1998 SEMIANNUAL REPORT
IDS
Tax-Free
Money
Fund
(icon of) shield with piggy bank enclosed
The goal of IDS Tax-Free Money Fund, Inc. is to provide as high a level of
current income exempt from federal income tax as is consistent with liquidity
and stability of principal. The Fund invests primarily in short-term bonds and
notes issued by or on behalf of state or local governmental units.
American Express Financial Advisors
Distributed by American Express Financial Advisors Inc.
<PAGE>
(icon of) shield with piggy bank enclosed
Stability
without taxes
Everyone needs to have a cash reserve to cover unexpected expenses. But where to
keep it? It's easy to find an investment that provides stability and ready
access to your money, but there's usually a drawback: You have to pay taxes on
the interest the money earns.But there is an alternative -- Tax-Free Money Fund.
The interest it pays is generally free from federal taxes. The result: a cash
reserve that can let you keep the tax-exempt income it earns.
Contents
From the chairman 3
From the portfolio manager 3
Financial statements 5
Notes to financial statements 8
Investments in securities 11
Board members and officers 19
IDS mutual funds 20
<PAGE>
To our shareholders
From the chairman
If you're an experienced investor, you know that the past few years have
been unusually strong in many financial markets. Perhaps just as
important, history shows that bull markets don't last forever. Though
they're often unpredictable, declines -- whether they're brief or
long-lasting, moderate or substantial -- are always a possibility. We saw
evidence of that last October, when declines in Asian markets spawned a
sharp drop in several financial markets worldwide, including the U.S.
The potential for such volatility reinforces the need for investors to
review periodically their long-term goals and examine whether their
investment program remains on track to achieving them. Your quarterly
investment statements are one part of that monitoring process. The other
is a meeting with your American Express financial advisor. That becomes
even more important if there's a major change in your financial situation
or in the financial markets.
William R. Pearce
(picture of) William R. Pearce
William R. Pearce
Chairman of the board
<PAGE>
From the portfolio manager
IDS Tax-Free Money Fund's yield fluctuated only slightly during the first
half of the fiscal year (January through June 1998), reflecting largely
stable short-term interest rates. The Fund's $1 net asset value was
unchanged during the six months, providing shareholders with continued
stability of principal in addition to a tax-free return.
For the seven-day period ended June 30, 1998, the Fund provided an
annualized simple yield of 2.96% and an annualized compound yield of
3.01%. These are equal to 4.11% simple and 4.18% compound yields for an
investor in the 28% federal income-tax bracket.
(Investors should keep in mind that an investment in the Fund is neither
insured nor guaranteed by the U.S. government. Although the Fund seeks to
maintain a stable $1 share price, there is no assurance that it will be
able to do so. Investors also should keep in mind that, under federal law,
some notes issued in the tax-free securities market are subject to the
alternative minimum tax, or AMT. To eliminate any federal income-tax
liabilities for investors who may be subject to the AMT requirement, the
Fund does not invest in such issues.)
Inflation stays subdued
Despite ongoing solid economic growth and generally rising wages in
several business sectors, inflation remained remarkably low during the
period. As a result, aside from a brief run-up at the beginning of the
year, short-term interest rates barely budged over the six months as the
Federal Reserve Board decided to continue the hands-off approach it had
maintained since the spring of 1997.
Changes to the portfolio were confined to a shift in its average maturity
-- from about 40 days at outset of the year to about 20 days in early
summer. This fluctuation in maturity is largely a result of ongoing
seasonal supply and demand factors in the short-term, tax-free market. An
increase in the supply of new issues occurs in early July every year,
replacing outstanding issues that mature in June. This results in a short
average maturity prior to the supply surge, followed by a lengthening when
the new issues come to market. As for the possibility of buying more
longer-term issues to increase the Fund's yield, in my view the yield
advantage provided by such securities was too slight to justify the
strategy.
