AXP (SM) Insured
Tax-Exempt
Fund
1999 SEMIANNUAL REPORT
American
Express(R)
Funds
(icon of) padlock
AXP Insured Tax-Exempt Fund, seeks to
provide shareholders with a high level of
income generally exempt from federal
income tax and preservation of
shareholders' capital.
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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 AXP 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.
CONTENTS
From the Chairman 3
From the Portfolio Manager 3
Fund Facts 5
The 10 Largest Holdings 6
Financial Statements 7
Notes to Financial Statements 10
Investments in Securities 18
<PAGE>
(picture of) Arne H. Carlson
Arne H. Carlson
Chairman of the board
From the Chairman
We are in an extraordinary period for investing in financial assets. Looking at
year 2000, American Express Financial Corporation, the Fund's investment
manager, expects the economy to continue to grow and long-term interest rates to
rise only slightly. This is a great time to take a close look at your goals and
investments. We encourage you to:
o Consult a professional investment adviser who can help you cut through
mountains of data.
o Set financial goals that extend beyond those achievable through retirement
plans of your employer.
o Learn as much as you can about your current investments.
The portfolio manager's letter that follows provides a review of the Fund's
investment strategies and performance. The annual report contains other valuable
information as well. The Fund's prospectus describes its investment objectives
and how it intends to achieve those objectives. As experienced investors know,
information is vital to making good investment decisions.
So, take a moment and decide again whether the Fund's investment objectives and
management style fit with your other investments to help you reach your
financial goals. And make it a practice on a regular basis to assess your
investment options.
On behalf of the Board,
Arne H. Carlson
<PAGE>
(picture of) Paul B. Hylle
Paul B. Hylle
Portfolio Manager
From the Portfolio Manager
In a very difficult environment for bonds, especially municipal issues, AXP
Insured Tax-Exempt Fund's Class A shares experienced a loss (excluding the sales
charge) of 2.74% on a total return basis (which includes net asset value change
and interest income) during the first half of the fiscal year - July through
December 1999. The Fund's monthly interest payout, however, remained largely
unchanged over the six months.
Although the data had yet to reflect a significant upturn in consumer
prices, the fear of potentially higher inflation was in the air when the period
began. Fostering investors' concerns were ongoing economic strength, a run-up in
oil prices, an unusually tight labor market and a hike in short-term interest
rates by the Federal Reserve Board just prior to the start of the period.
SELLING PRESSURE INCREASES
The ultimate result of these factors was increased selling pressure on bonds,
which in turn dragged down prices for much of the six months. A particular
problem for municipal issues was heavy selling on the part of insurance
companies, which historically have been large holders of municipals. Also adding
to the negative environment was a sizable new supply of corporate bonds, which
further drew potential buyers away from the municipal market, and generally weak
cash flow into municipal bond mutual funds.
For the Fund, this meant that, while it continued to earn interest income from
its holdings, the drop in bond prices resulted in a decline in its net asset
value (NAV). This was aggravated somewhat by my decision to increase the
duration of the Fund's portfolio in anticipation of a potential interest-rate
decline, which did not develop. (Duration, a function of the average maturity of
the securities in the portfolio, affects the NAV's sensitivity to interest-rate
changes. In general, the longer the duration, the greater the sensitivity.) On
the other hand, I'm glad to be able to report that the Fund's interest income
held up relatively well. This reflects my continued emphasis on keeping the
Fund's income as high as prudently possible.
As we enter the second half of the fiscal year, I'm looking forward to what I
think will be a gradually improving bond market, especially for municipals.
First and probably foremost, I think we'll see signs that the economy is
starting to cool off a bit, which in turn should alleviate concern on the part
of investors and the Federal Reserve Board that inflation may be about to shoot
up. Ultimately, that should reduce some of the upward pressure on interest
rates. Beyond that, it appears that the bulk of selling pressure from
institutional bond investors is over and that the municipal market won't be
flooded with a supply of new issues in the months ahead.
Paul B. Hylle
<PAGE>
Fund Facts
Class A -- 6-month performance
(All figures per share)
Net asset value (NAV)
Dec. 31, 1999 $5.16
June 30, 1999 $5.44
Decrease $0.28
Distributions -- July 1, 1999 - Dec. 31, 1999
From income $0.14
From capital gains $ --
Total distributions $0.14
Total return* -2.74%**
Class B -- 6-month performance
(All figures per share)
Net asset value (NAV)
Dec. 31, 1999 $5.16
June 30, 1999 $5.44
Decrease $0.28
Distributions -- July 1, 1999 - Dec. 31, 1999
From income $0.12
From capital gains $ --
Total distributions $0.12
Total return* -3.11%**
Class Y -- 6-month performance
(All figures per share)
Net asset value (NAV)
Dec. 31, 1999 $5.15
June 30, 1999 $5.44
Decrease $0.29
Distributions -- July 1, 1999 - Dec. 31, 1999
From income $0.14
From capital gains $ --
Total distributions $0.14
Total return* -2.68%**
*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>
<TABLE>
<CAPTION>
The 10 Largest Holdings
Percent Value
<S> <C> C>
(of net assets) (as of Dec. 31, 1999)
Brazos River Texas Authority Collateralized Pollution Control
Refunding Revenue Bonds Texas Utility Electric Series 1992C A.M.T.
6.70% 2022 3.40% $15,601,698
Pittsburgh Pennsylvania Water & Sewer Authority System Pre-refunded
Revenue Bonds Series 1991A
6.50% 2014 2.29 10,502,600
New York State Energy Research & Development Authority Solid Waste
Disposal Revenue Bonds State Electric & Gas Company Series 1993A A.M.T.
5.70% 2028 2.26 10,377,994
Metropolitan Washington D.C. Airports Authority Airport System Revenue
Bonds Series 1992A A.M.T.
6.63% 2019 2.11 9,675,847
San Diego County California Certificate of Participation Regional
Authority Bonds Mt. Tower Series 1991 Inverse Floater
6.36% 2019 2.03 9,294,119
Colorado River Texas Municipal Water District Water System
Pre-refunded Revenue Bonds Series 1991A
6.63% 2021 1.99 9,114,490
Harris County Texas Toll Road Senior Lien Pre-refunded Revenue Bonds
Series 1992A
6.50% 2017 1.89 8,685,445
Austin Texas Combined Utilities System Refunding Revenue Bonds Series 1994
5.75% 2024 1.88 8,611,520
Louisiana Energy & Power Authority Refunding Revenue Bonds Rodemacher
Unit 2 Series 1991
6.75% 2008 1.59 7,294,000
Houston Texas Water & Sewer System Junior Lien
Refunding Revenue Bonds Series 1997A
5.25% 2022 1.40 6,409,690
Note: Investment income from certain securities may be subject to the
Alternative Minimum Tax (A.M.T.). For further detail about these holdings,
please refer to the section entitled "Investments in Securities."
