1997 Annual Report
IDS Insured Tax-Exempt Fund
(prospectus enclosed)
(Icon of) star enclosed in shield
The goals of IDS Insured Tax-Exempt Fund, a part of IDS Special Tax-Exempt
Series Trust, are to provide a high level of income generally exempt from
federal income tax and preservation of shareholders' capital. The Fund invests
primarily in securities that are insured as to their scheduled payment of
principal and interest for at least as long as the securities are held in the
Fund. Insured securities fluctuate in market value as interest rates change.
(This annual report includes a prospectus that describes in detail the Fund's
objective, investment policies, risks, sales charges, fees and other matters of
interest. Please read the prospectus carefully before you invest or send money.)
AMERICAN
EXPRESS
Financial
Advisors
Distributed by American Express Financial Advisors Inc.
<PAGE>
(Icon of) star enclosed in shield
No-default insurance
Any investment involves risks. For a municipal bond investor, there's the risk
that the bond issuer could default on its payments. But there are bonds that are
insured against default, and these are the ones that Insured Tax-Exempt Fund
invests in. While this doesn't mean that shareholders are insulated from
fluctuations in bond market values, it does ensure that the Fund receives
principal and interest payments when they are due. Along the way, shareholders
enjoy regular income that is generally free from federal income tax.
<PAGE>
Contents
(Icon of) One open book inside of another.
The purpose of this annual report is to tell investors how the Fund performed.
The prospectus, which is bound into the middle of this annual report, describes
the Fund in detail.
1997 annual report
From the president 4
From the portfolio manager 4
The Fund's ten largest holdings 6
Making the most of the Fund 7
The Fund's long-term performance 8
Independent auditor's report 9
Financial statements 10
Notes to financial statements 13
Investments in securities 22
IDS mutual funds 32
Federal income tax information 36
1997 prospectus
The Fund in brief 3p
Goals 3p
Investment policies and risks 3p
Manager and distributor 3p
Portfolio manager 3p
Alternative purchase arrangements 4p
Sales charge and Fund expenses 5p
Performance 7p
Financial highlights 7p
Total returns 9p
Yield 11p
Investment policies and risks 12p
Facts about investments and their risks 12p
Alternative investment option 16p
Valuing Fund shares 17p
How to purchase, exchange or redeem shares 18p
Alternative purchase arrangements 18p
How to purchase shares 21p
How to exchange shares 23p
How to redeem shares 23p
Reductions and waivers of the sales charge 28p
Special shareholder services 32p
Services 32p
Quick telephone reference 32p
Distributions and taxes 33p
Dividend and capital gain distributions 33p
Reinvestments 34p
Taxes 35p
How to determine the correct TIN 37p
How the Fund is organized 38p
Shares 38p
Voting rights 38p
Shareholder meetings 38p
Board members and officers 38p
Investment manager 40p
Administrator and transfer agent 40p
Distributor 41p
About American Express Financial Corporation 42p
General Information 42p
Appendices 43p
1997 Federal tax information 43p
Descriptions of derivative instruments 45p
(This annual report is not part of the prospectus.)
<PAGE>
To our shareholders
(Photo of) William R. Pearce
President of the Fund
(Photo of) Paul Hylle
Portfolio manager
From the president
If you're an experienced investor, you know that the past few 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 more important if there's a major change in your financial
situation or in the financial markets.
(signature of) W. R. Pearce
William R. Pearce
From the portfolio manager
Despite considerable volatility in the fixed-income market, municipal bonds
fared relatively well during the past fiscal year. Reflecting the generally
positive environment, IDS Insured Tax-Exempt Fund generated a total return
(including net asset value change and dividends) of 7.1% for Class A shares for
the July 1996 through June 1997 period.
After a sluggish summer, bonds were energized last fall by ongoing reports of
stable, low inflation and moderate economic growth. Against that backdrop,
long-term interest began falling, driving up bond prices in the process. The
rally stalled out over the winter, however, then turned into a retreat in the
spring as reports of stronger-than-expected economic growth reignited inflation
fears and let to a rise in long-term interest rates. But the period ended on an
up note, as benign economic and inflation data again enticed investors back into
the market, allowing rates to come back down.
Favorable supply/demand situation
The Fund's performance roughly tracked that of
(This annual report is not part of the prospectus.)
<PAGE>
the broad bond market -- gaining ground last fall, slipping back in the spring
and rebounding in May and June. To the Fund's benefit, municipal bonds
outperformed Treasury bonds for the year as a whole, thanks chiefly to a
favorable supply/demand situation. A substantial number of municipal bonds were
"called" by issuers (taken out of the market because issuers paid off the
principal ahead of the bond's maturity dates), while the number of new bonds
coming to market was comparatively modest. The result was consistent demand and
less supply - a positive for security prices.
The flip side of the call situation was that it slightly eroded the Fund's
dividend, which resulted from the fact that newly issued bonds didn't pay as
much interest as the older bonds that were called away. Still, measured against
comparable municipal bond funds, this Fund's dividend held up better than most.
Also tempering performance a bit was the modest amount of investment capital
flowing into the municipal bond market, especially compared to the enormous
inflows into the stock market. This condition has persisted for more than three
years, limiting the net-asset-value appreciation the Fund might otherwise have
enjoyed.
A conservative tack
Given that the economy continues to expand, I think it's increasingly likely
that we'll see somewhat higher inflation in the new fiscal year. Ultimately, I
expect that will lead to moderately higher long-term interest rates, which may
mean a more difficult environment for bonds, including municipals. In light of
that possibility, I have structured the Fund more defensively, which includes a
shorter duration -- a strategy that helps cushion the Fund's net asset value
when interest rates rise and, in general, lessens its volatility. In addition, I
am concentrating on maintaining the Fund's dividend, which I expect to provide
most of the Fund's return in the months ahead.
(signature of ) Paul B. Hylle
Paul Hylle
Class A
12-month performance
(All figures per share)
Net asset value (NAV)
- ---------------------------- ---------------
June 30, 1997 $5.51
- ---------------------------- ---------------
June 30, 1996 $5.43
- ---------------------------- ---------------
Increase $0.08
- ---------------------------- ---------------
Distributions
July 1, 1996 - June 30, 1997
- ---------------------------- ---------------
From income $0.29
- ---------------------------- ---------------
From capital gains $ --
- ---------------------------- ---------------
Total distributions $0.29
- ---------------------------- ---------------
Total return* +7.1%**
- ---------------------------- ---------------
Class B
12-month performance
(All figures per share)
Net asset value (NAV)
- ---------------------------- ---------------
June 30, 1997 $5.51
- ---------------------------- ---------------
June 30, 1996 $5.43
- ---------------------------- ---------------
Increase $0.08
- ---------------------------- ---------------
Distributions
July 1, 1996 - June 30, 1997
- ---------------------------- ---------------
From income $0.25
- ---------------------------- ---------------
From capital gains $ --
- ---------------------------- ---------------
Total distributions $0.25
- ---------------------------- ---------------
Total return* +6.3%**
- ---------------------------- ---------------
Class Y
12-month performance
(All figures per share)
Net asset value (NAV)
- ---------------------------- ---------------
June 30, 1997 $5.52
- ---------------------------- ---------------
June 30, 1996 $5.44
- ---------------------------- ---------------
Increase $0.08
- ---------------------------- ---------------
Distributions
July 1, 1996 - June 30, 1997
- ---------------------------- ---------------
From income $0.30
- ---------------------------- ---------------
From capital gains $ --
- ---------------------------- ---------------
Total distributions $0.30
- ---------------------------- ---------------
Total return* +7.3%**
- ---------------------------- ---------------
*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.
(This annual report is not part of the prospectus.)
