1996 semiannual report
IDS Tax-Free Money Fund
(icon of piggy bank)
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.
Distributed by American Express Financial Advisors Inc.
<PAGE>
(icon of piggy bank)
Stability without taxes
Everyone needs to have a cash reserve to cover unexpected expenses. But
where to keep it? It's easy to find an investment that provides stability
and ready access to your money, but there's usually a drawback: You have
to pay taxes on the interest the money earns. But there is an
alternative -- Tax-Free Money Fund. The interest it pays is generally free
from federal taxes. The result: a cash reserve that can let you keep the
tax-exempt income it earns.
Contents
From the president 3
From the portfolio manager 3
Financial statements 5
Notes to financial statements 8
Investments in securities 12
Board members and officers 20
IDS mutual funds 21
<PAGE>
To our shareholders
(picture of William Pearce)
William R. Pearce
President of the Fund
(picture of Terry Fettig)
Terry Fettig
Portfolio manager
From the president
If you're an experienced investor, you know that 1995 and the opening
months of 1996 were an unusually strong period for the U.S. financial
markets. Perhaps just as important, you also know that history shows
that bull markets don't last forever. Though they're often unpredictable,
declines -- whether they're brief or long-lasting, moderate or
substantial -- are always a possibility.
That fact reinforces the need for investors to periodically review their
long-term goals and examine whether their investment program remains on
track to achieving them. Your quarterly investment statements are one
part of that monitoring process. The other is a meeting with your American
Express financial advisor. That becomes even more important if there's a
major change in your financial situation or in the financial markets.
William R. Pearce
From the portfolio manager
IDS Tax-Free Money Fund's yield decreased during the first half of the
fiscal year (January through June, 1996), following a decline in
short-term interest rates. The $1 net asset value was unchanged for the
six months, providing shareholders with continued stability of principal
in addition to a tax-free return.
For the seven-day period ended June 28, 1996, the Fund provided
shareholders with an annualized simple yield of 3.02% and an annualized
compound yield of 3.05%. These are equal to 4.19% simple and 4.24%
compound taxable yields for an investor in the 28-percent federal
income-tax bracket.
(Investors should keep in mind that an investment in the Fund is not
insured or guaranteed by the U.S. government. Although the Fund seeks to
maintain a stable $1 share price, there is no assurance that it will be
able to do so. Investors also should note that under federal law, some
notes issued on the tax-free market are subject to the alternative
minimum tax, or A.M.T. To eliminate any federal income-tax liabilities
for investors who may be subject to A.M.T. requirements, we refrain from
purchasing these issues.)
Tax-reform talk, economic growth temporarily upset market
Compared with last year, when the Orange County bankruptcy roiled the
municipal market, 1996 has thus far been an uneventful period. The
biggest news centered on political proposals for a flat federal income
tax and an economy that showed greater-than-expected growth. The
flat-tax talk created considerable volatility among municipal securities
before cooling off by the time summer arrived.
An ongoing factor influencing this Fund is that yields on tax-free
securities are seasonally affected by supply and demand factors.
Demand typically picks up at the outset of the year, creating lower
yields than otherwise might be expected. (When investors' interest in
municipal securities is high, municipalities can afford to reduce the
amount of interest they must offer on bonds to attract buyers.) This was
true again early in the year.
Shorter maturity
As for changes to the portfolio, the most notable was a reduction in
average maturity -- from about 40 days to 20 days. This strategy frees
up cash to allow for the purchase of new issues as they become available,
which will result in a slightly longer average maturity for the portfolio.
Looking to the rest of 1996, I expect a continuation of moderate economic
growth accompanied by a slight increase in the inflation rate. Unless
inflation rises markedly, I also expect the Federal Reserve Board to make
little, if any, adjustment to short-term interest rates. In such a
scenario, rates on the short-term, tax-free securities that comprise the
portfolio probably wouldn't change much. Ultimately, that would mean a
relatively stable yield for the Fund in the months ahead. However, if the
economy proves to be stronger and the Fed raises short-term rates, I
would expect rates on short-term, tax-free securities to rise as well.