The 10 holdings listed here
make up 20.84% of net assets
(icon of) pie chart
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<CAPTION>
Financial Statements
Statement of assets and liabilities
AXP Insured Tax-Exempt Fund
Dec. 31, 1999 (Unaudited)
Assets
Investments in securities, at value (Note 1)
<S> <C>
(identified cost $444,561,856) $450,269,565
Cash in bank on demand deposit 11,459
Accrued interest receivable 7,309,322
Receivable for investment securities sold 1,007,896
---------
Total assets 458,598,242
-----------
Liabilities
Dividends payable to shareholders 377,488
Payable for investment securities purchased 2,281
Accrued investment management services fee 5,659
Accrued distribution fee 4,325
Accrued service fee 2,345
Accrued transfer agency fee 649
Accrued administrative services fee 503
Other accrued expenses 77,846
------
Total liabilities 471,096
-------
Net assets applicable to outstanding capital stock $458,127,146
============
Represented by
Shares of beneficial interest-- $.01 par value (Note 1) $ 887,704
Additional paid-in capital 466,384,677
Excess of distributions over net investment income (23,135)
Accumulated net realized gain (loss) (14,725,923)
Unrealized appreciation (depreciation) on investments (Note 5) 5,603,823
---------
Total-- representing net assets applicable to outstanding shares $458,127,146
============
Net assets applicable to outstanding shares: Class A $401,157,664
Class B $ 56,968,256
Class Y $ 1,226
Net asset value per share of outstanding shares: Class A shares 77,731,687 $ 5.16
Class B shares 11,038,459 $ 5.16
Class Y shares 238 $ 5.15
----------- ------------
See accompanying notes to financial statements.
</TABLE>
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<TABLE>
<CAPTION>
Statement of operations
AXP Insured Tax-Exempt Fund
Six months ended Dec. 31, 1999 (Unaudited)
Investment income
Income:
<S> <C>
Interest $ 14,309,380
------------
Expenses (Note 2):
Investment management services fee 1,086,842
Distribution fee
Class A 529,389
Class B 297,639
Transfer agency fee 110,386
Incremental transfer agency fee
Class A 10,902
Class B 2,569
Administrative services fees and expenses 98,701
Compensation of board members 4,288
Custodian fees 19,237
Printing and postage 14,970
Registration fees 24,523
Audit fees 9,250
Other 264
---
Total expenses 2,208,960
Earnings credits on cash balances (Note 2) (9,797)
------
Total net expenses 2,199,163
---------
Investment income (loss) -- net 12,110,217
----------
Realized and unrealized gain (loss) -- net
Net realized gain (loss) on:
Security transactions (Note 3) (59,916)
Financial futures contracts (626,308)
--------
Net realized gain (loss) on investments (686,224)
Net change in unrealized appreciation (depreciation) on investments (24,965,666)
-----------
Net gain (loss) on investments (25,651,890)
Net increase (decrease) in net assets resulting from operations $(13,541,673)
============
See accompanying notes to financial statements.
</TABLE>
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<TABLE>
<CAPTION>
Statements of changes in net assets
AXP Insured Tax-Exempt Fund
Dec. 31, 1999 June 30, 1999
Six months ended Year ended
(Unaudited)
Operations and distributions
<S> <C> <C>
Investment income (loss) -- net $ 12,110,217 $ 24,414,236
Net realized gain (loss) on investments (686,224) 734,137
Net change in unrealized appreciation (depreciation) on investments (24,965,666) (16,718,013)
----------- -----------
Net increase (decrease) in net assets resulting from operations (13,541,673) 8,430,360
----------- ---------
Distributions to shareholders from:
Net investment income
Class A (10,832,938) (22,223,076)
Class B (1,299,888) (2,197,167)
Class Y (33) (68)
Net realized gain
Class A (13,944) (922,787)
Class B (1,999) (107,713)
Class Y -- (3)
-------- --------
Total distributions (12,148,802) (25,450,814)
----------- -----------
Share transactions (Note 4)
Proceeds from sales
Class A shares (Note 2) 34,167,158 58,225,005
Class B shares 9,280,010 23,201,849
Reinvestment of distributions at net asset value
Class A shares 7,534,117 15,818,861
Class B shares 1,003,698 1,774,014
Class Y shares 33 70
Payments for redemptions
Class A shares (57,390,991) (74,499,480)
Class B shares (Note 2) (10,641,078) (6,558,443)
----------- ----------
Increase (decrease) in net assets from share transactions (16,047,053) 17,961,876
----------- ----------
Total increase (decrease) in net assets (41,737,528) 941,422
Net assets at beginning of period 499,864,674 498,923,252
----------- -----------
Net assets at end of period $458,127,146 $499,864,674
============ ============
See accompanying notes to financial statements.
</TABLE>
<PAGE>
Notes to Financial Statements
AXP Insured Tax-Exempt Fund
(Unaudited as to Dec. 31, 1999)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
AXP Special Tax-Exempt Series Trust was organized as a Massachusetts business
trust on April 7, 1986. AXP Special Tax-Exempt Series Trust is a "series fund"
that is currently composed of six individual funds, including AXP 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.
o Class A shares are sold with a front-end sales charge.
o Class B shares may be subject to a contingent deferred sales charge and
automatically convert to Class A shares during the ninth calendar year of
ownership.
o Class Y shares have no sales charge and are offered only to qualifying
institutional investors.
All classes of shares have identical voting, dividend and liquidation rights.
The distribution fee, incremental 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.
The Fund's significant accounting policies are summarized below:
Use of estimates
Preparing financial statements that conform to generally accepted accounting
principles requires management to make estimates (e.g., on assets and
liabilities) that could differ from actual results.
Valuation of securities
All securities are valued at the close of each business day. Securities traded
on national securities exchanges or included in national market 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 that reflects fair value
as quoted by dealers 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
To produce incremental earnings, protect gains, and facilitate buying and
selling of securities for investments, the Fund may buy and sell put and call
options and write covered call options on portfolio securities as well as write
cash-secured put options. The risk in writing a call option is that the Fund
gives up the opportunity for 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 being unable to enter into a
closing transaction if a liquid secondary market does not exist. The Fund also
may write over-the-counter options where completing the obligation depends 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 when the option transaction expires or closes. 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
To gain exposure to or protect itself from market changes, the Fund may buy and
sell financial futures contracts. Risks of entering into futures contracts and
related options include the possibility of 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
The Fund's policy is to comply with all sections of the Internal Revenue Code
that apply to regulated investment companies and to distribute substantially all
of its taxable income to shareholders. No provision for income or excise taxes
is thus required.
