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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. 30 (File No. 2-66868) X
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY
ACT OF 1940
Amendment No. 31 (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)
x on Feb. 28, 1997 pursuant to paragraph (b)
60 days after filing pursuant to paragraph (a)
on (date) 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
Section Section in
Item No. in Prospectus Item No. Statement of Additional Information
<S> <C> <C> <C>
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
*Designates information is located in annual report.
**Designates location in prospectus.
/TABLE
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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 $58 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, 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 0.31%
12b-1 fee 0.00%
Other expenses* 0.24%
Total 0.55%
*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
$6 $18 $31 $69
This example does not represent actual expenses, past or future.
Actual expenses may be higher or lower than those shown.
Performance
Financial highlights
<TABLE><CAPTION>
IDS Tax-Free Money Fund, Inc.
Performance
Financial highlights
Year ended Dec. 31,
Per share income and capital changes*
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
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 year
Income from investment operations:
Net investment income .03 .03 .02 .02 .02 .04 .05 .05 .04 .04
Less distributions:
Dividends from net (.03) (.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 year
Ratios/supplemental data
1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
Net assets, end of year $157 $146 $133 $116 $137 $144 $153 $117 $131 $116
(in millions)
Ratio of expenses to .55% .58% .68% .68% .63% .70% .71% .67% .65% .69%
average daily net assets**
Ratio of net income to 2.94% 3.19% 2.11% 1.63% 2.25% 3.78% 5.24% 5.47% 4.54% 3.80%
average daily net assets
Total return 2.9% 3.2% 2.1% 1.6% 2.2% 3.8% 5.2% 5.6% 4.6% 3.9%
* For a share outstanding throughout the year. Rounded to the nearest cent.
** Effective fiscal year 1997, expense ratio is based on total expenses of the Fund before reduction of earnings credits on cash
balances.
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.
</TABLE>
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Yield
The Fund's annualized simple yield for the seven days ended Dec.
31, 1996, was 3.36% and its annualized compound yield was 3.41%.
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
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.
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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.
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.
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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.
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.
<TABLE><CAPTION>
Three ways to invest
<S> <C> <C>
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.
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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.
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.
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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.
<TABLE><CAPTION>
Three ways to request an exchange or redemption of shares
<S> <C>
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
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.
Minimum amount
Redemption: $100
</TABLE>
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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.
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.)
<TABLE><CAPTION>
Three ways to receive payment when you redeem shares
<S> <C>
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.
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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.
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.
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PAGE 14
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.
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.
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PAGE 15
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
You also could be subject to backup withholding because you failed
to report interest or dividends on your tax return as required.
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
<PAGE>
PAGE 16
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.
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. Board members and officers serve 47
IDS and IDS Life funds and 15 Master Trust portfolios, except for
William H. Dudley, who does not serve on the nine IDS Life funds.
Board members and officers of the Fund
President and interested board member
William R. Pearce
President and director, Board Services Corporation (provides
administrative services to boards of the IDS and IDS Life funds and
Master Trust portfolios).
Independent board members
H. Brewster Atwater, Jr.
Former chairman and chief executive officer, General Mills, Inc.
<PAGE>
PAGE 17
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.
Alan K. Simpson
Former United States senator for Wyoming.
Edson W. Spencer
Former chairman and chief executive officer, Honeywell, Inc.
Wheelock Whitney
Chairman, Whitney Management Company.
C. Angus Wurtele
Chairman of the board, The Valspar Corporation.
Interested board members who are officers and/or employees of AEFC
William H. Dudley
Executive vice president, AEFC.
David R. Hubers
President and chief executive officer, AEFC.
John R. Thomas
Senior vice president, AEFC.
Officers who also are officers and/or employees of AEFC
Peter J. Anderson
Senior vice president, AEFC. Vice president - Investments for the
Fund.
Melinda S. Urion
Senior vice president and chief financial officer, AEFC. Treasurer
for the Fund.
Other officer
Leslie L. Ogg
Vice president, treasurer and corporate secretary of Board Services
Corporation. Vice president, general counsel and secretary for the
Fund.
Refer to the SAI for the board members' and officers' biographies.
<PAGE>
PAGE 18
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 0.31% of its average daily net assets.
Under the Agreement, the Fund also pays taxes, brokerage
commissions and nonadvisory expenses.
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 0.55% 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.
<PAGE>
PAGE 19
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 $149 billion.
American Express Financial Advisors serves individuals and
businesses through its nationwide network of more than 177 offices
and more than 8,340 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 20
Appendix
Tax-exempt vs. taxable income
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.
STEP 1: Calculating your marginal tax rate.
Using your Taxable Income and Adjusted Gross Income figures as
guides, you can locate your Marginal Tax Rate in the table below.
First locate your Taxable Income in a filing status and income
range in the left-hand column. Then, locate your Adjusted Gross
Income at the top of the chart. At the point where your Taxable
Income line meets your Adjusted Gross Income column the percentage
indicated is an approximation of your Marginal Tax Rate. For
example: Let's assume you are married filing jointly, your taxable
income is $138,000 and your adjustable gross income is $175,000.
Under Taxable Income married filing jointly status, $138,000 is in
the $99,600-$151,750 range. Under Adjusted Gross Income, $175,000
is in the $121,200 to $181,800 column. The Taxable Income line and
Adjusted Gross Income column meet at 31.93%. This is the rate
you'll use in Step 2.