<PAGE>
The Fund's ten largest holdings
(pie chart) The ten holdings listed here make up 20.12% of the Fund's net assets
<TABLE>
<CAPTION>
Percent Value
(of Fund's net assets) (as of June 30, 1997)
<S> <C> <C>
Brazos River Texas Authority Collateralized Pollution Control
Refunding Revenue bonds Texas Utility Electric
Series 1992C A.M.T
6.70% 2022 3.27% $16,129,651
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 2.23 11,016,403
Pittsburgh Pennsylvania Water & Sewer Authority System
Pre-Refunded Revenue Bonds
Series 1991A
6.50% 2014 2.22 10,966,100
District of Columbia Metropolitan Washington Airports Authority Airport System
Revenue Bonds Series 1992A A.M.T.
6.625% 2019 2.06 10,168,513
Colorado River Texas Municipal Water District
Water System Pre-Refunded Revenue Bonds Series A
6.625% 2021 1.94 9,554,239
San Diego County California Certificate of Participation
Regional Authority Bonds Mt. Tower
Inverse Floater Series 1991
6.36% 2019 1.91 9,443,700
Harris County Texas Toll Road Senior Lien
Pre-Refunded Revenue Bonds Series A
6.50% 2017 1.83 9,055,873
Austin Texas Combined Utilities System
Refunding Revenue Bonds Series 1994
5.75% 2024 1.73 8,544,965
Louisiana Energy & Power Authority Power
Refunding Revenue Bonds Rodemacher Unit #2
Series 1991
6.75% 2008 1.54 7,586,950
Houston Texas Water & Sewer System Junior Lien
Refunding Revenue Bonds Series 1997A
5.25% 2022 1.39 6,879,133
</TABLE>
Note: The Fund's investment income from certain securities may be subject to
the Alternative Minimum Tax (A.M.T.).
(This annual report is not part of the prospectus.)
<PAGE>
Making the most of the Fund
Build your assets systematically
One of the best ways to invest in the Fund is by dollar-cost averaging -- a
time-tested strategy that can make market fluctuations work for you. To
dollar-cost average, simply invest a fixed amount of money regularly. You'll
automatically buy more shares when the Fund's share price is low, fewer shares
when it is high.
Using this strategy does not ensure a profit or avoid a loss if the market
declines, and requires that you be able to keep on investing on a regular basis,
even when the price of your shares falls or the market declines. Investing in
this manner can be an effective way to accumulate shares to meet your long-term
goals.
How dollar-cost averaging works
Month Amount Per-share Number of shares purchased
invested market price
Jan $100 $20 5.00 XXXXX
Feb 100 18 5.56 XXXXXx
March 100 17 5.88 XXXXXx
April 100 15 6.67 XXXXXXx
May 100 16 6.25 XXXXXXx
June 100 18 5.56 XXXXXx
July 100 17 5.88 XXXXXx
Aug 100 19 5.26 XXXXXx
Sept 100 21 4.76 XXXXx
Oct 100 20 5.00 XXXXX
(footnotes to table) By investing an equal number of dollars each month...
(arrow in table pointing to April) you automatically buy more shares when the
per share market price is low...
(arrow in table pointing to Sept) and fewer shares when the per share market
price is high.
You have paid an average price of only $17.91 per share over the 10 months,
while the average market price actually was $18.10.
(This annual report is not part of the prospectus.)
<PAGE>
The Fund's long-term performance
Three ways to benefit from a mutual fund:
your shares increase in value when the Fund's investments do well
you receive capital gains when the gains on investments sold by the Fund
exceed losses you receive income when the Fund's stock dividends, interest
and short-term gains exceed its
expenses.
All three make up your total return. And you potentially can increase your
investment if, like most investors, you reinvest your dividends and capital gain
distributions to buy additional shares of the Fund or another Fund.
How your $10,000 has grown in IDS Insured Tax-Exempt Fund
$20,015
Insured Tax-Exempt Fund
Class A
$20,000
Lehman Brothers Total Return Municipal Bond Index
$10,000
$9,500
'87 '88 '89 '90 '91 '92 '93 '94 '95 '96 '97
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
- ------------------------------------------------- -------------- ------------- -------------- --------------
Average annual total return
(as of June 30, 1997)
1 year Since 5 years 10 years
inception
Class A +1.72% --% 5.25% +7.18%
Class B +2.26% +3.65%* --% --%
Class Y +7.25% +6.19%* --% --%
*Inception date was March 20, 1995.
- ------------------------------------------------- -------------- ------------- -------------- --------------
</TABLE>
(footnotes to table) Assumes: o Holding period from 7/1/87 to 6/30/97.
o Returns do not reflect taxes payable on distributions.
o Reinvestment of all income and capital gain distributions for the Fund, with
a value of $8,953. Also see "Performance" in the Fund's current prospectus.
(footnotes to table) The Lehman Brothers Total Return Municipal Bond Index is an
unmanaged list of municipal bonds used as a general measure of market
performance.
On the graph above you can see how the Fund's total return compared to a widely
cited performance index, the Lehman Brothers Total Return Municipal Bond Index.
In comparing Insured Tax-Exempt Fund (Class A) to this index, you should take
into account the fact that the Fund's performance reflects the maximum sales
charge of 5%, while such charges are not reflected in the performance of the
index.
Your investment and return values fluctuate so that your shares, when redeemed,
may be worth more or less than the original cost. Average annual total return
figures reflect the impact of the applicable sales charge up to a maximum of 5%.
This was a period of widely fluctuating security prices. Past performance is no
guarantee of future results.
(This annual report is not part of the prospectus.)
<PAGE>
Independent auditor's report
The board and shareholders
IDS Special Tax-Exempt Series Trust:
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments in securities, of IDS Insured Tax-Exempt Fund (a
fund within IDS Special Tax-Exempt Series Trust) as of June 30, 1997, and the
related statement of operations for the year then ended and the statement 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 eight-year period
ended June 30, 1997, the six months ended June 30, 1989 and each of the years in
the two-year period ended December 31, 1988. 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, 1997, and the results of its operations, changes in its net assets 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 1, 1997
(This annual report is not part of the prospectus.)
<PAGE>
<TABLE>
<CAPTION>
Financial statements
Statement of assets and liabilities
IDS Insured Tax-Exempt Fund
June 30, 1997
Assets
<S> <C>
Investments in securities, at value (Note 1)
(identified cost $454,600,456) $490,904,655
Accrued interest receivable 8,662,530
Receivable for investment securities sold 62,500
------
Total assets 499,629,685
-----------
Liabilities
Disbursements in excess of cash on demand deposit 175,587
Dividends payable to shareholders 347,694
Payable for investment securities purchased 5,332,884
Accrued investment management services fee 18,269
Accrued distribution fee 1,931
Accrued service fee 7,221
Accrued transfer agency fee 1,819
Accrued administrative services fee 1,624
Other accrued expenses 47,640
------
Total liabilities 5,934,669
---------
Net assets applicable to outstanding shares $493,695,016
============
Represented by
Shares of beneficial interest-- $.01 par value, unlimited number of shares authorized $ 896,194
Additional paid-in capital 469,997,454
Undistributed net investment income 438,514
Accumulated net realized gain (loss) (Notes 1 and 6) (14,063,415)
Unrealized appreciation (depreciation) of investments (Note 5) 36,426,269
- ----------
Total-- representing net assets applicable to outstanding shares $493,695,016
============
Net assets applicable to outstanding shares: Class A $462,300,946
Class B $ 31,392,921
Class Y $ 1,149
Net asset value per share of outstanding shares: Class A shares 83,920,040 $ 5.51
Class B shares 5,699,121 $ 5.51
Class Y shares 208 $ 5.52
See accompanying notes to financial statements.
(This annual report is not part of the prospectus.)
