Page
IDS Insured
Tax-Exempt
Fund
1995 semiannual report
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.
Distributed by
American Express
Financial Advisors Inc.
No-default insurance
Any investment involves risks. For a municipal bond investor, there's the
risk that the bond issurer 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 all principal and interest due to investors will be
paid. Along the way, shareholders enjoy regular income that is generally
free from federal income tax.
Contents
From the president 3
From the portfolio manager 3
Ten largest holdings 5
Financial statements 6
Notes to financial statements 9
Investments in securities 17
Board members and officers 28
IDS mutual funds 29
To our shareholders
William R. Pearce
President of the Fund
Paul B. Hylle
Portfolio manager
From the president
If you're an experienced investor, you know that 1995 was an unusually
strong year for the U.S. financial markets. Perhalps just as impor-tant,
you also know that history shows that bull markets don't last forever.
Though they're often unpredictable, declines - whether they're brief or
long-lasting, moderate or substantial - are always a possibility.<PAGE>
That fact reinforces the need for investors to review periodically their
long-term goals and assess whether their investment program remains on
track to achieving them. Your quarterly investment statements are one
part of that monitoring process. The other is a meeting with your
American Express financial advisor. That becomes even more important if
there's a major change in your financial situation or in the financial
markets.
William R. Pearce
From the portfolio manager
The bond market followed up its stellar performance during the first half
of 1995 with another strong advance in the second six months. IDS Insured
Tax-Exempt Fund took good advantage of the ongoing positive environment to
generate a total return of approximately 8% (Class A shares) for the July
through December 1995 period, which marked the first half of the Fund's
current fiscal year.
As was true earlier in 1995, bonds continued to benefit from two critical
factors during the past several months: 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 Board 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 throughout nearly all of 1995. 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.
This Fund was particularly well-positioned to benefit from the favorable
environment because of our decision to emphasize municipal bonds with
longer-than-average maturities. This strategy makes a portfolio more
sensitive to interest-rate swings. Therefore, when rates came down, this
Fund enjoyed a performance boost.
The only thing to mar the otherwise excellent investment environment was
talk about the possibility of a flat federal income tax. Because a flat
tax would reduce municipal bonds'tax-free-income advantage, municipals
came under some selling pressure at times. Our view is that major tax
reform, if it ever becomes a reality, would not occur before next year.
Moderate suppy, solid demand
While the overall supply/demand situation for municipal bonds remained
favorable during the period, occasionally there were pockets of excess
supply in certain states. In such cases, bond prices came down, which
allowed us to add securities at lower-than-normal prices. Lastly, we kept
cash reserves at a low level. This also proved to be productive as the
returns we realized from our bond holdings far exceeded the modest amount
available from cash-equivalent investments.<PAGE>
Although we don't expect such spectacular results in 1996, we are
encouraged by the fact that the fundamentals that led to the bond
market's recent success are largely unchanged as we enter the second half
of the Fund's fiscal year. The economy continues to grow at a modest
pace; inflation remains at an acceptable level; and long-term interest
rates have yet to break out of the stable-to-declining path they've been
on for some time. The biggest question mark at this time (mid-January) is
the budget battle in Washington. While we think it's unlikely to occur,
an ongoing stalemate could derail the bond market at some point. Barring
that, however, we look for positive performance from municipal bonds in
the months ahead.
Paul B. Hylle
Class A
6-month performance
(All figures per share)
Net asset value (NAV)
Dec. 31, 1995 $5.70
June 30, 1995 $5.40
Increase $0.30
Distributions
July 1, 1995 - Dec. 31, 1995
From income $0.16
From capital gains $ --
Total distributions $0.16
Total return* +8.7%*
Class B
6-month performance
(All figures per share)
Net asset value (NAV)
Dec. 31, 1995 $5.70
June 30, 1995 $5.40
Increase $0.30
Distributions
July 1, 1995 - Dec. 31, 1995
From income $0.14
From capital gains $ --
Total distributions $0.14
Total return* +8.2%*
<PAGE>
Class Y
6-month performance
(All figures per share)
Net asset value (NAV)
Dec. 31, 1995 $5.70
June 30, 1995 $5.41
Increase $0.29
Distributions
July 1, 1995 - Dec. 31, 1995
From income $0.17
From capital gains $ --
Total distributions $0.17
Total return* +8.7%*
*The prospectus discusses the effects 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
<TABLE>
<CAPTION>
IDS Insured Tax-Exempt Fund
Your Fund's ten largest holdings
_____________________________________________________________________________________
Percent Value
(of Fund's net assets) (as of Dec. 31, 1995)
_____________________________________________________________________________________
<S> <C> <C>
Brazo River Texas Authority Collateralized Pollution
Control Refunding Revenue Bonds Texas Utility Electric
Series 1992C
6.70% 2022 2.99% $16,255,254
Denver City & County Airport Revenue Bonds
Series B A.M.T.
5.75% 2017 2.47 13,414,394
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 2.08 11,285,443
Pittsburgh, Pennsylvania Water & Sewer Authority
Water & Sewer System Pre-Refunding Revenue Bonds
Series 1991A
6.50% 2014 2.07 11,269,500
District of Columbia Metropolitan Washington Airports
Authority Airport System Revenue Bonds Series 1992A A.M.T.
