012 310,000 350,114
State Hospital Finance Authority Hospital Refunding Revenue Bonds
Detroit Medical Center Series 1988A 8.125 2012 90,000 98,731
State Hospital Finance Authority Hospital Refunding Revenue Bonds
Detroit Medical Center Series 1988B 8.00 2008 500,000 564,430
State Hospital Finance Authority Hospital Refunding Revenue Bonds
Sisters of Mercy Health Group Series 1993P (MBIA Insured) 5.25 2021 1,200,000 1,013,856
State Hospital Finance Authority Hospital Pre-Refunded Revenue Bonds
McLaren Obligated Group Series 1991A 7.50 2021 1,750,000 2,002,053
State Hospital Finance Authority Revenue Bonds Henry Ford Hospital Series A 7.50 2013 400,000 433,076
State Hospital Finance Authority Revenue Bonds Henry Ford Hospital
Series 1990A 7.00 2010 1,000,000 1,035,220
State Hospital Finance Authority Revenue Bonds Henry Ford Hospital
Series 1992A 5.75 2017 1,500,000 1,352,850
State Hospital Finance Authority Pre-Refunded Revenue Bonds
Oakwood Hospital Group Series 1990A (FGIC Insured) 7.10 2018 1,000,000 1,113,780
State Job Development Authority Pollution Control Revenue Bonds
Chrysler Project 5.70 1999 1,000,000 997,180
State Public Power Agency Belle River Pre-Refunded Bonds Series 1983 6.625 2019 675,000 697,639
State Public Power Agency Belle River Pre-Refunded Revenue Bonds Series 1986 7.00 2018 1,510,000 1,584,443
State Strategic Fund Limited Tax Obligation Refunding Revenue Bonds
Detroit Edison Series 1990BB (MBIA Insured) 7.00 2008 1,000,000 1,089,960
State Strategic Fund Limited Tax Obligation Refunding Revenue Bonds
Detroit Edison Series 1992BB (FGIC Insured) 6.50 2016 2,500,000 2,540,525
State Strategic Fund Limited Tax Obligation Refunding Revenue Bonds
Ford Motor Series 1991A 7.10 2006 1,650,000 1,786,950
State Strategic Fund Limited Tax Obligation Refunding Revenue Bonds
Escrowed to Maturity Oxford Institute 7.875 2005 150,000 173,898
State Trunk Line Series A (FGIC Insured) 5.75 2020 2,730,000 2,518,097
State University Board of Trustees General Revenue Bonds Series 1992A 6.25 2015 3,000,000 2,975,370
State University Hospital Pre-Refunded Revenue Bonds Series 1986A 7.75 2012 150,000 163,633
State University Revenue Parking System Pre-Refunded Bonds
Ann Arbor Campus Series A 7.40 2015 150,000 161,005
Taylor Tax Increment Finance Authority Bonds Series 1989A (MBIA Insured) 6.00 2007-09 1,205,000 1,220,455
_____________________________________________________________________________________________________________________________
See accompanying notes to investments in securities.
<PAGE>
PAGE 193
Investments in securities
IDS Michigan Tax-Exempt Fund (Percentages represent value of
June 30, 1994 investments compared to net assets)
_____________________________________________________________________________________________________________________________
Municipal Bonds (continued)
_____________________________________________________________________________________________________________________________
Name of issuer and Coupon Maturity Principal Value(a)
title of issue (b,c,d) rate amount
_____________________________________________________________________________________________________________________________
Warren Consolidated School District Refunding Revenue Bonds
Unlimited Tax General Obligation Bonds (MBIA Insured) 5.50% 2021 $1,500,000 $ 1,343,640
Waterford School District Unlimited Tax General Obligation Bonds
Series Q 6.25 2013 340,000 337,372
Wayne County Airport Revenue Bonds AMT Detroit Metropolitan Airport
Series 1986 (FGIC Insured) 8.00 2014 250,000 273,472
Wayne County Airport Revenue Bonds AMT Detroit Metropolitan Airport
Series 1990A (AMBAC Insured) 7.00 2020 1,080,000 1,148,299
Wayne County Airport Revenue Bonds Detroit Metropolitan Airport Series 1993C
(MBIA Insured) 5.25 2021 1,500,000 1,279,980
Wyandotte Electric Pre-Refunded Revenue Bonds Series 1987 (AMBAC Insured) 7.875 2017 300,000 332,292
_____________________________________________________________________________________________________________________________
Total municipal bonds
(Cost: $71,583,775) $ 74,896,329
_____________________________________________________________________________________________________________________________
Short-term security (0.6%)
_____________________________________________________________________________________________________________________________
Issuer (e) Effective Amount Value(a)
yield payable
at
maturity
_____________________________________________________________________________________________________________________________
Municipal note
Regents of the University of Michigan Hospital
Refunding Revenue Bonds Series 1992A
12-01-19 2.65% $ 500,000 $ 500,000
_____________________________________________________________________________________________________________________________
Total short-term security
(Cost: $500,000) $ 500,000
_____________________________________________________________________________________________________________________________
Total investments in securities
(Cost: $72,083,775)(f) $ 75,396,329
_____________________________________________________________________________________________________________________________
See accompanying notes to investments in securities.
</TABLE>
<PAGE>
PAGE 194
Investments in securities
IDS Michigan Tax-Exempt Fund
June 30, 1994
___________________________________________________________________
Investments in securities (continued)
___________________________________________________________________
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 06-30-94 06-30-93
___________________________________________________________________
AAA 65% 36%
AA 25 40
A 6 19
BBB and below 4 3
Non-rated - 2
Total 100% 100%
___________________________________________________________________
(c) The following abbreviations are used in portfolio descriptions
to identify the insurer of the issue:
AMBAC -- American Municipal Bond Association Corporation
BIG -- Bond Investors Guarantee
FGIC -- Financial Guarantee Insurance Corporation
FSA -- Financial Security Assurance
MBIA -- Municipal Bond Investors Assurance
(d) The following abbreviation is used in portfolio descriptions:
AMT -- Alternative Minimum Tax
(e) Interest rate varies to reflect current market conditions; rate
shown is the effective rate on June 30, 1994.
(f) At June 30, 1994, the cost of securities for federal income tax
purposes was $72,060,816 and the aggregate gross unrealized
appreciation and depreciation based on that cost was:
Unrealized appreciation $ 4,576,063
Unrealized depreciation (1,240,550)
___________________________________________________________________
Net unrealized appreciation $ 3,335,513
___________________________________________________________________
<PAGE>
PAGE 195
<TABLE>
<CAPTION>
Investments in securities (Percentages represent
IDS Minnesota Tax-Exempt Fund value of investments
June 30, 1994 compared to net assets)
_____________________________________________________________________________________________________________________________
Municipal bonds (96.4%)
_____________________________________________________________________________________________________________________________
Name of issuer and Coupon Maturity Principal Value(a)
title of issue (b,c,g) rate amount
_____________________________________________________________________________________________________________________________
<S> <C> <C> <C> <C>
Anoka County General Obligation Capital Improvement Revenue Bonds
Series 1989B 7.00% 2007-10 $7,950,000 $ 8,546,807
Anoka County Resource Recovery Revenue Bonds Northern States Power
Series 1985 7.15 2008 3,750,000 3,970,800
Apple Valley Certificate of Participation Lease Pre-Refunded Bonds
Central Garage Facility Financial Agreement 7.25 2001 155,000 164,660
Apple Valley Certificate of Participation Lease Pre-Refunded Bonds
Central Garage Facility Financial Agreement 7.30 2002 175,000 186,064
Apple Valley Certificate of Participation Lease Pre-Refunded Bonds
Central Garage Facility Financial Agreement 7.40 2003 190,000 202,441
Apple Valley Certificate of Participation Lease Pre-Refunded Bonds
Central Garage Facility Financial Agreement 7.50 2004 450,000 480,384
Appleton Correctional Facility Revenue Bonds Series 1990A 9.875 2020 4,000,000 (d) 2,520,000
Bass Brook Pollution Control Revenue Bonds Minnesota Power & Light
Series 1992 6.00 2022 6,300,000 5,942,412
Becker Pollution Control Revenue Bonds Northern States Power
Series 1987A 6.80 2007 4,025,000 4,180,727
Becker Pollution Control Revenue Bonds Northern States Power
Sherburne County Generating Station Units 1 & 2 Series 1987A 7.25 2005 2,000,000 2,072,200
Bemidji Hospital Facilities 1st Mortgage Revenue Bonds
North Country Health Services Series 1991 7.00 2021 1,755,000 1,819,566
Bloomington Community Development Refunding Revenue Bonds
Note 24th Avenue Motel 8.50 2005 1,858,796 1,905,266
Braham Independent School District #314 Refunding Bonds 5.20 2019 3,340,000 2,947,917
Brainerd Hospital Refunding Revenue Bonds Evangelical Lutheran
Good Samaritan Society Series 1992A (Capital Guaranty Insured) 6.65 2017 1,695,000 1,765,919
Brainerd Hospital Revenue Bonds Evangelical Lutheran
Good Samaritan Society Series 1992B (Capital Guaranty Insured) 6.65 2017 2,865,000 2,984,872
Burnsville Multi-family Housing Refunding Revenue Bonds
FHA-Summit Park Apartments Series 1993 6.00 2033 4,000,000 3,675,560
Chaska Advance Refunded Certificate of Participation
Lease Purchase Agreement Bonds Series 1986C 7.25 2001 800,000 850,784
Columbia Heights Multi-family Housing Revenue Bonds
Crestview Lutheran Home Royce Place Series 1991 10.00 2032 560,000 607,830
Columbia Heights Multi-family Housing Revenue Bonds
Crestview Lutheran Home Royce Place Series 1991 (FHA Insured) 7.75 2032 2,755,000 2,852,802
Duluth Economic Development Authority Health Care Facility
Pre-Refunded Revenue Bonds Benedictine Health System
St. Mary's Medical Center Series 1990 8.375 2020 2,000,000 2,336,040
Duluth Hospital Facilities St. Lukes Hospital
Pre-Refunded Revenue Bonds Series 1988 9.00 2018 2,500,000 2,882,400
Duluth Housing and Redevelopment Authority 1st Mortgage Revenue Bonds
Lakeshore Lutheran Home 8.25 2009 125,000 122,686
Duluth Recreation Revenue Certificate of Participation 9.00 2003-07 1,430,000 1,572,905
_____________________________________________________________________________________________________________________________
See accompanying notes to investments in securities.
</TABLE>
<PAGE>
PAGE 196
<TABLE>
<CAPTION>
Investments in securities (Percentages represent
IDS Minnesota Tax-Exempt Fund value of investments
June 30, 1994 compared to net assets)
_____________________________________________________________________________________________________________________________
Municipal bonds (continued)
_____________________________________________________________________________________________________________________________
Name of issuer and Coupon Maturity Principal Value(a)
title of issue (b,c,g) rate amount
_____________________________________________________________________________________________________________________________
<S> <C> <C> <C> <C>
Eden Prairie Housing Development Refunding Revenue Bonds Eden Commons
Series 1990 (FHA Insured) 8.25% 2025 $6,420,000 $ 6,313,235
Edina Hospital System Revenue Bonds Fairview Hospital & Health Care Services
Series 1989A 7.125 2019 2,500,000 2,585,350
Edina Multi-family Housing Revenue Bonds Walker Assisted Living
Series 1991 9.00 2031 6,700,000 7,249,936
Faribault Single Family Mortgage Refunding Revenue Bonds Series 1991A 7.50 2011 3,550,000 3,634,348
Hennepin County Lease Revenue Certificate of Participation Series 1991 6.80 2017 7,250,000 7,657,088
Hennepin County Solid Waste Resource Recovery General Obligation
Revenue Bonds Series 1987A 8.20 2009 1,760,000 1,873,344
Hermantown Independent School District #700 General Obligation
School Building Pre-Refunded Bonds Series 1986A (MBIA Insured) 8.10 2006 290,000 311,895
Hubbard County Solid Waste Disposal Revenue Bonds AMT Potlatch Series 1989 7.375 2013 5,610,000 5,960,401
International Falls Solid Waste Disposal Revenue Bonds AMT Boise Cascade
Series 1990 7.75 2015 4,000,000 4,194,080
Maplewood Care Institute Series 1994 7.75 2024 3,830,000 3,651,637
Maplewood Multi-family Housing Revenue Bonds Maplewood (FHA Insured) 7.75 2021 2,135,000 2,139,206
Minneapolis & St. Paul Housing Board Multi-family Mortgage Revenue Bonds AMT
GNMA Collateral Mortgage Revenue Loan Riverside Plaza Series 1988 8.25 2030 3,945,000 4,186,316
Minneapolis Community Development Agency & St. Paul Housing
& Redevelopment Authority Home Ownership Mortgage Revenue Bonds
Family Housing Mortgage Phase II 7.875 2017 1,515,000 1,579,887
Minneapolis Convention Center Sales Tax Pre-Refunded Revenue Bonds
Series 1986 (AMBAC Insured) 7.625 2004 1,750,000 1,880,778
Minneapolis Convention Center Sales Tax Pre-Refunded Revenue Bonds
Series 1986 (AMBAC Insured) 7.75 1996 700,000 753,774
Minneapolis General Obligation Sales Tax Refunding Bonds Series 1992 6.25 2012 13,000,000 13,567,190
Minneapolis Health Care Facilities Revenue Bonds Fairview Hospital &
Healthcare Services Series 1993A (MBIA Insured) 5.25 2019 3,750,000 3,288,450
Minneapolis Hospital Facility Pre-Refunded Revenue Bonds Lifespan
Incorporated
Series 1987A 8.125 2017 3,630,000 4,007,012
Minneapolis Hospital Facility Pre-Refunded Revenue Bonds Lifespan
Incorporated
Series 1989A 7.00 2014 5,000,000 5,528,250
Minneapolis Housing & Redevelopment Authority of St. Paul
Health Care System Revenue Bonds Healthspan Series 1993 (AMBAC Insured) 4.75 2018 3,000,000 2,386,620
Minneapolis Nursing Home Revenue Bonds Walker Cityview & Southview Projects
Series 1992 8.50 2022 5,565,000 5,720,931
Minneapolis St. Paul Housing & Redevelopment Authority Health Care System
Revenue Bonds Healthspan Series 1993A (AMBAC Insured) 5.00 2007-13 6,690,000 5,991,651
Minneapolis Water & Sewer Revenue Bonds Series 1992 5.00 1995 5,000,000 5,057,050
_____________________________________________________________________________________________________________________________
See accompanying notes to investments in securities.
<PAGE>
PAGE 197
Investments in securities (Percentages represent
IDS Minnesota Tax-Exempt Fund value of investments
June 30, 1994 compared to net assets)
_____________________________________________________________________________________________________________________________
Municipal bonds (continued)
_____________________________________________________________________________________________________________________________
Name of issuer and Coupon Maturity Principal Value(a)
title of issue (b,c,g) rate amount
_____________________________________________________________________________________________________________________________
Minnetonka Multi-family Housing Refunding Revenue Bonds Cedar Hill West
(FHA Insured) 7.75% 2026 $5,625,000 $ 5,520,150
Minnetonka Multi-family Housing Revenue Bonds The Cedar Hills Series 1985 7.50 2017 500,000 513,065
Montevideo Independent School District #129 General Obligation
Unlimited Tax Bonds School Credit Enhancement Program 4.90 2014 1,875,000 1,581,844
Northern Municipal Power Agency Electric Refunding Revenue Bonds
Series A (AMBAC Insured) 6.00 2019 2,250,000 2,174,422
Northern Municipal Power Agency Electric System Refunding Revenue Bonds
Series 1989A 7.25 2016 5,475,000 5,909,824
Northern Municipal Power Agency Electric System Pre-Refunded Revenue Bonds
Series 1989A (AMBAC Insured) 7.40 2018 1,000,000 1,107,480
Northern Municipal Power Agency Electric System Pre-Refunded Revenue Bonds
Series 1989B (AMBAC Insured) 7.40 2018 1,800,000 1,964,448
Norwood-Young America Independent School District #108 General Obligation
School Building Bonds Unlimited Tax School Credit
Enhancement Program Series 1994A 5.00 2014 1,345,000 1,159,229
Osseo Area Schools Independent School District #279
General Obligation School Building Bonds Series 1993A Inverse Floater 7.30 2012 5,000,000 (e) 4,250,000
Owatanna Public Utilities Pre-Refunded Revenue Bonds Series 1991 6.75 2016 1,000,000 1,075,470
Plymouth Multi-family Housing Revenue Bonds AMT Harbor Lane Apartments
Project
Series 1993 (Asset Guaranty Insured) 5.90 2013 2,325,000 2,142,069
Port Authority St. Paul General Obligation Bonds Series 1994 5.125 2017 2,885,000 2,544,916
Red Wing Industrial Development Refunding Revenue Bonds K mart Series 1993 5.50 2008 400,000 363,580
Richfield Independent School District #280 Unlimited Tax General Obligation
School Building Bonds Series 1993C Inverse Floater (FGIC Insured) 7.15 2010 3,300,000 (e) 2,833,875
Richfield Independent School District #280 Unlimited Tax General Obligation
School Building Bonds Series 1993C Inverse Floater (FGIC Insured) 7.25 2012 2,510,000 (e) 2,081,694
Robbinsdale Hospital Pre-Refunded Revenue Bonds
North Memorial Medical Center Series 1989 (AMBAC Insured) 7.375 2019 2,200,000 2,439,800
Rochester Health Care Facility Revenue Bonds Mayo Foundation/Mayo Medical
Center Series 1992I 5.75 2021 3,000,000 2,752,920
Rochester Multi-family Housing Development Revenue Bonds Civic Square
Series 1991 (FHA Insured) 7.45 2031 4,475,000 4,569,736
Roseville Health Care Facility Refunding Revenue Bonds
Presbyterian Homes of Minnesota Series 1987 7.50 2007 2,250,000 2,339,910
Rush City Independent School District #139 Unlimited Tax School Building
Refunding Bonds School Credit Enhancement Program 5.25 2018 2,595,000 2,297,250
St. Cloud Hospital Facilities Revenue Bonds St. Cloud Hospital Series 1990B
(AMBAC Insured) 7.00 2020 5,000,000 5,561,350
St. Cloud Hospital Refunding Revenue Bonds Series 1993C (AMBAC Insured) 5.25 2013 1,000,000 897,070
St. Cloud Hydro Electric Generation Facility Gross Revenue Bonds 7.375 2018 1,100,000 1,165,296
Series 1986
St. Louis Park Health Care Facilities Revenue Bonds
Healthsystem Minnesota Obligated Group Series 1993 (AMBAC Insured) 5.20 2023 4,500,000 3,817,935
_____________________________________________________________________________________________________________________________
See accompanying notes to investments in securities.
<PAGE>
PAGE 198
Investments in securities (Percentages represent
IDS Minnesota Tax-Exempt Fund value of investments
June 30, 1994 compared to net assets)
_____________________________________________________________________________________________________________________________
Municipal bonds (continued)
_____________________________________________________________________________________________________________________________
Name of issuer and Coupon Maturity Principal Value(a)
title of issue (b,c,g) rate amount
_____________________________________________________________________________________________________________________________
St. Louis Park Health Care Facilities Revenue Bonds
Healthsystem Minnesota Obligated Group Series 1993A (AMBAC Insured) 5.20% 2016 $ 3,000,000 $ 2,629,350
St. Louis Park Health Care Facilities Revenue Bonds
Healthsystem Minnesota Obligated Group Series 1993B Inverse Floater
(AMBAC Insured) 6.773 2013 7,000,000 (e) 5,232,500
St. Louis Park Health Care Facilities Pre-Refunded Revenue Bonds
Park Nicollet Medical Center Series 1990A 9.25 2020 4,000,000 4,822,680
St. Louis Park Health Care Facilities Pre-Refunded Revenue Bonds
Park Nicollet Medical Center Series 1991A 8.625 2021 2,000,000 2,358,160
St. Louis Park Multi-family Rental Housing Revenue Bonds
Mortgage Loan-Community Housing & Services Series 1985 (FHA Insured) 7.375 2028 2,250,000 2,343,555
St. Paul & Minneapolis Housing & Redevelopment Authority Health Care
Facility Revenue Bonds Group Health Plan Series 1992 6.75 2013 10,500,000 (f) 10,624,320
St. Paul Housing & Redevelopment Authority Hospital Facility Revenue Bonds
St. Paul Ramsey Medical Center (AMBAC Insured) 5.55 2023 2,000,000 1,821,140
St. Paul Housing & Development Bonds Highland Retirement (FHA Insured) 7.013 2026 5,210,000 (d) 4,793,200
St. Paul Housing & Redevelopment Authority Commercial Development
Refunding Revenue Bonds Beverly Enterprises Series 1992 7.75 2002 2,900,000 3,053,265
St. Paul Housing & Redevelopment Authority Health Care Facility
Revenue Bonds
Lyngblomsten Care Center Series 1993A 7.125 2017 1,960,000 1,889,714
St. Paul Housing & Redevelopment Authority Health Care Facility
Revenue Bonds
Lyngblomsten Care Center Series 1993A 9.60 2006 1,110,000 1,108,912
St. Paul Housing & Redevelopment Authority Health Care Facility
Revenue Bonds
Multi-family Rental Housing Revenue Bonds Lynblomsten Project 1993B 7.00 2024 1,930,000 1,786,794
St. Paul Housing & Redevelopment Authority Sales Tax Revenue Bonds
Civic Center Series 1993 5.55 2023 5,000,000 4,506,900
St. Paul Sewer Refunding Revenue Bonds Series 1993 (AMBAC Insured) 5.60 2008 7,700,000 7,484,477
Southern Minnesota Municipal Power Agency Power Supply System
Revenue Bonds Series 1992B 5.75 2018 1,100,000 1,023,770
Southern Minnesota Municipal Power Agency Pre-Refunded Bonds Series 1988A 8.125 2018 1,315,000 1,471,722
Southern Minnesota Municipal Power Agency Pre-Refunded Bonds Series 1988B 8.125 2018 1,000,000 1,119,180
Southern Minnesota Municipal Power Agency Power Supply System
Pre-Refunded Revenue Bonds Series 1986A 6.75 2013 1,000,000 1,055,090
Southern Minnesota Municipal Power Agency Power Supply System
Pre-Refunded Revenue Bonds Series 1986B 7.00 2016 2,500,000 2,646,725
Southern Minnesota Municipal Power Agency Power Supply System
Pre-Refunded Revenue Bonds Series 1984B 7.00 2018 3,475,000 3,707,269
Southern Minnesota Municipal Power Agency Power Supply System
Pre-Refunded Revenue Bonds Series 1986C 7.125 2015 8,000,000 8,484,000
Spring Park Health Care Facility Revenue Bonds Twin Birch Health
Care Center
Series 1991 8.25 2011 1,780,000 1,920,175
State General Obligation Various Purpose Pre-Refunded Bonds Series 1990 7.00 2009 7,850,000 8,604,306
State General Obligation Various Purpose Pre-Refunded Bonds Series 1991 6.70 2011 9,065,000 9,828,273
State Higher Education Facility Authority Mortgage
Pre-Refunded Revenue Bonds St. Mary's College Series 2M 8.375 2017 1,000,000 1,140,060
_____________________________________________________________________________________________________________________________
See accompanying notes to investments in securities.
