<PAGE>
PAGE 1
1996 ANNUAL REPORT
IDS Cash Management Fund
(prospectus enclosed)
(Icon of) piggy bank
The goal of Cash Management Fund is to provide maximum current
income consistent with liquidity and stability of principal. The
Fund invests in money market securities.
(This annual report includes a prospectus that describes in detail
the Fund's objective, investment policies, risks, sales charges,
fees and other matters of interest. Please read the prospectus
carefully before you invest or send money.)
Distributed by American Express Financial Advisors Inc.
<PAGE>
PAGE 2
A cache for cash
(Icon of) piggy bank
Keeping a portion of your investment portfolio in a cash reserve is
a cornerstone of a sound financial strategy. And a money market
mutual fund that stresses stability of your investment principal
and easy access when you need it is an excellent way to meet that
need. That's what Cash Management Fund is all about. For you,
that translates into peace of mind, plus a competitive return on
your money.
<PAGE>
PAGE 3
Contents
(Icon of) One open book inside of another.
The purpose of this annual report is to tell investors how the Fund
performed.
The prospectus, which is bound into the middle of this annual
report, describes the Fund in detail.
1996 annual report
From the president 4
From the portfolio manager 4
Making the most of the Fund 6
Independent auditors' report 7
Financial statements 8
Notes to financial statements 11
Investments in securities 15
IDS mutual funds 19
Federal income tax information 22
1996 prospectus
The Fund in brief 3p
Goal 3p
Investment policies and risks 3p
Manager and distributor 3p
Portfolio manager 3p
Purchases 3p
Sales charge and Fund expenses 4p
Performance 6p
Financial highlights 6p
Yield 8p
Investment policies and risks 9p
Facts about investments and their risks 9p
Alternative investment option 13p
Valuing Fund shares 13p
How to purchase, exchange or redeem shares 14p
Purchases 14p
How to purchase shares 16p
How to exchange shares 19p
How to redeem shares 21p
Class B - contingent deferred sales
charge alternative 27p
Waivers of the contingent deferred sales charge 28p
Special shareholder services 29p
Services 29p
Quick telephone reference 29p
<PAGE>
PAGE 4
Distributions and taxes 30p
Dividend and capital gain distributions 30p
Reinvestments 31p
Taxes 32p
How to determine the correct TIN 33p
How the Fund is organized 34p
Shares 34p
Voting rights 34p
Shareholder meetings 35p
Board members and officers 35p
Investment manager 37p
Administrator and transfer agent 37p
Distributor 38p
About American Express Financial Corporation 39p
General Information 39p
<PAGE>
PAGE 5
To our shareholders
(Photo of) William R. Pearce
President of the Fund
(Photo of) Terry Fettig
Portfolio manager
From the president
The volatility in the stock market in recent months has put some
investors, even experienced ones, on edge. Although no one can
know exactly what will happen next, history tells us that ups and
downs are intrinsic to stock investing.
But history also shows that changing strategies with every twist
and turn of the market is an impractical and, worse yet, typically
unproductive way to invest. What matters more, therefore, is how
we react to market volatility. If we take a long-term view and
accept the downs with the ups, we improve our chances of success.
For in the investment world, the race most often goes not the
swift, but to the persistent.
Along the way, of course, you'll still want to review your
investment program to make sure it's on track to achieving your
financial goals. Your American Express financial advisor will help
you do just that, and I suggest you take advantage of his or her
services on a regular basis.
William R. Pearce
From the portfolio manager
IDS Cash Management Fund's yield fluctuated during its fiscal year
(August 1995 through July 1996), tracking a down-then-up trend in
short-term interest rates over the 12 months.
For the seven-day period ended July 31, 1996, the Fund's compound
annualized yield was 5.05%, and the simple annualized yield was
4.95% for Class A shares. In keeping with its objective, the Fund
maintained a stable $1 per share price throughout the 12-month
period. (Although the Fund seeks to maintain a stable $1 share
price, there is no assurance that it will be able to do so. An
investment in the Fund is neither insured nor guaranteed by the
U.S. government.)
Fed lowers rates
At the start of the fiscal year (July 1995), it appeared that
economic growth was moderating while inflation was remaining under
control. In that environment, the Federal Reserve decided to lower
short-term interest rates slightly. Two more of these so-called
"easing" moves were to follow -- one in December and another in
January of 1996. (By way of background, the Fed adjusts short-term
rates based on the condition of the economy and the inflation
outlook. When the economy appears weak and inflation is low, the
Fed usually lowers rates to stimulate economic growth. When the
economy is strong, the Fed usually raises rates to moderate
economic growth and thereby keep inflation in check.)<PAGE>
PAGE 6
While the effect was not dramatic, the rate reductions did lead to
lower rates on the securities this Fund invests in and, ultimately,
to a somewhat lower Fund yield. To counter that effect, we
emphasized investments in securities with longer maturities. By
last February, the average maturity of the portfolio had reached
approximately 53 days, compared with approximately 42 days at the
beginning of the fiscal year.
Rates rise on inflation fear
From that point, and without any action on the part of the Federal
Reserve, short-term rates began edging higher. The impetus was
provided by signs of a strengthening economy and potentially higher
inflation. This modestly higher rate trend remained in place
through July and prompted me to reduce the portfolio's average
maturity to about 45 days by period-end.
It's important to point out that these subtle shifts in the
portfolio's maturity level did not alter the Fund's top priority of
providing a stable cash investment for shareholders. In keeping
with that, I maintained our conservative portfolio-management
approach, which results in an exclusive focus on high-grade
securities (high-quality commercial paper, bankers' acceptances and
certificates of deposit).
