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1996 ANNUAL REPORT
IDS Tax-Free Money Fund
(prospectus enclosed)
(icon of) shield with piggy bank enclosed
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.
(This annual report includes a prospectus that describes in detail
the Fund's objective, investment policies, risks, sales charges,
fees and other matters of interest. Please read the prospectus
carefully before you invest or send money.)
AMERICAN
EXPRESS
Financial
Advisors
Distributed by American Express Financial Advisors Inc.<PAGE>
PAGE 2
(icon of) shield with piggy bank enclosed
Stability without taxes
Everyone needs to have a cash reserve to cover unexpected expenses.
But where to keep it? It's easy to find an investment that
provides stability and ready access to your money, but there's
usually a drawback: You have to pay taxes on the interest the
money earns. But there is an alternative - Tax-Free Money Fund.
The interest it pays is generally free from federal taxes. The
result: a cash reserve that can let you keep the tax-exempt income
it earns.<PAGE>
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Contents
The purpose of this annual report is to tell investors how the Fund
performed.
(Icon of) One open book inside of another.
The prospectus, which is bound into the middle of this annual
report, describes the Fund in detail.
1996 annual report
From the president 4
From the portfolio manager 4
Making the most of your Fund 6
Independent auditors' report 8
Financial statements 9
Notes to financial statements 12
Investments in securities 18
IDS mutual funds 25
Federal income tax information 29
1997 prospectus
The Fund in brief 3p
Goal 3p
Types of Fund investments and their risks 3p
Manager and distributor 3p
Portfolio manager 3p
Sales charge and Fund expenses 4p
Performance 5p
Financial highlights 5p
Yield 5p
Investment policies and risks 6p
Facts about investments and their risks 6p
Alternative investment option 8p
Valuing Fund shares 8p
How to purchase, exchange or redeem shares 9p
How to purchase shares 9p
How to exchange shares 12p
How to redeem shares 13p
Special shareholder services 18p
Services 18p
Quick telephone reference 18p
Distributions and taxes 19p
Dividend and capital gain distributions 19p
Reinvestments 19p
Taxes 20p
How to determine the correct TIN 22p
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How the Fund is organized 23p
Shares 23p
Voting rights 23p
Shareholder meetings 24p
Board members and officers 24p
Investment manager and transfer agent 26p
Distributor 27p
About American Express Financial Corporation 28p
General information 28p
Appendix 29p
Tax-exempt vs. taxable income 29p
(This annual report is not part of the prospectus.)
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To our shareholders
(photo of) William R. Pearce
President of the Fund
(photo of) Terry Fettig
Portfolio manager
From the president
If you're an experienced investor, you know that the past two years
have been unusually strong ones in many financial markets. Perhaps
just as important, you also know that history shows that bull
markets don't last forever. Though they're often unpredictable,
declines-whether they're brief or long-lasting, moderate or
substantial-are always a possibility.
That fact reinforces the need for investors to periodically review
their long-term goals and examine whether their investment program
remains on track to achieving them. Your quarterly investment
statements are one part of that monitoring process. The other is a
meeting with your American Express financial advisor. That becomes
even more important if there's a major change in your financial
situation or in the financial markets.
(signature of) William R. Pearce
From the portfolio manager
IDS Tax-Free Money Fund's yield fell slightly during the fiscal
year (January through December, 1996), tracking a decline in short-
term interest rates. The $1 net asset value was unchanged for the
past 12 months, providing shareholders with continued stability of
principal in addition to a tax-free return.
For the seven-day period ended Dec. 31, 1996, the Fund provided
shareholders with an annualized simple yield of 3.36% and an
annualized compound yield of 3.41%. These are equal to 4.67%
simple and 4.74% compound taxable yields for an investor in the 28-
percent federal income-tax bracket.
(Investors should keep in mind that an investment in the Fund is
neither insured nor guaranteed by the U.S. government. Although
the Fund seeks to maintain a stable $1 share price, there is no
assurance that it will be able to do so. Investors also should
note that, under federal law, some notes issued on the tax-free
market are subject to the alternative minimum tax, or AMT. To
eliminate any federal income-tax liabilities for investors who may
be subject to AMT requirements, the Fund does not own such issues.)
Tax-reform talk, ecomomic growth temporarily upset market
The biggest market news in 1996 centered on political proposals for
a flat federal income tax and an economy that showed greater-than-
expected growth early in the year. Those factors created
considerable volatility among municipal securities before
dissipating by the time summer arrived.
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An ongoing factor influencing this Fund is that yields on tax-free
securities are seasonally affected by supply and demand factors.