<PAGE>
PAGE 199
Investments in securities (Percentages represent
IDS Minnesota Tax-Exempt Fund value of investments
June 30, 1994 compared to net assets)
_____________________________________________________________________________________________________________________________
Municipal bonds (continued)
_____________________________________________________________________________________________________________________________
Name of issuer and Coupon Maturity Principal Value(a)
title of issue (b,c,g) rate amount
_____________________________________________________________________________________________________________________________
State Housing Facility Authority Housing Development Bonds Series A 7.125% 2020 $ 845,000 $ 862,120
State Housing Facility Authority Housing Development Bonds Series 1976A 7.25 2018 205,000 209,799
State Housing Facility Authority Housing Development Bonds Series 1978B 7.10 2021 470,000 479,142
State Housing Facility Authority Housing Development Bonds Series 1979A 7.00 2022 700,000 714,595
State Housing Facility Authority Housing Finance Agency Housing Development
Single Family Mortgage Bonds Series B 7.25 2016 480,000 495,912
State Housing Finance Agency Single Family Mortgage Bonds Series AMT 1989A 8.00 2029 1,860,000 1,915,819
State Housing Finance Agency Single Family Mortgage Bonds Series AMT 1990A 7.95 2022 3,915,000 3,988,954
State Housing Finance Agency Single Family Mortgage Bonds Series AMT 1991A 7.45 2022 3,595,000 3,722,874
State Housing Finance Agency Single Family Mortgage Bonds Series 1992A 6.95 2016 3,330,000 3,390,107
State Public Facilities Authority Water Pollution Control Revenue Bonds
Series 1989A 7.00 2009 6,250,000 6,647,937
State Public Facilities Authority Water Pollution Control Revenue Bonds
Series 1992A 6.50 2014 9,050,000 9,574,538
State University Board of Regents General Obligation Bonds
Series 1993A Inverse Floater 6.427 2003 5,000,000 (e) 4,400,000
State University Board of Regents General Obligation Pre-Refunded Bonds
Series 1986A 7.75 2010 1,675,000 1,794,427
State University Board of Regents General Obligation Pre-Refunded Bonds
Series 1989A 6.00 2011 4,625,000 4,572,090
State University Board State University System Pre-Refunded Revenue Bonds
Series 1989A (MBIA Insured) 7.40 2019 4,000,000 4,412,640
Washington County General Obligation Capital Improvement Bonds
Series 1989A 7.00 2009-10 4,425,000 4,775,858
Washington County Housing & Redevelopment Authority Multi-family Housing
Revenue Bonds AMT Orleans Homes Series 1987-2 9.00 2017 2,000,000 2,155,480
Western Minnesota Municipal Power Agency Revenue Bonds
Escrowed to Maturity (AMBAC Insured) 6.75 2016 5,935,000 6,124,445
Western Minnesota Municipal Power Agency Supply Refunding Revenue Bonds
Series 1987A 5.50 2015 5,000,000 4,503,250
Western Minnesota Municipal Power Agency Supply Refunding Revenue Bonds
Series 1987A 6.875 2007 2,500,000 2,627,775
Western Minnesota Municipal Power Agency Supply Refunding Revenue Bonds
Series 1987A 7.00 2013 7,300,000 7,694,273
Western Minnesota Municipal Power Agency Supply Refunding Revenue Bonds
Series A (Secondary MBIA Insured) 5.50 2015 6,250,000 5,719,062
White Bear Lake Industrial Development Revenue Bonds AMT Taylor 8.75 2008 2,250,000 2,443,207
Series 1988A
_____________________________________________________________________________________________________________________________
Total municipal bonds
(Cost: $385,791,640) $393,852,645
_____________________________________________________________________________________________________________________________
See accompanying notes to investments in securities.
<PAGE>
PAGE 200
Investments in securities (Percentages represent
IDS Minnesota Tax-Exempt Fund value of investments
June 30, 1994 compared to net assets)
_____________________________________________________________________________________________________________________________
Short-term securities (1.7%)
_____________________________________________________________________________________________________________________________
Issuer(g) Annualized Amount Value(a)
yield on payable at
date of maturity
purchase
_____________________________________________________________________________________________________________________________
Municipal notes
Regents of University of Minnesota Series I
07-01-94 2.30% $1,000,000 $ 1,000,000
Richfield Independent School District #280 S.A.V.R.
(FGIC Insured)
08-01-94 3.16% 5,810,000 5,810,000
_____________________________________________________________________________________________________________________________
Total short-term securities
(Cost: $6,810,000) $ 6,810,000
_____________________________________________________________________________________________________________________________
Total investments in securities
(Cost: $392,601,640)(h) $400,662,645
_____________________________________________________________________________________________________________________________
See accompanying notes to investments in securities.
</TABLE>
<PAGE>
PAGE 201
Investments in securities
IDS Minnesota Tax-Exempt Fund
June 30, 1994
___________________________________________________________________
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 06-30-94 06-30-93
___________________________________________________________________
AAA 43% 22%
AA 24 28
A 20 31
BBB and below 13 3
Non-rated -- 16
Total 100% 100%
___________________________________________________________________
(c) The following abbreviations are used in portfolio descriptions
to identify the insurer of the issue:
AMBAC -- American Municipal Bond Association Corporation
FGIC -- Financial Guarantee Insurance Corporation
FHA -- Federal Housing Authority
MBIA -- Municipal Bond Investors Assurance
(d) Presently non-income producing. Item identified is in default
as to payment of interest and/or principal.
(e) Inverse floaters represent securities which pay interest at a
rate that increases (decreases) based on (decreases) increases
of market short-term rates. Interest rate disclosed is the rate
in effect on June 30, 1994.
(f) Partially pledged as initial deposit on the following open
interest rate futures purchase contracts (see Note 5 to the
financial statements):
Type of security Par value
_____________________________________________________
U.S. Treasury Bond, Sept. 1994 $27,500,000
_____________________________________________________
(g) The following abbreviations are used in portfolio descriptions:
AMT -- Alternative Minimum Tax
S.A.V.R. -- Select Auction Variable Rate
(h) At June 30, 1994, the cost of securities for federal income tax
purposes was $392,505,556 and the aggregate gross unrealized
appreciation and depreciation based on that cost was:
Unrealized appreciation $19,346,065
Unrealized depreciation (11,188,976)
Net unrealized appreciation $ 8,157,089
___________________________________________________________________
<PAGE>
PAGE 202
<TABLE>
<CAPTION>
Investments in securities
IDS New York Tax-Exempt Fund (Percentages represent value of
June 30, 1994 investments compared to net assets)
_____________________________________________________________________________________________________________________________
Municipal bonds (96.9%)
_____________________________________________________________________________________________________________________________
Name of issuer and Coupon Maturity Principal Value(a)
title of issue (b,c,h) rate amount
_____________________________________________________________________________________________________________________________
<S> <C> <C> <C> <C>
Battery Park City Authority Senior Refunding Revenue Bonds Series 1993A 5.25% 2017 $4,000,000 $ 3,456,920
Broome County Certificates of Partication Public Safety Facility
Series 1994 (MBIA Insured) 5.25 2022 1,250,000 1,064,338
Buffalo Municipal Water Finance Authority Water System Revenue Bonds
(FSA Insured) 5.75 2019 700,000 643,615
Erie County Water Authority Fourth Resolution Water Refunding Revenue Bonds
Zero Coupon Series 1992 (AMBAC Insured) 7.30 2017 1,215,000 (d) 225,613
Erie County Water Authority Water Works System Revenue Bonds
Escrowed to Maturity Series 1990A (AMBAC Insured) 6.00 2008 1,765,000 1,781,856
Fallsburg Sullivan County Unlimited Tax General Obligation Improvement
Pre-Refunded Bonds Series 1991 7.05 2011-14 1,300,000 1,450,566
Great Neck North Water Authority Water System Pre-Refunded Revenue Bonds
Series 1989A 6.00 2020 1,415,000 1,471,996
Metropolitan Transportation Authority Commuter Facilities
1987 Service Contract Refunding Bonds Series 5 6.50 2016 1,775,000 1,754,534
Metropolitan Transportation Authority Service Transit Facilities
Pre-Refunded Revenue Bonds Series G 8.50 2011 1,000,000 1,096,210
Metropolitan Transportation Authority Transit Facilities Bonds Series 5 6.00 2018 1,500,000 1,388,085
Metropolitan Transportation Authority Transit Facilities
Pre-Refunded Revenue Bonds Series F 8.375 2016 725,000 793,027
Monroe County Utility General Obligation Pre-Refunded Bonds
Water Improvement System 7.10 2008-14 2,190,000 2,406,328
Municipal Assistance New York City Series 57 7.25 2008 500,000 532,310
Municipal Assistance New York City Series 59 7.75 2006 660,000 722,561
Municipal Assistance New York City Series 62 6.75 2006 2,200,000 2,347,224
New York & New Jersey Port Authority Consolidated Revenue Bonds
AMT Series 61 8.125 2023 750,000 790,965
New York & New Jersey Port Authority Consolidated Revenue Bonds
AMT Series 62 8.00 2023 1,000,000 1,061,640
New York & New Jersey Port Authority Consolidated Revenue Bonds AMT
Series 84 6.00 2028 2,500,000 2,339,725
New York City General Obligation Unlimited Tax Bonds Series E
(Capital Guaranty Insured) 6.00 2016 1,500,000 (e) 1,438,230
New York City Municipal Water Finance Authority Water & Sewer System Revenue
Bonds Series B Inverse Floater (MBIA Insured) 7.35 2009 2,000,000 (f) 1,705,000
New York City Water Finance Authority Water & Sewer System
Pre-Refunded Revenue Bonds Series A (FGIC Insured) 6.75 2014 1,185,000 1,288,996
New York City Water Finance Authority Water & Sewer System Revenue
Bonds Series A (FGIC Insured) 6.75 2014 565,000 584,571
New York City Water Finance Authority Water & Sewer System Revenue
Pre-Refunded Bonds Series 1988A 7.00 2018 2,500,000 2,686,825
_____________________________________________________________________________________________________________________________
See accompanying notes to investments in securities.
<PAGE>
PAGE 203
Investments in securities
IDS New York Tax-Exempt Fund (Percentages represent value of
June 30, 1994 investments compared to net assets)
_____________________________________________________________________________________________________________________________
Municipal bonds (continued)
_____________________________________________________________________________________________________________________________
Name of issuer and Coupon Maturity Principal Value(a)
title of issue (b,c,h) rate amount
_____________________________________________________________________________________________________________________________
New York City Water Finance Authority Water & Sewer System Revenue Bonds
Series 1993A (AMBAC Insured) 5.75% 2018 $4,000,000 $ 3,706,400
State Certificate of Participation City University John J. College 7.25 2007 360,000 379,375
State Dormitory Authority City University System Pre-Refunded Revenue Bonds 8.125 2017 3,400,000 3,781,990
State Dormitory Authority City University System Pre-Refunded Revenue Bonds
Series 1986A 7.625 2013 1,000,000 1,079,900
State Dormitory Authority City University System Revenue Bonds
Series 1993A 5.75 2013 3,000,000 2,753,430
State Dormitory Authority State University Education Facility
Refunding Revenue Bonds Series 1990B 7.50 2011 1,900,000 2,098,968
State Dormitory Authority State University Education Facility
Pre-Refunded Revenue Bonds Series 1990A 7.70 2012 1,750,000 2,000,513
State Dormitory Authority Upstate Community Colleges Series A
(Connie Lee Insured) 5.625 2012 1,500,000 1,390,350
State Energy Research & Development Authority Electric Facility
Revenue Bonds AMT Consolidated Edison Series 1986A 7.50 2021 1,750,000 1,847,878
State Energy Research & Development Authority Electric Facility
Revenue Bonds AMT Consolidated Edison Series 1989A 7.75 2024 1,000,000 1,070,330
State Energy Research & Development Authority Electric Facility
Revenue Bonds AMT Consolidated Edison Series 1990A 7.50 2025 5,000,000 5,314,900
State Energy Research & Development Authority Gas Facility Revenue Bonds
Brooklyn Union Gas Series I 7.125 2020 2,000,000 2,114,620
State Energy Research & Development Authority Gas Facility Revenue Bonds
Brooklyn Union Gas Series II 7.00 2020 1,500,000 1,581,765
State Environmental Facility State Water & Pollution Control
Revolving Fund Revenue Bonds New York City Municipal Water
Finance Authority Series 1990A 7.50 2012 3,000,000 3,291,600
State Housing Finance Authority State University Construction Program
Pre-Refunded Bonds Series 1986A 8.00 2016 400,000 432,148
State Housing Finance Authority State University Construction Program
Pre-Refunded Bonds Series A 8.30 2018 500,000 563,535
State Local Government Assistance Pre-Refunded Bonds Series 1991A 7.00 2016 4,000,000 4,461,840
State Local Government Assistance Bonds Series 1992A 6.875 2019 2,000,000 2,103,380
State Medical Care Facility Finance Agency Hospital & Nursing Home
Mortgage Revenue Bonds Montefiore Hospital Series 1989A (FHA Insured) 7.25 2024 1,400,000 1,487,990
State Medical Care Facility Finance Agency Mental Health Services Facility
Improving Refunding Revenue Bonds Series 1993F 5.375 2014 1,000,000 867,180
State Medical Care Facility Finance Agency Mental Health Services Facility
Improving Refunding Revenue Bonds Series 1994A 5.25 2023 1,500,000 1,232,700
State Medical Care Facility Finance Agency Pre-Refunded Bonds
Presbyterian Hospital Series 1985B 8.00 2025 1,320,000 1,465,094
_____________________________________________________________________________________________________________________________
See accompanying notes to investments in securities.
<PAGE>
PAGE 204
Investments in securities
IDS New York Tax-Exempt Fund (Percentages represent value of
June 30, 1994 investments compared to net assets)
_____________________________________________________________________________________________________________________________
Municipal bonds (continued)
_____________________________________________________________________________________________________________________________
Name of issuer and Coupon Maturity Principal Value(a)
title of issue (b,c,h) rate amount
_____________________________________________________________________________________________________________________________
State Medical Care Facility Finance Agency Revenue Bonds
Buffalo General Hospital Series 1988C (FHA Insured) 7.60% 2008 $1,500,000 $ 1,680,120
State Medical Care Facility Finance Agency Revenue Bonds
Buffalo General Hospital Series 1988C (FHA Insured) 7.70 2022 1,950,000 2,187,471
State Medical Care Facility Finance Agency Revenue Bonds
North Shore University Glen Cove Series A (MBIA Insured) 5.125 2012 1,000,000 874,190
State Medical Care Facility Finance Agency Secured Hospital Revenue Bonds
Series 1987A 7.10 2027 550,000 571,148
State Mortgage Agency Homeowner Mortgage Revenue Bonds Series TT 7.50 2015 4,000,000 4,205,960
State Mortgage Agency Homeowner Mortgage Revenue Bonds Series 27 6.90 2015 3,000,000 3,046,320
State Mortgage Agency Revenue Bonds AMT Series 9 7.30 2017 1,000,000 1,019,880
State Power Authority General Purpose Pre-Refunded Revenue Bonds Series T 7.375 2018 1,000,000 1,063,120
State Thruway Authority Local Highway & Bridge Service Contract Bonds
Series 1991 6.00 2011 2,500,000 2,374,575
State Urban Development Correction Facility Pre-Refunded Bonds Series B 8.00 2015 1,000,000 1,073,260
State Urban Development Correction Facility
Pre-Refunded Revenue Bonds Series 1986 8.00 2015 750,000 804,945
State Urban Development Correction Facility Pre-Refunded Revenue Bonds
Series 1 (FSA Insured) 7.50 2020 4,500,000 5,080,950
State Urban Development Correctional Capital Facilities
Refunding Revenue Bonds Series 1993A 5.25 2021 2,500,000 2,066,600
Suffolk County General Obligation Public Improvement Refunding Bonds
Series G (MBIA Insured) 5.40 2014 1,000,000 902,120
Triborough Bridge & Tunnel Authority General Purpose
Pre-Refunded Revenue Bonds Series S 7.00 2021 3,000,000 3,327,030
Triborough Bridge & Tunnel Authority Special Obligation Refunding Bonds
Series 1991B (FGIC Insured) 6.875 2015 2,000,000 2,098,240
United Nations Development Pre-Refunded Revenue Bonds
Phase II & III 7.875 2026 1,460,000 1,574,333
United Nations Development Senior Lien Pre-Refunded Revenue Bonds
1986 Phase II & III 7.875 2006 250,000 269,577
United Nations Development Senior Lien Refunding Revenue Bonds
Series 1992A 6.00 2026 4,500,000 4,221,405
_____________________________________________________________________________________________________________________________
Total municipal bonds
(Cost: $111,051,032) $116,498,265
_____________________________________________________________________________________________________________________________
See accompanying notes to investments in securities.
<PAGE>
PAGE 205
Investments in securities
IDS New York Tax-Exempt Fund (Percentages represent value of
June 30, 1994 investments compared to net assets)
_____________________________________________________________________________________________________________________________
Short-term securities (1.1%)
_____________________________________________________________________________________________________________________________
Issuer (g) Effective Amount Value(a)
yield payable at
maturity
_____________________________________________________________________________________________________________________________
Municipal notes
New York City General Obligation Bonds Series H-5
08-12-12 3.50% $ 500,000 $ 500,000
New York City General Obligation Bonds Subseries 1994A-4
08-01-22 2.90 600,000 600,000
New York City Municipal Water Finance Authority
Water & Sewer System Series 1992C
06-15-22 2.75 200,000 200,000
_____________________________________________________________________________________________________________________________
Total short-term securities
(Cost: $1,300,000) $ 1,300,000
_____________________________________________________________________________________________________________________________
Total investments in securities
(Cost: $112,351,032)(i) $117,798,265
_____________________________________________________________________________________________________________________________
See accompanying notes to investments in securities.
</TABLE>
<PAGE>
PAGE 206
Investments in securities
IDS New York Tax-Exempt Fund
June 30, 1994
___________________________________________________________________
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 06-30-94 06-30-93
___________________________________________________________________
AAA 46% 26%
AA 30 43
A 11 15
BBB and below 13 16
Non-rated -- --
Total 100% 100%
___________________________________________________________________
(c) The following abbreviations are used in portfolio descriptions
to identify the insurer of the issue:
AMBAC - American Municipal Bond Association Corporation
FGIC - Financial Guarantee Insurance Corporation
FHA - Federal Housing Authority
FSA - Financial Security Assurance
MBIA - Municipal Bond Investors Assurance
(d) For zero coupon bonds, the interest rate disclosed represents
the annualized effective yield on the date of acquisition.
(e) Partially pledged as initial deposit on the following open
interest rate futures purchase contracts (see Note 5 to the
financial statements):
Type of security Par value
___________________________________________________________________
U.S. Treasury Bonds, Sept. 94 $9,000,000
___________________________________________________________________
(f) Inverse floaters represent securities which pay interest at a
rate that increases (decreases) based on (decreases) increases
of market short-term rates. Interest rate disclosed is the rate
in effect on June 30, 1994.
(g) Interest rate varies to reflect current market conditions; rate
shown is the effective rate on June 30, 1994.
(h) The following abbreviation is used in portfolio descriptions:
AMT - Alternative Minimum Tax
(i) At June 30, 1994, the cost of securities for federal income tax
purposes was $112,324,643 and the aggregate gross unrealized
appreciation and depreciation based on that cost was:
Unrealized appreciation $7,810,635
Unrealized depreciation (2,337,013)
Net unrealized appreciation $5,473,622
___________________________________________________________________
<PAGE>
PAGE 207
<TABLE>
<CAPTION>
Investments in securities
IDS Ohio Tax-Exempt Fund (Percentages represent value of
June 30, 1994 investments compared to net assets)
_____________________________________________________________________________________________________________________________
Municipal bonds (98.2%)
_____________________________________________________________________________________________________________________________
Name of issuer and Coupon Maturity Principal Value(a)
title of issue (b,c) rate amount
_____________________________________________________________________________________________________________________________
<S> <C> <C> <C> <C>
Akron Bath & Copley Joint Township Hospital Refunding Revenue Bonds
Childrens Hospital Medical Center (AMBAC Insured) 5.00% 2015 $1,000,000 $ 854,640
Akron Bath & Copley Joint Township Hospital Refunding Revenue Bonds
Childrens Hospital Medical Center Series 1993 (AMBAC Insured) 5.25 2020 1,500,000 1,300,290
Barberton Limited Tax Various Purpose General Obligation Bonds
Series 1989-1 7.35 2009 700,000 727,020
Bedford School District Unlimited Tax Improvement General Obligation
Various Purpose Bonds Series 1993 6.25 2013 700,000 688,373
Bedford Sewer System Mortgage Revenue Bonds Series 1986 (AMBAC Insured) 7.80 2010 300,000 327,597
Bellefontaine Hospital Facility Refunding Revenue Bonds
Mary Rutan Health Association of Logan County Series 1993 6.00 2013 1,000,000 892,680
Benjamin Logan Local School District Refunding Revenue Bonds
Childrens Hospital Medical Center (AMBAC Insured) 5.20 2010 550,000 502,271
Butler County Hospital Facility Improvement Refunding Revenue Bonds 7.50 2010 1,750,000 1,709,347
Cincinnati Student Loan Funding Corporation Junior Sub Bonds AMT
Series 1993B 6.20 2012 1,000,000 961,100
Cincinnati Student Loan Funding Corporation Senior Sub Bonds Series 1993A 6.15 2010 500,000 481,210
Clermont County Hospital Facility Refunding Revenue Bonds
Mercy Health Systems Series B (AMBAC Insured) 5.875 2015 1,250,000 1,193,837
Clermont County Hospital Facility Revenue Bonds Mercy Health System
Province of Cincinnati Series 1989A (AMBAC Insured) 7.50 2019 750,000 831,165
Cleveland Airport Systems Revenue Bonds AMT Series 1990A (MBIA Insured) 7.40 2020 500,000 547,750
Cleveland General Obligation Pre-Refunded Bonds 7.375 2003 125,000 136,746
Cleveland Public Power System 1st Mortgage Pre-Refunded Revenue Bonds 8.375 2017 100,000 111,740
Cleveland Waterworks Improvement 1st Mortgage Pre-Refunded Revenue Bonds
Series F 1992A (AMBAC Insured) 6.50 2021 1,590,000 1,722,145
Cleveland Waterworks Improvement 1st Mortgage Refunding Revenue Bonds
Series F 1992B (AMBAC Insured) 6.25 2016 1,000,000 999,980
Cleveland Waterworks Improvement 1st Mortgage Revenue Bonds Series 1987E 6.00 2017 200,000 189,614
Cleveland Waterworks Improvement 1st Mortgage Pre-Refunded Revenue Bonds
Series 1987E 7.875 2016 650,000 709,280
Columbus Sewer Pre-Refunded Revenue Bonds Series A 8.00 2008 100,000 108,391
Columbus Water System Refunding Revenue Bonds Series 1991 6.375 2010 1,000,000 1,009,320
Coshocton County Solid Waste Disposal Refunding Revenue Bonds
Stone Container Series 1992 7.875 2013 1,000,000 1,000,980
Cuyahoga County Hospital Improvement Revenue Bonds
Cleveland Clinic Foundation 7.00 2013 500,000 522,105
Cuyahoga County Hospital Improvement Pre-Refunded Revenue Bonds
Cleveland Clinic Foundation Series 1987A 7.875 2010 275,000 304,931
Cuyahoga County Hospital Improvement Revenue Bonds
Mount Sinai Medical Center Series 1991 (AMBAC Insured) 6.625 2021 600,000 615,288
_____________________________________________________________________________________________________________________________
See accompanying notes to investments in securities.