At this writing (mid-August), it appears that the most likely
scenario for the months ahead is that short-term rates will follow
a stable-to-rising course. If so, the rates on the securities the
Fund invests in may also increase slightly.
Terry Fettig
Class A
12-month performance
(All figures per share)
Net asset value (NAV)
____________________________
July 31, 1996 $ 1.00
____________________________
July 31, 1995 $ 1.00
____________________________
Increase $ --
____________________________
Distributions
Aug. 1, 1995 - July 31, 1996
____________________________
From income $ 0.05
____________________________
From capital gains $ --
____________________________
Total distributions $ 0.05
____________________________
Total return* +5.1%**
____________________________
<PAGE>
PAGE 7
Class B
12-month performance
(All figures per share)
Net asset value (NAV)
____________________________
July 31, 1996 $ 1.00
____________________________
July 31, 1995 $ 1.00
____________________________
Increase $ --
____________________________
Distributions
Aug. 1, 1995 - July 31, 1996
____________________________
From income $ 0.04
____________________________
From capital gains $ --
____________________________
Total distributions $ 0.04
____________________________
Total return* +4.3%**
____________________________
Class Y
12-month performance
(All figures per share)
Net asset value (NAV)
____________________________
July 31, 1996 $ 1.00
____________________________
July 31, 1995 $ 1.00
____________________________
Increase $ --
____________________________
Distributions
Aug. 31, 1995 - July 31, 1996
____________________________
From income $ 0.05
____________________________
From capital gains $ --
____________________________
Total distributions $ 0.05
____________________________
Total return* +5.1%**
____________________________
*The prospectus discusses the effect of sales charges, if any,
on the various classes.
**The total return is a hypothetical investment in the Fund with
all distributions reinvested.
<PAGE>
PAGE 8
Making the most of the Fund
Average annual total return
(as of July 31, 1996)
1 year Since inception* 5 years 10 years
Class A +5.11% --% +3.77% +5.44%
Class B -0.67% +1.43% --% --%
Class Y +5.10% +5.09% --% --%
*Inception date was March 20, 1995.
The performance of Class B and Class Y will vary from the
performance of Class A based on differences in sales charges and
fees.
Your investment and return values fluctuate so that your shares,
when redeemed, may be worth more or less than the original cost.
Figures for Class B reflect the effect of the maximum 5% sales
charge. This was a period of widely fluctuating security prices.
Past performance is no guarantee of future results.
<PAGE>
PAGE 9
Independent auditors' report
The board and shareholders
IDS Money Market Series, Inc.:
We have audited the accompanying statement of assets and
liabilities, including the schedule of investments in securities,
of IDS Cash Management Fund (a series of IDS Money Market Series,
Inc.) as of July 31, 1996, and the related statement of operations
for the year then ended, the statements of changes in net assets
for each of the years in the two-year period then ended, and the
financial highlights for each of the years in the ten-year period
ended July 31, 1996. 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
Cash Management Fund at July 31, 1996, and the results of its
operations for the year then ended, the changes in its net assets
for each of the years in the two-year period then ended, 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
September 6, 1996
<PAGE>
PAGE 10
<TABLE>
<CAPTION>
Statement of assets and liabilities
IDS Cash Management Fund
July 31, 1996
______________________________________________________________________________________________________________
Assets
______________________________________________________________________________________________________________
<S> <C>
Investments in securities, at value (Note 1)
(identified cost $2,644,249,896) $2,644,249,896
Cash in bank on demand deposit 20,005,018
Accrued interest receivable 3,304,849
_____________________________________________________________________________________________________________
Total assets 2,667,559,763
_____________________________________________________________________________________________________________
Liabilities
_____________________________________________________________________________________________________________
Dividends payable to shareholders 1,751,118
Accrued investment management services fee 20,876
Accrued distribution fees 5,518
Accrued transfer agency fee 15,221
Accrued administrative services fee 1,924
Other accrued expenses 551,740
_____________________________________________________________________________________________________________
Total liabilities 2,346,397
_____________________________________________________________________________________________________________
Net assets applicable to outstanding capital stock $2,665,213,366
_____________________________________________________________________________________________________________
Represented by
_____________________________________________________________________________________________________________
Capital stock -- authorized 10,000,000,000 shares of $.01 par value $ 26,653,100
Additional paid-in capital 2,638,591,732
Excess of distributions over net investment income (4,105)
Accumulated net realized loss (Note 1) (27,361)
_____________________________________________________________________________________________________________
Total -- representing net assets applicable to outstanding capital stock $2,665,213,366
_____________________________________________________________________________________________________________
Net assets applicable to outstanding shares: Class A $2,335,391,027
Class B $ 273,151,843
Class Y $ 56,670,496
Net asset value per share of outstanding capital stock: Class A shares 2,335,437,412 $ 1.00
Class B shares 273,186,813 $ 1.00
Class Y shares 56,685,808 $ 1.00
See accompanying notes to financial statements.