<TABLE><CAPTION>
Adjusted gross income*
<S> <C> <C> <C> <C>
________________________________________________________________________________________________
Taxable income** $0 $121,200 $181,800
to to to Over
$121,200(1) $181,800(2) $304,300(3) $304,300(2)
________________________________________________________________________________________________
Married Filing Jointly
$ 0 -$ 41,200 15.00%
41,200 - 99,600 28.00 28.84%
99,600 - 151,750 31.00 31.93 33.24%
151,750 - 271,050 36.00 37.08 38.61 37.08%
271,050+ 39.60 42.47*** 40.79
_____________________________________________________________________________________________
Adjusted gross income*
_____________________________________________________________________________________________
Taxable income** $0 $121,200 Over
to to
$121,200(1) $243,700(3) $243,700(2)
_____________________________________________________________________________________________
Single
$ 0 -$ 24,650 15.00%
24,650 - 59,750 28.00
59,750 - 124,650 31.00 32.59%
124,650 - 271,050 36.00 37.84 37.08%
271,050+ 39.60 40.79
* Gross income with certain adjustments before taking itemized deductions and personal exemptions.
** Amount subject to federal income tax after itemized deductions and personal exemptions.
*** This rate is applicable only in the limited case where your adjusted gross income is less than $304,300 and your taxable income
exceeds $271,050.
(1) No Phase-out -- Assumes no phase-out of itemized deductions or personal exemptions.
(2) Itemized Deductions Phase-out -- Assumes a single taxpayer has one personal exemption and joint taxpayers
have two personal exemptions.
(3) Itemized Deductions and Personal Exemption Phase-outs -- Assumes a single taxpayer has one personal
exemption, joint taxpayers have two personal exemptions and itemized deductions continue to phase-out.
If these assumptions do not apply to you, it will be necessary to construct your own personalized tax
equivalency table.
/TABLE
<PAGE>
PAGE 21
<TABLE><CAPTION>
STEP 2: Determining your federal taxable yield equivalents.
Using 31.93%, you may determine that a tax-exempt yield of 4% is equivalent to earning a taxable 5.88% yield.
For these Tax-Exempt Rates:
_______________________________________________________________
3.00% 3.50% 4.00% 4.50% 5.00% 5.50% 6.00% 6.50%
_______________________________________________________________
Marginal Tax Rates Equal the Taxable Rates shown below:
<S> <C> <C> <C> <C> <C> <C> <C> <C>
_________________________________________________________________________________________
28.84% 4.22 4.92 5.62 6.32 7.03 7.73 8.43 9.13
31.93% 4.41 5.14 5.88 6.61 7.35 8.08 8.81 9.55
32.59% 4.45 5.19 5.93 6.68 7.42 8.16 8.90 9.64
33.24% 4.49 5.24 5.99 6.74 7.49 8.24 8.99 9.74
37.08% 4.77 5.56 6.36 7.15 7.95 8.74 9.54 10.33
37.84% 4.83 5.63 6.44 7.24 8.04 8.85 9.65 10.46
38.61% 4.89 5.70 6.52 7.33 8.14 8.96 9.77 10.59
40.79% 5.07 5.91 6.76 7.60 8.44 9.29 10.13 10.98
42.47% 5.21 6.08 6.95 7.82 8.69 9.56 10.43 11.30
_________________________________________________________________________________________
</TABLE>
<PAGE>
PAGE 22
STATEMENT OF ADDITIONAL INFORMATION
FOR
IDS TAX-FREE MONEY FUND, INC.
Feb. 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 23
TABLE OF CONTENTS
Goal and Investment Policies......................See Prospectus
Additional Investment Policies................................p. 3
Security Transactions.........................................p. 5
Brokerage Commissions Paid to Brokers Affiliated with
American Express Financial Corporation........................p. 6
Performance Information.......................................p. 6
Valuing Fund Shares...........................................p. 8
Investing in the Fund.........................................p. 9
Redeeming Shares..............................................p. 10
Pay-out Plans.................................................p. 11
Taxes.........................................................p. 12
Agreements....................................................p. 13
Organizational Information....................................p. 15
Board Members and Officers....................................p. 15
Independent Auditors..........................................p. 20
Financial Statements..............................See Annual Report
Prospectus....................................................p. 20
Appendix A: Description of Bond and Note Ratings.............p. 21
Appendix B: Description of Short-Term Taxable Securities
and Repurchase Agreements........................p. 23
Appendix C: Dollar-Cost Averaging............................p. 25
<PAGE>
PAGE 24
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 25
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 American Express Financial Corporation (AEFC) 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).
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 <PAGE>
PAGE 26
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.
Each investment decision made for the Fund is made independently
from any decision made for another fund in the IDS MUTUAL FUND <PAGE>
PAGE 27
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.
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:
<PAGE>
PAGE 28
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.
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 3.36% and its compound yield
was 3.41% 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 <PAGE>
PAGE 29
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, Morningstar, 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.
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 <PAGE>
PAGE 30
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.
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;
<PAGE>
PAGE 31
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,
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 <PAGE>
PAGE 32
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.
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, <PAGE>
PAGE 33
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.
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.
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, 100% of the income distribution was designated as exempt from
federal income taxes.
<PAGE>
PAGE 34
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
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 0.310% 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.
<PAGE>
PAGE 35
The management fee is paid monthly. Under the agreement, the
amount paid was $481,827 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 $125,715 for the year ended Dec. 31,
1996, $128,899 for 1995, and $157,268 for 1994.
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 0.030% 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
$46,628 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 $164,893 for
the year ended Dec. 31, 1996.