<PAGE>
PAGE 208
Investments in securities
IDS Ohio Tax-Exempt Fund Percentages represent value of
June 30, 1994 investments compared to net assets)
_____________________________________________________________________________________________________________________________
Municipal bonds (continued)
_____________________________________________________________________________________________________________________________
Name of issuer and Coupon Maturity Principal Value(a)
title of issue (b,c) rate amount
_____________________________________________________________________________________________________________________________
Cuyahoga County Hospital Improvement Revenue Bonds
University Hospitals Health System Series 1992 (AMBAC Insured) 6.50% 2011 $ 500,000 $ 514,645
Cuyahoga County Hospital Refunding Revenue Bonds
Cleveland Clinic Foundation Series 1992 5.50 2011 1,500,000 1,399,695
Cuyahoga County Hospital Refunding Revenue Bonds
Mount Sinai Medical Center Series 1987A 8.125 2014 400,000 439,992
Cuyahoga County Hospital Revenue Bonds Cleveland Fairview
General & Lutheran Medical Center Series 1993 6.25 2010 500,000 494,455
Cuyahoga County Hospital Revenue Bonds Meridia Health Series 1991 7.00 2023 1,000,000 1,035,290
Cuyahoga County Limited Tax General Obligation Bonds 5.60 2013 500,000 471,620
Cuyahoga Hospital Revenue Bonds Metrohealth System Series 1989
(MBIA Insured) 6.00 2019 1,000,000 971,130
Dover Limited Tax Improvement General Obligation
Municipal Sewer System Bonds 7.10 2009 1,000,000 1,077,700
Dublin Local School District Unlimited Tax Improvement
School Building Construction Pre-Refunded Bonds (FGIC Insured) 7.50 2003 100,000 110,048
Elyria Limited Tax Improvement General Obligation
Recreation Facility Bonds 7.10 2009 715,000 765,379
Erie County Hospital Improvement Refunding Revenue Bonds
Firelands Community Hospital Series 1992 6.75 2015 2,000,000 2,030,780
Fairfield Union Local School District School Facilities
Unlimited Tax Improvement General Obligation Bonds (AMBAC Insured) 5.90 2018 625,000 601,525
Findlay Limited Tax General Obligation Sewage System Pre-Refunded Bonds
Series 1989 7.20 2011 500,000 555,180
Franklin County Convention Facilities Authority Tax & Lease
Revenue Anticipation Bond (MBIA Insured) 5.80 2013 1,000,000 960,570
Franklin County Convention Facilities Authority Tax & Lease
Revenue Anticipation Pre-Refunded Bonds (MBIA Insured) 7.00 2019 1,500,000 1,672,485
Franklin County Limited Tax General Obligation Refunding Bonds Series 1993 5.50 2013 1,000,000 929,510
Highland Heights Limited Tax Improvement General Obligation Street Bonds 7.75 2008 400,000 447,168
Kettering School District Improvement General Obligation Bonds
(FGIC Insured) 5.25 2022 1,000,000 872,530
Lake County Water System Limited Tax Improvement General Obligation
Pre-Refunded Bonds Series 1987-2 8.125 2010 700,000 783,503
Lakota Local School District Butler County School Unlimited Tax
Improvement Bonds 7.00 2012 500,000 545,200
Lakota Local School District Butler County School Unlimited Tax Improvement
Pre-Refunded Bonds 7.90 2011 200,000 222,648
Lima Limited Tax Improvement General Obligation Sanitary Sewer System
Pre-Refunded Bonds 8.25 2012 200,000 224,640
Lucas County Hospital Refunding Revenue Bonds St. Vincent's Medical Center
Series B (MBIA Insured) 5.25 2020 2,000,000 1,734,700
Lucas County Hospital Pre-Refunded Revenue Bonds Toledo Hospital
(MBIA Insured) 7.00 2014 100,000 106,587
_____________________________________________________________________________________________________________________________
See accompanying notes to investments in securities.
</TABLE>
<PAGE>
PAGE 209
<TABLE>
<CAPTION>
Investments in securities
IDS Ohio Tax-Exempt Fund
June 30, 1994 (Percentages represent value of
investments compared to net assets)
_____________________________________________________________________________________________________________________________
Municipal bonds (continued)
_____________________________________________________________________________________________________________________________
Name of issuer and Coupon Maturity Principal Value(a)
title of issue (b,c) rate amount
_____________________________________________________________________________________________________________________________
<S> <C> <C> <C> <C>
Marietta Sewer System Improvement Bonds (BIG Insured) 7.50% 2007 $ 200,000 $ 221,496
Marion County Health Care Facilities Improvement Refunding Revenue
Bonds United Church Homes Series 1993 6.375 2010 1,000,000 956,410
Marysville Sewer System 1st Mortgage Revenue Bonds AMT Series 1988
(BIG Insured) 7.85 2008 400,000 444,604
Marysville Water System Mortgage Revenue Bonds Series 1991 (MBIA Insured) 7.05 2021 1,000,000 1,077,830
Mason Waterworks System Refunding Revenue Bonds Series 1993
(AMBAC Insured) 6.00 2017 600,000 585,234
Massillon School District School Unlimited Tax Improvement
General Obligation Bonds Series 1989-1 (AMBAC Insured) 7.10 2011 300,000 333,552
Medina County Hospital Revenue Bonds Medina County Community Hospital
Series 1987 (AMBAC Insured) 6.875 2016 100,000 106,662
Miami County Hospital Facility Refunding Revenue Bonds
Upper Valley Medical Center Series 1987A 8.375 2013 75,000 82,701
Miami State University General Receipts Bonds Series 1993 (FGIC Insured) 5.60 2013 500,000 468,505
Montgomery County Health Facilities Revenue Bonds Friendship Village Dayton
Series 1990A 9.25 2016 1,000,000 1,054,270
Montgomery County Industrial Development Revenue Bonds AMT SPM System
Series 1991 10.00 2005 720,000 (d) 360,000
Montgomery County Sewer System Refunding Revenue Bonds
Greater Moraine - Beavercreek District Series 1993 (FGIC Insured) 5.60 2011 1,000,000 943,090
Newark Water System Limited Tax Improvement General Obligation Bonds
(AMBAC Insured) 6.00 2018 500,000 488,085
Parma Hospital Improvement Revenue Bonds Parma Community General Hospital
Series 1989B (MBIA Insured) 7.125 2013 500,000 541,490
Pickerington Local School District Unlimited Tax General Obligation
Pre-Refunded Bonds (AMBAC Insured) 7.00 2013 1,000,000 1,114,990
Pleasant Local School District Unlimited Tax Improvement
General Obligation Bonds Series 1993 (AMBAC Insured) 5.10 2018 780,000 669,224
Rocky River City School District Unlimited Tax Improvement
General Obligation Bonds Series 1991A 6.90 2011 2,220,000 2,344,409
Rural Loraine County Water Authority Water Resource Improvement
Pre-Refunded Revenue Bonds Series 1991 (AMBAC Insured) 7.00 2011 1,000,000 1,107,360
South Euclid Lyndhurst School District General Obligation Bonds
(FGIC Insured) 5.25 2018 1,000,000 876,670
Southwest Local School District Hamilton & Butler Counties School
Unlimited Tax Improvement Bonds (AMBAC Insured) 7.65 2010 500,000 572,640
Stark County Hospital Pre-Refunded Revenue Bonds
Timkin Mercy Medical Center 7.50 2007 125,000 135,503
_____________________________________________________________________________________________________________________________
See accompanying notes to investments in securities.
</TABLE>
<PAGE>
PAGE 210
<TABLE>
<CAPTION>
Investments in securities
IDS Ohio Tax-Exempt Fund
June 30, 1994 (Percentages represent value of
investments compared to net assets)
_____________________________________________________________________________________________________________________________
Municipal bonds (continued)
_____________________________________________________________________________________________________________________________
Name of issuer and Coupon Maturity Principal Value(a)
title of issue (b,c) rate amount
_____________________________________________________________________________________________________________________________
<S> <C> <C> <C> <C>
State Air Quality Development Authority Revenue Bonds
Cleveland Electric Illuminating Series A 7.00% 2009 $ 350,000 $ 350,431
State Building Authority Local Jail Grant Bonds Series 1989A
(MBIA Insured) 7.35 2009 500,000 560,265
State Building Authority State Correctional Facility Refunding Revenue Bonds
Series 1993A 5.90 2007 1,000,000 991,730
State Building Authority State Correctional Facility Refunding Revenue Bonds
Series 1993A 6.00 2008 500,000 509,065
State Building Authority State Correctional Facility Revenue Bonds Series B 7.125 2009 75,000 79,022
State Building Authority State Facility Pre-Refunded Bonds
Columbus State Office Building Series 1985C 7.35 2005 1,000,000 1,126,940
State Building Authority State Facility Pre-Refunded Bonds
Department of Administrative Services Data Center Series 1988A 7.80 2007 300,000 331,626
State Higher Educational Facility Pre-Refunded Revenue Bonds
Oberlin College Series 1989 7.375 2014 500,000 560,195
State Higher Educational Facility Revenue Bonds University of Dayton
Series 1994 (FGIC Insured) 5.80 2019 900,000 848,700
State Housing Finance Agency Mortgage Revenue Bonds AMT
Aristocrat South Board & Care Series 1991A (FHA Insured) 7.30 2031 1,500,000 1,525,515
State Housing Finance Agency Single Family Mortgage Revenue Bonds AMT
Series 1990A (GNMA Insured) 7.80 2030 745,000 772,200
State Housing Finance Agency Single Family Mortgage Revenue Bonds AMT
Series 1990C (GNMA Insured) 7.85 2021 990,000 1,025,977
State Municipal Electric Generation Agency Joint Venture #5 Revenue Bonds
(AMBAC Insured) 5.375 2024 1,250,000 1,098,600
State Water Development Authority Improvement Refunding Revenue Bonds
Pure Water Series (AMBAC Insured) 6.00 2008 1,500,000 1,517,265
State Water Development Authority Pollution Control Revenue Bonds
Phillip Morris 7.25 2008 150,000 161,028
State Water Development Authority Water Development Pre-Refunded Bonds
Pure Water Series 1987I 7.75 2006-14 200,000 219,190
State Water Development Authority Water Development Pre-Refunded Bonds
Pure Water Series 1988I 7.00 2014 500,000 535,165
Summit County Industrial Development Revenue Bonds Century Products 7.75 2005 100,000 107,639
Summit County Limited Tax General Obligation Pre-Refunded Bonds
Human Services Facility (AMBAC Insured) 8.00 2007 100,000 111,541
Sycamore Board of Education Community School District
Hamilton County School Improvement Bonds 6.50 2009 500,000 508,150
University of Cincinnati General Receipt Bonds Series 1991G 7.00 2011 1,000,000 1,068,220
University of Cincinnati General Receipt Pre-Refunded Bonds Series H 7.50 2008 250,000 276,100
University of Cincinnati General Receipt Pre-Refunded Bonds Series I-1 7.10 2010 750,000 828,270
University of Toledo General Receipt Bonds Series A (FGIC Insured) 5.90 2020 1,000,000 955,290
_____________________________________________________________________________________________________________________________
See accompanying notes to investments in securities.
<PAGE>
PAGE 211
Investments in securities
IDS Ohio Tax-Exempt Fund
June 30, 1994 (Percentages represent value of
investments compared to net assets)
_____________________________________________________________________________________________________________________________
Municipal bonds (continued)
_____________________________________________________________________________________________________________________________
Name of issuer and Coupon Maturity Principal Value(a)
title of issue (b,c) rate amount
_____________________________________________________________________________________________________________________________
University of Toledo General Receipt Bonds Series B (FGIC Insured) 5.90% 2020 $ 1,000,000 $ 955,290
University of Toledo General Receipt Pre-Refunded Bonds Series 1990
(MBIA Insured) 7.125 2020 500,000 556,935
Warren County Various Purpose Limited Tax General Obligation Bonds
Series 1992 6.10 2012 500,000 499,960
Whitehall City School District Franklin County Unlimited Tax
Improvement General Obligation School Building Construction
Pre-Refunded Bonds 7.25 2013 500,000 558,935
_____________________________________________________________________________________________________________________________
Total municipal bonds
(Cost: $68,841,082) 70,260,000 $ 70,538,749
_____________________________________________________________________________________________________________________________
Total investments in securities
(Cost: $68,841,082)(e) 70,260,000 $ 70,538,749
_____________________________________________________________________________________________________________________________
See accompanying notes to investments in securities.
</TABLE>
<PAGE>
PAGE 212
Investments in securities
IDS Ohio Tax-Exempt Fund
June 30, 1994
___________________________________________________________________
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 06-30-94 06-30-93
___________________________________________________________________
AAA 65% 43%
AA 11 22
A 14 23
BBB and below 10 6
Non-rated -- 6
Total 100% 100%
___________________________________________________________________
(c) The following abbreviations are used in portfolio descriptions
to identify the insurer of the issue:
AMBAC -- American Municipal Bond Association Corporation
BIG -- Bond Investors Guarantee
FGIC -- Financial Guarantee Insurance Corporation
FHA -- Federal Housing Authority
GNMA -- Government National Mortgage Association
MBIA -- Municipal Bond Investors Assurance
(d) Presently non-income producing. For long-term debt securities
item identified is in default as to payment of interest and/or
principal.
(e) At June 30, 1994, the cost of securities for federal income tax
purposes was $68,810,402 and the aggregate gross unrealized
appreciation and depreciation based on that cost was:
Unrealized appreciation $3,370,429
Unrealized depreciation (1,642,082)
___________________________________________________________________
Net unrealized appreciation $1,728,347
___________________________________________________________________
<PAGE>
PAGE 213
Independent auditors' report
___________________________________________________________________
The board of trustees and shareholders
IDS Special Tax-Exempt Series Trust:
We have audited the accompanying statement of assets and
liabilities, including the schedule of investments in securities,
of IDS Insured Tax-Exempt Fund (a fund within IDS Special Tax-
Exempt Series Trust) as of June 30, 1994, and the related statement
of operations for the year then ended and the statements of changes
in net assets for each of the years in the two-year period ended
June 30, 1994, and the financial highlights for each of the years
in the five-year period ended June 30, 1994, the six months ended
June 30, 1989, each of the years in the two-year period ended
December 31, 1988, and the period from August 18, 1986
(commencement of operations), to December 31, 1986. These financial
statements and the financial highlights are the responsibility of
fund management. Our responsibility is to express an opinion on
these financial statements and the financial highlights based on
our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements and the financial highlights are free of
material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the
financial statements. Investment securities held in custody are
confirmed to us by the custodian. As to securities purchased and
sold but not received or delivered, we request confirmations from
brokers, and where replies are not received, we carry out other
appropriate auditing procedures. An audit also includes assessing
the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable
basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of IDS
Insured Tax-Exempt Fund at June 30, 1994, and the results of its
operations for the year then ended and the changes in its net
assets for each of the years in the two-year period ended June 30,
1994, and the financial highlights for the periods stated in the
first paragraph above, in conformity with generally accepted
accounting principles.
KPMG Peat Marwick
Minneapolis, Minnesota
August 5, 1994
<PAGE>
PAGE 214
<TABLE>
<CAPTION>
Financial statements
Statement of assets and liabilities
IDS Insured Tax-Exempt Fund
June 30, 1994
_____________________________________________________________________________________________________________
Assets
_____________________________________________________________________________________________________________
<S> <C>
Investments in securities, at value (Note 1)
(identified cost $513,738,663) $526,088,252
Accrued interest receivable 10,212,400
Receivable for investment securities sold 8,184,070
_____________________________________________________________________________________________________________
Total assets 544,484,722
_____________________________________________________________________________________________________________
Liabilities
_____________________________________________________________________________________________________________
Disbursements in excess of cash on demand deposit 9,578,692
Dividends payable to shareholders 242,446
Payable for investment securities purchased 8,848,298
Accrued investment management and services fee 230,956
Accrued distribution fee 8,994
Accrued transfer agency fee 23,036
Other accrued expenses 112,776
_____________________________________________________________________________________________________________
Total liabilities 19,045,198
_____________________________________________________________________________________________________________
Net assets applicable to outstanding shares $525,439,524
_____________________________________________________________________________________________________________
Represented by
_____________________________________________________________________________________________________________
Shares of beneficial interest - $.01 par value, unlimited number of shares authorized;
outstanding 98,163,126 shares $ 981,631
Additional paid-in capital 514,868,773
Undistributed net investment income 5,013
Accumulated net realized loss (Note 1) (2,765,482)
Unrealized appreciation 12,349,589
_____________________________________________________________________________________________________________
Total -- representing net assets applicable to outstanding shares $525,439,524
_____________________________________________________________________________________________________________
Net asset value per share $ 5.35
_____________________________________________________________________________________________________________
See accompanying notes to financial statements.
</TABLE>
<PAGE>
PAGE 215
<TABLE>
<CAPTION>
Financial statements
Statement of operations
IDS Insured Tax-Exempt Fund
Year ended June 30, 1994
_____________________________________________________________________________________________________________
Investment income
_____________________________________________________________________________________________________________
<S> <C>
Income:
Interest $31,350,502
_____________________________________________________________________________________________________________
Expenses (Note 2):
Investment management and services fee 2,772,357
Distribution fee 103,301
Transfer agency fee 261,820
Compensation of trustees 10,049
Compensation of officers 5,139
Custodian fees 16,963
Postage 46,524
Registration fees 121,315
Reports to shareholders 22,873
Audit fees 15,500
Administrative 6,599
Portfolio insurance 130
Other 7,533
_____________________________________________________________________________________________________________
Total expenses 3,390,103
_____________________________________________________________________________________________________________
Investment income -- net 27,960,399
_____________________________________________________________________________________________________________
Realized and unrealized gain (loss) -- net
_____________________________________________________________________________________________________________
Net realized loss on security transactions (Note 3) (2,099,384)
Net realized gain on closed interest rate futures contracts 1,468,000
_____________________________________________________________________________________________________________
Net realized loss on investments (631,384)
Net change in unrealized appreciation or depreciation (28,613,958)
_____________________________________________________________________________________________________________
Net loss on investments (29,245,342)
_____________________________________________________________________________________________________________
Net decrease in net assets resulting from operations $(1,284,943)
_____________________________________________________________________________________________________________
See accompanying notes to financial statements.
</TABLE>
<PAGE>
PAGE 216
<TABLE>
<CAPTION>
Financial statements
Statements of changes in net assets
IDS Insured Tax-Exempt Fund
Year ended June 30, 1994
_____________________________________________________________________________________________________________
Operations and distributions 1994 1993
_____________________________________________________________________________________________________________
<S> <C> <C>
Investment income -- net $ 27,960,399 $ 21,102,522
Net realized loss on investments (631,384) (894,550)
Net change in unrealized appreciation or depreciation (28,613,958) 22,786,464
_____________________________________________________________________________________________________________
Net increase (decrease) in net assets resulting from operations (1,284,943) 42,994,436
_____________________________________________________________________________________________________________
Distributions to shareholders from:
Net investment income (27,955,386) (21,103,569)
Net realized gain on investments (129,500) --
_____________________________________________________________________________________________________________
Total distributions (28,084,886) (21,103,569)
_____________________________________________________________________________________________________________
Share transactions
_____________________________________________________________________________________________________________
Proceeds from sales of
27,036,137 and 30,509,841 shares (Note 2) 153,720,129 166,631,848
Net asset value of 3,605,846 and 2,691,805 shares
issued in reinvestment of distributions 20,296,120 14,717,222
Payments for redemptions of
14,841,541 and 8,624,410 shares (83,052,989) (47,103,860)
_____________________________________________________________________________________________________________
Increase in net assets from share transactions
representing net addition of
15,800,442 and 24,577,236 shares 90,963,260 134,245,210
_____________________________________________________________________________________________________________
Total increase in net assets 61,593,431 156,136,077
Net assets at beginning of year 463,846,093 307,710,016
_____________________________________________________________________________________________________________
Net assets at end of year
(including undistributed net investment income of
$5,013 and $0) $525,439,524 $463,846,093
_____________________________________________________________________________________________________________
See accompanying notes to financial statements.
</TABLE>
<PAGE>
PAGE 217
Notes to financial statements
IDS Insured Tax-Exempt Fund
___________________________________________________________________
1. Summary of significant accounting policies
IDS Special Tax-Exempt Series Trust was organized as a
Massachusetts business trust April 7, 1986. IDS Special Tax-Exempt
Series Trust is a "series fund" that is presently comprised of six
individual funds, including IDS Insured Tax-Exempt Fund. The fund
is registered under the Investment Company Act of 1940 (as amended)
as a diversified, open-end management investment company.
Significant accounting policies followed by the fund are summarized
below:
Valuation of securities
All securities are valued at the close of each business day.
Securities for which market quotations are not readily available
are valued at fair value according to methods selected in good
faith by the board of trustees. Determination of fair value
involves, among other things, reference to market indexes, matrixes
and data from independent brokers. Short-term securities maturing
in more than 60 days from the valuation date are valued at the
market price or approximate market value based on current interest
rates; those maturing in 60 days or less are valued at amortized
cost.
Futures transactions
In order to gain exposure to or protect itself from changes in the
market, the fund may buy and sell interest rate futures contracts.
Risks of entering into futures contracts include the possibility
that there may be an illiquid market and that a change in the value
of the contract 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.
<PAGE>
PAGE 218
Notes to financial statements
IDS Insured Tax-Exempt Fund
___________________________________________________________________
1. Summary of significant accounting policies
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, the
recognition of certain foreign currency gains (losses) as ordinary
income (loss) for tax purposes, 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. Portfolio
insurance expense is recognized over the premium period.
___________________________________________________________________
2. Expenses and sales charges
Under terms of an agreement dated Nov. 14, 1991, the fund pays IDS
Financial Corporation (IDS) a fee for managing its investments,
recordkeeping and other specified services. The fee is a percentage
of the fund's average daily net assets consisting of a group asset
charge in reducing percentages from 0.46% to 0.32% annually on the
combined net assets of all non-money market funds in the IDS MUTUAL
FUND GROUP and an individual annual asset charge of 0.13% of
average daily net assets.
The fund also pays IDS a distribution fee at an annual rate of $6
per shareholder account and a transfer agency fee at an annual rate
of $15.50 per shareholder account. The transfer agency fee is
reduced by earnings on monies pending shareholder redemptions.
IDS will assume and pay any expenses (except taxes and brokerage
commissions) that exceed the most restrictive applicable state
expense limitation.
<PAGE>
PAGE 219
Notes to financial statements
IDS Insured Tax-Exempt Fund
___________________________________________________________________
2. Expenses and sales charges
Sales charges by IDS Financial Services Inc. for distributing fund
shares were $5,617,954 for the year ended June 30, 1994.
The fund has a retirement plan for its independent trustees. Upon
retirement, trustees receive monthly payments equal to one-half of
the retainer fee for as many months as they served as trustees up
to 120 months. There are no death benefits. The plan is not funded
but the fund recognizes the cost of payments during the time the
trustees serve on the board. The retirement plan expense amounted
to $6,057 for the year ended June 30, 1994.
___________________________________________________________________
3. Securities transactions
Cost of purchases and proceeds from sales of securities (other than
short-term obligations) aggregated $288,656,727 and $187,291,824,
respectively, for the year ended June 30, 1994. Realized gains and
losses are determined on an identified cost basis.
___________________________________________________________________
4. Capital loss carryover
For federal income tax purposes, the fund has a capital loss
carryover of $2,130,102 at June 30, 1994, that will expire in 2002
if not offset by subsequent capital gains. It is unlikely the board
of trustees will authorize a distribution of any net realized
capital gains until the available capital loss carryover has been
offset or expires.
___________________________________________________________________
5. Financial highlights
"Financial highlights" showing per share data and selected
information is presented on page 5 of the prospectus.
