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. 31 (File No. 2-66868) X
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and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 32 (No. 811-3003) X
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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. 27, 1998 pursuant to paragraph (b)
60 days after filing pursuant to paragraph (a)(1)
on (date) pursuant to paragraph (a)(1)
75 days after filing pursuant to paragraph (a)(2)
on (date)pursuant to paragraph (a)(2) 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.
<PAGE>
Cross reference sheet showing the location in the prospectus and Statement of
Additional Information of the information called for by items enumerated in
Parts A and B of Form N-1A.
Negative answers omitted are so indicated.
PART A
Item No. Section in Prospectus
1 Cover page of prospectus
2 (a) Sales charge and Fund expenses
(b) The Fund in brief
(c) The Fund in brief
3 (a) Financial highlights
(b) NA
(c) Performance
(d) Financial highlights
4 (a) The Fund in brief; Investment policies and risks; How the Fund is
organized
(b) Investment policies and risks
(c) Investment policies and risks
5 (a) Board members and officers
(b)(i) Investment manager; About American Express Financial Corporation
- General information
(b)(ii) Investment manager
(b)(iii) Investment manager
(c) Portfolio manager
(d) Administrator and transfer agent
(e) Administrator and transfer agent
(f) Distributor
(g) Investment manager; About American Express Financial Corporation
- General information
5A(a) *
(b) *
6 (a) Shares; Voting rights
(b) NA
(c) NA
(d) Voting rights
(e) Cover page; Special shareholder services
(f) Dividend and capital gain distributions; Reinvestments
(g) Taxes
(h) Alternative purchase arrangements
7 (a) Distributor
(b) Valuing Fund shares
(c) How to purchase, exchange or redeem shares
(d) How to purchase shares
(e) NA
(f) Distributor
(g) Alternative purchase arrangements; Reductions and waivers of the
sales charge
8 (a) How to redeem shares
(b) NA
(c) How to purchase shares: Three ways to invest
(d) How to purchase, exchange or redeem shares: Redemption policies -
"Important...
9 None
PART B
Item No. Section in Statement of Additional Information
10 Cover page of SAI
11 Table of Contents
12 NA
13 (a) Additional Investment Policies; all appendices except Dollar-Cost
Averaging
(b) Additional Investment Policies
(c) Additional Investment Policies
(d) Security Transactions
14 (a) Board members and officers**; Board Members and Officers
(b) Board Members and Officers
(c) Board Members and Officers
15 (a) NA
(b) Principal Holders of Securities, if applicable
(c) Board Members and Officers
16 (a)(i) How the Fund is organized; About the American Express Financial
Corporation**
(a)(ii) Agreements: Investment Management Services Agreement, Plan and
Agreement of Distribution
(a)(iii) Agreements: Investment Management Services Agreement
(b) Agreements: Investment Management Services Agreement
(c) NA
(d) Agreements: Administrative Services Agreement, Shareholder
Service Agreement
(e) NA
(f) Agreement: Distribution Agreement
(g) NA
(h) Custodian Agreement; Independent Auditors
(i) Agreements: Transfer Agency Agreement; Custodian Agreement
17 (a) Security Transactions
(b) Brokerage Commissions Paid to Brokers Affiliated with American
Express Financial Corporation
(c) Security Transactions
(d) Security Transactions
(e) Security Transactions
18 (a) Shares; Voting rights**
(b) NA
19(a) Investing in the Fund
(b) Valuing Fund Shares; Investing in the Fund
(c) Redeeming Shares
20 Taxes
21 (a) Agreements: Distribution Agreement
(b) NA
(c) NA
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.
<PAGE>
IDS Tax-Free Money Fund
Prospectus
Feb. 27, 1998
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 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
800-862-7919
TTY: 800-846-4852
Web site address: http://www.americanexpress.com/advisors
<PAGE>
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
<PAGE>
About American Express Financial Corporation
General information
Appendix
Tax-exempt vs. taxable income
<PAGE>
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 investment manager believes present minimal
credit risk. For further information, refer to the later section in the
prospectus titled "Investment policies and risks."
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 $71 billion
in assets for the IDS MUTUAL FUND GROUP. Shares of the Fund are sold through
American Express Financial Advisors Inc. (AEFA), 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 Intermediate
Tax-Exempt Fund, IDS Life Moneyshare Fund and IDS Life Series Fund, Money Market
Portfolio.
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 percentage of offering price) 0%
<PAGE>
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.
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
Year ended Dec. 31,
Per share income and capital changesa
<TABLE>
<CAPTION>
1997 1996 1995 1994 1993 1992 1991 1990 1989 1988
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
beginning of year
Income from investment operations:
Net investment income .03 .03 .03 .02 .02 .02 .04 .05 .05 .04
Less distributions:
Dividends from net (.03) (.03) (.03) (.02) (.02) (.02) (.04) (.05) (.05) (.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
1997 1996 1995 1994 1993 1992 1991 1990 1989 1988
Net assets, end of year $152 $157 $146 $133 $116 $137 $144 $153 $117 $131
(in millions)
Ratio of expenses to .55% .55% .58% .68% .68% .63% .70% .71% .67% .65%
average daily net assetsb
Ratio of net income to 3.13% 2.94% 3.19% 2.11% 1.63% 2.25% 3.78% 5.24% 5.47% 4.54%
average daily net assets
Total return 3.2% 2.9% 3.2% 2.1% 1.6% 2.2% 3.8% 5.2% 5.6% 4.6%
</TABLE>
a For a share outstanding throughout the year. Rounded to the nearest
cent.
b Effective fiscal year 1996, 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.
Yield
The Fund's annualized simple yield for the seven days ended Dec. 31, 1997,
was 3.56% and its annualized compound yield was 3.62%. The Fund calculates
annualized simple and compound yields based on a seven-day period.
Past yields should not be considered on indicator of future yields.
The information in this table has been audited by KPMG Peat Marwick LLP,
independent auditors. The independent auditors' report and additional
information about the performance of the Fund are contained in the Fund's annual
report which, if not included with this prospectus, may be obtained without
charge.
Yield
The Fund's annualized simple yield for the seven days ended Dec. 31, 1997, was
3.56% and its annualized compound yield was 3.62%. 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
<PAGE>
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 investment 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 investment 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.
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.
<PAGE>
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 are investing in this Fund for the first time, you will need to set up an
account. Your financial advisor will help you fill out and submit an
application. Your application will be accepted only when federal funds (funds of
the Federal Reserve System) are available to the Fund, normally within three
days of receipt of your application. Once your account is set up, you can choose
among several convenient ways to invest.
Important: When opening an account, you must provide 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.
<PAGE>
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.
Three ways to invest
<TABLE>
<CAPTION>
<S> <C> <C>
1
By regular account Send your check and application (or your name Minimum amounts
and account number if you have an established Initial investment: $2,000
account) to: Additional
investments: $ 100
American Express Financial Advisors Inc. Account balances: $1,000*
P.O. Box 74
Minneapolis, MN 55440-0074
Your financial advisor will help you with this
process.
2
By scheduled investment Contact your financial advisor to set up one Minimum amounts
plan of the following scheduled plans: Initial investment: $2,000
Additional
o automatic payroll deduction investments: $ 100/
each payment
o bank authorization Account balances: $1,000
o direct deposit of Social Security check If account balance is below
$2,000, frequency of payments
o other plan approved by the Fund must be at least monthly.
<PAGE>
3
By wire If you have an established account, you may If this information is not
wire money to: included, the order may be
rejected and all money
Norwest Bank Minneapolis received by the Fund, less any
Routing No. 091000019 costs the Fund or AEFC incurs,
Minneapolis, MN will be returned promptly.
Attn: Domestic Wire Dept.
Minimum amounts
Give these instructions: Each wire investment:$1,000
Credit IDS Account #00-30-015 for personal
account # (your account number) for (your
name).
</TABLE>
*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 do not do
so within 30 days, your shares can be redeemed and the proceeds mailed to you.
If you are in a "wrap-fee" program sponsored by AEFA and your wrap program
balance falls below the required program minimum or is terminated, your shares
will be redeemed and the proceeds mailed to you.
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 on any other fund,
including fees and expenses, read that fund's prospectus carefully.