At this point (mid-July), it appears that our economy is weathering the
negative effect of the economic turmoil in Asia relatively well. In fact,
I think it's possible that growth could pick up before the year is out,
putting upward pressure on inflation. If so, the Federal Reserve may
decide to nudge up short-term interest rates, which would ultimately
result in a modestly higher yield for the Fund.
Terry Fettig
(picture of) Terry Fettig
Terry Fettig
Portfolio Manager
<PAGE>
To our shareholders
6-month performance
(All figures per share)
Net asset value (NAV)
June 30, 1998 $ 1.00
Dec. 31, 1997 $ 1.00
Increase $ --
Distributions
Jan. 1, 1998 - June 30, 1998
From income $ 0.01
From capital gains $ --
Total distributions $ 0.01
Total return* +1.5%
*The total return is a hypothetical investment
in the Fund with all distributions reinvested.
<PAGE>
<TABLE>
<CAPTION>
Financial statements
Statement of assets and liabilities
IDS Tax-Free Money Fund, Inc.
June 30, 1998
Assets
(Unaudited)
Investments in securities, at value (Note 1)
<S> <C>
(identified cost $154,595,374) $154,595,374
Cash in bank on demand deposit 10,391,643
Accrued interest receivable 620,043
-------
Total assets 165,607,060
-----------
Liabilities
Dividends payable to shareholders 61,750
Payable for investment securities purchased 12,818,527
Accrued investment management services fee 1,297
Accrued transfer agency fee 438
Accrued administrative services fee 126
Other accrued expenses 13,955
------
Total liabilities 12,896,093
----------
Net assets applicable to outstanding capital stock $152,710,967
============
Represented by
Capital stock-- $.01 par value (Note 1) $ 1,527,189
Additional paid-in capital 151,190,476
Undistributed net investment income 21
Accumulated net realized gain (loss) (6,719)
------
Total-- representing net assets applicable to outstanding capital stock $152,710,967
============
Shares outstanding 152,718,854
-----------
Net asset value per share of outstanding capital stock: $ 1.00
------------
See accompanying notes to financial statements.
</TABLE>
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<TABLE>
<CAPTION>
Financial statements
Statement of operations
IDS Tax-Free Money Fund, Inc.
Six months ended June 30, 1998
Investment income
(Unaudited)
Income:
<S> <C>
Interest $2,708,102
----------
Expenses (Note 2):
Investment management services fee 238,948
Transfer agency fee 79,414
Administrative services fees and expenses 24,079
Compensation of board members 3,885
Custodian fees 11,626
Postage11,094
Registration fees 36,816
Reports to shareholders 6,378
Audit fees 10,000
Other 530
---
Total expenses 422,770
Earnings credits on cash balances (Note 2) (30,454)
-------
Total net expenses 392,316
-------
Investment income (loss)-- net 2,315,786
---------
Net increase (decrease) in net assets resulting from operations $2,315,786
==========
See accompanying notes to financial statements.
</TABLE>
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<TABLE>
<CAPTION>
Statements of changes in net assets
IDS Tax-Free Money Fund, Inc.
Operations and distributions
June 30,1998 Dec. 31, 1997
Six months ended Year ended
(Unaudited)
<S> <C> <C>
Investment income (loss)-- net $ 2,315,786 $ 4,921,602
------------ ------------
Distributions to shareholders from:
Net investment income (2,315,804) (4,924,473)
---------- ----------
Capital share transactions at constant $1 net asset value
Proceeds from sales of shares 160,506,479 295,641,284
Net asset value of shares issued in reinvestment of distributions 2,270,525 4,769,737
Payments for redemptions of shares (162,411,490) (305,451,034)
------------ ------------
Increase (decrease) in net assets from capital share transactions 365,514 (5,040,013)
------- ----------
Total increase (decrease) in net assets 365,496 (5,042,884)
Net assets at beginning of period 152,345,471 157,388,355
----------- -----------
Net assets at end of period $152,710,967 $152,345,471
============ ============
Undistributed net investment income $ 21 $ 39
------------ ------------
See accompanying notes to financial statements.