6.625% 2019 1.87 10,168,607
Colorado River Texas Municipal Water District
Water System Pre-Refunded Revenue Bonds Series A
6.625% 2021 1.81 9,844,112
San Diego County California Certificate of Participation
Regional Authority Bonds Series 1991 Mt. Tower
Linked Inverse Floater
6.363% 2019 1.74 9,430,920
Harris County Texas Toll Road Senior Lien Pre-Refunded
Revenue Bonds Series A
6.50% 2017 1.71 9,284,225
Austin Texas Combined Utilitiesy System Refunding
Revenue Bonds Series 1994
5.75% 2024 1.59 8,647,050
Florida State Turnpike Authority Department of Transportation
Series A
5.50% 2021 1.52 8,255,483
</TABLE>
<PAGE>
PAGE
<TABLE>
<CAPTION>
Financial statements
Statement of assets and liabilities
IDS Insured Tax-Exempt Fund
Dec. 31, 1995
_____________________________________________________________________________________________________________
Assets
_____________________________________________________________________________________________________________
(Unaudited)
<S> <C>
Investments in securities, at value (Note 1)
(identified cost $489,840,916) $538,913,894
Accrued interest receivable 9,371,699
Receivable for investment securities sold 88,250
_____________________________________________________________________________________________________________
Total assets 548,373,843
_____________________________________________________________________________________________________________
Liabilities
_____________________________________________________________________________________________________________
Disbursements in excess of cash on demand deposit 719,579
Dividends payable to shareholders 150,665
Payable for investment securities purchased 4,036,204
Accrued investment management services fee 13,311
Accrued distribution fee 632
Accrued service fee 5,177
Accrued transfer agency fee 1,417
Accrued administrative services fee 1,183
Other accrued expenses 38,052
_____________________________________________________________________________________________________________
Total liabilities 4,966,220
_____________________________________________________________________________________________________________
Net assets applicable to outstanding shares $543,407,623
_____________________________________________________________________________________________________________
Represented by
_____________________________________________________________________________________________________________
Shares of beneficial interest - $.01 par value, unlimited number of shares authorized $ 954,119
Additional paid-in capital 501,504,610
Undistributed net investment income 2,416
Accumulated net realized loss (Note 1) (8,440,530)
Unrealized appreciation (Note 5) 49,387,008
_____________________________________________________________________________________________________________
Total -- representing net assets applicable to outstanding shares $543,407,623
_____________________________________________________________________________________________________________
Net assets applicable to outstanding shares: Class A $527,895,360
Class B $ 15,511,168
Class Y $ 1,095
Net asset value per share of outstanding shares: Class A shares 92,689,350 $ 5.70
Class B shares 2,722,365 $ 5.70
Class Y shares 192 $ 5.70
See accompanying notes to financial statements.<PAGE>
PAGE
Financial statements
Statement of operations
IDS Insured Tax-Exempt Fund
Six months ended Dec. 31, 1995
_____________________________________________________________________________________________________________
Investment income
_____________________________________________________________________________________________________________
(Unaudited)
Income:
Interest $15,347,061
_____________________________________________________________________________________________________________
Expenses (Note 2):
Investment management services fee 1,173,185
Distribution fee - Class B 40,582
Transfer agency fee 129,968
Incremental transfer agency fee - Class B 250
Service fee
Class A 445,002
Class B 9,466
Administrative services fee 103,347
Compensation of board members 8,293
Compensation of officers 2,934
Custodian fees 15,445
Postage 22,173
Registration fees 41,274
Reports to shareholders 4,677
Audit fees 8,750
Administrative 1,803
Other 5,187
_____________________________________________________________________________________________________________
Total expenses 2,012,336
Earnings credits on cash balances (Note 2) (1,131)
_____________________________________________________________________________________________________________
Total net expenses 2,011,205
_____________________________________________________________________________________________________________
Investment income -- net 13,335,856
_____________________________________________________________________________________________________________
Realized and unrealized gain -- net
_____________________________________________________________________________________________________________
Net realized gain on security transactions (Note 3) 2,933,908
Net realized gain on closed interest rate futures contracts 2,780,730
_____________________________________________________________________________________________________________
Net realized gain on investments 5,714,638
Net change in unrealized appreciation or depreciation 24,369,130
_____________________________________________________________________________________________________________
Net gain on investments 30,083,768
_____________________________________________________________________________________________________________
Net increase in net assets resulting from operations $43,419,624
_____________________________________________________________________________________________________________
See accompanying notes to financial statements.<PAGE>
PAGE
</TABLE>
<TABLE>
<CAPTION>
Financial statements
Statements of changes in net assets
IDS Insured Tax-Exempt Fund
_____________________________________________________________________________________________________________
Operations and distributions Dec. 30, 1995 June 30, 1995
_____________________________________________________________________________________________________________
Six months ended Year ended
(Unaudited)
<S> <C> <C>
Investment income -- net $ 13,335,856 $ 28,730,570
Net realized (gain) loss on investments 5,714,638 (9,678,666)
Net change in unrealized appreciation or depreciation 24,369,130 12,668,289
_____________________________________________________________________________________________________________
Net increase in net assets resulting from operations 43,419,624 31,720,193
_____________________________________________________________________________________________________________
Distributions to shareholders from:
Net investment income
Class A (13,100,196) (28,692,222)
Class B (238,948) (40,346)
Class Y (28) (10)
Net realized gain
Class A (1,659,686) --
Class B (48,604) --
Class Y (3) --
_____________________________________________________________________________________________________________
Total distributions (15,047,465) (28,732,578)
_____________________________________________________________________________________________________________
Share transactions (Note 4)
_____________________________________________________________________________________________________________
Proceeds from sales
Class A shares (Note 2) 21,599,882 74,499,609
Class B shares 9,071,997 6,369,393
Class Y shares -- 1,020
Reinvestment of distributions at net asset value
Class A shares 10,664,937 20,325,958
Class B shares 231,919 31,095
Class Y shares 31 10
Payments for redemptions
Class A shares (36,660,573) (118,788,670)
Class B shares (Note 2) (711,372) (26,911)
_____________________________________________________________________________________________________________
Increase (decrease) in net assets from share transactions 4,196,821 (17,588,496)
_____________________________________________________________________________________________________________
Total increase (decrease) in net assets 32,568,980 (14,600,881)
Net assets at beginning of period 510,838,643 525,439,524
_____________________________________________________________________________________________________________
Net assets at end of period
(including undistributed net investment income of
$2,416 and $5,732) $543,407,623 $510,838,643
_____________________________________________________________________________________________________________
See accompanying notes to financial statements.
/TABLE
<PAGE>
PAGE
Notes to financial statements
IDS Insured Tax-Exempt Fund
(Unaudited As to Dec. 31, 1995)
________________________________________________________________________
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, 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) 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>
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.
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 affect 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 Dec. 31, 1995, the Fund had entered into outstanding
when-issued or forward commitments of $4,036,204.<PAGE>
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 purposes. Also, due to the
timing of dividend distributions, the fiscal year in which amounts are
distributed may differ from the year that the income or realized gains
(losses) were recorded by the Fund.
Dividends to shareholders
Dividends from net investment income, declared daily and payable
monthly, are reinvested in additional shares of the Fund at net asset
value or payable in cash. Capital gains, when available, are distributed
along with the last income dividend of the calendar year.
Other
Security transactions are accounted for on the date securities are
purchased or sold. Interest income, including level-yield amortization
of premium and discount, is accrued daily.
At Dec. 31, 1995, AEFC owned 192 Y shares.
________________________________________________________________________
2. Expenses and sales charges
Effective March 20, 1995, when the Fund Began offering multiple classes
of shares, the Fund entered into agreement with AEFC for managing its
portfolio, providing 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 follows:
o Class A $15.50
o Class B $16.50
o Class Y $15.50
<PAGE>
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 a Plan and
Agreement of Distribution, the Fund pays a distribution fee at an annual
rate of 0.75% of the Fund's average daily net assets attributable to
Class B shares for distribution-related services.
Under a Shareholder Service Agreement, the Fund pays a fee for service
provided to shareholders by financial advisors and other servicing
agents. The fee is calculated at a rate of 0.175% of the Fund's average
daily net assets attributable to Class A and Class B shares.
