<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. 27 (File No. 33-5102) X
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 30 (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, 1995 pursuant to paragraph (b)
60 days after filing pursuant to paragraph (a)(i)
on (date) pursuant to paragraph (a)(i)
75 days after filing pursuant to paragraph (a)(ii)
on (date) pursuant to paragraph (a)(ii) of rule 485.
If appropriate, check the following box:
this post-effective amendment designates a new effective date
for a previously filed post-effective amendment.
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 was filed on or about Aug. 28, 1995.
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PAGE 2
Cross reference sheet for IDS California, Massachusetts,
Michigan, Minnesota, New York and Ohio Tax-Exempt and Insured Funds'
prospectuses and the Statements of Additional Information of
the information called for by the items enumerated in
Part A and Part B of Form N-1A.
Negative answers omitted from Part A or Part B are so indicated.
<TABLE><CAPTION>
PART A PART B
Section Section in
Item No. in Prospectus Item No. Statement of Additional Information
<S> <C> <C> <C>
1 Cover page of prospectus 10 Cover page of SAI
2(a) Sales charge and fund expenses 11 Table of Contents
(b) The fund in brief
(c) The fund in brief 12 NA
3(a) Financial highlights 13(a) Additional Investment Policies; all
(b) NA appendices except Dollar-Cost Averaging
(c) Performance (b) Additional Investment Policies
(d) Financial highlights (c) Additional Investment Policies
(d) Portfolio Transactions
4(a) The fund in brief; Investment policies and
risks; How the fund is organized 14(a) Directors and officers of the fund;**
(b) Investment policies and risks Directors and officers
(c) Investment policies and risks (b) Directors and Officers
(c) Directors and Officers
5(a) Directors and officers; Directors and
officers of the fund (listing) 15(a) NA
5(b)(i) Investment manager and transfer agent; (b) NA
About American Express Financial (c) Directors and Officers
Corporation -- General Information
(b)(ii) Investment manager and transfer agent 16(a)(i) How the fund is organized; About American
(b)(iii) Investment manager and transfer agent Express Financial Corporation**
(c) Portfolio manager (a)(ii) Agreements: Investment Management Services
(d) Investment manager and transfer agent Agreement, Plan and Supplemental
(e) Investment manager and transfer agent Agreement of Distribution
(f) Distributor (a)(iii) Agreements: Investment Management Services Agreement
(g) Investment manager and transfer agent; (b) Agreements: Investment Management Services Agreement
About American Express Financial (c) NA
Corporation -- General Information (d) Agreements: Administrative Services
Agreement, Shareholder Service Agreement
5A(a) * (e) NA
(b) * (f) Agreements: Distribution Agreement
(g) NA
6(a) Shares; Voting rights (h) Custodian; Independent Auditors
(b) NA (i) Agreements: Transfer Agency Agreement; Custodian
(c) NA
(d) Voting rights 17(a) Portfolio Transactions
(e) Cover page; Special shareholder services (b) Brokerage Commissions Paid to Brokers Affiliated
(f) Dividends and capital gains distributions; with American Express Financial Corporation
Reinvestments (c) Portfolio Transactions
(g) Taxes (d) Portfolio Transactions
(h) Alternative sales arrangements (e) Portfolio Transactions
7(a) Distributor 18(a) Shares; Voting rights**
(b) Key terms; Valuing assets (b) NA
(c) How to buy, exchange or sell shares
(d) How to buy shares 19(a) Investing in the Fund
(e) NA (b) Valuing Fund Shares; Investing in the Fund
(f) Distributor (c) NA
8(a) How to sell shares 20 Taxes
(b) NA
(c) How to buy shares: Three ways to invest 21(a) Agreements: Distribution Agreement
(d) How to buy, exchange or sell shares: (b) Agreements: Distribution Agreement
Redemption policies -- "Important..." (c) NA
9 None 22(a) Performance Information (for money market
funds only)
(b) Performance Information (for all funds except
money market funds)
23 Financial Statements
*Designates information is located in annual report.
**Designates location in prospectus.
/TABLE
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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
Aug. 29, 1995
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 or
more 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 (SEC). The SAI, dated Aug. 29, 1995, is incorporated
herein by reference. For a free copy, contact American Express
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. INVESTMENTS IN THE FUNDS
INVOLVE INVESTMENT RISK INCLUDING POSSIBLE LOSS OF PRINCIPAL.
American Express Shareholder Service
P.O. Box 534
Minneapolis, MN
55440-0534
612-671-3733
TTY: 800-846-4852
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PAGE 4
Table of contents
The funds in brief
Goal
Types of fund investments and their risks
Manager and distributor
Portfolio manager
Alternative sales arrangements
Sales charge and fund expenses
Performance
Financial highlights
Total returns
Yield
Key terms
Investment policies and risks
Facts about investments and their risks
Alternative investment option
Valuing assets
How to buy, exchange or sell shares
Alternative sales arrangements
How to buy shares
How to exchange shares
How to sell shares
Reductions and 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 American Express Financial Corporation
General information
Appendices
Description of corporate bond ratings
Descriptions of derivative instruments
1995 State Tax-Exempt and Taxable Equivalent
Yield Calculation
<PAGE>
PAGE 5
The funds in brief
Goal
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 this goal cannot be guaranteed. Only
shareholders can change the goal.
Types of fund investments and their risks
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. Other investments may include debt securities sold at
a deep discount, taxable investments and derivative instruments.
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 American Express Financial Corporation, a
provider of financial services since 1894. American Express
Financial Corporation currently manages more than $42 billion in
assets for the IDS MUTUAL FUND GROUP. Shares of the funds are sold
through American Express Financial Advisors Inc., a wholly owned
subsidiary of American Express Financial Corporation.
Portfolio manager
Paul Hylle joined American Express Financial Corporation in 1993
and serves as portfolio manager. He also is portfolio manager of
IDS Insured Tax-Exempt Fund. Prior to joining American Express
Financial Corporation, he had been a portfolio manager at Lutheran
Brotherhood, a Minnesota based fraternal benefit society offering
financial services to Lutherans.
Alternative sales arrangements
Each fund offers its shares in three classes. Class A shares are
subject to a sales charge at the time of purchase. Class B shares
are subject to a contingent deferred sales charge (CDSC) on
redemptions made within six years of purchase and an annual
distribution (12b-1) fee. Class Y shares are sold without a sales
charge to qualifying institutional investors. Other differences
between the classes include the fees paid by each class. Each fund
offers these alternatives so you may choose the method of
purchasing shares that is most beneficial given the amount of
purchase, length of time you expect to hold the shares and other
circumstances.
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PAGE 6
Sales charge and fund expenses
When you buy Class A 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." No sales charge applies at the time of
purchase of Class B shares, although Class B shares may be subject
to a CDSC on redemptions made within six years and are subject to
annual distribution (12b-1) fees. Class Y shares are sold without
a sales charge to qualifying institutional investors. Shareholder
transaction expenses are incurred directly by an investor on the
purchase or redemption of fund shares. Fund operating expenses are
paid out of fund assets for each class of assets. Operating
expenses are reflected in each fund's daily share price and
dividends, and are not charged directly to shareholder accounts.
Shareholder transaction expenses
Maximum sales charge on purchases (as percentage of offering price)
<TABLE><CAPTION>
California Massachusetts Michigan Minnesota New York Ohio
<S> <C> <C> <C> <C> <C> <C>
Class A 5% 5% 5% 5% 5% 5%
Class B 0% 0% 0% 0% 0% 0%
Class Y 0% 0% 0% 0% 0% 0%
Maximum deferred sales charge imposed on redemptions (as a percentage of original
purchase price)
California Massachusetts Michigan Minnesota New York Ohio
Class A 0% 0% 0% 0% 0% 0%
Class B 5% 5% 5% 5% 5% 5%
Class Y 0% 0% 0% 0% 0% 0%
</TABLE>
Annual fund operating expenses*
(% of average daily net assets):
California
Class A Class B Class Y
Management fee 0.40% 0.47% 0.47%
12b-1 fee 0.00% 0.75% 0.00%
Other expenses** 0.29% 0.29% 0.11%
Total 0.76% 1.51% 0.58%
Massachusetts
Class A Class B Class Y
Management fee 0.47% 0.47% 0.47%
12b-1 fee 0.00% 0.75% 0.00%
Other expenses** 0.35% 0.35% 0.18%
Total 0.82% 1.57% 0.65%
Michigan
Class A Class B Class Y
Management fee 0.47% 0.47% 0.47%
12b-1 fee 0.00% 0.75% 0.00%
Other expenses** 0.32% 0.32% 0.15%
Total 0.79% 1.54% 0.62%<PAGE>
PAGE 7
Minnesota
Class A Class B Class Y
Management fee 0.46% 0.46% 0.46%
12b-1 fee 0.00% 0.75% 0.00%
Other expenses** 0.30% 0.30% 0.12%
Total 0.75% 1.51% 0.58%
New York
Class A Class B Class Y
Management fee 0.47% 0.47% 0.47%
12b-1 fee 0.00% 0.75% 0.00%
Other expenses** 0.32% 0.32% 0.16%
Total 0.79% 1.54% 0.63%
Ohio
Class A Class B Class Y
Management fee 0.47% 0.47% 0.47%
12b-1 fee 0.00% 0.75% 0.00%
Other expenses** 0.34% 0.34% 0.16%
Total 0.81% 1.56% 0.63%
*Expenses for Class A are based on actual expenses for the last
year, restated to reflect current fees. Expenses for Class B and
Class Y are estimated based on the restated expenses for Class A,
except that the 12b-1 fee and transfer agency fee (under other
expenses) for Class B are based on agreements for that class and
that Class Y does not have a service fee.
**Other expenses include an administrative services fee, a
shareholder services fee for Class A and Class B, a transfer agency
fee, and other non-advisory expenses.
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:
California
1 year 3 years 5 years 10 years
Class A $57 $73 $ 90 $140
Class B $65 $88 $102 $160**
Class B* $15 $48 $ 82 $160**
Class Y $ 6 $19 $ 32 $ 73
Massachusetts
1 year 3 years 5 years 10 years
Class A $58 $75 $ 93 $147
Class B $66 $90 $106 $167**
Class B* $16 $50 $ 86 $167**
Class Y $ 7 $21 $ 36 $ 81
Michigan
1 year 3 years 5 years 10 years
Class A $58 $74 $ 92 $143
Class B $66 $89 $104 $164**
Class B* $16 $49 $ 84 $164**
Class Y $ 6 $20 $ 35 $ 78<PAGE>
PAGE 8
Minnesota
1 year 3 years 5 years 10 years
Class A $57 $73 $ 90 $140
Class B $65 $88 $102 $160**
Class B* $15 $48 $ 82 $160**
Class Y $ 6 $19 $ 32 $ 73
New York
1 year 3 years 5 years 10 years
Class A $58 $74 $ 92 $143
Class B $66 $89 $104 $164**
Class B* $16 $49 $ 84 $164**
Class Y $ 6 $20 $ 34 $ 77
Ohio
1 year 3 years 5 years 10 years
Class A $58 $75 $ 93 $145
Class B $66 $89 $105 $165**
Class B* $16 $49 $ 85 $165**
Class Y $ 6 $20 $ 35 $ 79
*Assuming Class B shares are not redeemed at the end of the period.
**Based on conversion of Class B shares to Class A shares after
eight years.
This example does not represent actual expenses, past or future.
Actual expenses may be higher or lower than those shown. Expense
information in this table has been restated to reflect estimates on
each fund's expenses from changes in fees approved by shareholders
in November 1994. Because Class B pays annual distribution (12b-1)
fees, long-term shareholders of Class B may indirectly pay an
equivalent of more than a 6.25% sales charge, the maximum permitted
by the National Association of Securities Dealers.
<PAGE>
PAGE 9
Performance
Financial highlights
<TABLE>
<CAPTION>
Performance
IDS California Tax-Exempt Trust
IDS California Tax-Exempt Fund
Financial highlights
Fiscal period ended June 30,
Per share income and capital changes****
1995 1994 1993 1992 1991 1990 1989* 1988** 1987** 1986+
Classes
A B*** Y***
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, $5.13 $5.21 $5.22 $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 .30 .09 .08 .31 .30 .31 .32 .32 .16 .32 .32 .11
Net gains (losses) .03 (.05) (.07) (.28) .23 .24 .05 (.08) .15 .16 (.41) .07
(both realized
and unrealized)
Total from investment .33 .04 .01 .03 .53 .55 .37 .24 .31 .48 (.09) .18
operations
Less distributions:
Dividends from net (.30) (.09) (.08) (.31) (.30) (.31) (.32) (.32) (.16) (.32) (.32) (.11)
investment income
Net asset value, $5.16 $5.16 $5.15 $5.13 $5.41 $5.18 $4.94 $4.89 $4.97 $4.82 $4.66 $5.07
end of period
Ratios/supplemental data
1995 1994 1993 1992 1991 1990 1989* 1988** 1987** 1986+
Classes
A B*** Y***
Net assets, end of period $239 $2 $ -- $255 $261 $222 $185 $142 $95 $63 $40 $21
(in millions)
Ratio of expenses to .65% 1.51%++ .54%++ .61% .63% .64% .60% .62% .64%++ .72% .78% .75%++#
average daily net assets
Ratio of net income 5.89% 4.87%++ 5.92%++ 5.67% 5.78% 6.16% 6.51% 6.53% 6.67%++ 6.61% 6.74% 6.44%++#
to average daily net assets
Portfolio turnover rate 48% 48% 48% 27% 5% 7% 23% 20% 6% 13% 16% 0%
(excluding short-term
securities)
Total return++++ 6.5% 0.8% 0.2% 0.4% 10.8% 11.4% 7.7% 5.0% 6.5%+++ 10.5% (1.6%) 3.5%+++
*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.
***Inception date was March 20, 1995 for Class B and Class Y. Significant shareholder activity began
March 21, 1995 for Class B and March 28, 1995 for Class Y.
****For a share outstanding throughout the period. Rounded to the nearest cent.
+Inception date. Period from Aug. 18, 1986 to Dec. 31, 1986.
++Adjusted to an annual basis.
+++For the fiscal periods ended Dec. 31, 1986 and June 30, 1989, the annualized total returns are 13.0%
and 13.6%, respectively.
++++Total return does not reflect payment of a sales charge.
#During this period, American Express Financial Corporation voluntarily reimbursed the fund for expenses
in excess of 0.75% of its average daily net assets, on an annual basis. Had American Express Financial
Corporation not done so, the ratio of expenses and ratio of net investment income would have been 0.93%
and 6.26%, respectively.
<PAGE>
PAGE 10
Performance
IDS Special Tax-Exempt Series Trust
IDS Massachusetts Tax-Exempt Fund
Financial highlights
Fiscal period ended June 30,
Per share income and capital changes*
1995 1994 1993 1992 1991 1990 1989 1988
Classes
A B*** Y***
Net asset value, $5.24 $5.31 $5.32 $5.49 $5.20 $4.96 $4.88 $5.01 $4.91 $5.00
beginning of period
Income from investment operations:
Net investment income .30 .09 .08 .30 .30 .31 .32 .32 .32 .31
Net gains (losses) .03 (.04) (.04) (.25) .29 .24 .08 (.12) .12 (.06)
(both realized
and unrealized)
Total from investment .33 .05 .04 .05 .59 .55 .40 .20 .44 .25
operations
Less distributions:
Dividends from net (.30) (.09) (.08) (.30) (.30) (.31) (.32) (.32) (.32) (.31)
investment income
Distributions from -- -- -- -- -- -- -- (.01) (.02) (.03)
realized gains
Total distributions (.30) (.09) (.08) (.30) (.30) (.31) (.32) (.33) (.34) (.34)
Net asset value, $5.27 $5.27 $5.28 $5.24 $5.49 $5.20 $4.96 $4.88 $5.01 $4.91
end of period
Ratios/supplemental data
1995 1994 1993 1992 1991 1990 1989 1988
Classes
A B*** Y***
Net assets, end of period $68 $2 $ -- $72 $64 $44 $27 $19 $13 $4
(in millions)
Ratio of expenses to .72% 1.59%++ .54%++ .69% .72% .72% .69% .70% .84% .93%+
average daily net assets
Ratio of net income 5.74% 4.83%++ 5.91%++5.40% 5.57% 6.05% 6.53% 6.59% 6.55% 6.40%+
to average daily net assets
Portfolio turnover rate 16% 16% 16% 6% 0% 2% 16% 36% 25% 34%
(excluding short-term
securities)
Total return** 6.5% 0.9% 0.9% 0.9% 11.5% 11.4% 8.5% 4.2% 9.2% 5.3%
*For a share outstanding throughout the period. Rounded to the nearest cent.
**Total return does not reflect payment of a sales charge.
***Inception date was March 20, 1995 for Class B and Class Y. Significant shareholder
activity began March 23, 1995 for Class B and March 28, 1995 for Class Y.
+During the period from July 2, 1987 to March 31, 1988, American Express Financial Corporation
voluntarily reimbursed the fund for expenses in excess of 0.75% of its average daily net assets,
on an annual basis. Had American Express Financial Corporation not done so, the ratio of
expenses and ratio of net investment income would have been 1.30% and 6.03%, respectively.
++Adjusted to an annual basis.
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PAGE 11
Performance
IDS Special Tax-Exempt Series Trust
IDS Michigan Tax-Exempt Fund
Financial highlights
Fiscal period ended June 30,
Per share income and capital changes*
1995 1994 1993 1992 1991 1990 1989 1988
Classes
A B*** Y***
Net asset value, $5.35 $5.43 $5.45 $5.60 $5.31 $5.04 $4.96 $5.08 $4.85 $5.00
beginning of period
Income from investment operations:
Net investment income .30 .09 .09 .31 .31 .32 .32 .32 .32 .31
Net gains (losses) .05 (.04) (.04) (.25) .29 .27 .08 (.12) .23 (.11)
(both realized
and unrealized)
Total from investment .35 .05 .05 .06 .60 .59 .40 .20 .55 .20
operations
Less distributions:
Dividends from net (.31) (.09) (.09) (.31) (.31) (.32) (.32) (.32) (.32) (.31)
investment income
Distributions from -- -- -- -- -- -- -- -- -- (.04)
realized gains
Total distributions (.31) (.09) (.09) (.31) (.31) (.32) (.32) (.32) (.32) (.35)
Net asset value, $5.39 $5.39 $5.41 $5.35 $5.60 $5.31 $5.04 $4.96 $5.08 $4.85
end of period
Ratios/supplemental data
1995 1994 1993 1992 1991 1990 1989 1988
Classes
A B*** Y***
Net assets, end of period $78 $1 $ -- $77 $72 $55 $41 $29 $16 $8
(in millions)
Ratio of expenses to .70% 1.62%++ .54%++ .65% .68% .67% .67% .71% .81% .87%+
average daily net assets
Ratio of net income 5.71% 4.89%++ 5.91%++5.43% 5.64% 6.18% 6.45% 6.47% 6.50% 6.56%+
to average daily net assets
Portfolio turnover rate 48% 48% 48% 16% 2% 0% 3% 5% 10% 14%
(excluding short-term
securities)
Total return** 6.6% 0.9% 0.9% 1.0% 11.6% 12.0% 8.3% 4.1% 11.7% 4.4%
*For a share outstanding throughout the period. Rounded to the nearest cent.
**Total return does not reflect payment of a sales charge.
***Inception date was March 20, 1995 for Class B and Class Y. Significant shareholder
activity began March 23, 1995 for Class B and March 28, 1995 for Class Y.
+During the period from July 2, 1987 to March 31, 1988, American Express Financial Corporation
voluntarily reimbursed the fund for expenses in excess of 0.75% of its average daily net assets,
on an annual basis. Had American Express Financial Corporation not done so, the ratio of
expenses and ratio of net investment income would have been 1.09% and 6.34%, respectively.
++Adjusted to an annual basis.<PAGE>
PAGE 12
Performance
IDS Special Tax-Exempt Series Trust
IDS Minnesota Tax-Exempt Fund
Financial highlights
Fiscal period ended June 30,
Per share income and capital changes****
1995 1994 1993 1992 1991 1990 1989* 1988** 1987** 1986+
Classes
A B*** Y***
Net asset value, $5.16 $5.24 $5.25 $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 .09 .09 .31 .31 .33 .33 .32 .16 .33 .33 .12
Net gains (losses) .03 (.05) (.05) (.28) .22 .21 .06 (.10) .19 .10 (.42) .19
(both realized
and unrealized)
Total from investment .34 .04 .04 .03 .53 .54 .39 .22 .35 .43 (.09) .31
operations
Less distributions:
Dividends from net (.31) (.09) (.09) (.31) (.31) (.33) (.33) (.32) (.16) (.33) (.33) (.12)
investment income
Distributions from -- -- -- -- -- -- -- -- -- -- -- (.01)
realized gains
Total distributions (.31) (.09) (.09) (.31) (.31) (.33) (.33) (.32) (.16) (.33) (.33) (.13)
Net asset value, $5.19 $5.19 $5.20 $5.16 $5.44 $5.22 $5.01 $4.95 $5.05 $4.86 $4.76 $5.18
end of period
Ratios/supplemental data
1995 1994 1993 1992 1991 1990 1989* 1988** 1987** 1986+
Classes
A B*** Y***
Net assets, end of period $403 $4 $-- $408 $402 $313 $233 $181 $121 $82 $50 $32
(in millions)
Ratio of expenses to .67% 1.27%++ .54%++ .66% .67% .66% .63% .64% .65%++ .65% .78% .75%++#
average daily net assets
Ratio of net income 6.01% 5.40%++ 5.91%++5.73% 5.91% 6.43% 6.67% 6.62% 6.84%++ 6.73% 6.83%6.85%++#
to average daily net assets
Portfolio turnover rate 28% 28% 28% 13% 2% 7% 10% 8% 0% 14% 40% 27%
(excluding short-term
securities)
Total return++++ 6.8% 0.8% 0.8% 0.4% 10.5% 11.0% 8.2% 4.8% 7.4%+++ 9.3% (1.4%) 6.1%+++
*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.
***Inception date was March 20, 1995 for Class B and Class Y. Significant shareholder activity
began March 21, 1995 for Class B and March 28, 1995 for Class Y.
****For a share outstanding throughout the period. Rounded to the nearest cent.
+Inception date. Period from Aug. 18, 1986 to Dec. 31, 1986.
++Adjusted to an annual basis.
+++For the fiscal periods ended Dec. 31, 1986 and June 30, 1989, the annualized total returns are 16.7%
and 15.5%, respectively.
++++Total return does not reflect payment of a sales charge.
#During this period, American Express Financial Corporation voluntarily reimbursed the fund for expenses
in excess of 0.75% of its average daily net assets, on an annual basis. Had American Express Financial
Corporation not done so, the ratio of expenses and ratio of net investment income would have been 0.88%
and 6.72%, respectively.<PAGE>
PAGE 13
Performance
IDS Special Tax-Exempt Series Trust
IDS New York Tax-Exempt Fund
Financial highlights
Fiscal period ended June 30,
Per share income and capital changes****
1995 1994 1993 1992 1991 1990 1989* 1988** 1987** 1986+
Classes
A B*** Y***
Net asset value, $5.12 $5.17 $5.17 $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 .09 .08 .30 .30 .31 .31 .31 .16 .31 .31 .11
Net gains (losses) (.03) (.08) (.06) (.29) .28 .27 .06 (.07) .14 .15 (.49) .07
(both realized
and unrealized)
Total from investment .27 .01 .02 .01 .58 .58 .37 .24 .30 .46 (.18) .18
operations
Less distributions:
Dividends from net (.30) (.09) (.08) (.30) (.30) (.31) (.31) (.31) (.16) (.31) (.31) (.11)
investment income
Net asset value, $5.09 $5.09 $5.11 $5.12 $5.41 $5.13 $4.86 $4.80 $4.87 $4.73 $4.58 $5.07
end of period
Ratios/supplemental data
1995 1994 1993 1992 1991 1990 1989* 1988** 1987** 1986+
Classes
A B*** Y***
Net assets, end of period $120 $2 $ -- $120 1$117 $95 $79 $68 $49 $34 $21 $13
(in millions)
Ratio of expenses to .70% 1.59%++ .54%++ .65% .67% .67% .65% .65% .66%++ .71% .88% .75%++#
average daily net assets
Ratio of net income 6.00% 5.42%++ 5.94%++ 5.61% 5.79% 6.26% 6.53% 6.57% 6.78%++ 6.61% 6.79% 6.52%++#
to average daily net assets
Portfolio turnover rate 20% 20% 20% 10% 0% 8% 17% 8% 1% 6% 20% 3%
(excluding short-term
securities)
Total return++++ 5.5% 0.2% 0.4% 0.1% 11.6% 12.3% 8.2% 5.0% 6.5%+++ 10.3% (3.4%) 3.6%+++
*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.
***Inception date was March 20, 1995 for Class B and Class Y. Significant shareholder activity
began March 21, 1995 for Class B and March 28, 1995 for Class Y.
****For a share outstanding throughout the period. Rounded to the nearest cent.
+Inception date. Period from Aug. 18, 1986 to Dec. 31, 1986.
++Adjusted to an annual basis.
+++For the fiscal periods ended Dec. 31, 1986 and June 30, 1989, the annualized total returns are 12.1%
and 13.6%, respectively.
++++Total return does not reflect payment of a sales charge.
#During this period, American Express Financial Corporation voluntarily reimbursed the fund for expenses
in excess of 0.75% of its average daily net assets, on an annual basis. Had American Express Financial
Corporation not done so, the ratio of expenses and ratio of net investment income would have been 1.11%
and 6.16%, respectively.<PAGE>
PAGE 14
Performance
IDS Special Tax-Exempt Series Trust
IDS Ohio Tax-Exempt Fund
Financial highlights
Fiscal period ended June 30,
Per share income and capital changes*
1995 1994 1993 1992 1991 1990 1989 1988
Classes
A B*** Y***
Net asset value, $5.26 $5.34 $5.35 $5.58 $5.28 $5.01 $4.94 $5.04 $4.87 $5.00
beginning of period
Income from investment operations:
Net investment income .29 .09 .08 .30 .30 .31 .32 .31 .31 .32
Net gains (losses) .03 (.06) (.07) (.32) .31 .27 .07 (.09) .18 (.10)
(both realized
and unrealized)
Total from investment .32 .03 .01 (.02) .61 .58 .39 .22 .49 .22
operations
Less distributions:
Dividends from net (.30) (.09) (.08) (.30) (.30) (.31) (.32) (.31) (.31) (.32)
investment income
Distributions from -- -- -- -- (.01) -- -- (.01) (.01) (.03)
realized gains
Total distributions (.30) (.09) (.08) (.30) (.31) (.31) (.32) (.32) (.32) (.35)
Net asset value, $5.28 $5.28 $5.28 $5.26 $5.58 $5.28 $5.01 $4.94 $5.04 $4.87
end of period
Ratios/supplemental data
1995 1994 1993 1992 1991 1990 1989 1988
Classes
A B*** Y***
Net assets, end of period $73 $1 $-- $72 $65 $47 $33 $25 $16 $8
(in millions)
Ratio of expenses to .71% 1.66%++ .54%++ .66% .67% .70% .68% .70% .82% .86%+
average daily net assets
Ratio of net income 5.65% 4.58%++ 5.93%++5.44% 5.65% 6.14% 6.41% 6.43% 6.40% 6.64%+
to average daily net assets
Portfolio turnover rate 45% 45% 45% 11% 0% 5% 2% 6% 10% 0%
(excluding short-term
securities)
Total return** 6.2% 0.6% 0.2% (0.5%) 12.1% 11.9% 8.1% 4.6% 10.5% 4.7%
*For a share outstanding throughout the period. Rounded to the nearest cent.
**Total return does not reflect payment of a sales charge.
***Inception date was March 20, 1995 for Class B and Class Y. Significant shareholder
activity began March 21, 1995 for Class B and March 28, 1995 for Class Y.
+During the period from July 2, 1987 to March 31, 1988, American Express Financial Corporation voluntarily
reimbursed the fund for expenses in excess of 0.75% of its average daily net assets, on an annual basis.
Had American Express Financial Corporation not done so, the ratio of expenses and ratio of net investment
income would have been 1.09% and 6.41%, respectively.
++Adjusted to an annual basis.
</TABLE>
The information in these tables has been audited by KPMG Peat
Marwick LLP, 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 15
Average annual total returns as of June 30, 1995
Purchase 1 year 5 years Since
made ago ago inception*
California Fund:
Class A +1.19% +6.20% +6.17%
Massachusetts Fund:
Class A +1.21% +6.57% +6.43%
Michigan Fund:
Class A +1.26% +6.72% +6.70%
Minnesota Fund:
Class A +1.43% +6.22% +6.41%
New York Fund:
Class A +0.18% +6.35% +6.02%
Ohio Fund:
Class A +0.92% +6.35% +6.44%
Lehman Brothers
Municipal Bond
Index +8.80% +8.27% +8.12%
+7.91*
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, 1995
Purchase 1 year 5 years Since
made ago ago inception*
California Fund:
Class A +1.19% +35.09% +70.09%
Massachusetts Fund:
Class A +1.21% +37.46% +64.63%
Michigan Fund:
Class A +1.26% +38.43% +68.00%
Minnesota Fund:
Class A +1.43% +35.22% +73.53%
New York Fund:
Class A +0.18% +36.05% +67.97%
Ohio Fund:
Class A +0.92% +36.05% +64.76%
Lehman Brothers
Municipal Bond
Index +8.80% +48.80% +86.81%
+96.49
<PAGE>
PAGE 16
1Since 8/18/86 for California, Minnesota and New York.
2Since 7/2/87 for Massachusetts, Michigan and Ohio.
The above tables show total returns from hypothetical investments
in Class A shares of a fund. These returns are compared to those
of popular indexes for the same periods.
Total returns
Period from March 20, 1995 to June 30, 1995
Class A Class B Class Y
California Fund -4.2% -4.2% +0.2%
Massachusetts Fund -4.0 -4.1 +0.9
Michigan Fund -4.0 -4.1 +0.9
Minnesota Fund -4.1 -4.2 +0.8
New York Fund -4.6 -4.8 +0.4
Ohio Fund -4.3 -4.4 +0.2
The above table shows returns for the three classes for the period
from March 20, 1995 to June 30, 1995. March 20, 1995 was the
inception date for Class B and Class Y. Total return for Class A
is shown for comparative purposes. The performance of Class B and
Class Y will vary from the performance of Class A based on
differences in sales charges and fees. Past performance for Class
Y for the periods prior to March 20, 1995 may be calculated based
on the past performance of Class A, adjusted to reflect differences
in sales charges although not other differences in expenses.
For purposes of calculation, information about each fund assumes:
o a sales charge of 5% for Class A shares
o redemption at the end of the period and deduction of the
applicable contingent deferred sales charge for Class B shares
o no sales charge for Class Y shares
o no adjustments for taxes an investor may have paid on the
reinvested income and capital gains
o a period of widely fluctuating securities prices. Returns
shown should not be considered a representation of a fund's
future performance.
Each 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 a fund.
<PAGE>
PAGE 17
Yield
SEC standardized yield and non-standardized (distribution) yield
for the 30-day period ended June 30, 1995 was the following for
each fund:
SEC standardized yield
Class A Class B Class Y
California Fund 4.33% 3.79% 4.79%
Massachusetts Fund 4.61% 4.11% 5.10%
Michigan Fund 4.46% 3.97% 4.83%
Minnesota Fund 5.24% 4.75% 5.51%
New York Fund 4.28% 3.75% 4.65%
Ohio Fund 4.40% 3.87% 4.88%
Non-standardized (distribution) yield
Class A Class B Class Y
California Fund 5.15% 4.68% 5.57%
Massachusetts Fund 5.11% 4.66% 5.60%
Michigan Fund 5.04% 4.59% 5.50%
Minnesota Fund 5.93% 5.51% 6.40%
New York Fund 6.07% 5.65% 6.53%
Ohio Fund 5.38% 4.92% 5.86%
Each fund calculates the 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.
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.
These yield calculations do not include any contingent deferred
sales charge, ranging from 5% to 0% on Class B shares, which would
reduce the yields quoted.
A fund's yield varies from day to day, mainly because share values
and offering prices (which are calculated daily) vary in response<PAGE>
PAGE 18
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.
Key terms
Net asset value (NAV)
Value of a single fund share. For each class, it is the total
market value of all of a fund's investments and other assets
attributable to that class, less any liabilities attributable to
that class, divided by the number of shares of that class
outstanding.
When you buy shares, you pay the NAV plus any applicable sales
charge. When you sell shares, the price you receive is the NAV
minus any applicable sales charge. The NAV usually changes daily,
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
for Class A. It is the NAV for Class B and Class Y. NAVs and
public offering prices of IDS funds are listed each day in major
newspapers and financial publications for classes of funds large
enough to be listed.
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.
<PAGE>
PAGE 19
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 their 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. Other investments may
include debt securities sold at a deep discount, taxable
investments and derivative instruments.
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 securities
rated Ba or B by Moody's or BB 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.
<PAGE>
PAGE 20
<TABLE><CAPTION>
Bond ratings and holdings for fiscal 1995 for
California Tax-Exempt Fund
Percent of net
assets in unrated
S&P Rating Protection of securities assessed
Percent of (or Moody's principal and by American Express
net assets equivalent) interest Financial Corporation
<S> <C> <C> <C>
39.52% AAA Highest quality 18.55%
19.99 AA High quality
16.07 A Upper medium grade 0.18
2.20 BBB Medium grade
BB Moderately speculative 1.09
B Speculative
CCC Highly speculative
CC Poor quality
C Lowest quality
D In default
19.89 Unrated Unrated securities 0.07
Bond ratings and holdings for fiscal 1995 for
Massachusetts Tax-Exempt Fund
Percent of net
assets in unrated
S&P Rating Protection of securities assessed
Percent of (or Moody's principal and by American Express
net assets equivalent) interest Financial Corporation
60.26% AAA Highest quality 4.62%
8.75 AA High quality
16.20 A Upper medium grade
5.31 BBB Medium grade 1.14
0.39 BB Moderately speculative 1.16
B Speculative
CCC Highly speculative
CC Poor quality
C Lowest quality
D In default
6.92 Unrated Unrated securities
Bond ratings and holdings for fiscal 1995 for
Michigan Tax-Exempt Fund
Percent of net
assets in unrated
S&P Rating Protection of securities assessed
Percent of (or Moody's principal and by American Express
net assets equivalent) interest Financial Corporation
48.94% AAA Highest quality 15.12%
20.97 AA High quality
6.44 A Upper medium grade 0.11
3.98 BBB Medium grade 0.91
BB Moderately speculative 0.46
B Speculative
CCC Highly speculative
CC Poor quality
C Lowest quality
D In default
17.10 Unrated Unrated securities 0.50
<PAGE>
PAGE 21
Bond ratings and holdings for fiscal 1995 for
Minnesota Tax-Exempt Fund
Percent of net
assets in unrated
S&P Rating Protection of securities assessed
Percent of (or Moody's principal and by American Express
net assets equivalent) interest Financial Corporation
32.99% AAA Highest quality 11.18%
18.54 AA High quality 2.68
18.63 A Upper medium grade 0.21
0.12 BBB Medium grade 4.95
1.03 BB Moderately speculative 4.13
B Speculative 1.03
CCC Highly speculative
CC Poor quality
C Lowest quality
1.20 D In default .55
25.31 Unrated Unrated securities .58
Bond ratings and holdings for fiscal 1995 for
New York Tax-Exempt Fund
Percent of net
assets in unrated
S&P Rating Protection of securities assessed
Percent of (or Moody's principal and by American Express
net assets equivalent) interest Financial Corporation
37.89% AAA Highest quality 11.86%
25.49 AA High quality
10.76 A Upper medium grade
11.44 BBB Medium grade
BB Moderately speculative
B Speculative
CCC Highly speculative
CC Poor quality
C Lowest quality
D In default
11.86 Unrated Unrated securities
Bond ratings and holdings for fiscal 1995 for
Ohio Tax-Exempt Fund
Percent of net
assets in unrated
S&P Rating Protection of securities assessed
Percent of (or Moody's principal and by American Express
net assets equivalent) interest Financial Corporation
59.81% AAA Highest quality 7.26%
9.20 AA High quality
9.93 A Upper medium grade
6.18 BBB Medium grade
1.64 BB Moderately speculative 1.43
B Speculative 1.39
CCC Highly speculative 0.50
CC Poor quality
C Lowest quality
D In default
10.58 Unrated Unrated securities
</TABLE>
See Appendix to this prospectus describing bond ratings for further
information.
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<PAGE>
PAGE 22
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, an 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) also may
affect other bonds in the same segment. This could increase market
risk.
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 tax 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 cause a downgrading 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<PAGE>
PAGE 23
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. A 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. Each 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 each
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 descriptions of
derivative instruments, see the Appendix to this prospectus.
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 each fund's net
assets will be held in inverse floaters.
Securities and derivative instruments that are illiquid: A
security or derivative instrument is illiquid if it 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 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.
<PAGE>
PAGE 24
Lending portfolio securities: Each 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
a fund's net assets.
Alternative investment option
In the future, the board of the funds may determine for operating
efficiencies to use a master/feeder structure. Under that
structure, each fund's investment portfolio would be managed by
another investment company with the same goal as the fund, rather
than investing directly in a portfolio of securities.
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
Alternative sales arrangements
Each fund offers three different classes of shares - Class A, Class
B and Class Y. The primary differences among the classes are in
the sales charge structures and in their ongoing expenses. These
differences are summarized in the table below. You may choose the
class that best suits your circumstances and objectives.
<TABLE><CAPTION>
Sales charge and
distribution
(12b-1) fee Service fee Other information
<S> <C> <C> <C>
Class A Maximum initial 0.175% of average Initial sales charge
sales charge of daily net assets waived or reduced
5%; no 12b-1 fee for certain purchases
Class B No initial sales 0.175% of average Shares convert to
charge; maximum CDSC daily net assets Class A after eight
of 5% declines to 0% years; CDSC waived in
after six years; 12b-1 certain circumstances
fee of 0.75% of average
daily net assets
<PAGE>
PAGE 25
Class Y None None Available only to
certain qualifying
institutional
investors
</TABLE>
Conversion of Class B shares to Class A shares - Eight calendar
years after Class B shares were originally purchased, Class B
shares will convert to Class A shares and will no longer be subject
to a distribution fee. The conversion will be on the basis of
relative net asset values of the two classes, without the
imposition of any sales charge. Class B shares purchased through
reinvested dividends and distributions will convert to Class A
shares in a pro-rata portion as the Class B shares purchased other
than through reinvestment.
Considerations in determining whether to purchase Class A or Class
B shares - You should consider the information below in determining
whether to purchase Class A or Class B shares. The sales charges
and distribution fee (included in Ongoing expenses) are structured
so that you will have approximately the same total return at the
end of eight years regardless of which class you chose.
Sales charges on purchase or redemption
If you purchase Class A If you purchase Class B
shares shares
o You will not have all o All of your money is
of your purchase price invested in shares of
invested. Part of your stock. However, you will
purchase price will go pay a sales charge if you
to pay the sales charge. redeem your shares within
You will not pay a sales six years of purchase.
charge when you redeem
your shares.
o You will be able to o No reductions of the
take advantage of sales charge are
reductions in the sales available for large
charge. purchases.
If your investments in IDS funds total $250,000 or more, you are
better off paying the reduced sales charge in Class A than paying
the higher fees in Class B. If you qualify for a waiver of the
sales charge, you should purchase Class A shares.
Ongoing expenses
If you purchase Class A If you purchase Class B
shares shares
o Your shares will have o The distribution and
a lower expense ratio transfer agency fees for
than Class B shares Class B will cause your
because Class A does not shares to have a higher
pay a distribution fee expense ratio and to pay
and the transfer agency lower dividends than<PAGE>
PAGE 26
fee for Class A is lower Class A shares. After
than the fee for Class B. eight years, Class B
As a result, Class A shares shares will convert to
will pay higher dividends Class A shares and will
than Class B shares. no longer be subject to
higher fees.
You should consider how long you plan to hold your shares and
whether the accumulated higher fees and CDSC on Class B shares
prior to conversion would be less than the initial sales charge on
Class A shares. Also consider to what extent the difference would
be offset by the lower expenses on Class A shares. To help you in
this analysis, the example in the "Sales charge and fund expenses"
section of the prospectus illustrates the charges applicable to
each class of shares.
Class Y shares - Class Y shares are offered to certain
institutional investors. Class Y shares are sold without a front-
end sales charge or a CDSC and are not subject to either a service
fee or a distribution fee. The following investors are eligible to
purchase Class Y shares:
o Qualified employee benefit plans* if the plan:
- uses a daily transfer recordkeeping service offering
participants daily access to IDS funds and has
- at least $10 million in plan assets or
- 500 or more participants; or
- does not use daily transfer recordkeeping and has
- at least $3 million invested in funds of the IDS MUTUAL
FUND GROUP or
- 500 or more participants.
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 $10
million invested in funds of the IDS MUTUAL FUND GROUP.
o Nonqualified deferred compensation plans* whose
participants are included in a qualified employee benefit
plan described above.
* Eligibility must be determined in advance by American Express
Financial Advisors. To do so, contact your financial advisor.
Financial advisors may receive different compensation for selling
Class A, Class B and Class Y shares.
How to buy shares
If you're investing in these funds for the first time, you'll need
to set up an account. Your financial advisor will help you fill
out and submit an application. Once your account is set up, you
can choose among several convenient ways to invest.<PAGE>
PAGE 27
Important: When opening an account, you must provide American
Express Financial Corporation 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,
American Express Financial Corporation, 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 American Express Financial Corporation 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.
o If your application does not specify which class of shares
you are purchasing, it will be assumed that you are investing
in Class A shares.
<TABLE><CAPTION>
Three ways to invest
1
<S> <C> <C>
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 investments
American Express Financial Advisors Inc. per fund: $ 100
P.O. Box 74 Account balances
Minneapolis, MN 55440-0074 per fund: $ 300*
Your financial advisor will help
you with this process.
<PAGE>
PAGE 28
2
By scheduled Contact your financial advisor 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 American Express Financial Corporation
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).
</TABLE>
*If your account balance falls below $300, you will be asked 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.
How to exchange shares
You can exchange your shares of the fund at no charge for shares of
the same class of any other publicly offered fund in the IDS MUTUAL
FUND GROUP available in your state. Exchanges into IDS Tax-Free
Money Fund must be made from Class A shares. 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. American Express
Shareholder Service will mail payment within seven days after
receiving your request.
<PAGE>
PAGE 29
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, minus any applicable sales charge, 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, minus any
applicable sales charge, 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.
<TABLE><CAPTION>
Two ways to request an exchange or sale of shares
1
<S> <C>
By letter Include in your letter:
o the name of the fund(s)
o the class of shares to be exchanged or redeemed
o your account number(s) (for exchanges, both funds must be registered in the same
ownership)
o your Taxpayer Identification Number (TIN)
o the dollar amount or number of shares you want to exchange or sell
o signature of all registered account owners
o for redemptions, indicate how you want your sales proceeds delivered to you
o any paper certificates of shares you hold
Regular mail:
American Express Shareholder Service
Attn: Redemptions
P.O. Box 534
Minneapolis, MN 55440-0534
Express mail:
American Express Shareholder Service
Attn: Redemptions
733 Marquette Ave.
Minneapolis, MN 55402
2
By phone
American Express Telephone o The fund and American Express Financial Corporation will honor any telephone exchange or
redemption request believed to be
Transaction Service: authentic and will use reasonable procedures to confirm that they are. This includes
800-437-3133 or asking identifying questions and tape recording calls. If reasonable
612-671-3800 procedures are not followed, the fund or American Express Financial Corporation 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 American Express Shareholder Service. Each registered owner must sign
the request.
o American Express Financial Corporation 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 Acting on your instructions, your financial advisor may conduct telephone transactions on
your behalf.
o Phone privileges may be modified or discontinued at any time.
Minimum amount
Redemption: $100
Maximum amount
Redemption: $50,000
</TABLE>
<PAGE>
PAGE 30
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 Exchanges must be made into the same class of shares of the new
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 American Express Financial Corporation 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 class from which you redeemed. If you
reinvest in Class A, you will purchase the new shares at net asset
value rather than the offering price on the date of a new purchase.
If you reinvest in Class B, any CDSC you paid on the amount you are
reinvesting also will be reinvested. To take advantage of this
option, 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 a check is mailed to you.
(A check may be mailed earlier if your bank provides evidence
satisfactory to the fund and American Express Financial Corporation
that your check has cleared.)
<PAGE>
PAGE 31
<TABLE><CAPTION>
Three ways to receive payment when you sell shares
1
<S> <C>
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 fund account.
NOTE: Pre-authorization required. For
instructions, contact your financial
advisor or American Express Shareholder
Service.
3
By scheduled payout plan o Minimum payment: $50.
o Contact your financial advisor or
American Express 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 and waivers of the sales charge
Class A - initial sales charge alternative
On purchases of Class A shares, 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 $400,000 3.8 3.95
Next $500,000 2.0 2.04
$1,000,000 or more 0.0 0.00
* To calculate the actual sales charge on an investment greater
than $50,000, amounts for each applicable increment must be
totaled. See the SAI.
Reductions of the sales charge on Class A shares
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<PAGE>
PAGE 32
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 Tax-Free Money Fund and Class A shares of IDS Cash
Management 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 for Class A shares
Sales charges do not apply to:
o Current or retired trustees, directors, officers or employees of
the fund or American Express Financial Corporation or its
subsidiaries, their spouses and unmarried children under 21.
o Current or retired American Express financial advisors, their
spouses and unmarried children under 21.
o Qualified employee benefit plans* using a daily transfer
recordkeeping system 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 Shareholders who have at least $1 million invested in funds of
the IDS MUTUAL FUND GROUP. If the investment is redeemed in the
first year after purchase, a CDSC of 1% will be charged on the
redemption.
o Purchases made within 30 days after a redemption of shares (up
to the amount redeemed):
- of a product distributed by American Express Financial
Advisors in a qualified plan subject to a deferred
sales charge or
- a qualified plan where American Express Trust Company has a
recordkeeping, trustee, investment management or investment
servicing relationship.
<PAGE>
PAGE 33
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.
o Purchases made through American Express Strategic Portfolio
Service (total amount of all investments made in the Strategic
Portfolio Service must be at least $50,000).
*Eligibility must be determined in advance by American Express
Financial Advisors. To do so, contact your financial advisor.
Class B - contingent deferred sales charge alternative
Where a CDSC is imposed on a redemption, it is based on the amount
of the redemption and the number of calendar years, including the
year of purchase, between purchase and redemption. The following
table shows the declining scale of percentages that apply to
redemptions during each year after a purchase:
If a redemption is The percentage rate
made during the for the CDSC is:
First year 5%
Second year 4%
Third year 4%
Fourth year 3%
Fifth year 2%
Sixth year 1%
Seventh year 0%
If the amount you are redeeming reduces the current net asset value
of your investment in Class B shares below the total dollar amount
of all your purchase payments during the last six years (including
the year in which your redemption is made), the CDSC is based on
the lower of the redeemed purchase payments or market value.
The following example illustrates how the CDSC is applied. Assume
you had invested $10,000 in Class B shares and that your investment
had appreciated in value to $12,000 after 15 months, including
reinvested dividend and capital gain distributions. You could
redeem any amount up to $2,000 without paying a CDSC ($12,000
current value less $10,000 purchase amount). If you redeemed
$2,500, the CDSC would apply only to the $500 that represented part
of your original purchase price. The CDSC rate would be 4% because
a redemption after 15 months would take place during the second
year after purchase.
Because the CDSC is imposed only on redemptions that reduce the
total of your purchase payments, you never have to pay a CDSC on
any amount you redeem that represents appreciation in the value of
your shares, income earned by your shares or capital gains. In
addition, when determining the rate of any CDSC, your redemption
will be made from the oldest purchase payment you made. Of course,
once a purchase payment is considered to have been redeemed, the
next amount redeemed is the next oldest purchase payment. By<PAGE>
PAGE 34
redeeming the oldest purchase payments first, lower CDSCs are
imposed than would otherwise be the case.