Demand typically picks up at the outset of the year, creating lower
yields than otherwise might be expected. (When investors' interest
in municipal securities is high, municipalities can afford to
reduce the amount of interest they must offer on bonds to attract
buyers.) By mid-year, the supply of new issues usually increases.
This was the case again last year.
Maturity shifts
As for changes to the portfolio, the most notable were shifts in
the portfolio's average maturity-varying from the mid-20-day range
in June to the 60-day range in July and August, as dictated largely
by the seasonal supply and demand factors described above. At
year-end, average maturity was about 45 days.
Looking to the current fiscal year, I expect a continuation of
moderate economic growth accompanied by a modest increase in the
inflation rate. I also expect the Federal Reserve Board to push
short-term interest rates somewhat higher. In such a scenario,
rates on the short-term, tax-free securities that comprise the
portfolio probably would increase slightly. Should that prove
true, the Fund's yield would rise accordingly.
(signature of) Terry Fettig
12-month performance
(All figures per share)
Net asset value (NAV)
_________________________________
Dec. 31, 1996 $ 1.00
_________________________________
Dec. 31, 1995 $ 1.00
_________________________________
Increase $ --
_________________________________
Distributions
Jan. 1, 1996 - Dec. 31, 1996
_________________________________
From income $ 0.03
_________________________________
From capital gains $ --
_________________________________
Total distributions $ 0.03
_________________________________
Total return* +2.9%
_________________________________
* The total return is a hypothetical
investment in the Fund with all
distributions reinvested.
(This annual report is not part of the prospectus.)
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Making the most of the Fund
Average annual total return
(as of Dec. 31, 1996)
1 year 5 years 10 years
+2.95% +2.42% +3.50%
Although there is no guarantee, the Fund will use its best efforts
to maintain a constant net asset value of $1 per share.
Your investment and return values may fluctuate so that your
shares, when redeemed, may be worth more or less than the original
cost. This was a period of widely fluctuating security prices.
Past performance is no guarantee of future results.
<PAGE>
The financial statements contained in Post-Effective Amendment #30
to Registration Statement No. 2-66868 filed on or about February
19, 1997 are incorporated herein by reference.
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PAGE 8
IDS mutual funds
Global/International funds
Funds in this group seek capital growth and/or income by investing
primarily in foreign securities. Foreign investments may be
subject to currency fluctuations and political and economic risks
of the countries in which the investments are made. They are high
risk mutual funds with a potential for high reward.
IDS Emerging Markets Fund
Invests in a Portfolio comprised primarily of stocks of companies
in developing countries throughout the world that are believed to
offer growth potential. Seeks to provide long-term growth of
capital.
(icon of) world with countries
IDS Global Growth Fund
Invests in a Portfolio comprised primarily of stocks of companies
throughout the world that are positioned to meet market needs in a
changing world economy. These companies offer above-average
potential for long-term growth.
(icon of) world
IDS International Fund
Invests primarily in common stocks of foreign companies that offer
potential for superior growth. The Fund may invest up to 20% of
its assets in the U.S. market.
(icon of) three flags
IDS Global Balanced Fund
Invests in stocks and bonds in, for the most part, major markets
throughout the world, including the U.S. Seeks to provide a
balance of growth of capital and current income.
(icon of) scale holding two worlds
IDS Global Bond Fund
Invests in a Portfolio comprised primarily of debt securities of
U.S. and foreign issuers to seek high total return through income
and growth of capital.
(icon of) globe
Growth funds
Funds in this group seek capital growth, primarily from common
stocks. They are high risk mutual funds with a potential for high
reward.
(This annual report is not part of the prospectus.)<PAGE>
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IDS Precious Metals Fund
Invests primarily in the securities of foreign or domestic
companies that explore for, mine and process or distribute gold and
other precious metals. A highly aggressive and speculative fund
that seeks long-term growth of capital.
(icon of) cart of precious gems
IDS Discovery Fund
Invests in small- and medium-size, growth-oriented companies
emphasizing technological innovation and productivity enhancement.
Buys and holds larger growth-oriented stocks.
(icon of) ship
IDS Small Company Index Fund
Invests in all or a representative group of the equity securities
comprising the S&P SmallCap 600 Index, as it strives to provide
long-term capital appreciation.
(icon of) office building
IDS Strategy Aggressive Fund
Invests primarily in common stocks of companies that are selected
for their potential for above-average growth. Above-average means
that their growth potential is better, in the opinion of the
portfolio's investment manager, than the Standard & Poor's
Corporation (S&P) 500 Stock Index.
(icon of) chess piece
IDS Research Opportunities Fund
Invests in a Portfolio comprised primarily of equity securities of
companies included in the S&P 500 Index that are believed to have
strong growth potential. The Portfolio is managed using a research
methodology by the Research Department of AEFC. Goal is long-term
appreciation.