<PAGE>
PAGE 36
Distribution Agreement
For an explanation of the Fund's Distribution Agreement, please see
your prospectus.
Additional information about commissions and compensation for the
last year is contained in the following table:
(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 None None None
American
Express
Financial
Advisors None None None None
Custodian Agreement
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.
Total fees and expenses
The Fund paid total fees and nonadvisory expenses of $819,063 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. They serve 15
Master Trust portfolios and 47 IDS and IDS Life funds (except for
William H. Dudley, who does not serve on the nine IDS Life fund
boards.)
<PAGE>
PAGE 37
All shares have cumulative voting rights with respect to the
election of board members.
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, Union Pacific Resources 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
<PAGE>
PAGE 38
Former president and chief operating officer, Cargill, Incorporated
(commodity merchants and processors).
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 U.S.
Congressman, U.S. Secretary of Defense and Presidential Counsellor.
Director, 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 and director, Board Services Corporation (provides
administrative services to boards). Director, trustee and officer
of registered investment companies whose boards are served by the
company. Former vice chairman of the board, Cargill, Incorporated
(commodity merchants and processors).
Alan K. Simpson
Born in 1931
1201 Sunshine Ave.
Cody, WY
Former three-term United States Senator for Wyoming. Former
Assistant Republican Leader, U.S. Senate. Director, PacifiCorp
(electric power.)
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,
<PAGE>
PAGE 39
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.
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, treasurer and corporate secretary of Board Services
Corporation. Vice president, general counsel and secretary for the
Fund.
Officers who also are officers and/or employees of AEFC
<PAGE>
PAGE 40
Peter J. Anderson
Born in 1942
IDS Tower 10
Minneapolis, MN
Director and senior vice president-investments of AEFC. Vice
president-investments for the Fund.
Melinda S. Urion
Born in 1953
IDS Tower 10
Minneapolis, MN
Director, senior vice president and chief financial officer of
AEFC. Director, executive vice president and controller of IDS
Life Insurance Company. Treasurer for the Fund.
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 25 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
Lynne V. Cheney $535 $186 $75 $77,400
Robert F. Froehlke 597 604 75 80,800
Heinz F. Hutter 637 697 36 82,500
Anne P. Jones 600 279 75 80,300
Donald M. Kendall 182 0 75 25,000
(part of year)
Melvin R. Laird 552 0 75 77,100
Lewis W. Lehr 178 0 73 24,800
(part of year)
Edson W. Spencer 737 0 40 85,900
Wheelock Whitney 611 0 75 81,600
C. Angus Wurtele 608 975 74 81,500
H. Brewster Atwater Jr. 167 0 0 16,800
(part of year)
</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 $9,402, including $2,741 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.
<PAGE>
PAGE 41
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 42
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 43
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 44
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 45
(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 46
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>
Independent auditors' report
- -----------------------------------------------------------------------------
The board and shareholders
IDS Tax-Free Money Fund, Inc.:
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments in securities, of IDS Tax-Free Money Fund, Inc. as
of December 31, 1996, and the related statement of operations for the year then
ended, and the statements of changes in net assets for each of the years in the
two-year period ended December 31, 1996, and the financial highlights for each
of the years in the ten-year period ended December 31, 1996, included in the
prospectus. These financial statements and the financial highlights are the
responsibility of fund management. Our responsibility is to express an opinion
on these financial statements and the financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and the financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Investment securities held in custody are confirmed to us by the
custodian. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of IDS Tax-Free Money Fund, Inc.
at December 31, 1996, and the results of its operations, changes in its net
assets, and the financial highlights for the periods stated in the first
paragraph above, in conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
Minneapolis, Minnesota
February 7, 1997
<PAGE>
Financial statements
Statement of assets and liabilities
IDS Tax-Free Money Fund, Inc.
Dec. 31, 1996
Assets
Investments in securities, at value (Note 1)
(identified cost $155,716,840) $155,716,840
Cash in bank on demand deposit 657,411
Accrued interest receivable 1,116,074
-------------
Total assets 157,490,325
-------------
Liabilities
Dividends payable to shareholders 71,795
Accrued investment management services fee 1,333
Accrued transfer agency fee 196
Accrued administrative services fee 129
Other accrued expenses 28,517
--------------
Total liabilities 101,970
--------------
Net assets applicable to outstanding capital stock $157,388,355
==============
Represented by
Capital stock -- authorized 10,000,000,000 shares of $.01 par value;
outstanding 157,393,356 shares $ 1,573,934
Additional paid-in capital 155,818,230
Undistributed net investment income 2,910
Accumulated net realized loss (6,719)
--------------
Total -- representing net assets applicable to
outstanding capital stock $ 157,388,355
==============
Net asset value per share of outstanding capital stock $ 1.00
See accompanying notes to financial statements. =============
<PAGE>
Statement of operations
IDS Tax-Free Money Fund, Inc.
Year ended Dec. 31, 1996
Investment income
Income:
Interest $5,362,281
----------
Expenses (Note 2):
Investment management services fee 481,827
Transfer agency fee 164,893
Administrative services fee 46,628
Compensation of board members 8,266
Compensation of officers 1,136
Custodian fee 16,006
Postage 17,155
Registration fees 68,737
Reports to shareholders 18,503
Audit fees 19,500
Administrative 1,409
Other 2,681
------------
Total expenses 846,741
Earnings credits on cash balances (Note 2) (27,678)
------------
Total net expenses 819,063
------------
Investment income -- net 4,543,218
-----------
Net increase in net assets resulting from operations $4,543,218
===========
See accompanying notes to financial statements.
