<PAGE>
PAGE 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No.
Post-Effective Amendment No. 28 (File No. 33-5102) X
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 31 (File No. 811-4647) X
IDS SPECIAL TAX-EXEMPT SERIES TRUST
IDS Tower 10, Minneapolis, Minnesota 55440-0534
(612) 330-9283
Leslie L. Ogg - 901 Marquette Avenue South
Minneapolis, MN 55402-3268
Approximate Date of Proposed Public Offering:
It is proposed that this filing will become effective (check
appropriate box)
immediately upon filing pursuant to paragraph (b)
X on Aug. 29, 1996 pursuant to paragraph (b)
60 days after filing pursuant to paragraph (a)(i)
on (date) pursuant to paragraph (a)(i)
75 days after filing pursuant to paragraph (a)(ii)
on (date) pursuant to paragraph (a)(ii) of rule 485.
If appropriate, check the following box:
this post-effective amendment designates a new effective date
for a previously filed post-effective amendment.
The registrant has registered an indefinite number or amount of
securities under the Securities Act of 1933 pursuant to section
24f-2 of the Investment Company Act of 1940. Rule 24f-2 Notice for
its most recent fiscal year was filed on or about Aug. 28, 1996.
<PAGE>
PAGE 2
<TABLE><CAPTION>
Cross reference sheet for IDS California, Massachusetts,
Michigan, Minnesota, New York and Ohio Tax-Exempt and Insured Funds'
prospectuses and the Statements of Additional Information of
the information called for by the items enumerated in
Part A and Part B of Form N-1A.
PART A PART B
Section Section in
Item No. in Prospectus Item No. Statement of Additional Information
<C> <C> <C> <C>
1 Cover page of prospectus 10 Cover page of SAI
2(a) Sales charge and Fund expenses 11 Table of Contents
(b) The Fund in brief
(c) The Fund in brief 12 NA
3(a) Financial highlights 13(a) Additional Investment Policies; all
(b) NA appendices except Dollar-Cost Averaging
(c) Performance (b) Additional Investment Policies
(d) Financial highlights (c) Additional Investment Policies
(d) Portfolio Transactions
4(a) The Fund in brief; Investment policies and
risks; How the Fund is organized 14(a) Directors and officers of the Fund;**
(b) Investment policies and risks Directors and officers
(c) Investment policies and risks (b) Directors and Officers
(c) Directors and Officers
5(a) Directors and officers; Directors and
officers of the Fund (listing) 15(a) NA
(b)(i) Investment manager and transfer agent; (b) NA
About American Express Financial (c) Directors and Officers
Corporation -- General Information
(b)(ii) Investment manager and transfer agent 16(a)(i) How the Fund is organized; About American
(b)(iii) Investment manager and transfer agent Express Financial Corporation**
(c) Portfolio manager (a)(ii) Agreements: Investment Management Services
(d) Investment manager and transfer agent Agreement, Plan and Supplemental
(e) Investment manager and transfer agent Agreement of Distribution
(f) Distributor (a)(iii) Agreements: Investment Management Services Agreement
(g) Investment manager and transfer agent; (b) Agreements: Investment Management Services Agreement
About American Express Financial (c) NA
Corporation -- General Information (d) Agreements: Administrative Services
Agreement, Shareholder Service Agreement
5A(a) * (e) NA
(b) * (f) Agreements: Distribution Agreement
(g) NA
6(a) Shares; Voting rights (h) Custodian; Independent Auditors
(b) NA (i) Agreements: Transfer Agency Agreement; Custodian
(c) NA
(d) Voting rights 17(a) Portfolio Transactions
(e) Cover page; Special shareholder services (b) Brokerage Commissions Paid to Brokers Affiliated
(f) Dividends and capital gains distributions; with American Express Financial Corporation
Reinvestments (c) Portfolio Transactions
(g) Taxes (d) Portfolio Transactions
(h) Alternative sales arrangements (e) Portfolio Transactions
7(a) Distributor 18(a) Shares; Voting rights**
(b) Valuing Fund shares (b) NA
(c) How to purchase, exchange or redeem shares
(d) How to purchase shares 19(a) Investing in the Fund
(e) NA (b) Valuing Fund Shares; Investing in the Fund
(f) Distributor (c) NA
8(a) How to redeem shares 20 Taxes
(b) NA
(c) How to purchase shares: Three ways to invest 21(a) Agreements: Distribution Agreement
(d) How to purchase, exchange or redeem shares: (b) Agreements: Distribution Agreement
Redemption policies -- "Important..." (c) NA
9 None 22(a) Performance Information (for money market
funds only)
(b) Performance Information (for all funds except
money market funds)
23 Financial Statements
*Designates information is located in annual report.
**Designates location in prospectus.
</TABLE>
<PAGE>
PAGE 3
IDS California Tax-Exempt Trust
California Tax-Exempt Fund
IDS Special Tax-Exempt Series Trust
Massachusetts Tax-Exempt Fund
Michigan Tax-Exempt Fund
Minnesota Tax-Exempt Fund
New York Tax-Exempt Fund
Ohio Tax-Exempt Fund
Prospectus
Aug. 29, 1996
Each Fund's goal is to provide a high level of income generally
exempt from federal income tax as well as from the respective state
and local income tax. A portion of each Fund's assets may be
invested in bonds whose interest is subject to the alternative
minimum tax computation.
This prospectus contains facts that can help you decide if one of
the Funds is the right investment for you. Read it before you
invest and keep it for future reference.
Additional facts about the Funds are in a Statement of Additional
Information (SAI), filed with the Securities and Exchange
Commission (SEC) and available for reference, along with other
related materials, on the SEC Internet Web Site
(http://www.sec.gov). The SAI, dated Aug. 29, 1996, is
incorporated here by reference. For a free copy, contact American
Express Shareholder Service.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
SHARES IN THE FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR
GUARANTEED OR ENDORSED BY, ANY BANK, AND SHARES ARE NOT FEDERALLY
INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL
RESERVE BOARD OR ANY OTHER AGENCY. INVESTMENTS IN THE FUNDS
INVOLVE INVESTMENT RISK INCLUDING POSSIBLE LOSS OF PRINCIPAL.
American Express Shareholder Service
P.O. Box 534
Minneapolis, MN
55440-0534
612-671-3733
TTY: 800-846-4852
<PAGE>
PAGE 4
Table of Contents
The Funds in brief
Goal
Types of Fund investments and their risks
Manager and distributor
Portfolio manager
Alternative purchase arrangements
Sales charge and Fund expenses
Performance
Financial highlights
Total returns
Yield
Investment policies and risks
Facts about investments and their risks
Alternative investment option
Valuing Fund shares
How to purchase, exchange or redeem shares
Alternative purchase arrangements
How to purchase shares
How to exchange shares
How to redeem shares
Reductions and waivers of the sales charge
Special shareholder services
Services
Quick telephone reference
Distributions and taxes
Dividend and capital gain distributions
Reinvestments
Taxes
How to determine the correct TIN
How the Funds are organized
Shares
Voting rights
Shareholder meetings
Board members and officers
Investment manager and transfer agent
Distributor
About American Express Financial Corporation
General information
Appendices
Description of bond ratings
1996 Federal tax information
Descriptions of derivative instruments
<PAGE>
PAGE 5
The Funds in brief
Goal
Each Fund seeks to provide shareholders a high level of income
generally exempt from federal income tax as well as from the
respective state and local income tax. Because any investment
involves risk, achieving this goal cannot be guaranteed. Only
shareholders can change the goal.
Types of Fund investments and their risks
Each Fund is a non-diversified mutual fund that invests primarily
in high- or medium-grade municipal securities that are generally
exempt from federal income tax as well as from the respective state
and local income tax. A portion of each Fund's assets may be
invested in bonds subject to the alternative minimum tax
computation. Other investments may include debt securities sold at
a deep discount, taxable investments and derivative instruments.
Each of the Funds may invest in lower-quality securities that tend
to be more price volatile than higher-quality securities. Non-
diversified mutual funds may have more market risk than funds that
have broader diversification.
Manager and distributor
The Funds are managed by American Express Financial Corporation
(AEFC), a provider of financial services since 1894. AEFC
currently manages more than $52 billion in assets for the IDS
MUTUAL FUND GROUP. Shares of the Funds are sold through American
Express Financial Advisors Inc., a wholly owned subsidiary of AEFC.
Portfolio manager
Paul Hylle joined AEFC in 1993 and serves as portfolio manager. He
also is portfolio manager of IDS Insured Tax-Exempt Fund. Prior to
joining AEFC, he had been a portfolio manager at Lutheran
Brotherhood, a Minnesota based fraternal benefit society offering
financial services to Lutherans.
Alternative purchase arrangements
Each Fund offers its shares in three classes. Class A shares are
subject to a sales charge at the time of purchase. Class B shares
are subject to a contingent deferred sales charge (CDSC) on
redemptions made within six years of purchase and an annual
distribution (12b-1) fee. Class Y shares are sold without a sales
charge to qualifying institutional investors.
<PAGE>
PAGE 6
Sales charge and Fund expenses
Shareholder transaction expenses are incurred directly by an
investor on the purchase or redemption of Fund shares. Fund
operating expenses are paid out of Fund assets for each class of
assets. Operating expenses are reflected in each Fund's daily
share price and dividends, and are not charged directly to
shareholder accounts.
Shareholder transaction expenses
Maximum sales charge on purchases (as percentage of offering
price)*
<TABLE>
<CAPTION>
California Massachusetts Michigan Minnesota New York Ohio
<S> <C> <C> <C> <C> <C> <C>
Class A 5% 5% 5% 5% 5% 5%
Class B 0% 0% 0% 0% 0% 0%
Class Y 0% 0% 0% 0% 0% 0%
Maximum deferred sales charge imposed on redemptions (as a percentage of original
purchase price)
California Massachusetts Michigan Minnesota New York Ohio
Class A 0% 0% 0% 0% 0% 0%
Class B 5% 5% 5% 5% 5% 5%
Class Y 0% 0% 0% 0% 0% 0%
</TABLE>
Annual Fund operating expenses
(% of average daily net assets):
California
Class A Class B Class Y
Management fee 0.47% 0.47% 0.47%
12b-1 fee 0.00% 0.75% 0.00%
Other expenses** 0.33% 0.35% 0.10%
Total 0.88% 1.57% 0.57%
Massachusetts
Class A Class B Class Y
Management fee 0.47% 0.47% 0.47%
12b-1 fee 0.00% 0.75% 0.00%
Other expenses** 0.39% 0.41% 0.19%
Total 0.86% 1.63% 0.66%
Michigan
Class A Class B Class Y
Management fee 0.47% 0.47% 0.47%
12b-1 fee 0.00% 0.75% 0.00%
Other expenses** 0.35% 0.37% 0.19%
Total 0.82% 1.59% 0.66% <PAGE>
PAGE 7
Minnesota
Class A Class B Class Y
Management fee 0.46% 0.46% 0.46%
12b-1 fee 0.00% 0.75% 0.00%
Other expenses** 0.34% 0.35% 0.08%
Total 0.80% 1.57% 0.54%
New York
Class A Class B Class Y
Management fee 0.47% 0.47% 0.47%
12b-1 fee 0.00% 0.75% 0.00%
Other expenses** 0.35% 0.37% 0.14%
Total 0.82% 1.59% 0.61%
Ohio
Class A Class B Class Y
Management fee 0.47% 0.47% 0.48%
12b-1 fee 0.00% 0.75% 0.00%
Other expenses** 0.38% 0.37% 0.10%
Total 0.85% 1.59% 0.58%
*This charge may be reduced depending on your total investments in
IDS funds. See "Reductions of the sales charge."
**Other expenses include an administrative services fee, a
shareholder services fee for Class A and Class B, a transfer agency
fee and other non-advisory expenses.
Example: Suppose for each year for the next 10 years, Fund expenses
are as above and annual return is 5%. If you sold your shares at
the end of the following years, for each $1,000 invested, you would
pay total expenses of:
California
1 year 3 years 5 years 10 years
Class A $58 $74 $ 92 $144
Class B $66 $90 $106 $166**
Class B* $16 $50 $ 86 $166**
Class Y $ 6 $18 $ 32 $ 72
*Assuming Class B shares are not redeemed at the end of the period.
**Based on conversion of Class B shares to Class A shares after
eight years.
Massachusetts
1 year 3 years 5 years 10 years
Class A $58 $76 $ 95 $151
Class B $67 $91 $109 $173**
Class B* $17 $51 $ 89 $173**
Class Y $ 7 $21 $ 37 $ 83
*Assuming Class B shares are not redeemed at the end of the period.
**Based on conversion of Class B shares to Class A shares after
eight years.
<PAGE>
PAGE 8
Michigan
1 year 3 years 5 years 10 years
Class A $58 $75 $ 93 $147
Class B $66 $90 $107 $169**
Class B* $16 $50 $ 87 $169**
Class Y $ 7 $21 $ 37 $ 83
*Assuming Class B shares are not redeemed at the end of the period.
**Based on conversion of Class B shares to Class A shares after
eight years.
Minnesota
1 year 3 years 5 years 10 years
Class A $58 $74 $ 92 $144
Class B $66 $90 $107 $166**
Class B* $16 $50 $ 87 $166**
Class Y $ 6 $17 $ 30 $ 68
*Assuming Class B shares are not redeemed at the end of the period.
**Based on conversion of Class B shares to Class A shares after
eight years.
New York
1 year 3 years 5 years 10 years
Class A $58 $75 $ 93 $147
Class B $66 $90 $107 $169**
Class B* $16 $50 $ 87 $169**
Class Y $ 6 $20 $ 34 $ 77
*Assuming Class B shares are not redeemed at the end of the period.
**Based on conversion of Class B shares to Class A shares after
eight years.
Ohio
1 year 3 years 5 years 10 years
Class A $58 $76 $ 95 $150
Class B $66 $90 $107 $169**
Class B* $16 $50 $ 87 $169**
Class Y $ 6 $19 $ 32 $ 73
*Assuming Class B shares are not redeemed at the end of the period.
**Based on conversion of Class B shares to Class A shares after
eight years.
This example does not represent actual expenses, past or future.
Actual expenses may be higher or lower than those shown. Because
Class B pays annual distribution (12b-1) fees, long-term
shareholders of Class B may indirectly pay an equivalent of more
than a 6.25% sales charge, the maximum permitted by the National
Association of Securities Dealers.
<PAGE>
PAGE 9
Performance
<TABLE>
<CAPTION>
IDS California Tax-Exempt Trust
IDS California Tax-Exempt Fund
______________________________________________________________________________
Financial highlights
The table below shows certain important financial
information for evaluating the Fund's results.
Fiscal period ended June 30,
Per share income and capital changes***
Class A
1996 1995 1994 1993 1992 1991 1990 1989* 1988** 1987** 1986+
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, $5.16 $5.13 $5.41 $5.18 $4.94 $4.89 $4.97 $4.82 $4.66 $5.07 $5.00
beginning of period
Income from investment operations:
Net investment income .28 .30 .31 .30 .31 .32 .32 .16 .32 .32 .11
Net gains (losses) .02 .03 (.28) .23 .24 .05 (.08) .15 .16 (.41) .07
(both realized
and unrealized)
Total from investment .30 .33 .03 .53 .55 .37 .24 .31 .48 (.09) .18
operations
Less distributions:
Dividends from net (.28) (.30) (.31) (.30) (.31) (.32) (.32) (.16) (.32) (.32) (.11)
investment income
Distributions from (.03) -- -- -- -- -- -- -- -- -- --
realized gains
Total distributions (.31) (.30) (.31) (.30) (.31) (.32) (.32) (.16) (.32) (.32) (.11)
Net asset value, $5.15 $5.16 5.13 $5.41 $5.18 $4.94 $4.89 $4.97 $4.82 $4.66 $5.07
end of period
Ratios/supplemental data
Class A
1996 1995 1994 1993 1992 1991 1990 1989* 1988** 1987** 1986+
Net assets, end of period $234 $239 $255 $261 $222 $185 $142 $95 $63 $40 $21
(in millions)
Ratio of expenses to .80%## .65% .61% .63% .64% .60% .62% .64%++ .72% .78% .75%++#
average daily net assets
Ratio of net income 5.40% 5.89% 5.67% 5.78% 6.16% 6.51% 6.53% 6.67%++ 6.61% 6.74% 6.44%++#
to average daily net assets
Portfolio turnover rate 15% 48% 27% 5% 7% 23% 20% 6% 13% 16% 0%
(excluding short-term
securities)
Total return++++ 6.0% 6.5% 0.4% 10.8% 11.4% 7.7% 5.0% 6.5%+++ 10.5% (1.66%) 3.5%+++
*Six months ended June 30, 1989. The Fund's fiscal year end was changed from
Dec. 31 to June 30, effective 1989.
**Fiscal years ended Dec. 31, 1987 and Dec. 31, 1988.
***For a share outstanding throughout the period. Rounded to the nearest cent.
+Inception date. Period from Aug. 18, 1986 to Dec. 31, 1986.
++Adjusted to an annual basis.
+++For the fiscal period ended Dec. 31, 1986 and June 30, 1989, the annualized
total returns are 13.0% and 13.6%, respectively.
++++Total return does not reflect payment of a sales charge.
#During this period, American Express Financial Corporation voluntarily
reimbursed the Fund for expenses in excess of 0.75% of its average daily net
assets, on an annual basis. Had American Express Financial Corporation
not done so, the ratio of expenses and ratio of net investment income
would have been 0.93% and 6.26%, respectively.
##Expense ratio is based on total expense of the Fund before applying
earnings credit.
/TABLE
<PAGE>
PAGE 10
<TABLE>
<CAPTION>
IDS California Tax-Exempt Trust
IDS California Tax-Exempt Fund
______________________________________________________________________________
Financial highlights
The table below shows certain important financial
information for evaluating the Fund's results.
Fiscal period ended June 30,
Per share income and capital changes*
Class B Class Y
1996 1995** 1996 1995**
<S> <C> <C> <C> <C>
Net asset value, $5.16 $5.21 $5.15 $5.22
beginning of period
Income from investment operations:
Net investment income .24 .09 .30 .08
Net gains (losses) .02 (.05) .02 (.07)
(both realized
and unrealized)
Total from investment .26 .04 .32 .01
operations
Less distributions:
Dividends from net (.24) (.09) (.29) (.08)
investment income
Distributions from (.03) -- (.03) --
realized gains
Total distributions (.27) (.09) (.32) (.08)
Net asset value, $5.15 $5.16 $5.15 $5.15
end of period
Ratios/supplemental data
Class B Class Y
1996 1995** 1996 1995**
Net assets, end of period $6 $2 $ -- $ --
(in millions)
Ratio of expenses to 1.57%# 1.51%+ .57%# .54%+
average daily net assets
Ratio of net income 4.64% 4.87%+ 5.53% 5.92%+
to average daily net assets
Portfolio turnover rate 15% 48% 15% 48%
(excluding short-term
securities)
Total return++ 5.2% 0.8% 6.1% 0.2%
*For a share outstanding throughout the period. Rounded to the nearest cent.
**Inception date was March 20, 1995 for Class B and Class Y.
+Adjusted to an annual basis.
++Total return does not reflect payment of a sales charge.
#Expense ratio is based on total expense of the Fund before applying earnings credit.
</TABLE>
<PAGE>
PAGE 11
<TABLE>
<CAPTION>
IDS Special Tax-Exempt Series Trust
IDS Massachusetts Tax-Exempt Fund
______________________________________________________________________________
Financial highlights
The table below shows certain important financial
information for evaluating the Fund's results.
Fiscal period ended June 30,
Per share income and capital changes*
Class A
1996 1995 1994 1993 1992 1991 1990 1989 1988
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, $5.27 $5.24 $5.49 $5.20 $4.96 $4.88 $5.01 $4.91 $5.00
beginning of period
Income from investment operations:
Net investment income .28 .30 .30 .30 .31 .32 .32 .32 .31
Net gains (losses) .03 .03 (.25) .29 .24 .08 (.12) .12 (.06)
(both realized
and unrealized)
Total from investment .31 .33 .05 .59 .55 .40 .20 .44 .25
operations
Less distributions:
Dividends from net (.28) (.30) (.30) (.30) (.31) (.32) (.32) (.32) (.31)
investment income
Distribution from -- -- -- -- -- -- (.01) (.02) (.03)
realized gains
Total distributions (.28) (.30) (.30) (.30) (.31) (.32) (.33) (.34) (.34)
Net asset value, $5.30 $5.27 $5.24 $5.49 $5.20 $4.96 $4.88 $5.01 $4.91
end of period
Ratios/supplemental data
1996 1995 1994 1993 1992 1991 1990 1989 1988
Net assets, end of period $68 $68 $72 $64 $44 $27 $19 $13 $4
(in millions)
Ratio of expenses to .86% .72% .69% .72% .72% .69% .70% .84% .93%**
average daily net assets
Ratio of net income 5.26% 5.74% 5.40% 5.57% 6.05% 6.53% 6.59% 6.55% 6.40%**
to average daily net assets
Portfolio turnover rate 6% 16% 6% 0% 2% 16% 36% 25% 34%
(excluding short-term
securities)
Total return*** 6.0% 6.5% 0.9% 11.5% 11.4% 8.5% 4.2% 9.2% 5.3%
*For a share outstanding throughout the period. Rounded to the nearest cent.
**During the period from July 2, 1987 to March 31, 1988, American Express
Financial Corporation voluntarily reimbursed the Fund for expenses in excess
of 0.75% of its average daily net assets, on an annual basis. Had American Express
Financial Corporation not done so, the ratio of net investment income would have
been 1.30% and 6.03%, respectively.
***Total return does not reflect payment of a sales charge.
+Expense ratio is based on total expense of the Fund
before applying earnings credit.
/TABLE
<PAGE>
PAGE 12
<TABLE>
<CAPTION>
IDS Special Tax-Exempt Series Trust
IDS Massachusetts Tax-Exempt Fund
______________________________________________________________________________
Financial highlights
The table below shows certain important financial
information for evaluating the Fund's results.
Fiscal period ended June 30,
Per share income and capital changes*
Class B Class Y
1996 1995** 1996 1995**
<S> <C> <C> <C> <C>
Net asset value, $5.27 $5.31 $5.28 $5.32
beginning of period
Income from investment operations:
Net investment income .24 .09 .30 .08
Net gains (losses) .03 (.04) .03 (.04)
(both realized
and unrealized)
Total from investment .27 .05 .33 .04
operations
Less distributions:
Dividends from net (.24) (.09) (.29) (.08)
investment income
Net asset value, $5.30 $5.27 $5.32 $5.28
end of period
Ratios/supplemental data
1996 1995** 1996 1995**
Net assets, end of period $6 $2 $-- $--
(in millions)
Ratio of expenses to 1.63%++ 1.59%*** .66% .54%***
average daily net assets
Ratio of net income 4.51% 4.83%*** 5.50% 5.91%***
to average daily net assets
Portfolio turnover rate 6% 16% 6% 16%
(excluding short-term
securities)
Total return+ 5.2% 0.9% 6.1% 0.9%
*For a share outstanding throughout the period. Rounded to the nearest cent.
**Inception date was March 20, 1995 for Class B and Class Y.
***Adjusted to an annual basis.
+Total return does not reflect payment of a sales charge.
++Expense ratio is based on total expense of the Fund
before applying earnings credit.
/TABLE
<PAGE>
PAGE 13
<TABLE>
<CAPTION>
IDS Special Tax-Exempt Series Trust
IDS Michigan Tax-Exempt Fund
______________________________________________________________________________
Financial highlights
The table below shows certain important financial
information for evaluating the Fund's results.
Fiscal period ended June 30,
Per share income and capital changes*
Class A
1996 1995 1994 1993 1992 1991 1990 1989 1988
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, $5.39 $5.35 $5.60 $5.31 $5.04 $4.96 $5.08 $4.85 $5.00
beginning of period
Income from investment operations:
Net investment income .30 .30 .31 .31 .32 .32 .32 .32 .31
Net gains (losses) .04 .05 (.25) .29 .27 .08 (.12) .23 (.11)
(both realized
and unrealized)
Total from investment .34 .35 .06 .60 .59 .40 .20 .55 .20
operations
Less distributions:
Dividends from net (.30) (.31) (.31) (.31) (.32) (.32) (.32) (.32) (.31)
investment income
Distributions from (.07) -- -- -- -- -- -- -- (.04)
realized gains
Total distributions (.37) (.31) (.31) (.31) (.32) (.32) (.32) (.32) (.35)
Net asset value, $5.36 $5.39 $5.35 $5.60 $5.31 $5.04 $4.96 $5.08 $4.85
end of period
Ratios/supplemental data
1996 1995 1994 1993 1992 1991 1990 1989 1988
Net assets, end of period $79 $78 $77 $72 $55 $41 $29 $16 $8
(in millions)
Ratio of expenses to .82%+ .70% .65% .68% .67% .67% .71% .81% .87%**
average daily net assets
Ratio of net income 5.37% 5.71% 5.43% 5.64% 6.18% 6.45% 6.47% 6.50% 6.56%**
to average daily net assets
Portfolio turnover rate 29% 48% 16% 2% 0% 3% 5% 10% 14%
(excluding short-term
securities)
Total return*** 6.3% 6.6% 1.0% 11.6% 12.0% 8.3% 4.1% 11.7% 4.4%
*For a share outstanding throughout the period. Rounded to the nearest cent.
**During the period from July 2, 1987 to March 31, 1988, American Express
Financial Corporation voluntarily reimbursed the Fund for expenses in excess
of 0.75% of its average daily net assets, on an annual basis. Had American Express
Financial Corporation not done so, the ratio of expenses and ratio of net investment
income would have been 1.09% and 6.34%, respectively.
***Total return does not reflect payment of a sales charge.
+Expense ratio is based on total expense of the Fund
before applying earnings credit.
/TABLE
<PAGE>
PAGE 14
<TABLE>
<CAPTION>
IDS Special Tax-Exempt Series Trust
IDS Michigan Tax-Exempt Fund
______________________________________________________________________________
Financial highlights
The table below shows certain important financial
information for evaluating the Fund's results.
Fiscal period ended June 30,
Per share income and capital changes*
Class B Class Y
1996 1995** 1996 1995**
<S> <C> <C> <C> <C>
Net asset value, $5.39 $5.43 $5.41 $5.45
beginning of period
Income from investment operations:
Net investment income .25 .09 .30 .09
Net gains (losses) .04 (.04) .04 (.04)
(both realized
and unrealized)
Total from investment .29 .05 .34 .05
operations
Less distributions:
Dividends from net (.25) (.09) (.30) (.09)
investment income
Distributions from (.07) -- (.07) --
realized gains
Total distributions (.32) (.09) (.37) (.09)
Net asset value, $5.36 $5.39 $5.38 $5.41
end of period
Ratios/supplemental data
1996 1995** 1996 1995**
Net assets, end of period $3 $1 $ -- $ --
(in millions)
Ratio of expenses to 1.59%++ 1.62%*** .66%++ .54%***
average daily net assets
Ratio of net income 4.63% 4.89%*** 5.49% 5.91%***
to average daily net assets
Portfolio turnover rate 29% 48% 29% 48%
(excluding short-term
securities)
Total return+ 5.6% 0.9% 6.4% 0.9%
*For a share outstanding throughout the period. Rounded to the nearest cent.
**Inception date was March 20, 1995 for Class B and Class Y.
***Adjusted to an annual basis.
+Total return does not reflect payment of a sales charge.
++Expense ratio is based on total expense of the Fund
before applying earnings credit.
</TABLE>
<PAGE>
PAGE 15
<TABLE>
<CAPTION>
IDS Special Tax-Exempt Series Trust
IDS Minnesota Tax-Exempt Fund
______________________________________________________________________________
Financial highlights
The table below shows certain important financial
information for evaluating the Fund's results.
Fiscal period ended June 30,
Per share income and capital changes***
Class A
1996 1995 1994 1993 1992 1991 1990 1989* 1988** 1987** 1986#
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, $5.19 $5.16 $5.44 $5.22 $5.01 $4.95 $5.05 $4.86 $4.76 $5.18 $5.00
beginning of period
Income from investment operations:
Net investment income .30 .31 .31 .31 .33 .33 .32 .16 .33 .33 .12
Net gains (losses) .01 .03 (.28) .22 .21 .06 (.10) .19 .10 (.42) .19
(both realized
and unrealized)
Total from investment .31 .34 .03 .53 .54 .39 .22 .35 .43 (.09) .31
operations
Less distributions:
Dividends from net (.30) (.31) (.31) (.31) (.33) (.33) (.32) (.16) (.33) (.33) (.12)
investment income
Distributions from -- -- -- -- -- -- -- -- -- -- (.01)
realized gains
Total distributions (.30) (.31) (.31) (.31) (.33) (.33) (.32) (.16) (.33) (.33) (.13)
Net asset value, $5.20 $5.19 $5.16 $5.44 $5.22 $5.01 $4.95 $5.05 $4.86 $4.76 $5.18
end of period
Ratios/supplemental data
1996** 1995 1994 1993 1992 1991 1990 1989* 1988** 1987** 1986#
Net assets, end of period $393 $403 $408 $402 $313 $233 $181 $121 $82 $50 $32
(in millions)
Ratio of expenses to .77%+ .67% .66% .67% .66% .63% .64% .65%+ .65% .78% .75+##
average daily net assets
Ratio of net income 5.66%+ 6.01% 5.73% 5.91% 6.43% 6.67% 6.62% 6.84%+ 6.73% 6.83% 6.85%+##
to average daily net assets
Portfolio turnover rate 13% 28% 13% 2% 7% 10% 8% 0% 14% 40% 27%
(excluding short-term
securities)
Total return++ 5.9% 6.8% 0.4% 10.5% 11.0% 8.2% 4.8% 7.4%+++ 9.3% (1.4%) 6.1%+++
*Six months ended June 30, 1989. The Fund's fiscal year end was changed from
Dec. 31 to June 30, effective 1989.
**Fiscal years ended Dec. 31, 1987 and Dec. 31, 1988.
***For a share outstanding throughout the period. Rounded to the nearest cent.
+Adjusted to an annual basis.
++Total return does not reflect payment of a sales charge.
+++For the fiscal periods ended Dec. 31, 1986 and June 30, 1989, the annualized total returns are
16.7% and 15.5%, respectively.
#Inception date. Period from Aug. 18, 1986 to Dec. 31, 1986.
##During this period, American Express Financial Corporation voluntarily reimbursed the Fund for
expenses in excess of 0.75% of its average daily net assets, on an annual basis. Had American
Express Financial Corporation not done so, the ratio of expenses and ratio of net investment
income would have been 0.88% and 6.76%, respectively.
###Expense ratio is based on total expense of the Fund before applying earnings credit.
/TABLE
<PAGE>
PAGE 16
<TABLE>
<CAPTION>
IDS Special Tax-Exempt Series Trust
IDS Minnesota Tax-Exempt Fund
______________________________________________________________________________
Financial highlights
The table below shows certain important financial
information for evaluating the Fund's results.
Fiscal period ended June 30,
Per share income and capital changes*
Class B Class Y
1996 1995** 1996 1995**
<S> <C> <C> <C> <C>
Net asset value, $5.19 $5.24 $5.20 $5.25
beginning of period
Income from investment operations:
Net investment income .26 .09 .31 .09
Net gains (losses) .01 (.05) .01 (.05)
(both realized
and unrealized)
Total from investment .27 .04 .32 .04
operations
Less distributions:
Dividends from net (.26) (.09) (.31) (.09)
investment income
Net asset value, $5.20 $5.19 $5.21 $5.20
end of period
Ratios/supplemental data
1996 1995** 1996 1995**
Net assets, end of period $16 $4 -- --
(in millions)
Ratio of expenses to 1.57%+ 1.27%+ .54%# .54%+
average daily net assets
Ratio of net income 4.94%+ 5.40%+ 5.88%+ 5.91%+
to average daily net assets
Portfolio turnover rate 13% 28% 13% 28%
(excluding short-term
securities)
Total return++ 5.2% 0.8% 6.1% 0.8%
*For a share outstanding throughout the period. Rounded to the nearest cent.
**Inception date was March 20, 1995 for Class B and Class Y.
+Adjusted to an annual basis.
++Total return does not reflect payment of a sales charge.
#Expense ratio is based on total expense of the Fund before applying earnings credit.
/TABLE
<PAGE>
PAGE 17
<TABLE>
<CAPTION>
IDS Special Tax-Exempt Series Trust
IDS New York Tax-Exempt Fund
______________________________________________________________________________
Financial highlights
The table below shows certain important financial
information for evaluating the Fund's results.
Fiscal period ended June 30,
Per share income and capital changes***
Class A
1996 1995 1994 1993 1992 1991 1990 1989* 1988** 1987** 1986##
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, $5.09 $5.12 $5.41 $5.13 $4.86 $4.80 $4.87 $4.73 $4.58 $5.07 $5.00
beginning of period
Income from investment operations:
Net investment income .29 .30 .30 .30 .31 .31 .31 .16 .31 .31 .11
Net gains (losses) (.03) (.03) (.29) .28 .27 .06 (.07) .14 .15 (.49) .07
(both realized
and unrealized)
Total from investment .26 .27 .01 .58 .58 .37 .24 .30 .46 (.18) .18
operations
Less distributions:
Dividends from net (.29) (.30) (.30) (.30) (.31) (.31) (.31) (.16) (.31) (.31) (.11)
investment income
Net asset value, $5.06 $5.09 $5.12 $5.41 $5.13 $4.86 $4.80 $4.87 $4.73 $4.58 $5.07
end of period
Ratios/supplemental data
1996 1995 1994 1993 1992 1991 1990 1989* 1988** 1987** 1986##
Net assets, end of period $115 $120 $120 $117 $95 $79 $68 $49 $34 $21 $13
(in millions)
Ratio of expenses to .85%### .70% .65% .67% .67% .65% .65% .66%+ .71% .88% .75%+#
average daily net assets
Ratio of net income 5.51% 6.00% 5.61% 5.79% 6.26% 6.53% 6.57% 6.78%+ 6.61% 6.79% 6.52%+#
to average daily net assets
Portfolio turnover rate 9% 20% 10% 0% 8% 17% 8% 1% 6% 20% 3%
(excluding short-term
securities)
Total return++ 5.2% 5.5% 0.1% 11.6% 12.3% 8.2% 5.0% 6.5%+++ 10.3% (3.4%) 3.6%+++
*Six months ended June 30, 1989. The Fund's fiscal year end was changed from
Dec. 31 to June 30, effective 1989.
**Fiscal years ended Dec. 31, 1987 and Dec. 31, 1988.
***For a share outstanding throughout the period. Round to the nearest cent.
+Adjusted to an annual basis.
++Total return does not reflect payment of a sales charge.
+++For the fiscal periods ended Dec. 31, 1986 and June 30, 1989, the annualized total
returns were 12.1% and 13.6% respectively.
#During this period, American Express Financial Corporation voluntarily reimbursed
the Fund for expenses in excess of 0.75% of its average daily net assets, on an
annual basis. Had American Financial Corporation not done so, the ratio of expenses
and ratio of net investment income would have been 1.11% and 6.16%, respectively.
##Inception date. Period from Aug. 18, 1986 to Dec. 31, 1996.
###Expense ratio is based on total expenses of the Fund before applying earnings credit.
</TABLE>
<PAGE>
PAGE 18
<TABLE>
<CAPTION>
IDS Special Tax-Exempt Series Trust
IDS New York Tax-Exempt Fund
______________________________________________________________________________
Financial highlights
The table below shows certain important financial
information for evaluating the Fund's results.
Fiscal period ended June 30,
Per share income and capital changes*
Class B Class Y
1996 1995** 1996 1995**
<S> <C> <C> <C> <C>
Net asset value, $5.09 $5.17 $5.11 $5.17
beginning of period
Income from investment operations:
Net investment income .25 .09 .29 .08
Net gains (losses) (.03) (.08) (.03) (.06)
(both realized
and unrealized)
Total from investment .22 .01 .26 .02
operations
Less distributions:
Dividends from net (.25) (.09) (.30) (.08)
investment income
Net asset value, $5.06 $5.09 $5.07 $5.11
end of period
Ratios/supplemental data
1996 1995** 1996 1995**
Net assets, end of period $5 $2 $ -- $ --
(in millions)
Ratio of expenses to 1.59%++ 1.59%+ .60%++ .54%+
average daily net assets
Ratio of net income 4.79% 5.42%+ 5.75% 5.94%+
to average daily net assets
Portfolio turnover rate 9% 20% 9% 20%
(excluding short-term
securities)
Total return*** 4.4% 0.2% 5.4% 0.4%
*For a share outstanding throughout the period. Rounded to the nearest cent.
**Inception date was March 20, 1995 for Class B and Class Y. Significant shareholder activity
began March 21, 1995 for Class B and March 28, 1995 for Class Y.
***Total return does not reflect payment of a sales charge.
+Adjusted to an annual basis.
++Expense ratio is based on total expense of the Fund before applying earnings credit.
</TABLE> <PAGE>
PAGE 19
<TABLE>
<CAPTION>
IDS Special Tax-Exempt Series Trust
IDS Ohio Tax-Exempt Fund
______________________________________________________________________________
Financial highlights
Fiscal period ended June 30,
Per share income and capital changes*
Class A
1996 1995 1994 1993 1992 1991 1990 1989 1988
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, $5.28 $5.26 $5.58 $5.28 $5.01 $4.94 $5.04 $4.87 $5.00
beginning of period
Income from investment operations:
Net investment income .29 .29 .30 .30 .31 .32 .31 .31 .32
Net gains (losses) .01 .03 (.32) .31 .27 .07 (.09) .18 (.10)
(both realized
and unrealized)
Total from investment .30 .32 (.02) .61 .58 .39 .22 .49 .22
operations
Less distributions:
Dividends from net (.29) (.30) (.30) (.30) (.31) (.32) (.31) (.31) (.32)
investment income
Distributions from (.01) -- -- (.01) -- -- (.01) (.01) (.03)
realized gains
Total distributions (.30) (.30) (.30) (.31) (.31) (.32) (.32) (.32) (.35)
Net asset value, $5.28 $5.28 $5.26 $5.58 $5.28 $5.01 $4.94 $5.04 $4.87
end of period
Ratios/supplemental data
Class A
1996 1995 1994 1993 1992 1991 1990 1989 1988
Net assets, end of period $72 $73 $72 $65 $47 $33 $25 $16 $8
(in millions)
Ratio of expenses to .85%# .71% .66% .67% .70% .68% .70% .82% .86%+
average daily net assets
Ratio of net income 5.35% 5.65% 5.44% 5.65% 6.14% 6.41% 6.43% 6.40% 6.64%+
to average daily net assets
Portfolio turnover rate 24% 45% 11% 0% 5% 2% 6% 10% 0%
(excluding short-term
securities)
Total return++ 5.7% 6.2% (0.5%) 12.1% 11.9% 8.1% 4.6% 10.5% 4.7%
*For a share outstanding throughout the period. Rounded to the nearest cent.
+During the period from July 2, 1987 to March 31, 1988, American Express
Financial Corporation voluntarily reimbursed the Fund for expenses in excess
of 0.75% of its average daily net assets, on an annual basis. Had American Express
Financial Corporation not done so, the ratio of net investment income would have
been 1.09% and 6.41%, respectively.
++Total return does not reflect payment of a sales charge.
#Expense ratio is based on total expense of the Fund before applying earnings credit.
/TABLE
<PAGE>
PAGE 20
<TABLE>
<CAPTION>
IDS Special Tax-Exempt Series Trust
IDS Ohio Tax-Exempt Fund
______________________________________________________________________________
Financial highlights
Fiscal period ended June 30,
Per share income and capital changes*
Class B Class Y
1996 1995** 1996 1995**
<S> <C> <C> <C> <C>
Net asset value, $5.28 $5.34 $5.28 $5.35
beginning of period
Income from investment operations:
Net investment income .24 .09 .31 .08
Net gains (losses) .01 (.06) .01 (.07)
(both realized
and unrealized)
Total from investment .25 .03 .32 .01
operations
Less distributions:
Dividends from net (.24) (.09) (.30) (.08)
investment income
Distributions from (.01) -- (.01) --
realized gains
Total distributions (.25) (.09) (.31) (.08)
Net asset value, $5.28 $5.28 $5.29 $5.28
end of period
Ratios/supplemental data
Class B Class Y
1996 1995** 1996 1995**
Net assets, end of period $2 $1 $-- $--
(in millions)
Ratio of expenses to 1.59%# 1.66%+ .58%# .54+
average daily net assets
Ratio of net income 4.63% 4.58%+ 5.54% 5.93%+
to average daily net assets
Portfolio turnover rate 24% 45% 24% 45%
(excluding short-term
securities)
Total return++ 5.0% 0.6% 5.9% 0.2%
*For a share outstanding throughout the period. Rounded to the nearest cent.
**Inception date was March 20, 1995 for Class B and Class Y.
+Adjusted to an annual basis.
++Total return does not reflect payment of a sales charge.
#Expense ratio is based on total expense of the Fund before applying earnings credit.
</TABLE>
The information on these tables has been audited by KPMG Peat
Marwick LLP, independent auditors. The independent auditors' report
and additional information about the performance of each Fund are
contained in the Funds' annual report which, if not included with
this prospectus, may be obtained without charge.
Total returns
Total return is the sum of all of your returns for a given period,
assuming you reinvest all distributions. It is calculated by
taking the total value of shares you own at the end of the period
(including shares acquired by reinvestment), less the price of
shares you purchased at the beginning of the period.<PAGE>
PAGE 21
Average annual total return is the annually compounded rate of
return over a given time period (usually two or more years). It is
the total return for the period converted to an equivalent annual
figure.
Average annual total returns as of June 30, 1996
Purchase 1 year 5 years Since
made ago ago inception
California
Fund:
Class A+ +0.70% +5.86% +6.15%
Class B** +1.19% -- +1.52%
Class Y** +6.11% -- +5.06%
Massachusetts Fund:
Class A++ +0.67% +6.06% +6.38%
Class B** +1.19% -- +1.62%
Class Y** +6.08% -- +5.38%
Michigan Fund:
Class A++ +1.04% +6.33% +6.66%
Class B** +1.57% -- +1.78%
Class Y** +6.45% -- +5.56%
Minnesota Fund:
Class A+ +0.63% +5.77% +6.36%
Class B** +1.20% -- +1.66%
Class Y** +6.14% -- +5.36%
New York Fund:
Class A+ -0.03% +5.76% +5.94%
Class B** +0.45% -- +0.63%
Class Y** +5.35% -- +4.33%
Ohio Fund:
Class A++ +0.47% +5.89% +6.37%
Class B** +0.96% -- -0.98%
Class Y** +5.86% -- +4.73%
Lehman Brothers
Municipal Bond +7.78%+
Index +6.64% +7.75% +7.96%++
+Since 8/18/86 for California, Minnesota and New York.
++Since 7/2/87 for Massachusetts, Michigan and Ohio.
**Inception date was March 20, 1995.
Cumulative total returns as of June 30, 1996
Purchase 1 year 5 years Since
made ago ago inception
California
Fund:
Class A+ +0.70% +32.94% +80.27%
Class B** +1.19% -- +1.98%
Class Y** +6.11% -- +6.54%<PAGE>
PAGE 22
Massachusetts Fund:
Class A++ +0.67% +34.20% +74.51%
Class B** +1.19% -- +2.12%
Class Y** +6.08% -- +6.95%
Michigan Fund:
Class A++ +1.04% +35.92% +78.69%
Class B** +1.57% -- +2.32%
Class Y** +6.54% -- +7.18%
Minnesota Fund:
Class A+ +0.63% +32.38% +83.83%
Class B** +1.20% -- +2.16%
Class Y** +6.14% -- +6.93%
New York Fund:
Class A+ -0.03% +32.31% +76.78%
Class B** +0.45% -- +0.82%
Class Y** +5.35% -- +5.59%
Ohio Fund:
Class A++ +0.47% +33.13% +74.36%
Class B** +0.96% -- +1.28%
Class Y** +5.86% -- +6.11%
Lehman Brothers
Municipal Bond
Index +6.64% +45.29% +109.53%
+99.21%++
+Since 8/18/86 for California, Minnesota and New York.
++Since 7/2/87 for Massachusetts, Michigan and Ohio.
**Inception date was March 20, 1995.
The above tables show total returns from hypothetical investments
in Class A, Class B and Class Y shares of each Fund. These returns
are compared to those of a popular index for the same periods. The
performance of Class B and Class Y will vary from the performance
of Class A based on differences in sales charges and fees. March
20, 1995 was the inception date for Class B and Class Y. Past
performance for Class Y for the periods prior to March 20, 1995 may
be calculated based on the performance of Class A, adjusted to
reflect differences in sales charges although not for other
differences in expenses.
For purposes of calculation, information about each Fund assumes:
o a sales charge of 5% for Class A shares
o redemption at the end of the period and deduction of the
applicable contingent deferred sales charge for Class B shares
o no sales charge for Class Y shares
o no adjustments for taxes an investor may have paid on the
reinvested income and capital gains
o a period of widely fluctuating securities prices. Returns
shown should not be considered a representation of a Fund's
future performance.
Lehman Brothers Municipal Bond Index is an unmanaged index made up
of a representative list of general obligation, revenue, insured
and pre-refunded bonds. The index is frequently used as a general <PAGE>
PAGE 23
measure of tax-exempt bond market performance. However, the
securities used to create the index may not be representative of
the bonds held in a Fund. The index reflects reinvestment of all
distributions and changes in market prices, but excludes brokerage
commissions or other fees.
Yield
Yield is the net investment income earned per share for a specified
time period, divided by the offering price at the end of the
period. SEC standardized yield for the 30-day period ended June
30, 1996 were the following for each Fund:
SEC standardized yield
Class A Class B Class Y
California Fund 4.35% 3.84% 5.04%
Massachusetts Fund 4.39% 3.88% 5.00%
Michigan Fund 4.11% 3.58% 4.73%
Minnesota Fund 4.71% 4.21% 5.29%
New York Fund 4.25% 3.73% 4.82%
Ohio Fund 4.61% 4.10% 5.31%
Each Fund calculates the 30-day SEC standardized yield by dividing:
o net investment income per share deemed earned during a 30-day
period by
o the public offering price per share on the last day of the
period, and
o converting the result to a yearly equivalent figure.
A Fund also may calculate a tax equivalent yield by dividing the
tax-exempt portion of its yield by one minus a stated income tax
rate. A tax equivalent yield demonstrates the taxable yield
necessary to produce an after-tax yield equivalent to that of a
fund that invests in exempt obligations.
These yield calculations do not include any contingent deferred
sales charge, ranging from 5% to 0% on Class B shares, which would
reduce the yields quoted.
A Fund's yield varies from day to day, mainly because share values
and offering prices (which are calculated daily) vary in response
to changes in interest rates. Net investment income normally
changes much less in the short run. Thus, when interest rates rise
and share values fall, yield tends to rise. When interest rates
fall, yield tends to follow.
Past yields should not be an indicator of future yields.
Investment policies and risks
Under normal market conditions, California, Massachusetts,
Michigan, Minnesota, New York and Ohio Funds will invest at least
80% of their net assets in bonds, notes and commercial paper issued
<PAGE>
PAGE 24
by or on behalf of their respective state or local governmental
units whose interest, in the opinion of bond counsel for the
issuer, is exempt from federal, state and local (if applicable)
income tax in their respective states. Other investments may
include debt securities sold at a deep discount, taxable
investments and derivative instruments.
In addition, a portion of each Fund's assets may be invested in
bonds whose interest is subject to the alternative minimum tax
computation. As long as the staff of the SEC maintains its current
position that a fund calling itself a "tax-exempt" fund may not
invest more than 20% of its net assets in these bonds, each Fund
will limit its investments in these bonds to 20% of its net assets.
The various types of investments the portfolio manager uses to
achieve investment performance are described in more detail in the
next section and in the SAI.
Facts about investments and their risks
Bonds and other debt securities exempt from federal, state and
local income taxes: The price of bonds generally falls as interest
rates increase, and rises as interest rates decrease. The price of
bonds also fluctuates if the credit rating is upgraded or
downgraded. At least 75% of each Fund's investments will be in
investment-grade securities, that is securities given the four
highest ratings by Moody's Investors Service, Inc. (Moody's) and
Standard & Poor's Corporation (S&P) or in non-rated securities of
equivalent investment quality in the judgment of the Fund's
investment manager. The other 25% may be in securities rated Ba or
B by Moody's or BB or B by S&P or the equivalent (commonly known as
junk bonds).
Debt securities below investment grade: The price of these bonds
may react more to the ability of a company to pay interest and
principal when due than to changes in interest rates. They have
greater price fluctuations, are more likely to experience a
default, and sometimes are referred to as "junk bonds." Reduced
market liquidity for these bonds may occasionally make it more
difficult to value them. In valuing bonds each Fund relies both on
independent rating agencies and the investment manager's credit
analysis. Securities that are subsequently downgraded in quality
may continue to be held by a Fund and will be sold only when the
Fund's investment manager believes it is advantageous to do so.
Bond ratings and holdings for fiscal 1996 for
California Tax-Exempt Fund
<TABLE>
<CAPTION>
Percent of
S&P Rating Protection of net assets in
Percent of (or Moody's principal and unrated securities
net assets equivalent) interest assessed by AEFC
<C> <C> <C> <C>
43.91% AAA Highest quality 14.18%
18.28 AA High quality ___
14.46 A Upper medium grade 0.16
5.15 BBB Medium grade ---
--- BB Moderately speculative 1.30
--- B Speculative ---
<PAGE>
PAGE 25
--- CCC Highly speculative ---
--- CC Poor quality ---
--- C Lowest quality ---
--- D In default ---
16.22 Unrated Unrated securities 0.58
Bond ratings and holdings for fiscal 1996 for
Massachusetts Tax-Exempt Fund
Percent of
S&P Rating Protection of net assets in
Percent of (or Moody's principal and unrated securities
net assets equivalent) interest assessed by AEFC
59.62% AAA Highest quality 5.46%
9.35 AA High quality ---
15.25 A Upper medium grade ---
5.25 BBB Medium grade 0.93
--- BB Moderately speculative 1.29
--- B Speculative ---
--- CCC Highly speculative ---
--- CC Poor quality ---
--- C Lowest quality ---
--- D In default ---
7.69 Unrated Unrated securities ---
Bond ratings and holdings for fiscal 1996 for
Michigan Tax-Exempt Fund
Percent of
S&P Rating Protection of net assets in
Percent of (or Moody's principal and unrated securities
net assets equivalent) interest assessed by AEFC
52.12% AAA Highest quality 14.38%
14.39 AA High quality ---
8.51 A Upper medium grade ---
5.07 BBB Medium grade 1.93
0.24 BB Moderately speculative 1.24
--- B Speculative ---
--- CCC Highly speculative ---
--- CC Poor quality ---
--- C Lowest quality ---
--- D In default ---
17.75 Unrated Unrated securities 0.20
Bond ratings and holdings for fiscal 1996 for
Minnesota Tax-Exempt Fund
Percent of
S&P Rating Protection of net assets in
Percent of (or Moody's principal and unrated securities
net assets equivalent) interest assessed by AEFC
36.60% AAA Highest quality 10.76%
16.40 AA High quality 3.01
15.35 A Upper medium grade 0.20
1.01 BBB Medium grade 5.28
0.46 BB Moderately speculative 5.42
--- B Speculative 1.54
--- CCC Highly speculative ---
--- CC Poor quality ---
--- C Lowest quality ---
1.18 D In default 0.57
27.16 Unrated Unrated securities 0.38
<PAGE>
PAGE 26
Bond ratings and holdings for fiscal 1996 for
New York Tax-Exempt Fund
Percent of
S&P Rating Protection of net assets in
Percent of (or Moody's principal and unrated securities
net assets equivalent) interest assessed by AEFC
43.19% AAA Highest quality 10.46%
17.28 AA High quality ---
14.36 A Upper medium grade ---
12.47 BBB Medium grade ---
--- BB Moderately speculative 0.10
--- B Speculative ---
--- CCC Highly speculative ---
--- CC Poor quality ---
--- C Lowest quality ---
--- D In default ---
10.56 Unrated Unrated securities ---
Bond ratings and holdings for fiscal 1996 for
Ohio Tax-Exempt Fund
Percent of
S&P Rating Protection of net assets in
Percent of (or Moody's principal and unrated securities
net assets equivalent) interest assessed by AEFC
59.77% AAA Highest quality 6.64%
9.42 AA High quality ---
9.31 A Upper medium grade ---
6.58 BBB Medium grade ---
3.08 BB Moderately speculative 1.38
--- B Speculative 1.39
--- CCC Highly speculative 0.12
--- CC Poor quality ---
--- C Lowest quality ---
--- D In default ---
9.53 Unrated Unrated securities ---
</TABLE>
(See Appendix to this prospectus describing bond ratings for
further information.)
Debt securities sold at a deep discount: Some bonds are sold at
deep discounts because they do not pay interest until maturity.
They include zero coupon bonds and PIK (pay-in-kind) bonds. To
comply with tax laws, each Fund has to recognize a computed amount
of interest income and pay dividends to shareholders even though no
cash has been received. In some instances, the Fund may have to
sell securities to have sufficient cash to pay the dividends.
Concentration: Each of the Funds concentrates its investments in
the securities of its respective state. In addition, each Fund may
invest more than 25% of its total assets in a particular segment of
the municipal securities market, such as electric revenue bonds,
hospital revenue bonds, housing agency bonds, industrial
development bonds, airport bonds, or in securities the interest
upon which is paid from revenues of a similar type of project. In
such circumstances, an economic, business, political or other
change affecting one bond (such as proposed legislation affecting
the financing of a project, shortages or price increases of needed
materials, or declining markets or needs of the projects) also may
affect other bonds in the same segment. This could increase market
risk.
<PAGE>
PAGE 27
Each Fund may invest more than 25% of its total assets in
industrial revenue bonds, but does not intend to invest more than
25% of its total assets in industrial revenue bonds issued for
companies in the same industry. As the similarity in issuers
increases, the potential for fluctuation in the net asset value of
each Fund's shares also increases.
Economic conditions in each respective state affect both the total
amount of taxes each state collects and the personal income growth
within each state. In the past, each state experienced financial
difficulty when budgeted expenses outpaced tax revenue collections.
Budgetary shortfalls were managed either by short-term borrowing
(in the case of California, New York and Massachusetts) or use of
reserve funds (in the case of Michigan, Minnesota and Ohio).
Current state budgets are assumed to be based on conservative
economic forecasts and reduced spending levels. Budgetary
shortfalls may cause rating agencies to lower a state's credit
rating. This may cause an increase in the yield and a decrease in
the price of a security issued by a particular state. Furthermore,
because local finances are dependent upon the fiscal integrity of
the state and upon the same financial factors that influence state
government, the credit ratings of state agencies, authorities and
municipalities may be similarly affected. See the SAI for more
information concerning each state.
Taxable investments: If, in the opinion of the investment manager,
appropriate tax-exempt securities are not available, each Fund may
invest up to 20% of its net assets, or more on a temporary
defensive basis, in investments the income from which is subject to
federal, state or local income tax, as described more fully in the
SAI.
Derivative instruments: The portfolio manager may use derivative
instruments in addition to securities to achieve investment
performance. Derivative instruments include futures, options and
forward contracts. Such instruments may be used to maintain cash
reserves while remaining fully invested, to offset anticipated
declines in values of investments, to facilitate trading, to reduce
transaction costs or to pursue higher investment returns.
Derivative instruments are characterized by requiring little or no
initial payment and a daily change in price based on or derived
from a security, a currency, a group of securities or currencies,
or an index. A number of strategies or combination of instruments
can be used to achieve the desired investment performance
characteristics. A small change in the value of the underlying
security, currency or index will cause a sizable gain or loss in
the price of the derivative instrument. Derivative instruments
allow the portfolio manager to change the investment performance
characteristics very quickly and at lower costs. Risks include
losses of premiums, rapid changes in prices, defaults by other
parties and inability to close such instruments. A Fund will use
derivative instruments only to achieve the same investment
performance characteristics it could achieve by directly holding
those securities and currencies permitted under the investment
policies. Each Fund will designate cash or appropriate liquid
assets to cover its portfolio obligations. The use of derivative <PAGE>
PAGE 28
instruments may produce taxable income. No more than 5% of each
Fund's net assets can be used at any one time for good faith
deposits on futures and premiums for options on futures that do not
offset existing investment positions. This does not, however,
limit the portion of a Fund's assets at risk to 5%. The Funds are
not limited as to the percentage of their assets that may be
invested in permissible investments, including derivatives, except
as otherwise explicitly provided in this prospectus or the SAI.
For descriptions of these and other types of derivative
instruments, see the Appendix to this prospectus and the SAI.
Inverse floaters: Inverse floaters are derivatives created by
underwriters using the interest payments on securities. A portion
of the interest received is paid to holders of instruments based on
current interest rates for short-term securities. What is left
over, less a servicing fee, is paid to holders of the inverse
floaters. As interest rates go down, the holders of the inverse
floaters receive more income and an increase in the price for the
inverse floaters. As interest rates go up, the holders of the
inverse floaters receive less income and a decrease in the price
for the inverse floaters. No more than 10% of each Fund's net
assets will be held in inverse floaters.
Securities and other instruments that are illiquid: A security or
other instrument is illiquid if it cannot be sold quickly in the
normal course of business. Some investments cannot be resold to
the U.S. public because of their terms or government regulations.
All securities and other instruments, however, can be sold in
private sales, and many may be sold to other institutions and
qualified buyers or on foreign markets. The portfolio manager will
follow guidelines established by the board and consider relevant
factors such as the nature of the security and the number of likely
buyers when determining whether a security is illiquid. No more
than 10% of each Fund's net assets will be held in securities and
other instruments that are illiquid.
The investment policies described above, except for the policies
concerning the type and amount of tax-exempt investments, may be
changed by the board.
Lending portfolio securities: Each Fund may lend its securities to
earn income so long as borrowers provide collateral equal to the
market value of the loans. The risks are that borrowers will not
provide collateral when required or return securities when due.
Unless a majority of the outstanding voting securities approve
otherwise, loans may not exceed 30% of a Fund's net assets.
Alternative investment option
In the future, the board of the Funds may determine for operating
efficiencies to use a master/feeder structure. Under that
structure, each Fund's assets would be invested in an investment
company with the same goal as the Fund, rather than invested
directly in a portfolio of securities.
<PAGE>
PAGE 29
Valuing Fund shares
The public offering price is the net asset value (NAV) adjusted for
the sales charge for Class A. It is the NAV for Class B and Class
Y.
The NAV is the value of a single Fund share. The NAV usually
changes daily, and is calculated at the close of business, normally
3 p.m. Central time, each business day (any day the New York Stock
Exchange is open). NAV generally declines as interest rates
increase and rises as interest rates decline.
To establish the net assets, all securities are valued as of the
close of each business day. In valuing assets:
o Bonds and assets without readily available market values are
valued at fair value according to methods selected in good
faith by the board.
o Securities maturing in 60 days or less are valued at amortized
cost.
o Securities (except bonds) and assets with available market
values are valued on that basis.
How to purchase, exchange or redeem shares
Alternative purchase arrangements
Each Fund offers three different classes of shares - Class A, Class
B and Class Y. The primary differences among the classes are in
the sales charge structures and in their ongoing expenses. These
differences are summarized in the table below. You may choose the
class that best suits your circumstances and objectives.
<TABLE>
<CAPTION>
Sales charge and
distribution
(12b-1) fee Service fee Other information
<S> <C> <C> <C>
Class A Maximum initial 0.175% of average Initial sales charge
sales charge of daily net assets waived or reduced
5%; no 12b-1 fee for certain purchases
Class B No initial sales 0.175% of average Shares convert to
charge; maximum CDSC daily net assets Class A after eight
of 5% declines to 0% years; CDSC waived in
after six years; 12b-1 certain circumstances
fee of 0.75% of average
daily net assets
Class Y None None Available only to
certain qualifying
institutional
investors
</TABLE>
<PAGE>
PAGE 30
Conversion of Class B shares to Class A shares - Eight calendar
years after Class B shares were originally purchased, Class B
shares will convert to Class A shares and will no longer be subject
to a distribution fee. The conversion will be on the basis of
relative net asset values of the two classes, without the
imposition of any sales charge. Class B shares purchased through
reinvested dividends and distributions will convert to Class A
shares in a pro rata portion as the Class B shares purchased other
than through reinvestment.
Considerations in determining whether to purchase Class A or Class
B shares - You should consider the information below in determining
whether to purchase Class A or Class B shares. The sales charges
and distribution fee (included in "Ongoing expenses") are
structured so that you will have approximately the same total
return at the end of eight years regardless of which class you
chose.
Sales charges on purchase or redemption
If you purchase Class A If you purchase Class B
shares shares
o You will not have all o All of your money is
of your purchase price invested in shares of
invested. Part of your stock. However, you will
purchase price will go pay a sales charge if you
to pay the sales charge. redeem your shares within
You will not pay a sales six years of purchase.
charge when you redeem
your shares.
o You will be able to o No reductions of the
take advantage of sales charge are
reductions in the sales available for large
charge. purchases.
If your investments in IDS funds that are subject to a sales charge
total $250,000 or more, you are better off paying the reduced sales
charge in Class A than paying the higher fees in Class B. If you
qualify for a waiver of the sales charge, you should purchase Class
A shares.
Ongoing expenses
If you purchase Class A If you purchase Class B
shares shares
o Your shares will have o The distribution and
a lower expense ratio transfer agency fees for
than Class B shares Class B will cause your
because Class A does not shares to have a higher
pay a distribution fee expense ratio and to pay
and the transfer agency lower dividends than
fee for Class A is lower Class A shares. After
<PAGE>
PAGE 31
than the fee for Class B. eight years, Class B
As a result, Class A shares shares will convert to
will pay higher dividends Class A shares and will
than Class B shares. no longer be subject to
higher fees.
You should consider how long you plan to hold your shares and
whether the accumulated higher fees and CDSC on Class B shares
prior to conversion would be less than the initial sales charge on
Class A shares. Also consider to what extent the difference would
be offset by the lower expenses on Class A shares. To help you in
this analysis, the example in the "Sales charge and Fund expenses"
section of the prospectus illustrates the charges applicable to
each class of shares.
Class Y shares - Class Y shares are offered to certain
institutional investors. Class Y shares are sold without a front-
end sales charge or a CDSC and are not subject to either a service
fee or a distribution fee. The following investors are eligible to
purchase Class Y shares:
o Qualified employee benefit plans* if the plan:
- uses a daily transfer recordkeeping service offering
participants daily access to IDS funds and has
- at least $10 million in plan assets or
- 500 or more participants; or
- does not use daily transfer recordkeeping and has
- at least $3 million invested in funds of the IDS MUTUAL
FUND GROUP or
- 500 or more participants.
o Trust companies or similar institutions, and charitable
organizations that meet the definition in Section 501(c)(3) of
the Internal Revenue Code.* These must have at least $10
million invested in funds of the IDS MUTUAL FUND GROUP.
o Nonqualified deferred compensation plans* whose participants
are included in a qualified employee benefit plan described
above.
* Eligibility must be determined in advance by American Express
Financial Advisors. To do so, contact your financial advisor.
How to purchase shares
Not all classes of the Funds are sold in every state. Your
financial advisor will help you determine if a particular class is
available in your state.
If you're investing in these Funds for the first time, you'll need
to set up an account. Your financial advisor will help you fill
out and submit an application. Once your account is set up, you
can choose among several convenient ways to invest.
Important: When opening an account, you must provide AEFC with
your correct Taxpayer Identification Number (Social Security or
Employer Identification number). See "Distributions and taxes."
<PAGE>
PAGE 32
When you purchase shares for a new or existing account, the price
you pay per share is determined at the close of business on the day
your investment is received and accepted at the Minneapolis
headquarters.
Purchase policies:
o Investments must be received and accepted in the Minneapolis
headquarters on a business day before 3 p.m. Central time to
be included in your account that day and to receive that day's
share price. Otherwise, your purchase will be processed the
next business day and you will pay the next day's share price.
o The minimums allowed for investment may change from time to
time.
o Wire orders can be accepted only on days when your bank, AEFC,
the Funds and Norwest Bank Minneapolis are open for business.
o Wire purchases are completed when wired payment is received
and the Fund accepts the purchase.
o AEFC and the Funds are not responsible for any delays that
occur in wiring funds, including delays in processing by the
bank.
o You must pay any fee the bank charges for wiring.
o Each Fund reserves the right to reject any application for any
reason.
o If your application does not specify which class of shares you
are purchasing, it will be assumed that you are investing in
Class A shares.
Three ways to invest
<TABLE>
<CAPTION>
<S> <C> <C>
1
By regular account Send your check and application Minimum amounts
(or your name and account number Initial investment
if you have an established account) per Fund: $2,000
to: Additional investments
American Express Financial Advisors Inc. per Fund: $ 100
P.O. Box 74 Account balances
Minneapolis, MN 55440-0074 per Fund: $ 300*
Your financial advisor will help
you with this process.
2
By scheduled Contact your financial advisor Minimum amounts
investment plan to set up one of the following Initial investment: $ 100
scheduled plans: Additional
investments: $100/mo.
o automatic payroll deduction Account balances: none
(on active plans of
o bank authorization monthly payments)
o direct deposit of
Social Security check
o other plan approved by the Fund
<PAGE>
PAGE 33
3
By wire If you have an established account, If this information is not
you may wire money to: included, the order may be
rejected and all money
Norwest Bank Minneapolis received by the Fund, less
Routing No. 091000019 any costs the Fund or AEFC
Minneapolis, MN incurs, will be returned
Attn: Domestic Wire Dept. promptly.
Give these instructions: Minimum amounts:
Credit IDS Account #00-30-015 Each wire investment: $1,000**
for personal account # (your
account number) for (your name).
*If your account balance falls below $300, you will be asked in writing to bring it up to $300 or establish a scheduled
investment plan. If you don't do so within 30 days, your shares can be redeemed and the proceeds mailed to you.
**The money sent by a single wire can be invested only in one Fund.
</TABLE>
How to exchange shares
You can exchange your shares of the Fund at no charge for shares of
the same class of any other publicly offered fund in the IDS MUTUAL
FUND GROUP available in your state. Exchanges into IDS Tax-Free
Money Fund must be made from Class A shares. For complete
information, including fees and expenses, read the prospectus
carefully before exchanging into a new fund.
If your exchange request arrives at the Minneapolis headquarters
before the close of business, your shares will be redeemed at the
net asset value set for that day. The proceeds will be used to
purchase new fund shares the same day. Otherwise, your exchange
will take place the next business day at that day's net asset
value.
For tax purposes, an exchange represents a redemption and purchase
and may result in a gain or loss. However, you cannot create a tax
loss (or reduce a taxable gain) by exchanging from the Fund within
91 days of your purchase. For further explanation, see the SAI.
How to redeem shares
You can redeem your shares at any time. American Express
Shareholder Service will mail payment within seven days after
receiving your request.
When you redeem shares, the amount you receive may be more or less
than the amount you invested. Your shares will be redeemed at net
asset value, minus any applicable sales charge, at the close of
business on the day your request is accepted at the Minneapolis
headquarters. If your request arrives after the close of business,
the price per share will be the net asset value, minus any
applicable sales charge, at the close of business on the next
business day.
A redemption is a taxable transaction. If your proceeds from your
redemption are more or less than the cost of your shares, you will
have a gain or loss, which can affect your tax liability.
Two ways to request an exchange or redemption of shares
<TABLE><CAPTION>
<S> <C>
1
By letter Include in your letter:
o the name of the fund(s)
o the class of shares to be exchanged or redeemed
o your account number(s) (for exchanges, both funds must be registered in the same
ownership)<PAGE>
PAGE 34
o your Taxpayer Identification Number (TIN)
o the dollar amount or number of shares you want to exchange or redeem
o signature of all registered account owners
o for redemptions, indicate how you want your money delivered to you
o any paper certificates of shares you hold
Regular mail:
American Express Shareholder Service
Attn: Redemptions
P.O. Box 534
Minneapolis, MN 55440-0534
Express mail:
American Express Shareholder Service
Attn: Redemptions
733 Marquette Ave.
Minneapolis, MN 55402
2
By phone
American Express Telephone o The Fund and AEFC will honor any telephone exchange or redemption request believed to be
Transaction Service: authentic and will use reasonable procedures to confirm that they are. This includes
800-437-3133 or asking identifying questions and tape recording calls. If reasonable
612-671-3800 procedures are not followed, the Fund or AEFC will be liable for any loss resulting from
fraudulent requests.
o Phone exchange and redemption privileges automatically apply to all accounts except
custodial, corporate or qualified retirement accounts unless you request these privileges
NOT apply by writing American Express Shareholder Service. Each registered owner must sign
the request.
o AEFC answers phone requests promptly, but you may experience delays when call volume is
high. If you are unable to get through, use mail procedure as an alternative.
o Acting on your instructions, your financial advisor may conduct telephone transactions
on your behalf.
o Phone privileges may be modified or discontinued at any time.
Minimum amount
Redemption: $100
Maximum amount
Redemption: $50,000
</TABLE>
Exchange policies:
o You may make up to three exchanges within any 30-day period,
with each limited to $300,000. These limits do not apply to
scheduled exchange programs and certain employee benefit plans or
other arrangements through which one shareholder represents the
interests of several. Exceptions may be allowed with pre-approval
of the Fund.
o Exchanges must be made into the same class of shares of the new
fund.
o If your exchange creates a new account, it must satisfy the
minimum investment amount for new purchases.
o Once we receive your exchange request, you cannot cancel it.
o Shares of the new fund may not be used on the same day for
another exchange.
o If your shares are pledged as collateral, the exchange will be
delayed until written approval is obtained from the secured party.
o AEFC and the Fund reserve the right to reject any exchange,
limit the amount, or modify or discontinue the exchange privilege,
to prevent abuse or adverse effects on the Fund and its <PAGE>
PAGE 35
shareholders. For example, if exchanges are too numerous or too
large, they may disrupt the Fund's investment strategies or
increase its costs.
Redemption policies:
o A "change of mind" option allows you to change your mind after
requesting a redemption and to use all or part of the proceeds to
purchase new shares in the same class from which you redeemed. If
you reinvest in Class A, you will purchase the new shares at net
asset value rather than the offering price on the date of a new
purchase. If you reinvest in Class B, any CDSC you paid on the
amount you are reinvesting also will be reinvested. To take
advantage of this option, send a written request within 30 days of
the date your redemption request was received. Include your
account number and mention this option. This privilege may be
limited or withdrawn at any time, and it may have tax consequences.
o A telephone redemption request will not be allowed within 30
days of a phoned-in address change.
Important: If you request a redemption of shares you recently
purchased by a check or money order that is not guaranteed, the
Fund will wait for your check to clear. It may take up to 10 days
from the date of purchase before a check is mailed to you. (A
check may be mailed earlier if your bank provides evidence
satisfactory to the Fund and AEFC that your check has cleared.)
Three ways to receive payment when you redeem shares
<TABLE><CAPTION>
<S> <C>
1
By regular or express mail o Mailed to the address on record.
o Payable to names listed on the account.
NOTE: The express mail delivery charges
you pay will vary depending on the
courier you select.
2
By wire o Minimum wire redemption: $1,000.
o Request that money be wired to your bank.
o Bank account must be in the same
ownership as the IDS fund account.
NOTE: Pre-authorization required. For
instructions, contact your financial
advisor or American Express Shareholder Service.
3
By scheduled payout plan o Minimum payment: $50.
o Contact your financial advisor or American Express
Shareholder Service to set up regular
payments to you on a monthly, bimonthly,
quarterly, semiannual or annual basis.
o Purchasing new shares while under a payout
plan may be disadvantageous because of
the sales charges.
</TABLE>
Reductions and waivers of the sales charge
Class A - initial sales charge alternative
On purchases of Class A shares, you pay a 5% sales charge on the
first $50,000 of your total investment and less on investments
after the first $50,000:<PAGE>
PAGE 36
Total investment Sales charge as a
percent of:*
Public Net
offering amount
price invested
Up to $50,000 5.0% 5.26%
Next $50,000 4.5 4.71
Next $400,000 3.8 3.95
Next $500,000 2.0 2.04
$1,000,000 or more 0.0 0.00
* To calculate the actual sales charge on an investment greater
than $50,000 and less than $1,000,000, amounts for each applicable
increment must be totaled. See the SAI.
Reductions of the sales charge on Class A shares
Your sales charge may be reduced, depending on the totals of:
o the amount you are investing in this Fund now,
o the amount of your existing investment in this Fund, if any, and
o the amount you and your primary household group are investing or
have in other funds in the IDS MUTUAL FUND GROUP that carry a sales
charge. (The primary household group consists of accounts in any
ownership for spouses or domestic partners and their unmarried
children under 21. Domestic partners are individuals who maintain
a shared primary residence and have joint property or other
insurable interests.)
Other policies that affect your sales charge:
o IDS Tax-Free Money Fund and Class A shares of IDS Cash
Management Fund do not carry sales charges. However, you may count
investments in these funds if you acquired shares in them by
exchanging shares from IDS funds that carry sales charges.
o Employee benefit plan purchases made through a payroll deduction
plan or through a plan sponsored by an employer, association of
employers, employee organization or other similar entity, may be
added together to reduce sales charges for all shares purchased
through that plan.
o If you intend to invest $1 million over a period of 13 months,
you can reduce the sales charges in Class A by filing a letter of
intent.
For more details, see the SAI.
Waivers of the sales charge for Class A shares
Sales charges do not apply to:
o Current or retired board members, officers or employees of the
Fund or AEFC or its subsidiaries, their spouses and unmarried
children under 21.
<PAGE>
PAGE 37
o Current or retired American Express financial advisors, their
spouses and unmarried children under 21.
o Qualified employee benefit plans* using a daily transfer
recordkeeping system offering participants daily access to IDS
funds.
(Participants in certain qualified plans for which the initial
sales charge is waived may be subject to a deferred sales charge of
up to 4% on certain redemptions. For more information, see the
SAI.)
o Shareholders who have at least $1 million invested in funds of
the IDS MUTUAL FUND GROUP. If the investment is redeemed in the
first year after purchase, a CDSC of 1% will be charged on the
redemption.
o Purchases made within 30 days after a redemption of shares (up
to the amount redeemed):
- of a product distributed by American Express Financial
Advisors in a qualified plan subject to a deferred
sales charge or
- a qualified plan where American Express Trust Company has a
recordkeeping, trustee, investment management or investment
servicing relationship.
Send the Fund a written request along with your payment, indicating
the amount of the redemption and the date on which it occurred.
o Purchases made with dividend or capital gain distributions from
another fund in the IDS MUTUAL FUND GROUP that has a sales charge.
o Purchases made through American Express Strategic Portfolio
Service (total amount of all investments made in the Strategic
Portfolio Service must be at least $50,000).
*Eligibility must be determined in advance by American Express
Financial Advisors. To do so, contact your financial advisor.
Class B - contingent deferred sales charge alternative
Where a CDSC is imposed on a redemption, it is based on the amount
of the redemption and the number of calendar years, including the
year of purchase, between purchase and redemption. The following
table shows the declining scale of percentages that apply to
redemptions during each year after a purchase:
If a redemption is The percentage rate
made during the for the CDSC is:
First year 5%
Second year 4%
Third year 4%
Fourth year 3%
Fifth year 2%
Sixth year 1%
Seventh year 0%
<PAGE>
PAGE 38
If the amount you are redeeming reduces the current net asset value
of your investment in Class B shares below the total dollar amount
of all your purchase payments during the last six years (including
the year in which your redemption is made), the CDSC is based on
the lower of the redeemed purchase payments or market value.
The following example illustrates how the CDSC is applied. Assume
you had invested $10,000 in Class B shares and that your investment
had appreciated in value to $12,000 after 15 months, including
reinvested dividend and capital gain distributions. You could
redeem any amount up to $2,000 without paying a CDSC ($12,000
current value less $10,000 purchase amount). If you redeemed
$2,500, the CDSC would apply only to the $500 that represented part
of your original purchase price. The CDSC rate would be 4% because
a redemption after 15 months would take place during the second
year after purchase.
Because the CDSC is imposed only on redemptions that reduce the
total of your purchase payments, you never have to pay a CDSC on
any amount you redeem that represents appreciation in the value of
your shares, income earned by your shares or capital gains. In
addition, when determining the rate of any CDSC, your redemption
will be made from the oldest purchase payment you made. Of course,
once a purchase payment is considered to have been redeemed, the
next amount redeemed is the next oldest purchase payment. By
redeeming the oldest purchase payments first, lower CDSCs are
imposed than would otherwise be the case.
Waivers of the contingent deferred sales charge
The CDSC on Class B shares will be waived on redemptions of shares:
o In the event of the shareholder's death,
o Purchased by any board member, officer or employee of a fund or
AEFC or its subsidiaries,
o Held in a trusteed employee benefit plan,
o Held in IRAs or certain qualified plans for which American
Express Trust Company acts as custodian, such as Keogh plans, tax-
sheltered custodial accounts or corporate pension plans, provided
that the shareholder is:
- at least 59-1/2 years old, and
- taking a retirement distribution (if the redemption is part
of a transfer to an IRA or qualified plan in a product
distributed by American Express Financial Advisors, or a
custodian-to-custodian transfer to a product not distributed
by American Express Financial Advisors, the CDSC will not be
waived), or
- redeeming under an approved substantially equal periodic
payment arrangement.
For investors in Class A shares who have over $1 million invested
in one year, the 1% CDSC on redemption of those shares will be
waived in the same circumstances described for Class B.
<PAGE>
PAGE 39
Special shareholder services
Services
To help you track and evaluate the performance of your investments,
AEFC provides these services:
Quarterly statements listing all of your holdings and transactions
during the previous three months.
Yearly tax statements featuring average-cost-basis reporting of
capital gains or losses if you redeem your shares along with
distribution information - which simplifies tax calculations.
