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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No. ____
Post-Effective Amendment No. 29 (File No. 2-66868) X
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY
ACT OF 1940
Amendment No. 30 (No. 811-3003) X
IDS TAX-FREE MONEY FUND, INC.
IDS Tower 10, Minneapolis, MN 55440-0534
Leslie L. Ogg - 901 S. Marquette Avenue, Suite 2810,
Minneapolis, MN 55402-3268
(612) 330-9283
Approximate Date of Proposed Public Offering:
It is proposed that this filing will become effective (check
appropriate box)
immediately upon filing pursuant to paragraph (b)
on (date) pursuant to paragraph (b)
60 days after filing pursuant to paragraph (a)
x on Feb. 28, 1997 pursuant to paragraph (a)(i) of rule 485
75 days after filing pursuant to paragraph (a)(ii)
on (date) pursuant to paragraph (a)(ii) of Rule 485
If appropriate, check the following box:
This post-effective amendment designates a new effective date
for a previously filed post-effective amendment.
The Registrant has registered an indefinite number or amount of
securities under the Securities Act of 1933 pursuant to Section
24-f of the Investment Company Act of 1940. Registrants' Rule
24f-2 Notice for its most recent fiscal year will be filed on or
about Feb. 28, 1997.
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Cross reference sheet showing the location in its prospectus and
the Statement of Additional Information of the information called
for by the items enumerated in Parts A and B of Form N-1A.
Negative answers omitted from prospectus are so indicated.
<TABLE><CAPTION>
PART A PART B
<C> <C> <C> <C>
Section Section in
Item No. in Prospectus Item No. Statement of Additional Information
1 Cover page of prospectus 10 Cover page of SAI
2(a) Sales charge and Fund expenses 11 Table of Contents
(b) The Fund in brief
(c) The Fund in brief 12 NA
3(a) Financial highlights 13(a) Additional Investment Policies; all
(b) NA appendices except Dollar-Cost Averaging
(c) Performance (b) Additional Investment Policies
(d) Financial highlights (c) Additional Investment Policies
(d) Security Transactions
4(a) The Fund in brief; Investment policies and
risks; How the Fund is organized 14(a) Board members and officers of the Fund;**
(b) Investment policies and risks Board members and officers
(c) Investment policies and risks (b) Board members and Officers
(c) Board members and Officers
5(a) Directors and officers; Directors and
officers of the Fund (listing) 15(a) NA
(b)(i) Investment manager (b) NA
About American Express Financial (c) Board members and Officers
Corporation -- General Information
(b)(ii) Investment manager 16(a)(i) How the Fund is organized; About American
(b)(iii) Investment manager Express Financial Corporation**
(c) Portfolio manager (a)(ii) Agreements: Investment Management Services
(d) Administrator and transfer agent Agreement, Plan and Agreement
(e) Administrator and transfer agent of Distribution
(f) Distributor (a)(iii) Agreements: Investment Management Services Agreement
(g) Investment manager (b) Agreements: Investment Management Services Agreement
About American Express Financial (c) NA
Corporation -- General Information (d) Agreements: Administrative Services
Agreement, Shareholder Service Agreement
5A(a) * (e) NA
(b) * (f) Agreements: Distribution Agreement
(g) NA
6(a) Shares; Voting rights (h) Custodian; Independent Auditors
(b) NA (i) Agreements: Transfer Agency Agreement; Custodian
(c) NA
(d) Voting rights 17(a) Security Transactions
(e) Cover page; Special shareholder services (b) Brokerage Commissions Paid to Brokers Affiliated
(f) Dividends and capital gains distributions; with American Express Financial Corporation
Reinvestments (c) Security Transactions
(g) Taxes (d) Security Transactions
(h) Alternative sales arrangements (e) Security Transactions
7(a) Distributor 18(a) Shares; Voting rights**
(b) Valuing Fund shares (b) NA
(c) How to purchase, exchange or redeem shares
(d) How to purchase shares 19(a) Investing in the Fund
(e) NA (b) Valuing Fund Shares; Investing in the Fund
(f) Distributor (c) NA
8(a) How to redeem shares 20 Taxes
(b) NA
(c) How to purchase shares: Three ways to invest 21(a) Agreements: Distribution Agreement
(d) How to purchase, exchange or redeem shares: (b) Agreements: Distribution Agreement
Redemption policies -- "Important..." (c) NA
9 None 22(a) Performance Information (for money market
funds only)
(b) Performance Information (for all funds except
money market funds)
23 Financial Statements
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*Designates information is located in annual report.
**Designates location in prospectus.<PAGE>
PAGE 3
IDS Tax-Free Money Fund
Prospectus
Feb. 28, 1997
The goal of IDS Tax-Free Money Fund, Inc. is to provide as high a
level of current income exempt from federal income tax as is
consistent with liquidity and stability of principal. The Fund
invests primarily in short-term bonds and notes issued by or on
behalf of state or local governmental units.
An investment in the Fund is neither insured nor guaranteed by the
U.S. government. There can be no assurance that the Fund will be
able to maintain a stable net asset value of $1 per share.
This prospectus contains facts that can help you decide if the Fund
is the right investment for you. Read it before you invest and
keep it for future reference.
Additional facts about the Fund are in a Statement of Additional
Information (SAI), filed with the Securities and Exchange
Commission (SEC) and available for reference, along with other
related materials, on the SEC Internet web site
(http://www.sec.gov). The SAI is incorporated here by reference.
For a free copy, contact American Express Shareholder Service.
Like all mutual fund shares, these securities have not been
approved or disapproved by the Securities and Exchange Commission
or any state securities commission, nor has the Securities and
Exchange Commission or any state securities commission passed upon
the accuracy or adequacy of this prospectus. Any representation to
the contrary is a criminal offense.
Please note that the Fund:
o is not a bank deposit
o is not federally insured
o is not endorsed by any bank or government agency
o is not guaranteed to achieve its goal
American Express Shareholder Service
P.O. Box 534
Minneapolis, MN
55440-0534
612-671-3733
TTY: 800-846-4852
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Table of contents
The Fund in brief
Goal
Investment policies and risks
Manager and distributor
Portfolio manager
Sales charge and Fund expenses
Performance
Financial highlights
Yield
Investment policies and risks
Facts about investments and their risks
Alternative investment option
Valuing Fund shares
How to purchase, exchange or redeem shares
How to purchase shares
How to exchange shares
How to redeem shares
Special shareholder services
Services
Quick telephone reference
Distributions and taxes
Dividend and capital gain distributions
Reinvestments
Taxes
How to determine the correct TIN
How the Fund is organized
Shares
Voting rights
Shareholder meetings
Board members and officers
Investment manager
Administrator and transfer agent
Distributor
About American Express Financial Corporation
General information
Appendix
Tax-exempt vs. taxable income
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The Fund in brief
Goal
IDS Tax-Free Money Fund (the Fund) seeks to provide shareholders
with as high a level of current income exempt from federal income
tax as is consistent with liquidity and stability of principal.
Because any investment involves risk, achieving this goal cannot be
guaranteed. Only shareholders can change the goal.
Investment policies and risks
The Fund is a diversified mutual fund that invests at least 80% of
its net assets in short-term debt obligations whose interest is
exempt from federal income tax. The Fund invests only in high-
quality debt securities such as municipal bonds and notes that the
portfolio manager believes present minimal credit risk.
Manager and distributor
The Fund is managed by American Express Financial Corporation
(AEFC), a provider of financial services since 1894. AEFC
currently manages more than $__ billion in assets for the IDS
MUTUAL FUND GROUP. Shares of the Fund are sold through American
Express Financial Advisors Inc., a wholly owned subsidiary of AEFC.
Portfolio manager
Terry Fettig joined AEFC in 1986 and serves as portfolio manager.
He has managed this Fund since April 1993. From 1986 to 1992 he
was a fixed income securities analyst and from 1992 to 1993 he was
an associate portfolio manager. He also serves as portfolio
manager of IDS Cash Management Fund and IDS Life Moneyshare Fund
and IDS Intermediate Tax-Exempt Fund.
Sales charge and Fund expenses
When you buy shares, you pay no sales charge. Fund operating
expenses are paid out of Fund assets. Operating expenses are
reflected in the Fund's daily share price and dividends, and are
not charged directly to shareholder accounts.
Shareholder transaction expenses
Maximum sales charge on purchases
(as a percent of offering price).................0%
Annual Fund operating expenses
(as a percentage of average daily net assets):
Management fee 0.__%
12b-1 fee 0.00%
Other expenses* 0.__%
Total 0.__%
*Other expenses include an administrative services fee and a
transfer agency fee.
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Example: Suppose for each year for the next ten years, Fund
expenses are as above and annual return is 5%. If you sold your
shares at the end of the following years, for each $1,000 invested,
you would pay total expenses of:
1 year 3 years 5 years 10 years
$__ $__ $__ $__
This example does not represent actual expenses, past or future.
Actual expenses may be higher or lower than those shown.
Performance
Financial highlights
The information in this table has been audited by KPMG Peat Marwick
LLP, independent auditors. The independent auditors' report and
additional information about the performance of the Fund are
contained in the Fund's annual report which, if not included with
this prospectus, may be obtained without charge.
Yield
The Fund's annualized simple yield for the seven days ended Dec.
31, 1996, was ___% and its annualized compound yield was ___%. The
Fund calculates annualized simple and compound yields based on a
seven-day period.
Past yields should not be considered an indicator of future yields.
Investment policies and risks
Under normal market conditions, the Fund will invest at least 80%
of its net assets in short-term debt securities whose interest, in
the opinion of bond counsel to the issuer, is wholly exempt from
federal income tax. The Fund does not intend to purchase bonds or
notes the interest from which is subject to the alternative minimum
tax. The Fund will maintain a dollar-weighted average portfolio
maturity of 90 days or less and will not purchase any security with
a remaining maturity of more than 13 months.
The various types of investments the portfolio manager uses to
achieve investment performance are described in more detail in the
next section and in the SAI.
Facts about investments and their risks
Short-term debt securities: The Fund invests only in short-term
debt securities the portfolio manager believes present minimal
credit risk. These securities must be rated in one of the two
highest categories by national rating services.
Short-term debt securities include variable rate instruments and
floating rate instruments, which provide for the periodic
adjustment of interest rates so that the market value approximates
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the face amount. Under normal market conditions the Fund will not
invest more than 65% of its net assets in variable rate instruments
or floating rate instruments. Short-term debt securities also
include securities subject to puts to shorten maturities,
securities with a series of maturity dates, securities placed in
escrow to refund other issues when they become refundable, and
municipal lease obligations. The Fund does not intend to invest
more than 10% of its net assets in municipal lease obligations.
Risks to investors in municipal lease obligations are the
likelihood that a municipality may discontinue funding of the
leased property, and the general credit quality of the issuing
municipality. Many of the securities held by the Fund are
supported by credit and liquidity enhancement from third parties,
such as banks and other financial institutions. As a result,
changes in the credit quality of these institutions could cause
losses to the Fund and affect its share price.
The Fund may invest up to 25% of its net assets in each of the
following: securities whose issuers are located in the same state;
securities paid from revenues of similar types of enterprises; and
industrial revenue bonds. In such circumstances, economic,
business, political or other changes affecting one bond also may
affect other bonds. This could increase market risk.
Securities that are illiquid: A security is illiquid if it cannot
be sold quickly in the normal course of business. No more than 10%
of the Fund's net assets will be held in illiquid securities.
Money market instruments: If suitable tax-exempt securities are
not available, the Fund may invest up to 20% of its net assets in
certain taxable investments. They include short-term government
securities, bank obligations, commercial paper and repurchase
agreements. The interest earned on these investments is not exempt
from federal income taxes. There also may be occasions when, as a
result of maturities of portfolio securities, heavy sales of Fund
shares, or anticipated redemption requests, the Fund may hold cash
that is not invested.
The investment policies described above, except for the policies
concerning the type and amount of tax-free investments to be held
by the Fund, may be changed by the board.
Lending portfolio securities: The Fund may lend its securities to
earn income so long as borrowers provide collateral equal to the
market value of the loans. The risks are that borrowers will not
provide collateral when required or return securities when due.
Unless a majority of the outstanding voting securities approve
otherwise, loans may not exceed 30% of the Fund's net assets.
Alternative investment option
In the future, the board of the Fund may determine for operating
efficiencies to use a master/feeder structure. Under that
structure, the Fund's assets would be invested in an investment
company with the same goal as the Fund, rather than invested
directly in a portfolio of securities.
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Valuing Fund shares
The NAV is the value of a single Fund share. The NAV is calculated
at the close of business, normally 3 p.m. Central time, each
business day (any day the New York Stock Exchange is open).
The portfolio securities are valued at amortized cost, which
approximates market value, as explained in the SAI. Although the
Fund cannot guarantee it will always be able to maintain a constant
net asset value of $1 per share, it will use its best efforts to do
so.
How to purchase, exchange or redeem shares
How to purchase shares
If you're investing in this Fund for the first time, you'll need to
set up an account. Your financial advisor will help you fill out
and submit an application. Your application will be accepted only
when federal funds (funds of the Federal Reserve System) are
available to the Fund, normally within three days of receipt of
your application. Once your account is set up, you can choose
among several convenient ways to invest.
Important: When opening an account, you must provide AEFC with
your correct Taxpayer Identification Number (Social Security or
Employer Identification number). See "Distributions and taxes."
When you purchase shares for a new or existing account, the price
you pay per share is determined at the close of business on the day
your investment is received and accepted at the Minneapolis
headquarters.
Combining investments: The Fund shares are offered without a sales
charge. Unless they were exchanged from a fund subject to a sales
charge, the shares are not included for purposes of determining
reduced charges for purchases of shares of other funds. For more
information about reduced sales charges, see the prospectuses of
other publicly offered funds in the IDS MUTUAL FUND GROUP.
Purchase policies:
o Investments must be received and accepted in the Minneapolis
headquarters on a business day before 3 p.m. Central time to
be included in your account that day and to receive that day's
share price. Otherwise, your purchase will be processed the
next business day and you will pay the next day's share price.
o The minimums allowed for investment may change from time to
time.
o Wire orders can be accepted only on days when your bank, AEFC,
the Fund and Norwest Bank Minneapolis are open for business.
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o Wire purchases are completed when wired payment is received
and the Fund accepts the purchase.
o AEFC and the Fund are not responsible for any delays that
occur in wiring funds, including delays in processing by the
bank.
o You must pay any fee the bank charges for wiring.
o The Fund reserves the right to reject any application for any
reason.
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Three ways to invest
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1
By regular account Send your check and application Minimum amounts
(or your name and account number Initial investment: $2,000
if you have an established account) Additional
to: investments: $ 100
American Express Financial Advisors Inc. Account balances: $1,000*
P.O. Box 74
Minneapolis, MN 55440-0074
Your financial advisor will help you
with this process.
2
By scheduled Contact your financial advisor Minimum amounts
investment plan to set up one of the following Initial investment: $2,000
scheduled plans: Additional
investments: $100/mo.
o automatic payroll deduction Account balances: $1,000
o bank authorization
o direct deposit of
Social Security check
o other plan approved by the Fund
3
By wire If you have an established account, If this information is not
you may wire money to: included, the order may be
rejected and all money
Norwest Bank Minneapolis received by the Fund, less
Routing No. 091000019 any costs the Fund or AEFC
Minneapolis, MN incurs, will be returned
Attn: Domestic Wire Dept. promptly.
Give these instructions: Minimum amounts:
Credit IDS Account #00-30-015 Each wire investment: $1,000
for personal account # (your
account number) for (your name).
*If your account balance falls below $1,000, you will be asked in writing to bring it up to $1,000 or establish a scheduled
investment plan. If you don't do so within 30 days, your shares can be redeemed and the proceeds mailed to you.
</TABLE>
How to exchange shares
You can exchange your shares of this Fund for Class A shares of any
other publicly offered fund in the IDS MUTUAL FUND GROUP available
in your state. If your initial investment was in this Fund, you
can exchange shares of this Fund for Class B shares of another
fund. For complete information, including fees and expenses, read
the prospectus carefully before exchanging into a new fund.
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If your initial investment was in this Fund, and you exchange into
a non-money market fund, you will pay an initial sales charge if
you exchange into Class A and be subject to a contingent deferred
sales charge if you exchange into Class B. If your initial
investment was in Class A shares of a non-money market fund and you
exchange shares into this Fund, you may exchange that amount,
including dividends earned on that amount, without paying a sales
charge.
If your exchange request arrives at the Minneapolis headquarters
before the close of business, your shares will be redeemed at the
net asset value set for that day. The proceeds will be used to
purchase new fund shares the same day. Otherwise, your exchange
will take place the next business day at that day's net asset
value.
For tax purposes, an exchange represents a redemption and purchase
and may result in a gain or loss. However, you cannot create a tax
loss (or reduce a taxable gain) by exchanging from the Fund within
91 days of your purchase. For further explanation, see the SAI.
How to redeem shares
You can redeem your shares at any time. American Express
Shareholder Service will mail payment within seven days after
receiving your request.
When you redeem shares, the amount you receive may be more or less
than the amount you invested. Your shares will be redeemed at net
asset value at the close of business on the day your request is
accepted at the Minneapolis headquarters. If your request arrives
after the close of business, the price per share will be the net
asset value at the close of business on the next business day.
A redemption is a taxable transaction. Although the Fund attempts
to maintain a stable $1 net asset value, you will have a gain or
loss if the Fund's net asset value is more or less than the cost of
your shares. This could affect your tax liability.