<PAGE>
PAGE 11
Financial statements
Statement of operations
IDS Cash Management Fund
Year ended July 31, 1996
_____________________________________________________________________________________________________________
Investment income
_____________________________________________________________________________________________________________
Income:
Interest $125,450,986
_____________________________________________________________________________________________________________
Expenses (Note 2):
Investment management services fee 6,557,898
Distribution fee -- Class B 1,389,698
Transfer agency fee 5,056,171
Incremental transfer agency fee -- Class B 12,057
Administrative services fee 612,417
Compensation of board members 56,416
Compensation of officers 18,060
Custodian fees 200,244
Postage 654,952
Registration fees 492,443
Reports to shareholders 386,505
Audit fees 32,500
Administrative 14,899
Other 10,079
_____________________________________________________________________________________________________________
Total expenses 15,494,339
Earnings credits on cash balances (Note 2) (14,971)
_____________________________________________________________________________________________________________
Total net expenses 15,479,368
_____________________________________________________________________________________________________________
Investment income -- net 109,971,618
_____________________________________________________________________________________________________________
Realized loss -- net
_____________________________________________________________________________________________________________
Net realized loss (Note 3) (2,565)
_____________________________________________________________________________________________________________
Net increase in net assets resulting from operations $109,969,053
_____________________________________________________________________________________________________________
See accompanying notes to financial statements.
</TABLE>
<PAGE>
PAGE 12
<TABLE>
<CAPTION>
Financial statements
Statements of changes in net assets
IDS Cash Management Fund
Year ended July 31,
_____________________________________________________________________________________________________________
Operations and distributions 1996 1995
_____________________________________________________________________________________________________________
<S> <C> <C>
Investment income -- net $ 109,971,618 $ 73,765,640
Net realized gain (loss) (2,565) 755
_____________________________________________________________________________________________________________
Net increase in net assets resulting from operations 109,969,053 73,766,395
_____________________________________________________________________________________________________________
Distributions to shareholders from:
Net investment income
Class A (98,832,686) (71,448,349)
Class B (7,718,760) (871,329)
Class Y (3,425,225) (1,445,224)
_____________________________________________________________________________________________________________
Total distributions (109,976,671) (73,764,902)
_____________________________________________________________________________________________________________
Capital share transactions at constant $1 net asset value
_____________________________________________________________________________________________________________
Proceeds from sales
Class A shares 6,873,710,335 5,083,998,091
Class B shares 546,797,564 145,099,672
Class Y shares 137,595,869 149,989,216
Fund merger (Note 4)
Class A shares -- 12,051,967
Reinvestment of distributions at net asset value
Class A shares 96,280,970 68,543,809
Class B shares 7,549,183 804,519
Class Y shares 3,059,283 1,211,841
Payments for redemptions
Class A shares (6,341,900,642) (4,610,927,088)
Class B shares (Note 2) (379,219,480) (47,855,995)
Class Y shares (169,773,277) (65,397,125)
_____________________________________________________________________________________________________________
Increase in net assets from capital share transactions 774,099,805 737,518,907
_____________________________________________________________________________________________________________
Total increase in net assets 774,092,187 737,520,400
Net assets at beginning of year 1,891,121,179 1,153,600,779
_____________________________________________________________________________________________________________
Net assets at end of year
(including undistributed net investment income of
$(4,105) and $948) $2,665,213,366 $1,891,121,179
_____________________________________________________________________________________________________________
See accompanying notes to financial statements.
</TABLE>
<PAGE>
PAGE 13
IDS Cash Management Fund
Prospectus
Sept. 27, 1996
The goal of IDS Cash Management Fund, a part of IDS Money Market
Series, Inc., is to provide maximum current income consistent with
liquidity and stability of principal. The Fund invests in money
market securities.
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, dated Sept. 27, 1996, is
incorporated here by reference. For a free copy, contact American
Express Shareholder Service.
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.
SHARES IN THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR
GUARANTEED OR ENDORSED BY, ANY BANK, AND SHARES ARE NOT FEDERALLY
INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL
RESERVE BOARD OR ANY OTHER AGENCY. INVESTMENTS IN THE FUND INVOLVE
INVESTMENT RISK INCLUDING POSSIBLE LOSS OF PRINCIPAL.
American Express Shareholder Service
P.O. Box 534
Minneapolis, MN
55440-0534
612-671-3733
TTY: 800-846-4852
<PAGE>
PAGE 14
Table of Contents
The Fund in brief
Goal
Investment policies and risks
Manager and distributor
Portfolio manager
Purchases
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
Purchases
How to purchase shares
How to exchange shares
How to redeem shares
Class B - contingent deferred sales charge alternative
Waivers of the contingent deferred sales charge
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
About American Express Financial Corporation
General information
<PAGE>
PAGE 15
The Fund in brief
Goal
IDS Cash Management Fund (the Fund) seeks to provide shareholders
with maximum current income 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 in money market
instruments, such as marketable debt securities issued by the U.S.
government or its agencies or instrumentalities, bank certificates
of deposit, bankers' acceptances, letters of credit and commercial
paper.
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 $51 billion in assets for the IDS
MUTUAL FUND GROUP. Shares of the Fund are sold through American
Express Financial Advisors Inc., 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. From 1992 to 1993 he was an
associate portfolio manager. He also serves as portfolio manager
of IDS Tax-Free Money Fund and IDS Life Moneyshare Fund.
Purchases
The Fund offers its shares in three classes. New investments must
be made in Class A shares of the Fund. Class A shares have no
sales charge or annual distribution (12b-1) fee. Class B and Class
Y shares enable shareholders holding those classes in other IDS
funds to exchange into the Fund. Class B shares have a contingent
deferred sales charge (CDSC) and are subject to a 12b-1 fee. Class
Y shares have no sales charge or 12b-1 fee to qualifying
institutional investors.
Sales charge and Fund expenses
Shareholder transaction expenses on Class B shares are incurred
directly by an investor on the redemption of Fund shares. Fund
operating expenses are paid out of Fund assets for each class of
shares. Operating expenses are reflected in the Fund's daily share
price and dividends, and are not charged directly to shareholder
accounts.
