1996 Semiannual Report
IDS
Insured
Tax-Exempt
Fund
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.
American
Express
Financial
Advisors
Distributed by American Express Financial Advisors Inc.
<PAGE>
(icon of) shield with star
No-default
insurance
Any investment involves risks. For a municipal bond investor, there's the risk
that the bond issuer could default on its payments. But there are bonds that are
insured against default, and these are the ones that Insured Tax-Exempt Fund
invests in. While this doesn't mean that shareholders are insulated from
fluctuations in bond market values, it does ensure that all principal and
interest due to investors will be paid. Along the way, shareholders enjoy
regular income that is generally free from federal income tax.
Contents
From the president 3
From the portfolio manager 3
Ten largest holdings 5
Financial statements 6
Notes to financial statements 9
Investments in securities 24
Board members and officers 35
IDS mutual funds 36
<PAGE>
To our shareholders
(picture of) William Pearce
William R. Pearce
President of the Fund
From the president
If you're an experienced investor, you know that the past two years have been
unusually strong ones in many financial markets. Perhaps just as important, you
also know that history shows that bull markets don't last forever. Though
they're often unpredictable, declines - whether they're brief or long-lasting,
moderate or substantial - are always a possibility.
That fact reinforces the need for investors to periodically review their
long-term goals and examine whether their investment program remains on
track to achieving them. Your quarterly investment statements are one part
of that monitoring process. The other is a meeting with your American Express
financial advisor. That becomes even more important if there's a major change
in your financial situation or in the financial markets.
William R. Pearce
(picture of) Paul Hylle
Paul B. Hylle
Portfolio manager
From the portfolio manager
Volatility continued
to pervade the bond market during the past six months, reflecting investors'
shifting outlooks regarding inflation. Fortunately, however, the upturns
overpowered the downturns, resulting in a productive period for IDS Insured
Tax-Exempt Fund. For the first half of the fiscal year -- July through December
1996 -- investors in Class A shares realized a total return (net asset value
change and dividends) of 4.6%.
When the period began last summer, the bond market was still licking the
wounds it received during the first three months of 1996, when a rise in
long-term interest rates, largely induced by what later proved to be an
unfounded fear of higher inflation, drove bond prices sharply lower.
A fall rally
By fall, though, the investment environment had improved, thanks to
reports of moderate economic growth and stable inflation. On that news,
long-term interest rates started coming back down, driving bond prices
higher in the process. The rally lasted through November, before renewed
inflation fears sent the market into a mild retreat during the final weeks of
1996.
The Fund's municipal bond holdings, like all fixed-income
investments, benefited substantially from the rally. Keeping a negligible
amount of cash reserves in the portfolio also worked to the Fund's advantage
during that time. Still, negative net cash flow into the municipal bond
market, a condition that has persisted for the past three years, limited
the capital appreciation the Fund enjoyed.
The supply situation, on the other hand, remained favorable as the number of
bonds "called away" by issuers (taken out of the market because issuers paid
off the principal ahead of the bonds' maturity dates) exceeded the number
of new bonds coming to market. The net result is fewer municipal bonds
outstanding than three years ago. The flip side of the call situation, which has
been in effect for the past few years, is that it continued to erode the Fund's
dividend slightly. This results from the fact that newly issued bonds don't
pay as much interest as the older bonds being called away. Measured against
comparable municipal bond funds, however, this Fund's dividend has held up
better than most.
A more stable environment?
Looking toward the second half of the fiscal year, while some fluctuation in
bond prices is inevitable, I think conditions may allow for less-dramatic
swings in the months ahead. As always, the main bond-market catalyst will be
the outlook for inflation, which, given the probability of ongoing moderate
economic growth, should increase only modestly in 1997. If that forecast proves
to be reasonably accurate, long-term interest rates would seem unlikely to
experience a substantial, sustained rise. In any event, I will update you
on the Fund's progress after the fiscal year ends in June.
Paul B. Hylle
<PAGE>
IDS Insured Tax-Exempt Fund
The Fund's ten largest holdings
(pie chart) The ten holdings listed here make up 20.17% of the Fund's net assets
- --------------------------------------------------------------------------------
Percent Value
(of Fund's net assets) (as of Dec. 31, 1996)
- --------------------------------------------------------------------------------
Brazo River Texas Authority Collateralized Pollution Control
Refunding Revenue Bonds Texas Utility Electric
Series 1992C A.M.T
6.70% 2022 3.18% $16,109,787
Pittsburgh Pennsylvania Water & Sewer Authority System
Pre-Refunded Revenue Bonds
Series 1991A
6.50% 2014 2.17 11,026,300
New York State Energy Resource & Development Authority
Solid Waste Disposal Revenue Bonds New York State
Electric & Gas Series A A.M.T.
5.70% 2028 2.15 10,904,415
District of Columbia Metropolitan Washington Airports Authority Airport System
Revenue Bonds Series 1992A A.M.T.
6.625% 2019 2.00 10,150,709
Colorado River Texas Municipal Water District
Water System Pre-Refunded Revenue Bonds Series A
6.625% 2021 1.90 9,620,811
San Diego County California Certificate of Participation
Regional Authority Bonds Mt. Tower
Inverse Floater Series 1991
6.36% 2019 1.86 9,455,040
Denver Colorado City & County Airport Revenue Bonds
Series B A.M.T.
5.75% 2017 1.83 9,266,868
Harris County Texas Toll Road Senior Lien
Pre-Refunded Revenue Bonds Series A
6.50% 2017 1.80 9,108,243
Austin Texas Combined Utilities System
Refunding Revenue Bonds Series 1994
5.75% 2024 1.68 8,542,075
Florida State Turnpike Authority Department of Transportation
Series A
5.50% 2021 1.60 8,112,055
Note: Certain of the Fund's income may be subject to the Alternative Minimum Tax
(A.M.T.).
<PAGE>
Class A
6-month performance
(All figures per share)
Net asset value (NAV)
- -------------------------------
Dec. 31, 1996 $ 5.53
- -------------------------------
June 30, 1996 $ 5.43
- -------------------------------
Increase $ 0.10
- -------------------------------
Distributions
July 1, 1996 - Dec. 31, 1996
- ------------------------------
From income $ 0.14
- ------------------------------
From capital gains $ --
- ------------------------------
Total distributions $ 0.14
- ------------------------------
Total return* +4.6%**
- ------------------------------
Class B
6-month performance
(All figures per share)
Net asset value (NAV)
- -------------------------------
Dec. 31, 1996 $ 5.53
- -------------------------------
June 30, 1996 $ 5.43
- -------------------------------
Increase $ 0.10
- -------------------------------
Distributions
July 1, 1996 - Dec. 31, 1996
- -------------------------------
From income $ 0.12
- -------------------------------
From capital gains $ --
- -------------------------------
Total distributions $ 0.12
- -------------------------------
Total return* +4.2%**
- -------------------------------
*The prospectus discusses the
effect of sales charges, if
any, on the various classes.
**The total return is a hypothetical
investment in the Fund with all
distributions reinvested.