<PAGE>
Statement of operations
IDS Insured Tax-Exempt Fund
Year ended June 30, 1997
Investment income
Income:
Interest $31,085,631
-----------
Expenses (Note 2):
Investment management services fee 2,269,770
Distribution fee-- Class B 195,038
Transfer agency fee 234,793
Incremental transfer agency fee--- Class B 997
Service fee
Class A 824,693
Class B 45,223
Administrative services fees and expenses 201,757
Compensation of board members 9,932
Compensation of officers 2,083
Custodian fees 39,370
Postage 39,915
Registration fees 32,120
Reports to shareholders 39,286
Audit fees 18,000
Other 4,887
-----
Total expenses 3,957,864
Earnings credits on cash balances (Note 2) (55,275)
- -------
Total net expenses 3,902,589
---------
Investment income -- net 27,183,042
----------
Realized and unrealized gain (loss) -- net
Net realized gain (loss) on:
Security transactions (Note 3) 1,809,931
Financial futures contracts (2,986,838)
----------
Net realized gain (loss) on investments (1,176,907)
Net change in unrealized appreciation (depreciation) of investments 8,442,998
---------
Net gain (loss) on investments 7,266,091
---------
Net increase (decrease) in net assets resulting from operations $34,449,133
===========
See accompanying notes to financial statements.
</TABLE>
(This annual report is not part of the prospectus.)
<PAGE>
Financial statements
<TABLE>
<CAPTION>
Statements of changes in net assets
IDS Insured Tax-Exempt Fund
Year ended June 30,
<S> <C> <C>
Investment income-- net $ 27,183,042 $ 26,786,000
Net realized gain (loss) on investments (1,176,907) 1,470,391
Net change in unrealized appreciation (depreciation) of investments 8,442,998 2,965,393
--------- ---------
Net increase (decrease) in net assets resulting from operations 34,449,133 31,221,784
---------- ----------
Distributions to shareholders from:
Net investment income
Class A (25,736,641) (26,156,789)
Class B (1,211,996) (632,447)
Class Y (63) (56)
Net realized gain
Class A -- (1,659,685)
Class B -- (48,604)
Class Y -- (3)
---------- ----------
Total distributions (26,948,700) (28,497,584)
---------- ----------
Share transactions (Note 4)
Proceeds from sales
Class A shares (Note 2) 34,091,690 42,283,689
Class B shares 13,289,699 16,779,713
Reinvestment of distributions at net asset value
Class A shares 17,755,994 19,769,773
Class B shares 932,161 541,841
Class Y shares 63 59
Payments for redemptions
Class A shares (87,518,045) (78,673,946)
Class B shares (Note 2) (3,979,528) (2,641,423)
---------- ----------
Increase (decrease) in net assets from share transactions (25,427,966) (1,940,294)
----------- ----------
Total increase (decrease) in net assets (17,927,533) 783,906
Net assets at beginning of year 511,622,549 510,838,643
----------- -----------
Net assets at end of year $493,695,016 $511,622,549
============ ============
Undistributed net investment income $ 438,514 $ 160,320
------------ ------------
See accompanying notes to financial statements.
(This annual report is not part of the prospectus.)
</TABLE>
<PAGE>
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:
(This annual report is not part of the prospectus.)
<PAGE>
Notes to financial statements
IDS Insured Tax-Exempt Fund
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.
(This annual report is not part of the prospectus.)
<PAGE>
Option transactions
In order to produce incremental earnings, protect gains, and facilitate
buying and selling of securities for investment purposes, the Fund may buy
and sell put and call options and write covered call options on portfolio
securities and may write cash-secured put options. The risk in writing a
call option is that the Fund gives up the opportunity of profit if the
market price of the security increases. The risk in writing a put option
is that the Fund may incur a loss if the market price of the security
decreases and the option is exercised. The risk in buying an option is
that the Fund pays a premium whether or not the option is exercised. The
Fund also has the additional risk of not being able to enter into a
closing transaction if a liquid secondary market does not exist. The Fund
also may write over-the-counter options where the completion of the
obligation is dependent upon the credit standing of the other party.
Option contracts are valued daily at the closing prices on their primary
exchanges and unrealized appreciation or depreciation is recorded. The
Fund will realize a gain or loss upon expiration or closing of the option
transaction. When options on debt securities or futures are exercised, the
Fund will realize a gain or loss. When other options are exercised, the
proceeds on sales for a written call option, the purchase cost for a
written put option or the cost of a security for a purchased put or call
option is adjusted by the amount of premium received or paid.
(This annual report is not part of the prospectus.)
<PAGE>
Notes to financial statements
IDS Insured Tax-Exempt Fund
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.
Securities purchased on a when-issued basis
Delivery and payment for securities that have been purchased by the Fund
on a forward-commitment or when-issued basis can take place one month or
more after the transaction date. During this period, such securities are
subject to market fluctuations, and they may affect the Fund's gross
assets the same as owned securities. The Fund designates cash or liquid
high-grade short-term debt securities at least equal to the amount of its
commitment. As of June 30, 1997, the Fund had entered into outstanding
when-issued or forward commitments of $5,332,884.
(This annual report is not part of the prospectus.)
<PAGE>
Federal taxes
Since the Fund's policy is to comply with all sections of the Internal
Revenue Code applicable to regulated investment companies and to
distribute all of its taxable income to share-holders, 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, undistributed net investment income has been
increased by $43,852, and accumulated net realized loss has been increased
by $43,852.
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, 1997, American Express Financial Corporation (AEFC) owned 208
Class Y shares.
(This annual report is not part of the prospectus.)
<PAGE>
Notes to financial statements
IDS Insured Tax-Exempt Fund
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 a fee 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. Additional administrative service expenses paid by the Fund are
office expenses, consultants' fees and compensation of officers and
employees. Under this agreement, the Fund also pays taxes, audit and
certain legal fees, registration fees for shares, compensation of board
members, corporate filing fees, and any other expenses properly payable by
the Fund and approved by the board.
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
(This annual report is not part of the prospectus.)
<PAGE>
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 and 0.10% of the Fund's
average daily net assets attributable to Class Y shares.
Sales charges received by American Express Financial Advisors Inc. for
distributing Fund shares were $968,182 for Class A and $34,205 for Class B
for the year ended June 30, 1997.
During the year ended June 30, 1997, the Fund's custodian and transfer
agency fees were reduced by $55,275 as a result of earnings credits from
overnight cash balances.
(This annual report is not part of the prospectus.)
<PAGE>
Notes to financial statements
IDS Insured Tax-Exempt Fund
3
Securities
transactions
Cost of purchases and proceeds from sales of securities (other than
short-term obligations) aggregated $161,096,624 and $183,012,598,
respectively, for the year ended June 30, 1997. 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:
Year ended June 30, 1997
Class A Class B Class Y
- --------------------------------------------------------------------------------
Sold 6,218,449 2,423,964 --
Issued for reinvested 3,241,482 170,206 11
distributions
Redeemed (15,964,818) (726,159) --
- --------------------------------------------------------------------------------
Net increase (decrease) (6,504,887) 1,868,011 11
- --------------------------------------------------------------------------------
Year ended June 30, 1996
Class A Class B Class Y
- --------------------------------------------------------------------------------
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
- --------------------------------------------------------------------------------
(This annual report is not part of the prospectus.)
<PAGE>
5
Interest rate
futures contracts
At June 30, 1997, investments in securities included securities valued at
$6,436,747 that were pledged as collateral to cover initial margin
deposits on 200 open sales contracts. The market value of the open
contracts at June 30, 1997 was $23,300,000 with a net unrealized gain (see
Summary of significant accounting policies) of $122,070.
6
Capital loss
carryover
For federal income tax purposes, the Fund had a capital loss carryover of
$824,794 at June 30, 1997, that will expire in 2005 if not offset by
subsequent capital gains. It is unlikely the board will authorize a
distribution of any net realized gains until the available capital loss
carryover has been offset or expires.