Waivers of the sales charge for Class B shares
The CDSC on Class B shares will be waived on redemptions of shares:
o In the event of the shareholder's death,
o Purchased by any trustee, director, officer or employee of a fund
or American Express Financial Corporation or its subsidiaries,
o Purchased by any American Express financial advisor,
o Held in a trusteed employee benefit plan,
o Held in IRAs or certain qualified plans for which American
Express Trust Company acts as custodian, such as Keogh plans, tax-
sheltered custodial accounts or corporate pension plans, provided
that the shareholder is:
- at least 59-1/2 years old, and
- taking a retirement distribution
(if the redemption is part of a transfer to an IRA or
qualified plan in a product distributed by American Express
Financial Advisors, or a custodian-to-custodian transfer to a
product not distributed by American Express Financial
Advisors, the CDSC will not be waived), or
- redeeming under an approved substantially equal periodic
payment arrangement.
Special shareholder services
Services
To help you track and evaluate the performance of your investments,
American Express Financial Corporation 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
advisor.
Quick telephone reference
American Express Telephone Transaction Service
Redemptions and exchanges, dividend payments or reinvestments and
automatic payment arrangements
National/Minnesota: 800-437-3133
Mpls./St. Paul area: 671-3800
American Express Shareholder Service
Fund performance, objectives and account inquiries
612-671-3733<PAGE>
PAGE 35
TTY Service
For the hearing impaired
800-846-4852
American Express Infoline
Automated account information (TouchToneR phones only), including
current fund prices and performance, account values and recent
account transactions
National/Minnesota: 800-272-4445
Mpls./St. Paul area: 671-1630
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. 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.) Short-term capital
gains earned by the fund are paid to shareholders as part of their
ordinary income dividend and are taxable as ordinary income.
Dividends paid by each class will be calculated at the same time,
in the same manner and in the same amount, except the expenses
attributable solely to Class A, Class B and Class Y will be paid
exclusively by that class. Class B shareholders will receive lower
per share dividends than Class A and Class Y shareholders because
expenses for Class B are higher than for Class A or Class Y. Class
A shareholders will receive lower per share dividends than Class Y
shareholders because expenses for Class A are higher than for Class
Y.
Reinvestments
Dividends and capital gain distributions are automatically
reinvested in additional shares in the same class of the fund,
unless:
o you request the fund in writing or by phone to pay
distributions to you in cash, or
<PAGE>
PAGE 36
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
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.
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 advisor
regarding its deductibility for state and local income tax
purposes.
Each January, you will receive a tax statement showing the kinds
and total amount of all distributions you received during the
previous year. You must report distributions on your tax returns,
even if they are reinvested in additional shares.
"Buying a dividend" creates a tax liability. This means buying
shares shortly before 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 37
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 American Express Financial Corporation.
If you don't provide the TIN, 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.
<TABLE><CAPTION>
How to determine the correct TIN
Use the Social Security or
For this type of account: Employer Identification number
of:
<S> <C>
Individual or joint account The individual or individuals
listed on the account
Custodian account of a minor The minor
(Uniform Gifts/Transfers 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
/TABLE
<PAGE>
PAGE 38
For details on TIN requirements, ask your financial advisor or
local American Express Financial Advisors 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 each fund. Tax matters are
highly individual and complex, and you should consult a qualified
tax advisor 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. Each fund issues shares in
three classes - Class A, Class B and Class Y. Each class has
different sales arrangements and bears different expenses. Each
class represents interests in the assets of the fund. 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.
<PAGE>
PAGE 39
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. Each class has exclusive voting rights with respect
to the provisions of the fund's distribution plan that pertain to a
particular class and other matters for which separate class voting
is appropriate under applicable law.
Shareholder meetings
The funds do not hold annual shareholder meetings. However, the
trustees may call meetings at their discretion, or on demand by
holders of 10% or more of the outstanding shares, to elect or
remove trustees.
Trustees and officers
Shareholders elect the trustees that 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 board.
The board has 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.
Heinz F. Hutter
Former president and chief operating officer, Cargill, Inc.
Anne P. Jones
Attorney and telecommunications consultant.
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.
<PAGE>
PAGE 40
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.
C. Angus Wurtele
Chairman of the board and chief executive officer, The Valspar
Corporation.
Interested trustees who are officers and/or employees of American
Express Financial Corporation
William H. Dudley
Executive vice president, American Express Financial Corporation.
David R. Hubers
President and chief executive officer, American Express Financial
Corporation.
John R. Thomas
Senior vice president, American Express Financial Corporation.
Officers who also are officers and/or employees of American Express
Financial Corporation
Peter J. Anderson
Vice president of all funds in the IDS MUTUAL FUND GROUP.
Melinda S. Urion
Treasurer of all funds in the IDS MUTUAL FUND GROUP.
Other officer
Leslie L. Ogg
Vice president, general counsel and secretary of all funds in the
IDS MUTUAL FUND GROUP.
Refer to the SAI for the trustees' and officers' biographies.
Investment manager and transfer agent
The funds pay American Express Financial Corporation for managing
their portfolios, providing administrative services and serving as
transfer agent (handling shareholder accounts).
Under its Investment Management Services Agreement, American
Express Financial Corporation determines which securities will be
purchased, held or sold (subject to the direction and control of
the fund's trustees). Under the current agreement, effective March
20, 1995, each fund pays American Express Financial Corporation a
fee for these services based on the average daily net assets of the
fund, as follows:
<PAGE>
PAGE 41
Assets Annual rate
(billions) at each asset level
First $0.25 0.470%
Next 0.25 0.445
Next 0.25 0.420
Next 0.25 0.405
Over 1.0 0.380
For the fiscal year ended June 30, 1995, under the current and
prior agreements, the funds paid American Express Financial
Corporation total investment management fees of 0.47% of its
average daily net assets for California, 0.47% for Massachusetts,
0.47% for Michigan, 0.46% for Minnesota, 0.47% for New York and
0.47% for Ohio Fund. Under the Agreement, each fund also pays
taxes, brokerage commissions and nonadvisory expenses.
Under an Administrative Services Agreement, each fund pays American
Express Financial Corporation for administration and accounting
services at an annual rate of 0.04% decreasing in gradual
percentages to 0.02% as assets increase.
In addition, under a separate Transfer Agency Agreement, American
Express Financial Corporation maintains shareholder accounts and
records. Each fund pays American Express Financial Corporation an
annual fee per shareholder account for this service as follows:
o Class A $15.50
o Class B $16.50
o Class Y $15.50
Distributor
The funds sell shares through American Express Financial Advisors,
a wholly owned subsidiary of American Express Financial
Corporation, under a Distribution Agreement. Financial advisors
representing American Express Financial Advisors provide
information to investors about individual investment programs, the
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.
For Class B shares, 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 American Express Financial
Advisors a distribution fee, also known as a 12b-1 fee. This fee
is paid under a Plan and Agreement of Distribution that follows the
terms of Rule 12b-1 of the Investment Company Act of 1940. Under
this Agreement, each fund pays a distribution fee at an annual rate
of 0.75% of the fund's average daily net assets attributable to
Class B shares for distribution-related services.
<PAGE>
PAGE 42
Total 12b-1 fees paid under the current and prior agreements were
0.75% of average daily net assets for California, Massachusetts,
Michigan, Minnesota, New York and Ohio funds for the fiscal year
ended June 30, 1995. These fees will not cover all of the costs
incurred by American Express Financial Advisors. For Class A
shares, the total 12b-1 fee paid by each fund under the prior
agreement for the fiscal year ended June 30, 1995 was 0.01% of its
average daily net assets for California and 0.02% for
Massachusetts, Michigan, Minnesota, New York and Ohio funds.
Under a Shareholder Service Agreement, each fund also pays a fee
for service provided to shareholders by financial advisors and
other servicing agents. The fee is calculated at a rate of 0.175%
of the fund's average daily net assets attributable to Class A and
Class B shares.
Total expenses paid by Class A shares of each fund for the fiscal
year ended June 30, 1995 were as shown below. Class B and Class Y
expenses were restated to reflect current agreements.
Class A Class B Class Y
California Fund 0.65% 1.51% 0.58%
Massachusetts Fund 0.72% 1.57% 0.65%
Michigan Fund 0.70% 1.54% 0.62%
Minnesota Fund 0.67% 1.51% 0.58%
New York Fund 0.70% 1.54% 0.61%
Ohio Fund 0.71% 1.56% 0.63%
Total fees and expenses (excluding taxes and brokerage commissions)
cannot exceed the most restrictive applicable state expense
limitation.
About American Express Financial Corporation
General information
The American Express Financial Corporation 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, American Express Financial Corporation also
manages investments for itself and its subsidiaries, IDS
Certificate Company and IDS Life Insurance Company. Total assets
under management on June 30, 1995 were more than $120 billion.
American Express Financial Advisors serves individuals and
businesses through its nationwide network of more than 175 offices
and more than 7,900 advisors.
Other American Express Financial Corporation subsidiaries provide
investment management and related services for pension, profit
sharing, employee savings and endowment funds of businesses and
institutions.
<PAGE>
PAGE 43
American Express Financial Corporation 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 American Express
Financial Corporation.<PAGE>
PAGE 44
Appendix A
Description of bond ratings
Bond 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. are Aaa, Aa, A, Baa, Ba,
B, Caa, Ca, C and D. Ratings by Standard & Poor's Corporation are
AAA, AA, A, BBB, BB, B, CCC, CC, C and D.
Aaa/AAA - Judged to be of the best quality and carry the smallest
degree of investment risk. Interest and principal are secure.
Aa/AA - 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.
A - Considered upper-medium grade. Protection for interest and
principal is deemed adequate but may be susceptible to future
impairment.
Baa/BBB - Considered medium-grade obligations. Protection for
interest and principal is adequate over the short-term; however,
these obligations may have certain speculative characteristics.
Ba/BB - Considered to have speculative elements. The protection of
interest and principal payments may be very moderate.
B - Lack characteristics of more desirable investments. There may
be small assurance over any long period of time of the payment of
interest and principal.
Caa/CCC - Are of poor standing. Such issues may be in default or
there may be risk with respect to principal or interest.
Ca/CC - Represent obligations that are highly speculative. Such
issues are often in default or have other marked shortcomings.
C - Are obligations with a higher degree of speculation. These
securities have major risk exposures to default.
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 the fund's objectives and policies. When assessing the risk
involved in each non-rated security, the fund will consider the
financial condition of the issuer or the protection afforded by the
terms of the security.
<PAGE>
PAGE 45
Definitions of zero-coupon and pay-in-kind securities
A zero-coupon security is a security that is sold at a deep
discount from its face value and makes no periodic interest
payments. The buyer of such a security receives a rate of return
by gradual appreciation of the security, which is redeemed at face
value on the maturity date.
A pay-in-kind security is a security in which the issuer has the
option to make interest payments in cash or in additional
securities. The securities issued as interest usually have the
same terms, including maturity date, as the pay-in-kind securities.
<PAGE>
PAGE 46
Appendix B
Descriptions of derivative instruments
What follows are brief descriptions of derivative instruments a
fund may use. At various times a fund may use some or all of these
instruments and is not limited to these instruments. It may use
other similar types of instruments if they are consistent with the
fund's investment goal and policies. For more information on these
instruments, see the Statement of Additional Information.
Options and futures contracts. An option is an agreement to buy or
sell an instrument at a set price during a certain period of time.
A futures contract is an agreement to buy and sell an instrument
for a set price on a future date. A fund may buy and sell options
and futures contracts to manage its exposure to changing interest
rates, security prices and currency exchange rates. Options and
futures may be used to hedge a fund's investments against price
fluctuations or to increase market exposure.
Asset-backed and mortgage-backed securities. Asset-backed and
mortgage-backed securities include interests in pools of consumer
loans or mortgages, such as collateralized mortgage obligations and
stripped mortgage-backed securities. Interest and principal
payments depend on payment of the underlying loans or mortgages.
The value of these securities may also be affected by changes in
interest rates, the market's perception of the issuers and the
creditworthiness of the parties involved. Stripped mortgage-backed
securities include interest only (IO) and principal only (PO)
securities. Cash flows and yields on IOs and POs are extremely
sensitive to the rate of principal payments on the underlying
mortgage loans or mortgage-backed securities.
Indexed securities. The value of indexed securities is linked to
currencies, interest rates, commodities, indexes or other financial
indicators. Most indexed securities are short- to intermediate-
term fixed income securities whose values at maturity or interest
rates rise or fall according to the change in one or more specified
underlying instruments. Indexed securities may be more volatile
than the underlying instrument itself.
Inverse floaters. Inverse floaters are created by underwriters
using the interest payment on securities. A portion of the
interest received is paid to holders of instruments based on
current interest rates for short-term securities. The remainder,
minus a servicing fee, is paid to holders of 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 inverse
floaters.
Structured products. Structured products are over-the-counter
financial instruments created specifically to meet the needs of one
or a small number of investors. The instrument may consist of a
warrant, an option or a forward contract embedded in a note or any<PAGE>
PAGE 47
of a wide variety of debt, equity and/or currency combinations.
Risks of structured products include the inability to close such
instruments, rapid changes in the market and defaults by other
parties.<PAGE>
PAGE 48
Appendix C
1995 State Tax-Exempt and Taxable Equivalent Yield Calculation
These tables will help you determine your state taxable yield
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 adjusted gross income is $175,000.
Under Taxable Income married filing jointly status, $138,000 is in
the $94,250-$143,600 range. Under Adjusted Gross Income, $175,000
is in the $172,050 to $294,550 column. The Taxable Income line and
Adjusted Gross Income column meet at 38.26%. This is the rate
you'll use in Step 2.
<TABLE><CAPTION>
Adjusted gross income*
___________________________________________________________________________________________
Taxable income** $0 $114,700 $172,050
to to to OVER
$114,700(1) $172,050(2) $294,550(3) $294,550(2)
___________________________________________________________________________________________
Married Filing Jointly
<S> <C> <C> <C> <C>
$ 0 - $ 9,444 15.85%
9,444 - 22,384 16.70
22,384 - 35,324 18.40
35,324 - 39,000 20.10
39,000 - 49,038 32.32
49,038 - 61,974 33.76
61,974 - 94,250 34.70 34.70%
94,250 - 143,600 37.42 38.26 38.26%
143,600 - 214,928 41.95 42.93 44.26
214,928 - 256,500 42.40 44.69 43.37%
256,500 - 429,858 45.64 48.16*** 46.71
429,858 + 46.24 47.30
___________________________________________________________________________________________
$0 $114,700
to to OVER
$114,700(1) $237,200(3) $237,200(2)
___________________________________________________________________________________________
Single
$ 0 - $ 4,722 15.85%
4,722 - 11,192 16.70
11,192 - 17,662 18.40
17,662 - 23.350 20.10
23,350 - 24,519 32.32
24,519 - 30,987 33.76
30,987 - 56,550 34.70
56,550 - 107,464 37.42 37.99%
107,464 - 117,950 37.90 39.31
117,950 - 214,929 42.40 44.03
214,929 - 256,500 43.04 44.66 44.00%
256,500 + 46.24 47.30
____________________________________________________________________________________________<PAGE>
PAGE 49
*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 $294,550 and your taxable income
exceeds $256,500.
</TABLE>
(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.
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, 1994. These rates may change if
California tax rates change in 1995. 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 50
STEP 2: Determining your combined federal and California state
taxable yield equivalents.
Using 38.26%, you may determine that a tax-exempt yield of 5% is
equivalent to earning a taxable 8.10% yield.
<TABLE><CAPTION>
For these Tax-Exempt Rates:
_____________________________________________________________________
3.00% 3.50% 4.00% 4.50% 5.00% 5.50% 6.00% 6.50
_____________________________________________________________________
Marginal Tax Rates Equal the Taxable Rates shown below:
_________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C> <C> <C> <C>
15.85% 3.57% 4.16% 4.75% 5.35% 5.94% 6.54% 7.13% 7.72%
16.70 3.60 4.20 4.80 5.40 6.00 6.60 7.20 7.80
18.40 3.68 4.29 4.90 5.51 6.13 6.74 7.35 7.97
20.10 3.75 4.38 5.01 5.63 6.26 6.88 7.51 8.14
32.32 4.43 5.17 5.91 6.65 7.39 8.13 8.87 9.60
33.76 4.53 5.28 6.04 6.79 7.55 8.30 9.06 9.81
34.70 4.59 5.36 6.13 6.89 7.66 8.42 9.19 9.95
37.42 4.79 5.59 6.39 7.19 7.99 8.79 9.59 10.39
37.90 4.83 5.64 6.44 7.25 8.05 8.86 9.66 10.47
37.99 4.84 5.64 6.45 7.26 8.06 8.87 9.68 10.48
38.26 4.86 5.67 6.48 7.29 8.10 8.91 9.72 10.53
38.74 4.90 5.71 6.53 7.35 8.16 8.98 9.79 10.61
39.31 4.94 5.77 6.59 7.41 8.24 9.06 9.89 10.71
41.95 5.17 6.03 6.89 7.75 8.61 9.47 10.34 11.20
42.40 5.21 6.08 6.94 7.81 8.68 9.55 10.42 11.28
42.93 5.26 6.13 7.01 7.89 8.76 9.64 10.51 11.39
43.04 5.27 6.14 7.02 7.90 8.78 9.66 10.53 11.41
43.37 5.30 6.18 7.06 7.95 8.83 9.71 10.60 11.48
44.00 5.36 6.25 7.14 8.04 8.93 9.82 10.71 11.61
44.03 5.36 6.25 7.14 8.04 8.93 9.82 10.71 11.61
44.26 5.38 6.28 7.18 8.07 8.97 9.87 10.76 11.66
44.66 5.42 6.32 7.23 8.13 9.04 9.94 10.84 11.75
44.69 5.42 6.33 7.23 8.14 9.04 9.94 10.85 11.75
45.64 5.52 6.44 7.36 8.28 9.20 10.12 11.04 11.96
46.24 5.58 6.51 7.44 8.37 9.30 10.23 11.16 12.09
46.71 5.63 6.57 7.51 8.44 9.38 10.32 11.26 12.20
47.30 5.69 6.64 7.59 8.54 9.49 10.44 11.39 12.33
48.02 5.77 6.73 7.70 8.66 9.62 10.58 11.54 12.50
48.16 5.79 6.75 7.72 8.68 9.65 10.61 11.57 12.54
48.74 5.79 6.75 7.72 8.68 9.65 10.61 11.57 12.54
_________________________________________________________________________________________________
/TABLE
<PAGE>
PAGE 51
Appendix C
1995 Massachusetts Tax-Exempt and Taxable Equivalent Yield
Calculation
These tables will help you determine your combined federal and state
taxable yield 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 adjusted gross income is $175,000.
Under Taxable Income married filing jointly status, $138,000 is in
the $94,250-$143,600 range. Under Adjusted Gross Income, $175,000 is
in the $172,050 to $294,550 column. The Taxable Income line and
Adjusted Gross Income column meet at 40.10%. This is the rate you'll
use in Step 2.
<TABLE><CAPTION>
Adjusted gross income*
________________________________________________________
Taxable income** $0 $114,700 $172,050
to to to OVER
$114,700(1) $172,050(2) $294,550(3) $294,550(2)
___________________________________________________________________________________________
Married Filing Jointly
<S> <C> <C> <C> <C>
$ 7,600 - $ 39,000 25.20%
39,000 - 94,250 36.64 36.64%
94,250 - 143,600 39.28 40.10 40.10%
143,600 - 256,500 43.68 44.63 45.92
256,500 + 46.85 49.32*** 47.89%
___________________________________________________________________________________________
$0 $114,700
to to OVER
$114,700(1) $237,200(3) $237,200(2)
___________________________________________________________________________________________
Single
$ 8,000 - $ 23,350 25.20%
23,350 - 56,550 36.64
56,550 - 117,950 39.28 40.66%
117,950 - 256,500 43.68 45.28 44.63%
256,500 + 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 $294,550 and your taxable income
exceeds $256,500.
</TABLE>
(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.<PAGE>
PAGE 52
(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.
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, 1995. These rates may change if
Massachusetts tax rates change in 1995. 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%, you may determine that a tax-exempt yield of 5% is
equivalent to earning a taxable 8.35% yield.
<TABLE><CAPTION>
For these Tax-Exempt Rates:
___________________________________________________________________________
3.00% 3.50% 4.00% 4.50% 5.00% 5.50% 6.00% 6.50%
___________________________________________________________________________
Marginal Tax Rates Equal the Taxable Rates shown below:
_________________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C> <C> <C> <C>
25.20% 4.01% 4.68% 5.35% 6.02% 6.68% 7.35% 8.02% 8.69%
36.64 4.73 5.52 6.31 7.10 7.89 8.68 9.47 10.26
39.28 4.94 5.76 6.59 7.41 8.23 9.06 9.88 10.70
40.10 5.01 5.84 6.68 7.51 8.35 9.18 10.02 10.85
40.66 5.06 5.90 6.74 7.58 8.43 9.27 10.11 10.95
43.68 5.33 6.21 7.10 7.99 8.88 9.77 10.65 11.54
44.63 5.42 6.32 7.22 8.13 9.03 9.93 10.84 11.74
45.28 5.48 6.40 7.31 8.22 9.14 10.05 10.96 11.88
45.92 5.55 6.47 7.40 8.32 9.25 10.17 11.09 12.02
46.85 5.64 6.59 7.53 8.47 9.41 10.35 11.29 12.23
47.89 5.76 6.72 7.68 8.64 9.60 10.55 11.51 12.47
48.60 5.84 6.81 7.78 8.75 9.73 10.70 11.67 12.65
49.32 5.92 6.91 7.89 8.88 9.87 10.85 11.84 12.83
______________________________________________________________________________________________ _________
/TABLE
<PAGE>
PAGE 53
Appendix C
1995 Michigan Tax-Exempt and Taxable Equivalent Yield Calculation
These tables will help you determine your combined federal and
state taxable yield 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 adjusted gross income is $175,000.
Under Taxable Income married filing jointly status, $138,000 is in
the $94,250-$143,600 range. Under Adjusted Gross Income, $175,000
is in the $172,050 to $294,550 column. The Taxable Income line and
Adjusted Gross Income column meet at 36.13%. This is the rate
you'll use in Step 2.
<TABLE><CAPTION>
Adjusted gross income*
___________________________________________________________________________________________
Taxable income** $0 $114,700 $172,050
to to to OVER
$114,700(1) $172,050(2) $294,550(3) $294,550(2)
___________________________________________________________________________________________
Married Filing Jointly
<S> <C> <C> <C> <C>
$ 0 - $ 39,000 18.74%
39,000 - 94,250 31.17 31.17%
94,250 - 143,600 34.04 34.93 36.13%
143,600 - 256,500 38.82 39.85 41.25
256,500 + 42.26 44.94*** 43.39%
___________________________________________________________________________________________
$0 $114,700
to to OVER
$114,700(1) $237,200(3) $237,200(2)
___________________________________________________________________________________________
Single
$ 0 - $ 23,350 18.74%
23,350 - 56,550 31.17
56,550 - 117,950 34.04 35.53%
117,950 - 256,500 38.82 40.55 39.85%
256,500 + 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 $294,550 and your taxable income
exceeds $256,500.
</TABLE>
(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<PAGE>
PAGE 54
taxpayers have two personal exemptions and itemized deductions
continue to phase-out.
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 1995. 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 36.13%, you may determine that a tax-exempt yield of 5% is
equivalent to earning a taxable 7.83% yield.
<TABLE><CAPTION>
For these Tax-Exempt Rates:
________________________________________________________________________
3.00% 3.50% 4.00% 4.50% 5.00% 5.50% 6.00% 6.50%
________________________________________________________________________
Marginal Tax Rates Equal the Taxable Rates shown below:
___________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C> <C> <C> <C>
18.74% 3.69% 4.31% 4.92% 5.54% 6.15% 6.77% 7.38% 8.00%
31.17 4.36 5.08 5.81 6.54 7.26 7.99 8.72 9.44
34.04 4.55 5.31 6.06 6.82 7.58 8.34 9.10 9.85
34.93 4.61 5.38 6.15 6.92 7.68 8.45 9.22 9.99
35.53 4.65 5.43 6.20 6.98 7.76 8.53 9.31 10.08
36.13 4.70 5.48 6.26 7.05 7.83 8.61 9.39 10.18
38.82 4.90 5.72 6.54 7.36 8.17 8.99 9.81 10.62
39.85 4.99 5.82 6.65 7.48 8.31 9.14 9.98 10.81
40.55 5.05 5.89 6.73 7.57 8.41 9.25 10.09 10.93
41.25 5.11 5.96 6.81 7.66 8.51 9.36 10.21 11.06
42.26 5.20 6.06 6.93 7.79 8.66 9.53 10.39 11.26
43.39 5.30 6.18 7.07 7.95 8.83 9.72 10.60 11.48
44.17 5.37 6.27 7.16 8.06 8.96 9.85 10.75 11.64
44.94 5.45 6.36 7.26 8.17 9.08 9.99 10.90 11.81
__________________________________________________________________________________________________
/TABLE
<PAGE>
PAGE 55
Appendix C
1995 Minnesota Tax-Exempt and Taxable Equivalent Yield Calculation
These tables will help you determine your combined federal and
state taxable yield 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 adjusted gross income is $175,000.
Under Taxable Income married filing jointly status, $138,000 is in
the $94,250-$143,600 range. Under Adjusted Gross Income, $175,000
is in the $172,050 to $294,550 column. The Taxable Income line and
Adjusted Gross Income column meet at 37.72%. This is the rate
you'll use in Step 2.
<TABLE><CAPTION>
Adjusted gross income*
___________________________________________________________________________________________
Taxable income** $0 $114,700 $172,050
to to to OVER
$114,700(1) $172,050(2) $294,550(3) $294,550(2)
___________________________________________________________________________________________
Married Filing Jointly
<S> <C> <C> <C> <C>
$ 0 - $ 22,840 20.10%
22,840 - 39,000 21.80
39,000 - 90,760 33.76 33.76%
90,760 - 94,250 34.12 34.12
94,250 - 143,600 36.87 37.72 37.72%
143,600 - 256,500 41.44 42.43 43.77
256,500 + 44.73 47.30*** 45.82%
___________________________________________________________________________________________
$0 $114,700
to to OVER
$114,700(1) $237,200(3) $237,200(2)
___________________________________________________________________________________________
Single
$ 0 - $ 15,620 20.10%
15,620 - 23,350 21.80
23,350 - 51,330 33.76
51,330 - 56,550 34.12
56,550 - 117,950 36.87 38.29%
117,950 - 256,500 41.44 43.10 42.43%
256,500 + 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 $294,550 and your taxable income
exceeds $256,500.
</TABLE>
(1) No Phase-out -- Assumes no phase-out of itemized deductions or
personal exemptions.
(2) Itemized Deductions Phase-out -- Assumes a single taxpayer has<PAGE>
PAGE 56
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.
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, 1995. These rates may change if
Minnesota tax rates change in 1995. 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%, you may determine that a tax-exempt yield of 5% is
equivalent to earning a taxable 8.03% yield.
<TABLE><CAPTION>
For these Tax-Exempt Rates:
__________________________________________________________________________
3.00% 3.50% 4.00% 4.50% 5.00% 5.50% 6.00% 6.50%
__________________________________________________________________________
Marginal Tax Rates Equal the Taxable Rates shown below:
_________________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C> <C> <C> <C>
20.10% 3.75% 4.38% 5.01% 5.63% 6.26% 6.88% 7.51% 8.14%
21.80 3.84 4.48 5.12 5.75 6.39 7.03 7.67 8.31
33.76 4.53 5.28 6.04 6.79 7.55 8.30 9.06 9.81
34.12 4.55 5.31 6.07 6.83 7.59 8.35 9.11 9.87
36.87 4.75 5.54 6.34 7.13 7.92 8.71 9.50 10.30
37.72 4.82 5.62 6.42 7.23 8.03 8.83 9.63 10.44
38.29 4.86 5.67 6.48 7.29 8.10 8.91 9.72 10.53
41.44 5.12 5.98 6.83 7.68 8.54 9.39 10.25 11.10
42.43 5.21 6.08 6.95 7.82 8.69 9.55 10.42 11.29
43.10 5.27 6.15 7.03 7.91 8.79 9.67 10.54 11.42
43.77 5.34 6.22 7.11 8.00 8.89 9.78 10.67 11.56
44.73 5.43 6.33 7.24 8.14 9.05 9.95 10.86 11.76
45.82 5.54 6.46 7.38 8.31 9.23 10.15 11.07 12.00
46.56 5.61 6.55 7.49 8.42 9.36 10.29 11.23 12.16
47.30 5.69 6.64 7.59 8.54 9.49 10.44 11.39 12.33
_______________________________________________________________________________________________________
/TABLE
<PAGE>
PAGE 57
Appendix C
1995 New York State Tax-Exempt and Taxable Equivalent Yield
Calculation
These tables will help you determine your combined federal and
state taxable yield 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 adjusted gross income is $175,000.
Under Taxable Income married filing jointly status, $138,000 is in
the $94,250-$143,600 range. Under Adjusted Gross Income, $175,000
is in the $172,050 to $294,550 column. The Taxable Income line and
Adjusted Gross Income column meet at 37.10%. This is the rate
you'll use in Step 2.
<TABLE><CAPTION>
Adjusted gross income*
__________________________________________________________________________________________________________
Taxable income** $0 $114,700 $172,050
to to to OVER
$114,700(1) $172,050(2) $294,550(3) $294,550(2)
__________________________________________________________________________________________________________
Married Filing Jointly
<S> <C> <C> <C> <C>
$ 0 - $ 13,000 18.87%
13,000 - 19,000 19.72
19,000 - 25,000 20.57
25,000 - 39,000 21.45
39,000 - 94,250 33.47
94,250 - 143,600 36.24 37.10% 37.10%
143,600 - 256,500 40.86 41.86 43.22
256,500 + 44.19 46.78 45.28***
__________________________________________________________________________________________________________
$0 $114,700
to to OVER
$114,700(1) $237,200(3) $237,200(2)
__________________________________________________________________________________________________________
Single
$ 0 - $ 6,500 18.87%
6,500 - 9,500 19.72
9,500 - 12,500 20.57
12,500 - 23,350 21.45
23,350 - 56,550 33.47
56,550 - 117,950 36.24 37.68%
117,950 - 256,500 40.86 42.54 41.86%
256,500 + 44.19 45.28
________________________________________________________________________________________________________
*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 $294,550 and your taxable income
exceeds $256,500.
/TABLE
<PAGE>
PAGE 58
(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. This does not take into
consideration the state AGI recapture of personal income tax, which
might increase the percentage.
(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.
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, 1995. These rates may change if New
York state tax rates change in 1995. 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.
<PAGE>
PAGE 59
STEP 2: Determining your combined federal and New York state
taxable yield equivalents.
Using 37.10%, you may determine that a tax-exempt yield of 5% is
equivalent to earning a taxable 7.95% yield.
<TABLE><CAPTION>
For these Tax-Exempt Rates:
____________________________________________________________________________
3.00% 3.50% 4.00% 4.50% 5.00% 5.50% 6.00% 6.50%
____________________________________________________________________________
Marginal Tax Rates Equal the Taxable Rates shown below:
_________________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C> <C> <C> <C>
18.87% 3.70% 4.31% 4.93% 5.55% 6.16% 6.78% 7.40% 8.01%
19.72 3.74 4.36 4.98 5.61 6.23 6.85 7.47 8.10
20.57 3.78 4.41 5.04 5.67 6.29 6.92 7.55 8.18
21.45 3.82 4.46 5.09 5.73 6.37 7.00 7.64 8.27
33.47 4.51 5.26 6.01 6.76 7.52 8.27 9.02 9.77
36.24 4.71 5.49 6.27 7.06 7.84 8.63 9.41 10.19
37.10 4.77 5.56 6.36 7.15 7.95 8.74 9.54 10.33
37.68 4.81 5.62 6.42 7.22 8.02 8.83 9.63 10.43
40.86 5.07 5.92 6.76 7.61 8.45 9.30 10.15 10.99
41.86 5.16 6.02 6.88 7.74 8.60 9.46 10.32 11.18
42.54 5.22 6.09 6.96 7.83 8.70 9.57 10.44 11.31
43.22 5.28 6.16 7.04 7.93 8.81 9.69 10.57 11.45
44.19 5.38 6.27 7.17 8.06 8.96 9.85 10.75 11.65
45.28 5.48 6.40 7.31 8.22 9.14 10.05 10.96 11.88
46.03 5.56 6.49 7.41 8.34 9.26 10.19 11.12 12.04
46.78 5.64 6.58 7.52 8.46 9.39 10.33 11.27 12.21
_______________________________________________________________________________________________________
/TABLE
<PAGE>
PAGE 60
Appendix C
1995 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 yield 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 adjusted gross income is $175,000.
Under Taxable Income married filing jointly status, $138,000 is in
the $108,000-$143,600 range. Under Adjusted Gross Income, $175,000
is in the $172,050 to $294,550 column. The Taxable Income line and
Adjusted Gross Income column meet at 40.13%. This is the rate
you'll use in Step 2.
<TABLE><CAPTION>
Adjusted gross income*
_________________________________________________________________________________________________________
Taxable income** $0 $114,700 $172,050
to to to OVER
$114,700(1) $172,050(2) $294,550(3) $294,550(2)
__________________________________________________________________________________________________________
Married Filing Jointly
<S> <C> <C> <C> <C>
$ 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 - 39,000 25.19
39,000 - 45,000 36.63
45,000 - 94,250 36.64
94,250 - 108,000 39.28
108,000 - 143,600 39.32 40.13% 40.13%
143,600 - 256,500 43.71 44.66 45.95
256,500 + 46.88 49.35*** 47.92%
___________________________________________________________________________________________________________
$0 $114,700
to to OVER
$114,700(1) $237,200(3) $237,200(2)
__________________________________________________________________________________________________________
Single
$ 0 - $ 6,500 21.05%
6,500 - 8,000 21.90
8,000 - 8,400 22.48
8,400 - 9,500 22.97
9,500 - 12,500 23.82
12,500 - 15,000 24.71
15,000 - 23,350 25.19
23,350 - 25,000 36.63
25,000 - 56,550 36.64
56,550 - 60,000 39.28
60,000 - 117,950 39.32 40.69%
117,950 - 256,500 43.71 45.31 44.66%
256,500 + 46.88 47.92
___________________________________________________________________________________________________________
*Gross income with certain adjustments before taking itemized deductions and personal exemptions.
**Amount subject to federal income tax after itemized deduction and personal exemptions.<PAGE>
PAGE 61
***This rate is applicable only in the limited case where your adjusted gross income is less than $294,550 and your taxable income
exceeds $256,500.
</TABLE>
(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. Does not take into
consideration the state AGI recapture of personal income tax, which
might increase the percentage.
(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.
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, 1995. These rates
may change if New York state or city tax rates change in 1995. 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 62
STEP 2: Determining your combined federal, New York state and New
York City taxable yield equivalents.
Using 40.13%, you may determine that a tax-exempt yield of 5% is
equivalent to earning a taxable 8.35% yield.
<TABLE><CAPTION>
For these Tax-Exempt Rates:
____________________________________________________________________________
3.00% 3.50% 4.00% 4.50% 5.00% 5.50% 6.00% 6.50%
____________________________________________________________________________
Marginal Tax Rates Equal the Taxable Rates shown below:
_________________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C> <C> <C> <C>
21.05% 3.80% 4.43% 5.07% 5.70% 6.33% 6.97% 7.60% 8.23%
21.90 3.84 4.48 5.12 5.76 6.40 7.04 7.68 8.32
22.48 3.87 4.51 5.16 5.80 6.45 7.09 7.74 8.38
22.97 3.89 4.54 5.19 5.84 6.49 7.14 7.79 8.44
23.82 3.94 4.59 5.25 5.91 6.56 7.22 7.88 8.53
24.71 3.98 4.65 5.31 5.98 6.64 7.31 7.97 8.63
25.19 4.01 4.68 5.35 6.02 6.68 7.35 8.02 8.69
36.63 4.73 5.52 6.31 7.10 7.89 8.68 9.47 10.26
36.64 4.73 5.52 6.31 7.10 7.89 8.68 9.47 10.26
39.28 4.94 5.76 6.59 7.41 8.23 9.06 9.88 10.70
39.32 4.94 5.77 6.59 7.42 8.24 9.06 9.89 10.71
40.13 5.01 5.85 6.68 7.52 8.35 9.19 10.02 10.86
40.69 5.06 5.90 6.74 7.59 8.43 9.27 10.12 10.96
43.71 5.33 6.22 7.11 7.99 8.88 9.77 10.66 11.55
44.66 5.42 6.32 7.23 8.13 9.04 9.94 10.84 11.75
45.31 5.49 6.40 7.31 8.23 9.14 10.06 10.97 11.89
45.95 5.55 6.48 7.40 8.33 9.25 10.18 11.10 12.03
46.88 5.65 6.59 7.53 8.47 9.41 10.35 11.30 12.24
47.92 5.76 6.72 7.68 8.64 9.60 10.56 11.52 12.48
48.63 5.84 6.81 7.79 8.76 9.73 10.71 11.68 12.65
49.35 5.92 6.91 7.90 8.88 9.87 10.86 11.85 12.83
_________________________________________________________________________________________________________
/TABLE
<PAGE>
PAGE 63
Appendix C
1995 Ohio Tax-Exempt and Taxable Equivalent Yield Calculation
These tables will help you determine your combined federal and
state taxable yield 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 adjusted gross income is $175,000.
Under Taxable Income married filing jointly status, $138,000 is in
the $100,000-$143,600 range. Under Adjusted Gross Income, $175,000
is in the $172,050 to $294,550 column. The Taxable Income line and
Adjusted Gross Income column meet at 36.63%. This is the rate
you'll use in Step 2.
<TABLE><CAPTION>
Adjusted gross income*
___________________________________________________________________________________________
Taxable income** $0 $114,700 $172,050
to to to OVER
$114,700(1) $172,050(2) $294,550(3) $294,550(2)
___________________________________________________________________________________________
Married Filing Jointly
<S> <C> <C> <C> <C>
$ 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 - 39,000 18.79
39,000 - 40,000 31.21
40,000 - 80,000 31.74 31.74%
80,000 - 94,250 32.28 32.28
94,250 - 100,000 35.10 35.10
100,000 - 143,600 35.76 36.63 36.63%
143,600 - 200,000 40.42 41.42 42.79
200,000 - 256,500 40.80 43.16*** 41.80%
256,500 + 44.13 45.23
___________________________________________________________________________________________
$0 $114,700
to to OVER
$114,700(1) $237,200(3) $237,200(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
20,000 - 23,350 18.79
23,350 - 40,000 31.21
40,000 - 56,550 31.74
56,550 - 80,000 34.59
80,000 - 100,000 35.10
100,000 - 117,950 35.76 37.22%
117,950 - 200,000 40.42 42.11
200,000 - 256,500 40.80 42.48 41.80%
256,500 + 44.13 45.23
____________________________________________________________________________________________<PAGE>
PAGE 64
*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 $294,550 and your taxable income
exceeds $256,500.
</TABLE>
(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.
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, 1994. These rates may change if Ohio tax
rates change in 1995. 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 36.63%, you may determine that a tax-exempt yield of 5% is
equivalent to earning a taxable 7.89% yield.
<TABLE><CAPTION>
For these Tax-Exempt Rates:
_____________________________________________________________________________
3.00% 3.50% 4.00% 4.50% 5.00% 5.50% 6.00% 6.50%
_____________________________________________________________________________
Marginal Tax Rates Equal the Taxable Rates shown below:
_________________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C> <C> <C> <C>
15.63% 3.56% 4.15% 4.74% 5.33% 5.93% 6.52% 7.11% 7.70%
16.27 3.58 4.18 4.78 5.37 5.97 6.57 7.17 7.76
17.52 3.64 4.24 4.85 5.46 6.06 6.67 7.27 7.88
18.16 3.67 4.28 4.89 5.50 6.11 6.72 7.33 7.94
18.79 3.69 4.31 4.93 5.54 6.16 6.77 7.39 8.00
31.21 4.36 5.09 5.81 6.54 7.27 8.00 8.72 9.45
31.74 4.39 5.13 5.86 6.59 7.32 8.06 8.79 9.52
32.28 4.43 5.17 5.91 6.65 7.38 8.12 8.86 9.60
34.59 4.59 5.35 6.12 6.88 7.64 8.41 9.17 9.94
35.10 4.62 5.39 6.16 6.93 7.70 8.47 9.24 10.02
35.76 4.67 5.45 6.23 7.00 7.78 8.56 9.34 10.12
36.63 4.73 5.52 6.31 7.10 7.89 8.68 9.47 10.26
37.22 4.78 5.58 6.37 7.17 7.96 8.76 9.56 10.35
40.42 5.04 5.87 6.71 7.55 8.39 9.23 10.07 10.91
40.80 5.07 5.91 6.76 7.60 8.45 9.29 10.14 10.98
41.42 5.12 5.97 6.83 7.68 8.54 9.39 10.24 11.10
41.80 5.15 6.01 6.87 7.73 8.59 9.45 10.31 11.17
42.11 5.18 6.05 6.91 7.77 8.64 9.50 10.36 11.23
42.48 5.22 6.08 6.95 7.82 8.69 9.56 10.43 11.30
42.79 5.24 6.12 6.99 7.87 8.74 9.61 10.49 11.36
43.16 5.28 6.16 7.04 7.92 8.80 9.68 10.56 11.44
44.13 5.37 6.26 7.16 8.05 8.95 9.84 10.74 11.63
45.23 5.48 6.39 7.30 8.22 9.13 10.04 10.95 11.87
45.98 5.55 6.48 7.40 8.33 9.26 10.18 11.11 12.03
46.72 5.63 6.57 7.51 8.45 9.38 10.32 11.26 12.20
_________________________________________________________________________________________________________
/TABLE
<PAGE>
PAGE 65
IDS Insured Tax-Exempt Fund
Prospectus
Aug. 29, 1995
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 (SEC). The SAI, dated Aug. 29, 1995, is incorporated
here by reference. For a free copy, contact American Express
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. INVESTMENTS IN THE FUND
INVOLVE INVESTMENT RISK INCLUDING POSSIBLE LOSS OF PRINCIPAL.
American Express Shareholder Service
P.O. Box 534
Minneapolis, MN
55440-0534
612-671-3733
TTY: 800-846-4852
<PAGE>
PAGE 66
Table of contents
The fund in brief
Goals
Types of fund investments and their risks
Manager and distributor
Portfolio manager
Alternative sales arrangements
Sales charge and fund expenses
Performance
Financial highlights
Total returns
Yield
Key terms
Investment policies and risks
Facts about investments and their risks
Alternative investment option
Valuing assets
How to buy, exchange or sell shares
Alternative sales arrangements
How to buy shares
How to exchange shares
How to sell shares
Reductions and 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 American Express Financial Corporation
General information
<PAGE>
PAGE 67
Appendices
1995 federal tax information
Descriptions of derivative instruments
<PAGE>
PAGE 68
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 and their risks
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. Other investments may include taxable investments,
derivative instruments and tax-exempt money market instruments.
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 American Express Financial Corporation
(AEFC), a provider of financial services since 1894. AEFC
currently manages more than $41 billion in assets for the IDS
MUTUAL FUND GROUP. Shares of the fund are sold through American
Express Financial Advisors Inc., a wholly owned subsidiary of AEFC.
Portfolio manager
Paul Hylle joined AEFC 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 AEFC, he had been a
portfolio manager at Lutheran Brotherhood, a Minnesota based
fraternal benefit society offering financial services to Lutherans.
Alternative sales arrangements
The fund offers its shares in three classes. Class A shares are
subject to a sales charge at the time of purchase. Class B shares
are subject to a contingent deferred sales charge (CDSC) on
redemptions made within six years of purchase and an annual
distribution (12b-1) fee. Class Y shares are sold without a sales
charge to qualifying institutional investors. Other differences
between the classes include the fees paid by each class. The fund
offers these alternatives so you may choose the method of
purchasing shares that is most beneficial given the amount of
purchase, length of time you expect to hold the shares and other
circumstances.<PAGE>
PAGE 69
Sales charge and fund expenses
When you buy Class A 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." No sales charge applies at the time of
purchase of Class B shares, although Class B shares may be subject
to a CDSC on redemptions made within six years and are subject to
annual distribution (12b-1) fees. Class Y shares are sold without
a sales charge to qualifying institutional investors. Shareholder
transaction expenses are incurred directly by an investor on the
purchase or redemption of fund shares. Fund operating expenses are
paid out of fund assets for each class of shares. Operating
expenses are reflected in the fund's daily share price and
dividends, and are not charged directly to shareholder accounts.
Shareholder transaction expenses
Class A Class B Class Y
Maximum sales charge on purchases
(as a percentage of offering price).......5% 0% 0%
Maximum deferred sales charge
imposed on redemptions (as a
percentage of original purchase price)....0% 5% 0%
Annual fund operating expenses*
(% of average daily net assets):
Class A Class B Class Y
Management fee .45% .45% .45%
12b-1 fee .00% .75% .00%
Other expenses** .30% .30% .12%
Total .75% 1.50% .57%
*Expenses for Class A are based on actual expenses for the last
fiscal year, restated to reflect current fees. Expenses for Class
B and Class Y are estimated based on the restated expenses for
Class A, except that the 12b-1 fee and transfer agency fee (under
other expenses) for Class B are based on agreements for that class
and that Class Y does not have a service fee.
**Other expenses include an administrative services fee, a
shareholder services fee for Class A and Class B, a transfer agency
fee, and other non-advisory expenses.
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
Class A $57 $73 $ 90 $139
Class B $65 $87 $102 $159**
Class B* $15 $47 $ 82 $159**
Class Y $ 6 $18 $ 32 $ 72
<PAGE>
PAGE 70
*Assuming Class B shares are not redeemed at the end of the period.
**Based on conversion of Class B shares to Class A shares after
eight years.
This example does not represent actual expenses, past or future.
Actual expenses may be higher or lower than those shown. Expense
information in this table has been restated to reflect estimates on
fund expenses from changes in fees approved by shareholders in
November 1994. Because Class B pays annual distribution (12b-1)
fees, long-term shareholders of Class B may indirectly pay an
equivalent of more than a 6.25% sales charge, the maximum permitted
by the National Association of Securities Dealers.
Performance
Financial highlights
<TABLE><CAPTION>
IDS Insured Tax-Exempt Fund
Performance
Financial highlights
Fiscal period ended June 30,
Per share income and capital changes*
1995 1994 1993 1992 1991 1990 1989*** 1988 1987 1986+
Classes
A B** Y**
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, $5.35 $5.47 $5.47 $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 .09 .08 .30 .30 .31 .32 .31 .16 .31 .32 .11
Net gains (losses) .05 (.07) (.06) (.28) .30 .29 .08 (.04) .14 .14 (.34) .07
(both realized
and unrealized)
Total from investment .35 .02 .02 .02 .60 .60 .40 .27 .30 .45 (.02) .18
operations
Less distributions:
Dividends from net (.30) (.09) (.08) (.30) (.30) (.31) (.32) (.31) (.16) (.32) (.32) (.11)
investment income
Net asset value, $5.40 $5.40 $5.41 $5.35 $5.63 $5.33 $5.04 $4.96 $5.00 $4.86 $4.73 $5.07
end of period
Ratios/supplemental data
1995 1994 1993 1992 1991 1990 1989*** 1988 1987 1986+
Classes
A B** Y**
Net assets, end of period $505 $6 $-- $525 $464 $308 $195 $133 $79 $55 $37 $25
(in millions)
Ratio of expenses to .66% 1.49%# .54%# .65% .65% .67% .67% .69% .72%# .77% .88% .75%++#
average daily net assets
Ratio of net income 5.66% 4.72%# 5.38%# 5.32% 5.53% 6.06% 6.36% 6.44% 6.60%# 6.55% 6.77% 6.52%++#
to average daily net assets
Portfolio turnover rate 53% 53% 53% 37% 5% 11% 8% 24% 19% 33% 29% 0%
(excluding short-term
securities)
Total return+++ 6.7% 0.4% 0.4% 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.
**Inception date was March 20, 1995 for Class B and Class Y. Significant shareholder activity
began March 28, 1995 for Class Y.
<PAGE>
PAGE 71
***The fund's fiscal year-end was changed from Dec. 31 to June 30, effective 1989.
+Inception date. Period from Aug. 18, 1986 to Dec. 31, 1986.