<PAGE>
Financial statements
Statement of assets and liabilities
IDS Insured Tax-Exempt Fund
Dec. 31, 1996
- --------------------------------------------------------------------------------
Assets
- --------------------------------------------------------------------------------
(Unaudited)
Investments in securities, at value (Note 1)
(identified cost $462,160,624) $500,387,270
Accrued interest receivable 9,172,324
Receivable for investment securities sold 225,000
- --------------------------------------------------------------------------------
Total assets 509,784,594
Liabilities
- --------------------------------------------------------------------------------
Disbursements in excess of cash on demand deposit 702,235
Dividends payable to shareholders 341,030
Payable for investment securities purchased 1,485,302
Accrued investment management services fee 6,255
Accrued distribution fee 531
Accrued service fee 2,523
Accrued transfer agency fee 547
Accrued administrative services fee 556
Other accrued expenses 46,926
- --------------------------------------------------------------------------------
Total liabilities 2,585,905
- --------------------------------------------------------------------------------
Net assets applicable to outstanding shares $507,198,689
- --------------------------------------------------------------------------------
Represented by
- --------------------------------------------------------------------------------
Shares of beneficial interest - $.01 par value,
unlimited number of shares authorized $ 917,373
Additional paid-in-capital 481,611,621
Excess of distributions over net investment income (16,227)
Accumulated net realized loss (Note 1) (13,265,723)
Unrealized appreciation (Note 5) 37,951,645
- --------------------------------------------------------------------------------
Total -- representing net assets applicable to
outstanding shares $507,198,689
- --------------------------------------------------------------------------------
Net assets applicable to outstanding shares: Class A $481,276,531
Class B $ 25,922,158
Net asset value per share of outstanding shares:
Class A shares 87,048,407 $ 5.53
Class B shares 4,688,930 $ 5.53
See accompanying notes to financial statements.
<PAGE>
Financial statements
Statement of operations
IDS Insured Tax-Exempt Fund
Six months ended Dec. 31, 1996
- --------------------------------------------------------------------------------
Investment income
- --------------------------------------------------------------------------------
(Unaudited)
Income:
Interest $15,298,657
- --------------------------------------------------------------------------------
Expenses (Note 2):
Investment management services fee 1,165,325
Distribution fee -- Class B 89,070
Transfer agency fee 122,305
Incremental transfer agency fee -- Class B 478
Service fee
Class A 425,444
Class B 20,668
Administrative services fee 103,584
Compensation of board members 4,238
Compensation of officers 2,083
Custodian fees 21,537
Postage 18,125
Registration fees 9,263
Reports to shareholders 3,295
Audit fees 9,000
Administrative 1,991
Other 4,347
- --------------------------------------------------------------------------------
Total expenses 2,000,753
Earnings credits on cash balances (Note 2) (26,328)
- --------------------------------------------------------------------------------
Total net expenses 1,974,425
- --------------------------------------------------------------------------------
Investment income -- net 13,324,232
- --------------------------------------------------------------------------------
Realized and unrealized gain (loss) -- net
- --------------------------------------------------------------------------------
Net realized gain on security transactions (Note 3) 1,227,827
Net realized loss on financial futures contracts (1,650,894)
- --------------------------------------------------------------------------------
Net realized loss on investments (423,067)
Net change in unrealized appreciation or depreciation 9,968,374
- --------------------------------------------------------------------------------
Net gain on investments 9,545,307
- --------------------------------------------------------------------------------
Net increase in net assets resulting from operations $22,869,539
- --------------------------------------------------------------------------------
See accompanying notes to financial statements.
<PAGE>
<TABLE>
Financial statements
Statements of changes in net assets
IDS Insured Tax-Exempt Fund
- -----------------------------------------------------------------------------------------------------------
<CAPTION>
Operations and distributions Dec. 31, 1996 June 30, 1996
- ------------------------------------------------------------------------------------------------------------------------------------
Six months ended Year ended
(Unaudited)
<S> <C> <C>
Investment income -- net $ 13,324,232 $ 26,786,000
Net realized gain (loss) on investments (423,067) 1,470,391
Net change in unrealized appreciation or depreciation 9,968,374 2,965,393
- -----------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 22,869,539 31,221,784
- -----------------------------------------------------------------------------------------------------------
Distributions to shareholders from:
Net investment income
Class A (12,966,190) (26,156,845)
Class B (534,589) (632,447)
Net realized gain
Class A -- (1,659,688)
Class B -- (48,604)
- -----------------------------------------------------------------------------------------------------------
Total distributions (13,500,779) (28,497,584)
- -----------------------------------------------------------------------------------------------------------
Share transactions (Note 4)
- -----------------------------------------------------------------------------------------------------------
Proceeds from sales
Class A shares (Note 2) 15,850,194 42,283,689
Class B shares 6,290,363 16,779,713
Reinvestment of distributions at net asset value
Class A shares 8,922,108 19,769,832
Class B shares 406,256 541,841
Payments for redemptions
Class A shares (43,268,053) (78,673,946)
Class B shares (Note 2) (1,993,488) (2,641,423)
- -----------------------------------------------------------------------------------------------------------
Decrease in net assets from share transactions (13,792,620) (1,940,294)
- -----------------------------------------------------------------------------------------------------------
Total increase (decrease) in net assets (4,423,860) 783,906
Net assets at beginning of period 511,622,549 510,838,643
- -----------------------------------------------------------------------------------------------------------
Net assets at end of period
(including undistributed net investment income of
$(16,227) and $160,320) $507,198,689 $511,622,549
- -----------------------------------------------------------------------------------------------------------
See accompanying notes to financial statements.
</TABLE>
<PAGE>
Notes to financial statements
IDS Insured Tax-Exempt Fund
(Unaudited as to Dec. 31, 1996)
- -------------------------------------------------------------------
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.
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 financial 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 and losses deferred due to "wash sale"
transactions. The character of distributions made during the year from net
investment income or net realized gains may differ from their ultimate
characterization for federal income tax purposes. Also, due to the timing of
dividend distributions, the fiscal year in which amounts are distributed may
differ from the year that the income or realized gains (losses) were recorded by
the Fund.
Dividends to shareholders
Dividends from net investment income, declared daily and payable monthly, are
reinvested in additional shares of the Fund at net asset value or payable in
cash. Capital gains, when available, are distributed along with the last income
dividend of the calendar year.
Other
Security transactions are accounted for on the date securities are purchased or
sold. Interest income, including level-yield amortization of premium and
discount, is accrued daily.
- -------------------------------------------------------------------
2. Expenses and sales charges
Effective March 20, 1995, the Fund entered into agreements with American Express
Financial Corporation (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
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.
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.
Sales charges received by American Express Financial Advisors Inc. for
distributing Fund shares were $500,653 for Class A and $14,789 for Class B for
the six months ended Dec. 31, 1996.
During the six months ended Dec. 31, 1996, the Fund's custodian and transfer
agency fees were reduced by $26,328 as a result of earnings credits from
overnight cash balances.
- -------------------------------------------------------------------
3. Securities transactions
Cost of purchases and proceeds from sales of securities (other than short-term
obligations) aggregated $97,106,789 and $110,880,491, respectively, for the six
months ended Dec. 31, 1996. Realized gains and losses are determined on an
identified cost basis.
- -------------------------------------------------------------------
4. Share transactions
Transactions in shares of the Fund for the periods indicated are as follows:
Six months ended Dec. 31, 1996
Class A Class B
- -----------------------------------------------------------------
Sold 2,885,685 1,147,215
Issued for reinvested 1,624,750 73,957
distributions
Redeemed (7,887,152) (363,352)
- -----------------------------------------------------------------
Net increase (decrease) (3,376,717) 857,820
- -----------------------------------------------------------------
Year ended June 30, 1996
Class A Class B
- -----------------------------------------------------------------
Sold 7,677,356 3,048,552
Issued for reinvested 3,585,255 98,195
distributions
Redeemed (14,339,111) (476,102)
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Net increase (decrease) (3,076,500) 2,670,645
- -----------------------------------------------------------------
- -----------------------------------------------------------------
5. Interest rate futures contracts
At Dec. 31, 1996, investments in securities included securities valued at
$6,411,649 that were pledged as collateral to cover initial margin deposits on
200 open sales contracts. The market value (see Summary of significant
accounting policies) the open contracts at Dec. 31, 1996 was $23,212,500 with a
net unrealized loss of $275,001.