(icon of) magnifying glass
IDS Growth Fund
Invests in a Portfolio comprised primarily of companies that have
above-average potential for long-term growth as a result of new
management, marketing opportunities or technological superiority.
(icon of) trees
(This annual report is not part of the prospectus.)
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IDS New Dimensions Fund
Invests in a Portfolio comprised primarily of companies with
significant growth potential due to superiority in technology,
marketing or management. The Fund frequently changes its industry
mix.
(icon of) dimension
IDS Progressive Fund
Invests primarily in undervalued common stocks. The Fund holds
stocks for the long term with the goal of capital growth.
(icon of) shooting star
Growth & income funds
These funds focus on securities of medium to large, well-
established companies that offer long-term growth of capital and
reasonable income from dividends and interest.
IDS Equity Select Fund
Invests primarily in a combination of moderate growth stocks,
higher-yielding equities and bonds. Seeks growth of capital and
income.
(icon of) three pine trees
IDS Blue Chip Advantage Fund
Invests in selected stocks from a major market index. Securities
purchased are those recommended by our research analysts as the
best from each industry represented on the index. Offers potential
for long-term growth as well as dividend income.
(icon of) ribbon
IDS Managed Allocation Fund
Invests in a Portfolio comprised primarily of U.S. equity
securities, U.S. and foreign debt securities, foreign equity
securities and money market instruments. The Fund provides
diversification among these major investment categories and has a
target mix that represents the way the Fund's investments will be
allocated over the long term. Seeks maximum total return.
(icon of) gyroscope
IDS Stock Fund
Invests in a Portfolio comprised primarily of common stock of
companies representing many sectors of the economy. Seeks current
income and growth of capital.
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(This annual report is not part of the prospectus.)<PAGE>
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IDS Equity Value Fund
Invests primarily in undervalued common stocks that offer potential
for growth of capital and income.
(icon of) three growing flowers
IDS Utilities Income Fund
Invests primarily in the stocks of public utility companies to seek
high current income and growth of income and capital with reduced
volatility.
(icon of) light bulb
IDS Diversified Equity Income Fund
Invests in a Portfolio comprised primarily of high-yielding common
stocks to seek high current income and, secondarily, to benefit
from the growth potential offered by stock investments.
(icon of) two puzzle pieces
IDS Mutual
Invests in a Portfolio which seeks to balance between common stocks
and senior securities (preferred stocks and bonds). Seeks a
balance of growth of capital and current income.
(icon of) scale of justice
Income funds
The funds in this group invest their assets primarily in corporate
bonds or government securities to seek interest income. Secondary
objective is capital growth. Risk varies by bond quality.
IDS Extra Income Fund
Invests in a Portfolio comprised mainly of long-term, high-yielding
corporate fixed-income securities in the lower rated, higher risk
bond categories to seek high current income. Secondary objective
is capital growth.
(icon of) coins
IDS Bond Fund
Invests mainly in corporate bonds, at least 50% in the higher
rated, lower risk bond categories, or the equivalent, and in
government bonds.
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(This annual report is not part of the prospectus.)
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IDS Selective Fund
Invests in a Portfolio comprised primarily of high-quality
corporate bonds and other highly rated debt instruments including
government securities and short-term investments. Seeks current
income and preservation of capital.
(icon of) skyline
IDS Federal Income Fund
Invests in a Portfolio comprised primarily of securities issued or
guaranteed as to the timely payment of principal and interest by
the U.S. government, its agencies and instrumentalities. Seeks a
high level of current income and safety of principal consistent
with its type of investments.
(icon of) shield with eagle head enclosed
Tax-exempt income funds
These funds provide tax-free income by investing in municipal
bonds. The income is generally free from federal income tax, but a
portion of the income may be subject to state and local taxes.
Risk varies by bond quality.
IDS Tax-Exempt Bond Fund
Invests mainly in bonds and notes of state or local government
units, with at least 75% in the four highest rated, lowest risk
bond categories.
(icon of) shield with Greek column enclosed
IDS Insured Tax-Exempt Fund
Invests primarily in municipal securities that are insured as to
the timely payment of principal and interest. The insurance
feature minimizes credit risk of the Fund but does not guarantee
the market value of the Fund's shares.
(icon of) shield with star enclosed
IDS State Tax-Exempt Funds
(CA, MA, MI, MN, NY, OH)
Invests primarily in high- and medium-grade municipal securities to
provide income to residents of each respective state that is exempt
from federal, state and local income taxes. (New York is the only
state that is exempt at the local level.)
(icon of) shield with U.S. enclosed
(This annual report is not part of the prospectus.)