A personalized mutual fund progress report detailing returns on
your initial investment and cash-flow activity in your account. It
calculates a total return to reflect your individual history in
owning Fund shares. This report is available from your financial
advisor.
Quick telephone reference
American Express Telephone Transaction Service
Redemptions and exchanges, dividend payments or reinvestments and
automatic payment arrangements
National/Minnesota: 800-437-3133
Mpls./St. Paul area: 671-3800
American Express Shareholder Service
Fund performance, objectives and account inquiries
612-671-3733
TTY Service
For the hearing impaired
800-846-4852
American Express Infoline
Automated account information (TouchToneR phones only), including
current Fund prices and performance, account values and recent
account transactions
National/Minnesota: 800-272-4445
Mpls./St. Paul area: 671-1630
Distributions and taxes
As a shareholder you are entitled to your share of a Fund's net
income and any net gains realized on its investments. Each Fund
distributes dividends and capital gain distributions to qualify as
a regulated investment company and to avoid paying corporate income
and excise taxes. Dividend and capital gain distributions will
have tax consequences you should know about.
Dividend and capital gain distributions
A Fund's net investment income from dividends and interest is
distributed to you monthly as dividends. Short-term capital gains
are distributed at the end of the calendar year and are included in
<PAGE>
PAGE 40
net investment income. Long-term capital gains are realized
whenever a security held for more than one year is sold for a
higher price than was paid for it. Net realized long-term capital
gains, if any, are distributed at the end of the calendar year as
capital gain distributions. Before they're distributed, net long-
term capital gains are included in the value of each share. After
they're distributed, the value of each share drops by the per-share
amount of the distribution. (If your distributions are reinvested,
the total value of your holdings will not change.)
Dividends for each class will be calculated at the same time, in
the same manner and will be the same amount prior to deduction of
expenses. Expenses attributable solely to a class of shares will
be paid exclusively by that class. Class B shareholders will
receive lower per share dividends than Class A and Class Y
shareholders because expenses for Class B are higher than for Class
A or Class Y. Class A shareholders will receive lower per share
dividends than Class Y shareholders because expenses for Class A
are higher than for Class Y.
Reinvestments
Dividends and capital gain distributions are automatically
reinvested in additional shares in the same class of the Fund,
unless:
o you request the Fund in writing or by phone to pay
distributions to you in cash, or
o you direct the Fund to invest your distributions in any
publicly available IDS fund for which you've previously opened
an account. You pay no sales charge on shares purchased
through reinvestment from this Fund into any IDS fund.
The reinvestment price is the net asset value at close of business
on the day the distribution is paid. (Your quarterly statement
will confirm the amount invested and the number of shares
purchased.)
If you choose cash distributions, you will receive only those
declared after your request has been processed.
If the U.S. Postal Service cannot deliver the checks for the cash
distributions, we will reinvest the checks into your account at the
then-current net asset value and make future distributions in the
form of additional shares.
Taxes
Dividends distributed from interest earned by each Fund on tax-
exempt securities (exempt-interest dividends) are exempt from
federal income taxes but may be subject to state and local taxes.
Dividends distributed from other income earned by each Fund and
capital gain distributions are not exempt from federal income
taxes. Distributions are taxable in the year a Fund declares them
regardless of whether you take them in cash or reinvest them.
<PAGE>
PAGE 41
Interest on certain private activity bonds is a preference item for
purposes of the individual and corporate alternative minimum taxes.
To the extent a Fund earns such income, it will flow through to its
shareholders and may be taxable to those shareholders who are
subject to the alternative minimum tax.
Because interest on municipal bonds and notes is tax-exempt for
federal income tax purposes, any interest on borrowed money used
directly or indirectly to purchase Fund shares is not deductible on
your federal income tax return. You should consult a tax advisor
regarding its deductibility for state and local income tax
purposes.
Each January, you will receive a tax statement showing the kinds
and total amount of all distributions you received during the
previous year. You must report distributions on your tax returns,
even if they are reinvested in additional shares.
Buying a dividend creates a tax liability. This means buying
shares shortly before a capital gain distribution. You pay the
full pre-distribution price for the shares, then receive a portion
of your investment back as a distribution, which is taxable.
Redemptions and exchanges subject you to a tax on any capital gain.
If you sell shares for more than their cost, the difference is a
capital gain. Your gain may be either short term (for shares held
for one year or less) or long term (for shares held for more than
one year).
Your Taxpayer Identification Number (TIN) is important. As with
any financial account you open, you must list your current and
correct Taxpayer Identification Number (TIN) -- either your Social
Security or Employer Identification number. The TIN must be
certified under penalties of perjury on your application when you
open an account at AEFC.
If you don't provide the TIN, or the TIN you report is incorrect,
you could be subject to backup withholding of 31% of taxable
distributions and proceeds from certain sales and exchanges. You
also could be subject to further penalties, such as:
o a $50 penalty for each failure to supply your correct TIN
o a civil penalty of $500 if you make a false statement that
results in no backup withholding
o criminal penalties for falsifying information
You also could be subject to backup withholding because you failed
to report interest or dividends on your tax return as required.
How to determine the correct TIN
Use the Social Security or
For this type of account: Employer Identification number
of:
Individual or joint account The individual or individuals
listed on the account
<PAGE>
PAGE 42
Custodian account of a minor The minor
(Uniform Gifts/Transfers to
Minors Act)
A living trust The grantor-trustee (the person
who puts the money into the
trust)
An irrevocable trust, pension The legal entity (not the
trust or estate personal representative or
trustee, unless no legal entity
is designated in the account
title)
Sole proprietorship The owner
Partnership The partnership
Corporate The corporation
Association, club or The organization
tax-exempt organization
For details on TIN requirements, ask your financial advisor or
local American Express Financial Advisors office for federal Form
W-9, "Request for Taxpayer Identification Number and
Certification."
Important: This information is a brief and selective summary of
certain federal tax rules that apply to each Fund. Tax matters are
highly individual and complex, and you should consult a qualified
tax advisor about your personal situation.
How the Funds are organized
IDS Special Tax-Exempt Series Trust, of which IDS Massachusetts
Tax-Exempt Fund, IDS Michigan Tax-Exempt Fund, IDS Minnesota Tax-
Exempt Fund, IDS New York Tax-Exempt Fund and IDS Ohio Tax-Exempt
Fund are a part, is an open-end management investment company, as
defined in the Investment Company Act of 1940. It was organized as
a Massachusetts business trust on April 7, 1986. IDS California
Tax-Exempt Trust, of which IDS California Tax-Exempt Fund is a
part, was organized as a Massachusetts business trust on April 7,
1986. The Funds' headquarters are at 901 S. Marquette Ave., Suite
2810, Minneapolis, MN 55402-3268.
The board members have considered that the use of a combined
prospectus for six funds makes each Fund responsible for disclosure
contained in the prospectus regardless of the particular Fund to
which it pertains and have concluded that the cost savings
available to shareholders support the use of a combined prospectus.
Shares
IDS Special Tax-Exempt Series Trust currently is composed of six
funds and IDS California Tax-Exempt Trust currently is composed of
one fund. Each fund issues its own shares of capital stock. Each <PAGE>
PAGE 43
fund is owned by its shareholders. Each fund issues shares in
three classes - Class A, Class B and Class Y. Each class has
different sales arrangements and bears different expenses. Each
class represents interests in the assets of a fund. Par value is
one cent per share. Both full and fractional shares can be issued.
The shares of each fund represent an interest in that fund's assets
only (and profits or losses), and, in the event of liquidation,
each share of a fund would have the same rights to dividends and
assets as every other share of that fund.
The board may from time to time issue other funds of the Series
Trust, the assets and liabilities of which will likewise be
separate and distinct from any other fund.
The Funds no longer issue stock certificates.
Voting rights
As a shareholder, you have voting rights over the Fund's management
and fundamental policies. You are entitled to one vote for each
share you own. Shares of the Fund have cumulative voting rights.
Each class has exclusive voting rights with respect to the
provisions of the Fund's distribution plan that pertain to a
particular class and other matters for which separate class voting
is appropriate under applicable law.
Shareholder meetings
The Funds do not hold annual shareholder meetings. However, the
board members may call meetings at their discretion, or on demand
by holders of 10% or more of the outstanding shares, to elect or
remove board members.
Board members and officers
Shareholders elect a board that oversees the operations of the Fund
and chooses its officers. Its officers are responsible for day-to-
day business decisions based on policies set by the board. The
board has named an executive committee that has authority to act on
its behalf between meetings. The board members also serve on the
boards of all 43 funds in the IDS MUTUAL FUND GROUP, except for Mr.
Dudley, who is a board member of all the Funds except the 9 life
funds.
Board members and officers of the Funds
President and interested board member
William R. Pearce
President of all funds in the IDS MUTUAL FUND GROUP.
Independent board members
Lynne V. Cheney
Distinguished fellow, American Enterprise Institute for Public
Policy Research.
<PAGE>
PAGE 44
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.
Melvin R. Laird
Senior counsellor for national and international affairs, The
Reader's Digest Association, Inc.
Edson W. Spencer
Former chairman and chief executive officer, Honeywell, Inc.
Wheelock Whitney
Chairman, Whitney Management Company.
C. Angus Wurtele
Chairman of the board, The Valspar Corporation.
Interested board members who are officers and/or employees of AEFC
William H. Dudley
Executive vice president, AEFC.
David R. Hubers
President and chief executive officer, AEFC.
John R. Thomas
Senior vice president, AEFC.
Officers who also are officers and/or employees of AEFC
Peter J. Anderson
Vice president of all funds in the IDS MUTUAL FUND GROUP.
Melinda S. Urion
Treasurer of all funds in the IDS MUTUAL FUND GROUP.
Other officer
Leslie L. Ogg
Vice president, general counsel and secretary of all funds in the
IDS MUTUAL FUND GROUP.
Refer to the SAI for the board members' and officers' biographies.
Investment manager and transfer agent
The Funds pay AEFC for managing their portfolios, providing
administrative services and serving as transfer agent (handling
shareholder accounts).
Under its Investment Management Services Agreement, AEFC determines
which securities will be purchased, held or sold (subject to the
direction and control of the board). Under the current agreement, <PAGE>
PAGE 45
effective March 20, 1995, each Fund pays AEFC a fee for these
services based on the average daily net assets of the Fund, as
follows:
Assets Annual rate
(billions) at each asset level
First $0.25 0.470%
Next 0.25 0.445
Next 0.25 0.420
Next 0.25 0.405
Over 1.0 0.380
For the fiscal year ended June 30, 1996, the Funds paid AEFC total
investment management fees of 0.47% of its average daily net assets
for California, 0.47% for Massachusetts, 0.47% for Michigan, 0.46%
for Minnesota, 0.47% for New York and 0.47% for Ohio Fund. Under
the Agreement, each Fund also pays taxes, brokerage commissions and
nonadvisory expenses.
Under an Administrative Services Agreement, each Fund pays AEFC for
administration and accounting services at an annual rate of 0.04%
decreasing in gradual percentages to 0.02% as assets increase.
In addition, under a separate Transfer Agency Agreement, AEFC
maintains shareholder accounts and records. Each Fund pays AEFC an
annual fee per shareholder account for this service as follows:
o Class A $15.50
o Class B $16.50
o Class Y $15.50
Distributor
The Funds have an exclusive distribution agreement with American
Express Financial Advisors, a wholly owned subsidiary of AEFC.
Financial advisors representing American Express Financial Advisors
provide information to investors about individual investment
programs, the Funds and their operations, new account applications,
and exchange and redemption requests. The cost of these services
is paid partially by the Funds' sales charges.
Persons who buy Class A shares pay a sales charge at the time of
purchase. Persons who buy Class B shares are subject to a
contingent deferred sales charge on a redemption in the first six
years and pay an asset-based sales charge (also known as a 12b-1
plan) of 0.75% of the Fund's average daily net assets. Class Y
shares are sold without a sales charge and without an asset-based
sales charge.
Financial advisors may receive different compensation for selling
Class A, Class B and Class Y shares. Portions of the sales charge
also may be paid to securities dealers who have sold the Funds'
shares or to banks and other financial institutions. The amounts
of those payments range from 0.8% to 4% of each Fund's offering
price depending on the monthly sales volume.
<PAGE>
PAGE 46
Under a Shareholder Service Agreement, each Fund also pays a fee
for service provided to shareholders by financial advisors and
other servicing agents. The fee is calculated at a rate of 0.175%
of the Fund's average daily net assets attributable to Class A and
Class B shares.
Total expenses paid by each Fund's Class A, Class B and Class Y
shares for the fiscal year ended June 30, 1996 were of average
daily net assets as follows.
Class A Class B Class Y
California Fund 0.80% 1.57% 0.57%
Massachusetts Fund 0.86% 1.63% 0.66%
Michigan Fund 0.82% 1.59% 0.66%
Minnesota Fund 0.88% 1.57% 0.54%
New York Fund 0.82% 1.59% 0.61%
Ohio Fund 0.85% 1.59% 0.58%
Total fees and expenses (excluding taxes and brokerage commissions)
cannot exceed the most restrictive applicable state expense
limitation.
About American Express Financial Corporation
General information
The AEFC family of companies offers not only mutual funds but also
insurance, annuities, investment certificates and a broad range of
financial management services.
Besides managing investments for all publicly offered funds in the
IDS MUTUAL FUND GROUP, AEFC also manages investments for itself and
its subsidiaries, IDS Certificate Company and IDS Life Insurance
Company. Total assets under management on June 30, 1996 were more
than $138 billion.
American Express Financial Advisors serves individuals and
businesses through its nationwide network of more than 135 offices
and more than 7,800 advisors.
Other AEFC subsidiaries provide investment management and related
services for pension, profit sharing, employee savings and
endowment funds of businesses and institutions.
AEFC is located at IDS Tower 10, Minneapolis, MN 55440-0010. It is
a wholly owned subsidiary of American Express Company (American
Express), a financial services company with headquarters at
American Express Tower, World Financial Center, New York, NY 10285.
The Fund may pay brokerage commissions to broker-dealer affiliates
of American Express and AEFC.
<PAGE>
PAGE 47
Appendix A
Description of bond ratings
Bond ratings concern the quality of the issuing state or local
governmental unit. They are not an opinion of the market value of
the security. Such ratings are opinions on whether the principal
and interest will be repaid when due. A security's rating may
change, which could affect its price. Ratings by Moody's Investors
Service, Inc. are Aaa, Aa, A, Baa, Ba, B, Caa, Ca and C. Ratings
by Standard & Poor's Corporation are AAA, AA, A, BBB, BB, B, CCC,
CC, C and D. The following is a compilation of the two agencies'
rating descriptions. For further information, see the SAI.
Aaa/AAA - Judged to be of the best quality and carry the smallest
degree of investment risk. Interest and principal are secure.
Aa/AA - Judged to be high-grade although margins of protection for
interest and principal may not be quite as good as Aaa or AAA rated
securities.
A - Considered upper-medium grade. Protection for interest and
principal is deemed adequate but may be susceptible to future
impairment.
Baa/BBB - Considered medium-grade obligations. Protection for
interest and principal is adequate over the short-term; however,
these obligations may have certain speculative characteristics.
Ba/BB - Considered to have speculative elements. The protection of
interest and principal payments may be very moderate.
B - Lack characteristics of more desirable investments. There may
be small assurance over any long period of time of the payment of
interest and principal.
Caa/CCC - Are of poor standing. Such issues may be in default or
there may be risk with respect to principal or interest.
Ca/CC - Represent obligations that are highly speculative. Such
issues are often in default or have other marked shortcomings.
C - Are obligations with a higher degree of speculation. These
securities have major risk exposures to default.
D - Are in payment default. The D rating is used when interest
payments or principal payments are not made on the due date.
Non-rated securities will be considered for investment when they
possess a risk comparable to that of rated securities consistent
with the Fund's objectives and policies. When assessing the risk
involved in each non-rated security, the Fund will consider the
financial condition of the issuer or the protection afforded by the
terms of the security.
<PAGE>
PAGE 48
Definitions of zero-coupon and pay-in-kind securities
A zero-coupon security is a security that is sold at a deep
discount from its face value and makes no periodic interest
payments. The buyer of such a security receives a rate of return
by gradual appreciation of the security, which is redeemed at face
value on the maturity date.
A pay-in-kind security is a security in which the issuer has the
option to make interest payments in cash or in additional
securities. The securities issued as interest usually have the
same terms, including maturity date, as the pay-in-kind securities.
<PAGE>
PAGE 49
Appendix B
Tax-exempt income vs. taxable income
1996 California Tax-Exempt and Taxable Equivalent Yield Calculation
These tables will help you determine your combined federal and
state taxable yield equivalents for given rates of tax-exempt
income.
These tables will help you determine your state taxable yield
equivalents for given rates of tax-exempt income.
se tables will help you determine your combined federal and state
taxable yield equivalents for given rates of tax-exempt
income.
STEP 1: Calculating your marginal tax rate.
Using your Taxable Income and Adjusted Gross Income figures as
guides, you can locate your Marginal Tax Rate in the table below.
First, locate your Taxable Income in a filing status and income
range in the left-hand column. Then, locate your Adjusted Gross
Income at the top of the chart. At the point where your Taxable
Income line meets your Adjusted Gross Income column, the percentage
indicated is an approximation of your Marginal Tax Rate. For
example: Let's assume you are married filing jointly, your taxable
income is $138,000 and your adjusted gross income is $175,000.
Under Taxable Income married filing jointly status, $138,000 is in
the $96,900-$147,700 range. Under Adjusted Gross Income, $175,000
is in the $117,950 to $176,950 column. The Taxable Income line and
Adjusted Gross Income column meet at 38.26%. This is the rate
you'll use in Step 2.
<TABLE>
<CAPTION>
Adjusted gross income*
___________________________________________________________________________________________
Taxable income** $0 $117,950 $176,950
Married Filing Jointly to to to OVER
$117,950(1) $176,950(2) $299,450(3) $299,450(2)
____________________________________________________________________
<S> <C> <C> <C> <C>
$ 0 - $ 9,662 15.85%
9,662 - 22,898 16.70
22,898 - 36,136 18.40
36,136 - 40,100 20.10
40,100 - 50,166 32.32
50,166 - 63,400 33.76
63,400 - 96,900 34.70 34.70%
96,900 - 147,700 37.42 38.26 38.26%
147,700 - 219,872 41.95 42.93 44.26
219,872 - 263,750 42.40 44.69 43.37%
263,750 - 439,774 45.64 48.16*** 46.71
439,774 + 46.24 47.30
___________________________________________________________________________________________
Taxable income** $0 $117,950
Single to to OVER
$117,950(1) $240,450(3) $240,450(2)
____________________________________________________________________
<PAGE>
PAGE 50
$ 0 - $ 4,831 15.85%
4,831 - 11,449 16.70
11,449 - 18,068 18.40
18,068 - 24,000 20.10
24,000 - 25,083 32.32
25,083 - 31,700 33.76
31,700 - 58,150 34.70
58,150 - 109,936 37.42
109,936 - 121,300 37.90 39.31%
121,300 - 219,872 42.40 44.03 43.37%
219,872 - 263,750 43.04 44.65 44.00
263,750 + 46.24 47.30
___________________________________________________________________________________________
</TABLE>
*Gross income with certain adjustments before taking itemized
deductions and personal exemptions.
**Amount subject to federal income tax after itemized deduction
and personal exemptions.
***This rate is applicable only in the limited case where your
adjusted gross income is less than $299,450 and your taxable income
exceeds $263,750.
(1) No Phase-out -- Assumes no phase-out of itemized deductions or
personal exemptions.
(2) Itemized Deductions Phase-out -- Assumes a single taxpayer has
one personal exemption and joint taxpayers have two personal
exemptions.
(3) Itemized Deductions and Personal Exemption Phase-outs --
Assumes a single taxpayer has one personal exemption, joint
taxpayers have two personal exemptions and itemized deductions
continue to phase-out.
Federal taxes are not deductible on the California state tax
return.
The combined federal/California tax brackets are based on state tax
rates in effect on Dec. 31, 1995. These rates may change if
California tax rates change in 1996. If state tax rates change,
equivalent rates may be higher than those shown.
If these assumptions do not apply to you, it will be necessary to
construct your own personalized tax equivalency table.
<PAGE>
PAGE 51
STEP 2: Determining your combined federal and California state
taxable yield equivalents.
Using 38.26%, you may determine that a tax-exempt yield of 5% is
equivalent to earning a taxable 8.10% yield.
<TABLE><CAPTION>
For these Tax-Exempt Rates:
_______________________________________________________________________
3.00% 3.50% 4.00% 4.50% 5.00% 5.50% 6.00% 6.50
_______________________________________________________________________
Marginal Tax Rates Equal the Taxable Rates shown below:
_______________________________________________________________________
<S> <C> <C> <C> <C> <C> <C> <C> <C>
15.85% 3.57 4.16 4.75 5.35 5.94 6.54 7.13 7.72
16.70% 3.60 4.20 4.80 5.40 6.00 6.60 7.20 7.80
18.40% 3.68 4.29 4.90 5.51 6.13 6.74 7.35 7.97
20.10% 3.75 4.38 5.01 5.63 6.26 6.88 7.51 8.14
32.32% 4.43 5.17 5.91 6.65 7.39 8.13 8.87 9.60
33.76% 4.53 5.28 6.04 6.79 7.55 8.30 9.06 9.81
34.70% 4.59 5.36 6.13 6.89 7.66 8.42 9.19 9.95
37.42% 4.79 5.59 6.39 7.19 7.99 8.79 9.59 10.39
37.90% 4.83 5.64 6.44 7.25 8.05 8.86 9.66 10.47
38.26% 4.86 5.67 6.48 7.29 8.10 8.91 9.72 10.53
38.74% 4.90 5.71 6.53 7.35 8.16 8.98 9.79 10.61
39.31% 4.94 5.77 6.59 7.41 8.24 9.06 9.89 10.71
41.95% 5.17 6.03 6.89 7.75 8.61 9.47 10.34 11.20
42.40% 5.21 6.08 6.94 7.81 8.68 9.55 10.42 11.28
42.93% 5.26 6.13 7.01 7.89 8.76 9.64 10.51 11.39
43.04% 5.27 6.14 7.02 7.90 8.78 9.66 10.53 11.41
43.37% 5.30 6.18 7.06 7.95 8.83 9.71 10.60 11.48
44.00% 5.36 6.25 7.14 8.04 8.93 9.82 10.71 11.61
44.03% 5.36 6.25 7.15 8.04 8.93 9.83 10.72 11.61
44.26% 5.38 6.28 7.18 8.07 8.97 9.87 10.76 11.66
44.65% 5.42 6.32 7.23 8.13 9.03 9.94 10.84 11.74
44.69% 5.42 6.33 7.23 8.14 9.04 9.94 10.85 11.75
45.64% 5.52 6.44 7.36 8.28 9.20 10.12 11.04 11.96
46.24% 5.58 6.51 7.44 8.37 9.30 10.23 11.16 12.09
46.71% 5.63 6.57 7.51 8.44 9.38 10.32 11.26 12.20
47.30% 5.69 6.64 7.59 8.54 9.49 10.44 11.39 12.33
48.02% 5.77 6.73 7.70 8.66 9.62 10.58 11.54 12.50
48.16% 5.79 6.75 7.72 8.68 9.65 10.61 11.57 12.54
48.74% 5.85 6.83 7.80 8.78 9.75 10.73 11.71 12.68
_______________________________________________________________________
</TABLE>
<PAGE>
PAGE 52
Appendix B
1996 Massachusetts Tax-Exempt and Taxable Equivalent Yield
Calculation
These tables will help you determine your combined federal and
state taxable yield equivalents for given rates of tax-exempt
income.
STEP 1: Calculating your marginal tax rate.
Using your Taxable Income and Adjusted Gross Income figures as
guides, you can locate your Marginal Tax Rate in the table below.
First, locate your Taxable Income in a filing status and income
range in the left-hand column. Then, locate your Adjusted Gross
Income at the top of the chart. At the point where your Taxable
Income line meets your Adjusted Gross Income column, the percentage
indicated is an approximation of your Marginal Tax Rate. For
example: Let's assume you are married filing jointly, your taxable
income is $138,000 and your adjusted gross income is $175,000.
Under Taxable Income married filing jointly status, $138,000 is in
the $96,900-$147,700 range. Under Adjusted Gross Income, $175,000
is in the $117,950 to $176,950 column. The Taxable Income line and
Adjusted Gross Income column meet at 40.10%. This is the rate
you'll use in Step 2.
<TABLE>
<CAPTION>
Adjusted gross income*
___________________________________________________________________________________________
Taxable income** $0 $117,950 $176,950
Married Filing Jointly to to to OVER
$117,950(1) $176,950(2) $299,450(3) $299,450(2)
____________________________________________________________________
<S> <C> <C> <C> <C>
$ 7,600 - $ 40,100 25.20%
40,100 - 96,900 36.64 36.64%
96,900 - 147,700 39.28 40.10 40.10%
147,700 - 263,750 43.68 44.63 45.92
263,750 + 46.85 49.32*** 47.89%
___________________________________________________________________________________________
Taxable income** $0 $117,950
Single to to OVER
$117,950(1) $240,450(3) $240,540(2)
___________________________________________________________________________________________
$ 8,000 - $ 24,000 25.20%
24,000 - 58,150 36.64
58,150 - 121,300 39.28 40.65%
121,300 - 263,750 43.68 45.28 44.63%
263,750 + 46.85 47.89
___________________________________________________________________________________________
</TABLE>
*Gross income with certain adjustments before taking itemized
deductions and personal exemptions.
**Amount subject to federal income tax after itemized deduction
and personal exemptions.
***This rate is applicable only in the limited case where your
adjusted gross income is less than $299,450 and your taxable income
exceeds $263,750.<PAGE>
PAGE 53
(1) No Phase-out -- Assumes no phase-out of itemized deductions or
personal exemptions.
(2) Itemized Deductions Phase-out -- Assumes a single taxpayer has
one personal exemption and joint taxpayers have two personal
exemptions.
(3) Itemized Deductions and Personal Exemption Phase-outs --
Assumes a single taxpayer has one personal exemption, joint
taxpayers have two personal exemptions and itemized deductions
continue to phase-out.
Federal taxes are not deductible on the Massachusetts state tax
return.
The combined federal/Massachusetts tax brackets are based on state
tax rates in effect on Jan. 1, 1996. These rates may change if
Massachusetts tax rates change in 1996. If state tax rates change,
equivalent rates may be higher than those shown.
If these assumptions do not apply to you, it will be necessary to
construct your own personalized tax equivalency table.
STEP 2: Determining your combined federal and Massachusetts state
taxable yield equivalents.
Using 34.93%, you may determine that a tax-exempt yield of 5% is
equivalent to earning a taxable 8.35% yield.
<TABLE><CAPTION>
For these Tax-Exempt Rates:
_____________________________________________________________
3.00% 3.50% 4.00% 4.50% 5.00% 5.50% 6.00% 6.50%
_____________________________________________________________
Marginal Tax Rates Equal the Taxable Rates shown below:
___________________________________________________________________________________________
<S> <C> <C> <C> <C> <C> <C> <C> <C>
25.20% 4.01 4.68 5.35 6.02 6.68 7.35 8.02 8.69
36.64% 4.73 5.52 6.31 7.10 7.89 8.68 9.47 10.26
39.28% 4.94 5.76 6.59 7.41 8.23 9.06 9.88 10.70
40.10% 5.01 5.84 6.68 7.51 8.35 9.18 10.02 10.85
40.65% 5.05 5.90 6.74 7.58 8.42 9.27 10.11 10.95
43.68% 5.33 6.21 7.10 7.99 8.88 9.77 10.65 11.54
44.63% 5.42 6.32 7.22 8.13 9.03 9.93 10.84 11.74
45.28% 5.48 6.40 7.31 8.22 9.14 10.05 10.96 11.88
45.92% 5.55 6.47 7.40 8.32 9.25 10.17 11.09 12.02
46.85% 5.64 6.59 7.53 8.47 9.41 10.35 11.29 12.23
47.89% 5.76 6.72 7.68 8.64 9.60 10.55 11.51 12.47
48.60% 5.84 6.81 7.78 8.75 9.73 10.70 11.67 12.65
49.32% 5.92 6.91 7.89 8.88 9.87 10.85 11.84 12.83
___________________________________________________________________________________________
</TABLE>
<PAGE>
PAGE 54
Appendix B
1996 Michigan Tax-Exempt and Taxable Equivalent Yield Calculation
These tables will help you determine your combined federal and
state taxable yield equivalents for given rates of tax-exempt
income.
STEP 1: Calculating your marginal tax rate.
Using your Taxable Income and Adjusted Gross Income figures as
guides, you can locate your Marginal Tax Rate in the table below.
First, locate your Taxable Income in a filing status and income
range in the left-hand column. Then, locate your Adjusted Gross
Income at the top of the chart. At the point where your Taxable
Income line meets your Adjusted Gross Income column, the percentage
indicated is an approximation of your Marginal Tax Rate. For
example: Let's assume you are married filing jointly, your taxable
income is $138,000 and your adjusted gross income is $175,000.
Under Taxable Income married filing jointly status, $138,000 is in
the $96,900-$147,700 range. Under Adjusted Gross Income, $175,000
is in the $117,950 to $176,950 column. The Taxable Income line and
Adjusted Gross Income column meet at 34.93%. This is the rate
you'll use in Step 2.
<TABLE>
<CAPTION>
Adjusted gross income*
___________________________________________________________________________________________
<S> <C> <C> <C> <C>
Taxable income** $0 $117,950 $176,950
Married Filing Jointly to to to OVER
$117,950(1) $176,950(2) $299,450(3) $299,450(2)
___________________________________________________________________________________________
$ 0 - $ 40,100 18.74%
40,100 - 96,900 31.17 31.17%
96,900 - 147,700 34.04 34.93 34.93%
147,700 - 263,750 38.82 39.85 41.25 39.85%
263,750 + 42.26 44.94*** 43.39
___________________________________________________________________________________________
Taxable income** $0 $117,950
Single to to OVER
$117,950(1) $240,450(3) $240,450(2)
___________________________________________________________________________________________
$ 0 - $ 24,000 18.74%
24,000 - 58,150 31.17
58,150 - 121,300 34.04 35.53%
121,300 - 263,750 38.82 40.55 39.85%
263,750 + 42.26 43.39
___________________________________________________________________________________________
</TABLE>
*Gross income with certain adjustments before taking itemized
deductions and personal exemptions.
**Amount subject to federal income tax after itemized deduction and
personal exemptions.
***This rate is applicable only in the limited case where your
adjusted gross income is less than $299,450 and your taxable income
exceeds $263,750.
<PAGE>
PAGE 55
(1) No Phase-out -- Assumes no phase-out of itemized deductions
orpersonal exemptions.
(2) Itemized Deductions Phase-out -- Assumes a single taxpayer has
one personal exemption and joint taxpayers have two personal
exemptions.
(3) Itemized Deductions and Personal Exemption Phase-outs --
Assumes a single taxpayer has one personal exemption, joint
taxpayers have two personal exemptions and itemized deductions
continue to phase-out.
Federal taxes are not deductible on the Michigan state tax return.
The combined federal/Michigan tax brackets are based on state tax
rates in effect on May 1, 1995. These rates may change if Michigan
tax rates change in 1996. If state tax rates change, equivalent
rates may be higher than those shown.
If these assumptions do not apply to you, it will be necessary to
construct your own personalized tax equivalency table.
STEP 2: Determining your combined federal and Michigan state
taxable yield equivalents.
Using 34.93%, you may determine that a tax-exempt yield of 5% is
equivalent to earning a taxable 7.68% yield.
<TABLE><CAPTION>
For these Tax-Exempt Rates:
_____________________________________________________________
3.00% 3.50% 4.00% 4.50% 5.00% 5.50% 6.00% 6.50%
_____________________________________________________________
Marginal Tax Rates Equal the Taxable Rates shown below:
___________________________________________________________________________________________
<S> <C> <C> <C> <C> <C> <C> <C> <C>
18.74% 3.69 4.31 4.92 5.54 6.15 6.77 7.38 8.00
31.17% 4.36 5.08 5.81 6.54 7.26 7.99 8.72 9.44
34.04% 4.55 5.31 6.06 6.82 7.58 8.34 9.10 9.85
34.93% 4.61 5.38 6.15 6.92 7.68 8.45 9.22 9.99
35.53% 4.65 5.43 6.20 6.98 7.76 8.53 9.31 10.08
38.82% 4.90 5.72 6.54 7.36 8.17 8.99 9.81 10.62
39.85% 4.99 5.82 6.65 7.48 8.31 9.14 9.98 10.81
40.55% 5.05 5.89 6.73 7.57 8.41 9.25 10.09 10.93
41.25% 5.11 5.96 6.81 7.66 8.51 9.36 10.21 11.06
42.26% 5.20 6.06 6.93 7.79 8.66 9.53 10.39 11.26
43.39% 5.30 6.18 7.07 7.95 8.83 9.72 10.60 11.48
44.94% 5.37 6.27 7.16 8.06 8.96 9.85 10.75 11.64
___________________________________________________________________________________________
</TABLE>
<PAGE>
PAGE 56
Appendix B
1996 Minnesota Tax-Exempt and Taxable Equivalent Yield Calculation
These tables will help you determine your combined federal and
state taxable yield equivalents for given rates of tax-exempt
income.
STEP 1: Calculating your marginal tax rate.
Using your Taxable Income and Adjusted Gross Income figures as
guides, you can locate your Marginal Tax Rate in the table below.
First, locate your Taxable Income in a filing status and income
range in the left-hand column. Then, locate your Adjusted Gross
Income at the top of the chart. At the point where your Taxable
Income line meets your Adjusted Gross Income column, the percentage
indicated is an approximation of your Marginal Tax Rate. For
example: Let's assume you are married filing jointly, your taxable
income is $138,000 and your adjusted gross income is $175,000.
Under Taxable Income married filing jointly status, $138,000 is in
the $96,900-$147,700 range. Under Adjusted Gross Income, $175,000
is in the $117,950 to $176,950 column. The Taxable Income line and
Adjusted Gross Income column meet at 37.72%. This is the rate
you'll use in Step 2.
<TABLE>
<CAPTION>
Adjusted gross income*
___________________________________________________________________________________________
<S> <C> <C> <C> <C>
Taxable income** $0 $117,950 $176,950
Married Filing Jointly to to to OVER
$117,950(1) $176,950(2) $299,450(3) $299,450(2)
___________________________________________________________________________________________
$ 0 - $ 23,490 20.10%
23,490 - 40,100 21.80
40,100 - 93,340 33.76 33.76%
93,340 - 96,900 34.12 34.12
96,900 - 147,700 36.87 37.72 37.72%
147,700 - 263,750 41.44 42.43 43.77 42.43%
263,750 + 44.73 47.30*** 45.82
___________________________________________________________________________________________
Taxable income** $0 $117,950
Single to to OVER
$117,950(1) $240,450(3) $240,450(2)
___________________________________________________________________________________________
$ 0 - $ 16,070 20.10%
16,070 - 24,000 21.80
24,000 - 52,790 33.76
52,790 - 58,150 34.12
58,150 - 121,300 36.87 38.29%
121,300 - 263,750 41.44 43.10 42.43%
263,750 + 44.73 45.82
___________________________________________________________________________________________
</TABLE>
*Gross income with certain adjustments before taking itemized
deductions and personal exemptions.
**Amount subject to federal income tax after itemized deduction
and personal exemptions.
<PAGE>
PAGE 57
***This rate is applicable only in the limited case where your
adjusted gross income is less than $299,450 and your taxable income
exceeds $263,750.
(1) No Phase-out -- Assumes no phase-out of itemized deductions or
personal exemptions.
(2) Itemized Deductions Phase-out -- Assumes a single taxpayer has
one personal exemption and joint taxpayers have two personal
exemptions.
(3) Itemized Deductions and Personal Exemption Phase-outs --
Assumes a single taxpayer has one personal exemption, joint
taxpayers have two personal exemptions and itemized deductions
continue to phase-out.
Federal taxes are not deductible on the Minnesota state tax return.
The combined federal/Minnesota tax brackets are based on state tax
rates in effect on Jan. 1, 1996. These rates may change if
Minnesota tax rates change in 1996. If state tax rates change,
equivalent rates may be higher than those shown.
If these assumptions do not apply to you, it will be necessary to
construct your own personalized tax equivalency table.
STEP 2: Determining your combined federal and Minnesota state
taxable yield equivalents.
Using 37.72%, you may determine that a tax-exempt yield of 5% is
equivalent to earning a taxable 8.03% yield.
<TABLE><CAPTION>
For these Tax-Exempt Rates:
___________________________________________________________________________________________
3.00% 3.50% 4.00% 4.50% 5.00% 5.50% 6.00% 6.50%
___________________________________________________________________________________________
Marginal Tax Rates Equal the Taxable Rates shown below:
___________________________________________________________________________________________
<S> <C> <C> <C> <C> <C> <C> <C> <C>
20.10% 3.75 4.38 5.01 5.63 6.26 6.88 7.51 8.14
21.80% 3.84 4.48 5.12 5.75 6.39 7.03 7.67 8.31
33.76% 4.53 5.28 6.04 6.79 7.55 8.30 9.06 9.81
34.12% 4.55 5.31 6.07 6.83 7.59 8.35 9.11 9.87
36.87% 4.75 5.54 6.34 7.13 7.92 8.71 9.50 10.30
37.72% 4.82 5.62 6.42 7.23 8.03 8.83 9.63 10.44
38.29% 4.86 5.67 6.48 7.29 8.10 8.91 9.72 10.53
41.44% 5.12 5.98 6.83 7.68 8.54 9.39 10.25 11.10
42.43% 5.21 6.08 6.95 7.82 8.69 9.55 10.42 11.29
43.10% 5.27 6.15 7.03 7.91 8.79 9.67 10.54 11.42
43.77% 5.34 6.22 7.11 8.00 8.89 9.78 10.67 11.56
44.73% 5.43 6.33 7.24 8.14 9.05 9.95 10.86 11.76
45.82% 5.54 6.46 7.38 8.31 9.23 10.15 11.07 12.00
46.56% 5.61 6.55 7.49 8.42 9.36 10.29 11.23 12.16
47.30% 5.69 6.64 7.59 8.54 9.49 10.44 11.39 12.33
___________________________________________________________________________________________
</TABLE>
<PAGE>
PAGE 58
Appendix B
1996 New York State Tax-Exempt and Taxable Equivalent Yield
Calculation
These tables will help you determine your combined federal and
state taxable yield equivalents for given rates of tax-exempt
income.
STEP 1: Calculating your marginal tax rate.
Using your Taxable Income and Adjusted Gross Income figures as
guides, you can locate your Marginal Tax Rate in the table below.
First, locate your Taxable Income in a filing status and income
range in the left-hand column. Then, locate your Adjusted Gross
Income at the top of the chart. At the point where your Taxable
Income line meets your Adjusted Gross Income column, the percentage
indicated is an approximation of your Marginal Tax Rate. For
example: Let's assume you are married filing jointly, your taxable
income is $138,000 and your adjusted gross income is $175,000.
Under Taxable Income married filing jointly status, $138,000 is in
the $96,900-$147,700 range. Under Adjusted Gross Income, $175,000
is in the $117,950 to $176,950 column. The Taxable Income line and
Adjusted Gross Income column meet at 36.78%. This is the rate
you'll use in Step 2.
<TABLE>
<CAPTION>
Adjusted gross income*
___________________________________________________________________________________________
<S> <C> <C> <C> <C>
Taxable income** $0 $117,950 $176,950
Married Filing Jointly to to to OVER
$117,950(1) $176,950(2) $299,450(3) $299,450(2)
___________________________________________________________________________________________
$ 0 - $ 11,000 18.40%
11,000 - 16,000 19.25
16,000 - 22,000 20.10
22,000 - 26,000 20.95
26,000 - 40,100 21.06
40,100 - 96,900 33.13 33.13%
96,900 - 147,700 35.92 36.78 36.78%
147,700 - 263,750 40.56 41.57 42.93 41.57%***
263,750 + 43.91 46.51 45.01
___________________________________________________________________________________________
Taxable income** $0 $117,950
Single to to OVER
$117,950(1) $240,450(3) $240,450(2)
___________________________________________________________________________________________
$ 0 - $ 5,500 18.40%
5,500 - 8,000 19.25
8,000 - 11,000 20.10
11,000 - 13,000 20.95
13,000 - 24,000 21.06
24,000 - 58,150 33.13
58,150 - 121,300 35.92 37.37%
121,300 - 263,750 40.56 42.25 41.57%
263,750 + 43.91 45.01
___________________________________________________________________________________________
</TABLE>
*Gross income with certain adjustments before taking itemized
deductions and personal exemptions.
<PAGE>
PAGE 59
**Amount subject to federal income tax after itemized deduction and
personal exemptions.
***This rate is applicable only in the limited case where your
adjusted gross income is less than $299,450 and your taxable income
exceeds $263,750.
(1) No Phase-out or recapture of personal income tax -- Assumes no
phase-out of itemized deductions or personal exemptions and does
not reflect the state recapture of personal income tax.
(2) Itemized Deductions Phase-out and Recapture of Personal Income
Tax -- Assumes a single taxpayer has one personal exemption, joint
taxpayers have two personal exemptions. This does not take into
consideration the state AGI recapture of personal income tax, which
might increase the percentage.
(3) Itemized Deductions and Personal Exemption Phase-outs --
Assumes a single taxpayer has one personal exemption, joint
taxpayers have two personal exemptions and itemized deductions
continue to phase-out.
Federal taxes are not deductible on the New York state tax return.
The combined federal/New York state tax brackets are based on state
tax rates in effect on Jan. 1, 1996. These rates may change if New
York state tax rates change in 1996. If state tax rates change,
equivalent rates may be higher than those shown.
This table does not refelect the state itemized deduction
adjustment.
If these assumptions do not apply to you, it will be necessary to
construct your own personalized tax equivalency table.
STEP 2: Determining your combined federal and New York state
taxable yield equivalents.
Using 36.78%, you may determine that a tax-exempt yield of 5% is
equivalent to earning a taxable 7.91% yield.
<TABLE><CAPTION>
For these Tax-Exempt Rates:
___________________________________________________________________________________________
3.00% 3.50% 4.00% 4.50% 5.00% 5.50% 6.00% 6.50%
___________________________________________________________________________________________
Marginal Tax Rates Equal the Taxable Rates shown below:
___________________________________________________________________________________________
<S> <C> <C> <C> <C> <C> <C> <C> <C>
18.40% 3.68 4.29 4.90 5.51 6.13 6.74 7.35 7.97
19.25% 3.72 4.33 4.95 5.57 6.19 6.81 7.43 8.05
20.10% 3.75 4.38 5.01 5.63 6.26 6.88 7.51 8.14
20.95% 3.80 4.43 5.06 5.69 6.33 6.96 7.59 8.22
21.06% 3.80 4.43 5.07 5.70 6.33 6.97 7.60 8.23
33.13% 4.49 5.23 5.98 6.73 7.48 8.22 8.97 9.72
35.92% 4.68 5.46 6.24 7.02 7.80 8.58 9.36 10.14
36.78% 4.75 5.54 6.33 7.12 7.91 8.70 9.49 10.28
37.37% 4.79 5.59 6.39 7.19 7.98 8.78 9.58 10.38
40.56% 5.05 5.89 6.73 7.57 8.41 9.25 10.09 10.94
41.57% 5.13 5.99 6.85 7.70 8.56 9.41 10.27 11.12
42.25% 5.19 6.06 6.93 7.79 8.66 9.52 10.39 11.26
42.93% 5.26 6.13 7.01 7.89 8.76 9.64 10.51 11.39
43.91% 5.35 6.24 7.13 8.02 8.91 9.81 10.70 11.59
45.01% 5.46 6.36 7.27 8.18 9.09 10.00 10.91 11.82
45.76% 5.53 6.45 7.37 8.30 9.22 10.14 11.06 11.98
46.51% 5.61 6.54 7.48 8.41 9.35 10.28 11.22 12.15
___________________________________________________________________________________________
/TABLE
<PAGE>
PAGE 60
Appendix B
1996 New York State and New York City Tax-Exempt and Taxable
Equivalent Yield Calculation
These tables will help you determine your combined federal and
state taxable yield equivalents for given rates of tax-exempt
income.
STEP 1: Calculating your marginal tax rate.
Using your Taxable Income and Adjusted Gross Income figures as
guides, you can locate your Marginal Tax Rate in the table below.
First, locate your Taxable Income in a filing status and income
range in the left-hand column. Then, locate your Adjusted Gross
Income at the top of the chart. At the point where your Taxable
Income line meets your Adjusted Gross Income column, the percentage
indicated is an approximation of your Marginal Tax Rate. For
example: Let's assume you are married filing jointly, your taxable
income is $138,000 and your adjusted gross income is $175,000.
Under Taxable Income married filing jointly status, $138,000 is in
the $108,000-$147,700 range. Under Adjusted Gross Income, $175,000
is in the $117,950 to $176,950 column. The Taxable Income line and
Adjusted Gross Income column meet at 40.64%. This is the rate
you'll use in Step 2.
<TABLE>
<CAPTION>
Adjusted gross income*
___________________________________________________________________________________________
<S> <C> <C> <C> <C>
Taxable income** $0 $117,950 $176,950
Married Filing Jointly to to to OVER
$117,950(1) $176,950(2) $299,450(3) $299,450(2)
___________________________________________________________________________________________
$ 0 - $ 11,000 20.89%
11,000 - 14,400 21.74
14,400 - 16,000 23.46
16,000 - 22,000 24.31
22,000 - 26,000 25.16
26,000 - 27,000 25.26
27,000 - 40,100 25.85
40,100 - 45,000 37.19
45,000 - 96,900 37.16 37.16%
96,900 - 108,000 39.78 40.59
108,000 - 147,700 39.83 40.64 41.74%
147,700 - 263,750 44.19 45.13 46.41 45.13%
263,750 + 47.33 49.77*** 48.36
___________________________________________________________________________________________
Taxable income** $0 $117,950
Single to to OVER
$117,950(1) $240,450(3) $240,450(2)
___________________________________________________________________________________________
$ 0 - $ 5,500 20.89%
5,500 - 8,000 21.74
8,000 - 8,400 23.25
8,400 - 11,000 24.31
11,000 - 13,000 25.16
13,000 - 15,000 25.27
15,000 - 24,000 25.85
24,000 - 25,000 37.19
25,000 - 58,150 37.16
58,150 - 60,000 39.78
60,000 - 121,300 39.83 41.19%
121,300 - 263,750 44.19 45.77 45.13%
263,750 + 47.33 49.07*** 48.36
___________________________________________________________________________________________
</TABLE>
<PAGE>
PAGE 61
*Gross income with certain adjustments before taking itemized
deductions and personal exemptions.
**Amount subject to federal income tax after itemized deduction and
personal exemptions.
***This rate is applicable only in the limited case where your
adjusted gross income is less than $299,450 and your taxable income
exceeds $263,750.
(1) No Phase-out -- Assumes no phase-out of itemized deductions or
personal exemptions.
(2) Itemized Deductions Phase-out and Recapture of Personal Income
Tax -- Assumes a single taxpayer has one personal exemption, joint
taxpayers have two personal exemptions. Does not take into
consideration the state AGI recapture of personal income tax, which
might increase the percentage.
(3) Itemized Deductions and Personal Exemption Phase-outs --
Assumes a single taxpayer has one personal exemption, joint
taxpayers have two personal exemptions and itemized deductions
continue to phase-out.
Federal taxes are not deductible on the New York state tax return.
The combined federal/New York state and city tax brackets are based
on state and city tax rates in effect on March 1, 1996. These
rates may change if New York state or city tax rates change in
1996. If state or city tax rates change, equivalent rates may be
higher than those shown.
This table does not reflect the state itemized deduction
adjustment.
If these assumptions do not apply to you, it will be necessary to
construct your own personalized tax equivalency table.
STEP 2: Determining your combined federal, New York state and New
York City taxable yield equivalents.
Using 40.64%, you may determine that a tax-exempt yield of 5% is
equivalent to earning a taxable 8.42% yield.
<TABLE><CAPTION>
For these Tax-Exempt Rates:
___________________________________________________________________________________________
3.00% 3.50% 4.00% 4.50% 5.00% 5.50% 6.00% 6.50%
___________________________________________________________________________________________
Marginal Tax Rates Equal the Taxable Rates shown below:
___________________________________________________________________________________________
<S> <C> <C> <C> <C> <C> <C> <C> <C>
20.89% 3.79 4.42 5.06 5.69 6.32 6.95 7.58 8.22
21.74% 3.83 4.47 5.11 5.75 6.39 7.03 7.67 8.31
23.25% 3.91 4.56 5.21 5.86 6.51 7.17 7.82 8.47
23.46% 3.92 4.57 5.23 5.88 6.53 7.19 7.84 8.49
23.81% 3.94 4.59 5.25 5.91 6.56 7.22 7.88 8.53
24.31% 3.96 4.62 5.28 5.95 6.61 7.27 7.93 8.59
25.16% 4.01 4.68 5.34 6.01 6.68 7.35 8.02 8.69
25.26% 4.01 4.68 5.35 6.02 6.69 7.36 8.03 8.70
25.27% 4.01 4.68 5.35 6.02 6.69 7.36 8.03 8.70
25.85% 4.05 4.72 5.39 6.07 6.74 7.42 8.09 8.77
37.16% 4.77 5.57 6.37 7.16 7.96 8.75 9.55 10.34
37.19% 4.78 5.57 6.37 7.16 7.96 8.76 9.55 10.35
39.78% 4.98 5.81 6.64 7.47 8.30 9.13 9.96 10.79
39.83% 4.99 5.82 6.65 7.48 8.31 9.14 9.97 10.80
<PAGE>
PAGE 62
40.59% 5.05 5.89 6.73 7.57 8.42 9.26 10.10 10.94
40.64% 5.05 5.90 6.74 7.58 8.42 9.27 10.11 10.95
41.19% 5.10 5.95 6.80 7.65 8.50 9.35 10.20 11.05
41.74% 5.15 6.01 6.87 7.72 8.58 9.44 10.30 11.16
44.19% 5.38 6.27 7.17 8.06 8.96 9.85 10.75 11.65
45.13% 5.47 6.38 7.29 8.20 9.11 10.02 10.93 11.85
45.77% 5.53 6.45 7.38 8.30 9.22 10.14 11.06 11.99
46.41% 5.60 6.53 7.46 8.40 9.33 10.26 11.20 12.13
47.33% 5.70 6.65 7.59 8.54 9.49 10.44 11.39 12.34
48.36% 5.81 6.78 7.75 8.71 9.68 10.65 11.62 12.59
49.07% 5.89 6.87 7.85 8.84 9.82 10.80 11.78 12.76
49.77% 5.97 6.97 7.96 8.96 9.95 10.95 11.95 12.94
___________________________________________________________________________________________
</TABLE>
<PAGE>
PAGE 63
Appendix B
1996 Ohio Tax-Exempt and Taxable Equivalent Yield Calculation
These tables will help you determine your combined federal and
state taxable yield equivalents for given rates of tax-exempt
income.
STEP 1: Calculating your marginal tax rate.
Using your Taxable Income and Adjusted Gross Income figures as
guides, you can locate your Marginal Tax Rate in the table below.
First, locate your Taxable Income in a filing status and income
range in the left-hand column. Then, locate your Adjusted Gross
Income at the top of the chart. At the point where your Taxable
Income line meets your Adjusted Gross Income column, the percentage
indicated is an approximation of your Marginal Tax Rate. For
example: Let's assume you are married filing jointly, your taxable
income is $138,000 and your adjusted gross income is $175,000.
Under Taxable Income married filing jointly status, $138,000 is in
the $100,000-$147,700 range. Under Adjusted Gross Income, $175,000
is in the $117,950 to $176,950 column. The Taxable Income line and
Adjusted Gross Income column meet at 36.63%. This is the rate
you'll use in Step 2.
<TABLE>
<CAPTION>
Adjusted gross income*
___________________________________________________________________________________________
<S> <C> <C> <C> <C>
Taxable income** $0 $117,950 $176,950
Married Filing Jointly to to to OVER
$117,950(1) $176,950(2) $299,450(3) $299,450(2)
___________________________________________________________________________________________
$ 0 - $ 5,000 15.63%
5,000 - 10,000 16.27
10,000 - 15,000 17.52
15,000 - 20,000 18.16
20,000 - 40,000 18.79
40,000 - 40,100 18.79
40,100 - 80,000 31.74 31.74%
80,000 - 96.900 32.28 32.28
96,900 - 100,000 35.10 35.10
100,000 - 147,700 35.76 36.63 36.63%
147,700 - 200,000 40.42 41.42 42.79
200,000 - 263,750 40.80 43.16 41.80%
263,750 + 44.13 46.72*** 45.23
___________________________________________________________________________________________
Taxable income** $0 $117,950
Single to to OVER
$117,950(1) $240,450(3) $240,450(2)
___________________________________________________________________________________________
$ 0 - $ 5,000 15.63%
5,000 - 10,000 16.27
10,000 - 15,000 17.52
15,000 - 20,000 18.16
20,000 - 24,000 18.79
24,000 - 40,000 31.21
40,000 - 58,150 31.74
58,150 - 80,000 34.59
80,000 - 100,000 35.10
100,000 - 121,300 35.76 37.22%
121,300 - 200,000 40.42 42.11 41.42%
200,000 - 263,750 40.80 42.48*** 41.80
263,750 + 44.13 45.23
___________________________________________________________________________________________
</TABLE>
<PAGE>
PAGE 64
*Gross income with certain adjustments before taking itemized
deductions and personal exemptions.
**Amount subject to federal income tax after itemized deduction and
personal exemptions.
***This rate is applicable only in the limited case where your
adjusted gross income is less than $299,450 and your taxable income
exceeds $263,750.
(1) No Phase-out -- Assumes no phase-out of itemized deductions or
personal exemptions.
(2) Itemized Deductions Phase-out -- Assumes a single taxpayer has
one personal exemption and joint taxpayers have two personal
exemptions.
(3) Itemized Deductions and Personal Exemption Phase-outs --
Assumes a single taxpayer has one personal exemption, joint
taxpayers have two personal exemptions and the itemized deductions
continue to phase-out.
Federal taxes are not deductible on the Ohio state tax return.
The combined federal/Ohio tax brackets are based on state tax rates
in effect on Dec. 31, 1995. These rates may change if Ohio tax
rates change in 1996. If state tax rates change, equivalent rates
may be higher than those shown.
This table does not reflect the state joint filing credit.
If these assumptions do not apply to you, it will be necessary to
construct your own personalized tax equivalency table.
STEP 2: Determining your combined federal and Ohio state taxable
yield equivalents.
Using 36.63%, you may determine that a tax-exempt yield of 5% is
equivalent to earning a taxable 7.89% yield.
<TABLE><CAPTION>
For these Tax-Exempt Rates:
___________________________________________________________________________________________
3.00% 3.50% 4.00% 4.50% 5.00% 5.50% 6.00% 6.50%
Marginal Tax Rates Equal the Taxable Rates shown below:
___________________________________________________________________________________________
<S> <C> <C> <C> <C> <C> <C> <C> <C>
15.63% 3.56 4.15 4.74 5.33 5.93 6.52 7.11 7.70
16.27% 3.58 4.18 4.78 5.37 5.97 6.57 7.17 7.76
17.52% 3.64 4.24 4.85 5.46 6.06 6.67 7.27 7.88
18.16% 3.67 4.28 4.89 5.50 6.11 6.72 7.33 7.94
18.79% 3.69 4.31 4.93 5.54 6.16 6.77 7.39 8.00
31.21% 4.36 5.09 5.81 6.54 7.27 8.00 8.72 9.45
31.74% 4.39 5.13 5.86 6.59 7.32 8.06 8.79 9.52
32.28% 4.43 5.17 5.91 6.65 7.38 8.12 8.86 9.60
34.59% 4.59 5.35 6.12 6.88 7.64 8.41 9.17 9.94
35.10% 4.62 5.39 6.16 6.93 7.70 8.47 9.24 10.02
35.76% 4.67 5.45 6.23 7.00 7.78 8.56 9.34 10.12
36.63% 4.73 5.52 6.31 7.10 7.89 8.68 9.47 10.26
37.22% 4.78 5.58 6.37 7.17 7.96 8.76 9.56 10.35
40.42% 5.04 5.87 6.71 7.55 8.39 9.23 10.07 10.91
40.80% 5.07 5.91 6.76 7.60 8.45 9.29 10.14 10.98
41.42% 5.12 5.97 6.83 7.68 8.54 9.39 10.24 11.10
41.80% 5.15 6.01 6.87 7.73 8.59 9.45 10.31 11.17
42.11% 5.18 6.05 6.91 7.77 8.64 9.50 10.36 11.23
42.48% 5.22 6.08 6.95 7.82 8.69 9.56 10.43 11.30
42.79% 5.24 6.12 6.99 7.87 8.74 9.61 10.49 11.36
<PAGE>
PAGE 65
43.16% 5.28 6.16 7.04 7.92 8.80 9.68 10.56 11.44
44.13% 5.37 6.26 7.16 8.05 8.95 9.84 10.74 11.63
45.23% 5.48 6.39 7.30 8.22 9.13 10.04 10.95 11.87
45.98% 5.55 6.48 7.40 8.33 9.26 10.18 11.11 12.03
46.72% 5.63 6.57 7.51 8.45 9.38 10.32 11.26 12.20
___________________________________________________________________________________________
</TABLE>
<PAGE>
PAGE 66
Appendix C
Descriptions of derivative instruments
What follows are brief descriptions of derivative instruments each
Fund may use. At various times a Fund may use some or all of these
instruments and is not limited to these instruments. It may use
other similar types of instruments if they are consistent with the
Fund's investment goal and policies. For more information on these
instruments, see the SAI.
Options and futures contracts. An option is an agreement to buy or
sell an instrument at a set price during a certain period of time.
A futures contract is an agreement to buy and sell an instrument
for a set price on a future date. A Fund may buy and sell options
and futures contracts to manage its exposure to changing interest
rates, security prices and currency exchange rates. Options and
futures may be used to hedge a Fund's investments against price
fluctuations or to increase market exposure.
Asset-backed and mortgage-backed securities. Asset-backed
securities include interests in pools of assets such as motor
vehicle installment sale contracts, installment loan contracts,
leases on various types of real and personal property, receivables
from revolving credit (credit card) agreements or other categories
of receivables. Mortgage-backed securities include collateralized
mortgage obligations and stripped mortgage-backed securities.
Interest and principal payments depend on payment of the underlying
loans or mortgages. The value of these securities may also be
affected by changes in interest rates, the market's perception of
the issuers and the creditworthiness of the parties involved. The
non-mortgage related asset-backed securities do not have the
benefit of a security interest in the related collateral. Stripped
mortgage-backed securities include interest only (IO) and principal
only (PO) securities. Cash flows and yields on IOs and POs are
extremely sensitive to the rate of principal payments on the
underlying mortgage loans or mortgage-backed securities.
Indexed securities. The value of indexed securities is linked to
currencies, interest rates, commodities, indexes or other financial
indicators. Most indexed securities are short- to intermediate-
term fixed income securities whose values at maturity or interest
rates rise or fall according to the change in one or more specified
underlying instruments. Indexed securities may be more volatile
than the underlying instrument itself.
<PAGE>
PAGE 67
Inverse floaters. Inverse floaters are created by underwriters
using the interest payment on securities. A portion of the
interest received is paid to holders of instruments based on
current interest rates for short-term securities. The remainder,
minus a servicing fee, is paid to holders of inverse floaters. As
interest rates go down, the holders of the inverse floaters receive
more income and an increase in the price for the inverse floaters.
As interest rates go up, the holders of the inverse floaters
receive less income and a decrease in the price for the inverse
floaters.
Structured products. Structured products are over-the-counter
financial instruments created specifically to meet the needs of one
or a small number of investors. The instrument may consist of a
warrant, an option or a forward contract embedded in a note or any
of a wide variety of debt, equity and/or currency combinations.
Risks of structured products include the inability to close such
instruments, rapid changes in the market and defaults by other
parties.
<PAGE>
PAGE 68
IDS SPECIAL TAX-EXEMPT SERIES TRUST
IDS CALIFORNIA TAX-EXEMPT SERIES TRUST
STATEMENT OF ADDITIONAL INFORMATION
FOR
IDS CALIFORNIA TAX-EXEMPT FUND
IDS MASSACHUSETTS TAX-EXEMPT FUND
IDS MICHIGAN TAX-EXEMPT FUND
IDS MINNESOTA TAX-EXEMPT FUND
IDS NEW YORK TAX-EXEMPT FUND
IDS OHIO TAX-EXEMPT FUND
Aug. 29, 1996
This Statement of Additional Information (SAI) is not a prospectus.
It should be read together with the prospectus and the financial
statements contained in the Annual Report which may be obtained
from your American Express financial advisor or by writing to
American Express Shareholder Service, P.O. Box 534, Minneapolis, MN
55440-0534.
This SAI is dated Aug. 29, 1996, and it is to be used with the
prospectus dated Aug. 29, 1996, and the Annual Report for the
fiscal year ended June 30, 1996.
<PAGE>
PAGE 69
TABLE OF CONTENTS
Goal and Investment Policies......................See Prospectus
Additional Investment Policies................................p. 3
Portfolio Transactions........................................p. 6
Brokerage Commissions Paid to Brokers Affiliated with
American Express Financial Corporation........................p. 8
Performance Information.......................................p. 9
Valuing Fund Shares...........................................p. 11
Investing in the Funds........................................p. 12
Redeeming Shares..............................................p. 16
Pay-out Plans.................................................p. 17
Capital Loss Carryover........................................p. 18
Taxes.........................................................p. 19
Agreements....................................................p. 20
Board Members and Officers....................................p. 25
Principal Holders of Securities...............................p. 31
Custodian.....................................................p. 31
The Trusts....................................................p. 31
Independent Auditors..........................................p. 31
Financial Statements..............................See Annual Report
Prospectus....................................................p. 32
Appendix A: Description of Ratings of Tax-Exempt Securities
and Short-Term Securities........................p. 33
Appendix B: Options and Interest Rate Futures Contracts......p. 37
Appendix C: State Risk Factors...............................p. 43
Appendix D: Dollar-Cost Averaging............................p. 55
<PAGE>
PAGE 70
ADDITIONAL INVESTMENT POLICIES
These are investment policies in addition to those presented in the
prospectus. Unless holders of a majority of the outstanding voting
securities agree to make the change each Fund will not:
'Act as an underwriter (sell securities for others). However,
under the securities laws, a Fund may be deemed to be an
underwriter when it purchases securities directly from the issuer
and later resells them.
'Borrow money or property, except as a temporary measure for
extraordinary or emergency purposes, in an amount not exceeding
one-third of the market value of its total assets (including
borrowings) less liabilities (other than borrowings) immediately
after the borrowing. No Fund has borrowed in the past and has any
present intention to borrow.
'Make cash loans if the total commitment amount exceeds 5% of the
Fund's total assets.
'Buy or sell real estate, unless acquired as a result of ownership
of securities or other instruments, except this shall not prevent
the Fund from investing in securities or other instruments backed
by real estate or securities of companies engaged in the real
estate business or real estate investment trusts. For purposes of
this policy, real estate includes real estate limited partnerships.
'Buy or sell physical commodities unless acquired as a result of
ownership of securities or other instruments, except this shall not
prevent the Fund from buying or selling options and futures
contracts or from investing in securities or other instruments
backed by, or whose value is derived from, physical commodities.
'Make a loan of any part of its assets to American Express
Financial Corporation (AEFC), to the board members and officers of
AEFC or to its own board members and officers.
'Purchase securities of an issuer if the board members and officers
of a Fund or the board members and officers of AEFC hold more than
a certain percentage of the issuer's outstanding securities. The
rule is this: the holdings of all board members and officers of a
Fund and the holding of all board members and officers of AEFC who
own more than 0.5% of an issuer's securities are added together,
and if in total they own more than 5%, a Fund will not purchase
securities of that issuer.
'Lend Fund securities in excess of 30% of its net assets, at market
value. The current policy of each Fund's board is to make these
loans, either long- or short-term, to broker-dealers. In making
loans, the Fund gets the market price in cash, U.S. government
securities, letters of credit or such other collateral as may be
permitted by regulatory agencies and approved by the board members.
<PAGE>
PAGE 71
If the Fund receives cash as collateral, a Fund will invest the
cash collateral in short-term debt securities. A Fund reviews the
market value of the loaned securities daily and will get additional
collateral if this value goes up. The risks are that the borrower
may not provide additional collateral when required or return the
securities when due.
Unless changed by the board, each Fund will not:
'Buy on margin or sell short, but it may enter into interest rate
futures contracts.
'Pledge or mortgage its assets beyond 15% of total assets. If a
Fund were ever to do so, valuation of the pledged or mortgaged
assets would be based on market values. For purposes of this
restriction, collateral arrangements for margin deposits on futures
contracts are not deemed to be a pledge of assets.
'Invest more than 5% of its total assets in securities whose issuer
or guarantor of principal and interest has been in operation for
less than three years.
'Invest in voting securities, securities of investment companies or
exploration or development programs, such as oil, gas or mineral
leases.
'Invest more than 5% of its net assets in warrants. Under one
state's law no more than 2% of the Fund's net assets may be
invested in warrants not listed on the New York or American Stock
Exchange.
'Invest more than 10% of its net assets in securities and
derivative instruments that are illiquid. In determining the
liquidity of municipal lease obligations, the investment manager,
under guidelines established by the board, will consider the
essential nature of the lease property, the likelihood that the
municipality will continue appropriating funding for the leased
property, and other relevant factors related to the general credit
quality of the municipality and the marketability of the municipal
lease obligation.
In determining the liquidity of commercial paper issued in
transactions not involving a public offering under Section 4(2) of
the Securities Act of 1933, the investment manager, under
guidelines established by the board, will evaluate relevant factors
such as the issuer and the size and nature of its commercial paper
programs, the willingness and ability of the issuer or dealer to
repurchase the paper, and the nature of the clearance and
settlement procedures for the paper.
Each Fund may purchase debt securities on a when-issued basis,
which means that it may take as long as 45 days after the purchase
before the securities are delivered to a Fund. Payment and <PAGE>
PAGE 72
interest terms, however, are fixed at the time the purchaser enters
into a commitment. Under normal market conditions, each Fund does
not intend to commit more than 5% of its total assets to these
practices. A Fund does not pay for the securities or start earning
interest on them until the contractual settlement date.
When-issued securities are subject to market fluctuations and they
may affect a Fund's total assets the same as owned securities.
Each Fund may invest up to 20% of its net assets in certain taxable
investments for temporary defensive purposes. It may purchase
short-term U.S. and Canadian government securities. It may invest
in bank obligations including negotiable certificates of deposit,
non-negotiable fixed time deposits, bankers' acceptances and
letters of credit. The issuing bank or savings and loan generally
must have capital, surplus and undivided profits (as of the date of
its most recently published annual financial statements in excess
of $100 million (or the equivalent in the instance of a foreign
branch of a U.S. bank) at the date of investment. Each Fund may
purchase short-term corporate notes and obligations rated in the
top two classifications by Moody's Investors Service, Inc.
(Moody's) or Standard & Poor's Corporation (S&P) or the equivalent.
It also may use repurchase agreements with broker-dealers
registered under the Securities Exchange Act of 1934 and with
commercial banks. Repurchase agreements involve investments in
debt securities where the seller (broker-dealer or bank) agrees to
repurchase the securities from the Fund at cost plus an agreed-to
interest rate within a specified time. A risk of a repurchase
agreement is that if the seller seeks the protection of the
bankruptcy laws, the Fund's ability to liquidate the security
involved could be impaired, and it might subsequently incur a loss
if the value of the security declines or if the other party to a
repurchase agreement defaults on its obligation.
Each Fund relies both on ratings assigned by credit agencies and on
the investment manager's credit analysis because credit agencies
may fail to reflect subsequent events on a timely basis and because
credit ratings do not evaluate market risk. With lower rated
securities, the achievement of each Fund's investment objective may
be more dependent upon the investment manager's credit analysis
than is the case for higher quality securities.
Notwithstanding any of the Fund's other investment policies, the
Fund may invest its assets in an open-end management investment
company having substantially the same investment objectives,
policies and restrictions as the Fund for the purpose of having
those assets managed as part of a combined pool.
For a description of ratings of tax-exempt securities and short-
term securities, see Appendix A. For a discussion on options and
interest rate futures contracts, see Appendix B. For a discussion
of state risk factors, see Appendix C.
<PAGE>
PAGE 73
PORTFOLIO TRANSACTIONS
Subject to policies set by the board, AEFC is authorized to
determine, consistent with each Fund's investment goal and
policies, which securities will be purchased, held or sold. In
determining where the buy and sell orders are to be placed, AEFC
has been directed to use its best efforts to obtain the best
available price and the most favorable execution except where
otherwise authorized by the trustees.
AEFC has a strict Code of Ethics that prohibits its affiliated
personnel from engaging in personal investment activities that
compete with or attempt to take advantage of planned portfolio
transactions for any fund in the IDS MUTUAL FUND GROUP. AEFC
carefully monitors compliance with its Code of Ethics.
Normally, each Fund's securities are traded on a principal rather
than an agency basis. In other words, AEFC will trade directly
with the issuer or with a dealer who buys or sells for its own
account, rather than acting on behalf of another client. AEFC does
not pay the dealer commissions. Instead, the dealer's profit, if
any, is the difference, or spread, between the dealer's purchase
and sale price for the security.
On occasion, it may be desirable to compensate a broker for
research services or for brokerage services by paying a commission
that might not otherwise be charged or a commission in excess of
the amount another broker might charge. The board has adopted a
policy authorizing AEFC to do so to the extent authorized by law,
if AEFC determines, in good faith, that such commission is
reasonable in relation to the value of the brokerage or research
services provided by a broker or dealer, viewed either in the light
of that transaction or AEFC's overall responsibilities to the funds
in the IDS MUTUAL FUND GROUP and other funds for which it acts as
investment advisor.
Research provided by brokers supplements AEFC's own research
activities. Such services include economic data on, and analysis
of, U.S. and foreign economies; information on specific industries;
information about specific companies, including earnings estimates;
purchase recommendations for stocks and bonds; portfolio strategy
services; political, economic, business and industry trend
assessments; historical statistical information; market data
services providing information on specific issues and prices; and
technical analysis of various aspects of the securities markets,
including technical charts. Research services may take the form of
written reports, computer software or personal contact by telephone
or at seminars or other meetings. AEFC has obtained, and in the
future may obtain, computer hardware from brokers, including but
not limited to personal computers that will be used exclusively for
investment decision-making purposes, which include the research,
portfolio management and trading functions and other services to
the extent permitted under an interpretation by the Securities and
Exchange Commission.<PAGE>
PAGE 74
When paying a commission that might not otherwise be charged or a
commission in excess of the amount another broker might charge,
AEFC must follow procedures authorized by the board of directors.
To date, three procedures have been authorized. One procedure
permits AEFC to direct an order to buy or sell a security traded on
a national securities exchange to a specific broker for research
services it has provided. The second procedure permits AEFC, in
order to obtain research, to direct an order on an agency basis to
buy or sell a security traded in the over-the-counter market to a
firm that does not make a market in that security. The commission
paid generally includes compensation for research services. The
third procedure permits AEFC, in order to obtain research and
brokerage services, to cause a Fund to pay a commission in excess
of the amount another broker might have charged. AEFC has advised
the Funds that it is necessary to do business with a number of
brokerage firms on a continuing basis to obtain such services as
the handling of large orders, the willingness of a broker to risk
its own money by taking a position in a security, and the
specialized handling of a particular group of securities that only
certain brokers may be able to offer. As a result of this
arrangement, some portfolio transactions may not be effected at the
lowest commission, but AEFC believes it may obtain better overall
execution. AEFC has assured the Funds that under all three
procedures the amount of commission paid will be reasonable and
competitive in relation to the value of the brokerage services
performed or research provided.
All other transactions shall be placed on the basis of obtaining
the best available price and the most favorable execution. In so
doing, if in the professional opinion of the person responsible for
selecting the broker or dealer, several firms can execute the
transaction on the same basis, consideration will be given to those
firms offering research services. Research services may be used by
AEFC in providing advice to all the funds in the IDS MUTUAL FUND
GROUP even though it is not possible to relate the benefits to any
particular fund or account.
Each investment decision made for a Fund is made independently from
any decision made for another fund in the IDS MUTUAL FUND GROUP or
other account advised by AEFC or any AEFC subsidiary. When a Fund
buys or sells the same security as another fund or account, AEFC
carries out the purchase or sale in a way the Fund agrees in
advance is fair. Although sharing in large transactions may
adversely affect the price or volume purchased or sold by the Fund,
the Fund hopes to gain an overall advantage in execution. AEFC has
assured the Funds it will continue to seek ways to reduce brokerage
costs.
On a periodic basis, AEFC makes a comprehensive review of the
broker-dealers and the overall reasonableness of their commissions.
The review evaluates execution, operational efficiency and research
services.
<PAGE>
PAGE 75
For the fiscal years ending June 30, each Fund paid the following
brokerage commissions on financial futures contracts.
Substantially all firms through whom transactions were executed
provided research services.
CA MA MI MN NY OH
1996 $12,144 $ 2,892 $ 3,252 $18,000 $ 7,320 $ 3,036
1995 55,741 10,533 11,742 91,029 30,993 11,668
1994 -0- -0- -0- -0- -0- -0-
No transactions were directed to brokers because of research
services they provided to each Fund.
As of the fiscal year ended June 30, 1996, each Fund held no
securities of their regular brokers or dealers or of the parents of
those brokers or dealers that derived more than 15% of gross
revenue from securities-related activities.
The portfolio turnover rates for the fiscal years ended June 30
were as follows:
CA MA MI MN NY OH
1996 15% 6% 29% 13% 9% 24%
1995 48 16 48 28 20 45
BROKERAGE COMMISSIONS PAID TO BROKERS AFFILIATED WITH AMERICAN
EXPRESS FINANCIAL CORPORATION
Affiliates of American Express Company (American Express) (of which
AEFC is a wholly owned subsidiary) may engage in brokerage and
other securities transactions on behalf of the Fund according to
procedures adopted by the Fund's board and to the extent consistent
with applicable provisions of the federal securities laws. AEFC
will use an American Express affiliate only if (i) AEFC determines
that the Fund will receive prices and executions at least as
favorable as those offered by qualified independent brokers
performing similar brokerage and other services for the Fund and
(ii) the affiliate charges the Fund commission rates consistent
with those the affiliate charges comparable unaffiliated customers
in similar transactions and if such use is consistent with terms of
the Investment Management Services Agreement.
AEFC may direct brokerage to compensate an affiliate. AEFC will
receive research on South Africa from New Africa Advisors, a
wholly-owned subsidiary of Sloan Financial Group. AEFC owns 100%
of IDS Capital Holdings Inc. which in turn owns 40% of Sloan
Financial Group. New Africa Advisors will send research to AEFC
and in turn AEFC will direct trades to a particular broker. The
broker will have an agreement to pay New Africa Advisors. All
transactions will be on a best execution basis. Compensation
received will be reasonable for the services rendered.
<PAGE>
PAGE 76
No brokerage commissions were paid to brokers affiliated with AEFC
for the three most recent fiscal years.
PERFORMANCE INFORMATION
Each Fund may quote various performance figures to illustrate past
performance. Average annual total return and current yield
quotations used by a Fund are based on standardized methods of
computing performance as required by the SEC. An explanation of
the methods used by a Fund to compute performance follows below.
Average annual total return
Each Fund may calculate average annual total return for a class for
certain periods by finding the average annual compounded rates of
return over the period that would equate the initial amount
invested to the ending redeemable value, according to the following
formula:
P(1+T)n = ERV
where: P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $1,000
payment, made at the beginning of a period, at the
end of the period (or fractional portion thereof)
Aggregate total return
Each Fund may calculate aggregate total return for a class for
certain periods representing the cumulative change in the value of
an investment in a Fund over a specified period of time according
to the following formula:
ERV - P
P
where: P = a hypothetical initial payment of $1,000
ERV = ending redeemable value of a hypothetical $1,000
payment, made at the beginning of a period, at the
end of the period (or fractional portion thereof)
Annualized yield
Each Fund may calculate an annualized yield for a class by dividing
the net investment income per share deemed earned during a 30-day
period by the public offering price per share (including the
maximum sales charge) on the last day of the period and annualizing
the results.
<PAGE>
PAGE 77
Yield is calculated according to the following formula:
Yield = 2[(a-b + 1)6 - 1]
cd
where: a = dividends and interest earned during the period
b = expenses accrued for the period (net of
reimbursements
c = the average daily number of shares outstanding
during the period that were entitled to receive
dividends
d = the maximum offering price per share on the last
day of the period
The following table gives an annualized yield quotation for each of
the funds:
30-Day Period Class A Class B Class Y
Fund Ended June 30, 1996 Yield Yield Yield
California 4.35% 3.84% 5.04%
Massachusetts 4.39 3.88 5.00
Michigan 4.11 3.58 4.73
Minnesota 4.71 4.21 5.29
New York 4.25 3.73 4.82
Ohio 4.61 4.10 5.31
Tax-Equivalent Yield
Tax-equivalent yield is calculated by dividing that portion of the
yield (as calculated above) which is tax-exempt by one minus a
stated income tax rate and adding the result to that portion, if
any, of the yield that is not tax-exempt. The following table
shows the tax equivalent yield, based on federal but not state tax
rates, for the funds listed:
<TABLE>
<CAPTION>
Marginal
Income Tax Tax-Equivalent Yield
Bracket for 30-Day Period Ended June 30, 1996
California Massachusetts Michigan Minnesota New York Ohio
<S> <C> <C> <C> <C> <C> <C>
Class A
15.0% 5.12% 5.16% 4.84% 5.54% 5.00% 5.42%
28.0% 6.04% 6.10% 5.71% 6.54% 5.90% 6.40%
33.0% 6.49% 6.55% 6.13% 7.03% 6.34% 6.88%
Class B
15.0% 4.52% 4.56% 4.21% 4.95% 4.39% 4.82%
28.0% 5.33% 5.39% 4.97% 5.85% 5.18% 5.69%
33.0% 5.73% 5.79% 5.34% 6.28% 5.57% 6.12%
Class Y
15.0% 5.93% 5.88% 5.56% 6.22% 5.67% 6.25%
28.0% 7.00% 6.94% 6.57% 7.35% 6.69% 7.38%
33.0% 7.52% 7.46% 7.06% 7.90% 7.19% 7.93%
</TABLE>
<PAGE>
PAGE 78
In its sales material and other communications, each Fund may
quote, compare or refer to rankings, yields or returns as published
by independent statistical services or publishers and publications
such as The Bank Rate Monitor National Index, Barron's, Business
Week, Donoghue's Money Market Fund Report, Financial Services Week,
Financial Times, Financial World, Forbes, Fortune, Global
Investors, Institutional Investor, Investor's Daily, Kiplinger's
Personal Finance, Lipper Analytical Services, Money, Mutual Fund
Forecaster, Newsweek, The New York Times, Personal Investor,
Stanger Report, Sylvia Porter's Personal Finance, USA Today, U.S.