7
Financial
highlights
"Financial highlights" showing per share data and selected information is
presented on pages 7 and 8 of the prospectus.
(This annual report is not part of the prospectus.)
<PAGE>
<TABLE>
<CAPTION>
Investments in securities
IDS Insured Tax-Exempt Fund
June 30, 1997
(Percentages represent
value of investments
compared to net assets)
<S> <C> <C> <C> <C>
Municipal bonds (99.4%)
Name of issuer and Coupon Maturity Principal Value(a)
title of issue (b,c,d) rate year amount
Alabama (0.7%)
Mobile General Obligation Capital Improvement Warrants
Convention Center Pre-Refunded Bonds Series 1990
(AMBAC Insured) 7.125% 2020 $3,000,000 $3,298,620
Alaska (1.6%)
North Slope Borough Capital Appreciation
Unlimited General Obligation Bonds
Series 1995A Zero Coupon (MBIA Insured) 5.61 2006 5,300,000(e) 3,350,766
North Slope Borough General Obligation Bonds
Series 1996B Zero Coupon (MBIA Insured) 5.72 2007 8,000,000(e) 4,760,000
Total 8,110,766
Arizona (1.8%)
Chandler Water & Sewer Refunding Revenue Bonds
Series 1991 (FGIC Insured) 7.00 2012 1,250,000 1,356,562
Health Facilities Authority Hospital System
Refunding Revenue Bonds Phoenix Baptist Hospital
Series 1992 (MBIA Insured) 6.25 2011 1,650,000 1,764,312
Phoenix Civic Improvement Wastewater System Lease
Refunding Revenue Bonds (Secondary MBIA Insured) 4.75 2023 4,500,000 3,996,270
State University Research Park Development
Refunding Bonds Series 1995 (MBIA Insured) 5.00 2021 1,975,000 1,849,252
Total 8,966,396
Arkansas (0.3%)
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 1,237,224
California (12.4%)
Contra Costa Water District Revenue Bonds
Series 1994G (MBIA Insured) 5.50 2019 4,675,000 4,580,565
Desert Sands Unified School District Convertible Capital
Appreciation Certificates Series 1995 Zero Coupon
(FSA Insured) 6.45 2020 3,000,000(f) 2,519,010
Eastern Municipal Water District Riverside County
Water & Sewer Pre-Refunded Revenue
Certificates of Participation Series 1991 (FGIC Insured) 6.50 2020 5,460,000 6,000,103
Fontana Unified School District San Bernardino County
General Obligation Convertible Capital Appreciation Bonds
Series 1990C Zero Coupon (FGIC Insured) 6.15 2020 6,000,000(f) 6,314,100
Fresno Health Facility Revenue Bonds Holy Cross-St. Agnes
(Secondary MBIA Insured) 6.625 2021 2,000,000 2,161,440
Long Beach Harbor Revenue Bonds
(MBIA Insured) A.M.T. 5.25 2025 3,000,000 2,796,570
Los Angeles Department of Airports Revenue Bonds
Los Angeles International Airport Series D
(FGIC Insured) A.M.T. 5.50 2015 2,000,000 1,990,860
Los Angeles Department of Water & Power Waterworks
Refunding Revenue Bonds Second Issue
(Secondary FGIC Insured) 4.50 2023 2,000,000 1,672,440
Northern California Transmission Select Auction
Variable Rate Security & Residual Interest Revenue Bonds
Inverse Floater (MBIA Insured) 5.50 2024 2,500,000(g) 2,411,525
Oceanside Certificate of Participation Refunding Bonds
Oceanside Civic Center (MBIA Insured) 5.25 2019 1,730,000 1,634,885
</TABLE>
See accompanying notes to investments in securities.
(This annual report is not part of the prospectus.)
<PAGE>
<TABLE>
<CAPTION>
Municipal bonds (continued)
Name of issuer and Coupon Maturity Principal Value(a)
title of issue (b,c,d) rate year amount
<S> <C> <C> <C> <C>
Placer County Certificate of Participation
Series 1997 (MBIA Insured) 5.25 2017 1,670,000 1,604,152
Rural Home Mortgage Financing Authority
Single Family Mortage Revenue Bonds
Series 1997A-3 (GNMA Insured) A.M.T. 6.25 2029 1,500,000 1,632,855
San Diego County Certificate of Participation
Regional Authority Bonds Mt. Tower
Inverse Floater Series 1991 (MBIA Insured) 6.36 2019 9,000,000(g) 9,443,700
San Jose Redevelopment Agency Merged Area
Redevelopment Tax Allocation Bonds Series 1993
(MBIA Insured) 4.75 2024 2,400,000 2,090,136
San Jose Redevelopment Agency Tax Allocation Bonds
Series 1997 (MBIA Insured) 5.50 2017 1,000,000 993,940
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 1,509,405
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 1,914,160
State Public Works Board Lease Revenue Bonds
University of California Series A (AMBAC Insured) 6.40 2016 2,000,000 2,232,800
State Unlimited Tax General Obligation Bonds
(Secondary FGIC Insured) 4.75 2023 2,500,000 2,181,925
Statewide Community Development Authority
Certificate of Participation
Sutter Health Obligated Group (MBIA Insured) 5.50 2022 5,750,000 5,604,467
Total 61,289,038
Colorado (1.7%)
Denver City & County Airport Revenue Bonds Series B
(MBIA Insured) A.M.T. 5.75 2017 4,290,000(h) 4,299,653
Douglas County School District General Obligation
Improvement Bonds Series 1994A (MBIA Insured) 6.50 2016 1,500,000 1,642,125
Larimer County School District R-1 Certificate of Participation
Series 1997 (MBIA Insured) 5.65 2016 1,000,000(h) 1,010,990
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) 911,440
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) 599,732
Total 8,463,940
Delaware (0.2%)
Health Facilities Authority Refunding Revenue Bonds
Medical Center of Delaware Series 1989 (MBIA Insured) 7.00 2015 1,000,000 1,067,650
District of Columbia (2.8%)
Howard University Revenue Bonds Series A (MBIA Insured) 8.00 2017 1,500,000 1,545,765
Metropolitan Washington Airports Authority Airport System
Revenue Bonds Series 1992A (MBIA Insured) A.M.T. 6.625 2019 9,420,000 10,168,513
Unlimited Tax General Obligation Refunding Bonds
Series B-2 (FSA Insured) 5.50 2010 2,000,000 2,010,940
Total 13,725,218
</TABLE>
See accompanying notes to investments in securities.
(This annual report is not part of the prospectus.)