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Three ways to request an exchange or redemption of shares
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1
By letter Include in your letter:
o the name of the fund(s)
o your account number(s) (for exchanges, both funds must be registered in the same
ownership)
o your Taxpayer Identification Number (TIN)
o the dollar amount or number of shares you want to exchange or redeem
o signature of all registered account owners
o for redemptions, indicate how you want your money delivered to you
o any paper certificates of shares you hold
Regular mail:
American Express Shareholder Service
Attn: Redemptions
P.O. Box 534
Minneapolis, MN 55440-0534
Express mail:
American Express Shareholder Service
Attn: Redemptions
733 Marquette Ave.
Minneapolis, MN 55402
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2
By phone
American Express Telephone o The Fund and AEFC will honor any telephone exchange or redemption request believed to be
Transaction Service: authentic and will use reasonable procedures to confirm that they are. This includes
800-437-3133 or asking identifying questions and tape recording calls. If reasonable
612-671-3800 procedures are not followed, the Fund or AEFC will be liable for any loss resulting
from fraudulent requests.
o Phone exchange and redemption privileges automatically apply to all accounts except
custodial, corporate or qualified retirement accounts unless you request these privileges
NOT apply by writing American Express Shareholder Service. Each registered owner must sign
the request.
o AEFC answers phone requests promptly, but you may experience delays when call volume is
high. If you are unable to get through, use mail procedure as an alternative.
o Acting on your instructions, your financial advisor may conduct telephone transactions
on your behalf.
o Phone privileges may be modified or discontinued at any time.
3
By draft
Free drafts are available and can be used just like a check to withdraw $100 or more from your account. The shares in your
account earn dividends until they are redeemed by the Fund to cover your drafts. Most accounts will automatically receive
free drafts. However, to receive drafts on qualified or custodial business accounts, you must contact American Express
Shareholder Service. A request form will be supplied and must be signed by each registered owner. Your draft writing
privilege may be modified or discontinued at any time. If you request a photocopy of a paid draft you will be charged $5 per
copy.
</TABLE>
Minimum amount
Redemption: $100
Exchange policies:
o You may make up to three exchanges within any 30-day period,
with each limited to $300,000. These limits do not apply to
certain employee benefit plans or other arrangements through which
one shareholder represents the interests of several. Exceptions
may be allowed with pre-approval of the Fund.
o Exchanges of Class A shares of other funds in the IDS MUTUAL
FUND GROUP to this Fund will be accepted. Exchanges of Class B
shares to this Fund will not be accepted.
o If your exchange creates a new account, it must satisfy the
minimum investment amount for new purchases.
o Once we receive your exchange request, you cannot cancel it.
o Shares of the new fund may not be used on the same day for
another exchange.
o If your shares are pledged as collateral, the exchange will be
delayed until written approval is obtained from the secured party.
o AEFC and the Fund reserve the right to reject any exchange,
limit the amount, or modify or discontinue the exchange privilege,
to prevent abuse or adverse effects on the Fund and its
shareholders. For example, if exchanges are too numerous or too
large, they may disrupt the Fund's investment strategies or
increase its costs.
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Redemption policies:
o A telephone redemption request will not be allowed within 30
days of a phoned-in address change.
Important: If you request a redemption of shares you recently
purchased by a check or money order that is not guaranteed, the
Fund will wait for your check to clear. It may take up to 10 days
from the date of purchase before a check is mailed to you. (A
check may be mailed earlier if your bank provides evidence
satisfactory to the Fund and AEFC that your check has cleared.)
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Three ways to receive payment when you redeem shares
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1
By regular or express mail o Mailed to the address on record.
o Payable to names listed on the account.
NOTE: The express mail delivery charges
you pay will vary depending on the
courier you select.
2
By wire o Minimum wire redemption: $1,000.
o Request that money be wired to your bank.
o Bank account must be in the same
ownership as the IDS fund account.
NOTE: Pre-authorization required. For
instructions, contact your financial
advisor or American Express Shareholder Service.
3
By scheduled payout plan o Minimum payment: $50.
o Contact your financial advisor or American Express
Shareholder Service to set up regular
payments to you on a monthly, bimonthly,
quarterly, semiannual or annual basis.
o Purchasing new shares while under a payout
plan may be disadvantageous because of
the sales charges.
</TABLE>
Special shareholder services
Services
To help you track and evaluate the performance of your investments,
AEFC provides these services:
Quarterly statements listing all of your holdings and transactions
during the previous three months.
Yearly tax statements featuring average-cost-basis reporting of
capital gains or losses if you redeem your shares along with
distribution information which simplifies tax calculations.
A personalized mutual fund progress report detailing returns on
your initial investment and cash-flow activity in your account. It
calculates a total return to reflect your individual history in
owning Fund shares. This report is available from your financial
advisor.
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Quick telephone reference
American Express Telephone Transaction Service
Redemptions and exchanges, dividend payments or reinvestments and
automatic payment arrangements
National/Minnesota: 800-437-3133
Mpls./St. Paul area: 671-3800
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 (TouchToneR 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
Distributions and taxes
As a shareholder you are entitled to your share of the Fund's net
income and any short-term capital gains realized on its
investments. The Fund distributes dividends and capital gain
distributions to qualify as a regulated investment company and to
avoid paying corporate income and excise taxes.
Dividend and capital gain distributions
The Fund's net investment income from dividends and interest is
distributed to you monthly as dividends. Short-term capital gains
are distributed at the end of the calendar year and are included in
net investment income. Long-term capital gains are realized
whenever a security held for more than one year is sold for a
higher price. The Fund will offset any net realized capital gains
by any available capital loss carryovers. Net realized long-term
capital gains, if any, are distributed at the end of the calendar
year as capital gain distribution.
Reinvestments
Dividends are automatically reinvested in additional shares of the
Fund, unless:
o you request the Fund in writing or by phone to pay
distributions to you monthly in cash, or
o you direct the Fund to invest your distributions monthly in
any publicly available IDS fund for which you've previously
opened an account. Your purchases may be subject to a sales
charge.
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PAGE 14
The reinvestment price is the net asset value at close of business
on the day the distribution is paid. (Your quarterly statement
will confirm the amount invested and the number of shares
purchased.)
If you choose cash distributions, you will receive only those
declared after your request has been processed.
If the U.S. Postal Service cannot deliver the checks for the cash
distributions, we will reinvest the checks into your account at the
then-current net asset value and make future distributions in the
form of additional shares.
Taxes
Distributions from interest earned on tax-exempt securities are
exempt from federal income tax. Distributions must be reported on
your income tax returns in the year the Fund declares them
regardless of whether you take them in cash or reinvest them.
Because interest on municipal bonds and notes is tax-exempt for
federal income tax purposes, any interest on borrowed money used
directly or indirectly to purchase Fund shares is not deductible on
your federal income tax return. You should consult a tax advisor
regarding its deductibility for state and local income tax
purposes.
Each January, you will receive a tax statement showing the kinds
and total amount of all distributions you received during the
previous year. You must report distributions on your tax returns,
even if they are reinvested in additional shares.
Redemptions and exchanges subject you to a tax on any capital gain.
If you sell shares for more than their cost, the difference is a
capital gain. Your gain may be either short term (for shares held
for one year or less) or long term (for shares held for more than
one year).
Your Taxpayer Identification Number (TIN) is important. As with
any financial account you open, you must list your current and
correct Taxpayer Identification Number (TIN) -- either your Social
Security or Employer Identification number. The TIN must be
certified under penalties of perjury on your application when you
open an account at AEFC.
If you don't provide the TIN, or the TIN you report is incorrect,
you could be subject to backup withholding of 31% of taxable
distributions and proceeds from certain sales and exchanges. You
also could be subject to further penalties, such as:
o a $50 penalty for each failure to supply your correct TIN
o a civil penalty of $500 if you make a false statement that
results in no backup withholding
o criminal penalties for falsifying information
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PAGE 15
<TABLE><CAPTION>
You also could be subject to backup withholding because you failed
to report interest or dividends on your tax return as required.
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How to determine the correct TIN
Use the Social Security or
For this type of account: Employer Identification number
of:
Individual or joint account The individual or individuals
listed on the account
Custodian account of a minor The minor
(Uniform Gifts/Transfers to
Minors Act)
A living trust The grantor-trustee (the person
who puts the money into the
trust)
An irrevocable trust, pension The legal entity (not the
trust or estate personal representative or
trustee, unless no legal entity
is designated in the account
title)
Sole proprietorship The owner
Partnership The partnership
Corporate The corporation
Association, club or The organization
tax-exempt organization
For details on TIN requirements, ask your financial advisor or
local American Express Financial Advisors office for federal Form
W-9, "Request for Taxpayer Identification Number and
Certification."
Important: This information is a brief and selective summary of
certain federal tax rules that apply to this Fund. Tax matters are
highly individual and complex, and you should consult a qualified
tax advisor about your personal situation.
How the Fund is organized
Shares
The Fund is owned by its shareholders. All shares issued by the
Fund are of the same class - capital stock. Par value is one cent
per share. Both full and fractional shares can be issued.
The Fund no longer issues stock certificates.
<PAGE>
PAGE 16
Voting rights
As a shareholder, you have voting rights over the Fund's management
and fundamental policies. You are entitled to one vote for each
share you own. Shares of the Fund have cumulative voting rights.
Shareholder meetings
The Fund does not hold annual shareholder meetings. However, the
board members may call meetings at their discretion, or on demand
by holders of 10% or more of the outstanding shares, to elect or
remove board members.
Board members and officers
Shareholders elect a board that oversees the operations of the Fund
and chooses its officers. Its officers are responsible for day-to-
day business decisions based on policies set by the board. The
board has named an executive committee that has authority to act on
its behalf between meetings. The board members serve on the boards
of all 47 funds in the IDS MUTUAL FUND GROUP, except for Mr.
Dudley. Mr. Dudley is a board member of all IDS funds except the
nine life funds.
Board members and officers of the Fund
President and interested board member
William R. Pearce
President of all funds in the IDS MUTUAL FUND GROUP.
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
Reader's Digest Association, Inc.
Edson W. Spencer
Former chairman and chief executive officer, Honeywell, Inc.
<PAGE>
PAGE 17
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
Vice president of all funds in the IDS MUTUAL FUND GROUP.
Melinda S. Urion
Treasurer of all funds in the IDS MUTUAL FUND GROUP.
Other officer
Leslie L. Ogg
Vice president, general counsel and secretary of all funds in the
IDS MUTUAL FUND GROUP.
Refer to the SAI for the board members' and officers' biographies.
Investment manager
The Fund pays AEFC for managing its assets. Under its Investment
Management Services Agreement that became effective March 20, 1995,
AEFC is paid a fee for these services based on the average daily
net assets of the Fund, as follows:
Assets Annual rate
(billions) at each asset level
First $1.0 0.310%
Next 0.5 0.293
Next 0.5 0.275
Next 0.5 0.258
Over 2.5 0.240
For the fiscal year ended Dec. 31, 1996, the Fund paid AEFC a total
investment management fee of 0.__% of its average daily net assets.
Under the Agreement, the Fund also pays taxes, brokerage
commissions and nonadvisory expenses.
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PAGE 18
Administrator and transfer agent
The Fund pays AEFC for shareholder accounting and transfer agent
services under two agreements. The first agreement, the
Administrative Services Agreement, has a declining annual rate
beginning at 0.03% and decreasing to 0.02% as assets increase. The
second agreement, the Transfer Agency Agreement, has an annual fee
of $20 per shareholder account.
Distributor
The Fund has an exclusive distribution agreement with American
Express Financial Advisors, a wholly owned subsidiary of AEFC.
Financial advisors representing American Express Financial Advisors
provide information to investors about individual investment
programs, the Fund and its operations, new account applications,
and exchange and redemption requests.
Total expenses paid by the Fund in the year ended Dec. 31, 1996
were 0.__% of its average daily net assets.
Total fees and expenses (excluding taxes and brokerage commissions)
cannot exceed the most restrictive applicable state expense
limitation.
About American Express Financial Corporation
General information
The AEFC family of companies offers not only mutual funds but also
insurance, annuities, investment certificates and a broad range of
financial management services.
Besides managing investments for all publicly offered funds in the
IDS MUTUAL FUND GROUP, AEFC also manages investments for itself and
its subsidiaries, IDS Certificate Company and IDS Life Insurance
Company. Total assets under management on Dec. 31, 1996 were more
than $__ billion.
American Express Financial Advisors serves individuals and
businesses through its nationwide network of more than ___ offices
and more than ____ advisors.
Other AEFC subsidiaries provide investment management and related
services for pension, profit sharing, employee savings and
endowment funds of businesses and institutions.
AEFC is located at IDS Tower 10, Minneapolis, MN 55440-0010. It is
a wholly owned subsidiary of American Express Company (American
Express), a financial services company with headquarters at
American Express Tower, World Financial Center, New York, NY 10285.
The Fund may pay brokerage commissions to broker-dealer affiliates
of AEFC.
<PAGE>
PAGE 19
Appendix
1997 Federal Tax-Exempt and Taxable Equivalent Yield Calculation
These tables will help you determine your federal taxable yield
equivalents for given rates of tax-exempt income.
[Federal tax tables to be inserted here in typeset by Accounting.]
<PAGE>
PAGE 20
STATEMENT OF ADDITIONAL INFORMATION
FOR
IDS TAX-FREE MONEY FUND, INC.
February 28, 1997
This Statement of Additional Information (SAI) is not a prospectus.
It should be read together with the prospectus and the financial
statements contained in the Annual Report which may be obtained
from your American Express financial advisor or by writing to
American Express Shareholder Service, P.O. Box 534, Minneapolis, MN
55440-0534.
This SAI is dated Feb. 28, 1997, and it is to be used with the
prospectus dated Feb. 28, 1997, and the Annual Report for the
fiscal year ended Dec. 31, 1996.
<PAGE>
PAGE 21
TABLE OF CONTENTS
Goal and Investment Policies......................See Prospectus
Additional Investment Policies................................p.
Security Transactions.........................................p.
Brokerage Commissions Paid to Brokers Affiliated with
American Express Financial Corporation........................p.
Performance Information.......................................p.
Valuing Fund Shares...........................................p.
Investing in the Fund.........................................p.
Redeeming Shares..............................................p.
Pay-out Plans.................................................p.
Taxes.........................................................p.
Agreements....................................................p.
Organizational Information....................................p.
Board Members and Officers....................................p.
Custodian.....................................................p.
Independent Auditors..........................................p.
Financial Statements..............................See Annual Report
Prospectus....................................................p.
Appendix A: Description of Bond and Note Ratings.............p.
Appendix B: Description of Short-Term Taxable Securities
and Repurchase Agreements........................p.
Appendix C: Dollar-Cost Averaging............................p.
<PAGE>
PAGE 22
ADDITIONAL INVESTMENT POLICIES
These are investment policies in addition to those presented in the
prospectus. Unless holders of a majority of the outstanding voting
securities agree to make the change the Fund will not:
'Act as an underwriter (sell securities for others). However,
under the securities laws, the Fund may be deemed to be an
underwriter when it purchases securities directly from the issuer
and later resells them.
'Borrow money or property, except as a temporary measure for
extraordinary or emergency purposes, in an amount not exceeding
one-third of the market value of its total assets (including
borrowings) less liabilities (other than borrowings) immediately
after the borrowing. The Fund has not borrowed in the past and has
no present intention to borrow.
'Make cash loans. The Fund, however, does make investments in debt
securities where the sellers agree to repurchase the securities at
cost plus an agreed-upon interest rate within a specified time.
'Invest in voting securities, securities of investment companies or
exploration or development programs, such as oil, gas or mineral
leases.
'Invest more than 5% of its total assets in securities whose issuer
or guarantor of principal and interest has been in operation for
less than three years.
'Pledge or mortgage its assets beyond 15% of total assets.
'Invest more than 5% of its total assets in securities of any one
company, government or political subdivision thereof, except the
limitation will not apply to investments in securities issued by
the U.S. government, its agencies or instrumentalities, and except
that up to 25% of the Fund's total assets may be invested without
regard to this 5% limitation. For purposes of this policy, the
terms of a municipal security determine the issuer. In order to
comply with revisions to Rule 2a-7, the Fund will observe the
limitation on investment in a single issuer as to 100% of its
portfolio.
'Buy on margin or sell short.
'Invest in real estate, but the Fund can invest in municipal bonds
and notes secured by real estate or interests therein. For
purposes of this policy, real estate includes real estate limited
partnerships.
'Invest in commodities or commodity contracts.
'Lend Fund securities in excess of 30% of its net assets. The
current policy of the Fund's board is to make these loans, either
long- or short-term, to broker-dealers. In making loans, the Fund
gets the market price in cash, U.S. government securities, letters
<PAGE>
PAGE 23
of credit or such other collateral as may be permitted by
regulatory agencies and approved by the board. If the market price
of the loaned securities goes up, the Fund will get additional
collateral on a daily basis. The risks are that the borrower may
not provide additional collateral when required or return the
securities when due. During the existence of the loan, the Fund
receives cash payments equivalent to all interest or other
distributions paid on the loaned securities. A loan will not be
made unless the investment manager believes the opportunity for
additional income outweighs the risks.
Unless changed by the board, the Fund will not:
'Invest more than 10% of the Fund's net assets in securities and
derivative instruments that are illiquid. In determining the
liquidity of municipal lease obligations, the investment manager,
under guidelines established by the board, will consider the
essential nature of the leased property, the likelihood that the
municipality will continue appropriating funding for the leased
property, and other relevant factors related to the general credit
quality of the municipality and the marketability of the municipal
lease obligations.
In determining the liquidity of commercial paper issued in
transactions not involving a public offering under Section 4(2) of
the Securities Act of 1933, the investment manager, under
guidelines established by the board, will evaluate relevant factors
such as the issuer and the size and nature of its commercial paper
programs, the willingness and ability of the issuer or dealer to
repurchase the paper, and the nature of the clearance and
settlement procedures for the paper.
