<PAGE>
PAGE 1
IDS Insured Tax-Exempt Fund
1996 annual report
(prospectus enclosed)
(Icon of) star enclosed in shield
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 annual report includes a prospectus that describes in detail
the Fund's objective, investment policies, risks, sales charges,
fees and other matters of interest. Please read the prospectus
carefully before you invest or send money.)
AMERICAN
EXPRESS
Financial
Advisors
Distributed by
American Express
Financial Advisors Inc.<PAGE>
PAGE 2
(Icon of) star enclosed in shield
No-default insurance
Any investment involves risks. For a municipal bond investor,
there's the risk that the bond issuer could default on its
payments. But there are bonds that are insured against default,
and these are the ones that Insured Tax-Exempt Fund invests in.
While this doesn't mean that shareholders are insulated from
fluctuations in bond market values, it does ensure that the Fund
receives principal and interest payments when they are due. Along
the way, shareholders enjoy regular income that is generally free
from federal income tax.
<PAGE>
PAGE 3
Contents
(Icon of) One open book inside of another.
The purpose of this annual report is to tell investors how the fund
performed.
The prospectus, which is bound into the middle of this annual
report, describes the fund in detail.
1996 annual report
From the president 4
From the portfolio manager 4
Ten largest holdings 6
Making the most of your fund 7
Long-term performance 8
Independent auditors' report 9
Financial statements 10
Notes to financial statements 13
Investments in securities 23
IDS mutual funds 33
Federal income tax information 36
1996 prospectus
The fund in brief
Goal 3p
Types of fund investments and their risks 3p
Manager and distributor 3p
Portfolio manager 3p
Alternative sales arrangements 4p
Sales charge and fund expenses 5p
Performance 7p
Financial highlights 7p
Total returns 9p
Yield 11p
Investment policies 12p
Facts about investments and their risks 12p
Alternative investment option 16p
Valuing assets 17p
How to buy, exchange or sell shares 18p
Alternative sales arrangements 17p
How to purchase shares 21p
How to exchange shares 23p
How to redeem shares 23p
Reductions and waivers of the sales charge 28p
Special shareholder services 32p
Services 32p
Quick telephone reference 32p
<PAGE>
PAGE 4
Distributions and taxes 33p
Dividend and capital gain distributions 33p
Reinvestments 34p
Taxes 35p
How to determine the correct TIN 37p
How the fund is organized 38p
Shares 38p
Voting rights 38p
Shareholder meeting 38p
Board members and officers 38p
Investment manager and transfer agent 40p
Distributor 41p
About American Express Financial Corporation 42p
General information 42p
Appendices 43p
1996 federal tax information 43p
Descriptions of derivative instruments 45p
<PAGE>
PAGE 5
To our shareholders
(Photo of) William R. Pearce
President of the Fund
(Photo of) Paul B. Hylle
Portfolio manager
From the president
If you're an experienced investor, you know that 1995 and the
opening months of 1996 were an unusually strong period for the U.S.
financial markets. Perhaps just as important, you also know that
history shows that bull markets don't last forever. Though they're
often unpredictable, declines -- whether they're brief or
longlasting, moderate or substantial -- are always a possibility.
That fact reinforces the need for investors to periodically review
their long-term goals and examine whether their investment program
remains on track to achieving them. Your annual and quarterly
investment statements are one part of that monitoring process. The
other is a meeting with your American Express financial advisor.
That becomes even more important if there's a major change in your
financial situation or in the financial markets.
William R. Pearce
From the portfolio manager
It was the best of times and the worst of times for municipal bonds
during the past fiscal year. The first half of the period could
hardly have been better, and municipals recorded a substantial
gain. The second half, however, was just the opposite, as
municipals gave back much of what they had previously earned.
Nevertheless, the net result was clearly positive for shareholders
of IDS Insured Tax-Exempt Fund, as the Fund produced a 6.3% total
return (Class A shares) for the fiscal year.
As was true earlier in 1995, bonds in general continued to benefit
from two critical factors during the second half of that year:
moderate economic growth and a low rate of inflation. Later in the
year, the possibility of an agreement to eventually balance the
federal budget and willingness on the part of the Federal Reserve
to reduce short-term interest rates lent further support to the
bond market.
Rates down, bond prices up
Together, these factors resulted in falling long-term interest
rates, a trend that remained in place through the end of last year.
Because falling rates boost the value of previously issued bonds,
their prices rose, which in turn drove up the net asset value of
mutual funds such as this one.
<PAGE>
PAGE 6
This Fund was particularily well-positioned to benefit from the
favorable environment because of its emphasis on municipal bonds
with longer-than-average maturities. This strategy makes a
portfolio more sensitive to interest-rate swings. Therefore, when
rates came down, the portfolio enjoyed a performance boost.
While the overall supply/demand situation for municipal bonds
remained favorable during 1995, occasionally there were pockets of
excess supply in certain states. In such cases, bond prices came
down, which created opportunities to add securities at lower-than-
normal prices. Lastly, I kept cash reserves at a low level. This
also proved to be productive as the returns generated by the bonds
in the portfolio far exceeded the modest amount available from
cash-equivalent investments.
Rates up, bond prices down
The positive environment was not to last, though, as the dawn of
the new year brought a switch in psychology to the bond market.
The first factor to have an effect was a breakdown in the
negotiations to balance the federal budget. That negative was soon
compounded by hints of a stronger-than-expected economy, which, in
the minds of some investors, would soon fuel the fire of higher
inflation. Lastly, the Federal Reserve, which had lowered short-
term interest rates three times in the previous several months,
switched to a hands-off approach -- a sign that it, too, thought
the economy had the potential to over-heat and, consequently, take
inflation with it. Whether those worries were legitimate or not,
the bond market went into rapid retreat during February and March,
driving up long-term interest rates and dragging down the Fund's
net asset value in the process.
To provide some protection during the decline, I reduced the
average maturity of the bonds in the portfolio -- a strategy the
makes the Fund's net asset value less sensitive to interest-rate
swings. Apart from that, to shore up the Fund's dividend, I added
some higher-yielding bonds, including a small amount that are
subject to the alternative minimum tax, to the portfolio. Still,
these efforts could not prevent the Fund from losing some of the
ground it gained in previous months.
As this new fiscal year begins, the possibility of a resurgent
economy and markedly higher inflation continues to make the bond
market edgy. While this psychology may continue for a time, at
this point (mid-July) I think such concerns will ultimately prove
to be unfounded. My expectation is that the economy will revert to
more modest growth as the year progresses, which should eventually
take some upward pressure off long-term interest rates. If so, I
think the bond market and the Fund will respond positively.
Paul B. Hylle
Class A
12-month performance
(All figures per share)
Net asset value (NAV)
<PAGE>
PAGE 7
June 30, 1996 $ 5.43
June 30, 1995 $ 5.40
Increase $ 0.03
Distributions
July 1, 1995 - June 30, 1996
From income $ 0.28
From capital gains $ 0.02
Total distributions $ 0.30
Total return* +6.3%***
Class B
12-month performance
(All figures per share)
Net asset value (NAV)
June 30, 1996 $ 5.43
June 30, 1995 $ 5.40
Increase $ 0.03
Distributions
July 1, 1995 - June 30, 1996
From income $ 0.24
From capital gains $ 0.02
Total distributions $ 0.26
Total return** + 5.5%**
Class Y
12-month performance
Net asset value (NAV)
June 30, 1996 $ 5.44
March 20, 1995* $ 5.41
Decrease $ (0.03)
Distributions
July 1, 1995* - June 30, 1996
From income $ 0.29
From capital gains $ 0.02
Total distributions $ 0.31
Total return* +6.4%**
* The prospectus discusses the effects of sales charge, if any, on
the various classes.
**The total return is a hypothetical investment in the fund with
all distributions reinvested.<PAGE>
PAGE 8
<TABLE>
<CAPTION>
IDS Insured Tax-Exempt Fund
The Fund's ten largest holdings
(pie chart) The ten holdings listed here make up 20.37% of the Fund's net assets
_____________________________________________________________________________________
Percent Value
(of Fund's net assets) (as of June 30, 1996)
_____________________________________________________________________________________
<S> <C> <C>
Brazo River Texas Authority Collateralized Pollution Control
Refunding Revenue Bonds Texas Utility Electric
Series 1992C
6.70% 2022 3.08% $15,755,380
Denver Colorado City & County Airport Revenue Bonds
Series B A.M.T.
5.75% 2017 2.52 12,891,699
Pittsburgh Pennsylvania Water & Sewer Authority
Water & Sewer System Pre-Refunded Revenue Bonds
Series 1991A
6.50% 2014 2.14 10,955,400
New York State Energy Resource & Development Authority
Solid Waste Disposal Revenue Bonds New York State
Electric & Gas Series A A.M.T.
5.70% 2028 2.10 10,731,333
District of Columbia Metropolitan Washington Airports
Authority Airport System Revenue Bonds Series 1992A A.M.T.