<PAGE>
<TABLE>
<CAPTION>
Investments in securities
IDS Insured Tax-Exempt Fund
(Percentages represent
value of investments
compared to net assets)
Municipal bonds (continued)
Name of issuer and Coupon Maturity Principal Value(a)
title of issue (b,c,d) rate year amount
<S> <C> <C> <C> <C>
Florida (2.2%)
Alachua County Public Improvement Refunding Revenue Bonds
(FSA Insured) 5.125 2021 2,000,000 1,897,900
Department of Transportation Turnpike Revenue Bonds
Series 1991A (AMBAC Insured) 6.25 2020 1,250,000 1,313,900
Fort Myers Utility System Refunding Revenue Bonds
Series 1989A (BIG Insured) 6.00 2019 2,000,000 2,042,780
Gulf Breeze Local Government Loan Program Boca Raton
Series 1985E (FGIC Insured) 7.75 2015 2,000,000 2,186,140
Osceola County Transportation Pre-Refunded Revenue Bonds
Series 1988A (FGIC Insured) 7.70 2013 1,215,000 1,273,527
Palm Beach County Solid Waste Authority Revenue Bonds
Series 1984 (BIG Insured) 8.375 2010 500,000 515,420
State Correctional Privatization Commission
Certificate of Participation 350 Bed Youthful Columbia
Series A (AMBAC Insured) 5.00 2017 1,900,000 1,787,463
Total 11,017,130
Georgia (3.0%)
Atlanta Metropolitan Rapid Transit Authority Sales Tax
Pre-Refunded Revenue Bonds Series L (AMBAC Insured) 7.20 2020 3,000,000 3,229,980
Chatham County Hospital Authority Revenue Bonds
Memorial Medical Center Series 1990A (MBIA Insured) 7.00 2021 4,500,000 4,956,345
Fulton County Water & Sewer Revenue Bonds
(FGIC Insured) 6.375 2014 3,250,000 3,642,633
Municipal Electrical Authority Special Obligation
Refunding Bonds 2nd Crossover Series (AMBAC Insured) 7.80 2020 500,000 518,705
Richmond County Water & Sewer Refunding Revenue
Improvement Bonds Series 1996A (FGIC Insured) 5.25 2028 2,500,000 2,385,500
Total 14,733,163
Hawaii (0.2%)
Harbor System Revenue Bonds
Series 1997 (MBIA Insured) A.M.T. 5.50 2027 1,000,000 960,320
Illinois (2.8%)
Chicago O'Hare International Airport General
Revenue Bonds Series 1990A (AMBAC Insured) A.M.T. 7.50 2016 2,000,000 2,154,560
Chicago O'Hare International Airport Terminal
Revenue Bonds (MBIA Insured) A.M.T. 7.625 2010 3,000,000 3,240,570
Chicago Public Building Commission
Pre-Refunded Revenue Bonds (MBIA Insured) A.M.T. 7.70 2008 1,000,000 1,039,060
Chicago Public Building Commission
Pre-Refunded Revenue Bonds Series 1989A (FGIC Insured) 7.75 2006 1,000,000 1,071,490
Chicago Public Building Commission
Pre-Refunded Revenue Bonds Series 1990A (MBIA Insured) 7.125 2015 5,000,000 5,445,900
St. Clair County Public Community Building
Capital Appreciation Revenue Bonds
Series 1997B Zero Coupon (FGIC Insured) 5.95 2014 2,000,000(e) 751,360
Total 13,702,940
Indiana (2.2%)
Educational Facilities Authority Pre-Refunded Bonds
Valpraiso University (BIG Insured) 7.80 2008 500,000 532,960
Marion County Hospital Authority Refunding Revenue Bonds
Methodist Hospital Series 1989 (MBIA Insured) 6.50 2013 4,000,000 4,308,320
</TABLE>
See accompanying notes to investments in securities.
(This annual report is not part of the prospectus.)
<PAGE>
<TABLE>
<CAPTION>
Municipal bonds (continued)
Name of issuer and Coupon Maturity Principal Value(a)
title of issue (b,c,d) rate year amount
<S> <C> <C> <C> <C>
State Health Facility Finance Authority Hospital
Refunding Revenue Bonds Columbus Regional Hospital
Series 1993 (CGIC Insured) 7.00 2015 5,000,000 5,872,200
Total 10,713,480
Kentucky (0.1%)
Louisville & Jefferson County Airport Authority System
Revenue Bonds (MBIA Insured) A.M.T. 8.50 2017 300,000 306,036
Louisiana (3.1%)
Energy & Power Authority Power Refunding Revenue Bonds
Rodemacher Unit #2 Series 1991 (FGIC Insured) 6.75 2008 7,000,000(h) 7,586,950
Jefferson Parish School Board Sales & Use Tax
Revenue Bonds (AMBAC Insured) 5.00 2014 3,035,000 2,893,357
New Orleans Audubon Park Commission Aquarium
Pre-Refunded Bonds Series 1988 (MBIA Insured) 7.90 2008 500,000 514,990
New Orleans International Airport Pre-Refunded
Revenue Bonds Series A (FGIC Insured) A.M.T. 8.875 2017 565,000 578,639
Orleans Parish Parishwide School District
Unlimited Tax General Obligation Bonds
Series 1997 (AMBAC Insured) 5.375 2021 2,500,000 2,409,750
Orleans Parish School Board
Unlimited Tax General Obligation Bonds
Series 1995 (FGIC Insured) 5.375 2018 1,250,000 1,227,425
Total 15,211,111
Maine (0.4%)
State Turnpike Authority Turnpike Revenue Bonds (MBIA Insured) 6.00 2018 1,790,000 1,845,186
Massachusetts (4.8%)
Boston Water & Sewer Commission Revenue Bonds
General Subordinate Series A (BIG Insured) 6.00 2008 2,500,000 2,531,400
Health & Educational Authority Revenue Bonds
Valley Regional Health System Series C
(Connie Lee Insured) 5.75 2018 1,500,000 1,496,370
Health & Educational Facilities Authority
Pre-Refunded Revenue Bonds
Lahey Clinic Medical Center (MBIA Insured) 7.625 2018 2,200,000 2,322,936
Health & Educational Facilities Authority
Pre-Refunded Revenue Bonds Northeastern University
Series 1989C (AMBAC Insured) 7.10 2006 1,000,000 1,075,120
Health & Educational Facilities Authority
Revenue Bonds Cape Cod Health System
Series A (Connie Lee Insured) 5.25 2021 4,000,000 3,759,160
Industrial Finance Agency Revenue Bonds
Brandeis University (MBIA Insured) 6.80 2019 1,700,000 1,817,266
Municipal Wholesale Electric Power Supply System
Refunding Revenue Bonds Series B (MBIA Insured) 4.75 2011 5,250,000 4,898,145
State Bay Transportation Authority Series B
(AMBAC Insured) 5.375 2025 4,000,000 3,847,720
State Water Resource Authority Revenue Bonds
Series A (MBIA Insured) 5.50 2022 2,000,000 1,939,160
Total 23,687,277
Michigan (3.5%)
Almont Community Schools
Unlimited Tax General Obligation Bonds
Series 1996 (FGIC Insured) 5.375 2022 1,900,000 1,842,867
</TABLE>
See accompanying notes to investments in securities.
(This annual report is not part of the prospectus.)
<PAGE>
<TABLE>
<CAPTION>
Investments in securities
IDS Insured Tax-Exempt Fund
(Percentages represent
value of investments
compared to net assets)
Municipal bonds (continued)
Name of issuer and Coupon Maturity Principal Value(a)
title of issue (b,c,d) rate year amount
<S> <C> <C> <C> <C>
Genesee County Sewer Disposal System No 3
Limited Tax General Obligation Bonds
Series A (AMBAC Insured) 5.50 2016 1,400,000 1,397,760
Hillman Community Schools General Obligation Bonds
Series 1997 (FGIC Insured) 5.25 2019-23 2,820,000 2,689,464
Iron Mountain School Unlimited Tax
General Obligation Refunding Bonds (AMBAC Insured) 5.125 2021 1,500,000 1,410,510
Kalamazoo Hospital Finance Authority
Refunding & Improvement Bonds
Bronson Methodist Hospital (Secondary MBIA Insured) 6.25 2012 3,000,000 3,183,300
Lincoln Park School District County of Wayne
School Building & Site General Obligation Bonds
Series 1996 (FGIC Insured) 5.90 2026 1,500,000 1,532,385
Monroe County Pollution Control Refunding Bonds
Detroit Edison Series I-B (MBIA Insured) A.M.T. 6.55 2024 5,000,000 5,383,500
Total 17,439,786
Minnesota (2.1%)
Southern Minnesota Municipal Power Agency
Power Supply System Refunding Revenue Bonds
Zero Coupon (MBIA Insured) 6.12 2021 6,000,000(e) 1,572,300
Southern Minnesota Municipal Power Agency
Power Supply System Refunding Revenue Bonds
Series A (Secondary FGIC Insured) 4.75 2016 4,250,000 3,832,523
Western Municipal Power Agency Transmission
Pre-Refunded Revenue Bonds Series 1991 (AMBAC Insured) 6.75 2016 4,500,000 4,846,995
Total 10,251,818
Mississippi (0.2%)
Alcorn County Hospital Refunding Revenue Bonds
Magnolia Regional Hospital Center (AMBAC Insured) 5.75 2013 1,000,000 1,024,810
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 4,372,280
State Board of Investments Payroll Tax Bonds
Worker's Compensation Program Series 1991 (MBIA Insured) 6.875 2020 4,750,000 5,252,930
Total 9,625,210
Nevada (1.0%)
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 4,760,350
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(h) 5,386,850
New Mexico (0.2%)
Santa Fe Water Revenue Bonds (AMBAC Insured) 6.30 2024 1,000,000 1,096,630
</TABLE>
See accompanying notes to investments in securities.