Net investment income (loss) and net realized gains (losses) may differ for
financial statement and tax purposes primarily because of deferred 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.
As of Dec. 31, 1999, American Express Finanical Corporation (AEFC) owned
238 Class Y shares.
2. EXPENSES AND SALES CHARGES
The Fund has an agreement with American Express Financial Corporation (AEFC) to
manage its portfolio and provide administrative services. 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. A minor
portion of additional administrative service expenses paid by the Fund are
consultants' fees and fund office expenses. 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, 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:
o Class A $19.50
o Class B $20.50
o Class Y $17.50
The Fund has agreements with American Express Financial Advisors Inc. (the
Distributor) for distribution and shareholder services. Under a Plan and
Agreement of Distribution, the Fund pays a distribution fee at an annual rate up
to 0.25% of the Fund's average daily net assets attributable to Class A shares
and up to 1.00% for Class B shares.
Under a Shareholder Service Agreement, the Fund's Class Y shares pay a fee
for service provided to shareholders by financial advisors and other servicing
agents. 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 the Distributor for distributing Fund shares were
$390,581 for Class A and $79,668 for Class B for the six months ended Dec. 31,
1999.
During the six months ended Dec. 31, 1999, the Fund's custodian and transfer
agency fees were reduced by $9,797 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 $17,838,633 and $44,999,345, respectively, for the six
months ended Dec. 31, 1999. 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, 1999
Class A Class B Class Y
Sold 6,499,355 1,753,058 --
Issued for reinvested distributions 1,426,507 190,070 6
Redeemed (10,887,813) (2,017,720) --
----------- ---------- ----------
Net increase (decrease) (2,961,951) (74,592) 6
Year ended June 30, 1999
Class A Class B Class Y
Sold 10,339,760 4,119,334 --
Issued for reinvested distributions 2,813,067 315,747 12
Redeemed (13,244,629) (1,174,064) --
----------- ---------- --------
Net increase (decrease) (91,802) 3,261,017 12
5. INTEREST RATE FUTURES CONTRACTS
As of Dec. 31, 1999, investments in securities included securities valued
at $970,610 that were pledged as collateral to cover initial margin deposits on
73 open purchase contracts. The market value of the open purchase contracts as
of Dec. 31, 1999, was $6,750,219 with a net unrealized loss of $103,886. See
"Summary of significant accounting policies."
6. BANK BORROWINGS
The Fund has a revolving credit agreement with U.S. Bank, N.A., whereby the Fund
is permitted to have bank borrowings for temporary or emergency purposes to fund
shareholder redemptions. The Fund must have asset coverage for borrowings not to
exceed the aggregate of 333% of advances equal to or less than five business
days plus 367% of advances over five business days. The agreement, which enables
the Fund to participate with other American Express mutual funds, permits
borrowings up to $200 million, collectively. Interest is charged to each Fund
based on its borrowings at a rate equal to the Federal Funds Rate plus 0.30% or
the Eurodollar Rate (Reserve Adjusted) plus 0.20%. Borrowings are payable up to
90 days after such loan is executed. The Fund also pays a commitment fee equal
to its pro rata share of the amount of the credit facility at a rate of 0.05%
per annum. The Fund had no borrowings outstanding during the six months ended
Dec. 31, 1999.
<PAGE>
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<CAPTION>
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
<S> <C> <C> <C> <C> <C>
1999b 1999 1998 1997 1996
Net asset value, beginning of period $5.44 $5.63 $5.51 $5.43 $5.40
Income from investment operations:
Net investment income (loss) .14 .27 .28 .30 .30
Net gains (losses) (both realized and unrealized) (.28) (.18) .13 .07 .03
Total from investment operations (.14) .09 .41 .37 .33
Less distributions:
Dividends from net investment income (.14) (.27) (.29) (.29) (.28)
Distributions from realized gains -- (.01) -- -- (.02)
Total distributions (.14) (.28) (.29) (.29) (.30)
Net asset value, end of period $5.16 $5.44 $5.63 $5.51 $5.43
Ratios/supplemental data
Net assets, end of period (in millions) $401 $439 $455 $462 $491
Ratio of expenses to average daily net assetsd .82%c .75% .73% .74% .75%
Ratio of net investment income (loss) to average daily net assets 5.11%c 4.87% 5.09% 5.42% 5.16%
Portfolio turnover rate (excluding short-term securities) 4% 13% 17% 33% 52%
Total returne (2.74%) 1.74% 7.60% 7.08% 6.26%
a For a share outstanding throughout the period. Rounded to the nearest cent.
b Six months ended Dec. 31, 1999 (Unaudited).
c Adjusted to an annual basis.
d Effective fiscal year 1996, expense ratio is based on total expenses of the
Fund before reduction of earnings credits on cash balances.
e Total return does not reflect payment of a sales charge.
</TABLE>
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<TABLE>
<CAPTION>
Fiscal period ended June 30,
Per share income and capital changesa
Class B Class Y
1999b 1999 1998 1997 1996 1999b 1999 1998 1997 1996
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $5.44 $5.63 $5.51 $5.43 $5.40 $5.44 $5.64 $5.52 $5.44 $5.41
Income from investment operations:
Net investment income (loss) .12 .23 .24 .25 .26 .14 .30 .29 .30 .31
Net gains (losses)
(both realized and unrealized) (.28) (.18) .13 .08 .03 (.29) (.19) .13 .08 .03
Total from investment operations (.16) .05 .37 .33 .29 (.15) .11 .42 .38 .34
Less distributions:
Dividends from net
investment income (.12) (.23) (.25) (.25) (.24) (.14) (.30) (.30) (.30) (.29)
Distributions from realized gains-- (.01) -- -- (.02) -- (.01) -- -- (.02)
Total distributions (.12) (.24) (.25) (.25) (.26) (.14) (.31) (.30) (.30) (.31)
Net asset value, end of period $5.16 $5.44 $5.63 $5.51 $5.43 $5.15 $5.44 $5.64 $5.52 $5.44
Ratios/supplemental data
Net assets, end of period (in millions) $57 $61 $44 $31 $21 $-- $-- $-- $-- $--
Ratio of expenses to
average daily net assetsd 1.58%c 1.51% 1.49% 1.50% 1.51% .71%c .60% .48% .58% .57%
Ratio of net investment income
(loss) to average daily net assets 4.36%c 4.13% 4.34% 4.71% 4.42% 5.19%c 5.01% 5.30% 5.78% 5.32%
Portfolio turnover rate
(excluding short-term securities) 4% 13% 17% 33% 52% 4% 13% 17% 33% 52%
Total returne (3.11%) .99% 6.80% 6.26% 5.46% (2.68%) 1.87% 7.73% 7.25% 6.40%
a For a share outstanding throughout the period. Rounded to the nearest cent.
b Six months ended Dec. 31, 1999 (Unaudited).
c Adjusted to an annual basis.
d Effective fiscal year 1996, expense ratio is based on total expenses of the
Fund before reduction of earnings credits on cash balances.
e Total return does not reflect payment of a sales charge.