<PAGE>
PAGE 220
<TABLE>
<CAPTION>
Investments in securities
IDS Insured Tax-Exempt Fund (Percentages represent value of
June 30, 1994 investments compared to net assets)
_____________________________________________________________________________________________________________________________
Municipal bonds (97.8%)
_____________________________________________________________________________________________________________________________
Name of issuer and title of issue (b)(c)(e) Coupon Maturity Principal Value(a)
rate amount
_____________________________________________________________________________________________________________________________
<S> <C> <C> <C> <C>
Alabama (0.6%)
Mobile General Obligation Capital Improvement Warrants Convention Center
Pre-Refunded Series 1990 (AMBAC Insured) 7.125% 2020 $ 3,000,000 $ 3,353,250
_____________________________________________________________________________________________________________________________
Arizona (0.7%)
Chandler Water & Sewer Refunding Revenue Bonds
Series 1991 (FGIC Insured) 7.00 2012 1,250,000 1,349,663
Health Facilities Authority Hospital System Refunding Revenue Bonds
Phoenix Baptist Hospital Series 1992 (MBIA Insured) 6.25 2011 2,150,000 2,167,630
____________
Total 3,517,293
_____________________________________________________________________________________________________________________________
California (9.2%)
Adelanto Improvement Agency Tax Allocation Refunding Bonds
Adelanto Improvement Series B (FGIC Insured) 5.50 2023 2,000,000 1,765,100
Alameda County Certificate of Participation Refunding Bonds
Santa Rita Jail (MBIA Insured) 5.00 2015 3,250,000 2,710,045
Eastern Municipal Water District Riverside County Water & Sewer
Pre-Refunded Revenue Certificates of Participation Series 1991
(FGIC Insured) 6.50 2020 5,460,000 5,965,323
Los Angeles County Metropolitan Transportation Authority Sales Tax
Refunding Revenue Bonds Series A (FGIC Insured) 5.00 2021 1,500,000 1,220,250
Los Angeles Wastewater System Refunding Revenue Bonds Series A
(MBIA Insured) 5.70 2020 4,690,000 4,260,443
Los Angeles Wastewater System Revenue Bonds Series A (MBIA Insured) 5.875 2024 2,500,000 2,318,750
Los Angeles Wastewater System Revenue Bonds Series B (MBIA Insured) 5.60 2020 2,000,000 1,791,740
Orange County Redevelopment Agency Tax Allocation
Refunding Revenue Bonds Southwest Redevelopment Series A
(AMBAC Insured) 5.70 2023 3,000,000 2,712,510
Pittsburg Public Financing Authority Wastewater Refunding Revenue Bonds
Series A (FGIC Insured) 5.125 2015 2,895,000 2,469,493
Pittsburg Redevelopment Agency Los Medanos Development Tax Allocation
Refunding Bonds Series A (AMBAC Insured) 5.25 2015 2,225,000 1,928,630
Pittsburg Redevelopment Agency Los Medanos Development Tax Allocation
Refunding Bonds Series 1993A (AMBAC Insured) 5.00 2017 2,800,000 2,312,800
Rancho Cucamonga Redevelopment Agency Rancho Redevelopment Tax Allocation
Refunding Bonds Series 1994 (MBIA Insured) 5.00 2015 3,485,000 2,919,698
San Jose Redevelopment Agency Merged Area Redevelopment
Tax Allocation Bonds Series 1993 (MBIA Insured) 5.25 2016 1,250,000 1,078,537
San Marcos Public Facility Authority Tax Allocation
Refunding Revenue Bonds Series A (Capital Guaranty Insured) 5.50 2023 3,000,000 2,606,580
San Mateo County Joint Power Financing Authority Lease Revenue Bonds
San Mateo County Health Center Series 1994A (FSA Insured) 5.75 2022 1,500,000 1,369,995
Southern Public Power Authority Transmission Refunding Revenue Bonds
Series 1994B (MBIA Insured) 5.00 2022 1,500,000 1,216,470
_____________________________________________________________________________________________________________________________
See accompanying notes to investments in securities.
<PAGE>
PAGE 221
Investments in securities
IDS Insured Tax-Exempt Fund (Percentages represent value of
June 30, 1994 investments compared to net assets)
_____________________________________________________________________________________________________________________________
Municipal bonds (continued)
_____________________________________________________________________________________________________________________________
Name of issuer and title of issue (b)(c)(e) Coupon Maturity Principal Value(a)
rate amount
_____________________________________________________________________________________________________________________________
State Public Works Board Lease Revenue Bonds
Department of Corrections California State Prison
Series B (MBIA Insured) 5.375% 2019 $ 1,230,000 $ 1,065,733
Statewide Community Development Authority Revenue
Certificate of Participation Sutter Health Obligated Group
(MBIA Insured) 5.50 2023 2,750,000 2,414,968
Stockton Certificate of Participation Refunding
Wastewater System (AMBAC Insured) 5.50 2015 2,250,000 2,028,758
Stockton Health Facility Revenue Bonds St. Joseph Medical Center
Series A (MBIA Insured) 5.50 2023 3,000,000 2,649,720
Suisun City Redevelopment Agency Tax Allocation Refunding Bonds
Suisun City Redevelopment (MBIA Insured) 5.50 2023 1,700,000 1,492,532
____________
Total 48,298,075
_____________________________________________________________________________________________________________________________
Colorado (1.1%)
Metro Wastewater Reclamation District Sewer Refunding Bonds
Series 1993B (AMBAC Insured) 4.75 2012 1,750,000 1,465,712
State Board of Trustees of Colleges in Colorado Auxiliary
Facility System Enterprise Revenue Bonds Western State College
Series 1994C (MBIA Insured) 5.625 2015 2,250,000 2,117,003
State Health Facility Authority Hospital Refunding Revenue Bonds
Boulder Community Hospital Series 1994B (MBIA Insured) 5.875 2023 2,370,000 2,226,852
____________
Total 5,809,567
_____________________________________________________________________________________________________________________________
Delaware (2.2%)
Economic Development Pollution Control Refunding Revenue Bonds
Delaware Power & Light Series 1992B (AMBAC Insured) 6.75 2019 10,000,000 10,519,700
Health Facilities Authority Refunding Revenue Bonds
Medical Center of Delaware Series 1989 (MBIA Insured) 7.00 2015 1,000,000 1,071,640
____________
Total 11,591,340
_____________________________________________________________________________________________________________________________
District of Columbia (4.0%)
General Obligation Bonds Series 1992B (MBIA Insured) 6.30 2010 3,840,000 3,879,168
Howard University Revenue Bonds Series A (MBIA Insured) 8.00 2017 1,500,000 1,649,400
Metropolitan Washington Airports Authority Airport System
Revenue Bonds AMT Series 1992A (MBIA Insured) 6.625 2019 8,670,000 8,781,236
Metropolitan Washington Airports Authority Airport System
Revenue Bonds AMT Series 1994A (MBIA Insured) 5.75 2020 7,500,000 6,874,200
____________
Total 21,184,004
_____________________________________________________________________________________________________________________________
See accompanying notes to investments in securities.
<PAGE>
PAGE 222
Investments in securities
IDS Insured Tax-Exempt Fund (Percentages represent value of
June 30, 1994 investments compared to net assets)
_____________________________________________________________________________________________________________________________
Municipal bonds (continued)
_____________________________________________________________________________________________________________________________
Name of issuer and title of issue (b)(c)(e) Coupon Maturity Principal Value(a)
rate amount
_____________________________________________________________________________________________________________________________
Florida (2.8%)
Alachua County Health Facilities Authority Pre-Refunded Revenue Bonds
Shands Hospital Series 1985A (MBIA Insured) 8.00% 2015 $ 500,000 $ 519,950
Dade County Seaport Authority Revenue Bonds (MBIA Insured) 6.75 2015 5,000,000 5,171,600
Department of Transportation Turnpike Revenue Bonds Series 1991A
(AMBAC Insured) 6.25 2020 1,250,000 1,249,975
Fort Myers Utility System Refunding Revenue Bonds Series 1989A
(BIG Insured) 6.00 2019 2,000,000 1,936,640
Gulf Breeze Local Government Loan Program Boca Raton Series 1985E
(FGIC Insured) 7.75 2015 2,000,000 2,244,100
Lee County Transportation Facilities Pre-Refunded Revenue Bonds
Series 1987 (AMBAC Insured) 8.25 2017 1,500,000 1,610,730
Osceola County Transportation Pre-Refunded Revenue Bonds
Series 1988A (FGIC Insured) 7.70 2013 1,215,000 1,350,011
Palm Beach County Solid Waste Authority Revenue Bonds Series 1984
(BIG Insured) 8.375 2010 500,000 558,840
____________
Total 14,641,846
_____________________________________________________________________________________________________________________________
Georgia (1.9%)
Atlanta Metropolitan Rapid Transit Authority Sales Tax
Pre-Refunded Revenue Bonds Series L (AMBAC Insured) 7.20 2020 3,000,000 3,330,150
Chatham County Hospital Authority Revenue Bonds Memorial Medical Center
Series 1990A (MBIA Insured) 7.00 2021 4,500,000 4,835,880
Municipal Electrical Authority Power Revenue Bonds Series M (BIG Insured) 8.10 2012 1,080,000 1,178,788
Municipal Electrical Authority Special Obligation Refunding Bonds
2nd Crossover Series (AMBAC Insured) 7.80 2020 500,000 549,495
____________
Total 9,894,313
_____________________________________________________________________________________________________________________________
Illinois (4.4%)
Chicago O'Hare International Airport General Revenue Bonds Series 1990A
(AMBAC Insured) 7.50 2016 2,000,000 2,201,340
Chicago O'Hare International Airport Terminal Revenue Bonds (MBIA Insured) 7.625 2010 3,000,000 3,348,180
Chicago Public Building Commission Pre-Refunded Revenue Bonds
(MBIA Insured) 7.70 2008 1,000,000 1,094,960
Chicago Public Building Commission Pre-Refunded Revenue Bonds
Series 1989A (FGIC Insured) 7.75 2006 1,000,000 1,123,940
Chicago Public Building Commission Pre-Refunded Revenue Bonds
Series 1990A (MBIA Insured) 7.125 2015 5,000,000 5,551,200
Regional Transportation Authority General Obligation Bonds Series 1992A
(AMBAC Insured) 6.50 2015 10,000,000 10,108,300
____________
Total 23,427,920
_____________________________________________________________________________________________________________________________
See accompanying notes to investments in securities.
<PAGE>
PAGE 223
Investments in securities
IDS Insured Tax-Exempt Fund (Percentages represent value of
June 30, 1994 investments compared to net assets)
_____________________________________________________________________________________________________________________________
Municipal bonds (continued)
_____________________________________________________________________________________________________________________________
Name of issuer and title of issue (b)(c)(e) Coupon Maturity Principal Value(a)
rate amount
_____________________________________________________________________________________________________________________________
Indiana (4.1%)
Educational Facilities Authority Pre-Refunded Bonds Valparaiso University
(BIG Insured) 7.80% 2008 $ 500,000 $ 562,140
Indianapolis Airport Authority Revenue Bonds Series 1993 (MBIA Insured) 6.00 2023 6,750,000 6,347,768
Jasper County Pollution Control Refunding Revenue Bonds
Northern Indiana Public Service Series 1989A (MBIA Insured) 7.50 2014 2,675,000 2,834,831
Jasper County Pollution Control Refunding Revenue Bonds
Northern Indiana Public Service Series 1991 (MBIA Insured) 7.10 2017 2,250,000 2,407,275
Marion County Hospital Authority Refunding Revenue Bonds Methodist Hospital
Series 1989 (MBIA Insured) 6.50 2013 4,000,000 4,079,680
State Health Facility Finance Authority Hospital Refunding Revenue Bonds
Columbus Regional Hospital Series 1993 (Capital Guaranty Insured) 7.00 2015 5,000,000 5,344,300
____________
Total 21,575,994
_____________________________________________________________________________________________________________________________
Kansas (2.3%)
Burlington Pollution Control Refunding Revenue Bonds
Kansas Gas & Electric Series 1991 (MBIA Insured) 7.00 2031 10,000,000 10,750,500
Olathe Kansas Facility Refunding Revenue Bonds
Olathe Medical Center Series 1994A (AMBAC Insured) 5.875 2016 1,250,000 1,188,288
____________
Total 11,938,788
_____________________________________________________________________________________________________________________________
Kentucky (0.1%)
Jefferson County Multi-family Housing Revenue Bonds AMT Brownsboro Gardens
Series 1986A (FHA Insured) 8.00 2026 395,000 405,049
Louisville & Jefferson County Airport Authority System Revenue Bonds AMT
(MBIA Insured) 8.50 2017 300,000 332,427
____________
Total 737,476
_____________________________________________________________________________________________________________________________
Louisiana (1.6%)
Energy & Power Authority Power Refunding Revenue Bonds Rodemacher Unit #2
Series 1991 (FGIC Insured) 6.75 2008 7,000,000 7,383,670
New Orleans Audubon Park Commission Aquarium Pre-Refunded Bonds
Series 1988 (MBIA Insured) 7.90 2008 500,000 554,035
New Orleans International Airport Pre-Refunded Revenue Bonds AMT Series A
(FGIC Insured) 8.875 2017 565,000 637,591
____________
Total 8,575,296
_____________________________________________________________________________________________________________________________
See accompanying notes to investments in securities.
<PAGE>
PAGE 224
Investments in securities
IDS Insured Tax-Exempt Fund (Percentages represent value of
June 30, 1994 investments compared to net assets)
_____________________________________________________________________________________________________________________________
Municipal bonds (continued)
_____________________________________________________________________________________________________________________________
Name of issuer and title of issue (b)(c)(e) Coupon Maturity Principal Value(a)
rate amount
_____________________________________________________________________________________________________________________________
Maryland (1.6%)
Baltimore Refunding Revenue Bonds Wastewater Series 1994A
(FGIC Insured) 5.00% 2022 $ 1,000,000 $ 825,440
Health & Higher Educational Facilities Authority Refunding Revenue
Bonds Greater Baltimore Medical Center (FGIC Insured) 5.00 2019 2,650,000 2,184,554
Health & Higher Educational Facilities Authority Revenue Bonds
Frederick Memorial Hospital Series 1993 (FGIC Insured) 5.00 2028 4,750,000 3,794,585
Health & Higher Educational Facilities Authority Revenue Bonds
Peninsula Regional Medical Center (MBIA Insured) 5.00 2023 2,000,000 1,626,140
____________
Total 8,430,719
_____________________________________________________________________________________________________________________________
Massachusetts (2.6%)
Boston Water & Sewer Commission Revenue Bonds General Subordinate Series A
(BIG Insured) 6.00 2008 2,500,000 2,513,925
Commonwealth General Obligation Pre-Refunded Bonds Consolidated Loan
Series 1989C (AMBAC Insured) 7.00 2009 1,500,000 1,650,090
Health & Educational Facilities Authority Pre-Refunded Revenue Bonds
Lahey Clinic Medical Center (MBIA Insured) 7.625 2018 2,200,000 2,442,396
Health & Educational Facilities Authority Pre-Refunded Revenue Bonds
Northeastern University Series 1989C (AMBAC Insured) 7.10 2006 1,000,000 1,088,000
Health & Educational Facilities Authority Revenue Bonds Boston College
Series J (FGIC Insured) 6.625 2021 2,250,000 2,291,917
Industrial Finance Agency Revenue Bonds Brandeis University (MBIA Insured) 6.80 2019 1,700,000 1,752,615
Quincy Refunding Revenue Bonds Quincy Hospital Series 1993 (FSA Insured) 5.25 2016 2,235,000 1,962,710
____________
Total 13,701,653
_____________________________________________________________________________________________________________________________
Michigan (0.8%)
Chippewa Valley School District Macomb County Qualified School Building
Loan Fund Unlimited Tax General Obligation Refunding Bonds
(FGIC Insured) 5.00 2021 2,145,000 1,776,339
Detroit Water Supply System Refunding Revenue Bonds Series 1993
(FGIC Insured) 5.00 2023 1,050,000 858,427
Sandusky County School District Refunding Bonds (AMBAC Insured) 5.25 2021 1,000,000 860,180
Wayne County Charter Airport Revenue Bonds AMT
Detroit Metropolitan Wayne County Airport (FGIC Insured) 8.00 2014 675,000 738,376
____________
Total 4,233,322
_____________________________________________________________________________________________________________________________
See accompanying notes to investments in securities.
<PAGE>
PAGE 225
Investments in securities
IDS Insured Tax-Exempt Fund (Percentages represent value of
June 30, 1994 investments compared to net assets)
_____________________________________________________________________________________________________________________________
Municipal bonds (continued)
_____________________________________________________________________________________________________________________________
Name of issuer and title of issue (b)(c)(e) Coupon Maturity Principal Value(a)
rate amount
_____________________________________________________________________________________________________________________________
Minnesota (1.4%)
St. Louis Park Health Care Facilities Revenue Bonds
Healthsystem Minnesota Obligated Group Series 1993A (AMBAC Insured) 5.20% 2023 $ 3,000,000 $ 2,545,290
Western Municipal Power Agency Transmission Pre-Refunded Revenue
Bonds Series 1991 (AMBAC Insured) 6.75 2016 4,500,000 4,643,640
____________
Total 7,188,930
_____________________________________________________________________________________________________________________________
Missouri (1.5%)
Kansas City School District Insured Leasehold Revenue Bonds
Capital Improvement (FGIC Insured) 5.00 2014 7,930,000 6,778,643
St. Louis Municipal Finance Leasehold Improvement Revenue Bonds
St. Louis Civil Courts Building Series 1994 (FGIC Insured) 5.75 2013 1,000,000 951,060
____________
Total 7,729,703
_____________________________________________________________________________________________________________________________
Montana (2.2%)
Forsyth Rosebud County Pollution Refunding Revenue Bonds AMT
Puget Sound Power & Light (AMBAC Insured) 7.25 2021 4,000,000 4,323,040
State Board of Investments Payroll Tax Bonds Worker's Compensation Program
Series 1991 (MBIA Insured) 6.875 2020 7,000,000 7,285,460
____________
Total 11,608,500
_____________________________________________________________________________________________________________________________
Nevada (1.9%)
Reno General Obligation Limited Tax Capital Improvement Pre-Refunded Bonds
(AMBAC Insured) 7.40 2007 1,000,000 1,114,310
Washoe County Gas & Water Facilities Refunding Revenue Bonds
Sierra Pacific Power Series 1993B (MBIA Insured) 5.90 2023 9,400,000 8,714,082
____________
Total 9,828,392
_____________________________________________________________________________________________________________________________
New Hampshire (2.5%)
Industrial Development Authority Pollution Control Revenue Bonds AMT
Light & Power Series 1989 (AMBAC Insured) 7.375 2019 5,000,000 5,432,250
State Higher Educational & University System of New Hampshire
(MBIA Insured) 5.75 2024 2,500,000 2,262,950
Turnpike System Refunding Revenue Bonds Series 1991A (FGIC Insured) 6.75 2011 5,000,000 5,262,950
____________
Total 12,958,150
_____________________________________________________________________________________________________________________________
See accompanying notes to investments in securities.
<PAGE>
PAGE 226
Investments in securities
IDS Insured Tax-Exempt Fund (Percentages represent value of
June 30, 1994 investments compared to net assets)
_____________________________________________________________________________________________________________________________
Municipal bonds (continued)
_____________________________________________________________________________________________________________________________
Name of issuer and title of issue (b)(c)(e) Coupon Maturity Principal Value(a)
rate amount
_____________________________________________________________________________________________________________________________
New Jersey (0.9%)
Health Care Facilities Finance Authority Revenue Bonds
Newark Bethleham Israel Medical Center Series 1994
(FSA Insured) 6.00% 2024 $ 5,000,000 (d) $ 4,762,500
_____________________________________________________________________________________________________________________________
New Mexico (1.3%)
Farmington Pollution Control Refunding Revenue Bonds
Southern California Edison Series A (MBIA Insured) 5.875 2023 5,750,000 5,354,227
Los Alamos Utility System Revenue Bonds Series 1994A
(FSA Insured) 6.00 2015 1,755,000 (d) 1,690,153
____________
Total 7,044,380
_____________________________________________________________________________________________________________________________
New York (1.2%)
Broome Certificate of Participation Public Safety Facility
Series 1994 (MBIA Insured) 5.25 2022 2,250,000 1,915,807
Metropolitan Transportation Authority Commuter Facility Service
Contract Bonds Series L (AMBAC Insured) 7.50 2017 1,300,000 1,424,007
New York City General Obligation Pre-Refunded Bonds Series A
(FGIC Insured) 8.125 2007 1,145,000 1,279,469
State Urban Development Correctional Facilities Pre-Refunded Revenue Bonds
Series 1 (FSA Insured) 7.50 2020 1,500,000 1,693,650
____________
Total 6,312,933
_____________________________________________________________________________________________________________________________
North Carolina (3.5%)
Charlotte Pre-Refunded Certificates of Participation Convention Facility
Series 1991 (AMBAC Insured) 6.75 2021 3,150,000 3,477,915
Charlotte Convention Facility Refunding Certificate of Participation
Series 1993C (AMBAC Insured) 5.25 2020 5,350,000 4,570,344
Eastern Municipal Power Agency Power System Revenue Bonds
Series 1993A (FGIC Insured) 6.125 2010 3,860,000 3,850,389
Metropolitan Sewerage District of Buncombe County Refunding Revenue Bonds
Series 1993A (FGIC Insured) 5.50 2022 1,400,000 1,245,132
Municipal Power Agency #1 Catawba Electric Refunding Revenue Bonds
Series 1993 (MBIA Insured) 5.75 2020 5,500,000 5,085,740
____________
Total 18,229,520
_____________________________________________________________________________________________________________________________
See accompanying notes to investments in securities.
<PAGE>
PAGE 227
Investments in securities
IDS Insured Tax-Exempt Fund (Percentages represent value of
June 30, 1994 investments compared to net assets)
_____________________________________________________________________________________________________________________________
Municipal bonds (continued)
_____________________________________________________________________________________________________________________________
Name of issuer and title of issue (b)(c)(e) Coupon Maturity Principal Value(a)
rate amount
_____________________________________________________________________________________________________________________________
North Dakota (0.3%)
State Building Authority Refunding Lease Revenue Bonds
Series 1993A (AMBAC Insured) 6.00% 2010 $ 1,500,000 $ 1,478,745
_____________________________________________________________________________________________________________________________
Ohio (1.4%)
Clermont County Hospital Facility Refunding Revenue Bonds
Mercy Health System Series A (MBIA Insured) 5.875 2015 1,000,000 955,870
Clermont County Sewer System Refunding Bonds (AMBAC Insured) 5.20 2021 4,000,000 3,452,080
Cuyahoga County Hospital Facility Revenue Bonds
Metrohealth System Series 1989 (MBIA Insured) 6.00 2019 1,500,000 1,456,695
Municipal Electric Generation Agency Joint Venture 5
Revenue Bonds (AMBAC Insured) 5.375 2024 1,480,000 1,300,742
____________
Total 7,165,387
_____________________________________________________________________________________________________________________________
Oklahoma (0.9%)
Moore Public Works Authority Refunding Revenue Bonds Series 1989
(AMBAC Insured) 7.60 2006 2,700,000 3,029,076
Tulsa International Airport General Revenue Bonds Consolidated Fixed Rate
Series 1989 (MBIA Insured) 7.50 2008 1,500,000 1,636,500
____________
Total 4,665,576
_____________________________________________________________________________________________________________________________
Pennsylvania (7.1%)
Allegheny County Airport Revenue Bonds Pittsburgh International
Series D (FGIC Insured) 7.75 2019 2,300,000 2,477,215
Armstrong County Hospital Authority Health Center Refunding Revenue Bonds
Canterbury PL (MBIA Insured) 6.50 2021 2,940,000 2,946,615
Lehigh County General Purpose Authority Fixed Rate Exempt Facility
Pre-Refunded Revenue Bonds Lehigh Pretreatment Plant Series 1984
(FGIC Insured) 7.25 2010 2,000,000 2,183,360
Montgomery County Industrial Development Authority Pollution Control
Refunding Revenue Bonds Philadelphia Electric Series 1991B
(MBIA Insured) 6.70 2021 10,000,000 10,237,300
Pittsburgh Water & Sewer Authority Water & Sewer System
Pre-Refunded Revenue Bonds Series 1991A (FGIC Insured) 6.50 2014 10,000,000 10,894,600
Robinson Township Municipal Authority Water & Sewer Revenue Bonds
(FGIC Insured) 6.00 2019 2,200,000 2,108,700
_____________________________________________________________________________________________________________________________
See accompanying notes to investments in securities.