Terry Fettig
6-month performance
(All figures per share)
Net asset value (NAV)
June 30, 1996 $1.00
Dec. 31, 1995 $1.00
Increase $ --
Distributions
Jan. 1, 1996 - June 30, 1996
From income $0.01
From capital gains $ --
Total distributions $0.01
Total return* +1.5%
* The total return is a hypothetical investment in the Fund with all
distributions reinvested.
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<TABLE>
<CAPTION>
Financial statements
Statement of assets and liabilities
IDS Tax-Free Money Fund, Inc.
June 30, 1996
_____________________________________________________________________________________________________________
Assets
_____________________________________________________________________________________________________________
<S> <C>
(Unaudited)
Investments in securities, at value (Note 1)
(identified cost $168,844,525) $168,844,525
Cash in bank on demand deposit 731,053
Accrued interest receivable 1,035,530
_____________________________________________________________________________________________________________
Total assets 170,611,108
_____________________________________________________________________________________________________________
Liabilities
_____________________________________________________________________________________________________________
Dividends payable to shareholders 25,622
Payable for investment securities purchased 14,084,210
Accrued investment management services fee 1,327
Accrued transfer agency fee 456
Accrued administrative services fee 128
Other accrued expenses 41,692
_____________________________________________________________________________________________________________
Total liabilities 14,153,435
_____________________________________________________________________________________________________________
Net assets applicable to outstanding capital stock $156,457,673
_____________________________________________________________________________________________________________
Represented by
_____________________________________________________________________________________________________________
Capital stock -- authorized 10,000,000,000 shares of $.01 par value;
outstanding 156,463,064 shares $ 1,564,631
Additional paid-in capital 154,897,242
Undistributed net investment income 2,519
Accumulated net realized loss (6,719)
_____________________________________________________________________________________________________________
Total -- representing net assets applicable to outstanding capital stock $156,457,673
_____________________________________________________________________________________________________________
Net asset value per share of outstanding capital stock $ 1.00
_____________________________________________________________________________________________________________
See accompanying notes to financial statements.
<PAGE>
PAGE
Financial statements
Statement of operations
IDS Tax-Free Money Fund, Inc.
Six months ended June 30, 1996
_____________________________________________________________________________________________________________
Investment income
_____________________________________________________________________________________________________________
(Unaudited)
Income:
Interest $2,551,873
_____________________________________________________________________________________________________________
Expenses (Note 2):
Investment management services fee 229,330
Transfer agency fee 83,109
Administrative services fee 22,193
Compensation of board members 5,044
Compensation of officers 581
Custodian fee 8,592
Postage 10,515
Registration fees 45,252
Reports to shareholders 6,534
Audit fees 9,500
Administrative 1,307
Other 1,292
_____________________________________________________________________________________________________________
Total expenses 423,249
_____________________________________________________________________________________________________________
Investment income -- net 2,128,624
_____________________________________________________________________________________________________________
Net increase in net assets resulting from operations $2,128,624
_____________________________________________________________________________________________________________
/TABLE
<PAGE>
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<TABLE>
<CAPTION>
Financial statements
Statements of changes in net assets
IDS Tax-Free Money Fund, Inc.
_____________________________________________________________________________________________________________
Operations and distributions June 30, 1996 Dec. 31, 1995
Six months ended Year ended
(Unaudited)
______________________________________________________________________________________________________________
<S> <C> <C>
Investment income -- net $ 2,128,624 $ 4,307,172
Net realized gain on investments __ 6,404
_____________________________________________________________________________________________________________
Net increase in net assets resulting from operations 2,128,624 4,313,576
_____________________________________________________________________________________________________________
Distributions to shareholders from:
Net investment income (2,126,163) (4,309,066)
_____________________________________________________________________________________________________________
Capital share transactions at constant $1 net asset value
_____________________________________________________________________________________________________________
Proceeds from sales of shares 151,730,933 249,009,513
Net asset value of shares
issued in reinvestment of distributions 2,080,516 4,186,232
Payments for redemptions of shares (143,237,953) (239,954,987)
_____________________________________________________________________________________________________________
Increase in net assets from capital share transactions 10,573,496 13,240,758
_____________________________________________________________________________________________________________
Total increase in net assets 10,575,957 13,245,268
Net assets at beginning of period 145,881,716 132,636,448
_____________________________________________________________________________________________________________
Net assets at end of period
(including undistributed net investment income of
$2,519 and $58) $156,457,673 $145,881,716
_____________________________________________________________________________________________________________
See accompanying notes to financial statements.