<PAGE>
PAGE 16
Shareholder transaction expenses
Class A Class B Class Y
Maximum sales charge on purchases
(as a percentage of offering price)..... 0% 0% 0%
Maximum deferred sales charge
imposed on redemptions (as a
percentage of original purchase price)...0% 5% 0%
Annual Fund operating expenses
(% of average daily net assets):
Class A Class B Class Y
Management fee 0.29% 0.29% 0.29%
12b-1 fee 0.00% 0.75% 0.00%
Other expenses* 0.34% 0.34% 0.33%
Total 0.63% 1.38% 0.62%
*Other expenses include an administrative services fee, a transfer
agency fee and other non-advisory expenses.
+Expense ratio is based on total expenses of the Fund before
reduction of earnings credit on cash balances.
Example: Suppose for each year for the next 10 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
Class A $ 6 $20 $35 $ 79
Class B $64 $84 $96 $145**
Class B* $14 $44 $76 $145**
Class Y $ 6 $20 $35 $ 78
*Assuming Class B shares are not redeemed at the end of the period.
**Based on conversion of Class B shares to Class A shares after
eight years.
This example does not represent actual expenses, past or future.
Actual expenses may be higher or lower than those shown. Because
Class B pays annual distribution (12b-1) fees, long-term
shareholders of Class B may indirectly pay an equivalent of more
than a 6.25% sales charge, the maximum permitted by the National
Association of Securities Dealers.
<PAGE>
PAGE 17
Performance
Financial highlights
IDS Cash Management Fund Performance
<TABLE>
<CAPTION>
Financial highlights
Fiscal period ended July 31,
Per share income and capital changes*
Class A
1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
<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 .05 .05 .03 .02 .04 .07 .08 .08 .06 .06
Less distributions:
Dividends from net (.05) (.05) (.03) (.02) (.04) (.07) (.08) (.08) (.06) (.06)
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
Class A
1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
Net assets, end of period $2,335 $1,707 $1,154 $1,053 $1,230 $1,655 $1,617 $1,392 $1,136 $852
(in millions)
Ratio of expenses to .63% .73% .94%# .94%# .91% .77% .74% .75% .69% .71%
average daily net assets+
Ratio of net income to 4.97% 4.99% 2.61% 2.36% 3.84% 6.55% 7.81% 8.42% 6.53% 5.64%
average daily net assets
Total return 5.1% 5.0% 2.6% 2.4% 3.8% 6.7% 7.9% 8.7% 6.7% 5.7%
*For a share outstanding throughout the period. Rounded to the nearest cent.
#During the fiscal years ended July 31, 1993 and 1994, AEFC voluntarily
reimbursed the Fund for a portion of its expenses. Had AEFC not done so,
the ratio of expenses to average daily net assets would have been 0.97%
+Effective fiscal year 1996, expense ratio is based on total expenses of
the Fund before reduction of earnings credit on cash balances.
<PAGE>
PAGE 18
IDS Cash Management Fund
Fiscal period ended July 31,
Per share income and capital changes*
Class B Class Y
1996 1995** 1996 1995**
Net asset value, $1.00 $1.00 $1.00 $1.00
beginning of period
Income from investment operations:
Net investment income .04 .02 .05 .02
Less distributions:
Dividends from net (.04) (.02) (.05) (.02)
investment income
Net asset value, $1.00 $1.00 $1.00 $1.00
end of period
Ratios/supplemental data
1996 1995** 1996 1995**
Class B Class Y
Net assets, end of period $273 $98 $57 $86
(in millions)
Ratio of expenses to 1.38% 1.41%+ .62% .65%+
average daily net assets#
Ratio of net income to 4.15% 4.73%+ 4.97% 5.53%+
average daily net assets
Total return 4.3% 2.0% 5.1% 2.3%
*For a share outstanding throughout the period. Rounded to
the nearest cent.
**Inception date was March 20, 1995 for Class B and Class Y.
+Adjusted to an annual basis.
#Effective fiscal year 1996, expense ratios are based on total
expenses of the Fund before reduction of earnings credit
on cash balances.
The information in these tables 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.
</TABLE>
Yield
The Fund's annualized simple yield for the seven days ended July
31, 1996 was 4.95% for Class A, 4.20% for Class B and 4.94% for
Class Y. The Fund's annualized compound yield for the same period
was 5.05% for Class A, 4.27% for Class B and 5.05% for Class Y.
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
The Fund will limit its investments to those that are denominated
in U.S. dollars, are of high quality and present minimal credit
risk. The Fund will 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.
<PAGE>
PAGE 19
The various types of investments the portfolio 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
Money market instruments: The Fund invests in short-term
government securities, bank obligations, commercial paper and
repurchase agreements. Except for the exception listed below, the
commercial paper the Fund invests in must be rated in the highest
category by at least two national rating services or, if unrated,
be of comparable quality as determined by the board. The Fund may
invest up to 5% of its total assets in commercial paper receiving
the second highest rating or in unrated paper determined to be of
comparable quality.
Debt securities: The Fund may invest in negotiable certificates of
deposit (CDs), fixed-time deposits, bankers' acceptances and
letters of credit of U.S. banks, branches of domestic banks located
outside the United States and U.S. branches of foreign banks. The
Fund may invest in CDs issued by savings and loans and CDs of
foreign banks issued outside the United States. (These CDs are
commonly referred to as Eurodollar CDs.) The Fund also may invest
in marketable securities issued or guaranteed as to principal and
interest by the U.S. government, its agencies or instrumentalities.