++During the period from Aug. 18, 1986 to Dec. 31, 1986, AEFC voluntarily reimbursed the fund
for expenses in excess of 0.75% of its average daily net assets, on an annual basis. Had AEFC
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.
#Adjusted to an annual basis.
##For the fiscal period ended Dec. 31, 1986 and June 30, 1989, the annualized total return is 9.5%
and 13.3%, respectively.
</TABLE>
The information in this table has been audited by KPMG Peat Marwick
LLP, independent auditors. The independent auditors' 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.
Total returns
Average annual total returns as of June 30, 1995
Purchase 1 year 5 years Since
made ago ago inception*
Insured Tax-Exempt:
Class A 1.32% 6.64% 6.55%
Lehman Brothers
Municipal Bond
Index 8.80% 8.27% 7.91%
*August 18, 1986
Cumulative total returns as of June 30, 1995
Purchase 1 year 5 years Since
made ago ago inception*
Insured Tax-Exempt:
Class A 1.32% 37.91% 75.56%
Lehman Brothers
Municipal Bond
Index 8.80% 48.80% 96.49%
*August 18, 1986
These examples show total returns from hypothetical investments in
Class A shares of the fund. These returns are compaired to those
of popular indexes for the same periods. Total returns for Class
A, Class B and Class Y for the period from March 20, 1995 to June
30, 1995 were -4.5%, -4.6% and +0.4%, respectively. March 20, 1995
was the inception date for Class B and Class Y. Total return for
Class A is shown for comparative purposes. The performance of
Class B and Class Y will vary from the performance of Class A based
on differences in sales charges and fees. Past performance for
Class Y for the periods prior to March 20, 1995 may be calculated
based on the performance of Class A, adjusted to reflect<PAGE>
PAGE 72
differences in sales charges although not other differences in
expenses.
For purposes of calculation, information about the fund assumes:
o a sales charge of 5% for Class A shares
o redemption at the end of the period and deduction of the
applicable contingent deferred sales charge for Class B shares
o no sales charge for Class Y shares
o no adjustments for taxes an investor may have paid on the
reinvested income and capital gains
o 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, 1995, was 4.54% for Class A, 4.02% for Class B and 4.90% for
Class Y. 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
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 (distribution) yield for the same 30-
day period ended June 30, 1995 was 4.98% for Class A, 4.52% for
Class B and 5.38% for Class Y. 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 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.<PAGE>
PAGE 73
These yield calculations do not include any contingent deferred
sales charge, ranging from 5% to 0% on Class B shares, which would
reduce the yields quoted.
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. For each class, it is the total
market value of all of a fund's investments and other assets
attributable to that class, less any liabilities attributable to
that class, divided by the number of shares of that class
outstanding.
When you buy shares, you pay the NAV plus any applicable sales
charge. When you sell shares, the price you receive is the NAV
minus any applicable sales charge. The NAV usually changes daily,
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
for Class A. It is the NAV for Class B and Class Y. NAVs and
public offering prices of IDS funds are listed each day in major
newspapers and financial publications for classes of funds large
enough to be listed.
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<PAGE>
PAGE 74
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.
Other investments may include taxable investments, derivative
instruments and tax-exempt money market instruments.
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 bonds generally falls as interest rates increase, and
rises as interest rates decrease. The price of a bond also
fluctuates 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). 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 the 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 75
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. These investments are not
insured or guaranteed. 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 descriptions of derivative instruments,
see the Appendix to this prospectus.
<PAGE>
PAGE 76
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. These investments are not insured or
guaranteed. No more than 10% of the fund's assets will be held in
inverse floaters.
Securities and derivative instruments that are illiquid: A
security or derivative instrument is illiquid if it 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 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 the fund's net assets
will be held in securities and derivative instruments that are
illiquid.
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
net 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, by an existing or secondary 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. None of the fund's<PAGE>
PAGE 77
assets were used to pay premiums for the fiscal year ended June 30,
1995.
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.
Alternative investment option
In the future, the board of the fund may determine for operating
efficiencies to use a master/feeder structure. Under that
structure, the fund's investment portfolio would be managed by
another investment company with the same goal as the fund, rather
than investing directly in a portfolio of securities.
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
Alternative sales arrangements
The fund offers three different classes of shares - Class A, Class
B and Class Y. The primary differences among the classes are in
the sales charge structures and in their ongoing expenses. These
differences are summarized in the table below. You may choose the
class that best suits your circumstances and objectives.
<TABLE><CAPTION>
Sales charge and
distribution
(12b-1) fee Service fee Other information
<S> <C> <C> <C>
Class A Maximum initial 0.175% of average Initial sales charge
sales charge of daily net assets waived or reduced
5%; no 12b-1 fee for certain purchases
<PAGE>
PAGE 78
Class B No initial sales 0.175% of average Shares convert to
charge; maximum CDSC daily net assets Class A after eight
of 5% declines to 0% years; CDSC waived in
after six years; 12b-1 certain circumstances
fee of 0.75% of average
daily net assets
Class Y None None Available only to
certain qualifying
institutional
investors
</TABLE>
Conversion of Class B shares to Class A shares - Eight calendar
years after Class B shares were originally purchased, Class B
shares will convert to Class A shares and will no longer be subject
to a distribution fee. The conversion will be on the basis of
relative net asset values of the two classes, without the
imposition of any sales charge. Class B shares purchased through
reinvested dividends and distributions will convert to Class A
shares in a pro-rata portion as the Class B shares purchased other
than through reinvestment.
Considerations in determining whether to purchase Class A or Class
B shares - You should consider the information below in determining
whether to purchase Class A or Class B shares. The sales charges
and distribution fee (included in "Ongoing expenses") are
structured so that you will have approximately the same total
return at the end of eight years regardless of which class you
chose.
Sales charges on purchase or redemption
If you purchase Class A If you purchase Class B
shares shares
o You will not have all o All of your money is
of your purchase price invested in shares of
invested. Part of your stock. However, you will
purchase price will go pay a sales charge if you
to pay the sales charge. redeem your shares within
You will not pay a sales six years of purchase.
charge when you redeem
your shares.
o You will be able to o No reductions of the
take advantage of sales charge are
reductions in the sales available for large
charge. purchases.
If your investments in IDS funds total $250,000 or more, you are
better off paying the reduced sales charge in Class A than paying
the higher fees in Class B. If you qualify for a waiver of the
sales charge, you should purchase Class A shares.
<PAGE>
PAGE 79
Ongoing expenses
If you purchase Class A If you purchase Class B
shares shares
o Your shares will have o The distribution and
a lower expense ratio transfer agency fees for
than Class B shares Class B will cause your
because Class A does not shares to have a higher
pay a distribution fee expense ratio and to pay
and the transfer agency lower dividends than
fee for Class A is lower Class A shares. After
than the fee for Class B. eight years, Class B
As a result, Class A shares shares will convert to
will pay higher dividends Class A shares and will
than Class B shares. no longer be subject to
higher fees.
You should consider how long you plan to hold your shares and
whether the accumulated higher fees and CDSC on Class B shares
prior to conversion would be less than the initial sales charge on
Class A shares. Also consider to what extent the difference would
be offset by the lower expenses on Class A shares. To help you in
this analysis, the example in the "Sales charge and fund expenses"
section of the prospectus illustrates the charges applicable to
each class of shares.
Class Y shares - Class Y shares are offered to certain
institutional investors. Class Y shares are sold without a front-
end sales charge or a CDSC and are not subject to either a service
fee or a distribution fee. The following investors are eligible to
purchase Class Y shares:
o Qualified employee benefit plans* if the plan:
- uses a daily transfer recordkeeping service offering
participants daily access to IDS funds and has
- at least $10 million in plan assets or
- 500 or more participants; or
- does not use daily transfer recordkeeping and has
- at least $3 million invested in funds of the IDS MUTUAL
FUND GROUP or
- 500 or more participants.
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 $10
million invested in funds of the IDS MUTUAL FUND GROUP.
o Nonqualified deferred compensation plans* whose participants
are included in a qualified employee benefit plan described
above.
* Eligibility must be determined in advance by American Express
Financial Advisors. To do so, contact your financial advisor.
Financial advisors may receive different compensation for selling
Class A, Class B and Class Y shares.<PAGE>
PAGE 80
How to buy shares
If you're investing in this fund for the first time, you'll need to
set up an account. Your financial advisor 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 AEFC 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, AEFC,
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 AEFC 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.
o If your application does not specify which class of shares you
are purchasing, it will be assumed that you are investing in
Class A shares.
<TABLE><CAPTION>
Three ways to invest
1
<S> <C> <C>
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 investments
American Express Financial Advisors Inc. per fund: $ 100
P.O. Box 74 Account balances
Minneapolis, MN 55440-0074 per fund: $ 300*
Your financial advisor will help
you with this process. <PAGE>
PAGE 81
2
By scheduled Contact your financial advisor 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 AEFC
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).
</TABLE>
*If your account balance falls below $300, you will be asked 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.
How to exchange shares
You can exchange your shares of the fund at no charge for shares of
the same class of any other publicly offered fund in the IDS MUTUAL
FUND GROUP available in your state. Exchanges into IDS Tax-Free
Money Fund must be made from Class A shares. 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. American Express
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, minus any applicable sales charge, at the close of
business on the day your request is accepted at the Minneapolis<PAGE>
PAGE 82
headquarters. If your request arrives after the close of business,
the price per share will be the net asset value, minus any
applicable sales charge, 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.
<TABLE><CAPTION>
Two ways to request an exchange or sale of shares
1
<S> <C>
By letter Include in your letter:
o the name of the fund(s)
o the class of shares to be exchanged or redeemed
o your account number(s) (for exchanges, both funds must be registered in the same
ownership)
o your Taxpayer Identification Number (TIN)
o the dollar amount or number of shares you want to exchange or sell
o signature of all registered account owners
o for redemptions, indicate how you want your sales proceeds delivered to you
o any paper certificates of shares you hold
Regular mail:
American Express Shareholder Service
Attn: Redemptions
P.O. Box 534
Minneapolis, MN 55440-0534
Express mail:
American Express Shareholder Service
Attn: Redemptions
733 Marquette Ave.
Minneapolis, MN 55402
2
By phone
American Express Telephone o The fund and AEFC will honor any telephone exchange or redemption request believed to be
Transaction Service: authentic and will use reasonable procedures to confirm that they are. This includes
800-437-3133 or asking identifying questions and tape recording calls. If reasonable
612-671-3800 procedures are not followed, the fund or AEFC 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 American Express Shareholder Service. Each registered owner must sign
the request.
o AEFC 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 Acting on your instructions, your financial advisor may conduct telephone transactions
on your behalf.
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.
<PAGE>
PAGE 83
o Exchanges must be made into the same class of shares of the new
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 AEFC 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 class from which you redeemed. If you
reinvest in Class A, you will purchase the new shares at net asset
value rather than the offering price on the date of a new purchase.
If you reinvest in Class B, any CDSC you paid on the amount you are
reinvesting also will be reinvested. To take advantage of this
option, 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 a check is mailed to you.
(A check may be mailed earlier if your bank provides evidence
satisfactory to the fund and AEFC that your check has cleared.)
<TABLE><CAPTION>
Three ways to receive payment when you sell shares
1
<S> <C>
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 fund account.
<PAGE>
PAGE 84
NOTE: Pre-authorization required. For
instructions, contact your financial
advisor or American Express Shareholder Service.
3
By scheduled payout plan o Minimum payment: $50.
o Contact your financial advisor or American Express
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 and waivers of the sales charge
Class A - initial sales charge alternative
On purchases of Class A shares, 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 $400,000 3.8 3.95
Next $500,000 2.0 2.04
$1,000,000 or more 0.0 0.00
* To calculate the actual sales charge on an investment greater
than $50,000, amounts for each applicable increment must be
totaled. See the SAI.
Reductions of the sales charge on Class A shares
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 Tax-Free Money Fund and Class A shares of IDS Cash
Management 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.<PAGE>
PAGE 85
For more details, see the SAI.
Waivers of the sales charge for Class A shares
Sales charges do not apply to:
o Current or retired trustees, directors, officers or employees of
the fund or AEFC or its subsidiaries, their spouses and unmarried
children under 21.
o Current or retired American Express financial advisors, their
spouses and unmarried children under 21.
o Qualified employee benefit plans* using a daily transfer
recordkeeping system 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 Shareholders who have at least $1 million invested in funds of
the IDS MUTUAL FUND GROUP. If the investment is redeemed in the
first year after purchase, a CDSC of 1% will be charged on the
redemption.
o Purchases made within 30 days after a redemption of shares (up
to the amount redeemed):
- of a product distributed by American Express Financial
Advisors in a qualified plan subject to a deferred
sales charge or
- a qualified plan where American Express Trust Company has a
recordkeeping, trustee, investment management or investment
servicing relationship.
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.
o Purchases made through American Express Strategic Portfolio
Service (total amount of all investments made in the Strategic
Portfolio Service must be at least $50,000).
*Eligibility must be determined in advance by American Express
Financial Advisors. To do so, contact your financial advisor.
Class B - contingent deferred sales charge alternative
Where a CDSC is imposed on a redemption, it is based on the amount
of the redemption and the number of calendar years, including the
year of purchase, between purchase and redemption. The following
table shows the declining scale of percentages that apply to
redemptions during each year after a purchase:
<PAGE>
PAGE 86
If a redemption is The percentage rate
made during the for the CDSC is:
First year 5%
Second year 4%
Third year 4%
Fourth year 3%
Fifth year 2%
Sixth year 1%
Seventh year 0%
If the amount you are redeeming reduces the current net asset value
of your investment in Class B shares below the total dollar amount
of all your purchase payments during the last six years (including
the year in which your redemption is made), the CDSC is based on
the lower of the redeemed purchase payments or market value.
The following example illustrates how the CDSC is applied. Assume
you had invested $10,000 in Class B shares and that your investment
had appreciated in value to $12,000 after 15 months, including
reinvested dividend and capital gain distributions. You could
redeem any amount up to $2,000 without paying a CDSC ($12,000
current value less $10,000 purchase amount). If you redeemed
$2,500, the CDSC would apply only to the $500 that represented part
of your original purchase price. The CDSC rate would be 4% because
a redemption after 15 months would take place during the second
year after purchase.
Because the CDSC is imposed only on redemptions that reduce the
total of your purchase payments, you never have to pay a CDSC on
any amount you redeem that represents appreciation in the value of
your shares, income earned by your shares or capital gains. In
addition, when determining the rate of any CDSC, your redemption
will be made from the oldest purchase payment you made. Of course,
once a purchase payment is considered to have been redeemed, the
next amount redeemed is the next oldest purchase payment. By
redeeming the oldest purchase payments first, lower CDSCs are
imposed than would otherwise be the case.
Waivers of the sales charge for Class B shares
The CDSC on Class B shares will be waived on redemptions of shares:
o In the event of the shareholder's death,
o Purchased by any trustee, director, officer or employee of a fund
or AEFC or its subsidiaries,
o Purchased by any American Express financial advisor,
o Held in a trusteed employee benefit plan,
o Held in IRAs or certain qualified plans for which American
Express Trust Company acts as custodian, such as Keogh plans, tax-
sheltered custodial accounts or corporate pension plans, provided
that the shareholder is:
<PAGE>
PAGE 87
- at least 59-1/2 years old, and
- taking a retirement distribution
(if the redemption is part of a transfer to an IRA or
qualified plan in a product distributed by American Express
Financial Advisors, or a custodian-to-custodian transfer to a
product not distributed by American Express Financial
Advisors, the CDSC will not be waived), or
- redeeming under an approved substantially equal periodic
payment arrangement.
Special shareholder services
Services
To help you track and evaluate the performance of your investments,
AEFC 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
advisor.
Quick telephone reference
American Express Telephone Transaction Service
Redemptions and exchanges, dividend payments or reinvestments and
automatic payment arrangements
National/Minnesota: 800-437-3133
Mpls./St. Paul area: 671-3800
American Express Shareholder Service
Fund performance, objectives and account inquiries
612-671-3733
TTY Service
For the hearing impaired
800-846-4852
American Express Infoline
Automated account information (TouchToneR phones only), including
current fund prices and performance, account values and recent
account transactions
National/Minnesota: 800-272-4445
Mpls./St. Paul area: 671-1630
<PAGE>
PAGE 88
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
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. 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.) Short-term capital
gains earned by the fund are paid to shareholders as part of their
ordinary income dividend and are taxable as ordinary income.
Dividends paid by each class will be calculated at the same time,
in the same manner and in the same amount, except the expenses
attributable solely to Class A, Class B and Class Y will be paid
exclusively by that class. Class B shareholders will receive lower
per share dividends than Class A and Class Y shareholders because
expenses for Class B are higher than for Class A or Class Y. Class
A shareholders will receive lower per share dividends than Class Y
shareholders because expenses for Class A are higher than for Class
Y.
Reinvestments
Dividends and capital gain distributions are automatically
reinvested in additional shares in the same class 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
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.<PAGE>
PAGE 89
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.
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 advisor
regarding its deductibility for state and local income tax
purposes.
Each January, you will receive a tax statement showing the kinds
and total amount of all distributions you received during the
previous year. You must report distributions on your tax returns,
even if they are reinvested in additional shares.
"Buying a dividend" creates a tax liability. This means buying
shares shortly before 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 AEFC.
If you don't provide the TIN, 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
<PAGE>
PAGE 90
You also could be subject to backup withholding because you failed
to report interest or dividends on your tax return as required.
<TABLE><CAPTION>
How to determine the correct TIN
Use the Social Security or
For this type of account: Employer Identification number
of:
<S> <C>
Individual or joint account The individual or individuals
listed on the account
Custodian account of a minor The minor
(Uniform Gifts/Transfers 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 advisor or
local American Express Financial Advisors 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 advisor 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<PAGE>
PAGE 91
owned by its shareholders. Each fund issues shares in three
classes - Class A, Class B and Class Y. Each class has different
sales arrangements and bears different expenses. Each class
represents interests in the assets of the fund. 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.
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. Each class has exclusive voting rights with respect
to the provisions of the fund's distribution plan that pertain to a
particular class and other matters for which separate class voting
is appropriate under applicable law.
Shareholder meetings
The fund does not hold annual shareholder meetings. However, the
trustees may call meetings at their discretion, or on demand by
holders of 10% or more of the outstanding shares, to elect or
remove trustees.
Trustees and officers
Shareholders elect the trustees that 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 board.
The board has 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.
<PAGE>
PAGE 92
Robert F. Froehlke
Former president of all funds in the IDS MUTUAL FUND GROUP.
Heinz F. Hutter
Former president and chief operating officer, Cargill, Inc.
Anne P. Jones
Attorney and telecommunications consultant.
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.
C. Angus Wurtele
Chairman of the board and chief executive officer, The Valspar
Corporation.
Interested trustees who are officers and/or employees of AEFC
William H. Dudley
Executive vice president, AEFC.
David R. Hubers
President and chief executive officer, AEFC.
John R. Thomas
Senior vice president, AEFC.
Officers who also are officers and/or employees of AEFC
Peter J. Anderson
Vice president of all funds in the IDS MUTUAL FUND GROUP.
Melinda S. Urion
Treasurer of all funds in the IDS MUTUAL FUND GROUP.
Other officer
Leslie L. Ogg
Vice president, general counsel and secretary of all funds in the
IDS MUTUAL FUND GROUP.
Refer to the SAI for the trustees' and officers' biographies.
<PAGE>
PAGE 93
Investment manager and transfer agent
The fund pays AEFC for managing its portfolios, providing
administrative services and serving as transfer agent (handling
shareholder accounts).
Under its Investment Management Services Agreement, AEFC determines
which securities will be purchased, held or sold (subject to the
direction and control of the fund's trustees). Under the current
agreement, effective March 20, 1995, the fund pays AEFC a fee for
these services based on the average daily net assets of the fund,
as follows:
Assets Annual rate
(billions) at each asset level
First $1.0 0.450%
Next 1.0 0.425
Next 1.0 0.400
Next 3.0 0.375
Over 6.0 0.350
For the fiscal year ended June 30, 1995, under the current and
prior agreements, the fund paid AEFC a total investment management
fee of 0.50% of its average daily net assets. Under the Agreement,
the fund also pays taxes, brokerage commissions and nonadvisory
expenses.
Under an Administrative Services Agreement, the fund pays AEFC for
administration and accounting services at an annual rate of 0.04%
decreasing in gradual percentages to 0.02% as assets increase.
In addition, under a separate Transfer Agency Agreement, AEFC
maintains shareholder accounts and records. The fund pays AEFC an
annual fee per shareholder account for this service as follows:
o Class A $15.50
o Class B $16.50
o Class Y $15.50
Distributor
The fund sells shares through American Express Financial Advisors,
a wholly owned subsidiary of AEFC, under a Distribution Agreement.
Financial advisors representing American Express Financial Advisors
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.
For Class B shares, to help defray costs not covered by sales
charges, including costs for marketing, sales administration,
training, overhead, direct marketing programs, advertising and<PAGE>
PAGE 94
related functions, the fund pays American Express Financial
Advisors a distribution fee, also known as a 12b-1 fee. This fee
is paid under a Plan and Agreement of Distribution that follows the
terms of Rule 12b-1 of the Investment Company Act of 1940. Under
this Agreement, the fund pays a distribution fee at an annual rate
of 0.75% of the fund's average daily net assets attributable to
Class B shares for distribution-related services. The total 12b-1
fee paid by the fund under the current agreement for the fiscal
year ended June 30, 1995 was 0.75% of its average daily net assets.
This fee will not cover all of the costs incurred by American
Express Financial Advisors.
For Class A shares, the total 12b-1 fee paid by the fund under the
prior agreement for the fiscal year ended June 30, 1995 was 0.01%
of its average daily net assets.
Under a Shareholder Service Agreement, the fund also pays a fee for
service provided to shareholders by financial advisors and other
servicing agents. The fee is calculated at a rate of 0.175% of the
fund's average daily net assets attributable to Class A and Class B
shares.
Total expenses paid by the fund's Class A shares for the fiscal
year ended June 30, 1995 were 0.66% of its average daily net
assets. Expenses for Class B and Class Y, 1.50% and 0.57%,
respectively, were restated to reflect current agreements.
Total fees and expenses (excluding taxes and brokerage commissions)
cannot exceed the most restrictive applicable state expense
limitation.
About American Express Financial Corporation
General information
The AEFC 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, AEFC also manages investments for itself and
its subsidiaries, IDS Certificate Company and IDS Life Insurance
Company. Total assets under management on June 30, 1995 were more
than $121 billion.
American Express Financial Advisors serves individuals and
businesses through its nationwide network of more than 175 offices
and more than 7,900 advisors.
Other AEFC subsidiaries provide investment management and related
services for pension, profit sharing, employee savings and
endowment funds of businesses and institutions.
AEFC 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<PAGE>
PAGE 95
Financial Center, New York, NY 10285. The fund may pay brokerage
commissions to broker-dealer affiliates of American Express and
AEFC.
<PAGE>
PAGE 96
Appendix A
1995 Federal Tax-Exempt and Taxable Equivalent Yield Calculation
These tables will help you determine your federal taxable yield
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 $94,250-$143,600 range. Under Adjusted Gross Income, $175,000
is in the $172,050 to $294,550 column. The Taxable Income line and
Adjusted Gross Income column meet at 33.17%. This is the rate
you'll use in Step 2.
</TABLE>
<TABLE><CAPTION>
Adjusted gross income*
___________________________________________________________________________________________
Taxable income** $0 $114,700 $172,050 Over
to to to
$114,700(1) $172,050(2) $294,550(3) $294,550(2)
___________________________________________________________________________________________
Married Filing Jointly
<S> <C> <C>
$ 0 - $ 39,000 15.00%
39,000 - 94,250 28.00 28.84%
94,250 - 143,600 31.00 31.93 33.17%
143,600 - 256,500 36.00 37.08 38.52 37.08%
256,500 + 39.60 42.37*** 40.79
___________________________________________________________________________________________
$0 $114,700 Over
to to
$114,700(1) $237,200(3) $237,200(2)
___________________________________________________________________________________________
Single
$ 0 - $ 23,350 15.00%
23,350 - 56,550 28.00
56,550 - 117,950 31.00 32.55%
117,950 - 256,500 36.00 37.80 37.08%
256,500 + 39.60 41.58 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 $294,550 and your taxable income
exceeds $256,500.
</TABLE>
(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.<PAGE>
PAGE 97
(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.
STEP 2: Determing your federal taxable yield equivalents.
Using 33.17%, you may determine that a tax-exempt yield of 4% is
equivalent to earning a taxable 5.99% 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
32.55 5.93 6.67 7.41 8.15 8.90 9.64 10.38 11.12
33.17 5.99 6.73 7.48 8.23 8.98 9.73 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
37.80 6.43 7.23 8.04 8.84 9.65 10.45 11.25 12.06
38.52 6.51 7.32 8.13 8.95 9.76 10.57 11.39 12.20
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
41.58 6.85 7.70 8.56 9.41 10.27 11.13 11.98 12.84
42.37 6.94 7.81 8.68 9.54 10.41 11.28 12.15 13.01
_______________________________________________________________________________________________________
/TABLE
<PAGE>
PAGE 98
Appendix B
Descriptions of derivative instruments
What follows are brief descriptions of derivative instruments the
fund may use. At various times the fund may use some or all of
these instruments and is not limited to these instruments. It may
use other similar types of instruments if they are consistent with
the fund's investment goal and policies. For more information on
these instruments, see the Statement of Additional Information.
Options and futures contracts. An option is an agreement to buy or
sell an instrument at a set price during a certain period of time.
A futures contract is an agreement to buy and sell an instrument
for a set price on a future date. The fund may buy and sell
options and futures contracts to manage its exposure to changing
interest rates, security prices and currency exchange rates.
Options and futures may be used to hedge the fund's investments
against price fluctuations or to increase market exposure.
Asset-backed and mortgage-backed securities. Asset-backed and
mortgage-backed securities include interests in pools of consumer
loans or mortgages, such as collateralized mortgage obligations and
stripped mortgage-backed securities. Interest and principal
payments depend on payment of the underlying loans or mortgages.
The value of these securities may also be affected by changes in
interest rates, the market's perception of the issuers and the
creditworthiness of the parties involved. Stripped mortgage-backed
securities include interest only (IO) and principal only (PO)
securities. Cash flows and yields on IOs and POs are extremely
sensitive to the rate of principal payments on the underlying
mortgage loans or mortgage-backed securities.
Indexed securities. The value of indexed securities is linked to
currencies, interest rates, commodities, indexes or other financial
indicators. Most indexed securities are short- to intermediate-
term fixed income securities whose values at maturity or interest
rates rise or fall according to the change in one or more specified
underlying instruments. Indexed securities may be more volatile
than the underlying instrument itself.
Inverse floaters. Inverse floaters are created by underwriters
using the interest payment on securities. A portion of the
interest received is paid to holders of instruments based on
current interest rates for short-term securities. The remainder,
minus a servicing fee, is paid to holders of inverse floaters. As
interest rates go down, the holders of inverse floaters receive
more income and an increase in the price for the inverse floaters.
As interest rates go up, the holders of the inveerse floaters
receive less income and a decrease in the price for the inverse
floaters.
Structured products. Structured products are over-the-counter
financial instruments created specifically to meet the needs of one
or a small number of investors. The instrument may consist of a
warrant, an option or a forward contract embedded in a note or any
of a wide variety of debt, equity and/or currency combinations.<PAGE>
PAGE 99
Risks of structured products include the inability to close such
instruments, rapid changes in the market and defaults by other
parties.<PAGE>
PAGE 100
IDS SPECIAL TAX-EXEMPT SERIES TRUST
IDS CALIFORNIA TAX-EXEMPT 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, 1995
This Statement of Additional Information (SAI) is not a prospectus.
It should be read together with the prospectus and the financial
statements contained in the Annual Report which may be obtained
from your American Express financial advisor or by writing to
American Express Shareholder Service, P.O. Box 534, Minneapolis, MN
55440-0534.
This SAI is dated Aug. 29, 1995, and it is to be used with the
prospectus dated Aug. 29, 1995, and the Annual Report for the
fiscal year ended June 30, 1995.
<PAGE>
PAGE 101
TABLE OF CONTENTS
Goal and Investment Policies.........................See Prospectus
Additional Investment Policies................................p. 3
Portfolio Transactions........................................p. 5
Brokerage Commissions Paid to Brokers Affiliated with AEFC....p. 7
Performance Information.......................................p. 8
Valuing Fund Shares...........................................p. 10
Investing in a Fund...........................................p. 11
Redeeming Shares..............................................p. 15
Pay-out Plans.................................................p. 15
Exchanges.....................................................p. 16
Capital Loss Carryover........................................p. 17
Taxes.........................................................p. 17
Agreements....................................................p. 18
Trustees and Officers.........................................p. 22
Principal Holders of Securities...............................p. 28
Custodian.....................................................p. 29
The Trusts....................................................p. 29
Independent Auditors..........................................p. 29
Financial Statements..............................See Annual Report
Prospectus....................................................p. 29
Appendix A: Description of Ratings of Tax-Exempt Securities
and Short-Term Securities........................p. 30
Appendix B: Options and Interest Rate Futures Contracts
and Additional Information on Investment
Policies.........................................p. 34
Appendix C: State Risk Factors...............................p. 40
Appendix D: Dollar-Cost Averaging............................p. 51
<PAGE>
PAGE 102
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:
'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.
'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 has any
present intention to borrow.
'Make cash loans if the total commitment amount exceeds 5% of the
fund's total assets.
'Buy or sell real estate, unless acquired as a result of ownership
of securities or other instruments, except this shall not prevent
the fund from investing in securities or other instruments backed
by real estate or securities if companies engaged in the real
estate business. For purposes of this policy, real estate includes
real estate limited partnerships.
'Buy or sell physical commodities unless acquired as a result of
ownership of securities or other instruments, except this shall not
prevent the fund from buying or selling options and futures
contracts or from investing in securities or other instruments
backed by, or whose value is derived from, physical commodities.
'Make a loan of any part of its assets to American Express
Financial Corporation (AEFC), to the directors and officers of AEFC
or to its own trustees and officers.
'Purchase securities of an issuer if the trustees and officers of
the fund or the directors and officers of AEFC 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 holding of all directors and officers of AEFC 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.
'Lend fund securities in excess of 30% of its net assets, at market
value. 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 gets the market price in cash, U.S. government
securities, letters of credit or such other collateral as may be
permitted by regulatory agencies and approved by the trustees. If
the 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<PAGE>
PAGE 103
collateral if this value goes up. The risks are that the borrower
may not provide additional collateral when required or return the
securities when due.
Unless changed by the trustees, each fund will not:
'Buy on margin or sell short, but it may enter into interest rate
futures contracts.
'Pledge or mortgage its assets beyond 15% of 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 futures
contracts are not deemed to be a pledge of assets.
'Invest more than 5% of its total assets in securities whose issuer
or guarantor of principal and interest has been in operation for
less than three years.
'Invest in voting securities, securities of investment companies or
exploration or development programs, such as oil, gas or mineral
leases.
'Invest more than 5% of its net assets in warrants. Under one
state's law no more than 2% of the fund's net assets may be
invested in warrants not listed on the New York or American Stock
Exchange.
'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. For purposes of complying with Ohio law, the
fund will not invest more than 15% of its total assets in a
combination of illiquid securities, 144A securities and securities
of companies, including any predecessor, that have a record of less
than three years continuous operations.
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<PAGE>
PAGE 104
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 or 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.
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 a fund. Payment and
interest terms, however, are fixed at the time the purchaser enters
into a commitment. Under normal market conditions, each 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 a 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.
Notwithstanding any of the fund's other investment policies, the
fund may invest its assets in an open-end management investment
company having substantially the same investment objectives,
policies and restrictions as the fund for the purpose of having
those assets managed as part of a combined pool.
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 and additional information on
investment policies, see Appendix B. For a discussion of state
risk factors, see Appendix C.
PORTFOLIO TRANSACTIONS
Subject to policies set by the board of trustees (the "trustees"),
AEFC is authorized to determine, consistent with each fund's
investment goal and policies, which securities will be purchased,<PAGE>
PAGE 105
held or sold. In determining where the buy and sell orders are to
be placed, AEFC 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.
AEFC has a strict Code of Ethics that prohibits its affiliated
personnel from engaging in personal investment activities that
compete with or attempt to take advantage of planned portfolio
transactions for any fund in the IDS MUTUAL FUND GROUP. AEFC
carefully monitors compliance with its Code of Ethics.
Normally, each fund's securities are traded on a principal rather
than an agency basis. In other words, AEFC 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. AEFC 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.
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 AEFC to do so to the extent authorized
by law, if AEFC 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 AEFC's overall responsibilities to the funds
in the IDS MUTUAL FUND GROUP and other funds for which it acts as
investment advisor.
Research provided by brokers supplements AEFC's 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. AEFC 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.
Each investment decision made for a fund is made independently from
any decision made for another fund in the IDS MUTUAL FUND GROUP or
other account advised by AEFC or any AEFC subsidiary. When a fund
buys or sells the same security as another fund or account, AEFC
carries out the purchase or sale in a way the fund agrees in
advance is fair. Although sharing in large transactions may<PAGE>
PAGE 106
adversely affect the price or volume purchased or sold by the fund,
the fund hopes to gain an overall advantage in execution. AEFC has
assured the funds it will continue to seek ways to reduce brokerage
costs.
On a periodic basis, AEFC makes a comprehensive review of the
broker-dealers and the overall reasonableness of their commissions.
The review evaluates execution, operational efficiency and research
services.
For the fiscal years ending June 30, each fund paid the following
brokerage commissions on financial futures contracts. No
transactions were directed to brokers because of research services
they provided to each fund.
CA MA MI MN NY OH
1995 $55,741 $10,533 $11,742 $91,029 $30,993 $11,668
1994 -0- -0- -0- 3,850 1,260 -0-
1993 -0- -0- -0- -0- -0- -0-
Each fund acquired no securities of their 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, 1995.
The portfolio turnover rates for the fiscal years ended June 30
were as follows:
CA MA MI MN NY OH
1995 48% 16% 48% 28% 20% 45%
1994 27 6 16 13 10 11
BROKERAGE COMMISSIONS PAID TO BROKERS AFFILIATED WITH AEFC
Affiliates of American Express Company (American Express) (of which
AEFC is a wholly owned subsidiary) may engage in brokerage and
other securities transactions on behalf of each fund according to
procedures adopted by the fund's board of directors and to the
extent consistent with applicable provisions of the federal
securities laws. AEFC will use an American Express affiliate only
if (i) AEFC determines that each fund will receive prices and
executions at least as favorable as those offered by qualified
independent brokers performing similar brokerage and other services
for the fund and (ii) the affiliate charges each fund commission
rates consistent with those the affiliate charges comparable
unaffiliated customers in similar transactions and if such use is
consistent with terms of the Investment Management Services
Agreement.
AEFC may direct brokerage to compensate an affiliate. AEFC will
receive research on South Africa from New Africa Advisors, a
wholly-owned subsidiary of Sloan Financial Group. AEFC owns 100%
of IDS Capital Holdings Inc. which in turn owns 40% of Sloan
Financial Group. New Africa Advisors will send research to AEFC<PAGE>
PAGE 107
and in turn American Express Financial Corporation will direct
trades to a particular broker. The broker will have an agreement
to pay New Africa Advisors. All transactions will be on a best
execution basis. Compensation received will be reasonable for the
services rendered.
No brokerage commissions were paid to brokers affiliated with AEFC
for the three most recent fiscal years.
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 a class 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 a class 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 for a class 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 108
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:
<TABLE><CAPTION>
30-Day Period Class A Class B Class Y
Fund Ended June 30, 1995 Yield Yield Yield
<S> <C> <C> <C>
California 4.33% 3.79% 4.79%
Massachusetts 4.61 4.11 5.10
Michigan 4.46 3.97 4.83
Minnesota 5.24 4.75 5.51
New York 4.28 3.75 4.65
Ohio 4.40 3.87 4.88
_________________________________________________________________________
</TABLE>
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, 1995
California Massachusetts Michigan Minnesota New York Ohio
<S> <C> <C> <C> <C> <C> <C>
Class A
15.0% 5.09% 5.42% 5.25% 6.16% 5.04% 5.18%
28.0% 6.01 6.40 6.19 7.28 5.94 6.11
33.0% 6.46 6.88 6.66 7.82 6.39 6.57
Class B
15.0% 4.46% 4.84% 4.67% 5.59% 4.41% 4.55%
28.0% 5.26 5.71 5.51 6.60 5.21 5.38
33.0% 5.66 6.13 5.93 7.09 5.60 5.78
Class Y
15.0% 5.64% 6.00% 5.68% 6.48% 5.47% 5.74%
28.0% 6.65 7.08 6.71 7.65 6.46 6.78
33.0% 7.15 7.61 7.21 8.22 6.94 7.28
</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,<PAGE>
PAGE 109
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
3, 1995, 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>
California
Class A $239,296,972 divided by 46,411,360 equals $5.156
Class B 2,045,066 396,638 5.156
Class Y 1,013 196 5.167
Massachusetts
Class A 68,257,758 12,949,679 5.271
Class B 1,844,020 349,909 5.270
Class Y 1,015 192 5.287
Michigan
Class A 77,491,272 14,382,196 5.388
Class B 987,798 183,333 5.388
Class Y 1,010 187 5.403
Minnesota
Class A 402,736,506 77,598,556 5.190
Class B 4,062,893 782,831 5.190
Class Y 1,015 195 5.203
New York
Class A 119,683,512 23,527,327 5.087
Class B 1,880,359 369,640 5.087
Class Y 1,005 197 5.100
Ohio
Class A 73,392,231 13,907,946 5.277
Class B 708,949 134,347 5.277
Class Y 1,010 191 5,287
</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.
<PAGE>
PAGE 110
'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
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 board of trustees (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, AEFC 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 each 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 if applicable. For Class B and Class Y,
there is no initial sales charge so the public offering price is
the same as the net asset value. For Class A, the public offering
price for an investment of less than $50,000, made July 3, 1995,
was determined as follows: The sales charge is paid to American
Express Financial Advisors by the person buying the shares.
<PAGE>
PAGE 111
<TABLE><CAPTION>
Fund Net asset value Divided by (1.00 Public offering
of one share -0.05) for a price
sales charge
<S> <C> <C> <C>
California $5.156 / 0.95 = $5.43
Massachusetts 5.271 / 0.95 = 5.55
Michigan 5.388 / 0.95 = 5.67
Minnesota 5.190 / 0.95 = 5.46
New York 5.087 / 0.95 = 5.35
Ohio 5.277 / 0.95 = 5.55
</TABLE>
Class A - Calculation of the Sales Charge
Sales charges are determined as follows:
Within each increment,
sales charge as a
percentage of:
Public Net
Amount of Investment Offering Price Amount Invested
First $ 50,000 5.0% 5.26%
Next 50,000 4.5 4.71
Next 400,000 3.8 3.95
Next 500,000 2.0 2.04
$1,000,000 or more 0.0 0.00
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.<PAGE>
PAGE 112
<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 5.00-4.50 5.26-4.71
More than 100,000 to 500,000 4.50-3.80 4.71-3.95
More than 500,000 to 999,999 3.80-2.00 3.95-2.04
$1,000,000 or more 0.00 0.00
</TABLE>
Class A - 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 AEFC or its subsidiaries and
deceased advisors.
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.
Class A - Letter of Intent (LOI)
If you intend to invest $1 million over a period of 13 months, you
can reduce the sales charges in Class A by filing a LOI. The
agreement can start at any time and will remain in effect for 13
months. Your investment will be charged normal sales charges until
you have invested $1 million. At that time, your account will be
credited with the sales charges previously paid. If you do not
invest $1 million by the end of 13 months, there is no penalty,<PAGE>
PAGE 113
you'll just miss out on the sales charge adjustment. A LOI is not
an option (absolute right) to buy shares.
Here's an example. You file a LOI to invest $1 million and make an
investment of $100,000 at that time. You pay the normal 5% sales
charge on the first $50,000 and 4.5% sales charge on the next
$50,000 of this investment. Let's say you make a second investment
of $900,000 (bringing the total up to $1 million) one month before
the 13-month period is up. AEFC makes an adjustment at the point
that you reach $1 million. The adjustment is made by crediting
your account with sales charges previously paid. The net effect is
that there's no sales charge on the total $1 million investment.
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? 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.
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 in the same class 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 American Express
Trust Company acts as custodian;<PAGE>
PAGE 114
Between two American Express 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).
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 board 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 SEC, 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 board 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. If you redeem Class B shares you may be
subject to a contingent deferred sales charge as discussed in the
prospectus. 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.
<PAGE>
PAGE 115
Applications for a systematic investment in a class of any fund
subject to a sales charge normally will not be accepted 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, please write or call American Express
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 AEFC 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'll 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.
Plan #1: Pay-out for a fixed period of time
If you choose this plan, a varying number of shares will be
redeemed 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
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 the 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 Class A shares on a subsequent purchase
of shares applies to the new shares acquired in the exchange. <PAGE>
PAGE 116
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 Massachusetts, Minnesota, New
York and Ohio Tax-Exempt Funds had total capital loss carryovers of
$471,391, $1,233,720, $670,740, and $210,685 respectively, at June
30, 1995, that if not offset by subsequent capital gains will
expire as set-out below:
<TABLE><CAPTION>
Fund 1997 1998 1999 2000 2001 2002 2003 2004
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Massachusetts $133,727 $ 6,931 $ 25,326 $ 763 $304,644
Minnesota 215,683 1,018,037
New York $284,215 106,387 32,265 22,639 212,496 12,738
Ohio 210,685
</TABLE>
It is unlikely that the board of trustees 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, 1995, 100% of each fund's income
distributions were designated as exempt from federal income tax.
In addition, 100% of five of the funds made exempt interest
distributions that were derived from interest on municipal
securities. Ninety-nine percent of Michigan's exempt interest
distributions were derived from interest 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 advisor 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 advisor before investing. The income from such bonds may not
be tax-exempt for you.
<PAGE>
PAGE 117
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,
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 advisor for more
complete information as the application of federal, state and local
income tax laws to fund distributions.
AGREEMENTS
Investment Management Services Agreement
Each fund has an Investment Management Services Agreement with
AEFC. For its services, AEFC is paid a fee based on the following
schedule:
Assets Annual rate at
(billions) each asset level
First $0.25 0.470%
Next 0.25 0.445
Next 0.25 0.420
Next 0.25 0.405
Over 1.0 0.380
On June 30, 1995, the daily rate applied to the fund's net assets
was equal to 0.47% for California, Massachusetts, Michigan, New
York and Ohio and 0.46% for Minnesota on an annual basis. The 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.
<PAGE>
PAGE 118
Fiscal Year Ended June 30,
Fund 1995 1994 1993
California $1,222,758 $1,418,804 $1,292,626
Massachusetts 349,517 377,077 288,822
Michigan 390,460 405,578 334,048
Minnesota 2,013,423 2,227,969 1,913,496
New York 599,733 648,514 567,263
Ohio 365,009 381,106 294,453
Under the current Agreement, each fund also pays 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; expenses incurred in connection with
lending portfolio securities of each fund; and expenses properly
payable by each fund, approved by the board of trustees. Under the
prior and current agreements, each fund paid nonadvisory expenses.
The table below shows the expenses paid over the past three fiscal
years.
Fiscal Year Ended June 30,
Fund 1995 1994 1993
California $77,270 $ 82,545 $ 87,327
Massachusetts 45,060 52,628 45,673
Michigan 43,853 40,366 43,191
Minnesota 95,952 229,572 172,869
New York 53,049 51,629 46,905
Ohio 46,013 40,747 30,732
Administrative Services Agreement
Each fund has an Administrative Services Agreement with AEFC.
Under this agreement, each fund pays AEFC for providing
administration and accounting services. The fee is calculated as
follows:
Assets Annual rate
(billions) each asset level
First $0.25 0.040%
Next 0.25 0.035
Next 0.25 0.030
Next 0.25 0.025
Over $1 0.020
On June 30, 1995, the daily rate applied to the fund's net assets
was equal to 0.04% for California, Massachusetts, Michigan,
Minnesota, New York and Ohio on an annual basis. The 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.
<PAGE>
PAGE 119
Transfer Agency Agreement
Each fund has a Transfer Agency Agreement with AEFC. This
agreement governs AEFC's 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 each fund's shares. Under the agreement, AEFC will earn a fee
from each fund determined by multiplying the number of shareholder
accounts at the end of the day by a rate determined for each class
and dividing by the number of days in the year. The rate for Class
A and Class Y is $15.50 per year and for Class B is $16.50 per
year. The fees paid to AEFC may be changed from time to time upon
agreement of the parties without shareholder approval. Each fund
paid the following fees for the fiscal year ended June 30, 1995:
California $ 99,650
Massachusetts 47,211
Michigan 43,003
Minnesota 241,699
New York 73,397
Ohio 41,659
Distribution Agreement
Under a Distribution Agreement, sales charges deducted for
distributing fund shares are paid to American Express Financial
Advisors daily. Line one of the following table shows total sales
charges collected. Line two shows the amounts retained by American
Express Financial Advisors 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> <C> <C>
1993 (1) Class A $1,429,331 $915,161 $610,586 $3,248,432 $820,465 $620,667
(2) Class A 501,684 328,492 213,345 1,145,154 283,310 214,778
1994 (1) Class A 1,177,341 867,225 560,739 2,458,058 728,741 593,137
(2) Class A 414,319 271,784 194,612 863,376 260,045 205,291
1995 (1) Class A 480,433 296,532 176,901 1,139,773 408,324 205,263
Class B 10 0 0 0 93 0
(2) Class A 163,762 105,261 65,915 403,365 136,500 73,622
Class B 47,452 42,032 22,392 96,366 37,870 17,999
</TABLE>
Additional information about commissions and compensation for the
fiscal year ended June 30, 1995, is contained in the following
table:
<PAGE>
PAGE 120
<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 American Express
Financial
Advisors $ 480,443 None None $31,102
Massachusetts American Express
Financial
Advisors $ 296,532 $ 224 None 15,615
Michigan American Express
Financial
Advisors $ 176,901 $16,171 None 12,860
Minnesota American Express
Financial
Advisors $1,139,773 $ 1,870 None 72,558
New York American Express
Financial
Advisors $ 408,417 None None 22,974
Ohio American Express
Financial
Advisors $ 205,263 $ 220 None 12,482
</TABLE>
*Distribution fees paid pursuant to the Plan and Supplemental
Agreement of Distribution.
Shareholder Service Agreement
Each fund pays a fee for service provided to shareholders by
financial advisors and other servicing agents. The fee is
calculated at a rate of 0.175% of each fund's average daily net
assets attributable to Class A and Class B shares.
Plan and Agreement of Distribution
For Class B shares, to help American Express Financial Advisors
defray the cost of distribution and servicing, not covered by sales
charges received under the Distribution Agreement, each fund and
American Express Financial Advisors entered into a Plan and
Agreement of Distribution (Plan). These costs relate to most
aspects of distributing each fund's shares including American
Express Financial Advisors' 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, American Express Financial
Advisors is paid a fee at an annual rate of 0.75% of each fund's
average daily net assets attributable to Class B shares.
The Plan must be approved annually by the board, including a
majority of the disinterested trustees, if it is to continue for
more than a year. At least quarterly, the board 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 the trustees who are not interested persons of the
Trusts and have no direct or indirect financial interest in the<PAGE>
PAGE 121
operation of the Plan or in any agreement related to the Plan, or
by vote of a majority of the outstanding voting securities of each
fund or by American Express Financial Advisors. The Plan (or any
agreement related to it) will 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 the trustees, including a majority of the 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 disinterested
trustees is the responsibility of 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,
AEFC will assume all expenses in excess of the limitation. AEFC
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 AEFC for expenses it assumes.
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+'
Born in 1941.
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.,
Lockheed-Martin Corp., and the Interpublic Group of Companies, Inc.
(advertising).
William H. Dudley+**
Born in 1932.
2900 IDS Tower
Minneapolis, MN
Executive vice president and director of AEFC.<PAGE>
PAGE 122
Robert F. Froehlke+
Born in 1922.
1201 Yale Place
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. (architectural
engineering) and Public Oversight Board of the American Institute
of Certified Public Accountants.
