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Riversource Special Tax-Exempt Series Trust – ‘N-30D’ for 12/31/96

As of: Wednesday, 2/19/97 · For: 12/31/96 · Accession #: 820027-97-230 · File #: 811-04647

  As Of                Filer                Filing    For·On·As Docs:Size              Issuer               Agent

 2/19/97  Riversource Special Tax-Exemp… Tr N-30D      12/31/96    1:74K                                    Ameriprise Financial Inc

Annual or Semi-Annual Report Mailed to Shareholders — Rule 30d-1
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: N-30D       Annual or Semi-Annual Report Mailed to                33±   156K 
                          Shareholders                                           

N-30D 1st “Page” of 15 TOC ↑Top Previous Next ↓Bottom Just 1st
 
1996 Semiannual Report                                                          

IDS                                                                             
Insured                                                                         
Tax-Exempt                                                                      
Fund                                                                            

The goals of IDS  Insured  Tax-Exempt  Fund,  a part of IDS  Special  Tax-Exempt
Series  Trust,  are to  provide a high  level of income  generally  exempt  from
federal income tax and preservation of shareholders'  capital.  The Fund invests
primarily  in  securities  that are  insured  as to their  scheduled  payment of
principal  and interest for at least as long as the  securities  are held in the
Fund. Insured securities fluctuate in market value as interest rates change.    

American                                                                        
Express                                                                         
Financial                                                                 
Advisors                                                                  

Distributed by American Express Financial Advisors Inc.                         

N-30D 2nd “Page” of 15 TOC 1st Previous Next ↓Bottom Just 2nd
(icon of) shield with star                                                      

No-default                                                                      
insurance                                                                       

Any investment  involves risks. For a municipal bond investor,  there's the risk
that the bond issuer could default on its payments. But there are bonds that are
insured  against  default,  and these are the ones that Insured  Tax-Exempt Fund
invests  in.  While this  doesn't  mean that  shareholders  are  insulated  from
fluctuations  in bond  market  values,  it does ensure  that all  principal  and
interest  due to  investors  will be paid.  Along  the way,  shareholders  enjoy
regular income that is generally free from federal income tax.                  

Contents                                                                        
From the president                3                                             
From the portfolio manager        3                                             
Ten largest holdings              5                                             
Financial statements              6                                             
Notes to financial statements     9                                             
Investments in securities        24                                             
Board members and officers       35                                             
IDS mutual funds                 36                                             

N-30D 3rd “Page” of 15 TOC 1st Previous Next ↓Bottom Just 3rd
To our shareholders                                                             

(picture of) William Pearce                                                     
William R. Pearce                                                               
President of the Fund                                                           

From the president                                                              
If you're an  experienced  investor,  you know that the past two years have been
unusually strong ones in many financial markets.  Perhaps just as important, you
also know that  history  shows  that bull  markets  don't last  forever.  Though
they're often  unpredictable,  declines - whether they're brief or long-lasting,
moderate or  substantial - are always a  possibility.                           
That fact  reinforces the need for  investors to  periodically  review their    
long-term  goals and examine whether  their  investment  program  remains on    
track to  achieving  them.  Your quarterly  investment  statements are one part 
of that monitoring  process.  The other is a meeting with your American Express 
financial  advisor.  That becomes even more important if there's a major change 
in your financial  situation or in the financial markets.                       

William R. Pearce                                                               

(picture of) Paul Hylle                                                         
Paul B. Hylle                                                                   
Portfolio manager                                                               

From the portfolio manager                                                      
Volatility continued                                                            
to pervade the bond market  during the past six  months,  reflecting  investors'
shifting  outlooks  regarding  inflation.   Fortunately,  however,  the  upturns
overpowered  the  downturns,  resulting in a  productive  period for IDS Insured
Tax-Exempt  Fund. For the first half of the fiscal year -- July through December
1996 --  investors  in Class A shares  realized a total  return (net asset value
change and  dividends)  of 4.6%.                                                
When the period  began last  summer, the bond market was still licking the      
wounds it received during the first three months of 1996, when a rise in        
long-term  interest  rates,  largely induced by what later proved to be an      
unfounded  fear of higher  inflation,  drove bond prices sharply lower.         
A fall rally                                                                    
By fall,  though,  the investment  environment had improved, thanks to          
reports of  moderate  economic  growth and stable  inflation.  On that news,    
long-term  interest rates started  coming back down,  driving bond prices       
higher in the process. The rally lasted through November,  before  renewed      
inflation  fears sent the market into a mild retreat during the final weeks of  
1996.                                                                           
The Fund's  municipal  bond  holdings,  like all fixed-income                   
investments,  benefited  substantially  from the rally.  Keeping a negligible   
amount of cash reserves in the  portfolio  also worked to the Fund's advantage  
during that time.  Still,  negative net cash flow into the  municipal bond      
market,  a condition  that has persisted for the past three years,  limited     
the capital  appreciation the Fund enjoyed.                                     
The supply situation,  on the other hand,  remained favorable as the number of  
bonds "called away" by issuers (taken out of the market  because  issuers paid  
off the  principal  ahead of the bonds' maturity  dates)  exceeded  the number  
of new bonds  coming to  market.  The net result is fewer municipal bonds       
outstanding than three years ago. The flip side of the call situation, which has
been in effect for the past few years, is that it continued to erode the Fund's 
dividend  slightly.  This results from the fact that newly  issued  bonds  don't
pay as much  interest  as the older bonds being called away.  Measured against  
comparable  municipal bond funds,  however,  this Fund's dividend has held up   
better than most.                                                               
A more stable environment?                                                      
Looking toward the second half of the fiscal year, while some fluctuation in    
bond prices is  inevitable, I think conditions may allow for  less-dramatic     
swings in the months ahead. As always, the main bond-market  catalyst will be   
the outlook for inflation,  which,  given the probability of ongoing  moderate  
economic growth, should  increase only modestly in 1997. If that forecast proves
to be reasonably accurate, long-term  interest  rates  would  seem  unlikely  to
experience  a substantial,  sustained  rise.  In any  event,  I will  update you
on the Fund's progress after the fiscal year ends in June.                      

Paul B. Hylle                                                                   

N-30D 4th “Page” of 15 TOC 1st Previous Next ↓Bottom Just 4th
IDS Insured Tax-Exempt Fund                                                     

The Fund's ten largest holdings                                                 

(pie chart) The ten holdings listed here make up 20.17% of the Fund's net assets
--------------------------------------------------------------------------------

                                                 Percent                 Value
                                    (of Fund's net assets) (as of Dec. 31, 1996)
--------------------------------------------------------------------------------

Brazo River Texas Authority Collateralized Pollution Control                    
Refunding Revenue Bonds Texas Utility Electric                                  
Series 1992C A.M.T                                                              
6.70% 2022                                          3.18%           $16,109,787 

Pittsburgh Pennsylvania Water & Sewer Authority System                          
Pre-Refunded Revenue Bonds                                                      
Series 1991A                                                                    
6.50% 2014                                          2.17             11,026,300 

New York State Energy Resource & Development Authority                          
Solid Waste Disposal Revenue Bonds New York State                               
Electric & Gas Series A A.M.T.                                                  
5.70% 2028                                          2.15             10,904,415 

District of Columbia  Metropolitan  Washington Airports Authority Airport System
Revenue Bonds Series 1992A A.M.T.                                               
6.625% 2019                                         2.00             10,150,709 

Colorado River Texas Municipal Water District                                   
Water System Pre-Refunded Revenue Bonds Series A                                
6.625% 2021                                         1.90              9,620,811 

San Diego County California Certificate of Participation                        
Regional Authority Bonds Mt. Tower                                              
Inverse Floater Series 1991                                                     
6.36% 2019                                          1.86              9,455,040 

Denver Colorado City & County Airport Revenue Bonds                             
Series B A.M.T.                                                                 
5.75% 2017                                          1.83              9,266,868 

Harris County Texas Toll Road Senior Lien                                       
Pre-Refunded Revenue Bonds Series A                                             
6.50% 2017                                          1.80              9,108,243 

Austin Texas Combined Utilities System                                          
Refunding Revenue Bonds Series 1994                                             
5.75% 2024                                          1.68              8,542,075 

Florida State Turnpike Authority Department of Transportation                   
Series A                                                                        
5.50% 2021                                          1.60              8,112,055 

Note: Certain of the Fund's income may be subject to the Alternative Minimum Tax
(A.M.T.).                                                                       

N-30D 5th “Page” of 15 TOC 1st Previous Next ↓Bottom Just 5th
Class A                                                                         

6-month performance                                                             
(All figures per share)                                                         
Net asset value (NAV)                                                           
-------------------------------                                                 
Dec. 31, 1996         $ 5.53                                                    
-------------------------------                                                 
June 30, 1996         $ 5.43                                                    
-------------------------------                                                 
Increase              $ 0.10                                                    
-------------------------------                                                 

Distributions                                                                   
July 1, 1996 - Dec. 31, 1996                                                    
------------------------------                                                  
From income           $ 0.14                                                    
------------------------------                                                  
From capital gains    $   --                                                    
------------------------------                                                  
Total distributions   $ 0.14                                                    
------------------------------                                                  
Total return*          +4.6%**                                                  
------------------------------                                                  
Class B                                                                         

6-month performance                                                             
(All figures per share)                                                         
Net asset value (NAV)                                                           
-------------------------------                                                 
Dec. 31, 1996         $ 5.53                                                    
-------------------------------                                                 
June 30, 1996         $ 5.43                                                    
-------------------------------                                                 
Increase              $ 0.10                                                    
-------------------------------                                                 

Distributions                                                                   
July 1, 1996 - Dec. 31, 1996                                                    
-------------------------------                                                 
From income           $ 0.12                                                    
-------------------------------                                                 
From capital gains    $   --                                                    
-------------------------------                                                 
Total distributions   $ 0.12                                                    
-------------------------------                                                 
Total return*          +4.2%**                                                  
-------------------------------                                                 

*The prospectus discusses the                                               
effect of sales charges, if                                               
any, on the various classes.                                              

**The total return is a hypothetical                                          
investment in the Fund with all                                           
distributions reinvested.                                                 

N-30D 6th “Page” of 15 TOC 1st Previous Next ↓Bottom Just 6th
Financial statements      

         Statement of assets and liabilities
 IDS Insured Tax-Exempt Fund
Dec. 31, 1996             
--------------------------------------------------------------------------------

Assets                  
--------------------------------------------------------------------------------
                                                                     (Unaudited)
Investments in securities, at value (Note 1)                                    
 (identified cost $462,160,624)                                   $500,387,270
Accrued interest receivable                                           9,172,324 
Receivable for investment securities sold                               225,000 
--------------------------------------------------------------------------------
Total assets                                                        509,784,594 

Liabilities             
--------------------------------------------------------------------------------
Disbursements in excess of cash on demand deposit                       702,235 
Dividends payable to shareholders                                       341,030 
Payable for investment securities purchased                           1,485,302 
Accrued investment management services fee                                6,255 
Accrued distribution fee                                                    531 
Accrued service fee                                                       2,523 
Accrued transfer agency fee                                                 547 
Accrued administrative services fee                                         556 
Other accrued expenses                                                   46,926 
--------------------------------------------------------------------------------
Total liabilities                                                     2,585,905 
--------------------------------------------------------------------------------
Net assets applicable to outstanding shares                        $507,198,689 
--------------------------------------------------------------------------------

Represented by            
--------------------------------------------------------------------------------
Shares of beneficial interest - $.01 par value,                                 
 unlimited number of shares authorized                            $    917,373
Additional paid-in-capital                                          481,611,621 
Excess of distributions over net investment income                      (16,227)
Accumulated net realized loss (Note 1)                              (13,265,723)
Unrealized appreciation (Note 5)                                     37,951,645 
--------------------------------------------------------------------------------
Total -- representing net assets applicable to                                  
 outstanding shares                                               $507,198,689
--------------------------------------------------------------------------------
Net assets applicable to outstanding shares:     Class A           $481,276,531 
                                                Class B           $ 25,922,158
Net asset value per share of outstanding shares:                                
                                        Class A shares 87,048,407 $       5.53
                                        Class B shares  4,688,930 $       5.53

See accompanying notes to financial statements.                                 