</TABLE>
<PAGE>
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Notes to financial statements
IDS Tax-Free Money Fund, Inc.
(Unaudited as to June 30, 1996)
______________________________________________________________________________
1. Summary of significant accounting policies
The Fund is registered under the Investment Company Act of 1940 (as amended)
as a diversified, open-end management investment company. The Fund invests
primarily in short-term bonds and notes issued by or on behalf of state
or local governmental units.
Significant accounting policies followed by the Fund are summarized below:
Use of estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements
and the reported amounts of increase and decrease in net assets from
operations during the period. Actual results could differ from those
estimates.
Valuation of securities
Pursuant to Rule 2a-7 of the 1940 Act, all securities are valued daily at
amortized cost, which approximates market value, in order to maintain a
constant net asset value of $1 per share.
Federal taxes
Since the Fund's policy is to comply with all sections of the Internal Revenue
Code applicable to regulated investment companies and to distribute all of its
taxable income to shareholders, no provision for income or excise taxes is
required.
Dividends to shareholders
Dividends from net investment income, declared daily and payable monthly, are
reinvested in additional shares of the Fund at net asset value or payable in
cash.
Other
Security transactions are accounted for on the date securities are purchased
or sold. Interest income, including level-yield amortization of premium and
discount, is accrued daily.
______________________________________________________________________________
2. Expenses
Effective March 20, 1995, the Fund entered into agreements with American
Express Financial Corporation (AEFC) for managing its portfolio, providing
administrative services and serving as transfer agent. Under its Investment
Management Services Agreement, AEFC determines which securities will be
purchased, held or sold. The management fee is a percentage of the Fund's
average daily net assets in reducing percentages from 0.31% to 0.24% annually.
Under an Administrative Services Agreement, the Fund pays AEFC for
administration and accounting services at a percentage of the Fund's average
daily net assets in reducing percentages from 0.03% to 0.02% annually.
Under a separate Transfer Agency Agreement, AEFC maintains shareholder
accounts and records. The Fund pays AEFC an annual fee of $20 per shareholder
account for this service.
AEFC will assume and pay any expenses (except taxes and brokerage commissions)
that exceed the most restrictive applicable state expense limitation.
Prior to April 30, 1996, the Fund had a retirement plan for its independent
board members. The plan was terminated April 30, 1996. The retirement plan
expense amounted to $2,741 for the period ended June 30, 1996. The total
liability for the plan is $14,513, which will be paid out at some future date.
______________________________________________________________________________
3. Securities transactions
Cost of purchases and proceeds from sales of securities aggregated
$252,980,920 and $224,280,000, respectively, for the six months ended June 30,
1996. Realized gains and losses are determined on an identified cost basis.
______________________________________________________________________________
4. Financial highlights
<TABLE>
<CAPTION>
The table below shows certain important financial information for evaluating
the fund's results.
Fiscal period ended Dec. 31,
Per share income and capital changes*
1996** 1995 1994 1993 1992 1991 1990 1989 1988 1987
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
beginning of period
Income from investment operations:
Net investment income .01 .03 .02 .02 .02 .04 .05 .05 .04 .04
Less distributions:
Dividends from net (.01) (.03) (.02) (.02) (.02) (.04) (.05) (.05) (.04) (.04)
investment income
Net asset value, $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
end of period
Ratios/supplemental data
1996** 1995 1994 1993 1992 1991 1990 1989 1988 1987
Net assets, end of period $156 $146 $133 $116 $137 $144 $153 $117 $131 $116
(in millions)
Ratio of expenses to .57%*** .58% .68% .68% .63% .70% .71% .67% .65% .69%
average daily net assets
Ratio of net income to 2.87%*** 3.19% 2.11% 1.63% 2.25% 3.78% 5.24% 5.47% 4.54% 3.80%
average daily net assets
Total return 1.5% 3.2% 2.1% 1.6% 2.2% 3.8% 5.2% 5.6% 4.6% 3.9%
*For a share outstanding throughout the period. Rounded to the nearest cent.
