1997 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 bondissuer 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 chairman 3
From the portfolio manager 3
The Fund's ten largest holdings 5
Financial statements 6
Notes to financial statements 9
Investments in securities 24
Board members and officers 42
IDS mutual funds 43
<PAGE>
To our shareholders
From the chairman
If you're an experienced investor, you know that the past few years have
been unusually strong in many financial markets. Perhaps just as
important, 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. We saw
evidence of that last October, when financial turmoil in Southeast Asia
sparked a sharp decline in worldwide stock markets, including the U.S.
That fact reinforces the need for investors to review periodically 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.
William R. Pearce
(picture of) William R. Pearce
William R. Pearce
Chairman of the board
<PAGE>
From the portfolio manager
A powerful rally by the U.S. bond market led to a very productive six
months for the IDS Insured Tax-Exempt Fund. For investors in the Funds'
Class A shares, the total return (which includes net asset value change
and dividends) was 5.2% for the July through December 1997 period -- the
first half of the fiscal year.
Despite a continuation of solid economic growth, which many observers
thought would put upward pressure on consumer prices, inflation remained
remarkably tame throughout the six months. Bolstering the low-inflation
outlook during November and December was the financial turmoil in Asian
markets, which reinforced the case for falling prices of imported goods as
well as somewhat slower economic growth in the U.S. In addition, the Asian
situation spawned a "flight to quality" by foreign investors, who, seeking
a safe haven for their investments, moved money into U.S. bonds, lending
further support for the market.
Rates down, bonds up
As a result, long-term interest rates, aside from a moderate run-up in
August, declined substantially during the period. In fact, yields on
municipal bonds reached a 25-year low by year-end. Bond prices, which move
in the opposite direction of interest rates, rose accordingly, boosting
the Fund's net asset value. On the other hand, the rate decline ultimately
depressed the Fund's dividend payments slightly. Compared to most
municipal bond funds, however, the dividend level held up quite well.
Looking at the technical factors in the market, the supply of new issues
was substantial. Fortunately, demand from both institutional and
individual buyers was equally strong. For the most part, I avoided
purchasing bonds issued by states without income taxes, concentrating
instead on securities issued by high-tax states. I kept a low level of
cash reserves (5% or less) in the Fund, a strategy that enhanced overall
performance during the period.
As the second half of the fiscal year begins, inflation appears to remain
well under control. Assuming that continues, the level of long-term
interest rates shouldn't present a serious problem for the bond market in
the months ahead. At the same time, given how much rates came down in
1997, I think a similar decline is unlikely this year. Therefore, I plan
to continue my emphasis on maintaining the Fund's dividend, which I expect
to provide the bulk of the return in 1998.
Paul Hylle
(picture of) Paul Hylle
Paul Hylle
Portfolio manager
<PAGE>
To our shareholders
Class A
6-month performance
(All figures per share)
Net asset value (NAV)
Dec. 31, 1997 $ 5.64
June 30, 1997 $ 5.51
Increase $ 0.13
Distributions
July 1, 1997 - Dec. 31, 1997
From income $ .15
From capital gains $ --
Total distributions $ .15
Total return* +5.2%**
Class B
6-month performance
(All figures per share)
Net asset value (NAV)
Dec. 31, 1997 $ 5.64
June 30, 1997 $ 5.51
Increase $ 0.13
Distributions
July 1, 1997 - Dec. 30, 1997
From income $ .13
From capital gains $ --
Total distributions $ .13
Total return* +4.8%**
Class Y
6-months performance
(All figures per share)
Net asset value (NAV)
Dec. 31, 1997 $ 5.65
June 30, 1997 $ 5.52
Increase $ 0.13
Distributions
July 1, 1997 - Dec. 31, 1997
From income $ .15
From capital gains $ --
Total distributions $ .15
Total return* +5.2%**
* 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>
The Fund's ten largest holdings
Percent Value
(of Fund's net assets) (as of Dec. 31, 1997)
Brazos River Texas Authority Collateralized Pollution
Control Refunding Revenue Bonds Texas Utility Electric
Series 1992C A.M.T.
6.70% 2022 3.28% $16,505,714
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 2.30 11,569,393
Pittsburgh Pennsylvania Water & Sewer Authority
System Pre-refunded Revenue Bonds
Series 1991A
6.50% 2014 2.18 10,981,000
District of Columbia Metropolitan Washington Airports
Authority Airport System Revenue Bonds Series 1992A
A.M.T.
6.625% 2019 2.06 10,380,840
San Diego County California Certificate of Participation
Regional Authority Bonds Mt. Tower Inverse Floater
Series 1991
6.36% 2019 1.93 9,687,510
Colorado River Texas Municipal Water District
Water System Pre-refunded Revenue Bonds Series A
6.625% 2021 1.90 9,541,334
Harris County Texas Toll Road Senior Lien
Pre-refunded Revenue Bonds Series A
6.50% 2017 1.81 9,089,288
Austin Texas Combined Utilities System
Refunding Revenue Bonds Series 1994
5.75% 2024 1.76 8,836,345
Louisiana Energy & Power Authority Power Refunding
Revenue Bonds Rodemacher Unit 2 Series 1991
6.75% 2008 1.52 7,632,240
Houston Texas Water & Sewer System Junior Lien
Refunding Revenue Bonds Series 1997A
5.25% 2022 1.43 7,215,984
Note: The Fund's investment income from certain securities may be subject to the
Alternative Minimum Tax (A.M.T.).