6.625% 2019 1.93 9,891,659
Colorado River Texas Municipal Water District
Water System Pre-Refunded Revenue Bonds Series A
6.625% 2021 1.87 9,577,557
San Diego County California Certificate of Participation
Regional Authority Bonds Mt. Tower Series 1991
Inverse Floater
6.36% 2019 1.79 9,173,700
Harris County Texas Toll Road Senior Lien
Pre-Refunded Revenue Bonds Series A
6.50% 2017 1.76 9,003,340
Austin Texas Combined Utilities System
Refunding Revenue Bonds Series 1994
5.75% 2024 1.64 8,360,260
Florida State Turnpike Authority Department of Transportation
Series A
5.50% 2021 1.54 7,855,656
Note: Certain of the Fund's income may be subject to the Alternative Minimum Tax (A.M.T.).
/TABLE
<PAGE>
PAGE 9
Class A
12-month performance
(All figures per share)
Net asset value (NAV)
_______________________________
June 30, 1996 $ 5.43
_______________________________
June 30, 1995 $ 5.40
_______________________________
Increase $ 0.03
_______________________________
Distributions
July 1, 1995 - June 30, 1996
______________________________
From income $ 0.28
______________________________
From capital gains $ 0.02
______________________________
Total distributions $ 0.30
______________________________
Total return* +6.3%**
______________________________
Class B
12-month performance
(All figures per share)
Net asset value (NAV)
_______________________________
June 30, 1996 $ 5.43
_______________________________
June 30, 1995 $ 5.40
_______________________________
Increase $ 0.03
_______________________________
Distributions
July 1, 1995 - June 30, 1996
_______________________________
From income $ 0.24
_______________________________
From capital gains $ 0.02
_______________________________
Total distributions $ 0.26
_______________________________
Total return* +5.5%**
_______________________________
<PAGE>
PAGE 10
Class Y
12-month performance
(All figures per share)
Net asset value (NAV)
________________________________
June 30, 1996 $ 5.44
________________________________
June 30, 1995 $ 5.41
________________________________
Increase $ 0.03
________________________________
Distributions
July 1, 1995 - June 30, 1996
_______________________________
From income $ 0.29
_______________________________
From capital gains $ 0.02
_______________________________
Total distributions $ 0.31
_______________________________
Total return* +6.4%**
_______________________________
*The prospectus discusses the
effect of sales charges, if
any, on the various classes.
**The total return is a hypothetical
investment in the Fund with all
distributions reinvested.
<PAGE>
PAGE 11
Making the most of your fund
Average annual total return
(as of June 30, 1995)
Class A*
1 year 5 years Since inception*
+0.96% +6.26% +6.52%
Class B**
+0.46% __% +1.43%
Class Y**
+6.38% --% +5.15%
*Inception date was Aug. 18, 1986.
**Inception date was March 20, 1995.
The performance of Class A and Class Y will vary from the
performance of Class B based on differences in sales charges and
fees.
Your investment and return values fluctuate so that your shares,
when redeemed, may be worth more or less than the original cost.
Figures for Class A and Class B reflect the effect of the maximum
5% sales charge. This was a period of widely fluctuating security
prices. Past performance is no guarantee of future results.
Build your assets systematically
To keep your assets growing steadily, one of the best ways to
invest in the fund is by dollar-cost averaging -- a time-tested
strategy that can make market fluctuations work for you. To
dollar-cost average, simply invest a fixed amount of money
regularly. You'll automatically buy more shares when the Fund's
share price is low, fewer shares when it is high.
This does not ensure a profit or avoid a loss if the market
declines. But, if you can continue to invest regularly through
changing market conditions, it can be an effective way to
accumulate shares to meet your long-term goals.
How dollar-cost averaging works
Month Amount Per-share Number of shares purchased
invested market price
Jan $100 $20 5.00
Feb 100 18 5.56
Mar 100 17 5.88
Apr 100 15 6.67
May 100 16 6.25
June 100 18 5.56
July 100 17 5.88
Aug 100 19 5.26
Sept 100 21 4.76
Oct 100 20 5.00
(footnotes to table) By investing an equal number of dollars each
month...
(arrow in table pointing to April) you automatically buy more
shares when the per share market price is low<PAGE>
PAGE 12
(arrow in table pointing to September) and fewer shares when the
per share market price is high.
You have paid an average price of only $17.91 per share over the 10
months, while the average market price actually was $18.10.
Your fund's long-term performance
Three ways to benefit from a mutual fund:
o your shares increase in value when the Fund's investments do
well
o you receive capital gains when the gains on investments sold by
the Fund exceed losses
o you receive income when the Fund's stock dividends, interest and
short-term gains exceed its expenses.
All three make up your total return. And you potentially can
increase your investment if, like most investors, you reinvest your
dividends and capital gain distributions to buy additional shares
of the fund or another fund.
Class A*
How your $10,000 has grown in IDS Insured Tax-Exempt Fund
$18,611
Insured Tax-Exempt Fund
Lehman Total Return
Muni Index
$10,000
$ 9,500
'86 '87 '88 '89 '90 '91 '92 '93 '94 '95
Average annual total return
(as of June 30, 1996)
1 year 5 years Since inception
Class A* +0.96% +6.26% +6.52%
Class B** +0.46% ---% ---%
Class Y** +6.38% ---% ---%
*Inception date was Aug. 18, 1986.
**Inception date was March 20, 1995.
On the graph ayou can see how the Fund's total return compared to a
widely cited performance index, the Lehman Total Return Muni Index.
In comparing Insured Tax-Exempt Fund to this index, you should take
into account the fact that the Fund's performance reflects the
maximum sales charge of 5%, while such charges are not reflected in
the performance of the index. If you were actually to buy
individual bonds, any sales charges that you pay would reduce your
total return as well.
<PAGE>
PAGE 13
Assumes: o Holding period from 9/1/86 to 6/30/96. o Returns do not
reflect taxes payable on distributions. o Reinvestment of all
income and capital gain distributions for the Fund, with a value of
$8,323. Also see "Performance" in the Fund's current prospectus.
The Lehman Total Return Muni Index is an unmanaged list of
municipal bonds used as a general measure of market performance.
On the graph above you can see how the Fund's total return compared
to a widely cited performance index, the Lehman Total Return Muni
Index. In comparing Insured Tax-Exempt Fund to this index, you
should take into account the fact that the Fund's performance
reflects the maximum sales charge of 5%, while such charges are not
reflected in the performance of the indexes. If you were actually
to buy individual bonds, any sales charges that you pay would
reduce your total return as well.
Your investment and return values fluctuate so that your shares,
when redeemed, may be worth more or less than the original cost.
Average annual total return figures reflect the deduction of the
maximum sales charge as discussed in the prospectus. This was a
period of widely fluctuating security prices. Past performance is
no guarantee of future results.
<PAGE>
PAGE 14
Independent auditors' report
___________________________________________________________________
The board of 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, 1996, and the related statement
of operations for the year then ended, the statements of changes in
net assets for each of the years in the two-year period then ended,
and the financial highlights for each of the years in the seven-
year period ended June 30, 1996, 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, 1996, and the results of its
operations for the year then ended, the changes in its net assets
for each of the years in the two-year period then ended, 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 2, 1996
<PAGE>
PAGE 15
<TABLE>
<CAPTION>
Financial statements
Statement of assets and liabilities
IDS Insured Tax-Exempt Fund
June 30, 1996
_____________________________________________________________________________________________________________
Assets
_____________________________________________________________________________________________________________
<S> <C>
Investments in securities, at value (Note 1)
(identified cost $474,706,499) $502,689,770
Accrued interest receivable 9,243,009
Receivable for investment securities sold 4,108,889
_____________________________________________________________________________________________________________
Total assets 516,041,668
_____________________________________________________________________________________________________________
Liabilities
_____________________________________________________________________________________________________________
Disbursements in excess of cash on demand deposit 1,624,570
Dividends payable to shareholders 154,762
Payable for investment securities purchased 2,558,291
Accrued investment management services fee 6,242
Accrued distribution fee 422
Accrued service fee 6,453
Accrued transfer agency fee 681
Accrued administrative services fee 555
Other accrued expenses 67,143
_____________________________________________________________________________________________________________
Total liabilities 4,419,119
_____________________________________________________________________________________________________________
Net assets applicable to outstanding shares $511,622,549
_____________________________________________________________________________________________________________
Represented by
_____________________________________________________________________________________________________________
Shares of beneficial interest - $.01 par value, unlimited number of shares authorized $ 942,562
Additional paid-in capital 495,379,052
Undistributed net investment income 160,320
Accumulated net realized loss (Note 1) (12,842,656)
Unrealized appreciation 27,983,271
_____________________________________________________________________________________________________________
Total -- representing net assets applicable to outstanding shares $511,622,549
_____________________________________________________________________________________________________________
Net assets applicable to outstanding shares: Class A $490,827,953
Class B $ 20,793,524
Class Y $ 1,072
Net asset value per share of outstanding shares: Class A shares 90,424,927 $ 5.43
Class B shares 3,831,110 $ 5.43
Class Y shares 197 $ 5.44
See accompanying notes to financial statements. <PAGE>
PAGE 16
Financial statements
Statement of operations
IDS Insured Tax-Exempt Fund
Year ended June 30, 1996
_____________________________________________________________________________________________________________
Investment income
_____________________________________________________________________________________________________________
Income:
Interest $30,821,789
_____________________________________________________________________________________________________________
Expenses (Note 2):
Investment management services fee 2,346,243
Distribution fee -- Class B 107,002
Transfer agency fee 257,231
Incremental transfer agency fee -- Class B 634
Service fee
Class A 878,462
Class B 25,053
Administrative services fee 207,619
Compensation of board members 17,590
Compensation of officers 4,960
Custodian fees 34,121
Postage 38,372
Registration fees 78,582
Reports to shareholders 17,990
Audit fees 17,500
Administrative 3,097
Other 9,461
_____________________________________________________________________________________________________________
Total expenses 4,043,917
Earnings credits on cash balances (Note 2) (8,128)
_____________________________________________________________________________________________________________
Total net expenses 4,035,789
_____________________________________________________________________________________________________________
Investment income -- net 26,786,000
_____________________________________________________________________________________________________________
Realized and unrealized gain (loss) -- net
_____________________________________________________________________________________________________________
Net realized gain on security transactions (Note 3) 1,577,537
Net realized loss on closed interest rate futures contracts (165,792)
Net realized gain on closed option contracts written (Note 5) 58,646
_____________________________________________________________________________________________________________
Net realized gain on investments 1,470,391
Net change in unrealized appreciation or depreciation 2,965,393
_____________________________________________________________________________________________________________
Net gain on investments 4,435,784
_____________________________________________________________________________________________________________
Net increase in net assets resulting from operations $31,221,784
_____________________________________________________________________________________________________________
See accompanying notes to financial statements.