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 $629,581 for Class A and $6 for Class B
for the six months ended Dec. 31, 1995.
During the six months ended Dec. 31, 1995, the Fund's custodian and
transfer agency fees were reduced by $1,131 as a result of earnings
credits from overnight cash balances.
The Fund has a retirement plan for its independent board members. Upon
retirement, board members receive monthly payments equal to one-half of
the retainer fee for as many months as they served as board members 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 board
members serve on the board. The retirement plan expense amounted to
$796 for the six months ended Dec. 31, 1995.
________________________________________________________________________
3. Securities transactions
Cost of purchases and proceeds from sales of securities (other than
short-term obligations) aggregated $156,624,216 and $150,042,854,
respectively, for the six months ended Dec. 31, 1995. Realized gains
and losses are determined on an identified cost basis.
________________________________________________________________________
4. Capital share transactions
Transactions in shares of the Fund for the periods indicated are as
follows:
<TABLE>
<CAPTION>
______________________________________________________________________________
Six months ended Dec. 31, 1995
Class A Class B Class Y
______________________________________________________________________________
<S> <C> <C> <C>
Sold 3,925,296 1,649,545 --
Issued for reinvested 1,931,077 41,795 6
distributions
Redeemed (6,668,461) (129,440) --
______________________________________________________________________________
Net increase (decrease) (812,088) 1,561,900 6
______________________________________________________________________________
<PAGE>
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. Interest rate futures contracts
At Dec. 31, 1995, investments in securities included securities valued
at $9,000,890 that were pledged as collateral to cover initial margin
deposit on 330 purchase contracts. The market value of the open
contracts on Dec. 31, 1995 was $39,988,000 with a net unrealized gain
of $314,030. The Fund maintains, in a segregated account with its
custodian, securities with at least a market value equal to the value of
these open long futures contracts.
<PAGE>
6. Financial highlights
The table below shows certain important financial
information for evaluating the Fund's results.
<TABLE>
<CAPTION>
Fiscal period ended June 30,
Per share income and capital changes*
Class A
1995** 1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C> <C>
Net asset value, $5.40 $5.35 $5.63 $5.33 $5.04 $4.96
beginning of period
Income from investment operations:
Net investment income .14 .30 .30 .30 .31 .32
Net gains (losses) .32 .05 (.28) .30 .29 .08
(both realized and unrealized)
Total from investment .46 .35 .02 .60 .60 .40
operations
Less distributions:
Dividends from net (.14) (.30) (.30) (.30) (.31) (.32)
investment income
Dividends from (.02) -- -- -- -- --
realized gains
Total distributions (.16) (.30) (.30) (.30) (.31) (.32)
Net asset value, $5.70 $5.40 $5.35 $5.63 $5.33 $5.04
end of period
Ratios/supplemental data
1995** 1995 1994 1993 1992 1991
Net assets, end of period $528 $505 $525 $464 $308 $195
(in millions)
Ratio of expenses to .76%+ .66% .65% .65% .67% .67%
average daily net assets
Ratio of net income 5.14%+ 5.66% 5.32% 5.53% 6.06% 6.36%
to average daily net assets
Portfolio turnover rate 29% 53% 37% 5% 11% 8%
(excluding short-term
securities)
Total return++ 8.7% 6.7% 0.3% 11.7% 12.3% 8.1%
*For a share outstanding throughout the period.
Rounded to the nearest cent.
**Six months ended Dec. 31, 1995 (Unaudited).
+Adjusted to an annual basis.
++Total return does not reflect payment of a sales
charge.
/TABLE
<PAGE>
Financial highlights
The table below shows certain important financial
information for evaluating the Fund's results.
<TABLE>
<CAPTION>
Fiscal period ended June 30,
Per share income and capital changes*
Class B Class Y
1995*** 1995** 1995*** 1995**
<S> <C> <C> <C> <C>
Net asset value, $5.40 $5.47 $5.41 $5.47
beginning of period
Income from investment operations:
Net investment income .12 .09 .15 .08
Net gains (losses) .32 (.07) .31 (.06)
(both realized
and unrealized)
Total from investment .44 .02 .46 .02
operations
Less distributions:
Dividends from net (.12) (.09) (.15) (.08)
investment income
Dividends from (.02) -- (.02) --
realized gains
Total distributions (.14) (.09) (.17) (.08)
Net asset value, $5.70 $5.40 $5.70 $5.41
end of period
Ratios/supplemental data
1995*** 1995** 1995*** 1995**
Net assets, end of period $16 $6 $-- $ --
(in millions)
Ratio of expenses to 1.52%+ 1.49%+ .58%+ .54%+
average daily net assets
Ratio of net income 4.42%+ 4.72%+ 5.40%+ 5.38%+
to average daily net assets
Portfolio turnover rate 29% 53% 29% 53%
(excluding short-term
securities)
Total return++ 8.2% 0.4% 8.7% 0.4%
*For a share outstanding throughout the period.
Rounded to the nearest cent.
**Inception date. Period from March 20, 1995 to
March 31, 1995.
***Six months ended Dec. 31, 1995 (Unaudited).
+Adjusted to an annual basis.
++Total return does not reflect payment of a sales
charge.