(This annual report is not part of the prospectus.)
<PAGE>
<TABLE>
<CAPTION>
Municipal bonds (continued)
Name of issuer and Coupon Maturity Principal Value(a)
title of issue (b,c,d) rate year amount
<S> <C> <C> <C> <C>
New York (8.1%)
Dormitory Authority City University System
Consolidated 3rd Resolution Revenue Bonds
Series 1994-2 (MBIA Insured) 6.25 2019 2,500,000 2,638,925
Metropolitan Transportation Authority Commuter Facility
Service Contract Bonds Series L (AMBAC Insured) 7.50 2017 1,300,000 1,367,028
New York City General Obligation Pre-Refunded Bonds
Series A (FGIC Insured) 8.125 2007 1,145,000 1,178,320
New York City Municipal Water Finance Authority
Water & Sewer System Revenue Bonds Series A
(Secondary MBIA Insured) 5.50 2023 5,000,000 4,878,450
State Dormitory Authority State University Education Facility
Revenue Bonds (Secondary AMBAC Insured) 5.25 2015 2,700,000 2,681,262
State Energy Resource & Development Authority
Gas Facility Revenue Bonds Brooklyn Union Gas
(MBIA Insured) A.M.T. 5.60 2025 4,500,000 4,357,890
State Energy Resource & Development Authority
Pollution Control Bonds Series 1987A (MBIA Insured) 6.15 2026 3,000,000 3,094,920
State Energy Resource & Development Authority
Pollution Control Refunding Revenue Bonds
Rochester Gas & Electric (MBIA Insured) A.M.T. 6.50 2032 4,000,000 4,270,880
State Energy Resource & Development Authority
Solid Waste Disposal Revenue Bonds
New York State Electric & Gas Series A
(MBIA Insured) A.M.T. 5.70 2028 11,210,000 11,016,403
State Urban Development Corporation Correctional
Capital Facilities Lease Revenue Bonds
Series 1995-6 (AMBAC Insured) 5.375 2025 3,000,000 2,889,570
State Urban Development Correctional Facilities
Pre-Refunded Revenue Bonds Series 1 (FSA Insured) 7.50 2020 1,500,000 1,642,725
Total 40,016,373
North Carolina (2.0%)
Charlotte Pre-Refunded Certificates of Participation
Convention Facility Series 1991 (AMBAC Insured) 6.75 2021 3,150,000 3,505,635
Concord Certificate of Participation Series B (MBIA Insured) 5.75 2016 1,480,000 1,501,504
Fayetteville Financial Corporation Installment Payment
Revenue Bonds Series 1996 (MBIA Insured) 5.625 2014 300,000 304,164
Pasquotank County Certificates of Participation
Elizabeth Pasquotank Public School
Series 1995 (MBIA Insured) 5.00 2020 5,000,000 4,645,550
Total 9,956,853
North Dakota (0.8%)
Fargo Health System Meritcare Obligated Group A
Revenue Bonds (MBIA Insured) 5.375 2027 4,350,000 4,153,902
Ohio (1.3%)
Lorain County Hospital Facilities Refunding Revenue Bonds
EMH Regional Medical Center Series 1995 (AMBAC Insured) 5.375 2021 2,000,000 1,919,920
Lucas County Hospital Refunding Revenue Bonds
St. Vincent Medical Center Series 1993C (MBIA Insured) 5.25 2022 1,725,000 1,617,498
Montgomery County Hospital Facility
Refunding Revenue & Improvement Bonds
Kettering Medical Center (MBIA Insured) 5.50 2026 2,500,000 2,426,025
North Olmsted Limited General Obligation Bonds
Series 1996 (AMBAC Insured) 5.00 2016 500,000 475,525
Total 6,438,968
</TABLE>
See accompanying notes to investments in securities.
(This annual report is not part of the prospectus.)
<PAGE>
<TABLE>
<CAPTION>
Investments in securities
IDS Insured Tax-Exempt Fund
(Percentages represent
value of investments
compared to net assets)
Municipal bonds (continued)
Name of issuer and Coupon Maturity Principal Value(a)
title of issue (b,c,d) rate year amount
<S> <C> <C> <C> <C>
Oklahoma (1.1%)
McAlester Public Works Authority Oklahoma Improvement
Refunding Revenue Bonds (FSA Insured) 5.25 2017-18 2,470,000 2,374,248
Moore Public Works Authority Refunding Revenue Bonds
Series 1989 (AMBAC Insured) 7.60 2006 2,700,000 2,911,248
Total 5,285,496
Oregon (0.1%)
Port of Portland Airport Revenue Bonds
Series 1996-11 (FGIC Insured) A.M.T. 5.625 2026 500,000 491,715
Pennsylvania (4.8%)
Allegheny County Airport Revenue Bonds
Pittsburgh International Series D (FGIC Insured) A.M.T. 7.75 2019 2,300,000 2,337,444
Allegheny County Sanitation Authority
Sewer Revenue Bonds Series 1997 (MBIA Insured) 5.375 2024 5,000,000(i) 4,815,950
Harrisburg Authority Dauphin County Revenue Bonds
Series 1997-II (MBIA Insured) 5.625 2022 2,000,000 1,990,480
Pittsburgh Water & Sewer Authority System
Pre-Refunded Revenue Bonds Series 1991A (FGIC Insured) 6.50 2014 10,000,000 10,966,100
Robinson Township Municipal Authority Water & Sewer
Revenue Bonds (FGIC Insured) 6.00 2019 2,200,000 2,276,912
Turnpike Commission Pre-Refunded Revenue Bonds
Series 1989K (MBIA Insured) 7.50 2012 1,000,000 1,094,420
Total 23,481,306
Rhode Island (0.6%)
Health & Education Building Corporation Higher Education
Facility Revenue Bonds Series 1996 (MBIA Insured) 5.625 2026 3,000,000 2,943,150
South Carolina (0.2%)
Piedmont Municipal Power Agency Electric
Refunding Revenue Bonds (FGIC Insured) 6.25 2021 1,000,000 1,102,480
Tennessee (1.2%)
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 3,879,712
Metropolitan Government Nashville & Davidson County
Sports Authority Public Improvement Revenue Bonds
Series 1996 (AMBAC Insured) 5.75 2017 2,160,000 2,198,772
Total 6,078,484
Texas (19.8%)
Austin Airport System Prior Lien Revenue Bonds Series 1995A
(MBIA Insured) A.M.T. 6.125 2025 3,000,000 3,086,760
Austin Combined Utilities System Refunding Revenue Bonds
Series 1994 (FGIC Insured) 5.75 2024 8,500,000 8,544,965
Austin Combined Utilities System Revenue Bonds
Series 1987 (BIG Insured) 8.625 2012-17 1,250,000 1,473,175
Austin Combined Utilities System Capital Appreciation
Refunding Revenue Bonds Series 1994 Zero Coupon
(FGIC Insured) 5.83 2017 5,900,000(e) 1,912,190
Bexar County Health Facility Development Hospital
Revenue Bonds San Antonio Baptist Memorial
Hospital System Series 1994 (MBIA Insured) 6.75 2019 5,000,000 5,692,550
</TABLE>
See accompanying notes to investments in securities.