(icon of) pie chart
The ten holdings listed here make up 20.17% of the Fund's net assets
<PAGE>
<TABLE>
<CAPTION>
Financial statements
Statement of assets and liabilities
IDS Insured Tax Exempt Fund
Dec. 31, 1997
Assets
(Unaudited)
Investments in securities, at value (Note 1)
<S> <C>
(identified cost $441,482,497) $490,555,266
Cash in bank on demand deposit 418,302
Accrued interest receivable 8,686,439
Receivable for investment securities sold 3,830,000
---------
Total assets 503,490,007
-----------
Liabilities
Dividends payable to shareholders 336,674
Payable for investment securities purchased 93,750
Accrued investment management services fee 6,200
Accrued distribution fee 785
Accrued service fee 2,411
Accrued transfer agency fee 584
Accrued administrative services fee 551
Other accrued expenses 27,420
------
Total liabilities 468,375
-------
Net assets applicable to outstanding shares $503,021,632
============
Represented by
Shares of beneficial interest--$.01 par value (Note 1) $ 891,596
Additional paid-in capital 467,431,292
Excess of distributions over net investment income (16,947)
Accumulated net realized gain (loss) (Note 6) (14,121,140)
Unrealized appreciation (depreciation) on investments (Note 5) 48,836,831
----------
Total-- representing net assets applicable to outstanding capital stock $503,021,632
============
Net assets applicable to outstanding shares: Class A $464,696,809
Class B $ 38,323,613
Class Y $ 1,210
Net asset value per share of outstanding capital stock: Class A shares 82,366,014 $ 5.64
Class B shares 6,793,357 $ 5.64
Class Y shares 214 $ 5.65
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Statement of operations
IDS Insured Tax Exempt Fund
Six months ended Dec. 31, 1997
Investment income
(Unaudited)
Income:
<S> <C>
Interest $14,590,369
-----------
Expenses (Note 2):
Investment management services fee 1,129,332
Distribution fee-- Class B 130,727
Transfer agency fee 108,667
Incremental transfer agency fee-- Class B 578
Service fee
Class A 404,283
Class B 30,181
Administrative services fees and expenses 102,571
Compensation of board members 4,084
Custodian fees 9,805
Postage 13,893
Registration fees 21,285
Reports to shareholders 729
Audit fees 9,000
Other 2,246
-----
Total expenses 1,967,381
Earnings credits on cash balances (Note 2) (56,127)
-------
Total net expenses 1,911,254
---------
Investment income (loss) -- net 12,679,115
----------
Realized and unrealized gain (loss) -- net
Net realized gain (loss) on:
Security transactions (Note 3) 1,393,286
Financial futures contracts (1,451,011)
----------
Net realized gain (loss) on investments (57,725)
Net change in unrealized appreciation (depreciation) on investments 12,410,562
----------
Net gain (loss) on investments 12,352,837
----------
Net increase (decrease) in net assets resulting from operations $25,031,952
===========
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Financial statements
Statements of changes in net assets
IDS Insured Tax Exempt Fund
Operations and distributions Dec. 31, 1997 June 30, 1997
Six months ended Year ended
(Unaudited)
<S> <C> <C>
Investment income (loss)-- net $ 12,679,115 $ 27,183,042
Net realized gain (loss) on investments (57,725) (1,176,907)
Net change in unrealized appreciation (depreciation) on investments 12,410,562 8,442,998
---------- ---------
Net increase (decrease) in net assets resulting from operations 25,031,952 34,449,133
---------- ----------
Distributions to shareholders from:
Net investment income
Class A (12,345,192) (25,736,641)
Class B (789,352) (1,211,996)
Class Y (32) (63)
--- ---
Total distributions (13,134,576) (26,948,700)
----------- -----------
Share transactions (Note 4)
Proceeds from sales
Class A shares (Note 2) 20,881,302 34,091,690
Class B shares 7,367,841 13,289,699
Reinvestment of distributions at net asset value
Class A shares 8,429,140 17,755,994
Class B shares 594,419 932,161
Class Y shares 32 63
Payments for redemptions
Class A shares (37,985,323) (87,518,045)
Class B shares (Note 2) (1,858,171) (3,979,528)
---------- ----------
Increase (decrease) in net assets from share transactions (2,570,760) (25,427,966)
---------- -----------
Total increase (decrease) in net assets 9,326,616 (17,927,533)
Net assets at beginning of period 493,695,016 511,622,549
----------- -----------
Net assets at end of period $503,021,632 $493,695,016
============ ============
Undistributed (excess of distributions over) net investment income $ (16,947) $ 438,514
------------ ------------
See accompanying notes to financial statements.
</TABLE>
<PAGE>
Notes to financial statements
IDS Insured Tax-Exempt Fund
(Unaudited as to Dec. 31, 1997)
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 has unlimited authorized shares of
beneficial interest.
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 shares during the ninth calendar
year of ownership. 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
traded on national securities exchanges or included in national markets
systems are valued at the last quoted sales price. Debt securities are
generally traded in the over-the counter market and are valued at a price
deemed best to reflect fair value as quoted by dealers who make markets in
these securities or by an independent pricing service. Securities for
which market quotations are not readily available are valued at fair value
according to methods selected in good faith by the board. 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 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.
Dividends to shareholders
Dividends from net investment income, declared daily and payable monthly,
are reinvested in additional shares of the Fund at net asset value or
payable in cash. Capital gains, when available, are distributed along with
the last income dividend of the calendar year.
Other
Security transactions are accounted for on the date securities are
purchased or sold. Interest income, including level-yield amortization of
premium and discount, is accrued daily.
At Dec. 31, 1997, American Express Financial Corporation (AEFC) owned 214
Class Y shares.
2
Expenses and
sales charges
Effective March 20, 1995, the Fund entered into agreements with AEFC for
managing its portfolio, providing administrative services and serving as
transfer agent. Under an 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, organizational expenses and any other
expenses properly payable by the Fund and approved by the board.
Under a separate Transfer Agency Agreement, American Express Client
Service Corporation (AECSC) maintains shareholder accounts and records.
The Fund pays AECSC an annual fee per shareholder account for this service
as follows:
oClass A $15.50
oClass B $16.50
oClass Y $15.50
Also effective March 20, 1995, the Fund entered into agreements with
American Express Financial Advisors Inc. for distribution and shareholder
servicing-related services. Under a Plan and Agreement of Distribution,
the Fund pays a distribution fee at an annual rate of 0.75% of the Fund's
average daily net assets attributable to Class B shares for
distribution-related services.