/TABLE
<PAGE>
PAGE 17
<TABLE>
<CAPTION>
Financial statements
Statements of changes in net assets
IDS Insured Tax-Exempt Fund
Year ended June 30,
_____________________________________________________________________________________________________________
Operations and distributions 1996 1995
_____________________________________________________________________________________________________________
<S> <C> <C>
Investment income -- net $ 26,786,000 $ 28,730,570
Net realized gain (loss) on investments 1,470,391 (9,678,666)
Net change in unrealized appreciation or depreciation 2,965,393 12,668,289
_____________________________________________________________________________________________________________
Net increase in net assets resulting from operations 31,221,784 31,720,193
_____________________________________________________________________________________________________________
Distributions to shareholders from:
Net investment income
Class A (26,156,789) (28,692,222)
Class B (632,447) (40,346)
Class Y (56) (10)
Net realized gain
Class A (1,659,685) --
Class B (48,604) --
Class Y (3) --
_____________________________________________________________________________________________________________
Total distributions (28,497,584) (28,732,578)
_____________________________________________________________________________________________________________
Share transactions (Note 4)
_____________________________________________________________________________________________________________
Proceeds from sales
Class A shares (Note 2) 42,283,689 74,499,609
Class B shares 16,779,713 6,369,393
Class Y shares -- 1,020
Reinvestment of distributions at net asset value
Class A shares 19,769,773 20,325,958
Class B shares 541,841 31,095
Class Y shares 59 10
Payments for redemptions
Class A shares (78,673,946) (118,788,670)
Class B shares (Note 2) (2,641,423) (26,911)
_____________________________________________________________________________________________________________
Decrease in net assets from share transactions (1,940,294) (17,588,496)
_____________________________________________________________________________________________________________
Total increase (decrease) in net assets 783,906 (14,600,881)
Net assets at beginning of year 510,838,643 525,439,524
_____________________________________________________________________________________________________________
Net assets at end of year
(including undistributed net investment income of
$160,320 and $5,732) $511,622,549 $510,838,643
_____________________________________________________________________________________________________________
See accompanying notes to financial statements.
</TABLE>
<PAGE>
PAGE 18
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 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. The Fund offers
Class A, Class B and Class Y shares. Class A shares are sold with a
front-end sales charge. Class B shares may be subject to a
contingent deferred sales charge and such shares automatically
convert to Class A after eight years. Class Y shares have no sales
charge and are offered only to qualifying institutional investors.
All classes of shares have identical voting, dividend, liquidation
and other rights, and the same terms and conditions, except that
the level of distribution fee, transfer agency fee and service fee
(class specific expenses) differs among classes. Income, expenses
(other than class specific expenses) and realized and unrealized
gains or losses on investments are allocated to each class of
shares based upon its relative net assets.
Significant accounting policies followed by the Fund are summarized
below:
Use of estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of increase and decrease in net assets from
operations during the period. Actual results could differ from
those estimates.
Valuation of securities
All securities are valued at the close of each business day.
Securities for which market quotations are not readily available
are valued at fair value according to methods selected in good
faith by the board. 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 19
Option transactions
In order to produce incremental earnings, protect gains, and
facilitate buying and selling of securities for investment
purposes, the Fund may buy and sell put and call options and write
covered call options on portfolio securities and may write
cash-secured put options. The risk in writing a call option is that
the Fund gives up the opportunity of profit if the market price of
the security increases. The risk in writing a put option is that
the Fund may incur a loss if the market price of the security
decreases and the option is exercised. The risk in buying an option
is that the Fund pays a premium whether or not the option is
exercised. The Fund also has the additional risk of not being able
to enter into a closing transaction if a liquid secondary market
does not exist. The Fund also may write over-the-counter options
where the completion of the obligation is dependent upon the credit
standing of the other party.
Option contracts are valued daily at the closing prices on their
primary exchanges and unrealized appreciation or depreciation is
recorded. The Fund will realize a gain or loss upon expiration or
closing of the option transaction. When options on debt securities
or futures are exercised, the Fund will realize a gain or loss.
When other options are exercised, the proceeds on sales for a
written call option, the purchase cost for a written put option or
the cost of a security for a purchased put or call option is
adjusted by the amount of premium received or paid.
Futures transactions
In order to gain exposure to or protect itself from changes in the
market, the Fund may buy and sell 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.
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 <PAGE>
PAGE 20
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, accumulated net realized loss
has been increased by $157,880 and undistributed net investment
income has been increased by $157,880.
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, 1996, American Express Financial Corporation (AEFC)
owned 197 Class Y shares.
___________________________________________________________________
2. Expenses and sales charges
Effective March 20, 1995, the Fund entered into agreements with
AEFC for managing its portfolio, providing administrative services
and serving as transfer agent. 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 follows:
o Class A $15.50
o Class B $16.50
o Class Y $15.50
Also effective March 20, 1995, the Fund entered into agreements
with American Express Financial Advisors Inc. for distribution and
shareholder servicing-related services. Under a Plan and Agreement
of Distribution, the Fund pays a distribution fee at an annual rate
of 0.75% of the Fund's average daily net assets attributable to
Class B shares for distribution-related services.<PAGE>
PAGE 21
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 received by American Express Financial Advisors Inc.
for distributing Fund shares were $1,273,756 for Class A and
$26,850 for Class B for the year ended June 30, 1996.
During the year ended June 30, 1996, the Fund's custodian and
transfer agency fees were reduced by $8,128 as a result of earnings
credits from overnight cash balances.
Prior to April 30, 1996, the Fund had a retirement plan for its
independent board members. The plan was terminated April 30, 1996.
The retirement plan expense amounted to $3,637 for the year. The
total liability for the plan is $14,434, which will be paid out at
some future date.
___________________________________________________________________
3. Securities transactions
Cost of purchases and proceeds from sales of securities (other than
short-term obligations) aggregated $268,763,856 and $270,160,540,
respectively, for the year ended June 30, 1996. Realized gains and
losses are determined on an identified cost basis.
___________________________________________________________________
4. Share transactions
Transactions in shares of the Fund for the years indicated are as
follows:
<TABLE><CAPTION>
Year ended June 30, 1996
Class A Class B Class Y
________________________________________________________________________
<S> <C> <C> <C>
Sold 7,677,356 3,048,552 --
Issued for reinvested 3,585,244 98,195 11
distributions
Redeemed (14,339,111) (476,102) --
________________________________________________________________________
Net increase (decrease) (3,076,511) 2,670,645 11
________________________________________________________________________
<PAGE>
PAGE 22
Year ended June 30, 1995
Class A Class B* Class Y*
________________________________________________________________________
Sold 14,090,841 1,159,679 184
Issued for reinvested 3,817,110 5,658 2
distributions
Redeemed (22,569,639) (4,872) --
________________________________________________________________________
Net increase (decrease) (4,661,688) 1,160,465 186
________________________________________________________________________
*Inception date was March 20, 1995.
________________________________________________________________________
</TABLE>
5. Option contracts written
The number of contracts and premium amounts associated with covered
call option contracts written is as follows:
Year ended June 30, 1996
__________________________
Contracts Premium
____________________________________________
Balance June 30, 1995 -- $ --
Opened 59 58,646
Closed (59) (58,646)
____________________________________________
Balance June 30, 1996 -- $ --
___________________________________________________________________
6. Financial highlights
"Financial highlights" showing per share data and selected
information is presented on pages 7 and 8 of the prospectus.