News and World Report, The Wall Street Journal and Wiesenberger
Investment Companies Service.
VALUING FUND SHARES
The value of an individual share is determined by using the net
asset value before shareholder transactions for the day. On July
1, 1996, the first business day following the end of the year, the
computation looked like this:
<TABLE>
<CAPTION>
Net assets before Shares outstanding Net asset value
Fund shareholder transactions at end of previous day of one share
<S> <C> <C> <C> <C> <C>
California
Class A $233,717,193 divided by 45,470,271 equals $5.144
Class B 6,388,655 1,242,929 5.14
Class Y 1,071 208 5.15
Massachusetts
Class A 67,764,184 12,785,695 5.296
Class B 5,561,703 1,049,378 5.30
Class Y 1,073 202 5.31
Michigan
Class A 79,022,223 14,742,952 5.360
Class B 2,595,248 484,188 5.36
Class Y 1,074 200 5.37
Minnesota
Class A 393,315,390 75,637,575 5.191
Class B 16,103,766 3,096,878 5.19
Class Y 1,047 207 5.20
New York
Class A 583,290,456 22,768,781 5.059
Class B 25,075,468 978,780 5.06
Class Y 5,374 209 5.07
Ohio
Class A 71,589,577 13,558,632 5.278
Class B 2,187,916 414,378 5.28
Class Y 1,069 202 5.28
</TABLE>
In determining net assets before shareholder transactions, the
Fund's securities are valued as follows as of the close of business
of the New York Stock Exchange (the Exchange):
'Securities, except bonds other than convertibles traded on a
securities exchange for which a last-quoted sales price is readily
available are valued at the last-quoted sales price on the exchange
where such security is primarily traded.
<PAGE>
PAGE 79
'Securities other than convertibles traded on a securities exchange
for which a last-quoted sales price is not readily available are
valued at the mean of the closing bid and asked prices, looking
first to the bid and asked prices on the exchange where the
security is primarily traded, and if none exists, to the over-the-
counter market.
'Securities included in the NASDAQ National Market System are
valued at the last-quoted sales price in this market.
'Securities included in the NASDAQ National Market System for which
a last-quoted sales price is not readily available, and other
securities traded over-the-counter but not included in the NASDAQ
National Market System are valued at the mean of the closing bid
and asked prices.
'Futures and options traded on major exchanges are valued at their
last-quoted sales price on their primary exchange.
'Short-term securities maturing more than 60 days from the
valuation date are valued at the readily available market price or
approximate market value based on current interest rates. Short-
term securities maturing in 60 days or less that originally had
maturities of more than 60 days at acquisition date are valued at
amortized cost using the market value on the 61st day before
maturity. Short-term securities maturing in 60 days or less at
acquisition date are valued at amortized cost. Amortized cost is
an approximation of market value determined by systematically
increasing the carrying value of a security if acquired at a
discount, or systematically reducing the carrying value if acquired
at a premium, so that the carrying value is equal to the maturity
value on maturity date.
'Securities without a readily available market price, bonds other
than convertibles and other assets are valued at fair value, as
determined in good faith by the board. The board is responsible
for selecting methods they believe provide fair value. When
possible bonds are valued by a pricing service independent from a
fund. If a valuation of a bond is not available from a pricing
service, the bond will be valued by a dealer knowledgeable about
the bond if such a dealer is available.
The New York Stock Exchange, AEFC and (each of) the Fund (Funds)
will be closed on the following holidays: New Year's Day,
Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor
Day, Thanksgiving Day and Christmas Day.
INVESTING IN THE FUNDS
Sales Charge
Shares of the Funds are sold at the public offering price
determined at the close of business on the day an application is
accepted. The public offering price is the net asset value of one <PAGE>
PAGE 80
share plus a sales charge, if applicable. For Class B and Class Y,
there is no initial sales charge so the public offering price is
the same as the net asset value. For Class A, the public offering
price for an investment of less than $50,000, made July 1, 1996 was
determined as follows: The sales charge is paid to American
Express Financial Advisors by the person buying the shares.
<TABLE>
<CAPTION>
Fund Net asset value Divided by (1.00 Public offering
of one share -0.05) for a price
sales charge
<S> <C> <C> <C> <C> <C>
California 5.144 / 0.95 = $5.41
Massachusetts 5.296 / 0.95 = 5.57
Michigan 5.360 / 0.95 = 5.64
Minnesota 5.191 / 0.95 = 5.46
New York 5.059 / 0.95 = 5.33
Ohio 5.278 / 0.95 = 5.56
</TABLE>
Class A - Calculation of the Sales Charge
Sales charges are determined as follows:
Within each increment,
sales charge as a
percentage of:
Public Net
Amount of Investment Offering Price Amount Invested
First $ 50,000 5.0% 5.26%
Next 50,000 4.5 4.71
Next 400,000 3.8 3.95
Next 500,000 2.0 2.04
$1,000,000 or more 0.0 0.00
Sales charges on an investment greater than $50,000 and less than
$1,000,000 are calculated for each increment separately and then
totaled. The resulting total sales charge, expressed as a
percentage of the public offering price and of the net amount
invested, will vary depending on the proportion of the investment
at different sales charge levels.
For example, compare an investment of $60,000 with an investment of
$85,000. The $60,000 investment is composed of $50,000 that incurs
a sales charge of $2,500 (5.0% x $50,000) and $10,000 that incurs a
sales charge of $450 (4.5% x $10,000). The total sales charge of
$2,950 is 4.92% of the public offering price and 5.17% of the net
amount invested.
In the case of the $85,000 investment, the first $50,000 also
incurs a sales charge of $2,500 (5.0% x $50,000) and $35,000 incurs
a sales charge of $1,575 (4.5% x $35,000). The total sales charge
of $4,075 is 4.79% of the public offering price and 5.04% of the
net amount invested.
The following table shows the range of sales charges as a
percentage of the public offering price and of the net amount
invested on total investments at each applicable level.
<PAGE>
PAGE 81
<TABLE>
<CAPTION>
On total investment, sales
charge as a percentage of
Public Net
Offering Price Amount Invested
Amount of Investment ranges from:
<S> <C> <C>
First $ 50,000 5.00% 5.26%
More than 50,000 to 100,000 5.00-4.50 5.26-4.71
More than 100,000 to 500,000 4.50-3.80 4.71-3.95
More than 500,000 to 999,999 3.80-2.00 3.95-2.04
$1,000,000 or more 0.00 0.00
</TABLE>
Class A - Reducing the Sales Charge
Sales charges are based on the total amount of your investments in
any of these Funds. The amount of all prior investments plus any
new purchase is referred to as your "total amount invested." For
example, suppose you have made an investment of $20,000 and later
decide to invest $40,000 more. Your total amount invested would be
$60,000. As a result, $10,000 of your $40,000 investment qualifies
for the lower 4.5% sales charge that applies to investments of more
than $50,000 and up to $100,000.
The total amount invested includes any shares held in any of these
Funds in the name of a member of your primary household group. The
primary household group consists of accounts in any ownership for
spouses or domestic partners and their unmarried children under 21.
Domestic partners are individuals who maintain a shared primary
residence and have joint property or other insurable interest. For
instance, if your spouse already has invested $20,000 and you want
to invest $40,000, your total amount invested will be $60,000 and
therefore you will pay the lower charge of 4.5% on $10,000 of the
$40,000.
Until a spouse remarries, the sales charge is waived for spouses
and unmarried children under 21 of deceased board members, officers
or employees of the Fund or AEFC or its subsidiaries and deceased
advisors.
The total amount invested also includes any investment you or your
immediate family already have in the other publicly offered funds
in the IDS MUTUAL FUND GROUP where the investment is subject to a
sales charge. For example, suppose you already have an investment
of $30,000 in another IDS Fund. If you invest $40,000 more in one
of these Funds, your total amount invested in the Funds will be
$70,000 and therefore $20,000 of your $40,000 investment will incur
a 4.5% sales charge.
Class A - Letter of Intent (LOI)
If you intend to invest $1 million over a period of 13 months, you
can reduce the sales charges in Class A by filing a LOI. The
agreement can start at any time and will remain in effect for 13
months. Your investment will be charged normal sales charges <PAGE>
PAGE 82
until you have invested $1 million. At that time, your account
will be credited with the sales charges previously paid. Class A
investments made prior to signing an LOI may be used to reach the
$1 million total, excluding Cash Management Fund and Tax-Free Money
Fund. However, we will not adjust for sales charges on investments
made prior to the signing of the LOI. If you do not invest $1
million by the end of 13 months, there is no penalty, you'll just
miss out on the sales charge adjustment. A LOI is not an option
(absolute right) to buy shares.
Here's an example. You file a LOI to invest $1 million and make an
investment of $100,000 at that time. You pay the normal 5% sales
charge on the first $50,000 and 4.5% sales charge on the next
$50,000 of this investment. Let's say you make a second investment
of $900,000 (bringing the total up to $1 million) one month before
the 13-month period is up. On the date that you bring your total
to $1 million, AEFC makes an adjustment to your account. The
adjustment is made by crediting your account with additional
shares, in an amount equivalent to sales charge previously paid.
Systematic Investment Programs
After you make your initial investment of $2,000 or more in a Fund,
you can arrange to make additional payments of $100 or more in that
fund on a regular basis. These minimums do not apply to all
systematic investment programs. You decide how often to make
payments - monthly, quarterly, or semiannually. You are not
obligated to make any payments. You can omit payments or
discontinue the investment program altogether. A Fund also can
change the program or end it at any time. If there is no
obligation, why do it? Putting money aside is an important part of
financial planning. With a systematic investment program, you have
a goal to work for.
How does this work? Your regular investment amount will purchase
more shares when the net asset value per share decreases, and fewer
shares when the net asset value per share increases. Each purchase
is a separate transaction. After each purchase your new shares
will be added to your account. Shares bought through these
programs are exactly the same as any other fund shares. They can
be bought and sold at any time. A systematic investment program is
not an option or an absolute right to buy shares.
The systematic investment program itself cannot ensure a profit,
nor can it protect against a loss in a declining market. If you
decide to discontinue the program and redeem your shares when their
net asset value is less than what you paid for them, you will incur
a loss.
For a discussion on dollar-cost averaging, see Appendix D.
<PAGE>
PAGE 83
Automatic Directed Dividends
Dividend and capital gain distributions, paid by another fund in
the IDS MUTUAL FUND GROUP subject to a sales charge, may be used to
automatically purchase shares in the same class of any of these
Funds without paying a sales charge. Dividends may be directed to
existing accounts only. Dividends declared by a Fund are exchanged
to one of these Funds the following day. Dividends can be
exchanged into one fund but cannot be split to make purchases in
two or more funds. Automatic directed dividends are available
between accounts of any ownership except:
Between a non-custodial account and an IRA, or 401(k) plan account
or other qualified retirement account of which American Express
Trust Company acts as custodian;
Between two American Express Trust Company custodial accounts with
different owners (for example, you may not exchange dividends from
your IRA to the IRA of your spouse);
Between different kinds of custodial accounts with the same
ownership (for example, you may not exchange dividends from your
IRA to your 401(k) plan account, although you may exchange
dividends from one IRA to another IRA).
Dividends may be directed from accounts established under the
Uniform Gifts to Minors Act (UGMA) or Uniform Transfers to Minors
Act (UTMA) only into other UGMA or UTMA accounts with identical
ownership.
Each Fund has a different investment goal described in its
prospectus along with other information, including fees and expense
ratios. Before exchanging dividends into another fund, you should
read its prospectus. You will receive a confirmation that the
automatic directed dividend service has been set up for your
account.
REDEEMING SHARES
You have a right to redeem your shares at any time. For an
explanation of redemption procedures, please see the prospectus.
During an emergency, the board can suspend the computation of net
asset value, stop accepting payments for purchase of shares or
suspend the duty of a Fund to redeem shares for more than seven
days. Such emergency situations would occur if:
'The Exchange closes for reasons other than the usual weekend and
holiday closings or trading on the Exchange is restricted, or
'Disposal of a Fund's securities is not reasonably practicable or
it is not reasonably practicable for that Fund to determine the
fair value of its net assets, or
<PAGE>
PAGE 84
'The SEC, under the provisions of the Investment Company Act of
1940 (the 1940 Act), as amended, declares a period of emergency to
exist.
Should a Fund stop selling shares, the board may make a deduction
from the value of the assets held by that Fund to cover the cost of
future liquidations of the assets so as to distribute fairly these
costs among all shareholders.
Each Fund has elected to be governed by Rule 18f-1 under the 1940
Act, which obligates a Fund to redeem shares in cash, with respect
to any one shareholder during any 90-day period, up to lesser of
$250,000 or 1% of the net assets of a Fund at the beginning of the
period. Although redemptions in excess of this limitation would
normally be paid in cash, each Fund reserves the right to make
these payments in whole or in part in securities or other assets in
case of an emergency, or if the payment of a redemption in cash
would be detrimental to the existing shareholders of a Fund as
determined by the board. In these circumstances, the securities
distributed would be valued as set forth in the prospectus. Should
a Fund distribute securities, a shareholder may incur brokerage
fees or other transaction costs in converting the securities to
cash.
PAY-OUT PLANS
You can use any of several pay-out plans to redeem your investment
in regular installments. If you redeem Class B shares you may be
subject to a contingent deferred sales charge as discussed in the
prospectus. While the plans differ on how the pay-out is figured,
they all are based on the redemption of your investment. Net
investment income dividends and any capital gain distributions will
automatically be reinvested, unless you elect to receive them in
cash.
Applications for a systematic investment in a class of any fund
subject to a sales charge normally will not be accepted while a
pay-out plan for any of those funds is in effect. Occasional
investments, however, may be accepted.
To start any of these plans, please write or call American Express
Shareholder Service, P.O. Box 534, Minneapolis, MN 55440-0534,
612-671-3733. Your authorization must be received in the
Minneapolis headquarters at least five days before the date you
want your payments to begin. The initial payment must be at least
$50. Payments will be made on a monthly, bimonthly, quarterly,
semiannual or annual basis. Your choice is effective until you
change or cancel it.
The following pay-out plans are designed to take care of the needs
of most shareholders in a way AEFC can handle efficiently and at a
reasonable cost. If you need a more irregular schedule of
payments, it may be necessary for you to make a series of
individual redemptions, in which case you'll have to send in a <PAGE>
PAGE 85
separate redemption request for each pay-out. Each Fund reserves
the right to change or stop any pay-out plan and to stop making
such plans available.
Plan #1: Pay-out for a fixed period of time
If you choose this plan, a varying number of shares will be
redeemed at regular intervals during the time period you choose.
This plan is designed to end in complete redemption of all shares
in your account by the end of the fixed period.
Plan #2: Redemption of a fixed number of shares
If you choose this plan, a fixed number of shares will be redeemed
for each payment and that amount will be sent to you. The length
of time these payments continue is based on the number of shares in
the account.
Plan #3: Redemption of a fixed dollar amount
If you decide on a fixed dollar amount, whatever number of shares
is necessary to make the payment will be redeemed in regular
installments until the account is closed.
Plan #4: Redemption of a percentage of net asset value
Payments are made based on a fixed percentage of the net asset
value of the shares in your account computed on the day of each
payment. Percentages range from 0.25% to 0.75%. For example, if
you are on this plan and arrange to take 0.5% each month, you will
get $50 if the value of your account is $10,000 on the payment
date.
CAPITAL LOSS CARRYOVER
For federal income tax purposes, IDS California, Massachusetts,
Michigan, Minnesota, New York and Ohio Tax-Exempt Funds had total
capital loss carryovers of $182,601, $426,167, $216,362,
$2,911,065, $2,695,894, and $843,358, respectively, at June 30,
that if not offset by subsequent capital gains will expire as set
out below:
<TABLE>
<CAPTION>
Fund 1999 2000 2001 2002 2003 2004 2005
<S> <C> <C> <C> <C> <C> <C> <C>
California $ 182,601
Massachusetts $133,728 $6,932 $25,326 $ 763 $11,866 71,473 $ 176,079
Michigan 216,362
Minnesota 2,911,065
New York 199,630 12,737 2,483,527
Ohio 843,358
</TABLE>
It is unlikely that the board will authorize a distribution of any
net realized capital gains until the available capital loss
carryover has been offset or has expired except as required by
Internal Revenue Service rules.
<PAGE>
PAGE 86
TAXES
If you buy shares in one of the Funds and then exchange into
another fund, it is considered a sale and subsequent purchase of
shares. Under tax laws, if this exchange is done within 91 days,
any sales charge waived on Class A shares on a subsequent purchase
of shares applies to the new shares acquired in the exchange.
Therefore, you cannot create a tax loss or reduce a tax gain
attributable to the sales charge when exchanging shares within 91
days.
All distributions of net investment income during the year will
have the same percentage designated as tax-exempt. This annual
percentage is expected to be substantially the same as the
percentage of tax-exempt income actually earned during any
particular distribution period.
For the fiscal year ended June 30, 1996, 100% of the income
distributions for California, Massachusetts, Michigan, Minnesota,
New York and Ohio were designated as exempt from federal income
tax. In addition, 100% of exempt interest distributions were
derived from interest on municipal securities for Massachusetts,
and New York whereas California, Michigan, Minnesota and Ohio had
91%, 81%, 99% and 97%, respectively, of exempt interest distributed
on municipal securities.
State law determines whether interest income on a particular
municipal bond is tax-exempt for state tax purposes. Each Fund
will tell you the percentage of interest income from municipal
bonds it received during the year.
Each shareholder should consult a tax advisor about reporting
income for local tax purposes.
Capital gain distributions received by individual and corporate
shareholders should be treated as long-term capital gains
regardless of how long they owned their shares. Short-term capital
gains earned by the Fund are paid to shareholders as part of their
ordinary income dividend and are taxable.
If you are a "substantial user" (or related person) of facilities
financed by industrial development bonds, you should consult your
tax advisor before investing. The income from such bonds may not
be tax-exempt for you.
Interest on private activity bonds generally issued after August
1986 is a preference item for purposes on the individual and
corporate alternative minimum taxes. "Private-activity" (non-
governmental purpose) municipal bonds include industrial revenue
bonds, student loan bonds and multi- and single-family housing
bonds. An exception is made for private-activity bonds issued for
qualified--501(c)(3)--organizations, including non-profit colleges,
universities and hospitals. These bonds will continue to be tax-
exempt and will not be subject to the alternative minimum tax for <PAGE>
PAGE 87
individuals. To the extent a fund earns income subject to the
alternative minimum tax, it will flow through to that fund's
shareholders and may subject some shareholders, depending on their
tax status, to the alternative minimum tax. Each Fund reports the
percentage of income earned from these bonds to shareholders with
their other tax information.
Under federal tax law, and an election made by each Fund under
federal tax rules, by the end of a calendar year each Fund must
declare and pay dividends representing 98% of ordinary income
through Dec. 31 and 98% of net capital gains (both long-term and
short-term) for the 12-month period ending Oct. 31 of that calendar
year. Each Fund is subject to an excise tax equal to 4% of the
excess, if any, of the amount required to be distributed over the
amount actually distributed. Each Fund intends to comply with
federal tax law and avoid any excise tax.
This is a brief summary that relates to federal income taxation
only. Shareholders should consult their tax advisor for more
complete information as to the application of federal, state and
local income tax laws to Fund distributions.
AGREEMENTS
Investment Management Services Agreement
Each Fund has an Investment Management Services Agreement with
AEFC. For its services, AEFC is paid a fee based on the following
schedule:
Assets Annual rate at
(billions) each asset level
First $0.25 0.470%
Next 0.25 0.445
Next 0.25 0.420
Next 0.25 0.405
Over 1.0 0.380
On June 30, 1996, the daily rate applied to the Funds' net assets
was equal to 0.470% for California, Massachusetts, Michigan, New
York and Ohio, and 0.460% for Minnesota on an annual basis. The
fee is calculated for each calendar day on the basis of net assets
as of the close of business two business days prior to the day for
which the calculation is made.
The management fee is paid monthly. The table below shows the
total amount paid by each Fund over the past three fiscal years.
<PAGE>
PAGE 88
Fiscal Year Ended June 30,
Fund 1996 1995 1994
California $1,138,491 $1,222,758 $1,418,804
Massachusetts 344,729 349,517 377,077
Michigan 381,069 390,460 405,578
Minnesota 1,895,243 2,013,423 2,227,969
New York 578,413 599,733 648,514
Ohio 355,739 365,009 381,106
Each Fund also pays taxes, brokerage commissions and nonadvisory
expenses, which include custodian fees; audit and certain legal
fees; cost of prospectuses, proxies and reports sent to
shareholders; fidelity bond premiums; registration fees for shares;
Fund office expenses; consultants' fees; compensation of board
members, officers and employees; corporate filing fees;
organizational expenses; expenses incurred in connection with
lending securities of each Fund; and expenses properly payable by
each Fund, approved by the board. Each Fund paid nonadvisory
expenses. The table below shows the expenses paid over the past
three fiscal years.
Fiscal Year Ended June 30,
Fund 1996 1995 1994
California $ 92,077 $77,270 $ 82,545
Massachusetts 77,636 45,060 52,628
Michigan 71,022 43,853 40,366
Minnesota 174,109 95,952 229,572
New York 94,745 53,049 51,629
Ohio 64,467 46,013 40,747
Administrative Services Agreement
Each Fund has an Administrative Services Agreement with AEFC.
Under this agreement, each Fund pays AEFC for providing
administration and accounting services. The fee is calculated as
follows:
Assets Annual rate
(billions) each asset level
First $0.25 0.040%
Next 0.25 0.035
Next 0.25 0.030
Next 0.25 0.025
Over 1.0 0.020
On June 28, 1996, the daily rate applied to the Fund's net assets
was equal to 0.040% for California, Massachusetts, Michigan, New
York and Ohio, and 0.038% for Minnesota on an annual basis. The
fee is calculated for each calendar day on the basis of net assets
as of the close of business two business days prior to the day for
which the calculation is made. Under the agreement, each Fund paid
fees of for the fiscal year ended June 30, 1996:
<PAGE>
PAGE 89
California $ 97,114
Massachusetts 30,015
Michigan 32,431
Minnesota 156,621
New York 49,226
Ohio 30,276
Transfer Agency Agreement
Each Fund has a Transfer Agency Agreement with AEFC. This
agreement governs AEFC's responsibility for administering and/or
performing transfer agent functions, for acting as service agent in
connection with dividend and distribution functions and for
performing shareholder account administration agent functions in
connection with the issuance, exchange and redemption or repurchase
of each Fund's shares. Under the agreement, AEFC will earn a fee
from each Fund determined by multiplying the number of shareholder
accounts at the end of the day by a rate determined for each class
and dividing by the number of days in the year. The rate for Class
A and Class Y is $15.50 per year and for Class B is $16.50 per
year. The fees paid to AEFC may be changed from time to time upon
agreement of the parties without shareholder approval. Under the
agreement, each Fund paid the following fees for the fiscal year
ended June 30, 1996:
California $ 97,179
Massachusetts 46,647
Michigan 42,771
Minnesota 235,102
New York 71,868
Ohio 41,725
Distribution Agreement
Under a Distribution Agreement, sales charges deducted for
distributing Fund shares are paid to American Express Financial
Advisors daily. Line 1 of the following table shows total sales
charges collected. Line 2 shows the commissions paid to financial
advisors for the past three fiscal years ending June 30.
<TABLE>
<CAPTION>
Year California Massachusetts Michigan Minnesota New York Ohio
<S> <C> <C> <C> <C> <C> <C>
1994 (1) $1,177,341 $867,225 $560,739 $2,458,058 $728,741 $593,137
(2) 763,022 595,441 366,127 1,594,682 468,696 387,846
1995 (1) 480,443 296,532 176,901 1,139,773 408,417 205,263
(2) 269,229 149,239 88,594 640,042 234,047 113,642
1996 (1) 734,901 316,202 211,247 1,120,048 271,649 178,969
(2) 577,886 298,859 178,151 1,004,069 256,802 165,903
</TABLE>
Additional information about commissions and compensation for the
fiscal year ended June 30, 1996 is contained in the following
table:
<PAGE>
PAGE 90
<TABLE>
<CAPTION>
(1) (2) (3) (4) (5)
Net Compensation
Name of Underwriting on Redemption
Principal Discounts and and Brokerage Other
Fund Underwriter Commissions Repurchases Commissions Compensation*
<S> <C> <C> <C> <C> <C>
California American Express
Financial
Advisors $ 734,901 None None $29,809
Massachusetts American Express
Financial
Advisors $ 316,202 None None 28,726
Michigan American Express
Financial
Advisors $ 211,247 None None 13,434
Minnesota American Express
Financial
Advisors $1,120,048 None None 71,223
New York American Express
Financial
Advisors $ 271,649 None None 27,377
Ohio American Express
Financial
Advisors $ 178,969 None None 11,346
_____________________________________________________________________________________________
</TABLE>
*Distribution fees paid pursuant to the Plan and Agreement of
Distribution.
Shareholder Service Agreement
Each Fund pays a fee for service provided to shareholders by
financial advisors and other servicing agents. The fee is
calculated at a rate of 0.175% of each Fund's average daily net
assets attributable to Class A and Class B shares.
Plan and Agreement of Distribution
For Class B shares, to help American Express Financial Advisors
defray the cost of distribution and servicing, not covered by the
sales charges received under the Distribution Agreement, each Fund
and American Express Financial Advisors entered into a Plan and
Agreement of Distribution (Plan). These costs relate to most
aspects of distributing each Fund's shares including American
Express Financial Advisors' overhead expenses. These costs do not
include compensation to the sales force. A substantial portion of
the costs are not specifically identified to any one fund in the
IDS MUTUAL FUND GROUP. Under the Plan, American Express Financial
Advisors is paid a fee at an annual rate of 0.75% of each Fund's
average daily net assets attributable to Class B shares.
The Plan must be approved annually by the board, including a
majority of the disinterested board members, if it is to continue
for more than a year. At least quarterly, the board must review
written reports concerning the amounts expended under the Plan and
the purposes for which such expenditures were made. The Plan and
any agreement related to it may be terminated at any time by vote <PAGE>
PAGE 91
of a majority of the board members who are not interested persons
of the Trusts and have no direct or indirect financial interest in
the operation of the Plan or in any agreement related to the Plan,
or by vote of a majority of the outstanding voting securities of
each Fund's Class B shares or by American Express Financial
Advisors. The Plan (or any agreement related to it) will terminate
in the event of its assignment, as that term is defined in the 1940
Act, as amended. The Plan may not be amended to increase the
amount to be spent for distribution without shareholders' approval,
and all material amendments to the Plan must be approved by a
majority of the board members, including a majority of the board
members who are not interested persons of the Trusts and who do not
have a financial interest in the operation of the Plan or any
agreement related to it. The selection and nomination of
disinterested board members is the responsibility of disinterested
board members. No board member who is not an interested person,
has any direct or indirect financial interest in the operation of
the Plan or any related agreement. The following fees were paid:
Fees paid as of
Fiscal year ended
June 30, 1996
California $29,809
Massachusetts 28,726
Michigan 13,434
Minnesota 71,223
New York 27,377
Ohio 11,346
Total fees and expenses
Total fees and nonadvisory expenses cannot exceed the most
restrictive applicable state limitation. Currently, the most
restrictive applicable state expense limitation, subject to
exclusion of certain expenses, is 2.5% of the first $30 million of
a Fund's average daily net assets, 2% of the next $70 million and
1.5% of average daily net assets over $100 million, on an annual
basis. At the end of each month, if the fees and expenses of a
Fund exceed this limitation for the Fund's fiscal year in progress,
AEFC will assume all expenses in excess of the limitation. AEFC
then may bill the Fund for such expenses in subsequent months up to
the end of that fiscal year, but not after that date. No interest
charges are assessed by AEFC for expenses it assumes. Each Fund
paid the following total fees and nonadvisory expenses for the
fiscal year ended June 30, 1996:
<PAGE>
PAGE 92
Total fees and
nonadvisory
expenses
California $1,876,173
Massachusetts 655,766
Michigan 681,449
Minnesota 3,247,625
New York 1,035,908
Ohio 635,037
BOARD MEMBERS AND OFFICERS
The following is a list of the Fund's board members who, except for
Mr. Dudley, are board members of all 43 funds in the IDS MUTUAL
FUND GROUP. Mr. Dudley is a board member of all funds except the 9
life funds. All shares have cumulative voting rights with respect
to the election of board members.
Lynne V. Cheney'
Born in 1941.
American Enterprise Institute
for Public Policy Research (AEI)
1150 17th St., N.W.
Washington, D.C.
Distinguished Fellow AEI. Former Chair of National Endowment of
the Humanities. Director, The Reader's Digest Association Inc.,
Lockheed-Martin, the Interpublic Group of Companies, Inc.
(advertising), and FPL Group, Inc. (holding company for Florida
Power and Light).
William H. Dudley**
Born in 1932.
2900 IDS Tower
Minneapolis, MN
Executive vice president and director of AEFC.
Robert F. Froehlke+
Born in 1922.
1201 Yale Place
Minneapolis, MN
Former president of all funds in the IDS MUTUAL FUND GROUP.
Director, the ICI Mutual Insurance Co., Institute for Defense
Analyses, Marshall Erdman and Associates, Inc. (architectural
engineering) and Public Oversight Board of the American Institute
of Certified Public Accountants.
David R. Hubers+**
Born in 1943.
2900 IDS Tower
Minneapolis, MN
<PAGE>
PAGE 93
President, chief executive officer and director of AEFC.
Previously, senior vice president, finance and chief financial
officer of AEFC.
Heinz F. Hutter+'
Born in 1929.
P.O. Box 2187
Minneapolis, MN
Former president and chief operating officer, Cargill, Incorporated
(commodity merchants and processors).
Anne P. Jones
Born in 1935.
5716 Bent Branch Rd.
Bethesda, MD
Attorney and telecommunications consultant. Former partner, law
firm of Sutherland, Asbill & Brennan. Director, Motorola, Inc. and
C-Cor Electronics, Inc.
Melvin R. Laird
Born in 1922.
Reader's Digest Association, Inc.
1730 Rhode Island Ave., N.W.
Washington, D.C.
Senior counsellor for national and international affairs, The
Reader's Digest Association, Inc. Former nine-term congressman,
secretary of defense and presidential counsellor. Director, Martin
Marietta Corp., Metropolitan Life Insurance Co., The Reader's
Digest Association, Inc., Science Applications International Corp.,
Wallace Reader's Digest Funds and Public Oversight Board (SEC
Practice Section, American Institute of Certified Public
Accountants).
William R. Pearce+*
Born in 1927.
901 S. Marquette Ave.
Minneapolis, MN
President of all funds in the IDS MUTUAL FUND GROUP since June
1993. Former vice chairman of the board, Cargill, Incorporated
(commodity merchants and processors).
Edson W. Spencer+
Born in 1926.
4900 IDS Center
80 S. 8th St.
Minneapolis, MN
President, Spencer Associates Inc. (consulting). Former chairman
of the board and chief executive officer, Honeywell Inc. Director,
Boise Cascade Corporation (forest products). Member of
International Advisory Council of NEC (Japan).
<PAGE>
PAGE 94
John R. Thomas**
Born in 1937.
2900 IDS Tower
Minneapolis, MN
Senior vice president and director of AEFC.
Wheelock Whitney+
Born in 1926.
1900 Foshay Tower
821 Marquette Ave.
Minneapolis, MN
Chairman, Whitney Management Company (manages family assets).
C. Angus Wurtele'
Born in 1934.
Valspar Corporation
Suite 1700
Foshay Tower
Minneapolis, MN
Chairman of the board and retired Chief Executive Officer, The
Valspar Corporation (paints). Director, Bemis Corporation
(packaging), Donaldson Company (air cleaners & mufflers) and
General Mills, Inc. (consumer foods).
+ Member of executive committee.
' Member of joint audit committee.
* Interested person by reason of being an officer and employee of
the Fund.
**Interested person by reason of being an officer, board member,
employee and/or shareholder of AEFC or American Express.
The board also has appointed officers who are responsible for day-
to-day business decisions based on policies it has established.
In addition to Mr. Pearce, who is president, the Fund's other
officers are:
Leslie L. Ogg
Born in 1938.
901 S. Marquette Ave.
Minneapolis, MN
Vice president, general counsel and secretary of all funds in the
IDS MUTUAL FUND GROUP.
Officers who also are officers and/or employees of AEFC
<PAGE>
PAGE 95
Peter J. Anderson
Born in 1942.
IDS Tower 10
Minneapolis, MN
Vice president-investments of all funds in the IDS MUTUAL FUND
GROUP. Director and senior vice president-investments of AEFC.
Melinda S. Urion
Born in 1953.
IDS Tower 10
Minneapolis, MN
Treasurer of all funds in the IDS MUTUAL FUND GROUP. Director,
senior vice president and chief financial officer of AEFC.
Director and executive vice president and controller of IDS Life
Insurance Company.
Members of the board who are not officers of a Fund or of AEFC
receive an annual fee of $100 for Ohio, Michigan and Massachusetts;
$150 for New York; $250 for California; and $400 for Minnesota.
They also receive attendance and other fees, the cost of which each
Fund shares with the other funds in the IDS MUTUAL FUND GROUP.
These fees include attendance of meetings of the Board, $1,000;
meetings of the Contracts Committee, $750; meetings of the Audit,
Executive or Investment Review Committees, $500; meetings of the
Personnel Committee, $300; out-of-state, $500; and Chair of the
Contracts Committee, $5,000. Expenses for attending those meetings
are also reimbursed.
During the fiscal year ended June 30, 1996, the members of the
board, for attending up to 25 meetings, received the following
compensation:
<TABLE>
<CAPTION>
Board compensation
IDS California Tax-Exempt Fund
Pension or
Aggregate Retirement Estimated Total cash
compensation benefits annual compensation
from the accrued as benefit upon from the IDS
Board member fund fund expenses* retirement MUTUAL FUND GROUP
<S> <C> <C> <C> <C>
Lynne V. Cheney $507 $ 91 $125 $69,800
Robert F. Froehlke 493 85 125 69,300
Heinz F. Hutter 520 143 60 70,300
Anne P. Jones 533 55 125 70,800
Donald M. Kendall 406 0 115 57,500
(part of year)
Melvin R. Laird 580 0 125 72,600
Lewis W. Lehr 465 0 114 59,800
(part of year)
Edson W. Spencer 622 0 67 74,300
Wheelock Whitney 510 25 125 70,000
C. Angus Wurtele 438 158 124 67,300
<PAGE>
PAGE 96
Board compensation
IDS Massachusetts Tax-Exempt Fund
Pension or
Aggregate Retirement Estimated Total cash
compensation benefits annual compensation
from the accrued as benefit upon from the IDS
Board member fund fund expenses* retirement MUTUAL FUND GROUP
Lynne V. Cheney $432 $ 96 $ 50 $69,800
Robert F. Froehlke 418 233 50 69,300
Heinz F. Hutter 445 158 24 70,300
Anne P. Jones 458 90 50 70,800
Donald M. Kendall 356 0 48 57,500
(part of year)
Melvin R. Laird 505 158 50 72,600
Lewis W. Lehr 415 0 47 59,800
(part of year)
Edson W. Spencer 547 111 27 74,300
Wheelock Whitney 435 156 50 70,000
C. Angus Wurtele 363 164 50 67,300
Board compensation
IDS Michigan Tax-Exempt Fund
Pension or
Aggregate Retirement Estimated Total cash
compensation benefits annual compensation
from the accrued as benefit upon from the IDS
Board member fund fund expenses* retirement MUTUAL FUND GROUP
Lynne V. Cheney $432 $ 96 $ 50 $69,800
Robert F. Froehlke 418 233 50 69,300
Heinz F. Hutter 445 158 24 70,300
Anne P. Jones 458 90 50 70,800
Donald M. Kendall 356 0 48 57,500
(part of year)
Melvin R. Laird 505 158 50 72,600
Lewis W. Lehr 415 0 47 59,800
(part of year)
Edson W. Spencer 547 111 27 74,300
Wheelock Whitney 435 156 50 70,000
C. Angus Wurtele 363 165 50 67,300
Board compensation
IDS Minnesota Tax-Exempt Fund
Pension or
Aggregate Retirement Estimated Total cash
compensation benefits annual compensation
from the accrued as benefit upon from the IDS
Board member fund fund expenses* retirement MUTUAL FUND GROUP
Lynne V. Cheney $582 $ 119 $200 $69,800
Robert F. Froehlke 568 336 200 69,300
Heinz F. Hutter 595 186 97 70,300
Anne P. Jones 608 119 200 70,800
Donald M. Kendall 456 1,065 190 57,500
(part of year)
Melvin R. Laird 655 274 200 72,600
Lewis W. Lehr 515 525 188 59,800
(part of year)
Edson W. Spencer 697 0 107 74,300
Wheelock Whitney 585 209 200 70,000
C. Angus Wurtele 513 204 199 67,300
<PAGE>
PAGE 97
Board compensation
IDS New York Tax-Exempt Fund
Pension or
Aggregate Retirement Estimated Total cash
compensation benefits annual compensation
from the accrued as benefit upon from the IDS
Board member fund fund expenses* retirement MUTUAL FUND GROUP
Lynne V. Cheney $457 $ 82 $75 $69,800
Robert F. Froehlke 443 255 75 69,300
Heinz F. Hutter 470 136 36 70,300
Anne P. Jones 483 79 75 70,800
Donald M. Kendall 372 0 71 57,500
(part of year)
Melvin R. Laird 530 198 75 72,600
Lewis W. Lehr 432 0 71 59,800
(part of year)
Edson W. Spencer 572 116 40 74,300
Wheelock Whitney 460 148 75 70,000
C. Angus Wurtele 388 142 74 67,300
Board compensation
IDS Ohio Tax-Exempt Fund
Pension or
Aggregate Retirement Estimated Total cash
compensation benefits annual compensation
from the accrued as benefit upon from the IDS
Board member fund fund expenses* retirement MUTUAL FUND GROUP
Lynne V. Cheney $432 $ 42 $ 50 $69,800
Robert F. Froehlke 418 101 50 69,300
Heinz F. Hutter 445 69 24 70,300
Anne P. Jones 458 39 50 70,800
Donald M. Kendall 356 0 48 57,500
(part of year)
Melvin R. Laird 505 68 50 72,600
Lewis W. Lehr 415 0 47 59,800
Edson W. Spencer 547 48 27 74,300
Wheelock Whitney 435 68 50 70,000
C. Angus Wurtele 363 71 50 67,300
</TABLE>
On June 30, 1996, the Fund's board members and officers as a group
owned less than 1% of the outstanding shares of each Fund. During
the fiscal year ended June 30, 1996, no board member or officer
earned more than $60,000 from the California, Massachusetts,
Michigan, Minnesota, New York and Ohio funds, respectively. Column
A illustrates the amount all board members and officers as a group
earned from each Fund; Column B details their retirement plan
benefits.
A B
California $ 8,841 $ 557
Massachusetts 7,341 1,166
Michigan 6,349 1,167
Minnesota 13,157 3,037
New York 8,170 1,156
Ohio 7,621 506
* The Fund had a retirement plan for its independent board members.
The plan was terminated April 30, 1996.
<PAGE>
PAGE 98
PRINCIPAL HOLDERS OF SECURITIES
As of June 30, 1996, the following held more than 5% of a fund's
shares.
IDS California Tax-Exempt Fund
Mr. and Mrs. Charles Wasserman, Tarzana, CA, 5.17%.
IDS Michigan Tax-Exempt Fund
Mr. James Garber trustee for George Kato, Plymouth, MI, 9.76%.
Anthony Yem trustee for Anthony W. Yem Trust, Kalamazoo, MI,
7.13%. Sharon K. Hawley, Morris, MN, 5.87%.
IDS Ohio Tax-Exempt Fund
Tanner Family Limited Partnership, Medina, OH, 8.86%. Helen
Reinhart, Paul Reinhart, Robert Reinhart, and Ruth Reinhart,
Tiffin, OH, 6.30%.
CUSTODIAN
The Fund's securities and cash are held by First Bank National
Association, 180 E. Fifth St., St. Paul, MN 55101-1631, through a
custodian agreement. The custodian is permitted to deposit some or
all of its securities in central depository systems as allowed by
federal law.
THE TRUSTS
The Trusts are entities of the type commonly known as Massachusetts
business trusts. Under Massachusetts law, shareholders of such a
trust may, under certain circumstances, be held personally liable
as partners for its obligations. However, the risk of a
shareholder incurring financial loss on account of shareholder
liability is limited to circumstances in which the Trust itself is
unable to meet its obligations.
INDEPENDENT AUDITORS
The financial statements contained in the Annual Report to
shareholders for the fiscal year ended June 30, 1996, were audited
by independent auditors, KPMG Peat Marwick LLP, 4200 Norwest
Center, 90 S. Seventh St., Minneapolis, MN 55402-3900. The
independent auditors also provide other accounting and tax-related
services as requested by the Fund.
FINANCIAL STATEMENTS
The Independent Auditors' Report and the Financial Statements,
including Notes to the Financial Statements and the Schedule of
Investments in Securities, contained in the 1996 Annual Report to
shareholders, pursuant to Section 30(d) of the Investment Company
Act of 1940, as amended, are hereby incorporated in this SAI by
reference. No other portion of the Annual Report, however, is
incorporated by reference.
<PAGE>
PAGE 99
PROSPECTUS
The prospectus for IDS California Tax-Exempt Trust and IDS Special
Tax-Exempt Trust dated Aug. 29, 1996, is hereby incorporated in
this SAI by reference.
<PAGE>
PAGE 100
APPENDIX A
DESCRIPTION OF RATINGS OF TAX-EXEMPT SECURITIES AND SHORT-TERM
SECURITIES
Tax-Exempt Securities
Tax-exempt securities are used to raise money for various public
purposes, such as constructing public facilities and making loans
to public institutions. Certain types of tax-exempt bonds are
issued to obtain funding for privately operated facilities. There
are two principal classifications of municipal securities: notes
and bonds. Notes are used generally to provide for short-term
capital needs and generally have a maturity of up to one year.
These include tax anticipation notes, revenue anticipation notes,
bond anticipation notes, construction loan notes, variable rate
demand notes and tax-exempt commercial paper (also known as
municipal paper). Bonds, which meet longer-term capital needs,
generally have maturities of more than one year and fall into one
of two categories. General obligation bonds are backed by the
taxing power of the issuing municipality and are considered the
safest type of municipal bond. Revenue bonds are payable only from
the revenues of a particular project or facility and are generally
dependent solely on a specific revenue source. Industrial
development bonds are a specific type of revenue bond backed by the
credit and security of a private issuer.
The ratings concern the quality of the issuer. They are not an
opinion of the market value of the security. Such ratings are
opinions on whether the principal and interest will be repaid when
due. A security's rating may change which could affect its price.
Ratings by Moody's Investors Service, Inc. (Moody's) are Aaa, Aa,
A, Baa, Ba, B, Caa, Ca, C and D. Standard & Poor's Corporation
(S&P) ratings are AAA, AA, A, BBB, BB, B, CCC, CC, C and D.
Securities rated Aaa and AAA are judged to be of the best quality.
Capacity to pay interest and repay principal is extremely strong.
Prices are responsive only to interest rate fluctuations.
Securities rated Aa and AA also are judged to be high-grade
although margins of protection for interest and principal may not
be quite as good as Aaa or AAA rated securities. Long-term risk
may appear greater than the Aaa or AAA group. Prices are primarily
responsive to interest rate fluctuations.
Securities rated A are considered upper-medium grade. Protection
for interest and principal is deemed adequate but susceptible to
future impairment. The market prices of such obligations move
primarily with interest rate fluctuations but also with changing
economic or trade conditions.
Securities rated Baa and BBB are considered upper-medium-grade
obligations. Protection for interest and principal is adequate
over the short-term; however, these obligations have certain <PAGE>
PAGE 101
speculative characteristics. They are susceptible to changing
economic conditions and require constant review. Such bonds are
more responsive to business and trade conditions than to interest
rate fluctuations.
Securities rated Ba and BB are considered to have speculative
elements. Their future cannot be considered well assured. The
protection of interest and principal payments may be very moderate
and not well safeguarded during future good and bad times.
Uncertainty of position characterizes these bonds.
Securities rated B or lower lack characteristics of more desirable
investments. There may be small assurance over any long period of
time of the payment of interest and principal or of the maintenance
of other contract terms. Some of these bonds are of poor standing
and may be in default or have other marked shortcomings.
Bonds rated Caa and CCC are of poor standing. Such issues may be
in default or there may be elements of danger with respect to
principal or interest.
Bonds rated Ca and CC represent obligations that are highly
speculative. Such issues are often in default or have other marked
shortcomings.
Bonds rated C are obligations with a higher degree of speculation.
These securities have major risk exposures to default.
Bonds rated D are in payment default. The D rating is used when
interest payments or principal payments are not made on the due
date.
Non-rated securities will be considered for investment when they
possess a risk comparable to that of rated securities consistent
with fund objectives and policies. When assessing the risk
involved in each nonrated security, the Funds will consider the
financial condition of the issuer or the protection afforded by the
terms of the security.
Short-term Tax-exempt Securities
A portion of each Fund's assets are in cash and short-term
securities for day-to-day operating purposes. The investments will
usually be in short-term municipal bonds and notes. These include:
(1) Tax anticipation notes sold to finance working capital needs
of municipalities in anticipation of receiving taxes on a future
date.
(2) Bond anticipation notes sold on an interim basis in
anticipation of a municipality issuing a longer term bond in the
future.
<PAGE>
PAGE 102
(3) Revenue anticipation notes issued in anticipation of revenues
from sources other than taxes, such as federal revenues available
under the Federal Revenue Sharing Program.
(4) Tax and revenue anticipation notes issued in anticipation of
revenues from taxes and other sources of revenue, except bond
placements.
(5) Construction loan notes insured by the Federal Housing
Administration which remain outstanding until permanent financing
by the Federal National Mortgage Association (FNMA) or the
Government National Mortgage Association (GNMA) at the end of the
project construction period.
(6) Tax-exempt commercial paper with a stated maturity of 365
days or less issued by agencies of state and local governments to
finance seasonal working capital needs or as short-term financing
in anticipation of longer-term financing.
(7) Variable rate demand notes, on which the yield is adjusted at
periodic intervals not exceeding 31 days and on which the principal
may be repaid after not more than seven days' notice, are
considered short-term regardless of the stated maturity.
Short-term municipal bonds and notes are rated by Moody's and by
S&P. The ratings reflect the liquidity concerns and market access
risks unique to notes.
Moody's MIG 1/VMIG 1 indicates the best quality. There is present
strong protection by established cash flows, superior liquidity
support or demonstrated broad-based access to the market for
refinancing.
Moody's MIG 2/VMIG 2 indicates high quality. Margins of protection
are ample although not so large as in the preceding group.
Moody's MIG 3/VMIG 3 indicates favorable quality. All security
elements are accounted for but there is lacking the undeniable
strength of the preceding grades. Liquidity and cash flow
protection may be narrow and market access for refinancing is
likely to be less well established.
Moody's MIG 4/VMIG 4 indicates adequate quality. Protection
commonly regarded as required of an investment security is present
and although not distinctly or predominantly speculative, there is
specific risk.
Standard & Poor's rating SP-1 indicates very strong or strong
capacity to pay principal and interest. Those issues determined to
possess overwhelming safety characteristics will be given a plus
(+) designation.
Standard & Poor's rating SP-2 indicates satisfactory capacity to
pay principal and interest.<PAGE>
PAGE 103
Standard & Poor's rating SP-3 indicates speculative capacity to pay
principal and interest.
Short-term Taxable Securities and Repurchase Agreement
Depending on market conditions, a portion of each Fund's
investments may be in short-term taxable securities. These
include:
(1) Obligations of the U.S. government, its agencies and
instrumentalities resulting principally from lending programs of
the U.S. government;
(2) U.S. Treasury bills with maturities up to one year. The
difference between the purchase price and the maturity value or
resale price is the interest income to the Fund;
(3) Certificates of deposit or receipts with fixed interest rates
issued by banks in exchange for deposit of funds;
(4) Bankers' acceptances arising from short-term credit
arrangements designed to enable businesses to obtain funds to
finance commercial transactions;
(5) Letters of credit which are short-term notes issued in bearer
form with a bank letter of credit obligating the bank to pay the
bearer the amount of the note;
(6) Commercial paper rated in the two highest grades by Moody's
or S&P. Commercial paper is generally defined as unsecured short-
term notes issued in bearer form by large well-known corporations
and finance companies. These ratings reflect a review of
management, economic evaluation of the industry competition,
liquidity, long-term debt and ten-year earning trends;
Moody's rating Prime-1 (P-1) and Standard & Poor's rating A-1
indicate that the degree of safety regarding timely payment of
short-term promissory obligations is either overwhelming or very
strong.
Moody's rating Prime-2 (P-2) and Standard & Poor's rating A-2
indicate that capacity for timely payment of short-term promissory
obligations with this designation is strong.
(7) Repurchase agreements involving acquisition of securities by
a Fund with a concurrent agreement by the seller, usually a bank or
securities dealer, to reacquire the securities at cost plus
interest within a specified time. From this investment, a Fund
receives a fixed rate of return that is insulated from market rate
changes while it holds the security.
<PAGE>
PAGE 104
APPENDIX B
OPTIONS AND INTEREST RATE FUTURES CONTRACTS
Each Fund may buy or write options traded on any U.S. exchange or
in the over-the-counter market. Each Fund may enter into interest
rate futures contracts traded on any U.S. exchange. Each Fund also
may buy or write put and call options on these futures. Bond
options in the over-the-counter market will be purchased only when
the investment manager believes a liquid secondary market exists
for the options and only from dealers and institutions the
investment manager believes present a minimal credit risk. Some
options are exercisable only on a specific date. In that case, or
if a liquid secondary market does not exist, a fund could be
required to buy or sell securities at disadvantageous prices,
thereby incurring losses.
OPTIONS. An option is a contract. A person who buys a call option
for a security has the right to buy the security at a set price for
the length of the contract. A person who sells a call option is
called a writer. The writer of a call option agrees to sell the
security at the set price when the buyer wants to exercise the
option, no matter what the market price of the security is at that
time. A person who buys a put option has the right to sell a stock
at a set price for the length of the contract. A person who writes
a put option agrees to buy the security at the set price if the
purchaser wants to exercise the option, no matter what the market
price of the security is at that time. An option is covered if the
writer owns the security (in the case of a call) or sets aside the
cash or securities of equivalent value (in the case of a put) that
would be required upon exercise.
The price paid by the buyer for an option is called a premium. In
addition the buyer generally pays a broker a commission. The
writer receives a premium, less a commission, at the time the
option is written. The cash received is retained by the writer
whether or not the option is exercised. A writer of a call option
may have to sell the security for less than the market price if
the market price rises above the exercise price. A writer of a put
option may have to pay an above-market price for the security if
the market price decreases below the exercise price.
Options can be used to produce incremental earnings, protect gains
and facilitate buying and selling securities for investment
reasons. The use of options and futures contracts may benefit a
fund and its shareholders by improving the Fund's liquidity and by
helping to stabilize the value of its net assets.
Buying options. Put and call options may be used as a trading
technique to facilitate buying and selling securities for
investment reasons. Options are used as a trading technique to
take advantage of any disparity between the price of the underlying
security in the security market and its price on the options
market. It is anticipated the trading technique will be utilized <PAGE>
PAGE 105
only to effect a security transaction when the price of the
security plus the option price will be as good or better than the
price at which the security could be bought or sold directly. When
the option is purchased, a Fund pays a premium and a commission.
It then pays a second commission on the purchase or sale of the
underlying security when the option is exercised. For record
keeping and tax purposes, the price obtained on the purchase of the
underlying security will be the combination of the exercise price,
the premium and both commissions. When using options as a trading
technique, commissions on the option will be set as if only the
underlying securities were traded.
Put and call options also may be held by a Fund for investment
purposes. Options permit a fund to experience the change in the
value of a security with a relatively small initial cash
investment. The risk a Fund assumes when it buys an option is the
loss of the premium. To be beneficial to a Fund, the price of the
underlying security must change within the time set by the option
contract. Furthermore, the change must be sufficient to cover the
premium paid, the commissions paid both in the acquisition of the
option and in a closing transaction or in the exercise of the
option and subsequent sale (in the case of a call) or purchase (in
the case of a put) of the underlying security. Even then the price
change in the underlying security does not ensure a profit since
prices in the option market may not reflect such a change.
Writing covered options. Each Fund will write covered options when
it feels it is appropriate and will follow these guidelines:
'Underlying securities will continue to be bought or sold solely on
the basis of investment considerations consistent with that fund's
goals.
'All options written by a Fund will be covered. For covered call
options if a decision is made to sell the security, that Fund will
attempt to terminate the option contract through a closing purchase
transaction.
'Each Fund will write options only as permitted under federal or
state laws or regulations, such as those that limit the amount of
total assets subject to the options. While no limit has been set
by the Funds, it will conform to the requirements of those states.
For example, California limits the writing of options to 50% of the
assets of a fund. Some regulations also affect the Custodian.
Net premiums on call options closed or premiums on expired call
options are treated as short-term capital gains. Since each Fund
is taxed as a regulated investment company under the Internal
Revenue Code, any gains on options and other securities held less
than three months must be limited to less than 30% of its annual
gross income.
<PAGE>
PAGE 106
If a covered call option is exercised, the security is sold by that
Fund. A Fund will recognize a capital gain or loss based upon the
difference between the proceeds and the security's basis.
Options on many securities are listed on options exchanges. If a
Fund writes listed options, it will follow the rules of the options
exchange. Options are valued at the close of the New York Stock
Exchange. An option listed on a national exchange, Chicago Board
Options Exchange (CBOE) or NASDAQ will be valued at the last-quoted
sales price or, if such a price is not readily available, at the
mean of the last bid and asked prices.
FUTURES CONTRACTS. A futures contract is an agreement between two
parties to buy and sell a security for a set price on a future
date. They have been established by boards of trade which have
been designated contracts markets by the Commodity Futures Trading
Commission (CFTC). Futures contracts trade on these markets in a
manner similar to the way a stock trades on a stock exchange, and
the boards of trade, through their clearing corporations, guarantee
performance of the contracts. Currently, there are futures
contracts based on such debt securities as long-term U.S. Treasury
bonds, Treasury notes, GNMA modified pass-through mortgage-backed
securities, three-month U.S. Treasury bills and bank certificates
of deposit. While futures contracts based on debt securities do
provide for the delivery and acceptance of securities, such
deliveries and acceptances are very seldom made. Generally, the
futures contract is terminated by entering into an offsetting
transaction. An offsetting transaction for a futures contract sale
is effected by each Fund entering into a futures contract purchase
for the same aggregate amount of the specific type of financial
instrument and same delivery date. If the price in the sale
exceeds the price in the offsetting purchase, that Fund immediately
is paid the difference and realizes a gain. If the offsetting
purchase price exceeds the sale price, each Fund pays the
difference and realizes a loss. Similarly, closing out a futures
contract purchase is effected by a Fund entering into a futures
contract sale. If the offsetting sale price exceeds the purchase
price, each Fund realizes a gain, and if the offsetting sale price
is less than the purchase price, each Fund realizes a loss. At the
time a futures contract is made, a good-faith deposit called
initial margin is set up within a segregated account at a Fund's
custodian bank. The initial margin deposit is approximately 1.5%
of a contract's face value. Daily thereafter, the futures contract
is valued and the payment of variation margin is required so that
each day each Fund would pay out cash in an amount equal to any
decline in the contract's value or receive cash equal to any
increase. At the time a futures contract is closed out, a nominal
commission is paid, which is generally lower than the commission on
a comparable transaction in the cash markets.
The purpose of a futures contract, in the case of a portfolio
holding long-term debt securities, is to gain the benefit of
changes in interest rates without actually buying or selling long-
term debt securities. For example, if a Fund owned long-term <PAGE>
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bonds and interest rates were expected to increase, it might enter
into futures contracts to sell securities which would have much the
same effect as selling some of the long-term bonds it owned.
Futures contracts are based on types of debt securities referred to
above, which have historically reacted to an increase or decline in
interest rates in a fashion similar to the debt securities a Fund
owns. If interest rates did increase, the value of the debt
securities in the portfolio would decline, but the value of a
Fund's futures contracts would increase at approximately the same
rate, thereby keeping the net asset value of a Fund from declining
as much as it otherwise would have. If, on the other hand, a Fund
held cash reserves and interest rates were expected to decline, it
might enter into interest rate futures contracts for the purchase
of securities. If short-term rates were higher than long-term
rates, the ability to continue holding these cash reserves would
have a very beneficial impact on a Fund's earnings. Even if short-
term rates were not higher, a Fund would still benefit from the
income earned by holding these short-term investments. At the same
time, by entering into futures contracts for the purchase of
securities, a Fund could take advantage of the anticipated rise in
the value of long-term bonds without actually buying them until the
market had stabilized. At that time, the futures contracts could
be liquidated and a Fund's cash reserves could then be used to buy
long-term bonds on the cash market. A Fund could accomplish
similar results by selling bonds with long maturities and investing
in bonds with short maturities when interest rates are expected to
decline. But by using futures contracts as an investment tool,
given the greater liquidity in the futures market than in the cash
market, it might be possible to accomplish the same result more
easily and more quickly. Successful use of futures contracts
depends on the investment manager's ability to predict the future
direction of interest rates. If the investment manager's
prediction is incorrect, a Fund would have been better off had it
not entered into futures contracts.
In addition to the requirement that futures contracts be offset by
assets of a Fund and not used for speculation, the board members
have adopted two restrictions on the use of futures contracts. The
first is that each Fund may not commit more than 5% of its total
assets to initial margin deposits. The second restriction is that
the aggregate market value of the futures contracts a Fund holds
may not exceed 30% of the market value of its total assets.
Neither of the restrictions would be changed by the Trustees
without considering the concerns of the various federal and state
regulatory agencies.
OPTIONS ON FUTURES CONTRACTS. Options on futures contracts give
the holder a right to buy or sell futures contracts in the future.
Unlike a futures contract, which requires the parties to the
contract to buy and sell a security on a set date, an option on a
futures contract merely entitles its holder to decide on or before
a future date (within nine months of the date of issue) whether to
enter into such a contract. If the holder decides not to enter
into the contract, all that is lost is the amount (premium) paid <PAGE>
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for the option. Furthermore, because the value of the option is
fixed at the point of sale, there are no daily payments of cash to
reflect the change in the value of the underlying contract.
However, since an option gives the buyer the right to enter into a
contract at a set price for a fixed period of time, its value does
change daily and that change is reflected in the net asset value of
that Fund.
RISKS. There are risks in engaging in each of the management tools
described above. The risk each Fund assumes when it buys an option
is the loss of the premium paid for the option. Purchasing options
also limits the use of monies that might otherwise be available for
long-term investments.
The risk involved in writing options on futures contracts a Fund
owns, or on securities held in its portfolio, is that there could
be an increase in the market value of such contracts or securities.
If that occurred, the option would be exercised and the asset sold
at a lower price than the cash market price. To some extent, the
risk of not realizing a gain could be reduced by entering into a
closing transaction. A Fund could enter into a closing transaction
by purchasing an option with the same terms as the one it had
previously sold. The cost to close the option and terminate a
Fund's obligation, however, might be more or less than the premium
received when it originally wrote the option. Furthermore, a Fund
might not be able to close the option because of insufficient
activity in the options market.
A risk in employing futures contracts to protect against the price
volatility of portfolio securities is that the prices of securities
subject to futures contracts may not correlate perfectly with the
behavior of the cash prices of that Fund's securities. The
correlation may be distorted because the futures market is
dominated by short-term traders seeking to profit from the
difference between a contract or security price and their cost of
borrowed funds. Such distortions are generally minor and would
diminish as the contract approached maturity.
Another risk is that a Fund's investment manager could be incorrect
in anticipating as to the direction or extent of various interest
rate movements or the time span within which the movements take
place. For example, if a Fund sold futures contracts for the sale
of securities in anticipation of an increase in interest rates, and
interest rates declined instead, it would lose money on the sale.
TAX TREATMENT. As permitted under federal income tax laws, each
Fund intends to identify futures contracts as mixed straddles and
not mark them to market, that is, not treat them as having been
sold at the end of the year at market value. Such an election may
result in a Fund being required to defer recognizing losses
incurred by entering into futures contracts and losses on
underlying securities identified as being hedged against.
<PAGE>
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Federal income tax treatment of gains or losses from transactions
in options on futures contracts and indexes will depend on whether
such option is a section 1256 contract. If the option is a non-
equity option, a Fund will either make a 1256(d) election and treat
the option as a mixed straddle or mark to market the option at
fiscal year end and treat the gain/loss as 40% short-term and 60%
long-term. Certain provisions of the Internal Revenue Code may
also limit a Fund's ability to engage in futures contracts and
related options transactions. For example, at the close of each
quarter of a Fund's taxable year, at least 50% of the value of its
assets must consist of cash, government securities and other
securities, subject to certain diversification requirements. Less
than 30% of its gross income must be derived from sales of
securities held less than three months.
The IRS has ruled publicly that an exchange-traded call option is a
security for purposes of the 50%-of-assets test and that its issuer
is the issuer of the underlying security, not the writer of the
option, for purposes of the diversification requirements. In order
to avoid realizing a gain within a three-month period, a Fund may
be required to defer closing out a contract beyond the time when it
might otherwise be advantageous to do so. Each Fund also may be
restricted in purchasing put options for the purpose of hedging
underlying securities because of applying the short sale holding
period rules with respect to such underlying securities.
Accounting for futures contracts will be according to generally
accepted accounting principles. Initial margin deposits will be
recognized as assets due from a broker (a Fund's agent in acquiring
the futures position). During the period the futures contract is
open, changes in value of the contract will be recognized as
unrealized gains or losses by marking to market on a daily basis to
reflect the market value of the contract at the end of each day's
trading. Variation margin payments will be made or received
depending upon whether gains or losses are incurred. All contracts
and options will be valued at the last-quoted sales price on their
primary exchange.
<PAGE>
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APPENDIX C
STATE RISK FACTORS
Each Fund's ability to achieve its investment objective is
dependent upon the ability of the issuers of state tax-exempt bonds
to meet their continuing obligation for the payment of principal
and interest.
The following information highlights certain legal, financial,
political and economic affairs for California, Massachusetts,
Michigan, Minnesota, New York and Ohio and their political
subdivisions and is based on official statements and public
information. No Fund has acquired direct knowledge of this
information, however, the Funds are not aware of any facts which
would render the information inaccurate. The matters discussed
below constitute only a brief summary of financial information and
do not purport to be a complete description.
Although revenue obligations of any state or its political
subdivisions may be payable from a specific project or source,
there can be no assurance that past, current or future economic
difficulties, and the resulting impact on state and local
governmental finances will not adversely affect the market value of
municipal obligations held in a fund or the ability of the
respective issuers to make required payments on the obligations.
FACTORS AFFECTING CALIFORNIA
California's economy is showing many signs of recovery after
several years of hardship. This year there have been strong gains
in employment, nonresidential construction and retail sales
sectors. A 1995-1996 budget surplus has created an opportunity to
erase the general fund deficit.
Employment this year is expected to grow 2.6% and personal income,
5.7%. Although the state's economic recovery is in the early
stages, a favorable debt position, restructuring of the economy to
reduce reliance on defense industry income, and revenue collections
exceeding budget forecasts are helping to stabilize the economy.
Certain California constitutional amendments, legislative measures,
executive orders, civil actions and voter initiatives could
adversely affect the ability of issuers of California state and
municipal securities to obtain sufficient revenue to pay their bond
obligations. Prior to 1977, revenues of the state government
experienced significant growth primarily as a result of inflation
and continuous expansion of the tax base of the state. In 1978,
California voters approved an amendment to the California
constitution known as Proposition 13, which added Article XIIIA to
the state Constitution. Article XIIIA reduced ad valorem
(according to value) taxes on real property, and restricted the
ability of taxing entities to increase real property tax revenues.
In addition, Article XIIIA provides that additional taxes may be <PAGE>
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levied by cities, counties and special districts only upon approval
of not less than a two-thirds vote of the "qualified electors" of
such district and requires not less than a two-thirds vote of each
of the two houses of the state legislature to enact any changes in
state taxes for purposes of increasing revenues, whether by
increased rate or changes in methods of computation.
In 1986 Proposition 62, an initiative statute enacted in
California, placed further limits on the ability of local
governments to levy taxes other than ad valorem property taxes,
except with voter approval. Legislation enacted subsequent to
Article XIIIA provided for the redistribution of California's
general fund surplus to local agencies, the reallocation of certain
state revenues to local agencies and the assumption of certain
local obligations by the state so as to help California municipal
issuers raise revenues to pay their bond obligations.
Primarily as a result of the reductions in local property tax
revenues received by local governments following the passage of
Proposition 13, the legislature undertook to provide assistance to
such governments by substantially increasing expenditures from the
general fund for that purpose beginning in the 1978-1979 fiscal
year. In past years, in addition to such increased expenditures,
the indexing of personal income tax rates (to adjust such rates for
the effects of inflation), the elimination of certain inheritance
and gift taxes, and the increase of exemption levels for certain
other such taxes and a moderating impact on the growth in state
revenues. In addition, the state has increased expenditures by
providing a variety of tax credits, senior citizens' credits and
energy credits.
In 1979, the voters of California passed an initiative adding
Article XIIIB to the California Constitution. Article XIIIB
prohibits the state from spending "appropriations subject to
limitation" in excess of the appropriations limit imposed.
"Appropriations subject to limitation" are authorizations to spend
"proceeds of taxes" which consist of tax revenues and certain other
funds. One of the exclusions from these limitations is "debt
service" (defined as "appropriations required to pay the cost of
interest and redemption charges, including the funding of any
reserve or sinking fund required in connection therewith, on
indebtedness on existing or legally authorized as of Jan. 1, 1979,
or on bonded indebtedness thereafter approved" by voters). In
addition, appropriations required to comply with mandates of courts
or the Federal government are not included as appropriations
subject to limitation.
The state's appropriations limit is adjusted annually to reflect
change in cost of living and population and transfer of financial
responsibility from one governmental unit to another. Revenues in
any fiscal year which exceed the amount which may be appropriated
in compliance with Article XIIIB must be returned to taxpayers by a
revision of tax rates or fee schedules within the two subsequent
fiscal years.<PAGE>
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In November 1988, voters approved an initiative called Proposition
98 which substantially modified Article XIIIB, by providing that a
substantial amount (up to $600 million per year currently) of any
excess state revenues would, instead of being returned to
taxpayers, be paid to public schools and community college
districts.
In the years immediately after enactment of Article XIIIB, very few
California government entities neared their appropriations limits.
To the extent the state remains constrained by its appropriations
limit, the absolute level, or the rate of growth, of assistance to
local governments may be reduced.
Because of the complex nature of Articles XIIIA and XIIIB, the
ambiguities and possible inconsistencies in their terms and the
applicability of their exemptions and exceptions and impossibility
of predicting future appropriations or changes in population and
cost of living, it is not currently possible to determine the
impact of Article XIIIA or Article XIIIB or any related legislation
on the securities held in the Fund or the ability of state or local
governments to pay interest on or repay the principal of such
securities. With a limited exception, to date the California
courts have either upheld the constitutionality of Article XIIIA
and its implementing and related legislation or have interpreted
them in such a manner as to avoid the necessity for direct
determination of constitutional issues. Article XIIIA and XIIIB
and their respective implementing and related legislation will most
probably be subject to continuing or future legal challenges. It
is not presently possible to predict the outcome of any such
legislation with respect to the ultimate scope, impact or
constitutionality of either Article XIIIA or Article XIIIB, or
their respective related legislation; or the impact of any
determinations upon state agencies or local government, or upon the
abilities of such entities to pay the interest on, or repay the
principal of, the securities held by a Fund.
FACTORS AFFECTING MASSACHUSETTS
Massachusetts finances continue to stabilize. Following several
years in which revenue fell short of budget forecast and caused
deficits, the general fund closed its fourth fiscal year in balance
and with a surplus. The proposed 1996-1997 budget is expected to
be balanced.
The Massachusetts constitution requires that a balanced budget be
provided for each year. In addition, the commonwealth adopted
certain budgetary and fiscal controls to eliminate the
possibilities of expenditures exceeding available revenues and
funds. The general fund, the local aid fund and the highway fund
are the three principal operating funds of the commonwealth and the
condition of these funds is generally regarded as the principal
indicator of whether the commonwealth's operating revenues and
expenses are balanced.
<PAGE>
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The commonwealth had and may continue to have unfunded general
liabilities of its retirement systems and a program to fund these
liabilities. In 1978, the commonwealth began assuming full
financial responsibility for all costs of the administration of
justice within the state, and Medicaid expenditures which have
increased each year. It also raised aggregate aid to cities,
towns, schools and other districts and transit authorities. In the
past the commonwealth signed constant decrees to improve mental
health care and programs for the mentally retarded to meet federal
standards including those governing federal reimbursements under
various programs.
All of the 351 cities and towns in Massachusetts have achieved a
property tax level of no more than 2.5% of full property values.
Legislation that effected this leveling is Proposition 2 1/2.
Under Proposition 2 1/2, cities and towns may increase the property
tax levy annually. In most cases property taxes can increase by
2.5% of the prior year's tax levy plus 2.5% of the value of new
properties and of significant improvements to property.
The reductions in local revenues and reductions in local personnel
and services resulting from Proposition 2 1/2 created a strong
demand for substantial increases in state-funded local aid, with
increases in fiscal years 1982 through 1987. The effect of this
increase in local aid was to shift a major part of the impact of
Proposition 2 1/2 to the commonwealth. Legislation had been
enacted providing for certain local option taxes.
Efforts to limit and reduce the levels of taxation in Massachusetts
have been underway for several years. Chapter 62F of the
Massachusetts General Laws establishes a state tax revenue growth
limit and does not exclude principal and interest payments on
commonwealth debt obligations from the scope of the limit.
Lawsuits filed against the commonwealth or its authorities may
affect its future fiscal condition. Among the more significant of
these suits are suits regarding the clean up of pollution in Boston
Harbor, services to be provided at state schools for the retarded
and at a state mental hospital, the governor's authority to reduce
allotments of appropriated funds and Medicaid reimbursement levels.
There have also been actions filed in which recipients of human
service benefits seek expanded levels of services and benefits and
in which providers of such services or benefits challenge the rate
at which they are reimbursed by the commonwealth. Any lawsuits
that result in judgments requiring the commonwealth to provide
expanded services or benefits, to pay increased rates or to take
other remedial measures, operating capital expenditures might be
needed to implement such judgments.
FACTORS AFFECTING MICHIGAN
Conservative fiscal management allow the state's operations to
continue to recover from past recessions and build-up the
stabilization fund. Employment was up by 6,000 in May 1996, <PAGE>
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although the unemployment rate also edged up slightly, as the
number of workers entering the job market exceeded employment
growth. Michigan's May unemployment rate, 4.7%, is still below the
national average of 5.6%.
Michigan's low debt position helped it to weather recent difficult
economic times. Financial operations remained solvent through
budget adjustments, spending cuts and use of non-recurring items.
Previous budget problems arose from revenue estimates falling below
expectation and increased spending levels. This caused deficits in
the general fund budget for fiscal years ended 1990 and 1991.
The principal sectors of Michigan's economy are manufacturing of
durable goods (including automobiles and office equipment), tourism
and agriculture. As of August 1987, manufacturing represented
25.8% of total employment in the state. Income derived from
manufacturing exceeded 35% of total state income from all
employment sectors. Because of the emphasis on durable goods,
however, economic activity in the state has tended to be more
cyclical than in the nation as a whole. Moreover, this domination
left the state's economy more susceptible to upward and downward
cycles. The manufacturer sector has benefitted from significant
private investment and improved international competitiveness. The
current low interest rate environment should continue to help
strengthen business investment.
The state's economy has improved over the years, primarily due to
diversification of the economic base, yet it remains vulnerable.
Service industry employment continues to replace manufacturing as
primary employment.
The declining trend of personal income has placed a strain on the
state as income taxes are a primary source of income. Other
factors that could strain the state's budget are property tax-
relief proposals (which are expected to reduce assessments by 30
percent over five years), and a requirement that the state
government appropriate 42% of its expenditures to local government
to insulate them from decreased state aid.
Budget pressure could occur if voters pass any property tax reform
legislation. Such reform will cause the state administration to
have to aid school districts affected by loss of property tax
revenue.
FACTORS AFFECTING MINNESOTA
Minnesota's diverse economy enables it to perform well across
economic cycles, compared to other states. Current economic
expansion in the state has brought unemployment down to 3.1% and
caused scattered labor shortages. The budget for 1996-1997
projects a surplus, revenues in line with budget estimates, and
rapid retirement of debt.
<PAGE>
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Economic weakness has tested Minnesota's historically strong
financial management. The rainy day fund established in the mid-
1980s totaled $550 million as of fiscal 1990. To address budget
gaps in 1991 and the 1992-1993 biennium, the reserve was drawn down
to $240 million as of June, 1992. The state operates on a cash
basis in its accounting general fund and ended fiscal year 1991
with a $555 million fund balance, including the budgetary reserve
and $42 million reserved for appropriations carried forward to
fiscal 1992.
Because most Minnesota tax-exempt bonds are revenue or general
obligations of local governments or authorities, rather than
general obligations of the state of Minnesota itself, ratings on
Minnesota tax-exempt bonds in the Trust's portfolio may be
different from the ratings given to the general obligation bonds of
the state.
The unemployment rate, growth rates and income trends in Minnesota
compare favorably with national averages, but the economy is
cyclically sensitive. Minnesota's employment and population are
forecasted to continue to grow at rates near the national average.
Total employment in the state is expected to grow at an average
annual rate of 1.3% a year through 2005, slightly below the
projected national growth rate of 1.5% annually. During the
recessionary period from 1980 to 1983, economic conditions in the
agricultural and iron mining industries, which are two of the
leading sectors of Minnesota's economy, were poor. However, mining
is a less significant factor in the state economy than it once was
while the manufacture of durable and non-durable goods is
relatively more important to the economy. The state relies heavily
on a progressive individual income tax for revenue, which results
in a fiscal system unusually sensitive to economic conditions.
There can be no assurances, however, that Minnesota's economy and
fiscal situation will continue to improve or that further
difficulties will not occur.
FACTORS AFFECTING NEW YORK
Revenues exceeded 1995 budget forecast. New York State ended
fiscal year 1996 with a $445 million budget surplus. Early 1996
reports indicate an economy that is outperforming expectations.
The state continues to move from a manufacturing to service based
economy.
The state has historically been one of the wealthiest in the
nation. For decades, however, the state economy has grown more
slowly than that of the nation as a whole, resulting in a gradual
erosion of its relative economic affluence. The causes of this
decline are varied and complex, in many cases involving national
and international developments beyond the state's control. Part of
the reason for the long-term relative decline in the state economy
has been attributed to the combined state and local tax burden,
which is among the highest in the nation. The existence of this
tax burden limits the state's ability to impose higher taxes in <PAGE>
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the event of future financial difficulties.
The financial condition of the state may be affected by various
financial, social, economic and political factors. Those factors
can be very complex, may vary from fiscal year to fiscal year, and
are frequently the result of actions taken not only by the state
and its authorities and municipalities but also entities that are
not under control by the state. The fiscal stability of the state
is related to the fiscal stability of New York City and the
authorities (which generally finance, construct and operate
revenue-producing public benefit facilities). The state's
experience has been that if New York City or any of the authorities
suffer serious financial difficulties, the ability of the state,
New York City, the state's political subdivisions and the
authorities to obtain financing in the public credit markets is
adversely affected. This results in part from the expectation that
to the extent that any authority or local government experiences
financial difficulty, it will seek and receive state financial
assistance. Moreover, New York City accounts for approximately 40%
of the state's population and tax receipts, so New York City's
financial integrity affects the state directly. Accordingly, if
there should be a default by New York City or any of the
authorities, the market value and marketability of all New York
tax-exempt securities could be adversely affected.
Since the enactment of the Federal Tax Reform Act of 1986, the
state has found it difficult to accurately estimate tax receipts.
In the 1988-89 fiscal year, the state overestimated tax receipts of
$1.9 billion. After implementing various deficit-reduction
measures, the state completed its 1988-89 fiscal year with a cash-
basis operating deficit of $529 million. The state faced a
potential budget gap for the 1989-90 fiscal year of approximately
$2.8 billion, but took measures to close that gap through a
combination of tax and fee increases and spending cuts, including a
reduction of financial aid to localities.