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 commencing on May 9,
1997, the fee is calculated at a rate of 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 $496,966 for Class A and $22,360 for Class B
for the six months ended Dec. 31, 1997.
During the six months ended Dec. 31, 1997, the Fund's custodian and
transfer agency fees were reduced by $56,127 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 $47,339,398 and $62,650,643,
respectively, for the six months ended Dec. 31, 1997. 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, 1997
Class A Class B Class Y
Sold 3,748,428 1,321,477 --
Issued for reinvested 1,509,964 106,476 6
distributions
Redeemed (6,812,418) (333,717) --
---------- -------- -----
Net increase (decrease) (1,554,026) 1,094,236 6
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
5
Interest rate
futures contracts
At Dec. 31, 1997, investments in securities included securities valued at
$6,524,036 that were pledged as collateral to cover initial margin
deposits on 200 open sales contracts. The market value of the open
contracts at Dec. 31, 1997 was $24,625,000 with a net unrealized loss of
$235,938. See Summary of significant accounting policies.
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.
<PAGE>
<TABLE>
<CAPTION>
Notes to financial statements
IDS Insured Tax-Exempt Fund
7. 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 changesa
Class A
1997b 1997 1996 1995 1994 1993 1992 1991 1990 1989c 1988
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, $5.51 $5.43 $5.40 $5.35 $5.63 $5.33 $5.04 $4.96 $5.00 $4.86 $4.73
beginning of period
Income from investment operations:
Net investment income (loss) .15 .30 .30 .30 .30 .30 .31 .32 .31 .16 .31
Net gains (losses) .13 .07 .03 .05 (.28) .30 .29 .08 (.04) .14 .14
(both realized
and unrealized)
Total from investment .28 .37 .33 .35 .02 .60 .60 .40 .27 .30 .45
operations
Less distributions:
Dividends from net (.15) (.29) (.28) (.30) (.30) (.30) (.31) (.32) (.31) (.16) (.32)
investment income
Distributions from -- -- (.02) -- -- -- -- -- -- -- --
realized gains
Total distributions (.15) (.29) (.30) (.30) (.30) (.30) (.31) (.32) (.31) (.16) (.32)
Net asset value, $5.64 $5.51 $5.43 $5.40 $5.35 $5.63 $5.33 $5.04 $4.96 $5.00 $4.86
end of period
Ratios/supplemental data
Class A
1997b 1997 1996 1995 1994 1993 1992 1991 1990 1989c 1988
Net assets, end of $465 $462 $491 $505 $525 $464 $308 $195 $133 $79 $55
period (in millions)
Ratio of expenses to .73%d .74% .75% .66% .65% .65% .67% .67% .69% .72%d .77%
average daily net assetse
Ratio of net income (loss) 5.10%d 5.42% 5.16% 5.66% 5.32% 5.53% 6.06% 6.36% 6.44% 6.60%d 6.55%
to average daily net assets
Portfolio turnover rate 10% 33% 52% 53% 37% 5% 11% 8% 24% 19% 33%
(excluding short-term
securities)
Total returnf 5.2% 7.1% 6.3% 6.7% .3% 11.7% 12.3% 8.1% 5.6% 6.4% 9.7%
aFor a share outstanding throughout the period. Rounded to nearest cent.
bSix months ended Dec. 31, 1997 (Unaudited).
cThe Fund's fiscal year-end was changed from Dec. 31 to June 30, effective
1989.
dAdjusted to an annual basis.
eEffective fiscal year 1996, expense ratio is based on total expenses of
the Fund before reduction of earnings credits on cash balances.
fTotal return does not reflect payment of a sales charge.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Fiscal period ended June 30,
Per share income and capital changesa
Class B Class Y
1997c 1997 1996 1995b 1997c 1997 1996 1995b
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, $5.51 $5.43 $5.40 $5.47 $5.52 $5.44 $5.41 $5.47
beginning of period
Income from investment operations:
Net investment income (loss) .13 .25 .26 .09 .15 .30 .31 .08
Net gains (losses) .13 .08 .03 (.07) .13 .08 .03 (.06)
(both realized
and unrealized)
Total from investment .26 .33 .29 .02 .28 .38 .34 .02
operations
Less distributions:
Dividends from net (.13) (.25) (.24) (.09) (.15) (.30) (.29) (.08)
investment income
Distributions from -- -- (.02) -- -- -- (.02) --
realized gains
Total distributions (.13) (.25) (.26) (.09) (.15) (.30) (.31) (.08)
Net asset value, $5.64 $5.51 $5.43 $5.40 $5.65 $5.52 $5.44 $5.41
end of period
Ratios/supplemental data
Class B Class Y
1997c 1997 1996 1995b 1997c 1997 1996 1995b
Net assets, end of $38 $31 $21 $6 $-- $-- $-- $--
period (in millions)
Ratio of expenses to 1.49%d 1.50% 1.51% 1.49%d .67%d .58% .57% .54%d
average daily net assetse
Ratio of net income (loss) 4.35%d 4.71% 4.42% 4.72%d 5.13%d 5.78% 5.32% 5.38%d
to average daily net assets
Portfolio turnover rate 10% 33% 52% 53% 10% 33% 52% 53%
(excluding short-term
securities)
Total returnf 4.8% 6.3% 5.5% .4% 5.2% 7.3% 6.4% .4%
aFor a share outstanding throughout the period. Rounded to the nearest
cent.
bInception date was March 20, 1995.
cSix months ended Dec. 31, 1997 (Unaudited).
dAdjusted to an annual basis.
eEffective fiscal year 1996, expense ratio is based on total expenses of
the Fund before reduction of earnings credits on cash balances.