<PAGE>
PAGE 228
Investments in securities
IDS Insured Tax-Exempt Fund (Percentages represent value of
June 30, 1994 investments compared to net assets)
_____________________________________________________________________________________________________________________________
Municipal bonds (continued)
_____________________________________________________________________________________________________________________________
Name of issuer and title of issue (b)(c)(e) Coupon Maturity Principal Value(a)
rate amount
_____________________________________________________________________________________________________________________________
State Higher Educational Facilities Authority Temple University
Revenue Bonds Series 1991-1 (MBIA Insured) 5.75% 2031 $ 3,100,000 $ 2,795,828
Turnpike Commission Pre-Refunded Revenue Bonds Series 1989K (MBIA Insured) 7.50 2012 1,000,000 1,130,610
Turnpike Commission Revenue Bonds Series 1991L (MBIA Insured) 6.00 2015 2,500,000 2,410,475
____________
Total 37,184,703
_____________________________________________________________________________________________________________________________
Tennessee (1.3%)
Johnson County Health & Educational Facility Board Hospital
Refunding Revenue Bonds Johnson County Medical Center Series 1994
(MBIA Insured) 5.00 2013 500,000 425,615
Knox County Health Education & Housing Facility Board Hospital Refunding
Revenue Bonds Fort Sanders Alliance Obligation Group Series 1993
(MBIA Insured) 5.75 2014 7,000,000 6,608,560
____________
Total 7,034,175
_____________________________________________________________________________________________________________________________
Texas (17.4%)
Austin Combine Utility System Pre-Refunded Revenue Bonds (AMBAC Insured) 5.75 2016 2,000,000 1,851,900
Austin Combine Utility System Revenue Bonds (MBIA Insured) 5.25 2018 2,300,000 1,975,838
Austin Combine Utility System Revenue Bonds Series 1987 (BIG Insured) 8.625 2012-17 1,250,000 1,506,227
Brazos River Authority Collateralized Pollution Control
Refunding Revenue Bonds Texas Utility Electric Series 1992
(AMBAC Insured) 6.75 2022 9,750,000 9,943,830
Brazos River Authority Collateralized Pollution Control
Refunding Revenue Bonds Texas Utility Electric Series 1992B
(FGIC Insured) 6.625 2022 6,000,000 6,066,780
Brazos River Authority Collateralized Pollution Control
Refunding Revenue Bonds Texas Utility Electric Series 1992C
(FGIC Insured) 6.70 2022 14,935,000 15,187,402
Colorado River Municipal Water District Water System
Pre-Refunded Revenue Bonds Series A (AMBAC Insured) 6.625 2021 8,900,000 9,531,366
Harris County Health Facilities Development Hospital Revenue Bonds
State Children's Hospital Series 1989A (MBIA Insured) 7.00 2019 1,500,000 1,600,425
Harris County Public Facilities Corporation Detention Facility Mortgage
Pre-Refunded Revenue Bonds (MBIA Insured) 7.80 2011 1,000,000 1,126,250
_____________________________________________________________________________________________________________________________
See accompanying notes to investments in securities.
<PAGE>
PAGE 229
Investments in securities
IDS Insured Tax-Exempt Fund (Percentages represent value of
June 30, 1994 investments compared to net assets)
_____________________________________________________________________________________________________________________________
Municipal bonds (continued)
_____________________________________________________________________________________________________________________________
Name of issuer and title of issue (b)(c)(e) Coupon Maturity Principal Value(a)
rate amount
_____________________________________________________________________________________________________________________________
Harris County Toll Road Senior Lien Pre-Refunded Revenue Bonds
Series A (AMBAC Insured) 6.50% 2017 $ 8,170,000 $ 8,905,300
Harris County Toll Road Senior Lien Refunding Revenue Bonds
Series A (AMBAC Insured) 6.50 2017 1,530,000 1,541,123
League City General Obligation Refunding & Improvement Bonds Series 1990
(FGIC Insured) 6.25 2013 2,500,000 2,475,450
Lower Colorado River Authority Priority Pre-Refunded Revenue Bonds
Series 1990 (BIG Insured) 7.75 1996-10 600,000 641,424
Matagorda County Navigation District #1 Collateralized Pollution Control
Revenue Bonds Central Power & Light Series 1984A (AMBAC Insured) 7.50 2014 2,500,000 2,771,125
Matagorda County Navigation District #1 Pollution Control
Refunding Revenue Bonds Houston Light & Power Series E (FGIC Insured) 7.20 2018 2,150,000 2,336,384
Matagorda County Navigation District #1 Pollution Control Revenue Bonds
AMT Central Power & Light Series 1990 (AMBAC Insured) 7.50 2020 2,000,000 2,194,020
Municipal Power Agency Refunding Revenue Bonds Series 1991A
(AMBAC Insured) 6.75 2012 5,250,000 5,445,300
North Central State Health Facilities Pre-Refunded Bonds
Children's Medical Center (BIG Insured) 7.875 2018 2,000,000 2,202,980
San Antonio Water Refunding Revenue Bonds (MBIA Insured) 5.50 2018 5,000,000 4,447,100
Tarrant County Health Facility Development Hospital Revenue Bonds
Adventist Health System/Sunbelt Series 1993
(Capital Guaranty Insured) 5.00 2013 1,250,000 1,057,150
Turnpike Authority Dallas North Tollway Pre-Refunded Revenue Bonds
Series 1990 (AMBAC Insured) 6.00 2020 5,000,000 5,199,350
University of Houston System Consolidated Pre-Refunded Revenue Bonds
Series 1990A (MBIA Insured) 7.40 2006 3,160,000 3,501,501
____________
Total 91,508,225
_____________________________________________________________________________________________________________________________
Utah (0.6%)
Intermountain Power Agency Special Obligation Bonds 2nd Crossover Series
(FGIC Insured) 7.25 2017 875,000 931,901
Intermountain Power Authority Power Supply Pre-Refunded Revenue Bonds
Series 1987C (AMBAC Insured) 8.375 2012 900,000 1,003,509
Salt Lake City-County Airport Pre-Refunded Revenue Bonds AMT Series 1989
(FGIC Insured) 7.875 2018 1,000,000 1,111,840
____________
Total 3,047,250
_____________________________________________________________________________________________________________________________
See accompanying notes to investments in securities.
<PAGE>
PAGE 230
Investments in securities
IDS Insured Tax-Exempt Fund (Percentages represent value of
June 30, 1994 investments compared to net assets)
_____________________________________________________________________________________________________________________________
Municipal bonds (continued)
_____________________________________________________________________________________________________________________________
Name of issuer and title of issue (b)(c)(e) Coupon Maturity Principal Value(a)
rate amount
_____________________________________________________________________________________________________________________________
Virginia (2.5%)
Industrial Development Authority Chesapeake Public Facility Lease
Revenue Bonds Chesapeake Jail Series 1994 (MBIA Insured) 5.625% 2014 $ 855,000 $ 783,163
Loudoun County Sanitation Authority Waste & Sewer
Refunding Revenue Bonds (MBIA Insured) 5.25 2030 1,435,000 1,196,044
Norfolk Water Revenue Bonds (AMBAC Insured) 5.375 2023 3,905,000 3,368,570
Roanoke Industrial Development Authority Refunding Revenue Bonds
Memorial Hospital Series A (MBIA Insured) 5.00 2024 4,250,000 3,432,003
Southeastern Public Service Authority Pre-Refunded Revenue Bonds
Regional Solid Waste System Series 1989 (BIG Insured) 7.00 2013 4,000,000 4,394,160
____________
Total 13,173,940
_____________________________________________________________________________________________________________________________
Washington (6.5%)
Public Power Supply System Nuclear Project #1 Pre-Refunded Revenue Bonds
Series A (MBIA Insured) 7.50 2015 1,805,000 2,025,625
Public Power Supply System Nuclear Project #1 Refunding Revenue Bonds
Series A (MBIA Insured) 7.50 2015 1,195,000 1,323,415
Public Power Supply System Nuclear Project #1 Refunding Revenue Bonds
Series 1992A (MBIA Insured) 6.25 2017 10,500,000 10,237,605
Public Power Supply System Pre-Refunded Revenue Bonds Nuclear Project #3
Series 1989A (BIG Insured) 7.25 2016 1,000,000 1,112,240
Public Power Supply System Refunding Revenue Bonds Nuclear Project #3
Series 1989A (BIG Insured) 6.00 2018 3,000,000 2,860,830
Snohomish County Public Utility District #1 General System Revenue Bonds
Series 1993 (FGIC Insured) 6.00 2013 12,920,000 12,364,052
Spokane Regional Solid Waste Management System Revenue Bonds AMT
Series 1989 (AMBAC Insured) 7.75 2011 300,000 331,548
Spokane Regional Solid Waste Management System Revenue Bonds AMT
Series 1989 (AMBAC Insured) 7.875 2007 1,250,000 1,390,275
State Health Care Facilities Authority Refunding Revenue Bonds
Dominican Health Service Spokane Series 1993 (Connie Lee Insured) 5.75 2020 2,800,000 2,492,000
____________
Total 34,137,590
_____________________________________________________________________________________________________________________________
See accompanying notes to investments in securities.
<PAGE>
PAGE 231
Investments in securities
IDS Insured Tax-Exempt Fund (Percentages represent value of
June 30, 1994 investments compared to net assets)
_____________________________________________________________________________________________________________________________
Municipal bonds (continued)
_____________________________________________________________________________________________________________________________
Name of issuer and title of issue (b)(c)(e) Coupon Maturity Principal Value(a)
rate amount
_____________________________________________________________________________________________________________________________
West Virginia (2.5%)
Board of Regents Registration Fee Pre-Refunded Revenue Bonds Series 1989B
(MBIA Insured) 7.40% 2009 $ 2,000,000 $ 2,228,620
School Building Authority Capital Improvement Pre-Refunded Revenue Bonds
(MBIA Insured) 7.25 2015 3,415,000 3,822,307
School Building Authority Capital Improvement Revenue Bonds Series 1990B
(MBIA Insured) 6.75 2017 5,000,000 5,105,100
State Parkway Economic Development & Tourism Authority Parkway
Pre-Refunded Revenue Bonds Series 1989 (FGIC Insured) 7.125 2019 2,000,000 2,208,020
____________
Total 13,364,047
_____________________________________________________________________________________________________________________________
Wyoming (0.9%)
State Municipal Power Agency Power Supply System Refunding Revenue Bonds
Series 1993A (MBIA Insured) 6.125 2016 5,000,000 4,854,750
_____________________________________________________________________________________________________________________________
Total municipal bonds
(Cost: $501,838,663) $514,188,252
_____________________________________________________________________________________________________________________________
</TABLE>
<TABLE>
<CAPTION>
Short-term securities (2.3%)
_____________________________________________________________________________________________________________________________
Issuer (e)(f) Effective Amount Value(a)
yield payable at
maturity
_____________________________________________________________________________________________________________________________
<S> <C> <C> <C>
Municipal notes
Gulf Coast Amoco V.R.D.B.
10-12-17 2.75% $1,400,000 $ 1,400,000
Lincoln County Wyoming Pollution Control V.R.D.B. Exxon
Series 1984A
11-01-14 3.00 500,000 500,000
New York City General Obligation V.R.D.B. Series H-2
08-01-14 3.30 3,700,000 3,700,000
_____________________________________________________________________________________________________________________________
See accompanying notes to investments in securities.
<PAGE>
PAGE 232
Investments in securities
IDS Insured Tax-Exempt Fund (Percentages represent value of
June 30, 1994 investments compared to net assets)
_____________________________________________________________________________________________________________________________
Short-term securities (continued)
_____________________________________________________________________________________________________________________________
Issuer (e)(f) Annualized Amount Value(a)
yield on date payable at
of purchase maturity
_____________________________________________________________________________________________________________________________
New York City General Obligation V.R.D.B Series H-4
08-01-15 3.30% $3,000,000 $ 3,000,000
New York City General Obligation V.R.D.B. Series H-6
08-01-11 3.30 3,300,000 3,300,000
_____________________________________________________________________________________________________________________________
Total short-term securities
(Cost: $11,900,000) $ 11,900,000
_____________________________________________________________________________________________________________________________
Total investments in securities
(Cost: $513,738,663)(g) $526,088,252
_____________________________________________________________________________________________________________________________
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:
</TABLE>
<TABLE>
<CAPTION>
(Unaudited)
__________________________________________
Rating 06-30-94 06-30-93
_______________________________________________________________________________________________________
<S> <C> <C>
AAA 100% 100%
AA - -
A - -
BBB - -
Non-rated - -
Total 100% 100%
_______________________________________________________________________________________________________
<PAGE>
PAGE 233
Investments in securities
IDS Insured Tax-Exempt Fund
June 30, 1994
_____________________________________________________________________________________________________________________________
Notes to investments in securities (continued)
_____________________________________________________________________________________________________________________________
(c) The following abbreviations are used in portfolio descriptions to identify the insurer of the issue:
AMBAC -- American Municipal Bond Association Corporation
BIG -- Bond Investors Guarantee
FGIC -- Financial Guarantee Insurance Corporation
FHA -- Federal Housing Authority
FSA -- Financial Security Assurance
MBIA -- Municipal Bond Investors Assurance
(d) At June 30, 1994, the cost of securities purchased on a when-issued basis was $6,508,119.
(e) The following abbreviations are used in the portfolio descriptions:
AMT -- Alternative Minimum Tax
V.R.D.B. -- Variable Rate Demand Bond
(f) Interest rate varies to reflect current market conditions; rate shown is the effective rate
on June 30, 1994.
(g) At June 30, 1994, the cost of securities for federal income tax purposes was $513,767,121
and the aggregate gross unrealized appreciation and depreciation based on that cost was:
Unrealized appreciation $24,427,424
Unrealized depreciation (12,106,293)
_______________________________________________________________________________________________________
Net unrealized appreciation $12,321,131
_______________________________________________________________________________________________________
</TABLE>
<PAGE>
PAGE 234
PART C. OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) FINANCIAL STATEMENTS
Financial statements for IDS California Tax-Exempt Fund, IDS
Massachusetts Tax-Exempt Fund, IDS Michigan Tax-Exempt Fund, IDS
Minnesota Tax-Exempt Fund, IDS New York Tax-Exempt Fund and IDS
Ohio Tax-Exempt Fund filed as part of this post-effective amendment
and included in Part B:
- Auditors' Report dated Aug. 5, 1994.
- Statements of Assets and Liabilities, June 30, 1994.
- Statements of Operations for the fiscal year ended June 30,
1994.
- Statements of Changes in Net Assets for the years ended June
30, 1994 and June 30, 1993.
- Notes to Financial Statements.
- Investments in Securities, June 30, 1994.
The following financial statements for IDS Insured Tax-Exempt Fund
as part of this post-effective amendment and included in Part B:
- Auditors' Report dated Aug. 5, 1994.
- Statements of Assets and Liabilities, June 30, 1994.
- Statements of Operations for the fiscal year ended June 30,
1994.
- Statements of Changes in Net Assets for the years ended June
30, 1994 and June 30, 1993.
- Notes to Financial Statements.
- Investments in Securities, June 30, 1994.
(b) EXHIBITS:
1. Declaration of Trust dated April 7, 1986, filed as Exhibit No.
1 to Registration Statement No. 33-5102 is incorporated herein
by reference.
2. Amended By-laws dated May 14, 1987, filed as Exhibit No. 2 to
Registration Statement 33-5102 is incorporated herein by
reference.
3. Not Applicable.
4. Form of Certificate for shares of beneficial interest filed as
Exhibit No. 4 to Pre-Effective Amendment No. 1 to Registration
Statement No. 33-5102 is incorporated herein by reference.
5. Investment Management and Services Agreement between IDS
Special Tax-Exempt Series Trust and IDS Financial Corporation,
dated Nov. 14, 1991, was filed as Exhibit 5 to Post-Effective
Amendment No. 18 to Registration Statement No. 33-5102 is
incorporated herein by reference.
6. Distribution Agreement between Registrant and IDS Financial
Services Inc. dated Jan. 1, 1987, is incorporated herein by
reference.
<PAGE>
PAGE 235
7. All employees are eligible to participate in a profit sharing
plan. Entry into the plan is Jan. 1 or July 1. The
Registrant contributes each year an amount up to 15 percent of
their annual salaries, the maximum deductible amount permitted
under Section 404(a) of the Internal Revenue Code.
8(a) Custodian Agreement filed as Exhibit No. 8 to Registration
Statement No. 33-5102 is incorporated herein by reference.
8(b) Amendment to Custodian Agreement, dated August 5, 1987, filed
as Exhibit 8 to Post-Effective Amendment No. 69 to
Registration Statement No. 2-10700, (IDS Selective Fund, Inc.)
is incorporated herein by reference.
9(a) Insurance Agreement between IDS Insured Tax-Exempt Fund and
Financial Guaranty Insurance Company filed as Exhibit No. 9 to
Pre-Effective Amendment No. 1 to Registration Statement No.
33-5102 is incorporated herein by reference.
9(b) Transfer Agency Agreement between IDS Special Tax-Exempt
Series Trust and IDS Financial Corporation dated Nov. 14,
1991, filed as Exhibit 9(b) to Post-Effective Amendment No. 18
to Registration Statement No. 33-5102 is incorporated herein
by reference.
10. Opinion and Consent of Counsel filed as Exhibit No. 10 to Pre-
Effective Amendment No. 3 to Registration Statement No. 33-
5102 is incorporated herein by reference.
11. Independent Auditors' Consent, filed electronically.
12. None.
13. Not Applicable.
14. Forms of Keogh, IRA and other retirement plans filed as
Exhibits 14(a) through 14(n) to IDS Growth Fund, Inc. Post-
Effective Amendment No. 34 to Registration Statement No. 2-
38355 on Sept. 8, 1986, are incorporated herein by reference.
15. Plan and Supplemental Agreement of Distribution, dated Jan. 1,
1987 filed as Exhibit 15 to Post-Effective Amendment No. 11 to
Registration Statement No. 33-5102 is incorporated herein by
reference.
16. Schedule for computation of each performance quotation
provided in the Registration Statement in response to Item 22
as Exhibit 16 to Registration Statement No. 33-5102 is
incorporated herein by reference.
17(a) Officers' Power of Attorney to sign Amendments to this
Registration Statement dated June 1, 1993, filed
electronically as Exhibit 17(a) to Registration Statement
No. 33-5102 is incorporated herein by reference.
17(b) Directors' Power of Attorney to sign Amendments to this
Registration Statement dated October 14, 1993, filed
electronically as Exhibit 17(b) to Registration Statement
No. 33-5102 is incorporated herein by reference.<PAGE>
PAGE 236
Item 25. Persons Controlled by or Under Common Control with
Registrant
Subsidiaries of IDS Financial Corporation:
IDS Financial Services Inc.; IDS Real Estate Services, Inc.;
Advisory Bank & Trust Company; IDS Securities Corporation;
Investors Accumulation Plan, Inc.; IDS Life Insurance Company; IDS
Life Insurance Company of New York; IDS Certificate Company;
Investors Syndicate Development Corp.; Mankato Ventures (Joint
Venture); Lawyers Joint Law Library Associates; Peninsular
Properties, Inc.; Relco-Bo, Inc.; IDS International, Inc.; IDS Fund
Management Ltd.; IDS Insurance Agency Inc.; IDS Insurance Agency of
Arkansas Inc.; IDS Insurance Agency of Alabama Inc.; IDS Insurance
Agency of New Mexico Inc.; IDS Insurance Agency of North Carolina
Inc.; IDS Insurance Agency of Massachusetts Inc.; IDS Insurance
Agency of Utah, Inc.; IDS Insurance Agency of Wyoming Inc.; IDS
Advisory Group Inc.
Item 26. Number of Holders of Securities
(1) (2)
Number of Record
Holders as of
Title of Class Aug. 19, 1994
IDS Insured Tax-Exempt Fund
Shares of Beneficial 18,076
Interest
$.01 par value
IDS Massachusetts Tax-Exempt Fund
Shares of Beneficial 3,203
Interest
$.01 par value
IDS Michigan Tax-Exempt Fund
Shares of Beneficial 2,834
Interest
$.01 par value
IDS Minnesota Tax-Exempt Fund
Shares of Beneficial 16,300
Interest
$.01 par value
IDS New York Tax-Exempt Fund
Shares of Beneficial 4,902
Interest
$.01 par value
<PAGE>
PAGE 237
IDS Ohio Tax-Exempt Fund
Share of Beneficial 2,740
Interest
$.01 par value
Item 27. Indemnification
The Declaration of Trust of the registrant provides that the Trust
shall indemnify any person who was or is a party or is threatened
to be made a party, by reason of the fact that he is or was a
trustee, officer, employee or agent of the Trust, or is or was
serving at the request of the Trust as a trustee, officer, employee
or agent of another company, partnership, joint venture, trust or
other enterprise, to any threatened, pending or completed action,
suit or proceeding, wherever brought, and the Trust may purchase
liability insurance and advance legal expenses, all to the fullest
extent permitted by the laws of the State of Massachusetts, as now
existing or hereafter amended. The By-laws of the registrant
provide that present or former directors or officers of the Trust
made or threatened to be made a party to or involved (including as
a witness) in an actual or threatened action, suit or proceeding
shall be indemnified by the Trust to the full extent authorized by
the laws of the Commonwealth of Massachusetts, all as more fully
set forth in the By-laws filed as an exhibit to this registration
statement.
Insofar as indemnification for liability arising under the
Securities Act of 1933 may be permitted to trustees, officers and
controlling persons of the registrant pursuant to the foregoing
provisions, or otherwise, the registrant has been advised that in
the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by
the registrant of expenses incurred or paid by a trustee, officer
or controlling person of the registrant in the successful defense
of any action, suit or proceeding) is asserted by such trustee,
officer or controlling person in connection with the securities
being registered, the registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in
the Act and will be governed by the final adjudication of such
issue.
Any indemnification hereunder shall not be exclusive of any other
rights of indemnification to which the trustees, officers,
employees or agents might otherwise be entitled. No
indemnification shall be made in violation of the Investment
Company Act of 1940.