New York state adopted a balanced 1992-1993 budget based on
realistic economic assumptions. Quick adoption of the budget also
afforded administrators more time to implement their plan and be
proactive instead of reactive to economic changes. The budget
maintained essential revenue-raising features including a deferral
of any cut in state's personal income tax rate, increases in energy
taxes and deferral of a scheduled reduction in business taxes.
Past fiscal problems have left the state's economy in a weak
position. Issues that affect the state's budget are: freezing
personal and business tax rates, escalating social service costs,
and costs associated with civil service employee collective
bargaining.
While principal and interest payments on outstanding authority
obligations are normally paid from revenues generated by the
projects of the authorities, in recent years New York has had to
appropriate large amounts to enable certain authorities to meet <PAGE>
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their financial obligations and in some cases to prevent default.
Further assistance may be required in the future. In particular,
the New York State Urban Development Corporation (UDC), the New
York State Housing Finance Agency (HFA), and the Metropolitan
Transportation Authority (MTA) may require substantial amounts of
assistance from the state.
The HFA provides financing for multifamily housing, state
university construction, hospital and nursing home development and
other programs. HFA depends upon mortgagors in each of its
programs to generate sufficient funds from rental income, subsidies
and other payments to meet their respective mortgage repayment
obligations to HFA as well as to meet the operating and maintenance
costs of the project. On several occasions in the past, in
fulfillment of its moral obligation commitment, New York
appropriated funds on behalf of HFA to replenish its debt service
reserve funds. There can be no assurance that the state will not
be called upon to provide further assistance in the future. Any
litigation decided against HFA also may have an adverse effect on
the financial condition of HFA mortgages.
The MTA oversees the operations of the city's bus and subway system
by the New York City Transit Authority and the Manhattan and Bronx
Surface Operating Authority (collectively, the TA) and, through
subsidiaries, operates certain commuter rail lines. The MTA has
depended and will continue to depend upon federal, state and local
government support to operate the transit system because fare
revenues are insufficient.
The TA and New York City had damage claims filed against it from
deaths and injuries sustained during a Dec. 1990 subway fire and an
Aug. 1991 train derailment. Lawsuits could have an adverse
financial impact on TA.
Beginning in 1975 (in part as a result of the New York City and UDC
financial crises), various localities of New York began
experiencing difficulty in marketing their securities. As a
result, certain localities, in addition to New York City, have
experienced financial problems leading to requests for state
assistance. If future financial problems cause agencies or
localities to seek special state assistance, this could adversely
affect New York's ability to pay its obligations. Similarly, if
financial difficulties of the state result in the inability to meet
its regular aid commitments or to provide further emergency
financing, issuers may default on their outstanding obligations,
which would affect the marketability of debt obligations of the
state, its agencies and municipalities, such as the New York tax-
exempt bonds in the Fund's portfolio.
Reductions in federal spending could materially and adversely
affect the financial condition and budget projections of New York's
localities. Should localities be adversely affected by federal
cutbacks, they may seek additional assistance from the state that
might, in turn, have an adverse impact on New York's ability to <PAGE>
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maintain a balanced budget.
The Long Island Lighting Company (LILCO) is the investor-owned
utility which supplies gas service and substantially all electric
service in Nassau and Suffolk Counties and a small portion of
Queens County and New York City. In early 1984, LILCO reported
that it faced serious cash-flow and other financial difficulties
that were attributable to, among other things, construction
problems on its 809-megawatt Shoreham Nuclear Power Facility.
LILCO is the largest single real property taxpayer in both Suffolk
and Nassau Counties and if its financial problems continue, there
could be severe financial difficulties for the affected localities,
particularly in Suffolk County. State legislation was enacted in
1986 creating the Long Island Power Authority (LIPA), a public
benefit corporation that has the power to acquire LILCO if it
determines that to do so would result in lower electric rates for
LILCO customers. The legislation requires that, with certain
exceptions, if LILCO property is acquired by LIPA and is therefore
removed from the tax rolls, LIPA is to make payments in lieu of
most state and local taxes that would otherwise have been paid by
LILCO. LIPA made and subsequently amended an offer to the Board of
Directors of LILCO for a negotiated acquisition of LILCO by LIPA.
The New York State comptroller recently reached a preliminary
conclusion that the issuance of tax-exempt bonds by LIPA to acquire
LILCO may create a temporary oversupply in the market for new and
outstanding issues of New York tax-exempt bonds.
In February 1989, the Governor and LILCO reached an agreement
pursuant to which LILCO would sell Shoreham to the New York Power
Authority for $1 (which would then decommission Shoreham) in return
for a schedule of rate increases which have since been approved by
the State Public Service Commission (the PSC). The agreement has
been approved by the New York Power Authority and LIPA. The
agreement and PSC rate increases have enabled LILCO to reenter the
public credit markets. It is difficult to predict the ultimate
fiscal and economic impact on the state or on local governments on
Long Island of any litigation to which LILCO is or may become a
party, or of any bankruptcy by or takeover of LILCO.
New York City and Municipal Assistance Corporation. In 1975, New
York City encountered severe financial difficulties that impaired
the borrowing ability of the city, the state and the authorities.
As a result, New York City lost access to public credit markets and
was not able to sell debt to the public until 1979. MAC was
organized in 1975 to provide financing assistance for New York City
and to exercise certain oversight and review functions with respect
to the city's financing. Prior to 1985, MAC had the authority to
issue bonds and notes and to pay or lend the proceeds to the city.
Since 1985, MAC has been authorized to issue bonds and notes only
to refund its outstanding bonds and notes. MAC also has the
authority to exchange its obligations for New York City
obligations. MAC bonds are payable from appropriations of certain
state sales and use taxes imposed by New York City, the state stock
transfer tax and per capita state aid to New York City. The state <PAGE>
PAGE 119
is not, however, obligated to continue these taxes, to continue to
appropriate revenue from these taxes or to continue the
appropriation of per capita state aid to pay MAC obligations. MAC
does not have taxing powers and its bonds are not obligations
enforceable against either New York City of New York.
New York City has maintained a balanced budget for several fiscal
years and has retired all of its federally guaranteed debt. As a
result, certain restrictions imposed on New York City by the New
York State Financial Control Board (the Control Board), which was
created in response to New York City's 1975 fiscal crisis, have
been suspended. Those restrictions, including the Control Board's
power to approve or disapprove certain contracts, long-term and
short-term borrowings and the four-year financial plan of the City,
will remain suspended unless and until, among other things, there
is a substantial threat of or an actual failure by the City to pay
debt service on its notes and bonds or to keep its annual operating
deficits below $100 million. The City's four-year financial plan
for fiscal years 1989 through 1992 was submitted to the Control
Board on July 5, 1988, and had been subsequently modified by the
City. As modified it projects a balanced budget for the 1989
fiscal year, and budget gaps of $661 million, $945 million and $818
million for the 1990, 1991, and 1992 fiscal years, respectively,
before implementation of gap closing programs.
The ability of New York City to balance its future budgets as
provided in its financial plans depend on various actions the City
expects will be taken but are not within its control. If expected
federal and state aid is not forthcoming, if economic conditions
significantly further reduce revenue derived from economically
sensitive taxes or increase expenditure for public assistance, or
if other uncertainties materialize which reduce expected revenues
or increase projected expenditures, then, to avoid operating
deficits, it is likely that New York City would make demands upon
the state for substantial additional financial assistance.
Litigation. Certain litigation pending against the state, its
subdivisions and their officers and employees could have a
substantial and long-term adverse effect on state finances. In
addition, New York City is a defendant in a significant number of
lawsuits pertaining to material matters, including those claims
asserted that are incidental to performing routine governmental and
other functions.
FACTORS AFFECTING OHIO
Ohio's fiscal year 1996 closed with a budget surplus in excess of
$400 million dollars. This was the second successive year state
operations closed with a positive balance. This year's surplus was
caused by greater than anticipated revenues and keeping state
expenditures down.
Increased employment opportunities led by services and trade
sectors has helped diversify the state's economy and give greater <PAGE>
PAGE 120
stability through the current recession. As with other states,
Ohio has experienced economic weakness in some revenue areas.
This, and other factors, led to budget shortfalls in 1991-1992.
However, these shortfalls were effectively managed through a draw-
down on the state's budget stabilization fund and an executive
order to reduce state spending by $196 million. In the early
1980s, Ohio's financial operations continued a trend of
vulnerability to economic cycles. Spending reductions coupled with
tax increases were implemented as a method of maintaining control
during recessionary periods. Ohio may face similar scenarios in
future years. However, the effects of economic cycles should be
less severe because the state's economic base is more diversified
than it has been in the two previous decades. Constitutional and
statutory provisions require the state to close each fiscal year
with a positive general fund balance, in conjunction with Ohio's
advantageous current budgetary practice should help future
financial performance.
Ohio benefits from a diversified revenue structure and a relatively
low tax burden. The state carries out most of its operations
through the general revenue fund which receives general state
revenues not otherwise dedicated. General fund revenues are
derived mainly from personal income, sales, corporate and franchise
taxes. General fund operations historically have paralleled
economic trends, as evidenced by the performance in recent
recessionary periods.
While diversifying more into the service area, Ohio's economy
continues to rely in part on durable-goods and manufacturing. This
reliance is largely concentrated in motor vehicles and equipment,
steel, rubber products and household appliances. As a result,
economic activity in Ohio, as in many other industrially developed
states, tends to be more cyclical than in some other states and in
the nation as a whole. However, the manufacturing industry is
stronger after downsizing and restructuring in the 1980s and has
performed reasonably well enough through the current recession.
The state's export activity also has been stabilizing during the
current recession. Agriculture also is an important segment of the
economy. The state has instituted several programs to provide
financial assistance to farmers.
A number of local Ohio communities and school districts have faced
significant financial problems. The state has established
procedures for municipal fiscal emergencies, under which joint
state and local commissions are established to monitor the fiscal
affairs of a financially troubled municipality the municipality
must develop a financial plan to eliminate deficits and cure any
defaults. Since their adoption in 1979, these procedures have been
applied to approximately twenty cities and villages, including the
City of Cleveland; in a majority of these communities, the fiscal
situation has been resolved and the procedures terminated.
Local school districts in Ohio receive a major portion of their
operational funds from state subsidies, but are dependent upon <PAGE>
PAGE 121
local taxes for significant portions of their budgets. Local
school districts are authorized to submit for voter approval an
income tax on the district income of individuals and estates. A
small number of local school districts have required emergency
advances from the state in order to prevent year-end deficits. The
number of districts applying for aid has fluctuated over the years.
Legislation (with enhanced provision for individual district
borrowing) has replaced the emergency advance loan program.
Ohio's current economic recovery reflects both a turnaround in the
manufacturing sector and economic restructuring that has shifted
employment from manufacturing to the wholesale and retail trade and
services sectors. Manufacturing employment in 1990 accounted for
22.7% of total employment, down from 28.9% in 1980. Despite its
decreasing prominence, manufacturing remains Ohio's major
employment and earnings sector. Services and trade follow closely
as second and third largest employment sectors. Since 1980, Ohio
has experienced an unemployment rate generally higher than the
United States average. Income levels are slightly below the
national average, but show a stable to positive trend.
<PAGE>
PAGE 122
APPENDIX D
DOLLAR-COST AVERAGING
A technique that works well for many investors is one that
eliminates random buy and sell decisions. One such system is
dollar-cost averaging. Dollar-cost averaging involves building a
portfolio through the investment of fixed amounts of money on a
regular basis regardless of the price or market condition. This
may enable an investor to smooth out the effects of the volatility
of the financial markets. By using this strategy, more shares will
be purchased when the price is low and less when the price is high.
As the accompanying chart illustrates, dollar-cost averaging tends
to keep the average price paid for the shares lower than the
average market price of shares purchased, although there is no
guarantee.
While this does not ensure a profit and does not protect against a
loss if the market declines, it is an effective way for many
shareholders who can continue investing through changing market
conditions to accumulate shares in a fund to meet long-term goals.
Dollar-cost averaging
___________________________________________________________________
Regular Market Price Shares
Investment of a Share Acquired
$100 $6.00 16.7
100 4.00 25.0
100 4.00 25.0
100 6.00 16.7
100 5.00 20.0
$500 $25.00 103.4
Average market price of a share over 5 periods:
$5.00 ($25.00 divided by 5).
The average price you paid for each share:
$4.84 ($500 divided by 103.4).
<PAGE>
PAGE 123
IDS Insured Tax-Exempt Fund
Prospectus
Aug. 29, 1996
The goals of IDS Insured Tax-Exempt Fund, a part of IDS Special
Tax-Exempt Series Trust, are to provide a high level of income
generally exempt from federal income tax and preservation of
shareholders' capital. The Fund invests primarily in securities
that are insured as to their scheduled payment of principal and
interest for at least as long as the securities are held in the
Fund. Insured securities fluctuate in market value as interest
rates change.
This prospectus contains facts that can help you decide if the Fund
is the right investment for you. Read it before you invest and
keep it for future reference.
Additional facts about the Fund are in a Statement of Additional
Information (SAI), filed with the Securities and Exchange
Commission (SEC) and available for reference, along with other
related materials, on the SEC Internet Web Site
(http://www.sec.gov). The SAI, dated Aug. 29, 1996, is
incorporated here by reference. For a free copy, contact American
Express Shareholder Service.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
SHARES IN THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR
GUARANTEED OR ENDORSED BY, ANY BANK, AND SHARES ARE NOT FEDERALLY
INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL
RESERVE BOARD OR ANY OTHER AGENCY. INVESTMENTS IN THE FUND INVOLVE
INVESTMENT RISK INCLUDING POSSIBLE LOSS OF PRINCIPAL.
American Express Shareholder Service
P.O. Box 534
Minneapolis, MN
55440-0534
612-671-3733
TTY: 800-846-4852
<PAGE>
PAGE 124
Table of Contents
The Fund in brief
Goals
Types of Fund investments and their risks
Manager and distributor
Portfolio manager
Alternative purchase arrangements
Sales charge and Fund expenses
Performance
Financial highlights
Total returns
Yield
Investment policies and risks
Facts about investments and their risks
Alternative investment option
Valuing Fund shares
How to purchase, exchange or redeem shares
Alternative purchase arrangements
How to purchase shares
How to exchange shares
How to redeem shares
Reductions and waivers of the sales charge
Special shareholder services
Services
Quick telephone reference
Distributions and taxes
Dividend and capital gain distributions
Reinvestments
Taxes
How to determine the correct TIN
How the Fund is organized
Shares
Voting rights
Shareholder meetings
Board members and officers
Investment manager and transfer agent
Distributor
About American Express Financial Corporation
General information
Appendices
1996 Federal tax information
Descriptions of derivative instruments
<PAGE>
PAGE 125
The Fund in brief
Goals
IDS Insured Tax-Exempt Fund (the Fund) seeks to provide
shareholders with a high level of income generally exempt from
federal income tax and preservation of shareholders' capital.
Because any investment involves risk, achieving these goals cannot
be guaranteed. Only shareholders can change the goals.
Types of Fund investments and their risks
The Fund is a diversified mutual fund that invests primarily in a
diversified portfolio of securities exempt from federal income tax,
with principal and interest either fully insured by private
insurers or guaranteed by an agency or instrumentality of the U.S.
government. At least 65% of the Fund's total assets will be
privately insured. The Fund may hold short-term tax-exempt
securities that are not insured. A portion of the assets may be
invested in bonds subject to the alternative minimum tax
computation.
Shares of the Fund held by an investor are not insured or
guaranteed and their net asset value fluctuates as the value of the
portfolio securities changes.
Manager and distributor
The Fund is managed by American Express Financial Corporation
(AEFC), a provider of financial services since 1894. AEFC
currently manages more than $52 billion in assets for the IDS
MUTUAL FUND GROUP. Shares of the Fund are sold through American
Express Financial Advisors Inc., a wholly owned subsidiary of AEFC.
Portfolio manager
Paul Hylle joined AEFC in 1993 and serves as portfolio manager. He
also is portfolio manager of IDS California Tax-Exempt Fund, IDS
Massachusetts Tax-Exempt Fund, IDS Michigan Tax-Exempt Fund, IDS
Minnesota Tax-Exempt Fund, IDS New York Tax-Exempt Fund and IDS
Ohio Tax-Exempt Fund. Prior to joining AEFC, he had been a
portfolio manager at Lutheran Brotherhood, a Minnesota based
fraternal benefit society offering financial services to Lutherans.
Alternative purchase arrangements
The Fund offers its shares in three classes. Class A shares are
subject to a sales charge at the time of purchase. Class B shares
are subject to a contingent deferred sales charge (CDSC) on
redemptions made within six years of purchase and an annual
distribution (12b-1) fee. Class Y shares are sold without a sales
charge to qualifying institutional investors.
<PAGE>
PAGE 126
Sales charge and Fund expenses
Shareholder transaction expenses are incurred directly by an
investor on the purchase or redemption of Fund shares. Fund
operating expenses are paid out of Fund assets for each class of
shares. Operating expenses are reflected in the Fund's daily share
price and dividends, and are not charged directly to shareholder
accounts.
Shareholder transaction expenses
Class A Class B Class Y
Maximum sales charge on purchases*
(as a percentage of offering price).......5% 0% 0%
Maximum deferred sales charge
imposed on redemptions (as a
percentage of original purchase price)....0% 5% 0%
Annual Fund operating expenses
(% of average daily net assets):
Class A Class B Class Y
Management fee 0.45% 0.45% 0.45%
12b-1 fee 0.00% 0.75% 0.00%
Other expenses** 0.30% 0.31% 0.12%
Total 0.75% 1.51% 0.57%
*This charge may be reduced depending on your total investments in
IDS funds. See "Reductions of the sales charge."
**Other expenses include an administrative services fee, a
shareholder services fee for Class A and Class B, a transfer agency
fee and other non-advisory expenses.
Example: Suppose for each year for the next 10 years, Fund
expenses are as above and annual return is 5%. If you sold your
shares at the end of the following years, for each $1,000 invested,
you would pay total expenses of:
1 year 3 years 5 years 10 years
Class A $57 $73 $ 90 $139
Class B $65 $88 $102 $160**
Class B* $15 $48 $ 82 $160**
Class Y $ 6 $18 $ 32 $ 72
*Assuming Class B shares are not redeemed at the end of the period.
**Based on conversion of Class B shares to Class A shares after
eight years.
This example does not represent actual expenses, past or future.
Actual expenses may be higher or lower than those shown. Because
Class B pays annual distribution (12b-1) fees, long-term
shareholders of Class B may indirectly pay an equivalent of more
than a 6.25% sales charge, the maximum permitted by the National
Association of Securities Dealers.
<PAGE>
PAGE 127
Performance
IDS Insured Tax-Exempt Fund
<TABLE>
<CAPTION>
Performance
Financial highlights
Fiscal period ended June 30,
Per share income and capital changes*
Class A
1996 1995 1994 1993 1992 1991 1990 1989** 1988 1987 1986#
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, $5.40 $5.35 $5.63 $5.33 $5.04 $4.96 $5.00 $4.86 $4.73 $5.07 $5.00
beginning of period
Income from investment operations:
Net investment income .30 .30 .30 .30 .31 .32 .31 .16 .31 .32 .11
Net gains (losses) .03 .05 (.28) .30 .29 .08 (.04) .14 .14 (.34) .07
(both realized and
unrealized)
Total from investment .33 .35 .02 .60 .60 .40 .27 .30 .45 (.02) .18
operations
Less distributions:
Dividends from net (.28) (.30) (.30) (.30) (.31) (.32) (.31) (.16) (.32) (.32) (.11)
investment income
Distributions from (.02) -- -- -- -- -- -- -- -- -- --
realized gains
Total distributions (.30) -- -- -- -- -- -- -- -- -- --
Net asset value, $5.43 $5.40 $5.35 $5.63 $5.33 $5.04 $4.96 $5.00 $4.86 $4.73 $5.07
end of period
Ratios/supplemental data
Class A
1996 1995 1994 1993 1992 1991 1990 1989** 1988 1987 1986#
Net assets, end of period $491 $505 $525 $464 $308 $195 $133 $79 $55 $37 $25
(in millions)
Ratio of expenses to .75%++ .66% .65% .65% .67% .67% .69% .72%+ .77% .88% .75%##+
average daily net assets
Ratio of net income 5.16% 5.66% 5.32% 5.53% 6.06% 6.36% 6.44% 6.60%+ 6.55% 6.77% 6.52%##+
to average daily net assets
Portfolio turnover rate 52% 53% 37% 5% 11% 8% 24% 19% 33% 29% 0%
(excluding short-term
securities)
Total return+++ 6.3% 6.7% 0.3% 11.7% 12.3% 8.1% 5.6% 6.4% 9.7% (0.2%) 3.5%
</TABLE>
*For a share outstanding throughout the period. Rounded to the
nearest cent.
**The Fund's fiscal year-end was changed from Dec. 31 to June 30,
effective 1989.
+Adjusted to an annual basis.
++Expense ratio is based on total expenses of the Fund before
applying earnings credits.
+++Total return does not reflect payment of a sales charge.
#Inception date. Period from Aug. 18, 1986 to Dec 31, 1986.
##During the period from Aug. 18, 1986 to Dec. 31, 1986, AEFC
voluntarily reimbursed the Fund for expenses in excess of 0.75% of
its average daily net assets, on an annual basis. Had AEFC not
done so, the ratio of expenses and ratio of net investment income
would have been 1.05% and 6.22%, respectively.
<PAGE>
PAGE 128
IDS Insured Tax-Exempt Fund
<TABLE>
<CAPTION>
Fiscal period ended June 30,
Per share income and capital changes*
Class B Class Y
1996 1995** 1996 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 .26 .09 .31 .08
Net gains (losses) both .03 (.07) .03 (.06)
realized and unrealized)
Total from investment .29 .02 .34 .02
operations
Less distributions:
Dividends from net (.24) (.09) (.29) (.08)
investment income
Distributions from (.02) -- (.02) --
realized gains
Total distributions (.26) -- (.31) --
Net asset value, $5.43 $5.40 $5.44 $5.41
end of period
Ratios/supplemental data
1996 1995** 1996 1995**
Class B Class Y
Net assets, end of period $21 $6 $-- $--
(in millions)
Ratio of expenses to 1.51%++ 1.49%+ .57%++ .54%+
average daily net assets
Ratio of net income 4.42% 4.72%+ 5.32% 5.38%+
to average daily net assets
Portfolio turnover rate 52% 53% 52% 53%
excluding short-term
securities)
Total return*** 5.5% 0.4% 6.4% 0.4%
</TABLE>
*For a share outstanding throughout the period. Rounded to the
nearest cent.
**Inception date was March 20, 1995 for Class B and Class Y.
***Total return does not reflect payment of a sales charge.
+Adjusted to an annual basis.
++Expense ratios are based on total expenses of the Fund before
applying earnings credits.
<PAGE>
PAGE 129
The information in these tables has been audited by KPMG Peat
Marwick LLP, independent auditors. The independent auditors' report
and additional information about the performance of the Fund are
contained in the Fund's annual report which, if not included with
this prospectus, may be obtained without charge.
Total returns
Total return is the sum of all of your returns for a given period,
assuming you reinvest all distributions. It is calculated by
taking the total value of shares you own at the end of the period
(including shares acquired by reinvestment), less the price of
shares you purchased at the beginning of the period.
Average annual total return is the annually compounded rate of
return over a given time period (usually two or more years). It is
the total return for the period converted to an equivalent annual
figure.
Average annual total returns as of June 30, 1996
Purchase 1 year 5 years Since
made ago ago inception
Insured Tax-Exempt:
Class A* +0.96% +6.26% +6.52%
Class B** +0.46% -- +1.43%
Class Y** +6.38% -- +5.15%
Lehman Brothers
Municipal Bond
Index +6.64% +7.75% +7.78%
*Inception date was Aug. 18, 1986.
**Inception date was March 20, 1995.
Cumulative total returns as of June 30, 1996
Purchase 1 year 5 years Since
made ago ago inception*
Insured Tax-Exmept:
Class A* +0.96% +35.47% +86.58%
Class B** +0.46% -- +1.86%
Class Y** +6.38% -- +6.65%
Lehman Brothers
Municipal Bond
Index +6.64% +45.29% +109.53%
*Inception date was Aug. 18, 1986.
**Inception date was March 20, 1995.
<PAGE>
PAGE 130
These examples show total returns from hypothetical investments in
Class A, Class B and Class Y shares of the Fund. These returns are
compared to those of a popular index for the same periods. The
performance of Class B and Class Y will vary from the performance
of Class A based on differences in sales charges and fees. March
20, 1995 was the inception date for Class B and Class Y. Past
performance for Class Y for the periods prior to March 20, 1995 may
be calculated based on the performance of Class A, adjusted to
reflect differences in sales charges although not for other
differences in expenses.
For purposes of calculation, information about the Fund assumes:
o a sales charge of 5% for Class A shares
o redemption at the end of the period and deduction of the
applicable contingent deferred sales charge for Class B shares
o no sales charge for Class Y shares
o no adjustments for taxes an investor may have paid on the
reinvested income and capital gains
o a period of widely fluctuating securities prices. Returns
shown should not be considered a representation of the Fund's
future performance.
Lehman Brothers Municipal Bond Index is an unmanaged index made up
of a representative list of general obligation, revenue, insured
and pre-refunded bonds. The index is frequently used as a general
measure of tax-exempt bond market performance. However, the
securities used to create the index may not be representative of
the bonds held in the Fund. The index reflects reinvestment of all
distributions and changes in market prices, but excludes brokerage
commissions or other fees.
Yield
Yield is the net investment income earned per share for a specified
time period, divided by the offering price at the end of the
period. The Fund's SEC standardized yield for the 30-day period
ended June 30, 1996, was 4.66% for Class A, 4.15% for Class B and
5.22% for Class Y. The Fund calculates this 30-day SEC
standardized yield by dividing:
o net investment income per share deemed earned during a 30-day
period by
o the public offering price per share on the last day of the
period, and
o converting the result to a yearly equivalent figure.
The Fund also may calculate a tax equivalent yield by dividing the
tax-exempt portion of its yield by one minus a stated income tax
rate. A tax equivalent yield demonstrates the taxable yield
necessary to produce an after-tax yield equivalent to that of a
fund that invests in exempt obligations.
<PAGE>
PAGE 131
These yield calculations do not include any contingent deferred
sales charge, ranging from 5% to 0% on Class B shares, which would
reduce the yields quoted.
The Fund's yield varies from day to day, mainly because share
values and offering prices (which are calculated daily) vary in
response to changes in interest rates. Net investment income
normally changes much less in the short run. Thus, when interest
rates rise and share values fall, yield tends to rise. When
interest rates fall, yield tends to follow.
Past yields should not be considered an indicator of future yields.
Investment policies and risks
Under normal market conditions, the Fund will invest at least 80%
of its net assets in securities issued by or on behalf of state or
local governmental units whose interest, in the opinion of counsel
for the issuer, is exempt from federal income tax. Under normal
market conditions, at least 65% of the Fund's total assets will be
invested in securities that are insured and have a maturity of more
than one year.
In addition, a portion of the Fund's assets may be invested in
bonds whose interest is subject to the alternative minimum tax
computation. As long as the staff of the SEC maintains its current
position that a fund calling itself a "tax-exempt" fund may not
invest more than 20% of its net assets in these bonds, the Fund
will limit its investments in these bonds to 20% of its net assets.
The various types of investments the portfolio manager uses to
achieve investment performance are described in more detail in the
next section and in the SAI.
Facts about investments and their risks
Bonds and other debt securities exempt from federal income taxes:
The price of bonds generally falls as interest rates increase, and
rises as interest rates decrease. The price of bonds also
fluctuates if the credit rating is upgraded or downgraded. The
Fund may purchase securities rated Aaa by Moody's Investors
Service, Inc. (Moody's) or AAA by Standard & Poor's Corporation
(S&P). In addition, the Fund may purchase securities rated lower
than Aaa by Moody's or AAA by S&P without regard to their rating,
provided the securities are insured. These securities generally
provide a higher yield than securities with the highest ratings.
The increased yield will be offset to a certain extent by the
premium paid to insure the securities. In purchasing these
securities the Fund hopes to achieve a higher yield while at the
same time providing the same level of safety available by the
purchase of AAA rated securities.
<PAGE>
PAGE 132
Concentration: The Fund may invest more than 25% of its total
assets in a particular segment of the municipal securities market,
such as electric revenue bonds, hospital revenue bonds, housing
agency bonds, industrial development bonds, airport bonds, or in
securities the interest upon which is paid from revenues of a
similar type of project. In such circumstances, economic,
business, political or other changes affecting one bond (such as
proposed legislation affecting the financing of a project,
shortages or price increases of needed materials, or declining
market or needs of the projects) might also affect other bonds in
the same segment. This could increase market risk.
The Fund may invest more than 25% of its total assets in industrial
revenue bonds, but it does not intend to invest more than 25% of
its total assets in industrial revenue bonds issued for companies
in the same industry or state. As the similarity in issuers
increases, the potential for fluctuation in the net asset value of
the Fund's shares also increases.
Taxable investments: If, in the opinion of the investment manager,
appropriate tax-exempt securities are not available, the Fund may
invest up to 20% of its net assets, or more on a temporary
defensive basis, in taxable investments as described more fully in
the SAI.
Derivative instruments: The portfolio manager may use derivative
instruments in addition to securities to achieve investment
performance. Derivative instruments include futures, options and
forward contracts. Such instruments may be used to maintain cash
reserves while remaining fully invested, to offset anticipated
declines in values of investments, to facilitate trading, to reduce
transaction costs or to pursue higher investment returns.
Derivative instruments are characterized by requiring little or no
initial payment and a daily change in price based on or derived
from a security, a currency, a group of securities or currencies,
or an index. A number of strategies or combination of instruments
can be used to achieve the desired investment performance
characteristics. A small change in the value of the underlying
security, currency or index will cause a sizable gain or loss in
the price of the derivative instrument. Derivative instruments
allow the portfolio manager to change the investment performance
characteristics very quickly and at lower costs. Risks include
losses of premiums, rapid changes in prices, defaults by other
parties and inability to close such instruments. The Fund will use
derivative instruments only to achieve the same investment
performance characteristics it could achieve by directly holding
those securities and currencies permitted under the investment
policies. The Fund will designate cash or appropriate liquid
assets to cover its portfolio obligations. The use of derivative
instruments may produce taxable income. These investments are not
insured or guaranteed. No more than 5% of the Fund's net assets
can be used at any one time for good faith deposits on futures and
premiums for options on futures that do not offset existing
investment positions. This does not, however, limit the portion of
the Fund's assets at risk to 5%. The Fund is not limited as to the
percentage of its assets that may be invested in permissible
<PAGE>
PAGE 133
investments, including derivatives, except as otherwise explicitly
provided in this prospectus or the SAI. For descriptions of these
and other types of derivative instruments, see the Appendix to this
prospectus and the SAI.
Inverse floaters: Inverse floaters are derivatives created by
underwriters using the interest payments on securities. A portion
of the interest received is paid to holders of instruments based on
current interest rates for short-term securities. What is left
over, less a servicing fee, is paid to holders of the inverse
floaters. As interest rates go down, the holders of the inverse
floaters receive more income and an increase in the price for the
inverse floaters. As interest rates go up, the holders of the
inverse floaters receive less income and a decrease in the price
for the inverse floaters. These investments are not insured or
guaranteed. No more than 10% of the Fund's assets will be held in
inverse floaters.
Securities and other instruments that are illiquid: A security or
other instrument is illiquid if it cannot be sold quickly in the
normal course of business. Some investments cannot be resold to
the U.S. public because of their terms or government regulations.
All securities and other instruments, however, can be sold in
private sales, and many may be sold to other institutions and
qualified buyers or on foreign markets. The portfolio manager will
follow guidelines established by the board and consider relevant
factors such as the nature of the security and the number of likely
buyers when determining whether a security is illiquid. No more
than 10% of the Fund's net assets will be held in securities and
other instruments that are illiquid.
Tax-exempt money market instruments: Pending investment in
municipal securities maturing in more than one year, or as a
temporary defensive position, the Fund may hold up to 35% of its
net assets in short-term tax-exempt instruments that are not
insured or guaranteed. The Fund will purchase these instruments
only if they are rated MIG-1 by Moody's or SP-1 by S&P or if the
long-term debt of such issuers is rated Aaa by Moody's or AAA by
S&P or the equivalent.
Insurance on tax-exempt securities: Payment of principal and
interest on tax-exempt securities which have a maturity of more
than one year will be either fully insured by private insurers or
guaranteed by an agency or instrumentality of the U.S. government.
These agencies include the Federal National Mortgage Association
and the Federal Housing Administration. Insurance or guarantee
features minimize the risks to the Fund and its shareholders
associated with defaults in the securities owned by the Fund.
Insurance or guarantees do not guarantee the market value of the
municipal securities or the value of the shares of the Fund.
Insurance premiums are paid from the assets of the Fund and will
reduce the Fund's current yield.
<PAGE>
PAGE 134
Except for securities guaranteed by the U.S. government, or an
agency thereof, and the short-term securities described above, each
tax-exempt security purchased by the Fund will be insured either by
a New Issue Insurance Policy or by a Portfolio Insurance Policy
issued by Financial Guaranty Insurance Company or a comparable
insurer as long as that insurer is rated Aaa by Moody's or AAA by
S&P or the equivalent. None of the Fund's assets were used to pay
premiums for the fiscal year ended June 30, 1996.
Except for the investment policies concerning the type and amount
of tax-exempt investments, the investment policies described above
may be changed by the board.
Lending portfolio securities: The Fund may lend its securities to
earn income so long as borrowers provide collateral equal to the
market value of the loans. The risks are that borrowers will not
provide collateral when required or return securities when due.
Unless a majority of the outstanding voting securities approve
otherwise, loans may not exceed 30% of the Fund's net assets.
Alternative investment option
In the future, the board of the Fund may determine for operating
efficiencies to use a master/feeder structure. Under that
structure, the Fund's assets would be invested in an investment
company with the same goal as the Fund, rather than invested
directly in a portfolio of securities.
Valuing Fund shares
The public offering price is the net asset value (NAV) adjusted for
the sales charge for Class A. It is the NAV for Class B and Class
Y.
The NAV is the value of a single Fund share. The NAV usually
changes daily, and is calculated at the close of business, normally
3 p.m. Central time, each business day (any day the New York Stock
Exchange is open). NAV generally declines as interest rates
increase and rises as interest rates decline.
To establish the net assets, all securities are valued as of the
close of each business day. In valuing assets:
o Bonds and assets without readily available market values are
valued at fair value according to methods selected in good
faith by the board.
o Securities maturing in 60 days or less are valued at amortized
cost.
o Securities (except bonds) and assets with available market
values are valued on that basis.
<PAGE>
PAGE 135
How to purchase, exchange or redeem shares
Alternative purchase arrangements
The Fund offers three different classes of shares - Class A, Class
B and Class Y. The primary differences among the classes are in
the sales charge structures and in their ongoing expenses. These
differences are summarized in the table below. You may choose the
class that best suits your circumstances and objectives.
<TABLE>
<CAPTION>
Sales charge and
distribution
(12b-1) fee Service fee Other information
<S> <C> <C> <C>
Class A Maximum initial 0.175% of average Initial sales charge
sales charge of daily net assets waived or reduced
5%; no 12b-1 fee for certain purchases
Class B No initial sales 0.175% of average Shares convert to
charge; maximum CDSC daily net assets Class A after eight
of 5% declines to 0% years; CDSC waived in
after six years; 12b-1 certain circumstances
fee of 0.75% of average
daily net assets
Class Y None None Available only to
certain qualifying
institutional
investors
</TABLE>
Conversion of Class B shares to Class A shares - Eight calendar
years after Class B shares were originally purchased, Class B
shares will convert to Class A shares and will no longer be subject
to a distribution fee. The conversion will be on the basis of
relative net asset values of the two classes, without the
imposition of any sales charge. Class B shares purchased through
reinvested dividends and distributions will convert to Class A
shares in a pro rata portion as the Class B shares purchased other
than through reinvestment.
Considerations in determining whether to purchase Class A or Class
B shares - You should consider the information below in determining
whether to purchase Class A or Class B shares. The sales charges
and distribution fee (included in "Ongoing expenses") are
structured so that you will have approximately the same total
return at the end of eight years regardless of which class you
chose.
<PAGE>
PAGE 136
Sales charges on purchase or redemption
If you purchase Class A If you purchase Class B
shares shares
o You will not have all o All of your money is
of your purchase price invested in shares of
invested. Part of your stock. However, you will
purchase price will go pay a sales charge if you
to pay the sales charge. redeem your shares within
You will not pay a sales six years of purchase.
charge when you redeem
your shares.
o You will be able to o No reductions of the
take advantage of sales charge are
reductions in the sales available for large
charge. purchases.
If your investments in IDS funds that are subject to a sales charge
total $250,000 or more, you are better off paying the reduced sales
charge in Class A than paying the higher fees in Class B. If you
qualify for a waiver of the sales charge, you should purchase Class
A shares.
Ongoing expenses
If you purchase Class A If you purchase Class B
shares shares
o Your shares will have o The distribution and
a lower expense ratio transfer agency fees for
than Class B shares Class B will cause your
because Class A does not shares to have a higher
pay a distribution fee expense ratio and to pay
and the transfer agency lower dividends than
fee for Class A is lower Class A shares. After
than the fee for Class B. eight years, Class B
As a result, Class A shares shares will convert to
will pay higher dividends Class A shares and will
than Class B shares. no longer be subject to
higher fees.
You should consider how long you plan to hold your shares and
whether the accumulated higher fees and CDSC on Class B shares
prior to conversion would be less than the initial sales charge on
Class A shares. Also consider to what extent the difference would
be offset by the lower expenses on Class A shares. To help you in
this analysis, the example in the "Sales charge and Fund expenses"
section of the prospectus illustrates the charges applicable to
each class of shares.
Class Y shares - Class Y shares are offered to certain
institutional investors. Class Y shares are sold without a front-
end sales charge or a CDSC and are not subject to either a service<PAGE>
PAGE 137
fee or a distribution fee. The following investors are eligible to
purchase Class Y shares:
o Qualified employee benefit plans* if the plan:
- uses a daily transfer recordkeeping service offering
participants daily access to IDS funds and has
- at least $10 million in plan assets or
- 500 or more participants; or
- does not use daily transfer recordkeeping and has
- at least $3 million invested in funds of the IDS MUTUAL
FUND GROUP or
- 500 or more participants.
o Trust companies or similar institutions, and charitable
organizations that meet the definition in Section 501(c)(3) of
the Internal Revenue Code.* These must have at least $10
million invested in funds of the IDS MUTUAL FUND GROUP.
o Nonqualified deferred compensation plans* whose participants
are included in a qualified employee benefit plan described
above.
* Eligibility must be determined in advance by American Express
Financial Advisors. To do so, contact your financial advisor.
How to purchase shares
If you're investing in this Fund for the first time, you'll need to
set up an account. Your financial advisor will help you fill out
and submit an application. Once your account is set up, you can
choose among several convenient ways to invest.
Important: When opening an account, you must provide AEFC with
your correct Taxpayer Identification Number (Social Security or
Employer Identification number). See "Distributions and taxes."
When you purchase shares for a new or existing account, the price
you pay per share is determined at the close of business on the day
your investment is received and accepted at the Minneapolis
headquarters.
Purchase policies:
o Investments must be received and accepted in the Minneapolis
headquarters on a business day before 3 p.m. Central time to
be included in your account that day and to receive that day's
<PAGE>
PAGE 138
share price. Otherwise, your purchase will be processed the
next business day and you will pay the next day's share price.
o The minimums allowed for investment may change from time to
time.
o Wire orders can be accepted only on days when your bank, AEFC,
the Fund and Norwest Bank Minneapolis are open for business.
o Wire purchases are completed when wired payment is received
and the Fund accepts the purchase.
o AEFC and the Fund are not responsible for any delays that
occur in wiring funds, including delays in processing by the
bank.
o You must pay any fee the bank charges for wiring.
o The Fund reserves the right to reject any application for any
reason.
o If your application does not specify which class of shares you
are purchasing, it will be assumed that you are investing in
Class A shares.
Three ways to invest
<TABLE>
<CAPTION>
<S> <C> <C>
1
By regular account Send your check and application Minimum amounts
(or your name and account number Initial investment: $2,000
if you have an established account) Additional
to: investments: $ 100
American Express Financial Advisors Inc. Account balances: $ 300*
P.O. Box 74
Minneapolis, MN 55440-0074
Your financial advisor will help
you with this process.
2
By scheduled Contact your financial advisor Minimum amounts
investment plan to set up one of the following Initial investment: $100
scheduled plans: Additional
investments: $100/mo.
o automatic payroll deduction Account balances: none
(on active plans of
o bank authorization monthly payments)
o direct deposit of
Social Security check
o other plan approved by the Fund
3
By wire If you have an established account, If this information is not
you may wire money to: included, the order may be
rejected and all money
Norwest Bank Minneapolis received by the Fund, less
Routing No. 091000019 any costs the Fund or AEFC
Minneapolis, MN incurs, will be returned
Attn: Domestic Wire Dept. promptly.
<PAGE>
PAGE 139
Give these instructions: Minimum amounts
Credit IDS Account #00-30-015 Each wire investment: $1,000
for personal account # (your
account number) for (your name).
*If your account balance falls below $300, you will be asked in writing to bring it up to $300 or establish a scheduled
investment plan. If you don't do so within 30 days, your shares can be redeemed and the proceeds mailed to you.
</TABLE>
How to exchange shares
You can exchange your shares of the Fund at no charge for shares of
the same class of any other publicly offered fund in the IDS MUTUAL
FUND GROUP available in your state. Exchanges into IDS Tax-Free
Money Fund must be made from Class A shares. For complete
information, including fees and expenses, read the prospectus
carefully before exchanging into a new fund.
If your exchange request arrives at the Minneapolis headquarters
before the close of business, your shares will be redeemed at the
net asset value set for that day. The proceeds will be used to
purchase new fund shares the same day. Otherwise, your exchange
will take place the next business day at that day's net asset
value.
For tax purposes, an exchange represents a redemption and purchase
and may result in a gain or loss. However, you cannot create a tax
loss (or reduce a taxable gain) by exchanging from the Fund within
91 days of your purchase. For further explanation, see the SAI.
How to redeem shares
You can redeem your shares at any time. American Express
Shareholder Service will mail payment within seven days after
receiving your request.
When you redeem shares, the amount you receive may be more or less
than the amount you invested. Your shares will be redeemed at net
asset value, minus any applicable sales charge, at the close of
business on the day your request is accepted at the Minneapolis
headquarters. If your request arrives after the close of business,
the price per share will be the net asset value, minus any
applicable sales charge, at the close of business on the next
business day.
A redemption is a taxable transaction. If your proceeds from your
redemption are more or less than the cost of your shares, you will
have a gain or loss, which can affect your tax liability.
Two ways to request an exchange or redemption of shares
<TABLE>
<CAPTION>
<S> <C>
1
By letter Include in your letter:
o the name of the fund(s)
o the class of shares to be exchanged or redeemed
o your account number(s) (for exchanges, both funds must be registered in the same
ownership)
o your Taxpayer Identification Number (TIN)
o the dollar amount or number of shares you want to exchange or redeem
o signature of all registered account owners
<PAGE>
PAGE 140
o for redemptions, indicate how you want your money delivered to you
o any paper certificates of shares you hold
Regular mail:
American Express Shareholder Service
Attn: Redemptions
P.O. Box 534
Minneapolis, MN 55440-0534
Express mail:
American Express Shareholder Service
Attn: Redemptions
733 Marquette Ave.
Minneapolis, MN 55402
2
By phone
American Express Telephone o The Fund and AEFC will honor any telephone exchange or redemption request believed to be
Transaction Service: authentic and will use reasonable procedures to confirm that they are. This includes
800-437-3133 or asking identifying questions and tape recording calls. If reasonable
612-671-3800 procedures are not followed, the Fund or AEFC will be liable for any loss resulting from
fraudulent requests.
o Phone exchange and redemption privileges automatically apply to all accounts except
custodial, corporate or qualified retirement accounts unless you request these privileges
NOT apply by writing American Express Shareholder Service. Each registered owner must sign
the request.
o AEFC answers phone requests promptly, but you may experience delays when call volume is
high. If you are unable to get through, use mail procedure as an alternative.
o Acting on your instructions, your financial advisor may conduct telephone transactions
on your behalf.
o Phone privileges may be modified or discontinued at any time.
Minimum amount
Redemption: $100
Maximum amount
Redemption: $50,000
</TABLE>
Exchange policies:
o You may make up to three exchanges within any 30-day period,
with each limited to $300,000. These limits do not apply to
scheduled exchange programs and certain employee benefit plans or
other arrangements through which one shareholder represents the
interests of several. Exceptions may be allowed with pre-approval
of the Fund.
o Exchanges must be made into the same class of shares of the new
fund.
o If your exchange creates a new account, it must satisfy the
minimum investment amount for new purchases.
o Once we receive your exchange request, you cannot cancel it.
o Shares of the new fund may not be used on the same day for
another exchange.
o If your shares are pledged as collateral, the exchange will be
delayed until written approval is obtained from the secured party.
<PAGE>
PAGE 141
o AEFC and the Fund reserve the right to reject any exchange,
limit the amount, or modify or discontinue the exchange privilege,
to prevent abuse or adverse effects on the Fund and its
shareholders. For example, if exchanges are too numerous or too
large, they may disrupt the Fund's investment strategies or
increase its costs.
Redemption policies:
o A "change of mind" option allows you to change your mind after
requesting a redemption and to use all or part of the proceeds to
purchase new shares in the same class from which you redeemed. If
you reinvest in Class A, you will purchase the new shares at net
asset value rather than the offering price on the date of a new
purchase. If you reinvest in Class B, any CDSC you paid on the
amount you are reinvesting also will be reinvested. To take
advantage of this option, send a written request within 30 days of
the date your redemption request was received. Include your
account number and mention this option. This privilege may be
limited or withdrawn at any time, and it may have tax consequences.
o A telephone redemption request will not be allowed within 30
days of a phoned-in address change.
Important: If you request a redemption of shares you recently
purchased by a check or money order that is not guaranteed, the
Fund will wait for your check to clear. It may take up to 10 days
from the date of purchase before a check is mailed to you. (A
check may be mailed earlier if your bank provides evidence
satisfactory to the Fund and AEFC that your check has cleared.)
Three ways to receive payment when you redeem shares
<TABLE>
<CAPTION>
<S> <C>
1
By regular or express mail o Mailed to the address on record.
o Payable to names listed on the account.
NOTE: The express mail delivery charges
you pay will vary depending on the
courier you select.
2
By wire o Minimum wire redemption: $1,000.
o Request that money be wired to your bank.
o Bank account must be in the same
ownership as the IDS fund account.
NOTE: Pre-authorization required. For
instructions, contact your financial
advisor or American Express Shareholder Service.
3
By scheduled payout plan o Minimum payment: $50.
o Contact your financial advisor or American Express
Shareholder Service to set up regular
payments to you on a monthly, bimonthly,
quarterly, semiannual or annual basis.
o Purchasing new shares while under a payout
plan may be disadvantageous because of
the sales charges.
</TABLE>
<PAGE>
PAGE 142
Reductions and waivers of the sales charge
Class A - initial sales charge alternative
On purchases of Class A shares, you pay a 5% sales charge on the
first $50,000 of your total investment and less on investments
after the first $50,000:
Total investment Sales charge as a
percent of:*
Public Net
offering amount
price invested
Up to $50,000 5.0% 5.26%
Next $50,000 4.5 4.71
Next $400,000 3.8 3.95
Next $500,000 2.0 2.04
$1,000,000 or more 0.0 0.00
* To calculate the actual sales charge on an investment greater
than $50,000 and less than $1,000,000, amounts for each applicable
increment must be totaled. See the SAI.
Reductions of the sales charge on Class A shares
Your sales charge may be reduced, depending on the totals of:
o the amount you are investing in this Fund now,
o the amount of your existing investment in this Fund, if any, and
o the amount you and your primary household group are investing or
have in other funds in the IDS MUTUAL FUND GROUP that carry a sales
charge. (The primary household group consists of accounts in any
ownership for spouses or domestic partners and their unmarried
children under 21. Domestic partners are individuals who maintain
a shared primary residence and have joint property or other
insurable interests.)
Other policies that affect your sales charge:
o IDS Tax-Free Money Fund and Class A shares of IDS Cash
Management Fund do not carry sales charges. However, you may count
investments in these funds if you acquired shares in them by
exchanging shares from IDS funds that carry sales charges.
o Employee benefit plan purchases made through a payroll deduction
plan or through a plan sponsored by an employer, association of
employers, employee organization or other similar entity, may be
added together to reduce sales charges for all shares purchased
through that plan.
o If you intend to invest $1 million over a period of 13 months,
you can reduce the sales charges in Class A by filing a letter of
intent.
For more details, see the SAI.
<PAGE>
PAGE 143
Waivers of the sales charge for Class A shares
Sales charges do not apply to:
o Current or retired board members, officers or employees of the
Fund or AEFC or its subsidiaries, their spouses and unmarried
children under 21.
o Current or retired American Express financial advisors, their
spouses and unmarried children under 21.
o Qualified employee benefit plans* using a daily transfer
recordkeeping system offering participants daily access to IDS
funds.
(Participants in certain qualified plans for which the initial
sales charge is waived may be subject to a deferred sales charge of
up to 4% on certain redemptions. For more information, see the
SAI.)
o Shareholders who have at least $1 million invested in funds of
the IDS MUTUAL FUND GROUP. If the investment is redeemed in the
first year after purchase, a CDSC of 1% will be charged on the
redemption.
o Purchases made within 30 days after a redemption of shares (up
to the amount redeemed):
- of a product distributed by American Express Financial
Advisors in a qualified plan subject to a deferred
sales charge or
- a qualified plan where American Express Trust Company has a
recordkeeping, trustee, investment management or investment
servicing relationship.
Send the Fund a written request along with your payment, indicating
the amount of the redemption and the date on which it occurred.
o Purchases made with dividend or capital gain distributions from
another fund in the IDS MUTUAL FUND GROUP that has a sales charge.
o Purchases made through American Express Strategic Portfolio
Service (total amount of all investments made in the Strategic
Portfolio Service must be at least $50,000).
*Eligibility must be determined in advance by American Express
Financial Advisors. To do so, contact your financial advisor.
Class B - contingent deferred sales charge alternative
Where a CDSC is imposed on a redemption, it is based on the amount
of the redemption and the number of calendar years, including the
year of purchase, between purchase and redemption. The following
table shows the declining scale of percentages that apply to
redemptions during each year after a purchase:
<PAGE>
PAGE 144
If a redemption is The percentage rate
made during the for the CDSC is:
First year 5%
Second year 4%
Third year 4%
Fourth year 3%
Fifth year 2%
Sixth year 1%
Seventh year 0%
If the amount you are redeeming reduces the current net asset value
of your investment in Class B shares below the total dollar amount
of all your purchase payments during the last six years (including
the year in which your redemption is made), the CDSC is based on
the lower of the redeemed purchase payments or market value.
The following example illustrates how the CDSC is applied. Assume
you had invested $10,000 in Class B shares and that your investment
had appreciated in value to $12,000 after 15 months, including
reinvested dividend and capital gain distributions. You could
redeem any amount up to $2,000 without paying a CDSC ($12,000
current value less $10,000 purchase amount). If you redeemed
$2,500, the CDSC would apply only to the $500 that represented part
of your original purchase price. The CDSC rate would be 4% because
a redemption after 15 months would take place during the second
year after purchase.
Because the CDSC is imposed only on redemptions that reduce the
total of your purchase payments, you never have to pay a CDSC on
any amount you redeem that represents appreciation in the value of
your shares, income earned by your shares or capital gains. In
addition, when determining the rate of any CDSC, your redemption
will be made from the oldest purchase payment you made. Of course,
once a purchase payment is considered to have been redeemed, the
next amount redeemed is the next oldest purchase payment. By
redeeming the oldest purchase payments first, lower CDSCs are
imposed than would otherwise be the case.
Waivers of the contingent deferred sales charge
The CDSC on Class B shares will be waived on redemptions of shares:
o In the event of the shareholder's death,
o Purchased by any board member, officer or employee of a fund or
AEFC or its subsidiaries,
o Held in a trusteed employee benefit plan,
o Held in IRAs or certain qualified plans for which American
Express Trust Company acts as custodian, such as Keogh plans, tax-
sheltered custodial accounts or corporate pension plans, provided
that the shareholder is:
- at least 59-1/2 years old, and
<PAGE>
PAGE 145
- taking a retirement distribution (if the redemption is part
of a transfer to an IRA or qualified plan in a product
distributed by American Express Financial Advisors, or a
custodian-to-custodian transfer to a product not distributed
by American Express Financial Advisors, the CDSC will not be
waived), or
- redeeming under an approved substantially equal periodic
payment arrangement.
For investors in Class A shares who have over $1 million invested
in one year, the 1% CDSC on redemption of those shares will be
waived in the same circumstances described for Class B.
Special shareholder services
Services
To help you track and evaluate the performance of your investments,
AEFC provides these services:
Quarterly statements listing all of your holdings and transactions
during the previous three months.
Yearly tax statements featuring average-cost-basis reporting of
capital gains or losses if you redeem your shares along with
distribution information - which simplifies tax calculations.
A personalized mutual fund progress report detailing returns on
your initial investment and cash-flow activity in your account. It
calculates a total return to reflect your individual history in
owning Fund shares. This report is available from your financial
advisor.
Quick telephone reference
American Express Telephone Transaction Service
Redemptions and exchanges, dividend payments or reinvestments and
automatic payment arrangements
National/Minnesota: 800-437-3133
Mpls./St. Paul area: 671-3800
American Express Shareholder Service
Fund performance, objectives and account inquiries
612-671-3733
TTY Service
For the hearing impaired
800-846-4852
American Express Infoline
Automated account information (TouchToneR phones only), including
current Fund prices and performance, account values and recent
account transactions
National/Minnesota: 800-272-4445
Mpls./St. Paul area: 671-1630<PAGE>
PAGE 146
Distributions and taxes
As a shareholder you are entitled to your share of the Fund's net
income and any net gains realized on its investments. The Fund
distributes dividends and capital gain distributions to qualify as
a regulated investment company and to avoid paying corporate income
and excise taxes. Dividend and capital gain distributions will
have tax consequences you should know about.
Dividend and capital gain distributions
The Fund's net investment income from dividends and interest is
distributed to you monthly as dividends. Short-term capital gains
are distributed at the end of the calendar year and are included in
net investment income. Long-term capital gains are realized
whenever a security held for more than one year is sold for a
higher price than was paid for it. Net realized long-term capital
gains, if any, are distributed at the end of the calendar year as
capital gain distributions. Before they're distributed, net long-
term capital gains are included in the value of each share. After
they're distributed, the value of each share drops by the per-share
amount of the distribution. (If your distributions are reinvested,
the total value of your holdings will not change.)
Dividends for each class will be calculated at the same time, in
the same manner and will be the same amount prior to deduction of
expenses. Expenses attributable solely to a class of shares will
be paid exclusively by that class. Class B shareholders will
receive lower per share dividends than Class A and Class Y
shareholders because expenses for Class B are higher than for Class
A or Class Y. Class A shareholders will receive lower per share
dividends than Class Y shareholders because expenses for Class A
are higher than for Class Y.
Reinvestments
Dividends and capital gain distributions are automatically
reinvested in additional shares in the same class of the Fund,
unless:
o you request the Fund in writing or by phone to pay
distributions to you in cash, or
o you direct the Fund to invest your distributions in any
publicly available IDS fund for which you've previously opened
an account. You pay no sales charge on shares purchased
through reinvestment from this Fund into any IDS fund.
The reinvestment price is the net asset value at close of business
on the day the distribution is paid. (Your quarterly statement
will confirm the amount invested and the number of shares
purchased.)
<PAGE>
PAGE 147
If you choose cash distributions, you will receive only those
declared after your request has been processed.
If the U.S. Postal Service cannot deliver the checks for the cash
distributions, we will reinvest the checks into your account at the
then-current net asset value and make future distributions in the
form of additional shares.
Taxes
Dividends distributed from interest earned on tax-exempt securities
(exempt-interest dividends) are exempt from federal income taxes
but may be subject to state and local taxes. Dividends distributed
from other income earned and capital gain distributions are not
exempt from federal income taxes. Distributions are taxable in the
year the Fund declares them regardless of whether you take them in
cash or reinvest them.
Interest on certain private activity bonds is a preference item for
purposes of the individual and corporate alternative minimum taxes.
To the extent the Fund earns such income, it will flow through to
its shareholders and may be taxable to those shareholders who are
subject to the alternative minimum tax.
Because interest on municipal bonds and notes is tax-exempt for
federal income tax purposes, any interest on borrowed money used
directly or indirectly to purchase Fund shares is not deductible on
your federal income tax return. You should consult a tax advisor
regarding its deductibility for state and local income tax
purposes.
Each January, you will receive a tax statement showing the kinds
and total amount of all distributions you received during the
previous year. You must report distributions on your tax returns,
even if they are reinvested in additional shares.
Buying a dividend creates a tax liability. This means buying
shares shortly before a capital gain distribution. You pay the
full pre-distribution price for the shares, then receive a portion
of your investment back as a distribution, which is taxable.
Redemptions and exchanges subject you to a tax on any capital gain.
If you sell shares for more than their cost, the difference is a
capital gain. Your gain may be either short term (for shares held
for one year or less) or long term (for shares held for more than
one year).
Your Taxpayer Identification Number (TIN) is important. As with
any financial account you open, you must list your current and
correct Taxpayer Identification Number (TIN) -- either your Social
Security or Employer Identification number. The TIN must be
certified under penalties of perjury on your application when you
open an account at AEFC.
<PAGE>
PAGE 148
If you don't provide the TIN, or the TIN you report is incorrect,
you could be subject to backup withholding of 31% of taxable
distributions and proceeds from certain sales and exchanges. You
also could be subject to further penalties, such as:
o a $50 penalty for each failure to supply your correct TIN
o a civil penalty of $500 if you make a false statement that
results in no backup withholding
o criminal penalties for falsifying information
You also could be subject to backup withholding because you failed
to report interest or dividends on your tax return as required.
How to determine the correct TIN
Use the Social Security or
For this type of account: Employer Identification number
of:
Individual or joint account The individual or individuals
listed on the account
Custodian account of a minor The minor
(Uniform Gifts/Transfers to
Minors Act)
A living trust The grantor-trustee (the person
who puts the money into the
trust)
An irrevocable trust, pension The legal entity (not the
trust or estate personal representative or
trustee, unless no legal entity
is designated in the account
title)
Sole proprietorship The owner
Partnership The partnership
Corporate The corporation
Association, club or The organization
tax-exempt organization
For details on TIN requirements, ask your financial advisor or
local American Express Financial Advisors office for federal Form
W-9, "Request for Taxpayer Identification Number and
Certification."
<PAGE>
PAGE 149
Important: This information is a brief and selective summary of
certain federal tax rules that apply to this Fund. Tax matters are
highly individual and complex, and you should consult a qualified
tax advisor about your personal situation.
How the Fund is organized
IDS Special Tax-Exempt Series Trust, of which IDS Insured Tax-
Exempt Fund is a part, is an open-end management company, as
defined in the Investment Company Act of 1940. It was organized as
a Massachusetts business trust on April 7, 1986. The Fund
headquarters are at 901 S. Marquette Ave., Suite 2810, Minneapolis,
MN 55402-3268.
Shares
IDS Special Tax-Exempt Series Trust currently is composed of six
funds, each issuing its own series of capital stock. Each fund is
owned by its shareholders. Each fund issues shares in three
classes - Class A, Class B and Class Y. Each class has different
sales arrangements and bears different expenses. Each class
represents interests in the assets of a fund. Par value is one
cent per share. Both full and fractional shares can be issued.
The shares of each fund represent an interest in that fund's assets
only (and profits or losses), and, in the event of liquidation,
each share of a fund would have the same rights to dividends and
assets as every other share of that fund.
The board may from time to time issue other funds of the Trust, the
assets and liabilities of which will likewise be separate and
distinct from this Fund.
The Fund no longer issues stock certificates.
Voting rights
As a shareholder, you have voting rights over the Fund's management
and fundamental policies. You are entitled to one vote for each
share you own. Shares of the Fund have cumulative voting rights.
Each class has exclusive voting rights with respect to the
provisions of the Fund's distribution plan that pertain to a
particular class and other matters for which separate class voting
is appropriate under applicable law.
Shareholder meetings
The Fund does not hold annual shareholder meetings. However, the
board members may call meetings at their discretion, or on demand
by holders of 10% or more of the outstanding shares, to elect or
remove board members.
<PAGE>
PAGE 150
Board members and officers
Shareholders elect a board that oversees the operations of the Fund
and chooses its officers. Its officers are responsible for day-to-
day business decisions based on policies set by the board. The
board has named an executive committee that has authority to act on
its behalf between meetings. The board members also serve on the
boards of all 43 funds in the IDS MUTUAL FUND GROUP, except for Mr.
Dudley, who is a board member of all the Funds except the 9 life
funds.
Board members and officers of the Fund
President and interested board member
William R. Pearce
President of all funds in the IDS MUTUAL FUND GROUP.
Independent board members
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.
Melvin R. Laird
Senior counsellor for national and international affairs, The
Reader's Digest Association, Inc.
Edson W. Spencer
Former chairman and chief executive officer, Honeywell, Inc.
Wheelock Whitney
Chairman, Whitney Management Company.
C. Angus Wurtele
Chairman of the board, The Valspar Corporation.
<PAGE>
PAGE 151
Interested board members who are officers and/or employees of AEFC
William H. Dudley
Executive vice president, AEFC.
David R. Hubers
President and chief executive officer, AEFC.
John R. Thomas
Senior vice president, AEFC.
Officers who also are officers and/or employees of AEFC
Peter J. Anderson
Vice president of all funds in the IDS MUTUAL FUND GROUP.
Melinda S. Urion
Treasurer of all funds in the IDS MUTUAL FUND GROUP.
Other officer
Leslie L. Ogg
Vice president, general counsel and secretary of all funds in the
IDS MUTUAL FUND GROUP.
Refer to the SAI for the board members' and officers' biographies.
Investment manager and transfer agent
The Fund pays AEFC for managing its portfolio, providing
administrative services and serving as transfer agent (handling
shareholder accounts).
Under its Investment Management Services Agreement, AEFC determines
which securities will be purchased, held or sold (subject to the
direction and control of the board). Under the current agreement,
effective March 20, 1995, the Fund pays AEFC a fee for these
services based on the average daily net assets of the Fund, as
follows:
Assets Annual rate
(billions) at each asset level
First $1.0 0.450%
Next 1.0 0.425
Next 1.0 0.400
Next 1.0 0.375
Over 3.0 0.350
<PAGE>
PAGE 152
For the fiscal year ended June 30, 1996, the Fund paid AEFC a total
investment management fee of 0.45% of its average daily net assets.
Under the Agreement, the Fund also pays taxes, brokerage
commissions and nonadvisory expenses.
Under an Administrative Services Agreement, the Fund pays AEFC for
administration and accounting services at an annual rate of 0.04%
decreasing in gradual percentages to 0.02% as assets increase.
In addition, under a separate Transfer Agency Agreement, AEFC
maintains shareholder accounts and records. The Fund pays AEFC an
annual fee per shareholder account for this service as follows:
o Class A $15.50
o Class B $16.50
o Class Y $15.50
Distributor
The Fund has an exclusive distribution agreement with American
Express Financial Advisors, a wholly owned subsidiary of AEFC.
Financial advisors representing American Express Financial Advisors
provide information to investors about individual investment
programs, the Fund and its operations, new account applications,
and exchange and redemption requests. The cost of these services
is paid partially by the Fund's sales charges.
Persons who buy Class A shares pay a sales charge at the time of
purchase. Persons who buy Class B shares are subject to a
contingent deferred sales charge on a redemption in the first six
years and pay an asset-based sales charge (also known as a 12b-1
plan) of 0.75% of the Fund's average daily net assets. Class Y
shares are sold without a sales charge and without an asset-based
sales charge.
Financial advisors may receive different compensation for selling
Class A, Class B and Class Y shares. Portions of the sales charge
also may be paid to securities dealers who have sold the Fund's
shares or to banks and other financial institutions. The amounts
of those payments range from 0.8% to 4% of the Fund's offering
price depending on the monthly sales volume.
Under a Shareholder Service Agreement, the Fund also pays a fee for
service provided to shareholders by financial advisors and other
servicing agents. The fee is calculated at a rate of 0.175% of the
Fund's average daily net assets attributable to Class A and Class B
shares.
<PAGE>
PAGE 153
Total expenses paid by the Fund's Class A shares for the fiscal
year ended June 30, 1996, were 0.75% of its average daily net
assets. Expenses for Class B and Class Y were 1.51% and 0.57%,
respectively.
Total fees and expenses (excluding taxes and brokerage commissions)
cannot exceed the most restrictive applicable state expense
limitation.
About American Express Financial Corporation
General information
The AEFC family of companies offers not only mutual funds but also
insurance, annuities, investment certificates and a broad range of
financial management services.
Besides managing investments for all publicly offered funds in the
IDS MUTUAL FUND GROUP, AEFC also manages investments for itself and
its subsidiaries, IDS Certificate Company and IDS Life Insurance
Company. Total assets under management on June 30, 1996 were more
than $138 billion.
American Express Financial Advisors serves individuals and
businesses through its nationwide network of more than 135 offices
and more than 7,800 advisors.
Other AEFC subsidiaries provide investment management and related
services for pension, profit sharing, employee savings and
endowment funds of businesses and institutions.
AEFC is located at IDS Tower 10, Minneapolis, MN 55440-0010. It is
a wholly owned subsidiary of American Express Company (American
Express), a financial services company with headquarters at
American Express Tower, World Financial Center, New York, NY 10285.
The Fund may pay brokerage commissions to broker-dealer affiliates
of American Express and AEFC.
<PAGE>
PAGE 154
Appendix A
1996 Federal Tax-Exempt and Taxable Equivalent Yield Calculation
These tables will help you determine your federal taxable yield
equivalents for given rates of tax-exempt income.
STEP 1: Calculating your marginal tax rate.
Using your Taxable Income and Adjusted Gross Income figures as
guides, you can locate your Marginal Tax Rate in the table below.
First locate your Taxable Income in a filing status and income
range in the left-hand column. Then, locate your Adjusted Gross
Income at the top of the chart. At the point where your Taxable
Income line meets your Adjusted Gross Income column the percentage
indicated is an approximation of your Marginal Tax Rate. For
example: Let's assume you are married filing jointly, your taxable
income is $138,000 and your adjustable gross income is $175,000.
Under Taxable Income married filing jointly status, $138,000 is in
the $96,900-$147,700 range. Under Adjusted Gross Income, $175,000
is in the $117,950 to $176,950 column. The Taxable Income line and
Adjusted Gross Income column meet at 31.93%. This is the rate
you'll use in Step 2.
<TABLE><CAPTION>
Adjusted gross income*
___________________________________________________________________________________________
Taxable income** $0 $117,950 $176,950 Over
to to to
$117,950(1) $176,950(2) $299,450(3) $299,450(2)
___________________________________________________________________________________________
Married Filing Jointly
<S> <C> <C> <C> <C>
$ 0 - $ 40,100 15.00%
40,100 - 96,900 28.00 28.84%
96,900 - 147,700 31.00 31.93 33.19%
147,700 - 263,750 36.00 37.08 38.55 37.08
263,750 + 39.60 42.40*** 40.79%
___________________________________________________________________________________________
Adjusted gross income*
____________________________________________________________________________________________
Taxable income** $0 $117,950 Over
to to
$117,950(1) $240,450(3) $240,450(2)
____________________________________________________________________________________________
Single
$ 0 - $ 24,000 15.00%
24,000 - 58,150 28.00
58,150 - 121,300 31.00 32.56%
121,300 - 263,750 36.00 37.81 37.08%
263,750 + 39.60 40.79
____________________________________________________________________________________________
</TABLE>
*Gross income with certain adjustments before taking itemized
deductions and personal exemptions.
**Amount subject to federal income tax after itemized deductions
and personal exemptions.
***This rate is applicable only in the limited case where your
adjusted gross income is less than $299,450 and your taxable income
exceeds $263,750.
(1) No Phase-out -- Assumes no phase-out of itemized deductions or
personal exemptions.
(2) Itemized Deductions Phase-out -- Assumes a single taxpayer has
one personal exemption and joint taxpayers have two personal
exemptions.
(3) Itemized Deductions and Personal Exemption Phase-outs --
Assumes a single taxpayer has one personal exemption, joint
taxpayers have two personal exemptions and itemized deductions
continue to phase-out.
If these assumptions do not apply to you, it will be necessary to
construct your own personalized tax equivalency table.
STEP 2: Determining your federal taxable yield equivalents.
Using 31.93%, you may determine that a tax-exempt yield of 4% is
equivalent to earning a taxable 5.88% yield.
<TABLE><CAPTION>
For these Tax-Exempt Rates:
_________________________________________________________________
3.50% 4.00% 4.50% 5.00% 5.50% 6.00% 6.50% 7.00%
__________________________________________________________________
Marginal Tax Rates Equal the Taxable Rates shown below:
_________________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C> <C> <C> <C>
15.00% 4.12 4.71 5.29 5.88 6.47 7.06 7.65 8.24
28.00% 4.86 5.56 6.25 6.94 7.64 8.33 9.03 9.72
28.84% 4.92 5.62 6.32 7.03 7.73 8.43 9.13 9.84
31.00% 5.07 5.80 6.52 7.25 7.97 8.70 9.42 10.14
31.93% 5.14 5.88 6.61 7.35 8.08 8.81 9.55 10.28
32.56% 5.19 5.93 6.67 7.41 8.16 8.90 9.64 10.38
33.19% 5.24 5.99 6.74 7.48 8.23 8.98 9.73 10.48
36.00% 5.47 6.25 7.03 7.81 8.59 9.38 10.16 10.94
37.08% 5.56 6.36 7.15 7.95 8.74 9.54 10.33 11.13
37.81% 5.63 6.43 7.24 8.04 8.84 9.65 10.45 11.26
38.55% 5.70 6.51 7.32 8.14 8.95 9.76 10.58 11.39
39.60% 5.79 6.62 7.45 8.28 9.11 9.93 10.76 11.59
40.79% 5.91 6.76 7.60 8.44 9.29 10.13 10.98 11.82
42.40% 6.08 6.94 7.81 8.68 9.55 10.42 11.28 12.15
</TABLE>
<PAGE>
PAGE 155
Appendix B
Descriptions of derivative instruments
What follows are brief descriptions of derivative instruments the
Fund may use. At various times the Fund may use some or all of
these instruments and is not limited to these instruments. It may
use other similar types of instruments if they are consistent with
the Fund's investment goal and policies. For more information on
these instruments, see the SAI.
Options and futures contracts. An option is an agreement to buy or
sell an instrument at a set price during a certain period of time.
A futures contract is an agreement to buy and sell an instrument
for a set price on a future date. The Fund may buy and sell
options and futures contracts to manage its exposure to changing
interest rates, security prices and currency exchange rates.
Options and futures may be used to hedge the Fund's investments
against price fluctuations or to increase market exposure.
Asset-backed and mortgage-backed securities. Asset-backed
securities include interests in pools of assets such as motor
vehicle installment sale contracts, installment loan contracts,
leases on various types of real and personal property, receivables
from revolving credit (credit card) agreements or other categories
of receivables. Mortgage-backed securities include collateralized
mortgage obligations and stripped mortgage-backed securities.
Interest and principal payments depend on payment of the underlying
loans or mortgages. The value of these securities may also be
affected by changes in interest rates, the market's perception of
the issuers and the creditworthiness of the parties involved. The
non-mortgage related asset-backed securities do not have the
benefit of a security interest in the related collateral. Stripped
mortgage-backed securities include interest only (IO) and principal
only (PO) securities. Cash flows and yields on IOs and POs are
extremely sensitive to the rate of principal payments on the
underlying mortgage loans or mortgage-backed securities.
Indexed securities. The value of indexed securities is linked to
currencies, interest rates, commodities, indexes or other financial
indicators. Most indexed securities are short- to intermediate-
term fixed income securities whose values at maturity or interest
rates rise or fall according to the change in one or more specified
underlying instruments. Indexed securities may be more volatile
than the underlying instrument itself.
<PAGE>
PAGE 156
Inverse floaters. Inverse floaters are created by underwriters
using the interest payment on securities. A portion of the
interest received is paid to holders of instruments based on
current interest rates for short-term securities. The remainder,
minus a servicing fee, is paid to holders of inverse floaters. As
interest rates go down, the holders of the inverse floaters receive
more income and an increase in the price for the inverse floaters.
As interest rates go up, the holders of the inverse floaters
receive less income and a decrease in the price for the inverse
floaters.
Structured products. Structured products are over-the-counter
financial instruments created specifically to meet the needs of one
or a small number of investors. The instrument may consist of a
warrant, an option or a forward contract embedded in a note or any
of a wide variety of debt, equity and/or currency combinations.
Risks of structured products include the inability to close such
instruments, rapid changes in the market and defaults by other
parties.
<PAGE>
PAGE 157
IDS SPECIAL TAX-EXEMPT SERIES TRUST
STATEMENT OF ADDITIONAL INFORMATION
FOR
IDS INSURED TAX-EXEMPT FUND
Aug. 29, 1996
This Statement of Additional Information (SAI) is not a prospectus.
It should be read together with the prospectus and the financial
statements contained in the Annual Report which may be obtained
from your American Express financial advisor or by writing to
American Express Shareholder Service, P.O. Box 534, Minneapolis, MN
55440-0534.
This SAI is dated Aug. 29, 1996, and it is to be used with the
prospectus dated Aug. 29, 1996, and the Annual Report for the
fiscal year ended June 30, 1996.
<PAGE>
PAGE 158
TABLE OF CONTENTS
Goal and Investment Policies......................See Prospectus
Additional Investment Policies................................p. 3
Security Transactions.........................................p. 6
Brokerage Commissions Paid to Brokers Affiliated with
American Express Financial Corporation........................p. 8
Performance Information.......................................p. 8
Valuing Fund Shares...........................................p.11
Investing in the Fund.........................................p.12
Redeeming Shares..............................................p.16
Pay-out Plans.................................................p.17
Taxes.........................................................p.18
Agreements....................................................p.19
Board Members and Officers....................................p.22
Custodian.....................................................p.27
The Trust.....................................................p.27
Independent Auditors..........................................p.27
Financial Statements..............................See Annual Report
Prospectus....................................................p.27
Appendix A: Description of Ratings of Tax-Exempt Securities
and Short-Term Securities........................p.28
Appendix B: Options and Interest Rate Futures Contracts......p.32
Appendix C: Insured Fund.....................................p.38
Appendix D: Dollar-Cost Averaging............................p.43
<PAGE>
PAGE 159
ADDITIONAL INVESTMENT POLICIES
These are investment policies in addition to those presented in the
prospectus. Unless holders of a majority of the outstanding voting
securities agree to make the change the Fund will not:
'Act as an underwriter (sell securities for others). However,
under the securities laws, the Fund may be deemed to be an
underwriter when it purchases securities directly from the issuer
and later resells them.
'Borrow money or property, except as a temporary measure for
extraordinary or emergency purposes, in an amount not exceeding
one-third of the market value of its total assets (including
borrowings) less liabilities (other than borrowings) immediately
after the borrowing. The Fund has not borrowed in the past and has
no present intention to borrow.
'Make cash loans if the total commitment amount exceeds 5% of the
Fund's total assets.
'Invest more than 5% of its total assets in securities of any one
company, government or political subdivision thereof, except the
limitation will not apply to investments in securities issued by
the U.S. government, its agencies or instrumentalities, and except
that up to 25% of the Fund's total assets may be invested without
regard to this 5% limitation.
'Buy or sell real estate, unless acquired as a result of ownership
of securities or other instruments, except this shall not prevent
the Fund from investing in securities or other instruments backed
by real estate or securities of companies engaged in the real
estate business or real estate investment trusts. For purposes of
this policy, real estate includes real estate limited partnerships.
'Buy or sell physical commodities unless acquired as a result of
ownership of securities or other instruments, except this shall not
prevent the Fund from buying or selling options and futures
contracts or from investing in securities or other instruments
backed by, or whose value is derived from, physical commodities.
'Make a loan of any part of its assets to American Express
Financial Corporation (AEFC), to the board members and officers of
AEFC or to its own board members and officers.
'Purchase securities of an issuer if the board members and officers
of the Fund or the board members and officers of AEFC hold more
than a certain percentage of the issuer's outstanding securities.
The rule is this: the holdings of all board members and officers
of the Fund and the holding of all board members and officers of
AEFC who own more than 0.5% of an issuer's securities are added
together, and if in total they own more than 5%, the Fund will not
purchase securities of that issuer.
<PAGE>
PAGE 160
'Lend Fund securities in excess of 30% of its net assets. The
current policy of the Fund's board is to make these loans, either
long- or short-term, to broker-dealers. In making loans, the Fund
receives the market price in cash, U.S. government securities,
letters of credit or such other collateral as permitted by
regulatory agencies and approved by the board of directors. If the
Fund receives cash as collateral, the Fund will invest the cash
collateral in short-term debt securities. The Fund will receive a
fee based on the value of the loan. The Fund reviews the market
value of the loaned securities daily and will get additional
collateral if this value goes up. The risks are the borrower may
not provide additional collateral when required or return the
securities when due.
Unless changed by the board, the Fund will not:
'Buy on margin or sell short, but it may enter into interest rate
futures contracts.
'Pledge or mortgage its assets beyond 15% of total assets. If the
Fund were ever to do so, valuation of the pledged or mortgaged
assets would be based on market values. For purposes of this
restriction, collateral arrangements for margin deposits on futures
contracts are not deemed to be a pledge of assets.
'Invest more than 5% of its total assets in securities whose issuer
or guarantor of principal and interest has been in operation for
less than three years.