fTotal return does not reflect payment of a sales charge.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Investments in securities
IDS Insured Tax-Exempt Fund (Percentages represent
Dec. 31, 1997 (Unaudited) value of investments
compared to net assets)
Municipal bonds (97.4%)
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
<S> <C> <C> <C> <C>
Series 1990 (AMBAC Insured) 7.125% 2020 $3,000,000 $3,282,960
Alaska (1.7%)
North Slope Borough Capital Appreciation
Unlimited General Obligation Bonds
Zero Coupon Series 1995A (MBIA Insured) 5.61 2006 5,300,000(f) 3,582,800
North Slope Borough General Obligation Bonds
Zero Coupon Series 1996B (MBIA Insured) 5.72 2007 8,000,000(f) 5,116,880
Total 8,699,680
Arizona (1.9%)
Chandler Water & Sewer Refunding Revenue Bonds
Series 1991 (FGIC Insured) 7.00 2012 1,250,000 1,367,225
Health Facilities Authority Hospital System
Refunding Revenue Bonds Phoenix Baptist Hospital
Series 1992 (MBIA Insured) 6.25 2011 1,650,000 1,833,942
Phoenix Civic Improvement Wastewater System Lease
Refunding Revenue Bonds (Secondary MBIA Insured) 4.75 2023 4,500,000 4,258,260
State University Research Park Development
Refunding Bonds Series 1995 (MBIA Insured) 5.00 2021 1,975,000 1,940,181
Total 9,399,608
Arkansas (0.3%)
Jonesboro Residential Housing & Health Care
Facility Board St. Bernard's Regional Medical Center
Hospital Refunding Revenue & Construction Bonds
Series 1996B (AMBAC Insured) 5.90 2016 1,200,000 1,292,280
California (11.8%)
Contra Costa Water District Revenue Bonds
Series 1994G (MBIA Insured) 5.50 2019 4,675,000 4,801,926
Desert Sands Unified School District Convertible Capital
Appreciation Certificates Zero Coupon Series 1995
(FSA Insured) 6.45 2001 3,000,000(g) 2,719,260
Eastern Municipal Water District Riverside County
Water & Sewer Pre-refunded Revenue
Certificates of Participation Series 1991
(FGIC Insured) 6.50 2020 5,460,000 5,996,773
Fontana Unified School District San Bernardino County
General Obligation Convertible Capital Appreciation
Bonds Series 1990C (FGIC Insured) 6.15 2020 6,000,000 6,632,280
Fresno Health Facility Revenue Bonds
Holy Cross-St. Agnes (Secondary MBIA Insured) 6.625 2021 2,000,000 2,194,520
Los Angeles Department of Airports Revenue Bonds
Los Angeles International Airport Series D
(FGIC Insured) A.M.T. 5.50 2015 2,000,000 2,066,420
Los Angeles Department of Water & Power Waterworks
Refunding Revenue Bonds Series 2
(Secondary FGIC Insured) 4.50 2023 2,000,000 1,816,940
Northern California Transmission Select Auction
Variable Rate Security & Residual Interest
Revenue Bonds Inverse Floater (MBIA Insured) 5.50 2024 2,500,000(h) 2,534,350
Oceanside Certificate of Participation Refunding Bonds
Oceanside Civic Center (MBIA Insured) 5.25 2019 1,730,000 1,727,699
Rural Home Mortgage Financing Authority
Single Family Mortgage Revenue Bonds
3rd Series 1997A (GNMA Insured) A.M.T. 6.25 2029 1,500,000 1,697,550
San Diego County Certificate of Participation
Regional Authority Bonds Mt. Tower
Inverse Floater Series 1991 (MBIA Insured) 6.36 2019 9,000,000(h) 9,687,510
San Jose Redevelopment Agency Merged Area
Redevelopment Tax Allocation Bonds Series 1993
(MBIA Insured) 4.75 2024 2,400,000 2,261,736
San Jose Redevelopment Agency Tax Allocation Bonds
Series 1997 (MBIA Insured) 5.50 2017 1,000,000 1,038,160
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 1,571,010
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 2,001,300
State Public Works Board Lease Revenue Bonds
University of California Series A (AMBAC Insured) 6.40 2016 2,000,000 2,235,820
State Unlimited Tax General Obligation Bonds
(Secondary FGIC Insured) 4.75 2023 2,500,000 2,361,700
Statewide Community Development Authority
Certificate of Participation
Sutter Health Obligated Group (MBIA Insured) 5.50 2022 5,750,000 5,887,655
Total 59,232,609
Colorado (2.8%)
Denver City & County Airport Revenue Bonds Series B
(MBIA Insured) 5.25 2023 5,000,000 4,999,700
Denver City & County Airport Revenue Bonds Series B
(MBIA Insured) A.M.T. 5.75 2017 4,290,000(i) 4,490,343
Douglas County School District General Obligation
Improvement Bonds Series 1994A (MBIA Insured) 6.50 2016 1,500,000 1,681,755
Larimer County School District R-1 Certificate of
Participation Series 1997 (MBIA Insured) 5.65 2016 1,000,000(i) 1,062,390
Larimer Weld & Boulder Counties School District R-2J
Thompson Unlimited General Obligation Capital
Appreciation Bonds Zero Coupon Series 1997
(FGIC Insured) 5.45 2011 2,000,000(f) 1,001,220
Larimer Weld & Boulder Counties School District R-2J
Thompson Unlimited General Obligation Capital
Appreciation Bonds Zero Coupon Series 1997
(FGIC Insured) 5.50 2012 1,400,000(f) 662,116
Total 13,897,524
Delaware (0.2%)
Health Facilities Authority Refunding Revenue Bonds
Medical Center of Delaware Series 1989
(MBIA Insured) 7.00 2015 1,000,000 1,062,650
District of Columbia (3.0%)
College Revenue Bonds Association of American
Medical Colleges Series 1997A 5.375 2027 2,500,000 2,522,425
Howard University Revenue Bonds Series A
(MBIA Insured) 8.00 2017 60,000 61,396
Metropolitan Washington Airports Authority Airport
System Revenue Bonds Series 1992A
(MBIA Insured) A.M.T. 6.625 2019 9,420,000 10,380,840
Unlimited Tax General Obligation Refunding Bonds
Series B-2 (FSA Insured) 5.50 2010 2,000,000 2,133,600