/TABLE
<PAGE>
PAGE
<TABLE>
<CAPTION>
Investments in securities
IDS Insured Tax-Exempt Fund (Percentages represent value of
Dec. 31, 1995 (Unaudited) investments compared to net assets)
_____________________________________________________________________________________________________________________________
Municipal bonds (98.1%)
_____________________________________________________________________________________________________________________________
Name of issuer and title of issue (b,c,d) Coupon Maturity Principal Value(a)
rate year amount
_____________________________________________________________________________________________________________________________
<S> <C> <C> <C> <C>
Alabama (0.6%)
Mobile General Obligation Capital Improvement Warrants Convention Center
Pre-Refunded Bonds Series 1990 (AMBAC Insured) 7.125% 2020 $ 3,000,000 $ 3,417,600
_____________________________________________________________________________________________________________________________
Arizona (1.7%)
Chandler Water & Sewer Refunding Revenue Bonds Series 1991 (FGIC Insured) 7.00 2012 1,250,000 1,407,425
Health Facilities Authority Hospital System Refunding Revenue Bonds
Phoenix Baptist Hospital Series 1992 (MBIA Insured) 6.25 2011 1,650,000 1,776,687
Phoenix Civic Improvement Wastewater System Lease Refunding Revenue Bonds
(Secondary MBIA Insured) 4.75 2023 4,500,000 4,188,645
Phoenix Civic Improvement Wastewater System Lease Refunding Revenue Bonds
(Secondary MBIA Insured) 5.50 2024 1,500,000 1,510,710
State University Research Park Development Refunding Bonds Series 1995
(MBIA Insured) 5.00 2021 625,000 604,025
____________
Total 9,487,492
_____________________________________________________________________________________________________________________________
California (11.2%)
Desert Sands Unified School District Convertible Capital Appreciation
Certificates Series 1995 Zero Coupon (FSA Insured) 6.45 2020 3,000,000 (e) 2,205,570
Eastern Municipal Water District Riverside County Water & Sewer
Pre-Refunded Revenue Certificates of Participation Series 1991
(FGIC Insured) 6.50 2020 5,460,000 6,155,549
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) 5,370,120
Fresno Health Facility Revenue Bonds Holy Cross-St. Agnes
(Secondary MBIA Insured) 6.625 2021 2,000,000 2,180,280
Los Angeles County Metropolitan Transit Authority Proposition C Sales Tax
Revenue Bonds (AMBAC Insured) 5.00 2025 1,500,000 1,446,225
Los Angeles Department of Airports Revenue Bonds
Los Angeles International Airport Series D (FGIC Insured) 5.50 2015 2,500,000 2,533,625
Los Angeles Department of Water & Power Waterworks
Refunding Revenue Bonds Second Issue (Secondary FGIC Insured) 4.50 2023 2,000,000 1,780,660
Los Angeles Multi-family Housing Revenue Bonds Earthquake Rehabilitation
Series B (FMNA Insured) A.M.T. 5.85 2027 4,625,000 4,724,345
Northern California Transmission Select Auction
Variable Rate Security & Residual Interest Revenue Bonds
Inverse Floater 5.50 2024 2,500,000 (f) 2,482,050
Oceanside Certificate of Participation Refunding Bonds
Oceanside Civic Center (MBIA Insured) 5.25 2019 1,730,000 1,695,521
Orange County Redevelopment Agency Tax Allocation
Refunding Revenue Bonds Southwest Redevelopment Series A (AMBAC Insured) 5.70 2023 3,000,000 3,052,830
San Diego County Certificate of Participation Regional Authority Bonds
Series 1991 Mt. Tower Inverse Floater (MBIA Insured) 6.363 2019 9,000,000 (f) 9,430,920
See accompanying notes to investments in securities.<PAGE>
San Jose Redevelopment Agency Merged Area Redevelopment
Tax Allocation Bonds Series 1993 (MBIA Insured) 4.75 2024 2,400,000 2,226,624
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 1,532,070
Southern California Public Power Authority San Juan Revenue Bonds
Series A (MBIA Insured) 5.00 2020 3,500,000 3,358,320
State Public Works Board Lease Revenue Bonds University of California
Series A (AMBAC Insured) 6.40 2016 2,000,000 2,161,100
State Unlimited Tax General Obligation Bonds (Secondary FGIC Insured) 4.75 2023 2,500,000 2,321,925
Statewide Community Development Authority Certificate of Participation
Sutter Health Obligated Group (MBIA Insured) 5.50 2022 6,250,000 6,214,938
____________
Total 60,872,672
_____________________________________________________________________________________________________________________________
Colorado (2.8%)
Denver City & County Airport Revenue Bonds Series B (MBIA Insured) A.M.T. 5.75 2017 13,290,000 13,414,394
Douglas County School District General Obligation Improvement Bonds
Series 1994A (MBIA Insured) 6.50 2016 1,500,000 1,679,745
____________
Total 15,094,139
_____________________________________________________________________________________________________________________________
Delaware (0.2%)
Health Facilities Authority Refunding Revenue Bonds
Medical Center of Delaware Series 1989 (MBIA Insured) 7.00 2015 1,000,000 1,105,260
_____________________________________________________________________________________________________________________________
District of Columbia (3.1%)
Howard University Revenue Bonds Series A (MBIA Insured) 8.00 2017 1,500,000 1,626,180
Metropolitan Washington Airports Authority Airport System
Revenue Bonds Series 1992A (MBIA Insured) 6.625 2019 9,420,000 10,168,607
Metropolitan Washington Airports Authority Airport System
Revenue Bonds Series 1994A (MBIA Insured) A.M.T. 5.50 2024 3,000,000 2,936,100
Unlimited Tax General Obligation Refunding Bonds Series B-2
(FSA Insured) 5.50 2010 2,000,000 2,013,780
____________
Total 16,744,667
_____________________________________________________________________________________________________________________________
Florida (3.6%)
Department of Transportation Turnpike Revenue Bonds Series 1991A
(AMBAC Insured) 6.25 2020 1,250,000 1,313,350
Florida State Turnpike Authority Department of Transportation Series A
(FGIC Insured) 5.50 2021 8,210,000 8,255,483
Fort Myers Utility System Refunding Revenue Bonds Series 1989A
(BIG Insured) 6.00 2019 2,000,000 2,046,920
Gulf Breeze Local Government Loan Program Boca Raton Series 1985E
(FGIC Insured) 7.75 2015 2,000,000 2,274,900
Orange County Health Facility Authority Revenue Bonds Series 1995
Adventist Health System Sunbelt Obligated Group (AMBAC Insured) 5.25 2020 1,250,000 1,226,100
Osceola County Transportation Pre-Refunded Revenue Bonds
Series 1988A (FGIC Insured) 7.70 2013 1,215,000 1,335,370
Palm Beach County Solid Waste Authority Revenue Bonds Series 1984
(BIG Insured) 8.375 2010 500,000 545,165
South Bay Correctional Facility Finance
Correctional Privatization Commission (MBIA Insured) 5.00 2017 1,350,000 1,311,741
State Correctional Privatization Commission Certificate of Participation
Youth Offender Correctional Facility Polk County Series 1995B 5.00 2017 1,000,000 964,140
____________
Total 19,273,169
_____________________________________________________________________________________________________________________________<PAGE>
Georgia (2.6%)
Atlanta Metropolitan Rapid Transit Authority Sales Tax