<PAGE>
PAGE 23
<TABLE>
<CAPTION>
Investments in securities
IDS Insured Tax-Exempt Fund (Percentages represent value of
June 30, 1996 investments compared to net assets)
_____________________________________________________________________________________________________________________________
Municipal bonds (98.3%)
_____________________________________________________________________________________________________________________________
Name of issuer and title of issue (b,c,d) Coupon Maturity Principal Value(a)
rate year 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 $ 3,318,360
_____________________________________________________________________________________________________________________________
Arizona (2.2%)
Chandler Water & Sewer Refunding Revenue Bonds
Series 1991 (FGIC Insured) 7.00 2012 1,250,000 1,361,788
Health Facilities Authority Hospital System
Refunding Revenue Bonds Phoenix Baptist Hospital
Series 1992 (MBIA Insured) 6.25 2011 1,650,000 1,708,558
Mohave County Industrial Development Authority
Baptist Hospital System Revenue Bonds Series 1996
(MBIA Insured) 5.50 2021 1,000,000 951,570
Phoenix Civic Improvement Wastewater System Lease
Refunding Revenue Bonds (Secondary MBIA Insured) 4.75 2023 4,500,000 3,785,580
Phoenix Civic Improvement Wastewater System Lease
Refunding Revenue Bonds (Secondary MBIA Insured) 5.50 2024 1,500,000 1,406,565
State University Research Park Development
Refunding Bonds Series 1995 (MBIA Insured) 5.00 2021 1,975,000 1,770,173
____________
Total 10,984,234
_____________________________________________________________________________________________________________________________
Arkansas (0.2%)
Jonesboro Residential Housing & Health Care Facility Board
St. Bernards Regional Medical Center
Hospital Refunding Revenue & Construction Bonds
Series 1996B (AMBAC Insured) 5.90 2016 1,200,000 1,202,040
_____________________________________________________________________________________________________________________________
California (10.8%)
Desert Sands Unified School District Convertible Capital
Appreciation Certificates Series 1995 Zero Coupon
(FSA Insured) 1.40 2020 3,000,000 (e) 2,231,610
Eastern Municipal Water District Riverside County
Water & Sewer Pre-Refunded Revenue
Certificates of Participation Series 1991 (FGIC Insured) 6.50 2020 5,460,000 5,998,574
Fontana Unified School District San Bernardino County
General Obligation Convertible Capital Appreciation Bonds
Series 1990C Zero Coupon (FGIC Insured) 0.61 2020 6,000,000 (e) 5,706,600
Fresno Health Facility Revenue Bonds Holy Cross-St. Agnes
(Secondary MBIA Insured) 6.625 2021 2,000,000 2,108,720
Los Angeles Department of Airports Revenue Bonds
Los Angeles International Airport Series D
(FGIC Insured) A.M.T. 5.50 2015 2,500,000 2,359,725
Los Angeles Department of Water & Power Waterworks
Refunding Revenue Bonds Second Issue
(Secondary FGIC Insured) 4.50 2023 2,000,000 1,601,940
Northern California Transmission Select Auction
Variable Rate Security & Residual Interest Revenue Bonds
Inverse Floater (MBIA Insured) 5.50 2024 2,500,000 (f) 2,312,625
Oceanside Certificate of Participation Refunding Bonds
Oceanside Civic Center (MBIA Insured) 5.25 2019 1,730,000 1,597,274
Orange County Redevelopment Agency Tax Allocation
Refunding Revenue Bonds Southwest Redevelopment
Series A (AMBAC Insured) 5.70 2023 3,000,000 2,930,760
San Bernardino County Certificate of Participation
Medical Center Financing Project
Series 1996 (MBIA Insured) 5.00 2028 1,375,000 1,199,413
San Diego County Certificate of Participation
Regional Authority Bonds Mt. Tower
Inverse Floater Series 1991 (MBIA Insured) 6.36 2019 9,000,000 (f) 9,173,700
See accompanying notes to investments in securities.
<PAGE>
PAGE 24
San Jose Redevelopment Agency Merged Area
Redevelopment Tax Allocation Bonds Series 1993
(MBIA Insured) 4.75 2024 2,400,000 2,017,656
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 1,474,110
Southern California Public Power Authority
San Juan Revenue Bonds Series A (MBIA Insured) 5.00 2020 3,500,000 3,077,970
State Public Works Board Lease Revenue Bonds
Department of Correction Substance Abuse Treatment
Facility & State Prison at Corcoran Series 1996A (AMBAC Insured) 5.25 2021 2,000,000 1,842,340
State Public Works Board Lease Revenue Bonds
University of California Series A (AMBAC Insured) 6.40 2016 2,000,000 2,073,580
State Unlimited Tax General Obligation Bonds
(Secondary FGIC Insured) 4.75 2023 2,500,000 2,083,450
Statewide Community Development Authority
Certificate of Participation
Sutter Health Obligated Group (MBIA Insured) 5.50 2022 5,750,000 5,474,403
____________
Total 55,264,450
_____________________________________________________________________________________________________________________________
Colorado (3.1%)
Denver City & County Airport Revenue Bonds Series B
(MBIA Insured) A.M.T. 5.75 2017 13,290,000 12,891,699
Douglas County School District General Obligation
Improvement Bonds Series 1994A (MBIA Insured) 6.50 2016 1,500,000 1,599,225
Municipal Subdistrict Northern Colorado Water Conservatory
District Refunding Revenue Bonds Series E (AMBAC Insured) 5.00 2017 1,500,000 1,369,245
____________
Total 15,860,169
_____________________________________________________________________________________________________________________________
Connecticut (0.2%)
Bridgeport General Obligation Refunding Bonds
Series 1996A (AMBAC Insured) 5.50 2015 1,000,000 967,710
_____________________________________________________________________________________________________________________________
Delaware (0.2%)
Health Facilities Authority Refunding Revenue Bonds
Medical Center of Delaware Series 1989 (MBIA Insured) 7.00 2015 1,000,000 1,077,310
_____________________________________________________________________________________________________________________________
District of Columbia (3.2%)
Howard University Revenue Bonds Series A (MBIA Insured) 8.00 2017 1,500,000 1,591,155
Metropolitan Washington Airports Authority Airport System
Revenue Bonds Series 1992A (MBIA Insured) A.M.T. 6.625 2019 9,420,000 9,891,659
Metropolitan Washington Airports Authority Airport System
Revenue Bonds Series 1994A (MBIA Insured) A.M.T. 5.50 2024 3,000,000 2,796,720
Unlimited Tax General Obligation Refunding Bonds
Series B-2 (FSA Insured) 5.50 2010 2,000,000 1,959,940
____________
Total 16,239,474
_____________________________________________________________________________________________________________________________
Florida (5.6%)
Alachua County Public Improvement Refunding Revenue Bonds
(FSA Insured) 5.125 2021 2,000,000 1,815,220
Department of Transportation Turnpike Revenue Bonds
Series 1991A (AMBAC Insured) 6.25 2020 1,250,000 1,267,650
Florida State Turnpike Authority Department of Transportation
Series A (FGIC Insured) 5.50 2021 8,210,000 7,855,656
Fort Myers Utility System Refunding Revenue Bonds
Series 1989A (BIG Insured) 6.00 2019 2,000,000 2,006,800
Gulf Breeze Local Government Loan Program Boca Raton
Series 1985E (FGIC Insured) 7.75 2015 2,000,000 2,218,200
Orange County Health Facility Authority Revenue Bonds
Adventist Health System Sunbelt Obligated Group
Series 1995 (AMBAC Insured) 5.25 2020 1,250,000 1,141,062
Osceola County Transportation Pre-Refunded Revenue Bonds
Series 1988A (FGIC Insured) 7.70 2013 1,215,000 1,311,204
Palm Beach County Solid Waste Authority Revenue Bonds
Series 1984 (BIG Insured) 8.375 2010 500,000 534,110
Sarasota County Solid Waste System Revenue Bonds
Series 1996 (AMBAC Insured) 5.50 2021 1,750,000 1,673,980
South Bay Correctional Facility Finance
Correctional Privatization Commission (MBIA Insured) 5.00 2017 3,390,000 3,047,034
State Correctional Privatization Commission Certificate of Participation
350 Bed Youthful Columbia Series A (AMBAC Insured) 5.00 2017 1,900,000 1,714,161
State Correctional Privatization Commission Certificate of Participation
Youth Offender Correctional Facility Polk County
Series 1995B (AMBAC Insured) 5.00 2017 4,500,000 4,049,730
____________
Total 28,634,807
<PAGE>
PAGE 25
____________________________________________________________________________________________________________________________
Georgia (2.6%)
Atlanta Metropolitan Rapid Transit Authority Sales Tax
Pre-Refunded Revenue Bonds Series L (AMBAC Insured) 7.20 2020 3,000,000 3,269,130
Chatham County Hospital Authority Revenue Bonds
Memorial Medical Center Series 1990A (MBIA Insured) 7.00 2021 4,500,000 4,862,970
Fulton County Water & Sewer Revenue Bonds Non-Callable
(FGIC Insured) 6.375 2014 3,250,000 3,494,725
Municipal Electrical Authority Power Revenue Bonds