</TABLE>
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<TABLE>
<CAPTION>
Investments in Securities
AXP Insured Tax-Exempt Fund
Dec. 31, 1999 (Unaudited)
(Percentages represent value of investments compared to net assets)
Municipal bonds (96.6%)
Name of issuer and Coupon Principal Value(a)
title of issue(b,c) rate amount
Alabama (1.2%)
Jefferson County Capital Improvement
Sewer Revenue Bonds Series A (FGIC Insured)
<S> <C> <C> <C>
02-01-39 5.13% $3,000,000 $2,501,040
Mobile General Obligation Capital Improvement Warrants
Convention Center Pre-refunded Bonds
Series 1990 (AMBAC Insured)
08-15-20 7.13 3,000,000 3,115,080
Total 5,616,120
Alaska (2.0%)
North Slope Borough Capital Appreciation
Unlimited General Obligation Bonds
Zero Coupon Series 1995A (MBIA Insured)
06-30-06 5.61 5,300,000(d) 3,772,328
North Slope Borough General Obligation Bonds
Zero Coupon Series 1996B (MBIA Insured)
06-30-07 5.72 8,000,000(d) 5,372,400
Total 9,144,728
Arizona (1.5%)
Chandler Water & Sewer Refunding Revenue Bonds
Series 1991 (FGIC Insured)
07-01-12 7.00 1,250,000 1,303,300
Health Facilities Authority Hospital System
Refunding Revenue Bonds Phoenix Baptist Hospital
Series 1992 (MBIA Insured)
09-01-11 6.25 1,650,000 1,736,790
Phoenix Civic Improvement Wastewater System
Lease Refunding Revenue Bonds (Secondary MBIA Insured)
07-01-23 4.75 4,500,000 3,688,605
Total 6,728,695
Arkansas (0.3%)
Jonesboro Residential Housing & Health Care Facility Board
St. Bernards Regional Medical Center Hospital Refunding
Revenue & Construction Bonds Series 1996B
(AMBAC Insured)
07-01-16 5.90 1,200,000 1,191,264
California (12.1%)
Contra Costa Water District Revenue Bonds
Series 1994G (MBIA Insured)
10-01-19 5.50 4,675,000 4,463,363
Delta Counties Home Mortgage Finance Authority
Single Family Mortgage Revenue
Bonds Series 1998A (MBIA Insured) A.M.T.
06-01-24 6.70 1,045,000 1,110,083
Desert Sands Unified School District Convertible
Capital Appreciation Certificates Zero Coupon Series 1995
(FSA Insured)
03-01-20 6.45 3,000,000(g) 2,871,000
Eastern Municipal Water District Riverside County
Water & Sewer Pre-refunded Revenue
Certificates of Participation Series 1991 (FGIC Insured)
07-01-20 6.50 5,460,000 5,732,726
Fontana Unified School District
San Bernardino County General Obligation
Convertible Capital Appreciation Bonds
Series 1995C (FGIC Insured)
05-01-20 6.15 6,000,000 6,103,319
Fresno Health Facility Revenue Bonds Holy Cross-St. Agnes
(Secondary MBIA Insured)
06-01-21 6.63 2,000,000 2,133,400
Los Angeles Department of Airports Revenue Bonds
Los Angeles International Airport Series 1995D
(FGIC Insured) A.M.T.
05-15-15 5.50 2,000,000 1,933,440
Los Angeles Department of Water & Power Waterworks
Refunding Revenue Bonds
Second Issue (Secondary FGIC Insured)
05-15-23 4.50 1,520,000 1,206,318
Northern California Transmission Select Auction
Variable Rate Security & Residual Interest Revenue Bonds
Inverse Floater (MBIA Insured)
04-29-24 5.50 2,500,000(e) 2,328,800
Oceanside Certificate of Participation Refunding Bonds
Oceanside Civic Center (MBIA Insured)
08-01-19 5.25 1,730,000 1,587,189
Rural Home Mortgage Financing Authority
Single Family Mortgage Revenue Bonds 3rd
Series 1997A (GNMA Insured) A.M.T.
09-01-29 7.00 1,425,000 1,527,657
San Diego County Certificate of Participation
Regional Authority Bonds Mt. Tower
Series 1991 Inverse Floater (MBIA Insured)
11-18-19 6.36 9,000,000(e) 9,294,119
San Jose Redevelopment Agency Merged Area
Redevelopment Tax Allocation Bonds
Series 1993 (MBIA Insured)
08-01-24 4.75 2,400,000 1,971,528
San Mateo County Joint Power Financing Authority
Lease Revenue Bonds San Mateo County Health Center
Series 1994A (FSA Insured)
07-15-22 5.75 1,500,000 1,596,855
State Public Works Board Lease Revenue Bonds
Department of Correction Substance Abuse Treatment
Facility & State Prison at Corcoran
Series 1996A (AMBAC Insured)
01-01-21 5.25 2,000,000 1,820,020
State Public Works Board Lease Revenue Bonds
University of California Series 1992A (AMBAC Insured)
12-01-16 6.40 2,000,000 2,141,240
State Unlimited Tax General Obligation Bonds
(Secondary FGIC Insured)
09-01-23 4.75 2,100,000 1,733,508
Statewide Community Development Authority
Certificate of Participation
Sutter Health Obligated Group (MBIA Insured)
08-15-22 5.50 5,750,000 5,349,225
Total 54,903,790
Colorado (2.2%)
Denver City & County Airport Revenue Bonds Series 1995B
(MBIA Insured) A.M.T.
11-15-17 5.75 4,290,000(i) 4,163,917
Denver City & County Airport Revenue Bonds Series A
(FSA Insured) A.M.T.