If your initial investment was in this Fund, and you exchange into a non-money
market fund, you will pay an initial sales charge if you exchange into Class A
and be subject to a contingent deferred sales charge if you exchange into Class
B. If your initial investment was in Class A shares of a non-money market fund
and you exchange shares into this Fund, you may exchange that amount, including
dividends earned on that amount, without paying a sales charge.
If your exchange request arrives at the Minneapolis headquarters before the
close of business, your shares will be redeemed at the net asset value set for
that day. The proceeds will be used to purchase new fund shares the same day.
Otherwise, your exchange will take place the next business day at that day's net
asset value.
For tax purposes, an exchange represents a redemption and purchase and may
result in a gain or loss. However, you cannot create a tax loss (or reduce a
taxable gain) by exchanging from the Fund within 91 days of your purchase. For
further explanation, see the SAI.
How to redeem shares
You can redeem your shares at any time. American Express Shareholder Service
will mail payment within seven days after receiving your request. When you
redeem shares, the amount you receive may be more or less than the amount you
invested. Your shares will be redeemed at net asset value at the close of
business on
<PAGE>
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 Financial o The Fund and AEFC will honor any telephone
Advisors Telephone Transaction exchange or redemption request believed
Service: 800-437-3133 or to be authentic and will use reasonable
612-617-3800 procedures to confirm that they are. This
includes asking identifying questions and
or tape recording calls.If reasonable
procedures are followed, the Fund or AEFC
will not be liable for any loss resulting
from fraudelent 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 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.
Minimum amount
Redemption: $100
Maximum amount
Redemption: $50,000
<PAGE>
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.
Minimum amount
Redemption: $100
</TABLE>
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.)
<PAGE>
<TABLE>
<CAPTION>
Three ways to receive payment when you redeem shares
<S> <C>
1 o Mailed to the address on record
By regular or o Payable to names listed on the account
express mail NOTE: You will be charged a fee if you request express mail delivery.
2 o Minimum wire redemption: $1,000
By wire o Request that money be wired to your bank
o Bank account must be in the same ownership as
the IDS fund account NOTE: Pre-authorization
required. For instructions, contact your
financial advisor or American Express
Shareholder Service.
3 o Minimum payment: $50
By scheduled o Contact your financial advisor or American Express Shareholder Service
payout plan 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 Financial Advisors 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
TTY Service
For the hearing impaired
800-846-4852
<PAGE>
American Express Financial Advisors Easy Access Line
Automated account information (TouchToneR phones only), including current Fund
prices and performance, account values and recent account transactions
800-862-7919
Distributions and taxes
As a shareholder you are entitled to your share of the Fund's net income and any
short-term capital gains realized on its investments. The Fund distributes
dividends and capital gain distributions to qualify as a regulated investment
company and to avoid paying corporate income and excise taxes. Dividend and
capital gain distributions will have tax consequences you should know about.
Dividend and capital gain distributions
The Fund's net investment income from dividends and interest is distributed to
you monthly as dividends. Capital gains are realized when a security is sold for
a higher price than was paid for it. 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 when a security is held for more than one
year. 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 distributions. These
long-term capital gains will be subject to differing tax rates depending on the
holding period of the underlying investments.
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 have 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.
<PAGE>
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. Prior to
reinvestment, no interest will accrue on amounts represented by uncashed
distribution or redemption checks.
Taxes
Distributions from interest earned on tax-exempt securities are exempt from
federal income tax. Distributions must be reported on your income tax returns in
the year the Fund declares them regardless of whether you take them in cash or
reinvest them.
Because interest on municipal bonds and notes is tax-exempt for federal income
tax purposes, any interest on borrowed money used directly or indirectly to
purchase Fund shares is not deductible on your federal income tax return. You
should consult a tax advisor regarding its deductibility for state and local
income tax purposes.
Each January, you will receive a tax statement showing the kinds and total
amount of all distributions you received during the previous year. You must
report distributions on your tax returns, even if they are reinvested in
additional shares.
Redemptions and exchanges subject you to a tax on any capital gain. If you sell
shares for more than their cost, the difference is a capital gain. Your gain may
be short term (for shares held for one year or less) or long term (for shares
held for more than one year). Long-term capital gains will be taxed at rates
that vary depending upon the holding period. Long-term capital gains are divided
into two holding periods: (1) shares held more than one year but not more than
18 months and (2) shares held more than 18 months.
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.
If you do not 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.
<PAGE>
<TABLE>
<CAPTION>
How to determine the correct TIN
<S> <C>
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 (Uniform The minor
Gifts/Transfers to Minors Act)
A living trust The grantor-trustee (the
person who puts the money
into the trust)
An irrevocable trust, The legal entity (not the personal representative
pension trust or estate 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 tax-exempt organization The organization
</TABLE>
For details on TIN requirements, ask your financial advisor or local American
Express Financial Advisors office for federal Form W-9, "Request for Taxpayer
Identification Number and Certification."
Important: This information is a brief and selective summary of certain federal
tax rules that apply to this Fund. Tax matters are highly individual and
complex, and you should consult a qualified tax advisor about your personal
situation.
How the Fund is organized
Shares
The Fund is owned by its shareholders. All shares issued by the Fund are of the
same class - capital stock. Par value is one cent per share. Both full and
fractional shares can be issued.
The Fund no longer issues stock certificates.
<PAGE>
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 the nine IDS Life funds.
Independent board members and officers
Chairman of the board
William R. Pearce*
Chairman of the board, Board Services Corporation (provides administrative
services to boards including the boards of the IDS and IDS Life funds and Master
Trust portfolios).
H. Brewster Atwater, Jr.
Retired chairman and chief executive officer, General Mills, Inc.
Lynne V. Cheney
Distinguished fellow, American Enterprise Institute for Public Policy Research.
Heinz F. Hutter
Retired president and chief operating officer, Cargill, Inc.
Anne P. Jones
Attorney and telecommunications consultant.
Alan K. Simpson
Former United States senator for Wyoming.
<PAGE>
Edson W. Spencer
Retired chairman and chief executive officer, Honeywell, Inc.
Wheelock Whitney
Chairman, Whitney Management Company.
C. Angus Wurtele
Chairman of the board, The Valspar Corporation.
Officer
Vice president, general counsel and secretary
Leslie L. Ogg*
President, treasurer and corporate secretary of Board Services Corporation.
Board members and officers associated with AEFC
President
John R. Thomas*
Senior vice president, AEFC.
William H. Dudley*
Senior advisor to the chief executive officer, AEFC.
David R. Hubers*
President and chief executive officer, AEFC.
Officers associated with AEFC
Vice president
Peter J. Anderson*
Senior vice president, AEFC.
Treasurer
Matthew N. Karstetter*
Vice president, AEFC.
Refer to the SAI for the board members' and officers' biographies.
* Interested person as defined by the Investment Company Act of 1940.
<PAGE>
Investment manager
The Fund pays AEFC for managing its assets. Under its Investment Management
Services Agreement, 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, 1997, 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
Under an Administrative Services Agreement, the Fund pays AEFC for
administration and accounting services at an annual rate of 0.03% decreasing in
gradual percentages to 0.02% as assets increase.
Under a separate Transfer Agency Agreement, American Express Client Service
Corporation (AECSC) maintains shareholder accounts and records. The Fund pays
AECSC an annual fee of $20 per shareholder account for this service.
Distributor
The Fund has an exclusive distribution agreement with American Express Financial
Advisors, a wholly-owned subsidiary of AEFC. Financial advisors representing
AEFA 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, 1997 were 0.55% of
its average daily net assets.
<PAGE>
About American Express Financial Corporation
General information
The AEFC family of companies offers not only mutual funds but also insurance,
annuities, investment certificates and a broad range of financial management
services. Besides managing investments for all 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, 1997 were more than $173 billion.
AEFA serves individuals and businesses through its nationwide network of more
than 175 offices and more than 8,700 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>
Appendix
1998 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 fitting 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 federal
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.