Pre-Refunded Revenue Bonds Series L (AMBAC Insured) 7.20 2020 3,000,000 3,354,930
Chatham County Hospital Authority Revenue Bonds Memorial Medical Center
Series 1990A (MBIA Insured) 7.00 2021 4,500,000 5,056,110
Fulton County Water & Sewer Revenue Bonds Non-Callable (FGIC Insured) 6.375 2014 3,250,000 3,751,118
Municipal Electrical Authority Power Revenue Bonds Series M (BIG Insured) 8.10 2012 1,080,000 1,146,409
Municipal Electrical Authority Special Obligation Refunding Bonds
2nd Crossover Series (AMBAC Insured) 7.80 2020 500,000 543,575
____________
Total 13,852,142
_____________________________________________________________________________________________________________________________
Illinois (3.7%)
Chicago O'Hare International Airport General Refunding Revenue Bonds
Second Lien Series A (MBIA Insured) 6.375 2015 5,000,000 5,466,050
Chicago O'Hare International Airport General Revenue Bonds Series 1990A
(AMBAC Insured) A.M.T. 7.50 2016 2,000,000 2,214,600
Chicago O'Hare International Airport Terminal Revenue Bonds (MBIA Insured) 7.625 2010 3,000,000 3,334,200
Chicago Public Building Commission Pre-Refunded Revenue Bonds
(MBIA Insured) A.M.T. 7.70 2008 1,000,000 1,110,440
Chicago Public Building Commission Pre-Refunded Revenue Bonds
Series 1989A (FGIC Insured) 7.75 2006 1,000,000 1,121,750
Chicago Public Building Commission Pre-Refunded Revenue Bonds
Series 1990A (MBIA Insured) 7.125 2015 5,000,000 5,695,550
Northern Cook County Solid Waste Agency Contract Revenue Bonds
(MBIA Insured) 6.50 2012 1,200,000 1,299,312
____________
Total 20,241,902
_____________________________________________________________________________________________________________________________
Indiana (2.0%)
Educational Facilities Authority Pre-Refunded Bonds Valpraiso University
(BIG Insured) 7.80 2008 500,000 558,305
Marion County Hospital Authority Refunding Revenue Bonds Methodist Hospital
Series 1989 (MBIA Insured) 6.50 2013 4,000,000 4,223,920
State Health Facility Finance Authority Hospital Refunding Revenue Bonds
Columbus Regional Hospital Series 1993 (CGIC Insured) 7.00 2015 5,000,000 6,042,700
____________
Total 10,824,925
_____________________________________________________________________________________________________________________________
Kentucky (0.1%)
Jefferson County Multi-family Housing Revenue Bonds Brownsboro Gardens
Series 1986A (FHA Insured) A.M.T. 8.00 2026 390,000 402,082
Louisville & Jefferson County Airport Authority System Revenue Bonds
(MBIA Insured) A.M.T. 8.50 2017 300,000 323,715
____________
Total 725,797
_____________________________________________________________________________________________________________________________
Louisiana (1.7%)
Energy & Power Authority Power Refunding Revenue Bonds Rodemacher Unit #2
Series 1991 (FGIC Insured) 6.75 2008 7,000,000 7,804,230
New Orleans Audubon Park Commission Aquarium Pre-Refunded Bonds
Series 1988 (MBIA Insured) 7.90 2008 500,000 543,815
New Orleans International Airport Pre-Refunded Revenue Bonds Series A
(FGIC Insured) 8.875 2017 565,000 618,494
____________
Total 8,966,539
_____________________________________________________________________________________________________________________________<PAGE>
Maine (0.3%)
State Turnpike Authority Turnpike Revenue Bonds (MBIA Insured) 6.00 2018 1,790,000 1,881,111
_____________________________________________________________________________________________________________________________
Maryland (1.0%)
Baltimore Refunding Revenue Bonds Wastewater Series 1994A
(FGIC Insured) 5.00 2022 1,000,000 984,120
Health & Higher Educational Facilities Authority Revenue Bonds
Frederick Memorial Hospital Series 1993 (FGIC Insured) 5.00 2028 4,750,000 4,474,215
____________
Total 5,458,335
_____________________________________________________________________________________________________________________________
Massachusetts (5.0%)
Boston Water & Sewer Commission Revenue Bonds General Subordinate Series A
(BIG Insured) 6.00 2008 2,500,000 2,591,300
Health & Educational Authority Revenue Bonds Mercy Hitchcock Memorial Hospital
Obligation Group Cooley Dickinson Hospital (AMBAC Insured) 5.50 2025 3,750,000 3,733,388
Health & Educational Authority Revenue Bonds Valley Regional Health System
Series C (Connie Lee Insured) 5.75 2018 1,500,000 1,523,640
Health & Educational Facilities Authority Pre-Refunded Revenue Bonds
Lahey Clinic Medical Center (MBIA Insured) 7.625 2018 2,200,000 2,429,284
Health & Educational Facilities Authority Pre-Refunded Revenue Bonds
Northeastern University Series 1989C (AMBAC Insured) 7.10 2006 1,000,000 1,109,420
Industrial Finance Agency Revenue Bonds Brandeis University (MBIA Insured) 6.80 2019 1,700,000 1,876,647
Milford General Obligation Bonds School Purpose Loan Series 1995
(AMBAC Insured) 5.125 2014 1,050,000 1,026,931
Municipal Wholesale Electric Power Supply System Refunding Revenue Bonds
Series B (MBIA Insured) 4.75 2011 5,250,000 5,000,625
Quincy Refunding Revenue Bonds Quincy Hospital Series 1993 (FSA Insured) 5.25 2016 2,235,000 2,191,507
State Health & Educational Facilities Authority Revenue Bonds
Cape Cod Health System Series A (Connie Lee Insured) 5.25 2021 4,000,000 3,867,920
State Water Resource Authority Revenue Bonds Series A (MBIA Insured) 5.50 2022 2,000,000 1,986,140
____________
Total 27,336,802
_____________________________________________________________________________________________________________________________
Michigan (3.6%)
Dearborn Municipal Building Authority Long-Term General Obligation Bonds
(AMBAC Insured) 5.00 2016 3,800,000 3,728,332
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 1,981,160
Hartford Public School District General Obligation Bonds (MBIA Insured) 5.25 2025 1,375,000 1,332,898
Hemlock Public School District General Obligation Bonds
Saginaw & Midland Counties Series 1996 (MBIA Insured) 5.25 2021 1,195,000 (g) 1,170,323
Ionia Public School Unlimited Tax General Obligation Bonds (AMBAC Insured) 5.30 2025 1,100,000 1,077,472
Kalamazoo Hospital Finance Authority Refunding & Improvement Bonds
Bronson Methodist Hospital (Secondary MBIA Insured) 6.25 2012 3,000,000 3,262,710
Monroe County Pollution Control Refunding Bonds Detroit Edison Series I-B
(MBIA Insured) 6.55 2024 5,000,000 5,449,650
Sandusky County School District Refunding Bonds (AMBAC Insured) 5.25 2021 1,000,000 984,770
Wayne County Charter Airport Revenue Bonds
Detroit Metropolitan Wayne County Airport (FGIC Insured) A.M.T. 8.00 2014 675,000 712,638
____________
Total 19,699,953
_____________________________________________________________________________________________________________________________<PAGE>
Minnesota (1.7%)
Southern Minnesota Municipal Power Agency Power Revenue Bonds
Series A (Secondary FGIC Insured) 4.75 2016 4,250,000 3,983,738
Western Municipal Power Agency Transmission Pre-Refunded Revenue
Bonds Series 1991 (AMBAC Insured) 6.75 2016 4,500,000 4,995,585
____________
Total 8,979,323