<PAGE>
<TABLE>
IDS Insured Tax-Exempt Fund
6. Financial highlights
The tables below show certain important financial information for evaluating the
Fund's results.
Fiscal period ended June 30,
Per share income and capital changes*
Class
A
<CAPTION>
1996*** 1996 1995 1994 1993 1992 1991 1990 1989** 1988 1987
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
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
beginning of period
Income from investment operations:
Net investment .14 .30 .30 .30 .30 .31 .32 .31 .16 .31 .32
income
Net gains (losses) .10 .03 .05 (.28) .30 .29 .08 (.04) .14 .14 (.34)
(both realized
and unrealized)
Total from .24 .33 .35 .02 .60 .60 .40 .27 .30 .45 (.02)
investment
operations
Less distributions:
Dividends from net (.14) (.28) (.30) (.30) (.30) (.31) (.32) (.31) (.16) (.32) (.32)
investment income
Distributions from -- (.02) -- -- -- -- -- -- -- -- --
realized gains
Total distributions (.14) (.30) (.30) (.30) (.30) (.31) (.32) (.31) (.16) (.32) (.32)
Net asset value, $5.53 $5.43 $5.40 $5.35 $5.63 $5.33 $5.04 $4.96 $5.00 $4.86 $4.73
end of period
Ratios/supplemental data
Class A
1996*** 1996 1995 1994 1993 1992 1991 1990 1989** 1988 1987
Net assets, end of $481 $491 $505 $525 $464 $308 $195 $133 $79 $55 $37
period (in millions)
Ratio of expenses to .74%+ .75% .66% .65% .65% .67% .67% .69% .72%+ .77% .88%
average daily net
assets#
Ratio of net income 5.17%+ 5.16% 5.66% 5.32% 5.53% 6.06% 6.36% 6.44% 6.60%+ 6.55% 6.77%
to
average daily net
assets
Portfolio turnover 19% 52% 53% 37% 5% 11% 8% 24% 19% 33% 29%
rate
(excluding
short-term
securities)
Total return++ 4.6% 6.3% 6.7% 0.3% 11.7% 12.3% 8.1% 5.6% 6.4% 9.7% (0.2%)
*For a share outstanding throughout the period. Rounded to
nearest cent.
**The Fund's fiscal year-end was changed from Dec. 31 to June 30,
effective 1989.
***Six months ended Dec. 31, 1996 (Unaudited).
+Adjusted to an annual basis.
++Total return does not reflect payment of a sales charge.
#Effective fiscal year 1996, expense ratio is based on total
expenses of the Fund before reduction of earnings credits on
cash balances.
</TABLE>
<PAGE>
Fiscal period ended June 30,
Per share income and capital changes*
Class B
1996*** 1996 1995**
Net asset value, $5.43 $5.40 $5.47
beginning of period
Income from investment operations:
Net investment income .12 .26 .09
Net gains (losses) .10 .03 (.07)
(both realized
and unrealized)
Total from investment .22 .29 .02
operations
Less distributions:
Dividends from net (.12) (.24) (.09)
investment income
Distributions from -- (.02) --
realized gains
Total distributions (.12) (.26) (.09)
Net asset value, $5.53 $5.43 $5.40
end of period
Ratios/supplemental data
Class B
1996*** 1996 1995**
Net assets, end of $26 $21 $6
period (in millions)
Ratio of expenses to 1.49%+ 1.51%# 1.49%+
average daily net
assets#
Ratio of net income to 4.41%+ 4.42% 4.72%+
average daily net
assets
Portfolio turnover 19% 52% 53%
rate
(excluding short-term
securities)
Total return++ 4.2% 5.5% 0.4%
*For a share outstanding throughout the period.
Rounded to the nearest cent.
**Inception date was March 20, 1995.
***Six months ended Dec. 31, 1996 (Unaudited).
+Adjusted to an annual basis.
++Total return does not reflect payment of a sales charge.
#Effective fiscal year 1996, expense ratio is based on total
expenses of the Fund before reduction of earnings credits on
cash balances.
<PAGE>
<TABLE>
Investments in securities
(Percentages represent
IDS Insured Tax-Exempt Fund value of investments
Dec. 31, 1996 (Unaudited) compared to net assets)
- ------------------------------------------------------------------------------------------------------------------------------------
Municipal bonds (98.7%)
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Name of issuer and title of issue (b,c,d) Coupon Maturity Principal Value(a)
rate year amount
- ------------------------------------------------------------------------------------------------------------------------------------
Alabama (0.7%)
Mobile General Obligation Capital Improvement Warrants
Convention Center Pre-Refunded Bonds Series 1990
<S> <C> <C> <C> <C>
(AMBAC Insured) 7.125% 2020 $3,000,000 $3,320,940
- ------------------------------------------------------------------------------------------------------------------------------------
Alaska (1.5%)
North Slope Borough Capital Appreciation
Unlimited General Obligation Bonds
Series 1995A Zero Coupon (MBIA Insured) 5.61 2006 5,300,000 (e) 3,215,510
North Slope Borough General Obligation Bonds
Series 1996B Zero Coupon (MBIA Insured) 5.72 2007 8,000,000 (e) 4,558,080
-------------
Total 7,773,590
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Arizona (1.8%)
Chandler Water & Sewer Refunding Revenue Bonds
Series 1991 (FGIC Insured) 7.00 2012 1,250,000 1,373,938
Health Facilities Authority Hospital System
Refunding Revenue Bonds Phoenix Baptist Hospital
Series 1992 (MBIA Insured) 6.25 2011 1,650,000 1,748,340
Phoenix Civic Improvement Wastewater System Lease
Refunding Revenue Bonds (Secondary MBIA Insured) 4.75 2023 4,500,000 3,954,195
State University Research Park Development
Refunding Bonds Series 1995 (MBIA Insured) 5.00 2021 1,975,000 1,850,535
------------
Total 8,927,008
- ------------------------------------------------------------------------------------------------------------------------------------
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 1,239,480
- ------------------------------------------------------------------------------------------------------------------------------------
California (9.7%)
Desert Sands Unified School District Convertible Capital
Appreciation Certificates Series 1995 Zero Coupon
(FSA Insured) 1.40 2020 3,000,000 (e) 2,398,320
Eastern Municipal Water District Riverside County
Water & Sewer Pre-Refunded Revenue
Certificates of Participation Series 1991 (FGIC Insured) 6.50 2020 5,460,000 6,041,654
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) 6,091,740
Fresno Health Facility Revenue Bonds Holy Cross-St. Agnes
(Secondary MBIA Insured) 6.625 2021 2,000,000 2,161,240
See accompanying notes to investments in securities.