(This annual report is not part of the prospectus.)
<PAGE>
<TABLE>
<CAPTION>
Municipal bonds (continued)
Name of issuer and Coupon Maturity Principal Value(a)
title of issue (b,c,d) rate year amount
<S> <C> <C> <C> <C>
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 16,129,651
Colorado River Municipal Water District Water System
Pre-Refunded Revenue Bonds Series A (AMBAC Insured) 6.625 2021 8,900,000 9,554,239
Corsicana Waterworks & Sewer System
Refunding Revenue Bonds Series 1997A (FGIC Insured) 5.75 2022 2,075,000 2,089,089
Georgetown Combination Tax & Utitlities System
Limited Revenue Certificates of Obligation
Series 1997 (FGIC Insured) 5.375 2017 1,000,000 988,430
Harris County Health Facilities Development Hospital
Revenue Bonds State Children's Hospital
Series 1989A (MBIA Insured) 7.00 2019 1,500,000 1,617,585
Harris County Public Facilities Corporation
Detention Facility Mortgage Pre-Refunded Revenue Bonds
(MBIA Insured) 7.80 2011 1,000,000 1,071,990
Harris County Toll Road Senior Lien
Pre-Refunded Revenue Bonds Series A (AMBAC Insured) 6.50 2017 8,170,000 9,055,873
Hillsboro Independent School District
Unlimited Tax School Building & Refunding Revenue Bonds
Series 1997 (PSFG Insured) 5.25 2026 1,000,000 958,240
Houston Water & Sewer System
Junior Lien Refunding Revenue Bonds
Series 1997A (FGIC Insured) 5.25 2022 7,210,000 6,879,133
Kilgore Independent School District Unlimited Tax
General Obligation Refunding Revenue Bonds
Series 1997 (PSFG Insured) 5.375 2018 500,000(i) 491,105
League City General Obligation
Refunding & Improvement Bonds
Series 1990 (FGIC Insured) 6.25 2013 2,500,000 2,640,050
Matagorda County Navigation District #1
Collateralized Pollution Control Revenue Bonds
Central Power & Light Series 1984A (AMBAC Insured) 7.50 2014 2,500,000 2,742,325
Matagorda County Navigation District #1 Pollution Control
Refunding Revenue Bonds Houston Light & Power
Series E (FGIC Insured) 7.20 2018 2,150,000 2,324,301
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 2,161,500
Municipal Power Agency Refunding Revenue Bonds
Series 1991A (AMBAC Insured) 6.75 2012 5,250,000 5,705,910
North Central State Health Facilities Pre-Refunded Bonds
Children's Medical Center (BIG Insured) 7.875 2018 2,000,000 2,040,220
Turnpike Authority Dallas North Tollway
Pre-Refunded Revenue Bonds Series 1990
(AMBAC Insured) 6.00 2020 5,000,000 5,137,800
Turnpike Authority Dallas North Tollway Revenue Bonds
Addison Airport Toll Tunnel Series 1994 (FGIC Insured) 6.60 2023 2,000,000 2,200,640
University of Houston System Consolidated
Pre-Refunded Revenue Bonds Series 1990A (MBIA Insured) 7.40 2006 3,160,000 3,403,762
Total 97,901,483
Utah (0.4%)
Intermountain Power Authority Power Supply
Pre-Refunded Revenue Bonds Series 1987C (AMBAC Insured) 8.375 2012 900,000 918,108
Salt Lake City-County Airport Pre-Refunded Revenue Bonds
Series 1989 (FGIC Insured) A.M.T. 7.875 2018 1,000,000 1,036,390
Total 1,954,498
</TABLE>
See accompanying notes to investments in securities.
(This annual report is not part of the prospectus.)
<PAGE>
<TABLE>
<CAPTION>
Investments in securities
IDS Insured Tax-Exempt Fund
(Percentages represent
value of investments
compared to net assets)
Municipal bonds (continued)
Name of issuer and Coupon Maturity Principal Value(a)
title of issue (b,c,d) rate year amount
<S> <C> <C> <C> <C>
Virginia (3.7%)
Chesapeake Industrial Development Authority Public
Facilities Lease Revenue Bonds Series 1996 (MBIA Insured) 5.25 2017 1,300,000 1,254,799
Hanover County Industrial Development Authority
Memorial Regional Medical Center (MBIA Insured) 5.50 2025 3,800,000 3,662,934
Loudoun County Sanitation Authority Waste & Sewer
Refunding Revenue Bonds (MBIA Insured) 5.25 2030 1,435,000 1,356,118
Portsmouth Redevelopment Housing Authority
Multi-family Housing Refunding Revenue Bonds
(FNMA Insured) 6.05 2008 5,780,000 6,033,915
Upper Occoquan Sewer Authority Regional Sewer
Revenue Bonds Series A (MBIA Insured) 4.75 2029 4,000,000 3,485,840
William County Lease Certificate of Participation Bonds
(MBIA Insured) 5.50 2020 2,590,000 2,526,623
Total 18,320,229
Washington (1.8%)
Public Power Supply System Non-Refunded Revenue Bonds
Nuclear Project #1 Series A (MBIA Insured) 7.50 2015 3,000,000 3,247,110
Public Power Supply System Pre-Refunded Revenue Bonds
Nuclear Project #3 Series 1989A (BIG Insured) 7.25 2016 1,000,000 1,077,610
Public Power Supply System Refunding Revenue Bonds
Nuclear Project #3 Series 1989A (BIG Insured) 6.00 2018 3,000,000 3,057,630
Spokane Regional Solid Waste Management System
Revenue Bonds Series 1989 (AMBAC Insured) A.M.T. 7.75 2011 300,000 318,543
Spokane Regional Solid Waste Management System
Revenue Bonds Series 1989 (AMBAC Insured) A.M.T. 7.875 2007 1,250,000 1,329,500
Total 9,030,393
West Virginia (2.7%)
Board of Regents Registration Fee Pre-Refunded Revenue Bonds
Series 1989B (MBIA Insured) 7.40 2009 2,000,000 2,146,180
School Building Authority Capital Improvement
Pre-Refunded Revenue Bonds (MBIA Insured) 7.25 2015 3,415,000 3,757,080
School Building Authority Capital Improvement
Revenue Bonds Series 1990B (MBIA Insured) 6.75 2017 5,000,000 5,431,150
State Parkway Economic Development & Tourism
Authority Parkway Pre-Refunded Revenue Bonds
Series 1989 (FGIC Insured) 7.125 2019 2,000,000 2,150,460
Total 13,484,870
Wisconsin (0.5%)
Center District Sales Tax Appreciation Senior Dedicated Bonds
Series A Zero Coupon (MBIA Insured) 6.03 2017 7,400,000(e) 2,343,506
Total municipal bonds
(Cost: $454,600,456) $490,904,655
Total investments in securities
(Cost: $454,600,456)(j) $490,904,655
</TABLE>
See accompanying notes to investments in securities.
(This annual report is not part of the prospectus.)
<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 06-30-97 06-30-96
- --------------------------------------------------------------------------------
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
FNMA -- Federal National Mortgage Association
FSA -- Financial Security Assurance
GNMA -- Government National Mortgage Association
MBIA -- Municipal Bond Investors Assurance
PSFG -- Permanent School Fund Guarantee
(d) The following abbreviation is used in the portfolio descriptions: A.M.T. --
Alternative Minimum Tax -- As of June 30, 1997, the value of securities subject
to alternative minimum tax represented 19.4% of net assets.
(e) For zero coupon bonds, the interest rate disclosed represents the annualized
effective yield on the date of acquisition.
(f) For those zero coupon bonds that 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.