<PAGE>
Under Taxable Income married filing jointly status, $138,000 is in the $102,300
- - $155,950 range. Under Adjusted Gross Income, $175,000 is in the $124,500 to
$186,800 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> <C>
- ------------------ ----------------- ----------------- ----------------- ----------------- -----------------
Taxable income** $0 $124,500 $186,800 Over
to to to
$124,500(1) $186,800(2) $309,300(3) $309,300(2)
- ------------------ ----------------- ----------------- ----------------- ----------------- -----------------
Married Filing Jointly
$ 0 - $ 42,350 15.00%
42,350 - 102,300 28.00 28.84%
102,300 - 155,950 31.00 31.93 33.27%
155,950 - 278,450 36.00 37.08 38.64 37.08%
278,450 + 39.60 42.50*** 40.79
</TABLE>
<TABLE>
<CAPTION>
Adjusted gross income*
<S> <C> <C> <C> <C>
- ------------------ ----------------- ----------------------- ----------------------- -----------------------
Taxable income** $0 $124,500 Over
to to
$124,500(1) $247,000(3) $247,000(2)
- ------------------ ----------------- ----------------------- ----------------------- -----------------------
Single
$ 0 - $ 25,350 15.00%
25,350 - 61,400 28.00
61,400 - 128,000 31.00 32.60%
128,100 - 278,450 36.00 37.86 37.08%
278,450 + 39.60 40.79
- ------------------ ----------------- ----------------------- ----------------------- -----------------------
</TABLE>
* Gross income with certain adjustments before taking itemized deductions
and personal exemptions.
** Amount subject to federal income tax after itemized deductions or standard
deduction and personal exemptions.
*** This rate is applicable only in the limited case where your adjusted gross
income is less than $309,300 and your taxable income exceeds $278,450.
(1) No Phase-out - Assumes no phase-out of itemized deductions or personal
exemptions.
(2) Itemized Deduction Phase-out - Assumes a phase-out of itemized
deductions and no current phase-out
of personal exemptions.
(3) Itemized Deduction and Personal Exemption Phase-outs - Assumes a single
taxpayer has one personal exemption, joint taxpayers have two personal
exemptions, personal exemptions phase-out 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.
<PAGE>
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.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
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:
- ---------------------- -------------------------------------------------------------------------------------
15.00% 3.53 4.12 4.71 5.29 5.88 6.47 7.06 7.65
28.00% 4.17 4.86 5.56 6.25 6.94 7.64 8.33 9.03
28.84% 4.22 4.92 5.62 6.32 7.03 7.75 8.43 9.13
31.00% 4.35 5.07 5.80 6.52 7.25 7.97 8.70 9.42
31.93% 4.41 5.14 5.88 6.61 7.35 8.08 8.81 9.55
32.60% 4.45 5.19 5.93 6.68 7.42 8.16 8.90 9.64
33.27% 4.50 5.25 5.99 6.74 7.49 8.24 8.99 9.74
36.00% 4.69 5.47 6.25 7.03 7.81 8.59 9.38 10.16
37.08% 4.77 5.56 6.36 7.15 7.95 8.74 9.54 10.33
37.86% 4.83 5.63 6.44 7.24 8.05 8.85 9.66 10.46
38.64% 4.89 5.70 6.52 7.33 8.15 8.96 9.78 10.59
39.60% 4.97 5.79 6.62 7.45 8.28 9.11 9.93 10.76
40.79% 5.07 5.91 6.76 7.60 8.44 9.29 10.13 10.98
42.50% 5.22 6.09 6.96 7.83 8.70 9.57 10.43 11.30
</TABLE>
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
FOR
IDS TAX-FREE MONEY FUND
Feb. 27, 1998
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. 27, 1998, and it is to be used with the prospectus dated
Feb. 27, 1998, and the Annual Report for the fiscal year ended Dec. 31, 1997.
<PAGE>
TABLE OF CONTENTS
Goal and Investment Policies.....................................See Prospectus
Additional Investment Policies.............................................p. 4
Security Transactions......................................................p. 6
Brokerage Commissions Paid to Brokers Affiliated with
American Express Financial Corporation.....................................p. 7
Performance Information....................................................p. 8
Valuing Fund Shares........................................................p. 9
Investing in the Fund.....................................................p. 10
Redeeming Shares..........................................................p. 12
Pay-out Plans.............................................................p. 13
Taxes.....................................................................p. 14
Agreements................................................................p. 15
Organizational Information................................................p. 17
Board Members and Officers................................................p. 17
Compensation for Fund Board Members.......................................p. 21
Independent Auditors......................................................p. 22
Financial Statements..........................................See Annual Report
Prospectus................................................................p. 22
<PAGE>
Appendix A: Description of Bond and Note Ratings....................p. 23
Appendix B: Description of Short-Term Taxable Securities
and Repurchase Agreements...............................p. 25
Appendix C: Dollar-Cost Averaging...................................p. 27
<PAGE>
ADDITIONAL INVESTMENT POLICIES
These are investment policies in addition to those presented in the prospectus.
The policies below are fundamental policies of IDS Tax-Free Money Fund, Inc.
(the Fund) and may be changed only with shareholder approval. 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.
<PAGE>
`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 receives the market price in cash,
U.S. government securities, letters of credit or such other collateral as may be
permitted by regulatory agencies and approved by the board. If the market price
of the loaned securities goes up, the Fund will get additional collateral on a
daily basis. The risks are that the borrower may not provide additional
collateral when required or return the securities when due. During the existence
of the loan, the Fund receives cash payments equivalent to all interest or other
distributions paid on the loaned securities. A loan will not be made unless the
investment manager believes the opportunity for additional income outweighs the
risks.
Unless changed by the board, the Fund will not:
`Invest more than 10% of the Fund's net assets in securities and derivative
instruments that are illiquid. In determining the liquidity of municipal lease
obligations, the investment manager, under guidelines established by the board,
will consider the essential nature of the leased property, the likelihood that
the municipality will continue appropriating funding for the leased property,
and other relevant factors related to the general credit quality of the
municipality and the marketability of the municipal lease obligations.
In determining the liquidity of commercial paper issued in transactions not
involving a public offering under Section 4(2) of the Securities Act of 1933,
the investment manager, under guidelines established by the board, will evaluate
relevant factors such as the issuer and the size and nature of its commercial
paper programs, the willingness and ability of the issuer or dealer to
repurchase the paper, and the nature of the clearance and settlement procedures
for the paper.
The quality of tax-exempt securities in which the Fund invests is valued
according to the amortized cost method (see "Valuing Fund Shares"). If the Fund
should decide at some point it is no longer appropriate to value its portfolio
according to amortized cost, then at least 80% of the value of the municipal
bonds and municipal notes in the Fund's portfolio may be issued that have been
rated at the time of purchase not lower than Baa or MIG-3 (applicable to
municipal notes) by Moody's Investors Service, Inc. (Moody's), or BBB by
Standard & Poor's Corporation (S&P), or in the case of notes that have not been
rated, will have been issued by an issuer having outstanding long-term debt
securities rated not lower than Baa by Moody's or BBB by S&P. The balance of the
portfolio may be in municipal bonds and notes that may be nonrated and may be
issued by issuers whose other debt securities have not been rated. Such
investments would be considered only when the Fund believes the financial
condition of the issuers limited the risks to the Fund to a degree comparable to
securities rated Baa or MIG-3 (or higher) by Moody's or BBB
<PAGE>
(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 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, American Express Financial Corporation
(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.
<PAGE>
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 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, 1997.
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 that
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.
<PAGE>
PERFORMANCE INFORMATION
The Fund may quote various performance figures to illustrate past performance.
Average annual total return and current yield quotations used by the Fund are
based on standardized methods of computing performance as required by the SEC.
An explanation of the methods used by the Fund to compute performance follows
below.
Average annual total return
The Fund may calculate average annual total return for certain periods by
finding the average annual compounded rates of return over the period that would
equate the initial amount invested to the ending redeemable value, according to
the following formula:
P(1+T)n = ERV
where: P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $1,000 payment,
made at the beginning of a period, at the end of the period
(or fractional portion thereof)
Aggregate total return
The Fund may calculate aggregate total return for certain periods representing
the cumulative change in the value of an investment in the Fund over a specified
period of time according to the following formula:
ERV - P
P
where: P = a hypothetical initial payment of $1,000
ERV = ending redeemable value of a hypothetical $1,000 payment,
made at the beginning of a period, at the end of the period
(or fractional portion thereof)
Annualized yield
The Fund calculates annualized simple and compound yields based on a seven-day
period.