<PAGE>
Statements of changes in net assets
IDS Tax-Free Money Fund, Inc.
Year ended Dec. 31,
Operations and distributions 1996 1995
Investment income -- net $ 4,543,218 $ 4,307,172
Net realized gain on investments -- 6,404
---------------- --------------
Net increase in net assets resulting
from operations 4,543,218 4,313,576
-------------- --------------
Distributions to shareholders from:
Net investment income (4,540,366) (4,309,066)
--------------- ---------------
Capital share transactions at constant $1 net asset value
Proceeds from sales of shares 326,625,378 249,009,513
Net asset value of shares
issued in reinvestment of distributions 4,396,455 4,186,232
Payments for redemptions of shares (319,518,046) (239,954,987)
-------------- --------------
Increase in net assets from capital share
transactions 11,503,787 13,240,758
-------------- --------------
Total increase in net assets 11,506,639 13,245,268
Net assets at beginning of year 145,881,716 132,636,448
------------- -------------
Net assets at end of year
(including undistributed net investment
income of $2,910 and $58) $157,388,355 $145,881,716
============ ============
See accompanying notes to financial statements.
Notes to financial statements
IDS Tax-Free Money Fund, Inc.
- ------------------------------------------------------------------------------
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.
During the year ended Dec. 31, 1996, the Fund's custodian and transfer agency
fees were reduced by $27,678 as a result of earnings credits from overnight cash
balances.
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.
- ------------------------------------------------------------------------------
3. Securities transactions
Cost of purchases and proceeds from sales of securities aggregated $482,248,235
and $466,675,000, respectively, for the year ended Dec. 31, 1996. Realized gains
and losses are determined on an identified cost basis.
______________________________________________________________________________
4. Financial highlights
"Financial highlights" showing per share data and selected information is
presented on page 5 of the prospectus.
<PAGE>
<TABLE>
<CAPTION>
Investments in securities
IDS Tax-Free Money Fund, Inc. (Percentages represent
Dec. 31, 1996 value of investments
compared to net assets)
- -------------------------------------------------------------------------------------------------------------
Name of issuer and title of issue (b)
- -------------------------------------------------------------------------------------------------------------
Issuer Principal Value(a)
amount
- -------------------------------------------------------------------------------------------------------------
Alabama (5.2%)
Columbia County Industrial Development
Pollution Control Revenue Bonds Series C (Alabama Power)
<S> <C> <C> <C> <C>
4.65% 10-1-22 $ 800,000(c,d) $ 800,000
5.10% 10-1-22 1,500,000(c,d) 1,500,000
Columbia County Pollution Control Revenue Bonds Series D
(Alabama Power)
4.90% 10-1-22 5,900,000(c,d) 5,900,000
------------
Total 8,200,000
- -------------------------------------------------------------------------------------------------------------
Alaska (0.6%)
Valdez Marine Terminal Refunding Revenue Bonds Alaska Pipeline (Mobil)
4.15% 11-1-03 1,000,000(c,d) 1,000,000
- -------------------------------------------------------------------------------------------------------------
Arizona (10.0%)
Maricopa County (Arizona Public Service Company) (Bank of America)
4.95% 5-1-29 2,700,000(c,d) 2,700,000
Maricopa County Pollution Control Revenue Bonds
(Arizona Public Service Company) (Morgan Guaranty)
4.95% 5-1-29 2,400,000(c,d) 2,400,000
Maricopa County Pollution Control Revenue Bonds Series 1994B
(Arizona Public Service Company)
5.00% 5-1-29 2,000,000(c,d) 2,000,000
Maricopa County Pollution Control Revenue Bonds C.P. Series E
(Southern California Edison)
3.50% 1-27-97 1,120,000 1,120,000
3.70% 1-3-97 1,000,000 1,000,000
3.70% 1-8-97 1,600,000 1,600,000
Salt River Agricultural Improvement & Power District C.P.
3.45% 1-23-97 1,000,000 1,000,000
3.45% 2-10-97 2,900,000 2,900,000
3.60% 1-6-97 1,000,000 1,000,000
------------
Total 15,720,000
- -------------------------------------------------------------------------------------------------------------
California (3.2%)
Los Angeles County T.R.A.N.
4.50% 6-30-97 2,000,000 2,006,171
San Francisco City & County T.R.A.N.
4.50% 10-8-97 1,000,000(d) 1,005,915
State of California 1996-97 R.A.N.
4.50% 6-30-97 2,000,000 2,005,027
------------
Total 5,017,113
- -------------------------------------------------------------------------------------------------------------
See accompanying notes to investments in securities.
<PAGE>
- -------------------------------------------------------------------------------------------------------------
Colorado (5.2%)
Moffat County Pollution Control Revenue Bonds Series 1994 (Pacificorp)
5.10% 5-1-13 5,100,000(c,d) 5,100,000
State T.R.A.N.
4.50% 6-27-97 3,000,000 3,009,105
--------------
Total 8,109,105
- -------------------------------------------------------------------------------------------------------------
Florida (2.6%)
Jacksonville Electric Authority Electrical System C.P. Series D-1
3.50% 3-11-97 1,500,000 1,500,000
3.55% 1-7-97 1,400,000 1,400,000
State Municipal Power Agency C.P.