Series M (BIG Insured) 8.10 2012 1,080,000 1,123,502
Municipal Electrical Authority Special Obligation
Refunding Bonds 2nd Crossover Series (AMBAC Insured) 7.80 2020 500,000 532,695
____________
Total 13,283,022
_____________________________________________________________________________________________________________________________
Illinois (2.8%)
Chicago O'Hare International Airport General
Revenue Bonds Series 1990A (AMBAC Insured) A.M.T. 7.50 2016 2,000,000 2,157,780
Chicago O'Hare International Airport Terminal
Revenue Bonds (MBIA Insured) A.M.T. 7.625 2010 3,000,000 3,254,490
Chicago Public Building Commission
Pre-Refunded Revenue Bonds (MBIA Insured) A.M.T. 7.70 2008 1,000,000 1,046,720
Chicago Public Building Commission
Pre-Refunded Revenue Bonds Series 1989A (FGIC Insured) 7.75 2006 1,000,000 1,095,910
Chicago Public Building Commission
Pre-Refunded Revenue Bonds Series 1990A (MBIA Insured) 7.125 2015 5,000,000 5,358,800
Chicago Unlimited Tax General Obligation
Refunding Bonds Series B (FGIC Insured) 5.125 2025 1,750,000 1,548,593
____________
Total 14,462,293
_____________________________________________________________________________________________________________________________
Indiana (2.2%)
Board of Trustees for the Vincesses University
Vincesses University House & Dining System
Revenue Bonds Series 1996 (MBIA Insured) 5.125 2021 800,000 711,368
Educational Facilities Authority Pre-Refunded Bonds
Valpraiso University (BIG Insured) 7.80 2008 500,000 546,770
Marion County Hospital Authority Refunding Revenue Bonds
Methodist Hospital Series 1989 (MBIA Insured) 6.50 2013 4,000,000 4,148,520
State Health Facility Finance Authority Hospital
Refunding Revenue Bonds Columbus Regional Hospital
Series 1993 (CGIC Insured) 7.00 2015 5,000,000 5,757,150
____________
Total 11,163,808
_____________________________________________________________________________________________________________________________
Kentucky (0.1%)
Jefferson County Multi-family Housing Revenue Bonds
Brownsboro Gardens Series 1986A (FHA Insured) A.M.T. 8.00 2026 390,000 400,456
Louisville & Jefferson County Airport Authority System
Revenue Bonds (MBIA Insured) A.M.T. 8.50 2017 300,000 317,160
____________
Total 717,616
_____________________________________________________________________________________________________________________________
Louisiana (2.4%)
Energy & Power Authority Power Refunding Revenue Bonds
Rodemacher Unit #2 Series 1991 (FGIC Insured) 6.75 2008 7,000,000 7,580,370
Jefferson Parish School Board Sales & Use Tax
Revenue Bonds (AMBAC Insured) 5.00 2014 3,785,000 3,442,003
New Orleans Audubon Park Commission Aquarium
Pre-Refunded Bonds Series 1988 (MBIA Insured) 7.90 2008 500,000 534,370
New Orleans International Airport Pre-Refunded
Revenue Bonds Series A (FGIC Insured) A.M.T. 8.875 2017 565,000 605,889
____________
Total 12,162,632
_____________________________________________________________________________________________________________________________
Maine (0.4%)
State Turnpike Authority Turnpike Revenue Bonds
(MBIA Insured) 6.00 2018 1,790,000 1,803,371
_____________________________________________________________________________________________________________________________
Maryland (0.2%)
Baltimore Refunding Revenue Bonds Wastewater
Series 1994A (FGIC Insured) 5.00 2022 1,000,000 893,240
_____________________________________________________________________________________________________________________________
Massachusetts (5.2%)
Boston Water & Sewer Commission Revenue Bonds
General Subordinate Series A (BIG Insured) 6.00 2008 2,500,000 2,532,375
<PAGE>
PAGE 26
Health & Educational Authority Revenue Bonds
Mercy Hitchcock Memorial Hospital Obligation Group
Cooley Dickinson Hospital (AMBAC Insured) 5.50 2025 3,750,000 3,536,588
Health & Educational Authority Revenue Bonds
Valley Regional Health System Series C (Connie Lee Insured) 5.75 2018 1,500,000 1,454,505
Health & Educational Facilities Authority
Pre-Refunded Revenue Bonds
Lahey Clinic Medical Center (MBIA Insured) 7.625 2018 2,200,000 2,387,264
Health & Educational Facilities Authority
Pre-Refunded Revenue Bonds Northeastern University
Series 1989C (AMBAC Insured) 7.10 2006 1,000,000 1,083,120
Industrial Finance Agency Revenue Bonds
Brandeis University (MBIA Insured) 6.80 2019 1,700,000 1,800,198
Municipal Wholesale Electric Power Supply System
Refunding Revenue Bonds Series B (MBIA Insured) 4.75 2011 5,250,000 4,625,565
State Bay Transportation Authority Series B
(AMBAC Insured) 5.375 2025 4,000,000 3,721,320
State Health & Educational Facilities Authority
Revenue Bonds Cape Cod Health System
Series A (Connie Lee Insured) 5.25 2021 4,000,000 3,630,560
State Water Resource Authority Revenue Bonds
Series A (MBIA Insured) 5.50 2022 2,000,000 1,881,520
____________
Total 26,653,015
_____________________________________________________________________________________________________________________________
Michigan (3.2%)
Chippewa Valley School Macomb County
Michigan Qualified School Building Loan Fund
General Obligation Unlimited Tax Refunding Bonds
Series 1993 (FGIC Insured) 5.00 2021 2,000,000 1,771,460
Grand Ledge Public Schools Counties of Eaton, Clinton & Ionia
Unlimited Tax General Obligation Refunding Bonds
Series 1995 (MBIA Insured) 5.375 2024 2,000,000 1,859,700
Ionia Public School Unlimited Tax
General Obligation Bonds (AMBAC Insured) 5.30 2025 1,100,000 1,011,802
Iron Mountain School Unlimited Tax
General Obligation Refunding Bonds (AMBAC Insured) 5.125 2021 1,500,000 1,351,125
Kalamazoo Hospital Finance Authority
Refunding & Improvement Bonds
Bronson Methodist Hospital (Secondary MBIA Insured) 6.25 2012 3,000,000 3,109,290
Lincoln Park School District County of Wayne
School Building & Site General Obligation Bonds
Series 1996 (FGIC Insured) 5.90 2026 1,500,000 1,503,660
Monroe County Pollution Control Refunding Bonds
Detroit Edison Series I-B (MBIA Insured) A.M.T. 6.55 2024 5,000,000 5,209,250
Wayne County Charter Airport Revenue Bonds
Detroit Metropolitan Wayne County Airport
(FGIC Insured) A.M.T. 8.00 2014 675,000 698,875
____________
Total 16,515,162
_____________________________________________________________________________________________________________________________
Minnesota (1.9%)
Southern Minnesota Municipal Power Agency Bonds
Zero Coupon (MBIA Insured) 6.12 2021 6,000,000 (e) 1,374,600
Southern Minnesota Municipal Power Agency Power
Revenue Bonds Series A (Secondary FGIC Insured) 4.75 2016 4,250,000 3,683,602
Western Municipal Power Agency Transmission
Pre-Refunded Revenue Bonds Series 1991 (AMBAC Insured) 6.75 2016 4,500,000 4,788,630
____________
Total 9,846,832
_____________________________________________________________________________________________________________________________
Mississippi (0.2%)
Alcorn County Hospital Refunding Revenue Bonds
Magnolia Regional Hospital Center (AMBAC Insured) 5.75 2013 1,000,000 990,190
_____________________________________________________________________________________________________________________________
Missouri (1.7%)
Kansas City Municipal Assistance Leasehold
Refunding Revenue Bonds H. Roe Bartle
Convention Center Project (MBIA Insured) 5.00 2020 7,670,000 6,855,523
St. Charles County Francis H. Ell School District Education
Facility Authority Bonds (FSA Insured) 5.25 2015 2,000,000 1,899,420
____________
Total 8,754,943
_____________________________________________________________________________________________________________________________
<PAGE>
PAGE 27
Montana (1.9%)
Forsyth Rosebud County Pollution Refunding Revenue Bonds
Puget Sound Power & Light (AMBAC Insured) A.M.T. 7.25 2021 4,000,000 4,365,760
State Board of Investments Payroll Tax Bonds
Worker's Compensation Program Series 1991 (MBIA Insured) 6.875 2020 4,750,000 5,075,422
____________
Total 9,441,182
_____________________________________________________________________________________________________________________________
Nevada (0.9%)
Clark County Passenger Facility Charge Revenue Bonds
Las Vegas McCarren Airport Series B
(Secondary AMBAC Insured) A.M.T. 5.50 2025 5,000,000 4,658,300
_____________________________________________________________________________________________________________________________
New Hampshire (1.1%)
Industrial Development Authority Pollution Control
Revenue Bonds Light & Power
Series 1989 (AMBAC Insured) A.M.T. 7.375 2019 5,000,000 5,437,200
_____________________________________________________________________________________________________________________________
New Mexico (0.2%)