N-30D 7th “Page” of 15 TOC 1st Previous Next ↓Bottom Just 7th
Financial statements      

Statement of operations   
 IDS Insured Tax-Exempt Fund
    Six months ended Dec. 31, 1996
--------------------------------------------------------------------------------

Investment income       
--------------------------------------------------------------------------------
                                                                   (Unaudited)
Income:                                                                         
Interest                                                            $15,298,657 
--------------------------------------------------------------------------------
Expenses (Note 2):                                                              
Investment management services fee                                    1,165,325 
Distribution fee -- Class B                                              89,070 
Transfer agency fee                                                     122,305 
Incremental transfer agency fee -- Class B                                  478 
Service fee                                                                     
 Class A                                                               425,444
 Class B                                                                20,668
Administrative services fee                                             103,584 
Compensation of board members                                             4,238 
Compensation of officers                                                  2,083 
Custodian fees                                                           21,537 
Postage                                                                  18,125 
Registration fees                                                         9,263 
Reports to shareholders                                                   3,295 
Audit fees                                                                9,000 
Administrative                                                            1,991 
Other                                                                     4,347 
--------------------------------------------------------------------------------
Total expenses                                                        2,000,753 
  Earnings credits on cash balances (Note 2)                            (26,328)
--------------------------------------------------------------------------------
Total net expenses                                                    1,974,425 
--------------------------------------------------------------------------------
Investment income -- net                                             13,324,232 
--------------------------------------------------------------------------------

                  Realized and unrealized gain (loss) -- net
--------------------------------------------------------------------------------
Net realized gain on security transactions (Note 3)                   1,227,827 
Net realized loss on financial futures contracts                     (1,650,894)
--------------------------------------------------------------------------------
Net realized loss on investments                                       (423,067)
Net change in unrealized appreciation or depreciation                 9,968,374 
--------------------------------------------------------------------------------
Net gain on investments                                               9,545,307 
--------------------------------------------------------------------------------
Net increase in net assets resulting from operations                $22,869,539 
--------------------------------------------------------------------------------
See accompanying notes to financial statements.                                 

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                                                        [Enlarge/Download Table]

                           Financial statements                                                                                     

                           Statements of changes in net assets                                                                      
                           IDS Insured Tax-Exempt Fund                                                                              

-----------------------------------------------------------------------------------------------------------                         


                           Operations and distributions         Dec. 31, 1996      June 30, 1996                                    
------------------------------------------------------------------------------------------------------------------------------------
                                                             Six months ended         Year ended                                    
                                                                  (Unaudited)                                                       

                                                                                                                                    
Investment income -- net                                         $ 13,324,232       $ 26,786,000                                    
Net realized gain (loss) on investments                              (423,067)         1,470,391                                    
Net change in unrealized appreciation or depreciation               9,968,374          2,965,393                                    
-----------------------------------------------------------------------------------------------------------                         
Net increase in net assets resulting from operations               22,869,539         31,221,784                                    
-----------------------------------------------------------------------------------------------------------                         
Distributions to shareholders from:                                                                                                 
 Net investment income                                                                                                              
   Class A                                                        (12,966,190)       (26,156,845)                                   
   Class B                                                           (534,589)          (632,447)                                   
  Net realized gain                                                                                                                 
   Class A                                                                 --         (1,659,688)                                   
   Class B                                                                 --            (48,604)                                   
-----------------------------------------------------------------------------------------------------------                         
Total distributions                                               (13,500,779)       (28,497,584)                                   
-----------------------------------------------------------------------------------------------------------                         

                           Share transactions (Note 4)                                                                              
-----------------------------------------------------------------------------------------------------------                         
Proceeds from sales                                                                                                                 
   Class A shares (Note 2)                                         15,850,194         42,283,689                                    
   Class B shares                                                   6,290,363         16,779,713                                    
Reinvestment of distributions at net asset value                                                                                    
  Class A shares                                                    8,922,108         19,769,832                                    
  Class B shares                                                      406,256            541,841                                    
Payments for redemptions                                                                                                            
  Class A shares                                                  (43,268,053)       (78,673,946)                                   
  Class B shares (Note 2)                                          (1,993,488)        (2,641,423)                                   
-----------------------------------------------------------------------------------------------------------                         

Decrease in net assets from share transactions                    (13,792,620)        (1,940,294)                                   
-----------------------------------------------------------------------------------------------------------                         

Total increase (decrease) in net assets                            (4,423,860)           783,906                                    
Net assets at beginning of period                                 511,622,549        510,838,643                                    
-----------------------------------------------------------------------------------------------------------                         
Net assets at end of period                                                                                                         
  (including undistributed net investment income of                                                                                 
  $(16,227) and $160,320)                                        $507,198,689       $511,622,549                                    
-----------------------------------------------------------------------------------------------------------                         
See accompanying notes to financial statements.                                                                                     


N-30D 9th “Page” of 15 TOC 1st Previous Next ↓Bottom Just 9th
Notes to financial statements                                                   

IDS Insured Tax-Exempt Fund                                                     
(Unaudited as to Dec. 31, 1996)                                                 
-------------------------------------------------------------------             
1. Summary of significant accounting policies                                   

IDS Special  Tax-Exempt  Series Trust was organized as a Massachusetts  business
trust April 7, 1986. IDS Special Tax-Exempt Series Trust is a "series fund" that
is currently composed of six individual funds,  including IDS Insured Tax-Exempt
Fund.  The Fund is  registered  under  the  Investment  Company  Act of 1940 (as
amended) as a diversified, open-end management investment company.              

The Fund invests  primarily in securities that are insured as to their scheduled
payment of principal  and interest  for at least as long as the  securities  are
held in the Fund. Insured securities fluctuate in market value as interest rates
change. The Fund offers Class A, Class B and Class Y shares.  Class A shares are
sold  with a  front-end  sales  charge.  Class  B  shares  may be  subject  to a
contingent deferred sales charge and such shares automatically  convert to Class
A after eight years. Class Y shares have no sales charge and are offered only to
qualifying institutional investors.                                             

All classes of shares have identical  voting,  dividend,  liquidation  and other
rights, and the same terms and conditions, except that the level of distribution
fee, transfer agency fee and service fee (class specific expenses) differs among
classes.  Income, expenses (other than class specific expenses) and realized and
unrealized  gains or losses on investments are allocated to each class of shares
based upon its relative net assets.                                             

Significant accounting policies followed by the Fund are summarized below:      

Use of estimates                                                                

The preparation of financial  statements in conformity  with generally  accepted
accounting principles requires management to make estimates and assumptions that
affect  the  reported  amounts  of assets  and  liabilities  and  disclosure  of
contingent  assets and  liabilities at the date of the financial  statements and
the  reported  amounts of increase  and  decrease in net assets from  operations
during the period. Actual results could differ from those estimates.            

Valuation of securities                                                         

All  securities  are valued at the close of each  business day.  Securities  for
which  market  quotations  are not  readily  available  are valued at fair value
according to methods selected in good faith by the board.  Determination of fair
value involves,  among other things,  reference to market indexes,  matrixes and
data from independent  brokers.  Short-term  securities maturing in more than 60
days from the  valuation  date are  valued at the  market  price or  approximate
market value based on current interest rates;  those maturing in 60 days or less
are valued at amortized cost.                                                   

Option transactions                                                             

In order to produce incremental  earnings,  protect gains, and facilitate buying
and selling of securities for investment purposes, the Fund may buy and sell put
and call options and write covered call options on portfolio  securities and may
write  cash-secured  put options.  The risk in writing a call option is that the
Fund  gives up the  opportunity  of profit if the market  price of the  security
increases. The risk in writing a put option is that the Fund may incur a loss if
the market price of the security decreases and the option is exercised. The risk
in buying an option is that the Fund pays a premium whether or not the option is
exercised. The Fund also has the additional risk of not being able to enter into
a closing transaction if a liquid secondary market does not exist. The Fund also
may write  over-the-counter  options where the  completion of the  obligation is
dependent upon the credit standing of the other party.                          

Option  contracts  are  valued  daily at the  closing  prices  on their  primary
exchanges and unrealized appreciation or depreciation is recorded. The Fund will
realize a gain or loss upon  expiration  or closing  of the option  transaction.
When options on debt securities or futures are exercised,  the Fund will realize
a gain or loss.  When other options are  exercised,  the proceeds on sales for a
written call option, the purchase cost for a written put option or the cost of a
security for a purchased put or call option is adjusted by the amount of premium
received or paid.                                                               

Futures transactions                                                            

In order to gain exposure to or protect  itself from changes in the market,  the
Fund may buy and sell  financial  futures  contracts.  Risks  of  entering  into
futures  contracts and related options include the possibility that there may be
an illiquid  market and that a change in the value of the contract or option may
not correlate with changes in the value of the underlying securities.           