David R. Hubers**
Born in 1943.
2900 IDS Tower
Minneapolis, MN
President, chief executive officer and director of AEFC.
Previously, senior vice president, finance and chief financial
officer of AEFC.
Heinz F. Hutter+
Born in 1929.
P.O. Box 5724
Minneapolis, MN
President and chief operating officer, Cargill, Incorporated
(commodity merchants and processors) from February 1991 to
September 1994. Executive vice president from 1981 to February
1991.
Anne P. Jones+
Born in 1935.
5716 Bent Branch Rd.
Bethesda, MD
Attorney and telecommunications consultant. Former partner, law
firm of Sutherland, Asbill & Brennan. Director, Motorola, Inc. and
C-Cor Electronics, Inc.
Donald M. Kendall'
Born in 1921.
PepsiCo, Inc.
Purchase, NY
Former chairman and chief executive officer, PepsiCo, Inc.
Melvin R. Laird+
Born in 1922.
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.,<PAGE>
PAGE 123
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'
Born in 1921.
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+*
Born in 1927.
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
Born in 1926.
4900 IDS Center
80 S. 8th St.
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**
Born in 1937.
2900 IDS Tower
Minneapolis, MN
Senior vice president and director of AEFC.
Wheelock Whitney+
Born in 1926.
1900 Foshay Tower
821 Marquette Ave.
Minneapolis, MN
Chairman, Whitney Management Company (manages family assets).
<PAGE>
PAGE 124
C. Angus Wurtele
Born in 1934.
1101 S. 3rd St.
Minneapolis, MN
Chairman of the board and chief executive officer, The Valspar
Corporation (paints). Director, Bemis Corporation (packaging),
Donaldson Company (air cleaners & mufflers) and General Mills, Inc.
(consumer foods).
+ 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 AEFC or American Express.
The board also has appointed officers who are responsible for day-
to-day business decisions based on policies it has established.
Officers who also are officers and/or employees of AEFC.
Peter J. Anderson
Born in 1942.
IDS Tower 10
Minneapolis, MN
Vice president-investments of all funds in the IDS MUTUAL FUND
GROUP. Director and senior vice president-investments of AEFC.
Melinda S. Urion
Born in 1953.
IDS Tower 10
Minneapolis, MN
Treasurer of all funds in the IDS MUTUAL FUND GROUP. Vice
president and corporate controller of AEFC. Director and executive
vice president and controller of IDS Life Insurance Company.
Besides Mr. Pearce, who is president, the fund's other officers
are:
Leslie L. Ogg
Born in 1938.
901 S. Marquette Ave.
Minneapolis, MN
Vice president, general counsel and secretary of all funds in the
IDS MUTUAL FUND GROUP.
Members who are not officers of each fund or directors of AEFC
receive an annual fee and retirement benefits from each fund. They
also receive attendance and other fees, the cost of which each fund
shares with the other funds in the IDS MUTUAL FUND GROUP. Members
of each fund's board of trustees (the "Board") receive an annual
fee of $250 and upon retirement at age 70, or earlier if for health<PAGE>
PAGE 125
reasons, such members also receive monthly payments equal to 1/2 of
the annual fee divided by 12 for as many months as the member
served on the Board up to 120 months or until the date of death.
There are no death benefits and the plan is not funded. The fees
shared with other funds are those for attendance at meetings of the
Contracts Committee, $750; meetings of the Audit, Board, Executive
or Investment Review Committees, $500; meetings of the Personnel
Committee, $300; out-of-state, $500; and Chair of the Contracts
Committee, $5,000. Expenses also are reimbursed.
During the fiscal year that ended June 30, 1995, the members of the
board, for attending up to 31 meetings, received the following
compensation.
<TABLE><CAPTION>
Board compensation
IDS California Tax-Exempt Fund
Aggregate Retirement Estimated Total Cash
compensation benefits annual compensation
from the accrued as benefit on from the IDS
Board member fund fund expenses retirement MUTUAL FUND GROUP
<S> <C> <C> <C> <C>
Lynne V. Cheney $597 $ 64 $125 $69,000
Robert F. Froehlke 695 241 125 73,000
Heinz F. Hutter 382 59 60 50,300
(part of year)
Anne P. Jones 636 54 125 70,500
Donald M. Kendall 535 145 115 66,500
Melvin R. Laird 634 134 125 70,500
Lewis W. Lehr 603 123 114 69,200
Edson W. Spencer 724 61 67 74,200
Wheelock Whitney 646 95 125 71,000
C. Angus Wurtele 388 58 124 50,500
Board compensation
IDS Massachusetts Tax-Exempt Fund
IDS Michigan Tax-Exempt Fund
IDS New York Tax-Exempt Fund
Aggregate Retirement Estimated Total Cash
compensation benefits annual compensation
from the accrued as benefit on from the IDS
Board member fund fund expenses retirement MUTUAL FUND GROUP
Lynne V. Cheney $472 $ 61 $125 $69,000
Robert F. Froehlke 570 238 125 73,000
Heinz F. Hutter 319 57 60 50,300
(part of year)
Anne P. Jones 511 58 125 70,500
Donald M. Kendall 410 410 119 66,500
Melvin R. Laird 509 208 125 70,500
Lewis W. Lehr 478 292 118 69,200
Edson W. Spencer 599 145 67 74,200
Wheelock Whitney 521 116 125 71,000
C. Angus Wurtele 326 55 124 50,500
<PAGE>
PAGE 126
Board compensation
IDS Minnesota Tax-Exempt Fund
Aggregate Retirement Estimated Total Cash
compensation benefits annual compensation
from the accrued as benefit on from the IDS
Board member fund fund expenses retirement MUTUAL FUND GROUP
Lynne V. Cheney $597 $122 $125 $69,000
Robert F. Froehlke 695 474 125 73,000
Heinz F. Hutter 382 114 60 50,300
(part of year)
Anne P. Jones 636 115 125 70,500
Donald M. Kendall 535 817 119 66,500
Melvin R. Laird 634 413 125 70,500
Lewis W. Lehr 603 582 118 69,200
Edson W. Spencer 724 288 67 74,200
Wheelock Whitney 646 231 125 71,000
C. Angus Wurtele 388 110 124 50,500
Board compensation
IDS Ohio Tax-Exempt Fund
Aggregate Retirement Estimated Total Cash
compensation benefits annual compensation
from the accrued as benefit on from the IDS
Board member fund fund expenses retirement MUTUAL FUND GROUP
Lynne V. Cheney $472 $ 65 $125 $69,000
Robert F. Froehlke 570 253 125 73,000
Heinz F. Hutter 319 61 60 50,300
(part of year)
Anne P. Jones 511 62 125 70,500
Donald M. Kendall 410 435 119 66,500
Melvin R. Laird 509 220 125 70,500
Lewis W. Lehr 478 311 118 69,200
Edson W. Spencer 599 153 67 74,200
Wheelock Whitney 521 123 125 71,000
C. Angus Wurtele 326 59 124 50,500
</TABLE>
On June 30, 1995, 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, 1995, 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 $ 8,537 $1,034
Massachusetts 9,316 1,640
Michigan 6,540 1,640
Minnesota 29,145 3,266
New York 5,964 1,640
Ohio 5,154 1,742
PRINCIPAL HOLDERS OF SECURITIES
The following shareholder accounts held more than 5% of a fund's
Class B shares as of the fiscal year ended June 30, 1995.
Massachusetts Tax-Exempt fund
Alfred W. Dentino, 136 Middle Rd., Acton, MA; 10.03% of shares.
Micheal Desmond Child Trust - Hyman Darling, 33 State Street,
Springfield, MA; 7.87% of shares. Catherine T. Donegan, 56 Redgate
Ln., Reading, MA; 5.36% of shares. Paul B. Callahan and Christine
T. Callahan, 151 Marshall Street, Paxton, MA; 5.18% of shares.
Stanley A. Bauman, 46 Breer Street, Brockton, MA; 6.26% of shares.<PAGE>
PAGE 127
Michigan Tax-Exempt Fund
The George Cato Trust - James N. Garber, 40137 Newporte Drive,
Plymouth, MI; 26.25% of shares. Ling Yem and Anthony W. Yew, 2627
Mockingbird Dr., Kalamazoo, MI; 19.66% of shares. Mabel L.
Haberstich, 628 N. 7th, Gladstone, MI; 10.06% of shares.
New York Tax-Exempt Fund
Theresia Mathew, 75 Avondale Rd., Yonkers, NY; 8.01% of shares.
Cheryl Lynn Ptacek, 61 Eckernkamp Drive, Smithtown, NY; 5.23% of
shares. Rema H. Wirth, 126 Church St., New Rochelle, NY; 5.23% of
shares.
Ohio Tax-Exempt Fund
Harvey J. Schwartz and Helen P. Schwartz, 3770 Camden Court,
Westlake, OH; 9.46% of shares. Jesse Harvey Summers and Pearl M.
Summers, 3215 Kingsville Rd., Cortland, OH; 7.46% of shares. Lynn
M. Comstock, 6492 East Indian Wood Dr., Mason, OH; 6.94% of shares.
Rosemary Schirtzinger, 305 N. Stygler Road, Gahanna, Oh; 10.89% of
shares.
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.
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.
INDEPENDENT AUDITORS
The financial statements contained in the Annual Report to
shareholders, for the fiscal year ended June 30, 1995, were audited
by independent auditors, KPMG Peat Marwick LLP, 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 1995 Annual Report to
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.<PAGE>
PAGE 128
PROSPECTUS
The prospectuses 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 dated Aug. 29, 1995, are hereby incorporated
in this SAI by reference.
<PAGE>
PAGE 129
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.
Capacity to pay interest and repay principal is extremely strong.
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 130
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 131
(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 132
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 133
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.
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
technique will be utilized only to effect a security transaction
when the price of the security plus the option price will be as <PAGE>
PAGE 134
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.
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
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.
<PAGE>
PAGE 135
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.
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<PAGE>
PAGE 136
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.
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<PAGE>
PAGE 137
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.
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)<PAGE>
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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%-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
Many signs lead economists to believe California's economy is on
the road to recovery. Economic growth and employment projections
appear sound, despite employment reductions in aerospace and
defense industries, and closing of military bases.
Past budgets thought to have been balanced had unrealistic economic
expectations. Declining revenue and escalating expenses caused the
state's general operating fund to fall significantly under budget.
Governor Wilson's budget contemplates reducing social welfare costs
and reducing aid to higher education.
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.
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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.
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.
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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 finances continue to stabilize. Following several
years in which revenue fell short of estimates and resulted in
deficits, the general fund closed its third fiscal year in balance
and a surplus. Governor Weld's 1995-1996 budget was balanced
tightly.
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<PAGE>
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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% 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% of the prior year's tax levy plus 2.5% 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.
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's financial condition continues to improve from the effect
of the national recession. The state has managed to substantially
rebuild the general and budget stabilization reserves which had
been depleted. The state had managed to balance its general fund
operations through the reserves, changes in accounting practices,
severre cuts in public assistance, and a state employee wage
freeze. As of February 1995 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<PAGE>
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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% of total employment in the state. Income derived from
manufacturing exceeded 35% 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 benefitted from significant
private investment 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.
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% 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 1995-1996 biennium budget is based on conservative
economic forecasts and a restraint on spending. Minnesota closed
fiscal year 1995 with a surplus. Anticipating reduced federal aid,
Governor Carlson has proposed increasing the state's budget reserve
to $500 million.
As of March 1995, 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<PAGE>
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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% a year through 2005, slightly below the
projected national growth rate of 1.5% 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.
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 continued to show signs of
improvement. Over the past few years, the state's administration
has: adopted accurate and conservative economic and budget
assumptions, managed to balance operations and closed the past two
years with operating surpluses. The 1995-1996 budget is expected
to continue the trend with emphasis on a total reduction in state
spending and cutting personal income and business taxes.
As of March 1995 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<PAGE>
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financial difficulty, it will seek and receive state financial
assistance. Moreover, New York City accounts for approximately 40%
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.
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<PAGE>
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litigation decided against HFA also may have an adverse effect on
the financial condition of HFA mortgages.
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
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<PAGE>
PAGE 147
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.
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<PAGE>
PAGE 148
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
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 the equivalent of AA ratings as
of January, 1995. Ohio's financial operations continue to
demonstrate significant improvement. Increased employment
opportunities led by service and trade sectors has helped diversify
the state's economy.
Strong economic growth through 1994 and into 1995 allowed for
larger tax receipts while lower than estimated Medicare case load
growth decreased social service spending.
Beginning in the early 1980s, Ohio's financial operations began 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 the future. 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.
<PAGE>
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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% of total employment, down from 28.9% 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.
<PAGE>
PAGE 150
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 151
IDS SPECIAL TAX-EXEMPT SERIES TRUST
STATEMENT OF ADDITIONAL INFORMATION
FOR
IDS INSURED TAX-EXEMPT FUND
Aug. 29, 1995
This Statement of Additional Information (SAI) is not a prospectus.
It should be read together with the prospectus and the financial
statements contained in the Annual Report which may be obtained
from your American Express financial advisor or by writing to
American Express Shareholder Service, P.O. Box 534, Minneapolis, MN
55440-0534.
This SAI is dated Aug. 29, 1995, and it is to be used with the
prospectus dated Aug. 29, 1995, and the Annual Report for the
fiscal year ended June 30, 1995.
<PAGE>
PAGE 152
TABLE OF CONTENTS
Goal and Investment Policies.........................See Prospectus
Additional Investment Policies................................p. 3
Portfolio Transactions........................................p. 5
Brokerage Commissions Paid to Brokers Affiliated with
Americal Express Financial Corporation........................p. 7
Performance Information.......................................p. 7
Valuing Fund Shares...........................................p. 10
Investing in the Fund.........................................p. 11
Redeeming Shares..............................................p. 14
Pay-out Plans.................................................p. 15
Exchanges.....................................................p. 16
Capital Loss Carryover........................................p. 16
Taxes.........................................................p. 16
Agreements....................................................p. 17
Trustees and Officers.........................................p. 21
Custodian.....................................................p. 25
The Trust.....................................................p. 25
Independent Auditors..........................................p. 25
Financial Statements..............................See Annual Report
Prospectus....................................................p. 26
Appendix A: Description of Ratings of Tax-Exempt Securities
and Short-Term Securities........................p. 27
Appendix B: Options and Interest Rate Futures Contracts......p. 31
Appendix C: Insured Fund.....................................p. 37
Appendix D: Dollar-Cost Averaging............................p. 42
<PAGE>
PAGE 153
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:
'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.
'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 if the total commitment amount exceeds 5% of the
fund's total assets.
'Invest more than 5% of its total assets 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 limitation.
'Buy or sell real estate, unless acquired as a result of ownership
of securities or other instruments, except this shall not prevent
the fund from investing in securities or other instruments backed
by real estate or securities of companies engaged in the real
estate business. For purposes of this policy, real estate includes
real estate limited partnerships.
'Buy or sell physical commodities unless acquired as a result of
ownership of securities or other instruments, except this shall not
prevent the fund from buying or selling options and futures
contracts or from investing in securities or other instruments
backed by, or whose value is derived from, physical commodities.
'Make a loan of any part of its assets to American Express
Financial Corporation (AEFC), to the directors and officers of AEFC
or to its own directors and officers.
'Purchase securities of an issuer if the trustees and officers of
the fund or the directors and officers of American Express
Financial Corporation 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 holding of all
directors and officers of AEFC 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.
'Lend fund securities in excess of 30% of its net assets. The
current policy of the fund's board of trustees is to make these<PAGE>
PAGE 154
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
directors. 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:
'Buy on margin or sell short, but it may enter into interest rate
futures contracts.
'Pledge or mortgage its assets beyond 15% of 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 futures
contracts are not deemed to be a pledge of assets.
'Invest more than 5% of its total assets in securities whose issuer
or guarantor of principal and interest has been in operation for
less than three years.
'Invest in voting securities, securities of investment companies or
exploration or development programs, such as oil, gas or mineral
leases.
'Invest more than 5% of its net assets in warrants. Under one
state's law no more than 2% of the fund's net assets may be
invested in warrants not listed on the New York or American Stock
Exchange.
'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 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. For purposes of complying with Ohio law, the
fund will not invest more than 15% of its total assets in a
combination of illiquid securities, 144A securities and securities
of companies, including any predecessor, that have a record of less
than three years continuous operations.
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<PAGE>
PAGE 155
issuer or dealer to repurchase the paper, and the nature of the
clearance and settlement procedures for the paper.
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. 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.
Notwithstanding any of the fund's other investment policies, the
fund may invest its assets in an open-end management investment
company having substantially the same investment objectives,
policies and restrictions as the fund for the purpose of having
those assets managed as part of a combined pool.
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 Insured Fund, see Appendix C.
PORTFOLIO TRANSACTIONS
Subject to policies set by the Trustees, AEFC 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, AEFC 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.
AEFC has a strict Code of Ethics that prohibits its affiliated
personnel from engaging in personal investment activities that
compete with or attempt to take advantage of planned portfolio
transactions for any fund in the IDS MUTUAL FUND GROUP. AEFC
carefully monitors compliance with its Code of Ethics.
<PAGE>
PAGE 156
Normally, the fund's securities are traded on a principal rather
than an agency basis. In other words, AEFC 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. AEFC 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.
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 AEFC to do so to the extent authorized
by law, if AEFC 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 AEFC's overall responsibilities to the funds
in the IDS MUTUAL FUND GROUP and other funds for which it acts as
investment advisor.
Research provided by brokers supplements AEFC's 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. AEFC 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.
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 AEFC or any of its subsidiaries.
When the fund buys or sells the same security as another fund or
account, AEFC 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.
AEFC has assured the fund it will continue to seek ways to reduce
brokerage costs.
On a periodic basis, AEFC makes a comprehensive review of the
broker-dealers and the overall reasonableness of their commissions.
The review evaluates execution, operational efficiency and research
services.
<PAGE>
PAGE 157
The fund paid total brokerage commissions of $80,516 for the fiscal
year ended June 30, 1995, $7,000 for fiscal year 1994, and $-0- for
fiscal year 1993. 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.
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, 1995.
The portfolio turnover rate was 53% in the fiscal year ended June
30, 1995, and 37% in fiscal year 1995.
BROKERAGE COMMISSIONS PAID TO BROKERS AFFILIATED WITH AMERICAN
EXPRESS FINANCIAL CORPORATION
Affiliates of American Express Company (American Express) (of which
AEFC is a wholly owned subsidiary) may engage in brokerage and
other securities transactions on behalf of the fund according to
procedures adopted by the fund's board of directors and to the
extent consistent with applicable provisions of the federal
securities laws. AEFC will use an American Express affiliate only
if (i) AEFC determines that the fund will receive prices and
executions at least as favorable as those offered by qualified
independent brokers performing similar brokerage and other services
for the fund and (ii) the affiliate charges the [each] fund
commission rates consistent with those the affiliate charges
comparable unaffiliated customers in similar transactions and if
such use is consistent with terms of the Investment Management
Services Agreement.
AEFC may direct brokerage to compensate an affiliate. AEFC will
receive research on South Africa from New Africa Advisors, a
wholly-owned subsidiary of Sloan Financial Group. AEFC owns 100%
of IDS Capital Holdings Inc. which in turn owns 40% of Sloan
Financial Group. New Africa Advisors will send research to AEFC
and in turn American Express Financial Corporation will direct
trades to a particular broker. The broker will have an agreement
to pay New Africa Advisors. All transactions will be on a best
execution basis. Compensation received will be reasonable for the
services rendered.
No brokerage commissions were paid to brokers affiliated with AEFC
for the three most recent fiscal years.
PERFORMANCE INFORMATION
The 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.
<PAGE>
PAGE 158
Average annual total return
The fund may calculate average annual total return for a class 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 a class 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 for a class 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.
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 4.54% for Class A, 4.02% for Class
B and 4.90% for Class Y for the 30-day period ended June 30, 1995.
<PAGE>
PAGE 159
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 4.98% for Class A, 4.52% for
Class B and 5.38% for Class Y for the 30-day period ended June 30,
1995.
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, 1995.
Marginal
Income Tax Tax-Equivalent Yield
Bracket Distribution Annualized
Class A
15.0% 5.86% 5.34%
28.0% 6.92 6.31
33.0% 7.43 6.78
Class B
15.0% 5.32% 4.73%
28.0% 6.28 5.58
33.0% 6.75 6.00
Class C
15.0% 6.33% 5.76%
28.0% 7.47 6.81
33.0% 8.03 7.31
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,
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.
<PAGE>
PAGE 160
VALUING FUND SHARES
The value of an individual share for each class is determined by
using the net asset value before shareholder transactions for the
day. On July 3, 1995, 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
<S> <C> <C> <C>
Class A $504,907,765 divided by 93,501,438 equals $5.40
Class B 6,266,511 1,160,465 5.40
Class Y 1,006 186 5.41
</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
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 board of trustees (the "trustees").<PAGE>
PAGE 161
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, AEFC 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 if applicable. For Class B and Class Y, there is no
initial sales charge so the public offering price is the same as
the net asset value. For Class A, the public offering price for an
investment of less than $50,000, made July 3, 1995, was determined
by dividing the net asset value of one share, $5.40, by 0.95 (1.00-
0.05 for a maximum 5% sales charge) for a public offering price of
$5.68. The sales charge is paid to American Express Financial
Advisors by the person buying the shares.
Class A - Calculation of the Sales Charge
Sales charges are determined as follows:
Within each increment,
sales charge as a
percentage of:
Public Net
Amount of Investment Offering Price Amount Invested
First $ 50,000 5.0% 5.26%
Next 50,000 4.5 4.71
Next 400,000 3.8 3.95
Next 500,000 2.0 2.04
$1,000,000 or more 0.0 0.00
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<PAGE>
PAGE 162
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 5.00-4.50 5.26-4.71
More than 100,000 to 500,000 4.50-3.80 4.71-3.95
More than 500,000 to 999,999 3.80-2.00 3.95-2.04
$1,000,000 or more 0.00 0.00
</TABLE>
Class A - 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 AEFC or its subsidiaries and
deceased advisors.
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.
<PAGE>
PAGE 163
Class A - Letter of Intent (LOI)
If you intend to invest $1 million over a period of 13 months, you
can reduce the sales charges in Class A by filing a LOI. The
agreement can start at any time and will remain in effect for 13
months. Your investment will be charged normal sales charges until
you have invested $1 million. At that time, your account will be
credited with the sales charges previously paid. If you do not
invest $1 million by the end of 13 months, there is no penalty,
you'll just miss out on the sales charge adjustment. A LOI is not
an option (absolute right) to buy shares.
Here's an example. You file a LOI to invest $1 million and make an
investment of $100,000 at that time. You pay the normal 5% sales
charge on the first $50,000 and 4.5% sales charge on the next
$50,000 of this investment. Let's say you make a second investment
of $900,000 (bringing the total up to $1 million) one month before
the 13-month period is up. AEFC makes an adjustment at the point
that you reach $1 million. The adjustment is made by crediting
your account with sales charges previously paid. The net effect is
that there's no sales charge on the total $1 million investment.
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? 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.
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.
<PAGE>
PAGE 164
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 in the same class 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 American Express
Trust Company acts as custodian;
Between two American Express 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).
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.
The fund's investment goal is 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 board 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:
'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
<PAGE>
PAGE 165
'The SEC, 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 board 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. If you redeem Class B shares you may be
subject to a contingent deferred sales charge as discussed in the
prospectus. 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.
Applications for a systematic investment in a class of any fund
subject to a sales charge normally will not be accepted 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, please write or call American Express
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 AEFC 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'll 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.
Plan #1: Pay-out for a fixed period of time
If you choose this plan, a varying number of shares will be
redeemed 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
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.
<PAGE>
PAGE 166
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 the 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 Class A shares 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 capital loss
carryover of $1,334,445 at June 30, 1995, that will expire in 2003.
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,
1995, 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.
<PAGE>
PAGE 167
If you are a "substantial user" (or related person) of facilities
financed by industrial development bonds, you should consult your
tax advisor 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 advisor 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.
This is a brief summary that relates to federal income taxation
only. Shareholders should consult their tax advisor for more
complete information as to the application of federal, state and
local income tax laws to fund distributions.
AGREEMENTS
Investment Management Services Agreement
The fund has an Investment Management Services Agreement with AEFC.
For its services, AEFC is paid a fee based on the following
schedule:
<PAGE>
PAGE 168
Assets Annual rate at
(billions) each asset level
First $1.0 0.450%
Next 1.0 0.425
Next 1.0 0.400
Next 3.0 0.375
Over 6.0 0.350
On June 30, 1995, the daily rate applied to the fund's net assets
was equal to 0.45% on an annual basis. The 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. Under the prior and current
agreements, the total amount paid was $2,560,188 for the fiscal
year ended June 30, 1995, $2,772,357 for fiscal year 1994, and
$2,057,249 for fiscal year 1993.
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
fees for shares; fund office expenses; consultants' fees;
compensation of directors, officers and employees; corporate filing
fees; 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 directors. Under the
prior and current agreements, the fund paid nonadvisory expenses of
$155,247 for the fiscal year ended June 30, 1995, $252,625 for
fiscal year 1994, and $155,547 for fiscal year 1993.
Administrative Services Agreement
The fund has an Administrative Services Agreement with AEFC. Under
this agreement, the fund pays AEFC for providing administration and
accounting services. The fee is calculated as follows:
Assets Annual rate
(billions) each asset level
First $1 0.040%
Next 1 0.035
Next 1 0.030
Next 3 0.025
Over 6 0.020
On June 30, 1995, the daily rate applied to the fund's net assets
was equal to 0.04% on an annual basis. The 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.
<PAGE>
PAGE 169
Transfer Agency Agreement
The fund has a Transfer Agency Agreement with AEFC. This agreement
governs AEFC's 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, AEFC will earn a fee from the
fund determined by multiplying the number of shareholder accounts
at the end of the day by a rate determined for each class per year
and dividing by the number of days in the year. The rate for Class
A and Class Y is $15.50 per year and for Class B is $16.50 per
year. The fees paid to AEFC may be changed from time to time upon
agreement of the parties without shareholder approval. The fund
paid fees of $266,237 for the year ended June 30, 1995.
Distribution Agreement
Under a Distribution Agreement, sales charges deducted for
distributing fund shares are paid to American Express Financial
Advisors daily. These charges amounted to $1,522,159 for Class A
and $32 for Class B for the fiscal year ended June 30, 1995. After
paying commissions to personal financial planners, and other
expenses, the amount retained was $942,149 for Class A and $128,487
for Class B. The amounts were $5,617,954 and $1,955,455 for the
fiscal year ended June 30, 1994, and $6,198,137 and $2,164,091 for
the fiscal year end June 30, 1993.
Additional information about commissions and compensation for the
fiscal year ended June 30, 1995 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>
AEFC None None None $82,029*
American
Express
Financial
Advisors $1,522,191 None None None
</TABLE>
*Distribution fees paid pursuant to the Plan and Supplemental
Agreement of Distribution.
Shareholder Service Agreement
The fund pays a fee for service provided to shareholders by
financial advisors and other servicing agents. The fee is
calculated at a rate of 0.175% of the fund's average daily net
assets attributable to Class A and Class B shares.<PAGE>
PAGE 170
Plan and Agreement of Distribution
For Class B shares, to help American Express Financial Advisors
defray the cost of distribution and servicing, not covered by sales
charges received under the Distribution Agreement, the fund and
American Express Financial Advisors entered into a Plan and
Agreement of Distribution (Plan). These costs relate to most
aspects of distributing the fund's shares including American
Express Financial Advisors' 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, American Express Financial
Advisors is paid a fee at an annual rate of 0.75% of the fund's
average daily net assets attributable to Class B shares.
The Plan must be approved annually by the board, including a
majority of the disinterested trustees, if it is to continue for
more than a year. At least quarterly, the board 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 the trustees who are not interested persons of the
Trust 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 American Express Financial Advisors. The Plan (or any
agreement related to it) will 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 shareholder approval,
and all material amendments to the Plan must be approved by a
majority of the trustees, including a majority of the trustees who
are not interested persons of the Trust 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 disinterested
trustees is the responsibility of disinterested trustees. No
interested person of the Trust, 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,
AEFC will assume all expenses in excess of the limitation. AEFC
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 AEFC for expenses it assumes.
<PAGE>
PAGE 171
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+'
Born in 1941.
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.,
Lockheed Martin, and the Interpublic Group of Companies, Inc.
(advertising).
William H. Dudley+**
Born in 1932.
2900 IDS Tower
Minneapolis, MN
Executive vice president and director of AEFC.
Robert F. Froehlke+
Born in 1922.
1201 Yale Place
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. (architectural
engineering) and Public Oversight Board of the American Institute
of Certified Public Accountants.
David R. Hubers**
Born in 1943.
2900 IDS Tower
Minneapolis, MN
President, chief executive officer and director of AEFC.
Previously, senior vice president, finance and chief financial
officer of AEFC.
Heinz F. Hutter+
Born in 1929.
P.O. Box 5724
Minneapolis, MN
President and chief operating officer, Cargill, Incorporated
(commodity merchants and processors) from February 1991 to
September 1994. Executive vice president from 1981 to February
1991.<PAGE>
PAGE 172
Anne P. Jones+
Born in 1935.
5716 Bent Branch Rd.
Bethesda, MD
Attorney and telecommunications consultant. Former partner, law
firm of Sutherland, Asbill & Brennan. Director, Motorola, Inc. and
C-Cor Electronics, Inc.
Donald M. Kendall'
Born in 1921.
PepsiCo, Inc.
Purchase, NY
Former chairman and chief executive officer, PepsiCo, Inc.
Melvin R. Laird+
Born in 1922.
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'
Born in 1921.
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+*
Born in 1927.
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).
<PAGE>
PAGE 173
Edson W. Spencer
Born in 1926.
4900 IDS Center
80 S. 8th St.
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**
Born in 1937.
2900 IDS Tower
Minneapolis, MN
Senior vice president and director of AEFC.
Wheelock Whitney+
Born in 1926.
1900 Foshay Tower
821 Marquette Ave.
Minneapolis, MN
Chairman, Whitney Management Company (manages family assets).
C. Angus Wurtele
Born in 1934.
1101 S. 3rd St.
Minneapolis, MN
Chairman of the board and chief executive officer, The Valspar
Corporation (paints). Director, Bemis Corporation (packaging),
Donaldson Company (air cleaners & mufflers) and General Mills, Inc.
(consumer foods).
+ 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 AEFC or American Express.
The board also has appointed officers who are responsible for day-
to-day business decisions based on policies it has established.
Officers who are also officers and/or employees of AEFC
Peter J. Anderson
Born in 1942.
IDS Tower 10
Minneapolis, MN
Vice president-investments of all funds in the IDS MUTUAL FUND
GROUP. Director and senior vice president-investments of AEFC.
<PAGE>
PAGE 174
Melinda S. Urion
Born in 1953.
IDS Tower 10
Minneapolis, MN
Treasurer of all funds in the IDS MUTUAL FUND GROUP. Vice
president and corporate controller of AEFC. Director and executive
vice president and controller of IDS Life Insurance Company.
Besides Mr. Pearce, who is president, the fund's other officer is:
Leslie L. Ogg
Born in 1938.
901 S. Marquette Ave.
Minneapolis, MN
Vice president, general counsel and secretary of all funds in the
IDS MUTUAL FUND GROUP.
Members who are not officers of the fund or directors of AEFC
receive an annual fee and retirement benefits from the fund. They
also receive attendance and other fees, the cost of which the fund
shares with the other funds in the IDS MUTUAL FUND GROUP. Members
of this fund's board of trustees (the "Board") receive an annual
fee of $250 and upon retirement at age 70, or earlier if for health
reasons, such members also receive monthly payments equal to 1/2 of
the annual fee divided by 12 for as many months as the member
served on the Board up to 120 months or until the date of death.
There are no death benefits and the plan is not funded. The fees
shared with other funds are those for attendance at meetings of the
Contracts Committee, $750; meetings of the Audit, Board, Executive
or Investment Review Committees, $500; meetings of the Personnel
Committee, $300; out-of-state, $500; and Chair of the Contracts
Committee, $5,000. Expenses also are reimbursed.
During the fiscal year that ended June 30, 1995, the members of the
board, for attending up to 31 meetings, received the following
compensation, in total, from all funds in the IDS MUTUAL FUND
GROUP.
<PAGE>
PAGE 175
<TABLE><CAPTION>
Board compensation
Aggregate Retirement Estimated Total Cash
compensation benefits annual compensation
from the accrued as benefit on from the IDS
Board member fund fund expenses retirement MUTUAL FUND GROUP
<S> <C> <C> <C> <C>
Lynne V. Cheney $722 $ 127 $125 $69,000
Robert F. Froehlke 820 499 125 73,000
Heinz F. Hutter 444 119 60 50,300
(part of year)
Anne P. Jones 761 128 125 70,500
Donald M. Kendall 660 1,030 119 66,500
Melvin R. Laird 759 482 125 70,500
Lewis W. Lehr 728 712 118 69,200
Edson W. Spencer 849 356 67 74,200
Wheelock Whitney 771 259 125 71,000
C. Angus Wurtele 451 116 124 50,500
(part of year)
</TABLE>
On June 30, 1995, the fund's trustees and officers as a group owned
less than 1% of the outstanding shares. During the fiscal year
ended June 30, 1995, no trustee or officer earned more than $60,000
from this fund. All trustees and officers as a group earned
$12,211, including $3,828 of retirement plan expense, from this
fund.
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.
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.
INDEPENDENT AUDITORS
The financial statements contained in the Annual Report to
shareholders, for the fiscal year ended June 30, 1995, were audited
by independent auditors, KPMG Peat Marwick LLP, 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 1995 Annual Report to
shareholders, pursuant to Section 30(d) of the Investment Company
Act of 1940, as amended, are hereby incorporated in this SAI by<PAGE>
PAGE 176
reference. No other portion of the Annual Report however, is
incorporated by reference.
PROSPECTUS
The prospectus for IDS Insured Tax-Exempt Fund dated Aug. 29, 1995,
is hereby incorporated in this SAI by reference.
<PAGE>
PAGE 177
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.
Capacity to pay interest and repay principal is extremely strong.
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.
<PAGE>
PAGE 178
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 fund 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 the 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.
<PAGE>
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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 the 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, the 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.
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
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 <PAGE>
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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.
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.<PAGE>
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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 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 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
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.
<PAGE>
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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
(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.<PAGE>
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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.
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.
<PAGE>
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The IRS has ruled publicly that an exchange-traded call option is a
security for purposes of the 50%-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.
Inverse Floaters
The Fund may invest in securities called "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.
<PAGE>
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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
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. <PAGE>
PAGE 188
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
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.
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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
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<PAGE>
PAGE 190
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 fire, property damage liability, workmen's
compensation and employer's liability and fidelity and surety
insurance. As of June 30, 1995, the total capital and surplus of
Financial Guaranty was approximately $978 million, as reported to
the State of New York Insurance Department. Moody's and Standard &
Poor's have rated the claims-paying ability of Financial Guaranty
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.
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.
<PAGE>
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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 Association 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 192
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 193
__________________________________________________________________
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, 1995, 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, 1995, the financial highlights for each of the years
in the six-year period ended June 30, 1995, 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 eight-year period ended June 30, 1995, 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 194
__________________________________________________________________
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, 1995,
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, 1995, and the financial highlights for the
periods stated in the first paragraph above, in conformity with
generally accepted accounting principles.
KPMG Peat Marwick LLP
Minneapolis, Minnesota
August 4, 1995
<PAGE>
PAGE 195
Financial statements
Statements of assets and liabilities
IDS California Tax-Exempt Trust
IDS Special Tax-Exempt Series Trust
June 30, 1995
<TABLE>
<CAPTION>
_____________________________________________________________________________________________________________________________
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 $220,918,920, $65,162,696 and
$72,749,708) $236,559,214 $68,218,531 $77,203,335
Cash in bank on demand deposit 2,230,320 500,217 43,795
Accrued interest receivable 4,702,894 1,491,471 1,210,420
Receivable for investment securities sold 58,782 7,228 1,250,019
_____________________________________________________________________________________________________________________________
Total assets 243,551,210 70,217,447 79,707,569
_____________________________________________________________________________________________________________________________
Liabilities
_____________________________________________________________________________________________________________________________
Dividends payable to shareholders 146,435 42,052 47,603
Payable for investment securities purchased 1,897,567 8,746 1,088,368
Accrued investment management services fee 68,919 20,962 23,751
Accrued distribution fee 855 797 362
Accrued service fee 27,018 7,934 8,846
Accrued transfer agency fee 6,122 2,806 2,677
Accrued administrative services fee 6,173 1,784 2,021
Other accrued expenses 35,241 19,618 35,234
_____________________________________________________________________________________________________________________________
Total liabilities 2,188,330 104,699 1,208,862
_____________________________________________________________________________________________________________________________
Net assets applicable to outstanding shares $241,362,880 $70,112,748 $78,498,707
_____________________________________________________________________________________________________________________________
Represented by
_____________________________________________________________________________________________________________________________
Shares of beneficial interest - $.01 par value, unlimited
number of shares authorized $ 468,082 $ 132,998 $ 145,657
Additional paid-in capital 232,542,662 68,486,517 74,742,452
Undistributed net investment income 2,661 -- 2,198
Accumulated net realized loss (Notes 1 and 6) (7,290,819) (1,562,602) (845,227)
Unrealized appreciation 15,640,294 3,055,835 4,453,627
_____________________________________________________________________________________________________________________________
Total -- representing net assets applicable to outstanding shares $241,362,880 $70,112,748 $78,498,707
_____________________________________________________________________________________________________________________________
Net assets applicable to outstanding shares: Class A $239,316,429 $68,267,204 $77,509,482
Class B $ 2,045,441 $ 1,844,530 $ 988,214
Class Y $ 1,010 $ 1,014 $ 1,011
Outstanding shares of beneficial interest: Class A shares 46,411,360 12,949,679 14,382,196
Class B shares 396,638 349,909 183,333
Class Y shares 196 192 187
Net asset value per share Class A $ 5.16 $ 5.27 $ 5.39
Class B $ 5.16 $ 5.27 $ 5.39
Class Y $ 5.15 $ 5.28 $ 5.41
See accompanying notes to financial statements.
<PAGE>
PAGE 196
Financial statements
Statements of assets and liabilities
IDS California Tax-Exempt Trust
IDS Special Tax-Exempt Series Trust
June 30, 1995
_____________________________________________________________________________________________________________________________
Assets
_____________________________________________________________________________________________________________________________
Minnesota New York Ohio
Tax-Exempt Tax-Exempt Tax-Exempt
Fund Fund Fund
_____________________________________________________________________________________________________________________________
Investments in securities, at value (Note 1)
(identified cost $381,197,944, $112,186,178
and $69,835,567) $398,818,639 $119,322,025 $72,981,828
Cash in bank on demand deposit 2,940,479 -- 109,155
Accrued interest receivable 8,738,803 2,497,080 1,103,323
Receivable for investment securities sold 2,794,340 33,883 13,460
_____________________________________________________________________________________________________________________________
Total assets 413,292,261 121,852,988 74,207,766
_____________________________________________________________________________________________________________________________
Liabilities
_____________________________________________________________________________________________________________________________
Disbursements in excess of cash on demand deposit -- 2,169 --
Dividends payable to shareholders 293,509 167,747 57,677
Payable for investment securities purchased 5,841,807 23,440 10,861
Accrued investment management services fee 119,655 36,474 22,315
Accrued distribution fee 1,074 836 305
Accrued service fee 45,497 13,584 8,311
Accrued transfer agency fee 14,813 4,588 2,621
Accrued administrative services fee 9,890 3,104 1,899
Other accrued expenses 73,818 17,524 23,281
_____________________________________________________________________________________________________________________________
Total liabilities 6,400,063 269,466 127,270
_____________________________________________________________________________________________________________________________
Net assets applicable to outstanding shares $406,892,198 $121,583,522 $74,080,496
_____________________________________________________________________________________________________________________________
Represented by
_____________________________________________________________________________________________________________________________
Shares of beneficial interest - $.01 par value, unlimited
number of shares authorized $ 783,815 $ 238,972 $ 140,424
Additional paid-in capital 399,894,149 118,232,931 72,396,659
Undistributed net investment income 10,692 -- (35,368)
Accumulated net realized loss (Notes 1 and 6) (11,417,153) (4,024,228) (1,567,480)
Unrealized appreciation 17,620,695 7,135,847 3,146,261
_____________________________________________________________________________________________________________________________
Total -- representing net assets applicable to outstanding shares $406,892,198 $121,583,522 $74,080,496
_____________________________________________________________________________________________________________________________
Net assets applicable to outstanding shares: Class A $402,827,560 $119,701,864 $73,370,743
Class B $ 4,063,624 $ 1,880,652 $ 708,745
Class Y $ 1,014 $ 1,006 $ 1,008
Outstanding shares of beneficial interest: Class A shares 77,598,556 23,527,327 13,907,946
Class B shares 782,831 369,640 134,347
Class Y shares 195 197 191
Net asset value per share: Class A $ 5.19 $ 5.09 $ 5.28
Class B $ 5.19 $ 5.09 $ 5.28
Class Y $ 5.20 $ 5.11 $ 5.28
See accompanying notes to financial statements.
<PAGE>
PAGE 197
Financial statements
Statements of operations
IDS California Tax-Exempt Trust
IDS Special Tax-Exempt Series Trust
Year ended June 30, 1995
_____________________________________________________________________________________________________________________________
Investment income
_____________________________________________________________________________________________________________________________
California Massachusetts Michigan
Tax-Exempt Tax-Exempt Tax-Exempt
Fund Fund Fund
_____________________________________________________________________________________________________________________________
Income:
Interest $15,885,649 $4,441,066 $4,928,265
_____________________________________________________________________________________________________________________________
Expenses (Note 2):
Investment management services fee 1,222,758 349,517 390,460
Distribution fee
Class A 28,560 13,369 12,119
Class B 2,542 2,246 741
Transfer agency fee 99,632 47,199 42,999
Incremental transfer agency fee - Class B 18 12 4
Service fee
Class A 119,787 33,912 39,225
Class B 593 524 173
Administrative services fee 27,514 7,871 9,004
Compensation of trustees 5,779 8,440 5,525
Compensation of officers 2,758 876 1,015
Postage 13,862 6,461 6,863
Registration fees 13,632 4,409 8,296
Reports to shareholders 17,628 5,198 2,776
Audit fees 16,500 15,250 15,250
Administrative 3,641 2,847 2,330
Other 3,470 1,579 1,798
_____________________________________________________________________________________________________________________________
Total expenses 1,578,674 499,710 538,578
_____________________________________________________________________________________________________________________________
Investment income -- net 14,306,975 3,941,356 4,389,687
_____________________________________________________________________________________________________________________________
Realized and unrealized gain (loss) -- net
_____________________________________________________________________________________________________________________________
Net realized gain (loss) on security transactions (Note 3) 1,987,621 (47,218) 872,830
Net realized loss on closed interest rate futures contracts (6,407,164) (1,306,219) (1,490,804)
Net realized gain on exercised or expired option contracts written (Note 5) 383,730 94,897 99,893
_____________________________________________________________________________________________________________________________
Net realized loss on investments (4,035,813) (1,258,540) (518,081)
Net change in unrealized appreciation or depreciation 4,486,171 1,474,819 1,141,073
_____________________________________________________________________________________________________________________________
Net gain on investments 450,358 216,279 622,992
_____________________________________________________________________________________________________________________________
Net increase in net assets resulting from operations $14,757,333 $ 4,157,635 $ 5,012,679
_____________________________________________________________________________________________________________________________
See accompanying notes to financial statements.
<PAGE>
PAGE 198
Financial statements
Statements of operations
IDS California Tax-Exempt Trust
IDS Special Tax-Exempt Series Trust
Year ended June 30, 1995
_____________________________________________________________________________________________________________________________
Investment income
_____________________________________________________________________________________________________________________________
Minnesota New York Ohio
Tax-Exempt Tax-Exempt Tax-Exempt
Fund Fund Fund
_____________________________________________________________________________________________________________________________
Income:
Interest $26,599,512 $7,881,568 $4,572,096
_____________________________________________________________________________________________________________________________
Expenses (Note 2):
Investment management services fee 2,013,423 599,733 365,009
Distribution fee
Class A 68,448 20,691 11,684
Class B 4,110 2,283 798
Transfer agency fee 241,659 73,377 41,650
Incremental transfer agency fee - Class B 40 20 9
Service fee
Class A 201,030 59,534 36,657
Class B 959 533 186
Administrative services fee 43,930 13,729 8,420
Compensation of trustees 25,823 4,678 4,273
Compensation of officers 3,322 1,286 881
Postage 29,942 9,930 5,187
Registration fees 358 10,279 11,372
Reports to shareholders 11,428 6,095 3,097
Audit fees 17,500 16,500 15,250
Administrative 3,049 1,652 1,469
Other 4,530 2,629 4,484
_____________________________________________________________________________________________________________________________
Total expenses 2,669,551 822,949 510,426
_____________________________________________________________________________________________________________________________
Investment income -- net 23,929,961 7,058,619 4,061,670
_____________________________________________________________________________________________________________________________
Realized and unrealized gain (loss) -- net
_____________________________________________________________________________________________________________________________
Net realized gain (loss) on security transactions (Note 3) (972,864) 137,459 122,298
Net realized loss on closed interest rate futures contracts (9,098,172) (3,141,580) (1,484,784)
Net realized gain on exercised or expired option contracts written (Note 5) 843,570 179,961 99,893
______________________________________________________________________________________________________________________________
Net realized loss on investments (9,227,466) (2,824,160) (1,262,593)
Net change in unrealized appreciation or depreciation 10,495,908 1,994,739 1,448,594
_____________________________________________________________________________________________________________________________
Net gain (loss) on investments 1,268,442 (829,421) 186,001
_____________________________________________________________________________________________________________________________
Net increase in net assets resulting from operations $25,198,403 $ 6,229,198 $ 4,247,671
_____________________________________________________________________________________________________________________________
See accompanying notes to financial statements.
/TABLE
<PAGE>
PAGE 199
<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 1995 1994 1995 1994
_____________________________________________________________________________________________________________________________
California Tax-Exempt Fund Massachusetts Tax-Exempt Fund
_____________________________________________________________________________________________________________________________
<S> <C> <C> <C> <C>
Investment income -- net $ 14,306,975 $ 15,236,634 $ 3,941,356 $ 3,862,026
Net realized loss on investments (4,035,813) (2,375,504) (1,258,540) (29,934)
Net change in unrealized appreciation or depreciation 4,486,171 (11,906,345) 1,474,819 (3,499,662)
_____________________________________________________________________________________________________________________________
Net increase in net assets resulting
from operations 14,757,333 954,785 4,157,635 332,430
_____________________________________________________________________________________________________________________________
Distributions to shareholders from:
Net investment income
Class A (14,290,556) (15,235,348) (3,926,867) (3,862,035)
Class B (16,509) -- (14,479) --
Class Y (11) -- (10) --
_____________________________________________________________________________________________________________________________
Total distributions (14,307,076) (15,235,348) (3,941,356) (3,862,035)
_____________________________________________________________________________________________________________________________
Share transactions (Note 4)
_____________________________________________________________________________________________________________________________
Proceeds from sales
Class A shares (Note 2) 22,693,617 35,683,408 10,352,839 22,403,265
Class B shares 2,091,151 -- 1,991,573 --
Class Y shares 1,020 -- 1,021 --
Reinvestment of distributions at asset value
Class A shares 9,854,175 10,573,864 3,023,192 3,055,527
Class B shares 13,558 -- 12,005 --
Class Y shares 11 -- 10 --
Payments for redemptions
Class A shares (48,910,065) (37,967,003) (17,395,360) (14,032,861)
Class B shares (Note 2) (27,600) -- (137,393) --
_____________________________________________________________________________________________________________________________
Increase (decrease) in net assets from
share transactions (14,284,133) 8,290,269 (2,152,113) 11,425,931
_____________________________________________________________________________________________________________________________
Total increase (decrease) in net assets (13,833,876) (5,990,294) (1,935,834) 7,896,326
Net assets at beginning of year 255,196,756 261,187,050 72,048,582 64,152,256
_____________________________________________________________________________________________________________________________
Net assets at end of year
(including undistributed net investment income
for IDS California of $2,661 for 1995
and $35 for 1994) $241,362,880 $255,196,756 $70,112,748 $72,048,582
_____________________________________________________________________________________________________________________________
See accompanying notes to financial statements.