<PAGE>
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 3.56% and its compound yield was 3.62%
on Dec. 31, 1997.
Yield, or rate of return, on Fund shares may fluctuate daily and does not
provide a basis for determining future yields. However, it may be used as one
element in assessing how the Fund is meeting its goal. When comparing an
investment in the Fund with savings accounts and similar investment
alternatives, you must consider that such alternatives often provide an agreed
to or guaranteed fixed yield for a stated period of time, whereas the Fund's
yield fluctuates. In comparing the yield of one money market fund to another,
you should consider the Fund's investment policies, including the types of
investments permitted.
In its sales material and other communications, the Fund may quote, compare or
refer to rankings, yields or returns as published by independent statistical
services or publishers and publications such as The Bank Rate Monitor National
Index, Barron's, Business Week, Donoghue's Money Market Fund Report, Financial
Services Week, Financial Times, Financial World, Forbes, Fortune, Global
Investor, Institutional Investor, Investor's Daily, Kiplinger's Personal
Finance, Lipper Analytical Services, Money, 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
<PAGE>
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 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
<PAGE>
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 the same class of another fund in the IDS MUTUAL FUND GROUP but cannot be
split to make purchases in two or more funds. Automatic directed dividends are
available between accounts of any ownership except:
Between a non-custodial account and an IRA, or 401(k) plan account or other
qualified retirement account of which American Express Trust Company acts as
custodian;
Between two American Express Trust Company custodial accounts with different
owners (for example, you may not exchange dividends from your IRA to the IRA of
your spouse);
Between different kinds of custodial accounts with the same ownership (for
example, you may not exchange dividends from your IRA to your 401(k) plan
account, although you may exchange dividends from one IRA to another IRA).
Dividends may be directed from accounts established under the Uniform Gifts to
Minors Act (UGMA) or Uniform Transfers to Minors Act (UTMA) only into other UGMA
or UTMA accounts with identical ownership.
The Fund's investment goal is described in its prospectus along with other
information, including fees and expense ratios. Before exchanging dividends into
another fund, you
<PAGE>
should read that fund's 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 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.
<PAGE>
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 Investment Company Act of 1940, as amended
(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 the 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 American Express Shareholder Service,
P.O. Box 534, Minneapolis, MN 55440-0534 or call American Express Financial
Advisors Telephone Transaction Service at 800-437-3133 (National/Minnesota) or
612-671-3800 (Mpls/St.Paul). 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.
<PAGE>
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,
1997, 100% of the income distribution was designated as exempt from federal
income taxes.
If you are a "substantial user" (or related person) of facilities financed by
industrial development bonds, you should consult your tax advisor before
investing. The income from such bonds may not be tax-exempt for you.
<PAGE>
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, 1997, the daily rate applied to the Fund's net assets was equal to
0.31% 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>
The management fee is paid monthly. Under the agreement, the amount paid was
$488,015 for the year ended Dec.31, 1997, $481,827 for 1996, and $427,876 for
1995.
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 $69,516 for the year ended Dec. 31, 1997, $125,715 for 1996, and $128,899 for
1995.
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 0.5 0.027
Next 0.5 0.025
Next 0.5 0.022
Over 2.5 0.020
On Dec. 31, 1997, the daily rate applied to the Fund's net assets was equal
to 0.03% 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 $48,992 for the fiscal year ended Dec. 31, 1997.
Transfer Agency Agreement
The Fund has a Transfer Agency Agreement with American Express Client Service
Corporation (AECSC). This agreement governs AECSC'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, AECSC 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
<PAGE>
fees paid to AECSC may be changed from time to time upon agreement of the
parties without shareholder approval. Under the agreement, the Fund paid fees of
$160,099 for the year ended Dec. 31, 1997.
Distribution Agreement
For an explanation of the Fund's Distribution Agreement, please see your
prospectus.
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, net of earnings credits, of
$766,622 for the fiscal year ended Dec. 31, 1997.
ORGANIZATIONAL INFORMATION
The Fund is a diversified, open-end management investment company, as defined in
the 1940 Act. 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). 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
Retired chairman and chief executive officer, General Mills, Inc. Director,
Merck & Co., Inc. and Darden Restaurants, Inc.
<PAGE>
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 and
Union Pacific Resources.
William H. Dudley**
Born in 1932
2900 IDS Tower
Minneapolis, MN
Senior advisor to the chief executive officer of AEFC.
David R. Hubers+**
Born in 1943
2900 IDS Tower
Minneapolis, MN
President and chief executive officer of AEFC since August 1993, 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
Retired 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.
<PAGE>
William R. Pearce+*
Born in 1927
901 S. Marquette Ave.
Minneapolis, MN
Chairman of the board, 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) and Biogen
(pharmaceuticals).
Edson W. Spencer+
Born in 1926
4900 IDS Center
80 S. 8th St.
Minneapolis, MN
President, Spencer Associates Inc. (consulting). Retired chairman of the
board and chief executive officer, Honeywell Inc. Director, Boise Cascade
Corporation (forest products). Member of International Advisory Council of NEC
(Japan).
John R. Thomas**
Born in 1937
2900 IDS Tower
Minneapolis, MN
Senior vice president of AEFC.
Wheelock Whitney+
Born in 1926
1900 Foshay Tower
821 Marquette Ave.
Minneapolis, MN
Chairman, Whitney Management Company (manages family assets).
<PAGE>
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 chairman of the board and Mr. Thomas, who is
president, the Fund's other officers are:
Leslie L. Ogg
Born in 1938
901 S. Marquette Ave.
Minneapolis, MN
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
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.
<PAGE>
Matthew N. Karstetter
Born in 1961
IDS Tower 10
Minneapolis, MN
Vice president of Investment Accounting for AEFC since 1996. Prior to joining,
AEFC he served as vice president of State Street Bank's mutual fund service
operation from 1991 to 1996. Treasurer for the Fund.
COMPENSATION FOR FUND BOARD MEMBERS
Members of the Fund board who are not officers of the Fund or of AEFC receive an
annual fee of $100, and the chair of the Contracts Committee receives an
additional fee of $86. 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 and Personnel
Committee $25 and for traveling from out-of-state $1. Expenses for attending
meetings are reimbursed.
During the fiscal year ended Dec. 31, 1997, the independent members of the
board, for attending up to 30 meetings, received the following compensation:
<TABLE>
<CAPTION>
Compensation Table
Total cash
compensation from
Aggregate Pension or Estimated annual the
compensations from Retirement benefit upon IDS MUTUAL FUND
Board member the Fund benefits accrued retirement GROUP and
as Preferred
Fund expenses Master Trust Group
- ----------------------- --------------------- -------------------- -------------------- --------------------
<S> <C> <C> <C> <C>
H. Brewster Atwater, $951 $0 $0 $101,100
Jr.
Lynne V. Cheney 807 0 0 95,200
Robert F. Froehlke 968 0 0 98,500
Heinz F. Hutter 1,001 0 0 104,000
Anne P. Jones 958 0 0 104,500
Melvin R. Laird 789 0 0 86,300
Alan K. Simpson 681 0 0 87,200
Edson W. Spencer 1,437 0 0 129,800
Wheelock Whitney 1,101 0 0 110,000
C. Angus Wurtele 1,051 0 0 106,900
On Dec. 31, 1997, the Fund's board members and officers as a group owned less than 1% of the outstanding
shares.
</TABLE>
<PAGE>
INDEPENDENT AUDITORS
The financial statements contained in the Annual Report to shareholders for the
fiscal year ended Dec. 31, 1997 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 Annual Report to shareholders for the fiscal year ended Dec.
31, 1997, pursuant to Section 30(d) of the 1940 Act, 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. 27, 1998, is hereby
incorporated in this SAI by reference.
<PAGE>
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.
<PAGE>
AA has a very strong capacity to pay interest and repay principal and differs
from the highest rated issues only in small degree.
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>
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.
<PAGE>
(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.
(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>
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 technique 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 on a regular basis through changing market conditions,
including times when the price of their shares falls or the market declines, to
accumulate shares in a fund to meet long-term goals.