The quality of tax-exempt securities in which the Fund invests is
valued according to the amortized cost method (see "Valuing Fund
Shares"). If the Fund should decide at some point it is no longer
appropriate to value its portfolio according to amortized cost,
then at least 80% of the value of the municipal bonds and municipal
notes in the Fund's portfolio may be issued that have been rated at
the time of purchase not lower than Baa or MIG-3 (applicable to
municipal notes) by Moody's Investors Service, Inc. (Moody's), or
BBB by Standard & Poor's Corporation (S&P), or in the case of notes
that have not been rated, will have been issued by an issuer having
outstanding long-term debt securities rated not lower than Baa by
Moody's or BBB by S&P. The balance of the portfolio may be in
municipal bonds and notes that may be nonrated and may be issued by
issuers whose other debt securities have not been rated. Such
investments would be considered only when the Fund believes the
financial condition of the issuers limited the risks to the Fund to
a degree comparable to securities rated Baa or MIG-3 (or higher) by
Moody's or BBB (or higher) by S&P. Any municipal bond or note that
is guaranteed by the federal government will be regarded as having
a rating of Aaa (Moody's) or AAA (S&P).
<PAGE>
PAGE 24
In addition to considering ratings assigned by the ratings services
in the selection of portfolio securities for the Fund, the Fund may
consider, among other things, information concerning the financial
history and condition of the issuer and its revenue and expense
prospect and, in the case of revenue bonds, the financial history
and condition of the source of revenue to service the bonds.
After a municipal bond or note has been purchased by the Fund, it
may be assigned a lower rating or cease to be rated. Such an event
would not require the elimination of the issue from the portfolio,
but the Fund will consider such an event in determining whether the
Fund should continue to hold the security in its portfolio.
Yields on municipal bonds and notes depend on a variety of factors,
including money market conditions, municipal bond market
conditions, the size of a particular offering, the maturity of the
obligation, and the rating of the issue. The market in municipal
bonds and notes is not comparable to the market in taxable money
market instruments in terms of liquidity and stability of
principal. This is because the market in municipal bonds and notes
is not as broad, does not offer as much choice in maturities, and
has fewer issuers.
Notwithstanding any of the Fund's other investment policies, the
Fund may invest its assets in an open-end management investment
company having substantially the same investment objectives,
policies and restrictions as the Fund for the purpose of having
those assets managed as part of a combined pool.
For a description of bond and note ratings, see Appendix A. For a
description of short-term taxable securities and repurchase
agreements, see Appendix B.
SECURITY TRANSACTIONS
Subject to policies set by the board, AEFC is authorized to
determine, consistent with the Fund's investment goal and policies,
which securities will be purchased, held or sold. In determining
where the buy and sell orders are to be placed, AEFC has been
directed to use its best efforts to obtain the best available price
and most favorable execution except where otherwise authorized by
the board.
AEFC has a strict Code of Ethics that prohibits its affiliated
personnel from engaging in personal investment activities that
compete with or attempt to take advantage of planned portfolio
transactions for any fund in the IDS MUTUAL FUND GROUP. AEFC
carefully monitors compliance with its Code of Ethics.
Normally, the Fund's securities are traded on a "principal" rather
than an "agency" basis. In other words, AEFC will trade directly
with the issuer or with a dealer who buys or sells for its own
account, rather than acting on behalf of another client. AEFC does
not pay the dealer commissions. Instead, the dealer's profit, if
any, is the difference, or spread, between the dealer's purchase
and sale price for the security.
<PAGE>
PAGE 25
Each investment decision made for the Fund is made independently
from any decision made for another fund in the IDS MUTUAL FUND
GROUP or other account advised by AEFC or any AEFC subsidiary.
When the Fund buys or sells the same security as another fund or
account, AEFC carries out the purchase or sale in a way the Fund
agrees in advance is fair. Although sharing in large transactions
may affect the price or volume purchased or sold by the Fund
adversely, the Fund hopes to gain an overall advantage in
execution.
The Fund acquired no securities of its regular brokers or dealers
or of the parents of those brokers or dealers that derived more
than 15% of gross revenue from securities related activities during
the year ended Dec. 31, 1996.
BROKERAGE COMMISSIONS PAID TO BROKERS AFFILIATED WITH AMERICAN
EXPRESS FINANCIAL CORPORATION
Affiliates of American Express Company (American Express) (of which
AEFC is a wholly owned subsidiary) may engage in brokerage and
other securities transactions on behalf of the Fund according to
procedures adopted by the Fund's board and to the extent consistent
with applicable provisions of the federal securities laws. AEFC
will use an American Express affiliate only if (i) AEFC determines
that the Fund will receive prices and executions at least as
favorable as those offered by qualified independent brokers
performing similar brokerage and other services for the Fund and
(ii) the affiliate charges the Fund commission rates consistent
with those the affiliate charges comparable unaffiliated customers
in similar transactions and if such use is consistent with terms of
the Investment Management Services Agreement.
AEFC may direct brokerage to compensate an affiliate. AEFC will
receive research on South Africa from New Africa Advisors, a
wholly-owned subsidiary of Sloan Financial Group. AEFC owns 100%
of IDS Capital Holdings Inc. which in turn owns 40% of Sloan
Financial Group. New Africa Advisors will send research to AEFC
and in turn AEFC will direct trades to a particular broker. The
broker will have an agreement to pay New Africa Advisors. All
transactions will be on a best execution basis. Compensation
received will be reasonable for the services rendered.
[No brokerage commissions were paid to brokers affiliated with AEFC
for the three most recent fiscal years.]
Information about brokerage commissions paid by the Fund for the
last three fiscal years to brokers affiliated with AEFC is
contained in the following table:
<PAGE>
PAGE 26
</TABLE>
<TABLE><CAPTION>
For the Fiscal Year Ended Dec. 31,
<S> <C> <C> <C> <C> <C> <C>
19 19 19
Aggregate Percent of Aggregate Aggregate
Dollar Aggregate Dollar Dollar Dollar
Amount of Percent of Amount of Amount of Amount of
Nature Commissions Aggregate Transactions Commissions Commissions
of Paid to Brokerage Involving Payment Paid to Paid to
Broker Affiliation Broker Commissions of Commissions Broker Broker
$ % % $ $
</TABLE>
(1) Under common control with AEFC as a subsidiary of American
Express until May 31, 1994. [Lehman Brothers]
(2) Wholly owned subsidiary of AEFC. [AEFA] [American Enterprise
Investment Services, Inc.]
PERFORMANCE INFORMATION
The Fund may quote various performance figures to illustrate past
performance. An explanation of the methods used by the Fund to
compute performance follows below.
Average annual total return
The Fund may calculate average annual total return for certain
periods by finding the average annual compounded rates of return
over the period that would equate the initial amount invested to
the ending redeemable value, according to the following formula:
P(1+T)n = ERV
where: P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $1,000
payment, made at the beginning of a period, at the
end of the period (or fractional portion thereof)
Aggregate total return
The Fund may calculate aggregate total return for certain periods
representing the cumulative change in the value of an investment in
the Fund over a specified period of time according to the following
formula:
ERV - P
P
where: P = a hypothetical initial payment of $1,000
ERV = ending redeemable value of a hypothetical $1,000
payment, made at the beginning of a period, at the
end of the period (or fractional portion thereof)
Annualized yield
The Fund calculates annualized simple and compound yields based on
a seven-day period.
<PAGE>
PAGE 27
The simple yield is calculated by determining the net change in the
value of a hypothetical account having a balance of one share at
the beginning of the seven-day period, dividing the net change in
account value by the value of the account at the beginning of the
period to obtain the return for the period, and multiplying that
return by 365/7 to obtain an annualized figure. The value of the
hypothetical account includes the amount of any declared dividends,
the value of any shares purchased with any dividend paid during the
period and any dividends declared for such shares. The Fund's
yield does not include any realized or unrealized gains or losses.
The Fund calculates its compound yield according to the following
formula:
Compound Yield = (return for seven-day period + 1)365/7 - 1
The Fund's simple annualized yield was ___% and its compound yield
was ___% on Dec. 31, 1996. The Fund's simple yield was ___% and
the compound yield was ___%, respectively on Dec. 31, 1996.
Yield, or rate of return, on Fund shares may fluctuate daily and
does not provide a basis for determining future yields. However,
it may be used as one element in assessing how the Fund is meeting
its goal. When comparing an investment in the Fund with savings
accounts and similar investment alternatives, you must consider
that such alternatives often provide an agreed to or guaranteed
fixed yield for a stated period of time, whereas the Fund's yield
fluctuates. In comparing the yield of one money market fund to
another, you should consider the Fund's investment policies,
including the types of investments permitted.
In its sales material and other communications, the Fund may quote,
compare or refer to rankings, yields or returns as published by
independent statistical services or publishers and publications
such as The Bank Rate Monitor National Index, Barron's, Business
Week, Donoghue's Money Market Fund Report, Financial Services Week,
Financial Times, Financial World, Forbes, Fortune, Global Investor,
Institutional Investor, Investor's Daily, Kiplinger's Personal
Finance, Lipper Analytical Services, Money, Mutual Fund Forecaster,
Newsweek, The New York Times, Personal Investor, Stanger Report,
Sylvia Porter's Personal Finance, USA Today, U.S. News and World
Report, The Wall Street Journal and Wiesenberger Investment
Companies Service.
VALUING FUND SHARES
The Fund values its securities as follows: All of the securities
in the Fund's portfolio (including those readily marketable assets
designated to cover commitments to buy when-issued securities) are
valued at amortized cost. The amortized cost method of valuation
is an approximation of market value determined by systematically
increasing the carrying value of a security if acquired at a
discount, or reducing the carrying value if acquired at a premium,
so that the carrying value is equal to maturity value on the
maturity date. It does not take into consideration unrealized
capital gains or losses.
<PAGE>
PAGE 28
The board has established procedures designed to stabilize the
Fund's price per share for purposes of sales and redemptions at $1,
to the extent that it is reasonably possible to do so. These
procedures include review of the Fund's securities by the board, at
intervals deemed appropriate by it, to determine whether the Fund's
net asset value per share computed by using available market
quotations deviates from a share value of $1 as computed using the
amortized cost method. The board must consider any deviation that
appears and if it exceeds 0.5% it must determine what action, if
any, needs to be taken. If the board determines a deviation exists
that may result in a material dilution of the holdings of current
shareholders or investors, or in other unfair consequences for such
persons, it must undertake remedial action that it deems necessary
and appropriate. Such action may include withholding dividends,
calculating net asset value per share for purposes of sales and
redemptions using available market quotations, making redemptions
in kind, and selling securities before maturity in order to realize
capital gains or losses or to shorten average portfolio maturity.
While the amortized cost method provides certainty and consistency
in portfolio valuation, it may result in valuations of securities
that are either somewhat higher or lower than the prices at which
the securities could be sold. This means that during times of
declining interest rates the yield on the Fund's shares may be
higher than if valuations of securities were made based on actual
market prices and estimates of market prices. Accordingly, if
using the amortized cost method were to result in a lower portfolio
value, a prospective investor in the Fund would be able to obtain a
somewhat higher yield than he would get if portfolio valuation were
based on actual market values. Existing shareholders, on the other
hand, would receive a somewhat lower yield than they would
otherwise receive. The opposite would happen during a period of
rising interest rates.
The Exchange, AEFC and the Fund will be closed on the following
holidays: New Year's Day, Memorial Day, Independence Day, Labor
Day, Thanksgiving Day and Christmas Day.
INVESTING IN THE FUND
The minimum purchase for directors, officers and employees of the
Fund or AEFC and AEFC financial advisors is $1000 (except payroll
deduction plans), with a minimum additional purchase of $25.
Systematic Investment Programs
After you make your initial investment of $2,000 or more, you can
arrange to make additional payments of $100 or more on a regular
basis. These minimums do not apply to all systematic investment
programs. You decide how often to make payments - monthly,
quarterly or semiannually. You are not obligated to make any
payments. You can omit payments, or discontinue the investment
program altogether. The Fund also can change the program or end it
at any time. If there is no obligation, why do it? Putting money
aside is an important part of financial planning. With a
systematic investment program, you have a goal to work for.
<PAGE>
PAGE 29
How does this work? When you send in your payment, your money is
invested at the net asset value. Each purchase is a separate
transaction. After each purchase your new shares will be added to
your account. Shares bought through these programs are exactly the
same as any other fund shares. They can be bought and sold at any
time. A systematic investment program is not an option or an
absolute right to buy shares.
For a discussion on dollar-cost averaging see appendix C.
Automatic Directed Dividends
Dividends, including capital gain distributions, paid by another
fund in the IDS MUTUAL FUND GROUP may be used to automatically
purchase shares of the Fund. Dividends may be directed to existing
accounts only. Dividends declared by the Fund are exchanged to
this Fund the following day. Dividends can be exchanged into one
Fund but cannot be split to make purchases in two or more funds.
Automatic directed dividends are available between accounts of any
ownership except:
Between a non-custodial account and an IRA, or 401(k) plan account
or other qualified retirement account of which American Express
Trust Company acts as custodian;
Between two American Express Trust Company custodial accounts with
different owners (for example, you may not exchange dividends from
your IRA to the IRA of your spouse);
Between different kinds of custodial accounts with the same
ownership (for example, you may not exchange dividends from your
IRA to your 401(k) plan account, although you may exchange
dividends from one IRA to another IRA).
Dividends may be directed from accounts established under the
Uniform Gifts to Minors Act (UGMA) or Uniform Transfers to Minors
Act (UTMA) only into other UGMA or UTMA accounts with identical
ownership.
The Fund's investment goal is described in its prospectus along
with other information, including fees and expense ratios. Before
exchanging dividends into another fund, you should read its
prospectus. You will receive a confirmation that the automatic
directed dividend service has been set up for your account.
REDEEMING SHARES
You have a right to redeem your shares at any time. For an
explanation of redemption procedures, please see the prospectus.
Drafts: Drafts should be requested by registered owners only. The
number of signatures required for payment of a draft may vary by
account ownership. Drafts should be used like checks, but should
not be sent directly to the Minneapolis headquarters to be cashed.
When the draft is accepted by the Fund through the banking system,
<PAGE>
PAGE 30
shares will be redeemed from your account. In order to qualify for
this service, all shares must be held in non-certificate form. If
the account is not large enough to cover a draft, it will be
dishonored and returned marked "insufficient funds." Drafts
written on purchases made with non-guaranteed funds less than 10
days old will not be honored in most cases. The draft writing
privilege may be modified or terminated at any time. It may not
always be possible to give all shareholders advance notification of
each change in the draft writing privilege.
Telephone Redemptions: Records maintained by AEFC will be binding
on all parties. Neither AEFC nor the Fund will be liable for any
loss, expense or damage arising in connection with telephone
redemption requests. In order to qualify for this service, all
shares must be held in non-certificate form.
The requesting registered owner must be prepared to provide
sufficient information to enable AEFC to verify the authenticity of
the call and to process the redemption request. All telephone
calls will be recorded. Redemption requests received before the
close of business (normally 3 p.m. Central time) will be processed
the same day. For each redemption, a number of shares equal to the
amount of the requested redemption will be redeemed. The following
business day, the redemption proceeds will be mailed to the address
of record or transmitted by Federal Reserve Wire to the bank
account designated on the telephone authorization form, provided
AEFC, the Fund, Norwest Bank Minneapolis and your bank are all
open. At the present time there is no additional fee charged for
the wire service, but if such a fee is imposed in the future, an
additional number of shares will be redeemed to cover it.
The telephone redemption privilege may be modified or discontinued
at any time. It may not always be possible to give all
shareholders advance notice of each change in the procedures for
telephone redemptions.
During an emergency, the board can suspend computation of the net
asset value, stop accepting payments for purchase of shares or
suspend the duty of the Fund to redeem shares for more than seven
days. Such emergency situations would occur if:
'The Exchange closes for reasons other than the usual weekend and
holiday closings or trading on the Exchange is restricted, or
'Disposal of the Fund's securities is not reasonably practicable,
or it is not reasonably practicable for the Fund to determine the
fair value of its net assets, or
'The SEC, under the provisions of the 1940 Act, declares a period
of emergency to exist.
Should the Fund stop selling shares, the board may make a deduction
from the value of the assets held by the Fund to cover the cost of
future liquidations of the assets so as to distribute these costs
fairly among all shareholders.
<PAGE>
PAGE 31
The Fund has elected to be governed by Rule 18f-1 under the 1940
Act, which obligates the Fund to redeem shares in cash, with
respect to any one shareholder during any 90-day period, up to
lesser of $250,000 or 1% of the net assets of the Fund at the
beginning of the period. Although redemptions in excess of this
limitation would normally be paid in cash, the Fund reserves the
right to make these payments in whole or in part in securities or
other assets in case of an emergency, or if the payment of a
redemption in cash would be detrimental to the existing
shareholders of the Fund as determined by the board. In these
circumstances, the securities distributed would be valued as set
forth in the prospectus. Should the Fund distribute securities, a
shareholder may incur brokerage fees or other transaction costs in
converting the securities to cash.
PAY-OUT PLANS
You can use any of several pay-out plans to redeem your investment
in regular installments. While the plans differ on how the pay-out
is figured, they all are based on the redemption of your
investment. Net investment income dividends and any capital gain
distributions will automatically be reinvested, unless you elect to
receive them in cash.
To start any of these plans, please write or call American Express
Shareholder Service, P.O. Box 534, Minneapolis, MN 55440-0534,
612-671-3733. Your authorization must be received in the
Minneapolis headquarters at least five days before the date you
want your payments to begin. The initial payment must be at least
$50. Payments will be made on a monthly, bimonthly, quarterly,
semiannual or annual basis. Your choice is effective until you
change or cancel it.
The following pay-out plans are designed to take care of the needs
of most shareholders in a way AEFC can handle efficiently and at a
reasonable cost. If you need a more irregular schedule of
payments, it may be necessary for you to make a series of
individual redemptions, in which case you'll have to send in a
separate redemption request for each pay-out. The Fund reserves
the right to change or stop any pay-out plan and to stop making
such plans available.