Total 15,098,261
Florida (2.1%)
Alachua County Public Improvement Refunding
Revenue Bonds (FSA Insured) 5.125 2021 2,000,000 1,976,980
Department of Transportation Turnpike Revenue Bonds
Series 1991A (AMBAC Insured) 6.25 2020 1,250,000 1,338,488
Fort Myers Utility System Refunding Revenue Bonds
Series 1989A (BIG Insured) 6.00 2019 2,000,000 2,058,280
Gulf Breeze Local Government Loan Program Boca Raton
Series 1985E (FGIC Insured) 7.75 2015 2,000,000 2,168,220
Osceola County Transportation Pre-refunded
Revenue Bonds Series 1988A (FGIC Insured) 7.70 2013 1,215,000 1,251,085
State Correctional Privatization Commission
Certificate of Participation 350 Bed Youthful
Columbia Series A (AMBAC Insured) 5.00 2017 1,900,000 1,879,803
Total 10,672,856
Georgia (3.9%)
Atlanta Metropolitan Rapid Transit Authority Sales Tax
Pre-refunded Revenue Bonds Series L
(AMBAC Insured) 7.20 2020 3,000,000 3,199,500
Chatham County Hospital Authority Revenue Bonds
Memorial Medical Center Series 1990A
(MBIA Insured) 7.00 2021 4,500,000 4,945,905
Cherokee County Water & Sewer Authority
Water & Sewer Revenue Bonds Series 1995
(MBIA Insured) 5.20 2025 5,000,000 5,159,200
Fulton County Water & Sewer Revenue Bonds
(FGIC Insured) 6.375 2014 3,250,000 3,785,307
Richmond County Water & Sewer Refunding Revenue
Improvement Bonds Series 1996A (FGIC Insured) 5.25 2028 2,500,000 2,503,850
Total 19,593,762
Hawaii (0.2%)
Harbor System Revenue Bonds
Series 1997 (MBIA Insured) A.M.T. 5.50 2027 1,000,000 1,025,720
Illinois (2.5%)
Chicago O'Hare International Airport General Revenue
Bonds Series 1990A (AMBAC Insured) A.M.T. 7.50 2016 2,000,000 2,148,140
Chicago O'Hare International Airport Terminal
Revenue Bonds (MBIA Insured) A.M.T. 7.625 2010 3,000,000 3,226,320
Chicago Public Building Commission Pre-refunded
Revenue Bonds Series 1989A (FGIC Insured) 7.75 2006 1,000,000 1,058,670
Chicago Public Building Commission Pre-refunded
Revenue Bonds Series 1990A (MBIA Insured) 7.125 2015 5,000,000 5,421,200
St. Clair County Public Community Building
Capital Appreciation Revenue Bonds
Zero Coupon Series 1997B (FGIC Insured) 5.95 2014 2,000,000(f) 843,380
Total 12,697,710
Indiana (2.2%)
Educational Facilities Authority Pre-refunded Bonds
Valparaiso University (BIG Insured) 7.80 2008 500,000 524,855
Marion County Hospital Authority Refunding
Revenue Bonds Methodist Hospital Series 1989
(MBIA Insured) 6.50 2013 4,000,000 4,465,800
State Health Facility Finance Authority Hospital
Refunding Revenue Bonds Columbus Regional
Hospital Series 1993 (CGIC Insured) 7.00 2015 5,000,000 6,188,800
Total 11,179,455
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Kansas (0.4%)
Sedgwick & Shawnee Counties Single Family
Housing Revenue Mortgage Backed Securities
<S> <C> <C> <C> <C>
1st Series 1997A (MBIA Insured) A.M.T. 5.50 2029 2,000,000 2,196,240
Louisiana (1.5%)
Energy & Power Authority Power Refunding
Revenue Bonds Rodemacher Unit 2 Series 1991
(FGIC Insured) 6.75 2008 7,000,000(i) 7,632,240
Maine (0.4%)
State Turnpike Authority Turnpike Revenue Bonds
(MBIA Insured) 6.00 2018 1,790,000 1,936,082
Massachusetts (5.1%)
Boston Water & Sewer Commission Revenue Bonds
General Subordinate Series A (BIG Insured) 6.00 2008 2,500,000 2,544,375
Health & Educational Authority Revenue Bonds
Valley Regional Health System Series C
(Connie Lee Insured) 5.75 2018 1,500,000 1,567,620
Health & Educational Facilities Authority
Pre-refunded Revenue Bonds
Lahey Clinic Medical Center (MBIA Insured) 7.625 2018 2,200,000 2,285,602
Health & Educational Facilities Authority Pre-refunded
Revenue Bonds Northeastern University
Series 1989C (AMBAC Insured) 7.10 2006 1,000,000 1,069,590
Health & Educational Facilities Authority
Revenue Bonds Cape Cod Health System
Series A (Connie Lee Insured) 5.25 2021 4,000,000 3,967,480
Industrial Finance Agency Revenue Bonds
Brandeis University (MBIA Insured) 6.80 2019 1,700,000 1,806,794
Municipal Wholesale Electric Power Supply System
Refunding Revenue Bonds Series B (MBIA Insured) 4.75 2011 5,250,000 5,170,357
State Bay Transportation Authority Series B
(AMBAC Insured) 5.375 2025 4,000,000 4,033,400
State Turnpike Authority Metropolitan Highway
System Senior Lien Revenue Bonds Toll Road
Series 1997A (MBIA Insured) 5.00 2037 1,000,000 966,730
State Water Resource Authority Revenue Bonds
Series A (MBIA Insured) 5.50 2022 2,000,000 2,029,580
Total 25,441,528
Michigan (3.2%)
Almont Community Schools
Unlimited Tax General Obligation Bonds
Series 1996 (FGIC Insured) 5.375 2022 1,900,000 1,920,824
Battle Creek Downtown Development Authority
Tax Allocation Refunding Revenue Bonds
Series 1997 (MBIA Insured) 5.00 2017 1,000,000 980,500
Genesee County Sewer Disposal System 3
Limited Tax General Obligation Bonds
Series A (AMBAC Insured) 5.50 2016 1,400,000 1,456,056
Iron Mountain School Unlimited Tax General
Obligation Refunding Bonds (AMBAC Insured) 5.125 2021 1,500,000 1,476,810
Kalamazoo Hospital Finance Authority Refunding &
Improvement Bonds Bronson Methodist Hospital
(Secondary MBIA Insured) 6.25 2012 3,000,000 3,280,050
Lincoln Park School District County of Wayne
School Building & Site General Obligation Bonds
Series 1996 (FGIC Insured) 5.90 2026 1,500,000 1,604,085
Monroe County Pollution Control Refunding Bonds