<TABLE>
<CAPTION>
Dollar-cost averaging
<S> <C> <C>
- ---------------------------- --------------------------- -----------------------
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
</TABLE>
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>
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, 1997, 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,
1997, and the financial highlights for each of the years in the ten-year
period ended December 31, 1997. 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, 1997, 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 6, 1998
(This annual report is not part of the prospectus.)
<PAGE>
<TABLE>
<CAPTION>
Financial statements
Statement of assets and liabilities
IDS Tax-Free Money Fund, Inc.
Dec. 31, 1997
Assets
<S> <C>
Investments in securities, at value (Note 1)
(identified cost $150,492,013) $150,492,013
Cash in bank on demand deposit 1,014,416
Accrued interest receivable 943,657
-------
Total assets 152,450,086
-----------
Liabilities
Dividends payable to shareholders 73,371
Accrued investment management services fee 1,288
Accrued transfer agency fee 439
Accrued administrative services fee 125
Other accrued expenses 29,392
------
Total liabilities 104,615
-------
Net assets applicable to outstanding capital stock $152,345,471
============
Represented by
Capital stock-- of $.01 par value (Note 1) $ 1,523,533
Additional paid-in capital 150,828,618
Undistributed net investment income 39
Accumulated net realized gain (loss) (6,719)
------
Total-- representing net assets applicable to outstanding capital stock $152,345,471
============
Shares outstanding 152,353,338
Net asset value per share of outstanding capital stock: $ 1.00
============
See accompanying notes to financial statements.
(This annual report is not part of the prospectus.)
</TABLE>
<PAGE>
Statement of operations
IDS Tax-Free Money Fund, Inc.
Year ended Dec. 31, 1997
Investment income
Income:
Interest $5,688,224
----------
Expenses (Note 2):
Investment management services fee 488,015
Transfer agency fee 160,099
Administrative services fees and expenses 48,992
Compensation of board members 9,744
Custodian fees 21,862
Postage 24,521
Registration fees 83,384
Reports to shareholders 11,278
Audit fees 20,000
Other 5,401
-----
Total expenses 873,296
Earnings credits on cash balances (Note 2) (106,674)
--------
Total net expenses 766,622
-------
Investment income (loss)-- net 4,921,602
---------
Net increase (decrease) in net assets resulting from operations $4,921,602
==========
See accompanying notes to financial statements.
(This annual report is not part of the prospectus.)
<PAGE>
<TABLE>
<CAPTION>
Financial statements
Statements of changes in net assets
IDS Tax-Free Money Fund, Inc.
Year ended Dec. 31, 1997
Operations and distributions 1997 1996
<S> <C> <C>
Investment income (loss)-- net $ 4,921,602 $ 4,543,218
------------ ------------
Distributions to shareholders from:
Net investment income (4,924,473) (4,540,366)
---------- ----------
Capital share transactions at constant $1 net asset value
Proceeds from sales of shares 295,641,284 326,625,378
Net asset value of shares
issued in reinvestment of distributions 4,769,737 4,396,455
Payments for redemptions of shares (305,451,034) (319,518,046)
------------ ------------
Increase (decrease) in net assets from capital share transactions (5,040,013) 11,503,787
---------- ----------
Total increase (decrease) in net assets (5,042,884) 11,506,639
Net assets at beginning of year 157,388,355 145,881,716
----------- -----------
Net assets at end of year $152,345,471 $157,388,355
============ ============
Undistributed net investment income $ 39 $ 2,910
------------ ------------
See accompanying notes to financial statements.
(This annual report is not part of the prospectus.)
</TABLE>
<PAGE>
Notes to financial statements
IDS Tax-Free Money Fund, Inc.
1
Summary of
significant
accounting policies
IDS Tax-Free Money Fund, Inc. is registered under the Investment Company
Act of 1940 (as amended), the "1940 Act", as a diversified, open-end
management investment company. The Fund has 10 billion authorized shares
of capital stock. 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. Additional administrative service expenses paid by the Fund are
office expenses, consultants' fees and compensation of officers and
employees. Under this agreement, the Fund also pays taxes, audit and
certain legal fees, registration fees for shares, compensation of board
members, corporate filing fees, and any other expenses properly payable by
the Fund and approved by the board.
Under a separate Transfer Agency Agreement, American Express Client
Service Corporation (AECSC) maintains shareholder accounts and records.
The Fund pays AECSC an annual fee of $20 per shareholder account for this
service.
During the year ended Dec. 31, 1997, the Fund's custodian and transfer
agency fees were reduced by $106,674 as a result of earnings credits from
overnight cash balances.
3
Securities
transactions
Cost of purchases and proceeds from sales of securities aggregated
$415,460,173 and $420,685,000, respectively, for the year ended Dec. 31,
1997. 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.
(This annual report is not part of the prospectus.)
<PAGE>
<TABLE>
<CAPTION>
Investments in securities
IDS Tax-Free Money Fund, Inc.
Dec. 31, 1997
(Percentages represent
value of investments
compared to net assets)
Name of issuer and title of issue (b)
Issuer Principal Value(a)
amount
<S> <C> <C>
Alabama (2.4%)
Columbia County Industrial Development Pollution Control
Revenue Bonds (Alabama Power) Series C
4.50% 10-1-22 $ 900,000(c,d) $ 900,000
5.00% 10-1-22 1,600,000(c,d) 1,600,000
Columbia County Pollution Control Revenue Bonds
(Alabama Power) Series D
5.00% 10-1-22 1,100,000(c,d) 1,100,000
Total 3,600,000
Alaska (0.7%)
Valdez Marine Terminal Refunding Revenue Bonds
Alaska Pipeline (Mobil)
3.70% 11-1-03 1,000,000(c,d) 1,000,000
Arizona (10.4%)
Maricopa County (Arizona Public Service Company)
(Bank of America)
4.95% 5-1-29 4,300,000(c,d) 4,300,000
Maricopa County Pollution Control Revenue Bonds
(Arizona Public Service Company) Series 1994B
4.80% 5-1-29 2,000,000(c,d) 2,000,000
Maricopa County Pollution Control Revenue Bonds
(Southern California Edison) C.P. Series E
3.70% 1-5-98 2,720,000 2,720,000
3.80% 1-15-98 1,000,000 1,000,000
Salt River Agricultural Improvement & Power District C.P.
3.65% 2-9-98 1,000,000 1,000,000
3.65% 2-10-98 2,900,000 2,900,000
3.75% 1-7-98 1,000,000 1,000,000
3.75% 3-2-98 1,000,000 1,000,000
Total 15,920,000
California (1.3%) State 1997 R.A.N.
4.50% 6-30-98 2,000,000 2,006,208
Florida (2.9%)
Jacksonville Electric Authority Electrical System C.P. Series D-1
3.70% 1-14-98 3,300,000 3,300,000
State Municipal Power Agency C.P.
3.75% 1-6-98 1,155,000 1,155,000
Total 4,455,000
Georgia (9.1%)
Burke County Development Authority Pollution Control Revenue Bonds
(Georgia Power) Vogtle
4.80% 4-1-25 3,900,000(c,d) 3,900,000
4.80% 9-1-26 1,100,000(c,d) 1,100,000
5.00% 7-1-24 700,000(c,d) 700,000
Burke County Pollution Control Revenue Bonds (Georgia Power)
Series 1994
4.95% 7-1-24 1,700,000(c,d) 1,700,000
Burke County Pollution Control Revenue Bonds
(Oglethorpe Power) C.P.
3.80% 5-28-98 1,000,000 1,000,000
Monroe County Development Authority (Georgia Power)
Series 2
4.50% 7-1-25 1,400,000(c,d) 1,400,000
Monroe County Pollution Control Revenue Bonds (Gulf Power)
Series 2
4.50% 9-1-24 1,450,000(c,d) 1,450,000
Putnam County Development Authority Pollution Control
Revenue Bonds (Georgia Power)
4.50% 4-1-32 200,000(c,d) 200,000
Putnam County Development Authority Pollution Control
Revenue Bonds (Georgia Power) Series 2
4.90% 9-1-29 2,400,000(c,d) 2,400,000
Total 13,850,000
Hawaii (0.7%)
State Department Budget & Finance Special Purpose Mortgage
Revenue Bonds (Kaiser Permanente)
3.65% 3-1-15 1,000,000(c,d) 1,000,000
Idaho (1.0%)
State T.A.N. Series 1997
4.625% 6-30-98 1,500,000 1,505,304
Indiana (3.3%)
Bond Bank Advanced Funding Notes Series 1997A-2
4.25% 1-21-98 1,000,000 1,000,291
Mount Vernon Pollution Control & Solid Waste Disposal Refunding Revenue Bonds
(General Electric) C.P.