<PAGE>
PAGE 238
<PAGE>
PAGE 1
Item 27. Indemnification
The Articles of Incorporation of the registrant provide that the
Fund shall indemnify any person who was or is a party or is
threatened to be made a party, by reason of the fact that she or he
is or was a director, officer, employee or agent of the Fund, or is
or was serving at the request of the Fund as a director, officer,
employee or agent of another company, partnership, joint venture,
trust or other enterprise, to any threatened, pending or completed
action, suit or proceeding, wherever brought, and the Fund may
purchase liability insurance and advance legal expenses, all to the
fullest extent permitted by the laws of the State of Minnesota, as
now existing or hereafter amended. The By-laws of the registrant
provide that present or former directors or officers of the Fund
made or threatened to be made a party to or involved (including as
a witness) in an actual or threatened action, suit or proceeding
shall be indemnified by the Fund to the full extent authorized by
the Minnesota Business Corporation Act, all as more fully set forth
in the By-laws filed as an exhibit to this registration statement.
Insofar as indemnification for liability arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the registrant pursuant to the foregoing
provisions, or otherwise, the registrant has been advised that in
the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by
the registrant of expenses incurred or paid by a director, officer
or controlling person of the registrant in the successful defense
of any action, suit or proceeding) is asserted by such director,
officer or controlling person in connection with the securities
being registered, the registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in
the Act and will be governed by the final adjudication of such
issue.
Any indemnification hereunder shall not be exclusive of any other
rights of indemnification to which the directors, officers,
employees or agents might otherwise be entitled. No
indemnification shall be made in violation of the Investment
Company Act of 1940.
<PAGE>
PAGE 2
<TABLE><CAPTION>
Item 28a. Business and Other Connections of Investment Adviser (IDS Financial Corporation)
Directors and officers of IDS Financial Corporation who are directors and/or officers of one
or more other companies:
<S> <C> <C>
Ronald G. Abrahamson, Vice President--Field Administration
American Express Service Corporation IDS Tower 10 Vice President
Minneapolis, MN 55440
IDS Financial Services Inc. Vice President-Field
Administration
Douglas A. Alger, Vice President--Total Compensation
IDS Financial Services Inc. IDS Tower 10 Vice President-
Minneapolis, MN 55440 Total Compensation
Jerome R. Amundson, Vice President and Controller--Mutual Funds Operations
IDS Financial Services Inc. IDS Tower 10 Vice President and
Minneapolis, MN 55440 Controller-Mutual Funds
Operations
Peter J. Anderson, Director and Senior Vice President--Investments
IDS Advisory Group Inc. IDS Tower 10 Director and Chairman
Minneapolis, MN 55440 of the Board
IDS Capital Holdings Inc. Director and President
IDS Financial Services Inc. Senior Vice President-
Investments
IDS Fund Management Limited Director
IDS International, Inc. Director, Chairman of the
Board and Executive Vice
President
IDS Securities Corporation Executive Vice President-
Investments
NCM Capital Management Group, Inc. 2 Mutual Plaza Director
501 Willard Street
Durham, NC 27701
Ward D. Armstrong, Vice President--Sales and Marketing, IDS Institutional Retirement Services
IDS Financial Services Inc. IDS Tower 10 Vice President-Sales and
Minneapolis, MN 55440 Marketing, IDS
Institutional Retirement
Services
Alvan D. Arthur, Region Vice President--Pacific Northwest Region
American Express Service Corporation IDS Tower 10 Vice President
IDS Financial Services Inc. Minneapolis, MN 55440 Region Vice President-
Pacific Northwest Region
<PAGE>
PAGE 3
Item 28a. Business and Other Connections of Investment Adviser (IDS
Financial Corporation)(cont'd)
Kent L. Ashton, Vice President--Financial Education Services
IDS Financial Services Inc. IDS Tower 10 Vice President-Financial
Minneapolis, MN 55440 Education Services
Joseph M. Barsky III, Vice President--Senior Portfolio Manager
IDS Advisory Group Inc. IDS Tower 10 Vice President
Minneapolis, MN 55440
IDS Financial Services Inc. Vice President-Senior
Portfolio Manager
Robert C. Basten, Vice President--Tax and Business Services
IDS Financial Services Inc. IDS Tower 10 Vice President-Tax
Minneapolis, MN 55440 and Business Services
Timothy V. Bechtold, Vice President--Insurance Product Development
IDS Financial Services Inc. IDS Tower 10 Vice President-Insurance
Minneapolis, MN 55440 Product Development
IDS Life Insurance Company Vice President-Insurance
Product Development
John D. Begley, Region Vice President--Mid-Central Region
American Express Service Corporation IDS Tower 10 Vice President
Minneapolis, MN 55440
IDS Financial Services Inc. Region Vice President-
Mid-Central Region
IDS Insurance Agency of Alabama Inc. Vice President-Mid-Central
Region
IDS Insurance Agency of Arkansas Inc. Vice President-Mid-Central
Region
IDS Insurance Agency of Massachusetts Inc. Vice President-Mid-Central
Region
IDS Insurance Agency of Nevada Inc. Vice President-Mid-Central
Region
IDS Insurance Agency of New Mexico Inc. Vice President-Mid-Central
Region
IDS Insurance Agency of North Carolina Inc. Vice President-Mid-Central
Region
IDS Insurance Agency of Ohio Inc. Vice President-Mid-Central
Region
IDS Insurance Agency of Wyoming Inc. Vice President-Mid-Central
Region
Carl E. Beihl, Vice President--Strategic Technology Planning
IDS Financial Services Inc. IDS Tower 10 Vice President-
Minneapolis, MN 55440 Strategic Technology
Planning
<PAGE>
PAGE 4
Item 28a. Business and Other Connections of Investment Adviser (IDS Financial
Corporation)(cont'd)
Alan F. Bignall, Vice President--Financial Planning Systems
American Express Service Corporation IDS Tower 10 Vice President
Minneapolis, MN 55440
IDS Financial Services Inc. Vice President-
Financial Planning
Systems
Brent L. Bisson, Region Vice President--Northwest Region
American Express Service Corporation IDS Tower 10 Vice President
Minneapolis, MN 55440
IDS Financial Services Inc. Region Vice President-
Northwest Region
IDS Insurance Agency of Alabama Inc. Vice President-
Northwest Region
IDS Insurance Agency of Arkansas Inc. Vice President-
Northwest Region
IDS Insurance Agency of Massachusetts Inc. Vice President-
Northwest Region
IDS Insurance Agency of Nevada, Inc. Vice President-
Northwest Region
IDS Insurance Agency of New Mexico Inc. Vice President-
Northwest Region
IDS Insurance Agency of North Carolina Inc. Vice President-
Northwest Region
IDS Insurance Agency of Ohio Inc. Vice President-
Northwest Region
IDS Insurance Agency of Wyoming Inc. Vice President-
Northwest Region
John C. Boeder, Vice President--Mature Market Group
IDS Financial Services Inc. IDS Tower 10 Vice President-
Minneapolis, MN 55440 Mature Market Group
IDS Life Insurance Company of New York Box 5144 Director
Albany, NY 12205
Karl J. Breyer, Director, Senior Vice President--Corporate Affairs and General Counsel
American Express Minnesota Foundation IDS Tower 10 Director
Minneapolis, MN 55440
IDS Aircraft Services Corporation Director and President
IDS Financial Services Inc. Senior Vice President-
Corporate Affairs and
Special Counsel
Harold E. Burke, Vice President and Assistant General Counsel
American Express Service Corporation IDS Tower 10 Vice President
IDS Financial Services Inc. Minneapolis, MN 55440 Vice President and
Assistant General Counsel
<PAGE>
PAGE 5
Item 28a. Business and Other Connections of Investment Adviser (IDS
Financial Corporation)(cont'd)
Daniel J. Candura, Vice President--Marketing Support
IDS Financial Services Inc. IDS Tower 10 Vice President-Marketing
Minneapolis, MN 55440 Support
Cynthia M. Carlson, Vice President--IDS Securities Services
American Enterprise Investment IDS Tower 10 Director, President and
Services Inc. Minneapolis, MN 55440 Chief Executive Officer
IDS Financial Services Inc. Vice President-IDS
Securities Services
Orison Y. Chaffee III, Vice President--Field Real Estate
IDS Financial Services Inc. IDS Tower 10 Vice President-Field
Minneapolis, MN 55440 Real Estate
James E. Choat, Director and Senior Vice President--Field Management
American Express Minnesota Foundation IDS Tower 10 Director
American Express Service Corporation Minneapolis, MN 55440 Vice President
IDS Financial Services Inc. Senior Vice President-
Field Management
IDS Insurance Agency of Alabama Inc. Vice President--North
Central Region
IDS Insurance Agency of Arkansas Inc. Vice President--North
Central Region
IDS Insurance Agency of Massachusetts Inc. Vice President--North
Central Region
IDS Insurance Agency of Nevada Inc. Vice President--North
Central Region
IDS Insurance Agency of New Mexico Inc. Vice President--North
Central Region
IDS Insurance Agency of North Carolina Inc. Vice President--North
Central Region
IDS Insurance Agency of Ohio Inc. Vice President--North
Central Region
IDS Insurance Agency of Wyoming Inc. Vice President-- North
Central Region
IDS Property Casualty Insurance Co. Director
Kenneth J. Ciak, Vice President and General Manager--IDS Property Casualty
IDS Financial Services Inc. IDS Tower 10 Vice President and General
Minneapolis, MN 55440 Manager-IDS Property
Casualty
IDS Property Casualty Insurance Co. I WEG Blvd. Director and President
DePere, Wisconsin 54115
<PAGE>
PAGE 6
Item 28a. Business and Other Connections of Investment Adviser (IDS
Financial Corporation)(cont'd)
Roger C. Corea, Region Vice President--Northeast Region
American Express Service Corporation IDS Tower 10 Vice President
Minneapolis, MN 55440
IDS Financial Services Inc. Region Vice President-
Northeast Region
IDS Insurance Agency of Alabama Inc. Vice President -
Northeast Region
IDS Insurance Agency of Arkansas Inc. Vice President -
Northeast Region
IDS Insurance Agency of Massachusetts Inc. Vice President -
Northeast Region
IDS Insurance Agency of Nevada Inc. Vice President -
Northeast Region
IDS Insurance Agency of New Mexico Inc. Vice President -
Northeast Region
IDS Insurance Agency of North Carolina Inc. Vice President -
Northeast Region
IDS Insurance Agency of Ohio, Inc. Vice President -
Northeast Region
IDS Insurance Agency of Wyoming Inc. Vice President -
Northeast Region
IDS Life Insurance Co. of New York Box 5144 Director
Albany, NY 12205
Kevin F. Crowe, Region Vice President--Atlantic Region
American Express Service Corporation IDS Tower 10 Vice President
Minneapolis, MN 55440
IDS Financial Services Inc. Region Vice President -
Atlantic Region
Alan R. Dakay, Vice President--Institutional Insurance Marketing
American Enterprise Life Insurance Co. IDS Tower 10 Director and President
Minneapolis, MN 55440
American Partners Life Insurance Co. Director and President
IDS Financial Services Inc. Vice President -
Institutional Insurance
Marketing
IDS Life Insurance Company Vice President -
Institutional Insurance
Marketing
William F. Darland, Region Vice President--South Central Region
American Express Service Corporation IDS Tower 10 Vice President
Minneapolis, MN 55440
IDS Financial Services Inc. Region Vice President-
South Central Region
IDS Insurance Agency of Alabama Inc. Vice President-
South Central Region
IDS Insurance Agency of Arkansas Inc. Vice President -
South Central Region
<PAGE>
PAGE 7
Item 28a. Business and Other Connections of Investment Adviser (IDS
Financial Corporation)(cont'd)
IDS Insurance Agency of Massachusetts Inc. Vice President-
South Central Region
IDS Insurance Agency of Nevada Inc. Vice President-
South Central Region
IDS Insurance Agency of New Mexico Inc. Vice President-
South Central Region
IDS Insurance Agency of North Carolina Inc. Vice President-
South Central Region
IDS Insurance Agency of Ohio Inc. Vice President-
South Central Region
IDS Insurance Agency of Wyoming Inc. Vice President-
South Central Region
William H. Dudley, Director and Executive Vice President--Investment Operations
IDS Advisory Group Inc. IDS Tower 10 Director
Minneapolis, MN 55440
IDS Capital Holdings Inc. Director
IDS Financial Services Inc. Director and Executive
Vice President-
Investment Operations
IDS Futures Corporation Director
IDS Futures III Corporation Director
IDS International, Inc. Director
IDS Securities Corporation Director, Chairman of the
Board, President and
Chief Executive Officer
Roger S. Edgar, Director and Senior Vice President--Information Systems
IDS Financial Services Inc. IDS Tower 10 Senior Vice President-
Minneapolis, MN 55440 Information Systems
Gordon L. Eid, Director, Senior Vice President and Deputy General Counsel
IDS Financial Services Inc. IDS Tower 10 Senior Vice President and
General Counsel
IDS Insurance Agency of Alabama Inc. Director and Vice President
IDS Insurance Agency of Arkansas Inc. Director and Vice President
IDS Insurance Agency of Massachusetts Inc. Director and Vice President
IDS Insurance Agency of Nevada Inc. Director and Vice President
IDS Insurance Agency of New Mexico Inc. Director and Vice President
IDS Insurance Agency of North Carolina Inc. Director and Vice President
IDS Insurance Agency of Ohio Inc. Director and Vice President
IDS Insurance Agency of Wyoming Inc. Director and Vice President
IDS Real Estate Services, Inc. Vice President
Investors Syndicate Development Corp. Director
Robert M. Elconin, Vice President--Government Relations
IDS Financial Services Inc. IDS Tower 10 Vice President-
Minneapolis, MN 55440 Government Relations
IDS Life Insurance Company Vice President
<PAGE>
PAGE 8
Item 28a. Business and Other Connections of Investment Adviser (IDS
Financial Corporation)(cont'd)
Mark A. Ernst, Vice President--Retail Services
American Enterprise Investment IDS Tower 10 Director
Services Inc. Minneapolis, MN 55440
IDS Financial Services Inc. Vice President-
Retail Services
Gordon M. Fines, Vice President--Mutual Fund Equity Investments
IDS Advisory Group Inc. IDS Tower 10 Executive Vice President
Minneapolis, MN 55440
IDS Financial Services Inc. Vice President-
Mutual Fund Equity
Investments
IDS International Inc. Vice President and
Portfolio Manager
Louis C. Fornetti, Director, Senior Vice President and Chief Financial Officer
American Enterprise Investment IDS Tower 10 Vice President
Services Inc. Minneapolis, MN 55440
IDS Cable Corporation Director
IDS Cable II Corporation Director
IDS Capital Holdings Inc. Senior Vice President
IDS Certificate Company Vice President
IDS Financial Services Inc. Senior Vice President and
Chief Financial Officer
IDS Insurance Agency of Alabama Inc. Vice President
IDS Insurance Agency of Arkansas Inc. Vice President
IDS Insurance Agency of Massachusetts Inc. Vice President
IDS Insurance Agency of Nevada Inc. Vice President
IDS Insurance Agency of New Mexico Inc. Vice President
IDS Insurance Agency of North Carolina Inc. Vice President
IDS Insurance Agency of Ohio Inc. Vice President
IDS Insurance Agency of Wyoming Inc. Vice President
IDS Life Insurance Company Director
IDS Life Series Fund, Inc. Vice President
IDS Life Variable Annuity Funds A&B Vice President
IDS Property Casualty Insurance Co. Director and Vice President
IDS Real Estate Services, Inc. Vice President
IDS Sales Support Inc. Director
IDS Securities Corporation Vice President
IDS Trust Company Director
Investors Syndicate Development Corp. Vice President
Douglas L. Forsberg, Vice President--Securities Services
IDS Financial Services Inc. IDS Tower 10 Vice President-
Minneapolis, MN 55440 Securities Services
<PAGE>
PAGE 9
Item 28a. Business and Other Connections of Investment Adviser (IDS
Financial Corporation)(cont'd)
Carl W. Gans, Region Vice President--North Central Region
American Express Service Corporation IDS Tower 10 Vice President
Minneapolis, MN 55440
IDS Financial Services Inc. Region Vice President-
North Central Region
Robert G. Gilbert, Vice President--Real Estate
IDS Financial Services Inc. IDS Tower 10 Vice President-
Minneapolis, MN 55440 Real Estate
John J. Golden, Vice President--Field Compensation Development
IDS Financial Services Inc. IDS Tower 10 Vice President-Field
Minneapolis, MN 55440 Compensation Development
Harvey Golub, Director
American Express Company American Express Tower Chairman and Chief
World Financial Center Executive Officer
New York, New York 10285
American Express Travel Chairman and Chief
Related Services Company, Inc. Executive Officer
National Computer Systems, Inc. 11000 Prairie Lakes Drive Director
Minneapolis, MN 55440
Morris Goodwin Jr., Vice President and Corporate Treasurer
American Enterprise Investment IDS Tower 10 Vice President and
Services Inc. Minneapolis, MN 55440 Treasurer
American Enterprise Life Insurance Co. Vice President and
Treasurer
American Express Minnesota Foundation Director, Vice President
and Treasurer
American Express Service Corporation Vice President and
Treasurer
IDS Advisory Group Inc. Vice President and
Treasurer
IDS Aircraft Services Corporation Vice President and
Treasurer
IDS Cable Corporation Vice President and
Treasurer
IDS Cable II Corporation Vice President and
Treasurer
IDS Capital Holdings Inc. Vice President and
Treasurer
IDS Certificate Company Vice President and
Treasurer
IDS Deposit Corp. Director, President
and Treasurer
IDS Financial Services Inc. Vice President and
Corporate Treasurer
<PAGE>
PAGE 10
Item 28a. Business and Other Connections of Investment Adviser (IDS
Financial Corporation)(cont'd)
IDS Insurance Agency of Alabama Inc. Vice President and
Treasurer
IDS Insurance Agency of Arkansas Inc. Vice President and
Treasurer
IDS Insurance Agency of Massachusetts Inc. Vice President and
Treasurer
IDS Insurance Agency of Nevada Inc. Vice President and
Treasurer
IDS Insurance Agency of New Mexico Inc. Vice President and
Treasurer
IDS Insurance Agency of North Carolina Inc. Vice President and
Treasurer
IDS Insurance Agency of Ohio Inc. Vice President and
Treasurer
IDS Insurance Agency of Wyoming Inc. Vice President and
Treasurer
IDS International, Inc. Vice President and
Treasurer
IDS Life Insurance Company Vice President and
Treasurer
IDS Life Series Fund, Inc. Vice President and
Treasurer
IDS Life Variable Annuity Funds A&B Vice President and
Treasurer
IDS Management Corporation Vice President and
Treasurer
IDS Partnership Services Corporation Vice President and
Treasurer
IDS Plan Services of California, Inc. Vice President and
Treasurer
IDS Property Casualty Insurance Co. Vice President and
Treasurer
IDS Real Estate Services, Inc Vice President and
Treasurer
IDS Realty Corporation Vice President and
Treasurer
IDS Sales Support Inc. Director, Vice President
and Treasurer
IDS Securities Corporation Vice President and
Treasurer
Investors Syndicate Development Corp. Vice President and
Treasurer
NCM Capital Management Group, Inc. 2 Mutual Plaza Director
501 Willard Street
Durham, NC 27701
Sloan Financial Group, Inc. Director
Suzanne Graf, Vice President--Systems Services
IDS Financial Services Inc. IDS Tower 10 Vice President-
Minneapolis, MN 55440 Systems Services
<PAGE>
PAGE 11
Item 28a. Business and Other Connections of Investment Adviser (IDS
Financial Corporation)(cont'd)
David A. Hammer, Vice President and Marketing Controller
IDS Financial Services Inc. IDS Tower 10 Vice President and
Minneapolis, MN 55440 Marketing Controller
IDS Plan Services of California, Inc. Director and Vice President
Robert L. Harden, Region Vice President--Mid-Atlantic Region
American Express Service Corporation IDS Tower 10 Vice President
Minneapolis, MN 55440
IDS Financial Services Inc. Region Vice President-
Mid Atlantic Region
IDS Insurance Agency of Alabama Inc. Vice President-
Mid Atlantic Region
IDS Insurance Agency of Arkansas Inc. Vice President-
Mid Atlantic Region
IDS Insurance Agency of Massachusetts Inc. Vice President-
Mid Atlantic Region
IDS Insurance Agency of Nevada Inc. Vice President-
Mid Atlantic Region
IDS Insurance Agency of New Mexico Inc. Vice President-
Mid Atlantic Region
IDS Insurance Agency of North Carolina Inc. Vice President-
Mid Atlantic Region
IDS Insurance Agency of Ohio Inc. Vice President-
Mid Atlantic Region
IDS Insurance Agency of Wyoming Inc. Vice President-
Mid Atlantic Region
Lorraine R. Hart, Vice President--Insurance Investments
American Enterprise Life IDS Tower 10 Vice President-Investments
Insurance Company Minneapolis, MN 55440
American Partners Life Insurance Co. Director and Vice
President-Investments
IDS Certificate Company Vice President-Investments
IDS Financial Services Inc. Vice President-Insurance
Investments
IDS Life Insurance Company Vice President-Investments
Investors Syndicate Development Corp. Vice President-Investments
Mark S. Hays, Vice President--Senior Portfolio Manager, IDS International
IDS Financial Services Inc. IDS Tower 10 Vice President-Senior
Minneapolis, MN 55440 Portfolio Manager, IDS
International
IDS Fund Management Limited Director
IDS International, Inc. Senior Vice President
<PAGE>
PAGE 12
Item 28a. Business and Other Connections of Investment Adviser (IDS
Financial Corporation)(cont'd)
Brian M. Heath, Region Vice President--Southwest Region
American Express Service Corporation IDS Tower 10 Vice President
Minneapolis, MN 55440
IDS Financial Services Inc. Region Vice President-
Southwest Region
IDS Insurance Agency of Alabama Inc. Vice President-
Southwest Region
IDS Insurance Agency of Arkansas Inc. Vice President-
Southwest Region
IDS Insurance Agency of Massachusetts Inc. Vice President-
Southwest Region
IDS Insurance Agency of Nevada Inc. Vice President-
Southwest Region
IDS Insurance Agency of New Mexico Inc. Vice President-
Southwest Region
IDS Insurance Agency of North Carolina Inc. Vice President-
Southwest Region
IDS Insurance Agency of Ohio Inc. Vice President-
Southwest Region
IDS Insurance Agency of Texas Inc. Director and President
IDS Insurance Agency of Wyoming Inc. Vice President-
Southwest Region
Raymond E. Hirsch, Vice President--Senior Portfolio Manager
IDS Advisory Group Inc. IDS Tower 10 Vice President
IDS Financial Services Inc. Minneapolis, MN 55440 Vice President-Senior
Portfolio Manager
James G. Hirsh, Vice President and Assistant General Counsel
IDS Financial Services Inc. IDS Tower 10 Vice President and
Minneapolis, MN 55440 Assistant General Counsel
IDS Securities Corporation Director, Vice President
and General Counsel
Paul C. Hopkins, Vice President--Senior Portfolio Manager-IDS International
IDS Financial Services Inc. IDS Tower 10 Vice President-Senior
Minneapolis, MN 55440 Portfolio Manager-IDS
International
IDS International, Inc. Senior Vice President
Kevin P. Howe, Vice President--Government and Customer Relations and Chief Compliance Officer
American Enterprise Investment IDS Tower 10 Vice President and
Services Inc. Minneapolis, MN 55440 Compliance Officer
American Express Service Corporation Vice President
IDS Financial Services Inc. Vice President-
Government and
Customer Relations
IDS Securities Corporation Vice President and Chief
Compliance Officer
<PAGE>
PAGE 13
Item 28a. Business and Other Connections of Investment Adviser (IDS
Financial Corporation)(cont'd)
David R. Hubers, Director, President and Chief Executive Officer
American Express Service Corporation IDS Tower 10 Director and President
Minneapolis, MN 55440
IDS Aircraft Services Corporation Director
IDS Certificate Company Director
IDS Financial Services Inc. Chairman, Chief Executive
Officer and President
IDS Life Insurance Company Director
IDS Plan Services of California, Inc. Director and President
IDS Property Casualty Insurance Co. Director
Marietta L. Johns, Director and Senior Vice President--Field Management
IDS Financial Services Inc. IDS Tower 10 Senior Vice President-
Minneapolis, MN 55440 Field Management
Douglas R. Jordal, Vice President--Taxes
IDS Aircraft Services Corporation IDS Tower 10 Vice President
Minneapolis, MN 55440
IDS Financial Services Inc. Vice President-Taxes
Craig A. Junkins, Vice President--IDS 1994 Implementation Planning and Financial Planning
Development