</TABLE>
<PAGE>
Notes to financial statements
IDS Tax-Free Money Fund, Inc.
(Unaudited as to June 30, 1998)
1
Summary of
significant
accounting policies
The Fund 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 and
providing administrative services. 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 a fee 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, organizational expenses 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 six months ended June 30, 1998, the Fund's custodian and
transfer agency fees were reduced by $30,454 as a result of earnings
credits from overnight cash balances.
3
Securities
transactions
Cost of purchases and proceeds from sales of securities aggregated
$246,298,361 and $242,195,000, respectively, for the six months ended June
30, 1998. Realized gains and losses are determined on an identified cost
basis.
<PAGE>
<TABLE>
<CAPTION>
IDS Tax-Free Money Fund, Inc.
4
Financial
highlights
The table below shows certain important financial information for evaluating the
Fund's results.
Fiscal period ended Dec. 31,
Per share income and capital changes(a)
1998(c) 1997 1996 1995 1994 1993 1992 1991 1990 1989
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
beginning of period
Income from investment operations:
Net investment income (loss) .01 .03 .03 .03 .02 .02 .02 .04 .05 .05
Less distributions:
Dividends from net (.01) (.03) (.03) (.03) (.02) (.02) (.02) (.04) (.05) (.05)
investment income
Net asset value, $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
end of period
Ratios/supplemental data
1998(c) 1997 1996 1995 1994 1993 1992 1991 1990 1989
Net assets, end of period $153 $152 $157 $146 $133 $116 $137 $144 $153 $117
(in millions)
Ratio of expenses to .55%d .55% .55% .58% .68% .68% .63% .70% .71% .67%
average daily net assets(b)
Ratio of net income (loss) to 3.00%d 3.13% 2.94% 3.19% 2.11% 1.63% 2.25% 3.78% 5.24% 5.47%
average daily net assets
Total return 1.5% 3.2% 2.9% 3.2% 2.1% 1.6% 2.2% 3.8% 5.2% 5.6%
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.
c Six months ended June 30, 1998 (Unaudited).
d Adjusted to an annual basis.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Investments in securities
IDS Tax-Free Money Fund, Inc.
June 30, 1998 (Unaudited)
(Percentages represent
value of investments
compared to net assets)
Short-term securities (101.2%)
Issuer (b) Principal Value(a)
amount
Municipal notes
Alabama (1.2%)
Columbia County Industrial Development Pollution Control
Revenue Bonds (Alabama Power) Series C
<S> <C> <C>
10-01-22 3.75% $500,000(c,d) $500,000
Columbia County Industrial Development Pollution Control
Revenue Bonds (Alabama Power) Series E
10-01-22 3.70 400,000(c,d) 400,000
Columbia County Pollution Control Revenue Bonds
(Alabama Power) Series D
10-01-22 3.95 1,000,000(c,d) 1,000,000
Total 1,900,000
Alaska (0.9%)
Valdez Marine Terminal Refunding Revenue Bonds
Alaska Pipeline (Mobil)
11-01-03 3.50 1,000,000(c,d) 1,000,000
Valdez Marine Terminal Revenue Bonds
Exxon Pipeline Series 1993A
12-01-33 3.70 300,000(c,d) 300,000
Total 1,300,000
Arizona (9.2%)
Maricopa County (Arizona Public Service Company)
(Bank of America)
05-01-29 3.80 3,000,000(c,d) 3,000,000
Maricopa County Pollution Control Revenue Bonds
Series 1994C
05-01-29 3.90 1,400,000(c,d) 1,400,000
Maricopa County Pollution Control Revenue Bonds
(Southern California Edison) C.P. Series 1998E
08-04-98 3.55 1,000,000 1,000,000
08-19-98 3.65 2,720,000 2,720,000
Salt River Agricultural Improvement & Power District
C.P.