Plan #1: Pay-out for a fixed period of time
If you choose this plan, a varying number of shares will be
redeemed at regular intervals during the time period you choose.
This plan is designed to end in complete redemption of all shares
in your account by the end of the fixed period.
Plan #2: Redemption of a fixed number of shares
If you choose this plan, a fixed number of shares will be redeemed
for each payment and that amount will be sent to you. The length
of time these payments continue is based on the number of shares in
your account.
<PAGE>
PAGE 32
Plan #3: Redemption of a fixed dollar amount
If you decide on a fixed dollar amount, whatever number of shares
is necessary to make the payment will be redeemed in regular
installments until the account is closed.
Plan #4: Redemption of a percentage of net asset value
Payments are made based on a fixed percentage of the net asset
value of the shares in your account computed on the day of each
payment. Percentages range from 0.25% to 0.75%. For example, if
you are on this plan and arrange to take 0.5% each month, you will
get $50 if the value of your account is $10,000 on the payment
date.
CAPITAL LOSS CARRYOVER
For federal income tax purposes, the Fund had capital loss
carryover of $___________ at Dec. 31, 1996, that will expire as
follows:
199 199
It is unlikely that the board will authorize a distribution of any
net realized capital gains until the available capital loss
carryover has been offset or has expired.
TAXES
All distributions of net investment income during the year will
have the same percentage designated as tax-exempt. This annual
percentage is expected to be substantially the same as the
percentage of tax-exempt income actually earned during any
particular distribution period. For the fiscal year ended Dec. 31,
1996, ___% of the income distribution was designated as exempt from
federal income taxes.
If you are a "substantial user" (or related person) of facilities
financed by industrial development bonds, you should consult your
tax advisor before investing. The income from such bonds may not
be tax-exempt for you.
State law determines whether interest income on a particular
municipal bond or note is tax-exempt for state tax purposes. It
also determines the tax treatment of those bonds and notes when
earned by a mutual fund and paid to the Fund's shareholders. The
Fund will tell you the percentage of interest income from municipal
bonds and notes it received during the year on a state-by-state
basis. Your tax advisor should help you report this income for
state tax purposes.
Under federal tax law and an election made by the Fund under
federal tax regulations, by the end of a calendar year the Fund
must declare and pay dividends representing 98% of ordinary income
<PAGE>
PAGE 33
through Dec. 31 and 98% of net capital gains (both long-term and
short-term) for the 12-month period ending Dec. 31 of that calendar
year. The Fund is subject to an excise tax equal to 4% of the
excess, if any, of the amount required to be distributed over the
amount actually distributed. The Fund intends to comply with
federal tax law and avoid any excise tax.
This is a brief summary that relates to federal income taxation
only. Shareholders should consult their tax advisor for more
complete information as to the application of federal, state and
local income tax laws to Fund distributions.
AGREEMENTS
Investment Management Services Agreement
The Fund has an Investment Management Services Agreement with AEFC.
AEFC is paid a fee based on the following schedule:
Group assets Annual rate at
(billions) each asset level
First $1.0 0.310%
Next 0.5 0.293
Next 0.5 0.275
Next 0.5 0.258
Over 2.5 0.240
On Dec. 31, 1996, the daily rate applied to the Fund's net assets
was equal to 0.___% on an annual basis. The fee is calculated for
each calendar day on the basis of the net assets of the Fund as of
the close of business of the full business day, which is two
business days prior to the day for which the calculation is being
made. In the case of the suspension of the computation of the net
asset value, the fee for each day shall be computed as of the close
of business on the last full business day on which the net assets
were computed.
The management fee is paid monthly. Under the agreement, the
amount paid was $________ for the year ended Dec. 31, 1996,
$427,876 for 1995, and $400,146 for 1994.
Under the agreement, the Fund also pays taxes, brokerage
commissions and nonadvisory expenses, which include custodian fees;
audit and certain legal fees; fidelity bond premiums; registration
fees for shares; office expenses; consultants' fees; compensation
of board members, officers and employees; corporate filing fees;
organizational expenses; expenses incurred in connection with
lending securities of the Fund; and expenses properly payable by
the Fund, approved by the board. Under the agreement, the Fund
paid nonadvisory expenses of $________ for the year ended Dec. 31,
1996, $128,899 for 1995, and $157,268 for 1994.
<PAGE>
PAGE 34
Administrative Services Agreement
The Fund has an Administrative Services Agreement with AEFC. Under
this agreement, the Fund pays AEFC for providing administration and
accounting services. The fee is calculated as follows:
Assets Annual rate
(billions) each asset level
First $1.0 0.030%
Next 0.50 0.027
Next 0.50 0.025
Next 0.50 0.022
Over 2.5 0.020
On Dec. 31, 1996, the daily rate applied to the Fund's net assets
was equal to 0.___% on an annual basis. The fee is calculated for
each calendar day on the basis of net assets as of the close of
business two business days prior to the day for which the
calculation is made. Under the agreement, the Fund paid fees of
$________ for the fiscal year ended Dec. 31, 1996.
Transfer Agency Agreement
The Fund has a Transfer Agency Agreement with AEFC. This agreement
governs AEFC's responsibility for administering and/or performing
transfer agent functions, for acting as service agent in connection
with dividend and distribution functions and for performing
shareholder account administration agent functions in connection
with the issuance, exchange and redemption or repurchase of the
Fund's shares. Under the agreement, AEFC earns a fee from the Fund
determined by multiplying the number of shareholder accounts at the
end of the day by a rate of $20 per year and dividing by the number
of days in the year. The fees paid to AEFC may be changed from
time to time upon agreement of the parties without shareholder
approval. Under the agreement, the Fund paid fees of $________ for
the period year ended Dec. 31, 1996.
Distribution Agreement
For an explanation of the Fund's Distribution Agreement, please see
your prospectus.
<PAGE>
PAGE 35
<TABLE><CAPTION>
Additional information about commissions and compensation for the
last year is contained in the following table:
<S> <C> <C> <C> <C>
(1) (2) (3) (4) (5)
Net Compensation
Name of Underwriting on Redemption
Principal Discounts and and Brokerage Other
Underwriter Commissions Repurchases Commissions Compensation
AEFC None $_______ $________* $________**
American
Express
Financial
Advisors $__________ None None None
</TABLE>
*For further information see "Brokerage Commissions Paid to Brokers
Affiliated with AEFC."
**Distribution fees paid pursuant to the Plan and Agreement of
Distribution.
Total fees and expenses
Total fees and nonadvisory expenses cannot exceed the most
restrictive applicable state limitation. Currently, the most
restrictive applicable state expense limitation, subject to
exclusion of certain expenses, is 2.5% of the first $30 million of
the Fund's average daily net assets, 2% of the next $70 million and
1.5% of average daily net assets over $100 million, on an annual
basis. At the end of each month, if the fees and expenses of the
Fund exceed this limitation for the Fund's fiscal year in progress,
AEFC will assume all expenses in excess of the limitation. AEFC
then may bill the Fund for such expenses in subsequent months up to
the end of that fiscal year, but not after that date. No interest
charges are assessed by AEFC for expenses it assumes. The Fund
paid total fees and nonadvisory expenses of $________ for the
fiscal year ended Dec. 31, 1996.
ORGANIZATIONAL INFORMATION
The Fund is a diversified, open-end management investment company,
as defined in the Investment Company Act of 1940. Originally
incorporated on Feb. 29, 1980 in Nevada, the Fund changed its state
of incorporation on June 13, 1986 by merging into a Minnesota
Corporation incorporated on April 7, 1986. The Fund headquarters
are at 901 S. Marquette Ave., Suite 2810, Minneapolis, MN 55402-
3268.
BOARD MEMBERS AND OFFICERS
The following is a list of the Fund's board members who, except for
Mr. Dudley, are also board members and officers of all other funds
in the IDS MUTUAL FUND GROUP. Mr. Dudley is a board member of all
IDS funds except the nine life funds. All shares have cumulative
voting rights with respect to the election of board members.
<PAGE>
PAGE 36
H. Brewster Atwater, Jr.
Born in 1931
4900 IDS Tower
Minneapolis, MN
Former chairman and chief executive officer, General Mills, Inc.
Director, Merck & Co., Inc. and Darden Restaurants, Inc.
Lynne V. Cheney'
Born in 1941
American Enterprise Institute
for Public Policy Research (AEI)
1150 17th St., N.W.
Washington, D.C.
Distinguished Fellow AEI. Former Chair of National Endowment of
the Humanities. Director, The Reader's Digest Association Inc.,
Lockheed-Martin, the Interpublic Group of Companies, Inc.
(advertising), and FPL Group, Inc. (holding company for Florida
Power and Light).
William H. Dudley**
Born in 1932
2900 IDS Tower
Minneapolis, MN
Executive vice president and director of AEFC.
Robert F. Froehlke+
Born in 1922
1201 Yale Place
Minneapolis, MN
Former president of all funds in the IDS MUTUAL FUND GROUP.
Director, the ICI Mutual Insurance Co., Institute for Defense
Analyses, Marshall Erdman and Associates, Inc. (architectural
engineering) and Public Oversight Board of the American Institute
of Certified Public Accountants.
David R. Hubers+**
Born in 1943
2900 IDS Tower
Minneapolis, MN
President, chief executive officer and director of AEFC.
Previously, senior vice president, finance and chief financial
officer of AEFC.
Heinz F. Hutter+'
Born in 1929
P.O. Box 2187
Minneapolis, MN
Former president and chief operating officer, Cargill, Incorporated
(commodity merchants and processors).
<PAGE>
PAGE 37
Anne P. Jones
Born in 1935
5716 Bent Branch Rd.
Bethesda, MD
Attorney and telecommunications consultant. Former partner, law
firm of Sutherland, Asbill & Brennan. Director, Motorola, Inc. and
C-Cor Electronics, Inc.
Melvin R. Laird
Born in 1922
Reader's Digest Association, Inc.
1730 Rhode Island Ave., N.W.
Washington, D.C.
Senior counsellor for national and international affairs, The
Reader's Digest Association, Inc. Former nine-term congressman,
secretary of defense and presidential counsellor. Director, Martin
Marietta Corp., Metropolitan Life Insurance Co., The Reader's
Digest Association, Inc., Science Applications International Corp.,
Wallace Reader's Digest Funds and Public Oversight Board (SEC
Practice Section, American Institute of Certified Public
Accountants).
William R. Pearce+*
Born in 1927
901 S. Marquette Ave.
Minneapolis, MN
President of all funds in the IDS MUTUAL FUND GROUP since June
1993. Former vice chairman of the board, Cargill, Incorporated
(com modity merchants and processors).
Edson W. Spencer+
Born in 1926
4900 IDS Center
80 S. 8th St.
Minneapolis, MN
President, Spencer Associates Inc. (consulting). Former chairman
of the board and chief executive officer, Honeywell Inc. Director,
Boise Cascade Corporation (forest products). Member of
International Advisory Council of NEC (Japan).
John R. Thomas**
Born in 1937
2900 IDS Tower
Minneapolis, MN
Senior vice president and director of AEFC.
<PAGE>
PAGE 38
Wheelock Whitney+
Born in 1926
1900 Foshay Tower
821 Marquette Ave.
Minneapolis, MN
Chairman, Whitney Management Company (manages family assets).
C. Angus Wurtele'
Born in 1934
Valspar Corporation
Suite 1700
Foshay Tower
Minneapolis, MN
Chairman of the board and retired chief executive officer, The
Valspar Corporation (paints). Director, Bemis Corporation
(packaging), Donaldson Company (air cleaners & mufflers) and
General Mills, Inc. (consumer foods).
+ Member of executive committee.
' Member of joint audit committee.
* Interested person by reason of being an officer and employee of
the Fund.
**Interested person by reason of being an officer, board member,
employee and/or shareholder of AEFC or American Express.
The board also has appointed officers who are responsible for day-
to-day business decisions based on policies it has established.
In addition to Mr. Pearce, who is president, the Fund's other
officers are:
Leslie L. Ogg
Born in 1938
901 S. Marquette Ave.
Minneapolis, MN
Vice president, general counsel and secretary of all funds in the
IDS MUTUAL FUND GROUP.
Officers who also are officers and/or employees of AEFC
Peter J. Anderson
Born in 1942
IDS Tower 10
Minneapolis, MN
Vice president-investments of all funds in the IDS MUTUAL FUND
GROUP. Director and senior vice president-investments of AEFC.
<PAGE>
PAGE 39
Melinda S. Urion
Born in 1953
IDS Tower 10
Minneapolis, MN
Treasurer of all funds in the IDS MUTUAL FUND GROUP. Director,
senior vice president and chief financial officer of AEFC.
Director and executive vice president and controller of IDS Life
Insurance Company.
Members of the board who are not officers of the Fund or AEFC
receive an annual fee of $100 and the chair of the Contracts
Committee receives an additional $90. Board members receive a $50
per day attendance fee for board meetings. The attendance fee for
meetings of the contracts and Investment Review Committees is $50;
for meetings of the Audit Committee $25 and for traveling from out-
of-state $8. Expenses for attending meetings are reimbursed.
During the fiscal year ended Dec. 31, 1996, the members of the
board, for attending up to __ meetings, received the following
compensation:
<TABLE><CAPTION>
Compensation Table
<S> <C> <C> <C> <C>
Pension or Estimated
Aggregate Retirement annual Total cash
compensation benefits benefit compensation
from the accrued as upon from the IDS
Board member Fund Fund expenses* retirement MUTUAL FUND GROUP
$ $ $ $
</TABLE>
On Dec. 31, 1996, the Fund's board members and officers as a group
owned less than 1% of the outstanding shares. During the fiscal
year ended Dec. 31, 1996, no board member or officer earned more
than $60,000 from this Fund. All board members and officers as a
group earned $________, including $________ of retirement plan
benefits, from this Fund.
*The Fund had a retirement plan for its independent board members.
The plan was terminated April 30, 1996.
PRINCIPAL HOLDERS OF SECURITIES
As of Dec. 31, 1996, ________ held ____ % of Fund shares.
CUSTODIAN
The Fund's securities and cash are held by First Bank National
Association, 180 E. Fifth St., St. Paul, MN 55101-1631, through a
custodian agreement. The custodian is permitted to deposit some or
all of its securities in central depository systems as allowed by
federal law. For its services, the Fund pays the custodian a
maintenance charge and a charge per transaction in addition to
reimbursing the custodian's out-of-pocket expenses.
<PAGE>
PAGE 40
INDEPENDENT AUDITORS
The financial statements contained in the Annual Report to
shareholders for the fiscal year ended Dec. 31, 1996, were audited
by independent auditors, KPMG Peat Marwick LLP, 4200 Norwest
Center, 90 S. Seventh St., Minneapolis, MN 55402-3900. The
independent auditors also provide other accounting and tax-related
services as requested by the Fund.
FINANCIAL STATEMENTS
The Independent Auditors' Report and the Financial Statements,
including Notes to the Financial Statements and the Schedule of
Investments in Securities, contained in the 1996 Annual Report to
shareholders, pursuant to Section 30(d) of the Investment Company
Act of 1940, as amended, are hereby incorporated in this SAI by
reference. No other portion of the Annual Report, however, is
incorporated by reference.
PROSPECTUS
The prospectus for IDS Tax-Free Money Fund dated Feb. 28, 1997, is
hereby incorporated in this SAI by reference.
<PAGE>
PAGE 41
APPENDIX A
DESCRIPTION OF BOND AND NOTE RATINGS
These ratings concern the quality of the issuing corporation. They
are not an opinion of the market value of the security. Such
ratings are opinions on whether the principal and interest will be
repaid when due. A security's rating may change which could affect
its price.
The four highest ratings by Moody's Investors Service, Inc. are
Aaa, Aa, A and Baa.
Bonds rated:
Aaa are judged to be of the best quality. They carry the smallest
degree of investment risk and are generally referred to as "gilt
edged." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the
various protective elements are likely to change, such changes as
can be visualized are most unlikely to impair the fundamentally
strong position of such issues.
Aa are judged to be of high quality by all standards. Together
with the Aaa group they comprise what are generally known as high
grade bonds. They are rated lower than the best bonds because
margins of protection may not be as large as in Aaa securities or
fluctuation of protective elements may be of greater amplitude or
there may be other elements present which make the long-term risk
appear somewhat larger than the Aaa securities.
A possess many favorable investment attributes and are to be
considered as upper-medium-grade obligations. Factors giving
security to principal and interest are considered adequate, but
elements may be present which suggest a susceptibility to
impairment sometime in the future.
Baa are considered as medium-grade obligations (i.e., they are
neither highly protected nor poorly secured). Interest payments
and principal security appear adequate for the present but certain
protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack
outstanding investment characteristics and in fact have speculative
characteristics as well.
The four highest ratings by Standard & Poor's Corporation are AAA,
AA, A, and BBB.
AAA has the highest rating assigned by S&P. Capacity to pay
interest and repay principal is extremely strong.
AA has a very strong capacity to pay interest and repay principal
and differs from the highest rated issues only in small degree.
<PAGE>
PAGE 42
A has a strong capacity to pay interest and repay principal,
although it is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than debt in
higher-rated categories.
BBB is regarded as having an adequate capacity to pay interest and
repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances
are more likely to lead to a weakened capacity to pay interest and
repay principal for debt in this category than in higher-rated
categories.
Moody's ratings for tax-exempt notes are designated "MIG" (Moody's
Investment Grade). Notes rated MIG-1 are of the best quality,
enjoying strong protection from established cash flows or funds for
their servicing or from established and broad-based access to the
market for refinancing, or both.
Notes rated MIG-2 are of high quality, with margins of protection
ample, although not so large as in the preceding group.
Notes rated MIG-3 are of favorable quality, with all security
elements accounted for but lacking the undeniable strength of the
preceding grades. Market access for refinancing, in particular, is
likely to be less well established.