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IDS High Yield Tax-Exempt Fund
Invests in a Portfolio comprised primarily of medium- and lower-
quality municipal bonds and notes. Lower-quality securities
generally involve greater risk of principal and income.
(icon of) shield with basket of apples enclosed
IDS Intermediate Tax-Exempt Fund
Invests in mainly investment-grade bonds and other debt securities
with intermediate-term maturities issued by state and local
government units. Goal is to seek a high level of current income
exempt from federal taxes.
(icon of) shield with a tree enclosed
Money market funds
These money market funds have three main goals: conservation of
capital, constant liquidity and the highest possible current income
consistent with these objectives. An investment in these funds is
neither insured nor guaranteed by the U.S. government, and there
can be no assurance that these funds will be able to maintain a
stable net asset value of $1.00 per share. Very limited risk.
IDS Cash Management Fund
Invests in such money market securities as high quality commercial
paper, bankers' acceptances, certificates of deposit (CDs) and
other bank securities.
(icon of) piggy bank
IDS Tax-Free Money Fund
Invests primarily in short-term bonds and notes issued by state and
local governments to seek high current income exempt from federal
income taxes.
(icon of) shield with piggy bank enclosed
For more complete information about any of these funds, including
charges and expenses, you can obtain a prospectus by contacting
your financial advisor or writing to American Express Shareholder
Service, P.O. Box 534, Minneapolis, MN 55440-0534. Read it
carefully before you invest or send money.
(This annual report is not part of the prospectus.)
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Federal income tax information
IDS Tax-Free Money Fund, Inc.
_____________________________________________________
The Fund is required by the Internal Revenue Code
of 1986 to tell its shareholders about the tax treatment of the
dividends it pays during its fiscal year. The dividends listed
below were reported to you on a Form 1099-DIV, Dividends and
Distributions, last January. Shareholders should consult a tax
advisor on how to report distributions for state and local
purposes.
IDS Tax-Free Money Fund, Inc.
Fiscal year ended Dec. 31, 1996
Exempt-interest dividends -- taxable status explained below.
Payable date Per share
Jan. 25, 1996 $0.00231
Feb. 26, 1996 0.00251
March 27, 1996 0.00226
April 26, 1996 0.00240
May 28, 1996 0.00263
June 26, 1996 0.00224
July 26, 1996 0.00218
Aug. 26, 1996 0.00253
Sept. 25, 1996 0.00244
Oct. 28, 1996 0.00272
Nov. 26, 1996 0.00243
Dec. 26, 1996 0.00249
Total distributions $0.02914
Source of distributions
100% of tax-exempt interest distributions during the year ended
Dec. 31, 1996, were derived exclusively from interest on tax-exempt
securities.
Federal taxation
Exempt-interest dividends are exempt from federal income taxes and
should not be included in shareholders' gross income.
Other taxation
Exempt-interest dividends may be subject to state and local taxes.
Each shareholder should consult a tax advisor about reporting this
income for state and local tax purposes.
(This annual report is not part of the prospectus.)
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Source of income by state
Percentages of income from municipal securities earned by the Fund
from various states during the year ended Dec. 31, 1996 are listed
below.
Alabama 1.305%
Alaska 0.652
Arizona 8.452
California 2.658
Colorado 5.058
Connecticut 1.475
Florida 2.641
Georgia 4.847
Idaho 1.765
Illinois 3.120
Indiana 4.709
Iowa 1.279
Kentucky 0.847
Louisiana 0.098
Maine 1.616
Maryland 1.935
Massachusetts 0.121
Michigan 5.028
Minnesota 8.205
Mississippi 2.319
Missouri 0.419
Nebraska 0.205
New Jersey 0.412
New Mexico 0.085
New York 4.871
North Carolina 3.106
Ohio 2.221
Pennsylvania 6.986
South Carolina 0.440
Texas 12.134
Vermont 1.158
Virginia 2.894
Washington 2.356
Wisconsin 2.266
Wyoming 2.317
(This annual report is not part of the prospectus.)
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PAGE 16
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
AMERICAN
EXPRESS
Financial
Advisors
IDS Tax-Free Money Fund
IDS Tower 10
Minneapolis, MN 55440-0010
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STATEMENT OF DIFFERENCES
Difference Description
1) The layout is different 1) Some of the layout in the
throughout the annual report. annual report to
shareholders is in two
columns.
2) Headings. 2) The headings in the
annual report are
placed in a blue strip
at the top of the page.
3) There are pictures, icons 3) Each picture, icon and
and graphs throughout the graph is described in
annual report. parentheses.
4) Footnotes for charts and 4) The footnotes for each
graphs are described at chart or graph are typed
the left margin. below the description of
the chart or graph.