11-15-25 5.00 2,000,000 1,648,080
Douglas County School District General Obligation
Improvement Bonds Series 1994A (MBIA Insured)
12-15-16 6.50 1,500,000 1,601,220
Larimer County School District R-1 Certificate of
Participation Series 1997 (MBIA Insured)
12-01-16 5.65 1,000,000 983,910
Larimer, Weld & Boulder Counties School District R-2J
Thompson Unlimited General Obligation Capital
Appreciation Bonds Zero Coupon
Series 1997 (FGIC Insured)
12-15-11 5.45 2,000,000(d) 1,022,620
12-15-12 5.50 1,400,000(d) 669,998
Total 10,089,745
Delaware (0.2%)
Health Facilities Authority Refunding Revenue Bonds
Medical Center of Delaware Series 1989 (MBIA Insured)
10-01-15 7.00 1,000,000 1,090,140
District of Columbia (0.5%)
Association of American Medical Colleges
College Revenue Bonds Series 1997A (AMBAC Insured)
02-15-27 5.38 2,500,000 2,209,825
Florida (0.9%)
Alachua County Public Improvement
Refunding Revenue Bonds
(FSA Insured)
08-01-21 5.13 2,000,000 1,780,780
Department of Transportation Turnpike Revenue Bonds
Series 1991A (AMBAC Insured)
07-01-20 6.25 1,250,000 1,281,750
State Correctional Privatization Commission
Certificate of Participation 350 Bed Youthful Columbia
Series 1995A (AMBAC Insured)
08-01-17 5.00 1,000,000 896,230
Total 3,958,760
Georgia (3.2%)
Chatham County Hospital Authority Revenue Bonds
Memorial Medical Center Series 1990A (MBIA Insured)
01-01-21 7.00 4,500,000 4,709,386
Cherokee County Water & Sewer Authority
Water & Sewer Revenue Bonds Series 1995
(MBIA Insured)
08-01-25 5.20 4,935,000 4,457,637
Fulton County Water & Sewer Revenue Bonds
(FGIC Insured)
01-01-14 6.38 3,250,000 3,514,606
Richmond County Water & Sewer Refunding Revenue
Improvement Bonds Series 1996A (FGIC Insured)
10-01-28 5.25 2,500,000 2,198,325
Total 14,879,954
Hawaii (0.2%)
Harbor System Revenue Bonds
Series 1997 (MBIA Insured) A.M.T.
07-01-27 5.50 1,000,000 887,530
Illinois (5.3%)
Chicago O'Hare International Airport
General Revenue Bonds Series 1990A
(AMBAC Insured) A.M.T.
01-01-16 7.50 1,045,000 1,066,088
Chicago Public Building Commission
Pre-refunded Revenue Bonds Series 1990A (MBIA Insured)
01-01-15 7.13 5,000,000 5,111,700
Chicago Reform Board of Trustees
Board of Education Unlimited Tax General Obligation
Refunding Bonds Dedicated Tax Revenue
Zero Coupon Series 1999A (FGIC Insured)
12-01-21 5.27 10,465,000(d) 2,619,808
Cook County Consolidated High School
District 200 Limited Tax General Obligation Bonds
Oak Park Zero Coupon Series 1998 (FSA Insured)
12-01-15 5.60 7,190,000(d) 2,745,933
12-01-17 5.62 3,750,000(d) 1,238,475
McHenry County Community High School District
157 Unlimited Tax Capital Appreciation General
Obligation Bonds Zero Coupon Series 1998 (FSA Insured)
12-01-17 5.60 5,790,000(d) 1,912,205
Southern Illinois University Housing & Auxiliary
Facilities System Revenue Bonds
Zero Coupon Series 1999A (MBIA Insured)
04-01-26 5.55 4,000,000(d) 757,640
St. Clair County Public Community Building
Capital Appreciation Revenue Bonds
Zero Coupon Series 1997B (FGIC Insured)
12-01-14 5.95 2,000,000(d) 831,640
St. Clair County Unlimited Tax Capital Appreciation
General Obligation Bonds Zero Coupon
Series 1999 (FGIC Insured)
10-01-16 5.58 4,710,000(d) 1,707,611
10-01-17 5.58 6,745,000(d) 2,277,989
10-01-18 5.80 6,935,000(d) 2,067,462
10-01-19 5.80 7,060,000(d) 1,958,162
Total 24,294,713
Indiana (2.5%)
Fort Wayne Hospital Authority Revenue Bonds
Parkview Health System (MBIA Insured)
11-15-28 4.75 2,500,000 1,943,875
Marion County Hospital Authority Refunding Revenue Bonds
Methodist Hospital Series 1989 (MBIA Insured)
09-01-13 6.50 4,000,000 4,047,480
State Health Facility Finance Authority Hospital
Refunding Revenue Bonds Columbus Regional Hospital
Series 1993 (CGIC Insured)
08-15-15 7.00 5,000,000 5,636,250
Total 11,627,605
Kansas (0.5%)
Labette County Single Family Housing Revenue
Bonds Series 1998A-2 (GNMA Insured)
12-01-11 7.65 215,000 222,729
Sedgwick & Shawnee Counties Single Family
Housing Revenue Mortgage Backed Securities
1st Series 1997A (MBIA Insured) A.M.T.
06-01-29 6.95 1,810,000(h) 1,941,786
Total 2,164,515
Louisiana (1.6%)
Energy & Power Authority Refunding Revenue Bonds
Rodemacher Unit 2 Series 1991 (FGIC Insured)
01-01-08 6.75 7,000,000 7,294,000
Maine (0.4%)
State Turnpike Authority Turnpike Revenue Bonds
(MBIA Insured)
07-01-18 6.00 1,790,000 1,905,688
Massachusetts (4.3%)
Health & Educational Facilities Authority
Revenue Bonds Cape Cod Health System
Series 1993A (Connie Lee Insured)
11-15-21 5.25 4,000,000 3,483,320
Municipal Wholesale Electric Power
Supply System Refunding Revenue Bonds
Series 1994B (MBIA Insured)
07-01-11 4.75 5,250,000 4,833,465
State Bay Transportation Authority Series 1995B
(AMBAC Insured)
03-01-25 5.38 4,000,000 3,577,200
State Health & Education Facilities Authority
Revenue Bonds Southcoast Health System
Series 1998A (MBIA Insured)
07-01-27 4.75 3,000,000 2,333,940
State Health & Education Facilities Authority
Revenue Bonds Valley Regional Health System
Series 1994C (Connie Lee Insured)
07-01-18 5.75 1,500,000 1,442,250
State Turnpike Authority Metro Highway System
Revenue Bonds Series 1999A (AMBAC Insured)
01-01-34 4.75 2,500,000 1,956,700
State Water Resource Authority Revenue Bonds
Series 1992A (Secondary MBIA Insured)
07-15-22 5.50 2,000,000 2,041,180
Total 19,668,055
Michigan (4.0%)
Almont Community Schools
Unlimited Tax General Obligation Bonds
Series 1996 (FGIC Insured)
05-01-22 5.38 1,900,000 1,728,715
Genesee County Sewer Disposal System 3
Limited Tax General Obligation Bonds
Series 1996A (AMBAC Insured)
04-01-16 5.50 1,400,000 1,353,184
Grand Rapids Sanitary Sewer System Revenue Bonds
Series 1998A (FGIC Insured)
01-01-28 4.75 3,000,000 2,391,870
Holly Area School District
Unlimited Tax General Obligation
Refunding Bonds (FGIC Insured)
05-01-25 4.75 1,000,000 808,230
Iron Mountain School Unlimited Tax
General Obligation Refunding Bonds (AMBAC Insured)
05-01-21 5.13 1,500,000 1,317,240
Jackson County Public Schools
School Building & Site
Unlimited Tax General Obligation Refunding Bonds
Series 1999 (FGIC Insured)
05-01-22 5.38 1,000,000 909,850
Kalamazoo Hospital Finance Authority
Refunding & Improvement Bonds
Bronson Methodist Hospital (Secondary MBIA Insured)
05-15-12 6.25 3,000,000 3,188,250
Lincoln Park School District Wayne County School Building
& Site Unlimited Tax General Obligation Bonds
(FGIC Insured)
05-01-26 5.90 1,500,000 1,587,630
Monroe County Pollution Control Refunding Bonds
Detroit Edison Series 1992I-B
(MBIA Insured) A.M.T.