_____________________________________________________________________________________________________________________________
Mississippi (0.3%)
Alcorn County Hospital Refunding Revenue Bonds
Magnolia Regional Hospital Center (AMBAC Insured) 5.75 2013 1,760,000 1,831,597
_____________________________________________________________________________________________________________________________
Missouri (0.8%)
Kansas City School District Insured Leasehold Revenue Bonds
Capital Improvement (FGIC Insured) 5.00 2014 2,000,000 1,967,180
St. Louis Municipal Finance Leasehold Improvement Revenue Bonds
St. Louis Civil Courts Building Series 1994 (FGIC Insured) 5.75 2013 2,065,000 2,166,763
____________
Total 4,133,943
_____________________________________________________________________________________________________________________________
Montana (1.8%)
Forsyth Rosebud County Pollution Refunding Revenue Bonds
Puget Sound Power & Light (AMBAC Insured) A.M.T. 7.25 2021 4,000,000 (h) 4,559,840
State Board of Investments Payroll Tax Bonds Worker's Compensation Program
Series 1991 (MBIA Insured) 6.875 2020 4,750,000 5,322,802
____________
Total 9,882,642
_____________________________________________________________________________________________________________________________
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 4,851,000
_____________________________________________________________________________________________________________________________
New Hampshire (1.0%)
Industrial Development Authority Pollution Control Revenue Bonds
Light & Power Series 1989 (AMBAC Insured) A.M.T. 7.375 2019 5,000,000 (h) 5,587,650
_____________________________________________________________________________________________________________________________
New Mexico (0.7%)
Las Cruces Revenue Bonds Series 1995 (MBIA Insured) 5.50 2015 1,000,000 1,001,330
Rio Rancho Water & Wastewater System Revenue Bonds Series A
(FSA Insured) 5.90 2015 1,500,000 1,571,025
Santa Fe Water Revenue Bonds (AMBAC Insured) 6.30 2024 1,000,000 1,120,520
____________
Total 3,692,875
_____________________________________________________________________________________________________________________________
New York (8.9%)
Broome Certificate of Participation Public Safety Facility
Series 1994 (MBIA Insured) 5.25 2022 2,250,000 2,199,645
Dormitory Authority City University System Consolidated 3rd Resolution
Revenue Bonds 1994 Series 2 (MBIA Insured) 6.25 2019 2,500,000 2,666,200
<PAGE>
Dormitory Authority City Lease Revenue Bonds University Dormitory Facility
Series 1995A (AMBAC Insured) 5.25 2014 1,000,000 1,000,000
Metropolitan Transit Authority Series O (MBIA Insured) 6.25 2014 1,250,000 1,347,825
Metropolitan Transportation Authority Commuter Facility Service
Contract Bonds Series L (AMBAC Insured) 7.50 2017 1,300,000 1,424,774
New York City General Obligation Pre-Refunded Bonds Series A
(FGIC Insured) 8.125 2007 1,145,000 1,249,378
New York City Municipal Water Finance Authority
Water & Sewer System Revenue Bonds Series A (Secondary MBIA Insured) 5.50 2023 5,000,000 5,003,500
New York City Municipal Water Finance Authority
Water & Sewer System Revenue Bonds Series B (Secondary MBIA Insured) 5.50 2019 4,000,000 4,002,800
State Dormitory Authority State University Education Facility
Revenue Bonds (Secondary AMBAC Insured) 5.25 2015 2,200,000 2,226,642
State Energy Resource & Development Authority Gas Facility Revenue Bonds
Brooklyn Union Gas (MBIA Insured) A.M.T. 5.60 2025 4,500,000 4,474,080
State Energy Resource & Development Authority Pollution Control
Refunding Revenue Bonds Rochester Gas & Electric (MBIA Insured) A.M.T. 6.50 2032 4,000,000 4,300,360
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 11,285,443
State Medical Care Facility Mental Health Services Revenue Bonds Series E
(Secondary FGIC Insured) 6.25 2019 1,500,000 1,610,760
State Medical Care Facility Mental Health Services Revenue Bonds Series F
(Secondary CGIC Insured) 5.375 2014 4,000,000 3,974,560
State Urban Development Correctional Facilities Pre-Refunded Revenue Bonds
Series 1 (FSA Insured) 7.50 2020 1,500,000 1,710,930
____________
Total 48,476,897
_____________________________________________________________________________________________________________________________
North Carolina (3.7%)
Charlotte Convention Facility Refunding Certificate of Participation
Series 1993C (AMBAC Insured) 5.25 2020 2,600,000 2,550,288
Charlotte Pre-Refunded Certificates of Participation Convention Facility
Series 1991 (AMBAC Insured) 6.75 2021 3,150,000 3,614,625
Fayetteville Public Work Commission Revenue Bonds Series 1995A
(AMBAC Insured) 5.375 2020 650,000 651,300
Municipal Power Agency #1 Catawba Electric Revenue Bonds Series 1995A
(Secondary AMBAC Insured) 5.00 2015 2,155,000 2,078,153
Municipal Power Agency #1 Catawba Electric Revenue Bonds Series 1995A
(Secondary AMBAC Insured) 5.375 2020 4,000,000 3,965,360
Pasquotank County Certificates of Participation Elizabeth Pasquotank
Public School Series 1995 (MBIA Insured) 5.00 2020 5,000,000 4,802,250
Randolph County Certificates of Participation Series 1995 (MBIA Insured) 5.30 2015 2,500,000 2,481,925
____________
Total 20,143,901
_____________________________________________________________________________________________________________________________
Ohio (1.9%)
Bellefontaine Water System Mortgage Revenue Bonds Series 1995
(AMBAC Insured) 5.00 2010 700,000 694,162
Lorain County Hospital Facilities Refunding Revenue Bonds Series 1995
EMH Regional Medical Center (AMBAC Insured) 5.375 2021 2,000,000 1,973,720
Lorain Water System Revenue Bonds Series 1995 (AMBAC Insured) 5.20 2016 2,760,000 2,759,779
Lucas County Hospital Refunding Revenue Bonds St. Vincent Medical Center
Series 1993C (MBIA Insured) 5.25 2022 1,725,000 1,683,807
Mahoning Hospital Improvement Bonds Western Reserve Care System
(MBIA Insured) 5.375 2015 3,310,000 3,229,402
____________
Total 10,340,870
_____________________________________________________________________________________________________________________________<PAGE>
Oklahoma (1.3%)
McAlester Public Works Authority Oklahoma Improvement
Refunding Revenue Bonds (FSA Insured) 5.25 2017-18 2,470,000 2,436,636
Moore Public Works Authority Refunding Revenue Bonds Series 1989
(AMBAC Insured) 7.60 2006 2,700,000 3,024,216
Tulsa International Airport General Revenue Bonds Consolidated Fixed Rate
Series 1989 (MBIA Insured) 7.50 2008 1,500,000 1,605,090
____________
Total 7,065,942
_____________________________________________________________________________________________________________________________
Pennsylvania (3.6%)
Allegheny County Airport Revenue Bonds Pittsburgh International
Series D (FGIC Insured) 7.75 2019 2,300,000 2,443,175
Lycoming County Hospital Authority Revenue Bonds Divine Providence Hospital
Sisters of Christian Charity Series 1995 (Connie Lee Insured) 5.50 2022 2,370,000 2,305,038
Pittsburgh Water & Sewer Authority Water & Sewer System
Pre-Refunded Revenue Bonds Series 1991A (FGIC Insured) 6.50 2014 10,000,000 11,269,500