Santa Fe Water Revenue Bonds (AMBAC Insured) 6.30 2024 1,000,000 1,085,520
_____________________________________________________________________________________________________________________________
New York (7.3%)
Dormitory Authority City University System
Consolidated 3rd Resolution Revenue Bonds
1994 Series 2 (MBIA Insured) 6.25 2019 2,500,000 2,558,400
Metropolitan Transportation Authority Commuter Facility
Service Contract Bonds Series L (AMBAC Insured) 7.50 2017 1,300,000 1,395,784
New York City General Obligation Pre-Refunded Bonds
Series A (FGIC Insured) 8.125 2007 1,145,000 1,225,642
New York City Municipal Water Finance Authority
Water & Sewer System Revenue Bonds Series A
(Secondary MBIA Insured) 5.50 2023 5,000,000 4,725,150
New York City Municipal Water Finance Authority
Water & Sewer System Revenue Bonds Series B
(Secondary MBIA Insured) 5.50 2019 4,000,000 3,804,880
State Dormitory Authority State University Education Facility
Revenue Bonds (Secondary AMBAC Insured) 5.25 2015 2,700,000 2,563,407
State Energy Resource & Development Authority
Gas Facility Revenue Bonds Brooklyn Union Gas
(MBIA Insured) A.M.T. 5.60 2025 4,500,000 4,265,820
State Energy Resource & Development Authority
Pollution Control Refunding Revenue Bonds
Rochester Gas & Electric (MBIA Insured) A.M.T. 6.50 2032 4,000,000 4,128,840
State Energy Resource & Development Authority
Solid Waste Disposal Revenue Bonds
New York State Electric & Gas Series A
(MBIA Insured) A.M.T. 5.70 2028 11,210,000 10,731,333
State Urban Development Correctional Facilities
Pre-Refunded Revenue Bonds Series 1 (FSA Insured) 7.50 2020 1,500,000 1,666,575
____________
Total 37,065,831
_____________________________________________________________________________________________________________________________
North Carolina (3.5%)
Charlotte Pre-Refunded Certificates of Participation
Convention Facility Series 1991 (AMBAC Insured) 6.75 2021 3,150,000 3,501,666
Concord Certificate of Participation Series B (MBIA Insured) 5.75 2016 1,480,000 1,415,724
Fayetteville Public Work Commission Revenue Bonds
Series 1995 (AMBAC Insured) 5.375 2020 650,000 612,228
Municipal Power Agency #1 Catawba Electric Revenue Bonds
Series 1995A (Secondary AMBAC Insured) 5.00 2015 2,155,000 1,958,636
Municipal Power Agency #1 Catawba Electric Revenue Bonds
Series 1995A (Secondary AMBAC Insured) 5.375 2020 4,000,000 3,734,760
Pasquotank County Certificates of Participation
Elizabeth Pasquotank Public School
Series 1995 (MBIA Insured) 5.00 2020 5,000,000 4,450,250
Randolph County Certificates of Participation
Series 1995 (MBIA Insured) 5.30 2015 2,500,000 2,360,150
____________
Total 18,033,414
_____________________________________________________________________________________________________________________________
Ohio (1.1%)
Lorain County Hospital Facilities Refunding Revenue Bonds
EMH Regional Medical Center Series 1995 (AMBAC Insured) 5.375 2021 2,000,000 1,872,600
Lucas County Hospital Refunding Revenue Bonds
St. Vincent Medical Center Series 1993C (MBIA Insured) 5.25 2022 1,725,000 1,576,426
Montgomery County Hospital Facility
Refunding Revenue & Improvement Bonds
Kettering Medical Center (MBIA Insured) 5.50 2026 2,500,000 2,383,825
<PAGE>
PAGE 28
____________
Total 5,832,851
_____________________________________________________________________________________________________________________________
Oklahoma (1.3%)
McAlester Public Works Authority Oklahoma Improvement
Refunding Revenue Bonds (FSA Insured) 5.25 2017-18 2,470,000 2,300,551
Moore Public Works Authority Refunding Revenue Bonds
Series 1989 (AMBAC Insured) 7.60 2006 2,700,000 2,950,668
Tulsa International Airport General Revenue Bonds
Consolidated Fixed Rate Series 1989 (MBIA Insured) 7.50 2008 1,500,000 1,577,640
____________
Total 6,828,859
_____________________________________________________________________________________________________________________________
Pennsylvania (4.4%)
Allegheny County Airport Revenue Bonds
Pittsburgh International Series D (FGIC Insured) A.M.T. 7.75 2019 2,300,000 2,396,209
Allegheny County Hospital Development Authority Revenue Bonds
University of Pittsburgh Medical Center (MBIA Insured) 5.375 2025 5,000,000 4,602,650
Lycoming County Hospital Authority Revenue Bonds
Divine Providence Hospital Sisters of Christian Charity
Series 1995 (Connie Lee Insured) 5.50 2022 1,500,000 1,414,395
Pittsburgh Water & Sewer Authority Water & Sewer System
Pre-Refunded Revenue Bonds Series 1991A (FGIC Insured) 6.50 2014 10,000,000 10,955,400
Robinson Township Municipal Authority Water & Sewer
Revenue Bonds (FGIC Insured) 6.00 2019 2,200,000 2,199,560
Turnpike Commission Pre-Refunded Revenue Bonds
Series 1989K (MBIA Insured) 7.50 2012 1,000,000 1,110,350
____________
Total 22,678,564
_____________________________________________________________________________________________________________________________
South Carolina (0.2%)
Piedmont Municipal Power Agency Electric
Refunding Revenue Bonds (FGIC Insured) 6.25 2021 1,000,000 1,050,390
_____________________________________________________________________________________________________________________________
Tennessee (1.1%)
Health Education & Housing Facility Shelby Hospital
Revenue Bonds Methodist Health Systems Series 1995
(MBIA Insured) 5.25 2015 2,000,000 1,862,980
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 3,758,212
____________
Total 5,621,192
_____________________________________________________________________________________________________________________________
Texas (17.5%)
Austin Airport System Prior Lien Revenue Bonds Series 1995A
(MBIA Insured) A.M.T. 6.125 2025 3,000,000 3,010,710
Austin Combined Utilities System Refunding Revenue Bonds
Series 1994 (FGIC Insured) 5.75 2024 8,500,000 8,360,260
Austin Combined Utilities System Revenue Bonds
Series 1987 (BIG Insured) 8.625 2012-17 1,250,000 1,489,525
Bexar County Health Facility Development Hospital
Revenue Bonds San Antonio Baptist Memorial Hospital System
Series 1994 (MBIA Insured) 6.75 2019 5,000,000 5,367,550
Brazos River Authority Collateralized Pollution Control
Refunding Revenue Bonds Texas Utility Electric
Series 1992C (FGIC Insured) A.M.T. 6.70 2022 14,935,000 15,755,380
Brownsville Utility System Priority
Refunding Revenue Bonds Series 1995 (AMBAC Insured) 5.25 2015 5,000,000 4,700,350
Colorado River Municipal Water District Water System
Pre-Refunded Revenue Bonds Series A (AMBAC Insured) 6.625 2021 8,900,000 9,577,557
Harris County Health Facilities Development Hospital
Revenue Bonds State Children's Hospital
Series 1989A (MBIA Insured) 7.00 2019 1,500,000 1,635,900
Harris County Public Facilities Corporation
Detention Facility Mortgage Pre-Refunded Revenue Bonds
(MBIA Insured) 7.80 2011 1,000,000 1,099,970
Harris County Toll Road Senior Lien
Pre-Refunded Revenue Bonds Series A (AMBAC Insured) 6.50 2017 8,170,000 9,003,340
League City General Obligation
Refunding & Improvement Bonds
Series 1990 (FGIC Insured) 6.25 2013 2,500,000 2,558,900
Matagorda County Navigation District #1
Collateralized Pollution Control Revenue Bonds
Central Power & Light Series 1984A (AMBAC Insured) 7.50 2014 2,500,000 2,786,875
Matagorda County Navigation District #1 Pollution Control
Refunding Revenue Bonds Houston Light & Power
Series E (FGIC Insured) 7.20 2018 2,150,000 2,344,768
<PAGE>
PAGE 29
Matagorda County Navigation District #1 Pollution Control
Revenue Bonds Central Power & Light
Series 1990 (AMBAC Insured) A.M.T. 7.50 2020 2,000,000 2,170,980
Municipal Power Agency Refunding Revenue Bonds
Series 1991A (AMBAC Insured) 6.75 2012 5,250,000 5,640,547
North Central State Health Facilities Pre-Refunded Bonds
Children's Medical Center (BIG Insured) 7.875 2018 2,000,000 2,119,960
Tarrant County Health Facility Development Revenue Bonds
Harris Methodist Health System
Series 1996A (AMBAC Insured) 5.125 2018 1,185,000 1,073,480
Turnpike Authority Dallas North Tollway
Pre-Refunded Revenue Bonds Series 1990
(AMBAC Insured) 6.00 2020 5,000,000 5,185,600
Turnpike Authority Dallas North Tollway Revenue Bonds
Addison Airport Toll Tunnel Series 1994 (FGIC Insured) 6.60 2023 2,000,000 2,129,440
University of Houston System Consolidated
Pre-Refunded Revenue Bonds Series 1990A (MBIA Insured) 7.40 2006 3,160,000 3,444,558
____________
Total 89,455,650
_____________________________________________________________________________________________________________________________
Utah (0.4%)
Intermountain Power Authority Power Supply
Pre-Refunded Revenue Bonds Series 1987C (AMBAC Insured) 8.375 2012 900,000 958,401
Salt Lake City-County Airport Pre-Refunded Revenue Bonds