09-01-24 6.55 5,000,000 5,153,600
Total 18,438,569
Minnesota (2.2%)
Southern Minnesota Municipal Power Agency
Power Supply System Refunding Revenue Bonds
Series 1993A (Secondary FGIC Insured)
01-01-16 4.75 4,250,000 3,622,530
Southern Minnesota Municipal Power Agency
Power Supply System Refunding Revenue Bonds
Zero Coupon Series 1994A (MBIA Insured)
01-01-21 6.12 6,000,000(d) 1,651,020
Western Minnesota Municipal Power Agency
Revenue Bonds Escrowed to Maturity (AMBAC Insured)
01-01-16 6.75 4,500,000 4,668,255
Total 9,941,805
Mississippi (1.1%)
Alcorn County Hospital Refunding Revenue Bonds
Magnolia Regional Hospital Center (AMBAC Insured)
10-01-13 5.75 1,000,000 1,002,380
State Home Single Family Mortgage Revenue Bonds
Series 1997H (GNMA & FNMA
Insured) A.M.T.
12-01-29 6.70 1,980,000(h) 2,017,580
State Home Single Family Mortgage Revenue Bonds
Series 1999A (GNMA Insured)
A.M.T.
06-01-31 5.25 2,000,000 2,032,100
Total 5,052,060
Montana (2.0%)
Forsyth Rosebud County Pollution Refunding
Revenue Bonds Puget Sound Power & Light
(AMBAC Insured) A.M.T.
08-01-21 7.25 4,000,000 4,201,040
State Board of Investments Payroll Tax Bonds
Worker's Compensation Program
Series 1991 (MBIA Insured)
06-01-20 6.88 4,750,000 4,961,328
Total 9,162,368
Nevada (1.0%)
Clark County Passenger Facility Charge
Revenue Bonds Las Vegas McCarren Airport
Series 1995B (Secondary AMBAC Insured) A.M.T.
07-01-25 5.50 5,000,000 4,455,100
New Hampshire (1.1%)
Industrial Development Authority Pollution Control
Revenue Bonds Light & Power
Series 1989 (AMBAC Insured) A.M.T.
12-01-19 7.38 5,000,000 5,151,250
New Jersey (0.1%)
Carteret Board of Education Refunding
Certificates of Participation
Series 1999 (MBIA Insured)
04-15-19 4.75 540,000 455,782
New Mexico (0.5%)
Rio Rancho Water & Wastewater System
Refunding Revenue Bonds
Series 1999 (AMBAC Insured)
05-15-22 4.75 1,500,000 1,233,870
Santa Fe Water Revenue Bonds (AMBAC Insured)
06-01-24 6.30 1,000,000 1,059,420
Total 2,293,290
New York (7.4%)
New York City Municipal Water Finance Authority
Water & Sewer System Revenue Bonds
Series 1995A (Secondary MBIA Insured)
06-15-23 5.50 5,000,000 4,622,300
State Dormitory Authority City University System
Consolidated 3rd Resolution Revenue Bonds
2nd Series 1994 (MBIA Insured)
07-01-19 6.25 2,500,000 2,648,275
State Dormitory Authority State University
Education Facility Revenue Bonds
(Secondary AMBAC Insured)
05-15-15 5.25 2,700,000 2,573,829
State Energy Research & Development Authority
Pollution Control Refunding Revenue Bonds
Rochester Gas & Electric (MBIA Insured) A.M.T.
05-15-32 6.50 4,000,000 4,052,600
State Energy Research & Development Authority
Solid Waste Disposal Revenue Bonds
State Electric & Gas Company
Series 1993A (MBIA Insured) A.M.T.
12-01-28 5.70 11,210,000 10,377,994
State Energy Resource & Development Authority
Gas Facility Revenue Bonds Brooklyn Union Gas
(MBIA Insured) A.M.T.
06-01-25 5.60 4,500,000 4,127,535
State Energy Resource & Development Authority
Pollution Control Bonds Series
1987A (MBIA Insured) A.M.T.
07-01-26 6.15 3,000,000 2,965,620
State Urban Development Corporation Correctional
Capital Facilities Lease Revenue Bonds
Series 1995-96 (AMBAC Insured)
01-01-25 5.38 3,000,000 2,698,050
Total 34,066,203
North Carolina (1.5%)
Charlotte Pre-refunded Certificates of Participation
Convention Facility Series 1991 (AMBAC Insured)
12-01-21 6.75 3,150,000 3,337,646
Concord Certificate of Participation Series 1996B
(MBIA Insured)
06-01-16 5.75 1,480,000 1,450,681
Cumberland County Financial Corporation
Installment Payment Miscellaneous Revenue Bonds
Public Building & Equipment Series 1998 (MBIA Insured)
12-01-17 4.75 1,000,000 842,490
Fayetteville Financial Corporation Installment Payment
Revenue Bonds Series 1996 (MBIA Insured)
02-01-14 5.63 300,000 299,262
Piedmont Triad Airport Authority Revenue Bonds
Series B (FSA Insured) A.M.T.