**Six months ended June 30, 1996 (Unaudited).
***Adjusted to an annual basis.
</TABLE>
<PAGE>
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<TABLE>
<CAPTION>
Investments in securities
IDS Tax-Free Money Fund, Inc. (Percentages represent
June 30, 1996 (Unaudited) value of investments
compared to net assets)
_____________________________________________________________________________________________________________________________
Name of issuer and title of issue (b)
____________________________________________________________________________________________________________________________
Issuer Principal Value(a)
amount
_____________________________________________________________________________________________________________________________
<S> <C> <C>
Alabama (1.6%)
Columbia County Pollution Control Revenue Bonds Series D
(Alabama Power)
3.65% 10-1-22 $2,400,000 (c,d) $2,400,000
____________________________________________________________________________________________________________________________
Alaska (0.6%)
Valdez Marine Terminal Refunding Revenue Bonds Alaska Pipeline (Mobil)
3.40% 11-1-03 1,000,000 (c,d) 1,000,000
____________________________________________________________________________________________________________________________
Arizona (11.3%)
Maricopa County Pollution Control Revenue Bonds
(Arizona Public Service Company) (Morgan Guaranty)
3.55% 5-1-29 2,400,000 (c,d) 2,400,000
Maricopa County Pollution Control Revenue Bonds Series 1994B
(Arizona Public Service Company)
3.60% 5-1-29 3,700,000 (c,d) 3,700,000
Maricopa County Pollution Control Revenue Bonds T.E.C.P.
Series E (Southern California Edison)
3.45% 10-1-96 1,600,000 1,600,000
3.45% 10-15-96 1,120,000 1,120,000
3.60% 10-23-96 1,000,000 1,000,000
Salt River Agricultural Improvement & Power District T.E.C.P.
3.40% 7-2-96 2,000,000 2,000,000
3.45% 8-14-96 2,000,000 2,000,000
3.45% 10-15-96 1,000,000 1,000,000
3.60% 10-8-96 2,900,000 2,900,000
____________
Total 17,720,000
_____________________________________________________________________________________________________________________________
California (3.2%)
Los Angeles County T.R.A.N.
4.50% 7-1-96 2,000,000 2,000,074
4.50% 6-30-97 2,000,000 2,012,480
State of California General Obligation C.P.
3.60% 7-17-96 1,000,000 1,000,000
____________
Total 5,012,554
_____________________________________________________________________________________________________________________________
Colorado (5.8%)
Moffat County Pollution Control Revenue Bonds Series 1994 (Pacificorp)
3.60% 5-1-13 6,000,000 (c,d) 6,000,000
State T.R.A.N.
4.50% 6-27-97 3,000,000 3,018,570
______________
Total 9,018,570
_____________________________________________________________________________________________________________________________
See accompanying notes to investments in securities.<PAGE>
PAGE
_____________________________________________________________________________________________________________________________
Florida (2.6%)
Jacksonville Electric Authority Electric System T.E.C.P. Series D-1
3.45% 7-8-96 1,400,000 1,400,000
3.60% 10-4-96 1,500,000 1,500,000
State Municipal Power Agency T.E.C.P.
3.40% 7-9-96 1,155,000 1,155,000
____________
Total 4,055,000
_____________________________________________________________________________________________________________________________
Georgia (5.5%)
Burke County Development Authority Pollution Control Revenue Bonds
(Georgia Power & Light)
3.60% 7-1-24 800,000 (c,d) 800,000
3.65% 7-1-24 500,000 (c,d) 500,000
Monroe County Development Authority Pollution Control Revenue Bonds
(Gulf Power)
3.75% 9-1-24 2,200,000 (c,d) 2,200,000
3.75% 7-1-25 3,100,000 (c,d) 3,100,000
Monroe County Development Authority Pollution Control Revenue Bonds
Series 1995 (Georgia Power & Light) (Scherer)
3.70% 7-1-25 2,000,000 (c,d) 2,000,000
____________
Total 8,600,000
_____________________________________________________________________________________________________________________________
Idaho (1.9%)
State T.A.N. Series 1994
4.50% 6-30-97 3,000,000 3,017,220
_______________________________________________________________________________________________________________________________
Illinois (3.5%)
Development Authority Pollution Control Revenue Bonds
Series 1994 (Amoco Oil)
3.55% 11-1-12 5,510,000 (c,d) 5,510,000
____________________________________________________________________________________________________________________________
Indiana (4.5%)
Bond Bank Advanced Funding Notes Series 1996A-1
4.25% 7-8-96 1,000,000 1,000,219
Bond Bank Advanced Funding Notes Series 1996A-2
4.25% 1-9-97 1,000,000 1,004,825
Hammond Pollution Control Revenue Bonds
(Amoco Oil)
3.55% 2-1-22 1,000,000 (c,d) 1,000,000
Mount Vernon Pollution Control Refunding Revenue Bonds T.E.C.P.
