AXP(SM)
Tax-Free
Money Fund
1999 ANNUAL REPORT
(PROSPECTUS ENCLOSED)
American
Express
Funds
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AXP Tax-Free Money 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.
(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.)
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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 -- AXP 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.
AXP Tax-Free Money Fund (This annual report is not part of the prospectus.)
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Table of Contents
1999 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 25
2000 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
Transactions through Third Parties 10p
Exchanging/Selling Shares 10p
Distributions and Taxes 14p
Other Information 16p
Financial Highlights 17p
Appendix 18p
(This annual report is not part of the prospectus.) Annual Report - 1999
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(Picture of) Arne H. Carlson
Arne H. Carlson
Chairman of the board
From the Chairman
We are in an extraordinary period for investing in financial assets, with many
stocks at their all-time highs. Looking at year 2000, American Express Financial
Corporation, the Fund's investment manager, expects the economy to continue to
grow and long-term interest rates to rise only slightly. This is a great time to
take a close look at your goals and investments. We encourage you to:
o Consult a professional investment adviser who can help you cut through
mountains of data .
o Set financial goals that extend beyond those achievable through retirement
plans of your employer.
o Learn as much as you can about your current investments.
The portfolio manager's letter that follows provides a review of the Fund's
investment strategies and performance. The annual report contains other valuable
information as well. The Fund's prospectus describes its investment objectives
and how it intends to achieve those objectives. As experienced investors know,
information is vital to making good investment decisions.
So, take a moment and decide again whether the Fund's investment objectives and
management style fit with your other investments to help you reach your
financial goals. And make it a practice on a regular basis to assess your
investment options.
On behalf of the Board,
Arne H. Carlson
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(picture of) Terry Fettig
Terry Fettig
Portfolio manager
From the Portfolio Manager
Short-term interest ratesfluctuatedconsiderablyduring the past 12 months,
ultimately resulting in aslight decline in AXP Tax-FreeMoney Fund's yield over
the fiscal year (January through December 1999). The Fund's net asset value
remained at $1 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, 1999, the Fund provided an annualized
simple yield of 3.67% and an annualized compound yield of 3.74%. These are equal
to 5.10% simple and 5.19% 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 share, it is possible to lose money by investing in the
Fund. 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.)
THE FED RAISES RATES
Despite strong economic growth, higher oil prices and generally rising wages in
several business sectors, inflation remained remarkably low over the 12 months.
Reflecting the tame inflation environment, short-term interest rates barely
budged during the first half of the year. But in late June, the Federal Reserve
Board (the Fed), concerned that the risk of higher inflation was increasing,
implemented the first of three hikes in short-term interest rates. The others
came in August and November. As a result, yields on the securities this Fund
invests in rose slightly during the final months of 1999.
To take advantage of the higher yields that became available, I reduced the
portfolio's average maturity during the fall and early winter. This strategy
allowed me to more quickly add new, higher-yielding securities and, ultimately,
enhance the Fund's yield payout. As usual, about half of the portfolio consisted
of variable-rate demand notes, with the rest split about evenly between
municipal notes and commercial paper.
As the new fiscal year begins, the data have yet to indicate a clear, upward
trend in inflation. Nevertheless, I think there's a good possibility that the
Fed will decide to push short-term interest rates somewhat higher to cool off
the economy and, therefore, relieve potential pressure on inflation. In light of
that, I plan to keep the portfolio's maturity shorter-than-average, at least
over the near term, in order to more readily add higher-yielding securities
should they come to market.
Terry Fettig
(This annual report is not part of the prospectus.) Annual Report - 1999
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1999 Fund Facts
12-month performance
(All figures per share)
Net asset value (NAV)
Dec. 31, 1999 $1.00
Dec. 31, 1998 $1.00
Increase $ --
Distributions -- Jan. 1, 1999 - Dec. 31, 1999
From income $0.03
From capital gains $ --
Total distributions $0.03
Total return* +2.68%
7-day yield +3.67%**
*The total return is a hypothetical investment in the Fund with all
distributions reinvested.
**The yield quotation more closely reflects thecurrent earnings of the money
market fund than the total return quotation.
AXP 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, 1999)
1 year 5 years 10 years
+2.68% +3.02% +2.99%
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 - 1999
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The financial statements contained in Post-Effective Amendment #34 to
Registration Statement No. 2-66868 filed on or about February 25, 2000, are
incorporated by reference.
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Federal Income Tax Information
(Unaudited)
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 are reported to you on Form 1099-DIV, Dividends
and Distributions.
AXP Tax-Free Money Fund, Inc.
Fiscal year ended Dec. 31, 1999
Exempt-interest dividends -- taxable status explained below.
Payable date Per share
Jan. 25, 1999 $0.00260
Feb. 25, 1999 0.00196
March 24, 1999 0.00179
April 26, 1999 0.00220
May 27, 1999 0.00238
June 23, 1999 0.00195
July 26, 1999 0.00227
Aug. 26, 1999 0.00220
Sept. 22, 1999 0.00203
Oct. 25, 1999 0.00249
Nov. 23, 1999 0.00223
Dec. 22, 1999 0.00218
Total distributions $0.02628
Source of distributions
100% of tax-exempt interest dividends during the year ended Dec. 31, 1999, were
derived exclusively from interest on tax-exempt securities.
Federal taxation
Exempt-interest dividends are exempt from federal income taxes and should not be
included in shareholders' gross income.
Other taxation
Exempt-interest dividends may be subject to state and local taxes. Each
shareholder should consult a tax advisor about reporting this income for state
and local tax purposes.
(This annual report is not part of the prospectus.) Annual Report - 1999
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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, 1999 are listed below.
Alabama 2.047
Alaska 2.978
Arizona 10.291
California 0.453
Colorado 0.692
Florida 1.386
Georgia 3.792
Hawaii 0.012
Idaho 1.867
Illinois 5.486
Indiana 6.176
Iowa 2.203
Kentucky 2.424
Louisiana 0.120
Maryland 1.147
Massachusetts 1.432
Michigan 5.954
Minnesota 8.193
Mississippi 1.225
Missouri 1.643
Montana 0.778
Nevada 1.045
New Jersey 0.716
New Mexico 2.697
New York 8.832
North Carolina 2.270
Ohio 0.877
Oregon 0.915
Pennsylvania 4.633
Tennessee 1.229
Texas 7.396
Utah 0.919
Virginia 3.563
Washington 0.748
Wisconsin 1.121
Wyoming 2.740
AXP Tax-Free Money Fund (This annual report is not part of the prospectus.)
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American
Express
Funds
AXP Tax-Free Money
Fund IDS Tower 10
Minneapolis, MN 55440-0010
PRSRT STD AUTO
U.S. POSTAGE
PAID
SPENCER, IA
PERMIT NO. 85
Distributed by American Express Financial Advisors Inc. Member NASD. American
Express Company is separate from American Express Financial Advisors Inc. and is
not a broker-dealer.
S-6433 P (2/00)
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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.