'Invest in voting securities, securities of investment companies or
exploration or development programs, such as oil, gas or mineral
leases.
'Invest more than 5% of its net assets in warrants. Under one
state's law no more than 2% of the Fund's net assets may be
invested in warrants not listed on the New York or American Stock
Exchange.
'Invest more than 10% of the Fund's assets in securities and
derivative instruments that are illiquid. In determining the
liquidity of municipal lease obligations, the investment manager,
under guidelines established by the board, will consider the
essential nature of the lease property, the likelihood that the
municipality will continue appropriating funding for the leased
property, and other relevant factors related to the general credit
quality of the municipality and the marketability of the municipal
lease obligation.
In determining the liquidity of commercial paper issued in
transactions not involving a public offering under Section 4(2) of
the Securities Act of 1933, the investment manager, under
guidelines established by the board, will evaluate relevant factors
such as the issuer and the size and nature of its commercial paper <PAGE>
PAGE 161
programs, the willingness and ability of the issuer or dealer to
repurchase the paper, and the nature of the clearance and
settlement procedures for the paper.
The Fund may make contracts to purchase securities for a fixed
price at a future date beyond normal settlement time (when-issued
securities or forward commitments). Under normal market
conditions, the Fund does not intend to commit more than 5% of its
total assets to these practices. The Fund does not pay for the
securities or receive dividends or interest on them until the
contractual settlement date. The Fund will designate cash or
liquid high-grade debt securities at least equal in value to its
commitments to purchase the securities. When-issued securities or
forward commitments are subject to market fluctuations and they may
affect the Fund's total assets the same as owned securities.
The Fund may invest up to 20% of its net assets in certain taxable
investments for temporary defensive purposes. It may purchase
short-term U.S. and Canadian government securities. It may invest
in bank obligations including negotiable certificates of deposit,
non-negotiable fixed time deposits, bankers' acceptances and
letters of credit. The issuing bank or savings and loan generally
must have capital, surplus and undivided profits (as of the date of
its most recently published annual financial statements) in excess
of $100 million (or the equivalent in the instance of a foreign
branch of a U.S. bank) at the date of investment.
The Fund may purchase short-term corporate notes and obligations
rated in the top two classifications by Moody's Investors Service,
Inc. (Moody's) or Standard & Poor's Corporation (S&P) or the
equivalent. It also may use repurchase agreements with broker-
dealers registered under the Securities Exchange Act of 1934 and
with commercial banks. Repurchase agreements involve investments
in debt securities where the seller (broker-dealer or bank) agrees
to repurchase the securities from the Fund at cost plus an agreed-
to interest rate within a specified time. A risk of a repurchase
agreement is that if the seller seeks the protection of the
bankruptcy laws, the Fund's ability to liquidate the security
involved could be impaired, and it might subsequently incur a loss
if the value of the security declines or if the other party to a
repurchase agreement defaults on its obligation.
Notwithstanding any of the Fund's other investment policies, the
Fund may invest its assets in an open-end management investment
company having substantially the same investment objectives,
policies and restrictions as the Fund for the purpose of having
those assets managed as part of a combined pool.
For a description of ratings of tax-exempt securities and short-
term securities, see Appendix A. For a discussion on options and
interest rate futures contracts see Appendix B. For a discussion
on Insured Fund, see Appendix C.
<PAGE>
PAGE 162
SECURITY TRANSACTIONS
Subject to policies set by the board, AEFC is authorized to
determine, consistent with the Fund's investment goal and policies,
which securities will be purchased, held or sold. In determining
where the buy and sell orders are to be placed, AEFC has been
directed to use its best efforts to obtain the best available price
and the most favorable execution except where otherwise authorized
by the board.
AEFC has a strict Code of Ethics that prohibits its affiliated
personnel from engaging in personal investment activities that
compete with or attempt to take advantage of planned portfolio
transactions for any fund in the IDS MUTUAL FUND GROUP. AEFC
carefully monitors compliance with its Code of Ethics.
Normally, the Fund's securities are traded on a principal rather
than an agency basis. In other words, AEFC will trade directly
with the issuer or with a dealer who buys or sells for its own
account, rather than acting on behalf of another client. AEFC does
not pay the dealer commissions. Instead, the dealer's profit, if
any, is the difference, or spread, between the dealer's purchase
and sale price for the security.
On occasion it may be desirable to compensate a broker for research
services or for brokerage services by paying a commission that
might not otherwise be charged or a commission in excess of the
amount another broker might charge. The board has adopted a policy
authorizing AEFC to do so to the extent authorized by law, if AEFC
determines, in good faith, that such commission is reasonable in
relation to the value of the brokerage or research services
provided by a broker or dealer, viewed either in the light of that
transaction or AEFC's overall responsibilities to the funds in the
IDS MUTUAL FUND GROUP and other funds for which it acts as
investment advisor.
Research provided by brokers supplements AEFC's own research
activities. Such services include economic data on, and analysis
of, U.S. and foreign economies; information on specific industries;
information about specific companies, including earnings estimates;
purchase recommendations for stocks and bonds; portfolio strategy
services; political, economic, business and industry trend
assessments; historical statistical information; market data
services providing information on specific issues and prices; and
technical analysis of various aspects of the securities markets,
including technical charts. Research services may take the form of
written reports, computer software or personal contact by telephone
or at seminars or other meetings. AEFC has obtained, and in the
future may obtain, computer hardware from brokers, including but
not limited to personal computers that will be used exclusively for
investment decision-making purposes, which include the research,
portfolio management and trading functions and other services to
the extent permitted under an interpretation by the Securities and
Exchange Commission (SEC).
<PAGE>
PAGE 163
When paying a commission that might not otherwise be charged or a
commission in excess of the amount another broker might charge,
AEFC must follow procedures authorized by the board. To date,
three procedures have been authorized. One procedure permits AEFC
to direct an order to buy or sell a security traded on a national
securities exchange to a specific broker for research services it
has provided. The second procedure permits AEFC, in order to
obtain research, to direct an order on an agency basis to buy or
sell a security traded in the over-the-counter market to a firm
that does not make a market in that security. The commission paid
generally includes compensation for research services. The third
procedure permits AEFC, in order to obtain research and brokerage
services, to cause the Fund to pay a commission in excess of the
amount another broker might have charged. AEFC has advised the
Fund it is necessary to do business with a number of brokerage
firms on a continuing basis to obtain such services as the handling
of large orders, the willingness of a broker to risk its own money
by taking a position in a security, and the specialized handling of
a particular group of securities that only certain brokers may be
able to offer. As a result of this arrangement, some portfolio
transactions may not be effected at the lowest commission, but AEFC
believes it may obtain better overall execution. AEFC has assured
the Fund that under all three procedures the amount of commission
paid will be reasonable and competitive in relation to the value of
the brokerage services performed or research provided.
All other transactions shall be placed on the basis of obtaining
the best available price and the most favorable execution. In so
doing, if in the professional opinion of the person responsible for
selecting the broker or dealer, several firms can execute the
transaction on the same basis, consideration will be given by such
person to those firms offering research services. Such services
may be used by AEFC in providing advice to all the funds in the IDS
MUTUAL FUND GROUP even though it is not possible to relate the
benefits to any particular fund or account.
Each investment decision made for the Fund is made independently
from any decision made for another fund in the IDS MUTUAL FUND
GROUP or other account advised by AEFC or any of its subsidiaries.
When the Fund buys or sells the same security as another fund or
account, AEFC carries out the purchase or sale in a way the Fund
agrees in advance is fair. Although sharing in large transactions
may adversely affect the price or volume purchased or sold by the
Fund, the Fund hopes to gain an overall advantage in execution.
AEFC has assured the Fund it will continue to seek ways to reduce
brokerage costs.
On a periodic basis, AEFC makes a comprehensive review of the
broker-dealers and the overall reasonableness of their commissions.
The review evaluates execution, operational efficiency and research
services.
<PAGE>
PAGE 164
The Fund paid total brokerage commissions of $21,654 for the fiscal
year ended June 30, 1996, $80,516 for fiscal year 1995, and $7,000
for fiscal year 1994. Substantially all firms through whom
transactions were executed provide research services.
No transactions were directed to brokers because of research
services they provided to the Fund.
As of the fiscal year ended June 30, 1996, the Fund held no
securities of its regular brokers or dealers or of the parents of
those brokers or dealers that derived more than 15% of gross
revenue from securities-related activities.
The portfolio turnover rate was 52% in the fiscal year ended
June 30, 1996, and 53% in fiscal year 1995.
BROKERAGE COMMISSIONS PAID TO BROKERS AFFILIATED WITH AMERICAN
EXPRESS FINANCIAL CORPORATION
Affiliates of American Express Company (American Express) (of which
AEFC is a wholly owned subsidiary) may engage in brokerage and
other securities transactions on behalf of the Fund according to
procedures adopted by the Fund's board and to the extent consistent
with applicable provisions of the federal securities laws. AEFC
will use an American Express affiliate only if (i) AEFC determines
that the Fund will receive prices and executions at least as
favorable as those offered by qualified independent brokers
performing similar brokerage and other services for the Fund and
(ii) the affiliate charges the Fund commission rates consistent
with those the affiliate charges comparable unaffiliated customers
in similar transactions and if such use is consistent with terms of
the Investment Management Services Agreement.
AEFC may direct brokerage to compensate an affiliate. AEFC will
receive research on South Africa from New Africa Advisors, a
wholly-owned subsidiary of Sloan Financial Group. AEFC owns 100%
of IDS Capital Holdings Inc. which in turn owns 40% of Sloan
Financial Group. New Africa Advisors will send research to AEFC
and in turn AEFC will direct trades to a particular broker. The
broker will have an agreement to pay New Africa Advisors. All
transactions will be on a best execution basis. Compensation
received will be reasonable for the services rendered.
No brokerage commissions were paid to brokers affiliated with AEFC
for the three most recent fiscal years.
PERFORMANCE INFORMATION
The Fund may quote various performance figures to illustrate past
performance. Average annual total return and current yield
quotations used by the Fund are based on standardized methods of
computing performance as required by the SEC. An explanation of
the methods used by the Fund to compute performance follows below.
<PAGE>
PAGE 165
Average annual total return
The Fund may calculate average annual total return for a class for
certain periods by finding the average annual compounded rates of
return over the period that would equate the initial amount
invested to the ending redeemable value, according to the following
formula:
P(1+T)n = ERV
where: P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $1,000
payment, made at the beginning of a period, at the
end of the period (or fractional portion thereof)
Aggregate total return
The Fund may calculate aggregate total return for a class for
certain periods representing the cumulative change in the value of
an investment in the Fund over a specified period of time according
to the following formula:
ERV - P
P
where: P = a hypothetical initial payment of $1,000
ERV = ending redeemable value of a hypothetical $1,000
payment, made at the beginning of a period, at the
end of the period (or fractional portion thereof)
Annualized yield
The Fund may calculate an annualized yield for a class by dividing
the net investment income per share deemed earned during a 30-day
period by the public offering price per share (including the
maximum sales charge) on the last day of the period and annualizing
the results.
Yield is calculated according to the following formula:
Yield = 2[(a-b + 1)6 - 1]
cd
where: a = dividends and interest earned during the period
b = expenses accrued for the period (net of
reimbursements
c = the average daily number of shares outstanding
during the period that were entitled to receive
dividends
d = the maximum offering price per share on the last
day of the period
<PAGE>
PAGE 166
The Fund's annualized yield was 4.66% for Class A, 4.15% for Class
B, and 5.22% for Class Y for the 30-day period ended June 30, 1996.
Distribution yield
Distribution yield is calculated according to the following
formula:
D divided by POP F equals DY
30 30
where: D = sum of dividends for 30-day period
POP = sum of public offering price for 30-day period
F = annualizing factor
DY = distribution yield
The Fund's distribution yield was 5.09% for Class A, 4.60% for
Class B, and 5.50% for Class Y for the 30-day period ended June 30,
1996.
Tax-Equivalent Yield
Tax-equivalent yield is calculated by dividing that portion of the
yield (as calculated above) which is tax-exempt by one minus a
stated income tax rate and adding the result to that portion, if
any, of the yield that is not tax-exempt. The following table
shows the fund's tax equivalent yield, based on federal but not
state tax rates, for the 30-day period ended June 30, 1996.
Marginal
Income Tax Tax-Equivalent Yield
Bracket Distribution Annualized
Class A
15.0% 5.99% 5.48%
28.0% 7.07% 6.47%
33.0% 7.60% 6.96%
Class B
15.0% 5.41% 4.88%
28.0% 6.39% 5.76%
33.0% 6.87% 6.19%
Class Y
15.0% 6.47% 6.14%
28.0% 7.64% 7.25%
33.0% 8.21% 7.79%
In its sales material and other communications, the Fund may quote,
compare or refer to rankings, yields or returns as published by
independent statistical services or publishers and publications
such as The Bank Rate Monitor National Index, Barron's, Business
Week, Donoghue's Money Market Fund Report, Financial Services Week,
<PAGE>
PAGE 167
Financial Times, Financial World, Forbes, Fortune, Global Investor,
Institutional Investor, Investor's Daily, Kiplinger's Personal
Finance, Lipper Analytical Services, Money, Mutual Fund Forecaster,
Newsweek, The New York Times, Personal Investor, Stanger Report,
Sylvia Porter's Personal Finance, USA Today, U.S. News and World
Report, The Wall Street Journal and Wiesenberger Investment
Companies Service.
VALUING FUND SHARES
The value of an individual share for each class is determined by
using the net asset value before shareholder transactions for the
day. On July 1, 1996, the first business day following the end of
the fiscal year, the computation looked like this:
<TABLE>
<CAPTION>
Net assets before Shares outstanding Net asset value
shareholder transactions at end of previous day of one share
<S> <C> <C> <C> <C> <C>
Class A $490,103,104 divided by 90,424,927 equals $5.42
Class B 20,764,616 3,831,110 5.42
Class Y 1,070 197 5.43
</TABLE>
In determining net assets before shareholder transactions, the
Fund's securities are valued as follows as of the close of business
of the New York Stock Exchange (the Exchange):
'Securities, except bonds, other than convertibles traded on a
securities exchange for which a last-quoted sales price is readily
available are valued at the last-quoted sales price on the exchange
where such security is primarily traded.
'Securities other than convertibles traded on a securities exchange
for which a last-quoted sales price is not readily available are
valued at the mean of the closing bid and asked prices, looking
first to the bid and asked prices on the exchange where the
security is primarily traded, and if none exists, to the over-the-
counter market.
'Securities included in the NASDAQ National Market System are
valued at the last-quoted sales price in this market.
'Securities included in the NASDAQ National Market System for which
a last-quoted sales price is not readily available, and other
securities traded over-the-counter but not included in the NASDAQ
National Market System are valued at the mean of the closing bid
and asked prices.
'Futures and options traded on major exchanges are valued at the
last-quoted sales price on their primary exchange.
'Short-term securities maturing more than 60 days from the
valuation date are valued at the readily available market price or
approximate market value based on current interest rates. Short-
term securities maturing in 60 days or less that originally had
maturities of more than 60 days at acquisition date are valued at
amortized cost using the market value on the 61st day before <PAGE>
PAGE 168
maturity. Short-term securities maturing in 60 days or less at
acquisition date are valued at amortized cost. Amortized cost is
an approximation of market value determined by systematically
increasing the carrying value of a security if acquired at a
discount, or systematically reducing the carrying value if acquired
at a premium, so that the carrying value is equal to maturity value
on maturity date.
'Securities without a readily available market price, bonds other
than convertibles and other assets are valued at fair value, as
determined in good faith by the board. The board is responsible
for selecting methods they believe provide fair value. When
possible, bonds are valued by a pricing service independent from
the Fund. If a valuation of a bond is not available from a pricing
service, the bond will be valued by a dealer knowledgeable about
the bond if such a dealer is available.
'In valuing securities subject to Portfolio Insurance, the Trust
will use the greater of (a) the value of the security with timely
payments of principal and interest guaranteed, less the
predetermined premiums for Secondary Market Insurance, or (b) the
uninsured value of the security.
The New York Stock Exchange, AEFC and the Fund will be closed on
the following holidays: New Year's Day, Presidents' Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day
and Christmas Day.
INVESTING IN THE FUND
Sales Charge
Shares of the Fund are sold at the public offering price determined
at the close of business on the day an application is accepted.
The public offering price is the net asset value of one share plus
a sales charge, if applicable. For Class B and Class Y, there is
no initial sales charge so the public offering price is the same as
the net asset value. For Class A, the public offering price for an
investment of less than $50,000, made July 1, 1996, was determined
by dividing the net asset value of one share, $5.42, by 0.95 (1.00-
0.05 for a maximum 5% sales charge) for a public offering price of
$5.71. The sales charge is paid to American Express Financial
Advisors by the person buying the shares.
Class A - Calculation of the Sales Charge
<PAGE>
PAGE 169
Sales charges are determined as follows:
Within each increment,
sales charge as a
percentage of:
Public Net
Amount of Investment Offering Price Amount Invested
First $ 50,000 5.0% 5.26%
Next 50,000 4.5 4.71
Next 400,000 3.8 3.95
Next 500,000 2.0 2.04
$1,000,000 or more 0.0 0.00
Sales charges on an investment greater than $50,000 and less than
$1,000,000 are calculated for each increment separately and then
totaled. The resulting total sales charge, expressed as a
percentage of the public offering price and of the net amount
invested, will vary depending on the proportion of the investment
at different sales charge levels.
For example, compare an investment of $60,000 with an investment of
$85,000. The $60,000 investment is composed of $50,000 that incurs
a sales charge of $2,500 (5.0% x $50,000) and $10,000 that incurs a
sales charge of $450 (4.5% x $10,000). The total sales charge of
$2,950 is 4.92% of the public offering price and 5.17% of the net
amount invested.
In the case of the $85,000 investment, the first $50,000 also
incurs a sales charge of $2,500 (5.0% x $50,000) and $35,000 incurs
a sales charge of $1,575 (4.5% x $35,000). The total sales charge
of $4,075 is 4.79% of the public offering price and 5.04% of the
net amount invested.
The following table shows the range of sales charges as a
percentage of the public offering price and of the net amount
invested on total investments at each applicable level.
<TABLE>
<CAPTION>
On total investment, sales
charge as a percentage of
Public Net
Offering Price Amount Invested
Amount of Investment ranges from:
<S> <C> <C>
First $ 50,000 5.00% 5.26%
More than 50,000 to 100,000 5.00-4.50 5.26-4.71
More than 100,000 to 500,000 4.50-3.80 4.71-3.95
More than 500,000 to 999,999 3.80-2.00 3.95-2.04
$1,000,000 or more 0.00 0.00
</TABLE>
<PAGE>
PAGE 170
Class A - Reducing the Sales Charge
Sales charges are based on the total amount of your investments in
the Fund. The amount of all prior investments plus any new
purchase is referred to as your "total amount invested." For
example, suppose you have made an investment of $20,000 and later
decide to invest $40,000 more. Your total amount invested would be
$60,000. As a result, $10,000 of your $40,000 investment qualifies
for the lower 4.5% sales charge that applies to investments of more
than $50,000 and up to $100,000.
The total amount invested includes any shares held in the Fund in
the name of a member of your primary household group. The primary
household group consists of accounts in any ownership for spouses
or domestic partners and their unmarried children under 21.
Domestic partners are individuals who maintain a shared primary
residence and have joint property or other insurable interest. For
instance, if your spouse already has invested $20,000 and you want
to invest $40,000, your total amount invested will be $60,000 and
therefore you will pay the lower charge of 4.5% on $10,000 of the
$40,000.
Until a spouse remarries, the sales charge is waived for spouses
and unmarried children under 21 of deceased board members, officers
or employees of the Fund or AEFC or its subsidiaries and deceased
advisors.
The total amount invested also includes any investment you or your
immediate family already have in the other publicly offered funds
in the IDS MUTUAL FUND GROUP where the investment is subject to a
sales charge. For example, suppose you already have an investment
of $30,000 in another IDS Fund. If you invest $40,000 more in this
fund, your total amount invested in the funds will be $70,000 and
therefore $20,000 of your $40,000 investment will incur a 4.5%
sales charge.
Class A - Letter of Intent (LOI)
If you intend to invest $1 million over a period of 13 months, you
can reduce the sales charges in Class A by filing a LOI. The
agreement can start at any time and will remain in effect for 13
months. Your investment will be charged normal sales charges until
you have invested $1 million. At that time, your account will be
credited with the sales charges previously paid. Class A
investments made prior to signing an LOI may be used to reach the
$1 million total, excluding Cash Management Fund and Tax-Free Money
Fund. However, we will not adjust for sales charges on investments
made prior to the signing of the LOI. If you do not invest $1
million by the end of 13 months, there is no penalty, you'll just
miss out on the sales charge adjustment. A LOI is not an option
(absolute right) to buy shares.
<PAGE>
PAGE 171
Here's an example. You file a LOI to invest $1 million and make an
investment of $100,000 at that time. You pay the normal 5% sales
charge on the first $50,000 and 4.5% sales charge on the next
$50,000 of this investment. Let's say you make a second investment
of $900,000 (bringing the total up to $1 million) one month before
the 13-month period is up. On the date that you bring your total
to $1 million, AEFC makes an adjustment to your account. The
adjustment is made by crediting your account wiht additional
shares, in an amount equivalent to the sales charge previously
paid.
Systematic Investment Programs
After you make your investment of $2,000 or more, you can arrange
to make additional payments of $100 or more on a regular basis.
These minimums do not apply to all systematic investment programs.
You decide how often you want to make payments - monthly,
quarterly, or semiannually. You are not obligated to make any
payments. You can omit payments or discontinue the investment
program altogether. The Fund also can change the program or end it
at any time. If there is no obligation, why do it? Putting money
aside is an important part of financial planning. With a
systematic investment program, you have a goal to work for.
How does this work? Your regular investment amount will purchase
more shares when the net asset value per share decreases, and fewer
shares when the net asset value per share increases. Each purchase
is a separate transaction. After each purchase your new shares
will be added to your account. Shares bought through these
programs are exactly the same as any other fund shares. They can
be bought and sold at any time. A systematic investment program is
not an option or an absolute right to buy shares.
The systematic investment program itself cannot ensure a profit,
nor can it protect against a loss in a declining market. If you
decide to discontinue the program and redeem your shares when their
net asset value is less than what you paid for them, you will incur
a loss.
For a discussion on dollar-cost averaging, see Appendix D.
Automatic Directed Dividends
Dividends, including capital gain distributions, paid by another
fund in the IDS MUTUAL FUND GROUP subject to a sales charge, may be
used to automatically purchase shares in the same class of this
Fund without paying a sales charge. Dividends may be directed to
existing accounts only. Dividends declared by a fund are exchanged
to this Fund the following day. Dividends can be exchanged into
one fund but cannot be split to make purchases in two or more
funds. Automatic directed dividends are available between accounts
of any ownership except:
<PAGE>
PAGE 172
Between a non-custodial account and an IRA, or 401(k) plan account
or other qualified retirement account of which American Express
Trust Company acts as custodian;
Between two American Express Trust Company custodial accounts with
different owners (for example, you may not exchange dividends from
your IRA to the IRA of your spouse);
Between different kinds of custodial accounts with the same
ownership (for example, you may not exchange dividends from your
IRA to your 401(k) plan account, although you may exchange
dividends from one IRA to another IRA).
Dividends may be directed from accounts established under the
Uniform Gifts to Minors Act (UGMA) or Uniform Transfers to Minors
Act (UTMA) only into other UGMA or UTMA accounts with identical
ownership.
The Fund's investment goal is described in its prospectus along
with other information, including fees and expense ratios. Before
exchanging dividends into another fund, you should read its
prospectus. You will receive a confirmation that the automatic
directed dividend service has been set up for your account.
REDEEMING SHARES
You have a right to redeem your shares at any time. For an
explanation of redemption procedures, please see the prospectus.
During an emergency, the board can suspend the computation of net
asset value, stop accepting payments for purchase of shares or
suspend the duty of the Fund to redeem shares for more than seven
days. Such emergency situations would occur if:
'The Exchange closes for reasons other than the usual weekend and
holiday closings or trading on the Exchange is restricted, or
'Disposal of the Fund's securities is not reasonably practicable or
it is not reasonably practicable for the Fund to determine the fair
value of its net assets, or 'The SEC, under the provisions of the
Investment Company Act of 1940 (the 1940 Act), as amended, declares
a period of emergency to exist.
Should the Fund stop selling shares, the board may make a deduction
from the value of the assets held by the Fund to cover the cost of
future liquidations of the assets so as to distribute fairly these
costs among all shareholders.
The Fund has elected to be governed by Rule 18f-1 under the 1940
Act, which obligates the Fund to redeem shares in cash, with
respect to any one shareholder during any 90-day period, up to
lesser of $250,000 or 1% of the net assets of the Fund at the
beginning of the period. Although redemptions in excess of this
limitation would normally be paid in cash, the Fund reserves the <PAGE>
PAGE 173
right to make these payments in whole or in part in securities or
other assets in case of an emergency, or if the payment of a
redemption in cash would be detrimental to the existing
shareholders of the Fund as determined by the board. In these
circumstances, the securities distributed would be valued as set
forth in the prospectus. Should the Fund distribute securities, a
shareholder may incur brokerage fees or other transaction costs in
converting the securities to cash.
PAY-OUT PLANS
You can use any of several pay-out plans to redeem your investment
in regular installments. If you redeem Class B shares you may be
subject to a contingent deferred sales charge as discussed in the
prospectus. While the plans differ on how the pay-out is figured,
they all are based on the redemption of your investment. Net
investment income dividends and any capital gain distributions will
automatically be reinvested, unless you elect to receive them in
cash.
Applications for a systematic investment in a class of any fund
subject to a sales charge normally will not be accepted while a
pay-out plan for any of those funds is in effect. Occasional
investments, however, may be accepted.
To start any of these plans, please write or call American Express
Shareholder Service, P.O. Box 534, Minneapolis, MN 55440-0534,
612-671-3733. Your authorization must be received in the
Minneapolis headquarters at least five days before the date you
want your payments to begin. The initial payment must be at least
$50. Payments will be made on a monthly, bimonthly, quarterly,
semiannual or annual basis. Your choice is effective until you
change or cancel it.
The following pay-out plans are designed to take care of the needs
of most shareholders in a way AEFC can handle efficiently and at a
reasonable cost. If you need a more irregular schedule of
payments, it may be necessary for you to make a series of
individual redemptions, in which case you'll have to send in a
separate redemption request for each pay-out. The Fund reserves
the right to change or stop any pay-out plan and to stop making
such plans available.
Plan #1: Pay-out for a fixed period of time
If you choose this plan, a varying number of shares will be
redeemed at regular intervals during the time period you choose.
This plan is designed to end in complete redemption of all shares
in your account by the end of the fixed period.
<PAGE>
PAGE 174
Plan #2: Redemption of a fixed number of shares
If you choose this plan, a fixed number of shares will be redeemed
for each payment and that amount will be sent to you. The length
of time these payments continue is based on the number of shares in
the account.
Plan #3: Redemption of a fixed dollar amount
If you decide on a fixed dollar amount, whatever number of shares
is necessary to make the payment will be redeemed in regular
installments until the account is closed.
Plan #4: Redemption of a percentage of net asset value
Payments are made based on a fixed percentage of the net asset
value of the shares in your account computed on the day of each
payment. Percentages range from 0.25% to 0.75%. For example, if
you are on this plan and arrange to take 0.5% each month, you will
get $50 if the value of your account is $10,000 on the payment
date.
TAXES
If you buy shares in one of the funds and then exchange into
another fund, it is considered a sale and subsequent purchase of
shares. Under tax laws, if this exchange is done within 91 days,
any sales charge waived on Class A shares on a subsequent purchase
of shares applies to the new shares acquired in the exchange.
Therefore, you cannot create a tax loss or reduce a tax gain
attributable to the sales charge when exchanging shares within 91
days.
All distributions of net investment income during the year will
have the same percentage designated as tax-exempt. This annual
percentage is expected to be substantially the same as the
percentage of tax-exempt income actually earned during any
particular distribution period. For the fiscal year ended June 30,
1996, 94% of the income distribution was designated as exempt from
federal income taxes.
Capital gain distributions received by individual and corporate
shareholders should be treated as long-term capital gains
regardless of how long they owned their shares. Short-term capital
gains earned by the Fund are paid to shareholders as part of their
ordinary income dividend and are taxable.
If you are a "substantial user" (or related person) of facilities
financed by industrial development bonds, you should consult your
tax advisor before investing. The income from such bonds may not
be tax-exempt for you.
<PAGE>
PAGE 175
Interest on private activity bonds generally issued after August
1986 is a preference item for purposes of the individual and
corporate alternative minimum taxes. "Private-activity" (non-
governmental purpose) municipal bonds include industrial revenue
bonds, student loan bonds and multi- and single-family housing
bonds. An exception is made for private-activity bonds issued for
qualified--501(c)(3)--organizations, including non-profit colleges,
universities and hospitals. These bonds will continue to be tax-
exempt and will not be subject to the alternative minimum tax for
individuals. To the extent a fund earns income subject to the
alternative minimum tax, it will flow through to that fund's
shareholders and may subject some shareholders, depending on their
tax status, to the alternative minimum tax. The Fund reports the
percentage of its income earned from these bonds to shareholders
with their other tax information.
State law determines whether interest income on a particular
municipal bond is tax-exempt for state tax purposes. It also
determines the tax treatment of those bonds when earned by a mutual
fund and paid to the Fund's shareholders. The Fund will tell you
the percentage of interest income from municipal bonds it received
during the year on a state-by-state basis. Your tax advisor should
help you report this income for state tax purposes.
Under federal tax law, and an election made by the Fund under
federal tax rules, by the end of a calendar year the Fund must
declare and pay dividends representing 98% of ordinary income
through Dec. 31 and 98% of net capital gains (both long-term and
short-term) for the 12-month period ending Oct. 31 of that calendar
year. The Fund is subject to an excise tax equal to 4% of the
excess, if any, of the amount required to be distributed over the
amount actually distributed. The Fund intends to comply with
federal tax law and avoid any excise tax.
This is a brief summary that relates to federal income taxation
only. Shareholders should consult their tax advisor for more
complete information as to the application of federal, state and
local income tax laws to Fund distributions.
AGREEMENTS
Investment Management Services Agreement
The Fund has an Investment Management Services Agreement with AEFC.
For its services, AEFC is paid a fee based on the following
schedule:
Assets Annual rate at
(billions) each asset level
First $1.0 0.450%
Next 1.0 0.425
Next 1.0 0.400
Next 3.0 0.375
Over 6.0 0.350<PAGE>
PAGE 176
On June 30, 1996, the daily rate applied to the Fund's net assets
was equal to 0.450% on an annual basis. The fee is calculated for
each calendar day on the basis of net assets as of the close of
business two business days prior to the day for which the
calculation is made.
The management fee is paid monthly. Under the agreement, the total
amount paid was $2,346,243 for the fiscal year ended June 30, 1996,
$2,560,188 for fiscal year 1995, and $2,772,357 for fiscal year
1994.
The Fund also pays taxes, brokerage commissions and nonadvisory
expenses, which include custodian fees; audit and certain legal
fees; fidelity bond premiums; registration fees for shares; Fund
office expenses; consultants' fees; compensation of board members,
officers and employees; corporate filing fees; organizational
expenses; expenses incurred in connection with lending securities
of the Fund; and expenses properly payable by the Fund, approved by
the board. The Fund paid nonadvisory expenses of $213,545 for the
fiscal year ended June 30, 1996, $155,247 for fiscal year 1995, and
$252,625 for fiscal year 1994.
Administrative Services Agreement
The Fund has an Administrative Services Agreement with AEFC. Under
this agreement, the Fund pays AEFC for providing administration and
accounting services. The fee is calculated as follows:
Assets Annual rate
(billions) each asset level
First $1.0 0.040%
Next 1.0 0.035
Next 1.0 0.030
Next 3.0 0.025
Over 6.0 0.020
On June 30, 1996, the daily rate applied to the Fund's net assets
was equal to 0.040% on an annual basis. The fee is calculated for
each calendar day on the basis of net assets as of the close of
business two business days prior to the day for which the
calculation is made. Under the agreement, the Fund paid fees of
$207,619 for the fiscal year ended June 30, 1996.
Transfer Agency Agreement
The Fund has a Transfer Agency Agreement with AEFC. This agreement
governs AEFC's responsibility for administering and/or performing
transfer agent functions, for acting as service agent in connection
with dividend and distribution functions and for performing
shareholder account administration agent functions in connection
with the issuance, exchange and redemption or repurchase of the
Fund's shares. Under the agreement, AEFC will earn a fee from the
Fund determined by multiplying the number of shareholder accounts <PAGE>
PAGE 177
at the end of the day by a rate determined for each class per year
and dividing by the number of days in the year. The rate for Class
A and Class Y is $15.50 per year and for Class B is $16.50 per
year. The fees paid to AEFC may be changed from time to time upon
agreement of the parties without shareholder approval. Under the
agreement, the Fund paid fees of $257,865 for the year ended
June 30, 1996.
Distribution Agreement
Under a Distribution Agreement, sales charges deducted for
distributing Fund shares are paid to American Express Financial
Advisors daily. These charges amounted to $1,300,606 for the
fiscal year ended June 30, 1996. Commissions paid to personal
financial advisors totaled $1,233,704. The amounts were $1,522,191
and $1,070,636 for the fiscal year 1995, and $5,617,954 and
$3,662,499 for fiscal year 1994.
Additional information about commissions and compensation for the
fiscal year ended June 30, 1996 is contained in the following
table:
<TABLE>
<CAPTION>
(1) (2) (3) (4) (5)
Net Compensation
Name of Underwriting on Redemption
Principal Discounts and and Brokerage Other
Underwriter Commissions Repurchases Commissions Compensation
<S> <C> <C> <C> <C>
AEFC None None None $107,002*
American
Express
Financial
Advisors $1,300,606
</TABLE>
*Distribution fees paid pursuant to the Plan and Agreement of
Distribution.
Shareholder Service Agreement
The Fund pays a fee for service provided to shareholders by
financial advisors and other servicing agents. The fee is
calculated at a rate of 0.175% of the Fund's average daily net
assets attributable to Class A and Class B shares.
Plan and Agreement of Distribution
For Class B shares, to help American Express Financial Advisors
defray the cost of distribution and servicing, not covered by sales
charges received under the Distribution Agreement, the Fund and
American Express Financial Advisors entered into a Plan and
Agreement of Distribution (Plan). These costs relate to most
aspects of distributing the Fund's shares including American
Express Financial Advisors' overhead expenses. These costs do not <PAGE>
PAGE 178
include compensation to the sales force. A substantial portion of
the costs are not specifically identified to any one fund in the
IDS MUTUAL FUND GROUP. Under the Plan, American Express Financial
Advisors is paid a fee at an annual rate of 0.75% of the Fund's
average daily net assets attributable to Class B shares.
The Plan must be approved annually by the board, including a
majority of the disinterested board members, if it is to continue
for more than a year. At least quarterly, the board must review
written reports concerning the amounts expended under the Plan and
the purposes for which such expenditures were made. The Plan and
any agreement related to it may be terminated at any time by vote
of a majority of the trustees who are not interested persons of the
Trust and have no direct or indirect financial interest in the
operation of the Plan or in any agreement related to the Plan, or
by vote of a majority of the outstanding voting securities of the
Fund or by American Express Financial Advisors. The Plan (or any
agreement related to it) will terminate in the event of its
assignment, as that term is defined in the Investment Company Act
of 1940, as amended. The Plan may not be amended to increase the
amount to be spent for distribution without shareholder approval,
and all material amendments to the Plan must be approved by a
majority of the board members, including a majority of the board
members who are not interested persons of the Trust and who do not
have a financial interest in the operation of the Plan or any
agreement related to it. The selection and nomination of
disinterested board members is the responsibility of disinterested
board members. No board member who is not an interested person,
has any direct or indirect financial interest in the operation of
the Plan or any related agreement. For the fiscal year ended June
30, 1996, the Fund paid fees of $107,002.
Total fees and expenses
Total fees and nonadvisory expenses cannot exceed the most
restrictive applicable state limitation. Currently, the most
restrictive applicable state expense limitation, subject to
exclusion of certain expenses, is 2.5% of the first $30 million of
the Fund's average daily net assets, 2% of the next $70 million and
1.5% of average daily net assets over $100 million, on an annual
basis. At the end of each month, if the fees and expenses of the
Fund exceed this limitation for the Fund's fiscal year in progress,
AEFC will assume all expenses in excess of the limitation. AEFC
then may bill the Fund for such expenses in subsequent months up to
the end of that fiscal year, but not after that date. No interest
charges are assessed by AEFC for expenses it assumes. The Fund
paid total fees and nonadvisory expenses of $4,035,789 for the
fiscal year ended June 30, 1996.
BOARD MEMBERS AND OFFICERS
The following is a list of the Fund's board members who, except for
Mr. Dudley, are board members of all 43 funds in the IDS MUTUAL
FUND GROUP. Mr. Dudley is a board member of all funds except the 9
life funds.
<PAGE>
PAGE 179
All shares have cumulative voting rights with respect to the
election of board members.
Lynne V. Cheney'
Born in 1941.
American Enterprise Institute
for Public Policy Research (AEI)
1150 17th St., N.W.
Washington, D.C.
Distinguished Fellow AEI. Former Chair of National Endowment of
the Humanities. Director, The Reader's Digest Association Inc.,
Lockheed-Martin, the Interpublic Group of Companies, Inc.
(advertising), and FPL Group, Inc. (holding company for Florida
Power and Light).
William H. Dudley**
Born in 1932.
2900 IDS Tower
Minneapolis, MN
Executive vice president and director of AEFC.
Robert F. Froehlke+
Born in 1922.
1201 Yale Place
Minneapolis, MN
Former president of all funds in the IDS MUTUAL FUND GROUP.
Director, the ICI Mutual Insurance Co., Institute for Defense
Analyses, Marshall Erdman and Associates, Inc. (architectural
engineering) and Public Oversight Board of the American Institute
of Certified Public Accountants.
David R. Hubers+**
Born in 1943.
2900 IDS Tower
Minneapolis, MN
President, chief executive officer and director of AEFC.
Previously, senior vice president, finance and chief financial
officer of AEFC.
Heinz F. Hutter+'
Born in 1929.
P.O. Box 2187
Minneapolis, MN
Former president and chief operating officer, Cargill, Incorporated
(commodity merchants and processors).
<PAGE>
PAGE 180
Anne P. Jones
Born in 1935.
5716 Bent Branch Rd.
Bethesda, MD
Attorney and telecommunications consultant. Former partner, law
firm of Sutherland, Asbill & Brennan. Director, Motorola, Inc. and
C-Cor Electronics, Inc.
Melvin R. Laird
Born in 1922.
Reader's Digest Association, Inc.
1730 Rhode Island Ave., N.W.
Washington, D.C.
Senior counsellor for national and international affairs, The
Reader's Digest Association, Inc. Former nine-term congressman,
secretary of defense and presidential counsellor. Director, Martin
Marietta Corp., Metropolitan Life Insurance Co., The Reader's
Digest Association, Inc., Science Applications International Corp.,
Wallace Reader's Digest Funds and Public Oversight Board (SEC
Practice Section, American Institute of Certified Public
Accountants).
William R. Pearce+*
Born in 1927.
901 S. Marquette Ave.
Minneapolis, MN
President of all funds in the IDS MUTUAL FUND GROUP since June
1993. Former vice chairman of the board, Cargill, Incorporated
(commodity merchants and processors).
Edson W. Spencer+
Born in 1926.
4900 IDS Center
80 S. 8th St.
Minneapolis, MN
President, Spencer Associates Inc. (consulting). Former chairman
of the board and chief executive officer, Honeywell Inc. Director,
Boise Cascade Corporation (forest products). Member of
International Advisory Council of NEC (Japan).
John R. Thomas**
Born in 1937.
2900 IDS Tower
Minneapolis, MN
Senior vice president and director of AEFC.
<PAGE>
PAGE 181
Wheelock Whitney+
Born in 1926.
1900 Foshay Tower
821 Marquette Ave.
Minneapolis, MN
Chairman, Whitney Management Company (manages family assets).
C. Angus Wurtele'
Born in 1934.
Valspar Corporation
Suite 1700
Foshay Tower
Minneapolis, MN
Chairman of the board and retired cheif executing officer, The
Valspar Corporation (paints). Director, Bemis Corporation
(packaging), Donaldson Company (air cleaners & mufflers) and
General Mills, Inc. (consumer foods).
+ Member of executive committee.
' Member of joint audit committee.
* Interested person by reason of being an officer and employee of
the Fund.
**Interested person by reason of being an officer, board member,
employee and/or shareholder of AEFC or American Express.
The board also has appointed officers who are responsible for day-
to-day business decisions based on policies it has established.
In addition to Mr. Pearce, who is president, the Fund's other
officers are:
Leslie L. Ogg
Born in 1938.
901 S. Marquette Ave.
Minneapolis, MN
Vice president, general counsel and secretary of all funds in the
IDS MUTUAL FUND GROUP.
Officers who also are officers and/or employees of AEFC
Peter J. Anderson
Born in 1942.
IDS Tower 10
Minneapolis, MN
Vice president-investments of all funds in the IDS MUTUAL FUND
GROUP. Director and senior vice president-investments of AEFC.
<PAGE>
PAGE 182
Melinda S. Urion
Born in 1953
IDS Tower 10
Minneapolis, MN
Treasurer of all funds in the IDS MUTUAL FUND GROUP. Director,
senior vice president and chief financial officer of AEFC.
Director and executive vice president and controller of IDS Life
Insurance Company.
Members of the board who are not officers of the Fund or of AEFC
receive an annual fee of $500. They also receive attendance and
other fees, the cost of which the Fund shares with the other funds
in the IDS MUTUAL FUND GROUP. These fees include attendance of
meetings of the Board, $1,000; meetings of the Contracts Committee,
$750; meetings of the Audit, Executive or Investment Review
Committees, $500; meetings of the Personnel Committee, $300; out-
of-state, $500; and Chair of the Contracts Committee, $5,000.
Expenses for attending those meetings are also reimbursed.
During the fiscal year ended June 30, 1996, the members of the
board, for attending up to 25 meetings, received the following
compensation:
<TABLE>
<CAPTION>
Compensation Table
Pension or Estimated
Aggregate Retirement annual Total cash
compensation benefits benefit compensation
from the accrued as upon from the IDS
Board member Fund Fund expenses* retirement MUTUAL FUND GROUP
<S> <C> <C> <C> <C>
Lynne V. Cheney $632 $ 187 $250 $69,800
Robert F. Froehlke 618 274 250 69,300
Heinz F. Hutter 645 287 121 70,300
Anne P. Jones 658 185 250 70,800
Donald M. Kendall 489 1,569 238 57,500
(Part of Year)
Melvin R. Laird 705 167 250 72,600
Lewis W. Lehr 548 356 235 59,800
(Part of Year)
Edson W. Spencer 747 0 133 74,300
Wheelock Whitney 635 284 250 70,000
C. Angus Wurtele 563 328 248 67,300
</TABLE>
On June 30, 1996, the Fund's board members and officers as a group
owned less than 1% of the outstanding shares. During the fiscal
year ended June 30, 1996, no board member or officer earned more
than $60,000 from this Fund. All board members and officers as a
group earned $22,550, including $3,637 of retirement plan benefits,
from this Fund.
*The Fund had a retirement plan for its independent board members.
The plan was terminated April 30, 1996.
<PAGE>
PAGE 183
CUSTODIAN
The Fund's securities and cash are held by First Bank National
Association, 180 E. Fifth St., St. Paul, MN 55101-1631, through a
custodian agreement. The custodian is permitted to deposit some or
all of its securities in central depository systems as allowed by
federal law.
THE TRUSTS
The Trusts are entities of the type commonly known as Massachusetts
business trusts. Under Massachusetts law, shareholders of such a
trust may, under certain circumstances, be held personally liable
as partners for its obligations. However, the risk of a
shareholder incurring financial loss on account of shareholder
liability is limited to circumstances in which the Trust itself is
unable to meet its obligations.
INDEPENDENT AUDITORS
The financial statements contained in the Annual Report to
shareholders for the fiscal year ended June 30, 1996, were audited
by independent auditors, KPMG Peat Marwick LLP, 4200 Norwest
Center, 90 S. Seventh St., Minneapolis, MN 55402-3900. The
independent auditors also provide other accounting and tax-related
services as requested by the Fund.
FINANCIAL STATEMENTS
The Independent Auditors' Report and the Financial Statements,
including Notes to the Financial Statements and the Schedule of
Investments in Securities, contained in the 1996 Annual Report to
shareholders, pursuant to Section 30(d) of the Investment Company
Act of 1940, as amended, are hereby incorporated in this SAI by
reference. No other portion of the Annual Report, however, is
incorporated by reference.
PROSPECTUS
The prospectus for IDS Insured Tax-Exempt Fund dated Aug. 29, 1996,
is hereby incorporated in this SAI by reference.
<PAGE>
PAGE 184
APPENDIX A
DESCRIPTION OF RATINGS OF TAX-EXEMPT SECURITIES AND SHORT-TERM
SECURITIES
Tax-Exempt Securities
Tax-exempt securities are used to raise money for various public
purposes, such as constructing public facilities and making loans
to public institutions. Certain types of tax-exempt bonds are
issued to obtain funding for privately operated facilities. There
are two principal classifications of municipal securities: notes
and bonds. Notes are used generally to provide for short-term
capital needs and generally have a maturity of up to one year.
These include tax anticipation notes, revenue anticipation notes,
bond anticipation notes, construction loan notes, variable rate
demand notes and tax-exempt commercial paper (also known as
municipal paper). Bonds, which meet longer-term capital needs,
generally have maturities of more than one year and fall into one
of two categories. General obligation bonds are backed by the
taxing power of the issuing municipality and are considered the
safest type of municipal bond. Revenue bonds are payable only from
the revenues of a particular project or facility and are generally
dependent solely on a specific revenue source. Industrial
development bonds are a specific type of revenue bond backed by the
credit and security of a private user.
The ratings concern the quality of the issuer. They are not an
opinion of the market value of the security. Such ratings are
opinions on whether the principal and interest will be repaid when
due. A security's rating may change which could affect its price.
Ratings by Moody's Investors Service, Inc. (Moody's) are Aaa, Aa,
A, Baa, Ba, B, Caa, Ca, C and D. Standard & Poor's Corporation
(S&P) ratings are AAA, AA, A, BBB, BB, B, CCC, CC, C and D.
Securities rated Aaa and AAA are judged to be of the best quality.
Capacity to pay interest and repay principal is extremely strong.
Prices are responsive only to interest rate fluctuations.
Securities rated Aa and AA also are judged to be high-grade
although margins of protection for interest and principal may not
be quite as good as Aaa or AAA rated securities. Long-term risk
may appear greater than the Aaa or AAA group. Prices are primarily
responsive to interest rate fluctuations.
Securities rated A are considered upper-medium grade. Protection
for interest and principal is deemed adequate but susceptible to
future impairment. The market prices of such obligations move
primarily with interest rate fluctuations but also with changing
economic or trade conditions.
Securities rated Baa and BBB are considered upper-medium-grade
obligations. Protection for interest and principal is adequate
over the short-term; however, these obligations have certain
speculative characteristics. They are susceptible to changing<PAGE>
PAGE 185
economic conditions and require constant review. Such bonds are
more responsive to business and trade conditions than to interest
rate fluctuations.
Securities rated Ba and BB are considered to have speculative
elements. Their future cannot be considered well assured. The
protection of interest and principal payments may be very moderate
and not well safeguarded during future good and bad times.
Uncertainty of position characterizes these bonds.
Securities rated B or lower lack characteristics of more desirable
investments. There may be small assurance over any long period of
time of the payment of interest and principal or of the maintenance
of other contract terms. Some of these bonds are of poor standing
and may be in default or have other marked shortcomings.
Bonds rated Caa and CCC are of poor standing. Such issues may be
in default or there may be elements of danger with respect to
principal or interest.
Bonds rated Ca and CC represent obligations that are highly
speculative. Such issues are often in default or have other marked
shortcomings.
Bonds rated C are obligations with a higher degree of speculation.
These securities have major risk exposures to default.
Bonds rated D are in payment default. The D rating is used when
interest payments or principal payments are not made on the due
date.
Non-rated securities will be considered for investment when they
possess a risk comparable to that of rated securities consistent
with the Fund objectives and policies. When assessing the risk
involved in each nonrated security, the Fund will consider the
financial condition of the issuer or the protection afforded by the
terms of the security.
Short-term Tax-exempt Securities
A portion of the Fund's assets are in cash and short-term
securities for day-to-day operating purposes. The investments will
usually be in short-term municipal bonds and notes. These include:
(1) Tax anticipation notes sold to finance working capital needs
of municipalities in anticipation of receiving taxes on a future
date.
(2) Bond anticipation notes sold on an interim basis in
anticipation of a municipality issuing a longer term bond in the
future.
(3) Revenue anticipation notes issued in anticipation of revenues
from sources other than taxes, such as federal revenues available
under the Federal Revenue Sharing Program.<PAGE>
PAGE 186
(4) Tax and revenue anticipation notes issued in anticipation of
revenues from taxes and other sources of revenue, except bond
placements.
(5) Construction loan notes insured by the Federal Housing
Administration which remain outstanding until permanent financing
by the Federal National Mortgage Association (FNMA) or the
Government National Mortgage Association (GNMA) at the end of the
project construction period.
(6) Tax-exempt commercial paper with a stated maturity of 365
days or less issued by agencies of state and local governments to
finance seasonal working capital needs or as short-term financing
in anticipation of longer-term financing.
(7) Variable rate demand notes, on which the yield is adjusted at
periodic intervals not exceeding 31 days and on which the principal
may be repaid after not more than seven days' notice, are
considered short-term regardless of the stated maturity.
Short-term municipal bonds and notes are rated by Moody's and by
S&P. The ratings reflect the liquidity concerns and market access
risks unique to notes.
Moody's MIG 1/VMIG 1 indicates the best quality. There is present
strong protection by established cash flows, superior liquidity
support or demonstrated broad-based access to the market for
refinancing.
Moody's MIG 2/VMIG 2 indicates high quality. Margins of protection
are ample enough although not so large as in the preceding group.
Moody's MIG 3/VMIG 3 indicates favorable quality. All security
elements are accounted for but there is lacking the undeniable
strength of the preceding grades. Liquidity and cash flow
protection may be narrow and market access for refinancing is
likely to be less well established.
Moody's MIG 4/VMIG 4 indicates adequate quality. Protection
commonly regarded as required of an investment security is present
and although not distinctly or predominantly speculative, there is
specific risk.
Standard & Poor's rating SP-1 indicates very strong or strong
capacity to pay principal and interest. Those issues determined to
possess overwhelming safety characteristics will be given a plus
(+) designation.
Standard & Poor's rating SP-2 indicates satisfactory capacity to
pay principal and interest.
Standard & Poor's rating SP-3 indicates speculative capacity to pay
principal and interest.
<PAGE>
PAGE 187
Short-term Taxable Securities and Repurchase Agreements
Depending on market conditions, a portion of the Fund's investments
may be in short-term taxable securities. These include:
(1) Obligations of the U.S. government, its agencies and
instrumentalities resulting principally from lending programs of
the U.S. government;
(2) U.S. Treasury bills with maturities up to one year. The
difference between the purchase price and the maturity value or
resale price is the interest income to the Fund;
(3) Certificates of deposit or receipts with fixed interest rates
issued by banks in exchange for deposit of funds;
(4) Bankers' acceptances arising from short-term credit
arrangements designed to enable businesses to obtain funds to
finance commercial transactions;
(5) Letters of credit which are short-term notes issued in bearer
form with a bank letter of credit obligating the bank to pay the
bearer the amount of the note;
(6) Commercial paper rated in the two highest grades by Moody's
or S&P. Commercial paper is generally defined as unsecured short-
term notes issued in bearer form by large well-known corporations
and finance companies. These ratings reflect a review of
management, economic evaluation of the industry competition,
liquidity, long-term debt and ten-year earning trends;
Moody's rating Prime-1 (P-1) and Standard & Poor's rating A-1
indicate that the degree of safety regarding timely payment of
short-term promissory obligations is either overwhelming or very
strong.
Moody's rating Prime-2 (P-2) and Standard & Poor's rating A-2
indicate that capacity for timely payment of short-term promissory
obligations with this designation is strong.
(7) Repurchase agreements involving acquisition of securities by
a fund with a concurrent agreement by the seller, usually a bank or
securities dealer, to reacquire the securities at cost plus
interest within a specified time. From this investment, the Fund
receives a fixed rate of return that is insulated from market rate
changes while it holds the security.
<PAGE>
PAGE 188
APPENDIX B
OPTIONS AND INTEREST RATE FUTURES CONTRACTS
The Fund may buy or write options traded on any U.S. or foreign
exchange or in the over-the-counter market. The Fund may enter
into interest rate futures contracts traded on any U.S. or foreign
exchange. The Fund also may buy or write put and call options on
these futures. Options in the over-the-counter market will be
purchased only when the investment manager believes a liquid
secondary market exists for the options and only from dealers and
institutions the investment manager believes present a minimal
credit risk. Some options are exercisable only on a specific date.
In that case, or if a liquid secondary market does not exist, the
Fund could be required to buy or sell securities at disadvantageous
prices, thereby incurring losses.
OPTIONS. An option is a contract. A person who buys a call option
for a security has the right to buy the security at a set price for
the length of the contract. A person who sells a call option is
called a writer. The writer of a call option agrees to sell the
security at the set price when the buyer wants to exercise the
option, no matter what the market price of the security is at that
time. A person who buys a put option has the right to sell a
security at a set price for the length of the contract. A person
who writes a put option agrees to buy the security at the set price
if the purchaser wants to exercise the option, no matter what the
market price of the security is at that time. An option is covered
if the writer owns the security (in the case of a call) or sets
aside the cash (in the case of a put) that would be required upon
exercise.
The price paid by the buyer for an option is called a premium. In
addition the buyer generally pays a broker a commission. The
writer receives a premium, less a commission, at the time the
option is written. The cash received is retained by the writer
whether or not the option is exercised. A writer of a call option
may have to sell the security for a below-market price if the
market price rises above the exercise price. A writer of a put
option may have to pay an above-market price for the security if
its market price decreases below the exercise price.
Options can be used to produce incremental earnings, protect gains
and facilitate buying and selling securities for investment
purposes. The use of options and futures contracts may benefit the
Fund and its shareholders by improving the Fund's liquidity and by
helping to stabilize the value of its net assets.
Buying options. Put and call options may be used as a trading
technique to facilitate buying and selling securities for
investment reasons. Options are used as a trading technique to
take advantage of any disparity between the price of the underlying
security in the securities market and its price on the options <PAGE>
PAGE 189
market. It is anticipated the trading technique will be utilized
only to effect a transaction when the price of the security plus
the option price will be as good or better than the price at which
the security could be bought or sold directly. When the option is
purchased, the Fund pays a premium and a commission. It then pays
a second commission on the purchase or sale of the underlying
security when the option is exercised. For record-keeping and tax
purposes, the price obtained on the purchase of the underlying
security will be the combination of the exercise price, the premium
and both commissions. When using options as a trading technique,
commissions on the option will be set as if only the underlying
securities were traded.
Put and call options also may be held by the Fund for investment
purposes. Options permit the Fund to experience the change in the
value of a security with a relatively small initial cash
investment. The risk the Fund assumes when it buys an option is
the loss of the premium. To be beneficial to the Fund, the price
of the underlying security must change within the time set by the
option contract. Furthermore, the change must be sufficient to
cover the premium paid, the commissions paid both in the
acquisition of the option and in a closing transaction or in the
exercise of the option and subsequent sale (in the case of a call)
or purchase (in the case of a put) of the underlying security.
Even then the price change in the underlying security does not
ensure a profit since prices in the option market may not reflect
such a change.
Writing covered options. The Fund will write covered options when
it feels it is appropriate and will follow these guidelines:
'Underlying securities will continue to be bought or sold solely on
the basis of investment considerations consistent with the Fund's
goal.
'All options written by the Fund will be covered. For covered call
options if a decision is made to sell the security, the Fund will
attempt to terminate the option contract through a closing purchase
transaction.
'The Fund will write options only as permitted under federal or
state laws or regulations, such as those that limit the amount of
total assets subject to the options. While no limit has been set
by the Fund, it will conform to the requirements of those states.
For example, California limits the writing of options to 50% of the
assets of a fund. Arkansas law limits the purchasing of puts,
calls, straddles, spreads, and any combination thereof to 5% of the
Fund's total assets.
Net premiums on call options closed or premiums on expired call
options are treated as short-term capital gains. Since the Fund is
taxed as a regulated investment company under the Internal Revenue
Code, any gains on options and other securities held less than
three months must be limited to less than 30% of its annual gross
income.<PAGE>
PAGE 190
If a covered call option is exercised, the security is sold by the
Fund. The Fund will recognize a capital gain or loss based upon
the difference between the proceeds and the security's basis.
Options on many securities are listed on options exchanges. If the
Fund writes listed options, it will follow the rules of the options
exchange. Options are valued at the close of the New York Stock
Exchange. An option listed on a national exchange, Chicago Board
Options Exchange (CBOE) or NASDAQ will be valued at the last-quoted
sales price or, if such a price is not readily available, at the
mean of the last bid and asked prices.
FUTURES CONTRACTS. A futures contract is an agreement between two
parties to buy and sell a security for a set price on a future
date. They have been established by boards of trade which have
been designated contracts markets by the Commodity Futures Trading
Commission (CFTC). Futures contracts trade on these markets in a
manner similar to the way a stock trades on a stock exchange, and
the boards of trade, through their clearing corporations, guarantee
performance of the contracts. Currently, there are futures
contracts based on such debt securities as long-term U.S. Treasury
bonds, Treasury notes, GNMA modified pass-through mortgage-backed
securities, three-month U.S. Treasury bills and bank certificates
of deposit. While futures contracts based on debt securities do
provide for the delivery and acceptance of securities, such
deliveries and acceptances are very seldom made. Generally, the
futures contract is terminated by entering into an offsetting
transaction. An offsetting transaction for a futures contract sale
is effected by the Fund entering into a futures contract purchase
for the same aggregate amount of the specific type of financial
instrument and same delivery date. If the price in the sale
exceeds the price in the offsetting purchase, the Fund immediately
is paid the difference and realizes a gain. If the offsetting
purchase price exceeds the sale price, the Fund pays the difference
and realizes a loss. Similarly, closing out a futures contract
purchase is effected by the Fund entering into a futures contract
sale. If the offsetting sale price exceeds the purchase price, the
Fund realizes a gain, and if the offsetting sale price is less than
the purchase price, the Fund realizes a loss. At the time a
futures contract is made, a good-faith deposit called initial
margin is set up within a segregated account at the Fund's
custodian bank. The initial margin deposit is approximately 1.5%
of a contract's face value. Daily thereafter, the futures contract
is valued and the payment of variation margin is required so that
each day the Fund would pay out cash in an amount equal to any
decline in the contract's value or receive cash equal to any
increase. At the time a futures contract is closed out, a nominal
commission is paid, which is generally lower than the commission on
a comparable transaction in the cash markets.
The purpose of a futures contract, in the case of a portfolio
holding long-term debt securities, is to gain the benefit of
changes in interest rates without actually buying or selling long-<PAGE>
PAGE 191
term debt securities. For example, if the Fund owned long-term
bonds and interest rates were expected to increase, it might enter
into futures contracts to sell securities which would have much the
same effect as selling some of the long-term bonds it owned.
Futures contracts are based on types of debt securities referred to
above, which have historically reacted to an increase or decline in
interest rates in a fashion similar to the debt securities the Fund
owns. If interest rates did increase, the value of the debt
securities in the portfolio would decline, but the value of the
Fund's futures contracts would increase at approximately the same
rate, thereby keeping the net asset value of the Fund from
declining as much as it otherwise would have. If, on the other
hand, the Fund held cash reserves and interest rates were expected
to decline, the Fund might enter into interest rate futures
contracts for the purchase of securities. If short-term rates were
higher than long-term rates, the ability to continue holding these
cash reserves would have a very beneficial impact on the Fund's
earnings. Even if short-term rates were not higher, the Fund would
still benefit from the income earned by holding these short-term
investments. At the same time, by entering into futures contracts
for the purchase of securities, the Fund could take advantage of
the anticipated rise in the value of long-term bonds without
actually buying them until the market had stabilized. At that
time, the futures contracts could be liquidated and the Fund's cash
reserves could then be used to buy long-term bonds on the cash
market. The Fund could accomplish similar results by selling bonds
with long maturities and investing in bonds with short maturities
when interest rates are expected to increase or by buying bonds
with long maturities and selling bonds with short maturities when
interest rates are expected to decline. But by using futures
contracts as an investment tool, given the greater liquidity in the
futures market than in the cash market, it might be possible to
accomplish the same result more easily and more quickly.
Successful use of futures contracts depends on the investment
manager's ability to predict the future direction of interest
rates. If the investment manager's prediction is incorrect, the
Fund would have been better off had it not entered into futures
contracts.
OPTIONS ON FUTURES CONTRACTS. Options on futures contracts give
the holder a right to buy or sell futures contracts in the future.
Unlike a futures contract, which requires the parties to the
contract to buy and sell a security on a set date, an option on a
futures contract merely entitles its holder to decide on or before
a future date (within nine months of the date of issue) whether to
enter into such a contract. If the holder decides not to enter
into the contract, all that is lost is the amount (premium) paid
for the option. Furthermore, because the value of the option is
fixed at the point of sale, there are no daily payments of cash to
reflect the change in the value of the underlying contract.
However, since an option gives the buyer the right to enter into a
contract at a set price for a fixed period of time, its value does
change daily and that change is reflected in the net asset value of
the Fund.<PAGE>
PAGE 192
RISKS. There are risks in engaging in each of the management tools
described above. The risk the Fund assumes when it buys an option
is the loss of the premium paid for the option. Purchasing options
also limits the use of monies that might otherwise be available for
long-term investments.
The risk involved in writing options on futures contracts the Fund
owns, or on securities held in its portfolio, is that there could
be an increase in the market value of such contracts or securities.
If that occurred, the option would be exercised and the asset sold
at a lower price than the cash market price. To some extent, the
risk of not realizing a gain could be reduced by entering into a
closing transaction. The Fund could enter into a closing
transaction by purchasing an option with the same terms as the one
it had previously sold. The cost to close the option and terminate
the Fund's obligation, however, might be more or less than the
premium received when it originally wrote the option. Furthermore,
the Fund might not be able to close the option because of
insufficient activity in the options market.
A risk in employing futures contracts to protect against the price
volatility of portfolio securities is that the prices of securities
subject to futures contracts may not correlate perfectly with the
behavior of the cash prices of the Fund's securities. The
correlation may be distorted because the futures market is
dominated by short-term traders seeking to profit from the
difference between a contract or security price and their cost of
borrowed funds. Such distortions are generally minor and would
diminish as the contract approached maturity.
Another risk is that the Fund's investment manager could be
incorrect in anticipating as to the direction or extent of various
interest rate movements or the time span within which the movements
take place. For example, if the Fund sold futures contracts for
the sale of securities in anticipation of an increase in interest
rates, and interest rates declined instead, the Fund would lose
money on the sale.
TAX TREATMENT. As permitted under federal income tax laws, the
Fund intends to identify futures contracts as mixed straddles and
not mark them to market, that is, not treat them as having been
sold at the end of the year at market value. Such an election may
result in the Fund being required to defer recognizing losses
incurred by entering into futures contracts and losses on
underlying securities identified as being hedged against.
Federal income tax treatment of gains or losses from transactions
in options on futures contracts and indexes will depend on whether
such option is a section 1256 contract . If the option is a non-
equity option, the Fund will either make a 1256(d) election and
treat the option as a mixed straddle or mark to market the option
at fiscal year end and treat the gain/loss as 40% short-term and
60% long-term. Certain provisions of the Internal Revenue Code may
<PAGE>
PAGE 193
also limit the Fund's ability to engage in futures contracts and
related options transactions. For example, at the close of each
quarter of the Fund's taxable year, at least 50% of the value of
its assets must consist of cash, government securities and other
securities, subject to certain diversification requirements. Less
than 30% of its gross income must be derived from sales of
securities held less than three months.
The IRS has ruled publicly that an exchange-traded call option is a
security for purposes of the 50%-of-assets test and that its issuer
is the issuer of the underlying security, not the writer of the
option, for purposes of the diversification requirements. In order
to avoid realizing a gain within the three-month period, the Fund
may be required to defer closing out a contract beyond the time
when it might otherwise be advantageous to do so. The Fund also
may be restricted in purchasing put options for the purpose of
hedging underlying securities because of applying the short sale
holding period rules with respect to such underlying securities.
Accounting for futures contracts will be according to generally
accepted accounting principles. Initial margin deposits will be
recognized as assets due from a broker (the Fund's agent in
acquiring the futures position). During the period the futures
contract is open, changes in value of the contract will be
recognized as unrealized gains or losses by marking to market on a
daily basis to reflect the market value of the contract at the end
of each day's trading. Variation margin payments will be made or
received depending upon whether gains or losses are incurred. All
contracts and options will be valued at the last-quoted sales price
on their primary exchange.
<PAGE>
PAGE 194
APPENDIX C
INSURED FUND
Insurance
The Fund's entire portfolio of municipal obligations will at all
times be fully insured as to the scheduled payment of all
installments of principal and interest thereon, except as noted
below. This insurance feature minimizes the risks to the Fund and
its shareholders associated with any defaults in the municipal
obligations owned by the Fund.
Each insured municipal obligation in the Fund's portfolio will be
covered by either a mutual fund Portfolio Insurance Policy issued
by Financial Guaranty Insurance Company (Financial Guaranty) or a
New Issue Insurance Policy obtained by the issuer of the obligation
at the time of its original issuance. If a municipal obligation is
already covered by a New Issue Insurance Policy then the obligation
is not required to be additionally insured under a Portfolio
Insurance Policy. A New Issue Insurance Policy may have been
written by Financial Guaranty or other insurers. Based upon the
expected composition of the Fund's portfolio, its investment
manager estimates that the annual premiums for the Portfolio
Insurance Policy will range from .059% to .508%, with an average
annual premium rate of approximately .10% to .25% of the Fund's
assets. Premiums are paid from the Fund's assets, and will reduce
the current yield on its portfolio by the amount thereof.
Both types of policies discussed above insure the scheduled payment
of all principal and interest on the municipal obligations as they
fall due. The insurance does not guarantee the market value of the
municipal obligations nor the value of the shares of the Fund and,
except as described above, has no effect on the net asset value or
redemption price of the shares of the Fund. The insurance of
principal refers to the face or par value of the municipal
obligation, and is not affected by the price paid by the Fund or by
the market value.
The Fund may purchase municipal obligations on which the payment of
interest and principal is guaranteed by an agency or
instrumentality of the U.S. government or which are rated Aaa, MIG-
1 or Prime-1 by Moody's or AAA, A-1 or SP-1 by S&P, in either case
without being required to insure the municipal obligations under
the Portfolio Insurance Policy.
New Issue Insurance. The New Issue Insurance Policies, if any,
have been obtained by the respective issuers or underwriters of the
municipal obligations and all premiums respecting the securities
have been paid in advance by the issuers or underwriters. The
policies are noncancelable and will continue in force so long as
the municipal obligations are outstanding and the respective
insurers remain in business. Since New Issue Insurance remains in <PAGE>
PAGE 195
effect as long as the insured municipal obligations are
outstanding, the insurance may have an effect on the resale value
of municipal obligations so insured in the Fund's portfolio.
Therefore, New Issue Insurance may be considered to represent an
element of market value in regard to municipal obligations thus
insured, but the exact effect, if any, of this insurance on market
value cannot be estimated. The Fund will acquire municipal
obligations subject to New Issue Insurance Policies only where the
insurer is rated Aaa by Moody's or AAA by S&P.
Portfolio Insurance. The Portfolio Insurance Policy to be obtained
by the Fund from Financial Guaranty will be effective only so long
as the Fund is in existence, Financial Guaranty is still in
business, and the municipal obligations described in the Portfolio
Insurance Policy continue to be held by the Fund. In the event of
a sale of any municipal obligation by the Fund or payment prior to
maturity, the Portfolio Insurance Policy terminates as to that
municipal obligation.
The Portfolio Insurance Policy obtained by the Fund is
noncancelable except for failure to pay the premiums. Nonpayment
of premiums on the Policy also will permit Financial Guaranty to
take action against the Fund to recover premium payments due it.
Premium rates for each issue of municipal obligations covered by
the Portfolio Insurance Policy are fixed for the period of time the
securities are owned by the Fund. The insurance premiums are
payable monthly by the Fund and are adjusted for purchases and
sales of covered municipal obligations during the month. The Fund
has reserved the right (a) to cancel the Portfolio Insurance Policy
upon 60 days' prior written notice to Financial Guaranty and (b) to
discontinue insuring newly-acquired municipal obligations under the
Portfolio Insurance Policy upon 30 days' prior written notice to
Financial Guaranty.
Under the provisions of the Portfolio Insurance Policy, Financial
Guaranty unconditionally and irrevocably agrees to pay to Citibank,
N.A., or its successor, as its agent (the Fiscal Agent), that
portion of the principal of and interest on the municipal
obligations which shall become due for payment but shall be unpaid
by reason of nonpayment by the issuer. Financial Guaranty will
make these payments to the Fiscal Agent on the date the principal
or interest becomes due for payment or on the business day next
following the day on which Financial Guaranty receives notice of
nonpayment, whichever is later. The Fiscal Agent will disburse to
the Fund the face amount of principal and interest which is then
due for payment but is unpaid by reason of nonpayment by the
issuer, but only upon receipt by the Fiscal Agent of (i) evidence
of the Fund's right to receive payment of the principal or interest
due for payment and (ii) evidence, including any appropriate
instruments of assignment, that all of the rights to payment of
principal or interest due for payment shall thereupon vest in
Financial Guaranty. Upon disbursement, Financial Guaranty shall <PAGE>
PAGE 196
become the owner of the municipal obligation, appurtenant coupon or
right to payment of principal or interest on the obligation and
shall be fully subrogated to all of the Fund's rights thereunder,
including the right to payment thereof.
In determining whether to insure any municipal obligation,
Financial Guaranty applies its own standards, which are not
necessarily the same as the criteria used in regard to the
selection of municipal obligations by the Fund's investment
adviser. Financial Guaranty's decision is made prior to the Fund's
purchase of the municipal obligations. Contracts to purchase
municipal obligations are not covered by the Portfolio Insurance
Policy although municipal obligations underlying the contracts are
covered by this insurance upon their physical delivery to the Fund
or its Custodian.
Secondary Market Insurance. The Fund may at any time purchase from
Financial Guaranty a secondary market insurance policy (Secondary
Market Policy) on any municipal obligation currently covered by the
Portfolio Insurance Policy. The coverage and obligation to pay
monthly premiums under the Portfolio Insurance Policy would cease
with the purchase by the Fund of a Secondary Market Policy.
By purchasing a Secondary Market Policy, the Fund would, upon
payment of a single premium, obtain insurance against nonpayment of
scheduled principal and interest for the remaining term of the
municipal obligation, regardless of whether the Fund then owned the
obligation. This insurance coverage would be noncancelable and
would continue in force so long as the municipal obligations so
insured are outstanding. The purpose of acquiring such a Policy
would be to enable the Fund to sell a municipal obligation to a
third party as a Aaa/AAA rated insured obligation at a market price
higher than what otherwise might be obtainable if the obligation
were sold without the insurance coverage. This rating is not
automatic, however, and must specifically be requested for each
obligation. Any difference between the excess of an obligation's
market value as a Aaa/AAA rated security over its market value
without this rating and the single premium payment would inure to
the Fund in determining the net capital gain or loss realized by
the Fund upon the sale of the obligation.
Since the Fund has the right to purchase a Secondary Market Policy
for an eligible municipal obligation even if the obligation is
currently in default as to any payments by the issuer, the Fund
would have the opportunity to sell the obligation rather than be
obligated to hold it in its portfolio in order to continue the
Portfolio Insurance Policy in force.
Because coverage under the Portfolio Insurance Policy terminates
upon sale of a municipal obligation insured thereunder, the
insurance does not have an effect on the resale value of the
obligation. Therefore, it is the intention of the Fund to retain
any insured municipal obligations which are in default or in
significant risk of default, and to place a value on the insurance <PAGE>
PAGE 197
which will be equal to the difference between the market value of
similar obligations which are not in default. Because of this
policy, the Fund's investment manager may be unable to manage the
Fund's portfolio to the extent that it holds defaulted municipal
obligations, which may limit its ability in certain circumstances
to purchase other municipal obligations. While a defaulted
municipal obligation is held in the Fund's portfolio, the Fund
continues to pay the insurance premium but also collects interest
payments from the insurer and retains the right to collect the full
amount of principal from the insurer when the municipal obligation
comes due. This would not be applicable if the Fund elected to
purchase a Secondary Market Policy discussed above with respect to
a municipal obligation.
Financial Guaranty Insurance Company. Financial Guaranty is a
wholly owned subsidiary of FGIC Corporation (the Corporation), a
Delaware holding company. Financial Guaranty, domiciled in the
State of New York, commenced its business of providing insurance
and financial guaranties for a variety of investment instruments in
January 1984. The Corporation is a wholly-owned subsidiary of
General Electric Capital Corporation.
In addition to providing insurance for the payment of interest on
and principal of municipal bonds and notes held in unit investment
trust and mutual fund portfolios, Financial Guaranty provides
insurance for new and secondary market issues of municipal bonds
and notes and for portions of new and secondary market issues of
municipal bonds and notes. Financial Guaranty also guarantees a
variety of non-municipal structured obligations, such as mortgage-
backed securities. It also is authorized to write surety
insurance. Moody's and Standard & Poor's have rated the claims-
paying ability of Financial Guaranty Aaa and AAA, respectively.
Financial Guaranty is licensed to provide insurance in 48 states
and the District of Columbia. It files reports with state
insurance regulatory agencies and is subject to audit and review by
these authorities. Financial Guaranty is also subject to
regulation by the State of New York Insurance Department. This
regulation, however, is no guarantee that Financial Guaranty will
be able to perform on its contracts of insurance in the event a
claim should be made thereunder at some time in the future.
The information about Financial Guaranty contained above has been
furnished by the Corporation. No representation is made as to the
accuracy or adequacy of this information.
The policy of insurance obtained by the Fund from Financial
Guaranty and the agreement and negotiations in respect thereof
represent the only relationship between Financial Guaranty and the
Fund. Otherwise, neither Financial Guaranty nor its parent, FGIC
Corporation, has any significant relationship, direct or indirect,
with the Fund.
<PAGE>
PAGE 198
Government Securities
The Fund may invest in securities guaranteed by an agency or
instrumentality of the United States government. These agencies
include Federal National Mortgage Association and Federal Housing
Administration (FHA). In the case of a default on a FHA security,
the outstanding balance is subject to an assignment fee and
interest payments may be delayed. This will reduce the return to
the Fund.
<PAGE>
PAGE 199
APPENDIX D
DOLLAR-COST AVERAGING
A technique that works well for many investors is one that
eliminates random buy and sell decisions. One such system is
dollar-cost averaging. Dollar-cost averaging involves building a
portfolio through the investment of fixed amounts of money on a
regular basis regardless of the price or market condition. This
may enable an investor to smooth out the effects of the volatility
of the financial markets. By using this strategy, more shares will
be purchased when the price is low and less when the price is high.
As the accompanying chart illustrates, dollar-cost averaging tends
to keep the average price paid for the shares lower than the
average market price of shares purchased, although there is no
guarantee.
While this does not ensure a profit and does not protect against a
loss if the market declines, it is an effective way for many
shareholders who can continue investing through changing market
conditions to accumulate shares in a fund to meet long-term goals.
Dollar-cost averaging
___________________________________________________________________
Regular Market Price Shares
Investment of a Share Acquired
$100 $6.00 16.7
100 4.00 25.0
100 4.00 25.0
100 6.00 16.7
100 5.00 20.0
$500 $25.00 103.4
Average market price of a share over 5 periods:
$5.00 ($25.00 divided by 5).
The average price you paid for each share:
$4.84 ($500 divided by 103.4).
<PAGE>
PAGE 200
__________________________________________________________________
Independent auditors' report
The board and shareholders
IDS California Tax-Exempt Trust
IDS Special Tax-Exempt Series Trust:
We have audited the accompanying statements of assets and
liabilities, including the schedules of investments in securities,
of IDS California Tax-Exempt Fund (a fund within IDS California
Tax-Exempt Trust), and IDS Massachusetts Tax-Exempt Fund, IDS
Michigan Tax-Exempt Fund, IDS Minnesota Tax-Exempt Fund, IDS New
York Tax-Exempt Fund and IDS Ohio Tax-Exempt Fund (funds within IDS
Special Tax-Exempt Series Trust) as of June 30, 1996, the related
statements of operations for the year then ended, the statements of
changes in net assets for each of the years in the two-year period
then ended, 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, of IDS California Tax-Exempt
Fund, IDS Minnesota Tax-Exempt Fund and IDS New York Tax-Exempt
Fund; and the financial highlights for each of the years in the
nine-year period ended June 30, 1996, of IDS Massachusetts Tax-
Exempt Fund, IDS Michigan Tax-Exempt Fund and IDS Ohio Tax-Exempt
Fund. These financial statements and the financial highlights are
the responsibility of fund management. Our responsibility is to
express an opinion on these financial statements and the financial
highlights based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements and the financial highlights are free of
material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the
financial statements. Investment securities held in custody are
confirmed to us by the custodian. As to securities purchased and
sold but not received or delivered, we request confirmations from
brokers, and where replies are not received, we carry out other
appropriate auditing procedures. An audit also includes assessing
the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis
for our opinion.