Robinson Township Municipal Authority Water & Sewer Revenue Bonds
(FGIC Insured) 6.00 2019 2,200,000 2,394,304
Turnpike Commission Pre-Refunded Revenue Bonds Series 1989K (MBIA Insured) 7.50 2012 1,000,000 1,139,830
____________
Total 19,551,847
_____________________________________________________________________________________________________________________________
South Carolina (0.2%)
Piedmont Municipal Power Agency Electric Refunding Revenue Bonds
(FGIC Insured) 6.25 2021 1,000,000 1,136,830
_____________________________________________________________________________________________________________________________
Tennessee (1.7%)
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 4,002,863
Health Education & Housing Facility Shelby Hosital Revenue Bonds
Methodist Health Systems Series 1995 (MBIA Insured) 5.25 2015 5,500,000 5,426,905
____________
Total 9,429,768
_____________________________________________________________________________________________________________________________
Texas (19.2%)
Austin Airport System Prior Lien Revenue Bonds Series 1995A (MBIA Insured) 6.125 2025 3,000,000 3,159,030
Austin Combine Utility System Revenue Bonds Series 1987 (BIG Insured) 8.625 2012-17 1,250,000 1,543,175
Austin Combined Utilities System Refunding Revenue Bonds Series 1994
(FGIC Insured) 5.75 2024 8,500,000 8,647,050
Bexar County Health Facility Development Hospital Revenue Bonds San Antonio
Baptist Memorial Hospital System Series 1994 (MBIA Insured) 6.75 2019 5,000,000 5,691,000
Brazos River Authority Collateralized Pollution Control
Refunding Revenue Bonds Texas Utility Electric Series 1992C
(FGIC Insured) 6.70 2022 14,935,000 16,255,254
Brownsville Utility System Priority Refunding Revenue Bonds Series 1995
(AMBAC Insured) 5.25 2015 5,000,000 5,007,150
Bryan Lease Revenue Bonds Blinn College Series 1995 (MBIA Insured) 5.30 2016 4,385,000 4,319,532
Colorado River Municipal Water District Water System
Pre-Refunded Revenue Bonds Series A (AMBAC Insured) 6.625 2021 8,900,000 9,844,112
Harris County Health Facilities Development Hospital Revenue Bonds
State Children's Hospital Series 1989A (MBIA Insured) 7.00 2019 1,500,000 1,676,730
Harris County Public Facilities Corporation Detention Facility Mortgage
Pre-Refunded Revenue Bonds (MBIA Insured) 7.80 2011 1,000,000 1,123,490
Harris County Toll Road Senior Lien Pre-Refunded Revenue Bonds
Series A (AMBAC Insured) 6.50 2017 8,170,000 9,284,225<PAGE>
Houston Water & Sewer System Refunding Revenue Bonds Lien Series A
(MBIA Insured) 6.20 2020 5,000,000 5,331,600
League City General Obligation Refunding & Improvement Bonds Series 1990
(FGIC Insured) 6.25 2013 2,500,000 2,634,025
Matagorda County Navigation District #1 Collateralized Pollution Control
Revenue Bonds Central Power & Light Series 1984A (AMBAC Insured) 7.50 2014 2,500,000 2,841,975
Matagorda County Navigation District #1 Pollution Control
Refunding Revenue Bonds Houston Light & Power Series E (FGIC Insured) 7.20 2018 2,150,000 2,401,679
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 2,236,220
Municipal Power Agency Refunding Revenue Bonds Series 1991A
(AMBAC Insured) 6.75 2012 5,250,000 5,885,827
North Central State Health Facilities Pre-Refunded Bonds
Children's Medical Center (BIG Insured) 7.875 2018 2,000,000 2,155,960
Turnpike Authority Dallas North Tollway Pre-Refunded Revenue Bonds
Series 1990 (AMBAC Insured) 6.00 2020 5,000,000 5,274,750
Turnpike Authority Dallas North Tollway Revenue Bonds Addison Airport
Toll Tunnel Series 1994 (FGIC Insured) 6.60 2023 2,000,000 2,232,180
Turnpike Authority Dallas North Tollway System Revenue Bonds Series 1995
(FGIC Insured) 5.25 2023 3,000,000 (g) 2,961,600
University of Houston System Consolidated Pre-Refunded Revenue Bonds
Series 1990A (MBIA Insured) 7.40 2006 3,160,000 3,541,886
____________
Total 104,048,450
_____________________________________________________________________________________________________________________________
Utah (0.4%)
Intermountain Power Authority Power Supply Pre-Refunded Revenue Bonds
Series 1987C (AMBAC Insured) 8.375 2012 900,000 (h) 976,707
Salt Lake City-County Airport Pre-Refunded Revenue Bonds Series 1989
(FGIC Insured) A.M.T. 7.875 2018 1,000,000 1,093,410
____________
Total 2,070,117
_____________________________________________________________________________________________________________________________
Virginia (2.5%)
Hanover County Industrial Development Authority
Memorial Regional Medical Center (MBIA Insured) 5.50 2025 3,800,000 3,783,204
Loudoun County Sanitation Authority Waste & Sewer
Refunding Revenue Bonds (MBIA Insured) 5.25 2030 1,435,000 1,408,223
Portsmouth Redevelopment Housing Authority Multi-Family Housing
Refunding Revenue Bonds (FNMA Insured) 6.05 2008 5,780,000 6,024,147
William County Lease Certificate of Participation Bonds (MBIA Insured) 5.50 2020 2,590,000 2,592,124
____________
Total 13,807,698
_____________________________________________________________________________________________________________________________
Washington (1.7%)
Public Power Supply System Nuclear Project #1 Pre-Refunded Revenue Bonds
Series A (MBIA Insured) 7.50 2015 1,805,000 2,036,076
Public Power Supply System Nuclear Project #1 Refunding Revenue Bonds
Series A (MBIA Insured) 7.50 2015 1,195,000 1,335,066
Public Power Supply System Pre-Refunded Revenue Bonds Nuclear Project #3
Series 1989A (BIG Insured) 7.25 2016 1,000,000 1,119,930
Public Power Supply System Refunding Revenue Bonds Nuclear Project #3
Series 1989A (BIG Insured) 6.00 2018 3,000,000 3,034,860
Spokane Regional Solid Waste Management System Revenue Bonds
Series 1989 (AMBAC Insured) A.M.T. 7.75 2011 300,000 331,926
Spokane Regional Solid Waste Management System Revenue Bonds
Series 1989 (AMBAC Insured) A.M.T. 7.875 2007 1,250,000 1,387,363
____________
Total 9,245,221
_____________________________________________________________________________________________________________________________<PAGE>
West Virginia (2.6%)
Board of Regents Registration Fee Pre-Refunded Revenue Bonds Series 1989B
(MBIA Insured) 7.40 2009 2,000,000 2,235,400
School Building Authority Capital Improvement Pre-Refunded Revenue Bonds
(MBIA Insured) 7.25 2015 3,415,000 3,898,188
School Building Authority Capital Improvement Revenue Bonds Series 1990B
(MBIA Insured) 6.75 2017 5,000,000 5,492,950
State Parkway Economic Development & Tourism Authority Parkway
Pre-Refunded Revenue Bonds Series 1989 (FGIC Insured) 7.125 2019 2,000,000 2,228,280
____________
Total 13,854,818
_____________________________________________________________________________________________________________________________
Total municipal bonds
(Cost: $484,040,916) $533,113,894
_____________________________________________________________________________________________________________________________
</TABLE>
<TABLE>
<CAPTION>
Short-term securities (1.1%)