Detroit Edison Series I-B (MBIA Insured) A.M.T. 6.55 2024 5,000,000 5,510,900
Total 16,229,225
Minnesota (2.1%)
Southern Minnesota Municipal Power Agency
Power Supply System Refunding Revenue Bonds
Series A (Secondary FGIC Insured) 4.75 2016 4,250,000 4,071,330
Southern Minnesota Municipal Power Agency
Power Supply System Refunding Revenue Bonds
Zero Coupon (MBIA Insured) 6.12 2021 6,000,000(f) 1,809,600
Western Municipal Power Agency Transmission
Pre-refunded Revenue Bonds Series 1991
(AMBAC Insured) 6.75 2016 4,500,000 4,873,185
Total 10,754,115
Mississippi (0.6%)
Alcorn County Hospital Refunding Revenue Bonds
Magnolia Regional Hospital Center (AMBAC Insured) 5.75 2013 1,000,000 1,074,170
State Home Single Family Mortgage Revenue Bonds
Series 1997H (GNMA & FNMA Insured) A.M.T. 5.50 2029 2,000,000 2,182,300
Total 3,256,470
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 4,407,280
State Board of Investments Payroll Tax Bonds Worker's
Compensation Program Series 1991 (MBIA Insured) 6.875 2020 4,750,000 5,404,923
Total 9,812,203
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 5,049,200
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(i) 5,362,300
New Jersey (0.1%)
Bayonne Municipal Utilities Authority Water System
Revenue Bonds Series 1997 (MBIA Insured) 5.00 2017 585,000 575,839
New Mexico (0.2%)
Santa Fe Water Revenue Bonds (AMBAC Insured) 6.30 2024 1,000,000 1,111,430
New York (8.0%)
Dormitory Authority City University System
Consolidated 3rd Resolution Revenue Bonds
2nd Series 1994 (MBIA Insured) 6.25 2019 2,500,000 2,736,850
Metropolitan Transportation Authority Commuter Facility
Service Contract Bonds Series L (AMBAC Insured) 7.50 2017 1,300,000 1,348,581
New York City Municipal Water Finance Authority
Water & Sewer System Revenue Bonds Series A
(Secondary MBIA Insured) 5.50 2023 5,000,000 5,113,300
State Dormitory Authority State University Education
Facility Revenue Bonds (Secondary AMBAC Insured) 5.25 2015 2,700,000 2,812,725
State Energy Resource & Development Authority
Gas Facility Revenue Bonds Brooklyn Union Gas
(MBIA Insured) A.M.T. 5.60 2025 4,500,000 4,630,455
State Energy Resource & Development Authority
Pollution Control Bonds Series 1987A
(MBIA Insured) A.M.T. 6.15 2026 3,000,000 3,234,870
State Energy Resource & Development Authority
Pollution Control Refunding Revenue Bonds
Rochester Gas & Electric (MBIA Insured) A.M.T. 6.50 2032 4,000,000 4,364,880
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 11,569,393
State Urban Development Corporation Correctional
Capital Facilities Lease Revenue Bonds
Series 1995-96 (AMBAC Insured) 5.375 2025 3,000,000 3,038,190
State Urban Development Correctional Facilities
Pre-refunded Revenue Bonds Series 1 (FSA Insured) 7.50 2020 1,500,000 1,629,495
Total 40,478,739
North Carolina (1.1%)
Charlotte Pre-refunded Certificates of Participation
Convention Facility Series 1991 (AMBAC Insured) 6.75 2021 3,150,000 3,508,879
Concord Certificate of Participation Series B
(MBIA Insured) 5.75 2016 1,480,000 1,571,923
Fayetteville Financial Corporation Installment Payment
Revenue Bonds Series 1996 (MBIA Insured) 5.625 2014 300,000 318,084
Total 5,398,886
North Dakota (0.9%)
Fargo Health System Meritcare Obligated Group A
Revenue Bonds (MBIA Insured) 5.375 2027 4,350,000 4,373,751
Ohio (1.2%)
Lorain County Hospital Facilities Refunding
Revenue Bonds EMH Regional Medical Center
Series 1995 (AMBAC Insured) 5.375 2021 2,000,000 2,014,280
Lucas County Hospital Refunding Revenue Bonds
St. Vincent Medical Center Series 1993C
(MBIA Insured) 5.25 2022 1,725,000 1,713,098
Montgomery County Hospital Facility
Refunding Revenue & Improvement Bonds
Kettering Medical Center (MBIA Insured) 5.50 2026 2,500,000 2,568,800
Total 6,296,178
Oklahoma (1.1%)
McAlester Public Works Authority Oklahoma
Improvement Refunding Revenue Bonds
(FSA Insured) 5.25 2017-18 2,470,000 2,490,221
Moore Public Works Authority Refunding
Revenue Bonds Series 1989 (AMBAC Insured) 7.80 2006 2,700,000 2,890,215
Total 5,380,436
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Pennsylvania (3.3%)
Harrisburg Authority Dauphin County Revenue Bonds
<S> <C> <C> <C> <C>
Series 1997-II (MBIA Insured) 5.625 2022 2,000,000 2,079,420
Pittsburgh Water & Sewer System Authority
Pre-refunded Revenue Bonds Series 1991A
(FGIC Insured) 6.50 2014 10,000,000 10,981,000
Robinson Township Municipal Authority Water & Sewer
Revenue Bonds (FGIC Insured) 6.00 2019 2,200,000 2,397,868
Turnpike Commission Pre-refunded Revenue Bonds
Series 1989K (MBIA Insured) 7.50 2012 1,000,000 1,083,420
Total 16,541,708
Rhode Island (0.6%)
Health & Education Building Corporation
Higher Education Facility Revenue Bonds
Series 1996 (MBIA Insured) 5.625 2026 3,000,000 3,123,450
South Carolina (0.2%)
Piedmont Municipal Power Agency Electric
Refunding Revenue Bonds (FGIC Insured) 6.25 2021 1,000,000 1,167,740
Tennessee (1.3%)
Knox County Health Education & Housing Facility Board
Hospital Refunding Revenue Bonds Fort Sanders
Alliance Obligation Group Series 1993 (MBIA Insured) 5.75 2014 3,750,000 4,109,437
Metropolitan Government Nashville & Davidson County
Sports Authority Public Improvement Revenue Bonds
Series 1996 (AMBAC Insured) 5.75 2017 2,160,000 2,292,970
Total 6,402,407
Texas (20.0%)
Austin Airport System Prior Lien Revenue Bonds
