IDS
Tax-Free
Money Fund
1998 ANNUAL REPORT
(PROSPECTUS ENCLOSED)
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The goal of IDS Tax-Free Money Fund, Inc. is to provide as high a level of
current income exempt from federal income tax as is consistent with liquidity
and stability of principal. The Fund invests primarily in short-term bonds and
notes issued by or on behalf of state or local governmental units.
(This annual report includes a prospectus that describes in detail the Fund's
objective, investment strategy, risks, sales charges, fees and other matters of
interest. Please read the prospectus carefully before you invest or send money.)
Distributed by American Express Financial Advisors Inc.
AMERICAN
EXPRESS
Financial
Advisors
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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.
IDS TAX-FREE MONEY FUND
(This annual report is not part of the prospectus.)
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Table of Contents
1998 ANNUAL REPORT
The purpose of this annual report is to tell investors how the Fund performed.
From the Chairman 4
From the Portfolio Manager 4
Fund Facts 6
Making the Most of the Fund 7
Independent Auditors' Report 8
Financial Statements 9
Notes to Financial Statements 12
Investments in Securities 15
Federal Income Tax Information 24
1999 PROSPECTUS
The prospectus, which is bound into the middle of this annual report, describes
the Fund in detail.
The Fund 3p
Goal 3p
Investment Strategy 3p
Risks 4p
Past Performance 5p
Fees and Expenses 6p
Management 7p
Buying and Selling Shares 7p
Valuing Fund Shares 7p
Purchasing Shares 7p
Exchanging/Selling Shares 10p
Distributions and Taxes 14p
Personalized Shareholder
Information 16p
About the Company 17p
Quick Telephone Reference 19p
Financial Highlights 20p
Appendix 21p
(This annual report is not part of the prospectus.)
ANNUAL REPORT - 1998
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(picture of) William R. Pearce
William R. Pearce
Chairman of the board
From the Chairman
If you're an experienced investor, you know that the past year was a highly
volatile period in many financial markets. But history tells us that substantial
market moves are nothing new. Though they're often unpredictable, declines --
whether they're brief or long-lasting, moderate or substantial -- are always a
possibility.
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.
(signature of)
William R. Pearce
(picture of) Terry Fettig
Terry Fettig
Portfolio Manager
From the Portfolio Manager
IDS Tax-Free Money Fund's yield declined somewhat during the fiscal year
(January through December 1998), reflecting a drop in short-term interest rates.
The Fund's $1 net asset value was unchanged during the 12 months, providing
shareholders with continued stability of principal in addition to a tax-free
return.
For the seven-day period ended Dec. 31, 1998, the Fund provided an annualized
simple yield of 3.27% and an annualized compound yield of 3.32%. These are equal
to 4.54% simple and 4.61% compound yields for an investor in the 28% federal
income-tax bracket.
(Investors should keep in mind that an investment in the Fund is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency. Although the Fund seeks to preserve the value of your investment at $1
per share, it is possible to lose money by investing in the Fund. Investors also
should keep in mind that, under federal law, some notes
IDS TAX-FREE MONEY FUND
(This annual report is not part of the prospectus.)
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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.)
FED CUTS RATES
Despite ongoing solid economic growth and generally rising wages in several
business sectors, inflation remained remarkably low over the 12 months. As a
result, aside from brief run-ups in January and July, short-term interest rates
barely budged through late September. It was then that the Federal Reserve Board
instituted the first of three reductions in short-term interest rates designed
to relieve credit restraints that had built up as a result of ongoing weakness
in several foreign markets. For the Fund, this ultimately meant less interest
from the securities it holds in the portfolio.
Changes to the portfolio were largely confined to a shift in its average
maturity -- from about 40 days at outset of the year to about 60 days in
mid-summer and about 50 days at year-end. 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
supply pattern results in a shorter average maturity prior to the supply surge,
followed by a lengthening when the new issues come to market.
As for the current fiscal year, I think economic growth and inflation are likely
to continue at about their recent pace, at least over the near term. Therefore,
I expect no major change in short-term interest rates and, consequently, a
relatively stable yield for the Fund.
(signarue of) Terry Fettig
Terry Fettig
(This annual report is not part of the prospectus.)