<PAGE>
PAGE 201
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of IDS
California Tax-Exempt Fund, IDS Massachusetts Tax-Exempt Fund, IDS
Michigan Tax-Exempt Fund, IDS Minnesota Tax-Exempt Fund, IDS New
York Tax-Exempt Fund and IDS Ohio Tax-Exempt Fund at June 30, 1996,
and the results of their operations for the year then ended, the
changes in their net assets for each of the years in the two-year
period ended, 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 202
<TABLE>
<CAPTION>
Financial statements
Statements of assets and liabilities
IDS California Tax-Exempt Trust
IDS Special Tax-Exempt Series Trust
June 30, 1996
_____________________________________________________________________________________________________________________________
Assets
_____________________________________________________________________________________________________________________________
California Massachusetts Michigan
Tax-Exempt Tax-Exempt Tax-Exempt
Fund Fund Fund
_____________________________________________________________________________________________________________________________
<S> <C> <C> <C>
Investments in securities, at value (Note 1)
(identified cost $219,312,804, $68,878,578
and $75,801,580) $234,980,999 $72,057,717 $80,439,025
Cash in bank on demand deposit 1,013,026 736,750 --
Accrued interest receivable 4,515,580 1,525,236 1,320,519
Receivable for investment securities sold 107,531 25,313 28,687
_____________________________________________________________________________________________________________________________
Total assets 240,617,136 74,345,016 81,788,231
_____________________________________________________________________________________________________________________________
Liabilities
_____________________________________________________________________________________________________________________________
Disbursements in excess of cash on demand deposit -- -- 59,689
Dividends payable to shareholders 51,808 20,083 18,090
Payable for investment securities purchased -- 965,203 --
Accrued investment management services fee 3,068 936 1,042
Accrued distribution fee 130 113 53
Accrued service fee 1,143 348 388
Accrued transfer agency fee 258 127 115
Accrued administrative services fee 261 80 89
Other accrued expenses 45,778 30,101 35,867
_____________________________________________________________________________________________________________________________
Total liabilities 102,446 1,016,991 115,333
_____________________________________________________________________________________________________________________________
Net assets applicable to outstanding shares $240,514,690 $73,328,025 $81,672,898
_____________________________________________________________________________________________________________________________
Represented by
_____________________________________________________________________________________________________________________________
Shares of beneficial interest -- $.01 par value,
unlimited number of shares authorized $ 467,134 $ 138,353 $ 152,273
Additional paid-in-capital 232,195,182 71,392,078 78,354,771
Undistributed net investment income 1,254 6,316 (3,116)
Accumulated net realized loss (Notes 1 and 6) (8,112,325) (1,467,048) (1,559,130)
Unrealized appreciation (Note 5) 15,963,445 3,258,326 4,728,100
_____________________________________________________________________________________________________________________________
Total -- representing net assets applicable to outstanding shares $240,514,690 $73,328,025 $81,672,898
_____________________________________________________________________________________________________________________________
Net assets applicable to outstanding shares: Class A $234,115,579 $67,765,538 $79,074,832
Class B $ 6,398,039 $ 5,561,413 $ 2,596,990
Class Y $ 1,072 $ 1,074 $ 1,076
Outstanding shares of beneficial interest: Class A shares 45,470,271 12,785,695 14,742,952
Class B shares 1,242,929 1,049,378 484,188
Class Y shares 208 202 200
Net asset value per share: Class A $ 5.15 $ 5.30 $ 5.36
Class B $ 5.15 $ 5.30 $ 5.36
Class Y $ 5.15 $ 5.32 $ 5.38
See accompanying notes to financial statements.
<PAGE>
PAGE 203 Financial statements
Statements of assets and liabilities
IDS California Tax-Exempt Trust
IDS Special Tax-Exempt Series Trust
June 30, 1996
_____________________________________________________________________________________________________________________________
Assets
_____________________________________________________________________________________________________________________________
Minnesota New York Ohio
Tax-Exempt Tax-Exempt Tax-Exempt
Fund Fund Fund
____________________________________________________________________________________________________________________________
Investments in securities, at value (Note 1)
(identified cost $383,139,342, $111,208,011
and $69,340,999) $400,295,278 $117,902,996 $72,981,281
Cash in bank on demand deposit 379,599 20,240 --
Accrued interest receivable 8,351,576 2,332,411 1,012,178
Receivable for investment securities sold 242,719 54,000 27,000
_____________________________________________________________________________________________________________________________
Total assets 409,269,172 120,309,647 74,020,459
_____________________________________________________________________________________________________________________________
Liabilities
_____________________________________________________________________________________________________________________________
Disbursements in excess of cash on demand deposit -- -- 153,982
Dividends payable to shareholders 126,049 35,710 21,942
Accrued investment management services fee 5,111 1,534 944
Accrued distribution fee 324 101 45
Accrued service fee 1,943 571 351
Accrued transfer agency fee 625 188 110
Accrued administrative services fee 422 130 80
Other accrued expenses 78,735 39,933 24,725
_____________________________________________________________________________________________________________________________
Total liabilities 213,209 78,167 202,179
_____________________________________________________________________________________________________________________________
Net assets applicable to outstanding shares $409,055,963 $120,231,480 $73,818,280
_____________________________________________________________________________________________________________________________
Represented by
_____________________________________________________________________________________________________________________________
Shares of beneficial interest -- $.01 par value,
unlimited number of shares authorized $ 787,347 $ 237,478 $ 139,732
Additional paid-in-capital 401,826,541 117,466,739 72,107,198
Undistributed net investment income 11,951 (11) 695
Accumulated net realized loss (Notes 1 and 6) (11,210,593) (4,337,180) (2,155,221)
Unrealized appreciation (Note 5) 17,640,717 6,864,454 3,725,876
_____________________________________________________________________________________________________________________________
Total -- representing net assets applicable to outstanding shares $409,055,963 $120,231,480 $73,818,280
_____________________________________________________________________________________________________________________________
Net assets applicable to outstanding shares: Class A $392,966,276 $115,274,794 $71,628,090
Class B $ 16,088,609 $ 4,955,626 $ 2,189,121
Class Y $ 1,078 $ 1,060 $ 1,069
Outstanding shares of beneficial interest: Class A shares 75,637,575 22,768,781 13,558,632
Class B shares 3,096,878 978,780 414,378
Class Y shares 207 209 202
Net asset value per share: Class A $ 5.20 $ 5.06 $ 5.28
Class B $ 5.20 $ 5.06 $ 5.28
Class Y $ 5.21 $ 5.07 $ 5.29
See accompanying notes to financial statements.
/TABLE
<PAGE>
PAGE 204
<TABLE>
<CAPTION>
Financial statements
Statements of operations
IDS California Tax-Exempt Trust
IDS Special Tax-Exempt Series Trust
Year ended June 30, 1996
_____________________________________________________________________________________________________________________________
Investment income
_____________________________________________________________________________________________________________________________
California Massachusetts Michigan
Tax-Exempt Tax-Exempt Tax-Exempt
Fund Fund Fund
_____________________________________________________________________________________________________________________________
<S> <C> <C> <C>
Income:
Interest $14,969,221 $4,486,909 $5,028,983
_____________________________________________________________________________________________________________________________
Expenses (Note 2):
Investment management services fee 1,138,491 344,729 381,069
Distribution fee -- Class B 29,809 28,726 13,434
Transfer agency fee 96,983 46,478 42,691
Incremental transfer agency fee -- Class B 196 169 80
Service fee
Class A 414,609 121,350 137,607
Class B 6,894 6,663 3,115
Administrative services fee 97,114 30,015 32,431
Compensation of board members 6,376 6,411 5,788
Compensation of officers 2,465 930 561
Custodian fees 100,438 5,630 23,266
Postage 16,475 5,355 3,597
Registration fees 27,954 24,903 33,241
Reports to shareholders 17,235 17,338 7,523
Audit fees 16,500 15,250 16,315
Administrative 1,896 2,583 987
Other 3,222 7,004 2,979
_____________________________________________________________________________________________________________________________
Total expenses 1,976,657 663,534 704,684
Earnings credits on cash balances (Note 2) (100,484) (7,768) (23,235)
_____________________________________________________________________________________________________________________________
Total net expenses 1,876,173 655,766 681,449
_____________________________________________________________________________________________________________________________
Investment income -- net 13,093,048 3,831,143 4,347,534
_____________________________________________________________________________________________________________________________
Realized and unrealized gain (loss) -- net
_____________________________________________________________________________________________________________________________
Net realized gain on security transactions (Note 3) 997,822 102,823 318,118
Net realized loss on closed interest rate futures contracts (537,999) (22,179) (17,177)
Net realized gain on exercised option contracts written (Note 7) 93,436 14,910 15,904
_____________________________________________________________________________________________________________________________
Net realized gain on investments 553,259 95,554 316,845
Net change in unrealized appreciation or depreciation 323,151 202,491 274,473
_____________________________________________________________________________________________________________________________
Net gain on investments 876,410 298,045 591,318
_____________________________________________________________________________________________________________________________
Net increase in net assets resulting from operations $13,969,458 $4,129,188 $ 4,938,852
_____________________________________________________________________________________________________________________________
See accompanying notes to financial statements.
<PAGE>
PAGE 205
Financial statements
Statements of operations
IDS California Tax-Exempt Trust
IDS Special Tax-Exempt Series Trust
Year ended June 30, 1996
_____________________________________________________________________________________________________________________________
Investment income
_____________________________________________________________________________________________________________________________
Minnesota New York Ohio
Tax-Exempt Tax-Exempt Tax-Exempt
Fund Fund Fund
_____________________________________________________________________________________________________________________________
Income:
Interest $26,512,346 $7,798,801 $4,675,409
_____________________________________________________________________________________________________________________________
Expenses (Note 2):
Investment management services fee 1,895,243 578,413 355,739
Distribution fee -- Class B 71,223 27,377 11,346
Transfer agency fee 234,593 71,670 41,628
Incremental transfer agency fee -- Class B 509 198 97
Service fee
Class A 698,714 207,892 128,837
Class B 16,613 6,387 2,647
Administrative services fee 156,621 49,226 30,276
Compensation of board members 8,036 7,000 6,949
Compensation of officers 5,121 1,170 672
Custodian fees 138,999 5,219 19,411
Postage 32,635 13,794 6,134
Registration fees 30,583 32,707 25,367
Reports to shareholders 35,566 14,838 7,395
Audit fees 17,500 16,500 16,129
Administrative 1,555 1,171 412
Other 15,694 6,139 1,401
_____________________________________________________________________________________________________________________________
Total expenses 3,359,205 1,039,701 654,440
Earnings credits on cash balances (Note 2) (111,580) (3,793) (19,403)
_____________________________________________________________________________________________________________________________
Total net expenses 3,247,625 1,035,908 635,037
_____________________________________________________________________________________________________________________________
Investment income -- net 23,264,721 6,762,893 4,040,372
_____________________________________________________________________________________________________________________________
Realized and unrealized gain (loss) -- net
_____________________________________________________________________________________________________________________________
Net realized gain (loss) on security transactions (Note 3) 609,392 153,907 (440,823)
Net realized loss on closed interest rate futures contracts (185,775) (537,433) (25,608)
Net realized gain on exercised or expired option contracts written (Note 7) 88,466 70,574 15,904
______________________________________________________________________________________________________________________________
Net realized gain (loss) on investments 512,083 (312,952) (450,527)
Net change in unrealized appreciation or depreciation 20,022 (271,393) 579,615
_____________________________________________________________________________________________________________________________
Net gain (loss) on investments 532,105 (584,345) 129,088
_____________________________________________________________________________________________________________________________
Net increase in net assets resulting from operations $23,796,826 $6,178,548 $4,169,460
_____________________________________________________________________________________________________________________________
See accompanying notes to financial statements.
/TABLE
<PAGE>
PAGE 206
<TABLE>
<CAPTION>
Financial statements
Statements of changes in net assets
IDS California Tax-Exempt Trust
IDS Special Tax-Exempt Series Trust
Year ended June 30,
_____________________________________________________________________________________________________________________________
Operations and distributions
_____________________________________________________________________________________________________________________________
1996 1995 1996 1995
California Massachusetts
Tax-Exempt Fund Tax-Exempt Fund
_____________________________________________________________________________________________________________________________
<S> <C> <C> <C> <C>
Investment income -- net $13,093,048 $ 14,306,975 $3,831,143 $ 3,941,356
Net realized gain (loss) on investments 553,259 (4,035,813) 95,554 (1,258,540)
Net change in unrealized appreciation or depreciation 323,151 4,486,171 202,491 1,474,819
_____________________________________________________________________________________________________________________________
Net increase in net assets resulting
from operations 13,969,458 14,757,333 4,129,188 4,157,635
_____________________________________________________________________________________________________________________________
Distributions to shareholders from:
Net investment income
Class A (12,910,349) (14,290,556) (3,652,150) (3,926,867)
Class B (184,985) (16,509) (172,619) (14,479)
Class Y (59) (11) (58) (10)
Net realized gain on securities
Class A (1,353,174) -- -- --
Class B (20,647) -- -- --
Class Y (6) -- -- --
_____________________________________________________________________________________________________________________________
Total distributions (14,469,220) (14,307,076) (3,824,827) (3,941,356)
_____________________________________________________________________________________________________________________________
Share transactions (Note 4)
_____________________________________________________________________________________________________________________________
Proceeds from sales
Class A shares (Note 2) 23,553,539 22,693,617 11,006,959 10,352,839
Class B shares 5,187,208 2,091,151 4,389,565 1,991,573
Class Y shares -- 1,020 -- 1,021
Reinvestment of distributions at net asset value
Class A shares 10,071,411 9,854,175 2,835,364 3,023,192
Class B shares 184,290 13,558 149,356 12,005
Class Y shares 65 11 58 10
Payments for redemptions
Class A shares (38,384,549) (48,910,065) (14,679,805) (17,395,360)
Class B shares (Note 2) (960,392) (27,600) (790,581) (137,393)
_____________________________________________________________________________________________________________________________
Increase (decrease) in net assets from
share transactions (348,428) (14,284,133) 2,910,916 (2,152,113)
_____________________________________________________________________________________________________________________________
Total increase (decrease) in net assets (848,190) (13,833,876) 3,215,277 (1,935,834)
Net assets at beginning of year 241,362,880 255,196,756 70,112,748 72,048,582
_____________________________________________________________________________________________________________________________
Net assets at end of year
(including undistributed net investment income
of $1,254 and $2,661 for IDS California, and
$6,316 and $0 for IDS Massachusetts) $240,514,690 $241,362,880 $73,328,025 $70,112,748
_____________________________________________________________________________________________________________________________
See accompanying notes to financial statements.
<PAGE>
PAGE 207
Financial statements
Statements of changes in net assets
IDS California Tax-Exempt Trust
IDS Special Tax-Exempt Series Trust
Year ended June 30,
_____________________________________________________________________________________________________________________________
Operations and distributions
______________________________________________________________________________________________________________________________
1996 1995 1996 1995
Michigan Minnesota
Tax-Exempt Fund Tax-Exempt Fund
______________________________________________________________________________________________________________________________
Investment income -- net $4,347,534 $ 4,389,687 $ 23,264,721 $ 23,929,961
Net realized gain (loss) on investments 316,845 (518,081) 512,083 (9,227,466)
Net change in unrealized appreciation or depreciation 274,473 1,141,073 20,022 10,495,908
_____________________________________________________________________________________________________________________________
Net increase in net assets resulting
from operations 4,938,852 5,012,679 23,796,826 25,198,403
_____________________________________________________________________________________________________________________________
Distributions to shareholders from:
Net investment income
Class A (4,267,908) (4,384,843) (22,792,618) (23,900,319)
Class B (83,171) (4,833) (470,510) (29,555)
Class Y (59) (11) (62) (11)
Net realized gain
Class A (1,011,041) (36,289) (300,980) --
Class B (21,404) -- (6,713) --
Class Y (13) -- (1) --
_____________________________________________________________________________________________________________________________
Total distributions (5,383,596) (4,425,976) (23,570,884) (23,929,885)
_____________________________________________________________________________________________________________________________
Share transactions (Note 4)
_____________________________________________________________________________________________________________________________
Proceeds from sales
Class A shares (Note 2) 7,791,545 12,053,759 43,579,588 57,985,486
Class B shares 1,729,504 997,872 12,784,665 4,124,509
Class Y shares -- 1,020 -- 1,020
Reinvestment of distributions at net asset value
Class A shares 3,972,887 3,277,481 18,480,819 18,880,977
Class B shares 85,004 4,262 401,374 24,745
Class Y shares 72 11 63 11
Payment for redemptions
Class A shares (9,793,095) (15,101,862) (72,296,842) (83,747,345)
Class B shares (Note 2) (166,982) (3,353) (1,011,844) (36,354)
_____________________________________________________________________________________________________________________________
Increase (decrease) in net assets from
share transactions 3,618,935 1,229,190 1,937,823 (2,766,951)
______________________________________________________________________________________________________________________________
Total increase (decrease) in net assets 3,174,191 1,815,893 2,163,765 (1,498,433)
Net assets at beginning of year 78,498,707 76,682,814 406,892,198 408,390,631
_____________________________________________________________________________________________________________________________
Net assets at end of year
(including undistributed net investment income
of $(3,116) and $2,198 for IDS Michigan, and
$11,951 and $10,692 for IDS Minnesota) $81,672,898 $78,498,707 $409,055,963 $406,892,198
_____________________________________________________________________________________________________________________________
See accompanying notes to financial statements.
<PAGE>
PAGE 208
Financial statements
Statements of changes in net assets
IDS California Tax-Exempt Trust
IDS Special Tax-Exempt Series Trust
Year ended June 30,
_____________________________________________________________________________________________________________________________
Operations and distributions
_____________________________________________________________________________________________________________________________
1996 1995 1996 1995
New York Ohio
Tax-Exempt Fund Tax-Exempt Fund
_____________________________________________________________________________________________________________________________
Investment income -- net $ 6,762,893 $ 7,058,619 $4,040,372 $ 4,061,670
Net realized loss on investments (312,952) (2,824,160) (450,527) (1,262,593)
Net change in unrealized appreciation or depreciation (271,393) 1,994,739 579,615 1,448,594
_____________________________________________________________________________________________________________________________
Net increase in net assets resulting
from operations 6,178,548 6,229,198 4,169,460 4,247,671
_____________________________________________________________________________________________________________________________
Distributions to shareholders from:
Net investment income
Class A (6,587,794) (7,042,080) (3,934,612) (4,092,348)
Class B (175,051) (16,527) (69,847) (5,227)
Class Y (59) (12) (58) (11)
Net realized gain
Class A -- -- (133,990) --
Class B -- -- (3,014) --
Class Y -- -- (2) --
_____________________________________________________________________________________________________________________________
Total distributions (6,762,904) (7,058,619) (4,141,523) (4,097,586)
_____________________________________________________________________________________________________________________________
Share transactions (Note 4)
_____________________________________________________________________________________________________________________________
Proceeds from sales
Class A shares (Note 2) 9,808,292 16,050,177 6,884,856 12,347,956
Class B shares 3,827,013 1,923,002 1,761,407 715,678
Class Y shares -- 1,020 -- 1,020
Reinvestment of distributions at net asset value
Class A shares 5,179,004 5,362,620 3,192,425 3,162,750
Class B shares 158,781 12,791 64,381 3,706
Class Y shares 59 12 60 11
Payments for redemptions
Class A shares (18,878,694) (21,072,998) (11,876,308) (14,135,624)
Class B shares (Note 2) (862,141) (22,313) (316,974) (21)
_____________________________________________________________________________________________________________________________
Increase (decrease) in net assets from
share transactions (767,686) 2,254,311 (290,153) 2,095,476
_____________________________________________________________________________________________________________________________
Total increase (decrease) in net assets (1,352,042) 1,424,890 (262,216) 2,245,561
Net assets at beginning of year 121,583,522 120,158,632 74,080,496 71,834,935
_____________________________________________________________________________________________________________________________
Net assets at end of year
(including undistributed net investment income
of $(11) and $0 for IDS New York, and $695
and $(35,368) for IDS Ohio) $120,231,480 $121,583,522 $73,818,280 $74,080,496
_____________________________________________________________________________________________________________________________
See accompanying notes to financial statements.
</TABLE>
<PAGE>
PAGE 209
Notes to financial statements
IDS California Tax-Exempt Trust
IDS Special Tax-Exempt Series Trust
___________________________________________________________________
1. Summary of significant accounting policies
IDS California Tax-Exempt Trust and IDS Special Tax-Exempt Series
Trust were organized as Massachusetts business trusts. IDS
California Tax-Exempt Trust includes only IDS California Tax-Exempt
Fund. IDS Special Tax-Exempt Series Trust is a "series fund" that
is currently composed of individual state tax-exempt funds and one
insured national tax-exempt fund, including IDS Massachusetts
Tax-Exempt Fund, IDS Michigan Tax-Exempt Fund, IDS Minnesota
Tax-Exempt Fund, IDS New York Tax-Exempt Fund, IDS Ohio Tax-Exempt
Fund and IDS Insured Tax-Exempt Fund (the Funds). The Funds are
non-diversified, open-end management investment companies as
defined in the Investment Company Act of 1940 (as amended).
Each Fund's goal is to provide a high level of income generally
exempt from federal income tax as well as from the respective state
and local income tax. A portion of each Fund's assets may be
invested in bonds whose interest is subject to the alternative
minimum tax computation. The Funds, excluding IDS Insured
Tax-Exempt Fund, concentrate their investments in a single state
and therefore may have more credit risk related to the economic
conditions of the respective state than Funds that have a broader
geographical diversification.
Each Fund offers Class A, Class B and Class Y shares. Class A
shares are sold with a front-end sales charge. Class B shares,
which each Fund began offering on March 20, 1995, may be subject to
a contingent deferred sales charge. Class B shares automatically
convert to Class A after eight years. Class Y shares, which each
Fund also began offering on March 20, 1995, have no sales charge
and are offered only to qualifying institutional investors.
All classes of shares have identical voting, dividend, liquidation
and other rights, and the same terms and conditions, except that
the level of distribution fee, transfer agency fee and service fee
(class specific expenses) 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 Funds 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.
<PAGE>
PAGE 210
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.
Option transactions
In order to produce incremental earnings, protect gains and
facilitate buying and selling of securities for investment
purposes, each Fund may buy and sell put and call options and write
covered call options on portfolio securities and may write
cash-secured put options. The risk in writing a call option is
that each Fund gives up the opportunity of profit if the market
price of the security increases. The risk in writing a put option
is that each Fund may incur a loss if the market price of the
security decreases and the option is exercised. The risk in buying
an option is that each Fund pays a premium whether or not the
option is exercised. Each Fund also has the additional risk of not
being able to enter into a closing transaction if a liquid
secondary market does not exist. Each Fund also may write
over-the-counter options where the completion of the obligation is
dependent upon the credit standing of the other party.
Futures transactions
In order to gain exposure to or protect itself from changes in the
market, each Fund may buy and sell interest rate futures contracts.
Risks of entering into futures contracts and related options
include the possibility that there may be an illiquid market and
that a change in the value of the contract or option may not
correlate with changes in the value of the underlying securities.
Securities purchased on a when-issued basis
Delivery and payment of securities that have been purchased by IDS
Massachusetts Tax-Exempt 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 June 30, 1996, IDS Massachusetts Tax-Exempt Fund had entered
into outstanding when-issued or forward commitments of $965,203.<PAGE>
PAGE 211
Federal taxes
Since each Fund's policy is to comply with all sections of the
Internal Revenue Code applicable to regulated investment companies
and to distribute all of its taxable income to shareholders, no
provision for income or excise taxes is required.
Net investment income (loss) and net realized gains (losses) may
differ for financial statement and tax purposes primarily because
of the deferral of losses on certain futures contracts 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.
On the statement of assets and liabilities, as a result of
permanent book-to-tax differences, accumulated net realize gain
(loss) and undistributed net investment income have been increased
(decreased), resulting in net reclassification adjustments to
additional paid-in-capital by the following:
<TABLE>
<CAPTION>
California Michigan Minnesota Ohio
Tax-Exempt Tax-Exempt Tax-Exempt Tax-Exempt
Fund Fund Fund Fund
___________________________________________________________________________
<S> <C> <C> <C> <C>
Accumulated net $(938) $1,710 $ 2,171 $(208)
realized gain (loss)
Undistributed net 938 1,710 (272) 208
investment income (loss)
___________________________________________________________________________
Additional paid-in-capital $ -- $ -- $(1,899) $ --
</TABLE>
Dividends to shareholders
Dividends from net investment income, declared daily and paid
monthly, are reinvested in additional shares of each Fund at net
asset value or payable in cash. Capital gains, when available, are
distributed along with the last income dividend at the end of the
calendar year.
Other
Security transactions are accounted for on the date securities are
purchased or sold. Interest income, including level-yield
amortization of premium and discount, is accrued daily.
At June 30, 1996, American Express Financial Corporation (AEFC)
owned 208 Class Y shares for IDS California, 202 for IDS
Massachusetts, 200 for IDS Michigan, 207 for IDS Minnesota, 209 for
IDS New York and 202 for IDS Ohio Tax-Exempt Funds.
<PAGE>
PAGE 212
___________________________________________________________________
2. Expenses and sales charges
Effective March 20, 1995, when each Fund began offering multiple
classes of shares, each Fund entered into agreements 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 each Fund's average daily net assets in reducing percentages
from 0.47% to 0.38% annually.
Under an Administrative Services Agreement, each Fund pays AEFC for
administration and accounting services at a percentage of each
Fund's average daily net assets in reducing percentages from 0.04%
to 0.02% annually.
Under a separate Transfer Agency Agreement, AEFC maintains
shareholder accounts and records. Each 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, each Fund entered into agreements
with American Express Financial Advisors Inc. for distribution and
shareholder servicing-related services. Under a Plan and Agreement
of Distribution, each Fund pays a distribution fee at an annual
rate of 0.75% of the Fund's average daily net assets attributable
to Class B shares for distribution-related services.
Under a Shareholder Service Agreement, each Fund pays a fee for
service provided to shareholders by financial advisors and other
servicing agents. The fee is calculated at a rate of 0.175% of each
Fund's average daily net assets attributable to Class A and Class B
shares.
American Express Financial Corporation will assume and pay any
expenses (except taxes and brokerage commissions) that exceed the
most restrictive applicable state expense limitation.
Sales charges received by American Express Financial Advisors Inc.
for distributing the Funds' shares for the year ended June 30,
1996, are as follows:
Class A Class B
IDS California $ 722,870 $12,031
IDS Massachusetts 313,479 2,723
IDS Michigan 209,670 1,577
IDS Minnesota 1,109,339 10,709
IDS New York 265,967 5,682
IDS Ohio 177,634 1,335
During the year ended June 30, 1996, the Funds' custodian and
transfer agency fees were reduced by $100,484 for IDS California,
$7,768 for IDS Massachusetts, $23,235 for IDS Michigan, $111,580
for IDS Minnesota, $3,793 for IDS New York and $19,403 for IDS Ohio
Tax-Exempt Funds as a result of earnings credits from overnight
cash balances.<PAGE>
PAGE 213
Prior to April 30, 1996, each Fund had a retirement plan for its
independent board members. The plan was terminated April 30, 1996.
The retirement plan expense amounted to $557 for IDS California,
$1,166 for IDS Massachusetts, $1,167 for IDS Michigan, $3,037 for
IDS Minnesota, $1,156 for IDS New York and $506 for IDS Ohio
Tax-Exempt Funds for the year. The total liability for the plan is
$13,293 for IDS California, $5,584 for IDS Massachusetts, $6,584
for IDS Michigan, $11,280 for IDS Minnesota, $6,224 for IDS New
York and $5,584 for IDS Ohio Tax-Exempt Funds and will be paid out
at some future date.
___________________________________________________________________
3. Securities transactions
For the year ended June 30, 1996, cost of purchases and proceeds
from sales (other than short-term obligations) aggregated
$35,078,861 and $37,682,799 for IDS California, $8,060,747 and
$3,947,688 for IDS Massachusetts, $25,233,011 and $23,299,257 for
IDS Michigan, $55,992,006 and $54,660,000 for IDS Minnesota,
$10,765,522 and $12,297,596 for IDS New York and $17,896,136 and
$18,049,881 for IDS Ohio Tax-Exempt Funds. Realized gains and
losses are determined on an identified cost basis.
___________________________________________________________________
4. Share transactions
Transactions in shares of each Fund for the periods indicated are
as follows:
California Tax-Exempt Fund
Year ended June 30, 1996
Class A Class B Class Y
_______________________________________________________________
Sold 4,511,208 995,477 --
Issued for reinvested 1,925,925 35,294 12
distributions
Redeemed (7,378,222) (184,480) --
_______________________________________________________________
Net increase
(decrease) (941,089) 846,291 12
_______________________________________________________________
<PAGE>
PAGE 214
Year ended June 30, 1995
Class A Class B* Class Y*
_______________________________________________________________
Sold 4,428,851 399,282 194
Issued for reinvested 1,929,797 2,588 2
distributions
Redeemed (9,662,241) (5,232) --
_______________________________________________________________
Net increase
(decrease) (3,303,593) 396,638 196
_______________________________________________________________
*Inception date was March 20, 1995.
Massachusetts Tax-Exempt Fund
Year ended June 30, 1996
Class A Class B Class Y
_______________________________________________________________
Sold 2,049,431 819,429 --
Issued for reinvested 529,215 27,882 10
distributions
Redeemed (2,742,630) (147,842) --
_______________________________________________________________
Net increase (decrease) (163,984) 699,469 10
_______________________________________________________________
Year ended June 30, 1995
Class A Class B* Class Y*
_______________________________________________________________
Sold 1,986,963 373,441 190
Issued for reinvested 581,883 2,245 2
distributions
Redeemed (3,369,135) (25,777) --
_______________________________________________________________
Net increase (decrease) (800,289) 349,909 192
_______________________________________________________________
*Inception date was March 20, 1995.
Michigan Tax-Exempt Fund
Year ended June 30, 1996
Class A Class B Class Y
________________________________________________________________
Sold 1,429,150 315,865 --
Issued for reinvested 725,981 15,490 13
distributions
Redeemed (1,794,375) (30,500) --
________________________________________________________________
Net increase 360,756 300,855 13
________________________________________________________________
<PAGE>
PAGE 215
Year ended June 30, 1995
Class A Class B* Class Y*
________________________________________________________________
Sold 2,295,997 183,169 185
Issued for reinvested 615,732 779 2
distributions
Redeemed (2,849,810) (615) --
________________________________________________________________
Net increase 61,919 183,333 187
________________________________________________________________
*Inception date was March 20, 1995.
Minnesota Tax-Exempt Fund
Year ended June 30, 1996
Class A Class B Class Y
_________________________________________________________________
Sold 8,270,935 2,429,988 --
Issued for reinvested 3,510,197 76,278 12
distributions
Redeemed (13,742,113) (192,219) --
_________________________________________________________________
Net increase
(decrease) (1,960,981) 2,314,047 12
_________________________________________________________________
Year ended June 30, 1995
Class A Class B* Class Y*
_________________________________________________________________
Sold 11,298,321 785,048 193
Issued for reinvested 3,679,693 4,700 2
distributions
Redeemed (16,502,683) (6,917) --
_________________________________________________________________
Net increase
(decrease) (1,524,669) 782,831 195
_________________________________________________________________
*Inception date was March 20, 1995.
<PAGE>
PAGE 216
New York Tax-Exempt Fund
Year ended June 30, 1996
Class A Class B Class Y
_________________________________________________________________
Sold 1,906,925 744,701 --
Issued for reinvested 1,006,832 30,877 12
distributions
Redeemed (3,672,303) (166,438) --
_________________________________________________________________
Net increase
(decrease) (758,546) 609,140 12
_________________________________________________________________
Year ended June 30, 1995
Class A Class B* Class Y*
_________________________________________________________________
Sold 3,164,808 371,486 195
Issued for reinvested 1,057,342 2,472 2
distributions
Redeemed (4,176,540) (4,318) --
__________________________________________________________________
Net increase 45,610 369,640 197
__________________________________________________________________
*Inception date was March 20, 1995.
Ohio Tax-Exempt Fund
Year ended June 30, 1996
Class A Class B Class Y
________________________________________________________________
Sold 1,279,987 327,095 --
Issued for reinvested 596,160 12,022 11
distributions
Redeemed (2,225,461) (59,086) --
________________________________________________________________
Net increase (decrease) (349,314) 280,031 11
________________________________________________________________
Year ended June 30, 1995
Class A Class B* Class Y*
________________________________________________________________
Sold 2,368,379 133,660 189
Issued for reinvested 604,956 691 2
distributions
Redeemed (2,726,424) (4) --
________________________________________________________________
Net increase 246,911 134,347 191
________________________________________________________________
*Inception date was March 20, 1995.
<PAGE>
PAGE 217
___________________________________________________________________
5. Interest rate futures contracts
Upon entering into a futures contract, each Fund is required to
deposit either cash or securities in an amount (initial margin)
equal to a certain percentage of the contract value. Subsequent
payments (variation margin) are made or received by each Fund each
day. The variation margin payments are equal to the daily changes
in the contract value and are recorded as unrealized gains and
losses. Each Fund recognizes a realized gain or loss when the
contract is closed or expires.
Investments in securities at June 30, 1996, included securities
valued at $5,923,940 for IDS California, $2,158,350 for IDS
Massachusetts, $2,106,765 for IDS Michigan, $5,368,150 for IDS
Minnesota, $5,303,990 for IDS New York and $1,584,485 for IDS Ohio
Tax-Exempt Funds that were pledged as collateral to cover initial
margin deposits on 111, 30, 34, 181, 64 and 32 open purchase
contracts, respectively. The market value of the open contracts at
June 30, 1996, was $12,470,156 for IDS California, $3,370,312 for
IDS Massachusetts, $3,819,688 for IDS Michigan, $20,334,219 for IDS
Minnesota, $7,190,000 for IDS New York and $3,595,000 for IDS Ohio
Tax-Exempt Funds with a net unrealized gain of $295,250 for IDS
California, $79,187 for IDS Massachusetts, $90,655 for IDS
Michigan, $484,781 for IDS Minnesota, $169,469 for IDS New York and
$85,594 for IDS Ohio Tax-Exempt Funds.
The Funds maintain, in a segregated account with its custodian,
advanced refunded bonds with at least a market value equal to the
value of these open long futures contracts. Advanced refunded
bonds are highly liquid, usually covered by government securities,
which will be refunded at the bond's first call date.
___________________________________________________________________
6. Capital loss carryover
For federal income tax purposes, capital loss carryovers were
$182,601 for California, $426,167 for IDS Massachusetts, $216,362
for IDS Michigan, $2,911,065 for IDS Minnesota $2,695,894 for IDS
New York and $843,358 for IDS Ohio tax-exempt funds at June 30,
1996. These capital loss carryovers will expire in 1999 through
2005 if not offset by subsequent capital gains. It is unlikely the
board will authorize a distribution of any net realized capital
gains for a fund until the respective capital loss carryover has
been offset or expires.
___________________________________________________________________
7. Option contracts written
Option contracts are valued daily at the closing prices on their
primary exchanges and unrealized appreciation or depreciation is
recorded. Each Fund will realize a gain or loss upon expiration or
closing of the option transaction. When options on debt securities
or futures are exercised, the Fund will realize a gain or loss.
When other options are exercised, the proceeds on sales for a
written call option, the purchase cost for a written put option or
the cost of a security for a purchased put or call option is
adjusted by the amount of the premium received or paid.
<PAGE>
PAGE 218
<TABLE>
<CAPTION>
The number of contracts and premium amounts associated with option contracts
written is as follows:
Year ended June 30, 1996
California Tax-Exempt Fund Massachusetts Tax Exempt Fund
___________________________________________________________________________
Calls Calls
___________________________________________________________________________
Contracts Premiums Contracts Premiums
___________________________________________________________________________
<S> <C> <C> <C> <C>
June 30, 1995 -- $ -- -- $ --
Opened 94 93,436 15 14,910
Exercised (94) (93,436) (15) (14,910)
___________________________________________________________________________
June 30, 1996 __ $ __ __ $ __
___________________________________________________________________________
Year ended June 30, 1996
Michigan Tax-Exempt Fund Minnesota Tax-Exempt Fund
___________________________________________________________________________
Calls Calls
___________________________________________________________________________
Contracts Premiums Contracts Premiums
___________________________________________________________________________
June 30, 1995 -- $ -- -- $ --
Opened 16 15,904 89 88,466
Exercised/Expired (16) (15,904) (89) (88,466)
____________________________________________________________________________
June 30, 1996 -- $ -- -- $ --
____________________________________________________________________________
Year ended June 30, 1996
New York Tax-Exempt Fund Ohio Tax-Exempt Fund
___________________________________________________________________________
Calls Calls
___________________________________________________________________________
Contracts Premiums Contracts Premiums
___________________________________________________________________________
June 30, 1995 -- $ -- -- $ --
Opened 71 70,574 16 15,904
Exercised 71 (70,574) (16) (15,904)
____________________________________________________________________________
June 30, 1996 -- $ -- -- $ --
____________________________________________________________________________
</TABLE>
<PAGE>
PAGE 219
___________________________________________________________________
8. Financial highlights
"Financial highlights" showing per share data and selected
information are presented on pages 8-19 of the prospectus.
<PAGE>
PAGE 220
<TABLE>
<CAPTION>
Investments in securities
IDS California Tax-Exempt Fund (Percentages represent value of
June 30, 1996 investments compared to net assets)
____________________________________________________________________________________________________________________________
Municipal bonds (97.7%)
____________________________________________________________________________________________________________________________
Name of issuer and Coupon Maturity Principal Value(a)
title of issue (b,c,d) rate year amount
_____________________________________________________________________________________________________________________________
<S> <C> <C> <C> <C>
Aliso Viejo Orange County District Community Facilities
District #88-1 Special Tax Bonds Series 1992A 7.35 % 2018 $ 3,000,000 $ 3,455,400
Anaheim Public Finance Authority Revenue Bonds
2nd Series Electric Utilities San Juan (FGIC Insured) 5.75 2022 11,100,000 10,877,889
Brea Redevelopment Agency Tax Allocation Refunding Bonds
Redevelopment Project AB (MBIA Insured) 5.50 2017 1,800,000 1,722,024
Burbank Redevelopment Agency Tax Allocation Bonds
Golden State Series 1993A 6.00 2023 2,000,000 1,942,320
Calaveras County Water District
Certificate of Participation Refunding Revenue Bonds
Water & Sewer System Improvement (AMBAC Insured) 5.25 2012 2,815,000 2,680,950
Chapman College Educational Facilities Authority Revenue Bonds
Series 1989B 7.50 2018 500,000 538,135
Chico Walker Senior Housing Insured Revenue Bonds
The Lodge Series 1993A 5.70 2023 1,500,000 1,403,550
Clearlake Redevelopment Agency Highlands Park Community Development
Tax Allocation Bonds Series 1993 6.40 2023 1,420,000 1,370,215
Eastern Municipal Water District Riverside County
Water & Sewer Revenue Certificates of Participation
Series 1991 6.00 2023 1,000,000 994,700
Eastern Municipal Water District Riverside County
Water & Sewer Pre-Refunded Revenue
Certificates of Participation Series 1991
(FGIC Insured) 6.50 2020 3,000,000 3,295,920
El Camino Hospital District Hospital Pre-Refunded Revenue
Certificate of Participation Series A 8.50 2017 1,500,000 1,610,445
Fontana Redevelopment Agency
Refunding Certificate of Participation
Police Facility Series 1993 5.625 2016 4,500,000 4,197,375
Fontana Unified School District
Unlimited Tax General Obligation Bonds
Zero Coupon CVT Series C (FGIC Insured) 6.40 1997 3,470,000 (e) 3,300,317
Foothill-De Anza Community College Santa Clara County
Refunding Certificate of Participation Series 1993
(Connie Lee Insured) 5.25 2021 1,675,000 1,500,766
Foothill/Eastern Transportation Corridor Agency Toll Road
Senior Lien Revenue Bonds Series 1995A 6.00 2034 1,775,000 1,686,534
Garden Grove Agency Community Development
Tax Allocation Refunding Bonds
Garden Grove Community 5.875 2023 3,000,000 2,779,590
Garden Grove Certificate of Participation
Bahia Village/Emerald Isle
(FSA Insured) 5.70 2023 2,660,000 2,550,222
Huntington Beach Certificate of Participation Revenue Bonds
Civic Center Refinancing (AMBAC Insured) 5.50 2016 1,715,000 1,623,213
See accompanying notes to investments in securities.
Indian Wells Improvement Bonds
Assessment District #13 7.50 2008 370,000 381,152
Irwindale Redevelopment Agency Sub Lien
Tax Allocation Bonds Series 1996 7.00 2019 1,700,000 1,738,726
Long Beach Harbor Revenue Bonds
Series 1989A A.M.T. 7.25 2019 7,000,000 (g) 7,421,960
Los Angeles Convention & Exhibition Center
Pre-Refunded Certificate of Participation
Series 1989A 7.00 2020 5,000,000 5,446,000
Los Angeles Convention & Exhibition Center
Pre-Refunded Certificate of Participation
Series 1989A 7.30 2009 1,000,000 1,097,890
Los Angeles Convention & Exhibition Center
Pre-Refunded Certificate of Participation
Series 1989A 7.375 2018 2,900,000 3,190,174
Los Angeles County Certificate of Participation
Disney Parking 5.50 2021 1,625,000 1,458,031
Los Angeles County Metropolitan Transportation Authority
Sales Tax Revenue Bonds (AMBAC Insured) 5.00 2025 1,265,000 1,104,598
<PAGE>
PAGE 221
Los Angeles County Transportation Commission
Sales Tax Refunding Revenue Bonds Series A 7.00 2019 4,150,000 4,442,243
Los Angeles County Transportation Commission
Sales Tax Pre-Refunded Revenue Bonds Series A 8.00 2016 2,000,000 2,125,100
Los Angeles County Transportation Commission
Sales Tax Pre-Refunded Revenue Bonds
Series 1988A 7.875 2008 500,000 545,150
Los Angeles County Transportation Commission
Sales Tax Refunding Revenue Bonds
Series 1989A 7.40 2015 2,000,000 2,192,320
Los Angeles Department of Water & Power
Electric Plant Revenue Bonds Series 1990 7.125 2030 6,500,000 7,136,935
Los Angeles Department of Water & Power
Waterworks Refunding Revenue Bonds
Second Issue (Secondary FGIC Insured) 4.50 2018 3,000,000 2,455,560
Los Angeles International Airport Revenue Bonds
Series D (FGIC Insured) A.M.T. 5.50 2015 1,000,000 943,890
Los Angeles Multi-family Housing Revenue Bonds
Park Parthenia Series 1986A
(GNMA Insured) A.M.T. 7.40 2022 1,000,000 1,032,310
Los Angeles Single Family Home Mortgage Revenue Bonds
Series 1991A (GNMA & FNMA Insured) A.M.T. 6.875 2025 810,000 831,927
Los Angeles State Building Authority
Lease Pre-Refunded Revenue Bonds
State Department of General Services Lease
Series 1988A 7.25 2006 1,500,000 1,606,860
Los Angeles State Building Authority
Lease Pre-Refunded Revenue Bonds
State Department of General Services Lease
Series 1988A 7.50 2011 1,500,000 1,612,875
Los Angeles State Harbor Revenue Bonds
Escrowed to Maturity 7.60 2018 1,000,000 1,187,930
Los Angeles Wastewater System
Pre-Refunded Revenue Bonds Series 1987 8.125 2017 1,000,000 1,075,590
Los Angeles Wastewater System
Refunding Revenue Bonds Series D (FGIC Insured) 4.70 2017 1,000,000 851,030
Modesto Certificate of Participation Pre-Refunded Bonds
Community Center 8.10 2015 1,000,000 1,075,270
Modesto Irrigation Certificate of Participation 7.25 2015 2,000,000 2,058,240
Mount Diablo Hospital District Hospital
Pre-Refunded Revenue Bonds
Series 1990A (AMBAC Insured) 7.00 2017 3,000,000 3,338,070
North City West Community School Facility Authority Special Tax
Refunding Revenue Bonds Series 1995B (CGIC Insured) 5.75 2015 1,000,000 994,170
Northern California Public Power Authority Power
Pre-Refunded Revenue Bonds Hydroelectric Series 1986B-3 8.00 2024 2,000,000 2,148,500
Northern California Public Power Authority Power
Pre-Refunded Revenue Bonds Hydroelectric #1 Series 1986B-1 8.00 2024 2,100,000 2,255,925
Northern California Transmission Agency
California-Oregon Transmission
Pre-Refunded Revenue Bonds
Series 1990A (MBIA Insured) 7.00 2024 2,000,000 2,194,520
Northern California Transmission
Select Auction Variable Rate Security &
Residual Interest Revenue Bonds Inverse Floater
(MBIA Insured) 5.50 2024 4,500,000 (f) 4,162,725
Northridge Water District Revenue Certificate of Participation
(AMBAC Insured) 5.25 2014 1,500,000 1,403,415
Novato Community Facility District #1 Vintage Oaks
Public Improvement Special Tax Refunding Bonds 7.25 2021 2,000,000 2,068,760
Pleasanton Joint Powers Financing Authority Reassessment
Revenue Bonds Series 1993A 6.15 2012 1,940,000 1,939,787
Port of Oakland Revenue Bonds
Series 1989A (BIG Insured) A.M.T. 7.60 2016 500,000 521,655
Rancho Cucamonga Redevelopment Agency
1990 Tax Allocation Pre-Refunded Bonds
(MBIA Insured) 7.125 2019 3,540,000 3,887,628
Rancho Mirage Joint Powers Finance Authority
Certificate of Participation Eisenhower Memorial Hospital 7.00 2022 4,250,000 4,535,430
Redding Redevelopment Agency Tax Allocation Refunding Bonds
Canby Hilltop Cypress Series D (CGIC Insured) 5.00 2023 4,700,000 4,101,690
Richmond Joint Powers Financing Authority Leases and Gas Tax
Refunding Revenue Bonds Series 1995A 5.25 2013 3,540,000 3,214,957
Sacramento Cogeneration Authority Cogeneration Revenue Bonds
Procter & Gamble Series 1995 6.375 2010 1,000,000 1,011,580
Sacramento Municipal Utility District Series R 6.00 2015-17 7,500,000 7,427,775
Sacramento Municipal Utility District Pre-Refunded Series V 7.50 2018 2,775,000 2,967,474
Sacramento Municipal Utility District Pre-Refunded Series W 7.50 2018 1,980,000 2,117,333
Sacramento Municipal Utility District Pre-Refunded Series Y
(MBIA Insured) 6.75 2019 3,400,000 3,781,684
<PAGE>
PAGE 222
Sacramento Power Authority Cogeneration Revenue Bonds Series 1995 6.00 2022 1,000,000 954,500
San Bernardino County Medical Center
Financing Project Certificate of Participation
Series 1996 (MBIA Insured) 5.00 2028 2,500,000 2,180,750
San Diego County Capital Asset Lease Certificate of Participation
Series 1993 Inverse Floater (AMBAC Insured) 7.27 2007 3,200,000 (f) 3,228,000
San Diego Industrial Development Revenue Bonds
San Diego Gas & Electric Series A 7.625 2021 1,000,000 1,021,170
San Diego Regional Transportation Commission Sales Tax
Pre-Refunded Revenue Bonds Limited Tax Series 1989A 6.25 2008 5,030,000 5,271,490
San Joaquin County Pre-Refunded Certificate of Participation
Human Services Facility Series 1989 (BIG Insured) 6.70 2009 3,500,000 3,784,025
San Joaquin County Certificate of Participation
Jail & Sheriffs Operation Center (MBIA Insured) 6.75 2015 2,000,000 2,179,880
San Jose Redevelopment Agency Merged Area Redevelopment
Tax Allocation Bonds Series 1993 (MBIA Insured) 4.75 2024 1,435,000 1,206,390
San Jose Redevelopment Agency Merged Area Tax Allocation Bonds
Series 1993 Inverse Floater (MBIA Insured) 7.08 2014 3,000,000 (f) 2,617,500
San Mateo County Transit District Limited Tax Pre-Refunded Bonds
Series 1990A (MBIA Insured) 6.50 2020 1,500,000 1,592,235
Santa Clara County Mountain View-
Los Altos Union High School District Unlimited Tax
General Obligation Bonds Series A 5.75 2015 1,200,000 1,182,168
Santa Cruz Certificate of Participation 8.375 2007 1,220,000 1,287,320
Southern California Home Financing Authority
Single Family Mortgage Revenue Bonds 1990B
(GNMA Insured) A.M.T. 7.75 2024 575,000 607,907
Southern California Public Power Authority Transmission
Special Bonds 6.00 2012 2,700,000 2,694,492
South Tahoe Joint Powers Financing Authority
Refunding Revenue Bonds Series 1995B 6.25 2020 2,700,000 2,624,238
State Department Water Resources Water System
Pre-Refunded Revenue Bonds Central Valley
Series D 7.70 2024 2,400,000 2,565,096
State Department Water Resource Water System Revenue Bonds
Central Valley Project Series L 5.50 2023 3,000,000 2,803,080
State Education Facility Authority Revenue Bonds
Pomona College 6.00 2017 3,000,000 2,992,710
State Health Facility Finance Authority Pre-Refunded Revenue Bonds
St. Joseph Health System Series 1989A 6.90 2014 3,500,000 (g) 3,803,380
State Health Facility Finance Authority Revenue Bonds
Sisters Providence 5.50 2016 1,045,000 1,003,012
State Housing Finance Agency Home Mortgage Revenue Bonds
Series 1986B 6.90 2016 1,990,000 2,032,487
State Pollution Control Finance Authority Pollution Control
Revenue Bonds Southern California Edison
Series 1988A A.M.T. 6.90 2006 2,000,000 2,151,340
State Public Works Board Lease Revenue Bonds
California Community Colleges Series 1994B 7.00 2019 2,000,000 2,192,140
State Public Works Board Lease Revenue Bonds
Department of Corrections
Substance Abuse Treatment Facility & State Prison at Corcoran
Series 1996A (AMBAC Insured) 5.25 2021 1,870,000 1,722,588
State Public Works Board University of California Lease
Pre-Refunded Revenue Bonds Series 1990A 7.00 2015 2,250,000 2,492,752
State University Revenue Bonds San Jose State University
Student Union Series B 7.60 2007 150,000 156,477
State Unlimited Tax General Obligation Bonds
(Secondary FGIC Insured) 4.75 2023 2,945,000 2,454,304
Statewide Community Development Authority
Certificate of Participation Sutter Health Group
(MBIA Insured) 5.50 2022 1,000,000 952,070
Statewide Community Development Authority
Health Facilities Revenue Bonds
Unihealth America Series 1993A
Inverse Floater (AMBAC Insured) 7.32 2011 5,000,000 (f) 4,825,000
Statewide Community Development Authority
Health Facilities Revenue Bonds
Certificate of Participation
San Gabriel Valley Medical Center
Series 1996A 5.50 2014 1,000,000 941,870
Statewide Community Development Authority Revenue
Certificate of Participation St. Joseph Health System Group 6.50 2015 5,500,000 5,692,115
Stockton Single Family Mortgage Revenue Bonds
Series 1990A (GNMA Insured) A.M.T. 7.50 2023 110,000 113,728
University of Southern California Educational Facilities Authority
Pre-Refunded Revenue Bonds Series 1989B 6.75 2015 5,000,000 5,321,350
Upland Certificate of Participation Water System Refunding Bonds
(FGIC Insured) 6.60 2016 1,000,000 1,065,230
<PAGE>
PAGE 223
Vacaville Limited Obligation Improvement Bonds
Water Rights Assessment District 8.00 2007 765,000 789,021
Vista Community Development Tax Allocation Revenue Bonds
(MBIA Insured) 5.25 2015 2,000,000 1,864,780
_____________________________________________________________________________________________________________________________
Total municipal bonds
(Cost: $219,312,804) $234,980,999
_____________________________________________________________________________________________________________________________
Total investments in securities
(Cost: $219,312,804)(h) $234,980,999
_____________________________________________________________________________________________________________________________
</TABLE>
<PAGE>
PAGE 224
___________________________________________________________________
Notes to investments in securities
___________________________________________________________________
(a) Securities are valued by procedures described in Note 1 to the
financial statements.
(b) Investments in bonds, by rating category as a percentage of
total bonds, are as follows:
<TABLE><CAPTION>
(Unaudited)
Rating 6-30-96 6-30-95
_____________________________________________________________________________
<S> <C> <C>
AAA 59% 61%
AA 19 16
A 13 19
BBB 7 3
BB and below 2 1
Non-rated -- --
_____________________________________________________________________________
Total 100% 100%
____________________________________________________________________________
</TABLE>
(c) The following abbreviations are used in portfolio descriptions
to identify the insurer of the issue:
AMBAC -- American Municipal Bond Association Corporation
BIG -- Bond Investors Guarantee
CGIC -- Capital Guaranty Insurance Company
FGIC -- Financial Guarantee Insurance Corporation
FNMA -- Federal National Mortgage Association
FSA -- Financial Security Assurance
GNMA -- Government National Mortgage Association
MBIA -- Municipal Bond Investors Assurance
(d) The following abbreviation is used in portfolio descriptions:
A.M.T. -- Alternative Minimum Tax -- As of June 30, 1996, the value
of securities subject to alternative minimum tax represented 5.8%
of net assets.
(e) For these zero coupon bonds, which become coupon paying at a
future date, the interest rate disclosed Represents the annualized
effective yield from the date of acquisition to interest reset date
disclosed.
(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 4.5% of the Fund's
net assets as of June 30, 1996.
(g) 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 Sept. 1996 $11,100,000
____________________________________________________________
<PAGE>
PAGE 225
(h) At June 30, 1996, the cost of securities for federal income tax
purposes was $219,142,112 and the aggregate gross unrealized
appreciation and depreciation based on that cost was:
<TABLE><CAPTION>
<S> <C>
Unrealized appreciation $17,111,872
Unrealized depreciation (1,272,985)
______________________________________________________________________
Net unrealized appreciation $15,838,887
______________________________________________________________________
</TABLE>
<PAGE>
PAGE 226
<TABLE>
<CAPTION>
Investments in securities
IDS Massachusetts Tax-Exempt Fund (Percentages represent value of
June 30, 1996 investments compared to net assets)
_____________________________________________________________________________________________________________________________
Municipal bonds (98.0%)
_____________________________________________________________________________________________________________________________
Name of issuer and Coupon Maturity Principal Value(a)
title of issue (b,c,d) rate year amount
_____________________________________________________________________________________________________________________________
<S> <C> <C> <C> <C>
Bay Transit Authority Series A (Secondary CGIC Insured) 5.50 % 2021 $ 500,000 $ 477,880
Bay Transportation Authority General Transportation System
Refunding Bonds Series 1992B 6.20 2016 1,500,000 1,575,135
Boston City Hospital Refunding Revenue Bonds
Series B (FHA Insured) 5.75 2023 3,000,000 2,885,250
Boston City Hospital Pre-Refunded Revenue Bonds
Series A (FHA Insured) 7.625 2021 1,000,000 1,133,940
Boston General Obligation Bonds
Series 1991A (MBIA Insured) 6.75 2011 500,000 552,720
Boston General Obligation Refunding Bonds
Series 1993A (AMBAC Insured) 5.65 2009 1,500,000 (e) 1,515,150
Boston Industrial Development Financing Authority Revenue Bonds
Massachusetts College of Pharmacy
Series 1993A (Connie Lee Insured) 5.25 2026 1,000,000 874,500
Boston Water & Sewer Commission
General Pre-Refunded Revenue Bonds
Senior Series 1991A (FGIC Insured) 7.00 2018 1,000,000 1,122,050
Boston Water & Sewer Commission
General Subordinate Revenue Bonds Series A
(MBIA Insured) 6.00 2008 500,000 506,475
Boston Water & Sewer Commission
Senior Revenue Bonds Series A 7.875 2013 365,000 376,972
Boston Water & Sewer Commission
Senior Pre-Refunded Revenue Bonds Series A 7.875 2013 210,000 217,052
Commonwealth General Obligation Consolidated Loan
Pre-Refunded Bonds
Series 1990A (FGIC Insured) 7.25 2009 500,000 552,750
Greater Lawrence Sanitary District North Andover
General Obligation Bonds 8.50 2005 510,000 534,618
Health & Educational Facilities Authority Refunding Revenue Bonds
Beth Israel Hospital Series 1989E 7.00 2009-14 550,000 582,559
Health & Educational Facilities Authority Revenue Bonds
Berkshire Health Systems Series A (MBIA Insured) 7.50 2008 500,000 544,255
Health & Educational Facilities Authority Revenue Bonds
Berkshire Health Systems Series C 5.90 2011 1,000,000 930,930
Health & Educational Facilities Authority Pre-Refunded Revenue Bonds
Beverly Hospital Series D (MBIA Insured) 7.30 2019 400,000 438,776
Health & Educational Facilities Authority Revenue Bonds
Boston College Series J (FGIC Insured) 6.625 2021 2,000,000 2,103,300
Health & Educational Facilities Authority Revenue Bonds
Boston College Series K 5.25 2023 1,000,000 897,950
Health & Educational Facilities Authority Revenue Bonds
Brigham & Women's Hospital Series C 6.75 2021 500,000 523,520
Health & Educational Facilities Authority Revenue Bonds
Brigham & Women's Hospital Series 1991D 6.75 2024 1,000,000 1,038,340
See accompanying notes to investments in securities.
Health & Educational Facilities Authority Revenue Bonds
Cape Cod Health System Series A (Connie Lee Insured) 5.25 2021 2,500,000 2,269,100
Health & Educational Facilities Authority Revenue Bonds
Charlton Memorial Hospital Series 1991B 7.25 2013 1,750,000 1,851,133
Health & Educational Facilities Authority Revenue Bonds
Cooley Dickinson Hospital Issue (AMBAC Insured) 5.50 2025 1,250,000 1,178,863
Health & Educational Facilities Authority Revenue Bonds
Holyoke Hospital Series B 6.50 2015 500,000 472,935
Health & Educational Facilities Authority Pre-Refunded Revenue Bonds
Lahey Clinic Medical Center Series A (MBIA Insured) 7.625 2018 500,000 542,560
Health & Educational Facilities Authority Revenue Bonds
Lahey Clinic Medical Center Series B (MBIA Insured) 5.625 2015 1,500,000 1,448,250
Health & Educational Facilities Authority Revenue Bonds
Melrose-Wakefield Hospital Series 1992B 6.375 2016 1,000,000 1,003,410
Health & Educational Facilities Authority Revenue Bonds
Morton Hospital & Medical Center
Series B (Connie Lee Insured) 5.25 2014 1,000,000 922,240
<PAGE>
PAGE 227
Health & Educational Facilities Authority Pre-Refunded Revenue Bonds
Mount Auburn Hospital Series A (MBIA Insured) 7.875 2018 205,000 223,427
Health & Educational Facilities Authority Revenue Bonds
New England Deaconess Hospital Series 1992D 6.625 2012 1,000,000 1,034,440
Health & Educational Facilities Authority Revenue Bonds
Newton Wellesley Hospital Series 1991D (MBIA Insured) 7.00 2015 1,000,000 1,080,130
Health & Educational Facilities Authority
Pre-Refunded Revenue Bonds Northeastern University
Series 1989C (AMBAC Insured) 7.10 2006 1,000,000 1,083,120
Health & Educational Facilities Authority Pre-Refunded Revenue Bonds
Northeastern University Series E (MBIA Insured) 6.55 2022 1,000,000 1,060,660
Health & Educational Facilities Authority Revenue Bonds
North Adams Regional Hospital Series 1 6.625 2018 1,000,000 (f) 973,500
Health & Educational Facilities Authority Revenue Bonds
South Shore Hospital Series 1992D (MBIA Insured) 6.50 2022 1,000,000 1,043,680
Health & Educational Facilities Authority Pre-Refunded Revenue Bonds
Stonehill College Series 1990D (AMBAC Insured) 7.70 2020 1,000,000 1,126,840
Health & Educational Facilities Authority Revenue Bonds
Suffolk University Series B (Connie Lee Insured) 6.35 2022 2,495,000 2,538,787
Health & Educational Facilities Authority Pre-Refunded Revenue Bonds
Wentworth Institute of Technology
Series A (AMBAC Insured) 7.40 2010 750,000 833,962
Health & Educational Facilities Authority Revenue Bonds
Valley Regional Health System
Series C (Connie Lee Insured) 5.75 2018 1,000,000 969,670
Health & Educational Facilities Authority Revenue Bonds
Wentworth Institute of Technology
Series B (Connie Lee Insured) 5.50 2023 1,500,000 1,380,420
Industrial Finance Agency Pollution Control Refunding Revenue Bonds
Eastern Edison Series 1993 5.875 2008 2,000,000 1,928,180
Industrial Finance Agency Resource Recovery Revenue Bonds
Ogden Haverhill Series 1986A (AMBAC Insured) A.M.T. 7.375 2011 175,000 180,719
Industrial Finance Agency Resource Recovery Revenue Bonds
SEMASS Series 1991A 9.00 2015 1,500,000 (e) 1,653,300
Industrial Finance Agency Revenue Bonds Museum of Science
Series 1989 (FSA Insured) 7.30 2009 1,000,000 1,103,460
Leominster General Obligation Bonds (MBIA Insured) 7.50 2009 1,000,000 1,115,070
Mansfield General Obligation Bonds (AMBAC Insured) 6.70 2011 1,000,000 1,072,960
Municipal Wholesale Electric Power Supply System
Pre-Refunded Revenue Bonds Series 1992B 6.75 2017 1,395,000 1,554,951
Municipal Wholesale Electric Power Supply System
Refunding Revenue Bonds Series B (MBIA Insured) 4.75 2011 1,750,000 1,541,855
Municipal Wholesale Electric Power Supply System Revenue Bonds
Special Pars & Inflows (AMBAC Insured) 5.45 2018 1,600,000 1,476,784
Nantucket General Obligation Bonds 6.80 2011 1,000,000 1,085,420
New Bedford General Obligation Bonds
Series 1995 (AMBAC Insured) 5.50 2015 700,000 669,480
North Andover General Obligation Bonds (MBIA Insured) 7.35 2008 310,000 345,647
Port Authority Revenue Bonds Series 1990A
(FGIC Insured) A.M.T. 7.50 2020 1,000,000 1,089,040
Quincy Refunding Revenue Bonds Quincy Hospital
Series 1993 (FSA Insured) 5.25 2016 1,000,000 925,150
Southeastern University Building Refunding Revenue Bonds
Series A (AMBAC Insured) 5.75 2016 1,250,000 1,244,038
Southern Berkshire Regional School District Unlimited Tax
General Obligation Pre-Refunded Bonds (AMBAC Insured) 7.55 2010 1,000,000 1,117,840
State Education Loan Authority, Educational Loan Revenue Bonds
Issue E Series B (AMBAC Insured) A.M.T. 6.00 2012 1,000,000 1,003,720
State General Obligation Consolidated Loan Bonds
Series 1991A (FGIC Insured) 6.00 2011 1,095,000 1,112,629
State Housing Finance Agency Single Family Housing Revenue Bonds
Series 13 A.M.T. 7.95 2023 485,000 510,564
State Housing Finance Authority Residential Development Bonds
Series 1992A (FNMA Insured) 6.875 2011 1,000,000 1,053,580
State Housing Finance Authority Single Family Mortgage Housing
Revenue Bonds Series 4 7.375 2014 430,000 443,442
State Housing Finance Authority Single Family Mortgage Housing
Revenue Bonds Series 7 A.M.T. 8.10 2020 245,000 255,535
State Water Resource Authority Revenue Bonds Series A
(Secondary MBIA Insured) 5.50 2022 1,100,000 1,034,836
University of Lowell Building Authority Facilities Revenue Bonds
4th Series A 7.40 2007 125,000 133,088
University of Lowell Building Authority Facilities Revenue Bonds
4th Series A 7.60 2012 50,000 53,364
University of Massachusetts Building Authority Revenue Bonds
Series A (FSA Insured) 7.50 2014 500,000 539,065
University of Massachusetts Building Authority Revenue Bonds
Series A Escrowed to Maturity 7.50 2011 120,000 132,026
Water Resource Authority General Pre-Refunded Revenue Bonds
Series 1990A 7.625 2014 500,000 559,850
<PAGE>
PAGE 228
Water Resource Authority General Pre-Refunded Revenue Bonds
Series 1991A 6.50 2019 1,000,000 1,099,800
Water Resource Authority General Revenue Bonds
Series 1993B (MBIA Insured) 5.00 2022 1,365,000 1,196,941
Water Resource Authority General Revenue Bonds
Series 1993C 5.25 2020 1,400,000 1,261,274
Worcester General Obligation Refunding Bonds
Series 1995G (MBIA Insured) 5.30 2015 1,000,000 942,860
_____________________________________________________________________________________________________________________________
Total municipal bonds
(Cost: $68,678,578) $71,857,717
_____________________________________________________________________________________________________________________________
</TABLE>
<TABLE>
<CAPTION>
Short-term security (0.3%)
_____________________________________________________________________________________________________________________________
Issuer (d,g) Effective Amount Value(a)
yield payable at
maturity
_____________________________________________________________________________________________________________________________
<S> <C> <C> <C>
Municipal note
State General Obligation V.R.D.B. Series E
12-01-97 3.60% $ 200,000 $ 200,000
_____________________________________________________________________________________________________________________________
Total short-term security
(Cost: $200,000) 200,000
_____________________________________________________________________________________________________________________________
Total investments in securities
(Cost: $68,878,578)(h) $72,057,717
_____________________________________________________________________________________________________________________________
</TABLE>
<PAGE>
PAGE 229
Notes to investments in securities
___________________________________________________________________
(a) Securities are valued by procedures described in Note 1 to the
financial statements.
(b) Investments in bonds, by rating category as a percentage of
total bonds, are as follows:
<TABLE><CAPTION>
(Unaudited)
Rating 06-30-96 06-30-95
_______________________________________________________________________________________________________
<S> <C> <C>
AAA 66% 65%
AA 9 11
A 16 17
BBB 7 5
BB and below 2 2
Non-rated -- --
_______________________________________________________________________________________________________
Total 100% 100%
_______________________________________________________________________________________________________
</TABLE>
(c) The following abbreviations are used in portfolio descriptions
to identify the insurer of the issue:
AMBAC -- American Municipal Bond Association Corporation
CGIC -- Capital Guaranty Insurance Company
FGIC -- Financial Guarantee Insurance Corporation
FHA -- Federal Housing Authority
FNMA -- Federal National Mortgage Association
FSA -- Financial Security Assurance
MBIA -- Municipal Bond Investors Assurance
(d) The following abbreviations are used in portfolio descriptions:
A.M.T. -- Alternative Minimum Tax - As of June 30, 1996, the value
of securities subject to alternative minimum tax represented 4.1%
of net assets. V.R.D.B. -- Variable Rate Demand Bond
(e) Partially pledged as initial deposit on the following open
interest rate futures contracts (see Note 5 to the financial
statements):
Type of security Notinal amount
Purchase contracts
________________________________________________________
Municipal Bonds September 1996 $3,000,000
________________________________________________________
(f) At June 30, 1996, the cost of securities purchased on a
when-issued basis was $965,203.
(g) Interest rate varies to reflect current market conditions; rate
shown is the effective rate on June 30, 1996.
(h) At June 30, 1996, the cost of securities for federal income tax
purposes was $68,879,596 and the aggregate gross unrealized
appreciation and depreciation based on that cost was:
Unrealized appreciation $3,831,024
Unrealized depreciation (652,903)
___________________________________________________________________
Net unrealized appreciation $3,178,121
___________________________________________________________________
<PAGE>
PAGE 230
<TABLE>
<CAPTION>
Investments in securities
IDS Michigan Tax-Exempt Fund (Percentages represent value of
June 30, 1996 investments compared to net assets)
_____________________________________________________________________________________________________________________________
Municipal bonds (96.8%)
_____________________________________________________________________________________________________________________________
Name of issuer and Coupon Maturity Principal Value(a)
title of issue (b,c,d) rate year amount
_____________________________________________________________________________________________________________________________
<S> <C> <C> <C> <C>
Auburn Hills Limited Tax General Obligation
Street Improvement Bonds 6.00 % 2004 $ 200,000 $ 206,898
Battle Creek Calhoun County
Downtown Development Authority Bonds Series 1994 7.65 2022 1,250,000 1,374,913
Battle Creek Water Supply System
Pre-Refunded Revenue Bonds Series 1990B 6.375 2008-10 1,640,000 1,740,171
Buena Vista School District Saginaw County
School Building & Site Unlimited Tax
General Obligation Pre-Refunded Bonds Series 1991 7.20 2016 1,500,000 (f) 1,673,460
Chelsea General Obligation Bonds (MBIA Insured) 8.20 2006 145,000 156,880
Chippewa Valley School Macomb County
Qualified School Building Loan Fund Unlimited Tax
General Obligation Bonds (FGIC Insured) 5.00 2021 1,000,000 885,730
Comstock Park Public School Kent County Unlimited Tax
General Obligation Pre-Refunded Bonds Series 1989 6.00 2016 400,000 422,200
Comstock Park Public School Kent County Unlimited Tax
General Obligation Pre-Refunded Bonds Series 1989 6.875 2010 260,000 280,426
Detroit General Obligation Pre-Refunded Bonds
Distributable State Aid Series 1989 (AMBAC Insured) 7.20 2009 1,000,000 1,089,650
Detroit Sewer Disposal Pre-Refunded Revenue Bonds 8.00 2008 500,000 530,140
Detroit Sewer Disposal Revenue Bonds
(FGIC Insured) 5.70 2023 2,000,000 1,887,180
Detroit Unlimited Tax General Obligation Bonds Series A 7.25 2009 1,000,000 1,086,550
Detroit Unlimited Tax General Obligation Bonds Series A 8.625 2007 100,000 105,507
Detroit Unlimited Tax General Obligation Bonds Series 1988A 7.875 2008 700,000 754,740
Detroit Unlimited Tax General Obligation Bonds Series 1995A 6.80 2015 1,000,000 1,055,520
Detroit Downtown Development Authority Development Area
Number 1 Project Tax Increment Series 1996D
(Junior Lien) 6.50 2025 1,000,000 999,990
Detroit Water Supply System Revenue Second Lien
Bonds Series 1995A (MBIA Insured) 5.50 2025 1,500,000 1,413,165
Detroit Water Supply System Pre-Refunded Revenue Bonds
Series 1988 (MBIA Insured) 7.875 2008 400,000 435,468
Detroit Water Supply System Refunding Revenue Bonds
Series 1993 (FGIC Insured) 5.00 2023 1,000,000 875,520
Dexter Community Schools Building Site &
Refunding Unlimited Tax General Obligation Bonds 5.00 2017 1,500,000 1,335,870
East Lansing School District School Building & Site
Unlimited Tax General Obligation Bonds Series 1991 6.625 2014 1,000,000 1,093,370
Eaton County Water System Limited Tax General
Obligation Bonds (MBIA Insured) 5.00 2013 2,200,000 2,007,808
Farmington Hills Hospital Finance Authority
Revenue Bonds Botsford General Hospital
Series 1992A (MBIA Insured) 6.50 2022 1,500,000 (f) 1,548,945
Ferris State University Board of Trustees
General Revenue & Refunding Bonds
Series 1995 (MBIA Insured) 5.25 2020 1,000,000 917,820
Forest Hills School District Unlimited Tax
General Obligation Pre-Refunded Bonds 7.375 2015 1,000,000 1,099,080
Frenchtown Resort Drainage District Monroe County Drain
Pre-Refunded Revenue Bonds Series 1987 7.50 2011-12 615,000 672,410
See accompanying notes to investments in securities.<PAGE>
PAGE 231
Garden City School District Authority
Pre-Refunded Revenue Bonds 7.80 2010 305,000 332,404
Grand Ledge Public Schools Unlimited Tax General Obligation
Refunding Bonds Counties of Eaton, Clinton & Ionia
Series 1995 (MBIA Insured) 5.375 2024 2,000,000 1,859,700
Grand Rapids Tax Increment Revenue Bonds
Series 1994 (MBIA Insured) 6.875 2024 380,000 413,254
Grand Rapids Water Supply System Improvement
Pre-Refunded Revenue Bonds Series 1988 7.875 2018 700,000 753,074
Grand Rapids Water Supply System Improvement
Pre-Refunded Revenue Bonds Series 1990 (FGIC Insured) 7.25 2020 1,250,000 1,374,938
Hemlock Public School District Unlimited Tax General Obligation
Refunding Revenue Bonds Counties of Saginaw & Midland
Series 1996 (MBIA Insured) 5.25 2021 1,000,000 916,950
Inkster School District Unlimited Tax General Obligation
Pre-Refunded Bonds (AMBAC Insured) 7.00 2018 450,000 491,436
Isoco County Water Supply System Limited Tax
General Obligation Bonds (AMBAC Insured) 5.50 2008-10 575,000 572,368
Johannesburg-Lewiston Area Schools Building & Site
Unlimited Tax General Obligation Bonds
(AMBAC Insured) 5.00 2016 2,415,000 2,180,938
Kent County Hospital Pre-Refunded Revenue Bonds
Butterworth Hospital Series 1989A 7.25 2013 500,000 542,665
Kent County Refuse Disposal System Limited Tax
General Obligation Refunding Bonds Series 1987 8.40 2010 150,000 160,337
Lake Orion School District General Obligation Bonds
(AMBAC Insured) 5.50 2020 1,000,000 953,980
Lincoln Park School Distict Wayne County School Building & Site
Unlimited Tax General Obligation Bonds (FGIC Insured) 5.90 2026 1,000,000 1,002,440
Marquette Hospital Finance Authority Refunding Revenue Bonds
Marquette General Hospital Series 1989C 7.50 2007-19 825,000 903,721
Mason Public Schools Unlimited Tax General Obligation Bonds
County of Ingham School Building & Site Bonds
Series 1995 (FGIC Insured) 5.40 2021 1,760,000 1,648,046
Monroe County Pollution Control Revenue Bonds Detroit Edison
Fermi Plants Series 1990I (FGIC Insured) A.M.T. 7.65 2020 1,000,000 1,100,580
Monroe County Pollution Control Revenue Bonds Detroit Edison
Fermi 2 Plants Series CC (AMBAC Insured) A.M.T. 7.50 2019 1,750,000 1,924,545
Muskegon Hospital Finance Authority Refunding Revenue Bonds
Hackley Hospital Series 1988A 8.00 2008 400,000 423,924
Northville Public Schools Unlimited Tax
General Obligation Bonds Series 1991B 7.00 2008 1,500,000 1,662,030
Ovid-Elsie School District Unlimited Tax
General Obligation Bonds (Secondary MBIA Insured) 5.60 2021 1,000,000 966,110
Redford General Obligation Bonds (MBIA Insured) 5.25 2016 1,450,000 1,351,951
Richmond Limited Obligation Refunding Revenue Bonds
K mart Series A 6.625 2007 530,000 492,508
Rochester Hill Unlimited Tax General Obligation Bonds
Series 1990A 6.00 2009-10 735,000 752,188
Rockford Public Schools Kent County Unlimited Tax
General Obligation Pre-Refunded Revenue Bonds 7.375 2019 1,000,000 1,099,080
Romulus Township School District Unlimited Tax
General Obligation Refunding Bonds (FGIC Insured) 5.75 2022 2,500,000 2,466,675
St. Louis Public Schools Unlimited Tax
General Obligation Refunding Revenue Bonds
Counties of Gratiot, Midland & Isabella Series 1995 5.25 2024 755,000 689,194
Sandusky County School District General Obligation
Refunding Bonds (AMBAC Insured) 5.25 2021 500,000 459,085
South Lake District Unlimited Tax General Obligation Bonds 6.80 2010 355,000 389,392
State Building Authority Refunding Revenue Bonds Series 1991I 6.25 2020 2,200,000 2,216,302
State Hospital Finance Authority Revenue Bonds
Central Michigan Community Hospital 6.25 2027 1,000,000 940,770
State Hospital Finance Authority Hospital Pre-Refunded Revenue Bonds
Detroit Medical Center Series 1988A 8.125 2012 310,000 339,233
State Hospital Finance Authority Hospital Pre-Refunded Revenue Bonds
McLaren Obligated Group Series 1991A 7.50 2021 1,750,000 1,993,687
State Hospital Finance Authority Hospital Refunding Revenue Bonds
Detroit Medical Center Series A 6.25 2013 1,200,000 1,213,188
State Hospital Finance Authority Hospital Refunding Revenue Bonds
Detroit Medical Center Series 1988A 8.125 2012 90,000 97,039
State Hospital Finance Authority Hospital Refunding Revenue Bonds
Detroit Medical Center Series 1988B 8.00 2008 500,000 545,890
State Hospital Finance Authority Hospital Refunding Revenue Bonds
Sinai Hospital of Greater Detroit Series 1995 6.70 2026 1,000,000 972,470
State Hospital Finance Authority Pre-Refunded Revenue Bonds
Oakwood Hospital Group Series 1990A (FGIC Insured) 7.10 2018 1,000,000 1,102,970
State Hospital Finance Authority Revenue Bonds
Henry Ford Hospital Series 1990A 7.00 2010 1,000,000 1,097,810
<PAGE>
PAGE 232
State Hospital Finance Authority Revenue Bonds
Presbyterian Villages of Michigan Obligated Group
Series 1995 6.50 2025 1,000,000 946,250
State Public Power Agency Belle River
Refunding Revenue Bonds Series A 5.25 2018 1,000,000 908,920
State Strategic Fund Limited Tax Obligation Refunding Revenue Bonds
Detroit Edison Series 1990BB (MBIA Insured) 7.00 2008 1,000,000 1,145,110
State Strategic Fund Limited Tax Obligation Refunding Revenue Bonds
Detroit Edison Series 1992BB (FGIC Insured) 6.50 2016 1,500,000 1,574,400
State Strategic Fund Limited Tax Obligation Refunding Revenue Bonds
Escrowed to Maturity Oxford Institute 7.875 2005 150,000 170,157
State Strategic Fund Limited Tax Obligation Refunding Revenue Bonds
Ford Motor Series 1991A 7.10 2006 1,650,000 1,857,075
State Strategic Fund Limited Tax Obligation Revenue Bonds
Great Lakes Pulp & Fibre A.M.T. 10.25 2016 1,000,000 873,420
State Trunk Line Bonds Series A (FGIC Insured) 5.75 2020 1,065,000 1,051,176
State University Revenue Bonds Series A 5.50 2022 560,000 516,331
Taylor Tax Increment Finance Authority Bonds
Series 1989A (MBIA Insured) 6.00 2007-09 1,205,000 1,233,741
Troy City Downtown Development Authority County of Oakland
Development Bonds Series 1995A (Asset Guaranty) 6.375 2018 1,500,000 1,513,695
Van Buren Township Tax Increment Revenue Bonds
Series 1994 8.40 2016 1,000,000 1,107,830
Waterford School District Unlimited Tax General Obligation Bonds
Series Q 6.25 2013 340,000 352,107
Wayne County Airport Revenue Bonds Detroit Metropolitan Airport
Series 1986 (FGIC Insured) A.M.T. 8.00 2014 250,000 258,843
Wayne County Airport Revenue Bonds Detroit Metropolitan Airport
Series 1990A (AMBAC Insured) A.M.T. 7.00 2020 1,080,000 1,157,155
Wyandotte Electric Pre-Refunded Revenue Bonds
Series 1987 (AMBAC Insured) 7.875 2017 300,000 320,532
_____________________________________________________________________________________________________________________________
Total municipal bonds
(Cost: $74,401,580) $79,039,025
_____________________________________________________________________________________________________________________________
</TABLE>
<TABLE>
<CAPTION>
Short-term securities (1.7%)
_____________________________________________________________________________________________________________________________
Issuer (d,e) Effective Amount Value(a)
yield payable
at
maturity
_____________________________________________________________________________________________________________________________
<S> <C> <C> <C>
Municipal notes
State Strategic Fund Consumer Power Company
Series 1988A V.R.