Upon entering into a futures  contract,  the Fund is required to deposit  either
cash or securities in an amount (initial  margin) equal to a certain  percentage
of the  contract  value.  Subsequent  payments  (variation  margin)  are made or
received by the Fund each day. The  variation  margin  payments are equal to the
daily  changes in the contract  value and are recorded as  unrealized  gains and
losses.  The Fund recognizes a realized gain or loss when the contract is closed
or expires.                                                                     

Federal taxes                                                                   

Since the Fund's  policy is to comply with all sections of the Internal  Revenue
Code applicable to regulated  investment  companies and to distribute all of its
taxable  income to  shareholders,  no  provision  for income or excise  taxes is
required.                                                                       

Net  investment  income  (loss) and net realized  gains  (losses) may differ for
financial statement and tax purposes primarily because of the deferral of losses
on  certain   futures   contracts  and  losses   deferred  due  to  "wash  sale"
transactions.  The  character  of  distributions  made  during the year from net
investment  income  or  net  realized  gains  may  differ  from  their  ultimate
characterization  for federal  income tax purposes.  Also,  due to the timing of
dividend  distributions,  the fiscal year in which amounts are  distributed  may
differ from the year that the income or realized gains (losses) were recorded by
the Fund.                                                                       

Dividends to shareholders                                                       

Dividends from net investment  income,  declared daily and payable monthly,  are
reinvested  in  additional  shares of the Fund at net asset  value or payable in
cash. Capital gains, when available,  are distributed along with the last income
dividend of the calendar year.                                                  

Other                                                                           

Security  transactions are accounted for on the date securities are purchased or
sold.  Interest  income,  including  level-yield  amortization  of  premium  and
discount, is accrued daily.                                                     

-------------------------------------------------------------------             
2. Expenses and sales charges                                                   

Effective March 20, 1995, the Fund entered into agreements with American Express
Financial   Corporation   (AEFC)   for   managing   its   portfolio,   providing
administrative  services  and serving as transfer  agent.  Under its  Investment
Management  Services  Agreement,   AEFC  determines  which  securities  will  be
purchased,  held or sold.  The  management  fee is a  percentage  of the  Fund's
average daily net assets in reducing percentages from 0.45% to 0.35% annually.  

Under  an   Administrative   Services   Agreement,   the  Fund   pays  AEFC  for
administration  and  accounting  services at a percentage of the Fund's  average
daily net assets in reducing percentages from 0.04% to 0.02% annually.          

Under a separate Transfer Agency Agreement,  AEFC maintains shareholder accounts
and records.  The Fund pays AEFC an annual fee per shareholder  account for this
service as follows:                                                             

o Class A $15.50                                                                
o Class B $16.50                                                                

Also effective  March 20, 1995, the Fund entered into  agreements  with American
Express    Financial    Advisors   Inc.   for   distribution   and   shareholder
servicing-related services. Under a Plan and Agreement of Distribution, the Fund
pays a  distribution  fee at an annual rate of 0.75% of the Fund's average daily
net assets attributable to Class B shares for distribution-related services.    

Under a Shareholder Service Agreement,  the Fund pays a fee for service provided
to shareholders by financial  advisors and other  servicing  agents.  The fee is
calculated  at a  rate  of  0.175%  of  the  Fund's  average  daily  net  assets
attributable to Class A and Class B shares.                                     

Sales charges received by American Express Financial Advisors Inc. for          
distributing Fund shares were $500,653 for Class A and $14,789 for Class B for  
the six months ended Dec. 31, 1996.                                             

During the six months  ended Dec. 31, 1996,  the Fund's  custodian  and transfer
agency  fees were  reduced  by  $26,328  as a result of  earnings  credits  from
overnight cash balances.                                                        

-------------------------------------------------------------------             
3. Securities transactions                                                      

Cost of purchases and proceeds from sales of securities (other than short-term  
obligations) aggregated $97,106,789 and $110,880,491, respectively, for the six 
months ended Dec. 31, 1996. Realized gains and losses are determined on an      
identified cost basis.                                                          
-------------------------------------------------------------------             
4. Share transactions                                                           

Transactions in shares of the Fund for the periods indicated are as follows:    

          Six months ended Dec. 31, 1996

            Class A        Class B
-----------------------------------------------------------------               

Sold                             2,885,685      1,147,215                       
Issued for reinvested            1,624,750         73,957                       
distributions                                                             
Redeemed                        (7,887,152)      (363,352)                      
-----------------------------------------------------------------               
Net increase (decrease)         (3,376,717)       857,820                       
-----------------------------------------------------------------               

          Year ended June 30, 1996

            Class A        Class B
-----------------------------------------------------------------               

Sold                             7,677,356      3,048,552                       
Issued for reinvested            3,585,255         98,195                       
distributions                                                             
Redeemed                       (14,339,111)      (476,102)                      
-----------------------------------------------------------------               
Net increase (decrease)         (3,076,500)     2,670,645                       
-----------------------------------------------------------------               

-----------------------------------------------------------------               
5. Interest rate futures contracts                                              

At Dec.  31, 1996,  investments  in  securities  included  securities  valued at
$6,411,649  that were pledged as collateral to cover initial margin  deposits on
200  open  sales  contracts.  The  market  value  (see  Summary  of  significant
accounting  policies) the open contracts at Dec. 31, 1996 was $23,212,500 with a
net unrealized loss of $275,001.                                                

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IDS Insured Tax-Exempt Fund                                                                      

6. Financial highlights                                                                          

The tables below show certain important financial information for evaluating the                 
Fund's results.                                                                                  
Fiscal period ended June 30,                                                                     
                     Per share income and capital changes*                                       
                                                 Class                                           
                                                 A                                               

                     1996***   1996   1995  1994   1993  1992   1991  1990   1989**   1988   1987
                                                                                                 
Net asset value,       $5.43  $5.40  $5.35 $5.63  $5.33 $5.04  $4.96 $5.00    $4.86  $4.73  $5.07
beginning of period                                                                              
                     Income from investment operations:                                          
Net investment           .14    .30    .30   .30    .30   .31    .32   .31      .16    .31    .32
income                                                                                           
Net gains (losses)       .10    .03    .05  (.28)   .30   .29    .08 (.04)      .14    .14  (.34)
(both realized                                                                                   
and unrealized)                                                                                  
Total from               .24    .33    .35   .02    .60   .60    .40   .27      .30    .45  (.02)
investment                                                                                       
operations                                                                                       
                     Less distributions:                                                         
Dividends from net     (.14)  (.28)  (.30) (.30)  (.30) (.31)  (.32) (.31)    (.16)  (.32)  (.32)
investment income                                                                                
Distributions from        --  (.02)     --    --     --    --     --    --       --     --     --
realized gains                                                                                   
Total distributions    (.14)  (.30)  (.30) (.30)  (.30) (.31)  (.32) (.31)    (.16)  (.32)  (.32)
Net asset value,       $5.53  $5.43  $5.40 $5.35  $5.63 $5.33  $5.04 $4.96    $5.00  $4.86  $4.73
end of period                                                                                    
                     Ratios/supplemental data                                                    
                                                 Class A                                         
                     1996***   1996   1995  1994   1993  1992   1991  1990   1989**   1988   1987
Net assets, end of      $481   $491   $505  $525   $464  $308   $195  $133      $79    $55    $37
period (in millions)                                                                             
Ratio of expenses to   .74%+   .75%   .66%  .65%   .65%  .67%   .67%  .69%    .72%+   .77%   .88%
average daily net                                                                                
assets#                                                                                          
Ratio of net income   5.17%+  5.16%  5.66% 5.32%  5.53% 6.06%  6.36% 6.44%   6.60%+  6.55%  6.77%
to                                                                                               
average daily net                                                                                
assets                                                                                           
Portfolio turnover       19%    52%    53%   37%     5%   11%     8%   24%      19%    33%    29%
rate                                                                                             
(excluding                                                                                       
short-term                                                                                       
securities)                                                                                      
Total return++          4.6%   6.3%   6.7%  0.3%  11.7% 12.3%   8.1%  5.6%     6.4%   9.7% (0.2%)

                *For a share outstanding throughout the period.  Rounded to                      
                 nearest cent.                                                                   
               **The Fund's fiscal year-end was changed from Dec. 31 to June 30,                 
                 effective 1989.                                                                 
              ***Six months ended Dec. 31, 1996 (Unaudited).                                     
                +Adjusted to an annual basis.                                                    
               ++Total return does not reflect payment of a sales charge.                        
                #Effective fiscal year 1996, expense ratio is based on total                     
                 expenses of the Fund before reduction of earnings credits on                    
                 cash balances.                                                                  


N-30D 11th “Page” of 15 TOC 1st Previous Next ↓Bottom Just 11th
Fiscal period ended June 30,                                                    

   Per share income and capital changes*
Class B           
1996***    1996 1995**            
Net asset value,         $5.43   $5.40  $5.47                                   
beginning of period                                                             
Income from investment operations:
Net investment income      .12     .26    .09                                   
Net gains (losses)         .10     .03  (.07)                                   
(both realized                                                                  
and unrealized)                                                                 
Total from investment      .22     .29    .02                                   
operations                                                                      
Less distributions:               
Dividends from net       (.12)   (.24)  (.09)                                   
investment income                                                               
Distributions from          --   (.02)     --                                   
realized gains                                                                  
Total distributions      (.12)   (.26)  (.09)                                   
Net asset value,        $5.53   $5.43  $5.40                                    
end of period                                                                   
Ratios/supplemental data          
Class B           
1996***    1996 1995**            
Net assets, end of         $26     $21     $6                                   
period (in millions)                                                            
Ratio of expenses to    1.49%+  1.51%# 1.49%+                                   
average daily net                                                               
assets#                                                                         
Ratio of net income to  4.41%+   4.42% 4.72%+                                   
average daily net                                                               
assets                                                                          
Portfolio turnover         19%     52%    53%                                   
rate                                                                            
(excluding short-term                                                           
securities)                                                                     
Total return++            4.2%    5.5%   0.4%                                   

   *For a share outstanding throughout the period.
Rounded to the nearest cent.              
**Inception date was March 20, 1995.          
***Six months ended Dec. 31, 1996 (Unaudited).  
+Adjusted to an annual basis.               
            ++Total return does not reflect payment of a sales charge.
                #Effective fiscal year 1996, expense ratio is based on total
                  expenses of the Fund before reduction of earnings credits on
cash balances.                            