ANNUAL REPORT - 1998
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Fund Facts
12-month performance
(All figures per share)
Net asset value (NAV)
Dec. 31, 1998 $1.00
Dec. 31, 1997 $1.00
Increase $ --
Distributions -- Jan. 1, 1998 - Dec. 31, 1998
From income $0.03
From capital gains $ --
Total distributions $0.03
Total return* +2.94%
*The total return is a hypothetical investment in the Fund with all
distributions reinvested.
IDS TAX-FREE MONEY FUND
(This annual report is not part of the prospectus.)
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Making the Most of the Fund
Average annual total return (as of Dec. 31, 1998)
1 year 5 years 10 years
+2.94% +2.88% +3.28%
Although there is no guarantee, the Fund will use its best efforts to maintain a
constant net asset value of $1 per share.
Your investment and return values may fluctuate so that your shares, when
redeemed, may be worth more or less than the original cost. This was a period of
widely fluctuating security prices. Past performance is no guarantee of future
results.
(This annual report is not part of the prospectus.)
ANNUAL REPORT - 1998
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The financial statements contained in Post-Effective Amendment #33 to
Registration Statement No. 2-66868 filed on or about February 19, 1999, are
incorporated herein by reference.
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Federal Income Tax Information
The Fund is required by the Internal Revenue Code of 1986 to tell its
shareholders about the tax treatment of the dividends it pays during its fiscal
year. The dividends listed below were reported to you on a Form 1099-DIV,
Dividends and Distributions.
IDS Tax-Free Money Fund, Inc.
Fiscal year ended Dec. 31, 1998
Exempt-interest dividends -- taxable status explained below.
Payable date Per share
Jan. 28, 1998 $0.00281
Feb. 26, 1998 0.00223
March 26, 1998 0.00210
April 28, 1998 0.00285
May 27, 1998 0.00254
June 25, 1998 0.00244
July 27, 1998 0.00252
Aug. 26, 1998 0.00235
Sept. 24, 1998 0.00237
Oct. 26, 1998 0.00253
Nov. 24, 1998 0.00222
Dec. 22, 1998 0.00208
Total distributions $0.02904
Source of distributions
100% of tax-exempt interest dividends during the year ended Dec. 31, 1998, were
derived exclusively from interest on tax-exempt securities.
Federal taxation
Exempt-interest dividends are exempt from federal income taxes and should not be
included in shareholders' gross income.
Other taxation
Exempt-interest dividends may be subject to state and local taxes. Each
shareholder should consult a tax advisor about reporting this income for state
and local tax purposes.
IDS TAX-FREE MONEY FUND
(This annual report is not part of the prospectus.)
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Source of income by state
Percentages of income from municipal securities earned by the Fund from various
states during the year ended Dec. 31, 1998 are listed below.
Alabama 2.126%
Alaska 0.742
Arizona 10.313
Arkansas 0.354
California 0.766
Colorado 0.788
Florida 2.784
Georgia 5.478
Hawaii 0.655
Idaho 1.517
Illinois 0.825
Indiana 5.423
Iowa 1.083
Kentucky 2.789
Louisiana 0.103
Maryland 2.556
Massachusetts 0.199
Michigan 7.057
Minnesota 7.287
Mississippi 2.003
Missouri 0.124
Montana 0.530
Nevada 0.287
New Jersey 0.133
New Mexico 3.670
New York 7.401
North Carolina 2.488
Ohio 3.433
Oregon 0.911
Pennsylvania 6.011
Tennessee 0.452
Texas 10.495
Utah 1.221
Virginia 1.027
Washington 0.944
Wisconsin 0.867
Wyoming 5.158
(This annual report is not part of the prospectus.)
ANNUAL REPORT - 1998
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AMERICAN
EXPRESS
IDS Tax-Free Money Fund Financial
IDS Tower 10 Advisors
Minneapolis, MN 55440-0010
S-6433 M (2/99)
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STATEMENT OF DIFFERENCES
Difference Description
1) The layout is different 1) Some of the layout in the
throughout the annual report. annual report to
shareholders is in two
columns.
2) There are pictures, icons 2) Each picture, icon and
and graphs throughout the graph is described in
annual report. parentheses.