04-15-18 3.55% $600,000 $600,000
State University Medical Service Plan
Series 1995A V.R.
12-01-27 3.55 800,000 800,000
_____________________________________________________________________________________________________________________________
Total short-term securities
(Cost: $1,400,000) $1,400,000
_____________________________________________________________________________________________________________________________
Total investments in securities
(Cost: $75,801,580)(g) $80,439,025
_____________________________________________________________________________________________________________________________
<PAGE>
PAGE 233
_____________________________________________________________________________________________________________________________
Notes to investments in securities
_____________________________________________________________________________________________________________________________
(a) Securities are valued by procedures described in Note 1 to the financial statements.
(b) Investments in bonds, by rating category as a percentage of total bonds, are as follows:
(Unaudited)
Rating 6-30-96 06-30-95
______________________________________________________________________________________________________
AAA 71% 65%
AA 12 17
A 6 10
BBB 9 6
BB and below 2 2
Non-rated -- --
______________________________________________________________________________________________________
Total 100% 100%
______________________________________________________________________________________________________
(c) The following abbreviations are used in portfolio descriptions to identify the insurer
of the issue:
AMBAC -- American Municipal Bond Association Corporation
FGIC -- Financial Guarantee Insurance Corporation
MBIA -- Municipal Bond Investors Assurance
(d) The following abbreviations are used in portfolio descriptions:
V.R. -- Variable Rate
A.M.T. -- Alternative Minimum Tax - As of June 30, 1996, the value of
securities subject to alternative minimum tax represented
6.5% of net assets.
(e) Interest rate varies to reflect current market conditions; rate shown is the effective rate
on June 30, 1996.
(f) Partially or fully 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 Sept. 1996 $3,400,000
__________________________________________________________________________
(g) At June 30, 1996, the cost of securities for federal income tax purposes was
$75,754,513 and the aggregate gross unrealized appreciation and depreciation based on
that cost was:
Unrealized appreciation $5,284,286
Unrealized depreciation (599,744)
__________________________________________________________________________
Net unrealized appreciation $4,684,512
__________________________________________________________________________
</TABLE>
<PAGE>
PAGE 234
<TABLE>
<CAPTION>
Investments in securities (Percentages represent
IDS Minnesota Tax-Exempt Fund value of investments
June 30, 1996 compared to net assets)
_____________________________________________________________________________________________________________________________
Municipal bonds (97.9%)
_____________________________________________________________________________________________________________________________
Name of issuer and Coupon Maturity Principal Value(a)
title of issue (b,c,d) rate year amount
_____________________________________________________________________________________________________________________________
<S> <C> <C> <C> <C>
Anoka County General Obligation Capital Improvement
Revenue Bonds Series 1989B 7.00 % 2007-10 $ 7,950,000 $ 8,371,032
Anoka County Resource Recovery Revenue Bonds
Northern States Power Series 1985 7.15 2008 3,750,000 4,004,062
Appleton Correctional Facility Revenue Bonds
Series 1990A 9.875 2020 4,000,000 (e) 2,520,000
Becker Pollution Control Revenue Bonds
Northern States Power Sherburne County
Generating Station Units 1 & 2 Series 1987A 7.25 2005 2,000,000 2,024,760
Becker Solid Waste Disposal Facility
Revenue Bonds Liberty Paper Series 1994B A.M.T. 9.00 2015 3,825,000 3,897,598
Bemidji Hospital Facilities 1st Mortgage Revenue Bonds
North Country Health Services Series 1991 7.00 2021 1,755,000 1,959,949
Bloomington Community Development
Refunding Revenue Bonds Note 24th Avenue Motel 8.50 2005 1,794,725 1,812,672
Braham Independent School District #314
Refunding Revenue Bonds 5.20 2019 3,340,000 3,121,096
Brooklyn Center Tax Credit Investor Revenue Bonds
Four Courts Apartment Project Series 1995B A.M.T. 7.58 2009 2,450,000 2,453,699
Burnsville Multi-family Housing
Refunding Revenue Bonds
FHA-Summit Park Apartments Series 1993 6.00 2033 4,000,000 3,890,040
Chaska Advance Refunded Certificate of Participation
Lease Purchase Agreement Bonds Series 1986C 7.25 2001 800,000 804,320
Columbia Heights Multi-family Housing Revenue Bonds
Crestview Lutheran Home Royce Place Series 1991 10.00 2032 560,000 595,353
Columbia Heights Multi-family Housing Revenue Bonds
Crestview Lutheran Home Royce Place
Series 1991 (FHA Insured) 7.75 2032 2,735,000 2,851,347
Duluth Economic Development Authority
Health Care Facility Pre-Refunded Revenue Bonds
Benedictine Health System
St. Mary's Medical Center Series 1990 8.375 2020 2,000,000 2,279,200
Duluth Hospital Facilities St. Lukes Hospital
Pre-Refunded Revenue Bonds Series 1988 9.00 2018 2,500,000 2,758,300
Duluth Housing and Redevelopment Authority 1st Mortgage
Revenue Bonds Lakeshore Lutheran Home 8.25 2009 125,000 125,191
Duluth Recreation Revenue Certificate of Participation 9.00 2004-07 1,180,000 1,223,200
Eden Prairie Housing Development Refunding Revenue Bonds
Eden Commons Series 1990 (FHA Insured) 8.25 2025 6,265,000 6,371,129
Edina Hospital System Revenue Bonds
Fairview Hospital & Health Care Services
Series 1989A 7.125 2019 2,500,000 2,669,500
Edina Multi-family Housing Revenue Bonds
Walker Assisted Living Series 1991 9.00 2031 6,700,000 7,311,978
See accompanying notes to investments in securities.
<PAGE>
PAGE 235
Faribault Rice & Goodhue County
Independent School District #656
General Obligation School Building Bonds
Series 1995 (CGIC Insured) 5.75 2015 6,900,000 6,875,988
Faribault Single Family Mortgage
Refunding Revenue Bonds Series 1991A 7.50 2011 2,165,000 2,254,220
Fergus Falls Health Care Facilities Revenue Bonds
LRHC Long-Term Care Facility Series 1995 6.50 2025 1,500,000 1,471,950
Hennepin County Lease
Revenue Certificate of Participation
Series 1991 6.80 2017 7,250,000 7,819,488
Hennepin County Solid Waste Resource Recovery
General Obligation Revenue Bonds
Series 1987A A.M.T. 8.20 2009 1,760,000 1,780,416
Hopkins Revenue Bonds Blake School 6.70 2024 3,120,000 3,384,919
Hubbard County Solid Waste Disposal Revenue Bonds
Potlatch Series 1989 A.M.T. 7.375 2013 5,610,000 5,993,163
International Falls Solid Waste Disposal
Revenue Bonds Boise Cascade
Series 1990 A.M.T. 7.75 2015 4,000,000 4,159,160
Little Canada Multi-family Housing Revenue Bonds
Provinces of Little Canada
Series 1996 A.M.T. 7.00 2027 3,885,000 3,733,174
Long Prairie/Grey Eagle Unlimited Tax
General Obligation School Bonds 5.00 2017 3,500,000 3,207,715
Mahtomedi Multi-family Housing
Briarcliff Revenue Bonds 7.35 2036 2,300,000 2,314,306
Maplewood Care Institute Series 1994 7.75 2024 3,830,000 3,854,512
Maplewood Multi-family Housing
Revenue Bonds Maplewood (FHA Insured) A.M.T. 7.75 2021 2,090,000 2,104,860
Maplewood Multi-family Housing
Carefree Cottages of Maplewood III
Refunding Revenue Bonds Series 1995 A.M.T. 7.20 2032 2,900,000 2,834,286
Minneapolis & St. Paul Housing Board
Multi-family Mortgage Revenue Bonds
GNMA Collateral Mortgage Revenue Loan
Riverside Plaza Series 1988 A.M.T. 8.25 2030 3,945,000 4,150,337
Minneapolis Community Development Agency
Limited Tax Supported Development
Revenue Common Bond Fund
Series 1996-01 6.00 2011 980,000 954,540
Minneapolis Community Development Agency &
St. Paul Housing & Redevelopment Authority
Home Ownership Mortgage Revenue Bonds
Family Housing Mortgage Phase II 7.875 2017 1,515,000 1,545,815
Minneapolis General Obligation Refunding Bonds
Sports Arena Series 1996 5.125 2020 5,000,000 4,624,200
Minneapolis General Obligation Bonds
Sports Arena Series 1996 5.20 2024 1,940,000 1,799,292
Minneapolis Hospital Facility
Pre-Refunded Revenue Bonds
Lifespan Incorporated Series 1987A 8.125 2017 3,630,000 3,819,595
Minneapolis Hospital Facility
Pre-Refunded Revenue Bonds
Lifespan Incorporated Series 1989A 7.00 2014 5,000,000 5,463,250
Minneapolis & St. Paul Housing &
Redevelopment Authority
Health Care System Revenue Bonds
Healthspan Series 1993 (AMBAC Insured) 4.75 2018 13,500,000 11,450,295
Minneapolis & St. Paul Housing &
Redevelopment Authority
Health Care System Revenue Bonds
Series 1995A (CGIC Insured) 5.50 2025 2,500,000 2,388,200
Minneapolis Nursing Home Revenue Bonds
Walker Cityview & Southview
Series 1992 8.50 2022 5,460,000 5,814,736
Minneapolis & St. Paul Housing &
Redevelopment Authority Health Care System
Revenue Bonds Healthspan Series 1993A (AMBAC Insured) 5.00 2013 2,955,000 2,665,144
Minnetonka Multi-family Housing
Refunding Revenue Bonds Cedar Hill West
(FHA Insured) 7.75 2026 5,535,000 5,691,807
Minnetonka Multi-family Housing Revenue Bonds
The Cedar Hills Series 1985 Inverse Floater 7.50 2017 500,000 (f) 508,385
New Brighton Tax Credit Investor Revenue Bonds
Polynesian Village Apartments Series 1995B A.M.T. 7.75 2009 2,355,000 2,380,057
Northern Municipal Power Agency Electric System
Refunding Revenue Bonds
Series 1989A 7.25 2016 5,475,000 5,813,355
<PAGE>
PAGE 236
Northern Municipal Power Agency Electric System
Pre-Refunded Revenue Bonds
Series 1989A (AMBAC Insured) 7.40 2018 1,000,000 1,087,940
Northern Municipal Power Agency Electric System
Pre-Refunded Revenue Bonds
Series 1989B (AMBAC Insured) 7.40 2018 1,800,000 1,939,536
Owatanna Public Utilities Pre-Refunded Revenue Bonds
Series 1991 6.75 2016 1,000,000 1,079,470
Plymouth Multi-family Housing Revenue Bonds
Harbor Lane Apartments Series 1993
(Asset Guaranty Insured) A.M.T. 5.90 2013 2,325,000 2,292,706
Port Authority St. Paul Unlimited Tax
General Obligation Bonds 5.125 2024 2,770,000 2,492,584
Red Wing Industrial Development
Refunding Revenue Bonds K mart Series 1993 5.50 2008 400,000 328,428
Richfield Independent School District #280
Unlimited Tax General Obligation
School Building Bonds Series 1993C
Inverse Floater (FGIC Insured) 6.58 2010 3,300,000 (f) 3,180,375
Richfield Independent School District #280
Unlimited Tax General Obligation
School Building Bonds Series 1993C Trust
Inverse Floater (FGIC Insured) 6.68 2012 2,510,000 (f) 2,378,225
Robbinsdale Hospital Pre-Refunded Revenue Bonds
North Memorial Medical Center
Series 1989 (AMBAC Insured) 7.375 2019 2,200,000 2,392,170
Rochester Health Care Facility Revenue Bonds
Mayo Foundation Series A 4.951 2019 5,000,000 4,278,050
Rochester Multi-family Housing Development
Revenue Bonds Civic Square
Series 1991 (FHA Insured) A.M.T. 7.45 2031 4,425,000 4,653,905
Roseville Health Care Facility
Refunding Revenue Bonds
Presbyterian Homes of Minnesota Series 1987 7.50 2007 2,250,000 2,315,160
Rush City Independent School District #139
Unlimited Tax School Building
Refunding Bonds School Credit Enhancement Program 5.25 2018 2,595,000 2,435,563
St. Cloud Hospital Facility
Refunding Revenue Bonds Series 1996B (AMBAC Insured) 5.00 2020 2,000,000 1,772,780
St. Cloud Hospital Facility
Refunding Revenue Bonds Series B (AMBAC Insured) 5.00 2012 2,900,000 2,680,064
St. Cloud Hospital Facility Revenue Bonds
St. Cloud Hospital Series 1990B
(AMBAC Insured) 7.00 2020 5,000,000 5,570,500
St. Cloud Hospital Facility Refunding Revenue Bonds
Series C (AMBAC Insured) 5.30 2020 1,515,000 1,392,906
St. Cloud Hydro Electric Generation Facility
Gross Revenue Bonds Series 1986 7.375 2018 1,100,000 1,133,143
St. Louis Park Health Care Facilities Revenue Bonds
Healthsystem Minnesota Obligated Group
Series 1993 (AMBAC Insured) 5.20 2023 6,000,000 5,406,300
St. Louis Park Health Care Facilities Revenue Bonds
Healthsystem Minnesota Obligated Group Series 1993B
Inverse Floater (AMBAC Insured) 6.275 2013 7,000,000 (f) 5,766,250
St. Louis Park Health Care Facilities
Pre-Refunded Revenue Bonds
Park Nicollet Medical Center Series 1990A 9.25 2020 4,000,000 4,653,840
St. Louis Park Health Care Facilities
Pre-Refunded Revenue Bonds
Park Nicollet Medical Center Series 1991A 8.625 2021 2,000,000 2,312,960
St. Louis Park Multi-family Housing
Revenue Refunding Bonds
Park Blvd Towers Series 1996A 7.00 2031 4,000,000 3,983,880
St. Louis Park Multi-family Rental Housing
Revenue Bonds Mortgage Loan
Community Housing & Services
Series 1985 (FHA Insured) 7.375 2028 2,250,000 2,368,193
St. Paul & Minneapolis Housing &
Redevelopment Authority Health Care
Facility Revenue Bonds Group Health Plan Series 1992 6.75 2013 10,500,000 (h) 11,273,115
St. Paul Housing & Development Bonds
Highland Retirement (FHA Insured) 7.50 2026 5,210,000 (e) 4,871,350
St. Paul Housing & Redevelopment Authority
Hospital Facility Revenue Bonds
St. Paul Ramsey Medical Center (AMBAC Insured) 5.55 2023 5,000,000 4,758,700
St. Paul Housing & Redevelopment Authority
Commercial Development
Refunding Revenue Bonds Beverly Enterprises Series 1992 7.75 2002 2,540,000 2,615,336
<PAGE>
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St. Paul Housing & Redevelopment Authority
Health Care Facility Revenue Bonds
Lyngblomsten Care Center Series 1993A 7.125 2017 1,915,000 1,932,158
St. Paul Housing & Redevelopment Authority
Health Care Facility Revenue Bonds
Lyngblomsten Care Center Series 1993A 9.60 2006 1,005,000 1,057,461
St. Paul Housing & Redevelopment Authority
Health Care Facility
Multi-family Rental Housing Revenue Bonds
Lynblomsten 1993B 7.00 2024 1,910,000 1,848,173
St. Paul Housing & Redevelopment Authority
Sales Tax Revenue Bonds
Civic Center (Secondary MBIA Insured) 5.55 2023 7,500,000 7,036,125
St. Paul Housing & Redevelopment Authority
Single Family Mortgage
Refunding Revenue Bonds Middle Income Phase II
FNMA Mortgage Backed 6.80 2028 3,460,000 3,657,428
St. Paul Independent School District #625
Unlimited Tax General Obligation Bonds (FSA Insured) 5.75 2016 3,500,000 3,487,575
Shoreview Senior Housing Revenue Bonds
Series 1996 7.25 2026 2,700,000 2,619,918
Southern Minnesota Municipal Power Agency Bonds
Escrowed to Maturity 5.75 2018 370,000 368,642
Southern Minnesota Municipal Power Agency
Power Supply System
Revenue Bonds Zero Coupon
Series 1994A (MBIA Insured) 6.67 2019 19,500,000 (g) 5,049,330
Southern Minnesota Municipal Power Agency
Power Supply System
Revenue Bonds Zero Coupon
Series 1994A (MBIA Insured) 6.88 2022 12,000,000 (g) 2,586,120
Southern Minnesota Municipal Power Agency
Pre-Refunded Bonds Series 1988A 8.125 2018 1,315,000 1,419,477
Southern Minnesota Municipal Power Agency
Pre-Refunded Bonds Series 1988B 8.125 2018 1,000,000 1,079,450
Southern Minnesota Municipal Power Agency
Pre-Refunded Revenue Bonds
Escrowed to Maturity Series A (Secondary MBIA Insured) 5.75 2018 1,600,000 1,594,128
Southern Minnesota Municipal Power Agency
Revenue Bonds (Secondary MBIA Insured) 4.75 2016 6,415,000 5,560,073
Southern Minnesota Municipal Power Agency
Series A (Secondary MBIA Insured) 5.75 2018 2,135,000 2,114,205
Southern Minnesota Municipal Power Agency
Un-Refunded Balance
Power Revenue Bonds Series A 5.75 2018 1,895,000 1,847,094
Spring Park Health Care Facility
Revenue Bonds Twin Birch Health Care Center
Series 1991 8.25 2011 1,780,000 1,917,772
State General Obligation Various Purpose
Pre-Refunded Bonds Series 1990 7.00 2009 7,850,000 8,511,519
State General Obligation Various Purpose
Pre-Refunded Bonds Series 1991 6.70 2011 8,000,000 8,690,240
State Higher Education Facilities Authority
Augsburg College Mortgage Revenue Bonds
Series 4-F1 6.25 2023 1,750,000 1,747,550
State Higher Education Facility Authority
Mortgage Pre-Refunded Revenue Bonds
St. Mary's College Series 2-M 8.375 2017 1,000,000 1,100,510
State Housing Facility Authority
Housing Finance Agency Housing Development
Single Family Mortgage Bonds Series B 7.25 2016 355,000 362,945
State Housing Finance Agency
Single Family Mortgage Bonds
Series 1989A A.M.T. 8.00 2029 1,265,000 1,314,664
State Housing Finance Agency
Single Family Mortgage Bonds
Series 1990A A.M.T. 7.95 2022 3,415,000 3,605,455
State Housing Finance Agency
Single Family Mortgage Bonds
Series 1991A A.M.T. 7.45 2022 3,575,000 3,727,903
State Housing Finance Agency
Single Family Mortgage Bonds Series 1992A 6.95 2016 3,130,000 3,278,769
State Housing Finance Agency
Single Family Mortgage Revenue Bonds
Series L A.M.T. 6.70 2020 1,100,000 1,125,586
State Public Facilities Authority
Water Pollution Control Revenue Bonds
Series 1989A 7.00 2009 6,250,000 6,763,313
<PAGE>
PAGE 238
State University Board of Regents
General Obligation Inverse Floater Bonds
Series 1993A Bonds 5.87 2003 5,000,000 (f) 4,775,000
State University Board of Regents
General Obligation Pre-Refunded Bonds
Series 1989A 6.00 2011 4,625,000 4,810,324
State University Board State University System
Pre-Refunded Revenue Bonds
Series 1989A (MBIA Insured) 7.40 2019 2,250,000 2,430,855
Vadnais Heights Multi-family Housing
Cottages of Vadnais Heights
Refunding Revenue Bonds
Series 1995 A.M.T. 7.00 2031 3,200,000 3,110,144
Washington County General Obligation
Capital Improvement Bonds
Series 1989A 7.00 2009-10 4,425,000 4,692,536
Washington County Housing & Redevelopment Authority
Multi-family Housing Revenue Bonds
Orleans Homes Series 1987-2 A.M.T. 9.00 2017 2,000,000 2,081,460
Western Minnesota Municipal Power Agency
Revenue Bonds
Escrowed to Maturity (AMBAC Insured) 6.75 2016 5,935,000 6,315,671
Western Minnesota Municipal Power Agency
Supply Refunding Revenue Bonds
Series 1987A 5.50 2015 5,000,000 4,744,200
Western Minnesota Municipal Power Agency
Supply Refunding Revenue Bonds
Series 1987A 6.875 2007 2,500,000 2,579,650
Western Minnesota Municipal Power Agency
Supply Refunding Revenue Bonds
Series 1987A 7.00 2013 7,300,000 7,537,177
Western Minnesota Municipal Power Agency
Supply Refunding Revenue Bonds
Series A (Secondary MBIA Insured) 5.50 2015 6,250,000 6,052,625
White Bear Lake Industrial Development
Revenue Bonds
Taylor Series 1988A A.M.T. 8.75 2008 2,250,000 2,447,033
_____________________________________________________________________________________________________________________________
Total investment in securities
(Cost: $383,139,342) (i) $400,295,278
______________________________________________________________________________________________________________________________
/TABLE
<PAGE>
PAGE 239
___________________________________________________________________
Notes to investments in securities
___________________________________________________________________
(a) Securities are valued by procedures described in Note 1 to the
financial statements.
(b) Investments in bonds, by rating category as a percentage of
total bonds, are as follows:
<TABLE><CAPTION>
(Unaudited)
Rating 6-30-96 06-30-95
______________________________________________________________________
<S> <C> <C>
AAA 48% 47%
AA 18 22
A 15 16
BBB 7 6
BB and below 10 7
Non-rated 2 2
_____________________________________________________________________
Total 100% 100%
_____________________________________________________________________
</TABLE>
(c) The following abbreviations are used in portfolio descriptions
to identify the insurer of the issue:
AMBAC -- American Municipal Bond Association Corporation
CGIC -- Capital Guaranty Insurance Company
FGIC -- Financial Guarantee Insurance Corporation
FHA -- Federal Housing Authority
FHA -- Financial Security Assurance
MBIA -- Municipal Bond Investors Assurance
(d) The following abbreviation is used in portfolio descriptions:
A.M.T. -- Alternative Minimum Tax -- As of June 30, 1996, the value
of securities subject to alternative minimum tax represented 14.7%
of net assets V.R.D.B. -- Variable Rate Demand Bond
(e) Presently non-income producing. Item identified is in default
as to payment of interest and/or principal.
(f) Inverse floaters represent securities that pay interest at a
rate that increases (decreases) in the same magnitude as, or in a
multiple of, a decline (increase) in market short-term rates.
Interest rate disclosed is the rate in effect on June 30, 1996.
Inverse floaters in the aggregate represent 4.5% of the Fund's net
assets as of June 30, 1996.
(g) For zero coupon bonds, the interest rate disclosed represents
the annualized effective yield on the date of acquisition.
(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 Sept 1996 $18,100,000
__________________________________________________________________
(i) At June 30, 1996, the cost of securities for federal income tax
purposes was $382,381,393 and the approximate aggregate gross
unrealized appreciation and depreciation based on that cost was:
<PAGE>
PAGE 240
Unrealized appreciation $21,442,883
Unrealized depreciation (3,528,998)
___________________________________________________________________
Net unrealized appreciation $17,913,885
___________________________________________________________________
<PAGE>
PAGE 241
<TABLE>
<CAPTION>
Investments in securities
IDS New York Tax-Exempt Fund (Percentages represent value of
June 30, 1996 investments compared to net assets)
_____________________________________________________________________________________________________________________________
Municipal bonds (97.3%)
_____________________________________________________________________________________________________________________________
Name of issuer Coupon Maturity Principal Value(a)
and title of issue (b,c,d) rate year amount
_____________________________________________________________________________________________________________________________
<S> <C> <C> <C> <C>
Battery Park City Authority
Senior Refunding Revenue Bonds Series 1993A 5.25 % 2017 $4,000,000 $ 3,557,600
Broome County Certificates of Partication
Public Safety Facility Series 1994 (MBIA Insured) 5.25 2022 2,650,000 2,423,081
Buffalo Municipal Water Agency Authority Water System
Revenue Bonds Series 1995 (FGIC Insured) 5.00 2025 1,000,000 875,690
Erie County Unlimited Tax General Obligation Bonds
Series B (FGIC Insured) 5.50 2025 700,000 665,987
Erie County Water Authority Fourth Resolution Water
Refunding Revenue Bonds Zero Coupon
Series 1992 (AMBAC Insured) 7.30 2017 1,215,000 (e) 263,047
Erie County Water Authority Water Works System
Revenue Bonds Escrowed to Maturity
Series 1990A (AMBAC Insured) 6.00 2008 1,765,000 1,871,377
Fallsburg Sullivan County Unlimited Tax General Obligation Improvement
Pre-Refunded Bonds Series 1991 7.05 2011-14 1,300,000 1,453,764
Great Neck North Water Authority Water System
Pre-Refunded Revenue Bonds Series 1989A 6.00 2020 1,415,000 1,478,505
Metropolitan Transportation Authority Commuter Facilities
1987 Service Contract Refunding Bonds Series 5 6.50 2016 1,775,000 1,796,850
Monroe County Utility General Obligation
Pre-Refunded Bonds Water Improvement System 7.10 2008-09 1,000,000 1,084,240
Municipal Assistance New York City Series 59 7.75 2006 660,000 694,538
Municipal Assistance New York City Series 62 6.75 2006 2,200,000 2,288,330
New York & New Jersey Port Authority Consolidated Revenue Bonds
Series 62 A.M.T. 8.00 2023 1,000,000 1,022,750
New York & New Jersey Port Authority Special Obligation Revenue Bonds
KIAC Partners Project Series 4 A.M.T. 6.75 2019 1,500,000 1,492,470
New York City General Obligation Bonds Series 1995B 7.00 2016 1,500,000 1,569,075
New York City General Obligation Bonds Series J 5.875 2019 1,000,000 928,600
New York City Municipal Water Finance Authority Water & Sewer System
Revenue Bonds Series B Inverse Floater (MBIA Insured) 6.44 2009 2,000,000 (f) 1,840,000
New York City Municipal Water Finance Authority Water & Sewer System
Revenue Bonds Series B (AMBAC Insured) 5.375 2019 500,000 467,795
New York City Municipal Water Finance Authority Water & Sewer System
Revenue Bonds Series B (MBIA Insured) 5.75 2026 500,000 490,190
New York City Unlimited Tax General Obligation Bonds
Series 1996G 5.75 2017 1,500,000 1,379,550
New York City Water Finance Authority Water & Sewer System
Pre-Refunded Revenue Bonds Series A (FGIC Insured) 6.75 2014 1,185,000 1,276,506
New York City Water Finance Authority Water & Sewer System
Revenue Bonds Series A (FGIC Insured) 6.75 2014 565,000 607,810
New York City Water Finance Authority Water & Sewer System
Revenue Pre-Refunded Bonds Series 1988A 7.00 2018 1,000,000 1,045,430
See accompanying notes to investments in securities.<PAGE>
PAGE 242
State Dormitory Authority City University System
Consolidated 3rd Resolution Revenue Bonds
Series 1994-2 (MBIA Insured) 6.25 2019 1,500,000 1,535,040
State Dormitory Authority City University System
Pre-Refunded Revenue Bonds 8.125 2017 3,400,000 3,615,798
State Dormitory Authority City University System
Revenue Bonds Series 1993A 5.75 2013 3,000,000 2,883,660
State Dormitory Authority Revenue Bonds The Devereux Foundation
Series 1995 (MBIA Insured) 5.00 2015 1,000,000 901,130
State Dormitory Authority Revenue Bonds NYACK Hospital
Series 1996 6.25 2013 1,000,000 980,530
State Dormitory Authority State University Education Facility
Pre-Refunded Revenue Bonds Series 1990A 7.70 2012 1,750,000 1,969,730
State Dormitory Authority State University Education Facility
Refunding Revenue Bonds Series 1990B 7.50 2011 1,900,000 2,192,011
State Dormitory Authority State University Education Facility
Revenue Bonds (Secondary AMBAC Insured) 5.25 2015 1,000,000 949,410
State Dormitory Authority State University Education Facility
Revenue Bonds (Secondary AMBAC Insured) 5.50 2019 2,000,000 1,936,660
State Dormitory Authority Upstate Community Colleges
Series A (Connie Lee Insured) 5.625 2012 1,500,000 1,480,545
State Energy Research & Development Authority Electric Facility
Revenue Bonds Consolidated Edison Series 1986A A.M.T. 7.50 2021 1,750,000 1,800,120
State Energy Research & Development Authority Electric Facility
Revenue Bonds Consolidated Edison Series 1989A A.M.T. 7.75 2024 1,000,000 1,053,100
State Energy Research & Development Authority Electric Facility
Revenue Bonds Consolidated Edison Series 1990A A.M.T. 7.50 2025 5,000,000 (h) 5,370,800
State Energy Research & Development Authority Gas Facility
Revenue Bonds Brooklyn Union Gas Series I 7.125 2020 2,000,000 2,056,980
State Energy Research & Development Authority Gas Facility
Revenue Bonds Brooklyn Union Gas Series II 7.00 2020 1,500,000 1,536,750
State Energy Research & Development Authority Pollution Control
Refunding Revenue Bonds Rochester Gas & Electric
(MBIA Insured) A.M.T. 6.50 2032 2,500,000 2,580,525
State Energy Research & Development Authority
Solid Waste Development Revenue Bonds State Gas & Electric Company
Series A (MBIA Insured) A.M.T. 5.70 2028 3,000,000 2,871,900
State Environmental Facility State Water & Pollution Control
Revolving Fund Revenue Bonds New York City
Municipal Water Finance Authority Series 1990A 7.50 2012 3,000,000 3,300,210
State Local Government Assistance Bonds Series C 5.50 2022 1,500,000 1,389,180
State Local Government Assistance Pre-Refunded Bonds
Series 1991A 7.00 2016 4,000,000 4,464,680
State Medical Care Facility Finance Agency Hospital & Nursing Home
Mortgage Revenue Bonds Montefiore Hospital
Series 1989A (FHA Insured) 7.25 2024 1,400,000 1,492,624
State Medical Care Facility Finance Agency Mental Health
Services Facility Improving Refunding Revenue Bonds
Series 1993F (Secondary FSA Insured) 5.375 2014 1,000,000 949,160
State Medical Care Facility Finance Agency Mental Health
Services Facility Improving Refunding Revenue Bonds
Series 1994A (Secondary FSA Insured) 5.25 2023 1,500,000 1,368,750
State Medical Care Facility Finance Agency Pre-Refunded Bonds
Presbyterian Hospital Series 1985B 8.00 2025 1,320,000 1,407,925
State Medical Care Facility Finance Agency Revenue Bonds
Buffalo General Hospital Series 1988C (FHA Insured) 7.60 2008 1,500,000 1,633,965
State Medical Care Facility Finance Agency Revenue Bonds
Buffalo General Hospital Series 1988C (FHA Insured) 7.70 2022 1,950,000 2,128,094
State Medical Care Facility Finance Agency
Mental Health Services Facility Mental Health Services
Series F (Secondary Capital Guaranty) 5.375 2014 1,570,000 1,490,181
State Medical Care Facility Finance Agency Revenue Bonds
North Shore University Glen Cove Series A (MBIA Insured) 5.125 2012 1,000,000 926,370
State Medical Care Facility Finance Agency Secured Hospital
Revenue Bonds Series 1987A 7.10 2027 550,000 564,850
State Mortgage Agency Homeowner Mortgage Revenue Bonds
Series TT 7.50 2015 4,000,000 4,238,440
State Mortgage Agency Homeowner Mortgage Revenue Bonds
Series 27 6.90 2015 3,000,000 (h) 3,155,670
State Mortgage Agency Revenue Bonds
Series 9 A.M.T. 7.30 2017 970,000 993,241
State Thruway Authority Local Highway & Bridge Service
Contract Bonds Series 1991 6.00 2011 2,500,000 2,440,925
State Urban Development Correction Facility
Pre-Refunded Revenue Bonds Series 1 (FSA Insured) 7.50 2020 4,500,000 4,999,725
State Urban Development Correctional Capital Facilities
Refunding Revenue Bonds Series 1993A 5.25 2021 2,500,000 2,171,625
State Urban Development Correctional Capital Facilities
Revenue Bonds Series 5 (MBIA Insured) 5.50 2025 750,000 710,812
<PAGE>
PAGE 243
State Urban Development Revenue Bonds
Higher Education Applied Technology Grants
Series 1995 (MBIA Insured) 5.75 2015 1,000,000 995,360
Triborough Bridge & Tunnel Authority
General Purpose Pre-Refunded Revenue Bonds Series S 7.00 2021 3,000,000 3,322,920
Triborough Bridge & Tunnel Authority
Special Obligation Refunding Bonds Series 1991B (FGIC Insured) 6.875 2015 2,000,000 2,138,140
United Nations Development Senior Lien
Refunding Revenue Bonds Series 1992A 6.00 2026 4,500,000 4,432,275
_____________________________________________________________________________________________________________________________
Total municipal bonds
(Cost: $110,308,011) $117,002,996
_____________________________________________________________________________________________________________________________
Short-term security (0.8%)
______________________________________________________________________________________________________________________________
Issuer (c,d,g) Effective Amount Value (a)
yield payable at
maturity
_____________________________________________________________________________________________________________________________
Municipal note
New York City Municipal Water Authority
Water & Sewer System Revenue Bonds (FGIC Insured) V.R.
06-15-23 3.60 900,000 900,000
_____________________________________________________________________________________________________________________________
Total short-term security
(Cost: $900,000) $ 900,000
_____________________________________________________________________________________________________________________________
Total investments in securities
(Cost: $111,208,011)(i) $117,902,996
_____________________________________________________________________________________________________________________________
/TABLE
<PAGE>
PAGE 244
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 52% 55%
AA 18 20
A 15 15
BBB 14 10
BB and below 1 --
Non-rated -- --
___________________________________________________________________
Total 100% 100%
___________________________________________________________________
(c) The following abbreviations are used in portfolio descriptions
to identify the insurer of the issue:
AMBAC -- American Municipal Bond Association Corporation
FGIC -- Financial Guarantee Insurance Corporation
FHA -- Federal Housing Authority
FSA -- Financial Security Assurance
MBIA -- Municipal Bond Investors Assurance
(d) The following abbreviation are used in portfolio descriptions:
A.M.T. -- Alternative Minimum Tax -- As of June 30, 1996, the value
of securities subject to alternative minimum tax represented 14.3%
of net assets. V.R. -- Variable Rate
(e) For zero coupon bonds, the interest rate disclosed represents
the annualized yield on the date of acquisition.
(f) Inverse floaters represent securities that pay interest at a
rate that increases (decreases) in the same magnitude as, or in a
multiple of, a decline (increase) in market short-term rates.
Interest rate disclosed is the rate in effect on June 30, 1996.
Inverse floaters in the aggregate represent 1.5% of the fund's net
assets as of June 30, 1996.
(g) Interest rate varies to reflect current market conditions; rate
shown is the effective rate on June 30, 1996.
(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 Sept. 1996 $6,400,000
___________________________________________________________________
<PAGE>
PAGE 245
(i) At June 30, 1996, the cost of securities for federal income tax
purposes was $110,149,750 and the gross unrealized appreciation and
depreciation based on that cost was:
Unrealized appreciation $7,628,819
Unrealized depreciation (875,573)
___________________________________________________________________
Net unrealized appreciation $6,753,246
___________________________________________________________________
<PAGE>
PAGE 246
<TABLE>
<CAPTION>
Investments in securities
IDS Ohio Tax-Exempt Fund
June 30, 1996 (Percentages represent value of
investments compared to net assets)
_____________________________________________________________________________________________________________________________
Municipal bonds (98.7%)
_____________________________________________________________________________________________________________________________
Name of issuer and Coupon Maturity Principal Value(a)
title of issue (b,c,d) rate year amount
_____________________________________________________________________________________________________________________________
<S> <C> <C> <C> <C>
Barberton Limited Tax Various Purpose General Obligation Bonds
Series 1989-1 7.35 % 2009 $ 700,000 $ 763,672
Bellefontaine Hospital Facility
Refunding Revenue Bonds
Mary Rutan Health Association of Logan County
Series 1993 6.00 2013 1,000,000 933,460
Buckeye Valley Local School District School Improvement Unlimited Tax
General Obligation Bonds Series 1995A (MBIA Insured) 5.25 2020 1,000,000 928,590
Butler County Hospital Facility Improvement
Refunding Revenue Bonds 7.50 2010 1,750,000 1,854,125
Carroll Water & Sewer District
Water System Improvement Unlimited Tax
General Obligation Bonds 6.25 2010 1,000,000 939,400
Clermont County Hospital Facility Revenue Bonds
Mercy Health System Province of Cincinnati
Series 1989A (AMBAC Insured) 7.50 2019 750,000 831,663
Cleveland Airport Systems Revenue Bonds
Series 1990A (MBIA Insured) A.M.T. 7.40 2020 500,000 539,200
Cleveland General Obligation Pre-Refunded Bonds 7.375 2003 125,000 132,661
Cleveland Public Power System 1st Mortgage
Pre-Refunded Revenue Bonds 8.375 2017 100,000 106,809
Cleveland Waterworks Improvement 1st Mortgage
Refunding Revenue Bonds
Series F 1992B (AMBAC Insured) 6.25 2016 1,000,000 (f) 1,025,850
Cleveland Waterworks Improvement 1st Mortgage
Revenue Bonds Series 1987E 6.00 2017 200,000 198,368
Cleveland Waterworks Improvement 1st Mortgage
Pre-Refunded Revenue Bonds Series 1987E 7.875 2016 650,000 676,481
Coshocton County Solid Waste Disposal Refunding Revenue Bonds
Stone Container Series 1992 7.875 2013 1,000,000 1,052,400
Cuyahoga County Hospital Improvement Revenue Bonds
Cleveland Clinic Foundation 7.00 2013 500,000 511,010
Cuyahoga County Hospital Improvement Pre-Refunded Revenue Bonds
Cleveland Clinic Foundation Series 1987A 7.875 2010 275,000 295,361
Cuyahoga County Hospital Improvement Revenue Bonds
Mount Sinai Medical Center Series 1991 (AMBAC Insured) 6.625 2021 600,000 661,542
Cuyahoga County Hospital Improvement Revenue Bonds
University Hospitals Health System
Series 1992 (AMBAC Insured) 6.50 2011 500,000 527,685
Cuyahoga County Hospital Refunding Revenue Bonds
Cleveland Clinic Foundation Series 1992 5.50 2011 1,500,000 1,475,460
Cuyahoga County Hospital Refunding Revenue Bonds
Mount Sinai Medical Center Series 1987A 8.125 2014 400,000 430,356
Cuyahoga County Hospital Revenue Bonds
Meridia Health Series 1991 7.00 2023 1,000,000 (f) 1,071,560
See accompanying notes to investments in securities.<PAGE>
PAGE 247
Cuyahoga County Limited Tax General Obligation Bonds 5.60 2013 500,000 487,190
Cuyahoga Hospital Revenue Bonds Metrohealth System
Series 1989 (MBIA Insured) 6.00 2019 1,000,000 1,001,200
Dayton International Airport Refunding Revenue Bonds (AMBAC Insured) 5.25 2015 2,000,000 1,879,360
Delaware County Sewer Improvement Limited Tax
General Obligation Bonds 5.25 2015 1,000,000 935,250
Dover Limited Tax Improvement General Obligation Bonds
Municipal Sewer System 7.10 2009 1,000,000 1,083,510
Dublin City School District: Franklin, Delaware, & Union Counties
Unlimited General Obligation School Building
Improvement Bonds Series 1995 (FGIC Insured) 5.00 2018 1,500,000 1,352,175
Elyria Limited Tax Improvement General Obligation
Recreation Facility Bonds 7.10 2009 715,000 774,710
Erie County Hospital Improvement Refunding Revenue Bonds
Firelands Community Hospital Series 1992 6.75 2015 2,000,000 2,088,380
Franklin County Convention Facilities Authority
Tax & Lease Revenue Anticipation
Pre-Refunded Bonds (MBIA Insured) 7.00 2019 1,500,000 1,660,110
Hamilton County Sewer System Improvement
Metropolitan Sewer District of Greater Cincinnati
Refunding Revenue Bonds Series A (FGIC Insured) 5.50 2017 1,000,000 970,580
Highland Heights Limited Tax Improvement
General Obligation Street Bonds 7.75 2008 400,000 434,108
Hilliard County School District Unlimited Tax
General Obligation Bonds Series A (FGIC Insured) 5.00 2020 1,000,000 896,160
Kettering School District Improvement General Obligation Bonds
(FGIC Insured) 5.25 2022 1,000,000 926,060
Lake County Water System Limited Tax Improvement
General Obligation Pre-Refunded Bonds Series 1987-2 8.125 2010 700,000 753,319
Lakewood Unlimited Tax General Obligation Bonds 5.50 2015 1,500,000 1,459,815
Lakota Local School District Butler County School
Unlimited Tax Improvement Bonds 7.00 2012 500,000 537,765
Lakota Local School District Butler County School
Unlimited Tax Improvement Pre-Refunded Bonds 7.90 2011 200,000 216,594
Lakota Local School District Unlimited Tax Improvement
General Obligation Bonds (AMBAC Insured) 6.25 2014 2,000,000 2,073,340
Lima Limited Tax Improvement General Obligation
Sanitary Sewer System Pre-Refunded Bonds 8.25 2012 200,000 215,722
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's Medical Center Series B (MBIA Insured) 5.25 2020 2,000,000 1,836,080
Lucas County Hospital Pre-Refunded Revenue Bonds
Toledo Hospital (MBIA Insured) 7.00 2014 100,000 102,819
Mahoning County Hospital Improvement Bonds
Western Reserve Care System (MBIA Insured) 5.375 2015 1,000,000 947,610
Marietta Sewer System Improvement Bonds (BIG Insured) 7.50 2007 200,000 211,802
Marion County Health Care Facilities Improvement Refunding Revenue
Bonds United Church Homes Series 1993 6.375 2010 1,000,000 975,600
Marysville Sewer System 1st Mortgage Revenue Bonds
Series 1988 (BIG Insured) A.M.T. 7.85 2008 400,000 427,128
Marysville Water System Mortgage Revenue Bonds
Series 1991 (MBIA Insured) 7.05 2021 1,000,000 1,115,550
Medina County Hospital Revenue Bonds Medina County
Community Hospital Series 1987 (AMBAC Insured) 6.875 2016 100,000 104,689
Miami County Hospital Facility Refunding Revenue Bonds
Upper Valley Medical Center Series 1987A 8.375 2013 75,000 78,275
Montgomery County Health Facilities Revenue Bonds
Friendship Village Dayton Series 1990A 9.25 2016 1,000,000 1,046,440
Montgomery County Hospital Facility
Refunding Revenue & Improvement Bonds
Ketter Medical Center
Series 1996 (MBIA Insured) 5.50 2026 1,000,000 953,530
Montgomery County Water Revenue Bonds
Greater Moraine - Beavercreek District (FGIC Insured) 6.25 2017 1,000,000 1,030,120
Parma Hospital Improvement Revenue Bonds
Parma Community General Hospital
Series 1989B (MBIA Insured) 7.125 2013 500,000 535,220
Pickerington Local School District Unlimited Tax
General Obligation Pre-Refunded Bonds (AMBAC Insured) 7.00 2013 1,000,000 1,106,740
Rural Loraine County Water Authority Water Resource Improvement
Pre-Refunded Revenue Bonds Series 1991 (AMBAC Insured) 7.00 2011 1,000,000 1,110,340
Southwest Licking Local School District School Facilities
Unlimited Tax General Obligation Bonds (FGIC Insured) 5.75 2022 1,000,000 993,230
Southwest Local School District Hamilton & Butler Counties School
Unlimited Tax Improvement Bonds (AMBAC Insured) 7.65 2010 500,000 561,480
State Air Quality Development Authority Refunding Revenue Bonds
JMG Funding Limited Partnership (AMBAC Insured) A.M.T. 6.375 2029 500,000 514,925
State Air Quality Development Authority Refunding Revenue Bonds
Series 1994 (AMBAC Insured) A.M.T. 6.375 2029 2,000,000 2,059,700
<PAGE>
PAGE 248
State Air Quality Development Authority Revenue Bonds
Cleveland Electric Illuminating Series A 7.00 2009 345,000 334,360
State Air Quality Development Authority Revenue Bonds
Columbus & Southern Series A (FGIC Insured) 6.375 2020 1,000,000 1,037,170
State Building Authority Local Jail Grant Bonds
Series 1989A (MBIA Insured) 7.35 2009 500,000 554,040
State Building Authority State Correctional Facility
Revenue Bonds Series B 7.125 2009 75,000 76,826
State Building Authority State Facility Pre-Refunded Bonds
Columbus State Office Building Series 1985C 7.35 2005 1,000,000 1,109,720
State Higher Educational Facility Pre-Refunded Revenue Bonds
Oberlin College Series 1989 7.375 2014 500,000 549,475
State Housing Finance Agency Mortgage Revenue Bonds
Aristocrat South Board & Care
Series 1991A (FHA Insured) A.M.T. 7.30 2031 1,500,000 1,561,080
State Housing Finance Agency Single Family Mortgage
Revenue Bonds Series 1990A (GNMA Insured) A.M.T. 7.80 2030 560,000 588,297
State Housing Finance Agency Single Family Mortgage
Revenue Bonds Series 1990C (GNMA Insured) A.M.T. 7.85 2021 855,000 900,409
State Municipal Electric Generation Agency Joint Venture #5
Revenue Bonds (AMBAC Insured) 5.375 2024 2,000,000 1,867,880
State Turnpike Revenue Bonds Series A 5.75 2024 1,000,000 975,600
State Turnpike Revenue Bonds Series A (MBIA Insured) 5.50 2026 1,000,000 953,630
State Valley School District School Improvement Unlimited Tax
General Obligation Bonds Counties of Adams & Highland
Series 1995 (MBIA Insured) 5.25 2021 2,000,000 1,854,580
State Water & Air Quality Development Authority
Cleveland Electric Illumination
Pollution Control Refunding Revenue Bonds
Series 1995 7.70 2025 1,000,000 1,013,420
State Water Development Authority Bonds Toledo Edison
Series 1994 A.M.T. 8.00 2023 1,000,000 1,019,550
State Water Development Authority Pollution Control
Revenue Bonds Phillip Morris 7.25 2008 150,000 158,261
State Water Development Authority Water Development
Pre-Refunded Bonds Pure Water Series 1987I 7.75 2006-14 200,000 211,182
State Water Development Authority Water Development
Pre-Refunded Bonds Pure Water Series 1988I 7.00 2014 500,000 525,920
State Water Development Authority Water Development
Refunding Revenue Bonds Pure Water (AMBAC Insured) 5.50 2018 750,000 719,212
State Water Development Solid Waste Disposal
Northstar BHP Steel LLC-Cargill Series 1995
Revenue Bonds A.M.T. 6.30 2020 500,000 510,195
Summit County Industrial Development Revenue Bonds
Century Products 7.75 2005 100,000 103,966
Summit County Limited Tax General Obligation Pre-Refunded Bonds
Human Services Facility (AMBAC Insured) 8.00 2007 100,000 107,576
Sycamore Board of Education Community School District
Hamilton County School Improvement Bonds 6.50 2009 500,000 519,175
University General Receipts Refunding Revenue Bonds
Student Recreation Center (FGIC Insured) 5.00 2013 1,000,000 901,780
University of Cincinnati General Receipt
Pre-Refunded Bonds Series I-1 7.10 2010 750,000 816,668
University of Toledo General Receipt
Pre-Refunded Bonds Series 1990 (MBIA Insured) 7.125 2020 500,000 551,120
Warren County Various Purpose Limited Tax
General Obligation Bonds Series 1992 6.10 2012 500,000 524,395
Whitehall City School District Franklin County Unlimited Tax
Improvement General Obligation Pre-Refunded
School Building Construction 7.25 2013 500,000 550,915
_____________________________________________________________________________________________________________________________
Total municipal bonds
(Cost: $69,240,999) $72,881,281
</TABLE>
<TABLE>
<CAPTION>
_____________________________________________________________________________________________________________________________
Short-term security (0.2%)
_____________________________________________________________________________________________________________________________
Issuer (d,e) Effective Amount Value(a)
yield payable at
maturity
_____________________________________________________________________________________________________________________________
<S> <C> <C> <C>
Municipal note
State Air Quality Development Authority Revenue Bonds
Cincinati Gas & Electric
Series A V.R.
09-01-30 3.55% $100,000 $ 100,000
<PAGE>
PAGE 249
_____________________________________________________________________________________________________________________________
Total short-term security
(Cost: $100,000) 100,000
_____________________________________________________________________________________________________________________________
Total investments in securities
(Cost: $69,340,999)(g) $72,981,281
___________________________________________________________________________________________________________________________
</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:
Rating 06-30-96 12-31-95
___________________________________________________________________
AAA 68% 68%
AA 10
A 9 10
BBB 7 6
B and below 6 6
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
FGIC -- Financial Guarantee Insurance Corporation
FHA -- Federal Housing Authority
GNMA -- Government National Mortgage Association
MBIA -- Municipal Bond Investors Assurance
(d) The following abbreviation is used in portfolio descriptions:
A.M.T. -- Alternative Minimum Tax -- As of June 30, 1996, the value
of securities subject to alternative minimum tax represented 11.0%
of net assets. V.R. -- Variable Rate
(e) Interest rate varies to reflect current market conditions; rate
shown is the effective rate on June 30, 1996.
(f) 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 Sept. 1996 $3,200,000
___________________________________________________________________
<PAGE>
PAGE 250
(g) At June 30, 1996, the cost of securities for federal income tax
purposes was $ and the aggregate gross unrealized appreciation and
depreciation based on that cost was:
Unrealized appreciation $
Unrealized depreciation
___________________________________________________________________
Net unrealized appreciation $
___________________________________________________________________
<PAGE>
PAGE 251
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 252
<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 253
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 254
<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 255
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 256
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 257
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 258
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 259
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 260
<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 261
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>
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____________________________________________________________________________________________________________________________
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 263
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 264
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 265 ____________
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 266
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 267 ____________
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 268
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 269
PART C. OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) FINANCIAL STATEMENTS:
Financial statements filed electronically as part of this
post-effective amendment and included in Part B for IDS
California, Massachusetts, Michigan, Minnesota, New York and
Ohio Tax-Exempt Funds:
o Independent Auditors' Report dated Aug. 2, 1996
o Statement of Assets and Liabilities, June 30, 1996
o Statement of Operations, Year ended June 30, 1996
o Statement of Changes in Net Assets, for the two-year
period ended June 30, 1995 and June 30, 1996
o Notes to Financial Statements
o Investments in Securities, June 30, 1996
o Notes to Investments in Securities
Financial statements filed electronically as part of this
post-effective amendment and included in Part B for IDS
Insured Tax-Exempt Fund:
o Independent Auditors' Report dated Aug. 2, 1996
o Statement of Assets and Liabilities, June 30, 1996
o Statement of Operations, Year ended June 30, 1996
o Statement of Changes in Net Assets, for the two-year
period ended June 30, 1995 and June 30, 1996
o Notes to Financial Statements
o Investments in Securities, June 30, 1996
o Notes to Investments in Securities
(b) EXHIBITS:
1. Declaration of Trust dated April 7, 1986, filed as Exhibit
No. 1 to Registration Statement No. 33-5102 is incorporated
herein by reference.
2. Amended By-laws dated May 14, 1987, filed as Exhibit No. 2 to
Registration Statement 33-5102 is incorporated herein by
reference.
3. Not Applicable.
4. Form of Certificate for shares of beneficial interest filed
as Exhibit No. 4 to Pre-Effective Amendment No. 1 to
Registration Statement No. 33-5102 is incorporated herein by
reference.
5. Form of Investment Management Services Agreement between
Registrant and American Express Financial Corporation, dated
March 20, 1995, filed electronically as Exhibit 5 to
Registrant's Post-Effective Amendment No. 24 to Registration
Statement No. 33-5102 is incorporated herein by reference.<PAGE>
PAGE 270
6. Form of Distribution Agreement between Registrant and
American Express Financial Advisors Inc., dated March 20,
1995, filed electronically as Exhibit 6 to Registrant's Post-
Effective Amendment No. 24 to Registration Statement No. 33-
5102 is incorporated herein by reference.
7. All employees are eligible to participate in a profit sharing
plan. Entry into the plan is Jan. 1 or July 1. The
Registrant contributes each year an amount up to 15 percent
of their annual salaries, the maximum deductible amount
permitted under Section 404(a) of the Internal Revenue Code.
8. Form of Custodian Agreement between Registrant and American
Express Trust Company, dated March 20, 1995, filed
electronically as Exhibit 8 to Registrant's Post-Effective
Amendment No. 24 to Registration Statement No. 33-5102 is
incorporated herein by reference.
9(a). Insurance Agreement between IDS Insured Tax-Exempt Fund and
Financial Guaranty Insurance Company filed as Exhibit No. 9
to Pre-Effective Amendment No. 1 to Registration Statement
No. 33-5102 is incorporated herein by reference.
9(b). Form of Transfer Agency Agreement between Registrant and
American Express Financial Corporation, dated March 20, 1995,
filed electronically as Exhibit 9(b) to Registrant's Post-
Effective Amendment No. 24 to Registration Statement No. 33-
5102 is incorporated herein by reference.
9(c). Form of Shareholder Service Agreement between Registrant and
American Express Financial Advisors Inc., dated March 20,
1995, filed electronically as Exhibit 9(c) to Registrant's
Post-Effective Amendment No. 24 to Registration Statement No.
33-5102 is incorporated herein by reference.
9(d). Form of Administrative Services Agreement between Registrant
and American Express Financial Corporation, dated March 20,
1995, filed electronically to Registrant's Post-Effective
Amendment No. 24 to Registration Statement No. 33-5102 is
incorporated herein by reference.
10. Opinion and consent of counsel as to the legality of the
securities being registered is filed with Registrant's most
recent 24f-2 Notice.
11. Independent Auditors' Consent filed electronically herewith.
12. None.
13. Not Applicable.
14. Forms of Keogh, IRA and other retirement plans filed as
Exhibits 14(a) through 14(n) to IDS Growth Fund, Inc. Post-
Effective Amendment No. 34 to Registration Statement No. 2-
38355 on Sept. 8, 1986, are incorporated herein by reference.
<PAGE>
PAGE 271
15. Form of Plan and Agreement of Distribution between Registrant
and American Express Financial Advisors Inc., dated March 20,
1995, filed electronically as Exhibit 15 to Registrant's
Post-Effective Amendment No. 24 to Registration Statement No.
33-5102 is incorporated herein by reference.
16. Schedule for computation of each performance quotation
provided in the Registration Statement in response to Item 22
as Exhibit 16 to Registration Statement No. 33-5102 is
incorporated herein by reference.
17. Financial Data Schedule filed electronically herewith.
18. Copy of plan pursuant to Rule 18f-3 under the 1940 Act filed
electronically as Exhibit 18 to Registrant's Post-Effective
Amendment No. 25 to Registration Statement No. 33-5102 is
incorporated herein by reference.
19(a). Trustees' Power of Attorney to sign Amendments to this
Registration Statement dated November 10, 1994, filed
electronically as Exhibit 18(a) to Registrant's Post-
Effective Amendment No. 23, is incorporated herein by
reference.
19(b). Officers' Power of Attorney to sign Amendments to this
Registration Statement dated June 1, 1993, filed
electronically as Exhibit 17(a) to Registration Statement
No. 33-5102 is incorporated herein by reference.
Item 25. Persons Controlled by or Under Common Control with
Registrant
<PAGE>
PAGE 272
Item 26. Number of Holders of Securities
(1) (2)
Number of Record
Holders as of
Title of Class Aug. 14, 1996
IDS Insured Tax-Exempt Fund 15,721
Shares of Beneficial
Interest
$.01 par value
IDS Massachusetts Tax-Exempt Fund 2,916
Shares of Beneficial
Interest
$.01 par value
IDS Michigan Tax-Exempt Fund 2,663
Shares of Beneficial
Interest
$.01 par value
IDS Minnesota Tax-Exempt Fund 14,398
Shares of Beneficial
Interest
$.01 par value
IDS New York Tax-Exempt Fund 4,342
Shares of Beneficial
Interest
$.01 par value
IDS Ohio Tax-Exempt Fund 2,546
Share of Beneficial
Interest
$.01 par value
<PAGE>
PAGE 273
Item 27. Indemnification
The Declaration of Trust of the registrant provides that the Trust
shall indemnify any person who was or is a party or is threatened
to be made a party, by reason of the fact that he is or was a
trustee, officer, employee or agent of the Trust, or is or was
serving at the request of the Trust as a trustee, officer, employee
or agent of another company, partnership, joint venture, trust or
other enterprise, to any threatened, pending or completed action,
suit or proceeding, wherever brought, and the Trust may purchase
liability insurance and advance legal expenses, all to the fullest
extent permitted by the laws of the State of Massachusetts, as now
existing or hereafter amended. The By-laws of the registrant
provide that present or former directors or officers of the Trust
made or threatened to be made a party to or involved (including as
a witness) in an actual or threatened action, suit or proceeding
shall be indemnified by the Trust to the full extent authorized by
the laws of the Commonwealth of Massachusetts, all as more fully
set forth in the By-laws filed as an exhibit to this registration
statement.
Insofar as indemnification for liability arising under the
Securities Act of 1933 may be permitted to trustees, officers and
controlling persons of the registrant pursuant to the foregoing
provisions, or otherwise, the registrant has been advised that in
the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by
the registrant of expenses incurred or paid by a trustee, officer
or controlling person of the registrant in the successful defense
of any action, suit or proceeding) is asserted by such trustee,
officer or controlling person in connection with the securities
being registered, the registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in
the Act and will be governed by the final adjudication of such
issue.
Any indemnification hereunder shall not be exclusive of any other
rights of indemnification to which the trustees, officers,
employees or agents might otherwise be entitled. No
indemnification shall be made in violation of the Investment
Company Act of 1940.
<PAGE>
PAGE 274
<PAGE>
PAGE 1
<TABLE><CAPTION>
Item 28. Business and Other Connections of Investment Adviser (American Express Financial
Corporation)
Directors and officers of American Express Financial Corporation who are directors and/or
officers of one or more other companies:
Ronald G. Abrahamson, Vice President--Service Quality and Reengineering
<S> <C> <C>
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 Service Quality
and Reengineering
Douglas A. Alger, Vice President--Total Compensation
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 Total Compensation
Peter J. Anderson, Director and Senior Vice President--Investments
American Express Financial Advisors IDS Tower 10 Senior Vice President-
Minneapolis, MN 55440 Investments
IDS Advisory Group Inc. Director and Chairman
of the Board
IDS Capital Holdings Inc. Director and President
IDS International, Inc. Director, Chairman of the
Board and Executive Vice
President
IDS Securities Corporation Executive Vice President-
Investments
NCM Capital Management Group, Inc. 2 Mutual Plaza Director
501 Willard Street
Durham, NC 27701
Ward D. Armstrong, Vice President-Sales and Marketing, American Express Institutional Services
American Express Financial Advisors IDS Tower 10 Vice President-Sales and
Minneapolis, MN 55440 Marketing, American
Express Institutional
Services
Joseph M. Barsky III, Vice President--Senior Portfolio Manager
American Express Financial Advisors IDS Tower 10 Vice President-Senior
Minneapolis, MN 55440 Portfolio Manager
IDS Advisory Group Inc. Vice President
Robert C. Basten, Vice President--Tax and Business Services
American Express Financial Advisors IDS Tower 10 Vice President-Tax
Minneapolis, MN 55440 and Business Services
American Express Tax & Business Director, President and
Services Inc. Chief Executive Officer
<PAGE>
PAGE 2
Item 28. Business and Other Connections of Investment Adviser (American Express Financial
Corporation)(cont'd)
Timothy V. Bechtold, Vice President--Risk Management Products
American Express Financial Advisors IDS Tower 10 Vice President-Risk
Minneapolis, MN 55440 Management Products
IDS Life Insurance Company Vice President-Risk
Management Products
Carl E. Beihl, Vice President--Strategic Technology Planning
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 Strategic Technology
Planning
Alan F. Bignall, Vice President--Technology and Development
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 Technology and
Development
John C. Boeder, Vice President--Mature Market Group
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 Mature Market Group
IDS Life Insurance Company of New York Box 5144 Director
Albany, NY 12205
Karl J. Breyer, Director, Senior Vice President--Corporate Affairs and General Counsel
American Express Financial Advisors IDS Tower 10 Senior Vice President-
Minneapolis, MN 55440 Corporate Affairs and
Special Counsel
American Express Minnesota Foundation Director
IDS Aircraft Services Corporation Director and President
Daniel J. Candura, Vice President--Marketing Support
American Express Financial Advisors IDS Tower 10 Vice President-Marketing
Minneapolis, MN 55440 Support
Cynthia M. Carlson, Vice President--American Express Securities Services
American Enterprise Investment IDS Tower 10 Director, President and
Services Inc. Minneapolis, MN 55440 Chief Executive Officer
American Express Financial Advisors Vice President-American
Express Securities Services
Orison Y. Chaffee III, Vice President--Field Real Estate
American Express Financial Advisors IDS Tower 10 Vice President-Field
Minneapolis, MN 55440 Real Estate
<PAGE>
PAGE 3
Item 28. Business and Other Connections of Investment Adviser (American Express Financial
Corporation)(cont'd)
James E. Choat, Director and Senior Vice President--Field Management
American Express Financial Advisors IDS Tower 10 Senior Vice President-
Minneapolis, MN 55440 Field Management
American Express Insurance Agency of Nevada Inc. Vice President--North
Central Region
American Express Minnesota Foundation Director
IDS Insurance Agency of Alabama Inc. Vice President--North
Central Region
IDS Insurance Agency of Arkansas Inc. Vice President--North
Central Region
IDS Insurance Agency of Massachusetts Inc. Vice President--North
Central Region
IDS Insurance Agency of New Mexico Inc. Vice President--North
Central Region
IDS Insurance Agency of North Carolina Inc. Vice President--North
Central Region
IDS Insurance Agency of Ohio Inc. Vice President--North
Central Region
IDS Insurance Agency of Wyoming Inc. Vice President-- North
Central Region
Kenneth J. Ciak, Vice President and General Manager--IDS Property Casualty
AMEX Assurance Co. Director and President
American Express Financial Advisors IDS Tower 10 Vice President and General
Minneapolis, MN 55440 Manager-IDS Property
Casualty
IDS Property Casualty Insurance Co. I WEG Blvd. Director and President
DePere, Wisconsin 54115
Colleen Curran, Vice President and Assistant General Counsel
American Express Financial Advisors IDS Tower 10 Vice President and
Minneapolis, MN 55440 Assistant General Counsel
American Express Service Corporation Vice President and Chief
Legal Counsel
Alan R. Dakay, Vice President--Institutional Products Group
American Centurion Life Assurance Co. IDS Tower 10 Director and Vice Chairman
Minneapolis, MN 55440 and President, Financial
Institutions Division
American Enterprise Life Insurance Co. Director and President
IDS Life Insurance Company Vice President -
Institutional Insurance
Marketing
American Express Financial Advisors Vice President -
Institutional Products
Group
Regenia David, Vice President--Systems Services
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 Systems Services
<PAGE>
PAGE 4
Item 28. Business and Other Connections of Investment Adviser (American Express Financial
Corporation)(cont'd)
William H. Dudley, Director and Executive Vice President--Investment Operations
American Express Financial Advisors IDS Tower 10 Director and Executive
Minneapolis, MN 55440 Vice President-
Investment Operations
IDS Advisory Group Inc. Director
IDS Capital Holdings Inc. Director
IDS Futures Corporation Director
IDS Futures III Corporation Director
IDS International, Inc. Director
IDS Securities Corporation Director, Chairman of the
Board, President and
Chief Executive Officer
Gordon L. Eid, Director, Senior Vice President and Deputy General Counsel
American Express Financial Advisors IDS Tower 10 Senior Vice President and
Minneapolis, MN 55440 General Counsel
American Express Insurance Agency of Nevada Inc. Director and Vice President
IDS Insurance Agency of Alabama Inc. Director and Vice President
IDS Insurance Agency of Arkansas Inc. Director and Vice President
IDS Insurance Agency of Massachusetts Inc. Director and Vice President
IDS Insurance Agency of New Mexico Inc. Director and Vice President
IDS Insurance Agency of North Carolina Inc. Director and Vice President
IDS Insurance Agency of Ohio Inc. Director and Vice President
IDS Insurance Agency of Wyoming Inc. Director and Vice President
IDS Real Estate Services, Inc. Vice President
Investors Syndicate Development Corp. Director
Robert M. Elconin, Vice President--Government Relations
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 Government Relations
IDS Life Insurance Company Vice President
Mark A. Ernst, Vice President--Retail Services
American Enterprise Investment IDS Tower 10 Director
Services Inc. Minneapolis, MN 55440
American Express Financial Advisors Vice President-
Retail Services
American Express Tax & Business Director and Chairman of
Services Inc. the Board
Gordon M. Fines, Vice President--Mutual Fund Equity Investments
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 Mutual Fund Equity
Investments
IDS Advisory Group Inc. Executive Vice President
Robert G. Gilbert, Vice President--Real Estate
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 Real Estate
<PAGE>
PAGE 5
Item 28. Business and Other Connections of Investment Adviser (American Express Financial
Corporation)(cont'd)
John J. Golden, Vice President--Field Compensation Development
American Express Financial Advisors IDS Tower 10 Vice President-Field
Minneapolis, MN 55440 Compensation Development
Harvey Golub, Director
American Express Company American Express Tower Chairman and Chief
World Financial Center Executive Officer
New York, New York 10285
American Express Travel Chairman and Chief
Related Services Company, Inc. Executive Officer
Morris Goodwin Jr., Vice President and Corporate Treasurer
American Centurion Life Assurance Co. Vice President and
Treasurer
American Enterprise Investment IDS Tower 10 Vice President and
Services Inc. Minneapolis, MN 55440 Treasurer
American Enterprise Life Insurance Vice President and
Company Treasurer
American Express Financial Advisors Vice President and
Corporate Treasurer
American Express Insurance Agency of Nevada Inc. Vice President and
Treasurer
American Express Minnesota Foundation Vice President and
Treasurer
American Express Tax & Business Vice President and
Services Inc. Treasurer
American Partners Life Insurance Co. Vice President and
Treasurer
AMEX Assurance Co. Vice President and
Treasurer
IDS Advisory Group Inc. Vice President and
Treasurer
IDS Aircraft Services Corporation Vice President and
Treasurer
IDS Cable Corporation Director, Vice President
and Treasurer
IDS Cable II Corporation Director, Vice President
and Treasurer
IDS Capital Holdings Inc. Vice President and
Treasurer
IDS Certificate Company Vice President and
Treasurer
IDS Deposit Corp. Director, President
and Treasurer
IDS Futures Corp. Director
IDS Futures III Corp. Director
IDS Insurance Agency of Alabama Inc. Vice President and
Treasurer
IDS Insurance Agency of Arkansas Inc. Vice President and
Treasurer
IDS Insurance Agency of Massachusetts Inc. Vice President and
Treasurer
<PAGE>
PAGE 6
Item 28. Business and Other Connections of Investment Adviser (American Express Financial
Corporation)(cont'd)
IDS Insurance Agency of New Mexico Inc. Vice President and
Treasurer
IDS Insurance Agency of North Carolina Inc. Vice President and
Treasurer
IDS Insurance Agency of Ohio Inc. Vice President and
Treasurer
IDS Insurance Agency of Wyoming Inc. Vice President and
Treasurer
IDS International, Inc. Vice President and
Treasurer
IDS Life Insurance Company Vice President and
Treasurer
IDS Life Series Fund, Inc. Vice President and
Treasurer
IDS Life Variable Annuity Funds A&B Vice President and
Treasurer
IDS Management Corporation Director, Vice President
and Treasurer
IDS Partnership Services Corporation Director, Vice President
and Treasurer
IDS Plan Services of California, Inc. Vice President and
Treasurer
IDS Property Casualty Insurance Co. Vice President and
Treasurer
IDS Real Estate Services, Inc Vice President and
Treasurer
IDS Realty Corporation Director, Vice President
and Treasurer
IDS Sales Support Inc. Director, Vice President
and Treasurer
IDS Securities Corporation Vice President and
Treasurer
Investors Syndicate Development Corp. Vice President and
Treasurer
National Computer Systems, Inc. 11000 Prairie Lakes Drive Director
Minneapolis, MN 55440
NCM Capital Management Group, Inc. 2 Mutual Plaza Director
501 Willard Street
Durham, NC 27701
Sloan Financial Group, Inc. Director
Suzanne Graf, Vice President--Systems Services
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 Systems Services
David A. Hammer, Vice President and Marketing Controller
American Express Financial Advisors IDS Tower 10 Vice President and
Minneapolis, MN 55440 Marketing Controller
IDS Plan Services of California, Inc. Director and Vice President
<PAGE>
PAGE 7
Item 28. Business and Other Connections of Investment Adviser (American Express Financial
Corporation)(cont'd)
Lorraine R. Hart, Vice President--Insurance Investments
American Enterprise Life IDS Tower 10 Vice President-Investments
Insurance Company Minneapolis, MN 55440
American Express Financial Advisors Vice President-Insurance
Investments
American Partners Life Insurance Co. Director and Vice
President-Investments
AMEX Assurance Co. Vice President-Investments
IDS Certificate Company Vice President-Investments
IDS Life Insurance Company Vice President-Investments
IDS Life Series Fund, Inc. Vice President-Investments
IDS Life Variable Annuity Funds A and B Vice President-Investments
IDS Property Casualty Insurance Company Vice President-Investment
Officer
Investors Syndicate Development Corp. Director and Vice
President-Investments
Scott A. Hawkinson, Vice President--Assured Assets Product Development and Management
American Express Financial Advisors IDS Tower 10 Vice President-Assured
Minneapolis, MN 55440 Assets Product
Development & Management
James G. Hirsh, Vice President and Assistant General Counsel
American Express Financial Advisors IDS Tower 10 Vice President and
Minneapolis, MN 55440 Assistant General Counsel
IDS Securities Corporation Director, Vice President
and General Counsel
Darryl G. Horsman, Vice President--Product Development and Technology, American Express
Institutional Retirement Services
American Express Trust Company IDS Tower 10 Director and President
Minneapolis, MN 55440
Kevin P. Howe, Vice President--Government and Customer Relations and Chief Compliance Officer
American Enterprise Investment IDS Tower 10 Vice President and Chief
Services Inc. Minneapolis, MN 55440 Compliance Officer
American Express Financial Advisors Vice President-
Government and
Customer Relations
American Express Service Corporation Vice President and Chief
Compliance Officer
IDS Securities Corporation Vice President and Chief
Compliance Officer
David R. Hubers, Director, President and Chief Executive Officer
American Express Financial Advisors IDS Tower 10 Chairman, Chief Executive
Minneapolis, MN 55440 Officer and President
American Express Service Corporation Director and Executive Vice
President
<PAGE>
PAGE 8
Item 28. Business and Other Connections of Investment Adviser (American Express Financial
Corporation)(cont'd)
AMEX Assurance Co. Director
IDS Aircraft Services Corporation Director
IDS Certificate Company Director
IDS Life Insurance Company Director
IDS Plan Services of California, Inc. Director and President
IDS Property Casualty Insurance Co. Director
Marietta L. Johns, Director and Senior Vice President--Field Management
American Express Financial Advisors IDS Tower 10 Senior Vice President-
Minneapolis, MN 55440 Field Management
James E. Kaare, Vice President--Marketing Promotions
American Express Financial Advisors IDS Tower 10 Vice President-Marketing
Minneapolis, MN 55440 Promotions
Linda B. Keene, Vice President--Market Development
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 Market Development
G. Michael Kennedy, Vice President--Investment Services and Investment Research
American Express Financial Advisors IDS Tower 10 Vice President-Investment
Minneapolis, MN 55440 Services and Investment
Research
Susan D. Kinder, Director and Senior Vice President--Human Resources
American Express Financial Advisors IDS Tower 10 Senior Vice President-
Minneapolis, MN 55440 Human Resources
American Express Minnesota Foundation Director
Richard W. Kling, Director and Senior Vice President--Risk Management Products
American Centurion Life Assurance Co. Director
American Enterprise Life Insurance Co. IDS Tower 10 Director and Chairman of
Minneapolis, MN 55440 the Board
American Express Financial Advisors Senior Vice President-
Risk Management Products
American Express Insurance Agency of Nevada Inc. Director and President
American Express Service Corporation Vice President
American Partners Life Insurance Co. Director and Chairman of
the Board
AMEX Assurance Co. Director and Chairman of
the Board
IDS Certificate Company Director and Chairman of
the Board
IDS Insurance Agency of Alabama Inc. Director and President
IDS Insurance Agency of Arkansas Inc. Director and President
IDS Insurance Agency of Massachusetts Inc. Director and President
IDS Insurance Agency of New Mexico Inc. Director and President
IDS Insurance Agency of North Carolina Inc. Director and President
IDS Insurance Agency of Ohio Inc. Director and President<PAGE>
PAGE 9
Item 28. Business and Other Connections of Investment Adviser (American Express Financial
Corporation)(cont'd)
IDS Insurance Agency of Wyoming Inc. Director and President
IDS Life Insurance Company Director and President
IDS Life Series Fund, Inc. Director and President
IDS Life Variable Annuity Funds A and B Director and Chairman of
the Board and President
IDS Property Casualty Insurance Co. Director and Chairman of
the Board
IDS Life Insurance Company P.O. Box 5144 Director, Chairman of the
of New York Albany, NY 12205 Board and President
Paul F. Kolkman, Vice President--Actuarial Finance
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 Actuarial Finance
IDS Life Insurance Company Director and Executive
Vice President
IDS Life Series Fund, Inc. Vice President and Chief
Actuary
IDS Property Casualty Insurance Company Director
Claire Kolmodin, Vice President--Service Quality
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 Service Quality
Steven C. Kumagai, Director and Senior Vice President--Field Management and Business Systems
American Express Financial Advisors IDS Tower 10 Director and Senior Vice
Minneapolis, MN 55440 President-Field
Management and Business
Systems
Edward Labenski, Jr., Vice President--Senior Portfolio Manager
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 Senior Portfolio
Manager
IDS Advisory Group Inc. Senior Vice President
Kurt A. Larson, Vice President--Senior Portfolio Manager
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 Senior Portfolio Manager
Lori J. Larson, Vice President--Variable Assets Product Development
American Express Financial Advisors IDS Tower 10 Vice President-Variable
Minneapolis, MN 55440 Assets Product
Development
IDS Cable Corporation Director and Vice President
IDS Cable II Corporation Director and Vice President
IDS Futures Brokerage Group Assistant Vice President-
General Manager/Director
IDS Futures Corporation Director and Vice President
IDS Futures III Corporation Director and Vice President
IDS Management Corporation Director and Vice President<PAGE>
PAGE 10
Item 28. Business and Other Connections of Investment Adviser (American Express Financial
Corporation)(cont'd)
IDS Partnership Services Corporation Director and Vice President
IDS Realty Corporation Director and Vice President
Ryan R. Larson, Vice President--IPG Product Development
American Centurion Life Assurance Co. Director and
Vice President-Product
Development
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 IPG Product Development
IDS Life Insurance Company Vice President-
Annuity Product
Development
Daniel E. Laufenberg, Vice President and Chief U.S. Economist
American Express Financial Advisors IDS Tower 10 Vice President and
Minneapolis, MN 55440 Chief U.S. Economist
Richard J. Lazarchic, Vice President--Senior Portfolio Manager
American Express Financial Advisors IDS Tower 10 Vice President-Senior
Minneapolis, MN 55440 Portfolio Manager
Peter A. Lefferts, Director and Senior Vice President--Corporate Strategy and Development
American Express Financial Advisors IDS Tower 10 Senior Vice President-
Minneapolis, MN 55440 Corporate Strategy and
Development
American Express Trust Company Director
IDS Plan Services of California, Inc. Director
Investors Syndicate Development Corp. Director
Douglas A. Lennick, Director and Executive Vice President--Private Client Group
American Express Financial Advisors IDS Tower 10 Director and Executive
Minneapolis, MN 55440 Vice President-Private
Client Group
Jonathan S. Linen, Director
Mary J. Malevich, Vice President--Senior Portfolio Manager
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 Senior Portfolio
Manager
Fred A. Mandell, Vice President--Field Marketing Readiness
American Express Financial Advisors IDS Tower 10 Vice President-Field
Minneapolis, MN 55440 Marketing Readiness
<PAGE>
PAGE 11
Item 28. Business and Other Connections of Investment Adviser (American Express Financial
Corporation)(cont'd)
William J. McKinney, Vice President--Field Management Support
American Express Financial Advisors IDS Tower 10 Vice President-Field
Minneapolis, MN 55440 Management Support
Thomas W. Medcalf, Vice President--Senior Portfolio Manager
American Express Financial Advisors IDS Tower 10 Vice President-Senior
Minneapolis, MN 55440 Portfolio Manager
William C. Melton, Vice President-International Research and Chief International Economist
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 International Research
and Chief International
Economist
Janis E. Miller, Vice President--Variable Assets
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 Variable Assets
IDS Cable Corporation Director and President
IDS Cable II Corporation Director and President
IDS Futures Corporation Director and President
IDS Futures III Corporation Director and President
IDS Life Insurance Company Director and Executive
Vice President-Variable
Assets
IDS Life Series Fund, Inc. Director
IDS Life Variable Annuity Funds A&B Director
IDS Management Corporation Director and President
IDS Partnership Services Corporation Director and President
IDS Realty Corporation Director and President
IDS Life Insurance Company of New York Box 5144 Executive Vice President
Albany, NY 12205
James A. Mitchell, Director and Executive Vice President--Marketing and Products
American Enterprise Investment IDS Tower 10 Director
Services Inc. Minneapolis, MN 55440
American Express Financial Advisors Executive Vice President-
Marketing and Products
American Express Service Corporation Senior Vice President
American Express Tax and Business Director
Services Inc.