<PAGE>
PAGE 200
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 1995 1994 1995 1994
______________________________________________________________________________________________________________________________
Michigan Tax-Exempt Fund Minnesota Tax-Exempt Fund
______________________________________________________________________________________________________________________________
Investment income -- net $ 4,389,687 $ 4,171,457 $ 23,929,961 $ 24,205,532
Net realized loss on investments (518,081) (72,444) (9,227,466) (351,284)
Net change in unrealized appreciation or depreciation 1,141,073 (3,496,616) 10,495,908 (22,689,828)
_____________________________________________________________________________________________________________________________
Net increase in net assets
resulting from operations 5,012,679 602,397 25,198,403 1,164,420
_____________________________________________________________________________________________________________________________
Distributions to shareholders from:
Net investment income
Class A (4,384,843) (4,171,489) (23,900,319) (24,204,281)
Class B (4,833) -- (29,555) --
Class Y (11) -- (11) --
Net realized gain
Class A (36,289) (68,841) -- --
_____________________________________________________________________________________________________________________________
Total distributions (4,425,976) (4,240,330) (23,929,885) (24,204,281)
_____________________________________________________________________________________________________________________________
Share transactions (Note 4)
_____________________________________________________________________________________________________________________________
Proceeds from sales
Class A shares (Note 2) 12,053,759 15,113,866 57,985,486 81,250,235
Class B shares 997,872 -- 4,124,509 --
Class Y shares 1,020 -- 1,020 --
Reinvestment of distributions at net asset value
Class A shares 3,277,481 3,148,115 18,880,977 19,448,232
Class B shares 4,262 -- 24,745 --
Class Y shares 11 -- 11 --
Payment for redemptions
Class A shares (15,101,862) (9,715,456) (83,747,345) (70,952,363)
Class B shares (Note 2) (3,353) -- (36,354) --
_____________________________________________________________________________________________________________________________
Increase (decrease) in net assets from
share transactions 1,229,190 8,546,525 (2,766,951) 29,746,104
______________________________________________________________________________________________________________________________
Total increase (decrease) in net assets 1,815,893 4,908,592 (1,498,433) 6,706,243
Net assets at beginning of year 76,682,814 71,774,222 408,390,631 401,684,388
_____________________________________________________________________________________________________________________________
Net assets at end of year
(including undistributed net investment income
for IDS Michigan of $2,198 for 1995 and
IDS Minnesota of $10,692 for 1995) $78,498,707 $76,682,814 $406,892,198 $408,390,631
_____________________________________________________________________________________________________________________________
See accompanying notes to financial statements.
<PAGE>
PAGE 201
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 1995 1994 1995 1994
_____________________________________________________________________________________________________________________________
New York Tax-Exempt Fund Ohio Tax-Exempt Fund
_____________________________________________________________________________________________________________________________
Investment income -- net $ 7,058,619 $ 6,895,342 $ 4,061,670 $ 3,927,846
Net realized loss on investments (2,824,160) (505,058) (1,262,593) (177,991)
Net change in unrealized appreciation or depreciation 1,994,739 (6,437,361) 1,448,594 (4,272,974)
_____________________________________________________________________________________________________________________________
Net increase (decrease) in net assets
resulting from operations 6,229,198 (47,077) 4,247,671 (523,119)
_____________________________________________________________________________________________________________________________
Distributions to shareholders from:
Net investment income
Class A (7,042,080) (6,894,339) (4,092,348) (3,927,883)
Class B (16,527) -- (5,227) --
Class Y (12) -- (11) --
Net realized gain
Class A -- -- -- (786)
_____________________________________________________________________________________________________________________________
Total distributions (7,058,619) (6,894,339) (4,097,586) (3,928,669)
_____________________________________________________________________________________________________________________________
Share transactions (Note 4)
_____________________________________________________________________________________________________________________________
Proceeds from sales
Class A shares (Note 2) 16,050,177 21,355,340 12,347,956 17,974,999
Class B shares 1,923,002 -- 715,678 --
Class Y shares 1,020 -- 1,020 --
Reinvestment of distributions at net asset value
Class A shares 5,362,620 5,365,427 3,162,750 3,100,875
Class B shares 12,791 -- 3,706 --
Class Y shares 12 -- 11 --
Payments for redemptions
Class A shares (21,072,998) (16,789,123) (14,135,624) (9,646,507)
Class B shares (Note 2) (22,313) -- (21) --
_____________________________________________________________________________________________________________________________
Increase in net assets from
share transactions 2,254,311 9,931,644 2,095,476 11,429,367
_____________________________________________________________________________________________________________________________
Total increase in net assets 1,424,890 2,990,228 2,245,561 6,977,579
Net assets at beginning of year 120,158,632 117,168,404 71,834,935 64,857,356
_____________________________________________________________________________________________________________________________
Net assets at end of year
(including undistributed net investment income
for IDS Ohio of $(35,368) for 1995) $121,583,522 $120,158,632 $74,080,496 $71,834,935
_____________________________________________________________________________________________________________________________
See accompanying notes to financial statements
</TABLE>
<PAGE>
PAGE 202
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 currently composed of individual state tax-exempt funds and
one insured national tax-exempt fund, including 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
and IDS Insured 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,
excluding IDS Insured Tax-Exempt Fund, 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.
Each fund offers Class A, Class B and Class Y shares. Class A
shares are sold with a front-end sales charge. Class B shares,
which each fund began offering on March 20, 1995, may be subject to
a contingent deferred sales charge. Class B shares automatically
convert to Class A after eight years. Class Y shares, which each
fund also began offering on March 20, 1995, have no sales charge
and are offered only to qualifying institutional investors.
All classes of shares have identical voting, dividend, liquidation
and other rights, and the same terms and conditions, except that
the level of distribution fee, transfer agency fee and service fee
(class specific expenses) differ among classes. Income, expenses
(other than class specific expenses) and realized and unrealized
gains or losses on investments are allocated to each class of
shares based upon its relative net assets.
Significant accounting policies followed by the fund are summarized
below:
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.
<PAGE>
PAGE 203
Option transactions
In order to produce incremental earnings, protect gains and
facilitate buying and selling of securities for investment
purposes, each fund may buy and sell put and call options and write
covered call options on portfolio securities and may write cash-
secured put options. The risk in writing a call option is that each
fund gives up the opportunity of profit if the market price of the
security increases. The risk in writing a put option is that each
fund may incur a loss if the market price of the security decreases
and the option is exercised. The risk in buying an option is that
each fund pays a premium whether or not the option is exercised.
Each fund also has the additional risk of not being able to enter
into a closing transaction if a liquid secondary market does not
exist. Each fund also may write over-the-counter options where the
completion of the obligation is dependent upon the credit standing
of the other party.
Option contracts are valued daily at the closing prices on their
primary exchanges and unrealized appreciation or depreciation is
recorded. Each fund will realize a gain or loss upon expiration or
closing of the option transaction. When options on debt securities
or futures are exercised, the fund will realize a gain or loss.
When other options are exercised, the proceeds on sales for a
written call option, the purchase cost for a written put option or
the cost of a security for a purchase put or call option is
adjusted by the amount of the premium received or paid.
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.
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<PAGE>
PAGE 204
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.
On the statement of assets and liabilities, as a result of
permanent book-to-tax differences, undistributed net investment
income has been increased by $2,727 for IDS California, $2,198 for
IDS Michigan, $10,616 for IDS Minneasota and $548 for IDS Ohio tax-
exempt funds. Accumulated net realized loss has been increased by
$2,727 for IDS California, $2,198 for IDS Michigan, $10,616 for IDS
Minnesota and $548 for IDS Ohio tax-exempt funds.
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.
At June 30, 1995, American Express Financial Corporation owned 196
Class Y shares for IDS California, 192 for IDS Massachusetts, 187
for IDS Michigan, 195 for IDS Minnesota, 197 for IDS New York and
191 for IDS Ohio tax-exempt funds.
___________________________________________________________________
2. Expenses and sales charges
Under terms of a prior agreement that ended March 19, 1995, the
fund paid American Express Financial Corporation a fee for managing
its investments, recordkeeping and other specified services. The
fee was 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.
Also under the terms of a prior agreement, each fund paid American
Express Financial Corporation 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 was reduced by earnings on monies pending shareholder
redemptions.
Effective March 20, 1995, when each fund began offering multiple
classes of shares, each fund entered into agreements with American
Express Financial Corporation for managing its portfolio, providing
administrative services and serving as transfer agent as follows:
Under its Investment Management Services Agreement, American
Express Financial Corporation determines which securities will be
purchased, held or sold. The management fee is a percentage of each<PAGE>
PAGE 205
fund's average daily net assets in reducing percentages from 0.47%
to 0.38% annually. Under an Administrative Services Agreement, each
fund pays American Express Financial Corporation for administration
and accounting services at a percentage of each fund's average
daily net assets in reducing percentages from 0.04% to 0.02%
annually.
Under a separate Transfer Agency Agreement, American Express
Financial Corporation maintains shareholder accounts and records.
Each fund pays American Express Financial Corporation an annual fee
per shareholder account for this service as follows:
o Class A $15.50
o Class B $16.50
o Class Y $15.50
Also effective March 20, 1995, each fund entered into agreements
with American Express Financial Advisors Inc. for distribution and
shareholder servicing-related services as follows: Under the
Distribution Agreement, each fund pays a distribution fee at an
annual rate of 0.75% of the fund's average daily net assets
attributable to Class B shares for distribution-related services.
Under a Shareholder Service Agreement, each fund pays a fee for
service provided to shareholders by financial advisors and other
servicing agents. The fee is calculated at a rate of 0.175% of each
fund's average daily net assets attributable to Class A and Class B
shares.
American Express Financial Corporation will assume and pay any
expenses (except taxes and brokerage commissions) that exceed the
most restrictive applicable state expense limitation.
Sales charges by American Express Financial Advisors Inc. for
distributing the funds' shares were $480,433 Class A, $10 Class B
for IDS California; $296,532 Class A for IDS Massachusetts;
$176,901 Class A for IDS Michigan; $1,139,773 Class A for IDS
Minnesota; $408,324 Class A, $93 Class B for IDS New York; and
$205,263 Class A for IDS Ohio tax-exempt funds for the year ended
June 30, 1995.
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 $1,034 for IDS California, $1,640 for IDS
Massachusetts, $1,640 for IDS Michigan, $3,266 for IDS Minnesota,
$1,640 for IDS New York, and $1,742 for IDS Ohio Tax-Exempt Funds
for the year ended
June 30, 1995.
___________________________________________________________________
3. Securities transactions
For the year ended June 30, 1995, cost of purchases and proceeds
from sales (other than short-term obligations) aggregated
$115,231,208 and $135,221,788 for IDS California, $10,437,562 and
$14,096,628 for IDS Massachusetts, $36,220,970 and $36,527,867 for<PAGE>
PAGE 206
IDS Michigan, $110,080,828 and $113,701,660 for IDS Minnesota,
$23,217,096 and $22,719,409 for IDS New York and $32,247,182 and
$31,374,995 for IDS Ohio Tax-Exempt Funds. Realized gains and
losses are determined on an identified cost basis.
___________________________________________________________________
4. Share transactions
Transactions in shares of each fund for the periods indicated are
as follows:
<TABLE><CAPTION>
California Tax-Exempt Fund
_______________________________________________________
Period ended June 30, 1995 Year ended
06/30/94
Class A Class B* Class Y* Class A
______________________________________________________________________________
<S> <C> <C> <C> <C>
Sold 4,428,851 399,282 194 6,578,766
Issued for reinvested
distributions 1,929,797 2,588 2 1,962,600
Redeemed (9,662,241) (5,232) -- (7,091,287)
______________________________________________________________________________
Net increase
(decrease) (3,303,593) 396,638 196 1,450,079
______________________________________________________________________________
*Inception date was March 20, 1995 for Class B and Class Y.
Massachusetts Tax-Exempt Fund
_______________________________________________________
Period ended June 30, 1995 Year ended
06/30/94
Class A Class B* Class Y* Class A
______________________________________________________________________________
Sold 1,986,963 373,441 190 4,061,994
Issued for reinvested
distributions 581,883 2,245 2 558,167
Redeemed (3,369,135) (25,777) -- (2,564,761)
______________________________________________________________________________
Net increase (decrease) (800,289) 349,909 192 2,055,400
______________________________________________________________________________
*Inception date was March 20, 1995 for Class B and Class Y.
Michigan Tax-Exempt Fund
_______________________________________________________
Period ended June 30, 1995 Year ended
06/30/94
Class A Class B* Class Y* Class A
______________________________________________________________________________
Sold 2,295,997 183,169 185 2,687,659
Issued for reinvested
distributions 615,732 779 2 562,683
Redeemed (2,849,810) (615) -- (1,739,752)
______________________________________________________________________________
Net increase 61,919 183,333 187 1,510,590
______________________________________________________________________________
*Inception date was March 20, 1995 for Class B and Class Y.
Minnesota Tax-Exempt Fund
_______________________________________________________
Period ended June 30, 1995 Year ended
06/30/94
Class A Class B* Class Y* Class A
______________________________________________________________________________
Sold 11,298,321 785,048 193 14,961,095
Issued for reinvested
distributions 3,679,693 4,700 2 3,599,781
Redeemed (16,502,683) (6,917) -- (13,233,479)
______________________________________________________________________________
Net increase
(decrease) (1,524,669) 782,831 195 5,327,397
______________________________________________________________________________
*Inception date was March 20, 1995 for Class B and Class Y.<PAGE>
PAGE 207
New York Tax-Exempt Fund
_______________________________________________________
Period ended June 30, 1995 Year ended
06/30/94
Class A Class B* Class Y* Class A
______________________________________________________________________________
Sold 3,164,808 371,486 195 3,952,327
Issued for reinvested
distributions 1,057,342 2,472 2 999,332
Redeemed (4,176,540) (4,318) -- (3,127,657)
______________________________________________________________________________
Net increase 45,610 369,640 197 1,824,002
______________________________________________________________________________
*Inception date was March 20, 1995 for Class B and Class Y.
Ohio Tax-Exempt Fund
_______________________________________________________
Period ended June 30, 1995 Year ended
06/30/94
Class A Class B* Class Y* Class A
______________________________________________________________________________
Sold 2,368,379 133,660 189 3,231,719
Issued for reinvested
distributions 604,956 691 2 562,446
Redeemed (2,726,424) (4) -- (1,753,354)
______________________________________________________________________________
Net increase 246,911 134,347 191 2,040,811
______________________________________________________________________________
*Inception date was March 20, 1995 for Class B and Class Y.
/TABLE
<PAGE>
PAGE 208
5. Option contracts written
The number of contracts and premium amounts associated with option
contracts written is as follows:
<TABLE><CAPTION>
California Tax-Exempt
Year ended June 30, 1995
____________________________________________
Puts Calls
____________________________________________
Contracts Premium Contracts Premium
____________________________________________
<S> <C> <C> <C> <C>
Balance June 30, 1994 -- $ -- -- $ --
Opened 150 219,810 237 163,920
Exercised (150) (219,810) (75) (89,710)
Expired -- -- (162) (74,210)
_____________________________________________________________
Balance June 30, 1995 -- $ -- -- $ --
_____________________________________________________________
Massachusetts Tax-Exempt
Year ended June 30, 1995
____________________________________________
Puts
____________________________________________
Contracts Premium
____________________________________________
Balance June 30, 1994 -- $ --
Opened 75 94,897
Exercised (35) (36,286)
Expired (40) (58,611)
____________________________________________
Balance June 30, 1995 -- $ --
____________________________________________
<PAGE>
PAGE 209
Michigan Tax-Exempt
Year ended June 30, 1995
____________________________________________
Puts
____________________________________________
Contracts Premium
____________________________________________
Balance June 30, 1994 -- $ --
Opened 80 99,893
Exercised (40) (41,282)
Expired (40) (58,611)
____________________________________________
Balance June 30, 1995 -- $ --
____________________________________________
Minnesota Tax-Exempt
Year ended June 30, 1995
____________________________________________
Puts Calls
____________________________________________
Contracts Premium Contracts Premium
____________________________________________
Balance June 30, 1994 -- $ -- -- $ --
Opened 425 622,088 322 221,481
Exercised -- -- (100) (119,613)
Expired (425) (622,088) (222) (101,868)
_____________________________________________________________
Balance June 30, 1995 -- $ -- -- $ --
_____________________________________________________________
New York Tax-Exempt
Year ended June 30, 1995
____________________________________________
Puts Calls
____________________________________________
Contracts Premium Contracts Premium
____________________________________________
Balance June 30, 1994 -- $ -- -- $ --
Opened 100 146,441 73 33,520
Exercised (100) (146,441) -- --
Expired -- -- (73) (33,520)
_____________________________________________________________
Balance June 30, 1995 -- $ -- -- $ --
_____________________________________________________________
Ohio Tax-Exempt
Year ended June 30, 1995
____________________________________________
Puts
____________________________________________
Contracts Premium
____________________________________________
Balance June 30, 1994 -- $ --
Opened 80 99,893
Exercised (40) (41,282)
Expired (40) (58,611)
____________________________________________
Balance June 30, 1995 -- $ --
____________________________________________
/TABLE
<PAGE>
PAGE 210
6. Capital loss carryover
For federal income tax purposes, capital loss carryovers were
$471,391 for IDS Massachusetts, $1,233,720 for IDS Minnesota,
$670,740 for IDS New York and $210,685 for IDS Ohio tax-exempt
funds at June 30, 1995. These capital loss carryovers will expire
in 1997 through 2004 if not offset by subsequent capital gains. It
is unlikely the board of trustees will authorize a distribution of
any net realized capital gains for a fund until the respective
capital loss carryover has been offset or expires.
___________________________________________________________________
7. Financial highlights
"Financial highlights" showing per share data and selected
information are pesented on pages 8-13 of the prospectus.
<PAGE>
PAGE 211
<TABLE>
<CAPTION>
Investments in securities
IDS California Tax-Exempt Fund (Percentages represent value of
June 30, 1995 investments compared to net assets)
_____________________________________________________________________________________________________________________________
Municipal bonds (98.0%)
_____________________________________________________________________________________________________________________________
Name of issuer and Coupon Maturity Principal Value(a)
title of issue (b,c,d) rate year amount
_____________________________________________________________________________________________________________________________
<S> <C> <C> <C> <C>
Aliso Viejo Orange County District Community Facilities District #88-1
Special Tax Bonds Series 1992A 7.35 % 2018 3,000,000 $ 3,511,500
Anaheim Public Finance Authority Revenue Bonds 2nd Series Electric Utilities
San Juan (FGIC Insured) 5.75 2022 11,100,000 10,571,418
Brea Redevelopment Agency Tax Allocation Refunding Bonds
Redevelopment Project AB (MBIA Insured) 5.50 2017 1,800,000 1,673,892
Burbank Redevelopment Agency Tax Allocation Bonds Golden State Series 1992A 6.00 2013 1,500,000 1,412,370
Burbank Redevelopment Agency Tax Allocation Bonds Golden State Series 1993A 6.00 2023 2,000,000 1,853,980
Calaveras County Water District Certificate of Participation
Refunding Revenue Bonds Water & Sewer System Improvement (AMBAC Insured) 5.25 2012 2,815,000 2,618,288
Chapman College Educational Facilities Authority Revenue Bonds
Series 1989B 7.50 2018 500,000 524,185
Chico Walker Senior Housing Insured Revenue Bonds The Lodge Series 1993A 5.70 2023 1,500,000 1,345,350
Clearlake Redevelopment Agency Highlands Park Community Development
Tax Allocation Bonds Series 1993 6.40 2023 1,420,000 1,352,309
Eastern Municipal Water District Riverside County Water & Sewer
Revenue Certificates of Participation Series 1991 6.00 2023 1,000,000 958,220
Eastern Municipal Water District Riverside County Water & Sewer
Pre-Refunded Revenue Certificates of Participation Series 1991
(FGIC Insured) 6.50 2020 3,000,000 3,336,660
Eden Township Hospital District Insured Health Facility Refunding Revenue
Certificate of Participation Series 1993 (California Mortgage Insured) 5.75 2012 3,000,000 2,787,900
El Camino Hospital District Hospital Pre-Refunded Revenue
Certificate of Participation Series A 8.50 2017 1,500,000 1,664,970
Fontana Redevelopment Agency Refunding Certificate of Participation
Police Facility Series 1993 5.625 2016 4,500,000 4,073,220
Fontana Unified School District Unlimited Tax General Oblgation Bonds
Zero Coupon Series C (FGIC Insured) 6.40 2020 3,470,000 (e) 3,088,300
Foothill-De Anza Community College Santa Clara County Refunding
Certificate of Participation Series 1993 (Connie Lee Insured) 5.25 2021 1,675,000 1,479,929
Foothill/Eastern Transportation Corridor Agency Toll Road
Senior Lien Revenue Bonds Series 1995A 6.00 2034 1,775,000 1,619,688
Fresno Sewer Non-callable Revenue Bonds Series A-1 (AMBAC Insured) 4.75 2021 1,240,000 1,019,023
Garden Grove Agency Community Development Tax Allocation Refunding Bonds
Garden Grove Community Project 5.875 2023 3,000,000 2,754,904
Garden Grove Certificate of Participation Bahia Village/Emerald Isle
(FSA Insured) 5.70 2023 2,660,000 2,487,233
Huntington Beach Certificate of Participation Revenue Bonds
Civic Center Refinancing (AMBAC Insured) 5.50 2016 1,715,000 1,607,195
Indian Wells Improvement Bonds Assessment District #13 7.50 2008 430,000 442,900
Long Beach Harbor Revenue Bonds AMT Series 1989A 7.25 2019 7,000,000 7,468,020
Los Angeles Convention & Exhibition Center Pre-Refunded
Certificate of Participation Series 1989A 7.00 2020 5,000,000 5,547,850
See accompanying notes to investments in securities.<PAGE>
PAGE 212
Los Angeles Convention & Exhibition Center Pre-Refunded
Certificate of Participation Series 1989A 7.30 2009 1,000,000 1,120,760
Los Angeles Convention & Exhibition Center Pre-Refunded
Certificate of Participation Series 1989A 7.375 2018 2,900,000 3,258,324
Los Angeles County Certificate of Participation Disney Parking 5.50 2021 1,625,000 1,429,058
Los Angeles County Transportation Commission Sales Tax Refunding
Revenue Bonds Series A 7.00 2019 4,150,000 4,450,170
Los Angeles County Transportation Commission Sales Tax Pre-Refunded
Revenue Bonds Series A 8.00 2016 2,000,000 2,187,820
Los Angeles County Transportation Commission Sales Tax Pre-Refunded
Revenue Bonds Series 1988A 7.875 2008 500,000 559,400
Los Angeles County Transportation Commission Sales Tax Refunding
Revenue Bonds Series 1989A 7.40 2015 2,000,000 2,190,580
Los Angeles Department of Water & Power Electric Plant Revenue Bonds
Series 1990 7.125 2030 6,500,000 7,237,555
Los Angeles Department of Water & Power Waterworks Refunding Revenue Bonds
Second Issue (Secondary FGIC Insured) 4.50 2018 3,000,000 2,408,760
Los Angeles Multi-family Housing Revenue Bonds AMT Park Parthenia
Series 1986A (GNMA Insured) 7.40 2022 1,000,000 1,041,580
Los Angeles Single Family Home Mortgage Revenue Bonds AMT Series 1991A
(GNMA & FNMA Insured) 6.875 2025 810,000 836,017
Los Angeles State Building Authority Lease Pre-Refunded Revenue Bonds
State Department of General Services Lease Series 1988A 7.25 2006 3,000,000 3,287,790
Los Angeles State Building Authority Lease Pre-Refunded Revenue Bonds
State Department of General Services Lease Series 1988A 7.50 2011 1,500,000 1,653,300
Los Angeles State Harbor Revenue Bonds Escrowed to Maturity 7.60 2018 1,000,000 1,095,000
Los Angeles Wastewater System Pre-Refunded Revenue Bonds Series 1987 8.125 2017 1,000,000 1,108,320
Los Angeles Wastewater System Refunding Revenue Bonds
Series D (FGIC Insured) 4.70 2017 1,000,000 833,560
Mayer Memorial Hospital District Insured Health Facility Revenue Bonds
(California Mortgage Insured) 5.50 2013 950,000 859,532
Modesto Certificate of Participation Pre-Refunded Bonds Community Center 8.10 2015 1,000,000 1,107,760
Modesto Irrigation Certificate of Participation 7.25 2015 2,000,000 2,090,960
Mount Diablo Hospital District Hospital Pre-Refunded Revenue Bonds
Series 1990A (AMBAC Insured) 7.00 2017 3,000,000 3,394,800
Northern California Public Power Authority Power Pre-Refunded Revenue Bonds
Hydroelectric Series 1986B-3 8.00 2024 2,000,000 2,214,100
Northern California Public Power Authority Power Pre-Refunded Revenue Bonds
Hydroelectric #1 Series 1986B-1 8.00 2024 2,100,000 2,324,805
Northern California Public Power Authority Refunding Revenue Bonds
Geothermal #3 Series 1985A 7.00 2010 830,000 830,075
Northern California Public Power Authority Refunding Revenue Bonds
Geothermal #3 Series 1987A 7.00 2007 6,825,000 7,013,916
Northern California Transmission Agency California-Oregon Transmission
Pre-Refunded Revenue Bonds Series 1990A (MBIA Insured) 7.00 2024 2,000,000 2,233,580
Northern California Transmission Select Auction Variable Rate
Security & Residual Interest Revenue Bonds Inverse Floater (MBIA Insured) 5.50 2024 2,500,000 (f) 2,319,700
Novato Community Facility District #1 Vintage Oaks Public Improvement
Special Tax Refunding Bonds 7.25 2021 2,000,000 2,022,560
Pleasanton Joint Powers Financing Authority Reassessment Revenue Bonds
Series 1993A 6.15 2012 1,950,000 1,897,428
Port of Oakland Revenue Bonds AMT Series 1989A (BIG Insured) 7.60 2016 500,000 533,840
Rancho Cucamonga Redevelopment Agency 1990 Tax Allocation Pre-Refunded Bonds
(MBIA Insured) 7.125 2019 3,540,000 3,962,534
Rancho Mirage Joint Powers Finance Authority Certificate of Participation
Eisenhower Memorial Hospital 7.00 2022 4,250,000 4,365,983
Redding Redevelopment Agency Tax Allocation Refunding Bonds
Canby Hilltop Cypress Series D (CGIC Insured) 5.00 2023 4,700,000 4,024,798
<PAGE>
PAGE 213
Sacramento Cogeneration Authority Cogeneration Revenue Bonds
Procter & Gamble Series 1995 6.375 2010 1,000,000 987,180
Sacramento Municipal Utility District Series R 6.00 2015-17 7,500,000 7,294,650
Sacramento Municipal Utility District Pre-Refunded Bonds Series V 7.50 2018 2,775,000 3,042,899
Sacramento Municipal Utility District Pre-Refunded Bonds Series W 7.50 2018 1,980,000 2,171,149
Sacramento Municipal Utility District Pre-Refunded Bonds Series Y
(MBIA Insured) 6.75 2019 3,400,000 3,833,976
San Bernadino County Certificate of Participation
Medical Center Financing Project Series A (MBIA Insured) 5.50 2022 2,000,000 1,839,280
San Diego County Capital Asset Lease Certificate of Participation
Series 1993 Inverse Floater (AMBAC Insured) 5.97 2007 3,200,000 (f) 3,216,000
San Diego Industrial Development Revenue Bonds San Diego Gas & Electric
Series A 7.625 2021 1,000,000 1,036,750
San Diego Regional Transportation Commission Sales Tax
Pre-Refunded Revenue Bonds Limited Tax Series 1989A 6.25 2008 5,030,000 5,348,198
San Francisco Bay Area Rapid Transmission District
Sales Tax Revenue Bonds (FGIC Insured) 5.50 2020 1,000,000 925,930
San Francisco City & County Certificate of Participation
San Francisco Courthouse Series 1995 (CGIC Insured) 5.60 2016 2,500,000 2,364,925
San Joaquin County Pre-Refunded Certificate of Participation
Human Services Facility Series 1989 (BIG Insured) 6.70 2009 3,500,000 3,842,790
San Joaquin County Certificate of Participation
Jail & Sheriffs Operation Center (MBIA Insured) 6.75 2015 2,000,000 2,218,120
San Jose Redevelopment Agency Merged Area Redevelopment Tax Allocation Bonds
Series 1993 (MBIA Insured) 4.75 2024 1,435,000 1,168,477
San Jose Redevelopment Agency Merged Area Tax Allocation Bonds
Series 1993 Inverse Floater (MBIA Insured) 5.591 2014 3,000,000 (f) 2,643,750
San Mateo County Transit District Limited Tax Pre-Refunded Bonds
Series 1990A (MBIA Insured) 6.50 2020 1,500,000 1,603,215
Santa Cruz Certificate of Participation 8.375 2007 1,220,000 1,298,544
Santa Rosa Sonoma County Wastewater Service Facility District
Pre-Refunded Improvement Bonds Series 1989 7.80 2015 1,000,000 1,090,180
Southern California Home Financing Authority Single Family Mortgage
Revenue Bonds AMT 1990B (GNMA Insured) 7.75 2024 575,000 606,849
Southern California Public Power Authority Transmission
Pre-Refunded Revenue Bonds Series 1986A 7.875 2018 1,500,000 1,603,515
Southern California Public Power Authority Transmission Special Bonds 5.858 2012 2,700,000 2,674,485
Southern California Public Power Authority Transportation Bonds Series B 7.375 2021 400,000 421,728
State Department Water Resources Water System Pre-Refunded Revenue Bonds
Central Valley Series D 7.70 2024 2,400,000 2,633,088
State Department Water Resource Water System Revenue Bonds
Central Valley Project Series L 5.50 2023 3,000,000 2,720,820
State Education Facility Authority Revenue Bonds Pomona College 6.00 2017 3,000,000 2,904,510
State Health Facility Finance Authority Pre-Refunded Revenue Bonds
St. Joseph Health System Series 1989A 6.90 2014 3,500,000 3,865,855
State Housing Finance Agency Home Mortgage Revenue Bonds Series 1986B 6.90 2016 1,990,000 2,046,416
State Pollution Control Finance Authority Pollution Control Revenue Bonds
AMT Southern California Edison Series 1988A 6.90 2006 2,000,000 2,107,200
State Public Works Board Lease Revenue Bonds California Community Colleges
Series 1994B 7.00 2019 2,000,000 2,113,680
State Public Works Board University of California Lease Pre-Refunded
Revenue Bonds Series 1990A 7.00 2015 2,250,000 2,535,727
State University Revenue Bonds San Jose State University Student Union
Series B 7.60 2007 150,000 157,600
State Unlimited Tax General Obligation Bonds
(Secondary FGIC Insured) 4.75 2023 2,500,000 2,045,523
<PAGE>
PAGE 214
Statewide Community Development Authority Certificate of Participation
Sutter Health Group (MBIA Insured) 5.50 2022 2,000,000 1,817,120
Statewide Community Development Authority Health Facilities Revenue Bonds
Unihealth America Series 1993A Inverse Floater (AMBAC Insured) 7.063 2011 5,000,000 (f) 4,687,500
Statewide Community Development Authority Revenue
Certificate of Participation Insured Health Facilities
Unihealth Series A (AMBAC Insured) 5.50 2014 1,750,000 1,635,550
Statewide Community Development Authority Revenue
Certificate of Participation St. Joseph Health System Group 6.50 2015 5,500,000 5,678,915
Stockton Single Family Mortgage Revenue Bonds AMT
Series 1990A (GNMA Insured) 7.50 2023 115,000 126,181
University of Southern California Educational Facilities Authority
Pre-Refunded Revenue Bonds Series 1989B 6.75 2015 5,000,000 5,245,550
Upland Certificate of Participation Water System Refunding Bonds
(FGIC Insured) 6.60 2016 1,000,000 1,056,820
Vacaville Limited Obligation Improvement Bonds
Water Rights Assessment District 8.00 2007 830,000 854,900
_____________________________________________________________________________________________________________________________
Total municipal bonds
(Cost: $220,918,920) $236,559,214
_____________________________________________________________________________________________________________________________
Total investments in securities
(Cost: $220,918,920)(g) $236,559,214
_____________________________________________________________________________________________________________________________
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 6-30-95 6-30-94
_____________________________________________________________________________
AAA 61% 63%
AA 16 18
A 19 16
BBB and below 4 3
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
BIG -- Bond Investors Guarantee
CGIC -- Capital Guaranty Insurance Company
FGIC -- Financial Guarantee Insurance Corporation
FNMA -- Federal National Mortgage Association
FSA -- Financial Security Assurance
GNMA -- Government National Mortgage Association
MBIA -- Municipal Bond Investors Assurance
(d) The following abbreviation is used in portfolio descriptions:
AMT -- Alternative Minimum Tax
(e) For zero coupon bonds, the interest rate disclosed represents the annualized effective yield
on the date of acquisition.<PAGE>
PAGE 215
(f) Inverse floaters represent securities that pay interest at a rate that increases (decreases) in the same
magnitude as, or in a multiple of, a decline (increase) in market short-term rates. Interest rate disclosed
is the rate in effect on June 30, 1995. Inverse floaters in the aggregate represent 4.4% of the fund's
net assets as of June 30, 1995.
(g) At June 30, 1995, the cost of securities for federal income tax purposes was $220,818,738
and the aggregate gross unrealized appreciation and depreciation based on that cost was:
Unrealized appreciation $17,422,577
Unrealized depreciation (1,682,101)
______________________________________________________________________
Net unrealized appreciation $15,740,476
______________________________________________________________________
</TABLE>
<PAGE>
PAGE 216
<TABLE>
<CAPTION>
Investments in securities
IDS Massachusetts Tax-Exempt Fund (Percentages represent value of
June 30, 1995 investments compared to net assets)
_____________________________________________________________________________________________________________________________
Municipal bonds (96.3%)
_____________________________________________________________________________________________________________________________
Name of issuer and title of issue (b,c,d) Coupon Maturity Principal Value(a)
rate year amount
_____________________________________________________________________________________________________________________________
<S> <C> <C> <C> <C>
Bay Transit Authority Series A (Secondary CGIC Insured) 5.50 % 2021 $ 500,000 $ 457,060
Bay Transportation Authority General Transportation System
Refunding Bonds Series 1992B 6.20 2016 1,500,000 1,538,700
Boston City Hospital Refunding Revenue Bonds Series B (FHA Insured) 5.75 2023 3,000,000 2,781,300
Boston City Hospital Pre-Refunded Revenue Bonds Series A (FHA Insured) 7.625 2021 1,000,000 1,139,660
Boston General Obligation Bonds Series 1991A (MBIA Insured) 6.75 2011 500,000 560,350
Boston General Obligation Refunding Bonds Series 1993A (AMBAC Insured) 5.65 2009 1,500,000 1,490,085
Boston Industrial Development Financing Authority Revenue Bonds
Massachusetts College of Pharmacy Series 1993A (Connie Lee Insured) 5.25 2026 1,000,000 871,860
Boston Water & Sewer Commission General Pre-Refunded Revenue Bonds
Senior Series 1991A (FGIC Insured) 7.00 2018 1,000,000 1,138,990
Boston Water & Sewer Commission General Subordinate Revenue Bonds Series A
(MBIA Insured) 6.00 2008 500,000 508,850
Boston Water & Sewer Commission Senior Revenue Bonds Series A 7.875 2013 365,000 388,466
Boston Water & Sewer Commission Senior Pre-Refunded Revenue Bonds Series A 7.875 2013 210,000 224,393
Commonwealth General Obligation Consolidated Loan Pre-Refunded Bonds
Series 1990A (FGIC Insured) 7.25 2009 500,000 562,245
Greater Lawrence Sanitary District North Andover General Obligation Bonds 8.50 2005 570,000 588,787
Health & Educational Facilities Authority Refunding Revenue Bonds
Beth Israel Hospital Series 1989E 7.00 2009-14 550,000 582,438
Health & Educational Facilities Authority Revenue Bonds
Berkshire Health Systems Series A (MBIA Insured) 7.50 2008 500,000 557,555
Health & Educational Facilities Authority Revenue Bonds
Berkshire Health Systems Series C 5.90 2011 1,000,000 872,160
Health & Educational Facilities Authority Pre-Refunded Revenue Bonds
Beverly Hospital Series D (MBIA Insured) 7.30 2019 400,000 447,616
Health & Educational Facilities Authority Revenue Bonds
Boston College Series J (FGIC Insured) 6.625 2021 2,000,000 2,104,460
Health & Educational Facilities Authority Revenue Bonds
Boston College Series K 5.25 2023 1,000,000 878,150
Health & Educational Facilities Authority Revenue Bonds
Brigham & Women's Hospital Series C 6.75 2021 500,000 515,285
Health & Educational Facilities Authority Revenue Bonds
Brigham & Women's Hospital Series 1991D 6.75 2024 1,000,000 1,031,100
Health & Educational Facilities Authority Revenue Bonds
Cape Cod Health System Series A (Connie Lee Insured) 5.25 2021 2,500,000 2,215,375
Health & Educational Facilities Authority Revenue Bonds
Charlton Memorial Hospital Series 1991B 7.25 2013 1,750,000 1,825,373
Health & Educational Facilities Authority Revenue Bonds
Holyoke Hospital Series B 6.50 2015 500,000 467,695
See accompanying notes to investments in securities.
<PAGE>
PAGE 217
Health & Educational Facilities Authority Pre-Refunded Revenue Bonds
Lahey Clinic Medical Center Series A (MBIA Insured) 7.625 2018 500,000 555,910
Health & Educational Facilities Authority Revenue Bonds
Lahey Clinic Medical Center Series B (MBIA Insured) 5.625 2015 1,500,000 1,424,910
Health & Educational Facilities Authority Revenue Bonds
Melrose-Wakefield Hospital Series 1992B 6.375 2016 1,000,000 977,940
Health & Educational Facilities Authority Revenue Bonds
Morton Hospital & Medical Center Series B (Connie Lee Insured) 5.25 2014 1,000,000 907,220
Health & Educational Facilities Authority Pre-Refunded Revenue Bonds
Mount Auburn Hospital Series A (MBIA Insured) 7.875 2018 205,000 229,354
Health & Educational Facilities Authority Revenue Bonds
New England Deaconess Hospital Series 1992D 6.625 2012 1,000,000 1,010,760
Health & Educational Facilities Authority Revenue Bonds
Newton Wellesley Hospital Series 1991D (MBIA Insured) 7.00 2015 1,000,000 1,079,600
Health & Educational Facilities Authority Pre-Refunded Revenue Bonds
Northeastern University Series 1989C (AMBAC Insured) 7.10 2006 1,000,000 1,098,540
Health & Educational Facilities Authority Pre-Refunded Revenue Bonds
Northeastern University Series E (MBIA Insured) 6.55 2022 1,000,000 1,058,150
Health & Educational Facilities Authority Revenue Bonds
South Shore Hospital Series 1992D (MBIA Insured) 6.50 2022 1,000,000 1,032,980
Health & Educational Facilities Authority Pre-Refunded Revenue Bonds
Stonehill College Series 1990D (AMBAC Insured) 7.70 2020 1,000,000 1,151,110
Health & Educational Facilities Authority Revenue Bonds
Suffolk University Series B (Connie Lee Insured) 6.35 2022 2,495,000 2,523,942
Health & Educational Facilities Authority Pre-Refunded Revenue Bonds
Wentworth Institute of Technology Series A (AMBAC Insured) 7.40 2010 750,000 849,360
Health & Educational Facilities Authority Revenue Bonds
Valley Regional Health System Series C (Connie Lee Insured) 5.75 2018 1,000,000 931,340
Health & Educational Facilities Authority Revenue Bonds
Wentworth Institute of Technology Series B (Connie Lee Insured) 5.50 2023 1,500,000 1,358,805
Industrial Finance Agency 1st Mortgage Pre-Refunded Revenue Bonds
Berkshire Retirement Community at Lennox 9.875 2018 200,000 218,954
Industrial Finance Agency Pollution Control Refunding Revenue Bonds
Eastern Edison Series 1993 5.875 2008 1,500,000 1,444,920
Industrial Finance Agency Resource Recovery Revenue Bonds AMT
Ogden Haverhill Series 1986A (AMBAC Insured) 7.375 2011 175,000 183,615
Industrial Finance Agency Resource Recovery Revenue Bonds
SEMASS Series 1991A 9.00 2015 1,500,000 1,631,520
Industrial Finance Agency Revenue Bonds Museum of Science Series 1989
(FSA Insured) 7.30 2009 1,000,000 1,126,430
Leominster General Obligation Bonds (MBIA Insured) 7.50 2009 1,000,000 1,136,710
Lowell Limited Tax General Obligation State Qualified Refunding Bonds
Series A (FSA Insured) 5.50 2010 800,000 773,560
Mansfield General Obligation Bonds (AMBAC Insured) 6.70 2011 1,000,000 1,071,750
Municipal Wholesale Electric Power Supply System Pre-Refunded Revenue Bonds
Series 1992B 6.75 2017 1,395,000 1,584,120
Municipal Wholesale Electric Power Supply System Refunding Revenue Bonds
Series B (MBIA Insured) 4.75 2011 1,750,000 1,536,798
Municipal Wholesale Electric Power Supply System Revenue Bonds
Special Pars & Inflows (AMBAC Insured) 5.31 2018 1,600,000 1,494,768
Nantucket General Obligation Bonds 6.80 2011 1,000,000 1,067,870
North Andover General Obligation Bonds (MBIA Insured) 7.35 2008 310,000 349,906
Port Authority Revenue Bonds AMT Series 1988A 7.75 2018 515,000 525,352
Port Authority Revenue Bonds AMT Series 1990A (FGIC Insured) 7.50 2020 1,000,000 1,094,340
Quincy Refunding Revenue Bonds Quincy Hospital Series 1993
(FSA Insured) 5.25 2016 1,000,000 904,420
<PAGE>
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Southeastern University Building Authority Refunding Revenue Bonds
Series 1986A 7.80 2016 100,000 105,173
Southeastern University Building Refunding Revenue Bonds Series A
(AMBAC Insured) 5.75 2016 1,250,000 1,204,688
Southeastern University Building Revenue Bonds 7.80 2011 325,000 341,812
Southern Berkshire Regional School District Unlimited Tax
General Obligation Pre-Refunded Bonds (AMBAC Insured) 7.55 2010 1,000,000 1,139,680
State College Building Authority Pre-Refunded Revenue Bonds Series 1986A 7.125 2006 150,000 156,987
State College Building Authority Pre-Refunded Revenue Bonds Series 1986A 7.25 2016 250,000 261,897
State General Obligation Consolidated Loan Bonds Series 1991A
(FGIC Insured) 6.00 2011 1,095,000 1,104,680
State Housing Finance Agency Single Family Housing Revenue Bonds AMT
Series 13 7.95 2023 500,000 534,110
State Housing Finance Authority Residential Development Bonds Series 1992A
(FNMA Insured) 6.875 2011 1,000,000 1,055,930
State Housing Finance Authority Single Family Mortgage Housing
Revenue Bonds Series 4 7.375 2014 445,000 466,591
State Housing Finance Authority Single Family Mortgage Housing
Revenue Bonds AMT Series 7 8.10 2020 255,000 272,368
State Water Resource Authority Revenue Bonds Series A
(Secondary MBIA Insured) 5.50 2022 1,100,000 1,011,703
University of Lowell Building Authority Facilities Revenue Bonds
4th Series A 7.40 2007 125,000 135,174
University of Lowell Building Authority Facilities Revenue Bonds
4th Series A 7.60 2012 50,000 54,149
University of Massachusetts Building Authority Revenue Bonds Series A
(FSA Insured) 7.50 2014 500,000 544,680
University of Massachusetts Building Authority Revenue Bonds Series A
Escrowed to Maturity 7.50 2011 120,000 132,877
Water Resource Authority General Pre-Refunded Revenue Bonds Series 1990A 7.625 2014 500,000 570,985
Water Resource Authority General Pre-Refunded Revenue Bonds Series 1991A 6.50 2019 1,000,000 1,112,940
Water Resource Authority General Revenue Bonds Series 1993C 5.25 2020 1,400,000 1,229,200
_____________________________________________________________________________________________________________________________
Total municipal bonds
(Cost: $64,462,696) $67,518,531
_____________________________________________________________________________________________________________________________
</TABLE>
<TABLE>
<CAPTION>
Short-term security (1.0%)
_____________________________________________________________________________________________________________________________
Issuer (d,e) Effective Amount Value(a)
yield payable at
maturity
_____________________________________________________________________________________________________________________________
<S> <C> <C> <C>
Municipal note
State General Obligation V.R.D.B. Series B
12-01-97 4.20% $700,000 $ 700,000
_____________________________________________________________________________________________________________________________
Total short-term security
(Cost: $700,000) 700,000
_____________________________________________________________________________________________________________________________
Total investments in securities
(Cost: $65,162,696)(f) $68,218,531
_____________________________________________________________________________________________________________________________
<PAGE>
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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 06-30-95 06-30-94
_______________________________________________________________________________________________________
AAA 65% 64%
AA 11 12
A 17 17
BBB and below 7 7
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
CGIC -- Capital Guaranty Insurance Company
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 abbreviations are used in portfolio descriptions:
AMT -- Alternative Minimum Tax
V.R.D.B. -- Variable Rate Demand Bond
(e) Interest rate varies to reflect current market conditions; rate shown is the effective rate
on June 30, 1995.