American Express Service Corporation IDS Tower 10 Vice President
Minneapolis, MN 55440
IDS Financial Services Inc. Vice President-IDS 1994
Implementation Planning
and Financial Planning
Development
James E. Kaarre, Vice President--Marketing Information
IDS Financial Services Inc. IDS Tower 10 Vice President-
Minneapolis, MN 55440 Marketing Information
G. Michael Kennedy, Vice President--Investment Services and Investment Research
IDS Financial Services Inc. IDS Tower 10 Vice President-Investment
Minneapolis, MN 55440 Services and Investment
Research
Susan D. Kinder, Director and Senior Vice President--Human Resources
American Express Minnesota Foundation IDS Tower 10 Director
Minneapolis, MN 55440
American Express Service Corporation Vice President
IDS Financial Services Inc. Senior Vice President-
Human Resources
<PAGE>
PAGE 14
Item 28a. Business and Other Connections of Investment Adviser (IDS
Financial Corporation)(cont'd)
Richard W. Kling, Director and Senior Vice President--Risk Management Products
American Enterprise Life Insurance Co. IDS Tower 10 Director and Chairman of
Minneapolis, MN 55440 the Board
American Partners Life Insurance Co. Director and Chairman of
the Board
IDS Financial Services Inc. Senior Vice President-
Risk Management Products
IDS Insurance Agency of Alabama Inc. Director and President
IDS Insurance Agency of Arkansas Inc. Director and President
IDS Insurance Agency of Massachusetts Inc. Director and President
IDS Insurance Agency of Nevada Inc. Director and President
IDS Insurance Agency of New Mexico Inc. Director and President
IDS Insurance Agency of North Carolina Inc. Director and President
IDS Insurance Agency of Ohio Inc. Director and President
IDS Insurance Agency of Wyoming Inc. Director and President
IDS Life Insurance Company Director and President
IDS Life Series Fund, Inc. Director and President
IDS Life Variable Annuity Funds A&B Member of Board of
Managers, Chairman of the
Board and President
IDS Property Casualty Insurance Co. Director and Chairman of
the Board
IDS Life Insurance Company P.O. Box 5144 Director, Chairman of the
of New York Albany, NY 12205 Board and President
Harold D. Knutson, Vice President--System Services
IDS Financial Services Inc. IDS Tower 10 Vice President--
Minneapolis, MN 55440 System Services
Paul F. Kolkman, Vice President--Actuarial Finance
IDS Financial Services Inc. IDS Tower 10 Vice President-
Minneapolis, MN 55440 Actuarial Finance
IDS Life Insurance Company Director and Executive
Vice President
IDS Life Series Fund, Inc. Vice President and Chief
Actuary
Claire Kolmodin, Vice President--Service Quality
IDS Financial Services Inc. IDS Tower 10 Vice President-
Minneapolis, MN 55440 Service Quality
David S. Kreager, Vice President--Field Management Development
IDS Financial Services Inc. IDS Tower 10 Vice President-Field
Minneapolis, MN 55440 Management Development
Christopher R. Kudrna, Vice President--Systems and Technology Development
IDS Financial Services Inc. IDS Tower 10 Vice President-Systems and
Minneapolis, MN 55440 Technology Development
<PAGE>
PAGE 15
Item 28a. Business and Other Connections of Investment Adviser (IDS
Financial Corporation)(cont'd)
Steven C. Kumagai, Director and Senior Vice President--Field Management and Business Systems
American Express Service Corporation IDS Tower 10 Vice President
Minneapolis, MN 55440
IDS Financial Services Inc. Director and Senior Vice
President-Field
Management and Business
Systems
Mitre Kutanovski, Region Vice President--Midwest Region
American Express Service Corporation IDS Tower 10 Vice President
Minneapolis, MN 55440
IDS Financial Services Inc. Region Vice President-
Midwest Region
Edward Labenski, Vice President--Senior Portfolio Manager
IDS Advisory Group Inc. IDS Tower 10 Senior Vice President
Minneapolis, MN 55440
IDS Financial Services Inc. Vice President-
Senior Portfolio
Manager
Peter L. Lamaison, Vice President--IDS International Division
IDS Financial Services Inc. IDS Tower 10 Vice President-
Minneapolis, MN 55440 IDS International
Division
IDS Fund Management Limited Director and Chairman of
the Board
IDS International, Inc. Director, President and
Chief Executive Officer
Kurt A. Larson, Vice President--Senior Portfolio Manager
IDS Financial Services Inc. IDS Tower 10 Vice President-
Minneapolis, MN 55440 Senior Portfolio Manager
Ryan R. Larson, Vice President--IPG Product Development
IDS Financial Services Inc. IDS Tower 10 Vice President-
Minneapolis, MN 55440 IPG Product Development
IDS Life Insurance Company Vice President-
Annuity Product
Development
Daniel E. Laufenberg, Vice President and Chief U.S. Economist
IDS Financial Services Inc. IDS Tower 10 Vice President and
Minneapolis, MN 55440 Chief U.S. Economist
<PAGE>
PAGE 16
Item 28a. Business and Other Connections of Investment Adviser (IDS
Financial Corporation)(cont'd)
Peter A. Lefferts, Director, Senior Vice President and Chief Marketing Officer
IDS Financial Services Inc. IDS Tower 10 Senior Vice President and
Minneapolis, MN 55440 Chief Marketing Officer
IDS Life Insurance Company Director and Executive
Vice President-Marketing
IDS Plan Services of California, Inc. Director
IDS Trust Company Director and Chairman of
the Board
Investors Syndicate Development Corp. Director
Douglas A. Lennick, Director and Executive Vice President--Private Client Group
American Express Service Corporation IDS Tower 10 Vice President
Minneapolis, MN 55440
IDS Financial Services Inc. Director and Executive
Vice President-Private
Client Group
Mary J. Malevich, Vice President--Senior Portfolio Manager
IDS Financial Services Inc. IDS Tower 10 Vice President-
Minneapolis, MN 55440 Senior Portfolio
Manager
IDS International Inc. Vice President and
Portfolio Manager
Fred A. Mandell, Vice President--Field Marketing Readiness
IDS Financial Services Inc. IDS Tower 10 Vice President-Field
Minneapolis, MN 55440 Marketing Readiness
William J. McKinney, Vice President--Field Management Support
IDS Financial Services Inc. IDS Tower 10 Vice President-Field
Minneapolis, MN 55440 Management Support
Thomas W. Medcalf, Vice President--Senior Portfolio Manager
IDS Financial Services Inc. IDS Tower 10 Vice President-Senior
Minneapolis, MN 55440 Portfolio Manager
William C. Melton, Vice President-International Research and Chief International Economist
IDS Financial Services Inc. IDS Tower 10 Vice President-
Minneapolis, MN 55440 International Research
and Chief International
Economist
<PAGE>
PAGE 17
Item 28a. Business and Other Connections of Investment Adviser (IDS
Financial Corporation)(cont'd)
Janis E. Miller, Vice President--Variable Assets
IDS Cable Corporation IDS Tower 10 Director and President
Minneapolis, MN 55440
IDS Cable II Corporation Director and President
IDS Financial Services Inc. Vice President-
Variable Assets
IDS Futures Corporation Director and President
IDS Futures III Corporation Director and President
IDS Life Insurance Company Director and Executive
Vice President-Variable
Assets
IDS Life Variable Annuity Funds A&B Director
IDS Life Series Fund, Inc. Director
IDS Management Corporation Director and President
IDS Partnership Services Corporation Director and President
IDS Realty Corporation Director and President
IDS Life Insurance Company of New York Box 5144 Executive Vice President
Albany, NY 12205
James A. Mitchell, Director and Executive Vice President--Marketing and Products
American Enterprise Investment IDS Tower 10 Director
Services Inc. Minneapolis, MN 55440
IDS Certificate Company Director and Chairman of
the Board
IDS Financial Services Inc. Executive Vice President-
Marketing and Products
IDS Life Insurance Company Director, Chairman of
the Board and Chief
Executive Officer
IDS Plan Services of California, Inc. Director
IDS Property Casualty Insurance Co. Director
Pamela J. Moret, Vice President--Corporate Communications
American Express Minnesota Foundation IDS Tower 10 Director and President
Minneapolis, MN 55440
IDS Financial Services Inc. Vice President-
Corporate Communications
Barry J. Murphy, Director and Senior Vice President--Client Service
IDS Financial Services Inc. IDS Tower 10 Senior Vice President-
Minneapolis, MN 55440 Client Service
IDS Life Insurance Company Director and Executive
Vice President-Client
Service
Robert J. Neis, Vice President--Information Systems Operations
IDS Financial Services Inc. IDS Tower 10 Vice President-
Minneapolis, MN 55440 Information Systems
Operations
<PAGE>
PAGE 18
Item 28a. Business and Other Connections of Investment Adviser (IDS
Financial Corporation)(cont'd)
Vernon F. Palen, Region Vice President--Rocky Mountain Region
American Express Service Corporation IDS Tower 10 Vice President
Minneapolis, MN 55440
IDS Financial Services Inc. Region Vice President-
Rocky Mountain Region
IDS Insurance Agency of Alabama Inc. Vice President-
Rocky Mountain Region
IDS Insurance Agency of Arkansas Inc. Vice President-
Rocky Mountain Region
IDS Insurance Agency of Massachusetts Inc. Vice President-
Rocky Mountain Region
IDS Insurance Agency of Nevada Inc. Vice President-
Rocky Mountain Region
IDS Insurance Agency of New Mexico Inc. Vice President-
Rocky Mountain Region
IDS Insurance Agency of North Carolina Inc. Vice President-
Rocky Mountain Region
IDS Insurance Agency of Ohio Inc. Vice President-
Rocky Mountain Region
IDS Insurance Agency of Wyoming Inc. Vice President-
Rocky Mountain Region
James R. Palmer, Vice President--Insurance Operations
IDS Financial Services Inc. IDS Tower 10 Vice President-
Minneapolis, MN 55440 Insurance Operations
IDS Life Insurance Company Vice President-Taxes
Judith A. Pennington, Vice President--Field Technology
IDS Financial Services Inc. IDS Tower 10 Vice President-
Minneapolis, MN 55440 Field Technology
George M. Perry, Vice President--Corporate Strategy and Development
IDS Financial Services Inc. IDS Tower 10 Vice President-
Minneapolis, MN 55440 Corporate Strategy
and Development
IDS Property Casualty Insurance Co. Director
Susan B. Plimpton, Vice President--Segmentation Development and Support
IDS Financial Services Inc. IDS Tower 10 Vice President--
Minneapolis, MN 55440 Segmentation Development
and Support
<PAGE>
PAGE 19
Item 28a. Business and Other Connections of Investment Adviser (IDS
Financial Corporation)(cont'd)
Ronald W. Powell, Vice President and Assistant General Counsel
IDS Cable Corporation IDS Tower 10 Vice President and
Minneapolis, MN 55440 Assistant Secretary
IDS Cable II Corporation Vice President and
Assistant Secretary
IDS Financial Services Inc. Vice President and
Assistant General Counsel
IDS Management Corporation Vice President and
Assistant Secretary
IDS Partnership Services Corporation Vice President and
Assistant Secretary
IDS Plan Services of California, Inc. Vice President and
Assistant Secretary
IDS Realty Corporation Vice President and
Assistant Secretary
James M. Punch, Vice President--TransAction Services
IDS Financial Services Inc. Vice President-Trans
Action Services
Frederick C. Quirsfeld, Vice President--Taxable Mutual Fund Investments
IDS Advisory Group Inc. IDS Tower 10 Vice President
Minneapolis, MN 55440
IDS Financial Services Inc. Vice President--
Taxable Mutual Fund
Investments
Roger B. Rogos, Region Vice President--Great Lakes Region
American Express Service Corporation IDS Tower 10 Vice President
Minneapolis, MN 55440
IDS Financial Services Inc. Region Vice President-
Great Lakes Region
IDS Insurance Agency of Alabama Inc. Vice President-
Great Lakes Region
IDS Insurance Agency of Arkansas Inc. Vice President-
Great Lakes Region
IDS Insurance Agency of Massachusetts Inc. Vice President-
Great Lakes Region
IDS Insurance Agency of Nevada Inc. Vice President-
Great Lakes Region
IDS Insurance Agency of New Mexico Inc. Vice President-
Great Lakes Region
IDS Insurance Agency of North Carolina Inc. Vice President-
Great Lakes Region
IDS Insurance Agency of Ohio Inc. Vice President-
Great Lakes Region
IDS Insurance Agency of Wyoming Inc. Vice President-
Great Lakes Region
<PAGE>
PAGE 20
Item 28a. Business and Other Connections of Investment Adviser (IDS
Financial Corporation)(cont'd)
ReBecca K. Roloff, Vice President--1994 Program Director
IDS Financial Services Inc. IDS Tower 10 Vice President-1994
Minneapolis, MN 55440 Program Director
Stephen W. Roszell, Vice President--Advisory Institutional Marketing
IDS Advisory Group Inc. IDS Tower 10 President and Chief
Minneapolis, MN 55440 Executive Officer
IDS Financial Services Inc. Vice President-Advisory
Institutional Marketing
Robert A. Rudell, Vice President--IDS Institutional Retirement Services
IDS Financial Services Inc. IDS Tower 10 Vice President-IDS
Minneapolis, MN 55440 Institutional Retirement
Services
IDS Sales Support Inc. Director and President
IDS Trust Company Director
John P. Ryan, Vice President and General Auditor
IDS Financial Services Inc. IDS Tower 10 Vice President and General
Minneapolis, MN 55440 Auditor
Erven A. Samsel, Director and Senior Vice President--Field Management
American Express Service Corporation IDS Tower 10 Vice President
Minneapolis, MN 55440
IDS Financial Services Inc. Senior Vice President-
Field Management
IDS Insurance Agency of Alabama Inc. Vice President-
New England Region
IDS Insurance Agency of Arkansas Inc. Vice President-
New England Region
IDS Insurance Agency of Massachusetts Inc. Vice President-
New England Region
IDS Insurance Agency of Nevada Inc. Vice President-
New England Region
IDS Insurance Agency of New Mexico Inc. Vice President-
New England Region
IDS Insurance Agency of North Carolina Inc. Vice President-
New England Region
IDS Insurance Agency of Ohio Inc. Vice President-
New England Region
IDS Insurance Agency of Wyoming Inc. Vice President-
New England Region
<PAGE>
PAGE 21
Item 28a. Business and Other Connections of Investment Adviser (IDS
Financial Corporation)(cont'd)
R. Reed Saunders, Director and Senior Vice President--Corporate Strategy and Development
American Express Service Corporation IDS Tower 10 Director and Vice
Minneapolis, MN 55440 President
IDS Financial Services Inc. Director and Senior
Vice President-Corporate
Strategy and Development
IDS Property Casualty Insurance Co. Director
Stuart A. Sedlacek, Vice President--Assured Assets
American Enterprise Life Insurance Co. IDS Tower 10 Director and Executive
Minneapolis, MN 55440 Vice President, Assured
Assets
IDS Certificate Company Director and President
IDS Financial Services Inc. Vice President-
Assured Assets
IDS Life Insurance Company Director and Executive
Vice President, Assured
Assets
Investors Syndicate Development Corp. Chairman of the Board
and President
Donald K. Shanks, Vice President--Property Casualty
IDS Financial Services Inc. IDS Tower 10 Vice President-
Minneapolis, MN 55440 Property Casualty
IDS Property Casualty Insurance Co. Senior Vice President
F. Dale Simmons, Vice President--Senior Portfolio Manager, Insurance Investments
American Enterprise Life Insurance Co. IDS Tower 10 Vice President-Real
Minneapolis, MN 55440 Estate Loan Management
American Partners Life Insurance Co. Vice President-Real
Estate Loan Management
IDS Certificate Company Vice President-Real
Estate Loan Management
IDS Financial Services Inc. Vice President-Senior
Portfolio Manager
Insurance Investments
IDS Life Insurance Company Vice President-Real
Estate Loan Management
IDS Partnership Services Corporation Vice President
IDS Real Estate Services Inc. Director and Vice President
IDS Realty Corporation Vice President
IDS Life Insurance Company of New York Box 5144 Vice President and
Albany, NY 12205 Assistant Treasurer
Judy P. Skoglund, Vice President--Human Resources and Organization Development
IDS Financial Services Inc. IDS Tower 10 Vice President-Human
Minneapolis, MN 55440 Resources and
Organization Development
<PAGE>
PAGE 22
Item 28a. Business and Other Connections of Investment Adviser (IDS
Financial Corporation)(cont'd)
Julian W. Sloter, Region Vice President--Southeast Region
American Express Service Corporation IDS Tower 10 Vice President
Minneapolis, MN 55440
IDS Financial Services Inc. Region Vice President-
Southeast Region
IDS Insurance Agency of Alabama Inc. Vice President-
Southeast Region
IDS Insurance Agency of Arkansas Inc. Vice President-
Southeast Region
IDS Insurance Agency of Massachusetts Inc. Vice President-
Southeast Region
IDS Insurance Agency of Nevada Inc. Vice President-
Southeast Region
IDS Insurance Agency of New Mexico Inc. Vice President-
Southeast Region
IDS Insurance Agency of North Carolina Inc. Vice President-
Southeast Region
IDS Insurance Agency of Ohio Inc. Vice President-
Southeast Region
IDS Insurance Agency of Wyoming Inc. Vice President-
Southeast Region
Ben C. Smith, Vice President--Workplace Marketing
IDS Financial Services Inc. IDS Tower 10 Vice President-
Minneapolis, MN 55440 Workplace Marketing
William A. Smith, Vice President and Controller--Private Client Group
IDS Financial Services Inc. IDS Tower 10 Vice President and
Minneapolis, MN 55440 Controller-Private
Client Group
James B. Solberg, Vice President--Advanced Financial Planning
IDS Financial Services Inc. IDS Tower 10 Vice President-
Minneapolis, MN 55440 Advanced Financial
Planning
Bridget Sperl, Vice President--Human Resources Management Services
IDS Financial Services Inc. IDS Tower 10 Vice President-Human
Minneapolis, MN 55440 Resources Management
Services
Jeffrey E. Stiefler, Director
American Express Company American Express Tower Director and President
World Financial Center
New York, NY 10285
<PAGE>
PAGE 23
Item 28a. Business and Other Connections of Investment Adviser (IDS
Financial Corporation)(cont'd)
Lois A. Stilwell, Vice President--Planner Training and Development
IDS Financial Services Inc. IDS Tower 10 Vice President-
Minneapolis, MN 55440 Planner Training and
Development
William A. Stoltzmann, Vice President and Assistant General Counsel
American Partners Life Insurance Co. IDS Tower 10 Director, Vice President,
Minneapolis, MN 55440 General Counsel and
Secretary
IDS Financial Services Inc. Vice President and
Assistant General Counsel
IDS Life Insurance Company Vice President, General
Counsel and Secretary
IDS Life Series Fund, Inc. General Counsel and
Assistant Secretary
IDS Life Variable Annuity Funds A&B General Counsel and
Assistant Secretary
American Enterprise Life Insurance P.O. Box 534 Director, Vice President,
Company Minneapolis, MN 55440 General Counsel
and Secretary
James J. Strauss, Vice President--Corporate Planning and Analysis
IDS Financial Services Inc. IDS Tower 10 Vice President-
Minneapolis, MN 55440 Corporate Planning and
Analysis
Jeffrey J. Stremcha, Vice President--Information Resource Management/ISD
IDS Financial Services Inc. IDS Tower 10 Vice President-Information
Minneapolis, MN 55440 Resource Management/ISD
Fenton R. Talbott, Director
ACUMA Ltd. ACUMA House President and Chief
The Glanty, Egham Executive Officer
Surrey TW 20 9 AT
UK
Neil G. Taylor, Vice President--Field Business Systems
IDS Financial Services Inc. IDS Tower 10 Vice President-
Minneapolis, MN 55440 Field Business Systems
<PAGE>
PAGE 24
Item 28a. Business and Other Connections of Investment Adviser (IDS
Financial Corporation)(cont'd)
John R. Thomas, Director and Senior Vice President--Information and Technology
IDS Bond Fund, Inc. IDS Tower 10 Director
Minneapolis, MN 55440
IDS California Tax-Exempt Trust Trustee
IDS Discovery Fund, Inc. Director
IDS Equity Plus Fund, Inc. Director
IDS Extra Income Fund, Inc. Director
IDS Federal Income Fund, Inc. Director
IDS Financial Services Inc. Senior Vice President-
Information and
Technology
IDS Global Series, Inc. Director
IDS Growth Fund, Inc. Director
IDS High Yield Tax-Exempt Fund, Inc. Director
IDS Investment Series, Inc. Director
IDS Managed Retirement Fund, Inc. Director
IDS Market Advantage Series, Inc. Director
IDS Money Market Series, Inc. Director
IDS New Dimensions Fund, Inc. Director
IDS Precious Metals Fund, Inc. Director
IDS Progressive Fund, Inc. Director
IDS Selective Fund, Inc. Director
IDS Special Tax-Exempt Series Trust Trustee
IDS Stock Fund, Inc. Director
IDS Strategy Fund, Inc. Director
IDS Tax-Exempt Bond Fund, Inc. Director
IDS Tax-Free Money Fund, Inc. Director
IDS Utilities Income Fund, Inc. Director
Melinda S. Urion, Vice President and Corporate Controller
American Enterprise Life IDS Tower 10 Vice President and
Insurance Company Minneapolis, MN 55440 Controller
American Partners Life Insurance Co. Director, Vice President,
Controller and Treasurer
IDS Financial Services Inc. Vice President and
Corporate Controller
IDS Life Insurance Company Director, Executive Vice
President and Controller
IDS Life Series Fund, Inc. Vice President and
Controller
Wesley W. Wadman, Vice President--Senior Portfolio Manager
IDS Advisory Group Inc. IDS Tower 10 Executive Vice President
Minneapolis, MN 55440
IDS Financial Services Inc. Vice President-
Senior Portfolio Manager
IDS Fund Management Limited Director
IDS International, Inc. Senior Vice President
<PAGE>
PAGE 25
Item 28a. Business and Other Connections of Investment Adviser (IDS
Financial Corporation)(cont'd)
Norman Weaver, Jr., Director and Senior Vice President--Field Management
American Express Service Corporation IDS Tower 10 Vice President
Minneapolis, MN 55440
IDS Financial Services Inc. Senior Vice President-
Field Management
IDS Insurance Agency of Alabama Inc. Vice President-
Pacific Region
IDS Insurance Agency of Arkansas Inc. Vice President-
Pacific Region
IDS Insurance Agency of Massachusetts Inc. Vice President-
Pacific Region
IDS Insurance Agency of Nevada Inc. Vice President-
Pacific Region
IDS Insurance Agency of New Mexico Inc. Vice President-
Pacific Region
IDS Insurance Agency of North Carolina Inc. Vice President-
Pacific Region
IDS Insurance Agency of Ohio Inc. Vice President-
Pacific Region
IDS Insurance Agency of Wyoming Inc. Vice President-
Pacific Region
Michael L. Weiner, Vice President--Corporate Tax Operations
IDS Capital Holdings Inc. IDS Tower 10 Vice President
Minneapolis, MN 55440
IDS Financial Services Inc. Vice President-Corporate
Tax Operations
IDS Futures III Corporation Vice President, Treasurer
and Secretary
IDS Futures Brokerage Group Vice President
IDS Futures Corporation Vice President, Treasurer
and Secretary
Lawrence J. Welte, Vice President--Investment Administration
IDS Financial Services Inc. IDS Tower 10 Vice President-
Minneapolis, MN 55440 Investment Administration
IDS Securities Corporation Director, Executive Vice
President and Chief
Operating Officer
William N. Westhoff, Director and Senior Vice President--Fixed Income Management
American Enterprise Life Insurance IDS Tower 10 Director
Company Minneapolis, MN 55440
IDS Financial Services Inc. Senior Vice President-
Fixed Income Management
IDS Partnership Services Corporation Director and Vice President
IDS Real Estate Services Inc. Director, Chairman of the
Board and President
IDS Realty Corporation Director and Vice President
Investors Syndicate Development Corp. Director
<PAGE>
PAGE 26
Item 28a. Business and Other Connections of Investment Adviser (IDS
Financial Corporation)(cont'd)
Edwin M. Wistrand, Vice President and Assistant General Counsel
IDS Financial Services Inc. IDS Tower 10 Vice President and
Minneapolis, MN 55440 Assistant General Counsel
Michael R. Woodward, Director and Senior Vice President--Field Management
American Express Service Corporation IDS Tower 10 Vice President
Minneapolis, MN 55440
IDS Financial Services Inc. Senior Vice President-
Field Management
IDS Insurance Agency of Alabama Inc. Vice President-
North Region
IDS Insurance Agency of Arkansas Inc. Vice President-
North Region
IDS Insurance Agency of Massachusetts Inc. Vice President-
North Region
IDS Insurance Agency of Nevada Inc. Vice President-
North Region
IDS Insurance Agency of New Mexico Inc. Vice President-
North Region
IDS Insurance Agency of North Carolina Inc. Vice President-
North Region
IDS Insurance Agency of Ohio Inc. Vice President-
North Region
IDS Insurance Agency of Wyoming Inc. Vice President-
North Region
IDS Life Insurance Company Box 5144 Director
of New York Albany, NY 12205
</TABLE>
<PAGE>
PAGE 27
Item 29. Principal Underwriters.