N-30D 12th “Page” of 15 TOC 1st Previous Next ↓Bottom Just 12th
                                                        [Enlarge/Download Table]

                Investments in securities                                                                                           

                                                                                   (Percentages represent                           
                IDS Insured Tax-Exempt Fund                                          value of investments                           
                Dec. 31, 1996 (Unaudited)                                          compared to net assets)                          
------------------------------------------------------------------------------------------------------------------------------------
Municipal bonds (98.7%)                                                                                                             
------------------------------------------------------------------------------------------------------------------------------------

Name of issuer and title of issue (b,c,d)                                       Coupon  Maturity       Principal            Value(a)
                                                                                  rate      year          amount                    
------------------------------------------------------------------------------------------------------------------------------------
Alabama (0.7%)                                                                                                                      
Mobile General Obligation Capital Improvement Warrants                                                                              
  Convention Center Pre-Refunded Bonds Series 1990                                                                                  
                                                                                                                                    
  (AMBAC Insured)                                                                7.125%     2020      $3,000,000          $3,320,940
------------------------------------------------------------------------------------------------------------------------------------
Alaska (1.5%)                                                                                                                       
North Slope Borough Capital Appreciation                                                                                            
  Unlimited General Obligation Bonds                                                                                                
  Series 1995A Zero Coupon (MBIA Insured)                                         5.61      2006       5,300,000 (e)       3,215,510
North Slope Borough General Obligation Bonds                                                                                        
  Series 1996B Zero Coupon (MBIA Insured)                                         5.72      2007       8,000,000 (e)       4,558,080
                                                                                                                       -------------
Total                                                                                                                      7,773,590
------------------------------------------------------------------------------------------------------------------------------------
Arizona (1.8%)                                                                                                                      
Chandler Water & Sewer Refunding Revenue Bonds                                                                                      
  Series 1991 (FGIC Insured)                                                      7.00      2012       1,250,000           1,373,938
Health Facilities Authority Hospital System                                                                                         
  Refunding Revenue Bonds Phoenix Baptist Hospital                                                                                  
  Series 1992 (MBIA Insured)                                                      6.25      2011       1,650,000           1,748,340
Phoenix Civic Improvement Wastewater System Lease                                                                                   
  Refunding Revenue Bonds (Secondary MBIA Insured)                                4.75      2023       4,500,000           3,954,195
State University Research Park Development                                                                                          
  Refunding Bonds Series 1995 (MBIA Insured)                                      5.00      2021       1,975,000           1,850,535
                                                                                                                        ------------
Total                                                                                                                      8,927,008
------------------------------------------------------------------------------------------------------------------------------------
Arkansas (0.2%)                                                                                                                     
Jonesboro Residential Housing & Health Care Facility Board                                                                          
  St. Bernards Regional Medical Center                                                                                              
  Hospital Refunding Revenue & Construction Bonds                                                                                   
  Series 1996B (AMBAC Insured)                                                    5.90      2016       1,200,000           1,239,480
------------------------------------------------------------------------------------------------------------------------------------
California (9.7%)                                                                                                                   
Desert Sands Unified School District Convertible Capital                                                                            
  Appreciation Certificates Series 1995 Zero Coupon                                                                                 
  (FSA Insured)                                                                   1.40      2020       3,000,000 (e)       2,398,320
Eastern Municipal Water District Riverside County                                                                                   
  Water & Sewer Pre-Refunded Revenue                                                                                                
  Certificates of Participation Series 1991 (FGIC Insured)                        6.50      2020       5,460,000           6,041,654
Fontana Unified School District San Bernardino County                                                                               
  General Obligation Convertible Capital Appreciation Bonds                                                                         
  Series 1990C Zero Coupon (FGIC Insured)                                         0.61      2020       6,000,000 (e)       6,091,740
Fresno Health Facility Revenue Bonds Holy Cross-St. Agnes                                                                           
  (Secondary MBIA Insured)                                                        6.625     2021       2,000,000           2,161,240

See accompanying notes to investments in securities.                                                                                

Los Angeles Department of Airports Revenue Bonds                                                                                    
  Los Angeles International Airport Series D                                                                                        
  (FGIC Insured) A.M.T.                                                           5.50      2015       2,000,000           1,979,340
Los Angeles Department of Water & Power Waterworks                                                                                  
  Refunding Revenue Bonds Second Issue                                                                                              
  (Secondary FGIC Insured)                                                        4.50      2023       2,000,000           1,672,080
Northern California Transmission Select Auction                                                                                     
  Variable Rate Security & Residual Interest Revenue Bonds                                                                          
  Inverse Floater (MBIA Insured)                                                  5.50      2024       2,500,000 (f)       2,400,875
Oceanside Certificate of Participation Refunding Bonds                                                                              
  Oceanside Civic Center (MBIA Insured)                                           5.25      2019       1,730,000           1,646,476
San Diego County Certificate of Participation                                                                                       
  Regional Authority Bonds Mt. Tower                                                                                                
  Inverse Floater Series 1991 (MBIA Insured)                                      6.36      2019       9,000,000 (f)       9,455,040
San Jose Redevelopment Agency Merged Area                                                                                           
 Redevelopment Tax Allocation Bonds Series 1993                                                                                     
 (MBIA Insured)                                                                   4.75      2024       2,400,000           2,081,784
San Mateo County Joint Power Financing Authority                                                                                    
  Lease Revenue Bonds San Mateo County Health Center                                                                                
  Series 1994A (FSA Insured)                                                      5.75      2022       1,500,000           1,503,225
State Public Works Board Lease Revenue Bonds                                                                                        
  Department of Correction Substance Abuse Treatment                                                                                
  Facility & State Prison at Corcoran Series 1996A (AMBAC Insured)                5.25      2021       2,000,000           1,910,740
State Public Works Board Lease Revenue Bonds                                                                                        
  University of California Series A (AMBAC Insured)                               6.40      2016       2,000,000           2,197,600
State Unlimited Tax General Obligation Bonds                                                                                        
  (Secondary FGIC Insured)                                                        4.75      2023       2,500,000           2,173,150
Statewide Community Development Authority                                                                                           
  Certificate of Participation                                                                                                      
  Sutter Health Obligated Group (MBIA Insured)                                    5.50      2022       5,750,000           5,603,202
                                                                                                                        ------------
Total                                                                                                                     49,316,466
------------------------------------------------------------------------------------------------------------------------------------
Colorado (2.7%)                                                                                                                     
Denver City & County Airport Revenue Bonds Series B                                                                                 
  (MBIA Insured) A.M.T.                                                           5.75      2017       9,290,000 (g)       9,266,868
Douglas County School District General Obligation                                                                                   
  Improvement Bonds Series 1994A (MBIA Insured)                                   6.50      2016       1,500,000           1,681,455
Larimer Weld & Boulder Counties School District R-2J                                                                                
  Thompson Unlimited General Obligation Capital                                                                                     
  Appreciation Bonds Series 1997 Zero Coupon (FGIC Insured)                       5.45      2011       2,000,000 (e)         891,020
Larimer Weld & Boulder Counties School District R-2J                                                                                
  Thompson Unlimited General Obligation Capital                                                                                     
  Appreciation Bonds Series 1997 Zero Coupon (FGIC Insured)                       5.50      2012       1,400,000 (e)         586,320
Municipal Subdistrict Northern Colorado Water Conservatory                                                                          
  District Refunding Revenue Bonds Series E (AMBAC Insured)                       5.00      2017       1,500,000           1,400,340
                                                                                                                        ------------
Total                                                                                                                     13,826,003
------------------------------------------------------------------------------------------------------------------------------------
Connecticut (0.3%)                                                                                                                  
Bridgeport General Obligation Refunding Bonds                                                                                       
  Series 1996A (AMBAC Insured)                                                    5.50      2015       1,750,000           1,725,763
------------------------------------------------------------------------------------------------------------------------------------
Delaware (0.2%)                                                                                                                     
Health Facilities Authority Refunding Revenue Bonds                                                                                 
  Medical Center of Delaware Series 1989 (MBIA Insured)                           7.00      2015       1,000,000           1,079,430
------------------------------------------------------------------------------------------------------------------------------------
District of Columbia (2.7%)                                                                                                         
Howard University Revenue Bonds Series A (MBIA Insured)                           8.00      2017       1,500,000           1,573,110
Metropolitan Washington Airports Authority Airport System                                                                           
  Revenue Bonds Series 1992A (MBIA Insured) A.M.T.                                6.625     2019       9,420,000          10,150,709
Unlimited Tax General Obligation Refunding Bonds                                                                                    
  Series B-2 (FSA Insured)                                                        5.50      2010       2,000,000           1,979,340
                                                                                                                        ------------
Total                                                                                                                     13,703,159
------------------------------------------------------------------------------------------------------------------------------------
Florida (5.1%)                                                                                                                      
Alachua County Public Improvement Refunding Revenue Bonds                                                                           
  (FSA Insured)                                                                   5.125     2021       2,000,000           1,894,320
Department of Transportation Turnpike Revenue Bonds                                                                                 
  Series 1991A (AMBAC Insured)                                                    6.25      2020       1,250,000           1,300,537
Florida State Turnpike Authority Department of Transportation                                                                       
  Series A (FGIC Insured)                                                         5.50      2021       8,210,000           8,112,055
Fort Myers Utility System Refunding Revenue Bonds                                                                                   
  Series 1989A (BIG Insured)                                                      6.00      2019       2,000,000           2,026,520
Gulf Breeze Local Government Loan Program Boca Raton                                                                                
  Series 1985E (FGIC Insured)                                                     7.75      2015       2,000,000           2,207,360
Lee County School Board Certificate of Participation                                                                                
  Series 1996A (FSA Insured)                                                      5.50      2017       1,000,000             995,070
Orange County Health Facility Authority Revenue Bonds                                                                               
  Adventist Health System Sunbelt Obligated Group                                                                                   
  Series 1995 (AMBAC Insured)                                                     5.25      2020       1,250,000           1,194,275
Osceola County Transportation Pre-Refunded Revenue Bonds                                                                            
  Series 1988A (FGIC Insured)                                                     7.70      2013       1,215,000           1,295,858
Palm Beach County Solid Waste Authority Revenue Bonds                                                                               
  Series 1984 (BIG Insured)                                                       8.375     2010         500,000             525,480
State Correctional Privatization Commission Certificate of Participation                                                            
  350 Bed Youthful Columbia Series A (AMBAC Insured)                              5.00      2017       1,900,000           1,788,185
State Correctional Privatization Commission Certificate of Participation                                                            
  Youth Offender Correctional Facility Polk County                                                                                  
  Series 1995B (AMBAC Insured)                                                    5.00      2017       4,500,000           4,235,175
                                                                                                                        ------------
Total                                                                                                                     25,574,835
------------------------------------------------------------------------------------------------------------------------------------
Georgia (3.2%)                                                                                                                      
Atlanta Metropolitan Rapid Transit Authority Sales Tax                                                                              
  Pre-Refunded Revenue Bonds Series L (AMBAC Insured)                             7.20      2020       3,000,000           3,264,810
Chatham County Hospital Authority Revenue Bonds                                                                                     
  Memorial Medical Center Series 1990A (MBIA Insured)                             7.00      2021       4,500,000           4,995,225
Dalton Development Authority Revenue Certificates                                                                                   
  Series 1996 (MBIA Insured)                                                      5.25      2026       3,000,000           2,848,800
Fulton County Water & Sewer Revenue Bonds                                                                                           
  (FGIC Insured)                                                                  6.375     2014       3,250,000           3,626,643
Municipal Electrical Authority Power Revenue Bonds                                                                                  
  Series M (BIG Insured)                                                          8.10      2012       1,080,000           1,101,600
Municipal Electrical Authority Special Obligation                                                                                   
  Refunding Bonds 2nd Crossover Series (AMBAC Insured)                            7.80      2020         500,000             525,475
                                                                                                                        ------------
Total                                                                                                                     16,362,553
------------------------------------------------------------------------------------------------------------------------------------
Illinois (3.2%)                                                                                                                     
Chicago O'Hare International Airport General                                                                                        
  Revenue Bonds Series 1990A (AMBAC Insured) A.M.T.                               7.50      2016       2,000,000           2,182,140
Chicago O'Hare International Airport Terminal                                                                                       
  Revenue Bonds (MBIA Insured) A.M.T.                                             7.625     2010       3,000,000           3,291,540
Chicago Public Building Commission                                                                                                  
  Pre-Refunded Revenue Bonds (MBIA Insured) A.M.T.                                7.70      2008       1,000,000           1,058,290
Chicago Public Building Commission                                                                                                  
  Pre-Refunded Revenue Bonds Series 1989A (FGIC Insured)                          7.75      2006       1,000,000           1,088,430
Chicago Public Building Commission                                                                                                  
  Pre-Refunded Revenue Bonds Series 1990A (MBIA Insured)                          7.125     2015       5,000,000           5,462,550
Cook County General Obligation Captial Improvement Bonds                                                                            
  Series 1996 (FGIC Insured)                                                      5.875     2022       2,925,000           2,948,400
State University Capital Appreciation Auxilliary Facility System                                                                    
  Revenue Bonds Series 1996 Zero Coupon (FSA Insured)                             5.90      2016       1,150,000 (e)         373,382
                                                                                                                       -------------
Total                                                                                                                     16,404,732
------------------------------------------------------------------------------------------------------------------------------------
Indiana (2.3%)                                                                                                                      
Board of Trustees for the Vincesses University                                                                                      
  House & Dining System                                                                                                             
  Revenue Bonds Series 1996 (MBIA Insured)                                        5.125     2021         800,000             748,352
Educational Facilities Authority Pre-Refunded Bonds                                                                                 
  Valpraiso University (BIG Insured)                                              7.80      2008         500,000             541,785
Marion County Hospital Authority Refunding Revenue Bonds                                                                            
  Methodist Hospital Series 1989 (MBIA Insured)                                   6.50      2013       4,000,000           4,273,160
State Health Facility Finance Authority Hospital                                                                                    
  Refunding Revenue Bonds Columbus Regional Hospital                                                                                
  Series 1993 (CGIC Insured)                                                      7.00      2015       5,000,000           5,886,150
                                                                                                                        ------------
Total                                                                                                                     11,449,447
------------------------------------------------------------------------------------------------------------------------------------
Kentucky (0.1%)                                                                                                                     
Louisville & Jefferson County Airport Authority System                                                                              
  Revenue Bonds (MBIA Insured) A.M.T.                                             8.50      2017         300,000             312,453
------------------------------------------------------------------------------------------------------------------------------------
Louisiana (2.4%)                                                                                                                    
Energy & Power Authority Power Refunding Revenue Bonds                                                                              
  Rodemacher Unit #2 Series 1991 (FGIC Insured)                                   6.75      2008       7,000,000 (g)       7,626,010
Jefferson Parish School Board Sales & Use Tax                                                                                       
  Revenue Bonds (AMBAC Insured)                                                   5.00      2014       3,785,000           3,580,913
New Orleans Audubon Park Commission Aquarium                                                                                        
  Pre-Refunded Bonds Series 1988 (MBIA Insured)                                   7.90      2008         500,000             525,710
New Orleans International Airport Pre-Refunded                                                                                      
  Revenue Bonds Series A (FGIC Insured) A.M.T.                                    8.875     2017         565,000             592,962
                                                                                                                        ------------
Total                                                                                                                     12,325,595
------------------------------------------------------------------------------------------------------------------------------------
Maine (0.4%)                                                                                                                        
State Turnpike Authority Turnpike Revenue Bonds                                                                                     
  (MBIA Insured)                                                                  6.00      2018       1,790,000           1,851,522
------------------------------------------------------------------------------------------------------------------------------------
Maryland (0.2%)                                                                                                                     
Baltimore Refunding Revenue Bonds Wastewater                                                                                        
  Series 1994A (FGIC Insured)                                                     5.00      2022       1,000,000             938,390
------------------------------------------------------------------------------------------------------------------------------------
Massachusetts (4.7%)                                                                                                                
Boston Water & Sewer Commission Revenue Bonds                                                                                       
  General Subordinate Series A (BIG Insured)                                      6.00      2008       2,500,000           2,544,400
Health & Educational Authority Revenue Bonds                                                                                        
  Valley Regional Health System Series C (Connie Lee Insured)                     5.75      2018       1,500,000           1,498,170
Health & Educational Facilities Authority                                                                                           
  Pre-Refunded Revenue Bonds                                                                                                        
  Lahey Clinic Medical Center (MBIA Insured)                                      7.625     2018       2,200,000           2,359,808
Health & Educational Facilities Authority                                                                                           
  Pre-Refunded Revenue Bonds Northeastern University                                                                                
  Series 1989C (AMBAC Insured)                                                    7.10      2006       1,000,000           1,082,520
Health & Educational Facilities Authority                                                                                           
   Revenue Bonds Cape Cod Health System                                                                                             
   Series A (Connie Lee Insured)                                                  5.25      2021       4,000,000           3,726,800
Industrial Finance Agency Revenue Bonds                                                                                             
  Brandeis University (MBIA Insured)                                              6.80      2019       1,700,000           1,827,262
Municipal Wholesale Electric Power Supply System                                                                                    
  Refunding Revenue Bonds Series B (MBIA Insured)                                 4.75      2011       5,250,000           4,815,773
State Bay Transportation Authority Series B                                                                                         
  (AMBAC Insured)                                                                 5.375     2025       4,000,000           3,856,400
State Water Resource Authority Revenue Bonds                                                                                        
   Series A (MBIA Insured)                                                        5.50      2022       2,000,000           1,928,240