Los Angeles Department of Airports Revenue Bonds
Los Angeles International Airport Series D
(FGIC Insured) A.M.T. 5.50 2015 2,000,000 1,979,340
Los Angeles Department of Water & Power Waterworks
Refunding Revenue Bonds Second Issue
(Secondary FGIC Insured) 4.50 2023 2,000,000 1,672,080
Northern California Transmission Select Auction
Variable Rate Security & Residual Interest Revenue Bonds
Inverse Floater (MBIA Insured) 5.50 2024 2,500,000 (f) 2,400,875
Oceanside Certificate of Participation Refunding Bonds
Oceanside Civic Center (MBIA Insured) 5.25 2019 1,730,000 1,646,476
San Diego County Certificate of Participation
Regional Authority Bonds Mt. Tower
Inverse Floater Series 1991 (MBIA Insured) 6.36 2019 9,000,000 (f) 9,455,040
San Jose Redevelopment Agency Merged Area
Redevelopment Tax Allocation Bonds Series 1993
(MBIA Insured) 4.75 2024 2,400,000 2,081,784
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 1,503,225
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 1,910,740
State Public Works Board Lease Revenue Bonds
University of California Series A (AMBAC Insured) 6.40 2016 2,000,000 2,197,600
State Unlimited Tax General Obligation Bonds
(Secondary FGIC Insured) 4.75 2023 2,500,000 2,173,150
Statewide Community Development Authority
Certificate of Participation
Sutter Health Obligated Group (MBIA Insured) 5.50 2022 5,750,000 5,603,202
------------
Total 49,316,466
- ------------------------------------------------------------------------------------------------------------------------------------
Colorado (2.7%)
Denver City & County Airport Revenue Bonds Series B
(MBIA Insured) A.M.T. 5.75 2017 9,290,000 (g) 9,266,868
Douglas County School District General Obligation
Improvement Bonds Series 1994A (MBIA Insured) 6.50 2016 1,500,000 1,681,455
Larimer Weld & Boulder Counties School District R-2J
Thompson Unlimited General Obligation Capital
Appreciation Bonds Series 1997 Zero Coupon (FGIC Insured) 5.45 2011 2,000,000 (e) 891,020
Larimer Weld & Boulder Counties School District R-2J
Thompson Unlimited General Obligation Capital
Appreciation Bonds Series 1997 Zero Coupon (FGIC Insured) 5.50 2012 1,400,000 (e) 586,320
Municipal Subdistrict Northern Colorado Water Conservatory
District Refunding Revenue Bonds Series E (AMBAC Insured) 5.00 2017 1,500,000 1,400,340
------------
Total 13,826,003
- ------------------------------------------------------------------------------------------------------------------------------------
Connecticut (0.3%)
Bridgeport General Obligation Refunding Bonds
Series 1996A (AMBAC Insured) 5.50 2015 1,750,000 1,725,763
- ------------------------------------------------------------------------------------------------------------------------------------
Delaware (0.2%)
Health Facilities Authority Refunding Revenue Bonds
Medical Center of Delaware Series 1989 (MBIA Insured) 7.00 2015 1,000,000 1,079,430
- ------------------------------------------------------------------------------------------------------------------------------------
District of Columbia (2.7%)
Howard University Revenue Bonds Series A (MBIA Insured) 8.00 2017 1,500,000 1,573,110
Metropolitan Washington Airports Authority Airport System
Revenue Bonds Series 1992A (MBIA Insured) A.M.T. 6.625 2019 9,420,000 10,150,709
Unlimited Tax General Obligation Refunding Bonds
Series B-2 (FSA Insured) 5.50 2010 2,000,000 1,979,340
------------
Total 13,703,159
- ------------------------------------------------------------------------------------------------------------------------------------
Florida (5.1%)
Alachua County Public Improvement Refunding Revenue Bonds
(FSA Insured) 5.125 2021 2,000,000 1,894,320
Department of Transportation Turnpike Revenue Bonds
Series 1991A (AMBAC Insured) 6.25 2020 1,250,000 1,300,537
Florida State Turnpike Authority Department of Transportation
Series A (FGIC Insured) 5.50 2021 8,210,000 8,112,055
Fort Myers Utility System Refunding Revenue Bonds
Series 1989A (BIG Insured) 6.00 2019 2,000,000 2,026,520
Gulf Breeze Local Government Loan Program Boca Raton
Series 1985E (FGIC Insured) 7.75 2015 2,000,000 2,207,360
Lee County School Board Certificate of Participation
Series 1996A (FSA Insured) 5.50 2017 1,000,000 995,070
Orange County Health Facility Authority Revenue Bonds
Adventist Health System Sunbelt Obligated Group
Series 1995 (AMBAC Insured) 5.25 2020 1,250,000 1,194,275
Osceola County Transportation Pre-Refunded Revenue Bonds
Series 1988A (FGIC Insured) 7.70 2013 1,215,000 1,295,858
Palm Beach County Solid Waste Authority Revenue Bonds
Series 1984 (BIG Insured) 8.375 2010 500,000 525,480
State Correctional Privatization Commission Certificate of Participation
350 Bed Youthful Columbia Series A (AMBAC Insured) 5.00 2017 1,900,000 1,788,185
State Correctional Privatization Commission Certificate of Participation
Youth Offender Correctional Facility Polk County
Series 1995B (AMBAC Insured) 5.00 2017 4,500,000 4,235,175
------------
Total 25,574,835
- ------------------------------------------------------------------------------------------------------------------------------------
Georgia (3.2%)
Atlanta Metropolitan Rapid Transit Authority Sales Tax
Pre-Refunded Revenue Bonds Series L (AMBAC Insured) 7.20 2020 3,000,000 3,264,810
Chatham County Hospital Authority Revenue Bonds
Memorial Medical Center Series 1990A (MBIA Insured) 7.00 2021 4,500,000 4,995,225
Dalton Development Authority Revenue Certificates
Series 1996 (MBIA Insured) 5.25 2026 3,000,000 2,848,800
Fulton County Water & Sewer Revenue Bonds
(FGIC Insured) 6.375 2014 3,250,000 3,626,643
Municipal Electrical Authority Power Revenue Bonds
Series M (BIG Insured) 8.10 2012 1,080,000 1,101,600
Municipal Electrical Authority Special Obligation
Refunding Bonds 2nd Crossover Series (AMBAC Insured) 7.80 2020 500,000 525,475
------------
Total 16,362,553
- ------------------------------------------------------------------------------------------------------------------------------------
Illinois (3.2%)
Chicago O'Hare International Airport General
Revenue Bonds Series 1990A (AMBAC Insured) A.M.T. 7.50 2016 2,000,000 2,182,140
Chicago O'Hare International Airport Terminal
Revenue Bonds (MBIA Insured) A.M.T. 7.625 2010 3,000,000 3,291,540
Chicago Public Building Commission
Pre-Refunded Revenue Bonds (MBIA Insured) A.M.T. 7.70 2008 1,000,000 1,058,290
Chicago Public Building Commission
Pre-Refunded Revenue Bonds Series 1989A (FGIC Insured) 7.75 2006 1,000,000 1,088,430
Chicago Public Building Commission
Pre-Refunded Revenue Bonds Series 1990A (MBIA Insured) 7.125 2015 5,000,000 5,462,550
Cook County General Obligation Captial Improvement Bonds
Series 1996 (FGIC Insured) 5.875 2022 2,925,000 2,948,400
State University Capital Appreciation Auxilliary Facility System
Revenue Bonds Series 1996 Zero Coupon (FSA Insured) 5.90 2016 1,150,000 (e) 373,382
-------------
Total 16,404,732
- ------------------------------------------------------------------------------------------------------------------------------------
Indiana (2.3%)
Board of Trustees for the Vincesses University
House & Dining System
Revenue Bonds Series 1996 (MBIA Insured) 5.125 2021 800,000 748,352
Educational Facilities Authority Pre-Refunded Bonds
Valpraiso University (BIG Insured) 7.80 2008 500,000 541,785
Marion County Hospital Authority Refunding Revenue Bonds
Methodist Hospital Series 1989 (MBIA Insured) 6.50 2013 4,000,000 4,273,160
State Health Facility Finance Authority Hospital
Refunding Revenue Bonds Columbus Regional Hospital
Series 1993 (CGIC Insured) 7.00 2015 5,000,000 5,886,150
------------
Total 11,449,447
- ------------------------------------------------------------------------------------------------------------------------------------