07-07-98 3.70 1,000,000 1,000,000
07-13-98 3.60 1,000,000 1,000,000
07-15-98 3.60 2,900,000 2,900,000
09-01-98 3.60 1,000,000 1,000,000
Total 14,020,000
Colorado (1.3%) State Series 1998 T.R.A.N.
06-25-99 4.00 2,000,000 2,008,540
Florida (2.9%)
Jacksonville Electric Authority
Electric System C.P. Series 1998D-1
08-27-98 3.70 3,300,000 3,300,000
State Municipal Power Agency C.P.
08-04-98 3.65 1,155,000 1,155,000
Total 4,455,000
Georgia (5.8%)
Burke County Development Authority
Pollution Control Revenue Bonds
(Georgia Power) Vogtle
04-01-25 3.90 1,700,000(c,d) 1,700,000
09-01-26 3.90 1,800,000(c,d) 1,800,000
Burke County Pollution Control Revenue Bonds
(Georgia Power) Series 1994
07-01-24 3.80 400,000(c,d) 400,000
Monroe County Development Authority (Georgia Power)
Series 2
07-01-25 3.75 1,400,000(c,d) 1,400,000
Monroe County Pollution Control Revenue Bonds
(Gulf Power) Series 2
09-01-24 3.75 1,450,000(c,d) 1,450,000
Putnam County Development Authority
Pollution Control Revenue Bonds
(Georgia Power)
04-01-32 3.75 200,000(c,d) 200,000
Putnam County Development Authority
Pollution Control Revenue Bonds
(Georgia Power) Series 2
09-01-29 3.90 1,900,000(c,d) 1,900,000
Total 8,850,000
Hawaii (0.7%)
State Department Budget & Finance Special Purpose
Mortgage Revenue Bonds (Kaiser Permanente)
03-01-15 3.80 1,000,000(c,d) 1,000,000
Idaho (2.0%) State Series 1998 T.A.N.
06-30-99 4.50 3,000,000 3,025,980
Illinois (0.2%)
Development Finance Authority Pollution Control
Revenue Bonds (Amoco Oil Company) Series 1994
11-01-12 3.80 310,000(c,d) 310,000
Indiana (5.7%)
Bond Bank Advanced Funding Notes
01-20-99 4.00 2,000,000 2,005,895
Jasper County Pollution Control Revenue Bonds
Northern Indiana Public Service
06-01-13 3.80 2,700,000(c,d) 2,700,000
Mount Vernon Pollution Control & Solid Waste Disposal Refunding Revenue Bonds
(General Electric) C.P.
08-10-98 3.55 1,800,000 1,800,000
09-02-98 3.60 1,190,000 1,190,000
State Education Facility (University of Notre Dame)
03-01-25 3.45 1,000,000(c,d) 1,000,000
Total 8,695,895
Iowa (1.3%)
School Cash Anticipation Program
Iowa School Corporation
Warrant Certificate 1
06-25-99 4.50 2,000,000 2,016,130
Kentucky (2.8%)
Jefferson County Pollution Control Revenue Notes
(Louisville Gas & Electric) C.P. Series 1993
07-08-98 3.65 1,300,000 1,300,000
09-09-98 3.65 3,000,000 3,000,000
Total 4,300,000
Maryland (2.6%)
Health & Educational Facilities Authority Revenue Bonds
(Kaiser Permanente) Series A
07-01-15 3.80 2,000,000(c,d) 2,000,000
Montgomery County Maryland C.P. B.A.N.