                                                                                                                        ------------
Total                                                                                                                     23,639,373
------------------------------------------------------------------------------------------------------------------------------------
Michigan (3.8%)                                                                                                                     
Almont Community Schools                                                                                                            
  Unlimited Tax General Obligation Bonds                                                                                            
  Series 1996 (FGIC Insured)                                                      5.375     2022       1,900,000           1,837,357
Genesee County Sewer Disposal System No 3                                                                                           
  Limited Tax General Obligation Bonds                                                                                              
  Series A (AMBAC Insured)                                                        5.50      2016       1,400,000           1,386,756
Iron Mountain School Unlimited Tax                                                                                                  
  General Obligation Refunding Bonds (AMBAC Insured)                              5.125     2021       1,500,000           1,413,420
Kalamazoo Hospital Finance Authority                                                                                                
  Refunding & Improvement Bonds                                                                                                     
  Bronson Methodist Hospital (Secondary MBIA Insured)                             6.25      2012       3,000,000           3,159,390
Lincoln Park School District County of Wayne                                                                                        
  School Building & Site General Obligation Bonds                                                                                   
  Series 1996 (FGIC Insured)                                                      5.90      2026       1,500,000           1,538,520
Monroe County Pollution Control Refunding Bonds                                                                                     
  Detroit Edison Series I-B (MBIA Insured) A.M.T.                                 6.55      2024       5,000,000           5,411,400
Napoleon School District Unlimited General Obligation                                                                               
  Refunding Revenue Bonds Series 1995 (FGIC Insured)                              5.50      2024       1,740,000           1,708,489
Reeths-Puffer Schools Unlimited General Obligation Bonds                                                                            
  Series 1996 (FGIC Insured)                                                      5.30      2026       1,075,000           1,025,743
South Redford School District Unlimited General                                                                                     
  Obligation Bonds Series 1996 (FGIC Insured)                                     5.50      2022       2,000,000           1,964,960
                                                                                                                        ------------
Total                                                                                                                     19,446,035
------------------------------------------------------------------------------------------------------------------------------------
Minnesota (2.0%)                                                                                                                    
Southern Minnesota Municipal Power Agency                                                                                           
  Power Supply System Refunding Revenue Bonds                                                                                       
  Zero Coupon (MBIA Insured)                                                      6.12      2021       6,000,000 (e)       1,546,320
Southern Minnesota Municipal Power Agency                                                                                           
  Power Supply System Refunding Revenue Bonds                                                                                       
  Series A (Secondary FGIC Insured)                                               4.75      2016       4,250,000           3,803,325
Western Municipal Power Agency Transmission                                                                                         
  Pre-Refunded Revenue Bonds Series 1991 (AMBAC Insured)                          6.75      2016       4,500,000           4,902,435
                                                                                                                        ------------
Total                                                                                                                     10,252,080
------------------------------------------------------------------------------------------------------------------------------------
Mississippi (0.2%)                                                                                                                  
Alcorn County Hospital Refunding Revenue Bonds                                                                                      
  Magnolia Regional Hospital Center (AMBAC Insured)                               5.75      2013       1,000,000           1,016,740
------------------------------------------------------------------------------------------------------------------------------------
Missouri (0.2%)                                                                                                                     
St. Louis Parking Facility Refunding Revenue Bonds                                                                                  
  Series 1996 (MBIA Insured)                                                      5.375     2016       1,000,000             980,200
------------------------------------------------------------------------------------------------------------------------------------
Montana (1.9%)                                                                                                                      
Forsyth Rosebud County Pollution Refunding Revenue Bonds                                                                            
  Puget Sound Power & Light (AMBAC Insured) A.M.T.                                7.25      2021       4,000,000           4,429,880
State Board of Investments Payroll Tax Bonds                                                                                        
  Worker's Compensation Program Series 1991 (MBIA Insured)                        6.875     2020       4,750,000           5,205,171
                                                                                                                        ------------
Total                                                                                                                      9,635,051
------------------------------------------------------------------------------------------------------------------------------------
Nevada (0.9%)                                                                                                                       
Clark County Passenger Facility Charge Revenue Bonds                                                                                
  Las Vegas McCarren Airport Series B                                                                                               
  (Secondary AMBAC Insured) A.M.T.                                                5.50      2025       5,000,000           4,752,050
------------------------------------------------------------------------------------------------------------------------------------
New Hampshire (1.1%)                                                                                                                
Industrial Development Authority Pollution Control                                                                                  
  Revenue Bonds Light & Power                                                                                                       
  Series 1989 (AMBAC Insured) A.M.T.                                              7.375     2019       5,000,000 (g)       5,460,550
------------------------------------------------------------------------------------------------------------------------------------
New Mexico (0.2%)                                                                                                                   
Santa Fe Water Revenue Bonds (AMBAC Insured)                                      6.30      2024       1,000,000           1,103,780
------------------------------------------------------------------------------------------------------------------------------------
New York (7.4%)                                                                                                                     
Dormitory Authority City University System                                                                                          
  Consolidated 3rd Resolution Revenue Bonds                                                                                         
  Series 1994-2  (MBIA Insured)                                                   6.25      2019       2,500,000           2,634,350
Metropolitan Transportation Authority Commuter Facility                                                                             
  Service Contract Bonds Series L (AMBAC Insured)                                 7.50      2017       1,300,000           1,383,811
New York City General Obligation Pre-Refunded Bonds                                                                                 
  Series A (FGIC Insured)                                                         8.125     2007       1,145,000           1,204,620
New York City Municipal Water Finance Authority                                                                                     
  Water & Sewer System Revenue Bonds Series A                                                                                       
  (Secondary MBIA Insured)                                                        5.50      2023       5,000,000           4,910,950
State Dormitory Authority Insured College                                                                                           
  Revenue Bonds Series 1996 (AMBAC Insured)                                       5.375     2016         700,000             683,886
State Dormitory Authority State University Education Facility                                                                       
  Revenue Bonds (Secondary AMBAC Insured)                                         5.25      2015       2,700,000           2,646,837
State Energy Resource & Development Authority                                                                                       
  Gas Facility Revenue Bonds Brooklyn Union Gas                                                                                     
  (MBIA Insured) A.M.T.                                                           5.60      2025       4,500,000           4,326,750
State Energy Resource & Development Authority                                                                                       
  Pollution Control Bonds Series 1987A (MBIA Insured)                             6.15      2026       3,000,000           3,074,610
State Energy Resource & Development Authority                                                                                       
  Pollution Control Refunding Revenue Bonds                                                                                         
  Rochester Gas & Electric (MBIA Insured) A.M.T.                                  6.50      2032       4,000,000           4,270,320
State Energy Resource & Development Authority                                                                                       
  Solid Waste Disposal Revenue Bonds                                                                                                
  New York State Electric & Gas Series A                                                                                            
  (MBIA Insured) A.M.T.                                                           5.70      2028      11,210,000          10,904,415
State Urban Development Correctional Facilities                                                                                     
  Pre-Refunded Revenue Bonds Series 1 (FSA Insured)                               7.50      2020       1,500,000           1,663,755
                                                                                                                        ------------
Total                                                                                                                     37,704,304
------------------------------------------------------------------------------------------------------------------------------------
North Carolina (2.8%)                                                                                                               
Charlotte Pre-Refunded Certificates of Participation                                                                                
  Convention Facility Series 1991 (AMBAC Insured)                                 6.75      2021       3,150,000           3,529,260
Concord Certificate of Participation Series B (MBIA Insured)                      5.75      2016       1,480,000           1,484,840
Fayetteville Financial Corporation Installment Payment                                                                              
  Revenue Bonds Series 1996 (MBIA Insured)                                        5.625   2014-18        665,000             664,063
Medical Care Community Hospital Revenue Bonds                                                                                       
  Series 1996 (AMBAC Insured)                                                     5.375     2019       1,000,000             969,920
Pasquotank County Certificates of Participation                                                                                     
  Elizabeth Pasquotank Public School                                                                                                
  Series 1995 (MBIA Insured)                                                      5.00      2020       5,000,000           4,641,750
Randolph County Certificates of Participation                                                                                       
  Series 1995 (MBIA Insured)                                                      5.30      2015       3,000,000           2,920,770
                                                                                                                        ------------
Total                                                                                                                     14,210,603
------------------------------------------------------------------------------------------------------------------------------------
Ohio (1.6%)                                                                                                                         
Lorain County Hospital Facilities Refunding Revenue Bonds                                                                           
   EMH Regional Medical Center Series 1995 (AMBAC Insured)                        5.375     2021       2,000,000           1,939,860
Lucas County Hospital Refunding Revenue Bonds                                                                                       
  St. Vincent Medical Center Series 1993C (MBIA Insured)                          5.25      2022       1,725,000           1,620,965
Montgomery County Hospital Facility                                                                                                 
  Refunding Revenue & Improvement Bonds                                                                                             
  Kettering Medical Center (MBIA Insured)                                         5.50      2026       2,500,000           2,435,925
North Olmsted Limited General Obligation Bonds                                                                                      
  Series 1996 (AMBAC Insured)                                                     5.00      2016       1,000,000             942,200
University of Cincinnati  Certificate of Participation                                                                              
  Series 1996 (MBIA Insured)                                                      5.125     2024       1,000,000             943,130
                                                                                                                        ------------
Total                                                                                                                      7,882,080
------------------------------------------------------------------------------------------------------------------------------------
Oklahoma (1.4%)                                                                                                                     
McAlester Public Works Authority Oklahoma Improvement                                                                               
  Refunding Revenue Bonds (FSA Insured)                                           5.25     2017-18     2,470,000           2,409,028
Moore Public Works Authority Refunding Revenue Bonds                                                                                
  Series 1989 (AMBAC Insured)                                                     7.60      2006       2,700,000           2,940,111
Tulsa International Airport General Revenue Bonds                                                                                   
  Consolidated Fixed Rate Series 1989 (MBIA Insured)                              7.50      2008       1,500,000           1,558,380
                                                                                                                        ------------
Total                                                                                                                      6,907,519
------------------------------------------------------------------------------------------------------------------------------------
Oregon (0.9%)                                                                                                                       
Port of Portland Airport Revenue Bonds                                                                                              
  Series 1996-11 (FGIC Insured) A.M.T.                                            5.625     2026       2,500,000           2,430,625
State Department of Administration Services                                                                                         
  Certificate of Participation Series 1996B (MBIA Insured)                        5.625     2020       2,050,000           2,048,483
                                                                                                                        ------------
Total                                                                                                                      4,479,108
------------------------------------------------------------------------------------------------------------------------------------
Pennsylvania (3.7%)                                                                                                                 
Allegheny County Airport Revenue Bonds                                                                                              
  Pittsburgh International Series D (FGIC Insured) A.M.T.                         7.75      2019       2,300,000           2,375,256