(g) 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, 1997. Inverse floaters in the aggregate represent 2.4% of the
Fund's net assets as of June 30, 1997.
(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
- -------------------------------------------------------------------------------
Sales contracts
Municipal Bonds Index Sept. 1997 $20,000,000
(i) At June 30, 1997, the cost of securities purchased on a when-issued basis
was $5,332,884.
(j) At June 30, 1997, the cost of securities for federal income tax purposes was
$454,217,436 and the aggregate gross unrealized appreciation and depreciation
based on that cost was:
Unrealized appreciation.........................................$36,801,236
Unrealized depreciation............................................(114,017)
--------
Net unrealized appreciation.....................................$36,687,219
===========
(This annual report is not part of the prospectus.)
<PAGE>
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 with countries
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 holding two worlds
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) office 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
(This annual report is not part of the prospectus.)
<PAGE>
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) trees
(This annual report is not part of the prospectus.)
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 & 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. Foreign investments may be subject to currency fluctuations and
political and economic risks of the countries in which the investments are made.
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) gyroscope
IDS Stock Fund
Invests in a Portfolio comprised primarily of common stock of companies
representing many sectors of the economy. Seeks current income and growth of
capital.
(icon of) building with columns
IDS Equity Value Fund
Invests primarily in undervalued common stocks that offer potential for growth
of capital and income.
(icon of) three growing flowers
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 of 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 that 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
(This annual report is not part of the prospectus.)
<PAGE>
IDS mutual funds
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 of long-term, high-yielding corporate
fixed-income securities in the lower rated, higher risk bond categories to seek
high current income. Secondary objective is capital growth.
(icon of) coins
IDS Bond Fund
Invests mainly in corporate bonds, at least 50% in the higher rated, lower risk
bond categories, or the equivalent, and in government bonds.
(icon of) greek column
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 enclosed
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 enclosed
IDS Insured Tax-Exempt Fund
Invests primarily in municipal securities that are insured as to the timely
payment of principal and interest. The insurance feature minimizes credit risk
of the Fund but does not guarantee the market value of the Fund's shares.
(icon of) shield with star enclosed
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 a tree enclosed
(This annual report is not part of the prospectus.)
<PAGE>
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
For more complete information about any of these funds, including charges and
expenses, you can obtain a prospectus by contacting your financial advisor or
writing to American Express Shareholder Service, P.O. Box 534, Minneapolis, MN
55440-0534. Read it carefully before you invest or send money.
(This annual report is not part of the prospectus.)
<PAGE>
Federal income tax information
IDS Insured Tax-Exempt Fund
The Fund is required by the Internal Revenue
Code of 1986 to tell its shareholders about the tax treatment of the
dividends it pays during its fiscal year. Some of the dividends listed
below were reported to you on your year-end statement, last January.
Dividends paid to you since the end of last year will be reported to you
on a tax statement sent next January.
IDS Insured Tax-Exempt Fund
Fiscal year ended June 30, 1997
Class A
Exempt-interest dividends -- taxable status explained below.
Payable date Per share
July 26, 1996 $0.02320
Aug. 26, 1996 0.02373
Sept. 25, 1996 0.02413
Oct. 28, 1996 0.02574
Nov. 26, 1996 0.02282
Dec. 26, 1996 0.02299
Jan. 29, 1997 0.02636
Feb. 26, 1997 0.02393
March 26, 1997 0.02165
April 28, 1997 0.02598
May 28, 1997 0.02471
June 26, 1997 0.02723
Total $0.29247
Taxable dividend -- income distribution taxable as dividend income.
Payable date Per share
Dec. 26, 1996 $0.00166
Total distributions $0.29413
(This annual report is not part of the prospectus.)
<PAGE>
Class B
Exempt-interest dividends -- taxable status explained below.
Payable date Per share
July 26, 1996 $0.01986
Aug. 26, 1996 0.02023
Sept. 25, 1996 0.02076
Oct. 28, 1996 0.02198
Nov. 26, 1996 0.01951
Dec. 26, 1996 0.01957
Jan. 29, 1997 0.02250
Feb. 26, 1997 0.02074
March 26, 1997 0.01849
April 28, 1997 0.02229
May 28, 1997 0.02133
June 26, 1997 0.02394
Total $0.25120
Taxable dividend -- income distribution taxable as dividend income.
Payable date Per share
Dec. 26, 1996 $0.00166
Total distributions $0.25286
(This annual report is not part of the prospectus.)
<PAGE>
Federal income tax information
Class Y
Exempt-interest dividends -- taxable status explained below.
Payable date Per share
July 26, 1996 $0.02415
Aug. 26, 1996 0.02475
Sept. 25, 1996 0.02474
Oct. 28, 1996 0.02678
Nov. 26, 1996 0.02336
Dec. 26, 1996 0.02386
Jan. 29, 1997 0.02721
Feb. 26, 1997 0.02481
March 26, 1997 0.02230
April 28, 1997 0.02694
May 28, 1997 0.02535
June 26, 1997 0.02789
Total $0.30214
Taxable dividend -- income distribution taxable as dividend income.
Payable date Per share
Dec. 26, 1996 $0.00166
Total distributions $0.30380
Source of distributions
Distributions during the fiscal year ended June 30, 1997, were derived
exclusively from interest on tax-exempt securities.
Federal taxation
Exempt-interest dividends are exempt from federal income taxes and should
not be included in shareholders' gross income.
Other taxation
Exempt-interest dividends may be subject to state and local taxes. Each
shareholder should consult a tax advisor about reporting this income for
state and local tax purposes.
(This annual report is not part of the prospectus.)
<PAGE>
Source of income by state
Percentages of income from municipal securities earned by the Fund from
various states during the fiscal year ended June 30, 1997 are listed
below.
Alabama 0.789%
Alaska 1.059
Arizona 1.739
Arkansas 0.223
California 12.890
Colorado 2.101
Connecticut 0.204
Delaware 0.228
Florida 4.150
Georgia 2.879
Hawaii 0.044
Illinois 3.649
Indiana 2.166
Kentucky 0.115
Louisiana 2.589
Maine 0.352
Maryland 0.142
Massachusetts 4.739
Michigan 3.194
Minnesota 1.940
Mississippi 0.214
Missouri 0.776
Montana 2.005
Nevada 0.911
New Hampshire 1.197
New Mexico 0.202
New York 7.139
North Carolina 2.531
North Dakota 0.217
Ohio 1.264
Oklahoma 1.431
Oregon 0.349
Pennsylvania 3.777
Rhode Island 0.475
South Carolina 0.380
Tennessee 1.296
Texas 18.480
Utah 0.518
Virginia 3.368
Washington 1.967
Washington, DC 2.982
West Virginia 2.855
Wisconsin 0.474
(This annual report is not part of the prospectus.)
<PAGE>
Quick telephone reference
- -----------------------------------------------------------------
American Express Financial Advisors 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
- -----------------------------------------------------------------
TTY Service
For the hearing impaired
800-846-4852
- -----------------------------------------------------------------
American Express Financial Advisors Easy Access Line
Automated account information (TouchToneR phones only), including current fund
prices and performance, account values and recent account transactions
800-862-7919
AMERICAN
EXPRESS
Financial
Advisors
IDS Insured Tax-Exempt Fund
IDS Tower 10
Minneapolis, MN 55440-0010
<PAGE>
STATEMENT OF DIFFERENCES
Difference Description
1) The layout is different 1) Some of the layout in the
throughout the annual report annual report to shareholders
is in two columns.
2) Headings. 2) The headings in the annual report
and prospectus are placed in a
blue strip at the top of the page.
3) There are pictures, icons and 3) Each picture, icon and graph is
graphs throughout the annual described in parentheses.
report and prospectus.
4) Footnotes for charts and graphs 4) The footnotes for each chart or
are described at the left margin. graph are typed below the
description of the chart or graph.