3.70% 1-7-97 1,155,000 1,155,000
------------
Total 4,055,000
- -------------------------------------------------------------------------------------------------------------
Georgia (3.7%)
Burke County Development Authority Pollution Control Revenue Bonds
(Georgia Power & Light) Vogtle 5th
4.90% 7-1-24 1,700,000(c,d) 1,700,000
Burke County Pollution Control Revenue Bonds (Georgia Power)
Series 1994
4.95% 7-1-24 1,500,000(c,d) 1,500,000
Monroe County Development Authority Pollution Control Revenue Bonds
(Gulf Power)
4.65% 7-1-25 600,000(c,d) 600,000
Monroe County Development Authority Pollution Control Revenue Bonds
Series 1995 (Georgia Power & Light) (Scherer)
5.00% 7-1-25 2,000,000(c,d) 2,000,000
------------
Total 5,800,000
- -------------------------------------------------------------------------------------------------------------
Idaho (1.9%)
State T.A.N. Series 1994
4.50% 6-30-97 3,000,000(d) 3,008,539
- -------------------------------------------------------------------------------------------------------------_
Illinois
(1.3%)
Chicago Park District Corporate T.A.N. Series 1996
4.70% 9-30-97 2,000,000 2,011,496
- -------------------------------------------------------------------------------------------------------------
Indiana (3.2%)
Bond Bank Advanced Funding Notes Series 1996A-2
4.25% 1-9-97 1,000,000 1,000,199
Mount Vernon Pollution Control & Solid Waste Disposal
Refunding Revenue Bonds C.P. (General Electric)
3.40% 2-4-97 1,190,000 1,190,000
3.40% 2-5-97 1,800,000 1,800,000
State Education Facility (University of Notre Dame)
4.00% 3-1-25 1,000,000(c,d) 1,000,000
-------------
Total 4,990,199
- -------------------------------------------------------------------------------------------------------------
Iowa (1.9%)
State School Warrant Certificates Series A
4.75% 6-27-97 2,000,000 2,007,458
State School Warrant Certificates Series B
(FSA Insured)
4.25% 1-30-97 1,000,000(e) 1,000,653
-------------
Total 3,008,111
- -------------------------------------------------------------------------------------------------------------
Kentucky (0.8%)
Jefferson County Pollution Control Revenue Notes C.P. V.R.D.N.
Series 1993 (Louisville Gas & Electric)
3.60% 1-10-97 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) 2,005,831
- -------------------------------------------------------------------------------------------------------------
Maryland (2.1%)
Health & Educational Facilities Authority Revenue Bonds
Series A (Kaiser Permanente)
4.10% 7-1-15 2,000,000(c,d) 2,000,000
Montgomery County C.P. B.A.N.
3.50% 3-4-97 1,300,000 1,300,000
--------------
Total 3,300,000
- -------------------------------------------------------------------------------------------------------------
Maryland (2.1%)____________________________________________________________________________________________________________
Michigan
(3.3%)
Regents of the University Hospital Refunding Revenue Bonds Series 1992A
5.10% 12-1-19 3,000,000(c,d) 3,000,000
Regents of the University Hospital Refunding Revenue Bonds Series 1995A
5.10% 12-1-27 2,200,000(c,d) 2,200,000
------------
Total 5,200,000
- -------------------------------------------------------------------------------------------------------------
Minnesota (6.5%)
Becker C.P. Series 1993B (Northern States Power)
3.45% 2-18-97 3,000,000 3,000,000
3.60% 1-3-97 1,000,000 1,000,000
Regents of the University of Minnesota C.P. Series I
3.60% 1-6-97 1,000,000 1,000,000
Rochester Health Care Facility Revenue Bonds Series A (Mayo Clinic)
3.45% 3-5-97 1,000,000 1,000,000
Southern Minnesota Municipal Power C.P. Series B
3.70% 1-2-97 2,000,000 2,000,000
University of Minnesota C.P. V.R.D.B. Series 1985H
3.55% 1-21-97 1,300,000(d) 1,300,000
3.60% 1-22-97 1,000,000(d) 1,000,000
------------
Total 10,300,000
- -------------------------------------------------------------------------------------------------------------
Mississippi (4.0%)
Jackson County Pollution Control Refunding Revenue Bonds (Chevron)
5.00% 12-1-16 4,200,000(c,d) 4,200,000
Jackson County Port Bonds Series 1993 (Chevron)
4.90% 6-1-23 1,000,000(c,d) 1,000,000
Jackson County Port Facility (Chevron)
4.90% 6-1-23 300,000(c,d) 300,000
Jackson County Port Facility Revenue Bonds Series 1993 (Chevron)
4.90% 6-1-23 800,000(c,d) 800,000
------------
Total 6,300,000
- -------------------------------------------------------------------------------------------------------------
Missouri (2.5%)
State Health and Education Facilities Authority
Series B (Washington University)
4.95% 9-1-30 2,700,000(c,d) 2,700,000
Washington University Health & Education Facilities Authority Series A
4.95% 9-1-30 1,200,000(c,d) 1,200,000
------------
Total 3,900,000
- -------------------------------------------------------------------------------------------------------------
New Jersey (1.9%)
State C.P. T.R.A.N. Series 1997A
3.50% 3-6-97 3,000,000 3,000,000
- -------------------------------------------------------------------------------------------------------------
New Mexico (0.3%)
Farmington Pollution Control Refunding Revenue Bonds
Series B (Arizona Public Service)
5.00% 9-1-24 500,000(c,d) 500,000
- -------------------------------------------------------------------------------------------------------------
New York (4.6%)
New York City Municipal Water & Sewer System Revenue Bonds
5.00% 6-15-22 1,300,000(c,d) 1,300,000