Allegheny County Hospital Development Authority                                                                                     
  Hospital Revenue Bonds Series 1996 (AMBAC Insured)                              5.625     2026       2,025,000           1,989,036
Pittsburgh Water & Sewer Authority  System                                                                                          
  Pre-Refunded Revenue Bonds Series 1991A (FGIC Insured)                          6.50      2014      10,000,000          11,026,300
Robinson Township Municipal Authority Water & Sewer                                                                                 
  Revenue Bonds (FGIC Insured)                                                    6.00      2019       2,200,000           2,253,416
Turnpike Commission Pre-Refunded Revenue Bonds                                                                                      
  Series 1989K (MBIA Insured)                                                     7.50      2012       1,000,000           1,107,660
                                                                                                                        ------------
Total                                                                                                                     18,751,668
------------------------------------------------------------------------------------------------------------------------------------
Rhode Island (0.6%)                                                                                                                 
Health  & Education Building Corporation Higher Education                                                                           
  Facility Revenue Bonds Series 1996 (MBIA Insured)                               5.625     2026       3,000,000           2,934,420
------------------------------------------------------------------------------------------------------------------------------------
South Carolina (0.5%)                                                                                                               
Greenville Memorial Auditorium District Public Facilities                                                                           
  Corporation Certificate of Participation BI-LO Center                                                                             
  Series 1996B (AMBAC Insured)                                                    5.75      2016       1,250,000           1,258,075
Piedmont Municipal Power Agency Electric                                                                                            
  Refunding Revenue Bonds (FGIC Insured)                                          6.25      2021       1,000,000           1,096,450
                                                                                                                        ------------
Total                                                                                                                      2,354,525
------------------------------------------------------------------------------------------------------------------------------------
Tennessee (2.0%)                                                                                                                    
Health Education & Housing Facility Shelby Hospital                                                                                 
  Revenue Bonds Methodist Health Systems Series 1995                                                                                
  (MBIA Insured)                                                                  5.25      2015       1,000,000             965,440
Knox County Health Education & Housing Facility Board                                                                               
  Hospital Refunding Revenue Bonds Fort Sanders                                                                                     
  Alliance Obligation Group Series 1993 (MBIA Insured)                            5.75      2014       3,750,000           3,865,275
Knox County Health Educational & Housing Facilities                                                                                 
  Hospital Refunding Revenue & Improvement Bonds                                                                                    
  (Connie Lee Insured)                                                            5.50      2017       3,500,000           3,371,340
Metropolitan Government Nashville & Davidson County                                                                                 
  Sports Authority Public Improvement Revenue Bonds                                                                                 
  Series 1996 (AMBAC Insured)                                                     5.75      2017       2,160,000           2,187,194
                                                                                                                        ------------
Total                                                                                                                     10,389,249
------------------------------------------------------------------------------------------------------------------------------------
Texas (17.1%)                                                                                                                       
Austin Airport System Prior Lien Revenue Bonds Series 1995A                                                                         
  (MBIA Insured) A.M.T.                                                           6.125     2025       3,000,000           3,102,030
Austin Combined Utilities System Refunding Revenue Bonds                                                                            
  Series 1994 (FGIC Insured)                                                      5.75      2024       8,500,000           8,542,075
Austin Combined Utilities System Revenue Bonds                                                                                      
  Series 1987 (BIG Insured)                                                       8.625    2012-17     1,250,000           1,491,562
Austin Combined Utilities System Capital Appreciation                                                                               
  Refunding Revenue Bonds Series 1994 Zero Coupon (FGIC Insured)                  5.83      2017       5,900,000 (e)       1,837,083
Bexar County Health Facility Development Hospital                                                                                   
  Revenue Bonds San Antonio Baptist Memorial Hospital System                                                                        
  Series 1994 (MBIA Insured)                                                      6.75      2019       5,000,000           5,543,150
Brazos River Authority Collateralized Pollution Control                                                                             
  Refunding Revenue Bonds Texas Utility Electric                                                                                    
  Series 1992C (FGIC Insured) A.M.T.                                              6.70      2022      14,935,000          16,109,787
Colorado River Municipal Water District Water System                                                                                
  Pre-Refunded Revenue Bonds Series A (AMBAC Insured)                             6.625     2021       8,900,000           9,620,811
Harris County Health Facilities Development Hospital                                                                                
  Revenue Bonds State Children's Hospital                                                                                           
  Series 1989A (MBIA Insured)                                                     7.00      2019       1,500,000           1,635,045
Harris County Public Facilities Corporation                                                                                         
  Detention Facility Mortgage Pre-Refunded Revenue Bonds                                                                            
  (MBIA Insured)                                                                  7.80      2011       1,000,000           1,090,490
Harris County Toll Road Senior Lien                                                                                                 
  Pre-Refunded Revenue Bonds Series A (AMBAC Insured)                             6.50      2017       8,170,000           9,108,243
League City General Obligation                                                                                                      
  Refunding & Improvement Bonds                                                                                                     
  Series 1990 (FGIC Insured)                                                      6.25      2013       2,500,000           2,626,675
Matagorda County Navigation District #1                                                                                             
  Collateralized Pollution Control Revenue Bond                                                                                     
  Central Power & Light Series 1984A (AMBAC Insured)                              7.50      2014       2,500,000           2,777,725
Matagorda County Navigation District #1 Pollution Control                                                                           
  Refunding Revenue Bonds Houston Light & Power                                                                                     
  Series E (FGIC Insured)                                                         7.20      2018       2,150,000           2,340,963
Matagorda County Navigation District #1 Pollution Control                                                                           
  Revenue Bonds Central Power & Light                                                                                               
  Series 1990 (AMBAC Insured) A.M.T.                                              7.50      2020       2,000,000           2,196,720
Municipal Power Agency Refunding Revenue Bonds                                                                                      
  Series 1991A (AMBAC Insured)                                                    6.75      2012       5,250,000           5,773,425
North Central State Health Facilities Pre-Refunded Bonds                                                                            
  Children's Medical Center (BIG Insured)                                         7.875     2018       2,000,000           2,081,640
Turnpike Authority Dallas North Tollway                                                                                             
  Pre-Refunded Revenue Bonds Series 1990                                                                                            
  (AMBAC Insured)                                                                 6.00      2020       5,000,000           5,190,300
Turnpike Authority Dallas North Tollway Revenue Bonds                                                                               
  Addison Airport Toll Tunnel Series 1994 (FGIC Insured)                          6.60      2023       2,000,000           2,212,040
University of Houston System Consolidated                                                                                           
  Pre-Refunded Revenue Bonds Series 1990A (MBIA Insured)                          7.40      2006       3,160,000           3,446,707
                                                                                                                        ------------
Total                                                                                                                     86,726,471
------------------------------------------------------------------------------------------------------------------------------------
Utah (0.4%)                                                                                                                         
Intermountain Power Authority Power Supply                                                                                          
  Pre-Refunded Revenue Bonds Series 1987C (AMBAC Insured)                         8.375     2012         900,000 (g)         939,168
Salt Lake City-County Airport Pre-Refunded Revenue Bonds                                                                            
  Series 1989 (FGIC Insured) A.M.T.                                               7.875     2018       1,000,000           1,057,340
                                                                                                                        ------------
Total                                                                                                                      1,996,508
------------------------------------------------------------------------------------------------------------------------------------
Virginia (3.7%)                                                                                                                     
Chesapeake Industrial Development Authority Public                                                                                  
  Facilities Lease Revenue Bonds Series 1996 (MBIA Insured)                       5.25      2017       1,300,000           1,240,434
Hanover County Industrial Development Authority                                                                                     
  Memorial Regional Medical Center (MBIA Insured)                                 5.50      2025       3,800,000           3,682,656
Loudoun County Sanitation Authority Waste & Sewer                                                                                   
  Refunding Revenue Bonds (MBIA Insured)                                          5.25      2030       1,435,000           1,339,443
Portsmouth Redevelopment Housing Authority Multi-family Housing                                                                     
  Refunding Revenue Bonds (FNMA Insured)                                          6.05      2008       5,780,000           6,028,367
Upper Occoquan Sewer Authority Regional Sewer                                                                                       
  Revenue Bonds Series A (MBIA Insured)                                           4.75      2029       4,500,000           3,924,405
William County Lease Certificate of Participation Bonds                                                                             
  (MBIA Insured)                                                                  5.50      2020       2,590,000           2,532,606
                                                                                                                        ------------
Total                                                                                                                     18,747,911
------------------------------------------------------------------------------------------------------------------------------------
Washington (1.8%)                                                                                                                   
Public Power Supply System Non-Refunded Revenue Bonds                                                                               
  Nuclear Project #1 Series A (MBIA Insured)                                      7.50      2015       1,195,000           1,298,487
Public Power Supply System Pre-Refunded Revenue Bonds                                                                               
  Nuclear Project #1 Series A (MBIA Insured)                                      7.50      2015       1,805,000           1,975,699
Public Power Supply System Pre-Refunded Revenue Bonds                                                                               
  Nuclear Project #3 Series 1989A (BIG Insured)                                   7.25      2016       1,000,000           1,090,950
Public Power Supply System Refunding Revenue Bonds                                                                                  
  Nuclear Project #3 Series 1989A (BIG Insured)                                   6.00      2018       3,000,000           3,016,530
Spokane Regional Solid Waste Management System                                                                                      
  Revenue Bonds Series 1989 (AMBAC Insured) A.M.T.                                7.75      2011         300,000             323,280
Spokane Regional Solid Waste Management System                                                                                      
  Revenue Bonds Series 1989 (AMBAC Insured) A.M.T.                                7.875     2007       1,250,000           1,349,950
                                                                                                                        ------------
Total                                                                                                                      9,054,896
------------------------------------------------------------------------------------------------------------------------------------
West Virginia (2.7%)                                                                                                                
Board of Regents Registration Fee Pre-Refunded Revenue Bonds                                                                        
  Series 1989B (MBIA Insured)                                                     7.40      2009       2,000,000           2,175,900
School Building Authority Capital Improvement                                                                                       
  Pre-Refunded Revenue Bonds (MBIA Insured)                                       7.25      2015       3,415,000           3,796,797
School Building Authority Capital Improvement Revenue Bonds                                                                         
  Series 1990B (MBIA Insured)                                                     6.75      2017       5,000,000           5,419,000
State Parkway Economic Development & Tourism Authority Parkway                                                                      
  Pre-Refunded Revenue Bonds Series 1989 (FGIC Insured)                           7.125     2019       2,000,000           2,174,020
                                                                                                                        ------------
Total                                                                                                                     13,565,717
------------------------------------------------------------------------------------------------------------------------------------
Wisconsin (0.4%)                                                                                                                    
Center District Sales Tax Appreciation Senior Dedicated Bonds                                                                       
  Series A Zero Coupon (MBIA Insured)                                             6.03      2017       7,400,000 (e)       2,265,066
------------------------------------------------------------------------------------------------------------------------------------
Total municipal bonds                                                                                                               
(Cost: $462,160,624)                                                                                                    $500,387,270
------------------------------------------------------------------------------------------------------------------------------------
Total investments in securities                                                                                                     
(Cost: $462,160,624)(h)                                                                                                 $500,387,270
------------------------------------------------------------------------------------------------------------------------------------