Series 1989 (FGIC Insured) A.M.T. 7.875 2018 1,000,000 1,072,740
____________
Total 2,031,141
_____________________________________________________________________________________________________________________________
Virginia (3.3%)
Hanover County Industrial Development Authority
Memorial Regional Medical Center (MBIA Insured) 5.50 2025 3,800,000 3,569,378
Loudoun County Sanitation Authority Waste & Sewer
Refunding Revenue Bonds (MBIA Insured) 5.25 2030 1,435,000 1,303,296
Portsmouth Redevelopment Housing Authority Multi-family Housing
Refunding Revenue Bonds (FNMA Insured) 6.05 2008 5,780,000 5,952,764
Upper Occoquan Sewer Authority Regional Sewer
Revenue Bonds Series A (MBIA Insured) 4.75 2029 4,500,000 3,740,265
William County Lease Certificate of Participation Bonds
(MBIA Insured) 5.50 2020 2,590,000 2,456,719
____________
Total 17,022,422
_____________________________________________________________________________________________________________________________
Washington (1.8%)
Public Power Supply System Non-Refunded Revenue Bonds
Nuclear Project #1 Series A (MBIA Insured) 7.50 2015 1,195,000 1,303,339
Public Power Supply System Pre-Refunded Revenue Bonds
Nuclear Project #1 Series A (MBIA Insured) 7.50 2015 1,805,000 1,986,800
Public Power Supply System Pre-Refunded Revenue Bonds
Nuclear Project #3 Series 1989A (BIG Insured) 7.25 2016 1,000,000 1,093,760
Public Power Supply System Refunding Revenue Bonds
Nuclear Project #3 Series 1989A (BIG Insured) 6.00 2018 3,000,000 2,989,080
Spokane Regional Solid Waste Management System
Revenue Bonds Series 1989 (AMBAC Insured) A.M.T. 7.75 2011 300,000 324,300
Spokane Regional Solid Waste Management System
Revenue Bonds Series 1989 (AMBAC Insured) A.M.T. 7.875 2007 1,250,000 1,354,887
____________
Total 9,052,166
_____________________________________________________________________________________________________________________________
West Virginia (2.6%)
Board of Regents Registration Fee Pre-Refunded Revenue Bonds
Series 1989B (MBIA Insured) 7.40 2009 2,000,000 2,185,700
School Building Authority Capital Improvement
Pre-Refunded Revenue Bonds (MBIA Insured) 7.25 2015 3,415,000 3,785,152
School Building Authority Capital Improvement Revenue Bonds
Series 1990B (MBIA Insured) 6.75 2017 5,000,000 5,298,800
State Parkway Economic Development & Tourism Authority Parkway
Pre-Refunded Revenue Bonds Series 1989 (FGIC Insured) 7.125 2019 2,000,000 2,180,560
____________
Total 13,450,212
_____________________________________________________________________________________________________________________________
Wisconsin (0.6%)
Center District Sales Tax Appreciation Senior Dedicated Bonds
Series A Zero Coupon (MBIA Insured) 6.05 2016 2,000,000 (e) 592,520
Center District Sales Tax Appreciation Senior Dedicated Bonds
Series A Zero Coupon (MBIA Insured) 6.03 2017 7,400,000 (e) 2,063,638
Center District Sales Tax Appreciation Senior Dedicated Bonds
Series A Zero Coupon (MBIA Insured) 6.00 2019 2,000,000 (e) 494,040
<PAGE>
PAGE 30
____________
Total 3,150,198
_____________________________________________________________________________________________________________________________
Total municipal bonds
(Cost: $474,706,499) $502,689,770
_____________________________________________________________________________________________________________________________
Total investments in securities
(Cost: $474,706,499)(g) $502,689,770
_____________________________________________________________________________________________________________________________
<PAGE>
PAGE 31
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 06-30-96 06-30-95
___________________________________________________________________________________________________________
AAA 100% 100%
AA - -
A - -
BBB - -
BB and below - -
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
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 the portfolio descriptions:
A.M.T. -- Alternative Minimum Tax -- As of June 30, 1996, the value of securities subject to
alternative minimum tax represented 19.8% of net assets.
(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, 1996. Inverse floaters in the aggregate
represent 2.2% of the Fund's net assets as of June 30, 1996.
(g) At June 30, 1996, the cost of securities for federal income tax purposes was
$474,462,130 and the aggregate gross unrealized appreciation and depreciation
based on that cost was:
Unrealized appreciation $29,867,527
Unrealized depreciation (1,639,887)
______________________________________________________________________________________________________
Net unrealized appreciation $28,227,640
______________________________________________________________________________________________________
</TABLE>
<PAGE>
PAGE 32
IDS mutual funds
Cash equivalent investments
These money market funds have three main goals: conservation of
capital, constant liquidity and the highest possible current income
consistent with these objectives. Very limited risk.
IDS Cash Management Fund
Invests in such money market securities as high quality commercial
paper, bankers' acceptances, certificates of deposits (CDs) and
other bank securities.
(icon of) piggy bank
IDS Tax-Free Money Fund
Invests primarily in short-term bonds and notes issued by state and
local governments to seek high current income exempt from federal
income taxes.
(icon of) shield with piggy bank enclosed
Income investments
The funds in this group invest their assets primarily in corporate
bonds or government securities to seek interest income. Secondary
objective is capital growth. Risk varies by bond quality.
IDS Global Bond Fund
Invests primarily in debt securities of U.S. and foreign issuers to
seek high total return through income and growth of capital.
(icon of) globe
IDS Extra Income Fund
Invests mainly in long-term, high-yielding corporate fixed-income
securities in the lower rated, higher risk bond categories to seek
high current income. Secondary objective is capital growth.
(icon of) coins
IDS Bond Fund
Invests mainly in corporate bonds, at least 50% in the higher
rated, lower risk bond categories, or the equivalent, and in
government bonds.
(icon of) greek column
<PAGE>
PAGE 33
IDS Selective Fund
Invests in high-quality corporate bonds and other highly rated debt
instruments including government securities and short-term
investments. Seeks current income and preservation of capital.
(icon of) skyline
IDS Federal Income Fund
Invests primarily in securities issued or guaranteed as to the
timely payment of principal and interest by the U.S. government,
its agencies and instrumentalities. Seeks a high level of current
income and safety of principal consistent with its type of
investments.
(icon of) shield with eagle head enclosed
Tax-exempt income investments
These funds provide tax-free income by investing in municipal
bonds. The income is generally free from federal income tax. Risk
varies by bond quality.
IDS High Yield Tax-Exempt Fund
Invests primarily in medium- and lower-quality municipal bonds and
notes. Lower-quality securities generally involve greater risk of
principal and income.
(icon of) shield with basket of apples enclosed
IDS State Tax-Exempt Funds
(CA, MA, MI, MN, NY, OH)
Invests primarily in high- and medium-grade municipal securities to
provide income to residents of each respective state that is exempt
from federal, state and local income taxes. (New York is the only
state that is exempt at the local level.)
(icon of) shield with U.S. enclosed
IDS Tax-Exempt Bond Fund
Invests mainly in bonds and notes of state or local government
units, with at least 75% in the four highest rated, lowest risk
bond categories.
(icon of) shield with Greek column enclosed
IDS Insured Tax-Exempt Fund
Invests primarily in municipal securities that are insured as to
the timely payment of principal and interest. The insurance
feature minimizes credit risk of the fund but does not guarantee
the market value of the fund's shares.
(icon of) shield with star enclosed
<PAGE>
PAGE 34
Growth and income investments
These funds focus on securities of medium to large, well-
established companies that offer long-term growth of capital and
reasonable income from dividends and interest. Moderate risk.
IDS International Fund
Invests primarily in common stocks of foreign companies that offer
potential for superior growth. The fund may invest up to 20% of
its assets in the U.S. market.
(icon of) three flags
IDS Managed Allocation Fund
Invests in U.S. equity securities, U.S. and foreign debt
securities, foreign equity securities and money market instruments.