(a) IDS Financial Services Inc. acts as principal underwriter
for the following investment companies:
IDS Bond Fund, Inc.; IDS California Tax-Exempt Trust; IDS
Discovery Fund, Inc.; IDS Equity Plus Fund, Inc.; IDS Extra
Income Fund, Inc.; IDS Federal Income Fund, Inc.; IDS Global
Series, Inc.; IDS Growth Fund, Inc.; IDS High Yield Tax-Exempt
Fund, Inc.; IDS International Fund, Inc.; IDS Investment
Series, Inc.; IDS Managed Retirement Fund, Inc.; IDS Market
Advantage Series, Inc.; IDS Money Market Series, Inc.; IDS New
Dimensions Fund, Inc.; IDS Precious Metals Fund, Inc.; IDS
Progressive Fund, Inc.; IDS Selective Fund, Inc.; IDS Special
Tax-Exempt Series Trust; IDS Stock Fund, Inc.; IDS Strategy
Fund, Inc.; IDS Tax-Exempt Bond Fund, Inc.; IDS Tax-Free Money
Fund, Inc.; IDS Utilities Income Fund, Inc. and IDS
Certificate Company.
(b) As to each director, officer or partner of the principal
underwriter:
Positions and
Name and Principal Position and Offices Offices with
Business Address with Underwriter Registrant
Ronald G. Abrahamson Vice President- None
IDS Tower 10 Field Administration
Minneapolis, MN 55440
Douglas A. Alger Vice President-Total None
IDS Tower 10 Compensation
Minneapolis, MN 55440
Jerome R. Amundson Vice President and None
IDS Tower 10 Controller-Mutual Funds
Minneapolis, MN 55440 Operations
Peter J. Anderson Senior Vice President- None
IDS Tower 10 Investments
Minneapolis, MN 55440
Ward D. Armstrong Vice President- None
IDS Tower 10 Sales and Marketing,
Minneapolis, MN 55440 IDS Institutional Retirement
Services
Alvan D. Arthur Region Vice President- None
IDS Tower 10 Pacific Northwest Region
Minneapolis, MN 55440
Kent L. Ashton Vice President- None
IDS Tower 10 Financial Education
Minneapolis, MN 55440 Services
<PAGE>
PAGE 28
Item 29. (Continued)
Positions and
Name and Principal Position and Offices Offices with
Business Address with Underwriter Registrant
Joseph M. Barsky III Vice President-Senior None
IDS Tower 10 Portfolio Manager
Minneapolis, MN 55440
Robert C. Basten Vice President-Tax None
IDS Tower 10 and Business Services
Minneapolis, MN 55440
Timothy V. Bechtold Vice President-Insurance None
IDS Tower 10 Product Development
Minneapolis, MN 55440
John D. Begley Region Vice President- None
Olentangy Valley Center Mid-Central Region
Suite 300
7870 Olentangy River Rd.
Columbus, OH 43235
Carl E. Beihl Vice President- None
IDS Tower 10 Strategic Technology
Minneapolis, MN 55440 Planning
Alan F. Bignall Vice President- None
IDS Tower 10 Financial Planning
Minneapolis, MN 55440 Systems
Brent L. Bisson Region Vice President- None
Seafirst Financial Northwest Region
Center, Suite 1730
601 W. Riverside Ave.
Spokane, WA 99201
John C. Boeder Vice President- None
IDS Tower 10 Mature Market Group
Minneapolis, MN 55440
Karl J. Breyer Senior Vice President- None
IDS Tower 10 Corporate Affairs and
Minneapolis, MN 55440 Special Counsel
Harold E. Burke Vice President None
IDS Tower 10 and Assistant
Minneapolis, MN 55440 General Counsel
Daniel J. Candura Vice President- None
IDS Tower 10 Marketing Support
Minneapolis, MN 55440
Cynthia M. Carlson Vice President-IDS None
IDS Tower 10 Securities Services
Minneapolis, MN 55440
Orison Y. Chaffee III Vice President-Field None
IDS Tower 10 Real Estate
Minneapolis, MN 55440
<PAGE>
PAGE 29
Item 29. (continued)
Positions and
Name and Principal Position and Offices Offices with
Business Address with Underwriter Registrant
James E. Choat Senior Vice President- None
Suite 124 Field Management
6210 Campbell Rd.
Dallas, TX 75248
Kenneth J. Ciak Vice President and None
IDS Property Casualty General Manager-
1400 Lombardi Avenue IDS Property Casualty
Green Bay, WI 54304
Roger C. Corea Region Vice President- None
345 Woodcliff Drive Northeast Region
Fairport, NY 14450
Kevin F. Crowe Region Vice President- None
IDS Tower 10 Atlantic Region
Minneapolis, MN 55440
Alan R. Dakay Vice President- None
IDS Tower 10 Institutional Insurance
Minneapolis, MN 55440 Marketing
William F. Darland Region Vice President- None
Suite 108C South Central Region
301 Sovereign Court
Manchester, MO 63011
William H. Dudley Director and Executive Director/
IDS Tower 10 Vice President- Trustee
Minneapolis MN 55440 Investment Operations
Roger S. Edgar Senior Vice President- None
IDS Tower 10 Information Systems
Minneapolis, MN 55440
Gordon L. Eid Senior Vice President None
IDS Tower 10 and General Counsel
Minneapolis, MN 55440
Robert M. Elconin Vice President- None
IDS Tower 10 Government Relations
Minneapolis, MN 55440
Mark A. Ernst Vice President- None
IDS Tower 10 Retail Services
Minneapolis, MN 55440
Gordon M. Fines Vice President- None
IDS Tower 10 Mutual Fund Equity
Minneapolis MN 55440 Investments
Louis C. Fornetti Senior Vice President None
IDS Tower 10 and Chief Financial
Minneapolis, MN 55440 Officer
<PAGE>
PAGE 30
Item 29. (Continued)
Positions and
Name and Principal Position and Offices Offices with
Business Address with Underwriter Registrant
Douglas L. Forsberg Vice President- None
IDS Tower 10 Securities Services
Minneapolis, MN 55440
Carl W. Gans Region Vice President- None
IDS Tower 10 North Central Region
Minneapolis, MN 55440
Robert G. Gilbert Vice President- None
IDS Tower 10 Real Estate
Minneapolis, MN 55440
John J. Golden Vice President- None
IDS Tower 10 Field Compensation
Minneapolis, MN 55440 Development
Morris Goodwin Jr. Vice President and None
IDS Tower 10 Corporate Treasurer
Minneapolis, MN 55440
Suzanne Graf Vice President- None
IDS Tower 10 Systems Services
Minneapolis, MN 55440
David A. Hammer Vice President None
IDS Tower 10 and Marketing
Minneapolis, MN 55440 Controller
Robert L. Harden Region Vice President- None
Suite 403 Mid-Atlantic Region
8500 Leesburg Pike
Vienna, VA 22180
Lorraine R. Hart Vice President- None
IDS Tower 10 Insurance Investments
Minneapolis, MN 55440
Mark S. Hays Vice President-Senior None
IDS Tower 10 Portfolio Manager, IDS
Minneapolis, MN 55440 International
Brian M. Heath Region Vice President- None
IDS Tower 10 Southwest Region
Minneapolis, MN 55440
Raymond E. Hirsch Vice President-Senior None
IDS Tower 10 Portfolio Manager
Minneapolis, MN 55440
James G. Hirsh Vice President and None
IDS Tower 10 Assistant General
Minneapolis, MN 55440 Counsel
<PAGE>
PAGE 31
Item 29. (Continued)
Positions and
Name and Principal Position and Offices Offices with
Business Address with Underwriter Registrant
Paul C. Hopkins Vice President- None
IDS Tower 10 Senior Portfolio Manager,
Minneapolis, MN 55440 IDS International
Kevin P. Howe Vice President- None
IDS Tower 10 Government and
Minneapolis, MN 55440 Customer Relations
David R. Hubers Chairman, Chief None
IDS Tower 10 Executive Officer and
Minneapolis, MN 55440 President
Marietta L. Johns Senior Vice President- None
IDS Tower 10 Field Management
Minneapolis, MN 55440
Douglas R. Jordal Vice President-Taxes None
IDS Tower 10
Minneapolis, MN 55440
Craig A. Junkins Vice President - IDS 1994 None
IDS Tower 10 Implementation Planning
Minneapolis, MN 55440 and Financial Planning
Development
James E. Kaarre Vice President- None
IDS Tower 10 Marketing Information
Minneapolis, MN 55440
G. Michael Kennedy Vice President-Investment None
IDS Tower 10 Services and Investment
Minneapolis, MN 55440 Research
Susan D. Kinder Senior Vice President- None
IDS Tower 10 Human Resources
Minneapolis, MN 55440
Richard W. Kling Senior Vice President- None
IDS Tower 10 Risk Management Products
Minneapolis, MN 55440
Harold D. Knutson Vice President- None
IDS Tower 10 System Services
Minneapolis, MN 55440
Paul F. Kolkman Vice President- None
IDS Tower 10 Actuarial Finance
Minneapolis, MN 55440
Claire Kolmodin Vice President- None
IDS Tower 10 Service Quality
Minneapolis, MN 55440
David S. Kreager Vice President-Field None
IDS Tower 10 Management Development
Minneapolis, MN 55440
<PAGE>
PAGE 32
Item 29. (Continued)
Positions and
Name and Principal Position and Offices Offices with
Business Address with Underwriter Registrant
Christopher R. Kudrna Vice President- None
IDS Tower 10 Systems and Technology
Minneapolis, MN 55440 Development
Steven C. Kumagai Director and Senior None
IDS Tower 10 Vice President-Field
Minneapolis, MN 55440 Management and Business
Systems
Mitre Kutanovski Region Vice President- None
IDS Tower 10 Midwest Region
Minneapolis, MN 55440
Edward Labenski Vice President- None
IDS Tower 10 Senior Portfolio
Minneapolis, MN 55440 Manager
Peter L. Lamaison Vice President- None
One Broadgate IDS International
London, England Division
Kurt A. Larson Vice President- None
IDS Tower 10 Senior Portfolio
Minneapolis, MN 55440 Manager
Ryan R. Larson Vice President- None
IDS Tower 10 IPG Product Development
Minneapolis, MN 55440
Daniel E. Laufenberg Vice President and None
IDS Tower 10 Chief U.S. Economist
Minneapolis, MN 55440
Peter A. Lefferts Senior Vice President and None
IDS Tower 10 Chief Marketing Officer
Minneapolis, MN 55440
Douglas A. Lennick Director and Executive None
IDS Tower 10 Vice President-Private
Minneapolis, MN 55440 Client Group
Mary J. Malevich Vice President- None
IDS Tower 10 Senior Portfolio
Minneapolis, MN 55440 Manager
Fred A. Mandell Vice President- None
IDS Tower 10 Field Marketing Readiness
Minneapolis, MN 55440
William J. McKinney Vice President- None
IDS Tower 10 Field Management
Minneapolis, MN 55440 Support
Thomas W. Medcalf Vice President- None
IDS Tower 10 Senior Portfolio Manager
Minneapolis, MN 55440
<PAGE>
PAGE 33
Item 29. (Continued)
Positions and
Name and Principal Position and Offices Offices with
Business Address with Underwriter Registrant
William C. Melton Vice President- None
IDS Tower 10 International Research
Minneapolis, MN 55440 and Chief International
Economist
Janis E. Miller Vice President- None
IDS Tower 10 Variable Assets
Minneapolis, MN 55440
James A. Mitchell Executive Vice President- None
IDS Tower 10 Marketing and Products
Minneapolis, MN 55440
Pamela J. Moret Vice President- None
IDS Tower 10 Corporate Communications
Minneapolis, MN 55440
Barry J. Murphy Senior Vice President- None
IDS Tower 10 Client Service
Minneapolis, MN 55440
Robert J. Neis Vice President- None
IDS Tower 10 Information Systems
Minneapolis, MN 55440 Operations
Vernon F. Palen Region Vice President- None
Suite D-222 Rocky Mountain Region
7100 E. Lincoln Drive
Scottsdale, AZ 85253
James R. Palmer Vice President- None
IDS Tower 10 Insurance Operations
Minneapolis, MN 55440
Judith A. Pennington Vice President- None
IDS Tower 10 Field Technology
Minneapolis, MN 55440
George M. Perry Vice President- None
IDS Tower 10 Corporate Strategy
Minneapolis, MN 55440 and Development
Susan B. Plimpton Vice President- None
IDS Tower 10 Segmentation Development
Minneapolis, MN 55440 and Support
Ronald W. Powell Vice President and None
IDS Tower 10 Assistant General
Minneapolis, MN 55440 Counsel
James M. Punch Vice President- None
IDS Tower 10 TransAction Services
Minneapolis, MN 55440
Frederick C. Quirsfeld Vice President-Taxable None
IDS Tower 10 Mutual Fund Investments
Minneapolis, MN 55440
<PAGE>
PAGE 34
Item 29. (Continued)
Positions and
Name and Principal Position and Offices Offices with
Business Address with Underwriter Registrant
Roger B. Rogos Region Vice President- None
Suite 15, Parkside Place Great Lakes Region
945 Boardman-Canfield Rd
Youngstown, Ohio 44512
ReBecca K. Roloff Vice President-1994 None
IDS Tower 10 Program Director
Minneapolis, MN 55440
Stephen W. Roszell Vice President- None
IDS Tower 10 Advisory Institutional
Minneapolis, MN 55440 Marketing
Robert A. Rudell Vice President- None
IDS Tower 10 IDS Institutional
Minneapolis, MN 55440 Retirement Services
John P. Ryan Vice President and None
IDS Tower 10 General Auditor
Minneapolis, MN 55440
Erven A. Samsel Senior Vice President- None
45 Braintree Hill Park Field Management
Braintree, MA 02184
R. Reed Saunders Director and Senior None
IDS Tower 10 Vice President-Corporate
Minneapolis, MN 55440 Strategy and Development
Stuart A. Sedlacek Vice President- None
IDS Tower 10 Assured Assets
Minneapolis, MN 55440
Donald K. Shanks Vice President- None
IDS Tower 10 Property Casualty
Minneapolis, MN 55440
F. Dale Simmons Vice President-Senior None
IDS Tower 10 Portfolio Manager,
Minneapolis, MN 55440 Insurance Investments
Judy P. Skoglund Vice President- None
IDS Tower 10 Human Resources and
Minneapolis, MN 55440 Organization Development
Julian W. Sloter Region Vice President- None
9040 Roswell Rd. Southeast Region
River Ridge-Suite 600
Atlanta, GA 30350
Ben C. Smith Vice President- None
IDS Tower 10 Workplace Marketing
Minneapolis, MN 55440
<PAGE>
PAGE 35
Item 29. (Continued)
Positions and
Name and Principal Position and Offices Offices with
Business Address with Underwriter Registrant
William A. Smith Vice President and None
IDS Tower 10 Controller-Private
Minneapolis, MN 55440 Client Group
James B. Solberg Vice President- None
IDS Tower 10 Advanced Financial
Minneapolis, MN 55440 Planning
Bridget Sperl Vice President- None
IDS Tower 10 Human Resources
Minneapolis, MN 55440 Management Services
Lois A. Stilwell Vice President- None
IDS Tower 10 Planner Training and
Minneapolis, MN 55440 Development
William A. Stoltzmann Vice President and None
IDS Tower 10 Assistant General
Minneapolis, MN 55440 Counsel
James J. Strauss Vice President- None
IDS Tower 10 Corporate Planning
Minneapolis, MN 55440 and Analysis
Jeffrey J. Stremcha Vice President-Information None
IDS Tower 10 Resource Management/ISD
Minneapolis, MN 55440
Neil G. Taylor Vice President- None
IDS Tower 10 Field Business Systems
Minneapolis, MN 55440
John R. Thomas Senior Vice President- Director/
IDS Tower 10 Information and Trustee
Minneapolis, MN 55440 Technology
Melinda S. Urion Vice President and None
IDS Tower 10 Corporate Controller
Minneapolis, MN 55440
Wesley W. Wadman Vice President- None
IDS Tower 10 Senior Portfolio
Minneapolis, MN 55440 Manager
Norman Weaver Jr. Senior Vice President- None
Suite 215 Field Management
1501 Westcliff Drive
Newport Beach, CA 92660
<PAGE>
PAGE 36
Item 29. (Continued)
Positions and
Name and Principal Position and Offices Offices with
Business Address with Underwriter Registrant
Michael L. Weiner Vice President- None
IDS Tower 10 Corporate Tax
Minneapolis, MN 55440 Operations
Lawrence J. Welte Vice President- None
IDS Tower 10 Investment Administration
Minneapolis, MN 55440
William N. Westhoff Senior Vice President- None
IDS Tower 10 Fixed Income Management
Minneapolis, MN 55440
Edwin M. Wistrand Vice President and None
IDS Tower 10 Assistant General
Minneapolis, MN 55440 Counsel
Michael R. Woodward Senior Vice President- None
Suite 815 Field Management
8585 Broadway
Merrillville, IN 46410
Item 29(c). Not applicable.
Item 30. Location of Accounts and Records
IDS Financial Corporation
IDS Tower 10
Minneapolis, MN 55440
Item 31. Management Services
Not Applicable.
Item 32. Undertakings
(a) Not Applicable.
(b) Not Applicable.
(c) The Registrant undertakes to furnish each person
to whom a prospectus is delivered with a copy of
the Registrant's latest annual report to
shareholders, upon request and without charge.
<PAGE>
<PAGE>
PAGE 239
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant, IDS Special Tax-
Exempt Series Trust certifies that it meets the requirements for
the effectiveness of this amendment to its Registration Statement
pursuant to Rule 485(b) under the Securities Act of 1933 and has
duly caused this Amendment to its Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized,
in the City of Minneapolis and the State of Minnesota on the 25th
day of August, 1994.
IDS SPECIAL TAX-EXEMPT SERIES TRUST
By /s/ William R. Pearce* **
William R. Pearce, President
Pursuant to the requirements of the Securities Act of 1933, this
Amendment to its Registration Statement has been signed below by
the following persons in the capacities indicated on the 25th day
of August, 1994.
Signature Capacity
/s/ William R. Pearce* ** President,Principal
William R. Pearce Executive Officer
and Trustee
/s/ Leslie L. Ogg * Treasurer, Principal
Leslie L. Ogg Financial Officer
and Principal
Accounting Officer
/s/ Trustee
Lynn V. Cheney
/s/ William H. Dudley** Trustee
William H. Dudley
/s/ Robert F. Froehlke** Trustee
Robert F. Froehlke
/s/ David R. Hubers** Trustee
David R. Hubers
/s/ Anne P. Jones** Trustee
Anne P. Jones
/s/ Donald M. Kendall** Trustee
Donald M. Kendall
/s/ Melvin R. Laird** Trustee
Melvin R. Laird
<PAGE>
PAGE 240
Signature Capacity
/s/ Lewis W. Lehr** Trustee
Lewis W. Lehr
/s/ Edson W. Spencer** Trustee
Edson W. Spencer
/s/ John R. Thomas** Trustee
John R. Thomas
/s/ Wheelock Whitney** Trustee
Wheelock Whitney
*Signed pursuant to Officers' Power of Attorney filed on or about
June 23, 1994 as Exhibit 17(a) to Post-Effective Amendment No. 21
to Registration Statement No. 33-5102 by
__________________________
Leslie L. Ogg
**Signed pursuant to Directors' Power of Attorney filed on or about
June 23, 1994 as Exhibit 17(b) to Post-Effective Amendment No. 21
to Registration Statement No. 33-5102 by
__________________________
Leslie L. Ogg
<PAGE>
PAGE 241
CONTENTS OF THIS
POST-EFFECTIVE AMENDMENT NO. 22
TO REGISTRATION STATEMENT NO. 33-5102
This Post-Effective Amendment comprises the following papers and
documents:
The facing sheet.
The cross-reference page.
PART A
Prospectus for IDS California, Massachusetts, Michigan,
Minnesota, New York and Ohio Tax-Exempt Funds.
Prospectus for IDS Insured Tax-Exempt Fund.
PART B
Statement of Additional Information for IDS California,
Massachusetts, Michigan, Minnesota, New York and Ohio Tax-
Exempt Funds.
Statement of Additional Information for IDS Insured Tax-Exempt
Fund.
Financials.
PART C
Other Information.
Exhibits.
The signatures.
<PAGE>
PAGE 1
EXHIBIT INDEX
11 Independent Auditors' Consent.
<PAGE>
PAGE 1
INDEPENDENT AUDITORS' CONSENT
___________________________________________________________________
The Board of Trustees and Shareholders
IDS Special Tax-Exempt Series Trust
We consent to the use of our report incorporated herein by
reference and to the references to our Firm under the headings
"Financial Highlights in Part A and "INDEPENDENT AUDITORS" in Part
B of the Registration Statement.
KPMG Peat Marwick LLP
Minneapolis, Minnesota
August , 1994