Kentucky (0.1%)
Louisville & Jefferson County Airport Authority System
Revenue Bonds (MBIA Insured) A.M.T. 8.50 2017 300,000 312,453
- ------------------------------------------------------------------------------------------------------------------------------------
Louisiana (2.4%)
Energy & Power Authority Power Refunding Revenue Bonds
Rodemacher Unit #2 Series 1991 (FGIC Insured) 6.75 2008 7,000,000 (g) 7,626,010
Jefferson Parish School Board Sales & Use Tax
Revenue Bonds (AMBAC Insured) 5.00 2014 3,785,000 3,580,913
New Orleans Audubon Park Commission Aquarium
Pre-Refunded Bonds Series 1988 (MBIA Insured) 7.90 2008 500,000 525,710
New Orleans International Airport Pre-Refunded
Revenue Bonds Series A (FGIC Insured) A.M.T. 8.875 2017 565,000 592,962
------------
Total 12,325,595
- ------------------------------------------------------------------------------------------------------------------------------------
Maine (0.4%)
State Turnpike Authority Turnpike Revenue Bonds
(MBIA Insured) 6.00 2018 1,790,000 1,851,522
- ------------------------------------------------------------------------------------------------------------------------------------
Maryland (0.2%)
Baltimore Refunding Revenue Bonds Wastewater
Series 1994A (FGIC Insured) 5.00 2022 1,000,000 938,390
- ------------------------------------------------------------------------------------------------------------------------------------
Massachusetts (4.7%)
Boston Water & Sewer Commission Revenue Bonds
General Subordinate Series A (BIG Insured) 6.00 2008 2,500,000 2,544,400
Health & Educational Authority Revenue Bonds
Valley Regional Health System Series C (Connie Lee Insured) 5.75 2018 1,500,000 1,498,170
Health & Educational Facilities Authority
Pre-Refunded Revenue Bonds
Lahey Clinic Medical Center (MBIA Insured) 7.625 2018 2,200,000 2,359,808
Health & Educational Facilities Authority
Pre-Refunded Revenue Bonds Northeastern University
Series 1989C (AMBAC Insured) 7.10 2006 1,000,000 1,082,520
Health & Educational Facilities Authority
Revenue Bonds Cape Cod Health System
Series A (Connie Lee Insured) 5.25 2021 4,000,000 3,726,800
Industrial Finance Agency Revenue Bonds
Brandeis University (MBIA Insured) 6.80 2019 1,700,000 1,827,262
Municipal Wholesale Electric Power Supply System
Refunding Revenue Bonds Series B (MBIA Insured) 4.75 2011 5,250,000 4,815,773
State Bay Transportation Authority Series B
(AMBAC Insured) 5.375 2025 4,000,000 3,856,400
State Water Resource Authority Revenue Bonds
Series A (MBIA Insured) 5.50 2022 2,000,000 1,928,240
------------
Total 23,639,373
- ------------------------------------------------------------------------------------------------------------------------------------
Michigan (3.8%)
Almont Community Schools
Unlimited Tax General Obligation Bonds
Series 1996 (FGIC Insured) 5.375 2022 1,900,000 1,837,357
Genesee County Sewer Disposal System No 3
Limited Tax General Obligation Bonds
Series A (AMBAC Insured) 5.50 2016 1,400,000 1,386,756
Iron Mountain School Unlimited Tax
General Obligation Refunding Bonds (AMBAC Insured) 5.125 2021 1,500,000 1,413,420
Kalamazoo Hospital Finance Authority
Refunding & Improvement Bonds
Bronson Methodist Hospital (Secondary MBIA Insured) 6.25 2012 3,000,000 3,159,390
Lincoln Park School District County of Wayne
School Building & Site General Obligation Bonds
Series 1996 (FGIC Insured) 5.90 2026 1,500,000 1,538,520
Monroe County Pollution Control Refunding Bonds
Detroit Edison Series I-B (MBIA Insured) A.M.T. 6.55 2024 5,000,000 5,411,400
Napoleon School District Unlimited General Obligation
Refunding Revenue Bonds Series 1995 (FGIC Insured) 5.50 2024 1,740,000 1,708,489
Reeths-Puffer Schools Unlimited General Obligation Bonds
Series 1996 (FGIC Insured) 5.30 2026 1,075,000 1,025,743
South Redford School District Unlimited General
Obligation Bonds Series 1996 (FGIC Insured) 5.50 2022 2,000,000 1,964,960
------------
Total 19,446,035
- ------------------------------------------------------------------------------------------------------------------------------------
Minnesota (2.0%)
Southern Minnesota Municipal Power Agency
Power Supply System Refunding Revenue Bonds
Zero Coupon (MBIA Insured) 6.12 2021 6,000,000 (e) 1,546,320
Southern Minnesota Municipal Power Agency
Power Supply System Refunding Revenue Bonds
Series A (Secondary FGIC Insured) 4.75 2016 4,250,000 3,803,325
Western Municipal Power Agency Transmission
Pre-Refunded Revenue Bonds Series 1991 (AMBAC Insured) 6.75 2016 4,500,000 4,902,435
------------
Total 10,252,080
- ------------------------------------------------------------------------------------------------------------------------------------
Mississippi (0.2%)
Alcorn County Hospital Refunding Revenue Bonds
Magnolia Regional Hospital Center (AMBAC Insured) 5.75 2013 1,000,000 1,016,740
- ------------------------------------------------------------------------------------------------------------------------------------
Missouri (0.2%)
St. Louis Parking Facility Refunding Revenue Bonds
Series 1996 (MBIA Insured) 5.375 2016 1,000,000 980,200
- ------------------------------------------------------------------------------------------------------------------------------------
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 4,429,880
State Board of Investments Payroll Tax Bonds
Worker's Compensation Program Series 1991 (MBIA Insured) 6.875 2020 4,750,000 5,205,171
------------
Total 9,635,051
- ------------------------------------------------------------------------------------------------------------------------------------
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 4,752,050
- ------------------------------------------------------------------------------------------------------------------------------------
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 (g) 5,460,550
- ------------------------------------------------------------------------------------------------------------------------------------
New Mexico (0.2%)
Santa Fe Water Revenue Bonds (AMBAC Insured) 6.30 2024 1,000,000 1,103,780
- ------------------------------------------------------------------------------------------------------------------------------------
New York (7.4%)
Dormitory Authority City University System
Consolidated 3rd Resolution Revenue Bonds
Series 1994-2 (MBIA Insured) 6.25 2019 2,500,000 2,634,350
Metropolitan Transportation Authority Commuter Facility
Service Contract Bonds Series L (AMBAC Insured) 7.50 2017 1,300,000 1,383,811
New York City General Obligation Pre-Refunded Bonds
Series A (FGIC Insured) 8.125 2007 1,145,000 1,204,620
New York City Municipal Water Finance Authority
Water & Sewer System Revenue Bonds Series A
(Secondary MBIA Insured) 5.50 2023 5,000,000 4,910,950
State Dormitory Authority Insured College
Revenue Bonds Series 1996 (AMBAC Insured) 5.375 2016 700,000 683,886
State Dormitory Authority State University Education Facility
Revenue Bonds (Secondary AMBAC Insured) 5.25 2015 2,700,000 2,646,837
State Energy Resource & Development Authority
Gas Facility Revenue Bonds Brooklyn Union Gas
(MBIA Insured) A.M.T. 5.60 2025 4,500,000 4,326,750
State Energy Resource & Development Authority
Pollution Control Bonds Series 1987A (MBIA Insured) 6.15 2026 3,000,000 3,074,610
State Energy Resource & Development Authority
Pollution Control Refunding Revenue Bonds
Rochester Gas & Electric (MBIA Insured) A.M.T. 6.50 2032 4,000,000 4,270,320
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 10,904,415
State Urban Development Correctional Facilities
Pre-Refunded Revenue Bonds Series 1 (FSA Insured) 7.50 2020 1,500,000 1,663,755
------------
Total 37,704,304