(General Electric)
3.40% 7-10-96 1,190,000 1,190,000
3.45% 7-29-96 1,800,000 1,800,000
State Education Facility (University of Notre Dame)
3.15% 3-1-25 1,000,000 (c,d) 1,000,000
_____________
Total 6,995,044
_____________________________________________________________________________________________________________________________
Iowa (1.9%)
State School Warrant Certificates Series A
4.75% 6-27-97 2,000,000 2,015,296
State School Warrant Certificates Series B
(FSA Insured)
4.25% 1-30-97 1,000,000 1,004,838
_____________
Total 3,020,134
_____________________________________________________________________________________________________________________________
Kentucky (0.8%)
Jefferson County Pollution Control Revenue Bonds T.E.C.P. Series 1993
3.45% 7-1-96 1,300,000 1,300,000
_____________________________________________________________________________________________________________________________
Maine (1.3%)
State General Obligation T.R.A.N.
4.50% 6-27-97 2,000,000 (c,d) 2,011,860
______________________________________________________________________________________________________________________________
Maryland (2.1%)
Health & Educational Facilities Authority Revenue Bonds
Series A (Kaiser Permanente)
3.35% 7-1-15 2,000,000 (c,d) 2,000,000
Montgomery County C.P. B.A.N.
3.45% 7-8-96 1,300,000 1,300,000
______________
Total 3,300,000
_______________________________________________________________________________________________________________________________
Michigan (6.2%)
Regents of the University Hospital Refunding Revenue Bonds Series 1992A
3.55% 12-1-19 3,700,000 (c,d) 3,700,000
Regents of the University Hospital Refunding Revenue Bonds Series 1995A
3.55% 12-1-27 3,000,000 (c,d) 3,000,000
State General Obligation T.R.A.N.
4.00% 9-30-96 3,000,000 3,006,736
____________
Total 9,706,736
______________________________________________________________________________________________________________________________
Minnesota (9.0%)
Becker T.E.C.P. Series 1993B (Northern States Power)
3.60% 10-30-96 3,000,000 3,000,000
3.65% 7-16-96 1,000,000 1,000,000
Bloomington Port Authority Special Tax Refunding Revenue Bonds
Mall of America (FSA Insured)
3.45% 2-1-09 1,800,000 (c,d,e) 1,800,000
Regents of the University T.E.C.P. Series I
3.40% 7-19-96 1,000,000 1,000,000
3.65% 7-24-96 1,000,000 1,000,000
Regents of the University T.E.C.P. Series 1985H
3.20% 8-8-96 2,300,000 2,300,000
Regents of the University T.E.C.P. Series 1991A
3.35% 8-1-96 1,000,000 1,000,000
Southern Minnesota Minicipal Power T.E.C.P. Series B
3.60% 7-23-96 2,000,000 2,000,000
State Health Care Facility Revenue Bonds
Series A (Mayo Clinic)
3.35% 8-6-96 1,000,000 1,000,000
______________
Total 14,100,000
_____________________________________________________________________________________________________________________________
Mississippi (4.2%)
Jackson County Port Bonds Series 1993 (Chevron)
3.55% 6-1-23 6,600,000 (c,d) 6,600,000
_____________________________________________________________________________________________________________________________
Missouri (1.8%)
State Health and Education Facilities Authority
Series B (Washington University)
3.60% 9-1-30 2,800,000 (c,d) 2,800,000
_____________________________________________________________________________________________________________________________
New York (5.9%)
New York City Municipal Assistance C.P. Series F
(AMBAC Insured)
3.70% 7-18-96 1,000,000 1,000,000
New York City Municipal Water Financial Authority Series 1994
(FGIC Insured)
3.60% 6-15-23 1,400,000 (c,d,e) 1,400,000
3.60% 6-15-22 5,800,000 (c,d,e) 5,800,000
Triborough Bridge & Tunnel Authority Special Obligation Bonds Series 1994
(FGIC Insured)
3.05% 1-1-24 1,000,000 (c,d,e) 1,000,000
______________
Total 9,200,000
_____________________________________________________________________________________________________________________________
North Carolina (3.2%)