N-30D 13th “Page” of 15 TOC 1st Previous Next ↓Bottom Just 13th
Notes to investments in securities                                              
--------------------------------------------------------------------------------
(a) Securities are valued by procedures described in Note 1 to the financial    
statements.                                                                     
(b) Investments in bonds, by rating category as a percentage of total bonds,    
are as follows:                                                                 

                                     (Unaudited)
 Rating                                12-31-96                         06-30-96
--------------------------------------------------------------------------------
AAA                                        99%                            100%
AA                                         --                              -- 
A                                          --                              -- 
BBB                                        --                              -- 
BB and below                               --                              -- 
Non-rated                                   1                              -- 

Total                                     100%                            100%

(c)  The  following  abbreviations  are  used  in  portfolio descriptions to    
identify the insurer of the issue:                                              
AMBAC --  American Municipal Bond Association Corporation               
BIG   --  Bond Investors Guarantee                                      
CGIC  --  Capital Guaranty Insurance Company                            
FGIC  --  Financial Guarantee Insurance Corporation                     
FNMA  --  Federal National Mortgage Association                         
FSA   --  Financial Security Assurance                                  
MBIA  --  Municipal Bond Investors Assurance                            
(d) The following abbreviations are used in the portfolio descriptions:         
   A.M.T.    --  Alternative Minimum Tax -- As of  Dec. 31, 1996, the value of
securities subject to alternative minimum tax represented 19.2% of net  
assets.                                                                 
(e) For zero coupon bonds, the interest rate disclosed represents the annualized
effective yield on the date of acquisition.                             
(f) Inverse floaters represent securities that pay interest at a rate that      
increases (decreases) in the same magnitude as, or in a multiple of, a  
  decline (increase) in market short-term rates.  Interest rate disclosed is
the rate in effect on Dec. 31, 1996. Inverse floaters in the aggregate  
represent 2.3% of the Fund's net assets as of Dec. 31, 1996.            
(g) Partially pledged as initial deposit on the following open interest rate    
futures contracts (see Note 5 to the financial statements):             
   Type of security                                          Notional amount
Sales contracts                                                       
   Municipal Bonds Index March 1997                              $20,000,000
(h) At Dec. 31, 1996, the cost of securities for federal income tax purposes was
   approximately $461,836,000 and the approximate aggregate gross unrealized
appreciation and depreciation based on that cost was:                 

  Unrealized appreciation                                        $38,737,000
   Unrealized depreciation                                           (186,000)
    ----------------------------------------------------------------------------
  Net unrealized appreciation                                    $38,551,000
    ----------------------------------------------------------------------------

N-30D 14th “Page” of 15 TOC 1st Previous Next ↓Bottom Just 14th
Board members and officers                                                      

Board members and officers of the Fund                                          
-----------------------------------------------------------------               
President and interested board member                                           

William R. Pearce                                                               
President and director, Board Services Corporation (provides                    
administrative services to boards including the boards of the                   
IDS and IDS Life funds and Master Trust portfolios).                            
-----------------------------------------------------------------               
Independent board members                                                       

H. Brewster Atwater Jr.                                                         
Former chairman and chief executive officer, General Mills, Inc.                

Lynne V. Cheney                                                                 
Distinguished fellow, American Enterprise Institute for                         
Public Policy Research.                                                         

Robert F. Froehlke                                                              
Former president of all funds in the IDS MUTUAL FUND GROUP.                     

Heinz F. Hutter                                                                 
Former president and chief operating officer, Cargill, Inc.                     

Anne P. Jones                                                                   
Attorney and telecommunications consultant.                                     

Melvin R. Laird                                                                 
Senior counsellor for national and international  affairs,  The Readers's Digest
Association, Inc.                                                               

Alan K. Simpson                                                                 
Former United States senator for Wyoming.                                       

Edson W. Spencer                                                                
Former chairman and chief executive officer, Honeywell, Inc.                    

Wheelock Whitney                                                                
Chairman, Whitney Management Company.                                           

C. Angus Wurtele                                                                
Chairman of the board, The Valspar Corporation.                                 
-----------------------------------------------------------------               
Interested board members who are officers and/or employees of AEFC              

William H. Dudley                                                               
Executive vice president, AEFC.                                                 

David R. Hubers                                                                 
President and chief executive officer, AEFC.                                    

John R. Thomas                                                                  
Senior vice president, AEFC.                                                    
-----------------------------------------------------------------               
Officers who also are officers and/or employees of AEFC                         

Peter J. Anderson                                                               
Senior vice president, AEFC.  Vice-president -- Investments for the Fund.       

Melinda S. Urion                                                                
Senior vice president and chief financial officer, AEFC.  Treasurer             
for the Fund.                                                                   
-------------------------------------------------------------------             
Other officer                                                                   

Leslie L. Ogg                                                                   
Vice  president, treasurer and corporate secretary of Board Services            
Corporation.  Vice president, general counsel and secretary for the Fund.       

Refer to the SAI for the board members' and officers' biographies.              

IDS mutual funds                                                                

Global/International funds                                                      

Funds in this group seek capital growth and/or income by investing  primarily in
foreign securities.  Foreign investments may be subject to currency fluctuations
and political and economic risks of the countries in which the  investments  are
made. They are high risk mutual funds with a potential for high reward.         

IDS Emerging Markets Fund                                                       

Invests in a Portfolio  comprised primarily of stocks of companies in developing
countries  throughout  the world that are  believed to offer  growth  potential.
Seeks to provide long-term growth of capital.                                   

(icon of) world globe                                                           

IDS Global Growth Fund                                                          
Invests in a Portfolio comprised primarily of stocks of companies throughout the
world that are  positioned  to meet market  needs in a changing  world  economy.
These companies offer above-average potential for long-term growth.             