5.00% 6-15-23 1,600,000(c,d) 1,600,000
New York City Municipal Water Financial Authority Series 1994C
5.00% 6-15-23 1,250,000(c,d) 1,250,000
New York City R.A.N. Series A
4.49% 4-15-97 1,000,000 1,002,467
New York City T.A.N. Series A
4.50% 2-12-97 2,000,000 2,001,792
--------------
Total 7,154,259
- -------------------------------------------------------------------------------------------------------------
North Carolina (2.5%)
Medical Care Community Hospital Revenue Bonds Duke University Hospital
Series 1985B-C
3.95% 6-1-15 4,000,000(c,d) 4,000,000
- -------------------------------------------------------------------------------------------------------------
Ohio (1.0%)
State Air Quality Development Authority Revenue Bonds
Series 1995B (Cincinnati Gas & Electric)
4.70% 12-1-15 1,200,000(c,d) 1,200,000
State Air Quality Development Authority Revenue Bonds
Series A (Cincinnati Gas & Electric)
4.90% 9-1-30 400,000(c,d) 400,000
------------
Total 1,600,000
- -------------------------------------------------------------------------------------------------------------______________________
Pennsylvania
(7.5%)
Delaware County Industrial Development Authority Airport Facility
Revenue Bonds Series 1985 (United Parcel Service)
4.85% 12-1-15 2,800,000(c,d) 2,800,000
State Higher Education Facilities Authority Refunding Revenue Bonds
Series B (Carnegie Mellon)
5.00% 11-1-27 5,000,000(c) 5,000,000
State Higher Education Facilities Authority Revenue Bonds
Series C
4.00% 1-1-26 3,000,000(c,d) 3,000,000
State T.R.A.N.
4.50% 6-30-97 1,000,000(d) 1,003,840
-------------
Total 11,803,840
- -------------------------------------------------------------------------------------------------------------
Texas (11.1%) Houston T.R.A.N.
4.50% 6-30-97 2,000,000 2,006,794
Jefferson Port Arthur Navigation District
Pollution Control Revenue Bonds (Texaco)
5.00% 10-1-24 7,900,000(c,d) 7,900,000
San Antonio Electric & Gas System C.P. Series A
3.50% 2-11-97 1,500,000 1,500,000
State Municipal Power Authority C.P.
3.40% 2-3-97 1,500,000 1,500,000
3.60% 1-2-97 1,600,000 1,600,000
State T.R.A.N. Series 1996
4.75% 8-29-97 3,000,000 3,014,796
------------
Total 17,521,590
- -------------------------------------------------------------------------------------------------------------
Vermont (0.6%)
State General Obligation C.P. R.A.N. Series I
3.50% 1-24-97 1,000,000 1,000,000
- -------------------------------------------------------------------------------------------------------------
Virginia (2.9%)
Peninsula Port Authority Series 1987 (Shell Oil)
5.00% 12-1-05 4,600,000(c,d) 4,600,000
- -------------------------------------------------------------------------------------------------------------
Washington (1.2%)
State General Obligation C.P. R.A.N. Series 1996B
4.00% 6-15-20 1,000,000(c,d) 1,000,000
Washington Public Power Supply System Electric Refunding Revenue Bonds
Project #3
4.10% 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 4,011,757
- -------------------------------------------------------------------------------------------------------------
Wyoming (3.4%)
Lincoln County Pollution Control Revenue Bonds Series 1984B (Exxon)
5.00% 11-1-14 100,000(c,d) 100,000
Lincoln County Pollution Control Revenue Bonds Series 1985 (Exxon)
4.90% 8-1-15 3,200,000(c,d) 3,200,000
Sublette County Series 1984 (Exxon)
4.90% 11-1-14 2,100,000(c,d) 2,100,000
-------------
Total 5,400,000
- -------------------------------------------------------------------------------------------------------------
Total investments in securities (98.9%)
(Cost: $155,716,840)(f)
$155,716,840
- -------------------------------------------------------------------------------
Notes to investments in securities
- -------------------------------------------------------------------------------
</TABLE>
(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.R.A.N. -- Tax & Revenue Anticipation Note
V.R.D.B. -- Variable Rate Demand Bond
V.R.D.N. -- Variable Rate Demand Note
(c) Interest rate varies to reflect current market conditions; rate shown
is the effective rate on Dec. 31,1996.
(d) The Fund is entitled to receive principal amount from issuer or corporate
guarantor, if indicated in parentheses, after a day or a week's notice. The
maturity date disclosed represents the final maturity. However, for purposes of
Rule 2a-7, maturity is the later of the next put or interest rate reset date.
(e) The following abbreviation is used in the portfolio description
to identify the insurer of the issue:
FSA -- Financial Security Assurance
(f) At Dec. 31, 1996, also represents the cost of securities for federal
income tax purposes.
<PAGE>
PAGE 47
PART C. OTHER INFORMATION
Item 24. Financial Statements and Exhibits.
(a) List of financial statements filed electronically as part of
this Post-Effective Amendment to the Registration Statement:
-Independent Auditors' Report dated February 7, 1997
-Statement of assets and liabilities, December 31, 1996
-Statement of operations, Year ended December 31, 1996
-Statements of changes in net assets, for the two-year period
ended December 31, 1995 and December 31, 1996
-Notes to financial statements
-Investments in Securities, December 31, 1996
-Notes to Investments in Securities
(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, filed electronically as Exhibit 5 to Post-
Effective Amendment No. 29, is incorporated herein by
reference.