Medical Care Community Hospital Revenue Bonds Duke University Hospital
Series 1985B-C
3.25% 6-1-15 5,000,000 (c,d) 5,000,000
______________________________________________________________________________________________________________________________
Ohio (2.8%)
State Air Quality Development Authority Revenue Bonds
Series B (Cincinnati Gas & Electric)
3.55% 9-1-30 4,400,000 (c,d) 4,400,000
_______________________________________________________________________________________________________________________________
Pennsylvania (6.8%)
Delaware County Industrial Development Authority Airport Facility
Revenue Bonds Series 1985 (United Parcel Service)
3.60% 12-1-15 4,600,000 (c,d) 4,600,000
State Higher Education Facility Authority Refunding Revenue Bonds
Series B (Carnegie Mellon)
3.70% 11-1-27 3,000,000 (c,d) 3,000,000
State Higher Education Facility Authority Revenue Bonds
Series C
3.25% 1-1-26 3,000,000 (c,d) 3,000,000
_____________
Total 10,600,000
_____________________________________________________________________________________________________________________________
Texas (11.8%)
Gulf Coast (Amoco)
3.50% 10-1-17 1,500,000 (c,d) 1,500,000
Jefferson Port Arthur Navigation District
Pollution Control Revenue Bonds (Texaco)
3.65% 10-1-24 5,700,000 (c,d) 5,700,000
Lower Colorado River Authority T.E.C.P. Series B
3.30% 7-1-96 1,000,000 1,000,000
San Antonio Electric & Gas System T.E.C.P. Series A
3.75% 7-31-96 2,500,000 2,500,000
State Municipal Power Agency T.E.C.P.
3.20% 8-7-96 2,600,000 (c,d) 2,600,000
3.60% 10-9-96 1,500,000 (c,d) 1,500,000
3.65% 7-17-96 650,000 (c,d) 650,000
State T.R.A.N.
4.75% 8-30-96 3,000,000 3,003,327
____________
Total 18,453,327
_____________________________________________________________________________________________________________________________
Virginia (2.7%)
Peninsula Port Authority Series 1987 (Shell Oil)
3.55% 12-1-05 4,300,000 (c,d) 4,300,000
_____________________________________________________________________________________________________________________________
Washington (1.2%)
State General Obligation C.P.R.A.N. Series 1996B
3.25% 6-15-20 1,000,000 (c,d) 1,000,000
Washington Public Power Supply System Electric Refunding Revenue Bonds
Project #3
3.35% 7-1-18 900,000 (c,d) 900,000
____________
Total 1,900,000
_____________________________________________________________________________________________________________________________
Wisconsin (2.6%)
State Operating Notes Series 1996
4.50% 6-16-97 4,000,000 4,024,080
_____________________________________________________________________________________________________________________________
Wyoming (3.1%)
Kemmerer Pollution Control Revenue Bonds Series 1984 (Exxon)
3.55% 11-1-14 1,300,000 (c,d) 1,300,000
Lincoln County Pollution Control Revenue Bonds Series 1984D (Exxon)
3.60% 11-1-14 500,000 (c,d) 500,000
Lincoln County Pollution Control Revenue Bonds Series 1985 (Exxon)
3.55% 8-1-15 3,000,000 (c,d) 3,000,000
_____________
Total 4,800,000
_____________________________________________________________________________________________________________________________
Total investments in securities (107.9%)
(Cost: $168,844,525)(f) $168,844,525
_____________________________________________________________________________________________________________________________
Notes to investments in securities
_____________________________________________________________________________________________________________________________
(a) Securities are valued by procedures described in Note 1 to the financial statements.
(b) The following abbreviations are used in portfolio descriptions:
B.A.N. -- Bond Anticipation Note
C.P. -- Commercial Paper
R.A.N. -- Revenue Anticipation Note
T.A.N. -- Tax Anticipation Note
T.E.C.P. -- Tax-Exempt Commercial Paper
T.R.A.N. -- Tax & Revenue Anticipation Note
(c) Interest rate varies to reflect current market conditions; rate shown is the effective rate on June 30, 1996.