_____________________________________________________________________________________________________________________________
Issuer (d) Effective Amount Value(a)
yield payable at
maturity
_____________________________________________________________________________________________________________________________
<S> <C> <C> <C>
Municipal notes
Burke County Georgia Development Authority
Georgia Power Pollution Control Revenue V.R.D.B.
07-01-24 6.00% $ 200,000 $ 200,000
Delaware County Industrial Development Authority
Airport Facility Revenue V.R.D.B.
12-01-15 5.90 300,000 300,000
Jackson County Port Facility Refunding V.R.D.B. Chevron Series 1993
06-01-23 5.95 100,000 100,000
Maricopa County Public Service Pollution Control Revenue V.R.D.B.
Series 94C
05-01-29 6.00 2,800,000 2,800,000
Ohio State Air Quality Development Authority
Cincinnati Gas & Electric Revenue V.R.D.B. Series B
09-01-30 5.95 2,400,000 2,400,000
_____________________________________________________________________________________________________________________________
Total short-term securities
(Cost: $5,800,000) $ 5,800,000
_____________________________________________________________________________________________________________________________
Total investments in securities
(Cost: $489,840,916)(i) $538,913,894
_____________________________________________________________________________________________________________________________
/TABLE
<PAGE>
<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:
<CAPTION>
(Unaudited)
__________________________________________
Rating 12-31-95 06-30-95
___________________________________________________________________________________________________________
<S> <C> <C>
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 Mininum Tax - As of Dec. 31, 1995, the value of securities subject to
alternative minimum tax represented 12.1% of net assets.
V.R.D.B. -- Variable Rate Demand Bond
(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 Dec. 31, 1995. Inverse floaters in the aggregate
represent 2.2% of the Fund's net assets as of Dec. 31, 1995.
(g) At Dec. 31, 1995, the cost of securities purchased, including interest purchased, on a when-issued
basis was $4,036,204.
(h) Partially pledged as initial deposit on the following open interest rate futures contracts (see Note 5
to the financial statements):
Type of security Notional amount
_______________________________________________________________
Purchase contracts
Municipal Bonds Index March 1996 $22,100,000
U.S. Treasury Bonds March 1996 10,900,000
_______________________________________________________________
Total $33,000,000
(i) At Dec. 31, 1995, the cost of securities for federal income tax purposes was approximately
$489,576,000 and the approximate aggregate gross unrealized appreciation and depreciation
based on that cost was:
Unrealized appreciation $49,338,000
Unrealized depreciation --
______________________________________________________________________________________________________
Net unrealized appreciation $49,338,000
______________________________________________________________________________________________________
/TABLE
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Directors and officers
Directors and officers of the Fund
_____________________________________________________________________
President and interested director
William R. Pearce
President of all funds in the IDS MUTUAL FUND GROUP.
_____________________________________________________________________
Independent directors
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.
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 directors who are officers and/or employees of AEFC
William H. Dudley
Exective vice president, AEFC.
David R. Hubers
President and chief executive officer, AEFC.
John R. Thomas
Senior vice president, AEFC.
<PAGE>
_____________________________________________________________________
Officers who 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 treasurer of all funds in the
IDS MUTUAL FUND GROUP.<PAGE>
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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 deposit (CDs) and
other bank securities.
(icon of) piggy bank
IDS Tax-Free Money Fund
Invests primarily in short-term bonds and notes issued by state and
local governments to seek high current income exempt from federal
income taxes.
(icon of) shield with piggy bank enclosed
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.
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IDS Bond Fund
Invests mainly in corporate bonds, at least 50% in the higher rated,
lower risk bond categories, or the equivalent, and in government bonds.
(icon of) greek column
IDS Selective Fund
Invests in 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) federal building
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.
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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
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 eagle head
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 Retirement Fund
Invests in a combination of common stocks, fixed-income
investments and money market securities to seek a maximum total
return through a combination of growth of capital and current income.
(icon of) bird in a nest
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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 apple 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 stocks of companies representing many
sectors of the economy. Seeks current income and growth of capital.
(icon of) building with columns
IDS Equity Value Fund
Invests primarily in undervalued common stocks that offer potential
for growth of capital and income.
(icon of) three growing flowers
IDS Utilities Income Fund
Invests primarily in the stocks of public utility companies to seek
high current income and growth of income and capital with reduced
volatility.
(icon of) electrical cord
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) four 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.
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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 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 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) flower
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 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
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
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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
For more complete information about any of these funds, including charges
and expenses, you can obtain a prospectus by contacting your financial
planner 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>
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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 (TouchTone 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
AMERICAN EXPRESS FINANCIAL ADVISORS
IDS Insured Tax-Exempt Fund
IDS Tower 10
Minneapolis, MN 55440-0010