Some of these securities are not direct obligations of the U.S
government and consequently are not backed by the full faith and
credit of the government.
Concentration: Depending on market conditions and the availability
of other securities, the Fund may invest more than 25% of its total
assets in U.S. banks, U.S. branches of foreign banks and U.S.
government securities. The risk of concentrating investments in
banks is that the value of these investments may be adversely
affected by economic or regulatory developments in the banking
industry and by the concentration of bank loan participations.
Foreign investments: Investments in foreign banks and branches of
domestic banks outside the United States involve certain risks.
Domestic banks are required to maintain specified levels of
reserves, are limited in the amounts they can loan to a single
borrower and are subject to other regulations designed to promote
financial soundness. Not all of these laws and regulations apply
to the foreign branches of domestic banks. Domestic bank
regulations do not apply to foreign banks. Eurodollar CDs and non-
U.S. fixed-time deposits may be subject to political and economic
risks of the countries in which the investments are made, including
the possibility of seizure or nationalization of foreign deposits,
penalties for early withdrawal of time deposits, imposition of
withholding taxes on income, establishment of exchange controls or
adoption of other restrictions that might affect an investment
adversely. The Fund may invest up to 35% of its total assets in
foreign investments.
<PAGE>
PAGE 20
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.
The investment policies described above 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
Purchases
New investments must be made in Class A shares of the Fund. The
Fund offers Class B and Class Y shares only to facilitate exchanges
between classes of these shares in other IDS funds. The primary
differences among the classes are in the sales charge structures
and in their ongoing expenses. These differences are summarized in
the table below.
Sales charge
and distribution
(12b-1) fee Other information
Class A None
Class B No initial sales charge; Shares convert to
maximum CDSC of 5%, Class A after eight years;
declines to 0% after six CDSC waived in certain
years; 12b-1 fee of 0.75% circumstances
of average daily net assets
<PAGE>
PAGE 21
Class Y None Available only to
certain qualifying
institutional
investors
Conversion of Class B shares to Class A shares - Eight calendar
years after Class B shares were originally purchased, Class B
shares will convert to Class A shares and will no longer be subject
to a distribution fee. The conversion will be on the basis of
relative net asset values of the two classes, without the
imposition of any sales charge. Class B shares purchased through
reinvested dividends and distributions will convert to Class A
shares in a pro rata portion as the Class B shares purchased other
than through reinvestment.
Class Y shares - Class Y shares are offered to certain
institutional investors. Class Y shares are sold without a front-
end sales charge or a CDSC and are not subject to either a service
fee or a distribution fee. The following investors are eligible to
purchase Class Y shares:
o Qualified employee benefit plans* if the plan:
- uses a daily transfer recordkeeping service offering
participants daily access to IDS funds and has
- at least $10 million in plan assets or
- 500 or more participants; or
- does not use daily transfer recordkeeping and has
- at least $3 million invested in funds of the IDS MUTUAL
FUND GROUP or
- 500 or more participants.
o Trust companies or similar institutions, and charitable
organizations that meet the definition in Section 501(c)(3) of
the Internal Revenue Code.* These must have at least $10
million invested in funds of the IDS MUTUAL FUND GROUP.
o Nonqualified deferred compensation plans* whose participants
are included in a qualified employee benefit plan described
above.
* Eligibility must be determined in advance by American Express
Financial Advisors. To do so, contact your financial advisor.
How to purchase shares
If you're investing in this Fund for the first time, you'll 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 AEFC with
your correct Taxpayer Identification Number (Social Security or
Employer Identification number). See "Distributions and taxes."
<PAGE>
PAGE 22
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.
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.
o If your application does not specify which class of shares you
are purchasing, it will be assumed that you are investing in
Class A shares.
Three ways to invest
<TABLE>
<CAPTION>
<S> <C> <C>
1
By regular account Send your check and application Minimum amounts
(or your name and account number Initial investment: $2,000
if you have an established account) Additional
to: 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 Contact your financial advisor Minimum amounts
investment plan to set up one of the following Initial investment: $2,000
scheduled plans: Additional
investments: $100/mo.
o automatic payroll deduction Account balances: $1,000
o bank authorization
o direct deposit of
Social Security check
o other plan approved by the Fund
<PAGE>
PAGE 23
3
By wire If you have an established account, If this information is not
you may wire money to: included, the order may be
rejected and all money
Norwest Bank Minneapolis received by the Fund, less
Routing No. 091000019 any costs the Fund or AEFC
Minneapolis, MN incurs, will be returned
Attn: Domestic Wire Dept. promptly.
Give these instructions: Minimum amounts:
Credit IDS Account #00-30-015 Each wire investment: $1,000
for personal account # (your
account number) for (your name).
*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 don't do so within 30 days, your shares can be redeemed and the proceeds mailed to you.
</TABLE>
How to exchange shares
New investments of Class A shares may be exchanged for either Class
A or Class B shares of any other publicly offered fund in the IDS
MUTUAL FUND GROUP available in your state, except that exchanges
into IDS Tax-Free Money Fund must be made from Class A shares. If
you exchange shares from this Fund to another IDS fund, any further
exchanges must be between shares of the same class. For example,
you may not exchange from Class B shares of another IDS fund into
Class A shares of this Fund. Exchange rules are illustrated in the
following tables:
EXCHANGES:
FROM TO
Cash
Management Other IDS funds*
Class A Class B
Class A Yes Yes
Class B No Yes
EXCHANGES:
FROM TO
Other
IDS funds* Cash Management Fund
Class A Class B
Class A Yes No
Class B No Yes
*Tax-Free Money Fund has only a single class. Therefore, exchanges
into Tax-Free Money Fund must be made from Class A shares.