(d) The Fund is entitled to receive principal amount from issuer or corporate guarantor, if indicated in parenthesis, after a
day or a week's notice. The maturity date disclosed represents the final maturity. However, for purposes of Rule 2a-7, maturity
is the later of the next put or interest rate reset date.
(e) The following abbreviations are used in the portfolio descriptions to identify the insurer of the issue:
AMBAC -- American Municipal Bond Association Corporation
FGIC -- Financial Guarantee Insurance Corporation
FSA -- Financial Security Assurance
(f) At June 30, 1996, also represents the cost of securities for federal income tax purposes.
</TABLE>
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Board members and officers
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
Lynne V. Cheney
Distinguished fellow, American Enterprise Institute for
Public Policy Research.
Robert F. Froehlke
Former president of all funds in the IDS MUTUAL FUND GROUP.
Heinz F. Hutter
Former president and chief operating officer, Cargill, Inc.
Anne P. Jones
Attorney and telecommunications consultant.
Melvin R. Laird
Senior counsellor for national and international affairs,
The Readers's Digest Association, Inc.
Edson W. Spencer
Former chairman and chief executive officer, Honeywell, Inc.
Wheelock Whitney
Chairman, Whitney Management Company.
C. Angus Wurtele
Chairman of the board, The Valspar Corporation.
_____________________________________________________________________
Interested board members who are officers and/or employees of AEFC
William H. Dudley
Executive vice president, AEFC.
David R. Hubers
President and chief executive officer, AEFC.
John R. Thomas
Senior vice president, AEFC.
_____________________________________________________________________
Officers who also are officers and/or employees of AEFC
Peter J. Anderson
Vice President of all funds in the IDS MUTUAL FUND GROUP.
Melinda S. Urion
Treasurer of all funds in the IDS MUTUAL FUND GROUP.
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Other officer
Leslie L. Ogg
Vice president, general counsel and secretary of all funds in
the IDS MUTUAL FUND GROUP.
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IDS mutual funds
Cash equivalent investments
These money market funds have three main goals: conservation of
capital, constant liquidity and the highest possible current income
consistent with these objectives. Very limited risk.
IDS Cash Management Fund
Invests in such money market securities as high quality commercial
paper, bankers' acceptances, certificates of deposit (CDs) and
other bank securities.
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IDS Tax-Free Money Fund
Invests primarily in short-term bonds and notes issued by state and
local governments to seek high current income exempt from federal
income taxes.
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Income investments
The funds in this group invest their assets primarily in corporate
bonds or government securities to seek interest income.
Secondary objective is capital growth. Risk varies by bond quality.
IDS Global Bond Fund
Invests primarily in debt securities of U.S. and foreign issuers to
seek high total return through income and growth of capital.
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IDS Extra Income Fund
Invests mainly in long-term, high-yielding corporate fixed-income
securities in the lower rated, higher risk bond categories to seek
high current income. Secondary objective is capital growth.
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IDS Bond Fund
Invests mainly in corporate bonds, at least 50% in the higher rated,
lower risk bond categories, or the equivalent, and in government bonds.
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IDS Selective Fund
Invests in high-quality corporate bonds and other highly rated debt
instruments including government securities and short-term
investments. Seeks current income and preservation of capital.
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IDS Federal Income Fund
Invests primarily in securities issued or guaranteed as to the timely
payment of principal and interest by the U.S. government, its agencies
and instrumentalities. Seeks a high level of current income and
safety of principal consistent with its type of investments.
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Tax-exempt income investments
These funds provide tax-free income by investing in municipal bonds.
The income is generally free from federal income tax. Risk varies
by bond quality.
IDS High Yield Tax-Exempt Fund
Invests primarily in medium- and lower-quality municipal bonds and
notes. Lower-quality securities generally involve greater risk of
principal and income.
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IDS State Tax-Exempt Funds
(CA, MA, MI, MN, NY, OH)
Invests primarily in high- and medium-grade municipal securities
to provide income to residents of each respective state that is
exempt from federal, state and local income taxes. (New York
is the only state that is exempt at the local level.)
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IDS Tax-Exempt Bond Fund
Invests mainly in bonds and notes of state or local government
units, with at least 75% in the four highest rated, lowest risk bond
categories.