Standard & Poor's rating SP-1 on tax-exempt notes indicates very
strong or strong capacity to pay principal and interest. Those
issues determined to possess overwhelming safety characteristics
will be given a plus (+) designation.
Standard & Poor's rating SP-2 indicates satisfactory capacity to
pay principal and interest.
Standard & Poor's rating SP-3 indicates speculative capacity to pay
principal and interest.
<PAGE>
PAGE 43
APPENDIX B
DESCRIPTION OF SHORT-TERM TAXABLE SECURITIES AND REPURCHASE
AGREEMENTS
Depending on market conditions, a portion of the Fund's investments
may be invested in short-term taxable securities. These include:
(1) Obligations of the U.S. government, its agencies and
instrumentalities that result principally from lending programs of
the U.S. government;
(2) U.S. Treasury bills with maturities up to one year. The
difference between the purchase price and the maturity value or
resale price is the interest income to the Fund;
(3) Certificates of deposit or receipts with fixed interest rates
issued by banks in exchange for deposit of funds;
(4) Bankers' acceptances arising from short-term credit
arrangements designed to enable businesses to obtain funds to
finance commercial transactions;
(5) Letters of credit, which are short-term notes issued in
bearer form with a bank letter of credit obligating the bank to pay
the bearer the amount of the note;
(6) Commercial paper rated in the two highest grades by Standard
& Poor's or Moody's. Commercial paper is generally defined as
unsecured short-term notes issued in bearer form by large well-
known corporations and finance companies. These ratings reflect a
review of management, economic evaluation of the industry
competition, liquidity, long-term debt and ten-year earning trends:
Standard & Poor's Rating A-1 indicates that the degree of safety
regarding timely repayment is either overwhelming or very strong.
Standard & Poor's Rating A-2 indicates that capacity for timely
payment on issues with this designation is strong.
Moody's Rating Prime-1 (P-1) indicates a superior capacity for
repayment of short-term promissory obligations.
Moody's Rating Prime-2 (P-2) indicates a strong capacity for
repayment of short-term promissory obligations.
(7) Repurchase agreements involving acquisition of securities by
the Fund with a concurrent agreement by the seller, usually a bank
or securities dealer, to reacquire the securities at cost plus
interest within a specified time. From this investment, the Fund
receives a fixed rate of return that is insulated from market rate
changes while it holds the security.
<PAGE>
PAGE 44
(8) Variable rate demand notes (VRDNs), whose terms provide (1)
the Fund is unconditionally entitled to obtain the amount due upon
notice of seven days or less or at specified intervals not
exceeding one year upon no more than seven days' notice, and (2)
the interest rate provisions will be such that the instrument will
have a current market value approximately equal to its face amount.
The Fund will invest only in VRDNs that are in the top two ratings
by a major rating service or are of comparable quality as
determined by the board of directors. The required liquidity may
be provided by a bank letter of credit, in which event the quality
and liquidity of the issue may be determined by reference to the
bank's creditworthiness.
<PAGE>
PAGE 45
APPENDIX C
DOLLAR-COST AVERAGING
A technique that works well for many investors is one that
eliminates random buy and sell decisions. One such system is
dollar-cost averaging. Dollar-cost averaging involves building a
portfolio through the investment of fixed amounts of money on a
regular basis regardless of the price or market condition. This
may enable an investor to smooth out the effects of the volatility
of the financial markets. By using this strategy, more shares will
be purchased when the price is low and less when the price is high.
As the accompanying chart illustrates, dollar-cost averaging tends
to keep the average price paid for the shares lower than the
average market price of shares purchased, although there is no
guarantee.
While this does not ensure a profit and does not protect against a
loss if the market declines, it is an effective way for many
shareholders who can continue investing through changing market
conditions to accumulate shares in a fund to meet long-term goals.
Dollar-cost averaging
___________________________________________________________________
Regular Market Price Shares
Investment of a Share Acquired
$100 $6.00 16.7
100 4.00 25.0
100 4.00 25.0
100 6.00 16.7
100 5.00 20.0
$500 $25.00 103.4
Average market price of a share over 5 periods:
$5.00 ($25.00 divided by 5).
The average price you paid for each share:
$4.84 ($500 divided by 103.4).
<PAGE>
PAGE 46
PART C. OTHER INFORMATION
Item 24. Financial Statements and Exhibits.
(a) Registrant's semiannual report to shareholders filed
electronically pursuant to section 270.30d-1 with the
commission on or about Aug. 23, 1996, is incorporated herein
by reference.
(b) EXHIBITS
1. Copy of Articles of Incorporation as amended October 17, 1988,
filed electronically as Exhibit 1 to Post-Effective Amendment
No. 14 to Registration Statement No. 2-66868, is incorporated
herein by reference.
2. Copy of By-laws as amended January 12, 1989, filed
electronically as Exhibit 2 to Post-Effective Amendment No. 16
to Registration Statement No. 2-66868, is incorporated herein
by reference.
3. Not Applicable.
4. Copy of Stock certificate, filed as Exhibit 4 to Registrant's
Registration Statement No. 2-66868, is incorporated herein by
reference.
5. Copy of Investment Management Services Agreement between
Registrant and American Express Financial Corporation dated
March 20, 1995, is filed electronically herewith.
6. Copy of Distribution Agreement between Registrant and American
Express Financial Advisors Inc. dated March 20, 1995, is filed
electronically herewith.
7. All employees are eligible to participate in a profit sharing
plan. Entry into the plan is Jan. 1 or July 1. The
Registrant contributes each year an amount up to 15 percent of
their annual salaries, the maximum deductible amount permitted
under Section 404(a) of the Internal Revenue Code.
8. Copy of Custodian Agreement between Registrant and First
National Bank of Minneapolis, dated November 1, 1988, is filed
electronically herewith.
9. (a) Copy of Plan and Agreement of Merger, dated April 10,
1986, filed electronically as Exhibit 9(a) to Post-Effective
Amendment No. 14 to Registration Statement No. 2-66868, is
incorporated herein by reference.
(b) Copy of License Agreement, dated January 25, 1988, between
the Registrant and IDS Financial Corporation, filed
electronically as Exhibit 9(c) to Post-Effective Amendment No.
16 to Registration Statement No. 2-66868, is incorporated
herein by reference.
<PAGE>
PAGE 47
(c) Copy of Transfer Agency Agreement between Registrant and
American Express Financial Corporation dated March 20, 1995,
is filed electronically herewith.
(d) Copy of Administrative Services Agreement between
Registrant and American Express Financial Corporation dated
March 20, 1995, is filed electronically herewith.
10. Opinion and consent of counsel as to the legality of the
securities being registered is filed with Registrant's most
recent 24f-2 Notice.
11. Not applicable.
12. None.
13. Not applicable.
14. Forms of Keogh, IRA and other retirement plans, filed as
Exhibits 14(a) through 14(n) to IDS Growth Fund, Inc., Post-
Effective Amendment No. 34 to Registration Statement No. 2-
38355, are incorporated herein by reference.
15. Copy of Plan and Supplemental Agreement of Distribution
between Registrant and IDS Financial Corporation dated January
1, 1987, filed electronically as Exhibit 15 to Post-Effective
Amendment No. 13 to Registration Statement No. 2-66868, is
incorporated herein by reference.
16. Not applicable.
17. Not applicable.
18. (a) Directors' Power of Attorney to sign amendments to this
Registration Statement dated November 10, 1994 filed
electronically as Exhibit 18(a) to Post-Effective Amendment
No. 26 to Registration Statement No. 2-66868, is incorporated
herein by reference.
(b) Officers' Power of Attorney to sign amendments to this
Registration Statement dated November 1, 1995 filed
electronically as Exhibit 18(b) to Registrant's Post-Effective
Amendment No. 28, is incorporated herein by reference.
Item 25. Persons Controlled by or Under Common Control with
Registrant
None
<PAGE>
PAGE 48
Item 26. Number of Holders of Securities
(1) (2)
Number of Record
Holders as of
Title of Class Dec. 4, 1996
Common Stock 8,013
Item 27. Indemnification
The Articles of Incorporation of the registrant provide that the
Fund shall indemnify any person who was or is a party or is
threatened to be made a party, by reason of the fact that she or he
is or was a director, officer, employee or agent of the Fund, or is
or was serving at the request of the Fund as a director, officer,
employee or agent of another company, partnership, joint venture,
trust or other enterprise, to any threatened, pending or completed
action, suit or proceeding, wherever brought, and the Fund may
purchase liability insurance and advance legal expenses, all to the
fullest extent permitted by the laws of the State of Minnesota, as
now existing or hereafter amended. The By-laws of the registrant
provide that present or former directors or officers of the Fund
made or threatened to be made a party to or involved (including as
a witness) in an actual or threatened action, suit or proceeding
shall be indemnified by the Fund to the full extent authorized by
the Minnesota Business Corporation Act, all as more fully set forth
in the By-laws filed as an exhibit to this registration statement.
Insofar as indemnification for liability arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the registrant pursuant to the foregoing
provisions, or otherwise, the registrant has been advised that in
the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by
the registrant of expenses incurred or paid by a director, officer
or controlling person of the registrant in the successful defense
of any action, suit or proceeding) is asserted by such director,
officer or controlling person in connection with the securities
being registered, the registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in
the Act and will be governed by the final adjudication of such
issue.
Any indemnification hereunder shall not be exclusive of any other
rights of indemnification to which the directors, officers,
employees or agents might otherwise be entitled. No
indemnification shall be made in violation of the Investment
Company Act of 1940.
<PAGE>
<PAGE>
PAGE 1<PAGE>
Item 29(c). Not applicable.
Item 30. Location of Accounts and Records
American Express Financial Corporation
IDS Tower 10
Minneapolis, MN 55440
Item 31. Management Services
Not Applicable.
Item 32. Undertakings
(a) Not Applicable.
(b) Not Applicable.
(c) The Registrant undertakes to furnish each person
to whom a prospectus is delivered with a copy of
the Registrant's latest annual report to
shareholders, upon request and without charge.
<PAGE>
PAGE 49
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant, IDS Tax-Free Money
Fund, Inc., has duly caused this Amendment to its Registration
Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Minneapolis and the State of
Minnesota on the 16th day of December, 1996.
IDS TAX-FREE MONEY FUND, INC.
By /s/ William R. Pearce**
William R. Pearce, President
By /s/ Melinda S. Urion
Melinda S. Urion, Treasurer
Pursuant to the requirements of the Securities Act of 1933, this
Amendment to its Registration Statement has been signed below by
the following persons in the capacities indicated on the 16th day
of December, 1996.
Signatures Capacity
/s/ William R. Pearce* President, Chief
William R. Pearce Executive Officer and
Director
H. Brewster Atwater, Jr.
/s/ Lynne V. Cheney*
Lynne V. Cheney Director
/s/ William H. Dudley* Director
William H. Dudley
/s/ Robert F. Froehlke* Director
Robert F. Froehlke
/s/ David R. Hubers* Director
David R. Hubers
/s/ Heinz F. Hutter* Director
Heinz F. Hutter
/s/ Anne P. Jones* Director
Anne P. Jones
<PAGE>
PAGE 50
Signatures Capacity
/s/ Melvin R. Laird* Director
Melvin R. Laird
/s/ Edson W. Spencer* Director
Edson W. Spencer
/s/ John R. Thomas* Director
John R. Thomas
/s/ Wheelock Whitney* Director
Wheelock Whitney
/s/ C. Angus Wurtele*
C. Angus Wurtele Director
* Signed pursuant to Directors' Power of Attorney dated November
10, 1994, filed electronically as Exhibit 18(a) to Post-Effective
Amendment No. 26 to Registration Statement No. 2-66868, by:
_______________________________
Leslie L. Ogg
** Signed pursuant to Officers' Power of Attorney dated November 1,
1995, filed electronically as Exhibit 18(b) to Post-Effective
Amendment No. 28 to Registration Statement No. 2-66868, by:
_______________________________
Leslie L. Ogg
<PAGE>
PAGE 51
CONTENTS OF THIS
POST-EFFECTIVE AMENDMENT NO. 29
TO REGISTRATION STATEMENT NO. 2-66868
This post-effective amendment comprises the following papers and
documents:
The facing sheet.
The cross reference sheet.
Part A.
The prospectus.
Part B.
Statement of Additional Information.
Part C.
Other Information.
The signatures.
Exhibits.
<PAGE>
PAGE 1
IDS Tax-Free Money Fund, Inc.
File No. 2-66868/811-3003
Exhibit Index
Exhibit 5: Copy of Investment Management Services Agreement
between Registrant and American Express Financial
Corporation.
Exhibit 6: Copy of Distribution Agreement between Registrant
and American Express Financial Advisors Inc.
Exhibit 8: Copy of Custodian Agreement between Registrant and
First National Bank of Minneapolis.
Exhibit 9(c): Copy of Transfer Agency Agreement between Registrant
and American Express Financial Corporation.
Exhibit 9(d): Copy of Administrative Services Agreement between
Registrant and American Express Financial
Corporation.
<PAGE>
PAGE 1
INVESTMENT MANAGEMENT SERVICES AGREEMENT
AGREEMENT made the 20th day of March, 1995, by and between IDS
Tax-Free Money Fund, Inc. (the "Fund"), a Minnesota corporation,
and American Express Financial Corporation, a Delaware corporation.
Part One: INVESTMENT MANAGEMENT AND OTHER SERVICES
(1) The Fund hereby retains American Express Financial
Corporation, and American Express Financial Corporation hereby
agrees, for the period of this Agreement and under the terms and
conditions hereinafter set forth, to furnish the Fund continuously
with suggested investment planning; to determine, consistent with
the Fund's investment objectives and policies, which securities in
American Express Financial Corporation's discretion shall be
purchased, held or sold and to execute or cause the execution of
purchase or sell orders; to prepare and make available to the Fund
all necessary research and statistical data in connection
therewith; to furnish services of whatever nature required in
connection with the management of the Fund as provided under this
Agreement; and to pay such expenses as may be provided for in Part
Three; subject always to the direction and control of the Board of
Directors (the "Board"), the Executive Committee and the authorized
officers of the Fund. American Express Financial Corporation
agrees to maintain an adequate organization of competent persons to
provide the services and to perform the functions herein mentioned.
American Express Financial Corporation agrees to meet with any
persons at such times as the Board deems appropriate for the
purpose of reviewing American Express Financial Corporation's
performance under this Agreement.
(2) American Express Financial Corporation agrees that the
investment planning and investment decisions will be in accordance
with general investment policies of the Fund as disclosed to
American Express Financial Corporation from time to time by the
Fund and as set forth in its prospectuses and registration
statements filed with the United States Securities and Exchange
Commission (the "SEC").
(3) American Express Financial Corporation agrees that it
will maintain all required records, memoranda, instructions or
authorizations relating to the acquisition or disposition of
securities for the Fund.
(4) The Fund agrees that it will furnish to American Express
Financial Corporation any information that the latter may
reasonably request with respect to the services performed or to be
performed by American Express Financial Corporation under this
Agreement.
(5) American Express Financial Corporation is authorized to
select the brokers or dealers that will execute the purchases and
sales of portfolio securities for the Fund and is directed to use
its best efforts to obtain the best available price and most
favorable execution, except as prescribed herein. Subject to prior
authorization by the Fund's Board of appropriate policies and
procedures, and subject to termination at any time by the Board,
<PAGE>
PAGE 2
American Express Financial Corporation may also be authorized to
effect individual securities transactions at commission rates in
excess of the minimum commission rates available, to the extent
authorized by law, if American Express Financial Corporation
determines in good faith that such amount of commission was
reasonable in relation to the value of the brokerage and research
services provided by such broker or dealer, viewed in terms of
either that particular transaction or American Express Financial
Corporation's overall responsibilities with respect to the Fund and
other funds for which it acts as investment adviser.
(6) It is understood and agreed that in furnishing the Fund
with the services as herein provided, neither American Express
Financial Corporation, nor any officer, director or agent thereof
shall be held liable to the Fund or its creditors or shareholders
for errors of judgment or for anything except willful misfeasance,
bad faith, or gross negligence in the performance of its duties, or
reckless disregard of its obligations and duties under the terms of
this Agreement. It is further understood and agreed that American
Express Financial Corporation may rely upon information furnished
to it reasonably believed to be accurate and reliable.
Part Two: COMPENSATION TO INVESTMENT MANAGER
(1) The Fund agrees to pay to American Express Financial
Corporation, and American Express Financial Corporation covenants
and agrees to accept from the Fund in full payment for the services
furnished, a fee for each calendar day of each year equal to the
total of 1/365th (1/366th in each leap year) of each of the
respective percentages set forth below of the net assets of the
Fund; to be computed for each day on the basis of net assets as of
the close of business of the full business day two (2) business
days prior to the day for which the computation is being made. In
the case of the suspension of the computation of net asset value,
the asset charge for each day during such suspension shall be
computed as of the close of business on the last full business day
on which the net assets were computed. Net assets as of the close
of a full business day shall include all transactions in shares of
the Fund recorded on the books of the Fund for that day.
Assets Annual Rate at
(Billions) Each Asset Level
First $1.0 0.310%
Next $0.5 0.293
Next $0.5 0.275
Next $0.5 0.258
Over $2.5 0.240
(2) The fee shall be paid on a monthly basis and, in the
event of the termination of this Agreement, the fee accrued shall
be prorated on the basis of the number of days that this Agreement
is in effect during the month with respect to which such payment is
made.
(3) The fee provided for hereunder shall be paid in cash by
the Fund to American Express Financial Corporation within five
business days after the last day of each month.<PAGE>
PAGE 3
Part Three: ALLOCATION OF EXPENSES
(1) The Fund agrees to pay:
(a) Fees payable to American Express Financial Corporation
for its services under the terms of this Agreement.