Note: Exchanges from Class A to Class B are not permitted within
Cash Management.
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
<PAGE>
PAGE 24
exchange shares into this Fund, you may exchange that amount,
including dividends earned on that amount, without paying a sales
charge. For complete information, including fees and expenses,
read the prospectus carefully before exchanging into a new fund.
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, minus any applicable sales charge, at the close of
business on 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, minus any
applicable sales charge, 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.
Three ways to request an exchange or redemption of shares
<TABLE>
<CAPTION>
<S> <C>
1
By letter Include in your letter:
o the name of the fund(s)
o the class of shares to be exchanged or redeemed
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
<PAGE>
PAGE 25
2
By phone
American Express Telephone o The Fund and AEFC will honor any telephone exchange or redemption request believed
Transaction Service: to be authentic and will use reasonable procedures to confirm that they are. This
800-437-3133 or includes asking identifying questions and tape recording calls. If reasonable
612-671-3800 procedures are not followed, the Fund or AEFC will be liable for any loss resulting
from fraudulent 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 phone 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.
3
By draft
For Class A only, 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. If you request a photocopy of a paid draft you will be
charged $5 per copy.
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 Except as otherwise noted, exchanges must be made into the same
class of shares of the new fund.
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 For Class B only a "change of mind" option allows you to change
your mind after requesting a redemption and to use all or part of
the proceeds to purchase new shares in the same class from which
you redeemed. If you reinvest in Class B, any CDSC you paid on the
<PAGE>
PAGE 26
amount you are reinvesting also will be reinvested. To take
advantage of this option, send a written request within 30 days of
the date your redemption request was received. Include your
account number and mention this option. This privilege may be
limited or withdrawn at any time, and it may have tax consequences.
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.)
Three ways to receive payment when you redeem shares
<TABLE>
<CAPTION>
<S> <C>
1
By regular or express mail o Mailed to the address on record.
o Payable to names listed on the account.
NOTE: The express mail delivery charges
you pay will vary depending on the
courier you select.
2
By wire o Minimum wire redemption: $1,000.
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
By scheduled payout plan o Minimum payment: $50.
o Contact your financial advisor or American Express
Shareholder Service 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>
Class B - contingent deferred sales charge alternative
Where a CDSC is imposed on a redemption, it is based on the amount
of the redemption and the number of calendar years, including the
year of purchase, between purchase and redemption. The following
table shows the declining scale of percentages that apply to
redemptions during each year after a purchase:
If a redemption is The percentage rate
made during the for the CDSC is:
First year 5%
Second year 4%
Third year 4%
Fourth year 3%
Fifth year 2%
Sixth year 1%
Seventh year 0%<PAGE>
PAGE 27
If the amount you are redeeming reduces the current net asset value
of your investment in Class B shares below the total dollar amount
of all your purchase payments during the last six years (including
the year in which your redemption is made), the CDSC is based on
the lower of the redeemed purchase payments or market value.
The following example illustrates how the CDSC is applied. Assume
you had invested $10,000 in Class B shares and that your investment
had appreciated in value to $12,000 after 15 months, including
reinvested dividend and capital gain distributions. You could
redeem any amount up to $2,000 without paying a CDSC ($12,000
current value less $10,000 purchase amount). If you redeemed
$2,500, the CDSC would apply only to the $500 that represented
part of your original purchase price. The CDSC rate would be 4%
because a redemption after 15 months would take place during the
second year after purchase.
Because the CDSC is imposed only on redemptions that reduce the
total of your purchase payments, you never have to pay a CDSC on
any amount you redeem that represents appreciation in the value of
your shares, income earned by your shares or capital gains. In
addition, when determining the rate of any CDSC, your redemption
will be made from the oldest purchase payment you made. Of course,
once a purchase payment is considered to have been redeemed, the
next amount redeemed is the next oldest purchase payment. By
redeeming the oldest purchase payments first, lower CDSCs are
imposed than would otherwise be the case.
Waivers of the contingent deferred sales charge
The CDSC on Class B shares will be waived on redemptions of shares:
o In the event of the shareholder's death,
o Purchased by any board member, officer or employee of a fund or
AEFC or its subsidiaries,
o Held in a trusteed employee benefit plan,
o Held in IRAs or certain qualified plans for which American
Express Trust Company acts as custodian, such as Keogh plans, tax-
sheltered custodial accounts or corporate pension plans, provided
that the shareholder is:
- at least 59-1/2 years old, and
- taking a retirement distribution (if the redemption is part
of a transfer to an IRA or qualified plan in a product
distributed by American Express Financial Advisors, or a
custodian-to-custodian transfer to a product not distributed
by American Express Financial Advisors, the CDSC will not be
waived), or
- redeeming under an approved substantially equal periodic
payment arrangement.
Special shareholder services
Services
To help you track and evaluate the performance of your investments,
AEFC provides these services:
<PAGE>
PAGE 28
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 Telephone Transaction Service
Redemptions and exchanges, dividend payments or reinvestments and
automatic payment arrangements
National/Minnesota: 800-437-3133
Mpls./St. Paul area: 671-3800
American Express Shareholder Service
Fund performance, objectives and account inquiries
612-671-3733
TTY Service
For the hearing impaired
800-846-4852
American Express Infoline
Automated account information (TouchToneR phones only), including
current Fund prices and performance, account values and recent
account transactions
National/Minnesota: 800-272-4445
Mpls./St. Paul area: 671-1630
Distributions and taxes
As a shareholder you are entitled to your share of the Fund's net
income and any net 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. 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
whenever a security held for more than one year is sold for a
higher price than was paid for it. Net realized long-term capital
gains, if any, are distributed at the end of the calendar year as
capital gain distributions.