- ------------------------------------------------------------------------------------------------------------------------------------
North Carolina (2.8%)
Charlotte Pre-Refunded Certificates of Participation
Convention Facility Series 1991 (AMBAC Insured) 6.75 2021 3,150,000 3,529,260
Concord Certificate of Participation Series B (MBIA Insured) 5.75 2016 1,480,000 1,484,840
Fayetteville Financial Corporation Installment Payment
Revenue Bonds Series 1996 (MBIA Insured) 5.625 2014-18 665,000 664,063
Medical Care Community Hospital Revenue Bonds
Series 1996 (AMBAC Insured) 5.375 2019 1,000,000 969,920
Pasquotank County Certificates of Participation
Elizabeth Pasquotank Public School
Series 1995 (MBIA Insured) 5.00 2020 5,000,000 4,641,750
Randolph County Certificates of Participation
Series 1995 (MBIA Insured) 5.30 2015 3,000,000 2,920,770
------------
Total 14,210,603
- ------------------------------------------------------------------------------------------------------------------------------------
Ohio (1.6%)
Lorain County Hospital Facilities Refunding Revenue Bonds
EMH Regional Medical Center Series 1995 (AMBAC Insured) 5.375 2021 2,000,000 1,939,860
Lucas County Hospital Refunding Revenue Bonds
St. Vincent Medical Center Series 1993C (MBIA Insured) 5.25 2022 1,725,000 1,620,965
Montgomery County Hospital Facility
Refunding Revenue & Improvement Bonds
Kettering Medical Center (MBIA Insured) 5.50 2026 2,500,000 2,435,925
North Olmsted Limited General Obligation Bonds
Series 1996 (AMBAC Insured) 5.00 2016 1,000,000 942,200
University of Cincinnati Certificate of Participation
Series 1996 (MBIA Insured) 5.125 2024 1,000,000 943,130
------------
Total 7,882,080
- ------------------------------------------------------------------------------------------------------------------------------------
Oklahoma (1.4%)
McAlester Public Works Authority Oklahoma Improvement
Refunding Revenue Bonds (FSA Insured) 5.25 2017-18 2,470,000 2,409,028
Moore Public Works Authority Refunding Revenue Bonds
Series 1989 (AMBAC Insured) 7.60 2006 2,700,000 2,940,111
Tulsa International Airport General Revenue Bonds
Consolidated Fixed Rate Series 1989 (MBIA Insured) 7.50 2008 1,500,000 1,558,380
------------
Total 6,907,519
- ------------------------------------------------------------------------------------------------------------------------------------
Oregon (0.9%)
Port of Portland Airport Revenue Bonds
Series 1996-11 (FGIC Insured) A.M.T. 5.625 2026 2,500,000 2,430,625
State Department of Administration Services
Certificate of Participation Series 1996B (MBIA Insured) 5.625 2020 2,050,000 2,048,483
------------
Total 4,479,108
- ------------------------------------------------------------------------------------------------------------------------------------
Pennsylvania (3.7%)
Allegheny County Airport Revenue Bonds
Pittsburgh International Series D (FGIC Insured) A.M.T. 7.75 2019 2,300,000 2,375,256
Allegheny County Hospital Development Authority
Hospital Revenue Bonds Series 1996 (AMBAC Insured) 5.625 2026 2,025,000 1,989,036
Pittsburgh Water & Sewer Authority System
Pre-Refunded Revenue Bonds Series 1991A (FGIC Insured) 6.50 2014 10,000,000 11,026,300
Robinson Township Municipal Authority Water & Sewer
Revenue Bonds (FGIC Insured) 6.00 2019 2,200,000 2,253,416
Turnpike Commission Pre-Refunded Revenue Bonds
Series 1989K (MBIA Insured) 7.50 2012 1,000,000 1,107,660
------------
Total 18,751,668
- ------------------------------------------------------------------------------------------------------------------------------------
Rhode Island (0.6%)
Health & Education Building Corporation Higher Education
Facility Revenue Bonds Series 1996 (MBIA Insured) 5.625 2026 3,000,000 2,934,420
- ------------------------------------------------------------------------------------------------------------------------------------
South Carolina (0.5%)
Greenville Memorial Auditorium District Public Facilities
Corporation Certificate of Participation BI-LO Center
Series 1996B (AMBAC Insured) 5.75 2016 1,250,000 1,258,075
Piedmont Municipal Power Agency Electric
Refunding Revenue Bonds (FGIC Insured) 6.25 2021 1,000,000 1,096,450
------------
Total 2,354,525
- ------------------------------------------------------------------------------------------------------------------------------------
Tennessee (2.0%)
Health Education & Housing Facility Shelby Hospital
Revenue Bonds Methodist Health Systems Series 1995
(MBIA Insured) 5.25 2015 1,000,000 965,440
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 3,865,275
Knox County Health Educational & Housing Facilities
Hospital Refunding Revenue & Improvement Bonds
(Connie Lee Insured) 5.50 2017 3,500,000 3,371,340
Metropolitan Government Nashville & Davidson County
Sports Authority Public Improvement Revenue Bonds
Series 1996 (AMBAC Insured) 5.75 2017 2,160,000 2,187,194
------------
Total 10,389,249
- ------------------------------------------------------------------------------------------------------------------------------------
Texas (17.1%)
Austin Airport System Prior Lien Revenue Bonds Series 1995A
(MBIA Insured) A.M.T. 6.125 2025 3,000,000 3,102,030
Austin Combined Utilities System Refunding Revenue Bonds
Series 1994 (FGIC Insured) 5.75 2024 8,500,000 8,542,075
Austin Combined Utilities System Revenue Bonds
Series 1987 (BIG Insured) 8.625 2012-17 1,250,000 1,491,562
Austin Combined Utilities System Capital Appreciation
Refunding Revenue Bonds Series 1994 Zero Coupon (FGIC Insured) 5.83 2017 5,900,000 (e) 1,837,083
Bexar County Health Facility Development Hospital
Revenue Bonds San Antonio Baptist Memorial Hospital System
Series 1994 (MBIA Insured) 6.75 2019 5,000,000 5,543,150
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 16,109,787
Colorado River Municipal Water District Water System
Pre-Refunded Revenue Bonds Series A (AMBAC Insured) 6.625 2021 8,900,000 9,620,811
Harris County Health Facilities Development Hospital
Revenue Bonds State Children's Hospital
Series 1989A (MBIA Insured) 7.00 2019 1,500,000 1,635,045
Harris County Public Facilities Corporation
Detention Facility Mortgage Pre-Refunded Revenue Bonds
(MBIA Insured) 7.80 2011 1,000,000 1,090,490
Harris County Toll Road Senior Lien
Pre-Refunded Revenue Bonds Series A (AMBAC Insured) 6.50 2017 8,170,000 9,108,243
League City General Obligation
Refunding & Improvement Bonds
Series 1990 (FGIC Insured) 6.25 2013 2,500,000 2,626,675
Matagorda County Navigation District #1
Collateralized Pollution Control Revenue Bond
Central Power & Light Series 1984A (AMBAC Insured) 7.50 2014 2,500,000 2,777,725
Matagorda County Navigation District #1 Pollution Control
Refunding Revenue Bonds Houston Light & Power
Series E (FGIC Insured) 7.20 2018 2,150,000 2,340,963
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 2,196,720
Municipal Power Agency Refunding Revenue Bonds
Series 1991A (AMBAC Insured) 6.75 2012 5,250,000 5,773,425
North Central State Health Facilities Pre-Refunded Bonds
Children's Medical Center (BIG Insured) 7.875 2018 2,000,000 2,081,640
Turnpike Authority Dallas North Tollway
Pre-Refunded Revenue Bonds Series 1990
(AMBAC Insured) 6.00 2020 5,000,000 5,190,300
Turnpike Authority Dallas North Tollway Revenue Bonds
Addison Airport Toll Tunnel Series 1994 (FGIC Insured) 6.60 2023 2,000,000 2,212,040
University of Houston System Consolidated
Pre-Refunded Revenue Bonds Series 1990A (MBIA Insured) 7.40 2006 3,160,000 3,446,707
------------
Total 86,726,471
- ------------------------------------------------------------------------------------------------------------------------------------
Utah (0.4%)
Intermountain Power Authority Power Supply
Pre-Refunded Revenue Bonds Series 1987C (AMBAC Insured) 8.375 2012 900,000 (g) 939,168