The fund provides diversification among these major investment
categories and has a target mix that represents the way the fund's
investments will be allocated over the long term. Seeks maximum
total return.
(icon of) bird in a nest
IDS Equity Select Fund
Invests primarily in a combination of moderate growth stocks,
higher-yielding equities and bonds. Seeks growth of capital and
income.
(icon of) three pine trees
IDS Blue Chip Advantage Fund
Invests in selected stocks from a major market index. Securities
purchased are those recommended by our research analysts as the
best from each industry represented on the index. Offers potential
for long-term growth as well as dividend income.
(icon of) ribbon
IDS Stock Fund
Invests in common stock of companies representing many sectors of
the economy. Seeks current income and growth of capital.
(icon of) building with columns
IDS Equity Value Fund
Invests primarily in undervalued common stocks that offer potential
for growth of capital and income.
(icon of) three growing flowers
<PAGE>
PAGE 35
IDS Utilities Income Fund
Invests primarily in the stocks of public utility companies to seek
high current income and growth of income and capital with reduced
volatility.
(icon of) light bulb
IDS Diversified Equity Income Fund
Invests primarily in high-yielding common stocks to seek high
current income and, secondarily, to benefit from the growth
potential offered by stock investments.
(icon of) two puzzle pieces
IDS Mutual
Invests in a balance between common stocks and senior securities
(preferred stocks and bonds). Seeks a balance of growth of capital
and current income.
(icon of) scale of justice
Growth investments
Funds in this group seek capital growth, primarily from common
stocks. They are high risk mutual funds with a potential for high
reward.
IDS Discovery Fund
Invests in small- and medium-size, growth-oriented companies
emphasizing technological innovation and productivity enhancement.
Buys and holds larger growth-oriented stocks.
(icon of) ship
IDS Small Company Index Fund
Invests in all or a representative group of the equity securities
comprising the S&P SmallCap 600 Index, as it strives to provide
long-term capital appreciation.
(icon of) office building
IDS Progressive Fund
Invests primarily in undervalued common stocks. The fund holds
stocks for the long term with the goal of capital growth.
(icon of) shooting star
<PAGE>
PAGE 36
IDS Global Growth Fund
Invests in stocks of companies throughout the world that are
positioned to meet market needs in a changing world economy. These
companies offer above-average potential for long-term growth.
(icon of) world
IDS Strategy Aggressive Fund
Invests primarily in common stocks of companies that are selected
for their potential for above-average growth. Above-average means
that their growth potential is better, in the opinion of the
portfolio's investment manager, than the Standard & Poor's
Corporation (S&P) 500 Stock Index.
(icon of) chess piece
IDS Research Opportunities Fund
Invests primarily in equity securities of companies included in the
S&P 500 Index that are believed to have strong growth potential.
The Portfolio is managed using a research methodology by the
Research Department of AEFC. Goal is long-term appreciation.
(icon of) magnifying glass
IDS Growth Fund
Invests primarily in companies that have above-average potential
for long-term growth as a result of new management, marketing
opportunities or technological superiority.
(icon of) trees
IDS New Dimensions Fund
Invests primarily in companies with significant growth potential
due to superiority in technology, marketing or management. The
fund frequently changes its industry mix.
(icon of) dimension
Specialty growth investment
This fund aggressively seeks capital growth as a hedge against
inflation.
IDS Precious Metals Fund
Invests primarily in the securities of foreign or domestic
companies that explore for, mine and process or distribute gold and
other precious metals. This is the most aggressive and most
speculative IDS mutual fund.
(icon of) cart of precious gems
<PAGE>
PAGE 37
For more complete information about any of these funds, including
charges and expenses, you can obtain a prospectus by contacting
your financial advisor or writing to American Express Shareholder
Service, P.O. Box 534, Minneapolis, MN 55440-0534. Read it
carefully before you invest or send money.
<PAGE>
PAGE 38
Federal income tax information
IDS Insured Tax-Exempt Fund
_____________________________________________________
The Fund is required by the Internal Revenue Code of
1986 to tell its shareholders about the tax treatment
of the dividends it pays during its fiscal year. Some
of the dividends listed below were reported to you on
your year-end statement, last January. Dividends paid
to you since the end of last year will be reported to
you on a tax statement sent next January.
IDS Insured Tax-Exempt Fund
Fiscal year ended June 30, 1996
Class A
Exempt-interest dividends -- taxable status
explained below.
Payable date Per share
July 26, 1995 $0.02311
Aug. 25, 1995 0.02328
Sept. 25, 1995 0.02458
Oct. 26, 1995 0.02395
Nov. 27, 1995 0.02487
Dec. 27, 1995 0.02294
Jan. 25, 1996 0.02218
Feb. 26, 1996 0.02607
March 27, 1996 0.02316
April 26, 1996 0.02376
May 28, 1996 0.02388
June 26, 1996 0.02300
Total $0.28478
Taxable dividend -- short-term capital
gain taxable as dividend income.
Payable date Per share
Dec. 27, 1995 $0.00967
Capital gain distribution -- taxable as
long-term capital gain.
Payable date Per share
Dec. 27, 1995 $0.00833
Total distribtuions $0.30278
<PAGE>
PAGE 39
Class B
Exempt-interest dividends -- taxable status
explained below.
Payable date Per share
July 26, 1995 $0.01978
Aug. 25, 1995 0.01998
Sept. 25, 1995 0.02110
Oct. 26, 1995 0.02044
Nov. 27, 1995 0.02120
Dec. 27, 1995 0.01945
Jan. 25, 1996 0.01879
Feb. 26, 1996 0.02233
March 27, 1996 0.01972
April 26, 1996 0.02040
May 28, 1996 0.02031
June 26, 1996 0.01976
Total $0.24326
Taxable dividend -- short-term capital
gain taxable as dividend income.
Payable date Per share
Dec. 27, 1995 $0.00967
Capital gain distribution -- taxable
as long-term capital gain.
Payable date Per share
Dec. 27, 1995 $0.00833
Total distributions $0.26126
Class Y
Exempt-interest dividends -- taxable status
explained below.
Payable date Per share
July 26, 1995 $0.02394
Aug. 25, 1995 0.02410
Sept. 25, 1995 0.02570
Oct. 26, 1995 0.02478
Nov. 27, 1995 0.02583
Dec. 27, 1995 0.02409
Jan. 25, 1996 0.02282
Feb. 26, 1996 0.02698
March 27, 1996 0.02365
April 26, 1996 0.02458
May 28, 1996 0.02452
June 26, 1996 0.02369
Total $0.29468<PAGE>
PAGE 40
Taxable dividend -- short-term capital
gain taxable as dividend income.
Payable date Per share
Dec. 27, 1995 $0.00967
Capital gain distribution -- taxable as
long-term capital gain.
Payable date Per share
Dec. 27, 1995 $0.00833
Total distributions $0.31268
Source of distributions
Distributions during the fiscal year ended June 30, 1996, were
derived exclusively from interest on tax-exempt securities.
Federal taxation
Exempt-interest dividends are exempt from federal income taxes and
should not be included in shareholders' gross income.
Other taxation
Exempt-interest dividends may be subject to state and local taxes.
Each shareholder should consult a tax advisor about reporting this
income for state and local tax purposes.
Source of income by state
Percentages of income from municipal securities earned by the Fund
from various states during the fiscal year ended June 30, 1996 are
listed below.
Alabama 0.721%
Arizona 1.537
California 11.491
Colorado 3.023
Connecticut 0.019
Delaware 0.227
Florida 4.117
Georgia 2.828
Illinois 4.081
Indiana 2.159
Kentucky 0.182
Louisiana 1.912
Maine 0.351
Maryland 0.876
Massachusetts 4.786
Michigan 3.196
Minnesota 1.671
Mississippi 0.274
Missouri 1.372
Montana 1.982
Nebraska 0.626<PAGE>
PAGE 41
Nevada 0.917
New Hampshire 1.193
New Jersey 0.110
New Mexico 0.556
New York 7.941
North Carolina 2.408
Ohio 1.193
Oklahoma 1.271
Oregon 0.087
Pennsylvania 4.007
South Carolina 0.204
Tennessee 1.269
Texas 19.054
Utah 0.499
Virginia 3.075
Washington 1.976
Washington, DC 3.708
West Virginia 2.846
Wisconsin 0.205
Wyoming 0.050<PAGE>
PAGE 42
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
Your IDS financial advisor:
IDS INSURED TAX-EXEMPT FUND
IDS Tower 10
Minneapolis, MN 55440-0010
<PAGE>
PAGE 43
STATEMENT OF DIFFERENCES
Difference Description
1) The layout is different 1) Some of the layout in the
throughout the annual report. annual report to
shareholders is in two
columns.
2) Headings. 2) The headings in the
annual report and
prospectus are placed
in blue strip at the top
of the page.
3) There are pictures, icons 3) Each picture, icon and
and graphs throughout the graph is described in
annual report and prospectus. parentheses.
4) Footnotes for charts and 4) The footnotes for each
graphs are described at chart or graph are typed
the left margin. below the description of
the chart or graph.