3.60% 1-8-98 1,800,000 1,800,000
3.70% 1-6-98 1,190,000 1,190,000
State Education Facility (University of Notre Dame)
4.05% 3-1-25 1,000,000(c,d) 1,000,000
Total 4,990,291
Iowa (1.3%)
School Cash Anticipation Warrant Certificates Series 1996B
4.25% 1-30-98 1,000,000 1,000,459
State School Cash Anticipation Warrant Certificates Series A
4.50% 6-26-98 1,000,000 1,003,250
Total 2,003,709
Kentucky (2.8%)
Jefferson County Pollution Control Revenue Notes
(Louisville Gas & Electric) C.P. V.R.D.N. Series 1993
3.65% 1-7-98 1,300,000(c,d) 1,300,000
3.80% 1-9-98 3,000,000(c,d). 3,000,000
Total 4,300,000
Louisiana (0.9%)
East Baton Rouge Parish Pollution Control Revenue Bonds (Exxon)
4.80% 3-1-22 1,400,000(c,d) 1,400,000
Maryland (2.6%)
Health & Educational Facilities Authority Revenue Bonds
(Kaiser Permanente) Series A
3.65% 7-1-15 2,000,000(c,d) 2,000,000
Montgomery County B.A.N. C.P.
3.80% 1-8-98 2,000,000 2,000,000
Total 4,000,000
Michigan (7.5%)
Regents of the University Hospital Refunding Revenue Bonds
Series 1992A
5.10% 12-1-19 4,200,000(c,d) 4,200,000
Regents of the University Hospital Refunding Revenue Bonds
Series 1995A
5.10% 12-1-27 2,200,000(c,d) 2,200,000
School District of Detroit Wayne County State School Aid Notes
4.50% 5-1-98 2,000,000 2,003,821
State Full Faith & Credit General Obligation Notes
4.50% 9-30-98 3,000,000 3,015,888
Total 11,419,709
Minnesota (7.2%)
Becker (Northern States Power) C.P. Series 1993B
3.70% 2-11-98 1,000,000 1,000,000
Becker Pollution Control Revenue Bonds
(Northern States Power) C.P. Series A
3.70% 2-12-98 2,000,000 2,000,000
3.80% 1-6-98 3,000,000 3,000,000
Rochester Health Care Facility Revenue Bonds (Mayo Clinic)
Series A
3.65% 1-16-98 1,000,000 1,000,000
Rochester Health Care Facility Revenue Bonds (Mayo Clinic)
Series B
3.65% 1-16-98 2,000,000 2,000,000
Southern Minnesota Municipal Power C.P. Series B
3.75% 2-23-98 2,000,000 2,000,000
Total 11,000,000
Mississippi (0.9%)
Jackson County Pollution Control Refunding Revenue Bonds
(Chevron)
4.95% 6-1-23 1,300,000(c,d) 1,300,000
Missouri (0.1%)
Washington University Health & Education Facilities Authority
Series A
5.00% 9-1-30 200,000(c,d) 200,000
Montana (0.7%)
State T.R.A.N. Series 1997
4.50% 6-30-98 1,000,000 1,003,123
New Mexico (4.2%)
Farmington Pollution Control Refunding Revenue Bonds
(Arizona Public Service) Series B
5.00% 9-1-24 3,400,000(c,d) 3,400,000
State T.R.A.N.
4.50% 6-30-98 3,000,000 3,009,259
Total 6,409,259
New York (3.1%)
New York City Municipal Water & Sewer System Revenue Bonds
5.10% 6-15-22 2,000,000(c,d) 2,000,000
5.10% 6-15-23 1,400,000(c,d) 1,400,000
New York City Municipal Water Financial Authority Series 1994C
5.10% 6-15-23 1,300,000(c,d) 1,300,000
Total 4,700,000
North Carolina (2.6%)
Medical Care Community Hospital Revenue Bonds
Duke University Hospital Series 1985B-C
4.10% 6-1-15 4,000,000(c,d) 4,000,000
Ohio (3.7%)
State Air Quality Development Authority Revenue Bonds
(Cincinnati Gas & Electric) Series 1995B
4.50% 12-1-15 2,600,000(c,d) 2,600,000
State Air Quality Development Authority Revenue Bonds
(Cincinnati Gas & Electric) Series A
4.95% 9-1-30 3,000,000(c,d) 3,000,000
Total 5,600,000
Pennsylvania (6.2%)
Philadelphia School District T.R.A.N.
4.50% 6-30-98 1,000,000 1,002,608
State Higher Education Facilities Authority Refunding
Revenue Bonds (Carnegie Mellon) Series B
4.85% 11-1-27 5,400,000(c,d) 5,400,000
State Higher Education Facilities Authority Revenue Bonds
Series C
3.60% 1-1-26 3,000,000(c,d) 3,000,000
Total 9,402,608
Texas (13.6%)
Houston T.R.A.N. Series 1997
4.50% 6-30-98 2,000,000 2,006,171
Jefferson Port Arthur Navigation District Pollution Control
Revenue Bonds (Texaco)
5.05% 10-1-24 8,100,000(c,d) 8,100,000
San Antonio Electric & Gas System C.P. Series A
3.80% 1-13-98 2,000,000 2,000,000
3.80% 1-20-98 3,500,000 3,500,000
State Municipal Power Authority C.P.
3.65% 1-5-98 1,600,000 1,600,000
3.75% 1-7-98 1,500,000 1,500,000
State T.R.A.N. Series 1997
4.75% 8-31-98 2,000,000 2,011,747
Total 20,717,918
Utah (1.3%)
State Highway General Obligation Notes C.P.
3.75% 1-14-98 1,000,000 1,000,000
3.70% 1-15-98 1,000,000 1,000,000
Total 2,000,000
Washington (1.2%)
State General Obligation C.P. R.A.N. Series 1996B
3.60% 6-15-20 1,000,000(c,d) 1,000,000
State Public Power Supply System Electric Refunding
Revenue Bonds Project 3
3.75% 7-1-18 900,000(c,d) 900,000
Total 1,900,000
Wisconsin (1.3%)
State Operating Notes Series 1997
4.50% 6-15-98 2,000,000 2,005,613
Wyoming (5.8%)
Lincoln County Pollution Control Revenue Bonds (Exxon)
4.95% 8-1-15 3,800,000(c,d) 3,800,000
Lincoln County Pollution Control Revenue Bonds (Exxon)
Series 1985
4.95% 8-1-15 1,500,000(c,d) 1,500,000
State T.R.A.N. Series 1997
4.50% 6-26-98 1,000,000 1,003,271
Sublette County (Exxon) Series 1984
4.95% 11-1-14 2,500,000(c,d) 2,500,000
Total 8,803,271
Total investments in securities (98.8%)
(Cost: $150,492,013)(e) $150,492,013
============
See accompanying notes to investments in securities.
(This annual report is not part of the prospectus)
</TABLE>
<PAGE>
Investments in securities
IDS Tax-Free Money Fund, Inc.
Notes to investments in securities
(a) Securities are valued by procedures described in Note 1 to the financial
statements.
(b) The following abbreviations are used in portfolio descriptions:
B.A.N. -- Bond Anticipation Note
C.P. -- Commercial Paper
R.A.N. -- Revenue Anticipation Note
T.A.N. -- Tax Anticipation Note
T.R.A.N. -- Tax & Revenue Anticipation Note
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, 1997.
(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) At Dec. 31, 1997, also represents the cost of securities for federal income
tax purposes.
(This annual report is not part of the prospectus)
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 6, 1998
-Statement ofassets and liabilities, December 31, 1997
-Statement of operations, Year ended December 31, 1997
-Statements of changes in net assets, for the two-year period ended
December 31, 1996 and December 31, 1997
-Notes to financial statements
-Investments in securities, December 31, 1997
-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>
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 incorporateherein 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 January 1, 1998 is filed
electronically herewith.