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IDS Insured Tax-Exempt Fund
Invests primarily in municipal securities that are insured as to
the timely payment of principal and interest. The insurance
feature minimizes credit risk of the fund but does not guarantee
the market value of the fund's shares.
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Growth and income investments
These funds focus on securities of medium to large, well-established
companies that offer long-term growth of capital and reasonable income
from dividends and interest. Moderate risk.
IDS International Fund
Invests primarily in common stocks of foreign companies that offer
potential for superior growth. The fund may invest up to 20%
of its assets in the U.S. market.
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IDS Managed Retirement Fund
Invests in U.S. equity securities, U.S. and foreign debt
securities, foreign equity securities and money market
instruments. The fund provides diversification among these
major investments categories and has a target mix that
represents the way the fund's investments will be allocated
over the long term.
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IDS Equity Select Fund
Invests primarily in a combination of moderate growth stocks,
higher-yielding equities and bonds. Seeks growth of
capital and income.
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IDS Blue Chip Advantage Fund
Invests in selected stocks from a major market index. Securities
purchased are those recommended by our research analysts as the
best from each industry represented on the index. Offers potential
for long-term growth as well as dividend income.
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IDS Stock Fund
Invests in common stocks of companies representing many
sectors of the economy. Seeks current income and growth of capital.
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IDS Equity Value Fund
Invests primarily in undervalued common stocks that offer potential
for growth of capital and income.
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IDS Utilities Income Fund
Invests primarily in the stocks of public utility companies to seek
high current income and growth of income and capital with reduced
volatility.
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IDS Diversified Equity Income Fund
Invests primarily in high-yielding common stocks to seek high current
income and, secondarily, to benefit from the growth potential offered
by stock investments.
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IDS Mutual
Invests in a balance between common stocks and senior securities
(preferred stocks and bonds). Seeks a balance of growth of capital
and current income.
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Growth investments
Funds in this group seek capital growth, primarily from common stocks.
They are high risk mutual funds with a potential for high reward.
IDS Discovery Fund
Invests in small- and medium-size, growth-oriented companies
emphasizing technological innovation and productivity enhancement.
Buys and holds larger growth-oriented stocks.
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IDS Small Company Index Fund
Invests in all or a representative group of the equity
securities comprising the S&P SmallCap 600 Index, as it
strives to provide long-term capital appreciation.
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IDS Strategy Aggressive Fund
Invests primarily in common stocks of companies that are selected
for their potential for above-average growth. Above-average means
that their growth potential is better, in the opinion of the
portfolio's investment manager, than the Standard & Poor's
Corporation (S&P) 500 Stock Index.
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IDS Research Opportunities Fund
Invests primarily in equity securities of companies included
in the S&P 500 Index that are believed to have strong growth
potential. The Portfolio is managed using a research methodology
by the Research Department of AEFC. Goal is long-term appreciation.
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IDS Growth Fund
Invests primarily in companies that have above-average potential
for long-term growth as a result of new management, marketing
opportunities or technological superiority.
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IDS Global Growth Fund
Invests in stocks of companies throughout the world that are
positioned to meet market needs in a changing world economy.
These companies offer above-average potential for long-term growth.
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IDS New Dimensions Fund
Invests primarily in companies with significant growth
potential due to superiority in technology, marketing or management.
The fund frequently changes its industry mix.
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IDS Progressive Fund
Invests primarily in undervalued common stocks. The fund holds
stocks for the long term with the goal of capital growth.
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Specialty growth investment
This fund aggressively seeks capital growth as a hedge against inflation.
IDS Precious Metals Fund
Invests primarily in the securities of foreign or domestic companies
that explore for, mine and process or distribute gold and other
precious metals. This is the most aggressive and most speculative
IDS mutual fund.
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For more complete information about any of these funds, including charges
and expenses, you can obtain a prospectus by contacting your financial
advisor or writing to American Express Shareholder Service, P.O. Box 534,
Minneapolis, MN 55440-0534. Read it carefully before you invest or send
money.
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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 (TouchTone 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
AMERICAN EXPRESS FINANCIAL ADVISORS
IDS Tax Free Money Fund
IDS Tower 10
Minneapolis, MN 55440-0010