<PAGE>
PAGE 29
Dividends for each class will be calculated at the same time, in
the same manner and will be the same amount prior to deduction of
expenses. Expenses attributable solely to a class of shares will
be paid exclusively by that class. Class B shareholders will
receive lower per share dividends than Class A and Class Y
shareholders because expenses for Class B are higher than for Class
A or Class Y.
Reinvestments
Dividends and capital gain distributions are automatically
reinvested in additional shares in the same class 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've 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.
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.
Taxes
Distributions are subject to federal income tax and also may be
subject to state and local taxes. Distributions are taxable in the
year the Fund declares them regardless of whether you take them in
cash or reinvest them.
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 either short term (for shares held
for one year or less) or long term (for shares held for more than
one year).
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 <PAGE>
PAGE 30
Security or Employer Identification number. The TIN must be
certified under penalties of perjury on your application when you
open an account at AEFC.
If you don't 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.
How to determine the correct TIN
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 The minor
(Uniform Gifts/Transfers to
Minors Act)
A living trust The grantor-trustee (the person
who puts the money into the
trust)
An irrevocable trust, pension The legal entity (not the
trust or estate personal representative 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 The organization
tax-exempt organization
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.
<PAGE>
PAGE 31
How the Fund is organized
IDS Money Market Series, Inc., of which IDS Cash Management Fund is
a part, is an open-end management investment company, as defined in
the Investment Company Act of 1940. Originally incorporated on
Aug. 22, 1975 in Nevada, IDS Money Market Series, Inc. 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.
Shares
The Fund is owned by its shareholders. The Fund issues shares in
three classes - Class A, Class B and Class Y. Each class has
different sales arrangements and bears different expenses. Each
class represents interests in the assets of the Fund. Par value is
one cent per share. Both full and fractional shares can be issued.
The Fund no longer issues stock certificates.
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.
Each class has exclusive voting rights with respect to the
provisions of the Fund's distribution plan that pertain to a
particular class and other matters for which separate class voting
is appropriate under applicable law.
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. The board members serve on the boards
of all 43 of the funds in the IDS MUTUAL FUND GROUP, except for Mr.
Dudley, who is a board member of all 32 publicly offered funds.
Board members and officers of the Fund
President and interested board member
William R. Pearce
President of all funds in the IDS MUTUAL FUND GROUP.
<PAGE>
PAGE 32
Independent board members
Lynne V. Cheney
Distinguished fellow, American Enterprise Institute for Public
Policy Research.
Robert F. Froehlke
Former president of all funds in the IDS MUTUAL FUND GROUP.
Heinz F. Hutter
Former president and chief operating officer, Cargill, Inc.
Anne P. Jones
Attorney and telecommunications consultant.
Melvin R. Laird
Senior counsellor for national and international affairs, The
Reader's Digest Association, Inc.
Edson W. Spencer
Former chairman and chief executive officer, Honeywell, Inc.
Wheelock Whitney
Chairman, Whitney Management Company.
C. Angus Wurtele
Chairman of the board, The Valspar Corporation.
Interested board members who are officers and/or employees of AEFC
William H. Dudley
Executive vice president, AEFC.
David R. Hubers
President and chief executive officer, AEFC.
John R. Thomas
Senior vice president, AEFC.
Officers who also are officers and/or employees of AEFC
Peter J. Anderson
Vice president of all funds in the IDS MUTUAL FUND GROUP.
Melinda S. Urion
Treasurer of all funds in the IDS MUTUAL FUND GROUP.
Other officer
Leslie L. Ogg
Vice president, general counsel and secretary of all funds in the
IDS MUTUAL FUND GROUP.
Refer to the SAI for the board members' and officers' biographies.
<PAGE>
PAGE 33
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 July 31, 1996, the Fund paid AEFC a total
investment management fee of 0.29% of its average daily net assets.
Under the Agreement, the Fund also pays taxes, brokerage
commissions and nonadvisory expenses.
Administrator and transfer agent
The Fund pays AEFC for shareholder accounting and transfer agent
services under two agreements. The first, the Administrative
Services Agreement, has a declining annual rate beginning at 0.03%
and decreasing to 0.02% as assets increase. The second, the
Transfer Agency Agreement, has an annual fee per shareholder
account as follows:
o Class A $20
o Class B $21
o Class Y $20
Distributor
The Fund has an exclusive distribution agreement with American
Express Financial Advisors, a wholly owned subsidiary of AEFC.
Financial advisors representing American Express Financial Advisors
provide information to investors about individual investment
programs, the Fund and its operations, new account applications,
and exchange and redemption requests.
Persons who buy Class A shares pay no sales charge at the time of
purchase. Persons who buy Class B shares are subject to a
contingent deferred sales charge on a redemption in the first six
years and pay an asset-based sales charge (also known as a 12b-1
plan) of 0.75% of the Fund's average daily net assets. Class Y
shares are sold without a sales charge and without an asset-based
sales charge.
Financial advisors may receive different compensation for selling
Class A, Class B and Class Y shares.
Total expenses paid by the Fund's Class A shares for the fiscal
year ended July 31, 1996, were 0.63% of its average daily net
assets. Expenses for Class B and Class Y were 1.38% and 0.62%,
respectively.
<PAGE>
PAGE 34
Total fees and expenses (excluding taxes and brokerage commissions)
cannot exceed the most restrictive applicable state expense
limitation.