Series 1995A (MBIA Insured) A.M.T. 6.125 2025 3,000,000 3,235,980
Austin Combined Utilities System Refunding
Revenue Bonds Series 1994 (FGIC Insured) 5.75 2024 8,500,000 8,836,345
Austin Combined Utilities System
Capital Appreciation Refunding Revenue Bonds
Zero Coupon Series 1994 (FGIC Insured) 5.83 2017 5,900,000(f) 2,157,925
Austin Combined Utilities System Revenue Bonds
Series 1987 (BIG Insured) 8.625 2012-17 1,250,000 1,470,438
Bexar County Health Facility Development Hospital
Revenue Bonds San Antonio Baptist Memorial
Hospital System Series 1994 (MBIA Insured) 6.75 2019 5,000,000 5,763,300
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 16,505,714
Colorado River Municipal Water District Water System
Pre-refunded Revenue Bonds Series A
(AMBAC Insured) 6.625 2021 8,900,000 9,541,334
Corsicana Waterworks & Sewer System
Refunding Revenue Bonds Series 1997A
(FGIC Insured) 5.75 2022 2,075,000 2,181,261
Georgetown Combination Tax & Utilities System
Limited Revenue Certificates of Obligation
Series 1997 (FGIC Insured) 5.375 2017 1,000,000 1,021,410
Harris County Health Facilities Development Hospital
Revenue Bonds State Children's Hospital
Series 1989A (MBIA Insured) 7.00 2019 1,500,000 1,603,980
Harris County Public Facilities Corporation
Detention Facility Mortgage Pre-refunded
Revenue Bonds (MBIA Insured) 7.80 2011 1,000,000 1,057,500
Harris County Toll Road Senior Lien Pre-refunded
Revenue Bonds Series A (AMBAC Insured) 6.50 2017 8,170,000 9,089,288
Hillsboro Independent School District
Unlimited Tax School Building & Refunding
Revenue Bonds Series 1997 (PSFG Insured) 5.25 2026 1,000,000 1,003,690
Houston Water & Sewer System
Junior Lien Refunding Revenue Bonds
Series 1997A (FGIC Insured) 5.25 2022 7,210,000 7,215,984
League City General Obligation Refunding &
Improvement Bonds Series 1990 (FGIC Insured) 6.25 2013 2,500,000 2,641,800
Matagorda County Navigation District 1
Collateralized Pollution Control Revenue Bonds
Central Power & Light Series 1984A
(AMBAC Insured) 7.50 2014 2,500,000 2,714,975
Matagorda County Navigation District 1
Pollution Control Refunding Revenue Bonds
Houston Light & Power Series E (FGIC Insured) 7.20 2018 2,150,000 2,309,272
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 2,156,540
Municipal Power Agency Refunding Revenue Bonds
Series 1991A (AMBAC Insured) 6.75 2012 5,250,000 5,752,687
North Texas Tollway Authority Dallas North Tollway
System Refunding Revenue Bonds Series 1997A
(FGIC Insured) 5.00 2023 3,565,000 3,480,510
Turnpike Authority Dallas North Tollway
Pre-refunded Revenue Bonds Series 1990
(AMBAC Insured) 6.00 2020 5,000,000 5,111,850
Turnpike Authority Dallas North Tollway Revenue Bonds
Addison Airport Toll Tunnel Series 1994
(FGIC Insured) 6.60 2023 2,000,000 2,299,980
University of Houston System Consolidated
Pre-refunded Revenue Bonds Series 1990A
(MBIA Insured) 7.40 2006 3,160,000 3,377,313
Total 100,529,076
Virginia (3.8%)
Hanover County Industrial Development Authority
Memorial Regional Medical Center (MBIA Insured) 5.50 2025 3,800,000 3,890,972
Loudoun County Sanitation Authority Waste & Sewer
Refunding Revenue Bonds (MBIA Insured) 5.25 2030 1,435,000 1,435,000
New River Valley Regional Jail Authority
Correctional Facility Revenue Bonds Series 1997
(MBIA Insured) 5.125 2019 1,000,000 990,220
Portsmouth Redevelopment Housing Authority
Multi-family Housing Refunding Revenue Bonds
(FNMA Insured) 6.05 2008 5,780,000 6,157,029
Upper Occoquan Sewer Authority Regional Sewer
Revenue Bonds Series A (MBIA Insured) 4.75 2029 4,000,000 3,757,840
William County Lease Certificate of Participation Bonds
(MBIA Insured) 5.50 2020 2,590,000 2,651,513
Total 18,882,574
Washington (1.8%)
Public Power Supply System Non-refunded
Revenue Bonds Nuclear Project 1 Series A
(MBIA Insured) 7.50 2015 3,000,000 3,210,690
Public Power Supply System Pre-refunded
Revenue Bonds Nuclear Project 3 Series 1989A
(BIG Insured) 7.25 2016 1,000,000 1,066,620
Public Power Supply System Refunding
Revenue Bonds Nuclear Project 3 Series 1989A
(BIG Insured) 6.00 2018 3,000,000 3,089,160
Spokane Regional Solid Waste Management System
Revenue Bonds Series 1989
(AMBAC Insured) A.M.T. 7.75 2011 300,000 315,381
Spokane Regional Solid Waste Management System
Revenue Bonds Series 1989
(AMBAC Insured) A.M.T. 7.875 2007 1,250,000 1,319,263
Total 9,001,114
West Virginia (2.7%)
Board of Regents Registration Fee Pre-refunded
Revenue Bonds Series 1989B (MBIA Insured) 7.40 2009 2,000,000 2,124,560
School Building Authority Capital Improvement
Pre-refunded Revenue Bonds (MBIA Insured) 7.25 2015 3,415,000 3,736,727
School Building Authority Capital Improvement
Revenue Bonds Series 1990B (MBIA Insured) 6.75 2017 5,000,000 5,412,150
State Parkway Economic Development & Tourism
Authority Parkway Pre-refunded Revenue Bonds
Series 1989 (FGIC Insured) 7.125 2019 2,000,000 2,130,840
Total 13,404,277
Wisconsin (0.5%)
Center District Sales Tax Appreciation Senior
Dedicated Bonds Zero Coupon Series A
(MBIA Insured) 6.03 2017-21 7,045,000(f) 2,282,983
Total municipal bonds
(Cost: $440,682,497) $489,755,266
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Short-term security (0.2%)
Issuer (d,e) Effective Amount Value(a)
yield payable at
maturity
Municipal note
Valdez Alaska Marine Terminal Exxon Pipeline
Series 1985 V.R.