6. Copy of Distribution Agreement between Registrant and American
Express Financial Advisors Inc. dated March 20, 1995, filed
electronically as Exhibit 6 to Post-Effective Amendment No.
29, is incorporated herein by reference.
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, filed
electronically as Exhibit 8 to Post-Effective Amendment No.
29, is incorporated herein by reference.
<PAGE>
PAGE 48
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.
(c) Copy of Transfer Agency Agreement between Registrant and
American Express Financial Corporation dated March 20, 1995,
filed electronically as Exhibit 9(c) to Post-Effective
Amendment No. 29, is incorporated herein by reference.
(d) Copy of Administrative Services Agreement between
Registrant and American Express Financial Corporation dated
March 20, 1995, filed electronically as Exhibit 9(d) to Post-
Effective Amendment No. 29, is incorporated herein by
reference.
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. Independent Auditors' Consent is filed electronically
herewith.
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. Copy of Schedule of Computation of each performance quotation
provided in the Registration Statement in response to Item
22(b) is filed electronically herewith.
17. Financial Data Schedule is filed electronically herewith.
18. (a) Directors' Power of Attorney to sign amendments to this
Registration Statement dated January 8, 1997, is filed
electronically herewith.
<PAGE>
PAGE 49
(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
Item 26. Number of Holders of Securities
(1) (2)
Number of Record
Holders as of
Title of Class Feb. 10, 1997
Common Stock 8,020
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
<PAGE>
PAGE 50
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 51
<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 52
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., certifies that it meets the requirements for the
effectiveness of this Amendment to its Registration Statement
pursuant to Rule 485(b) under the Securities Act of 1933, and 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 19th
day of February, 1997.
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 19th day
of February, 1997.
Signatures Capacity
/s/ William R. Pearce* President, Chief
William R. Pearce Executive Officer and
Director
/s/ H. Brewster Atwater, Jr.*
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 53
Signatures Capacity
/s/ Melvin R. Laird* Director
Melvin R. Laird
/s/ Alan K. Simpson* Director
Alan K. Simpson
/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 January 8,
1997, is filed electronically herewith.
_______________________________
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 54
CONTENTS OF THIS
POST-EFFECTIVE AMENDMENT NO. 30
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 11: Independent Auditors Consent
Exhibit 16: Copy of Schedule of Computation
Exhibit 17: Financial Data Schedule
Exhibit 18(a): Directors' Power of Attorney, dated January 8, 1997
<PAGE>
PAGE 1
Independent auditors' consent
___________________________________________________________________
The board and shareholders
IDS Tax-Free Money Fund, Inc.:
We consent to the use of our report incorporated herein by
reference and to the references to our Firm under the headings
"Financial highlights" in Part A and "INDEPENDENT AUDITORS" in Part
B of the Registration Statement.
KPMG Peat Marwick LLP
Minneapolis, Minnesota
February 19, 1997
<PAGE>
PAGE 1
IDS Tax-Free Money Fund, Inc.
Performance Calculations
As disclosed in the Funds' prospectus, aggregate total return is
the percentage change between the net asset value of one Fund share
at the beginning of a period and the net asset value of that share
at the end of the period with income and capital gain distributions
treated as reinvested at net asset value on the payable date. The
Fund's computerized data base file is updated monthly with ending
net asset value, income and capital gain distribution amounts per
share, and reinvestment value. From this information, ending total
values are calculated for any requested period and aggregate total
returns are calculated according to the following formula:
Aggregate Total Return = Ending Total Value - Initial Amount
Invested
_________________________________________
Initial Amount Invested
Based on initial $1,000 investment made December 31, 1995, and the
net asset value and distribution information attached, the value of
each investment at December 31, 1996, and aggregate total return
for the one-year period, are as follows:
Aggregate
Ending Total
Value Return
$1,030 $1,030 - 1,000 = +2.95%
$1,000
Aggregate total return for the period from December 31, 1986 to
December 31, 1996 is as follows:
$1,411 - 1,000 = +41.13%
$1,000
Average annual total return (T) equates the initial amount invested
(P) to the ending redeemable value (ERV) over each period (n) in
accordance with the formula prescribed by the Securities and
Exchange Commission: P(1+T)n = ERV.
Average annual total returns for the same period as above is as
follows:
$1,000(1 + .0350)10 = $1,035 T= +3.50%
<PAGE>
PAGE 2
IDS Tax-Free Money Fund, Inc.
Net Reinvest Dividend/ Capital
Date Asset Value Value Share Gain Dist.
12/31/95 1.000 1.000 0.00000 0.0000
01/31/96 1.000 1.000 0.00231 0.0000
02/29/96 1.000 1.000 0.00251 0.0000
03/31/96 1.000 1.000 0.00226 0.0000
04/30/96 1.000 1.000 0.00240 0.0000
05/31/96 1.000 1.000 0.00263 0.0000
06/30/96 1.000 1.000 0.00224 0.0000
07/31/96 1.000 1.000 0.00218 0.0000
08/31/96 1.000 1.000 0.00253 0.0000
09/30/96 1.000 1.000 0.00244 0.0000
10/31/96 1.000 1.000 0.00272 0.0000
11/30/96 1.000 1.000 0.00243 0.0000
12/31/96 1.000 1.000 0.00249 0.0000
As disclosed in the Fund's Statement of Additional Information,
annualized simple yield for a 7-day period are computed 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, and multiplying that
return by 365/7 to obtain an annualized figure. The value of the
hypothetical account includes any declared dividends, the value of
any shares purchased with any dividend paid during the period and
any dividends declared for such shares.