07-09-98 3.65 2,000,000 2,000,000
Total 4,000,000
Michigan (7.1%)
Regents of the University Hospital Refunding
Revenue Bonds Series 1992A
12-01-19 3.80 1,400,000(c,d) 1,400,000
Regents of the University Hospital Refunding
Revenue Bonds Series 1995A
12-01-27 3.80 2,200,000(c,d) 2,200,000
Regents of the University Hospital Revenue Bonds
Series 1995A
12-01-27 3.80 4,200,000(c,d) 4,200,000
State Full Faith & Credit General Obligation Notes
09-30-98 4.50 3,000,000 3,005,316
Total 10,805,316
Minnesota (7.2%)
Becker (Northern States Power)
C.P. Series 1993B
08-05-98 3.65 1,000,000 1,000,000
Becker Pollution Control Revenue Bonds
(Northern States Power) C.P. Series 1998A
07-09-98 3.70 2,000,000 2,000,000
09-08-98 3.65 3,000,000 3,000,000
Rochester Health Care Facility Revenue Bonds
(Mayo Clinic) Series 1998A
07-07-98 3.45 1,000,000 1,000,000
Rochester Health Care Facility Revenue Bonds
(Mayo Clinic) Series 1998B
07-15-98 3.55 2,000,000 2,000,000
Southern Municipal Power C.P. Series 1998B
10-06-98 3.60 2,000,000 2,000,000
Total 11,000,000
Mississippi (4.5%)
Jackson County Pollution Control Refunding
Revenue Bonds (Chevron)
06-01-23 3.80 1,300,000(c,d) 1,300,000
Jackson County Port Facility (Chevron USA)
06-01-23 3.80 5,600,000(c,d) 5,600,000
Total 6,900,000
Missouri (0.1%)
Washington University Health & Education
Facilities Authority Series A
09-01-30 3.85 200,000(c,d) 200,000
New Mexico (3.9%)
Farmington Pollution Control Revenue Bonds
(Arizona Public Service Company) Series 1994B
05-01-24 3.90 500,000(c,d) 500,000
09-01-24 3.80 1,700,000(c,d) 1,700,000
State Series 1998 T.R.A.N.
06-30-99 4.25 3,750,000 3,773,400
Total 5,973,400
New York (9.9%)
Long Island Power Authority Electric Revenue Bonds
Variable Sub Series 5
05-01-33 3.75 7,400,000(c,d) 7,400,000
New York City Municipal Water & Sewer System
Revenue Bonds
06-15-22 4.00 2,000,000(c,d) 2,000,000
06-15-23 4.00 900,000(c,d) 900,000
New York City Municipal Water Finance Authority
Series 1994C
06-15-23 4.00 1,900,000(c,d) 1,900,000
New York City Municipal Water Finance Authority
Water & Sewer Systems Revenue Bonds
06-15-22 4.00 2,900,000(c,d) 2,900,000
Total 15,100,000
North Carolina (2.6%)
Medical Care Community Hospital Revenue Bonds
Duke University Hospital Series 1985B-C
06-01-15 3.45 4,000,000(c,d) 4,000,000
Ohio (5.2%)
State Air Quality Development Authority Revenue Bonds
(Cincinnati Gas & Electric) Series 1995A
09-01-30 3.70 2,500,000(c,d) 2,500,000
State Air Quality Development Authority Revenue Bonds
(Cincinnati Gas & Electric) Series 1995B
12-01-15 3.80 2,400,000(c,d) 2,400,000
State Air Quality Development Authority Revenue Bonds
(Cincinnati Gas & Electric) Series A
09-01-30 3.80 3,000,000(c,d) 3,000,000
Total 7,900,000
Oregon (1.3%)
Klamath Falls Electric
Revenue Bonds Series 1998B
05-03-99 3.80 2,000,000 2,000,000
Pennsylvania (5.9%) Philadelphia T.R.A.N.
06-30-99 4.25 2,000,000 2,011,820
State Higher Education Facilities Authority Refunding
Revenue Bonds (Carnegie Mellon) Series B
11-01-27 4.00 1,800,000(c,d) 1,800,000
State Higher Education Facilities Authority Revenue Bonds
(Carnegie Mellon) Series 1995A
11-01-25 4.00 200,000(c,d) 200,000
State Higher Education Facilities Authority Revenue Bonds
(Carnegie Mellon) Series 1995D
11-01-30 4.00 1,000,000(c,d) 1,000,000
State Higher Education Facilities Authority Revenue Bonds
Series C
01-01-26 3.50 3,000,000(c,d) 3,000,000
State University Notes Series 1998A
03-30-99 4.50 1,000,000 1,006,852
Total 9,018,672
Texas (9.9%) Houston Series 1998 T.R.A.N.