(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 electronically herewith.
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) filed as
Exhibit 16 to Post-Effective Amendment No. 30 to Registration Statement
No. 2-66868, is incorporated herein by reference.
17. Financial Data Schedule is filed electronically herewith.
18. (a) Directors' Power of Attorney to sign amendments to this
Registration Statement dated January 7, 1998, is filed electronically
herewith.
<PAGE>
(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. 4, 1998
Common Stock 8,026
Item 27. Indemnification
The Articles of Incorporation of the registrant provide that the Fund shall
indemnify any person who was or is a party or is threatened to be made a party,
by reason of the fact that she or he is or was a director, officer, employee or
agent of the Fund, or is or was serving at the request of the Fund as a
director, officer, employee or agent of another company, partnership, joint
venture, trust or other enterprise, to any threatened, pending or completed
action, suit or proceeding, wherever brought, and the Fund may purchase
liability insurance and advance legal expenses, all to the fullest extent
permitted by the laws of the State of Minnesota, as now existing or hereafter
amended. The By-laws of the registrant provide that present or former directors
or officers of the Fund made or threatened to be made a party to or involved
(including as a witness) in an actual or threatened action, suit or proceeding
shall be indemnified by the Fund to the full extent authorized by the Minnesota
Business Corporation Act, all as more fully set forth in the By-laws filed as an
exhibit to this registration statement.
Insofar as indemnification for liability arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
Any indemnification hereunder shall not be exclusive of any other rights of
indemnification to which the directors, officers, employees or agents might
otherwise be entitled. No indemnification shall be made in violation of the
Investment Company Act of 1940.
<PAGE>
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 20th day of February, 1998.
IDS TAX-FREE MONEY FUND, INC.
By /s/ William R. Pearce**
William R. Pearce,
Chief executive officer
By ___________________________________
Matthew N. Karstetter,
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 20th day of February, 1998.
Signatures Capacity
/s/ William R. Pearce* Chairman of the Board
William R. Pearce
/s/ H. Brewster Atwater, Jr.* Director
H. Brewster Atwater, Jr.
/s/ Lynne V. Cheney* Director
Lynne V. Cheney
/s/ William H. Dudley* Director
William H. Dudley
/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>
Signatures Capacity
/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* Director
C. Angus Wurtele
* Signed pursuant to Directors' Power of Attorney dated January 7, 1998, 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>
CONTENTS OF THIS POST-EFFECTIVE AMENDMENT NO. 31 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.
Exhibit Index
Exhibit 9(c): Transfer Agency Agreement
Exhibit 10: Opinion of Counsel
Exhibit 11: Independent Auditors Consent
Exhibit 17: Financial Data Schedule
Exhibit 18(a): Director's Power of Attorney
TRANSFER AGENCY AGREEMENT
AGREEMENT dated as of January 1, 1998, between IDS Tax-Free Money Fund, Inc.
(the "Company"), a Minnesota corporation, (the "Fund"), and American Express
Client Service Corporation (the "Transfer Agent"), a Delaware corporation.
In consideration of the mutual promises set forth below, the Company and the
Transfer Agent agree as follows:
1. Appointment of the Transfer Agent. The Company hereby appoints the
Transfer Agent, as transfer agent for its shares and as shareholder
servicing agent for the Company, and the Transfer Agent accepts such
appointment and agrees to perform the duties set forth below.
2. Compensation. The Company will compensate the Transfer Agent for the
performance of its obligations as set forth in Schedule A. Schedule A
does not include out-of-pocket disbursements of the Transfer Agent for
which the Transfer Agent shall be entitled to bill the Company
separately.
The Transfer Agent will bill the Company monthly. The fee provided for
hereunder shall be paid in cash by the Company to the Transfer Agent
within five (5) business days after the last day of each month.
Out-of-pocket disbursements shall include, but shall not be limited to,
the items specified in Schedule B. Reimbursement by the Company for
expenses incurred by the Transfer Agent in any month shall be made as
soon as practicable after the receipt of an itemized bill from the
Transfer Agent.
Any compensation jointly agreed to hereunder may be adjusted from time
to time by attaching to this Agreement a revised Schedule A, dated and
signed by an officer of each party.
3. Documents. The Company will furnish from time to time such
certificates, documents or opinions as the Transfer Agent deems to be
appropriate or necessary for the proper performance of its duties.
4. Representations of the Company and the Transfer Agent.
(a) The Company represents to the Transfer Agent that all
outstanding shares are validly issued, fully paid and
non-assessable by the Company. When shares are hereafter
issued in accordance with the terms of the Company's Articles
of Incorporation and its By-laws, such shares shall be validly
issued, fully paid and non-assessable by the Company.
(b) The Transfer Agent represents that it is registered under
Section 17A(c) of the Securities Exchange Act of 1934. The
Transfer Agent agrees to maintain the necessary facilities,
equipment and personnel to perform its duties and obligations
under this agreement and to comply with all applicable laws.
<PAGE>
5. Duties of the Transfer Agent. The Transfer Agent shall be responsible,
separately and through its subsidiaries or affiliates, for the
following functions:
(a) Sale of Fund Shares.
(1) On receipt of an application and payment, wired
instructions and payment, or payment identified as
being for the account of a shareholder, the Transfer
Agent will deposit the payment, prepare and present
the necessary report to the Custodian and record the
purchase of shares in a timely fashion in accordance
with the terms of the Fund's prospectus. All shares
shall be held in book entry form and no certificate
shall be issued unless the Fund is permitted to do so
by its prospectus and the purchaser so requests.
(2) On receipt of notice that payment was dishonored, the
Transfer Agent shall stop redemptions of all shares
owned by the purchaser related to that payment, place
a stop payment on any checks that have been issued to
redeem shares of the purchaser and take such other
action as it deems appropriate.
(b) Redemption of Fund Shares. On receipt of instructions to
redeem shares in accordance with the terms of the Fund's
prospectus, the Transfer Agent will record the redemption of
shares of the Fund, prepare and present the necessary report
to the Custodian and pay the proceeds of the redemption to the
shareholder, an authorized agent or legal representative upon
the receipt of the monies from the Custodian.
(c) Transfer or Other Change Pertaining to Fund Shares. On receipt
of instructions or forms acceptable to the Transfer Agent to
transfer the shares to the name of a new owner, change the
name or address of the present owner or take other legal
action, the Transfer Agent will take such action as is
requested.
(d) Exchange of Fund Shares. On receipt of instructions to
exchange the shares of the Fund for the shares of another fund
in the IDS MUTUAL FUND GROUP or other American Express
Financial Corporation product in accordance with the terms of
the prospectus, the Transfer Agent will process the exchange
in the same manner as a redemption and sale of shares.
(e) Right to Seek Assurance. The Transfer Agent may refuse to transfer,
exchange or redeem shares of a Fund or take any action requested by a
shareholder until it is satisfied that the requested transaction or action
is legally authorized or until it is satisfied there is no basis for any
claims adverse to the transaction or action. It may rely on the provisions
of the Uniform Act for the Simplification of Fiduciary Security Transfers
or the Uniform Commercial Code. The Company shall indemnify the Transfer
Agent for any act done or omitted to be done in reliance on such laws or
for refusing to transfer, exchange or redeem shares or taking any requested
action if it acts on a good faith belief that the transaction or action is
illegal or unauthorized.
<PAGE>
(f) Shareholder Records, Reports and Services.
(1) The Transfer Agent shall maintain all shareholder
accounts, which shall contain all required tax,
legally imposed and regulatory information; shall
provide shareholders, and file with federal and state
agencies, all required tax and other reports
pertaining to shareholder accounts; shall prepare
shareholder mailing lists; shall cause to be printed
and mailed all required prospectuses, annual reports,
semiannual reports, statements of additional
information (upon request), proxies and other
mailings to shareholders; and shall cause proxies to
be tabulated.
(2) The Transfer Agent shall respond to all valid
inquiries related to its duties under this Agreement.
(3) The Transfer Agent shall create and maintain all
records in accordance with all applicable laws, rules
and regulations, including, but not limited to, the
records required by Section 31(a) of the Investment
Company Act of 1940.