07-01-21 6.00 1,000,000 978,740
Total 6,908,819
North Dakota (0.8%)
Fargo Health System Meritcare Obligated Group
Revenue Bonds Series 1996A (MBIA Insured)
06-01-27
5.38 4,350,000 3,816,429
Ohio (1.2%)
Lorain County Hospital Facilities Refunding Revenue Bonds
EMH Regional Medical Center
Series 1995 (AMBAC Insured)
11-01-21 5.38 2,000,000 1,792,860
Lucas County Hospital Refunding Revenue Bonds
St. Vincent's Medical Center Series 1993C (MBIA Insured)
08-15-22 5.25 1,725,000 1,509,910
Montgomery County Hospital Facility
Refunding Revenue & Improvement Bonds
Ketter Medical Center
Series 1996 (MBIA Insured)
04-01-26 5.50 2,500,000 2,277,325
Total 5,580,095
Oklahoma (0.5%)
McAlester Public Works Authority Oklahoma Improvement
Refunding Revenue Bonds (FSA Insured)
12-01-17 5.25 1,470,000 1,493,549
12-01-18 5.25 1,000,000 1,016,020
Total 2,509,569
Pennsylvania (4.3%)
Allegheny County Certificates of Participation
County Courthouse Renovation
Series 1999 (AMBAC Insured)
12-01-28 5.00 3,000,000 2,483,760
Harrisburg Authority Dauphin County Revenue Bonds
Series 1997-II (MBIA Insured)
09-15-22 5.63 2,000,000 1,869,900
Philadelphia Unlimited General Obligation Bonds
(MBIA Insured)
05-15-25 5.00 4,500,000 3,773,520
Pittsburgh Water & Sewer Authority System
Pre-refunded Revenue Bonds Series 1991A (FGIC Insured)
09-01-14 6.50 10,000,000 10,502,600
Robinson Township Municipal Authority Water & Sewer
Revenue Bonds (FGIC Insured)
11-15-19 6.00 1,290,000 1,284,389
Total 19,914,169
Rhode Island (0.6%)
Health & Education Building Corporation Higher Education
Facility Revenue Bonds Series 1996 (MBIA Insured)
06-01-26 5.63 3,000,000 2,766,120
South Carolina (0.9%)
Piedmont Municipal Power Agency Electric
Refunding Revenue Bonds (FGIC Insured)
01-01-21 6.25 1,000,000 1,035,700
Piedmont Municipal Power Agency Electric
Refunding Revenue Bonds Series 1998A (MBIA Insured)
01-01-25 4.75 3,900,000 3,102,684
Total 4,138,384
Tennessee (0.7%)
Franklin Special School District Williamson County
Limited Tax Capital Appreciation General Obligation Bonds
Zero Coupon (FSA Insured)
06-01-19 5.79 1,425,000(d) 428,939
06-01-20 5.80 2,345,000(d) 659,625
Metropolitan Government Nashville & Davidson Counties
Sports Authority Public Improvement Revenue Bonds
Series 1996 (AMBAC Insured)
07-01-17 5.75 2,160,000 2,141,208
Total 3,229,772
Texas (18.5%)
Austin Airport System Prior Lien Revenue
Bonds Series 1995A (MBIA Insured) A.M.T.
11-15-25 6.13 3,000,000 2,936,880
Austin Combined Utilities System Capital Appreciation
Refunding Revenue Bonds Series 1994 Zero Coupon
(FGIC Insured)
05-15-17 5.83 5,900,000(d) 2,042,639
Austin Combined Utilities System Refunding Revenue Bonds
Series 1994 (FGIC Insured)
05-15-24 5.75 8,500,000 8,611,520
Austin Combined Utilities System Revenue Bonds
Series 1987 (BIG Insured)
11-15-12 8.63 750,000 815,775
11-15-17 8.63 500,000 543,850
Bexar County Health Facility Development Hospital
Revenue Bonds San Antonio Baptist Memorial
Hospital System Series 1994 (MBIA Insured)
08-15-19 6.75 5,000,000 5,473,300
Brazos River Authority Collateralized Pollution Control
Refunding Revenue Bonds Texas Utility Electric
Series 1992C (FGIC Insured) A.M.T.
10-01-22 6.70 14,935,000 15,601,698
Colorado River Municipal Water District Water System
Pre-refunded Revenue Bonds Series 1991A
(AMBAC Insured)
01-01-21 6.63 8,900,000 9,114,490
Corsicana Waterworks & Sewer System
Refunding Revenue Bonds Series 1997A (FGIC Insured)
08-15-22 5.75 2,075,000 1,993,722
Dallas County Utility & Reclamation District
Unlimited Tax Refunding General Obligation Bonds
Series 1999B (AMBAC Insured)
02-15-29 5.88 2,000,000 1,923,120
Georgetown Combination Tax & Utilities System
Limited Revenue Certificates of Obligation
Series 1997 (FGIC Insured)
08-15-17 5.38 1,000,000 939,750
Harris County Toll Road Senior Lien
Pre-refunded Revenue Bonds Series 1992A
(AMBAC Insured)
08-15-17 6.50 8,170,000 8,685,445
Hillsboro Independent School District
Unlimited Tax School Building & Refunding
Revenue Bonds Series 1997
(Permanent School Fund Guarantee)
08-15-26 5.25 1,000,000 876,860
Houston Water & Sewer System
Junior Lien Refunding Revenue Bonds
Series 1997A (FGIC Insured)
12-01-22 5.25 7,210,000 6,409,690
Keller Independent School District
Unlimited General Obligation Bonds
(Permanent School Fund Guarantee)
08-15-30 5.00 2,000,000 1,660,620
League City General Obligation
Refunding & Improvement Bonds
Series 1990 (FGIC Insured)
02-01-13 6.25 2,500,000 2,554,300
Matagorda County Navigation District 1
Collateralized Pollution Control Revenue Bonds
Central Power & Light Series
1990 (AMBAC Insured) A.M.T.
03-01-20 7.50 2,000,000 2,050,580
Municipal Power Agency Refunding Revenue Bonds
Series 1991A (AMBAC Insured)
09-01-12 6.75 5,250,000 5,518,800
Rosenberg Limited Tax General Obligation Bonds
Series 1998 (FSA Insured)
03-01-16 4.50 740,000 609,353
03-01-17 4.50 785,000 638,700
Turnpike Authority Dallas North Tollway Revenue Bonds
Addison Airport Toll Tunnel Series 1994 (FGIC Insured)
01-01-23 6.60 2,000,000 2,184,300
University of Houston System Consolidated
Pre-refunded Revenue Bonds Series 1990A (MBIA Insured)
02-15-06 7.40 3,160,000 3,172,545
Total 84,357,937
Vermont (0.2%)
University of Vermont & State Agricultural College
Revenue Bonds Series 1998 (MBIA Insured)
10-01-38 4.75 1,000,000 774,940
Virginia (5.1%)
Hanover County Industrial Development Authority
Memorial Regional Medical Center (MBIA Insured)
08-15-25 5.50 1,050,000 947,478
Loudoun County Sanitation Authority Waste & Sewer
Refunding Revenue Bonds (MBIA Insured)
01-01-30 5.25 1,435,000 1,245,106
Metropolitan Washington D.C. Airports Authority Airport
System Revenue Bonds Series 1992A (MBIA Insured) A.M.T.