06-30-99 4.25% $2,000,000 $2,013,480
Port Arthur Naval District of Jefferson
Pollution Control Revenue Bonds Texaco
10-01-24 3.85 7,600,000(c,d) 7,600,000
San Antonio Electric & Gas Systems
C.P. Series 1998A
07-08-98 3.65 3,500,000 3,500,000
State Series 1997 T.R.A.N.
08-31-98 4.75 2,000,000 2,002,961
Total 15,116,441
Utah (1.3%)
State General Obligation Highway
C.P. Series 1997B
09-30-98 3.65 1,000,000 1,000,000
State General Obligation Highway
C.P. Series 1998B
07-08-98 3.75 1,000,000 1,000,000
Total 2,000,000
Washington (0.7%)
State General Obligation C.P. Series 1996B R.A.N.
06-15-20 3.45 1,000,000(c,d) 1,000,000
Wyoming (5.0%)
Kemmerer Pollution Control Revenue Bonds
(Exxon)
11-01-14 3.70 900,000(c,d) 900,000
Lincoln County Pollution Control Revenue Bonds
(Exxon)
08-01-15 3.80 2,800,000(c,d) 2,800,000
Lincoln County Pollution Control Revenue Bonds
(Exxon) Series 1985
08-01-15 3.80 1,500,000(c,d) 1,500,000
Sublette County (Exxon) Series 1984
11-01-14 3.80 2,500,000(c,d) 2,500,000
Total 7,700,000
Total investments in securities
(Cost: $154,595,374)(e) $154,595,374
See accompanying notes to investments in securities.
Notes to investments in securities
(a) Securities are valued by procedures described in Note 1 to the financial
statements.
(b) The following abbreviations may be used in the 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. -- Variable Rate
V.R.D.B. -- Variable Rate Demand Bond
V.R.D.N. -- Variable Rate Demand Note
(c) Interest rate varies either based on a predetermined schedule or to reflect
current market conditions; rate shown is the effective rate on June 30, 1998.
(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) Also represents the cost of securities for federal income tax purposes at
June 30, 1998.
</TABLE>
<PAGE>
Board members and officers
Independent board members and officers
Chairman William R. Pearce*
of the board Chairman of the board, Board Services Corporation (provides
administrative services to boards including the boards of the
IDS and IDSLife funds and Master Trust portfolios).
H. Brewster Atwater, Jr.
Former chairman and chief executive officer, General Mills,
Inc.
Lynne V. Cheney
Distinguished fellow, American Enterprise Institute for Public
Policy Research.
Heinz F. Hutter
Former president and chief operating officer, Cargill, Inc.
Anne P. Jones
Attorney and telecommunications consultant.
Alan K. Simpson
Former United States senator for Wyoming.
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, Leslie L. Ogg*
general counsel President of Board Services Corporation.
and secretary
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
Vice president Frederick C. Quirsfeld*
Vice president, AEFC
Treasurer Matthew N. Karstetter*
Vice president, AEFC
* Interested person as defined by the Investment Company Act of 1940.
<PAGE>
IDS mutual funds
Global/International funds
Funds in this group seek capital growth and/or income by investing primarily in
foreign securities. Foreign investments may be subject to currency fluctuations
and political and economic risks of the countries in which the investments are
made. They are high risk mutual funds with a potential for high reward.
IDS Emerging Markets Fund
Invests in a Portfolio comprised primarily of stocks of companies in developing
countries throughout the world that are believed to offer growth potential.
Seeks to provide long-term growth of capital.