(f) At June 30, 1995, the cost of securities for federal income tax purposes was
$65,175,338 and the aggregate gross unrealized appreciation and depreciation based
on that cost was:
Unrealized appreciation $3,874,845
Unrealized depreciation (831,652)
_______________________________________________________________________________________________________
Net unrealized appreciation $3,043,193
_______________________________________________________________________________________________________
</TABLE>
<PAGE>
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<TABLE>
<CAPTION>
Investments in securities
IDS Michigan Tax-Exempt Fund (Percentages represent value of
June 30, 1995 investments compared to net assets)
_____________________________________________________________________________________________________________________________
Municipal bonds (97.6%)
_____________________________________________________________________________________________________________________________
Name of issuer and Coupon Maturity Principal Value(a)
title of issue (b,c,d) rate year amount
_____________________________________________________________________________________________________________________________
<S> <C> <C> <C> <C>
Auburn Hills Limited Tax General Obligation Street Improvement Bonds 6.00 % 2004 $ 200,000 $ 207,824
Battle Creek Calhoun County Downtown Development Authority Bonds
Series 1994 7.65 2022 1,250,000 1,330,362
Battle Creek Water Supply System Pre-Refunded Revenue Bonds Series 1990B 6.375 2008-10 1,640,000 1,767,330
Berkley School District Unlimited Tax General Obligation Bonds
County of Oakland School Building and Site Bonds Series 1995 (FGIC Insured)5.625 2015 1,210,000 1,155,562
Buena Vista School District Saginaw County School Building & Site
Unlimited Tax General Obligation Pre-Refunded Bonds Series 1991 7.20 2016 1,500,000 1,704,765
Caledonia Community School Unlimited Tax General Obligation
Refunding Revenue Bonds (AMBAC Insured) 5.50 2022 2,000,000 1,862,200
Cedar Springs School District Unlimited Tax
General Obligation Bonds (MBIA Insured) 5.875 2024 1,000,000 966,250
Charter Township of Redford Limited Tax General Obligation Bonds
County of Wayne Series 1995 (MBIA Insured) 5.25 2016 1,450,000 1,334,638
Chassell Township Schools County of Houghton Refunding Unlimited Tax
General Obligation Bonds Qualified School Bond Loan Fund 5.25 2020 1,045,000 935,703
Chelsea General Obligation Bonds (BIG Insured) 8.20 2006 145,000 161,539
Chippewa Valley School Macomb County Qualified School Building Loan Fund
Unlimited Tax General Obligation Bonds (FGIC Insured) 5.00 2021 1,000,000 868,240
Comstock Park Public School Kent County Unlimited Tax
General Obligation Pre-Refunded Bonds Series 1989 6.00 2016 400,000 429,104
Comstock Park Public School Kent County Unlimited Tax
General Obligation Pre-Refunded Bonds Series 1989 6.875 2010 260,000 286,863
Detroit General Obligation Pre-Refunded Bonds Distributable State Aid
Series 1989 (AMBAC Insured) 7.20 2009 1,000,000 1,111,670
Detroit Sewer Disposal Pre-Refunded Revenue Bonds 8.00 2008 500,000 545,325
Detroit Unlimited Tax General Obligation Bonds Series A 7.25 2009 1,000,000 1,037,330
Detroit Unlimited Tax General Obligation Bonds Series A 8.625 2007 100,000 106,582
Detroit Unlimited Tax General Obligation Bonds Series 1988A 7.875 2008 700,000 738,458
Detroit Water Supply System Pre-Refunded Revenue Bonds
Series 1988 (MBIA Insured) 7.875 2008 400,000 447,520
Detroit Water Supply System Refunding Revenue Bonds
Series 1993 (FGIC Insured) 5.00 2023 1,000,000 857,940
Dexter Community Schools Building Site & Refunding Unlimited Tax
General Obligation Bonds 5.00 2017 1,500,000 1,295,715
East Lansing School District School Building & Site Unlimited Tax
General Obligation Bonds Series 1991 6.625 2014 1,000,000 1,052,550
Eastern Michigan University Pre-Refunded Revenue Bonds Residence Hall 7.80 2006 205,000 216,304
Eaton County Water System Limited Tax General Obligation Bonds (MBIA Insured)5.00 2013 2,200,000 1,974,214
Farmington Hills Hospital Finance Authority Revenue Bonds
Botsford General Hospital Series 1992A (MBIA Insured) 6.50 2022 1,500,000 1,554,900
Forest Hills School District Unlimited Tax General Obligation
Pre-Refunded Bonds 7.375 2015 1,000,000 1,123,320
<PAGE>
PAGE 221
Frenchtown Resort Drainage District Monroe County Drain
Pre-Refunded Bonds Series 1987 7.50 2011-12 615,000 687,109
Garden City School District Authority Pre-Refunded Revenue Bonds 7.80 2010 305,000 341,383
Grand Rapids Tax Increment Revenue Bonds Series 1994 (MBIA Insured) 6.875 2024 380,000 410,286
Grand Rapids Water Supply System Improvement
Pre-Refunded Revenue Bonds Series 1988 7.875 2018 700,000 772,947
Grand Rapids Water Supply System Improvement Pre-Refunded Revenue Bonds
Series 1990 (FGIC Insured) 7.25 2020 1,250,000 1,401,537
Hesperia Community Schools General Obligation Bonds (MBIA Insured) 5.625 2017 1,280,000 1,188,134
Inkster School District Unlimited Tax General Obligation
Pre-Refunded Bonds (AMBAC Insured) 7.00 2018 450,000 500,899
Isoco County Water Supply System Limited Tax General Obligation Bonds
(AMBAC Insured) 5.50 2008-10 575,000 562,347
Jackson County Unlimited Tax General Obligation Refunding Bonds
Series 1987 6.75 2011 150,000 159,357
Kent County Airport Revenue Bonds AMT 5.85 2011 875,000 849,004
Kent County Hospital Pre-Refunded Revenue Bonds Butterworth Hospital
Series 1989A 7.25 2013 500,000 553,420
Kent County Refuse Disposal System Limited Tax
General Obligation Refunding Bonds Series 1987 8.40 2010 150,000 164,134
Lake Orion School District General Obligation Bonds (AMBAC Insured) 5.50 2020 1,000,000 927,250
Livonia Public School District General Obligation
Refunding Bonds (FGIC Insured) 5.50 2021 1,500,000 1,400,115
Marquette Hospital Finance Authority Refunding Revenue Bonds
Marquette General Hospital Series 1989C 7.50 2007-19 825,000 892,765
Mona Shores Public Schools Unlimited Tax General Obligation Bonds
County of Muskegon
School Building & Site Bonds Series 1995 (FGIC Insured) 5.50 2014 1,000,000 946,080
Monroe County Pollution Control Revenue Bonds AMT Detroit Edison
Fermi Plants Series 1990I (FGIC Insured) 7.65 2020 1,000,000 1,114,940
Monroe County Pollution Control Revenue Bonds AMT Detroit Edison
Fermi 2 Plants Series CC (AMBAC Insured) 7.50 2019 1,750,000 1,936,060
Muskegon Hospital Finance Authority Refunding Revenue Bonds Hackley Hospital
Series 1988A 8.00 2008 400,000 436,832
Northville Public Schools Unlimited Tax General Obligation Bonds
Series 1991B 7.00 2008 1,500,000 1,624,920
Richmond Limited Obligation Refunding Revenue Bonds Kmart Series A 6.625 2007 530,000 535,141
Rochester Hill Unlimited Tax General Obligation Bonds Series 1990A 6.00 2009-10 735,000 744,403
Rockford Public Schools Kent County Unlimited Tax
General Obligation Pre-Refunded Bonds 7.375 2019 1,000,000 1,123,320
Romulus Township School District Unlimited Tax General Obligation
Refunding Bonds (FGIC Insured) 5.75 2022 2,500,000 2,384,875
Sandusky County School District General Obligation
Refunding Bonds (AMBAC Insured) 5.25 2021 500,000 450,415
South Lake District Unlimited Tax General Obligation Bonds 6.80 2010 355,000 378,324
State Building Authority Refunding Revenue Bonds Series 1991I 6.25 2020 2,200,000 2,180,420
State Hospital Finance Authority Hospital Pre-Refunded Revenue Bonds
Detroit Medical Center Series 1988A 8.125 2012 310,000 348,952
State Hospital Finance Authority Hospital Refunding Revenue Bonds
Detroit Medical Center Series A 6.25 2013 1,200,000 1,183,248
State Hospital Finance Authority Hospital Refunding Revenue Bonds
Detroit Medical Center Series 1988A 8.125 2012 90,000 99,391
State Hospital Finance Authority Hospital Refunding Revenue Bonds
Detroit Medical Center Series 1988B 8.00 2008 500,000 561,015
State Hospital Finance Authority Hospital Refunding Revenue Bonds
Sisters of Mercy Health Group Series 1993P (MBIA Insured) 5.25 2021 1,200,000 1,057,536
State Hospital Finance Authority Hospital Pre-Refunded Revenue Bonds
McLaren Obligated Group Series 1991A 7.50 2021 1,750,000 2,036,195
<PAGE>
PAGE 222
State Hospital Finance Authority Revenue Bonds Henry Ford Hospital
Series 1990A 7.00 2010 1,000,000 1,067,850
State Hospital Finance Authority Revenue Bonds Henry Ford Hospital
Series 1992A 5.75 2017 1,500,000 1,432,095
State Hospital Finance Authority Pre-Refunded Revenue Bonds
Oakwood Hospital Group Series 1990A (FGIC Insured) 7.10 2018 1,000,000 1,124,600
State Housing Development Authority Rental Housing
Refunding Revenue Bonds Series B 5.70 2012 2,500,000 2,388,100
State Public Power Agency Belle River Refunding Revenue Bonds
Series A 5.25 2018 1,000,000 896,690
State Strategic Fund Limited Tax Obligation Refunding Revenue Bonds
Detroit Edison Series 1990BB (MBIA Insured) 7.00 2008 1,000,000 1,133,300
State Strategic Fund Limited Tax Obligation Refunding Revenue Bonds
Detroit Edison Series 1992BB (FGIC Insured) 6.50 2016 1,500,000 1,567,350
State Strategic Fund Limited Tax Obligation Refunding Revenue Bonds
Ford Motor Series 1991A 7.10 2006 1,650,000 1,790,613
State Strategic Fund Limited Tax Obligation Refunding Revenue Bonds
Escrowed to Maturity Oxford Institute 7.875 2005 150,000 173,697
State Strategic Fund Limited Tax Obligation Revenue Bonds
Great Lakes Pulp & Fibre 10.25 2016 1,000,000 1,057,870
State Trunk Line Bonds Series A (FGIC Insured) 5.75 2020 1,065,000 1,015,776
State University Revenue Bonds Series A 5.50 2022 560,000 509,477
State University Revenue Parking System Pre-Refunded Bonds
Ann Arbor Campus Series A 7.40 2015 150,000 157,751
Taylor Tax Increment Finance Authority Bonds Series 1989A (MBIA Insured) 6.00 2007-09 1,205,000 1,229,859
<PAGE>
PAGE 223
Troy City Downtown Development Authority County of Oakland
Development Bonds Series 1995A (Asset Guaranty) 6.375 2018 1,500,000 1,466,880
Van Buren Township Tax Increment Revenue Bonds Series 1994 8.40 2016 1,000,000 1,073,710
Warren Consolidated School District Refunding Revenue Bonds
Unlimited Tax General Obligation Bonds (MBIA Insured) 5.50 2021 1,500,000 1,400,115
Waterford School District Unlimited Tax General Obligation Bonds
Series Q 6.25 2013 340,000 349,850
Wayne County Airport Revenue Bonds AMT Detroit Metropolitan Airport
Series 1986 (FGIC Insured) 8.00 2014 250,000 266,208
Wayne County Airport Revenue Bonds AMT Detroit Metropolitan Airport
Series 1990A (AMBAC Insured) 7.00 2020 1,080,000 1,147,176
Wyandotte Electric Pre-Refunded Revenue Bonds Series 1987 (AMBAC Insured) 7.875 2017 300,000 329,406
_____________________________________________________________________________________________________________________________
Total municipal bonds
(Cost: $72,149,708) $76,603,335
_____________________________________________________________________________________________________________________________
</TABLE>
<TABLE>
<CAPTION>
Short-term security (0.8%)
_____________________________________________________________________________________________________________________________
Issuer (e) Effective Amount Value(a)
yield payable
at
maturity
_____________________________________________________________________________________________________________________________
<S> <C> <C> <C>
Municipal notes
Regents of the University of Michigan Hospital
Refunding Revenue Bonds Series 1992A
12-01-19 4.20% $100,000 $ 100,000
12-01-27 4.20 500,000 500,000
_____________________________________________________________________________________________________________________________
Total short-term security
(Cost: $600,000) $ 600,000
_____________________________________________________________________________________________________________________________
Total investments in securities
(Cost: $72,749,708)(f) $77,203,335
_____________________________________________________________________________________________________________________________
_____________________________________________________________________________________________________________________________
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 06-30-95 06-30-94
______________________________________________________________________________________________________
AAA 65% 65%
AA 17 25
A 10 6
BBB and below 8 4
Non-rated -- --
Total 100% 100%
______________________________________________________________________________________________________<PAGE>
PAGE 224
(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
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, 1995.
(f) At June 30, 1995, the cost of securities for federal income tax purposes was $72,717,168
and the aggregate gross unrealized appreciation and depreciation based on that cost was:
Unrealized appreciation $5,049,984
Unrealized depreciation (563,817)
__________________________________________________________________________
Net unrealized appreciation $4,486,167
__________________________________________________________________________
/TABLE
<PAGE>
PAGE 225
<TABLE>
<CAPTION>
Investments in securities (Percentages represent
IDS Minnesota Tax-Exempt Fund value of investments
June 30, 1995 compared to net assets)
_____________________________________________________________________________________________________________________________
Municipal bonds (98.0%)
_____________________________________________________________________________________________________________________________
Name of issuer and Coupon Maturity Principal Value(a)
title of issue (b,c,d) rate year amount
_____________________________________________________________________________________________________________________________
<S> <C> <C> <C> <C>
Anoka County General Obligation Capital Improvement Revenue Bonds
Series 1989B 7.00 % 2007-10 $ 7,950,000 $ 8,519,458
Anoka County Resource Recovery Revenue Bonds Northern States Power
Series 1985 7.15 2008 3,750,000 4,016,625
Apple Valley Certificate of Participation Lease Pre-Refunded Bonds
Central Garage Facility Financial Agreement 7.25 2001 155,000 161,832
Apple Valley Certificate of Participation Lease Pre-Refunded Bonds
Central Garage Facility Financial Agreement 7.30 2002 175,000 182,831
Apple Valley Certificate of Participation Lease Pre-Refunded Bonds
Central Garage Facility Financial Agreement 7.40 2003 190,000 198,765
Apple Valley Certificate of Participation Lease Pre-Refunded Bonds
Central Garage Facility Financial Agreement 7.50 2004 450,000 471,375
Appleton Correctional Facility Revenue Bonds Series 1990A 9.875 2020 4,000,000 (e) 2,000,000
Becker Pollution Control Revenue Bonds Northern States Power
Sherburne County Generating Station Units 1 & 2 Series 1987A 7.25 2005 2,000,000 2,047,380
Becker Solid Waste Disposal Facility
Revenue Bonds AMT Liberty Paper Series 1994B 9.00 2015 3,825,000 3,893,620
Bemidji Hospital Facilities 1st Mortgage Revenue Bonds
North Country Health Services Series 1991 7.00 2021 1,755,000 1,843,715
Bloomington Community Development Refunding Revenue Bonds
Note 24th Avenue Motel 8.50 2005 1,828,116 1,864,679
Braham Independent School District #314 Refunding Bonds 5.20 2019 3,340,000 2,993,275
Brooklyn Park Tax Credit Investor Revenue Bonds AMT
Four Courts Apartment Project Series 1995B 7.58 2009 2,450,000 2,440,396
Burnsville Multi-family Housing Refunding Revenue Bonds
FHA-Summit Park Apartments Series 1993 6.00 2033 4,000,000 3,827,520
Chaska Advance Refunded Certificate of Participation
Lease Purchase Agreement Bonds Series 1986C 7.25 2001 800,000 825,784
Columbia Heights Multi-family Housing Revenue Bonds
Crestview Lutheran Home Royce Place Series 1991 10.00 2032 560,000 597,744
Columbia Heights Multi-family Housing Revenue Bonds
Crestview Lutheran Home Royce Place Series 1991 (FHA Insured) 7.75 2032 2,745,000 2,891,803
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 2,339,880
Duluth Hospital Facilities St. Lukes Hospital
Pre-Refunded Revenue Bonds Series 1988 9.00 2018 2,500,000 2,860,425
Duluth Housing and Redevelopment Authority 1st Mortgage Revenue Bonds
Lakeshore Lutheran Home 8.25 2009 125,000 123,724
Duluth Recreation Revenue Certificate of Participation 9.00 2003-07 1,430,000 1,520,238
Eden Prairie Housing Development Refunding Revenue Bonds Eden Commons
Series 1990 (FHA Insured) 8.25 2025 6,360,000 6,471,364
Edina Hospital System Revenue Bonds Fairview Hospital & Health Care Services
Series 1989A 7.125 2019 2,500,000 2,647,425
Edina Multi-family Housing Revenue Bonds Walker Assisted Living
Series 1991 9.00 2031 6,700,000 7,312,112
See accompanying notes to investments in securities.<PAGE>
PAGE 226
Faribault Rice & Goodhue County Independent School District #656
General Obligation School Building Bonds Series 1995 (CGIC Insured) 5.75 2015 6,900,000 6,755,514
Faribault Single Family Mortgage Refunding Revenue Bonds Series 1991A 7.50 2011 2,710,000 2,894,876
Hennepin County Lease Revenue Certificate of Participation Series 1991 6.80 2017 7,250,000 7,718,495
Hennepin County Solid Waste Resource Recovery General Obligation
Revenue Bonds Series 1987A 8.20 2009 1,760,000 1,833,709
Hopkins Revenue Bonds Blake School 6.70 2024 3,120,000 3,267,482
Hubbard County Solid Waste Disposal Revenue Bonds AMT Potlatch Series 1989 7.375 2013 5,610,000 5,967,413
International Falls Solid Waste Disposal Revenue Bonds AMT Boise Cascade
Series 1990 7.75 2015 4,000,000 4,154,600
Maplewood Care Institute Series 1994 7.75 2024 3,830,000 3,775,882
Maplewood Multi-family Housing Revenue Bonds Maplewood (FHA Insured) 7.75 2021 2,115,000 2,126,040
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 4,251,448
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 1,570,707
Minneapolis Health Care Facilities Revenue Bonds Fairview Hospital &
Healthcare Services Series 1993A (MBIA Insured) 5.25 2019 5,315,000 4,794,874
Minneapolis Hospital Facility Pre-Refunded Revenue Bonds Lifespan Incorporated
Series 1987A 8.125 2017 3,630,000 3,944,503
Minneapolis Hospital Facility Pre-Refunded Revenue Bonds Lifespan Incorporated
Series 1989A 7.00 2014 5,000,000 5,582,050
Minneapolis Housing & Redevelopment Authority of St. Paul
Health Care System Revenue Bonds Healthspan Series 1993 (AMBAC Insured) 4.75 2018 12,000,000 10,034,280
Minneapolis Nursing Home Revenue Bonds Walker Cityview & Southview
Series 1992 8.50 2022 5,565,000 5,808,524
Minneapolis St. Paul Housing & Redevelopment Authority Health Care System
Revenue Bonds Healthspan Series 1993A (AMBAC Insured) 5.00 2007-13 5,690,000 5,290,850
Minneapolis Water & Sewer Revenue Bonds Series 1992 5.00 1995 5,000,000 5,024,450
Minnetonka Multi-family Housing Refunding Revenue Bonds Cedar Hill West
(FHA Insured) 7.75 2026 5,585,000 5,755,454
Minnetonka Multi-family Housing Revenue Bonds The Cedar Hills Series 1985 7.50 2017 500,000 531,805
Montevideo Independent School District #129 General Obligation
Unlimited Tax Bonds School Credit Enhancement Program 4.90 2014 1,875,000 1,647,581
New Brighton Tax Credit Investor Revenue Bonds AMT
Polynesian VIllage Apartments Series 1995B 7.75 2009 2,355,000 2,379,162
Northern Municipal Power Agency Electric System Refunding Revenue Bonds
Series 1989A 7.25 2016 5,475,000 5,932,874
Northern Municipal Power Agency Electric System Pre-Refunded Revenue Bonds
Series 1989A (AMBAC Insured) 7.40 2018 1,000,000 1,110,800
Northern Municipal Power Agency Electric System Pre-Refunded Revenue Bonds
Series 1989B (AMBAC Insured) 7.40 2018 1,800,000 1,981,062
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 1,198,220
Osseo Area Schools Independent School District #279 General Obligation
School Building Bonds 5.40 2010-12 9,750,000 9,299,028
Owatanna Public Utilities Pre-Refunded Revenue Bonds Series 1991 6.75 2016 1,000,000 1,095,850
Plymouth Multi-family Housing Revenue Bonds AMT Harbor Lane Apartments
Series 1993 (Asset Guaranty Insured) 5.90 2013 2,325,000 2,267,851
Port Authority St. Paul General Obligation Bonds Series 1994 5.125 2017 2,885,000 2,587,268
Port Authority St. Paul Unlimited Tax General Obligation Bonds 5.125 2024 2,770,000 2,429,678
Red Wing Industrial Development Refunding Revenue Bonds K mart Series 1993 5.50 2008 400,000 370,200
Richfield Independent School District #280 Unlimited Tax General Obligation
School Building Bonds Series 1993C Inverse Floater
(FGIC Insured) 5.975 2010 3,300,000 (f) 3,089,625
<PAGE>
PAGE 227
Richfield Independent School District #280 Unlimited Tax General Obligation
School Building Bonds Series 1993C Trust Inverse Floater
(FGIC Insured) 6.075 2012 2,510,000 (f) 2,328,025
Robbinsdale Hospital Pre-Refunded Revenue Bonds
North Memorial Medical Center Series 1989 (AMBAC Insured) 7.375 2019 2,200,000 2,442,022
Rochester Health Care Facility Revenue Bonds Mayo Foundation Series A 4.951 2019 5,000,000 4,367,150
Rochester Multi-family Housing Development Revenue Bonds Civic Square
Series 1991 (FHA Insured) 7.45 2031 4,450,000 4,691,902
Roseville Health Care Facility Refunding Revenue Bonds
Presbyterian Homes of Minnesota Series 1987 7.50 2007 2,250,000 2,338,425
Rush City Independent School District #139 Unlimited Tax School Building
Refunding Bonds School Credit Enhancement Program 5.25 2018 2,595,000 2,416,386
St. Cloud Hospital Facilities Revenue Bonds St. Cloud Hospital Series 1990B
(AMBAC Insured) 7.00 2020 5,000,000 5,668,250
St. Cloud Hospital Facility Refunding Revenue Bonds Series C (AMBAC Insured) 5.30 2020 1,515,000 1,372,332
St. Cloud Hospital Refunding Revenue Bonds Series 1993C (AMBAC Insured) 5.25 2013 1,000,000 923,640
St. Cloud Hydro Electric Generation Facility Gross Revenue Bonds Series 1986 7.375 2018 1,100,000 1,153,042
St. Louis Park Health Care Facilities Revenue Bonds
Healthsystem Minnesota Obligated Group Series 1993 (AMBAC Insured) 5.20 2023 6,000,000 5,330,460
St. Louis Park Health Care Facilities Revenue Bonds
Healthsystem Minnesota Obligated Group Series 1993A (AMBAC Insured) 5.20 2016 3,000,000 2,725,500
St. Louis Park Health Care Facilities Revenue Bonds
Healthsystem Minnesota Obligated Group Series 1993B
Inverse Floater (AMBAC Insured) 5.575 2013 7,000,000 (f) 5,810,000
St. Louis Park Health Care Facilities Pre-Refunded Revenue Bonds
Park Nicollet Medical Center Series 1990A 9.25 2020 4,000,000 4,803,040
St. Louis Park Health Care Facilities Pre-Refunded Revenue Bonds
Park Nicollet Medical Center Series 1991A 8.625 2021 2,000,000 2,374,620
St. Louis Park Multi-family Rental Housing Revenue Bonds
Mortgage Loan-Community Housing & Services Series 1985 (FHA Insured) 7.375 2028 2,250,000 2,337,008
St. Paul & Minneapolis Housing & Redevelopment Authority Health Care
Facility Revenue Bonds Group Health Plan Series 1992 6.75 2013 10,500,000 10,906,665
St. Paul Housing & Development Bonds Highland Retirement (FHA Insured) 7.013 2026 5,210,000 4,897,400
St. Paul Housing & Redevelopment Authority Hospital Facility Revenue Bonds
St. Paul Ramsey Medical Center (AMBAC Insured) 5.55 2023 5,000,000 4,677,500
St. Paul Housing & Redevelopment Authority Commercial Development
Refunding Revenue Bonds Beverly Enterprises Series 1992 7.75 2002 2,700,000 2,801,547
St. Paul Housing & Redevelopment Authority Health Care Facility Revenue Bonds
Lyngblomsten Care Center Series 1993A 7.125 2017 1,945,000 1,935,042
St. Paul Housing & Redevelopment Authority Health Care Facility Revenue Bonds
Lyngblomsten Care Center Series 1993A 9.60 2006 1,060,000 1,118,258
St. Paul Housing & Redevelopment Authority Health Care Facility
Multi-family Rental Housing Revenue Bonds Lynblomsten 1993B 7.00 2024 1,930,000 1,857,837
St. Paul Housing & Redevelopment Authority Sales Tax Revenue Bonds
Civic Center (Secondary MBIA Insured) 5.55 2023 5,000,000 4,688,300
St. Paul Housing & Redevelopment Authority Single Family Mortgage
Refunding Revenue Bonds Middle Income Phase II FNMA Mortgage Backed 6.80 2028 3,460,000 3,677,011
St. Paul Housing & Redevelopment Authority Tax Increment Revenue Bonds
Downtown & Seventh Place (AMBAC Insured) 5.40 2008 1,140,000 1,117,816
St. Paul Independent School District #625 Full Faith & Credit Certificates
Series 1995C 5.25 2014 2,225,000 2,067,670
St. Paul Independent School District #625 Full Faith & Credit Certificates
Series 1995C 5.40 2010 1,675,000 1,620,747
St. Paul Independent School District #625 Full Faith & Credit Certificates
Series 1995C 5.50 2013 2,100,000 2,022,027
St. Paul Independent School District #625 Unlimited Tax
General Obligation Bonds (CGIC Insured) 5.75 2016 4,000,000 3,919,400
Southern Minnesota Municipal Power Agency Bonds Escrowed to Maturity 5.75 2018 370,000 365,856
<PAGE>
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Southern Minnesota Municipal Power Agency Power Supply System
Revenue Bonds Zero Coupon Series 1994A (MBIA Insured) 6.67 2019 19,500,000 (g) 4,750,005
6.88 2022 12,000,000 (g) 2,403,600
Southern Minnesota Municipal Power Agency Pre-Refunded Bonds Series 1988A 8.125 2018 1,315,000 1,459,768
Southern Minnesota Municipal Power Agency Pre-Refunded Bonds Series 1988B 8.125 2018 1,000,000 1,110,090
Southern Minnesota Municipal Power Agency Pre-Refunded Revenue Bonds
Escrowed to Maturity Series A (Secondary MBIA Insured) 5.75 2018 1,600,000 1,582,080
Southern Minnesota Municipal Power Agency Revenue Bonds
(Secondary MBIA Insured) 4.75 2016 2,115,000 1,814,353
Southern Minnesota Municipal Power Agency Series A
(Secondary MBIA Insured) 5.75 2018 4,385,000 4,250,556
Southern Minnesota Municipal Power Agency Un-Refunded Balance
Power Revenue Bonds Series A 5.75 2018 1,895,000 1,787,876
Spring Park Health Care Facility Revenue Bonds Twin Birch Health Care Center
Series 1991 8.25 2011 1,780,000 1,943,475
State General Obligation Various Purpose Pre-Refunded Bonds Series 1990 7.00 2009 7,850,000 8,680,216
State General Obligation Various Purpose Pre-Refunded Bonds Series 1991 6.70 2011 8,000,000 8,833,360
State Higher Education Facility Authority Mortgage
Pre-Refunded Revenue Bonds St. Mary's College Series 2-M 8.375 2017 1,000,000 1,132,760
State Housing Facility Authority Housing Development Bonds Series A 7.125 2020 845,000 861,106
State Housing Facility Authority Housing Development Bonds Series 1976A 7.25 2018 205,000 210,326
State Housing Facility Authority Housing Development Bonds Series 1978B 7.10 2021 470,000 478,230
State Housing Facility Authority Housing Development Bonds Series 1979A 7.00 2022 700,000 712,257
State Housing Facility Authority Housing Finance Agency Housing Development
Single Family Mortgage Bonds Series B 7.25 2016 390,000 403,190
State Housing Finance Agency Single Family Mortgage Bonds AMT Series 1989A 8.00 2029 1,350,000 1,421,982
State Housing Finance Agency Single Family Mortgage Bonds AMT Series 1990A 7.95 2022 3,670,000 3,903,816
State Housing Finance Agency Single Family Mortgage Bonds AMT Series 1991A 7.45 2022 3,575,000 3,809,413
State Housing Finance Agency Single Family Mortgage Bonds Series 1992A 6.95 2016 3,295,000 3,465,319
State Housing Finance Agency Single Family Mortgage Revenue Bonds AMT
Series L 6.70 2020 1,100,000 1,128,336
State Public Facilities Authority Water Pollution Control Revenue Bonds
Series 1989A 7.00 2009 6,250,000 6,711,500
State University Board of Regents General Obligation Bonds
Series 1993A Inverse Floater 5.362 2003 5,000,000 (f) 4,831,250
State University Board of Regents General Obligation Pre-Refunded Bonds
Series 1989A 6.00 2011 4,625,000 4,657,329
State University Board State University System Pre-Refunded Revenue Bonds
Series 1989A (MBIA Insured) 7.40 2019 2,250,000 2,488,162
Washington County General Obligation Capital Improvement Bonds
Series 1989A 7.00 2009-10 4,425,000 4,787,363
Washington County Housing & Redevelopment Authority Multi-family Housing
Revenue Bonds AMT Orleans Homes Series 1987-2 9.00 2017 2,000,000 2,164,100
Western Minnesota Municipal Power Agency Revenue Bonds
Escrowed to Maturity (AMBAC Insured) 6.75 2016 5,935,000 6,385,941
Western Minnesota Municipal Power Agency Supply Refunding Revenue Bonds
Series 1987A 5.50 2015 5,000,000 4,671,250
Western Minnesota Municipal Power Agency Supply Refunding Revenue Bonds
Series 1987A 6.875 2007 2,500,000 2,612,825
Western Minnesota Municipal Power Agency Supply Refunding Revenue Bonds
Series 1987A 7.00 2013 7,300,000 7,633,756
Western Minnesota Municipal Power Agency Supply Refunding Revenue Bonds
Series A (Secondary MBIA Insured) 5.50 2015 6,250,000 5,969,438
White Bear Lake Industrial Development Revenue Bonds AMT Taylor Series 1988A 8.75 2008 2,250,000 2,484,608
_____________________________________________________________________________________________________________________________
Total municipal bonds
(Cost: $381,197,944) $398,818,639
________________________________________________________________________________________________________________________
<PAGE>
PAGE 229
Total investments in securities
(Cost: $381,197,944)(h) $398,818,639
_____________________________________________________________________________________________________________________________
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 06-30-95 06-30-94
_______________________________________________________________________________________________________
AAA 47% 43%
AA 22 24
A 16 20
BBB and below 13 13
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
CGIC -- Capital Guaranty Insurance Company
FGIC -- Financial Guarantee Insurance Corporation
FHA -- Federal Housing Authority
MBIA -- Municipal Bond Investors Assurance
(d) The following abbreviation is used in portfolio descriptions:
AMT -- Alternative Minimum Tax
(e) Presently non-income producing. For long-term debt securities, item identified is in default as to payment of interest
and/or principal.
(f) Inverse floaters represent securities that pay interest at a rate that increases (decreases) in the same
magnitude as, or in a multiple of, a decline (increase) in market short-term rates. Interest rate disclosed
is the rate in effect on June 30, 1995. Inverse floaters in the aggregate represent 3.9% of the fund's net
assets as of June 30, 1995.
(g) For zero coupon bonds, the interest rate disclosed represents the annualized
effective yield on the date of acquisition.
(h) At June 30, 1995, the cost of securities for federal income tax purposes was $380,768,210
and the aggregate gross unrealized appreciation and depreciation based on that cost was:
Unrealized appreciation $22,569,270
Unrealized depreciation (4,518,841)
___________________________________________________________________________________________
Net unrealized appreciation $18,050,429
___________________________________________________________________________________________
</TABLE>
<PAGE>
PAGE 230
<TABLE>
<CAPTION>
Investments in securities
IDS New York Tax-Exempt Fund (Percentages represent value of
June 30, 1995 investments compared to net assets)
_____________________________________________________________________________________________________________________________
Municipal bonds (97.7%)
_____________________________________________________________________________________________________________________________
Name of issuer and title of issue (b,c,d) Coupon Maturity Principal Value(a)
rate year amount
_____________________________________________________________________________________________________________________________
<S> <C> <C> <C> <C>
Battery Park City Authority Senior Refunding Revenue Bonds Series 1993A 5.25 % 2017 $4,000,000 $ 3,534,600
Broome County Certificates of Partication Public Safety Facility
Series 1994 (MBIA Insured) 5.25 2022 2,650,000 2,386,564
Buffalo Municipal Water Finance Authority Water System Revenue Bonds
(FSA Insured) 5.75 2019 700,000 672,728
Erie County Unlimited Tax General Obligation Bonds
Series B (FGIC Insured) 5.50 2025 700,000 647,003
Erie County Water Authority Fourth Resolution Water Refunding Revenue Bonds
Zero Coupon Series 1992 (AMBAC Insured) 7.30 2017 1,215,000 (e) 243,061
Erie County Water Authority Water Works System Revenue Bonds
Escrowed to Maturity Series 1990A (AMBAC Insured) 6.00 2008 1,765,000 1,795,852
Fallsburg Sullivan County Unlimited Tax General Obligation Improvement
Pre-Refunded Bonds Series 1991 7.05 2011-14 1,300,000 1,477,138
Great Neck North Water Authority Water System Pre-Refunded Revenue Bonds
Series 1989A 6.00 2020 1,415,000 1,492,372
Metropolitan Transportation Authority Commuter Facilities
1987 Service Contract Refunding Bonds Series 5 6.50 2016 1,775,000 1,779,367
Metropolitan Transportation Authority Service Transit Facilities
Pre-Refunded Revenue Bonds Series G 8.50 2011 1,000,000 1,065,480
Metropolitan Transportation Authority Transit Facilities
Pre-Refunded Revenue Bonds Series F 8.375 2016 725,000 771,581
Monroe County Utility General Obligation Pre-Refunded Bonds
Water Improvement System 7.10 2008-09 1,000,000 1,107,080
Municipal Assistance New York City Series 57 7.25 2008 500,000 522,470
Municipal Assistance New York City Series 59 7.75 2006 660,000 711,440
Municipal Assistance New York City Series 62 6.75 2006 2,200,000 2,322,804
New York & New Jersey Port Authority Consolidated Revenue Bonds AMT
Series 61 8.125 2023 750,000 768,750
New York & New Jersey Port Authority Consolidated Revenue Bonds AMT
Series 62 8.00 2023 1,000,000 1,042,290
New York City General Obligation Bonds Series 1995B 7.00 2016 1,500,000 1,551,375
New York City Municipal Water Finance Authority Water & Sewer System
Revenue Bonds Series B Inverse Floater (MBIA Insured) 5.975 2009 2,000,000 (f) 1,857,500
New York City Water Finance Authority Water & Sewer System
Pre-Refunded Revenue Bonds Series A (FGIC Insured) 6.75 2014 1,185,000 1,300,087
New York City Water Finance Authority Water & Sewer System
Revenue Bonds Series A (FGIC Insured) 6.75 2014 565,000 593,764
New York City Water Finance Authority Water & Sewer System
Revenue Pre-Refunded Bonds Series 1988A 7.00 2018 1,500,000 1,605,300
See accompanying notes to investments in securities.<PAGE>
PAGE 231
State Certificate of Participation City University John J. College 7.25 2007 360,000 372,168
State Dormitory Authority City University System
Consolidated 3rd Resolution Revenue Bonds Series 1994-2 (MBIA Insured) 6.25 2019 1,500,000 1,516,425
State Dormitory Authority City University System Pre-Refunded Revenue Bonds 8.125 2017 3,400,000 3,727,352
State Dormitory Authority City University System Pre-Refunded Revenue Bonds
Series 1986A 7.625 2013 1,000,000 1,055,310
State Dormitory Authority City University System Revenue Bonds
Series 1993A 5.75 2013 3,000,000 2,817,630
State Dormitory Authority State University Education Facility
Pre-Refunded Revenue Bonds Series 1990A 7.70 2012 1,750,000 2,015,720
State Dormitory Authority State University Education Facility
Refunding Revenue Bonds Series 1990B 7.50 2011 1,900,000 2,153,270
State Dormitory Authority State University Education Facility
Revenue Bonds (Secondary AMBAC Insured) 5.50 2019 2,000,000 1,868,980
State Dormitory Authority Upstate Community Colleges Series A
(Connie Lee Insured) 5.625 2012 1,500,000 1,445,190
State Energy Research & Development Authority Electric Facility
Revenue Bonds AMT Consolidated Edison Series 1986A 7.50 2021 1,750,000 1,827,175
State Energy Research & Development Authority Electric Facility
Revenue Bonds AMT Consolidated Edison Series 1989A 7.75 2024 1,000,000 1,067,500
State Energy Research & Development Authority Electric Facility
Revenue Bonds AMT Consolidated Edison Series 1990A 7.50 2025 5,000,000 5,345,200
State Energy Research & Development Authority Gas Facility Revenue Bonds
Brooklyn Union Gas Series I 7.125 2020 2,000,000 2,064,920
State Energy Research & Development Authority Gas Facility Revenue Bonds
Brooklyn Union Gas Series II 7.00 2020 1,500,000 1,545,975
State Energy Research & Development Authority Pollution Control
Refunding Revenue Bonds AMT Rochester Gas & Electric (MBIA Insured) 6.50 2032 2,500,000 2,538,425
State Energy Research & Development Authority Solid Waste Development
Revenue Bonds AMT State Gas & Electric Company Series A (MBIA Insured) 5.70 2028 3,000,000 2,789,310
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 3,329,430
State Housing Finance Authority State University Construction Program
Pre-Refunded Bonds Series 1986A 8.00 2016 400,000 421,892
State Housing Finance Authority State University Construction Program
Pre-Refunded Bonds Series A 8.30 2018 500,000 556,090
State Local Government Assistance Bonds Series C 5.50 2022 1,500,000 1,363,530
State Local Government Assistance Pre-Refunded Bonds Series 1991A 7.00 2016 4,000,000 4,535,040
State Medical Care Facility Finance Agency Hospital & Nursing Home
Mortgage Revenue Bonds Montefiore Hospital Series 1989A (FHA Insured) 7.25 2024 1,400,000 1,509,172
State Medical Care Facility Finance Agency Mental Health Services Facility
Improving Refunding Revenue Bonds Series 1993F (Secondary FSA Insured) 5.375 2014 1,000,000 929,320
State Medical Care Facility Finance Agency Mental Health Services Facility
Improving Refunding Revenue Bonds Series 1994A (Secondary FSA Insured) 5.25 2023 1,500,000 1,331,265
State Medical Care Facility Finance Agency Pre-Refunded Bonds
Presbyterian Hospital Series 1985B 8.00 2025 1,320,000 1,439,750
State Medical Care Facility Finance Agency Revenue Bonds
Buffalo General Hospital Series 1988C (FHA Insured) 7.60 2008 1,500,000 1,675,545
State Medical Care Facility Finance Agency Revenue Bonds
Buffalo General Hospital Series 1988C (FHA Insured) 7.70 2022 1,950,000 2,183,844
State Medical Care Facility Finance Agency Revenue Bonds
Hospital & Nursing Series B (FHA Insured) 6.25 2025 3,675,000 3,699,512
State Medical Care Facility Finance Agency Revenue Bonds
North Shore University Glen Cove Series A (MBIA Insured) 5.125 2012 1,000,000 915,480
State Medical Care Facility Finance Agency Secured Hospital Revenue Bonds
Series 1987A 7.10 2027 550,000 567,061
State Mortgage Agency Homeowner Mortgage Revenue Bonds Series TT 7.50 2015 4,000,000 4,306,240
State Mortgage Agency Homeowner Mortgage Revenue Bonds Series 27 6.90 2015 3,000,000 3,160,500
<PAGE>
PAGE 232
State Mortgage Agency Revenue Bonds AMT Series 9 7.30 2017 970,000 1,006,133
State Thruway Authority Local Highway & Bridge Service Contract Bonds
Series 1991 6.00 2011 2,500,000 2,408,475
State Urban Development Correction Facility
Pre-Refunded Revenue Bonds Series 1986 8.00 2015 750,000 780,990
State Urban Development Correction Facility Pre-Refunded Revenue Bonds
Series 1 (FSA Insured) 7.50 2020 4,500,000 5,106,465
State Urban Development Correctional Capital Facilities
Refunding Revenue Bonds Series 1993A 5.25 2021 2,500,000 2,140,850
State Urban Development Revenue Bonds Higher Education Applied Technology
Grants Series 1995 (MBIA Insured) 5.75 2015 1,000,000 963,350
Suffolk County General Obligation Public Improvement Refunding Bonds
Series G (MBIA Insured) 5.40 2014 1,000,000 945,800
Triborough Bridge & Tunnel Authority General Purpose
Pre-Refunded Revenue Bonds Series S 7.00 2021 3,000,000 3,376,890
Triborough Bridge & Tunnel Authority Special Obligation Refunding Bonds
Series 1991B (FGIC Insured) 6.875 2015 2,000,000 2,164,700
United Nations Development Senior Lien Pre-Refunded Revenue Bonds
1986 Phase II & III 7.875 2006 250,000 264,845
United Nations Development Senior Lien Refunding Revenue Bonds
Series 1992A 6.00 2026 4,500,000 4,340,700
_____________________________________________________________________________________________________________________________
Total municipal bonds
(Cost: $111,686,178) $118,822,025
_____________________________________________________________________________________________________________________________
</TABLE>
<TABLE>
<CAPTION>
Short-term securities (0.4%)
______________________________________________________________________________________________________________________________
Issuer (c,g) Effective Amount Value(a)
yield payable at
maturity
_____________________________________________________________________________________________________________________________
<S> <C> <C> <C>
Municipal notes
New York City General Obligation Bonds Series B-4
08-15-23 4.25% $200,000 $ 200,000
New York City Municipal Water Finance Authority Adjustable Bonds
Series 1992-C (FGIC Insured)
06-15-22 4.25 300,000 300,000
_____________________________________________________________________________________________________________________________
Total short-term securities
(Cost: $500,000) $ 500,000
_____________________________________________________________________________________________________________________________
Total investments in securities
(Cost: $112,186,178)(h) $119,322,025
_____________________________________________________________________________________________________________________________
<PAGE>
PAGE 233
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 06-30-95 06-30-94
_______________________________________________________________________________________________________
<S> <C> <C>
AAA 55% 46%
AA 20 30
A 15 11
BBB and below 10 13
Non-rated - -
Total 100% 100%
_______________________________________________________________________________________________________
</TABLE>
(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) The following abbreviation is used in portfolio descriptions:
AMT -- Alternative Minimum Tax
(e) For zero coupon bonds, the interest rate disclosed represents
the annualized yield on the date of acquisition.
(f) Inverse floaters represent securities that pay interest at a
rate that increases (decreases) in the same magnitude as, or in a
multiple of, a decline (increase) in market short-term rates.
Interest rate disclosed is the rate in effect on June 30, 1995.
Inverse floaters in the aggregate represent 1.5% of the fund's net
assets as of June 30, 1995.
(g) Interest rate varies to reflect current market conditions; rate
shown is the effective rate on June 30, 1995.