Salt Lake City-County Airport Pre-Refunded Revenue Bonds
Series 1989 (FGIC Insured) A.M.T. 7.875 2018 1,000,000 1,057,340
------------
Total 1,996,508
- ------------------------------------------------------------------------------------------------------------------------------------
Virginia (3.7%)
Chesapeake Industrial Development Authority Public
Facilities Lease Revenue Bonds Series 1996 (MBIA Insured) 5.25 2017 1,300,000 1,240,434
Hanover County Industrial Development Authority
Memorial Regional Medical Center (MBIA Insured) 5.50 2025 3,800,000 3,682,656
Loudoun County Sanitation Authority Waste & Sewer
Refunding Revenue Bonds (MBIA Insured) 5.25 2030 1,435,000 1,339,443
Portsmouth Redevelopment Housing Authority Multi-family Housing
Refunding Revenue Bonds (FNMA Insured) 6.05 2008 5,780,000 6,028,367
Upper Occoquan Sewer Authority Regional Sewer
Revenue Bonds Series A (MBIA Insured) 4.75 2029 4,500,000 3,924,405
William County Lease Certificate of Participation Bonds
(MBIA Insured) 5.50 2020 2,590,000 2,532,606
------------
Total 18,747,911
- ------------------------------------------------------------------------------------------------------------------------------------
Washington (1.8%)
Public Power Supply System Non-Refunded Revenue Bonds
Nuclear Project #1 Series A (MBIA Insured) 7.50 2015 1,195,000 1,298,487
Public Power Supply System Pre-Refunded Revenue Bonds
Nuclear Project #1 Series A (MBIA Insured) 7.50 2015 1,805,000 1,975,699
Public Power Supply System Pre-Refunded Revenue Bonds
Nuclear Project #3 Series 1989A (BIG Insured) 7.25 2016 1,000,000 1,090,950
Public Power Supply System Refunding Revenue Bonds
Nuclear Project #3 Series 1989A (BIG Insured) 6.00 2018 3,000,000 3,016,530
Spokane Regional Solid Waste Management System
Revenue Bonds Series 1989 (AMBAC Insured) A.M.T. 7.75 2011 300,000 323,280
Spokane Regional Solid Waste Management System
Revenue Bonds Series 1989 (AMBAC Insured) A.M.T. 7.875 2007 1,250,000 1,349,950
------------
Total 9,054,896
- ------------------------------------------------------------------------------------------------------------------------------------
West Virginia (2.7%)
Board of Regents Registration Fee Pre-Refunded Revenue Bonds
Series 1989B (MBIA Insured) 7.40 2009 2,000,000 2,175,900
School Building Authority Capital Improvement
Pre-Refunded Revenue Bonds (MBIA Insured) 7.25 2015 3,415,000 3,796,797
School Building Authority Capital Improvement Revenue Bonds
Series 1990B (MBIA Insured) 6.75 2017 5,000,000 5,419,000
State Parkway Economic Development & Tourism Authority Parkway
Pre-Refunded Revenue Bonds Series 1989 (FGIC Insured) 7.125 2019 2,000,000 2,174,020
------------
Total 13,565,717
- ------------------------------------------------------------------------------------------------------------------------------------
Wisconsin (0.4%)
Center District Sales Tax Appreciation Senior Dedicated Bonds
Series A Zero Coupon (MBIA Insured) 6.03 2017 7,400,000 (e) 2,265,066
- ------------------------------------------------------------------------------------------------------------------------------------
Total municipal bonds
(Cost: $462,160,624) $500,387,270
- ------------------------------------------------------------------------------------------------------------------------------------
Total investments in securities
(Cost: $462,160,624)(h) $500,387,270
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
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 12-31-96 06-30-96
- --------------------------------------------------------------------------------
AAA 99% 100%
AA -- --
A -- --
BBB -- --
BB and below -- --
Non-rated 1 --
Total 100% 100%
(c) The following abbreviations are used in portfolio descriptions to
identify the insurer of the issue:
AMBAC -- American Municipal Bond Association Corporation
BIG -- Bond Investors Guarantee
CGIC -- Capital Guaranty Insurance Company
FGIC -- Financial Guarantee Insurance Corporation
FNMA -- Federal National Mortgage Association
FSA -- Financial Security Assurance
MBIA -- Municipal Bond Investors Assurance
(d) The following abbreviations are used in the portfolio descriptions:
A.M.T. -- Alternative Minimum Tax -- As of Dec. 31, 1996, the value of
securities subject to alternative minimum tax represented 19.2% 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 Dec. 31, 1996. Inverse floaters in the aggregate
represent 2.3% of the Fund's net assets as of Dec. 31, 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
Sales contracts
Municipal Bonds Index March 1997 $20,000,000
(h) At Dec. 31, 1996, the cost of securities for federal income tax purposes was
approximately $461,836,000 and the approximate aggregate gross unrealized
appreciation and depreciation based on that cost was:
Unrealized appreciation $38,737,000
Unrealized depreciation (186,000)
----------------------------------------------------------------------------
Net unrealized appreciation $38,551,000
----------------------------------------------------------------------------
<PAGE>
Board members and officers
Board members and officers of the Fund
- -----------------------------------------------------------------
President and interested board member
William R. Pearce
President and director, Board Services Corporation (provides
administrative services to boards including the boards of the
IDS and IDS Life funds and Master Trust portfolios).
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Independent board members
H. Brewster Atwater Jr.
Former chairman and chief executive officer, General Mills, Inc.
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 Readers's Digest
Association, Inc.
Alan K. Simpson
Former United States senator for Wyoming.
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.
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Officers who also are officers and/or employees of AEFC
Peter J. Anderson
Senior vice president, AEFC. Vice-president -- Investments for the Fund.
Melinda S. Urion
Senior vice president and chief financial officer, AEFC. Treasurer
for the Fund.
- -------------------------------------------------------------------
Other officer
Leslie L. Ogg
Vice president, treasurer and corporate secretary of Board Services
Corporation. Vice president, general counsel and secretary for the Fund.
Refer to the SAI for the board members' and officers' biographies.
IDS mutual funds
Global/International funds
Funds in this group seek capital growth and/or income by investing primarily in
foreign securities. Foreign investments may be subject to currency fluctuations
and political and economic risks of the countries in which the investments are
made. They are high risk mutual funds with a potential for high reward.
IDS Emerging Markets Fund
Invests in a Portfolio comprised primarily of stocks of companies in developing
countries throughout the world that are believed to offer growth potential.
Seeks to provide long-term growth of capital.
(icon of) world globe
IDS Global Growth Fund
Invests in a Portfolio comprised primarily of stocks of companies throughout the
world that are positioned to meet market needs in a changing world economy.
These companies offer above-average potential for long-term growth.
(icon of) world
IDS International Fund
Invests primarily in common stocks of foreign companies that offer potential for
superior growth. The Fund may invest up to 20% of its assets in the U.S. market.
(icon of) three flags
IDS Global Balanced Fund
Invests in stocks-and bonds in, for the most part, major markets throughout the
world, including the U.S. Seeks to provide a balance of growth of capital and
current income.