Annualized Simple Yield = (Sum of Dividends for 7 day Period)
365/7
*Anualizing Factor
Annualized Simple yield for the 7-day period ended December 31,
1996 is as follows:
IDS Tax-Free Money Fund, Inc. (.0006437423) * 365/7 =
3.36%
Compound yield for the fund is calculated according to the
following formula:
Compound Yield = [(Return for Seven-day Period + 1) 365/7] - 1
IDS Tax-Free Money Fund, Inc.
[(.0006439199 + 1) 365/7] - 1
3.41%
<PAGE>
PAGE 3
Distribution Yield Information
IDS Tax-Free Money Fund, Inc.
Date Dividend Rate
Per Share
12/31/96 0.0000986257
12/30/96 0.0000890150
12/29/96 0.0000921262
12/28/96 0.0000921262
12/27/96 0.0000921262
12/26/96 0.0000898615
12/25/96 0.0000898615
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 1
<NAME> IDS TAX-FREE MONEY FUND
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 155716840
<INVESTMENTS-AT-VALUE> 155716840
<RECEIVABLES> 1116074
<ASSETS-OTHER> 657411
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 157490325
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 101970
<TOTAL-LIABILITIES> 101970
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 157392164
<SHARES-COMMON-STOCK> 157393356
<SHARES-COMMON-PRIOR> 145889568
<ACCUMULATED-NII-CURRENT> 2910
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (6719)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 157388355
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 5362281
<OTHER-INCOME> 0
<EXPENSES-NET> 819063
<NET-INVESTMENT-INCOME> 4543218
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 4543218
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (4540366)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 326625378
<NUMBER-OF-SHARES-REDEEMED> (319518046)
<SHARES-REINVESTED> 4396455
<NET-CHANGE-IN-ASSETS> 11506639
<ACCUMULATED-NII-PRIOR> 4307172
<ACCUMULATED-GAINS-PRIOR> 6404
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 481827
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 819063
<AVERAGE-NET-ASSETS> 154581355
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> .03
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> (.03)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> .55
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<PAGE>
PAGE 1
DIRECTORS/TRUSTEES POWER OF ATTORNEY
City of Minneapolis
State of Minnesota
Each of the undersigned, as directors and trustees of the
below listed open-end, diversified investment companies that
previously have filed registration statements and amendments
thereto pursuant to the requirements of the Securities Act of 1933
and the Investment Company Act of 1940 with the Securities and
Exchange Commission:
1933 Act 1940 Act
Reg. Number Reg. Number
IDS Bond Fund, Inc. 2-51586 811-2503
IDS California Tax-Exempt Trust 33-5103 811-4646
IDS Discovery Fund, Inc. 2-72174 811-3178
IDS Equity Select Fund, Inc. 2-13188 811-772
IDS Extra Income Fund, Inc. 2-86637 811-3848
IDS Federal Income Fund, Inc. 2-96512 811-4260
IDS Global Series, Inc. 33-25824 811-5696
IDS Growth Fund, Inc. 2-38355 811-2111
IDS High Yield Tax-Exempt Fund, Inc. 2-63552 811-2901
IDS International Fund, Inc. 2-92309 811-4075
IDS Investment Series, Inc. 2-11328 811-54
IDS Managed Retirement Fund, Inc. 2-93801 811-4133
IDS Market Advantage Series, Inc. 33-30770 811-5897
IDS Money Market Series, Inc. 2-54516 811-2591
IDS New Dimensions Fund, Inc. 2-28529 811-1629
IDS Precious Metals Fund, Inc. 2-93745 811-4132
IDS Progressive Fund, Inc. 2-30059 811-1714
IDS Selective Fund, Inc. 2-10700 811-499
IDS Special Tax-Exempt Series Trust 33-5102 811-4647
IDS Stock Fund, Inc. 2-11358 811-498
IDS Strategy Fund, Inc. 2-89288 811-3956
IDS Tax-Exempt Bond Fund, Inc. 2-57328 811-2686
IDS Tax-Free Money Fund, Inc. 2-66868 811-3003
IDS Utilities Income Fund, Inc. 33-20872 811-5522
hereby constitutes and appoints William R. Pearce and Leslie L. Ogg
or either one of them, as her or his attorney-in-fact and agent, to
sign for her or him in her or his name, place and stead any and all
further amendments to said registration statements filed pursuant
to said Acts and any rules and regulations thereunder, and to file
such amendments with all exhibits thereto and other documents in
<PAGE>
PAGE 2
connection therewith with the Securities and Exchange Commission,
granting to either of them the full power and authority to do and
perform each and every act required and necessary to be done in
connection therewith.
Dated the 8th day of January, 1997.
/s/ H. Brewster Atwater, Jr. /s/ Melvin R. Laird
H. Brewster Atwater, Jr. Melvin R. Laird
/s/ Lynne V. Cheney /s/ William R. Pearce
Lynne V. Cheney William R. Pearce
/s/ William H. Dudley /s/ Alan K. Simpson
William H. Dudley Alan K. Simpson
/s/ Robert F. Froehlke /s/ Edson W. Spencer
Robert F. Froehlke Edson W. Spencer
/s/ David R. Hubers /s/ John R. Thomas
David R. Hubers John R. Thomas
/s/ Heinz F. Hutter /s/ Wheelock Whitney
Heinz F. Hutter Wheelock Whitney
/s/ Anne P. Jones /s/ C. Angus Wurtele
Anne P. Jones C. Angus Wurtele