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IDS Global Growth Fund
Invests in a Portfolio comprised primarily of stocks of companies throughout the
world that are positioned to meet market needs in a changing world economy.
These companies offer above-average potential for long-term growth.
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IDS International Fund
Invests primarily in common stocks of foreign companies that offer potential for
superior growth. The Fund may invest up to 20% of its assets in the U.S. market.
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IDS Global Balanced Fund
Invests in stocks and bonds in, for the most part, major markets throughout the
world, including the U.S. Seeks to provide a balance of growth of capital and
current income.
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IDS Global Bond Fund
Invests in a Portfolio comprised primarily of debt securities of U.S. and
foreign issuers to seek high total return through income and growth of capital.
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Growth funds
Funds in this group seek capital growth, primarily from common stocks. They are
high risk mutual funds with a potential for high reward.
IDS Precious Metals Fund
Invests primarily in the securities of foreign or domestic companies that
explore for, mine and process or distribute gold and other precious metals. A
highly aggressive and speculative fund that seeks long-term growth of capital.
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IDS Discovery Fund
Invests in small- and medium-size, growth-oriented companies emphasizing
technological innovation and productivity enhancement. Buys and holds larger
growth-oriented stocks.
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IDS Small Company Index Fund
Invests in all or a representative group of the equity securities comprising the
S&P SmallCap 600 Index, as it strives to provide long-term capital appreciation.
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IDS Strategy Aggressive Fund
Invests primarily in common stocks of companies that are selected for their
potential for above-average growth. Above-average means that their growth
potential is better, in the opinion of the portfolio's investment manager, than
the S&P 500 Stock Index.
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IDS Research Opportunities Fund
Invests in a Portfolio comprised primarily of equity securities of companies
included in the S&P 500 Stock Index that are believed to have strong growth
potential. The Portfolio is managed using a research methodology by the Research
Department of AEFC. Goal is long-term appreciation.
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IDS Growth Fund
Invests in a Portfolio comprised primarily of companies that have above-average
potential for long-term growth as a result of new management, marketing
opportunities or technological superiority.
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IDS New Dimensions Fund
Invests in a Portfolio comprised primarily of companies with
significant growth potential due to superiority in
technology, marketing or management. The Fund frequently
changes its industry mix.
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IDS Progressive Fund
Invests primarily in undervalued common stocks. The Fund holds stocks for the
long term with the goal of capital growth.
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Growth & income funds
These funds focus on securities of medium to large, well-established companies
that offer long-term growth of capital and reasonable income from dividends and
interest. Foreign investments may be subject to currency fluctuations and
political and economic risks of the countries in which the investments are made.
IDS Equity Select Fund
Invests primarily in a combination of moderate growth stocks that generaly pay
dividends and bonds. Seeks growth of capital and income.
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IDS Blue Chip Advantage Fund
Invests in selected stocks from a major market index. Securities purchased are
those recommended by our research analysts as the best from each industry
represented on the index. Offers potential for long-term growth as well as
dividend income.
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IDS Managed Allocation Fund
Invests in a Portfolio comprised primarily of U.S. equity securities, U.S. and
foreign debt securities, foreign equity securities and money market instruments.
The Fund provides diversification among these major investment categories and
has a target mix that represents the way the Fund's investments will be
allocated over the long term. Seeks maximum total return.
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IDS Stock Fund
Invests in a Portfolio comprised primarily of common stock of companies
representing many sectors of the economy. Seeks current income and growth of
capital.
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IDS Equity Value Fund
Invests primarily in undervalued common stocks that offer potential for growth
of capital and income.
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IDS Utilities Income Fund
Invests primarily in the stocks of public utility companies to seek high current
income and growth of income and capital with reduced volatility.
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IDS Diversified Equity Income Fund
Invests in a Portfolio comprised primarily in high-yielding common stocks to
seek high current income and, secondarily, to benefit from the growth potential
offered by stock investments.