(icon of) world                                                                 

IDS International Fund                                                          

Invests primarily in common stocks of foreign companies that offer potential for
superior growth. The Fund may invest up to 20% of its assets in the U.S. market.

(icon of) three flags                                                           

IDS Global Balanced Fund                                                        

Invests in stocks-and bonds in, for the most part, major markets  throughout the
world,  including  the U.S.  Seeks to provide a balance of growth of capital and
current income.                                                                 

(icon of) scale of globes                                                       

IDS Global Bond Fund                                                            

Invests in a  Portfolio  comprised  primarily  of debt  securities  of U.S.  and
foreign issuers to seek high total return through income and growth of capital. 

(icon of) globe                                                                 

Growth funds                                                                    

Funds in this group seek capital growth,  primarily from common stocks. They are
high risk mutual funds with a potential for high reward.                        

IDS Precious Metals Fund                                                        

Invests  primarily  in the  securities  of foreign or  domestic  companies  that
explore for, mine and process or distribute  gold and other precious  metals.  A
highly aggressive and speculative fund that seeks long-term growth of capital.  

(icon of) cart of precious gems                                               

IDS Discovery Fund                                                              

Invests  in  small-  and  medium-size,   growth-oriented  companies  emphasizing
technological innovation and productivity enhancement.                          
Buys and holds larger growth-oriented stocks.                                   

(icon of) ship                                                                  

IDS Small Company Index Fund                                                    

Invests in all or a representative group of the equity securities comprising the
S&P SmallCap 600 Index, as it strives to provide long-term capital appreciation.

(icon of) building                                                              

IDS Strategy Aggressive Fund                                                    

Invests  primarily  in common  stocks of  companies  that are selected for their
potential  for  above-average  growth.  Above-average  means that  their  growth
potential is better, in the opinion of the portfolio's  investment manager, than
the Standard & Poor's Corporation (S&P) 500 Stock Index.                        

(icon of) chess piece                                                           

IDS Research Opportunities Fund                                                 

Invests in a Portfolio  comprised  primarily of equity  securities  of companies
included in the S&P 500 Index that are believed to have strong growth potential.
The Portfolio is managed using a research methodology by the Research Department
of AEFC. Goal is long-term appreciation.                                        

(icon of) magnifying glass                                                      

IDS Growth Fund                                                                 

Invests in a Portfolio  comprised primarily of companies that have above-average
potential  for  long-term  growth  as a  result  of  new  management,  marketing
opportunities or technological superiority.                                     

(icon of) flower                                                                

IDS New Dimensions Fund                                                         

Invests in a Portfolio  comprised primarily of companies with significant growth
potential due to superiority in  technology,  marketing or management.  The Fund
frequently changes its industry mix.                                            

(icon of) dimension                                                             

IDS Progressive Fund                                                            

Invests  primarily in undervalued  common stocks.  The Fund holds stocks for the
long term with the goal of capital growth.                                      

(icon of) shooting star                                                         

Growth and income funds                                                         

These funds focus on securities of medium to large,  well-established  companies
that offer long-term growth of capital and reasonable  income from dividends and
interest.                                                                       

IDS Equity Select Fund                                                          

Invests  primarily in a combination of moderate  growth stocks,  higher-yielding
equities and bonds. Seeks growth of capital and income.                         

(icon of) three pine trees                                                      

IDS Blue Chip Advantage Fund                                                    

Invests in selected stocks from a major market index.  Securities  purchased are
those  recommended  by our  research  analysts  as the best from  each  industry
represented  on the index.  Offers  potential  for  long-term  growth as well as
dividend income.                                                                

(icon of) ribbon                                                                

IDS Managed Allocation Fund                                                     

Invests in a Portfolio comprised  primarily of U.S. equity securities,  U.S. and
foreign debt securities, foreign equity securities and money market instruments.
The Fund provides  diversification  among these major investment  categories and
has a  target  mix  that  represents  the way  the  Fund's  investments  will be
allocated over the long term. Seeks maximum total return.                       

(icon of) spinning toy                                                          

IDS Stock Fund                                                                  

Invests  in a  Portfolio  comprised  primarily  of common  stocks  of  companies
representing  many sectors of the economy.  Seeks  current  income and growth of
capital.                                                                        

(icon of) building with columns                                                 

IDS Equity Value Fund                                                           

Invests  primarily in undervalued  common stocks that offer potential for growth
of capital and income.                                                          

(icon of) three growing flowers                                                 

IDS Utilities Income Fund                                                       

Invests primarily in the stocks of public utility companies to seek high current
income and growth of income and capital with reduced volatility.                

(icon of) light bulb                                                            

IDS Diversified Equity Income Fund                                              

Invests in a Portfolio  comprised  primarily in  high-yielding  common stocks to
seek high current income and, secondarily,  to benefit from the growth potential
offered by stock investments.                                                   

(icon of) two puzzle pieces                                                     

IDS Mutual                                                                      

Invests in a Portfolio  which seeks to balance  between common stocks and senior
securities  (preferred  stocks and bonds).  Seeks a balance of growth of capital
and current income.                                                             

(icon of) scale of justice                                                      

Income funds                                                                    

The funds in this group  invest their  assets  primarily  in corporate  bonds or
government  securities to seek interest income.  Secondary  objective is capital
growth. Risk varies by bond quality.                                            

IDS Extra Income Fund                                                           

Invests in a Portfolio  comprised mainly in long-term,  high-yielding  corporate
fixed-income  securities in the lower rated, higher risk bond categories to seek
high current income. Secondary objective is capital growth.                     

(icon of) two coins                                                             

IDS Bond Fund                                                                   

Invests mainly in corporate bonds, at least 50% in the higher rated,  lower risk
bond categories, or the equivalent, and in government bonds.                    

(icon of) Greek column                                                          

IDS Selective Fund                                                              

Invests in a Portfolio comprised  primarily of high-quality  corporate bonds and
other  highly  rated  debt  instruments   including  government  securities  and
short-term investments. Seeks current income and preservation of capital.       

(icon of) skyline                                                               

IDS Federal Income Fund                                                         

Invests in a Portfolio comprised primarily of securities issued or guaranteed as
to the timely  payment of  principal  and interest by the U.S.  government,  its
agencies and instrumentalities.  Seeks a high level of current income and safety
of principal consistent with its type of investments.                           

(icon of) shield with eagle head                                                

Tax-exempt income funds                                                         

These funds provide  tax-free income by investing in municipal bonds. The income
is generally  free from  federal  income tax, but a portion of the income may be
subject to state and local taxes. Risk varies by bond quality.                  

IDS Tax-Exempt Bond Fund                                                        

Invests mainly in bonds and notes of state or local  government  units,  with at
least 75% in the four highest rated, lowest risk bond categories.               

(icon of) shield with Greek column                                              

IDS Insured Tax-Exempt Fund                                                   

Invests  primarily  in  municipal  securities  that are insured as to the timely
payment of principal and interest.  The insurance  feature minimizes credit risk
of the Fund but does not guarantee the market value of the Fund's shares.       

(icon of) shield with star                                                      

IDS State Tax-Exempt Funds                                                      
(CA, MA, MI, MN, NY, OH)                                                        

Invests  primarily in high- and  medium-grade  municipal  securities  to provide
income to residents of each respective state that is exempt from federal,  state
and local income taxes.  (New York is the only state that is exempt at the local
level.)                                                                         

(icon of) shield with U.S. enclosed                                             

IDS High Yield Tax-Exempt Fund                                                  

Invests  in  a  Portfolio  comprised  primarily  of  medium-  and  lower-quality
municipal bonds and notes.  Lower-quality  securities  generally involve greater
risk of principal and income.                                                   

(icon of) shield with basket of apples enclosed                                 

IDS Intermediate Tax-Exempt Fund                                                

Invests  in  mainly  investment-grade  bonds  and  other  debt  securities  with
intermediate-term maturities issued by state and local government units. Goal is
to seek a high level of current income exempt from federal taxes.               

(icon of) shield with tree enclosed                                             

Money market funds                                                              

These  money  market  funds have  three main  goals:  conservation  of  capital,
constant liquidity and the highest possible current income consistent with these
objectives.  An investment in these funds is neither  insured nor  guaranteed by
the U.S. government, and there can be no assurance that these funds will be able
to maintain a stable net asset value of $1.00 per share. Very limited risk.     

IDS Cash Management Fund                                                        

Invests  in such money  market  securities  as high  quality  commercial  paper,
bankers' acceptances, certificates of deposit (CDs) and other bank securities.  

(icon of) piggy bank                                                            

IDS Tax-Free Money Fund                                                         
Invests  primarily  in  short-term  bonds  and  notes  issued by state and local
governments to seek high current income exempt from federal income taxes.       

(icon of) shield with piggy bank enclosed                                       

PAGE                                                                            
Quick telephone reference                                                       

American Express Telephone Transaction Service                                  

Redemptions and exchanges, dividend payments or reinvestments and               
automatic payment arrangements                                                  

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National/Minnesota:                                                             
800-437-3133                                                                    

Mpls./St. Paul area:                                                            
671-3800                                                                        

American Express Shareholder Service                                            

Fund performance, objectives and account inquiries                              

612-671-3733                                                                    

TTY Service                                                                     

For the hearing impaired                                                        

800-846-4852                                                                    

American Express Infoline                                                       

Automated account information (TouchTone(R) phones only), including current fund
prices and performance, account values and recent account transactions          

National/Minnesota:                                                             
800-272-4445                                                                    

Mpls./St. Paul area:                                                            
671-1630                                                                        

PAGE                                                                            
AMERICAN EXPRESS FINANCIAL ADVISORS                                             

IDS Insured Tax-Exempt Fund                                                     
IDS Tower 10                                                                    
Minneapolis, MN 55440-0010

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Dates Referenced Herein and Documents Incorporated by Reference

		Referenced-On Page
This ‘N-30D’ Filing	Date	First	Last	Other Filings

Filed on:	2/19/97
For Period End:	12/31/96	4	13	N-30D, NSAR-A
	7/1/96	5
	6/30/96	5	9	24F-2NT, N-30D, NSAR-B, NSAR-B/A
	3/20/95	9	11
				List all Filings

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Filing Submission 0000820027-97-000230 – Alternative Formats (Word / Rich Text, HTML, Plain Text, et al.)

Riversource Special Tax-Exempt Series Trust – ‘N-30D’ for 12/31/96

As of: Wednesday, 2/19/97 · For: 12/31/96 · Accession #: 820027-97-230 · File #: 811-04647

Previous ‘N-30D’: ‘N-30D’ on 9/4/96 for 6/30/96 · Next: ‘N-30D’ on 2/24/97 for 12/31/96 · Latest: ‘N-30D’ on 3/3/03 for 12/31/02

Annual or Semi-Annual Report Mailed to Shareholders — Rule 30d-1Filing Table of Contents

Dates Referenced Herein and Documents Incorporated by Reference

Annual or Semi-Annual Report Mailed to Shareholders — Rule 30d-1
Filing Table of Contents