<S> <C> <C> <C>
10-01-25 5.00% $ 800,000 $ 800,000
Total short-term security
(Cost: $800,000) $ 800,000
Total investments in securities
(Cost: $441,482,497)(j) $490,555,266
See accompanying notes to investments in securities.
</TABLE>
<PAGE>
Investments in securities
IDS Insured Tax-Exempt Fund
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 12-31-97 06-30-97
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 abbreviations are used in the portfolio descriptions:
A.M.T. -- Alternative Minimum Tax-- As of Dec. 31, 1997, the value of
securities subject to alternative minimum tax represented 19.3%
of net assets.
V.R. -- Variable Rate
(e) The Fund is entitled to receive principal amount from issuer or corporate
guarantor, if indicated in parentheses, after a day or a week's notice. The
maturity date disclosed represents the final maturity. Interest rate varies to
reflect current market conditions; rate shown is the effective rate on Dec. 31,
1997.
(f) For zero coupon bonds, the interest rate disclosed represents the annualized
effective yield on the date of acquisition.
(g) 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.
(h) 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, 1997. Inverse floaters in the aggregate represent 2.4% of the
Fund's net assets as of Dec. 31, 1997.
(i) 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 1998 $20,000,000
(j) At Dec. 31, 1997, the cost of securities for federal income tax purposes was
approximately $441,050,000 and the approximate aggregate gross unrealized
appreciation and depreciation based on that cost was:
Unrealized appreciation..........................................$49,505,000
Unrealized depreciation............................................ --
Net unrealized appreciation......................................$49,505,000
<PAGE>
Board members and officers
IDS Insured Tax-Exempt Fund
Independent board members and officers
Chairman William R. Pearce*
of the board Chairman of the board, Board Services Corporation (provides
administrative services to boards including the boards of the
IDS and IDSLife funds and Master Trust portfolios).
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.
Heinz F. Hutter
Former president and chief operating officer, Cargill, Inc.
Anne P. Jones
Attorney and telecommunications consultant.
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.
Officer
Vice president, Leslie L. Ogg*
general counsel President, treasurer and corporate secretary of Board Services
and secretary Corporation.
Board members and officers associated with AEFC
President John R. Thomas*
Senior vice president, AEFC.
William H. Dudley*
Senior advisor to the chief executive officer, AEFC.
David R. Hubers*
President and chief executive officer, AEFC.
Officers associated with AEFC
Vice president Peter J. Anderson*
Senior vice president, AEFC
Treasurer Matthew N. Karstetter*
Vice president, AEFC
* Interested person as defined by the Investment Company Act of 1940.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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IDS Progressive Fund
Invests primarily in undervalued common stocks. The Fund holds stocks for the
long term with the goal of capital growth.
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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.
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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.
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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.
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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.
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IDS Equity Value Fund
Invests primarily in undervalued common stocks that offer potential for growth
of capital and income.
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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.
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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.
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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.
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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.
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IDS Bond Fund
Invests mainly in corporate bonds, at least 50% in the higher rated, lower risk
bond categories, or the equivalent, and in government bonds.
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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.
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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.
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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.
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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.
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IDS State Tax-Exempt Funds
(CA, MA, MI, MN, NY, OH)
Invests primarily in high- and medium-grade municipal securities to provide
income to residents of each respective state that is exempt from federal, state
and local income taxes. (New York is the only state that is exempt at the local
level.)
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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.
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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.
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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.
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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.
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For more complete information about any of these funds, including charges and
expenses, you can obtain a prospectus by contacting your financial advisor or
writing to American Express Shareholder Service, P.O. Box 534, Minneapolis, MN
55440-0534. Read it carefully before you invest or send money.
<PAGE>
Quick telephone reference
American Express Redemptions and exchanges, National/Minnesota
Financial Advisors dividend payments or 800-437-3133
Telephone Transaction reinvestments and automatic
Service payment arrangements Mpls./St. Paul area:
671-3800
TTY Service For the hearing impaired 800-846-4852
American Express Automated account information 800-862-7919
Financial Advisors (TouchTone(R) phones only),
Easy Access Line including current fund prices
and performance, account values
and recent account transactions
AMERICAN EXPRESS Financial Advisors
IDS Insured Tax-Exempt Fund
IDS Tower 10
Minneapolis, MN 55440-0010