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IDS Mutual
Invests in a Portfolio that seeks to balance between common stocks and senior
securities (preferred stocks and bonds). Seeks a balance of growth of capital
and current income.
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Income funds
The funds in this group invest their assets primarily in corporate bonds or
government securities to seek interest income. Secondary objective is capital
growth. Risk varies by bond quality.
IDS Extra Income Fund
Invests in a Portfolio comprised mainly of long-term, high-yielding corporate
fixed-income securities in the lower rated, higher risk bond categories to seek
high current income. Secondary objective is capital growth.
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IDS Bond Fund
Invests mainly in corporate bonds, at least 50% in the higher rated, lower risk
bond categories, or the equivalent, and in government bonds.
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IDS Selective Fund
Invests in a Portfolio comprised primarily of high-quality corporate bonds and
other highly rated debt instruments including government securities and
short-term investments. Seeks current income and preservation of capital.
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IDS Federal Income Fund
Invests in a Portfolio comprised primarily of securities issued or guaranteed as
to the timely payment of principal and interest by the U.S. government, its
agencies and instrumentalities. Seeks a high level of current income and safety
of principal consistent with its type of investments.
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Tax-exempt income funds
These funds provide tax-free income by investing in municipal bonds. The income
is generally free from federal income tax, but a portion of the income may be
subject to state and local taxes. Risk varies by bond quality.
IDS Tax-Exempt Bond Fund
Invests mainly in bonds and notes of state or local government units, with at
least 75% in the four highest rated, lowest risk bond categories.
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IDS Insured Tax-Exempt Fund
Invests primarily in municipal securities that are insured as to the timely
payment of principal and interest. The insurance feature minimizes credit risk
of the Fund but does not guarantee the market value of the Fund's shares.
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IDS State Tax-Exempt Funds
(CA, MA, MI, MN, NY, OH)
Invests primarily in high- and medium-grade municipal securities to provide
income to residents of each respective state that is exempt from federal, state
and local income taxes. (New York is the only state that is exempt at the local
level.)
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IDS High Yield Tax-Exempt Fund
Invests in a Portfolio comprised primarily of medium- and lower-quality
municipal bonds and notes. Lower-quality securities generally involve greater
risk of principal and income.
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IDS Intermediate Tax-Exempt Fund
Invests in mainly investment-grade bonds and other debt securities with
intermediate-term maturities issued by state and local government units. Goal is
to seek a high level of current income exempt from federal taxes.
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Money market funds
These money market funds have three main goals: conservation of capital,
constant liquidity and the highest possible current income consistent with these
objectives. An investment in these funds is neither insured nor guaranteed by
the U.S. government, and there can be no assurance that these funds will be able
to maintain a stable net asset value of $1.00 per share. Very limited risk.
IDS Cash Management Fund
Invests in such money market securities as high quality commercial paper,
bankers' acceptances, certificates of deposit (CDs) and other bank securities.
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IDS Tax-Free Money Fund
Invests primarily in short-term bonds and notes issued by state and local
governments to seek high current income exempt from federal income taxes.
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For more complete information about any of these funds, including charges and
expenses, you can obtain a prospectus by contacting your financial advisor or
writing to American Express Shareholder Service, P.O. Box 534, Minneapolis, MN
55440-0534. Read it carefully before you invest or send money.
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Quick telephone reference
American Express Redemptions and exchanges, National/Minnesota
Financial Advisors dividend payments or 800-437-3133
Telephone Transaction reinvestments and automatic
Service payment arrangements Mpls./St. Paul area:
671-3800
TTY Service For the hearing impaired 800-846-4852
American Express Automated account information 800-862-7919
Financial Advisors (TouchTone(R) phones only),
Easy Access Line including current fund prices
and performance, account values
and recent account transactions
You may experience delays when call volumes are high.
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AMERICAN EXPRESS Financial Advisors
IDS Fund
IDS Tower 10
Minneapolis, MN 55440-0010