(b) Taxes.
(c) Brokerage commissions and charges in connection with the
purchase and sale of assets.
(d) Custodian fees and charges.
(e) Fees and charges of its independent certified public
accountants for services the Fund requests.
(f) Premium on the bond required by Rule 17g-1 under the
Investment Company Act of 1940.
(g) Fees and expenses of attorneys (i) it employs in matters
not involving the assertion of a claim by a third party against the
Fund, its directors and officers, (ii) it employs in conjunction
with a claim asserted by the Board against American Express
Financial Corporation, except that American Express Financial
Corporation shall reimburse the Fund for such fees and expenses if
it is ultimately determined by a court of competent jurisdiction,
or American Express Financial Corporation agrees, that it is liable
in whole or in part to the Fund, and (iii) it employs to assert a
claim against a third party.
(h) Fees paid for the qualification and registration for
public sale of the securities of the Fund under the laws of the
United States and of the several states in which such securities
shall be offered for sale.
(i) Fees of consultants employed by the Fund.
(j) Directors, officers and employees expenses which shall
include fees, salaries, memberships, dues, travel, seminars,
pension, profit sharing, and all other benefits paid to or provided
for directors, officers and employees, directors and officers
liability insurance, errors and omissions liability insurance,
worker's compensation insurance and other expenses applicable to
the directors, officers and employees, except the Fund will not pay
any fees or expenses of any person who is an officer or employee of
American Express Financial Corporation or its affiliates.
(k) Filing fees and charges incurred by the Fund in
connection with filing any amendment to its articles of
incorporation, or incurred in filing any other document with the
State of Minnesota or its political subdivisions.
(l) Organizational expenses of the Fund.
(m) Expenses incurred in connection with lending portfolio
securities of the Fund.<PAGE>
PAGE 4
(n) Expenses properly payable by the Fund, approved by the
Board.
(2) American Express Financial Corporation agrees to pay all
expenses associated with the services it provides under the terms
of this Agreement. Further, American Express Financial Corporation
agrees that if, at the end of any month, the expenses of the Fund
under this Agreement and any other agreement between the Fund and
American Express Financial Corporation, but excluding those
expenses set forth in (1)(b) and (1)(c) of this Part Three, exceed
the most restrictive applicable state expenses limitation, the Fund
shall not pay those expenses set forth in (1)(a) and (d) through
(n) of this Part Three to the extent necessary to keep the Fund's
expenses from exceeding the limitation, it being understood that
American Express Financial Corporation will assume all unpaid
expenses and bill the Fund for them in subsequent months but in no
event can the accumulation of unpaid expenses or billing be carried
past the end of the Fund's fiscal year.
Part Four: MISCELLANEOUS
(1) American Express Financial Corporation shall be deemed to
be an independent contractor and, except as expressly provided or
authorized in this Agreement, shall have no authority to act for or
represent the Fund.
(2) A "full business day" shall be as defined in the By-laws.
(3) The Fund recognizes that American Express Financial
Corporation now renders and may continue to render investment
advice and other services to other investment companies and persons
which may or may not have investment policies and investments
similar to those of the Fund and that American Express Financial
Corporation manages its own investments and/or those of its
subsidiaries. American Express Financial Corporation shall be free
to render such investment advice and other services and the Fund
hereby consents thereto.
(4) Neither this Agreement nor any transaction had pursuant
hereto shall be invalidated or in any way affected by the fact that
directors, officers, agents and/or shareholders of the Fund are or
may be interested in American Express Financial Corporation or any
successor or assignee thereof, as directors, officers, stockholders
or otherwise; that directors, officers, stockholders or agents of
American Express Financial Corporation are or may be interested in
the Fund as directors, officers, shareholders, or otherwise; or
that American Express Financial Corporation or any successor or
assignee, is or may be interested in the Fund as shareholder or
otherwise, provided, however, that neither American Express
Financial Corporation, nor any officer, director or employee
thereof or of the Fund, shall sell to or buy from the Fund any
property or security other than shares issued by the Fund, except
in accordance with applicable regulations or orders of the SEC.
<PAGE>
PAGE 5
(5) Any notice under this Agreement shall be given in
writing, addressed, and delivered, or mailed postpaid, to the party
to this Agreement entitled to receive such, at such party's
principal place of business in Minneapolis, Minnesota, or to such
other address as either party may designate in writing mailed to
the other.
(6) American Express Financial Corporation agrees that no
officer, director or employee of American Express Financial
Corporation will deal for or on behalf of the Fund with himself as
principal or agent, or with any corporation or partnership in which
he may have a financial interest, except that this shall not
prohibit:
(a) Officers, directors or employees of American Express
Financial Corporation from having a financial interest in the Fund
or in American Express Financial Corporation.
(b) The purchase of securities for the Fund, or the sale of
securities owned by the Fund, through a security broker or dealer,
one or more of whose partners, officers, directors or employees is
an officer, director or employee of American Express Financial
Corporation, provided such transactions are handled in the capacity
of broker only and provided commissions charged do not exceed
customary brokerage charges for such services.
(c) Transactions with the Fund by a broker-dealer affiliate
of American Express Financial Corporation as may be allowed by
rule or order of the SEC, and if made pursuant to procedures
adopted by the Fund's Board.
(7) American Express Financial Corporation agrees that,
except as herein otherwise expressly provided or as may be
permitted consistent with the use of a broker-dealer affiliate of
American Express Financial Corporation under applicable provisions
of the federal securities laws, neither it nor any of its officers,
directors or employees shall at any time during the period of this
Agreement, make, accept or receive, directly or indirectly, any
fees, profits or emoluments of any character in connection with the
purchase or sale of securities (except shares issued by the Fund)
or other assets by or for the Fund.
Part Five: RENEWAL AND TERMINATION
(1) This Agreement shall continue in effect until March 19,
1997, or until a new agreement is approved by a vote of the
majority of the outstanding shares of the Fund and by vote of the
Fund's Board, including the vote required by (b) of this paragraph,
and if no new agreement is so approved, this Agreement shall
continue from year to year thereafter unless and until terminated
by either party as hereinafter provided, except that such
continuance shall be specifically approved at least annually (a) by
the Board of the Fund or by a vote of the majority of the
outstanding shares of the Fund and (b) by the vote of a majority of
the directors who are not parties to this Agreement or interested
persons of any such party, cast in person at a meeting called for
the purpose of voting on such approval. As used in this paragraph,<PAGE>
PAGE 6
the term "interested person" shall have the same meaning as set
forth in the Investment Company Act of 1940, as amended (the "1940
Act").
(2) This Agreement may be terminated by either the Fund or
American Express Financial Corporation at any time by giving the
other party 60 days' written notice of such intention to terminate,
provided that any termination shall be made without the payment of
any penalty, and provided further that termination may be effected
either by the Board of the Fund or by a vote of the majority of the
outstanding voting shares of the Fund. The vote of the majority of
the outstanding voting shares of the Fund for the purpose of this
Part Five shall be the vote at a shareholders' regular meeting, or
a special meeting duly called for the purpose, of 67% or more of
the Fund's shares present at such meeting if the holders of more
than 50% of the outstanding voting shares are present or
represented by proxy, or more than 50% of the outstanding voting
shares of the Fund, whichever is less.
(3) This Agreement shall terminate in the event of its
assignment, the term "assignment" for this purpose having the same
meaning as set forth in the 1940 Act.
IN WITNESS THEREOF, the parties hereto have executed the
foregoing Agreement as of the day and year first above written.
IDS TAX-FREE MONEY FUND, INC.
By /s/Leslie L. Ogg
Leslie L. Ogg
Vice President
AMERICAN EXPRESS FINANCIAL CORPORATION
By /s/Janis E. Miller
Vice President
<PAGE>
PAGE 1
DISTRIBUTION AGREEMENT
Agreement made as of the 20th day of March, 1995, by and between
IDS Tax-Free Money Fund, Inc. (the "Fund"), a Minnesota
corporation, and American Express Financial Advisors Inc., a
Delaware corporation.
Part One: DISTRIBUTION OF SECURITIES
(1) The Fund covenants and agrees that, during the term of
this agreement and any renewal or extension, American Express
Financial Advisors shall have the exclusive right to act as
principal underwriter for the Fund and to offer for sale and to
distribute either directly or through any affiliate any and all
shares issued or to be issued by the Fund.
(2) American Express Financial Advisors hereby covenants and
agrees to act as the principal underwriter of shares issued and to
be issued by the Fund during the period of this agreement and
agrees during such period to offer for sale such shares as long as
such shares remain available for sale, unless American Express
Financial Advisors is unable or unwilling to make such offer for
sale or sales or solicitations therefor legally because of any
federal, state, provincial or governmental law, rule or agency or
for any financial reason.
(3) With respect to the offering for sale and sale of shares to be
issued by the Fund, it is mutually understood and agreed that such
shares are to be sold on the following terms:
(a) All sales shall be made by means of an application, and
every application shall be subject to acceptance or rejection by
the Fund at its principal place of business. Shares are to be sold
for cash, payable at the time the application and payment for such
shares are received at the principal place of business of the Fund.
(b) No shares shall be sold at less than the asset value
(computed in the manner provided by the currently effective
prospectus or Statement of Additional Information and the
Investment Company Act of 1940, and rules thereunder). The number
of shares or fractional shares to be acquired by each applicant
shall be determined by dividing the amount of each accepted
application by the public offering price of one share of the
capital stock of the Fund as of the close of business on the day
when the application, together with payment, is received by the
Fund at its principal place of business. The computation as to the
number of shares and fractional shares shall be carried to three
decimal points of one share with the computation being carried to
the nearest 1/l000th of a share. If the day of receipt of the
application and payment is not a full business day, then the asset
value of the share for use in such computation shall be determined
as of the close of business on the next succeeding full business
day. In the event of a period of emergency, the computation of the
asset value for the purpose of determining the number of shares or
fractional shares to be acquired by the applicant may be deferred
until the close of business on the first full business day
<PAGE>
PAGE 2
following the termination of the period of emergency. A period of
emergency shall have the definition given thereto in the Investment
Company Act of 1940, and rules thereunder.
(4) The Fund agrees to make prompt and reasonable effort to do
any and all things necessary, in the opinion of American Express
Financial Advisors, to have and to keep the Fund's shares properly
registered or qualified in all appropriate jurisdictions and, as to
shares, in such amounts as American Express Financial Advisors may
from time to time designate in order that the Fund's shares may be
offered or sold in such jurisdictions.
(5) The Fund agrees that it will furnish American Express
Financial Advisors with information with respect to the affairs and
accounts of the Fund, and in such form, as American Express
Financial Advisors may from time to time reasonably require and
further agrees that American Express Financial Advisors, at all
reasonable times, shall be permitted to inspect the books and
records of the Fund.
(6) American Express Financial Advisors or its agents may prepare
or cause to be prepared from time to time circulars, sales
literature, broadcast material, publicity data and other
advertising material to be used in the sales of shares issued by
the Fund, including material which may be deemed to be a prospectus
under rules promulgated by the Securities and Exchange Commission
(each separate promotional piece is referred to as an "Item of
Soliciting Material"). At its option, American Express Financial
Advisors may submit any Item of Soliciting Material to the Fund for
its prior approval. Unless a particular Item of Soliciting
Material is approved in writing by the Fund prior to its use,
American Express Financial Advisors agrees to indemnify the Fund
and its directors and officers against any and all claims, demands,
liabilities and expenses which the Fund or such persons may incur
arising out of or based upon the use of any Item of Soliciting
Material. The term "expenses" includes amounts paid in
satisfaction of judgments or in settlements. The foregoing right
of indemnification shall be in addition to any other rights to
which the Fund or any director or officer may be entitled as a
matter of law. Notwithstanding the foregoing, such indemnification
shall not be deemed to abrogate or diminish in any way any right or
claim American Express Financial Advisors may have against the Fund
or its officers or directors in connection with the Fund's
registration statement, prospectus, Statement of Additional
Information or other information furnished by or caused to be
furnished by the Fund.
(7) American Express Financial Advisors agrees to submit to the
Fund each application for shares immediately after the receipt of
such application and payment therefor by American Express Financial
Advisors at its principal place of business.
(8) American Express Financial Advisors agrees to cause to be
delivered to each person submitting an application a prospectus or
circular to be furnished by the Fund in the form required by the
applicable federal laws or by the acts or statutes of any
applicable state, province or country.<PAGE>
PAGE 3
(9) Shares issued by the Fund may be offered and sold at their
asset value to the shareholders of the same class of other funds in
the IDS MUTUAL FUND GROUP who wish to exchange their investments in
shares of the other funds in the IDS MUTUAL FUND GROUP to
investments in shares of the Fund, to the extent set forth in the
currently effective prospectus or Statement of Additional
Information, such asset value to be computed as of the close of
business on the day of sale of such shares of the Fund.
(10) American Express Financial Advisors and the Fund agree to
use their best efforts to conform with all applicable state and
federal laws and regulations relating to any rights or obligations
under the term of this agreement.
Part Two: ALLOCATION OF EXPENSES
Except as provided by any other agreements between the parties,
American Express Financial Advisors covenants and agrees that
during the period of this agreement it will pay or cause to be paid
all expenses incurred by American Express Financial Advisors, or
any of its affiliates, in the offering for sale or sale of each
class of the Fund's shares.
Part Three: MISCELLANEOUS
(1) American Express Financial Advisors shall be deemed to be an
independent contractor and, except as expressly provided or
authorized in this agreement, shall have no authority to act for or
represent the Fund.
(2) American Express Financial Advisors shall be free to render to
others services similar to those rendered under this agreement.
(3) Neither this agreement nor any transaction had pursuant hereto
shall be invalidated or in any way affected by the fact that
directors, officers, agents and/or shareholders of the Fund are or
may be interested in American Express Financial Advisors as
directors, officers, shareholders or otherwise; that directors,
officers, shareholders or agents of American Express Financial
Advisors are or may be interested in the Fund as directors,
officers, shareholders or otherwise; or that American Express
Financial Advisors is or may be interested in the Fund as
shareholder or otherwise, provided, however, that neither American
Express Financial Advisors nor any officer or director of American
Express Financial Advisors or any officers or directors of the Fund
shall sell to or buy from the Fund any property or security other
than a security issued by the Fund, except in accordance with a
rule, regulation or order of the federal Securities and Exchange
Commission.
(4) For the purposes of this agreement, a "business day" shall
have the same meaning as is given to the term in the By-laws of the
Fund.
<PAGE>
PAGE 4
(5) Any notice under this agreement shall be given in writing,
addressed and delivered, or mailed postpaid, to the parties to this
agreement at each company's principal place of business in
Minneapolis, Minnesota, or to such other address as either party
may designate in writing mailed to the other.
(6) American Express Financial Advisors agrees that no officer,
director or employee of American Express Financial Advisors will
deal for or on behalf of the Fund with himself as principal or
agent, or with any corporation or partnership in which he may have
a financial interest, except that this shall not prohibit:
(a) Officers, directors and employees of American Express
Financial Advisors from having a financial interest in the Fund or
in American Express Financial Advisors.
(b) The purchase of securities for the Fund, or the sale of
securities owned by the Fund, through a security broker or dealer,
one or more of whose partners, officers, directors or employees is
an officer, director or employee of American Express Financial
Advisors, provided such transactions are handled in the capacity of
broker only and provided commissions charged do not exceed
customary brokerage charges for such services.
(c) Transactions with the Fund by a broker-dealer affiliate
of American Express Financial Advisors if allowed by rule or order
of the Securities and Exchange Commission and if made pursuant to
procedures adopted by the Fund's Board of Directors.
(7) American Express Financial Advisors agrees that, except as
otherwise provided in this agreement, or as may be permitted
consistent with the use of a broker-dealer affiliate of American
Express Financial Advisors under applicable provisions of the
federal securities laws, neither it nor any of its officers,
directors or employees shall at any time during the period of this
agreement make, accept or receive, directly or indirectly, any
fees, profits or emoluments of any character in connection with the
purchase or sale of securities (except securities issued by the
Fund) or other assets by or for the Fund.
Part Four: TERMINATION
(1) This agreement shall continue from year to year unless and
until terminated by American Express Financial Advisors or the
Fund, except that such continuance shall be specifically approved
at least annually by a vote of a majority of the Board of Directors
who are not parties to this agreement or interested persons of any
such party, cast in person at a meeting called for the purpose of
voting on such approval, and by a majority of the Board of
Directors or by vote of a majority of the outstanding voting
securities of the Fund. As used in this paragraph, the term
"interested person" shall have the meaning as set forth in the
Investment Company Act of 1940, as amended.
<PAGE>
PAGE 5
(2) This agreement may be terminated by American Express Financial
Advisors or the Fund at any time by giving the other party sixty
(60) days written notice of such intention to terminate.
(3) This agreement shall terminate in the event of its assignment,
the term "assignment" for this purpose having the same meaning as
set forth in the Investment Company Act of 1940, as amended.
IN WITNESS WHEREOF, The parties hereto have executed the foregoing
agreement on the date and year first above written.
IDS TAX-FREE MONEY FUND, INC.
By /s/Leslie L. Ogg
Leslie L. Ogg
Vice President
AMERICAN EXPRESS FINANCIAL ADVISORS INC.
By /s/Janis E. Miller
Vice President
<PAGE>
PAGE 1
CUSTODIAN AGREEMENT
THIS CUSTODIAN AGREEMENT dated November 1, 1988, between IDS Tax-
Free Money Fund, Inc., a Minnesota Corporation (hereinafter also
called the "Corporation") and First National Bank of Minneapolis, a
corporation organized under the laws of the United States of
America with its principal place of business at Minneapolis,
Minnesota (hereinafter also called the "Custodian").
WHEREAS, the Corporation desires that its securities and cash be
hereafter held and administered by Custodian pursuant to the terms
of this Agreement.