(h) At June 30, 1995, the cost of securities for federal income tax
purposes was $112,148,011 and the aggregate gross unrealized
appreciation and depreciation based on that cost was:
Unrealized appreciation $8,349,582
Unrealized depreciation (1,175,568)
___________________________________________________________________
Net unrealized appreciation $7,174,014
___________________________________________________________________
<PAGE>
PAGE 234
<TABLE>
<CAPTION>
Investments in securities
IDS Ohio Tax-Exempt Fund
June 30, 1995 (Percentages represent value of
investments compared to net assets)
_____________________________________________________________________________________________________________________________
Municipal bonds (98.5%)
_____________________________________________________________________________________________________________________________
Name of issuer and Coupon Maturity Principal Value(a)
title of issue (b,c,d) rate year 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 $ 886,450
Akron Bath & Copley Joint Township Hospital Refunding Revenue Bonds
Childrens Hospital Medical Center Series 1993 (AMBAC Insured) 5.25 2020 1,500,000 1,352,400
Barberton Limited Tax Various Purpose General Obligation Bonds
Series 1989-1 7.35 2009 700,000 742,742
Bedford Sewer System Mortgage Revenue Bonds Series 1986 (AMBAC Insured) 7.80 2010 300,000 320,238
Bellefontaine Hospital Facility Refunding Revenue Bonds
Mary Rutan Health Association of Logan County Series 1993 6.00 2013 1,000,000 909,290
Buckeye Valley Local School District School Improvement Unlimited Tax
General Obligation Bonds Series 1995A (MBIA Insured) 5.25 2020 1,000,000 919,810
Butler County Hospital Facility Improvement Refunding Revenue Bonds 7.50 2010 1,750,000 1,805,107
Clermont County Hospital Facility Revenue Bonds Mercy Health System
Province of Cincinnati Series 1989A (AMBAC Insured) 7.50 2019 750,000 850,649
Cleveland Airport Systems Revenue Bonds AMT Series 1990A (MBIA Insured) 7.40 2020 500,000 546,125
Cleveland Airport Systems Revenue Bonds AMT Series A (FGIC Insured) 6.00 2024 1,500,000 1,462,050
Cleveland General Obligation Pre-Refunded Bonds 7.375 2003 125,000 135,706
Cleveland Public Power System 1st Mortgage Pre-Refunded Revenue Bonds 8.375 2017 100,000 110,242
Cleveland School District Unlimited Tax Improvement
General Obligation Bonds Series A (FGIC Insured) 5.875 2011 1,000,000 1,000,300
Cleveland Waterworks Improvement 1st Mortgage Refunding Revenue Bonds
Series F 1992B (AMBAC Insured) 6.25 2016 1,000,000 1,024,470
Cleveland Waterworks Improvement 1st Mortgage Revenue Bonds Series 1987E 6.00 2017 200,000 195,282
Cleveland Waterworks Improvement 1st Mortgage Pre-Refunded Revenue Bonds
Series 1987E 7.875 2016 650,000 698,028
Coshocton County Solid Waste Disposal Refunding Revenue Bonds
Stone Container Series 1992 7.875 2013 1,000,000 1,025,390
Cuyahoga County Hospital Improvement Revenue Bonds
Cleveland Clinic Foundation 7.00 2013 500,000 522,395
Cuyahoga County Hospital Improvement Pre-Refunded Revenue Bonds
Cleveland Clinic Foundation Series 1987A 7.875 2010 275,000 303,479
Cuyahoga County Hospital Improvement Revenue Bonds
Mount Sinai Medical Center Series 1991 (AMBAC Insured) 6.625 2021 600,000 636,510
Cuyahoga County Hospital Improvement Revenue Bonds
University Hospitals Health System Series 1992 (AMBAC Insured) 6.50 2011 500,000 521,930
Cuyahoga County Hospital Refunding Revenue Bonds
Cleveland Clinic Foundation Series 1992 5.50 2011 1,500,000 1,441,995
Cuyahoga County Hospital Refunding Revenue Bonds
Mount Sinai Medical Center Series 1987A 8.125 2014 400,000 427,320
Cuyahoga County Hospital Revenue Bonds Meridia Health Series 1991 7.00 2023 1,000,000 1,041,300
Cuyahoga County Limited Tax General Obligation Bonds 5.60 2013 500,000 474,530
Cuyahoga Hospital Revenue Bonds Metrohealth System Series 1989
(MBIA Insured) 6.00 2019 1,000,000 994,900
See accompanying notes to investments in securities.<PAGE>
PAGE 235
Delaware County Sewer Improvement Limited Tax General Obligation Bonds 5.25 2015 1,000,000 928,970
Dover Limited Tax Improvement General Obligation
Municipal Sewer System Bonds 7.10 2009 1,000,000 1,065,930
Elyria Limited Tax Improvement General Obligation
Recreation Facility Bonds 7.10 2009 715,000 762,140
Erie County Hospital Improvement Refunding Revenue Bonds
Firelands Community Hospital Series 1992 6.75 2015 2,000,000 2,034,840
Findlay Water System Limited Tax Improvement General Obligation Bonds 5.55 2018 365,000 343,352
Franklin County Convention Facilities Authority Tax & Lease
Revenue Anticipation Pre-Refunded Bonds (MBIA Insured) 7.00 2019 1,500,000 1,691,220
Franklin County Limited Tax General Obligation Refunding Bonds Series 1993 5.50 2013 1,000,000 966,260
Gahanna-Jefferson City School District Unlimited Tax
General Obligation Bonds (Secondary FGIC Insured) 6.15 2017 1,000,000 1,014,530
Highland Heights Limited Tax Improvement General Obligation Street Bonds 7.75 2008 400,000 444,280
Hilliard County School District School Improvement Unlimited Tax
General Obligation Bonds Series 1995A (FGIC Insured) 5.75 2019 1,000,000 963,150
Kettering School District Improvement General Obligation Bonds
(FGIC Insured) 5.25 2022 1,000,000 910,870
Lake County Water System Limited Tax Improvement General Obligation
Pre-Refunded Bonds Series 1987-2 8.125 2010 700,000 775,194
Lakota Local School District Butler County School Unlimited Tax
Improvement Bonds 7.00 2012 500,000 549,140
Lakota Local School District Butler County School Unlimited Tax Improvement
Pre-Refunded Bonds 7.90 2011 200,000 222,992
Lakota Local School District Unlimited Tax Improvement
General Obligation Bonds (AMBAC Insured) 6.25 2014 2,000,000 2,056,900
Lima Limited Tax Improvement General Obligation
Sanitary Sewer System Pre-Refunded Bonds 8.25 2012 200,000 222,054
Lorain County Hospital Facilities Refunding Revenue Bonds
EMH Regional Medical Center Series 1995 (AMBAC Insured) 5.375 2021 1,000,000 911,540
Lorain Various Purpose Limited Tax General Obligation Bonds
Series 1995 (AMBAC Insured) 5.65 2015 370,000 358,230
Lucas County Hospital Refunding Revenue Bonds St. Vincent's Medical Center
Series B (MBIA Insured) 5.25 2020 2,000,000 1,792,160
Lucas County Hospital Pre-Refunded Revenue Bonds Toledo Hospital
(MBIA Insured) 7.00 2014 100,000 104,574
Marietta Sewer System Improvement Bonds (BIG Insured) 7.50 2007 200,000 216,114
Marion County Health Care Facilities Improvement Refunding Revenue
Bonds United Church Homes Series 1993 6.375 2010 1,000,000 964,360
Marysville Sewer System 1st Mortgage Revenue Bonds AMT Series 1988
(BIG Insured) 7.85 2008 400,000 441,400
Marysville Water System Mortgage Revenue Bonds Series 1991 (MBIA Insured) 7.05 2021 1,000,000 1,135,700
Medina County Hospital Revenue Bonds Medina County Community Hospital
Series 1987 (AMBAC Insured) 6.875 2016 100,000 106,705
Miami County Hospital Facility Refunding Revenue Bonds
Upper Valley Medical Center Series 1987A 8.375 2013 75,000 81,031
Miami State University General Receipts Bonds Series 1993 (FGIC Insured) 5.60 2013 500,000 486,540
Montgomery County Health Facilities Revenue Bonds Friendship Village Dayton
Series 1990A 9.25 2016 1,000,000 1,040,160
Montgomery County Industrial Development Revenue Bonds AMT SPM System
Series 1991 10.00 2005 720,000 (e) 360,000
Montgomery County Water Revenue Bonds Greater Moraine - Beavercreek
District (FGIC Insured) 6.25 2017 1,000,000 1,026,660
Parma Hospital Improvement Revenue Bonds Parma Community General Hospital
Series 1989B (MBIA Insured) 7.125 2013 500,000 545,475
Pickerington Local School District Unlimited Tax General Obligation
Pre-Refunded Bonds (AMBAC Insured) 7.00 2013 1,000,000 1,127,480
<PAGE>
PAGE 236
Ross County Hospital Refunding Revenue Bonds
Medical Center Hospital (AMBAC Insured) 5.60 2014 900,000 863,946
Rural Loraine County Water Authority Water Resource Improvement
Pre-Refunded Revenue Bonds Series 1991 (AMBAC Insured) 7.00 2011 1,000,000 1,130,160
South Euclid Lyndhurst School District General Obligation Bonds
(FGIC Insured) 5.25 2018 1,000,000 920,970
Southwest Licking Local School District School Facilities Unlimited Tax
General Obligation Bonds (FGIC Insured) 5.75 2022 1,000,000 961,320
Southwest Local School District Hamilton & Butler Counties School
Unlimited Tax Improvement Bonds (AMBAC Insured) 7.65 2010 500,000 575,210
Stark County Hospital Pre-Refunded Revenue Bonds
Timkin Mercy Medical Center 7.50 2007 125,000 133,444
State Air Quality Development Authority Refunding Revenue Bonds AMT
JMG Funding Limited Partnership (AMBAC Insured) 6.375 2029 500,000 513,885
State Air Quality Development Authority Refunding Revenue Bonds AMT
Series 1994 (AMBAC Insured) 6.375 2029 2,000,000 2,055,540
State Air Quality Development Authority Revenue Bonds
Cleveland Electric Illuminating Series A 7.00 2009 350,000 350,599
State Air Quality Development Authority Revenue Bonds
Columbus & Southern Series A (FGIC Insured) 6.375 2020 1,000,000 1,028,070
State Building Authority Local Jail Grant Bonds Series 1989A
(MBIA Insured) 7.35 2009 500,000 558,840
State Building Authority State Correctional Facility Revenue Bonds Series B 7.125 2009 75,000 78,481
State Building Authority State Facility Pre-Refunded Bonds
Columbus State Office Building Series 1985C 7.35 2005 1,000,000 1,134,750
State Higher Educational Facility Pre-Refunded Revenue Bonds
Oberlin College Series 1989 7.375 2014 500,000 562,060
State Housing Finance Agency Mortgage Revenue Bonds AMT
Aristocrat South Board & Care Series 1991A (FHA Insured) 7.30 2031 1,500,000 1,578,105
State Housing Finance Agency Single Family Mortgage Revenue Bonds AMT
Series 1990A (GNMA Insured) 7.80 2030 640,000 677,946
State Housing Finance Agency Single Family Mortgage Revenue Bonds AMT
Series 1990C (GNMA Insured) 7.85 2021 950,000 1,007,399
State Municipal Electric Generation Agency Joint Venture #5 Revenue Bonds
(AMBAC Insured) 5.375 2024 2,000,000 1,822,220
State Turnpike Revenue Bonds Series A 5.75 2024 1,000,000 955,410
State Valley School District School Improvement Unlimited Tax
General Obligation Bonds Counties of Adams & Highland
Series 1995 (MBIA Insured) 5.25 2021 2,000,000 1,822,000
State Water Development Authority Pollution Control Revenue Bonds
Phillip Morris 7.25 2008 150,000 161,736
State Water Development Authority Bonds AMT Toledo Edison Series 1994 8.00 2023 1,000,000 1,041,230
State Water Development Authority Water Development Pre-Refunded Bonds
Pure Water Series 1987I 7.75 2006-14 200,000 217,186
State Water Development Authority Water Development Pre-Refunded Bonds
Pure Water Series 1988I 7.00 2014 500,000 537,915
State Water Development Authority Water Development Refunding Revenue Bonds
Pure Water (AMBAC Insured) 5.50 2018 750,000 710,310
Summit County Industrial Development Revenue Bonds Century Products 7.75 2005 100,000 105,966
Summit County Limited Tax General Obligation Pre-Refunded Bonds
Human Services Facility (AMBAC Insured) 8.00 2007 100,000 110,641
Sycamore Board of Education Community School District
Hamilton County School Improvement Bonds 6.50 2009 500,000 521,145
Toledo General Obligation Improvement Bonds (AMBAC Insured) 6.10 2014 1,000,000 1,015,550
University General Receipts Refunding Revenue Bonds
Student Recreation Center (FGIC Insured) 5.00 2013 1,500,000 1,358,895
University of Cincinnati General Receipt Pre-Refunded Bonds Series I-1 7.10 2010 750,000 832,485
University of Toledo General Receipt Pre-Refunded Bonds Series 1990
(MBIA Insured) 7.125 2020 500,000 562,040
<PAGE>
PAGE 237
Warren County Various Purpose Limited Tax General Obligation Bonds
Series 1992 6.10 2012 500,000 514,615
Whitehall City School District Franklin County Unlimited Tax
Improvement General Obligation Pre-Refunded
School Building Construction 7.25 2013 500,000 563,170
_____________________________________________________________________________________________________________________________
Total municipal bonds
(Cost: $69,835,567) $72,981,828
_____________________________________________________________________________________________________________________________
Total investments in securities
(Cost: $69,835,567)(f) $72,981,828
_____________________________________________________________________________________________________________________________
</TABLE>
Notes to investments in securities
___________________________________________________________________
__________________________________________________________
(a) Securities are valued by procedures described in Note 1 to the
financial statements.
(b) Investments in bonds, by rating category as a percentage of
total bonds, are as follows:
<TABLE><CAPTION>
(Unaudited)
Rating 06-30-95 06-30-94
___________________________________________________________________________________________________________
<S> <C> <C>
AAA 72% 65%
AA 7 11
A 10 14
BBB and below 11 10
Non-rated -- --
Total 100% 100%
</TABLE>
(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) The following abbreviation is used in portfolio descriptions:
AMT -- Alternative Minimum Tax
(e) Presently non-income producing. For long-term debt securities,
item identified is in default as to payment of interest and/or
principal.
(f) At June 30, 1995, the cost of securities for federal income tax
purposes was $69,787,505 and the aggregate gross unrealized
appreciation and depreciation based on that cost was:
Unrealized appreciation $3,985,796
Unrealized depreciation (791,473)
___________________________________________________________________
Net unrealized appreciation $3,194,323
___________________________________________________________________<PAGE>
PAGE 238
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, 1995, 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, 1995, and the financial highlights for each of the years
in the six-year period ended June 30, 1995, 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, 1995, 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,
1995, and the financial highlights for the periods stated in the
first paragraph above, in conformity with generally accepted
accounting principles.
KPMG Peat Marwick LLP
Minneapolis, Minnesota
August 4, 1995
<PAGE>
PAGE 239
Financial statements
Statement of assets and liabilities
IDS Insured Tax-Exempt Fund
June 30, 1995
<TABLE>
<CAPTION>
_____________________________________________________________________________________________________________
Assets
_____________________________________________________________________________________________________________
<S> <C>
Investments in securities, at value (Note 1)
(identified cost $486,025,646) $511,043,524
Accrued interest receivable 9,581,748
Receivable for investment securities sold 98,015
_____________________________________________________________________________________________________________
Total assets 520,723,287
_____________________________________________________________________________________________________________
Liabilities
_____________________________________________________________________________________________________________
Disbursements in excess of cash on demand deposit 147,050
Dividends payable to shareholders 297,185
Payable for investment securities purchased 9,168,790
Accrued investment management services fee 149,679
Accrued distribution fee 2,707
Accrued service fee 57,493
Accrued transfer agency fee 16,324
Accrued administrative services fee 12,214
Other accrued expenses 33,202
_____________________________________________________________________________________________________________
Total liabilities 9,884,644
_____________________________________________________________________________________________________________
Net assets applicable to outstanding shares $510,838,643
_____________________________________________________________________________________________________________
Represented by
_____________________________________________________________________________________________________________
Shares of beneficial interest - $.01 par value, unlimited number of shares authorized; $ 946,621
Additional paid-in capital 497,315,287
Undistributed net investment income 5,732
Accumulated net realized loss (Note 1) (12,446,875)
Unrealized appreciation 25,017,878
_____________________________________________________________________________________________________________
Total -- representing net assets applicable to outstanding shares $510,838,643
_____________________________________________________________________________________________________________
Net assets applicable to outstanding shares: Class A $504,568,357
Class B $ 6,269,279
Class Y $ 1,007
Net asset value per share of outstanding shares: Class A shares 93,501,438 $ 5.40
Class B shares 1,160,465 $ 5.40
Class Y shares 186 $ 5.41
See accompanying notes to financial statements. <PAGE>
PAGE 240
Financial statements
Statement of operations
IDS Insured Tax-Exempt Fund
Year ended June 30, 1995
_____________________________________________________________________________________________________________
Investment income
_____________________________________________________________________________________________________________
Income:
Interest $32,104,013
_____________________________________________________________________________________________________________
Expenses (Note 2):
Investment management services fee 2,560,188
Distribution fee
Class A 75,677
Class B 6,352
Transfer agency fee 266,187
Incremental transfer agency fee - Class B 50
Service fee
Class A 253,810
Class B 1,572
Administrative services fee 54,360
Compensation of trustees 6,509
Compensation of officers 5,702
Custodian fees 25,993
Postage 32,725
Registration fees 54,585
Reports to shareholders 8,481
Audit fees 17,500
Administrative 1,910
Other 1,842
_____________________________________________________________________________________________________________
Total expenses 3,373,443
_____________________________________________________________________________________________________________
Investment income -- net 28,730,570
_____________________________________________________________________________________________________________
Realized and unrealized gain (loss) -- net
_____________________________________________________________________________________________________________
Net realized gain on security transactions (Note 3) 1,798,609
Net realized loss on closed interest rate futures contracts (11,694,275)
Net realized gain on exercised option contracts written (Note 6) 217,000
_____________________________________________________________________________________________________________
Net realized loss on investments (9,678,666)
Net change in unrealized appreciation or depreciation 12,668,289
_____________________________________________________________________________________________________________
Net gain on investments 2,989,623
_____________________________________________________________________________________________________________
Net increase in net assets resulting from operations $31,720,193
_____________________________________________________________________________________________________________
See accompanying notes to financial statements.
/TABLE
<PAGE>
PAGE 241
Financial statements
Statements of changes in net assets
IDS Insured Tax-Exempt Fund
Year ended June 30,
<TABLE>
<CAPTION>
_____________________________________________________________________________________________________________
Operations and distributions 1995 1994
_____________________________________________________________________________________________________________
<S> <C> <C>
Investment income -- net $ 28,730,570 $ 27,960,399
Net realized loss on investments (9,678,666) (631,384)
Net change in unrealized appreciation or depreciation 12,668,289 (28,613,958)
_____________________________________________________________________________________________________________
Net increase (decrease) in net assets resulting from operations 31,720,193 (1,284,943)
_____________________________________________________________________________________________________________
Distributions to shareholders from:
Net investment income
Class A (28,692,222) (27,955,386)
Class B (40,346) --
Class Y (10) --
Net realized gain
Class A -- (129,500)
_____________________________________________________________________________________________________________
Total distributions (28,732,578) (28,084,886)
_____________________________________________________________________________________________________________
Share transactions (Note 4)
_____________________________________________________________________________________________________________
Proceeds from sales
Class A shares (Note 2) 74,499,609 153,720,129
Class B shares 6,369,393 --
Class Y shares 1,020 --
Reinvestment of distributions at net asset value
Class A shares 20,325,958 20,296,120
Class B shares 31,095 --
Class Y shares 10 --
Payments for redemptions
Class A shares (118,788,670) (83,052,989)
Class B shares (Note 2) (26,911) --
_____________________________________________________________________________________________________________
Increase (decrease) in net assets from share transactions (17,588,496) 90,963,260
_____________________________________________________________________________________________________________
Total increase (decrease) in net assets (14,600,881) 61,593,431
Net assets at beginning of year 525,439,524 463,846,093
_____________________________________________________________________________________________________________
Net assets at end of year
(including undistributed net investment income of
$5,732 and $5,013) $510,838,643 $525,439,524
_____________________________________________________________________________________________________________
See accompanying notes to financial statements.
</TABLE>
<PAGE>
PAGE 242
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 currently composed 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.
The fund offers Class A, Class B and Class Y shares. Class A shares
are sold with a front-end sales charge. Class B shares, which the
fund began offering on March 20, 1995, may be subject to a
contingent deferred sales charge. Class B shares automatically
convert to Class A after eight years. Class Y shares, which the
fund also began offering on March 20, 1995, have no sales charge
and are offered only to qualifying institutional investors.
All classes of shares have identical voting, dividend, liquidation
and other rights, and the same terms and conditions, except that
the level of distribution fee, transfer agency fee, and service fee
(class specific expenses) differ among classes. Income, expenses
(other than class specific expenses) and realized and unrealized
gains or losses on investments are allocated to each class of
shares based upon its relative net assets.
Significant accounting policies followed by the fund are summarized
below:
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.
Option transactions
In order to produce incremental earnings, protect gains, and
facilitate buying and selling of securities for investment
purposes, the fund may buy and sell put and call options and write
covered call options on portfolio securities and may write cash-
secured put options. The risk in writing a call option is that the
fund gives up the opportunity of profit if the market price of the
security increases. The risk in writing a put option is that the
fund may incur a loss if the market price of the security decreases
and the option is exercised. The risk in buying an option is that
the fund pays a premium whether or not the option is exercised. The
fund also has the additional risk of not being able to enter into a
closing transaction if a liquid secondary market does not exist.<PAGE>
PAGE 243
The fund also may write over-the-counter options where the
completion of the obligation is dependent upon the credit standing
of the other party.
Option contracts are valued daily at the closing prices on their
primary exchanges and unrealized appreciation or depreciation is
recorded. The fund will realize a gain or loss upon expiration or
closing of the option transaction. When options on debt securities
or futures are exercised, the fund will realize a gain or loss.
When other options are exercised, the proceeds on sales for a
written call option, the purchase cost for a written put option or
the cost of a security for a purchased put or call option is
adjusted by the amount of premium received or paid.
Futures transactions
In order to gain exposure to or protect itself from changes in the
market, the fund may buy and sell 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, 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.
Securities purchased on a when-issued basis
Delivery and payment for securities that have been purchased by the
fund on a forward-commitment or when-issued basis can take place
one month or more after the transaction date. During this period,
such securities are subject to market fluctuations, and they may
effect the fund's net assets the same as owned securities. The fund
designates cash or liquid high-grade debt securities at least equal
to the amount of its commitment. As of June 30, 1995, the fund had
entered into oustanding when-issued or forward commitments of
$9,086,501.
Federal taxes
Since the fund's policy is to comply with all sections of the
Internal Revenue Code applicable to regulated investment companies
and to distribute all of its taxable income to shareholders, no
provision for income or excise taxes is required.
Net investment income (loss) and net realized gains (losses) may
differ for financial statement and tax purposes primarily because
of the deferral of losses on certain futures contracts, 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<PAGE>
PAGE 244
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.
On the statement of assets and liabilities, as a result of
permanent book-to-tax differences, accumulated net realized loss
has been increased by $2,727 and undistributed net investment
income has been increased by $2,727.
Dividends to shareholders
Dividends from net investment income, declared daily and payable
monthly, are reinvested in additional shares of the fund at net
asset value or payable in cash. Capital gains, when available, are
distributed along with the last income dividend of the calendar
year.
Other
Security transactions are accounted for on the date securities are
purchased or sold. Interest income, including level-yield
amortization of premium and discount, is accrued daily.
At June 30, 1995, American Express Financial Corporation (AEFC)
owns 186 Class Y shares.
___________________________________________________________________
2. Expenses and sales charges
Under terms of a prior agreement that ended March 19, 1995, the
fund paid AEFC a fee for managing its investments, recordkeeping
and other specified services. The fee was 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.
Also under the terms of a prior agreement, the fund paid AEFC 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 was reduced by
earnings on monies pending shareholder redemptions.
Effective March 20, 1995, when the fund began offering multiple
classes of shares, the fund entered into agreements with AEFC for
managing its portfolio, provding administrative services and
serving as transfer agent as follows: Under its Investment
Management Services Agreement, AEFC determines which securities
will be purchased, held or sold. The management fee is a percentage
of the fund's average daily net assets in reducing percentages from
0.45% to 0.35% annually. Under an Administrative Services
Agreement, the fund pays AEFC for administration and accounting
services at a percentage of the fund's average daily net assets in
reducing percentages from 0.04% to 0.02% annually.
Under a separate Transfer Agency Agreement, AEFC maintains
shareholder accounts and records. The fund pays AEFC an annual fee
per shareholder account for this service as follow:<PAGE>
PAGE 245
o Class A $15.50
o Class B $16.50
o Class Y $15.50
Also effective March 20, 1995, the fund entered into agreements
with American Express Financial Advisors Inc. for distribution and
shareholder servicing-related services as follows: Under the Plan
and Agreement of Distribution, the fund pays a distribution fee at
an annual rate of 0.75% of the fund's average daily net assets
attributable to Class B shares for distribution-related services.
Under a Shareholder Service Agreement, the fund pays a fee for
service provided to shareholders by financial advisors and other
servicing agents. The fee is calculated at a rate of 0.175% of the
fund's average daily net assets attributable to Class A and Class B
shares.
AEFC will assume and pay any expenses (except taxes and brokerage
commissions) that exceed the most restrictive applicable state
expense limitation.
Sales charges by American Express Financial Advisors Inc. for
distributing fund shares were $1,522,159 for Class A and $32 for
Class B for the year ended June 30, 1995.
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 $3,828 for the year ended June 30, 1995.
___________________________________________________________________
3. Securities transactions
Cost of purchases and proceeds from sales of securities (other than
short-term obligations) aggregated $264,940,607 and $294,099,294,
respectively, for the year ended June 30, 1995. Realized gains and
losses are determined on an identified cost basis.
___________________________________________________________________
4. Share transactions
Transactions in shares of the fund for the periods indicated are as
follows:<PAGE>
PAGE 246
<TABLE>
<CAPTION>
_______________________________________________________________________________________
Period ended June 30, 1995 Year ended
06/30/94
Class A Class B* Class Y* Class A
_______________________________________________________________________________________
<S> <C> <C> <C> <C>
Sold 14,090,841 1,159,679 184 27,036,137
Issued for reinvested
distributions 3,817,110 5,658 2 3,605,846
Redeemed (22,569,639) (4,872) -- (14,841,541)
_______________________________________________________________________________________
Net increase (decrease) (4,661,688) 1,160,465 186 15,800,442
_______________________________________________________________________________________
*Inception date was March 20, 1995 for Class B and for Class Y.
______________________________________________________________________________
</TABLE>
5. Capital loss carryover
For federal income tax purposes, the fund has a capital loss
carryover of $1,334,445 at June 30, 1995, that will expire in 1996
through 2003 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.
___________________________________________________________________
6. Option contracts written
The number of contracts and premium amounts associated with option
contracts written is as follows:
Year ended June 30, 1995
_____________________________
Calls
Contracts Premium
________________________________________________
Balance June 30, 1994 -- $ --
Opened 250 217,000
Exercised (250) (217,000)
________________________________________________
Balance June 30, 1995 -- $ --
________________________________________________
__________________________________________________________________
7. Financial highlights
"Financial highlights" showing per share data and selected
information is presented on page 7 of the prospectus.
<PAGE>
PAGE 247
<TABLE>
<CAPTION>
Investments in securities
IDS Insured Tax-Exempt Fund (Percentages represent value of
June 30, 1995 investments compared to net assets)
_____________________________________________________________________________________________________________________________
Municipal bonds (97.8%)
_____________________________________________________________________________________________________________________________
Name of issuer and title of issue (b,c,d) Coupon Maturity Principal Value(a)
rate amount
_____________________________________________________________________________________________________________________________
<S> <C> <C> <C> <C>
Alabama (0.7%)
Mobile General Obligation Capital Improvement Warrants Convention Center
Pre-Refunded Bonds Series 1990 (AMBAC Insured) 7.125% 2020 $ 3,000,000 $ 3,383,760
_____________________________________________________________________________________________________________________________
Arizona (0.6%)
Chandler Water & Sewer Refunding Revenue Bonds Series 1991 (FGIC Insured) 7.00 2012 1,250,000 1,369,237
Health Facilities Authority Hospital System Refunding Revenue Bonds
Phoenix Baptist Hospital Series 1992 (MBIA Insured) 6.25 2011 1,650,000 1,705,193
____________
Total 3,074,430
_____________________________________________________________________________________________________________________________
California (15.3%)
Alameda County Certificate of Participation Refunding Bonds
Santa Rita Jail (MBIA Insured) 5.00 2015 3,250,000 2,866,597
Brea Redevelopment Agency Tax Allocation Refunding Bonds
(MBIA Insured) 5.50 2017 3,250,000 3,022,305
Concord Redevelopment Agency Tax Allocation
Central Concord Redevelopment (AMBAC Insured) 5.25 2013 4,250,000 3,928,403
Eastern Municipal Water District Riverside County Water & Sewer
Pre-Refunded Revenue Certificates of Participation Series 1991
(FGIC Insured) 6.50 2020 5,460,000 6,072,721
Fontana Unified School District San Bernardino County
General Obligation Convertible Capital Appreciation Bonds
Series 1990C Zero Coupon (FGIC Insured) 6.15 2020 6,000,000 (e) 5,340,000
Fresno Health Facility Revenue Bonds Holy Cross-St. Agnes
(Secondary MBIA Insured) 6.625 2021 2,000,000 2,095,100
Los Angeles Department of Water & Power Waterworks
Refunding Revenue Bonds (Secondary FGIC Insured) 4.50 2023 2,000,000 1,571,300
Northern California Transmission Select Auction
Variable Rate Security & Residual Interest Revenue Bonds Inverse Floater 5.50 2024 2,500,000 (f) 2,319,700
Orange County Redevelopment Agency Tax Allocation
Refunding Revenue Bonds Southwest Redevelopment Series A (AMBAC Insured) 5.70 2023 3,000,000 2,819,760
Pittsburg Public Financing Authority Wastewater Refunding Revenue Bonds
Series A (FGIC Insured) 5.125 2015 2,895,000 2,605,761
Pittsburg Redevelopment Agency Los Medanos Development Tax Allocation
Refunding Bonds Series 1993A (AMBAC Insured) 5.00 2017 2,800,000 2,447,228
Rancho Cucamonga Redevelopment Agency Rancho Redevelopment Tax Allocation
Refunding Bonds Series 1994 (MBIA Insured) 5.00 2015 3,485,000 3,083,807
San Bernardino County Medical Center Financing Certificate of Participation
Series A (MBIA Insured) 5.50 2022 5,000,000 4,598,200
San Diego County Certificate of Participation Regional Authority Bonds
Series 1991 Mt. Tower Inverse Floater (MBIA Insured) 6.363 2019 9,000,000 (f) 9,126,540
San Diego Industrial Development Refunding Revenue Bonds
San Diego Gas & Electric Series C (Secondary MBIA Insured) 5.90 2018 5,400,000 5,233,842
See accompanying notes to investments in securities.<PAGE>
PAGE 248
San Francisco City & County Certificate of Participation
San Francisco Courthouse Series 1995 (CGIC Insured) 5.60 2016 2,500,000 2,364,925
San Jose Redevelopment Agency Merged Area Redevelopment
Tax Allocation Bonds Series 1993 (MBIA Insured) 4.75 2024 2,400,000 1,954,248
San Jose Redevelopment Agency Merged Area Redevelopment
Tax Allocation Bonds Series 1993 (MBIA Insured) 5.25 2016 1,250,000 1,139,962
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 1,404,510
State Public Works Board Lease Revenue Bonds Department of Justice Building
Series A (FSA Insured) 5.80 2015 2,000,000 1,937,980
State Public Works Board Lease Revenue Bonds University of California
Series A (AMBAC Insured) 6.40 2016 2,000,000 2,042,380
State University & Colleges Student Union Revenue Bonds Fresno University
Series B (AMBAC Insured) 5.80 2025 1,410,000 1,347,044
State Unlimited Tax General Obligation Bonds (Secondary FGIC Insured) 4.75 2023 2,500,000 2,045,425
Statewide Community Development Authority Certificate of Participation
Sutter Health Obligated Group (MBIA Insured) 5.50 2022 6,250,000 (g) 5,678,500
Statewide Community Development Authority Revenue
Certificate of Participation Bonds Sisters of Charity
(Secondary MBIA Insured) 5.00 2023 1,500,000 1,273,095
____________
Total 78,319,333
_____________________________________________________________________________________________________________________________
Colorado (3.2%)
Colorado Springs Hospital Refunding Revenue Bonds (MBIA Insured) 6.00 2024 1,815,000 1,792,676
Denver City & County Airport Revenue Bonds AMT Series B (MBIA Insured) 5.75 2017 10,940,000 10,272,113
Douglas County School District General Obligation Improvement Bonds
Series 1994A (MBIA Insured) 6.50 2016 1,500,000 1,587,450
Metro Wastewater Reclamation District Sewer Refunding Bonds
Series 1993B (AMBAC Insured) 4.75 2012 1,750,000 1,542,608
State Board of Trustees of Colleges in Colorado Auxiliary
Facility System Enterprise Revenue Bonds Western State College
Series 1994C (MBIA Insured) 5.625 2015 1,250,000 1,217,087
____________
Total 16,411,934
_____________________________________________________________________________________________________________________________
Delaware (0.2%)
Health Facilities Authority Refunding Revenue Bonds
Medical Center of Delaware Series 1989 (MBIA Insured) 7.00 2015 1,000,000 1,078,300
_____________________________________________________________________________________________________________________________
District of Columbia (4.4%)
Howard University Revenue Bonds Series A (MBIA Insured) 8.00 2017 1,500,000 1,633,620
Metropolitan Washington Airports Authority Airport System
Revenue Bonds Series 1992A (MBIA Insured) 6.625 2019 9,420,000 9,818,749
Metropolitan Washington Airports Authority Airport System
Revenue Bonds AMT Series 1994A (MBIA Insured) 5.75 2020 10,000,000 9,428,300
Unlimited Tax General Obligation Refunding Bonds Series B-2
(FSA Insured) 5.50 2010 2,000,000 1,877,840
____________
Total 22,758,509
_____________________________________________________________________________________________________________________________
Florida (2.2%)
Dade County Aviation Revenue Bonds AMT Series B (MBIA Insured) 6.60 2022 2,440,000 2,538,991
Department of Transportation Turnpike Revenue Bonds Series 1991A
(AMBAC Insured) 6.25 2020 1,250,000 1,263,662
Fort Myers Utility System Refunding Revenue Bonds Series 1989A
(BIG Insured) 6.00 2019 2,000,000 1,999,760
Gulf Breeze Local Government Loan Program Boca Raton Series 1985E
(FGIC Insured) 7.75 2015 2,000,000 2,254,620
<PAGE>
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Orange County Health Facility Authority Revenue Bonds Series 1995
Adventist Health System Sunbelt Obligated Group (AMBAC Insured) 5.25 2020 1,250,000 1,118,062
Osceola County Transportation Pre-Refunded Revenue Bonds
Series 1988A (FGIC Insured) 7.70 2013 1,215,000 1,348,371
Palm Beach County Solid Waste Authority Revenue Bonds Series 1984
(BIG Insured) 8.375 2010 500,000 548,335
____________
Total 11,071,801
_____________________________________________________________________________________________________________________________
Georgia (2.6%)
Atlanta Metropolitan Rapid Transit Authority Sales Tax
Pre-Refunded Revenue Bonds Series L (AMBAC Insured) 7.20 2020 3,000,000 3,346,230
Chatham County Hospital Authority Revenue Bonds Memorial Medical Center
Series 1990A (MBIA Insured) 7.00 2021 4,500,000 4,899,285
Fulton County Water & Sewer Revenue Bonds Non-Callable (FGIC Insured) 6.375 2014 3,250,000 3,441,295
Municipal Electrical Authority Power Revenue Bonds Series M (BIG Insured) 8.10 2012 1,080,000 1,155,265
Municipal Electrical Authority Special Obligation Refunding Bonds
2nd Crossover Series (AMBAC Insured) 7.80 2020 500,000 544,635
____________
Total 13,386,710
_____________________________________________________________________________________________________________________________
Illinois (4.3%)
Chicago O'Hare International Airport General Refunding Revenue Bonds
Second Lien Series A (MBIA Insured) 6.375 2015 5,000,000 5,120,700
Chicago O'Hare International Airport General Revenue Bonds Series 1990A
(AMBAC Insured) 7.50 2016 2,000,000 2,173,980
Chicago O'Hare International Airport Terminal Revenue Bonds (MBIA Insured) 7.625 2010 3,000,000 3,275,700
Chicago Public Building Commission Pre-Refunded Revenue Bonds
(MBIA Insured) 7.70 2008 1,000,000 1,081,130
Chicago Public Building Commission Pre-Refunded Revenue Bonds
Series 1989A (FGIC Insured) 7.75 2006 1,000,000 1,122,030
Chicago Public Building Commission Pre-Refunded Revenue Bonds
Series 1990A (MBIA Insured) 7.125 2015 5,000,000 5,459,400
Cook County Unlimited Tax General Obligation Bonds (FGIC Insured) 5.50 2022 2,535,000 2,325,710
Northern Cook County Solid Waste Agency Contract Revenue Bonds
(MBIA Insured) 6.50 2012 1,200,000 1,245,216
____________
Total 21,803,866
_____________________________________________________________________________________________________________________________
Indiana (2.0%)
Educational Facilities Authority Pre-Refunded Bonds Valpraiso University
(BIG Insured) 7.80 2008 500,000 562,060
Marion County Hospital Authority Refunding Revenue Bonds Methodist Hospital
Series 1989 (MBIA Insured) 6.50 2013 4,000,000 4,136,840
State Health Facility Finance Authority Hospital Refunding Revenue Bonds
Columbus Regional Hospital Series 1993 (CGIC Insured) 7.00 2015 5,000,000 5,579,250
____________
Total 10,278,150
_____________________________________________________________________________________________________________________________
Kentucky (0.1%)
Jefferson County Multi-family Housing Revenue Bonds AMT Brownsboro Gardens
Series 1986A (FHA Insured) 8.00 2026 385,000 392,096
Louisville & Jefferson County Airport Authority System Revenue Bonds AMT
(MBIA Insured) 8.50 2017 300,000 327,951
____________
Total 720,047
_____________________________________________________________________________________________________________________________
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Louisiana (1.7%)
Energy & Power Authority Power Refunding Revenue Bonds Rodemacher Unit #2
Series 1991 (FGIC Insured) 6.75 2008 7,000,000 7,535,290
New Orleans Audubon Park Commission Aquarium Pre-Refunded Bonds
Series 1988 (MBIA Insured) 7.90 2008 500,000 549,280
New Orleans International Airport Pre-Refunded Revenue Bonds Series A
(FGIC Insured) 8.875 2017 565,000 628,455
____________
Total 8,713,025
_____________________________________________________________________________________________________________________________
Maine (0.3%)
State Turnpike Authority Turnpike Revenue Bonds (MBIA Insured) 6.00 2018 1,790,000 1,761,467
_____________________________________________________________________________________________________________________________
Maryland (1.7%)
Baltimore Refunding Revenue Bonds Wastewater Series 1994A
(FGIC Insured) 5.00 2022 1,000,000 864,700
Health & Higher Educational Facilities Authority Refunding Revenue
Bonds Greater Baltimore Medical Center (FGIC Insured) 5.00 2019 2,650,000 2,294,025
Health & Higher Educational Facilities Authority Revenue Bonds
Frederick Memorial Hospital Series 1993 (FGIC Insured) 5.00 2028 4,750,000 3,996,603
Health & Higher Educational Facilities Authority Revenue Bonds
Peninsula Regional Medical Center (MBIA Insured) 5.00 2023 2,000,000 1,703,980
____________
Total 8,859,308
_____________________________________________________________________________________________________________________________
Massachusetts (4.5%)
Bay Transportation Authority Refunding Bonds Series B
(Secondary MBIA Insured) 5.50 2021 1,770,000 1,627,568
Boston Water & Sewer Commission Revenue Bonds General Subordinate Series A
(BIG Insured) 6.00 2008 2,500,000 2,544,250
Health & Educational Authority Revenue Bonds Valley Regional Health System
Series C (Connie Lee Insured) 5.75 2018 1,500,000 1,397,010
Health & Educational Facilities Authority Pre-Refunded Revenue Bonds
Lahey Clinic Medical Center (MBIA Insured) 7.625 2018 2,200,000 2,446,004
Health & Educational Facilities Authority Pre-Refunded Revenue Bonds
Northeastern University Series 1989C (AMBAC Insured) 7.10 2006 1,000,000 1,098,540
Industrial Finance Agency Revenue Bonds Brandeis University (MBIA Insured) 6.80 2019 1,700,000 1,821,686
Municipal Wholesale Electric Power Supply System Refunding Revenue Bonds
Series B (MBIA Insured) 4.75 2011 5,250,000 4,610,392
Quincy Refunding Revenue Bonds Quincy Hospital Series 1993 (FSA Insured) 5.25 2016 2,235,000 2,021,379
State Health & Educational Facilities Authority Revenue Bonds
Cape Cod Health System Series A (Connie Lee Insured) 5.25 2021 4,000,000 3,544,600
State Water Resource Authority Revenue Bonds Series A (MBIA Insured) 5.50 2022 2,000,000 1,839,460
____________
Total 22,950,889
_____________________________________________________________________________________________________________________________
Michigan (2.3%)
Berkley School District County of Oakland School Building & Site
Unlimited Tax General Obligation Bonds Series 1995 (FGIC Insured) 5.625 2015 1,000,000 955,010
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 1,862,375
Detroit Water Supply System Refunding Revenue Bonds Series 1993
(FGIC Insured) 5.00 2023 1,050,000 900,837
Kalamazoo Hospital Finance Authority Refunding & Improvement Bonds
Bronson Methodist Hopsital (Secondary MBIA Insured) 6.25 2012 3,000,000 3,086,520
River Rouge School District (FSA Insured) 5.625 2022 2,400,000 2,262,168
Sandusky County School District Refunding Bonds (AMBAC Insured) 5.25 2021 1,000,000 900,830
<PAGE>
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State Hospital Finance Authority Refunding Bonds Oakwood Hospital Group
Series A (FGIC Insured) 5.625 2018 1,000,000 940,010
Wayne County Charter Airport Revenue Bonds AMT
Detroit Metropolitan Wayne County Airport (FGIC Insured) 8.00 2014 675,000 718,760
____________
Total 11,626,510
_____________________________________________________________________________________________________________________________
Minnesota (1.7%)
Southern Minnesota Municipal Power Agency Power Revenue Bonds
Series A (Secondary FGIC Insured) 4.75 2016 4,250,000 3,645,863
Western Municipal Power Agency Transmission Pre-Refunded Revenue
Bonds Series 1991 (AMBAC Insured) 6.75 2016 4,500,000 4,841,910
____________
Total 8,487,773
_____________________________________________________________________________________________________________________________
Missouri (1.1%)
Kansas City School District Insured Leasehold Revenue Bonds
Capital Improvement (FGIC Insured) 5.00 2014 4,000,000 3,588,280
St. Louis Municipal Finance Leasehold Improvement Revenue Bonds
St. Louis Civil Courts Building Series 1994 (FGIC Insured) 5.75 2013 2,065,000 2,021,718
____________
Total 5,609,998
_____________________________________________________________________________________________________________________________
Montana (1.8%)
Forsyth Rosebud County Pollution Refunding Revenue Bonds AMT
Puget Sound Power & Light (AMBAC Insured) 7.25 2021 4,000,000 4,354,400
State Board of Investments Payroll Tax Bonds Worker's Compensation Program
Series 1991 (MBIA Insured) 6.875 2020 4,750,000 5,099,933
____________
Total 9,454,333
_____________________________________________________________________________________________________________________________
Nebraska (2.0%)
Public Power District Revenue Bonds Power Supply System (MBIA Insured) 5.75 2020 5,000,000 4,803,350
Public Power District Supply System Revenue Bonds Series 1995A
(MBIA Insured) 5.25 2022 6,115,000 5,562,693
_____________
Total 10,366,043
_____________________________________________________________________________________________________________________________
Nevada (1.0%)
Clark County Passenger Facility Charge Revenue Bonds AMT
Las Vegas McCarren Airport Series B (AMBAC Insured) 6.25 2022 5,000,000 4,919,850
_____________________________________________________________________________________________________________________________
New Hampshire (1.1%)
Industrial Development Authority Pollution Control Revenue Bonds AMT
Light & Power Series 1989 (AMBAC Insured) 7.375 2019 5,000,000 5,400,900
_____________________________________________________________________________________________________________________________
New Mexico (0.8%)
Rio Rancho Water & Wastewater System Revenue Bonds Series A
(FSA Insured) 5.90 2015 2,700,000 2,647,188
Santa Fe Water Revenue Bonds (AMBAC Insured) 6.30 2024 1,350,000 1,371,978
____________
Total 4,019,166
_____________________________________________________________________________________________________________________________
New York (5.9%)
Broome Certificate of Participation Public Safety Facility
Series 1994 (MBIA Insured) 5.25 2022 2,250,000 2,026,327
Dormitory Authority City University System Consolidated 3rd Resolution
Revenue Bonds 1994 Series 2 (MBIA Insured) 6.25 2019 2,500,000 2,527,375
<PAGE>
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Metropolitan Transportation Authority Commuter Facility Service
Contract Bonds Series L (AMBAC Insured) 7.50 2017 1,300,000 1,423,513
New York City General Obligation Pre-Refunded Bonds Series A
(FGIC Insured) 8.125 2007 1,145,000 1,263,805
State Energy Resource & Development Authority Gas Facility Revenue Bonds
AMT Brooklyn Union Gas (MBIA Insured) 5.60 2025 4,500,000 4,134,285
State Energy Resource & Development Authority Pollution Control
Refunding Revenue Bonds AMT Rochester Gas & Electric (MBIA Insured) 6.50 2032 4,000,000 4,061,480
State Energy Resource & Development Authority Revenue Bonds AMT
Consolidated Edison (Secondary AMBAC Insured) 6.75 2027 2,500,000 2,571,125
State Energy Resource & Development Authority Solid Waste Disposal
Revenue Bonds AMT New York State Electric & Gas Series A
(MBIA Insured) 5.70 2028 11,210,000 10,422,722
State Urban Development Correctional Facilities Pre-Refunded Revenue Bonds
Series 1 (FSA Insured) 7.50 2020 1,500,000 1,702,155
____________
Total 30,132,787
_____________________________________________________________________________________________________________________________
North Carolina (1.4%)
Charlotte Pre-Refunded Certificates of Participation Convention Facility
Series 1991 (AMBAC Insured) 6.75 2021 3,150,000 3,564,005
Charlotte Convention Facility Refunding Certificate of Participation
Series 1993C (AMBAC Insured) 5.25 2020 3,100,000 2,794,774
Fayetteville Public Work Commission Revenue Bonds Series 1995A
(AMBAC Insured) 5.375 2020 650,000 597,194
____________
Total 6,955,973
_____________________________________________________________________________________________________________________________
Ohio (2.7%)
Adams County Valley School District County of Adams & Highland
School Improvement Unlimited Tax General Obligation Bonds
Series 1995 (MBIA Insured) 5.25 2021 2,500,000 2,277,500
Clermont County Sewer System Refunding Bonds (AMBAC Insured) 5.20 2021 4,000,000 3,617,440
Cleveland Airport System Revenue Bonds AMT Series A (FGIC Insured) 6.00 2024 1,650,000 1,608,255
Cleveland City School District Unlimited Tax General Obligation Bonds
Series A (FGIC Insured) 5.875 2011 2,325,000 2,325,697
Lorain County Hospital Facilities Refunding Revenue Bonds Series 1995
EMH Regional Medical Center (AMBAC Insured) 5.375 2021 1,000,000 911,540
Lucas County Hospital Refunding Revenue Bonds St. Vincent Medical Center
Series 1993C (MBIA Insured) 5.25 2022 1,725,000 1,539,942
Municipal Electric Generation Agency Joint Venture 5
Revenue Bonds (AMBAC Insured) 5.375 2024 1,480,000 1,348,443
____________
Total 13,628,817
_____________________________________________________________________________________________________________________________
Oklahoma (0.9%)
Moore Public Works Authority Refunding Revenue Bonds Series 1989
(AMBAC Insured) 7.60 2006 2,700,000 3,002,481
Tulsa International Airport General Revenue Bonds Consolidated Fixed Rate
Series 1989 (MBIA Insured) 7.50 2008 1,500,000 1,609,665
____________
Total 4,612,146
_____________________________________________________________________________________________________________________________
Pennsylvania (3.7%)
Allegheny County Airport Revenue Bonds Pittsburgh International
Series D (FGIC Insured) 7.75 2019 2,300,000 2,464,542
Delaware County Authority Health Care Revenue Bonds
Mercy Health Southeastern (Connie Lee Insured) 5.125 2012 2,000,000 1,810,600
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Pittsburgh Water & Sewer Authority Water & Sewer System
Pre-Refunded Revenue Bonds Series 1991A (FGIC Insured) 6.50 2014 10,000,000 11,097,900
Robinson Township Municipal Authority Water & Sewer Revenue Bonds
(FGIC Insured) 6.00 2019 2,200,000 2,185,876
Turnpike Commission Pre-Refunded Revenue Bonds Series 1989K (MBIA Insured) 7.50 2012 1,000,000 1,136,260
____________
Total 18,695,178
_____________________________________________________________________________________________________________________________
South Carolina (0.2%)
Piedmont Municipal Power Agency Electric Refunding Revenue Bonds
(FGIC Insured) 6.25 2021 1,000,000 1,031,100
_____________________________________________________________________________________________________________________________
Tennessee (0.7%)
Knox County Health Education & Housing Facility Board Hospital Refunding
Revenue Bonds Fort Sanders Alliance Obligation Group Series 1993
(MBIA Insured) 5.75 2014 3,750,000 3,697,500
_____________________________________________________________________________________________________________________________
Texas (17.6%)
Austin Combine Utility System Revenue Bonds (MBIA Insured) 5.25 2018 2,300,000 2,091,965
Austin Combine Utility System Revenue Bonds Series 1987 (BIG Insured) 8.625 2012-17 1,250,000 1,524,600
Austin Combined Utilities System Refunding Revenue Bonds Series 1994
(FGIC Insured) 5.75 2024 8,500,000 8,086,560
Bexar County Health Facility Development Hospital Revenue Bonds San Antonio
Baptist Memorial Hospital System Series 1994 (MBIA Insured) 6.75 2019 5,000,000 5,292,400
Brazos River Authority Collateralized Pollution Control
Refunding Revenue Bonds Texas Utility Electric Series 1992C
(FGIC Insured) 6.70 2022 14,935,000 15,570,484
Colorado River Municipal Water District Water System
Pre-Refunded Revenue Bonds Series A (AMBAC Insured) 6.625 2021 8,900,000 9,717,732
Fort Bend County Levy Improvement District #11 Refunding Bonds
Series 1995 (MBIA Insured) 5.875 2013 1,210,000 1,201,348
Harris County Health Facilities Development Hospital Revenue Bonds
State Children's Hospital Series 1989A (MBIA Insured) 7.00 2019 1,500,000 1,612,125
Harris County Public Facilities Corporation Detention Facility Mortgage
Pre-Refunded Revenue Bonds (MBIA Insured) 7.80 2011 1,000,000 1,130,310
Harris County Toll Road Senior Lien Pre-Refunded Revenue Bonds
Series A (AMBAC Insured) 6.50 2017 8,170,000 9,105,220
League City General Obligation Refunding & Improvement Bonds Series 1990
(FGIC Insured) 6.25 2013 2,500,000 2,549,750
Matagorda County Navigation District #1 Collateralized Pollution Control
Revenue Bonds Central Power & Light Series 1984A (AMBAC Insured) 7.50 2014 2,500,000 2,808,300
Matagorda County Navigation District #1 Pollution Control
Refunding Revenue Bonds Houston Light & Power Series E (FGIC Insured) 7.20 2018 2,150,000 2,369,128
Matagorda County Navigation District #1 Pollution Control Revenue Bonds
AMT Central Power & Light Series 1990 (AMBAC Insured) 7.50 2020 2,000,000 2,192,780
Municipal Power Agency Refunding Revenue Bonds Series 1991A
(AMBAC Insured) 6.75 2012 5,250,000 5,715,990
North Central State Health Facilities Pre-Refunded Bonds
Children's Medical Center (BIG Insured) 7.875 2018 2,000,000 2,179,580
San Antonio Water Refunding Revenue Bonds (MBIA Insured) 5.50 2018 5,000,000 4,684,750
Tarrant County Health Facility Development Hospital Revenue Bonds
Adventist Health System/Sunbelt Series 1993
(CGIC Insured) 5.00 2013 1,250,000 1,105,525
Turnpike Authority Dallas North Tollway Pre-Refunded Revenue Bonds
Series 1990 (AMBAC Insured) 6.00 2020 5,000,000 5,243,800
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Turnpike Authority Dallas North Tollway Revenue Bonds Addison Airport
Toll Tunnel Series 1994 (FGIC Insured) 6.60 2023 2,000,000 2,095,280
University of Houston System Consolidated Pre-Refunded Revenue Bonds
Series 1990A (MBIA Insured) 7.40 2006 3,160,000 3,519,008
____________
Total 89,796,635
_____________________________________________________________________________________________________________________________
Utah (0.4%)
Intermountain Power Authority Power Supply Pre-Refunded Revenue Bonds
Series 1987C (AMBAC Insured) 8.375 2012 900,000 989,388
Salt Lake City-County Airport Pre-Refunded Revenue Bonds AMT Series 1989
(FGIC Insured) 7.875 2018 1,000,000 1,103,560
____________
Total 2,092,948
_____________________________________________________________________________________________________________________________
Virginia (4.2%)
Hanover County Industrial Development Authority
Memorial Regional Medical Center (MBIA Insured) 5.50 2025 3,500,000 (g) 3,207,295
Industrial Development Authority Chesapeake Public Facility Lease
Revenue Bonds Chesapeake Jail Series 1994 (MBIA Insured) 5.625 2014 855,000 821,766
Loudoun County Sanitation Authority Waste & Sewer
Refunding Revenue Bonds (MBIA Insured) 5.25 2030 1,435,000 1,267,607
Norfolk Water Revenue Bonds (AMBAC Insured) 5.375 2023 3,905,000 3,564,172
Portsmouth Redevelopment Housing Authority Multi-Family Housing
Refunding Revenue Bonds (FNMA Insured) 6.05 2008 5,780,000 5,875,601
Richmond Metropolitan Authority Expressway Refunding Bonds
Series A (FGIC Insured) 5.75 2022 3,890,000 3,715,495
Roanoke Industrial Development Authority Refunding Revenue Bonds
Memorial Hospital Series A (MBIA Insured) 5.00 2024 3,750,000 3,205,612
____________
Total 21,657,548
_____________________________________________________________________________________________________________________________
Washington (1.8%)
Public Power Supply System Nuclear Project #1 Pre-Refunded Revenue Bonds
Series A (MBIA Insured) 7.50 2015 1,805,000 2,032,936
Public Power Supply System Nuclear Project #1 Refunding Revenue Bonds
Series A (MBIA Insured) 7.50 2015 1,195,000 1,302,251
Public Power Supply System Pre-Refunded Revenue Bonds Nuclear Project #3
Series 1989A (BIG Insured) 7.25 2016 1,000,000 1,117,220
Public Power Supply System Refunding Revenue Bonds Nuclear Project #3
Series 1989A (BIG Insured) 6.00 2018 3,000,000 2,992,530
Spokane Regional Solid Waste Management System Revenue Bonds AMT
Series 1989 (AMBAC Insured) 7.75 2011 300,000 332,703
Spokane Regional Solid Waste Management System Revenue Bonds AMT
Series 1989 (AMBAC Insured) 7.875 2007 1,250,000 1,390,600
____________
Total 9,168,240
_____________________________________________________________________________________________________________________________
West Virginia (2.7%)
Board of Regents Registration Fee Pre-Refunded Revenue Bonds Series 1989B
(MBIA Insured) 7.40 2009 2,000,000 2,233,340
School Building Authority Capital Improvement Pre-Refunded Revenue Bonds
(MBIA Insured) 7.25 2015 3,415,000 3,863,150
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School Building Authority Capital Improvement Revenue Bonds Series 1990B
(MBIA Insured) 6.75 2017 5,000,000 5,296,700
State Parkway Economic Development & Tourism Authority Parkway
Pre-Refunded Revenue Bonds Series 1989 (FGIC Insured) 7.125 2019 2,000,000 2,225,360
____________
Total 13,618,550
_____________________________________________________________________________________________________________________________
Total municipal bonds
(Cost: $474,525,646) $499,543,524
_____________________________________________________________________________________________________________________________
</TABLE>
<TABLE>
<CAPTION>
Short-term securities (2.2%)
_____________________________________________________________________________________________________________________________
Issuer (h,i) Effective Amount Value(a)
yield payable at
maturity
_____________________________________________________________________________________________________________________________
<S> <C> <C> <C>
Municipal notes
Gulf Coast Amoco V.R.D.B.