(g) Dividends and Distributions. The Transfer Agent shall prepare
and present the necessary report to the Custodian and shall
cause to be prepared and transmitted the payment of income
dividends and capital gains distributions or cause to be
recorded the investment of such dividends and distributions in
additional shares of the Funds or as directed by instructions
or forms acceptable to the Transfer Agent.
(h) Confirmations and Statements. The Transfer Agent shall confirm
each transaction either at the time of the transaction or
through periodic reports as may be legally permitted.
(i) Lost or Stolen Checks. The Transfer Agent will replace lost or
stolen checks issued to shareholders upon receipt of proper
notification and will maintain any stop payment orders against
the lost or stolen checks as it is economically desirable to
do.
(j) Reports to Company. The Transfer Agent will provide reports
pertaining to the services provided under this Agreement as
the Company may request to ascertain the quality and level of
services being provided or as required by law.
(k) Other Duties. The Transfer Agent may perform other duties for
additional compensation if agreed to in writing by the parties
to this Agreement.
6. Ownership and Confidentiality of Records. The Transfer Agent agrees
that all records prepared or maintained by it relating to the services
to be performed by it under the terms of this Agreement are the
property of the Company and may be inspected by the Company or any
person retained by the Company at reasonable times. The Company and
Transfer Agent agree to protect the confidentiality of those records.
<PAGE>
7. Action by Board and Opinion of Counsel. The Transfer Agent may rely on
resolutions of the Board of Directors (the "Board") or the Executive
Committee of the Board and on opinion of counsel for the Compan
8. Duty of Care. It is understood and agreed that, in furnishing
the Company with the services as herein provided, neither the
Transfer Agent, nor any officer, director or agent thereof shall
be held liable for any loss arising out of or in connection with
their actions under this Agreement so long as they act in good
faith and with due diligence, and are not negligent or guilty of any
willful misconduct. It is further understood and agreed that the
Transfer Agent may rely upon information furnished to it reasonably
believed to be accurate and reliable. In the event the
Transfer Agent is unable to perform its obligations under the terms of
this Agreement because of an act of God, strike or equipment or
transmission failure reasonably beyond its control, the Transfer
Agent shall not be liable for any damages resulting from such failure.
9. Term and Termination. This Agreement shall become effective on the date
first set forth above (the "Effective Date") and shall continue in effect
from year to year thereafter as the parties may mutually agree; provided
that either party may terminate this Agreement by giving the other party
notice in writing specifying the date of such termination, which shall be
not less than 60 days after the date of receipt of such notice. In the
event such notice is given by the Company, it shall be accompanied by a
vote of the Board, certified by the Secretary, electing to terminate this
Agreement and designating a successor transfer agent or transfer agents.
Upon such termination and at the expense of the Company, the Transfer Agent
will deliver to such successor a certified list of shareholders of the
Funds (with name, address and taxpayer identification or Social Security
number), a historical record of the account of each shareholder and the
status thereof, and all other relevant books, records, correspondence, and
other data established or maintained by the Transfer Agent under this
Agreement in the form reasonably acceptable to the Company, and will
cooperate in the transfer of such duties and responsibilities, including
provisions for assistance from the Transfer Agent's personnel in the
establishment of books, records and other data by such successor or
successors.
10. Amendment. This Agreement may not be amended or modified in any manner
except by a written agreement executed by both parties.
11. Subcontracting. The Company agrees that the Transfer Agent may
subcontract for certain of the services described under this Agreement
with the understanding that there shall be no diminution in the quality
or level of the services and that the Transfer Agent remains fully
responsible for the services. Except for out-of-pocket expenses
identified in Schedule B, the Transfer Agent shall bear the cost of
subcontracting such services, unless otherwise agreed by the parties.
<PAGE>
12. Miscellaneous.
(a) This Agreement shall extend to and shall be binding upon the
parties hereto, and their respective successors and assigns;
provided, however, that this Agreement shall not be assignable
without the written consent of the other party.
(b) This Agreement shall be governed by the laws of the State of
Minnesota.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
by their respective officers as of the day and year written above.
IDS TAX-FREE MONEY FUND, INC.
By: /s/ Leslie L. Ogg
Leslie L. Ogg
Vice President
AMERICAN EXPRESS CLIENT SERVICE CORPORATION
By: /s/ Barry J. Murphy
Barry J. Murphy
President
<PAGE>
Schedule A
IDS TAX-FREE MONEY FUND, INC.
FEE
The annual per account fee for services under this agreement, accrued daily and
payable monthly is as follows:
Class A Class B Class Y
$15.50 $16.50 $15.50
<PAGE>
Schedule B
OUT-OF-POCKET EXPENSES
The Company shall reimburse the Transfer Agent monthly for the following
out-of-pocket expenses:
o typesetting, printing, paper, envelopes, postage and return postage for
proxy solicitingmaterial, and proxy tabulation costs
o printing, paper, envelopes and postage for dividend notices, dividend
checks, records of account, purchase confirmations, exchange
confirmations and exchange prospectuses, redemption confirmations,
redemption checks, confirmations on changes of address and any other
communication required to be sent to shareholders
o typesetting, printing, paper, envelopes and postage for prospectuses,
annual and semiannual reports, statements of additional information,
supplements for prospectuses and statements of additional information
and other required mailings to shareholders
o stop orders
o outgoing wire charges
o other expenses incurred at the request or with the consent of the
Company
February 20, 1998
IDS Tax-Free Money Fund, Inc.
IDS Tower 10
Minneapolis, Minnesota 55440
Gentlemen:
I have examined the Articles of Incorporation and the By-Laws of the
Company and all necessary certificates, permits, minute books, documents and
records of the Company, and the applicable statutes of the State of Minnesota,
and it is my opinion:
(a) That the Company is a corporation duly organized and existing under the
laws of the State of Minnesota with an authorized capital stock
of10,000,000,000 shares, all of $.01 par value, that such shares may be
issued as full or fractional shares;
(b) That all such authorized shares are, under the laws of the State of
Minnesota, redeemable as provided in the Articles of Incorporation
of the Company and upon redemption shall have the status of authorized
shares and unissued shares;
(c) That the Company registered on July 31, 1980 an indefinite number of shares
pursuant to Rule 24f-2 and is herewith filing a Rule 24f-2;
(d) That shares which were sold at not less than their par value and in
accordance with applicable federal and state securities laws were legally
issued, fully paid and nonassessable.
I hereby consent that the foregoing opinion may be used in connection with this
Post-Effective Amendment.
Very truly yours,
Leslie L. Ogg
Attorney at Law
901 S. Marquette Ave., Suite 2810
Minneapolis, Minnesota 55402-3268
<PAGE>
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 20, 1998
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER>1
<NAME>IDS TAX-FREE MONEY FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 150492013
<INVESTMENTS-AT-VALUE> 150492013
<RECEIVABLES> 943657
<ASSETS-OTHER> 1014416
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 152450086
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 104615
<TOTAL-LIABILITIES> 104615
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 152352151
<SHARES-COMMON-STOCK> 152353338
<SHARES-COMMON-PRIOR> 157393356
<ACCUMULATED-NII-CURRENT> 39
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 6719
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 152345471
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 5688224
<OTHER-INCOME> 0
<EXPENSES-NET> 766622
<NET-INVESTMENT-INCOME> 4921602
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 4921602
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 4924473
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 295641279
<NUMBER-OF-SHARES-REDEEMED> 305451034
<SHARES-REINVESTED> 4769737
<NET-CHANGE-IN-ASSETS> (5042884)
<ACCUMULATED-NII-PRIOR> 2910
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 6719
<GROSS-ADVISORY-FEES> 488015
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 873296
<AVERAGE-NET-ASSETS> 157423595
<PER-SHARE-NAV-BEGIN> 1
<PER-SHARE-NII> 0.03
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0.03
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1
<EXPENSE-RATIO> 0.55
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
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 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.
<PAGE>
Dated the 7th day of January, 1998.
/s/ H. Brewster Atwater, Jr. /s/ William R. Pearce
H. Brewster Atwater, Jr. William R. Pearce
/s/ Lynne V. Cheney /s/ Alan K. Simpson
Lynne V. Cheney Alan K. Simpson
/s/ William H. Dudley /s/ Edson W. Spencer
William H. Dudley 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