NOW, THEREFORE, in consideration of the mutual agreements herein
made, the Corporation and the Custodian agree as follows:
Section 1. Definitions
The word "securities" as used herein shall be construed to include,
without being limited to, shares, stocks, treasury stocks,
including any stocks of this Corporation, notes, bonds, debentures,
evidences of indebtedness, options to buy or sell stocks or stock
indexes, certificates of interest or participation in any profit-
sharing agreements, collateral trust certificates, preorganization
certificates or subscriptions, transferable shares, investment
contracts, voting trust certificates, certificates of deposit for a
security, fractional or undivided interests in oil, gas or other
mineral rights, or any certificates of interest or participation
in, temporary or interim certificates for, receipts for, guarantees
of, or warrants or rights to subscribe to or purchase any of the
foregoing, acceptances and other obligations and any evidence of
any right or interest in or to any cash, property or assets and any
interest or instrument commonly known as a security. In addition,
for the purpose of this Custodian Agreement, the word "securities"
also shall include any other instruments in which the Corporation
may invest.
The words "custodian order" shall mean a request or direction,
including a computer printout, directed to the Custodian and
signed in the name of the Corporation by any two individuals
designated in the current certified list referred to in Section 2.
The word "facsimile" shall mean an exact copy or likeness which is
electronically transmitted for instant reproduction.
Section 2. Names, Titles and Signatures of Authorized Persons
The Corporation will certify to the Custodian the names and
signatures of its present officers and other designated persons
authorized on behalf of the Corporation to direct the Custodian by
custodian order as hereinbefore defined. The Corporation agrees
that whenever any change occurs in this list it will file with the
Custodian a copy of a resolution certified by the Secretary or an
Assistant Secretary of the Corporation as having been duly adopted
by the Board of Directors or the Executive Committee of the Board
of Directors of the Corporation designating those persons currently
<PAGE>
PAGE 2
authorized on behalf of the Corporation to direct the Custodian by
custodian order, as hereinbefore defined, and upon such filing (to
be accompanied by the filing of specimen signatures of the
designated persons) the persons so designated in said resolution
shall constitute the current certified list. The Custodian is
authorized to rely and act upon the names and signatures of the
individuals as they appear in the most recent certified list from
the Corporation which has been delivered to the Custodian as
hereinabove provided.
Section 3. Use of Subcustodians
The Custodian may make arrangements, where appropriate, with other
banks having not less than two million dollars aggregate capital,
surplus and undivided profits for the custody of securities and
cash.
All subcustodians of the Custodian (such subcustodians,
collectively, the "Subcustodians"), shall be subject to the
instructions of the Custodian and not to those of the Corporation
and shall act solely as agent of the Custodian.
Section 4. Receipt and Disbursement of Money
(1) The Custodian shall open and maintain a separate account or
accounts in the name of the Corporation or cause its agent to open
and maintain such account or accounts subject only to checks,
drafts or directives by the Custodian pursuant to the terms of this
Agreement. The Custodian or its agent shall hold in such account
or accounts, subject to the provisions hereof, all cash received by
it from or for the account of the Corporation. The Custodian or
its agent shall make payments of cash to or for the account of the
Corporation from such cash only:
(a) for the purchase of securities for the portfolio of the
Corporation upon the receipt of such securities by the
Custodian or its agent;
(b) for the purchase or redemption of shares of capital stock
of the Corporation;
(c) for the payment of interest, dividends, taxes, management
fees, or operating expenses (including, without
limitation thereto, fees for legal, accounting and
auditing services);
(d) for payment of distribution fees, commissions, or
redemption fees, if any;
(e) for payments in connection with the conversion, exchange
or surrender of securities owned or subscribed to by the
Corporation held by or to be delivered to the Custodian;
(f) for payments in connection with the return of securities
loaned by the Corporation upon receipt of such securities
or the reduction of collateral upon receipt of proper
notice;
<PAGE>
PAGE 3
(g) for payments for other proper corporate purposes; or
(h) upon the termination of this Agreement.
Before making any such payment for the purposes permitted under the
terms of items (a), (b), (c), (d), (e), (f) or (g) of paragraph (1)
of this section, the Custodian shall receive and may rely upon a
custodian order directing such payment and stating that the payment
is for such a purpose permitted under these items (a), (b), (c),
(d), (e), (f) or (g) and that in respect to item (g), a copy of a
resolution of the Board of Directors or of the Executive Committee
of the Board of Directors of the Corporation signed by an officer
of the Corporation and certified by its Secretary or an Assistant
Secretary, specifying the amount of such payment, setting forth the
purpose to be a proper corporate purpose, and naming the person or
persons to whom such payment is made. Notwithstanding the above,
for the purposes permitted under items (a) or (f) of paragraph (1)
of this section, the Custodian may rely upon a facsimile order.
(2) The Custodian is hereby appointed the attorney-in-fact of the
Corporation to endorse and collect all checks, drafts or other
orders for the payment of money received by the Custodian for the
account of the Corporation and drawn on or to the order of the
Corporation and to deposit same to the account of the Corporation
pursuant to this Agreement.
Section 5. Use of Depository
Subject to such rules, regulations or guidelines as the Securities
and Exchange Commission may adopt, the Custodian may deposit all or
any part of the securities owned by the Corporation in a securities
depository which includes any system for the central handling of
securities established by a national securities exchange or a
national securities association registered with the Securities and
Exchange Commission under the Securities Exchange Act of 1934, or
such other person as may be permitted by the Commission, pursuant
to which system all securities of any particular class or series of
any issuer deposited within the system are treated as fungible and
may be transferred or pledged by bookkeeping entry without physical
delivery of such securities.
Section 6. Transfer Exchange, Delivery, etc. of Securities
The Custodian shall have sole power to release or deliver any
securities of the Corporation held by it pursuant to this
Agreement. The Custodian agrees to transfer, exchange or deliver
securities held by it or its agent hereunder only:
(a) for sales of such securities for the account of the
Corporation, upon receipt of payment therefore;
(b) when such securities are called, redeemed, retired or
otherwise become payable;
(c) for examination upon the sale of any such securities in
accordance with "street delivery" custom which would
include delivery against interim receipts or other proper
delivery receipts;<PAGE>
PAGE 4
(d) in exchange for or upon conversion into other securities
alone or other securities and cash whether pursuant to
any plan of merger, consolidation, reorganization,
recapitalization or readjustment, or otherwise;
(e) for the purpose of exchanging interim receipts or
temporary certificates for permanent certificates;
(f) upon conversion of such securities pursuant to their
terms into other securities;
(g) upon exercise of subscription, purchase or other similar
rights represented by such securities;
(h) for loans of such securities by the Corporation upon
receipt of collateral; or
(i) for other proper corporate purposes.
As to any deliveries made by the Custodian pursuant to items (a),
(b), (c), (d), (e), (f), (g) and (h), securities or cash received
in exchange therefore shall be delivered to the Custodian, its
agent, or to a securities depository. Before making any such
transfer, exchange or delivery, the Custodian shall receive a
custodian order or a facsimile from the Corporation requesting such
transfer, exchange or delivery and stating that it is for a purpose
permitted under Section 6 (whenever a facsimile is utilized, the
Corporation will also deliver an original signed custodian order)
and, in respect to item (i), a copy of a resolution of the Board of
Directors or of the Executive Committee of the Board of Directors
of the Corporation signed by an officer of the Corporation and
certified by its Secretary or an Assistant Secretary, specifying
the securities, setting forth the purpose for which such payment,
transfer, exchange or delivery is to be made, declaring such
purpose to be a proper corporate purpose, and naming the person or
persons to whom such transfer, exchange or delivery of such
securities shall be made.
Section 7. Custodian's Acts Without Instructions
Unless and until the Custodian receives a contrary custodian order
from the Corporation, the Custodian shall or shall cause its agent
to:
(a) present for payment all coupons and other income items
held by the Custodian or its agent for the account of the
Corporation which call for payment upon presentation and
hold all cash received by it upon such payment for the
account of the Corporation;
(b) present for payment all securities held by it or its
agent which mature or when called, redeemed, retired or
otherwise become payable;
<PAGE>
PAGE 5
(c) ascertain all stock dividends, rights and similar
securities to be issued with respect to any securities
held by the Custodian or its agent hereunder, and to
collect and hold for the account of the Corporation all
such securities; and
(d) ascertain all interest and cash dividends to be paid to
security holders with respect to any securities held by
the Custodian or its agent, and to collect and hold such
interest and cash dividends for the account of the
Corporation.
Section 8. Voting and Other Action
Neither the Custodian nor any nominee of the Custodian shall vote
any of the securities held hereunder by or for the account of the
Corporation. The Custodian shall promptly deliver to the
Corporation all notices, proxies and proxy soliciting materials
with relation to such securities, such proxies to be executed by
the registered holder of such securities (if registered otherwise
than in the name of the Corporation), but without indicating the
manner in which such proxies are to be voted.
Custodian shall transmit promptly to the Corporation all written
information (including, without limitation, pendency of calls and
maturities of securities and expirations of rights in connection
therewith) received by the Custodian from issuers of the securities
being held for the Corporation. With respect to tender or exchange
offers, the Custodian shall transmit promptly to the Corporation
all written information received by the Custodian from issuers of
the securities whose tender or exchange is sought and from the
party (or his agents) making the tender or exchange offer.
Section 9. Transfer Taxes
The Corporation shall pay or reimburse the Custodian for any
transfer taxes payable upon transfers of securities made hereunder,
including transfers resulting from the termination of this
Agreement. The Custodian shall execute such certificates in
connection with securities delivered to it under this Agreement as
may be required, under any applicable law or regulation, to exempt
from taxation any transfers and/or deliveries of any such
securities which may be entitled to such exemption.
Section 10. Custodian's Reports
The Custodian shall furnish the Corporation as of the close of
business each day a statement showing all transactions and entries
for the account of the Corporation. The books and records of the
Custodian pertaining to its actions as Custodian under this
Agreement and securities held hereunder by the Custodian shall be
open to inspection and audit by officers of the Corporation,
internal auditors employed by the Corporation's investment adviser,
and independent auditors employed by the Corporation. The
Custodian shall furnish the Corporation in such form as may
reasonably be requested by the Corporation a report, including a
list of the securities held by it in custody for the account of the
<PAGE>
PAGE 6
Corporation, identification of any subcustodian, and identification
of such securities held by such subcustodian, as of the close of
business of the last business day of each month, which shall be
certified by a duly authorized officer of the Custodian. It is
further understood that additional reports may from time to time be
requested by the Corporation. Should any report ever be filed with
any governmental authority pertaining to lost or stolen securities,
the Custodian will concurrently provide the Corporation with a copy
of that report.
The Custodian also shall furnish such reports on its systems of
internal accounting control as the Corporation may reasonably
request from time to time.
Section 11. Concerning Custodian
For its services hereunder the Custodian shall be paid such
compensation at such times as may from time to time be agreed on in
writing by the parties hereto in a Custodian Fee Agreement.
The Custodian shall not be liable for any action taken in good
faith upon any custodian order or facsimile herein described or
certified copy of any resolution of the Board of Directors or of
the Executive Committee of the Board of Directors of the
Corporation, and may rely on the genuineness of any such document
which it may in good faith believe to have been validly executed.
The Corporation agrees to indemnify and hold harmless Custodian and
its nominee from all taxes, charges, expenses, assessments, claims
and liabilities (including counsel fees) incurred or assessed
against it or its nominee in connection with the performance of
this Agreement, except such as may arise from the Custodian's or
its nominee's own negligent action, negligent failure to act or
willful misconduct. Custodian is authorized to charge any account
of the Corporation for such items. In the event of any advance of
cash for any purpose made by Custodian resulting from orders or
instructions of the Corporation, or in the event that Custodian or
its nominee shall incur or be assessed any taxes, charges,
expenses, assessments, claims or liabilities in connection with the
performance of this Agreement, except such as may arise from its or
its nominee's own negligent action, negligent failure to act or
willful misconduct, any property at any time held for the account
of the Corporation shall be security therefore.
The Custodian shall maintain a standard of care equivalent to that
which would be required of a bailee for hire and shall not be
liable for any loss or damage to the Corporation resulting from
participation in a securities depository unless such loss or damage
arises by reason of any negligence, misfeasance, or willful
misconduct of officers or employees of the Custodian, or from its
failure to enforce effectively such rights as it may have against
any securities depository or from use of an agent, unless such loss
or damage arises by reason of any negligence, misfeasance, or
willful misconduct of officers or employees of the Custodian, or
from its failure to enforce effectively such rights as it may have
against any agent.
<PAGE>
PAGE 7
The Custodian shall have no power or authority to assign,
hypothecate, pledge or otherwise dispose of any such securities,
except pursuant to the directive of the Corporation and only for
the account of the Corporation as set forth in Section 6 of this
Agreement.
Section 12. Termination and Amendment of Agreement
The Corporation and the Custodian mutually may agree from time to
time in writing to amend, to add to, or to delete from any
provision of this Agreement.
The Custodian may terminate this Agreement by giving the
Corporation ninety days' written notice of such termination by
registered mail addressed to the Corporation at its principal place
of business.
The Corporation may terminate this Agreement at any time by written
notice thereof delivered, together with a copy of the resolution of
the Board of Directors authorizing such termination and certified
by the Secretary of the Corporation, by registered mail to the
Custodian.
Upon such termination of this Agreement, assets of the Corporation
held by the Custodian shall be delivered by the Custodian to a
successor custodian, if one has been appointed by the Corporation,
upon receipt by the Custodian of a copy of the resolution of the
Board of Directors of the Corporation certified by the Secretary,
showing appointment of the successor custodian, and provided that
such successor custodian is a bank or trust company, organized
under the laws of the United States or of any State of the United
States, having not less than two million dollars aggregate capital,
surplus and undivided profits. Upon the termination of this
Agreement as a part of the transfer of assets, either to a
successor custodian or otherwise, the Custodian will deliver
securities held by it hereunder, when so authorized and directed by
resolution of the Board of Directors of the Corporation, to a duly
appointed agent of the successor custodian or to the appropriate
transfer agents for transfer of registration and delivery as
directed. Delivery of assets on termination of this Agreement
shall be effected in a reasonable, expeditious and orderly manner;
and in order to accomplish an orderly transition from the Custodian
to the successor custodian, the Custodian shall continue to act as
such under this Agreement as to assets in its possession or
control. Termination as to each security shall become effective
upon delivery to the successor custodian, its agent, or to a
transfer agent for a specific security for the account of the
successor custodian, and such delivery shall constitute effective
delivery by the Custodian to the successor under this Agreement.
In addition to the means of termination hereinbefore authorized,
this Agreement may be terminated at any time by the vote of a
majority of the outstanding shares of the Corporation and after
written notice of such action to the Custodian.
<PAGE>
PAGE 8
Section 13. General
Nothing expressed or mentioned in or to be implied from any
provision of this Agreement is intended to, or shall be construed
to give any person or corporation other than the parties hereto,
any legal or equitable right, remedy or claim under or in respect
of this Agreement, or any covenant, condition or provision herein
contained, this Agreement and all of the covenants, conditions and
provisions hereof being intended to be and being for the sole and
exclusive benefit of the parties hereto and their respective
successors and assigns.
This Agreement shall be governed by the laws of the State of
Minnesota.
Attest: IDS TAX-FREE MONEY FUND, INC.
/s/William C. Herber By /s/Leslie L. Ogg
William C. Herber Leslie L. Ogg
Secretary Vice President
FIRST NATIONAL BANK OF MINNEAPOLIS
By /s/Robert Spies
Vice President
<PAGE>
PAGE 1
TRANSFER AGENCY AGREEMENT
AGREEMENT dated as of March 20, 1995, between IDS Tax-Free Money
Fund, Inc. (the "Fund"), a Minnesota corporation, and American
Express Financial Corporation (the "Transfer Agent"), a Delaware
corporation.
In consideration of the mutual promises set forth below, the Fund
and the Transfer Agent agree as follows:
1. Appointment of the Transfer Agent. The Fund hereby appoints the
Transfer Agent, as transfer agent for its shares and as shareholder
servicing agent for the Fund, and the Transfer Agent accepts such
appointment and agrees to perform the duties set forth below.
2. Compensation. The Fund will compensate the Transfer Agent for
the performance of its obligations as set forth in Schedule A.
Schedule A does not include out-of-pocket disbursements of the
Transfer Agent for which the Transfer Agent shall be entitled to
bill the Fund separately.
The Transfer Agent will bill the Fund monthly. The fee provided
for hereunder shall be paid in cash by the Fund to American Express
Financial Corporation within five (5) business days after the last
day of each month.
Out-of-pocket disbursements shall include, but shall not be limited
to, the items specified in Schedule B. Reimbursement by the Fund
for expenses incurred by the Transfer Agent in any month shall be
made as soon as practicable after the receipt of an itemized bill
from the Transfer Agent.
Any compensation jointly agreed to hereunder may be adjusted from
time to time by attaching to this Agreement a revised Schedule A,
dated and signed by an officer of each party.
3. Documents. The Fund will furnish from time to time such
certificates, documents or opinions as the Transfer Agent deems to
be appropriate or necessary for the proper performance of its
duties.
4. Representations of the Fund and the Transfer Agent.
(a) The Fund represents to the Transfer Agent that all outstanding
shares are validly issued, fully paid and non-assessable by the
Fund. When shares are hereafter issued in accordance with the
terms of the Fund's Articles of Incorporation and its prospectus,
such shares shall be validly issued, fully paid and non-assessable
by the Fund.
(b) The Transfer Agent represents that it is registered under
Section 17A(c) of the Securities Exchange Act of 1934. The
Transfer Agent agrees to maintain the necessary facilities,
equipment and personnel to perform its duties and obligations under
this agreement and to comply with all applicable laws.