10-12-17 4.10% $3,000,000 $ 3,000,000
New York City General Obligation V.R.D.B. Series B-6
08-15-05 4.00 1,800,000 1,800,000
New York City General Obligation V.R.D.B. Series B-4
08-15-23 4.25 2,000,000 2,000,000
New York City Municipal Water Finance Authority V.R.D.B. Series 1994C
06-15-23 4.25 100,000 100,000
New York City Municipal Water Finance Authority Water & Sewer System
Revenue V.R.D.B. Series A
06-15-25 4.50 4,100,000 4,100,000
Regents of the University of Michigan Hospital Refunding Revenue V.R.D.B.
Series 1992A
12-01-19 4.20 500,000 500,000
_____________________________________________________________________________________________________________________________
Total short-term securities
(Cost: $11,500,000) $ 11,500,000
_____________________________________________________________________________________________________________________________
Total investments in securities
(Cost: $486,025,646)(i) $511,043,524
_____________________________________________________________________________________________________________________________
</TABLE>
Notes to investments in securities
___________________________________________________________________
__________________________________________________________
(a) Securities are valued by procedures described in Note 1 to the
financial statements.
(b) Investments in bonds, by rating category as a percentage of
total bonds, are as follows:
<PAGE>
PAGE 256
<TABLE><CAPTION> (Unaudited)
__________________________________________
Rating 06-30-95 06-30-94
___________________________________________________________________________________________________________
<S> <C> <C>
AAA 100% 100%
AA - -
A - -
BBB - -
Non-rated - -
Total 100% 100%
</TABLE>
(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
CGIC -- Capital Guaranty Insurance Company
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 Mininum Tax
(e) For zero coupon bonds, the interest rate disclosed represents
the annualized effective yield on the date of acquisition.
(f) Inverse floaters represent securities that pay interest at a
rate that increases (decreases) in the same magnitude as, or in a
multiple of, a decline (increase) in market short-term rates.
Interest rate disclosed is the rate in effect on June 30, 1995.
Inverse floaters in the aggregate represent 1.8% of the fund's net
assets as of June 30, 1995.
(g) At June 30, 1995, the cost of securities purchased, including
interest purchased, on a when-issued basis was $9,086,501.
(h) The following abbreviation is used in the portfolio
descriptions:
V.R.D.B. -- Variable Rate Demand Bond
(i) At June 30, 1995, the cost of securities for federal income tax
purposes was $485,908,978 and the aggregate gross unrealized
appreciation and depreciation based on that cost was:
Unrealized appreciation $29,479,738
Unrealized depreciation (4,345,192)
___________________________________________________________________
Net unrealized appreciation $25,134,546
___________________________________________________________________
<PAGE>
PAGE 257
PART C. OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) FINANCIAL STATEMENTS:
Financial statements filed electronically as part of this
post-effective amendment and included in Part B for IDS
California, Massachusetts, Michigan, Minnesota, New York and
Ohio Tax-Exempt Funds:
o Independent Auditors' Report dated Aug. 4, 1995
o Statement of Assets and Liabilities, June 30, 1995
o Statement of Operations, Year ended June 30, 1995
o Statement of Changes in Net Assets, for the two-year
period ended June 30, 1994 and June 30, 1995
o Notes to Financial Statements
o Investments in Securities, June 30, 1995
o Notes to Investments in Securities
Financial statements filed electronically as part of this
post-effective amendment and included in Part B for IDS
Insured Tax-Exempt Fund:
o Independent Auditors' Report dated Aug. 4, 1995
o Statement of Assets and Liabilities, June 30, 1995
o Statement of Operations, Year ended June 30, 1995
o Statement of Changes in Net Assets, for the two-year
period ended June 30, 1994 and June 30, 1995
o Notes to Financial Statements
o Investments in Securities, June 30, 1995
o Notes to Investments in Securities
(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. Form of Investment Management Services Agreement between
Registrant and American Express Financial Corporation, dated
March 20, 1995, filed electronically as Exhibit 5 to
Registrant's Post-Effective Amendment No. 24 to Registration
Statement No. 33-5102 is incorporated herein by reference.<PAGE>
PAGE 258
6. Form of Distribution Agreement between Registrant and American
Express Financial Advisors Inc., dated March 20, 1995, filed
electronically as Exhibit 6 to Registrant's Post-Effective
Amendment No. 24 to Registration Statement No. 33-5102 is
incorporated herein by reference.
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. Form of Custodian Agreement between Registrant and American
Express Trust Company, dated March 20, 1995, filed
electronically as Exhibit 8 to Registrant's Post-Effective
Amendment No. 24 to Registration Statement No. 33-5102 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). Form of Transfer Agency Agreement between Registrant and
American Express Financial Corporation, dated March 20,
1995, filed electronically as Exhibit 9(b) to
Registrant's Post-Effective Amendment No. 24 to
Registration Statement No. 33-5102 is incorporated herein
by reference.
9(c). Form of Shareholder Service Agreement between Registrant
and American Express Financial Advisors Inc., dated March
20, 1995, filed electronically as Exhibit 9(c) to
Registrant's Post-Effective Amendment No. 24 to
Registration Statement No. 33-5102 is incorporated herein
by reference.
9(d). Form of Administrative Services Agreement between
Registrant and American Express Financial Corporation,
dated March 20, 1995, filed electronically to
Registrant's Post-Effective Amendment No. 24 to
Registration Statement No. 33-5102 is incorporated herein
by reference.
10. Opinion and consent of counsel as to the legality of the
securities being registered is filed with Registrant's most
recent 24f-2 Notice.
11. Independent Auditors' Consent filed electronically herewith.
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.<PAGE>
PAGE 259
15. Form of Plan and Agreement of Distribution between Registrant
and American Express Financial Advisors Inc., dated March 20,
1995, filed electronically as Exhibit 15 to Registrant's Post-
Effective Amendment No. 24 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. Financial Data Schedule filed electronically herewith.
18. Copy of plan pursuant to Rule 18f-3 under the 1940 Act filed
electronically as Exhibit 18 to Registrant's Post-Effective
Amendment No. 25 to Registration Statement No. 33-5102 is
incorporated herein by reference.
19(a). Trustees' Power of Attorney to sign Amendments to this
Registration Statement dated November 10, 1994, filed
electronically as Exhibit 18(a) to Registrant's Post-
Effective Amendment No. 23, is incorporated herein by
reference.
19(b). 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.
Item 25. Persons Controlled by or Under Common Control with
Registrant
<PAGE>
PAGE 260
Item 26. Number of Holders of Securities
(1) (2)
Number of Record
Holders as of
Title of Class Aug. 15, 1995
IDS Insured Tax-Exempt Fund 16,950
Shares of Beneficial
Interest
$.01 par value
IDS Massachusetts Tax-Exempt Fund 3,016
Shares of Beneficial
Interest
$.01 par value
IDS Michigan Tax-Exempt Fund 2,771
Shares of Beneficial
Interest
$.01 par value
IDS Minnesota Tax-Exempt Fund 15,398
Shares of Beneficial
Interest
$.01 par value
IDS New York Tax-Exempt Fund 4,737
Shares of Beneficial
Interest
$.01 par value
IDS Ohio Tax-Exempt Fund 2,739
Share of Beneficial
Interest
$.01 par value
<PAGE>
PAGE 261
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 262
<PAGE>
PAGE 1
<TABLE><CAPTION>
Item 28. Business and Other Connections of Investment Adviser (American Express Financial
Corporation)
Directors and officers of American Express Financial Corporation who are directors and/or
officers of one or more other companies:
<S> <C> <C>
Ronald G. Abrahamson, Vice President--Service Quality and Reengineering
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 Service Quality
and Reengineering
American Express Service Corporation Vice President
Douglas A. Alger, Vice President--Total Compensation
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 Total Compensation
Jerome R. Amundson, Vice President--Investment Accounting
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 Investment Accounting
Peter J. Anderson, Director and Senior Vice President--Investments
American Express Financial Advisors IDS Tower 10 Senior Vice President-
Minneapolis, MN 55440 Investments
IDS Advisory Group Inc. Director and Chairman
of the Board
IDS Capital Holdings Inc. Director and President
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, American Express Institutional Services
American Express Financial Advisors IDS Tower 10 Vice President-Sales and
Minneapolis, MN 55440 Marketing, American
Express Institutional
Services
<PAGE>
PAGE 2
Item 28. Business and Other Connections of Investment Adviser (American Express Financial
Corporation)(cont'd)
Joseph M. Barsky III, Vice President--Senior Portfolio Manager
American Express Financial Advisors IDS Tower 10 Vice President-Senior
Minneapolis, MN 55440 Portfolio Manager
IDS Advisory Group Inc. Vice President
Robert C. Basten, Vice President--Tax and Business Services
American Express Financial Advisors IDS Tower 10 Vice President-Tax
Minneapolis, MN 55440 and Business Services
American Express Tax & Business Director, President and
Services Inc. Chief Executive Officer
Timothy V. Bechtold, Vice President--Risk Management Products
American Express Financial Advisors IDS Tower 10 Vice President-Risk
Minneapolis, MN 55440 Management Products
IDS Life Insurance Company Vice President-Risk
Management Products
Carl E. Beihl, Vice President--Strategic Technology Planning
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 Strategic Technology
Planning
Alan F. Bignall, Vice President--Financial Planning Systems
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 Financial Planning
Systems
American Express Service Corporation Vice President
John C. Boeder, Vice President--Mature Market Group
American Express Financial Advisors 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 and Senior Vice President--Corporate Affairs and General Counsel
American Express Financial Advisors IDS Tower 10 Senior Vice President-
Minneapolis, MN 55440 Corporate Affairs and
Special Counsel
American Express Minnesota Foundation Director
IDS Aircraft Services Corporation Director and President
<PAGE>
PAGE 3
Item 28. Business and Other Connections of Investment Adviser (American Express Financial
Corporation)(cont'd)
Harold E. Burke, Vice President and Assistant General Counsel
American Express Financial Advisors IDS Tower 10 Vice President and
Minneapolis, MN 55440 Assistant General Counsel
American Express Service Corporation Vice President
Daniel J. Candura, Vice President--Marketing Support
American Express Financial Advisors IDS Tower 10 Vice President-Marketing
Minneapolis, MN 55440 Support
Cynthia M. Carlson, Vice President--American Express Securities Services
American Enterprise Investment IDS Tower 10 Director, President and
Services Inc. Minneapolis, MN 55440 Chief Executive Officer
American Express Financial Advisors Vice President-American
Express Securities Services
Orison Y. Chaffee III, Vice President--Field Real Estate
American Express Financial Advisors IDS Tower 10 Vice President-Field
Minneapolis, MN 55440 Real Estate
James E. Choat, Director and Senior Vice President--Field Management
American Express Financial Advisors IDS Tower 10 Senior Vice President-
Minneapolis, MN 55440 Field Management
American Express Minnesota Foundation Director
American Express Service Corporation Vice President
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
<PAGE>
PAGE 4
Item 28. Business and Other Connections of Investment Adviser (American Express Financial
Corporation)(cont'd)
Kenneth J. Ciak, Vice President and General Manager--IDS Property Casualty
American Express Financial Advisors 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
Alan R. Dakay, Vice President--Institutional Products Group
American Enterprise Life Insurance Co. IDS Tower 10 Director and President
Minneapolis, MN 55440
American Express Financial Advisors Vice President -
Institutional Products
Group
American Partners Life Insurance Co. Director and President
IDS Life Insurance Company Vice President -
Institutional Insurance
Marketing
Regenia David, Vice President--Systems Services
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 Systems Services
William H. Dudley, Director and Executive Vice President--Investment Operations
American Express Financial Advisors IDS Tower 10 Director and Executive
Minneapolis, MN 55440 Vice President-
Investment Operations
IDS Advisory Group Inc. Director
IDS Capital Holdings Inc. Director
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, Senior Vice President and Technology Advisor
American Express Financial Advisors IDS Tower 10 Senior Vice President and
Minneapolis, MN 55440 Technology Advisor
<PAGE>
PAGE 5
Item 28. Business and Other Connections of Investment Adviser (American Express Financial
Corporation)(cont'd)
Gordon L. Eid, Director, Senior Vice President and Deputy General Counsel
American Express Financial Advisors IDS Tower 10 Senior Vice President and
Minneapolis, MN 55440 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
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 Government Relations
IDS Life Insurance Company Vice President
Mark A. Ernst, Vice President--Retail Services
American Enterprise Investment IDS Tower 10 Director
Services Inc. Minneapolis, MN 55440
American Express Financial Advisors Vice President-
Retail Services
American Express Tax & Business Director and Chairman of
Services Inc. the Board
Gordon M. Fines, Vice President--Mutual Fund Equity Investments
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 Mutual Fund Equity
Investments
IDS Advisory Group Inc. Executive Vice President
IDS International, Inc. Vice President and
Portfolio Manager
<PAGE>
PAGE 6
Item 28. Business and Other Connections of Investment Adviser (American Express Financial
Corporation)(cont'd)
Louis C. Fornetti, Director, Senior Vice President and Chief Financial Officer
American Enterprise Investment IDS Tower 10 Vice President
Services Inc. Minneapolis, MN 55440
American Express Financial Advisors Senior Vice President and
Chief Financial Officer
American Express Tax & Business Director
Services Inc.
American Express Trust Company Director
IDS Cable Corporation Director
IDS Cable II Corporation Director
IDS Capital Holdings Inc. Senior Vice President
IDS Certificate Company Vice President
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
Investors Syndicate Development Corp. Vice President
Robert G. Gilbert, Vice President--Real Estate
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 Real Estate
John J. Golden, Vice President--Field Compensation Development
American Express Financial Advisors 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
<PAGE>
PAGE 7
Item 28. Business and Other Connections of Investment Adviser (American Express Financial
Corporation)(cont'd)
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 Vice President and
Company Treasurer
American Express Financial Advisors Vice President and
Corporate Treasurer
American Express Minnesota Foundation Director, Vice President
and Treasurer
American Express Service Corporation Vice President and
Treasurer
American Express Tax & Business Vice President and
Services Inc. Treasurer
IDS Advisory Group Inc. Vice President and
Treasurer
IDS Aircraft Services Corporation Vice President and
Treasurer
IDS Cable Corporation Director, Vice President
and Treasurer
IDS Cable II Corporation Director, 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 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
<PAGE>
PAGE 8
Item 28. Business and Other Connections of Investment Adviser (American Express Financial
Corporation)(cont'd)
IDS Life Variable Annuity Funds A&B Vice President and
Treasurer
IDS Management Corporation Director, Vice President
and Treasurer
IDS Partnership Services Corporation Director, 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 Director, 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
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 Systems Services
David A. Hammer, Vice President and Marketing Controller
American Express Financial Advisors IDS Tower 10 Vice President and
Minneapolis, MN 55440 Marketing Controller
IDS Plan Services of California, Inc. Director and Vice President
Lorraine R. Hart, Vice President--Insurance Investments
American Enterprise Life IDS Tower 10 Vice President-Investments
Insurance Company Minneapolis, MN 55440
American Express Financial Advisors Vice President-Insurance
Investments
American Partners Life Insurance Co. Director and Vice
President-Investments
IDS Certificate Company Vice President-Investments
IDS Life Insurance Company Vice President-Investments
IDS Life Series Fund, Inc. Vice President-Investments
IDS Life Variable Annuity Funds A and B Vice President-Investments
IDS Property Casualty Insurance Company Vice President-Investment
Officer
Investors Syndicate Development Corp. Vice President-Investments
<PAGE>
PAGE 9
Item 28. Business and Other Connections of Investment Adviser (American Express Financial
Corporation)(cont'd)
Scott A. Hawkinson, Vice President--Assured Assets Product Development and Management
American Express Financial Advisors IDS Tower 10 Vice President-Assured
Minneapolis, MN 55440 Assets Product
Development & Management
Raymond E. Hirsch, Vice President--Senior Portfolio Manager
American Express Financial Advisors IDS Tower 10 Vice President-Senior
Minneapolis, MN 55440 Portfolio Manager
James G. Hirsh, Vice President and Assistant General Counsel
American Express Financial Advisors IDS Tower 10 Vice President and
Minneapolis, MN 55440 Assistant General Counsel
IDS Securities Corporation Director, Vice President
and General Counsel
Darryl G. Horsman, Vice President--Product Development and Technology, American Express
Institutional Services
American Express Trust Company IDS Tower 10 Director and President
Minneapolis, MN 55440
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 Financial Advisors Vice President-
Government and
Customer Relations
American Express Service Corporation Vice President
IDS Securities Corporation Vice President and Chief
Compliance Officer
David R. Hubers, Director, President and Chief Executive Officer
American Express Financial Advisors IDS Tower 10 Chairman, Chief Executive
Minneapolis, MN 55440 Officer and President
American Express Service Corporation Director and President
IDS Aircraft Services Corporation Director
IDS Certificate Company Director
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
American Express Financial Advisors IDS Tower 10 Senior Vice President-
Minneapolis, MN 55440 Field Management
<PAGE>
PAGE 10
Item 28. Business and Other Connections of Investment Adviser (American Express Financial
Corporation)(cont'd)
Douglas R. Jordal, Vice President--Taxes
American Express Financial Advisors IDS Tower 10 Vice President-Taxes
Minneapolis, MN 55440
IDS Aircraft Services Corporation Vice President
James E. Kaarre, Vice President--Marketing Information
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 Marketing Information
Linda B. Keene, Vice President--Market Development
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 Market Development
G. Michael Kennedy, Vice President--Investment Services and Investment Research
American Express Financial Advisors 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 Financial Advisors IDS Tower 10 Senior Vice President-
Minneapolis, MN 55440 Human Resources
American Express Minnesota Foundation Director
American Express Service Corporation Vice President
<PAGE>
PAGE 11
Item 28. Business and Other Connections of Investment Adviser (American Express 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 Express Financial Advisors Senior Vice President-
Risk Management Products
American Partners Life Insurance Co. Director and Chairman of
the Board
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 and B Chairman of the Board of
Managers 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
Paul F. Kolkman, Vice President--Actuarial Finance
American Express Financial Advisors 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
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 Service Quality
Steven C. Kumagai, Director and Senior Vice President--Field Management and Business Systems
American Express Financial Advisors IDS Tower 10 Director and Senior Vice
Minneapolis, MN 55440 President-Field
Management and Business
Systems
American Express Service Corporation Vice President
<PAGE>
PAGE 12
Item 28. Business and Other Connections of Investment Adviser (American Express Financial
Corporation)(cont'd)
Edward Labenski, Vice President--Senior Portfolio Manager
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 Senior Portfolio
Manager
IDS Advisory Group Inc. Senior Vice President
Kurt A. Larson, Vice President--Senior Portfolio Manager
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 Senior Portfolio Manager
Lori J. Larson, Vice President--Variable Assets Product Development
American Express Financial Advisors IDS Tower 10 Vice President-Variable
Minneapolis, MN 55440 Assets Product
Development
IDS Cable Corporation Director and Vice President
IDS Cable II Corporation Director and Vice President
IDS Futures Brokerage Group Assistant Vice President-
General Manager/Director
IDS Futures Corporation Director and Vice President
IDS Futures III Corporation Director and Vice President
IDS Management Corporation Director and Vice President
IDS Partnership Services Corporation Director and Vice President
IDS Realty Corporation Director and Vice President
Ryan R. Larson, Vice President--IPG Product Development
American Express Financial Advisors 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
American Express Financial Advisors IDS Tower 10 Vice President and
Minneapolis, MN 55440 Chief U.S. Economist
Richard J. Lazarchic, Vice President--Senior Portfolio Manager
American Express Financial Advisors IDS Tower 10 Vice President-Senior
Minneapolis, MN 55440 Portfolio Manager
<PAGE>
PAGE 13
Item 28. Business and Other Connections of Investment Adviser (American Express Financial
Corporation)(cont'd)
Peter A. Lefferts, Director and Senior Vice President--Corporate Strategy and Development
American Express Financial Advisors IDS Tower 10 Senior Vice President-
Minneapolis, MN 55440 Corporate Strategy and
Development
American Express Service Corporation Director
American Express Trust Company Director
IDS Life Insurance Company Director and Executive
Vice President-Marketing
IDS Plan Services of California, Inc. Director
Investors Syndicate Development Corp. Director
Douglas A. Lennick, Director and Executive Vice President--Private Client Group
American Express Financial Advisors IDS Tower 10 Director and Executive
Minneapolis, MN 55440 Vice President-Private
Client Group
American Express Service Corporation Vice President
Mary J. Malevich, Vice President--Senior Portfolio Manager
American Express Financial Advisors 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
American Express Financial Advisors IDS Tower 10 Vice President-Field
Minneapolis, MN 55440 Marketing Readiness
William J. McKinney, Vice President--Field Management Support
American Express Financial Advisors IDS Tower 10 Vice President-Field
Minneapolis, MN 55440 Management Support
Thomas W. Medcalf, Vice President--Senior Portfolio Manager
American Express Financial Advisors IDS Tower 10 Vice President-Senior
Minneapolis, MN 55440 Portfolio Manager
William C. Melton, Vice President-International Research and Chief International Economist
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 International Research
and Chief International
Economist
<PAGE>
PAGE 14
Item 28. Business and Other Connections of Investment Adviser (American Express Financial
Corporation)(cont'd)
Janis E. Miller, Vice President--Variable Assets
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 Variable Assets
IDS Cable Corporation Director and President
IDS Cable II Corporation Director and President
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 Series Fund, Inc. Director
IDS Life Variable Annuity Funds A&B 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
American Express Financial Advisors Executive Vice President-
Marketing and Products
American Express Tax and Business Director
Services Inc.
IDS Certificate Company Director and Chairman of
the Board
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 Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 Corporate Communications
American Express Minnesota Foundation Director and President
Barry J. Murphy, Director and Senior Vice President--Client Service
American Express Financial Advisors IDS Tower 10 Senior Vice President-
Minneapolis, MN 55440 Client Service
IDS Life Insurance Company Director and Executive
Vice President-Client
Service
<PAGE>
PAGE 15
Item 28. Business and Other Connections of Investment Adviser (American Express Financial
Corporation)(cont'd)
Robert J. Neis, Vice President--Information Systems Operations
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 Information Systems
Operations
James R. Palmer, Vice President--Insurance Operations
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 Insurance Operations
IDS Life Insurance Company Vice President-Taxes
Carla P. Pavone, Vice President--Specialty Service Teams and Emerging Business
American Express Financial Advisors IDS Tower 10 Vice President-Specialty
Minneapolis, MN 55440 Service Teams and
Emerging Business
George M. Perry, Vice President--Corporate Strategy and Development
American Express Financial Advisors 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
American Express Financial Advisors IDS Tower 10 Vice President--
Minneapolis, MN 55440 Segmentation Development
and Support
Ronald W. Powell, Vice President and Assistant General Counsel
American Express Financial Advisors IDS Tower 10 Vice President and
Minneapolis, MN 55440 Assistant General Counsel
IDS Cable Corporation Vice President and
Assistant Secretary
IDS Cable II Corporation Vice President and
Assistant Secretary
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
<PAGE>
PAGE 16
Item 28. Business and Other Connections of Investment Adviser (American Express Financial
Corporation)(cont'd)
James M. Punch, Vice President--TransAction Services
American Express Financial Advisors IDS Tower 10 Vice President-Trans
Minneapolis, MN 55440 Action Services
Frederick C. Quirsfeld, Vice President--Taxable Mutual Fund Investments
American Express Financial Advisors IDS Tower 10 Vice President--
Minneapolis, MN 55440 Taxable Mutual Fund
Investments
IDS Advisory Group Inc. Vice President
ReBecca K. Roloff, Vice President--1994 Program Director
American Express Financial Advisors IDS Tower 10 Vice President-1994
Minneapolis, MN 55440 Program Director
Stephen W. Roszell, Vice President--Advisory Institutional Marketing
American Express Financial Advisors IDS Tower 10 Vice President-Advisory
Minneapolis, MN 55440 Institutional Marketing
IDS Advisory Group Inc. President and Chief
Executive Officer
Robert A. Rudell, Vice President--American Express Institutional Services
American Express Financial Advisors IDS Tower 10 Vice President-American
Minneapolis, MN 55440 Express Institutional
Services
American Express Trust Company Director and Chairman of
the Board
IDS Sales Support Inc. Director and President
John P. Ryan, Vice President and General Auditor
American Express Financial Advisors IDS Tower 10 Vice President and General
Minneapolis, MN 55440 Auditor
<PAGE>
PAGE 17
Item 28. Business and Other Connections of Investment Adviser (American Express Financial
Corporation)(cont'd)
Erven A. Samsel, Director and Senior Vice President--Field Management
American Express Financial Advisors IDS Tower 10 Senior Vice President-
Minneapolis, MN 55440 Field Management
American Express Service Corporation Vice President
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
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
American Express Financial Advisors Vice President-
Assured Assets
IDS Certificate Company Director and President
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
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 Property Casualty
IDS Property Casualty Insurance Co. Senior Vice President
<PAGE>
PAGE 18
Item 28. Business and Other Connections of Investment Adviser (American Express Financial
Corporation)(cont'd)
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 Express Financial Advisors Vice President-Senior
Portfolio Manager,
Insurance Investments
American Partners Life Insurance Co. Vice President-Real
Estate Loan Management
IDS Certificate Company Vice President-Real
Estate Loan Management
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
American Express Financial Advisors IDS Tower 10 Vice President-Human
Minneapolis, MN 55440 Resources and
Organization Development
Ben C. Smith, Vice President--Workplace Marketing
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 Workplace Marketing
William A. Smith, Vice President and Controller--Private Client Group
American Express Financial Advisors IDS Tower 10 Vice President and
Minneapolis, MN 55440 Controller-Private
Client Group
Bridget Sperl, Vice President--Human Resources Management Services
American Express Financial Advisors 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 19
Item 28. Business and Other Connections of Investment Adviser (American Express Financial
Corporation)(cont'd)
William A. Stoltzmann, Vice President and Assistant General Counsel
American Express Financial Advisors IDS Tower 10 Vice President and
Minneapolis, MN 55440 Assistant General Counsel
American Partners Life Insurance Co. Director, Vice President,
General Counsel and
Secretary
IDS Life Insurance Company Vice President, General
Counsel and 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
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 Corporate Planning and
Analysis
Jeffrey J. Stremcha, Vice President--Information Resource Management/ISD
American Express Financial Advisors 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
<PAGE>
PAGE 20
Item 28. Business and Other Connections of Investment Adviser (American Express Financial
Corporation)(cont'd)
John R. Thomas, Director and Senior Vice President--Information and Technology
American Express Financial Advisors IDS Tower 10 Senior Vice President-
Minneapolis, MN 55440 Information and
Technology
IDS Bond Fund, Inc. Director
IDS California Tax-Exempt Trust Trustee
IDS Discovery Fund, Inc. Director
IDS Equity Select Fund, Inc. Director
IDS Extra Income Fund, Inc. Director
IDS Federal Income Fund, Inc. Director
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 Express Financial Advisors Vice President and
Corporate Controller
American Partners Life Insurance Co. Director, Vice President,
Controller and Treasurer
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
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 Senior Portfolio Manager
IDS Advisory Group Inc. Executive Vice President
IDS Fund Management Limited Director and Vice Chairman
IDS International, Inc. Senior Vice President
<PAGE>
PAGE 21
Item 28. Business and Other Connections of Investment Adviser (American Express Financial
Corporation)(cont'd)
Michael L. Weiner, Vice President--Corporate Tax Operations
American Express Financial Advisors IDS Tower 10 Vice President-Corporate
Minneapolis, MN 55440 Tax Operations
IDS Capital Holdings Inc. Vice President
IDS Futures Brokerage Group Vice President
IDS Futures Corporation Vice President, Treasurer
and Secretary
IDS Futures III Corporation Vice President, Treasurer
and Secretary
Lawrence J. Welte, Vice President--Investment Administration
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 Investment Administration
IDS Securities Corporation Director, Executive Vice
President and Chief
Operating Officer
Jeffry F. Welter, Vice President--Equity and Fixed Income Trading
American Express Financial Advisors IDS Tower 10 Vice President-Equity
Minneapolis, MN 55440 and Fixed Income Trading
William N. Westhoff, Director, Senior Vice President and Global Chief Investment Officer
American Enterprise Life Insurance IDS Tower 10 Director
Company Minneapolis, MN 55440
American Express Financial Advisors Senior Vice President and
Global Chief Investment
Officer
IDS Fund Management Limited Director
IDS International, Inc. Director
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 22
Item 28. Business and Other Connections of Investment Adviser (American Express Financial
Corporation)(cont'd)
Edwin M. Wistrand, Vice President and Assistant General Counsel
American Express Financial Advisors IDS Tower 10 Vice President and
Minneapolis, MN 55440 Assistant General Counsel
Michael R. Woodward, Director and Senior Vice President--Field Management
American Express Financial Advisors IDS Tower 10 Senior Vice President-
Minneapolis, MN 55440 Field Management
American Express Service Corporation Vice President
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 23
Item 29. Principal Underwriters.
(a) American Express Financial Advisors acts as principal
underwriter for the following investment companies:
IDS Bond Fund, Inc.; IDS California Tax-Exempt Trust; IDS
Discovery Fund, Inc.; IDS Equity Select 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 Service Quality and
Minneapolis, MN 55440 Reengineering
Douglas A. Alger Vice President-Total None
IDS Tower 10 Compensation
Minneapolis, MN 55440
Peter J. Anderson Senior Vice President- Vice
IDS Tower 10 Investments President
Minneapolis, MN 55440
Ward D. Armstrong Vice President- None
IDS Tower 10 Sales and Marketing,
Minneapolis, MN 55440 American Express
Institutional Services
Alvan D. Arthur Group Vice President- None
IDS Tower 10 Central California/
Minneapolis, MN 55440 Western Nevada
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
<PAGE>
PAGE 24
Item 29(b). As to each director, officer or partner of the
principal underwriter (American Express Financial Advisors):
(cont'd)
Positions and
Name and Principal Position and Offices Offices with
Business Address with Underwriter Registrant
Timothy V. Bechtold Vice President-Risk None
IDS Tower 10 Management Products
Minneapolis, MN 55440
John D. Begley Group Vice President- None
Suite 100 Ohio/Indiana
7760 Olentangy River Rd.
Columbus, OH 43235
Carl E. Beihl Vice President- None
IDS Tower 10 Strategic Technology
Minneapolis, MN 55440 Planning
Jack A. Benjamin Group Vice President- None
Suite 200 Greater Pennsylvania
3500 Market Street
Camp Hill, PA 17011
Alan F. Bignall Vice President- None
IDS Tower 10 Financial Planning
Minneapolis, MN 55440 Systems
Brent L. Bisson Group Vice President- None
Ste 900 e Westside Tower Los Angeles Metro
11835 West Olympic Blvd.
Los Angeles, CA 90064
John C. Boeder Vice President- None
IDS Tower 10 Mature Market Group
Minneapolis, MN 55440
Bruce J. Bordelon Group Vice President- None
Galleria One Suite 1900 Gulf States
Galleria Blvd.
Metairie, LA 70001
Charles R. Branch Group Vice President- None
Suite 200 Northwest
West 111 North River Dr
Spokane, WA 99201
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
<PAGE>
PAGE 25
Item 29(b). As to each director, officer or partner of the
principal underwriter (American Express Financial Advisors):
(cont'd)
Positions and
Name and Principal Position and Offices Offices with
Business Address with Underwriter Registrant
Daniel J. Candura Vice President- None
IDS Tower 10 Marketing Support
Minneapolis, MN 55440
Cynthia M. Carlson Vice President- None
IDS Tower 10 American Express
Minneapolis, MN 55440 Securities Services
Orison Y. Chaffee III Vice President-Field None
IDS Tower 10 Real Estate
Minneapolis, MN 55440
James E. Choat Senior Vice President- None
IDS Tower 10 Field Management
Minneapolis, MN 55440
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 Group Vice President- None
290 Woodcliff Drive Upstate New York
Fairport, NY 14450
Henry J. Cormier Group Vice President- None
Commerce Center One Connecticut
333 East River Drive
East Hartford, CT 06108
John M. Crawford Group Vice President- None
Suite 200 Arkansas/Springfield/Memphis
10800 Financial Ctr Pkwy
Little Rock, AR 72211
Kevin F. Crowe Group Vice President- None
Suite 312 Carolinas/Eastern Georgia
7300 Carmel Executive Pk
Charlotte, NC 28226
Alan R. Dakay Vice President- None
IDS Tower 10 Institutional Products
Minneapolis, MN 55440 Group
Regenia David Vice President- None
IDS Tower 10 Systems Services
Minneapolis, MN 55440
<PAGE>
PAGE 26
Item 29(b). As to each director, officer or partner of the
principal underwriter (American Express Financial Advisors):
(cont'd)
Positions and
Name and Principal Position and Offices Offices with
Business Address with Underwriter Registrant
Scott M. Digiammarino Group Vice President- None
Suite 500 Washington/Baltimore
8045 Leesburg Pike
Vienna, VA 22182
Bradford L. Drew Group Vice President- None
Two Datran Center Eastern Florida
Penthouse One B
9130 S. Dadeland Blvd.
Miami, FL 33156
William H. Dudley Director and Executive Director
IDS Tower 10 Vice President-
Minneapolis MN 55440 Investment Operations
Roger S. Edgar Senior Vice President None
IDS Tower 10 and Technology Advisor
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
Joseph Evanovich Jr. Group Vice President- None
One Old Mill Nebraska/Iowa/Dakotas
101 South 108th Avenue
Omaha, NE 68154
Louise P. Evenson Group Vice President- None
Suite 200 San Francisco Bay Area
1333 N. California Blvd.
Walnut Creek, CA 94596
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 27
Item 29(b). As to each director, officer or partner of the
principal underwriter (American Express Financial Advisors):
(cont'd)
Positions and
Name and Principal Position and Offices Offices with
Business Address with Underwriter Registrant
Douglas L. Forsberg Group Vice President- None
Suite 100 Portland/Eugene
7931 N. E. Halsey
Portland, OR 97213
William P. Fritz Group Vice President- None
Suite 160 Northern Missouri
12855 Flushing Meadows Dr
St. Louis, MO 63131
Carl W. Gans Group Vice President- None
8500 Tower Suite 1770 Twin City Metro
8500 Normandale Lake Blvd.
Bloomington, MN 55437
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
Bruce M. Guarino Group Vice President- None
Suite 1736 Hawaii
1585 Kapiolani Blvd.
Honolulu, HI 96814
David A. Hammer Vice President None
IDS Tower 10 and Marketing
Minneapolis, MN 55440 Controller
Teresa A. Hanratty Group Vice President- None
Suites 6&7 Northern New England
169 South River Road
Bedford, NH 03110
John R. Hantz Group Vice President- None
Suite 107 Detroit Metro
17177 N. Laurel Park
Livonia, MI 48154
<PAGE>
PAGE 28
Item 29(b). As to each director, officer or partner of the
principal underwriter (American Express Financial Advisors):
(cont'd)
Positions and
Name and Principal Position and Offices Offices with
Business Address with Underwriter Registrant
Robert L. Harden Group Vice President- None
Two Constitution Plaza Boston Metro
Boston, MA 02129
Lorraine R. Hart Vice President- None
IDS Tower 10 Insurance Investments
Minneapolis, MN 55440
Scott A. Hawkinson Vice President-Assured None
IDS Tower 10 Assets Product Development
Minneapolis, MN 55440 and Management
Brian M. Heath Group Vice President- None
Suite 250 North Texas
801 E. Campbell Road
Richardson, TX 75081
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
David J. Hockenberry Group Vice President- None
30 Burton Hills Blvd. Eastern Tennessee
Suite 175
Nashville, TN 37215
Kevin P. Howe Vice President- None
IDS Tower 10 Government and
Minneapolis, MN 55440 Customer Relations
David R. Hubers Chairman, Chief Director
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
James E. Kaarre Vice President- None
IDS Tower 10 Marketing Information
Minneapolis, MN 55440
<PAGE>
PAGE 29
Item 29(b). As to each director, officer or partner of the
principal underwriter (American Express Financial Advisors):
(cont'd)
Positions and
Name and Principal Position and Offices Offices with
Business Address with Underwriter Registrant
Linda B. Keene Vice President- None
IDS Tower 10 Market Development
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
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 Group Vice President- None
Ste 108 Trestle Bridge V Greater Michigan
5136 Lovers Lane
Kalamazoo, MI 49002
Steven C. Kumagai Director and Senior None
IDS Tower 10 Vice President-Field
Minneapolis, MN 55440 Management and Business
Systems
Mitre Kutanovski Group Vice President- None
Suite 680 Chicago Metro
8585 Broadway
Merrillville, IN 48410
Edward Labenski Vice President- None
IDS Tower 10 Senior Portfolio
Minneapolis, MN 55440 Manager
Kurt A. Larson Vice President- None
IDS Tower 10 Senior Portfolio
Minneapolis, MN 55440 Manager
Lori J. Larson Vice President- None
IDS Tower 10 Variable Assets Product
Minneapolis, MN 55440 Development
<PAGE>
PAGE 30
Item 29(b). As to each director, officer or partner of the
principal underwriter (American Express Financial Advisors):
(cont'd)
Positions and
Name and Principal Position and Offices Offices with
Business Address with Underwriter Registrant
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
Richard J. Lazarchic Vice President- None
IDS Tower 10 Senior Portfolio
MInneapolis, MN 55440 Manager
Peter A. Lefferts Senior Vice President- None
IDS Tower 10 Corporate Strategy and
Minneapolis, MN 55440 Development
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
Daniel E. Martin Group Vice President- None
Suite 650 Pittsburgh Metro
5700 Corporate Drive
Pittsburgh, PA 15237
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
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
<PAGE>
PAGE 31
Item 29(b). As to each director, officer or partner of the
principal underwriter (American Express Financial Advisors):
(cont'd)
Positions and
Name and Principal Position and Offices Offices with
Business Address with Underwriter Registrant
James A. Mitchell Executive Vice President- None
IDS Tower 10 Marketing and Products
Minneapolis, MN 55440
John P. Moraites Group Vice President- None
Union Plaza Suite 900 Kansas/Oklahoma
3030 Northwest Expressway
Oklahoma City, OK 73112
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
Ronald E. Newton Group Vice President- None
319 Southbridge St. Rhode Island/Central
Auburn, MA 01501 Massachusetts
Thomas V. Nicolosi Group Vice President- None
Suite 220 New York Metro Area
500 Mamaronick Avenue
Harrison, NY 10528
James R. Palmer Vice President- None
IDS Tower 10 Taxes
Minneapolis, MN 55440
Carla P. Pavone Vice President- None
IDS Tower 10 Specialty Service Teams
Minneapolis, MN 55440 and Emerging Business
Susan B. Plimpton Vice President- None
IDS Tower 10 Segmentation Development
Minneapolis, MN 55440 and Support
Larry M. Post Group Vice President- None
One Tower Bridge Philadelphia Metro
100 Front Street 8th Fl
West Conshohocken, PA 19428
<PAGE>
PAGE 32
Item 29(b). As to each director, officer or partner of the
principal underwriter (American Express Financial Advisors):
(cont'd)
Positions and
Name and Principal Position and Offices Offices with
Business Address with Underwriter Registrant
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 Geographical Service
Minneapolis, MN 55440 Teams
Frederick C. Quirsfeld Vice President-Taxable None
IDS Tower 10 Mutual Fund Investments
Minneapolis, MN 55440
R. Daniel Richardson Group Vice President- None
Suite 800 Southern Texas
Arboretum Plaza One
9442 Capital of Texas Hwy N.
Austin, TX 78759
Roger B. Rogos Group Vice President- None
One Sarasota Tower Western Florida
Suite 700
Two N. Tamiami Trail
Sarasota, FL 34236
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
Max G. Roth Group Vice President- None
Suite 201 S IDS Ctr Wisconsin/Upper Michigan
1400 Lombardi Avenue
Green Bay, WI 54304
Robert A. Rudell Vice President- None
IDS Tower 10 American Express
Minneapolis, MN 55440 Institutional Services
John P. Ryan Vice President and None
IDS Tower 10 General Auditor
Minneapolis, MN 55440
<PAGE>
PAGE 33
Item 29(b). As to each director, officer or partner of the
principal underwriter (American Express Financial Advisors):
(cont'd)
Positions and
Name and Principal Position and Offices Offices with
Business Address with Underwriter Registrant
Russell L. Scalfano Group Vice President- None
Suite 201 Exec Pk East Illinois/Indiana/Kentucky
101 Plaza East Blvd.
Evansville, IN 47715
William G. Scholz Group Vice President- None
Suite 205 Arizona/Las Vegas
7333 E Doubletree Ranch Rd
Scottsdale, AZ 85258
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 Group Vice Presidnet- None
Ste 1700 Orlando FinCtr Orlando/Jacksonville
800 North Magnolia Ave.
Orlando, FL 32803
Ben C. Smith Vice President- None
IDS Tower 10 Workplace Marketing
Minneapolis, MN 55440
William A. Smith Vice President and None
IDS Tower 10 Controller-Private
Minneapolis, MN 55440 Client Group
James B. Solberg Group Vice President- None
IDS Tower 10 Eastern Iowa Area
Minneapolis, MN 55440
Bridget Sperl Vice President- None
IDS Tower 10 Human Resources
Minneapolis, MN 55440 Management Services
<PAGE>
PAGE 34
Item 29(b). As to each director, officer or partner of the
principal underwriter (American Express Financial Advisors):
(cont'd)
Positions and
Name and Principal Position and Offices Offices with
Business Address with Underwriter Registrant
Paul J. Stanislaw Group Vice President- None
Suite 1100 Southern California
Two Park Plaza
Irvine, CA 92714
Lois A. Stilwell Group Vice President- None
Suite 433 Outstate Minnesota Area/
9900 East Brn Road North Dakota/Western Wisconsin
Minnetonka, MN 55343
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 Group Vice President- None
Suite 425 Seattle/Tacoma
101 Elliott Avenue West
Seattle, WA 98119
John R. Thomas Senior Vice President- Director
IDS Tower 10 Information and
Minneapolis, MN 55440 Technology
Melinda S. Urion Vice President and Treasurer
IDS Tower 10 Corporate Controller
Minneapolis, MN 55440
Peter S. Velardi Group Vice President- None
Suite 180 Atlanta/Birmingham
1200 Ashwood Parkway
Atlanta, GA 30338
Charles F. Wachendorfer Group Vice President- None
Suite 100 Denver/Salt Lake City/
Stanford Plaza II Albuquerque
7979 East Tufts Ave Pkwy
Denver, CO 80237
Wesley W. Wadman Vice President- None
IDS Tower 10 Senior Portfolio
Minneapolis, MN 55440 Manager
<PAGE>
PAGE 35
Item 29(b). As to each director, officer or partner of the
principal underwriter (American Express Financial Advisors):
(cont'd)
Positions and
Name and Principal Position and Offices Offices with
Business Address with Underwriter Registrant
Norman Weaver Jr. Senior Vice President- None
1010 Main St Suite 2B Field Management
Huntington Beach, CA 92648
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
Jeffry M. Welter Vice President- None
IDS Tower 10 Equity and Fixed Income
Minneapolis, MN 55440 Trading
William N. Westhoff Senior Vice President and None
IDS Tower 10 Global Chief Investment
Minneapolis, MN 55440 Officer
Thomas L. White Group Vice President- None
Suite 200 Cambridge Ct Cleveland Metro
28601 Chagrin Blvd.
Woodmere, OH 44122
Eric S. Williams Group Vice President- None
Suite 250 Virginia
3951 Westerre Parkway
Richmond, VA 23233
Edwin M. Wistrand Vice President and None
IDS Tower 10 Assistant General
Minneapolis, MN 55440 Counsel
Michael R. Woodward Senior Vice President- None
32 Ellicott St Ste 100 Field Management
Batavia, NY 14020
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.
<PAGE>
PAGE 36
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 263
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 1993, 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 28th
day of August, 1995.
IDS SPECIAL TAX-EXEMPT SERIES TRUST
By
Melinda S. Urion, Treasurer
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 28th day
of August, 1995.
Signature Capacity
/s/ William R. Pearce** President,Principal
William R. Pearce Executive Officer
and Trustee
/s/ Leslie L. Ogg** Vice President,
Leslie L. Ogg General Counsel
and Secretary
/s/Lynne V. Cheney* 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/ Heinz F. Hutter* Trustee
Heinz F. Hutter<PAGE>
PAGE 264
Signature Capacity
/s/ Anne P. Jones* Trustee
Anne P. Jones
/s/ Donald M. Kendall* Trustee
Donald M. Kendall
/s/ Melvin R. Laird* Trustee
Melvin R. Laird
/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
/s/ C. Angus Wurtele* Trustee
C. Angus Wurtele
*Signed pursuant to Trustees' Power of Attorney filed
electronically as Exhibit 18(a) to Registrant's Post-Effective
Amendment No. 23, by:
Leslie L. Ogg
**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
<PAGE>
PAGE 265
CONTENTS OF THIS
POST-EFFECTIVE AMENDMENT NO. 27
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.
Financial Statements.
PART C
Other information.
Exhibits.
The signatures.
EXHIBIT INDEX
(B)(11) Independent Auditors Consent
(B)(17) Financial Data Schedules
<PAGE>
PAGE 1
INDEPENDENT AUDITORS' CONSENT
__________________________________________________________________
The Board of Trustees and Shareholders
IDS California Tax-Exempt Trust
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 , 1995
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