10-01-19 6.63 9,420,000 9,675,847
Portsmouth Redevelopment Housing Authority
Multi-family Housing Refunding Revenue Bonds
(FNMA Insured)
12-01-08 6.05 5,780,000 5,903,461
Upper Occoquan Sewer Authority Regional Sewer
Revenue Bonds Series 1995A (MBIA Insured)
07-01-29 4.75 4,000,000 3,164,840
William County Lease Certificate of Participation Bonds
(MBIA Insured)
12-01-20 5.50 2,590,000 2,413,362
Total 23,350,094
Washington (0.5%)
Central Puget Sound Regional Transit Authority
Sales Tax Revenue Bonds (FGIC Insured)
02-01-28 4.75 3,000,000 2,377,860
West Virginia (1.9%)
School Building Authority Capital Improvement
Pre-refunded Revenue Bonds (MBIA Insured)
07-01-15 7.25 3,415,000 3,536,028
School Building Authority Capital Improvement
Revenue Bonds Series 1990B (MBIA Insured)
07-01-17 6.75 5,000,000 5,165,450
Total 8,701,478
Wisconsin (0.5%)
Center District Sales Tax Appreciation Senior
Dedicated Bonds Zero Coupon Series 1996A
(MBIA Insured)
12-15-17 6.03 4,000,000(d) 1,336,360
12-15-21 5.45 3,045,000(d) 771,816
Southeast Professional Baseball Park District
Sales Tax Revenue Bonds Zero Coupon
(MBIA Insured)
12-15-29 5.15 2,125,000(d) 320,089
Total 2,428,265
Wyoming (1.1%)
Central Regional Water System-Joint Powers Board
Refunding Revenue Bonds (FSA Insured)
06-01-30 5.25 4,000,000 3,458,240
Green River Joint Powers Board Water & Sewer
Refunding Revenue Bonds Sweetwater County
Series 1999A (FSA Insured)
03-01-24 5.00 2,000,000 1,685,840
Total 5,144,080
Total municipal bonds
(Cost: $436,961,856) $442,669,565
Municipal notes (1.7%)
Issuer(c,f) Effective Amount Value(a)
yield payable at
maturity
Allentown Pennsylvania Commercial &
Individual Development Agency
(Diocese of Allentown) V.R.
12-01-29 3.50 1,200,000 1,200,000
Cohasset Minnesota Revenue Bonds
(Minnesota Power & Light) Series 1997B V.R.
06-01-13 4.70 600,000 600,000
East Baton Rouge Louisiana Solid Waste
(Exxon)
12-01-28 4.85 300,000 300,000
Maricopa County Arizona Pollution Control Revenue Bonds
(Arizona Public Service) Series 1994A
05-01-29 4.75 900,000 900,000
Minneapolis St. Paul Minnesota Housing & Redevelopment
Health Care (Children's Hospital) Series 1995B V.R.
08-15-25 4.75 1,900,000 1,900,000
New York City Series 1994B2
08-15-09 4.75 500,000 500,000
08-15-11 4.75 1,600,000 1,600,000
Valdez Alaska Marine Terminal Revenue Bonds
(Exxon Pipeline) Series 1993A V.R.
12-01-33 4.75 600,000 600,000
Total municipal notes
(Cost: $7,600,000) $7,600,000
Total investments in securities
(Cost: $444,561,856)(j) $450,269,565
See accompanying notes to investments in securities.
</TABLE>
<PAGE>
Notes to investments in securities
(a) Securities are valued by procedures described in Note 1 to the financial
statements.
(b) The following abbreviations may be used in portfolio descriptions to
identify the insurer of the issue:
ACA -- ACA Financial Guaranty Corporation
AMBAC -- American Municipal Bond Association Corporation
BIG -- Bond Investors Guarantee
CGIC -- Capital Guaranty Insurance Company
FGIC -- Financial Guarantee Insurance Corporation
FHA -- Federal Housing Authority
FNMA -- Federal National Mortgage Association
FSA -- Financial Security Assurance
GNMA -- Government National Mortgage Association
MBIA -- Municipal Bond Investors Assurance
(c) The following abbreviations may be used in the portfolio descriptions:
A.M.T. -- Alternative Minimum Tax -- As of Dec. 31, 1999, the value of
securities subject to alternative minimum tax represented 19.66% of net assets.
B.A.N. -- Bond Anticipation Note
C.P. -- Commercial Paper
R.A.N. -- Revenue Anticipation Note
T.A.N. -- Tax Anticipation Note
T.R.A.N. -- Tax & Revenue Anticipation Note
V.R. -- Variable Rate
V.R.D.B. -- Variable Rate Demand Bond
V.R.D.N. -- Variable Rate Demand Note
(d) For zero coupon bonds, the interest rate disclosed represents the annualized
effective yield on the date of acquisition.
(e) 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, 1999. Inverse floaters in the
aggregate represent 2.54% of the Fund's net assets as of Dec. 31, 1999.
(f) 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,
1999.
(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) Interest rate varies either based on a predetermined schedule or to reflect
current market conditions; rate shown is the effective rate on Dec. 31, 1999.
(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
Purchase contracts Municipal Bonds, March 2000 $7,300,000
(j) At Dec. 31, 1999, the cost of securities for federal income tax purposes was
approximately $444,562,000 and the approximate aggregate gross unrealized
appreciation and depreciation based on that cost was:
Unrealized appreciation $16,699,000
Unrealized depreciation (10,991,000)
-----------
Net unrealized appreciation $ 5,708,000
<PAGE>
American
Express
Funds
AXP Insured Tax-Exempt Fund
IDS Tower 10
Minneapolis, MN 55440-0010
Ticker Symbol
Class A: IINSX Class B: IINBX Class Y: N/A
PRSRT STD AUTO
U.S. POSTAGE
PAID
SPENCER, IA
PERMIT NO. 85
AMERICAN
EXPRESS
S-6330 N (2/00)
Distributed by American Express Financial Advisors Inc. Member NASD.
American Express Company is separate from American Express Financial Advisors
Inc. and is not a broker-dealer.