<PAGE>
PAGE 2
5. Duties of the Transfer Agent. The Transfer Agent shall be
responsible, separately and through its subsidiaries or affiliates,
for the following functions:
(a) Sale of Fund Shares.
(1) On receipt of an application and payment, wired instructions
and payment, or payment identified as being for the account of a
shareholder, the Transfer Agent will deposit the payment, prepare
and present the necessary report to the Custodian and record the
purchase of shares in a timely fashion in accordance with the terms
of the prospectus. All shares shall be held in book entry form and
no certificate shall be issued unless the Fund is permitted to do
so by the prospectus and the purchaser so requests.
(2) On receipt of notice that payment was dishonored, the Transfer
Agent shall stop redemptions of all shares owned by the purchaser
related to that payment, place a stop payment on any checks that
have been issued to redeem shares of the purchaser and take such
other action as it deems appropriate.
(b) Redemption of Fund Shares. On receipt of instructions to redeem
shares in accordance with the terms of the Fund's prospectus, the
Transfer Agent will record the redemption of shares of the Fund,
prepare and present the necessary report to the Custodian and pay
the proceeds of the redemption to the shareholder, an authorized
agent or legal representative upon the receipt of the monies from
the Custodian.
(c) Transfer or Other Change Pertaining to Fund Shares. On receipt
of instructions or forms acceptable to the Transfer Agent to
transfer the shares to the name of a new owner, change the name or
address of the present owner or take other legal action, the
Transfer Agent will take such action as is requested.
(d) Exchange of Fund Shares. On receipt of instructions to exchange
the shares of the Fund for the shares of another fund in the IDS
MUTUAL FUND GROUP or other American Express Financial Corporation
product in accordance with the terms of the prospectus, the
Transfer Agent will process the exchange in the same manner as a
redemption and sale of shares.
(e) Right to Seek Assurance. The Transfer Agent may refuse to
transfer, exchange or redeem shares of the Fund or take any action
requested by a shareholder until it is satisfied that the requested
transaction or action is legally authorized or until it is
satisfied there is no basis for any claims adverse to the
transaction or action. It may rely on the provisions of the
Uniform Act for the Simplification of Fiduciary Security Transfers
or the Uniform Commercial Code. The Fund shall indemnify the
Transfer Agent for any act done or omitted to be done in reliance
on such laws or for refusing to transfer, exchange or redeem shares
or taking any requested action if it acts on a good faith belief
that the transaction or action is illegal or unauthorized.
(f) Shareholder Records, Reports and Services.
<PAGE>
PAGE 3
(1) The Transfer Agent shall maintain all shareholder accounts,
which shall contain all required tax, legally imposed and
regulatory information; shall provide shareholders, and file with
federal and state agencies, all required tax and other reports
pertaining to shareholder accounts; shall prepare shareholder
mailing lists; shall cause to be printed and mailed all required
prospectuses, annual reports, semiannual reports, statements of
additional information (upon request), proxies and other mailings
to shareholders; and shall cause proxies to be tabulated.
(2) The Transfer Agent shall respond to all valid inquiries related
to its duties under this Agreement.
(3) The Transfer Agent shall create and maintain all records in
accordance with all applicable laws, rules and regulations,
including, but not limited to, the records required by Section
31(a) of the Investment Company Act of 1940.
(g) Dividends and Distributions. The Transfer Agent shall prepare
and present the necessary report to the Custodian and shall cause
to be prepared and transmitted the payment of income dividends and
capital gains distributions or cause to be recorded the investment
of such dividends and distributions in additional shares of the
Fund or as directed by instructions or forms acceptable to the
Transfer Agent.
(h) Confirmations and Statements. The Transfer Agent shall confirm
each transaction either at the time of the transaction or through
periodic reports as may be legally permitted.
(i) Lost or Stolen Checks. The Transfer Agent will replace lost or
stolen checks issued to shareholders upon receipt of proper
notification and will maintain any stop payment orders against the
lost or stolen checks as it is economically desirable to do.
(j) Reports to Fund. The Transfer Agent will provide reports
pertaining to the services provided under this Agreement as the
Fund may request to ascertain the quality and level of services
being provided or as required by law.
(k) Other Duties. The Transfer Agent may perform other duties for
additional compensation if agreed to in writing by the parties to
this Agreement.
6. Ownership and Confidentiality of Records. The Transfer Agent
agrees that all records prepared or maintained by it relating to
the services to be performed by it under the terms of this
Agreement are the property of the Fund and may be inspected by the
Fund or any person retained by the Fund at reasonable times. The
Fund and Transfer Agent agree to protect the confidentiality of
those records.
7. Action by Board and Opinion of Fund's Counsel. The Transfer
Agent may rely on resolutions of the Board of Directors or the
Executive Committee of the Board of Directors and on opinion of
counsel for the Fund.
<PAGE>
PAGE 4
8. Duty of Care. It is understood and agreed that, in furnishing
the Fund with the services as herein provided, neither the Transfer
Agent, nor any officer, director or agent thereof shall be held
liable for any loss arising out of or in connection with their
actions under this Agreement so long as they act in good faith and
with due diligence, and are not negligent or guilty of any willful
misconduct. It is further understood and agreed that the Transfer
Agent may rely upon information furnished to it reasonably believed
to be accurate and reliable. In the event the Transfer Agent is
unable to perform its obligations under the terms of this Agreement
because of an act of God, strike or equipment or transmission
failure reasonably beyond its control, the Transfer Agent shall not
be liable for any damages resulting from such failure.
9. Term and Termination. This Agreement shall become effective on
the date first set forth above (the "Effective Date") and shall
continue in effect from year to year thereafter as the parties may
mutually agree; provided that either party may terminate this
Agreement by giving the other party notice in writing specifying
the date of such termination, which shall be not less than 60 days
after the date of receipt of such notice. In the event such notice
is given by the Fund, it shall be accompanied by a vote of the
Board of Directors, certified by the Secretary, electing to
terminate this Agreement and designating a successor transfer agent
or transfer agents. Upon such termination and at the expense of
the Fund, the Transfer Agent will deliver to such successor a
certified list of shareholders of the Fund (with name, address and
taxpayer identification or Social Security number), a historical
record of the account of each shareholder and the status thereof,
and all other relevant books, records, correspondence, and other
data established or maintained by the Transfer Agent under this
Agreement in the form reasonably acceptable to the Fund, and will
cooperate in the transfer of such duties and responsibilities,
including provisions for assistance from the Transfer Agent's
personnel in the establishment of books, records and other data by
such successor or successors.
10. Amendment. This Agreement may not be amended or modified in any
manner except by a written agreement executed by both parties.
11. Subcontracting. The Fund agrees that the Transfer Agent may
subcontract for certain of the services described under this
Agreement with the understanding that there shall be no diminution
in the quality or level of the services and that the Transfer Agent
remains fully responsible for the services. Except for
out-of-pocket expenses identified in Schedule B, the Transfer Agent
shall bear the cost of subcontracting such services, unless
otherwise agreed by the parties.
12. Miscellaneous.
(a) This Agreement shall extend to and shall be binding upon the
parties hereto, and their respective successors and assigns;
provided, however, that this Agreement shall not be assignable
without the written consent of the other party.
<PAGE>
PAGE 5
(b) This Agreement shall be governed by the laws of the State of
Minnesota.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be executed by their respective officers as of the day and year
written above.
IDS TAX-FREE MONEY FUND, INC.
By: /s/Leslie L. Ogg
Leslie L. Ogg
Vice President
AMERICAN EXPRESS FINANCIAL CORPORATION
By: /s/Janis E. Miller
Vice President
<PAGE>
PAGE 6
Schedule A
IDS TAX-FREE MONEY FUND, INC.
TRANSFER AGENT FEE
Effective the 20th day of March, 1995, the Annual Per Account
Fee accrued daily and payable monthly is revised as follows:
CLASS FEE
A $ 20
<PAGE>
PAGE 7
Schedule B
OUT-OF-POCKET EXPENSES
The Fund shall reimburse the Transfer Agent monthly for the
following out-of-pocket expenses:
o typesetting, printing, paper, envelopes, postage and return
postage for proxy soliciting material, and proxy tabulation costs
o printing, paper, envelopes and postage for dividend notices,
dividend checks, records of account, purchase confirmations,
exchange confirmations and exchange prospectuses, redemption
confirmations, redemption checks, confirmations on changes of
address and any other communication required to be sent to
shareholders
o typesetting, printing, paper, envelopes and postage for
prospectuses, annual and semiannual reports, statements of
additional information, supplements for prospectuses and statements
of additional information and other required mailings to
shareholders
o stop orders
o outgoing wire charges
o other expenses incurred at the request or with the consent of the
Fund
<PAGE>
PAGE 1
ADMINISTRATIVE SERVICES AGREEMENT
AGREEMENT made the 20th day of March, 1995, by and between IDS Tax-
Free Money Fund, Inc. (the "Fund"), a Minnesota corporation, and
American Express Financial Corporation, a Delaware corporation.
Part One: SERVICES
(1) The Fund hereby retains American Express Financial Corporation,
and American Express Financial Corporation hereby agrees, for the
period of this Agreement and under the terms and conditions
hereinafter set forth, to furnish the Fund continuously with all
administrative, accounting, clerical, statistical, correspondence,
corporate and all other services of whatever nature required in
connection with the administration of the Fund as provided under
this Agreement; and to pay such expenses as may be provided for in
Part Three hereof; subject always to the direction and control of
the Board of Directors, the Executive Committee and the authorized
officers of the Fund. American Express Financial Corporation
agrees to maintain an adequate organization of competent persons to
provide the services and to perform the functions herein mentioned.
American Express Financial Corporation agrees to meet with any
persons at such times as the Board of Directors deems appropriate
for the purpose of reviewing American Express Financial
Corporation's performance under this Agreement.
(2) The Fund agrees that it will furnish to American Express
Financial Corporation any information that the latter may
reasonably request with respect to the services performed or to be
performed by American Express Financial Corporation under this
Agreement.
(3) It is understood and agreed that in furnishing the Fund with
the services as herein provided, neither American Express Financial
Corporation, nor any officer, director or agent thereof shall be
held liable to the Fund or its creditors or shareholders for errors
of judgment or for anything except willful misfeasance, bad faith,
or gross negligence in the performance of its duties, or reckless
disregard of its obligations and duties under the terms of this
Agreement. It is further understood and agreed that American
Express Financial Corporation may rely upon information furnished
to it reasonably believed to be accurate and reliable.
Part Two: COMPENSATION FOR SERVICES
(1) The Fund agrees to pay to American Express Financial
Corporation, and American Express Financial Corporation covenants
and agrees to accept from the Fund in full payment for the services
furnished, based on the net assets of the Fund as set forth in the
following table:
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PAGE 2
Assets Annual Rate At
(Billions) Each Asset Level
First $1 0.030%
Next 0.50 0.027
Next 0.50 0.025
Next 0.50 0.022
Over $2.5 0.020
The administrative fee for each calendar day of each year shall be
equal to 1/365th (1/366th in each leap year) of the total amount
computed. The computation shall be made for each such day on the
basis of net assets as of the close of business of the full
business day two (2) business days prior to the day for which the
computation is being made. In the case of the suspension of the
computation of net asset value, the administrative fee for each day
during such suspension shall be computed as of the close of
business on the last full business day on which the net assets were
computed. As used herein, "net assets" as of the close of a full
business day shall include all transactions in shares of the Fund
recorded on the books of the Fund for that day.
(2) The administrative fee shall be paid on a monthly basis and, in
the event of the termination of this Agreement, the administrative
fee accrued shall be prorated on the basis of the number of days
that this Agreement is in effect during the month with respect to
which such payment is made.
(3) The administrative fee provided for hereunder shall be paid in
cash by the Fund to American Express Financial Corporation within
five (5) business days after the last day of each month.
Part Three: ALLOCATION OF EXPENSES
(1) The Fund agrees to pay:
(a) Administrative fees payable to American Express Financial
Corporation for its services under the terms of this Agreement.
(b) Taxes.
(c) Fees and charges of its independent certified public
accountants for services the Fund requests.
(d) Fees and expenses of attorneys (i) it employs in matters not
involving the assertion of a claim by a third party against the
Fund, its directors and officers, (ii) it employs in conjunction
with a claim asserted by the Board of Directors against American
Express Financial Corporation, except that American Express
Financial Corporation shall reimburse the Fund for such fees and
expenses if it is ultimately determined by a court of competent
jurisdiction, or American Express Financial Corporation agrees,
that it is liable in whole or in part to the Fund, and (iii) it
employs to assert a claim against a third party.
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PAGE 3
(e) Fees paid for the qualification and registration for public
sale of the securities of the Fund under the laws of the United
States and of the several states in which such securities shall be
offered for sale.
(f) Office expenses which shall include a charge for occupancy,
insurance on the premises, furniture and equipment, telephone,
telegraph, electronic information services, books, periodicals,
published services, and office supplies used by the Fund, equal to
the cost of such incurred by American Express Financial
Corporation.
(g) Fees of consultants employed by the Fund.
(h) Directors, officers and employees expenses which shall include
fees, salaries, memberships, dues, travel, seminars, pension,
profit sharing, and all other benefits paid to or provided for
directors, officers and employees, directors and officers liability
insurance, errors and omissions liability insurance, worker's
compensation insurance and other expenses applicable to the
directors, officers and employees, except the Fund will not pay any
fees or expenses of any person who is an officer or employee of
American Express Financial Corporation or its affiliates.
(i) Filing fees and charges incurred by the Fund in connection with
filing any amendment to its articles of incorporation, or incurred
in filing any other document with the State of Minnesota or its
political subdivisions.
(j) Organizational expenses of the Fund.
(k) One-half of the Investment Company Institute membership dues
charged jointly to the IDS MUTUAL FUND GROUP and American Express
Financial Corporation.
(l) Expenses properly payable by the Fund, approved by the Board of
Directors.
(2) American Express Financial Corporation agrees to pay all
expenses associated with the services it provides under the terms
of this Agreement. Further, American Express Financial Corporation
agrees that if, at the end of any month, the expenses of the Fund
under this Agreement and any other agreement between the Fund and
American Express Financial Corporation, but excluding those
expenses set forth in (1)(b) of this Part Three, exceed the most
restrictive applicable state expenses limitation, the Fund shall
not pay those expenses set forth in (1)(a) and (c) through (m) of
this Part Three to the extent necessary to keep the Fund's expenses
from exceeding the limitation, it being understood that American
Express Financial Corporation will assume all unpaid expenses and
bill the Fund for them in subsequent months but in no event can the
accumulation of unpaid expenses or billing be carried past the end
of the Fund's fiscal year.
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PAGE 4
Part Four: MISCELLANEOUS
(1) American Express Financial Corporation shall be deemed to be an
independent contractor and, except as expressly provided or
authorized in this Agreement, shall have no authority to act for or
represent the Fund.
(2) A "full business day" shall be as defined in the By-laws.
(3) The Fund recognizes that American Express Financial Corporation
now renders and may continue to render investment advice and other
services to other investment companies and persons which may or may
not have investment policies and investments similar to those of
the Fund and that American Express Financial Corporation manages
its own investments and/or those of its subsidiaries. American
Express Financial Corporation shall be free to render such
investment advice and other services and the Fund hereby consents
thereto.
(4) Neither this Agreement nor any transaction had pursuant hereto
shall be invalidated or in anyway affected by the fact that
directors, officers, agents and/or shareholders of the Fund are or
may be interested in American Express Financial Corporation or any
successor or assignee thereof, as directors, officers, stockholders
or otherwise; that directors, officers, stockholders or agents of
American Express Financial Corporation are or may be interested in
the Fund as directors, officers, shareholders, or otherwise; or
that American Express Financial Corporation or any successor or
assignee, is or may be interested in the Fund as shareholder or
otherwise, provided, however, that neither American Express
Financial Corporation, nor any officer, director or employee
thereof or of the Fund, shall sell to or buy from the Fund any
property or security other than shares issued by the Fund, except
in accordance with applicable regulations or orders of the United
States Securities and Exchange Commission.
(5) Any notice under this Agreement shall be given in writing,
addressed, and delivered, or mailed postpaid, to the party to this
Agreement entitled to receive such, at such party's principal place
of business in Minneapolis, Minnesota, or to such other address as
either party may designate in writing mailed to the other.
(6) American Express Financial Corporation agrees that no officer,
director or employee of American Express Financial Corporation will
deal for or on behalf of the Fund with himself as principal or
agent, or with any corporation or partnership in which he may have
a financial interest, except that this shall not prohibit officers,
directors or employees of American Express Financial Corporation
from having a financial interest in the Fund or in American Express
Financial Corporation.
(7) The Fund agrees that American Express Financial Corporation may
subcontract for certain of the services described under this
Agreement with the understanding that there shall be no diminution
in the quality or level of the services and that American Express
Financial Corporation remains fully responsible for the services.
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PAGE 5
(8) This Agreement shall extend to and shall be binding upon the
parties hereto, and their respective successors and assigns;
provided, however, that this Agreement shall not be assignable
without the written consent of the other party. This Agreement
shall be governed by the laws of the State of Minnesota.
Part Five: RENEWAL AND TERMINATION
(1) This Agreement shall become effective on the date first set
forth above (the "Effective Date") and shall continue in effect
from year to year thereafter as the parties may mutually agree;
provided that either party may terminate this Agreement by giving
the other party notice in writing specifying the date of such
termination, which shall be not less than 60 days after the date of
receipt of such notice.
(2) This Agreement may not be amended or modified in any manner
except by a written agreement executed by both parties.
IN WITNESS THEREOF, the parties hereto have executed the foregoing
Agreement as of the day and year first above written.
IDS TAX-FREE MONEY FUND, INC.
By: /s/Leslie L. Ogg
Leslie L. Ogg
Vice President
AMERICAN EXPRESS FINANCIAL CORPORATION
By: /s/Janis E. Miller
Vice President