(icon of) scale of globes
IDS Global Bond Fund
Invests in a Portfolio comprised primarily of debt securities of U.S. and
foreign issuers to seek high total return through income and growth of capital.
(icon of) globe
Growth funds
Funds in this group seek capital growth, primarily from common stocks. They are
high risk mutual funds with a potential for high reward.
IDS Precious Metals Fund
Invests primarily in the securities of foreign or domestic companies that
explore for, mine and process or distribute gold and other precious metals. A
highly aggressive and speculative fund that seeks long-term growth of capital.
(icon of) cart of precious gems
IDS Discovery Fund
Invests in small- and medium-size, growth-oriented companies emphasizing
technological innovation and productivity enhancement.
Buys and holds larger growth-oriented stocks.
(icon of) ship
IDS Small Company Index Fund
Invests in all or a representative group of the equity securities comprising the
S&P SmallCap 600 Index, as it strives to provide long-term capital appreciation.
(icon of) building
IDS Strategy Aggressive Fund
Invests primarily in common stocks of companies that are selected for their
potential for above-average growth. Above-average means that their growth
potential is better, in the opinion of the portfolio's investment manager, than
the Standard & Poor's Corporation (S&P) 500 Stock Index.
(icon of) chess piece
IDS Research Opportunities Fund
Invests in a Portfolio comprised primarily of equity securities of companies
included in the S&P 500 Index that are believed to have strong growth potential.
The Portfolio is managed using a research methodology by the Research Department
of AEFC. Goal is long-term appreciation.
(icon of) magnifying glass
IDS Growth Fund
Invests in a Portfolio comprised primarily of companies that have above-average
potential for long-term growth as a result of new management, marketing
opportunities or technological superiority.
(icon of) flower
IDS New Dimensions Fund
Invests in a Portfolio comprised primarily of companies with significant growth
potential due to superiority in technology, marketing or management. The Fund
frequently changes its industry mix.
(icon of) dimension
IDS Progressive Fund
Invests primarily in undervalued common stocks. The Fund holds stocks for the
long term with the goal of capital growth.
(icon of) shooting star
Growth and income funds
These funds focus on securities of medium to large, well-established companies
that offer long-term growth of capital and reasonable income from dividends and
interest.
IDS Equity Select Fund
Invests primarily in a combination of moderate growth stocks, higher-yielding
equities and bonds. Seeks growth of capital and income.
(icon of) three pine trees
IDS Blue Chip Advantage Fund
Invests in selected stocks from a major market index. Securities purchased are
those recommended by our research analysts as the best from each industry
represented on the index. Offers potential for long-term growth as well as
dividend income.
(icon of) ribbon
IDS Managed Allocation Fund
Invests in a Portfolio comprised primarily of U.S. equity securities, U.S. and
foreign debt securities, foreign equity securities and money market instruments.
The Fund provides diversification among these major investment categories and
has a target mix that represents the way the Fund's investments will be
allocated over the long term. Seeks maximum total return.
(icon of) spinning toy
IDS Stock Fund
Invests in a Portfolio comprised primarily of common stocks of companies
representing many sectors of the economy. Seeks current income and growth of
capital.
(icon of) building with columns
IDS Equity Value Fund
Invests primarily in undervalued common stocks that offer potential for growth
of capital and income.
(icon of) three growing flowers
IDS Utilities Income Fund
Invests primarily in the stocks of public utility companies to seek high current
income and growth of income and capital with reduced volatility.
(icon of) light bulb
IDS Diversified Equity Income Fund
Invests in a Portfolio comprised primarily in high-yielding common stocks to
seek high current income and, secondarily, to benefit from the growth potential
offered by stock investments.
(icon of) two puzzle pieces
IDS Mutual
Invests in a Portfolio which seeks to balance between common stocks and senior
securities (preferred stocks and bonds). Seeks a balance of growth of capital
and current income.
(icon of) scale of justice
Income funds
The funds in this group invest their assets primarily in corporate bonds or
government securities to seek interest income. Secondary objective is capital
growth. Risk varies by bond quality.
IDS Extra Income Fund
Invests in a Portfolio comprised mainly in long-term, high-yielding corporate
fixed-income securities in the lower rated, higher risk bond categories to seek
high current income. Secondary objective is capital growth.
(icon of) two coins
IDS Bond Fund
Invests mainly in corporate bonds, at least 50% in the higher rated, lower risk
bond categories, or the equivalent, and in government bonds.
(icon of) Greek column
IDS Selective Fund
Invests in a Portfolio comprised primarily of high-quality corporate bonds and
other highly rated debt instruments including government securities and
short-term investments. Seeks current income and preservation of capital.
(icon of) skyline
IDS Federal Income Fund
Invests in a Portfolio comprised primarily of securities issued or guaranteed as
to the timely payment of principal and interest by the U.S. government, its
agencies and instrumentalities. Seeks a high level of current income and safety
of principal consistent with its type of investments.
(icon of) shield with eagle head
Tax-exempt income funds
These funds provide tax-free income by investing in municipal bonds. The income
is generally free from federal income tax, but a portion of the income may be
subject to state and local taxes. Risk varies by bond quality.
IDS Tax-Exempt Bond Fund
Invests mainly in bonds and notes of state or local government units, with at
least 75% in the four highest rated, lowest risk bond categories.
(icon of) shield with Greek column
IDS Insured Tax-Exempt Fund
Invests primarily in municipal securities that are insured as to the timely
payment of principal and interest. The insurance feature minimizes credit risk
of the Fund but does not guarantee the market value of the Fund's shares.
(icon of) shield with star
IDS State Tax-Exempt Funds
(CA, MA, MI, MN, NY, OH)
Invests primarily in high- and medium-grade municipal securities to provide
income to residents of each respective state that is exempt from federal, state
and local income taxes. (New York is the only state that is exempt at the local
level.)
(icon of) shield with U.S. enclosed
IDS High Yield Tax-Exempt Fund
Invests in a Portfolio comprised primarily of medium- and lower-quality
municipal bonds and notes. Lower-quality securities generally involve greater
risk of principal and income.
(icon of) shield with basket of apples enclosed
IDS Intermediate Tax-Exempt Fund
Invests in mainly investment-grade bonds and other debt securities with
intermediate-term maturities issued by state and local government units. Goal is
to seek a high level of current income exempt from federal taxes.
(icon of) shield with tree enclosed
Money market funds
These money market funds have three main goals: conservation of capital,
constant liquidity and the highest possible current income consistent with these
objectives. An investment in these funds is neither insured nor guaranteed by
the U.S. government, and there can be no assurance that these funds will be able
to maintain a stable net asset value of $1.00 per share. Very limited risk.
IDS Cash Management Fund
Invests in such money market securities as high quality commercial paper,
bankers' acceptances, certificates of deposit (CDs) and other bank securities.
(icon of) piggy bank
IDS Tax-Free Money Fund
Invests primarily in short-term bonds and notes issued by state and local
governments to seek high current income exempt from federal income taxes.
(icon of) shield with piggy bank enclosed
PAGE
Quick telephone reference
American Express Telephone Transaction Service
Redemptions and exchanges, dividend payments or reinvestments and
automatic payment arrangements
<PAGE>
National/Minnesota:
800-437-3133
Mpls./St. Paul area:
671-3800
American Express Shareholder Service
Fund performance, objectives and account inquiries
612-671-3733
TTY Service
For the hearing impaired
800-846-4852
American Express Infoline
Automated account information (TouchTone(R) 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
AMERICAN EXPRESS FINANCIAL ADVISORS
IDS Insured Tax-Exempt Fund
IDS Tower 10
Minneapolis, MN 55440-0010
<PAGE>