AMEX Assurance Co. Director
IDS Certificate Company Director
IDS Life Insurance Company Director, Chairman of
the Board and Chief
Executive Officer
IDS Plan Services of California, Inc. Director
IDS Property Casualty Insurance Co. Director
<PAGE>
PAGE 12
Item 28. Business and Other Connections of Investment Adviser (American Express Financial
Corporation)(cont'd)
Pamela J. Moret, Vice President--Services
American Express Financial Advisors IDS Tower 10 Vice President-Services
Minneapolis, MN 55440
American Express Minnesota Foundation Director and President
Barry J. Murphy, Director and Senior Vice President--Client Service
American Express Financial Advisors IDS Tower 10 Senior Vice President-
Minneapolis, MN 55440 Client Service
IDS Life Insurance Company Director and Executive
Vice President-Client
Service
Mary Owens Neal, Vice President--Mature Market Segment
American Express Financial Advisors Inc. IDS Tower 10 Vice President-
Minneapolis, MN 55440 Mature Market Segment
Robert J. Neis, Vice President--Technology Services
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 Technology Services
James R. Palmer, Vice President--Taxes
American Express Financial Advisors IDS Tower 10 Vice President-Taxes
Minneapolis, MN 55440
IDS Aircraft Services Corp. Vice President
IDS Life Insurance Company Vice President-Taxes
Carla P. Pavone, Vice President--Specialty Service Teams and Emerging Business
American Express Financial Advisors IDS Tower 10 Vice President-Specialty
Minneapolis, MN 55440 Service Teams and
Emerging Business
Susan B. Plimpton, Vice President--Segmentation Development and Support
American Express Financial Advisors IDS Tower 10 Vice President--
Minneapolis, MN 55440 Segmentation Development
and Support
Ronald W. Powell, Vice President and Assistant General Counsel
American Express Financial Advisors IDS Tower 10 Vice President and
Minneapolis, MN 55440 Assistant General Counsel
IDS Cable Corporation Vice President and
Assistant Secretary
IDS Cable II Corporation Vice President and
Assistant Secretary
IDS Management Corporation Vice President and
Assistant Secretary
IDS Partnership Services Corporation Vice President and
Assistant Secretary<PAGE>
PAGE 13
Item 28. Business and Other Connections of Investment Adviser (American Express Financial
Corporation)(cont'd)
IDS Plan Services of California, Inc. Vice President and
Assistant Secretary
IDS Realty Corporation Vice President and
Assistant Secretary
James M. Punch, Vice President--Geographic Service Teams
American Express Financial Advisors IDS Tower 10 Vice President-Geographic
Minneapolis, MN 55440 Services Teams
Frederick C. Quirsfeld, Vice President--Taxable Mutual Fund Investments
American Express Financial Advisors IDS Tower 10 Vice President--
Minneapolis, MN 55440 Taxable Mutual Fund
Investments
IDS Advisory Group Inc. Vice President
ReBecca K. Roloff, Vice President--Private Client Group
American Express Financial Advisors IDS Tower 10 Vice President-Private
Minneapolis, MN 55440 Client Group
Stephen W. Roszell, Vice President--Advisory Institutional Marketing
American Express Financial Advisors IDS Tower 10 Vice President-Advisory
Minneapolis, MN 55440 Institutional Marketing
IDS Advisory Group Inc. President and Chief
Executive Officer
IDS International, Inc. Director
IDS Fund Management Limited Director
Robert A. Rudell, Vice President--American Express Institutional Retirement Services
American Express Financial Advisors IDS Tower 10 Vice President-American
Minneapolis, MN 55440 Express Institutional
Services
American Express Trust Company Director and Chairman of
the Board
IDS Sales Support Inc. Director and President
John P. Ryan, Vice President and General Auditor
American Express Financial Advisors IDS Tower 10 Vice President and General
Minneapolis, MN 55440 Auditor
Erven A. Samsel, Director and Senior Vice President--Field Management
American Express Financial Advisors IDS Tower 10 Senior Vice President-
Minneapolis, MN 55440 Field Management
American Express Insurance Agency of Nevada Inc. Vice President-
New England Region
IDS Insurance Agency of Alabama Inc. Vice President-
New England Region
IDS Insurance Agency of Arkansas Inc. Vice President-
New England Region
<PAGE>
PAGE 14
Item 28. Business and Other Connections of Investment Adviser (American Express Financial
Corporation)(cont'd)
IDS Insurance Agency of Massachusetts Inc. Vice President-
New England Region
IDS Insurance Agency of New Mexico Inc. Vice President-
New England Region
IDS Insurance Agency of North Carolina Inc. Vice President-
New England Region
IDS Insurance Agency of Ohio Inc. Vice President-
New England Region
IDS Insurance Agency of Wyoming Inc. Vice President-
New England Region
Stuart A. Sedlacek, Vice President--Assured Assets
American Centurion Life Assurance Co. Director and Chairman
and President
American Enterprise Life Insurance Co. IDS Tower 10 Director and Executive
Minneapolis, MN 55440 Vice President, Assured
Assets
American Express Financial Advisors Vice President-
Assured Assets
American Partners Life Insurance Co. Director and President
IDS Certificate Company Director and President
IDS Life Insurance Company Director and Executive
Vice President, Assured
Assets
Investors Syndicate Development Corp. Director and Chairman of
the Board and President
Donald K. Shanks, Vice President--Property Casualty
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 Property Casualty
IDS Property Casualty Insurance Co. Senior Vice President
F. Dale Simmons, Vice President--Senior Portfolio Manager, Insurance Investments
American Enterprise Life Insurance Co. IDS Tower 10 Vice President-Real
Minneapolis, MN 55440 Estate Loan Management
American Express Financial Advisors Vice President-Senior
Portfolio Manager,
Insurance Investments
American Partners Life Insurance Co. Vice President-Real
Estate Loan Management
AMEX Assurance Co. Vice President
IDS Certificate Company Vice President-Real
Estate Loan Management
IDS Life Insurance Company Vice President-Real
Estate Loan Management
IDS Partnership Services Corporation Vice President
IDS Real Estate Services Inc. Director and Vice President
IDS Realty Corporation Vice President
IDS Life Insurance Company of New York Box 5144 Vice President and
Albany, NY 12205 Assistant Treasurer
<PAGE>
PAGE 15
Item 28. Business and Other Connections of Investment Adviser (American Express Financial
Corporation)(cont'd)
Judy P. Skoglund, Vice President--Human Resources and Organization Development
American Express Financial Advisors IDS Tower 10 Vice President-Human
Minneapolis, MN 55440 Resources and
Organization Development
Ben C. Smith, Vice President--Workplace Marketing
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 Workplace Marketing
William A. Smith, Vice President and Controller--Private Client Group
American Express Financial Advisors IDS Tower 10 Vice President and
Minneapolis, MN 55440 Controller-Private
Client Group
Bridget Sperl, Vice President--Human Resources Management Services
American Express Financial Advisors IDS Tower 10 Vice President-Human
Minneapolis, MN 55440 Resources Management
Services
William A. Stoltzmann, Vice President and Assistant General Counsel
American Express Financial Advisors IDS Tower 10 Vice President and
Minneapolis, MN 55440 Assistant General Counsel
American Partners Life Insurance Co. Director, Vice President,
General Counsel and
Secretary
IDS Life Insurance Company Vice President, General
Counsel and Secretary
American Enterprise Life Insurance P.O. Box 534 Director, Vice President,
Company Minneapolis, MN 55440 General Counsel
and Secretary
James J. Strauss, Vice President--Corporate Planning and Analysis
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 Corporate Planning and
Analysis
Jeffrey J. Stremcha, Vice President--Information Resource Management/ISD
American Express Financial Advisors IDS Tower 10 Vice President-Information
Minneapolis, MN 55440 Resource Management/ISD
John R. Thomas, Director and Senior Vice President--Information and Technology
American Express Financial Advisors IDS Tower 10 Senior Vice President-
Minneapolis, MN 55440 Information and
Technology
<PAGE>
PAGE 16
Item 28. Business and Other Connections of Investment Adviser (American Express Financial
Corporation)(cont'd)
Melinda S. Urion, Director, Senior Vice President and Chief Financial Officer
American Enterprise Life IDS Tower 10 Vice President and
Insurance Company Minneapolis, MN 55440 Controller
American Express Financial Advisors Senior Vice President and
Chief Financial Officer
American Express Trust Company Director
American Partners Life Insurance Co. Director and Vice President
IDS Life Insurance Company Director, Executive Vice
President and Controller
IDS Life Series Fund, Inc. Vice President and
Controller
Wesley W. Wadman, Vice President--Senior Portfolio Manager
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 Senior Portfolio Manager
IDS Advisory Group Inc. Executive Vice President
IDS Fund Management Limited Director and Vice Chairman
IDS International, Inc. Senior Vice President
Norman Weaver Jr., Director and Senior Vice President--Field Management
American Express Financial Advisors IDS Tower 10 Senior Vice President--
Minneapolis, MN 55440 Field Management
American Express Insurance Agency of Nevada Inc. Vice President-Southeast
Region
IDS Insurance Agency of Alabama Inc. Vice President-Pacific
Region
IDS Insurance Agency of Arkansas Inc. Vice President-Pacific
Region
IDS Insurance Agency of Massachusetts Inc. Vice President-Pacific
Region
IDS Insurance Agency of New Mexico Inc. Vice President-Pacific
Region
IDS Insurance Agency of North Carolina Inc. Vice President-Pacific
Region
IDS Insurance Agency of Ohio Inc. Vice President-Pacific
Region
IDS Insurance Agency of Wyoming Inc. Vice President-Pacific
Region
Michael L. Weiner, Vice President--Tax Research and Audit
American Express Financial Advisors IDS Tower 10 Vice President-Tax Research
Minneapolis, MN 55440 and Audit
American Express Service Corporation Assistant Treasurer
IDS Capital Holdings Inc. Vice President
IDS Futures Brokerage Group Vice President
IDS Futures Corporation Vice President, Treasurer
and Secretary
IDS Futures III Corporation Vice President, Treasurer
and Secretary
<PAGE>
PAGE 17
Item 28. Business and Other Connections of Investment Adviser (American Express Financial
Corporation)(cont'd)
Lawrence J. Welte, Vice President--Investment Administration
American Express Financial Advisors IDS Tower 10 Vice President-
Minneapolis, MN 55440 Investment Administration
IDS Securities Corporation Director, Executive Vice
President and Chief
Operating Officer
Jeffry F. Welter, Vice President--Equity and Fixed Income Trading
American Express Financial Advisors IDS Tower 10 Vice President-Equity
Minneapolis, MN 55440 and Fixed Income Trading
William N. Westhoff, Director, Senior Vice President and Global Chief Investment Officer
American Enterprise Life Insurance IDS Tower 10 Director
Company Minneapolis, MN 55440
American Express Financial Advisors Senior Vice President and
Global Chief Investment
Officer
IDS Fund Management Limited Director
IDS International, Inc. Director
IDS Partnership Services Corporation Director and Vice President
IDS Real Estate Services Inc. Director, Chairman of the
Board and President
IDS Realty Corporation Director and Vice President
Investors Syndicate Development Corp. Director
Edwin M. Wistrand, Vice President and Assistant General Counsel
American Express Financial Advisors IDS Tower 10 Vice President and
Minneapolis, MN 55440 Assistant General Counsel
Michael R. Woodward, Director and Senior Vice President--Field Management
American Express Financial Advisors IDS Tower 10 Senior Vice President-
Minneapolis, MN 55440 Field Management
American Express Insurance Agency of Nevada Inc. Vice President-
North Region
IDS Insurance Agency of Alabama Inc. Vice President-
North Region
IDS Insurance Agency of Arkansas Inc. Vice President-
North Region
IDS Insurance Agency of Massachusetts Inc. Vice President-
North Region
IDS Insurance Agency of New Mexico Inc. Vice President-
North Region
IDS Insurance Agency of North Carolina Inc. Vice President-
North Region
IDS Insurance Agency of Ohio Inc. Vice President-
North Region
IDS Insurance Agency of Wyoming Inc. Vice President-
North Region
IDS Life Insurance Company Box 5144 Director
of New York Albany, NY 12205
/TABLE
<PAGE>
PAGE 18
Item 29. Principal Underwriters.
(a) American Express Financial Advisors acts as principal
underwriter for the following investment companies:
IDS Bond Fund, Inc.; IDS California Tax-Exempt Trust; IDS
Discovery Fund, Inc.; IDS Equity Select Fund, Inc.; IDS Extra
Income Fund, Inc.; IDS Federal Income Fund, Inc.; IDS Global
Series, Inc.; IDS Growth Fund, Inc.; IDS High Yield Tax-
Exempt Fund, Inc.; IDS International Fund, Inc.; IDS
Investment Series, Inc.; IDS Managed Retirement Fund, Inc.;
IDS Market Advantage Series, Inc.; IDS Money Market Series,
Inc.; IDS New Dimensions Fund, Inc.; IDS Precious Metals
Fund, Inc.; IDS Progressive Fund, Inc.; IDS Selective Fund,
Inc.; IDS Special Tax-Exempt Series Trust; IDS Stock Fund,
Inc.; IDS Strategy Fund, Inc.; IDS Tax-Exempt Bond Fund,
Inc.; IDS Tax-Free Money Fund, Inc.; IDS Utilities Income
Fund, Inc. and IDS Certificate Company.
(b) As to each director, officer or partner of the principal
underwriter:
Positions and
Name and Principal Position and Offices Offices with
Business Address with Underwriter Registrant
Ronald G. Abrahamson Vice President- None
IDS Tower 10 Service Quality and
Minneapolis, MN 55440 Reengineering
Douglas A. Alger Vice President-Total None
IDS Tower 10 Compensation
Minneapolis, MN 55440
Peter J. Anderson Senior Vice President- Vice
IDS Tower 10 Investments President--
Minneapolis, MN 55440 Investments
Ward D. Armstrong Vice President- None
IDS Tower 10 Sales and Marketing,
Minneapolis, MN 55440 IDS Institutional
Retirement Services
Joseph M. Barsky III Vice President-Senior None
IDS Tower 10 Portfolio Manager
Minneapolis, MN 55440
Robert C. Basten Vice President-Tax None
IDS Tower 10 and Business Services
Minneapolis, MN 55440
Timothy V. Bechtold Vice President-Risk None
IDS Tower 10 Management Products
Minneapolis, MN 55440
John D. Begley Group Vice President- None
Suite 100 Ohio/Indiana
7760 Olentangy River Rd.
Columbus, OH 43235<PAGE>
PAGE 19
Item 29(b). As to each director, officer or partner of the
principal underwriter (American Express Financial Advisors):
(cont'd)
Positions and
Name and Principal Position and Offices Offices with
Business Address with Underwriter Registrant
Carl E. Beihl Vice President- None
IDS Tower 10 Strategic Technology
Minneapolis, MN 55440 Planning
Jack A. Benjamin Group Vice President- None
Suite 200 Greater Pennsylvania
3500 Market Street
Camp Hill, PA 17011
Alan F. Bignall Vice President- None
IDS Tower 10 Technology and
Minneapolis, MN 55440 Development
Brent L. Bisson Group Vice President- None
Ste 900 E. Westside Twr Los Angeles Metro
11835 West Olympic Blvd.
Los Angeles, CA 90064
John C. Boeder Vice President- None
IDS Tower 10 Mature Market Group
Minneapolis, MN 55440
Walter K. Booker Group Vice President- None
Suite 200 New Jersey
3500 Market Street
Camp Hill, NJ 17011
Bruce J. Bordelon Group Vice President- None
Galleria One Suite 1900 Gulf States
Galleria Blvd.
Metairie, LA 70001
Charles R. Branch Group Vice President- None
Suite 200 Northwest
West 111 North River Dr
Spokane, WA 99201
Karl J. Breyer Senior Vice President- None
IDS Tower 10 Corporate Affairs and
Minneapolis, MN 55440 Special Counsel
Daniel J. Candura Vice President- None
IDS Tower 10 Marketing Support
Minneapolis, MN 55440
Cynthia M. Carlson Vice President- None
IDS Tower 10 American Express
Minneapolis, MN 55440 Securities Services<PAGE>
PAGE 20
Item 29(b). As to each director, officer or partner of the
principal underwriter (American Express Financial Advisors):
(cont'd)
Positions and
Name and Principal Position and Offices Offices with
Business Address with Underwriter Registrant
Orison Y. Chaffee III Vice President-Field None
IDS Tower 10 Real Estate
Minneapolis, MN 55440
James E. Choat Senior Vice President- None
IDS Tower 10 Field Management
Minneapolis, MN 55440
Kenneth J. Ciak Vice President and None
IDS Property Casualty General Manager-
1400 Lombardi Avenue IDS Property Casualty
Green Bay, WI 54304
Roger C. Corea Group Vice President- None
290 Woodcliff Drive Upstate New York
Fairport, NY 14450
Henry J. Cormier Group Vice President- None
Commerce Center One Connecticut
333 East River Drive
East Hartford, CT 06108
John M. Crawford Group Vice President- None
Suite 200 Arkansas/Springfield/Memphis
10800 Financial Ctr Pkwy
Little Rock, AR 72211
Kevin F. Crowe Group Vice President- None
Suite 312 Carolinas/Eastern Georgia
7300 Carmel Executive Pk
Charlotte, NC 28226
Colleen Curran Vice President and None
IDS Tower 10 Assistant General Counsel
Minneapolis, MN 55440
Alan R. Dakay Vice President- None
IDS Tower 10 Institutional Products
Minneapolis, MN 55440 Group
Regenia David Vice President- None
IDS Tower 10 Systems Services
Minneapolis, MN 55440
Scott M. DiGiammarino Group Vice President- None
Suite 500 Washington/Baltimore
8045 Leesburg Pike
Vienna, VA 22182
<PAGE>
PAGE 21
Item 29(b). As to each director, officer or partner of the
principal underwriter (American Express Financial Advisors):
(cont'd)
Positions and
Name and Principal Position and Offices Offices with
Business Address with Underwriter Registrant
Bradford L. Drew Group Vice President- None
Two Datran Center Eastern Florida
Penthouse One B
9130 S. Dadeland Blvd.
Miami, FL 33156
William H. Dudley Director and Executive Board member
IDS Tower 10 Vice President-
Minneapolis MN 55440 Investment Operations
Gordon L. Eid Senior Vice President None
IDS Tower 10 and General Counsel
Minneapolis, MN 55440
Robert M. Elconin Vice President- None
IDS Tower 10 Government Relations
Minneapolis, MN 55440
Mark A. Ernst Vice President- None
IDS Tower 10 Retail Services
Minneapolis, MN 55440
Joseph Evanovich Jr. Group Vice President- None
One Old Mill Nebraska/Iowa/Dakotas
101 South 108th Avenue
Omaha, NE 68154
Louise P. Evenson Group Vice President- None
Suite 200 San Francisco Bay Area
1333 N. California Blvd.
Walnut Creek, CA 94596
Gordon M. Fines Vice President- None
IDS Tower 10 Mutual Fund Equity
Minneapolis MN 55440 Investments
Douglas L. Forsberg Group Vice President- None
Suite 100 Portland/Eugene
7931 N. E. Halsey
Portland, OR 97213
William P. Fritz Group Vice President- None
Suite 160 Northern Missouri
12855 Flushing Meadows Dr
St. Louis, MO 63131
Carl W. Gans Group Vice President- None
8500 Tower Suite 1770 Twin City Metro
8500 Normandale Lake Blvd.
Bloomington, MN 55437
<PAGE>
PAGE 22
Item 29(b). As to each director, officer or partner of the
principal underwriter (American Express Financial Advisors):
(cont'd)
Positions and
Name and Principal Position and Offices Offices with
Business Address with Underwriter Registrant
Robert G. Gilbert Vice President- None
IDS Tower 10 Real Estate
Minneapolis, MN 55440
John J. Golden Vice President- None
IDS Tower 10 Field Compensation
Minneapolis, MN 55440 Development
Morris Goodwin Jr. Vice President and None
IDS Tower 10 Corporate Treasurer
Minneapolis, MN 55440
Suzanne Graf Vice President- None
IDS Tower 10 Systems Services
Minneapolis, MN 55440
Bruce M. Guarino Group Vice President- None
Suite 1736 Hawaii
1585 Kapiolani Blvd.
Honolulu, HI 96814
David A. Hammer Vice President None
IDS Tower 10 and Marketing
Minneapolis, MN 55440 Controller
Teresa A. Hanratty Group Vice President- None
Suites 6&7 Northern New England
169 South River Road
Bedford, NH 03110
John R. Hantz Group Vice President- None
Suite 107 Detroit Metro
17177 N. Laurel Park
Livonia, MI 48154
Robert L. Harden Group Vice President- None
Two Constitution Plaza Boston Metro
Boston, MA 02129
Lorraine R. Hart Vice President- None
IDS Tower 10 Insurance Investments
Minneapolis, MN 55440
Scott A. Hawkinson Vice President-Assured None
IDS Tower 10 Assets Product Development
Minneapolis, MN 55440 and Management
Brian M. Heath Group Vice President- None
Suite 150 North Texas
801 E. Campbell Road
Richardson, TX 75081<PAGE>
PAGE 23
Item 29(b). As to each director, officer or partner of the
principal underwriter (American Express Financial Advisors):
(cont'd)
Positions and
Name and Principal Position and Offices Offices with
Business Address with Underwriter Registrant
James G. Hirsh Vice President and None
IDS Tower 10 Assistant General
Minneapolis, MN 55440 Counsel
David J. Hockenberry Group Vice President- None
30 Burton Hills Blvd. Eastern Tennessee
Suite 175
Nashville, TN 37215
Kevin P. Howe Vice President- None
IDS Tower 10 Government and
Minneapolis, MN 55440 Customer Relations and
Chief Compliance Officer
David R. Hubers Chairman, Chief Board member
IDS Tower 10 Executive Officer and
Minneapolis, MN 55440 President
Marietta L. Johns Senior Vice President- None
IDS Tower 10 Field Management
Minneapolis, MN 55440
James E. Kaarre Vice President- None
IDS Tower 10 Marketing Promotions
Minneapolis, MN 55440
Linda B. Keene Vice President- None
IDS Tower 10 Market Development
Minneapolis, MN 55440
G. Michael Kennedy Vice President-Investment None
IDS Tower 10 Services and Investment
Minneapolis, MN 55440 Research
Susan D. Kinder Senior Vice President- None
IDS Tower 10 Human Resources
Minneapolis, MN 55440
Richard W. Kling Senior Vice President- None
IDS Tower 10 Risk Management Products
Minneapolis, MN 55440
Paul F. Kolkman Vice President- None
IDS Tower 10 Actuarial Finance
Minneapolis, MN 55440
Claire Kolmodin Vice President- None
IDS Tower 10 Service Quality
Minneapolis, MN 55440
<PAGE>
PAGE 24
Item 29(b). As to each director, officer or partner of the
principal underwriter (American Express Financial Advisors):
(cont'd)
Positions and
Name and Principal Position and Offices Offices with
Business Address with Underwriter Registrant
David S. Kreager Group Vice President- None
Ste 108 Trestle Bridge V Greater Michigan
5136 Lovers Lane
Kalamazoo, MI 49002
Steven C. Kumagai Director and Senior None
IDS Tower 10 Vice President-Field
Minneapolis, MN 55440 Management and Business
Systems
Mitre Kutanovski Group Vice President- None
Suite 680 Chicago Metro
8585 Broadway
Merrillville, IN 48410
Edward Labenski Jr. Vice President- None
IDS Tower 10 Senior Portfolio
Minneapolis, MN 55440 Manager
Kurt A. Larson Vice President- None
IDS Tower 10 Senior Portfolio
Minneapolis, MN 55440 Manager
Lori J. Larson Vice President- None
IDS Tower 10 Variable Assets Product
Minneapolis, MN 55440 Development
Ryan R. Larson Vice President- None
IDS Tower 10 IPG Product Development
Minneapolis, MN 55440
Daniel E. Laufenberg Vice President and None
IDS Tower 10 Chief U.S. Economist
Minneapolis, MN 55440
Richard J. Lazarchic Vice President- None
IDS Tower 10 Senior Portfolio
Minneapolis, MN 55440 Manager
Peter A. Lefferts Senior Vice President- None
IDS Tower 10 Corporate Strategy and
Minneapolis, MN 55440 Development
Douglas A. Lennick Director and Executive None
IDS Tower 10 Vice President-Private
Minneapolis, MN 55440 Client Group
Mary J. Malevich Vice President- None
IDS Tower 10 Senior Portfolio
Minneapolis, MN 55440 Manager
<PAGE>
PAGE 25
Item 29(b). As to each director, officer or partner of the
principal underwriter (American Express Financial Advisors):
(cont'd)
Positions and
Name and Principal Position and Offices Offices with
Business Address with Underwriter Registrant
Fred A. Mandell Vice President- None
IDS Tower 10 Field Marketing Readiness
Minneapolis, MN 55440
Daniel E. Martin Group Vice President- None
Suite 650 Pittsburgh Metro
5700 Corporate Drive
Pittsburgh, PA 15237
William J. McKinney Vice President- None
IDS Tower 10 Field Management
Minneapolis, MN 55440 Support
Thomas W. Medcalf Vice President- None
IDS Tower 10 Senior Portfolio Manager
Minneapolis, MN 55440
William C. Melton Vice President- None
IDS Tower 10 International Research
Minneapolis, MN 55440 and Chief International
Economist
Janis E. Miller Vice President- None
IDS Tower 10 Variable Assets
Minneapolis, MN 55440
James A. Mitchell Executive Vice President- None
IDS Tower 10 Marketing and Products
Minneapolis, MN 55440
John P. Moraites Group Vice President- None
Union Plaza Suite 900 Kansas/Oklahoma
3030 Northwest Expressway
Oklahoma City, OK 73112
Pamela J. Moret Vice President-Services None
IDS Tower 10
Minneapolis, MN 55440
Alan D. Morgenstern Group Vice President- None
Suite 200 Central California/
3500 Market Street Western Nevada
Camp Hill, NJ 17011
Barry J. Murphy Senior Vice President- None
IDS Tower 10 Client Service
Minneapolis, MN 55440
Mary Owens Neal Vice President- None
IDS Tower 10 Mature Market Segment
Minneapolis, MN 55440
<PAGE>
PAGE 26
Item 29(b). As to each director, officer or partner of the
principal underwriter (American Express Financial Advisors):
(cont'd)
Positions and
Name and Principal Position and Offices Offices with
Business Address with Underwriter Registrant
Robert J. Neis Vice President- None
IDS Tower 10 Technology Services
Minneapolis, MN 55440 Operations
Ronald E. Newton Group Vice President- None
319 Southbridge St. Rhode Island/Central
Auburn, MA 01501 Massachusetts
Thomas V. Nicolosi Group Vice President- None
Suite 220 New York Metro Area
500 Mamaroneck Avenue
Harrison, NY 10528
James R. Palmer Vice President- None
IDS Tower 10 Taxes
Minneapolis, MN 55440
Carla P. Pavone Vice President- None
IDS Tower 10 Specialty Service Teams
Minneapolis, MN 55440 and Emerging Business
Susan B. Plimpton Vice President- None
IDS Tower 10 Segmentation Development
Minneapolis, MN 55440 and Support
Larry M. Post Group Vice President- None
One Tower Bridge Philadelphia Metro
100 Front Street 8th Fl
West Conshohocken, PA 19428
Ronald W. Powell Vice President and None
IDS Tower 10 Assistant General
Minneapolis, MN 55440 Counsel
James M. Punch Vice President- None
IDS Tower 10 Geographical Service
Minneapolis, MN 55440 Teams
Frederick C. Quirsfeld Vice President-Taxable None
IDS Tower 10 Mutual Fund Investments
Minneapolis, MN 55440
R. Daniel Richardson Group Vice President- None
Suite 800 Southern Texas
Arboretum Plaza One
9442 Capital of Texas Hwy N.
Austin, TX 78759
<PAGE>
PAGE 27
Item 29(b). As to each director, officer or partner of the
principal underwriter (American Express Financial Advisors):
(cont'd)
Positions and
Name and Principal Position and Offices Offices with
Business Address with Underwriter Registrant
Roger B. Rogos Group Vice President- None
One Sarasota Tower Western Florida
Suite 700
Two N. Tamiami Trail
Sarasota, FL 34236
ReBecca K. Roloff Vice President-Private None
IDS Tower 10 Client Group
Minneapolis, MN 55440
Stephen W. Roszell Vice President- None
IDS Tower 10 Advisory Institutional
Minneapolis, MN 55440 Marketing
Max G. Roth Group Vice President- None
Suite 201 S IDS Ctr Wisconsin/Upper Michigan
1400 Lombardi Avenue
Green Bay, WI 54304
Robert A. Rudell Vice President- None
IDS Tower 10 American Express
Minneapolis, MN 55440 Institutional Retirement
Services
John P. Ryan Vice President and None
IDS Tower 10 General Auditor
Minneapolis, MN 55440
Erven Samsel Senior Vice President- None
45 Braintree Hill Park Field Management
Suite 402
Braintree, MA 02184
Russell L. Scalfano Group Vice President- None
Suite 201 Illinois/Indiana/Kentucky
101 Plaza East Blvd.
Evansville, IN 47715
William G. Scholz Group Vice President- None
Suite 205 Arizona/Las Vegas
7333 E Doubletree Ranch Rd
Scottsdale, AZ 85258
Stuart A. Sedlacek Vice President- None
IDS Tower 10 Assured Assets
Minneapolis, MN 55440
Donald K. Shanks Vice President- None
IDS Tower 10 Property Casualty
Minneapolis, MN 55440
<PAGE>
PAGE 28
Item 29(b). As to each director, officer or partner of the
principal underwriter (American Express Financial Advisors):
(cont'd)
Positions and
Name and Principal Position and Offices Offices with
Business Address with Underwriter Registrant
F. Dale Simmons Vice President-Senior None
IDS Tower 10 Portfolio Manager,
Minneapolis, MN 55440 Insurance Investments
Judy P. Skoglund Vice President- None
IDS Tower 10 Human Resources and
Minneapolis, MN 55440 Organization Development
Julian W. Sloter Group Vice President- None
Ste 1700 Orlando FinCtr Orlando/Jacksonville
800 North Magnolia Ave.
Orlando, FL 32803
Ben C. Smith Vice President- None
IDS Tower 10 Workplace Marketing
Minneapolis, MN 55440
William A. Smith Vice President and None
IDS Tower 10 Controller-Private
Minneapolis, MN 55440 Client Group
James B. Solberg Group Vice President- None
466 Westdale Mall Eastern Iowa Area
Cedar Rapids, IA 52404
Bridget Sperl Vice President- None
IDS Tower 10 Human Resources
Minneapolis, MN 55440 Management Services
Paul J. Stanislaw Group Vice President- None
Suite 1100 Southern California
Two Park Plaza
Irvine, CA 92714
Lois A. Stilwell Group Vice President- None
Suite 433 Outstate Minnesota Area/
9900 East Bren Road North Dakota/Western Wisconsin
Minnetonka, MN 55343
William A. Stoltzmann Vice President and None
IDS Tower 10 Assistant General
Minneapolis, MN 55440 Counsel
James J. Strauss Vice President- None
IDS Tower 10 Corporate Planning
Minneapolis, MN 55440 and Analysis
Jeffrey J. Stremcha Vice President-Information None
IDS Tower 10 Resource Management/ISD
Minneapolis, MN 55440
<PAGE>
PAGE 29
Item 29(b). As to each director, officer or partner of the
principal underwriter (American Express Financial Advisors):
(cont'd)
Positions and
Name and Principal Position and Offices Offices with
Business Address with Underwriter Registrant
Neil G. Taylor Group Vice President- None
Suite 425 Seattle/Tacoma
101 Elliott Avenue West
Seattle, WA 98119
John R. Thomas Senior Vice President- Board member
IDS Tower 10 Information and
Minneapolis, MN 55440 Technology
Melinda S. Urion Senior Vice President Treasurer
IDS Tower 10 and Chief Financial
Minneapolis, MN 55440 Officer
Peter S. Velardi Group Vice President- None
Suite 180 Atlanta/Birmingham
1200 Ashwood Parkway
Atlanta, GA 30338
Charles F. Wachendorfer Group Vice President- None
Suite 100 Denver/Salt Lake City/
Stanford Plaza II Albuquerque
7979 East Tufts Ave Pkwy
Denver, CO 80237
Wesley W. Wadman Vice President- None
IDS Tower 10 Senior Portfolio
Minneapolis, MN 55440 Manager
Norman Weaver Jr. Senior Vice President- None
1010 Main St Suite 2B Field Management
Huntington Beach, CA 92648
Michael L. Weiner Vice President- None
IDS Tower 10 Tax Research and Audit
Minneapolis, MN 55440
Lawrence J. Welte Vice President- None
IDS Tower 10 Investment Administration
Minneapolis, MN 55440
Jeffry M. Welter Vice President- None
IDS Tower 10 Equity and Fixed Income
Minneapolis, MN 55440 Trading
William N. Westhoff Senior Vice President and None
IDS Tower 10 Global Chief Investment
Minneapolis, MN 55440 Officer
<PAGE>
PAGE 30
Item 29(b). As to each director, officer or partner of the
principal underwriter (American Express Financial Advisors):
(cont'd)
Positions and
Name and Principal Position and Offices Offices with
Business Address with Underwriter Registrant
Thomas L. White Group Vice President- None
Suite 200 Cleveland Metro
28601 Chagrin Blvd.
Woodmere, OH 44122
Eric S. Williams Group Vice President- None
Suite 250 Virginia
3951 Westerre Parkway
Richmond, VA 23233
Edwin M. Wistrand Vice President and None
IDS Tower 10 Assistant General
Minneapolis, MN 55440 Counsel
Michael R. Woodward Senior Vice President- None
32 Ellicott St Ste 100 Field Management
Batavia, NY 14020
Item 29(c). Not applicable.
Item 30. Location of Accounts and Records
American Express Financial Corporation
IDS Tower 10
Minneapolis, MN 55440
Item 31. Management Services
Not Applicable.
Item 32. Undertakings
(a) Not Applicable.
(b) Not Applicable.
(c) The Registrant undertakes to furnish each person
to whom a prospectus is delivered with a copy of
the Registrant's latest annual report to
shareholders, upon request and without charge.
<PAGE>
PAGE 275
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant, IDS Special Tax-
Exempt Series Trust, certifies that it meets the requirements for
the effectiveness of this Amendment to its Registration Statement
pursuant to Rule 485(b) under the Securities Act of 1993, and has
duly caused this Amendment to its Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized,
in the City of Minneapolis and the State of Minnesota on the 28th
day of August, 1996.
IDS SPECIAL TAX-EXEMPT SERIES TRUST
By /s/ Melinda S. Urion
Melinda S. Urion, Treasurer
By /s/ William R. Pearce**
William R. Pearce, President
Pursuant to the requirements of the Securities Act of 1933, this
Amendment to its Registration Statement has been signed below by
the following persons in the capacities indicated on the 28th day
of August, 1996.
Signature Capacity
/s/ William R. Pearce** President,Principal
William R. Pearce Executive Officer
and Trustee
/s/ Leslie L. Ogg** Vice President,
Leslie L. Ogg General Counsel
and Secretary
/s/Lynne V. Cheney* Trustee
Lynn V. Cheney
/s/ William H. Dudley* Trustee
William H. Dudley
/s/ Robert F. Froehlke* Trustee
Robert F. Froehlke
/s/ David R. Hubers* Trustee
David R. Hubers
/s/ Heinz F. Hutter* Trustee
Heinz F. Hutter<PAGE>
PAGE 276
Signature Capacity
/s/ Anne P. Jones* Trustee
Anne P. Jones
/s/ Donald M. Kendall* Trustee
Donald M. Kendall
/s/ Melvin R. Laird* Trustee
Melvin R. Laird
/s/ Lewis W. Lehr* Trustee
Lewis W. Lehr
/s/ Edson W. Spencer* Trustee
Edson W. Spencer
/s/ John R. Thomas* Trustee
John R. Thomas
/s/ Wheelock Whitney* Trustee
Wheelock Whitney
/s/ C. Angus Wurtele* Trustee
C. Angus Wurtele
*Signed pursuant to Trustees' Power of Attorney filed
electronically as Exhibit 18(a) to Registrant's Post-Effective
Amendment No. 23, by:
Leslie L. Ogg
**Signed pursuant to Officers' Power of Attorney filed
electronically as Exhibit 17(a) to Post-Effective Amendment No. 21
to Registration Statement No. 33-5102 by:
Leslie L. Ogg
<PAGE>
PAGE 277
CONTENTS OF THIS
POST-EFFECTIVE AMENDMENT NO. 28
TO REGISTRATION STATEMENT NO. 33-5102
This Post-Effective Amendment comprises the following papers and
documents:
The facing sheet.
The cross-reference page.
PART A
Prospectus for IDS California, Massachusetts, Michigan,
Minnesota, New York and Ohio Tax-Exempt Funds.
Prospectus for IDS Insured Tax-Exempt Fund.
PART B
Statement of Additional Information for IDS California,
Massachusetts, Michigan, Minnesota, New York and Ohio Tax-
Exempt Funds.
Statement of Additional Information for IDS Insured Tax-Exempt
Fund.
Financial Statements.
PART C
Other information.
Exhibits.
The signatures.
EXHIBIT INDEX
B(11) Independent Auditor's Consent
B(17) Financial Data Schedules
<PAGE>
PAGE 1
INDEPENDENT AUDITORS' CONSENT
___________________________________________________________________
The Board and Shareholders
IDS California Tax-Exempt Trust
IDS Special Tax-Exempt Series Trust
We consent to the use of our report incorporated herein by
reference and to the references to our Firm under the headings
"Financial Highlights in Part A and "INDEPENDENT AUDITORS" in Part
B of the Registration Statement.
KPMG Peat Marwick LLP
Minneapolis, Minnesota
August 29, 1996
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 1
<NAME> IDS CALIFORNIA TAX-EXEMPT FUND CLASS A
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-END> JUN-30-1996
<INVESTMENTS-AT-COST> 219312804
<INVESTMENTS-AT-VALUE> 234980999
<RECEIVABLES> 4623111
<ASSETS-OTHER> 1013026
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 240617136
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 102446
<TOTAL-LIABILITIES> 102446
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 232662316
<SHARES-COMMON-STOCK> 45470271
<SHARES-COMMON-PRIOR> 46411360
<ACCUMULATED-NII-CURRENT> 316
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (8111387)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 15963445
<NET-ASSETS> 234115579
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 14969221
<OTHER-INCOME> 0
<EXPENSES-NET> 1876173
<NET-INVESTMENT-INCOME> 13093048
<REALIZED-GAINS-CURRENT> 553259
<APPREC-INCREASE-CURRENT> 323151
<NET-CHANGE-FROM-OPS> 13969458
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (12910349)
<DISTRIBUTIONS-OF-GAINS> (1353174)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 4511208
<NUMBER-OF-SHARES-REDEEMED> (7378222)
<SHARES-REINVESTED> 1925925
<NET-CHANGE-IN-ASSETS> (848190)
<ACCUMULATED-NII-PRIOR> 15236634
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<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1138491
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<GROSS-EXPENSE> 1876173
<AVERAGE-NET-ASSETS> 239713869
<PER-SHARE-NAV-BEGIN> 5.16
<PER-SHARE-NII> .28
<PER-SHARE-GAIN-APPREC> .02
<PER-SHARE-DIVIDEND> (.28)
<PER-SHARE-DISTRIBUTIONS> (.03)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 5.15
<PAGE>
<EXPENSE-RATIO> .80
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<PAGE>
<ARTICLE> 6
<SERIES>
[NUMBER] 2
<NAME> IDS CALIFORNIA TAX-EXEMPT FUND CLASS B
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-END> JUN-30-1996
[INVESTMENTS-AT-COST] 219312804
[INVESTMENTS-AT-VALUE] 234980999
[RECEIVABLES] 4623111
[ASSETS-OTHER] 1013026
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 240617136
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 102446
[TOTAL-LIABILITIES] 102446
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 232662316
[SHARES-COMMON-STOCK] 1242929
[SHARES-COMMON-PRIOR] 0
[ACCUMULATED-NII-CURRENT] 316
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] (8111387)
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 15963445
[NET-ASSETS] 6398039
[DIVIDEND-INCOME] 0
[INTEREST-INCOME] 14969221
[OTHER-INCOME] 0
[EXPENSES-NET] (1876173)
[NET-INVESTMENT-INCOME] 13093048
[REALIZED-GAINS-CURRENT] 553259
[APPREC-INCREASE-CURRENT] 323151
[NET-CHANGE-FROM-OPS] 13969458
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] (184985)
[DISTRIBUTIONS-OF-GAINS] (20647)
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 995477
[NUMBER-OF-SHARES-REDEEMED] (184480)
[SHARES-REINVESTED] 35294
[NET-CHANGE-IN-ASSETS] (848190)
[ACCUMULATED-NII-PRIOR] 15236634
[ACCUMULATED-GAINS-PRIOR] (2375504)
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 1138491
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 1876173
[AVERAGE-NET-ASSETS] 3991433
[PER-SHARE-NAV-BEGIN] 5.16
[PER-SHARE-NII] .24
[PER-SHARE-GAIN-APPREC] .02
[PER-SHARE-DIVIDEND] (.24)
[PER-SHARE-DISTRIBUTIONS] (.03)
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 5.15
<PAGE>
PAGE 4
[EXPENSE-RATIO] 1.57
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
<PAGE>
<ARTICLE> 6
<SERIES>
[NUMBER] 3
<NAME> IDS CALIFORNIA TAX-EXEMPT FUND CLASS Y
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-END> JUN-30-1996
[INVESTMENTS-AT-COST] 219312804
[INVESTMENTS-AT-VALUE] 234980999
[RECEIVABLES] 4623111
[ASSETS-OTHER] 1013026
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 240617136
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 102446
[TOTAL-LIABILITIES] 102446
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 231662316
[SHARES-COMMON-STOCK] 208
[SHARES-COMMON-PRIOR] 0
[ACCUMULATED-NII-CURRENT] 316
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] (8111387)
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 15963445
[NET-ASSETS] 1072
[DIVIDEND-INCOME] 0
[INTEREST-INCOME] 14969221
[OTHER-INCOME] 0
[EXPENSES-NET] 1876173
[NET-INVESTMENT-INCOME] 13093048
[REALIZED-GAINS-CURRENT] 553259
[APPREC-INCREASE-CURRENT] 323151
[NET-CHANGE-FROM-OPS] 13969458
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] (59)
[DISTRIBUTIONS-OF-GAINS] (6)
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 0
[NUMBER-OF-SHARES-REDEEMED] 0
[SHARES-REINVESTED] 2
[NET-CHANGE-IN-ASSETS] (848190)
[ACCUMULATED-NII-PRIOR] 15236634
[ACCUMULATED-GAINS-PRIOR] (2375504)
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 1138491
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 1876173
[AVERAGE-NET-ASSETS] 1052
[PER-SHARE-NAV-BEGIN] 5.15
[PER-SHARE-NII] .30
[PER-SHARE-GAIN-APPREC] .02
[PER-SHARE-DIVIDEND] (.29)
[PER-SHARE-DISTRIBUTIONS] (.03)
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 5.15
<PAGE>
PAGE 6
[EXPENSE-RATIO] .57
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 1
<NAME> IDS MASSACHUSETTS TAX-EXEMPT FUND CLASS A
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-END> JUN-30-1996
<INVESTMENTS-AT-COST> 68878578
<INVESTMENTS-AT-VALUE> 72057717
<RECEIVABLES> 1550549
<ASSETS-OTHER> 736750
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 74345016
<PAYABLE-FOR-SECURITIES> 965203
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 51788
<TOTAL-LIABILITIES> 1016991
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 71530431
<SHARES-COMMON-STOCK> 12785695
<SHARES-COMMON-PRIOR> 12949679
<ACCUMULATED-NII-CURRENT> 6316
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (1467048)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 3258326
<NET-ASSETS> 67765538
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 4486909
<OTHER-INCOME> 0
<EXPENSES-NET> 655766
<NET-INVESTMENT-INCOME> 3831143
<REALIZED-GAINS-CURRENT> 95554
<APPREC-INCREASE-CURRENT> 202491
<NET-CHANGE-FROM-OPS> 4129188
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (3652150)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2049431
<NUMBER-OF-SHARES-REDEEMED> (2742630)
<SHARES-REINVESTED> 529215
<NET-CHANGE-IN-ASSETS> 3215277
<ACCUMULATED-NII-PRIOR> 3941356
<ACCUMULATED-GAINS-PRIOR> (1258540)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 344729
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 655766
<AVERAGE-NET-ASSETS> 69772857
<PER-SHARE-NAV-BEGIN> 5.27
<PER-SHARE-NII> .28
<PER-SHARE-GAIN-APPREC> .03
<PER-SHARE-DIVIDEND> (.28)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 5.30
<PAGE>
<EXPENSE-RATIO> .86
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<PAGE>
<ARTICLE> 6
<SERIES>
[NUMBER] 1
<NAME> IDS MASSACHUSETTS TAX-EXEMPT FUND CLASS B
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-END> JUN-30-1996
[INVESTMENTS-AT-COST] 68878578
[INVESTMENTS-AT-VALUE] 72057717
[RECEIVABLES] 1550549
[ASSETS-OTHER] 736750
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 74345016
[PAYABLE-FOR-SECURITIES] 965203
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 51788
[TOTAL-LIABILITIES] 1016991
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 71530431
[SHARES-COMMON-STOCK] 1049378
[SHARES-COMMON-PRIOR] 349909
[ACCUMULATED-NII-CURRENT] 6316
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] (1467048)
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 3258326
[NET-ASSETS] 5561413
[DIVIDEND-INCOME] 0
[INTEREST-INCOME] 4486909
[OTHER-INCOME] 0
[EXPENSES-NET] 655766
[NET-INVESTMENT-INCOME] 3831143
[REALIZED-GAINS-CURRENT] 95554
[APPREC-INCREASE-CURRENT] 202491
[NET-CHANGE-FROM-OPS] 4129188
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] (172619)
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 819429
[NUMBER-OF-SHARES-REDEEMED] (147842)
[SHARES-REINVESTED] 27882
[NET-CHANGE-IN-ASSETS] 3215277
[ACCUMULATED-NII-PRIOR] 3941356
[ACCUMULATED-GAINS-PRIOR] (1258540)
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 344729
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 655766
[AVERAGE-NET-ASSETS] 3846148
[PER-SHARE-NAV-BEGIN] 5.27
[PER-SHARE-NII] .24
[PER-SHARE-GAIN-APPREC] .03
[PER-SHARE-DIVIDEND] (.24)
[PER-SHARE-DISTRIBUTIONS] 0
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 5.30
<PAGE>
PAGE 4
[EXPENSE-RATIO] 1.63
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
<PAGE>
<ARTICLE> 6
<SERIES>
[NUMBER] 1
<NAME> IDS MASSACHUSETTS TAX-EXEMPT FUND CLASS Y
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-END> JUN-30-1996
[INVESTMENTS-AT-COST] 68878578
[INVESTMENTS-AT-VALUE] 72057717
[RECEIVABLES] 1550549
[ASSETS-OTHER] 736750
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 74345016
[PAYABLE-FOR-SECURITIES] 965203
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 51788
[TOTAL-LIABILITIES] 1016991
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 71530431
[SHARES-COMMON-STOCK] 202
[SHARES-COMMON-PRIOR] 192
[ACCUMULATED-NII-CURRENT] 6316
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] (1467048)
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 3258326
[NET-ASSETS] 1074
[DIVIDEND-INCOME] 0
[INTEREST-INCOME] 4486909
[OTHER-INCOME] 0
[EXPENSES-NET] 655766
[NET-INVESTMENT-INCOME] 3831143
[REALIZED-GAINS-CURRENT] 95554
[APPREC-INCREASE-CURRENT] 202491
[NET-CHANGE-FROM-OPS] 4129188
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] (58)
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 0
[NUMBER-OF-SHARES-REDEEMED] 0
[SHARES-REINVESTED] 10
[NET-CHANGE-IN-ASSETS] 3215277
[ACCUMULATED-NII-PRIOR] 3941356
[ACCUMULATED-GAINS-PRIOR] (1258540)
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 344729
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 655766
[AVERAGE-NET-ASSETS] 1057
[PER-SHARE-NAV-BEGIN] 5.28
[PER-SHARE-NII] .30
[PER-SHARE-GAIN-APPREC] .03
[PER-SHARE-DIVIDEND] (.29)
[PER-SHARE-DISTRIBUTIONS] 0
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 5.32
<PAGE>
PAGE 6
[EXPENSE-RATIO] .66
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 1
<NAME> IDS MICHIGAN TAX-EXEMPT FUND CLASS A
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-END> JUN-30-1996
<INVESTMENTS-AT-COST> 75801580
<INVESTMENTS-AT-VALUE> 80439025
<RECEIVABLES> 1349206
<ASSETS-OTHER> 736750
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 81788231
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 115333
<TOTAL-LIABILITIES> 115333
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 78507044
<SHARES-COMMON-STOCK> 14742952
<SHARES-COMMON-PRIOR> 14382196
<ACCUMULATED-NII-CURRENT> (1406)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (1560840)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 4728100
<NET-ASSETS> 79074832
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 5028983
<OTHER-INCOME> 0
<EXPENSES-NET> 681449
<NET-INVESTMENT-INCOME> 4347534
<REALIZED-GAINS-CURRENT> 316845
<APPREC-INCREASE-CURRENT> 274473
<NET-CHANGE-FROM-OPS> 4938852
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (4267908)
<DISTRIBUTIONS-OF-GAINS> (1011041)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1429150
<NUMBER-OF-SHARES-REDEEMED> (1794375)
<SHARES-REINVESTED> 725981
<NET-CHANGE-IN-ASSETS> 3174191
<ACCUMULATED-NII-PRIOR> 4389687
<ACCUMULATED-GAINS-PRIOR> (518081)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 381069
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 681449
<AVERAGE-NET-ASSETS> 79580247
<PER-SHARE-NAV-BEGIN> 5.39
<PER-SHARE-NII> .30
<PER-SHARE-GAIN-APPREC> .04
<PER-SHARE-DIVIDEND> (.30)
<PER-SHARE-DISTRIBUTIONS> (.07)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 5.36
<PAGE>
<EXPENSE-RATIO> .85
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<PAGE>
<ARTICLE> 6
<SERIES>
[NUMBER] 1
<NAME> IDS MICHIGAN TAX-EXEMPT FUND CLASS B
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-END> JUN-30-1996
[INVESTMENTS-AT-COST] 75801580
[INVESTMENTS-AT-VALUE] 80439025
[RECEIVABLES] 1349206
[ASSETS-OTHER] 736750
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 81788231
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 115333
[TOTAL-LIABILITIES] 115333
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 78507044
[SHARES-COMMON-STOCK] 1049378
[SHARES-COMMON-PRIOR] 183333
[ACCUMULATED-NII-CURRENT] (1406)
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] (1560840)
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 4728100
[NET-ASSETS] 2596990
[DIVIDEND-INCOME] 0
[INTEREST-INCOME] 5028983
[OTHER-INCOME] 0
[EXPENSES-NET] 681449
[NET-INVESTMENT-INCOME] 4347534
[REALIZED-GAINS-CURRENT] 316845
[APPREC-INCREASE-CURRENT] 274473
[NET-CHANGE-FROM-OPS] 4938852
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] (83171)
[DISTRIBUTIONS-OF-GAINS] (21404)
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 315865
[NUMBER-OF-SHARES-REDEEMED] (30500)
[SHARES-REINVESTED] 15490
[NET-CHANGE-IN-ASSETS] 3174191
[ACCUMULATED-NII-PRIOR] 4389687
[ACCUMULATED-GAINS-PRIOR] (518081)
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 381069
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 681449
[AVERAGE-NET-ASSETS] 1797700
[PER-SHARE-NAV-BEGIN] 5.39
[PER-SHARE-NII] .25
[PER-SHARE-GAIN-APPREC] .04
[PER-SHARE-DIVIDEND] (.25)
[PER-SHARE-DISTRIBUTIONS] (.07)
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 5.36
<PAGE>
PAGE 4
[EXPENSE-RATIO] 1.62
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
<PAGE>
<ARTICLE> 6
<SERIES>
[NUMBER] 1
<NAME> IDS MICHIGAN TAX-EXEMPT FUND CLASS Y
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-END> JUN-30-1996
[INVESTMENTS-AT-COST] 75801580
[INVESTMENTS-AT-VALUE] 80439025
[RECEIVABLES] 1349206
[ASSETS-OTHER] 736750
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 81788231
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 115333
[TOTAL-LIABILITIES] 115333
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 78507044
[SHARES-COMMON-STOCK] 202
[SHARES-COMMON-PRIOR] 187
[ACCUMULATED-NII-CURRENT] (1406)
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] (1560840)
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 4728100
[NET-ASSETS] 1076
[DIVIDEND-INCOME] 0
[INTEREST-INCOME] 5028983
[OTHER-INCOME] 0
[EXPENSES-NET] 681449
[NET-INVESTMENT-INCOME] 4347534
[REALIZED-GAINS-CURRENT] 316845
[APPREC-INCREASE-CURRENT] 274473
[NET-CHANGE-FROM-OPS] 4938852
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] (59)
[DISTRIBUTIONS-OF-GAINS] (13)
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 0
[NUMBER-OF-SHARES-REDEEMED] 0
[SHARES-REINVESTED] 13
[NET-CHANGE-IN-ASSETS] 3174191
[ACCUMULATED-NII-PRIOR] 4389687
[ACCUMULATED-GAINS-PRIOR] (518081)
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 381069
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 681449
[AVERAGE-NET-ASSETS] 1060
[PER-SHARE-NAV-BEGIN] 5.41
[PER-SHARE-NII] .30
[PER-SHARE-GAIN-APPREC] .04
[PER-SHARE-DIVIDEND] (.30)
[PER-SHARE-DISTRIBUTIONS] (.07)
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 5.38
<PAGE>
PAGE 6
[EXPENSE-RATIO] .66
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 1
<NAME> IDS MINNESOTA TAX-EXEMPT FUND CLASS A
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-END> JUN-30-1996
<INVESTMENTS-AT-COST> 383139342
<INVESTMENTS-AT-VALUE> 400295278
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<ASSETS-OTHER> 379599
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<TOTAL-ASSETS> 409269172
<PAYABLE-FOR-SECURITIES> 126049
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 87160
<TOTAL-LIABILITIES> 213209
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 402613888
<SHARES-COMMON-STOCK> 75637575
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<ACCUMULATED-NII-CURRENT> 11951
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<ACCUMULATED-NET-GAINS> (11210593)
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<EXPENSES-NET> 3247625
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<REALIZED-GAINS-CURRENT> 512083
<APPREC-INCREASE-CURRENT> 20022
<NET-CHANGE-FROM-OPS> 23796826
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (22792618)
<DISTRIBUTIONS-OF-GAINS> (300980)
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<NUMBER-OF-SHARES-SOLD> 8270935
<NUMBER-OF-SHARES-REDEEMED> (13742113)
<SHARES-REINVESTED> 3510197
<NET-CHANGE-IN-ASSETS> 2163765
<ACCUMULATED-NII-PRIOR> 23929961
<ACCUMULATED-GAINS-PRIOR> (9227466)
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<GROSS-EXPENSE> 3247625
<AVERAGE-NET-ASSETS> 403881826
<PER-SHARE-NAV-BEGIN> 5.19
<PER-SHARE-NII> .30
<PER-SHARE-GAIN-APPREC> .01
<PER-SHARE-DIVIDEND> (.30)
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<PAGE>
<EXPENSE-RATIO> .80
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<PAGE>
<ARTICLE> 6
<SERIES>
[NUMBER] 1
<NAME> IDS MINNESOTA TAX-EXEMPT FUND CLASS B
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-END> JUN-30-1996
[INVESTMENTS-AT-COST] 383139342
[INVESTMENTS-AT-VALUE] 400295278
[RECEIVABLES] 8594295
[ASSETS-OTHER] 379599
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 409269172
[PAYABLE-FOR-SECURITIES] 126049
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 87160
[TOTAL-LIABILITIES] 213209
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 402613888
[SHARES-COMMON-STOCK] 3096878
[SHARES-COMMON-PRIOR] 782831
[ACCUMULATED-NII-CURRENT] 11951
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] (11210593)
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 17640717
[NET-ASSETS] 16088609
[DIVIDEND-INCOME] 0
[INTEREST-INCOME] 26512346
[OTHER-INCOME] 0
[EXPENSES-NET] 3247625
[NET-INVESTMENT-INCOME] 23264721
[REALIZED-GAINS-CURRENT] 512083
[APPREC-INCREASE-CURRENT] 20022
[NET-CHANGE-FROM-OPS] 23796826
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] (470510)
[DISTRIBUTIONS-OF-GAINS] (6713)
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 2429988
[NUMBER-OF-SHARES-REDEEMED] (192219)
[SHARES-REINVESTED] 76278
[NET-CHANGE-IN-ASSETS] 2163765
[ACCUMULATED-NII-PRIOR] 23929961
[ACCUMULATED-GAINS-PRIOR] (9227466)
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 1895243
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 3247625
[AVERAGE-NET-ASSETS] 9537531
[PER-SHARE-NAV-BEGIN] 5.19
[PER-SHARE-NII] .26
[PER-SHARE-GAIN-APPREC] .01
[PER-SHARE-DIVIDEND] (.26)
[PER-SHARE-DISTRIBUTIONS] 0
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 5.20
<PAGE>
PAGE 4
[EXPENSE-RATIO] 1.54
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
<PAGE>
<ARTICLE> 6
<SERIES>
[NUMBER] 1
<NAME> IDS MINNESOTA TAX-EXEMPT FUND CLASS Y
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-END> JUN-30-1996
[INVESTMENTS-AT-COST] 383139342
[INVESTMENTS-AT-VALUE] 400295278
[RECEIVABLES] 8594295
[ASSETS-OTHER] 379599
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 409269172
[PAYABLE-FOR-SECURITIES] 126049
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 87160
[TOTAL-LIABILITIES] 213209
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 402613888
[SHARES-COMMON-STOCK] 207
[SHARES-COMMON-PRIOR] 195
[ACCUMULATED-NII-CURRENT] 11951
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] (11210593)
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 17640717
[NET-ASSETS] 1078
[DIVIDEND-INCOME] 0
[INTEREST-INCOME] 26512346
[OTHER-INCOME] 0
[EXPENSES-NET] 3247625
[NET-INVESTMENT-INCOME] 23264721
[REALIZED-GAINS-CURRENT] 512083
[APPREC-INCREASE-CURRENT] 20022
[NET-CHANGE-FROM-OPS] 23796826
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] (62)
[DISTRIBUTIONS-OF-GAINS] (1)
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 0
[NUMBER-OF-SHARES-REDEEMED] 0
[SHARES-REINVESTED] 0
[NET-CHANGE-IN-ASSETS] 2163765
[ACCUMULATED-NII-PRIOR] 23929961
[ACCUMULATED-GAINS-PRIOR] (9227466)
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 1895243
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 3247625
[AVERAGE-NET-ASSETS] 1057
[PER-SHARE-NAV-BEGIN] 5.20
[PER-SHARE-NII] .31
[PER-SHARE-GAIN-APPREC] .01
[PER-SHARE-DIVIDEND] (.31)
[PER-SHARE-DISTRIBUTIONS] 0
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 5.21
<PAGE>
PAGE 6
[EXPENSE-RATIO] .53
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 1
<NAME> IDS NEW YORK TAX-EXEMPT FUND CLASS A
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-END> JUN-30-1996
<INVESTMENTS-AT-COST> 111208011
<INVESTMENTS-AT-VALUE> 117902996
<RECEIVABLES> 2386411
<ASSETS-OTHER> 20240
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 120309647
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 78167
<TOTAL-LIABILITIES> 78167
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 117704217
<SHARES-COMMON-STOCK> 22768781
<SHARES-COMMON-PRIOR> 23527327
<ACCUMULATED-NII-CURRENT> (11)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (4337180)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 6864454
<NET-ASSETS> 115274794
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 7798801
<OTHER-INCOME> 0
<EXPENSES-NET> 1035908
<NET-INVESTMENT-INCOME> 6762893
<REALIZED-GAINS-CURRENT> (312952)
<APPREC-INCREASE-CURRENT> (271393)
<NET-CHANGE-FROM-OPS> 6178548
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<DISTRIBUTIONS-OF-INCOME> (6587794)
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<NUMBER-OF-SHARES-SOLD> 1906925
<NUMBER-OF-SHARES-REDEEMED> (3672303)
<SHARES-REINVESTED> 1006832
<NET-CHANGE-IN-ASSETS> (1352042)
<ACCUMULATED-NII-PRIOR> 7058619
<ACCUMULATED-GAINS-PRIOR> (2824160)
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<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 578413
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1035908
<AVERAGE-NET-ASSETS> 119854036
<PER-SHARE-NAV-BEGIN> 5.09
<PER-SHARE-NII> .29
<PER-SHARE-GAIN-APPREC> (.03)
<PER-SHARE-DIVIDEND> (.29)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 5.06
<PAGE>
<EXPENSE-RATIO> .82
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<PAGE>
<ARTICLE> 6
<SERIES>
[NUMBER] 1
<NAME> IDS NEW YORK TAX-EXEMPT FUND CLASS B
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-END> JUN-30-1996
[INVESTMENTS-AT-COST] 111208011
[INVESTMENTS-AT-VALUE] 117902996
[RECEIVABLES] 2386411
[ASSETS-OTHER] 20240
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 120309647
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 78167
[TOTAL-LIABILITIES] 78167
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 117704217
[SHARES-COMMON-STOCK] 978780
[SHARES-COMMON-PRIOR] 369640
[ACCUMULATED-NII-CURRENT] (11)
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] (4337180)
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 6864454
[NET-ASSETS] 4955626
[DIVIDEND-INCOME] 0
[INTEREST-INCOME] 7798801
[OTHER-INCOME] 0
[EXPENSES-NET] 1035908
[NET-INVESTMENT-INCOME] 6762893
[REALIZED-GAINS-CURRENT] (312952)
[APPREC-INCREASE-CURRENT] (271393)
[NET-CHANGE-FROM-OPS] 6178548
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] (175051)
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 744701
[NUMBER-OF-SHARES-REDEEMED] (166438)
[SHARES-REINVESTED] 744701
[NET-CHANGE-IN-ASSETS] (1352042)
[ACCUMULATED-NII-PRIOR] 7058619
[ACCUMULATED-GAINS-PRIOR] (2824160)
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 578413
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 1035908
[AVERAGE-NET-ASSETS] 3665162
[PER-SHARE-NAV-BEGIN] 5.09
[PER-SHARE-NII] .25
[PER-SHARE-GAIN-APPREC] (.03)
[PER-SHARE-DIVIDEND] (.25)
[PER-SHARE-DISTRIBUTIONS] 0
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 5.06
<PAGE>
PAGE 4
[EXPENSE-RATIO] 1.59
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
<PAGE>
<ARTICLE> 6
<SERIES>
[NUMBER] 1
<NAME> IDS NEW YORK TAX-EXEMPT FUND CLASS Y
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-END> JUN-30-1996
[INVESTMENTS-AT-COST] 111208011
[INVESTMENTS-AT-VALUE] 117902996
[RECEIVABLES] 2386411
[ASSETS-OTHER] 20240
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 120309647
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 78167
[TOTAL-LIABILITIES] 78167
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 117704217
[SHARES-COMMON-STOCK] 209
[SHARES-COMMON-PRIOR] 197
[ACCUMULATED-NII-CURRENT] (11)
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] (4337180)
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 6864454
[NET-ASSETS] 1060
[DIVIDEND-INCOME] 0
[INTEREST-INCOME] 7798801
[OTHER-INCOME] 0
[EXPENSES-NET] 1035908
[NET-INVESTMENT-INCOME] 6762893
[REALIZED-GAINS-CURRENT] (312952)
[APPREC-INCREASE-CURRENT] (271393)
[NET-CHANGE-FROM-OPS] 6178548
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] (59)
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 0
[NUMBER-OF-SHARES-REDEEMED] 0
[SHARES-REINVESTED] 12
[NET-CHANGE-IN-ASSETS] (1352042)
[ACCUMULATED-NII-PRIOR] 7058619
[ACCUMULATED-GAINS-PRIOR] (2824160)
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 578413
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 1035908
[AVERAGE-NET-ASSETS] 1046
[PER-SHARE-NAV-BEGIN] 5.11
[PER-SHARE-NII] .29
[PER-SHARE-GAIN-APPREC] (.03)
[PER-SHARE-DIVIDEND] (.30)
[PER-SHARE-DISTRIBUTIONS] 0
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 5.07
<PAGE>
PAGE 6
[EXPENSE-RATIO] .58
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 1
<NAME> IDS OHIO TAX-EXEMPT FUND CLASS A
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-END> JUN-30-1996
<INVESTMENTS-AT-COST> 69340999
<INVESTMENTS-AT-VALUE> 72981281
<RECEIVABLES> 1039178
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 74020459
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 202179
<TOTAL-LIABILITIES> 202179
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 72246930
<SHARES-COMMON-STOCK> 13558632
<SHARES-COMMON-PRIOR> 13907946
<ACCUMULATED-NII-CURRENT> 695
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (2155221)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 3725876
<NET-ASSETS> 71628090
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 4675409
<OTHER-INCOME> 0
<EXPENSES-NET> 635037
<NET-INVESTMENT-INCOME> 4040372
<REALIZED-GAINS-CURRENT> (450527)
<APPREC-INCREASE-CURRENT> 579615
<NET-CHANGE-FROM-OPS> 4169460
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (3934612)
<DISTRIBUTIONS-OF-GAINS> (133990)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1279987
<NUMBER-OF-SHARES-REDEEMED> (2225461)
<SHARES-REINVESTED> 596160
<NET-CHANGE-IN-ASSETS> (262216)
<ACCUMULATED-NII-PRIOR> 4061670
<ACCUMULATED-GAINS-PRIOR> (1262593)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 355739
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 635037
<AVERAGE-NET-ASSETS> 74449335
<PER-SHARE-NAV-BEGIN> 5.28
<PER-SHARE-NII> .29
<PER-SHARE-GAIN-APPREC> .01
<PER-SHARE-DIVIDEND> (.29)
<PER-SHARE-DISTRIBUTIONS> (.01)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 5.28
<PAGE>
PAGE 2
<EXPENSE-RATIO> .85
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<PAGE>
PAGE 3
<ARTICLE> 6
<SERIES>
[NUMBER] 1
<NAME> IDS OHIO TAX-EXEMPT FUND CLASS B
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-END> JUN-30-1996
[INVESTMENTS-AT-COST] 69340999
[INVESTMENTS-AT-VALUE] 72981281
[RECEIVABLES] 1039178
[ASSETS-OTHER] 0
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 74020459
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 202179
[TOTAL-LIABILITIES] 202179
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 72246930
[SHARES-COMMON-STOCK] 414378
[SHARES-COMMON-PRIOR] 134347
[ACCUMULATED-NII-CURRENT] 695
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] (2155221)
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 3725876
[NET-ASSETS] 2189121
[DIVIDEND-INCOME] 0
[INTEREST-INCOME] 4675409
[OTHER-INCOME] 0
[EXPENSES-NET] 635037
[NET-INVESTMENT-INCOME] 4040372
[REALIZED-GAINS-CURRENT] (450527)
[APPREC-INCREASE-CURRENT] 579615
[NET-CHANGE-FROM-OPS] 4169460
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] (69847)
[DISTRIBUTIONS-OF-GAINS] (3014)
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 327095
[NUMBER-OF-SHARES-REDEEMED] (59086)
[SHARES-REINVESTED] 12022
[NET-CHANGE-IN-ASSETS] (262216)
[ACCUMULATED-NII-PRIOR] 4061670
[ACCUMULATED-GAINS-PRIOR] (1262593)
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 355739
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 635037
[AVERAGE-NET-ASSETS] 1519224
[PER-SHARE-NAV-BEGIN] 5.28
[PER-SHARE-NII] .24
[PER-SHARE-GAIN-APPREC] .01
[PER-SHARE-DIVIDEND] (.24)
[PER-SHARE-DISTRIBUTIONS] (.01)
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 5.28
<PAGE>
PAGE 4
[EXPENSE-RATIO] 1.59
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
<PAGE>
<ARTICLE> 6
<SERIES>
[NUMBER] 1
<NAME> IDS OHIO TAX-EXEMPT FUND CLASS Y
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-END> JUN-30-1996
[INVESTMENTS-AT-COST] 69340999
[INVESTMENTS-AT-VALUE] 72981281
[RECEIVABLES] 1039178
[ASSETS-OTHER] 0
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 74020459
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 202179
[TOTAL-LIABILITIES] 202179
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 72246930
[SHARES-COMMON-STOCK] 202
[SHARES-COMMON-PRIOR] 191
[ACCUMULATED-NII-CURRENT] 695
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] (2155221)
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 3725876
[NET-ASSETS] 1069
[DIVIDEND-INCOME] 0
[INTEREST-INCOME] 4675409
[OTHER-INCOME] 0
[EXPENSES-NET] 635037
[NET-INVESTMENT-INCOME] 4040372
[REALIZED-GAINS-CURRENT] (450527)
[APPREC-INCREASE-CURRENT] 579615
[NET-CHANGE-FROM-OPS] 4169460
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] (58)
[DISTRIBUTIONS-OF-GAINS] (2)
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 0
[NUMBER-OF-SHARES-REDEEMED] 0
[SHARES-REINVESTED] 11
[NET-CHANGE-IN-ASSETS] (262216)
[ACCUMULATED-NII-PRIOR] 4061670
[ACCUMULATED-GAINS-PRIOR] (1262593)
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 355739
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 635037
[AVERAGE-NET-ASSETS] 1051
[PER-SHARE-NAV-BEGIN] 5.28
[PER-SHARE-NII] .31
[PER-SHARE-GAIN-APPREC] .01
[PER-SHARE-DIVIDEND] (.30)
[PER-SHARE-DISTRIBUTIONS] (.01)
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 5.29
<PAGE>
PAGE 6
[EXPENSE-RATIO] .57
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 7
<NAME> IDS INSURED TAX-EXEMPT FUND CLASS A
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-END> JUN-30-1996
<INVESTMENTS-AT-COST> 474706499
<INVESTMENTS-AT-VALUE> 502689770
<RECEIVABLES> 13351898
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 516041668
<PAYABLE-FOR-SECURITIES> 2558291
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1860828
<TOTAL-LIABILITIES> 4419119
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 496321614
<SHARES-COMMON-STOCK> 90424927
<SHARES-COMMON-PRIOR> 93501438
<ACCUMULATED-NII-CURRENT> 160320
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (12842656)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 27983271
<NET-ASSETS> 490827953
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 30821789
<OTHER-INCOME> 0
<EXPENSES-NET> 4035789
<NET-INVESTMENT-INCOME> 26786000
<REALIZED-GAINS-CURRENT> 1470391
<APPREC-INCREASE-CURRENT> 2965393
<NET-CHANGE-FROM-OPS> 31221784
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (26156789)
<DISTRIBUTIONS-OF-GAINS> (1659685)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 7677356
<NUMBER-OF-SHARES-REDEEMED> (14339111)
<SHARES-REINVESTED> 3585244
<NET-CHANGE-IN-ASSETS> 783906
<ACCUMULATED-NII-PRIOR> 28730570
<ACCUMULATED-GAINS-PRIOR> (9678666)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 2346243
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 4035789
<AVERAGE-NET-ASSETS> 508587708
<PER-SHARE-NAV-BEGIN> 5.40
<PER-SHARE-NII> .30
<PER-SHARE-GAIN-APPREC> .03
<PER-SHARE-DIVIDEND> (.28)
<PER-SHARE-DISTRIBUTIONS> (.02)
<RETURNS-OF-CAPITAL> 0
<PAGE>
<PER-SHARE-NAV-END> 5.43
<EXPENSE-RATIO> .75
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<PAGE>
<ARTICLE> 6
(SERIES>
[NUMBER] 8
<NAME> IDS INSURED TAX-EXEMPT FUND CLASS B
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-END> JUN-30-1996
[INVESTMENTS-AT-COST] 474706499
[INVESTMENTS-AT-VALUE] 502689770
[RECEIVABLES] 13351898
[ASSETS-OTHER] 0
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 516041668
[PAYABLE-FOR-SECURITIES] 2558291
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 1860828
[TOTAL-LIABILITIES] 4419119
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 496321614
[SHARES-COMMON-STOCK] 3831110
[SHARES-COMMON-PRIOR] 1160465
[ACCUMULATED-NII-CURRENT] 160320
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] (12842656)
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 27983271
[NET-ASSETS] 20793524
[DIVIDEND-INCOME] 0
[INTEREST-INCOME] 30821789
[OTHER-INCOME] 0
[EXPENSES-NET] 4035789
[NET-INVESTMENT-INCOME] 26786000
[REALIZED-GAINS-CURRENT] 1470391
[APPREC-INCREASE-CURRENT] 2965393
[NET-CHANGE-FROM-OPS] 31221784
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] (632447)
[DISTRIBUTIONS-OF-GAINS] (48604)
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 3048552
[NUMBER-OF-SHARES-REDEEMED] (476102)
[SHARES-REINVESTED] 98195
[NET-CHANGE-IN-ASSETS] 783906
[ACCUMULATED-NII-PRIOR] 28730570
[ACCUMULATED-GAINS-PRIOR] (9678666)
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 2346243
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 4035789
[AVERAGE-NET-ASSETS] 14329419
[PER-SHARE-NAV-BEGIN] 5.40
[PER-SHARE-NII] .26
[PER-SHARE-GAIN-APPREC] .03
[PER-SHARE-DIVIDEND] (.24)
[PER-SHARE-DISTRIBUTIONS] (.02)
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 5.43
<PAGE>
[EXPENSE-RATIO] 1.51
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
<PAGE>
<ARTICLE> 6
(SERIES>
[NUMBER] 9
<NAME> IDS INSURED TAX-EXEMPT FUND CLASS Y
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-END> JUN-30-1996
[INVESTMENTS-AT-COST] 474706499
[INVESTMENTS-AT-VALUE] 502689770
[RECEIVABLES] 13351898
[ASSETS-OTHER] 0
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 516041668
[PAYABLE-FOR-SECURITIES] 2558291
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 1860828
[TOTAL-LIABILITIES] 4419119
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 496321614
[SHARES-COMMON-STOCK] 197
[SHARES-COMMON-PRIOR] 186
[ACCUMULATED-NII-CURRENT] 160320
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] (12842656)
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 27983271
[NET-ASSETS] 1072
[DIVIDEND-INCOME] 0
[INTEREST-INCOME] 30821789
[OTHER-INCOME] 0
[EXPENSES-NET] 4035789
[NET-INVESTMENT-INCOME] 26786000
[REALIZED-GAINS-CURRENT] 1470391
[APPREC-INCREASE-CURRENT] 2965393
[NET-CHANGE-FROM-OPS] 31221784
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] (56)
[DISTRIBUTIONS-OF-GAINS] (3)
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 0
[NUMBER-OF-SHARES-REDEEMED] 0
[SHARES-REINVESTED] 11
[NET-CHANGE-IN-ASSETS] 783906
[ACCUMULATED-NII-PRIOR] 28730570
[ACCUMULATED-GAINS-PRIOR] (9678666)
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 2346243
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 4035789
[AVERAGE-NET-ASSETS] 1055
[PER-SHARE-NAV-BEGIN] 5.41
[PER-SHARE-NII] .31
[PER-SHARE-GAIN-APPREC] .03
[PER-SHARE-DIVIDEND] (.29)
[PER-SHARE-DISTRIBUTIONS] (.02)
[RETURNS-OF-CAPITAL] 0
<PAGE>
[PER-SHARE-NAV-END] 5.44
[EXPENSE-RATIO] .57
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