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 publicly offered 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 July 31, 1996 were more
than $136 billion.
American Express Financial Advisors serves individuals and
businesses through its nationwide network of more than 175 offices
and more than 7,900 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>
PAGE 35
IDS Cash Management Fund
IDS Tower 10
Minneapolis, MN 55440-0010
Distributed by
American Express
Financial Advisors Inc.
<PAGE>
PAGE 36
Notes to Financial Statements
IDS Cash Management Fund
___________________________________________________________________
1. Summary of significant accounting policies
The Fund is a series of IDS Money Market Series, Inc. and is
registered under the Investment Company Act of 1940 (as amended) as
a diversified, open-end management investment company. The Fund
invests in money market securities. The Fund offers Class A, Class
B and Class Y shares. Class A shares have no sales charge. Class B
shares may be subject to a contingent deferred sales charge and
such shares automatically convert to Class A after eight years.
Class Y shares have no sales charge and are offered only to
qualifying institutional investors.
All classes of shares have identical voting, dividend, liquidation
and other rights, and the same terms and conditions, except that
the level of distribution fee and transfer agent fee (class
specific expenses) differs among classes. Income, expenses (other
than class specific expenses) and realized and unrealized gains or
losses on investments are allocated to each class of shares based
upon its relative net assets.
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.
<PAGE>
PAGE 37
Net investment income (loss) and net realized gains (losses) may
differ for financial statement and tax purposes. The character of
distributions made during the year from net investment income or
net realized gains may differ from their ultimate characterization
for federal income tax purposes. Also, due to the timing of
dividend distributions, the fiscal year in which amounts are
distributed may differ from the year that the income or realized
gains (losses) were recorded by the Fund.
On the statement of assets and liabilities, as a result of
permanent book-to-tax differences, additional paid-in-capital and
accumulated net realized loss have been decreased by $6,356.
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 amortization of
premium and discount, is accrued daily.
___________________________________________________________________
2. Expenses and sales charges
Effective March 20, 1995, when the Fund began offering multiple
classes of shares, 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.
Under a separate Transfer Agency Agreement, AEFC maintains
shareholder accounts and records. The Fund pays AEFC an annual fee
per shareholder account for this service as follows:
o Class A $20
o Class B $21
o Class Y $20
Also effective March 20, 1995, the Fund entered into agreements
with American Express Financial Advisors Inc. for distribution and
shareholder servicing-related services. Under a Plan and Agreement
of Distribution, the Fund pays a distribution fee at an annual rate
of 0.75% of the Fund's average daily net assets attributable to
Class B shares for distribution-related services.
<PAGE>
PAGE 38
AEFC will assume and pay any expenses (except taxes and brokerage
commissions) that exceed the most restrictive applicable state
expense limitation.
Sales charges received by American Express Financial Advisors Inc.
for distributing Class B shares were $463,819 for the year ended
July 31, 1996.
During the year ended July 31, 1996 the Fund's custodian and
transfer agency fees were reduced by $14,971 as a result of
earnings credits from overnight cash balances.
Prior to April 30, 1996, the Fund had a retirement plan for its
independent board members. The plan was terminated April 30, 1996.
The retirement plan expense amounted to $19,134 for the year. The
total liability for the plan is $81,619, which will be paid out at
some future date.
___________________________________________________________________
3. Securities transactions
Cost of purchases and proceeds from sales of securities aggregated
$14,931,282,848 and $14,165,430,515, respectively, for the year
ended July 31, 1996. Realized gains and losses are determined on an
identified cost basis.
___________________________________________________________________
4. Fund merger
Effective with the close of business on Nov. 18, 1994, IDS Planned
Investment Account was acquired by IDS Cash Management Fund. The
merger was accomplished by a tax free exchange of 12,051,967 shares
of the IDS Cash Management Fund with a net asset value of $1 per
share for net assets of $12,051,967 from the IDS Planned Investment
Account.
___________________________________________________________________
5. Financial highlights
"Financial highlights" showing per share data and selected
information is presented on pages 6 and 7 of the prospectus.
<PAGE>
PAGE 39
<TABLE>
<CAPTION>
Investments in securities
IDS Cash Management Fund (Percentages represent value of
July 31, 1996 investments compared to net assets)
_____________________________________________________________________________________________________________________________
Issuer Annualized Amount Value(a)
yield on payable at
date of maturity
purchase
_____________________________________________________________________________________________________________________________
<S> <C> <C> <C>
U.S. government agencies (1.7%)
Farm Credit Disc Nts
08-15-96 5.02% $20,000,000 $ 19,961,889
03-03-97 5.17 15,000,000 14,981,398
U.S. Treasury Bills
08-22-96 4.97 10,000,000 9,971,708
_____________________________________________________________________________________________________________________________
Total U.S. government agencies
(Cost: $44,914,995) 44,914,995
_____________________________________________________________________________________________________________________________
Certificates of deposit (5.2%)
Eurodollar
ABN Amro Yankee
03-18-97 5.53 15,000,000 14,991,819
Canadian Imperial Bank Yankee
08-28-96 5.37 15,000,000 15,000,000
01-09-97 5.50 10,000,000 10,000,000
03-20-97 5.71 10,000,000 10,000,000
04-15-97 5.75 5,000,000 5,000,000
Commerzbank Yankee
03-19-97 5.68 10,000,000 10,000,000
Deutsche Bank Yankee
03-21-97 5.73 20,000,000 20,000,000
04-11-97 5.73 5,000,000 4,999,502
Societe Generale Yankee
02-24-97 5.35 13,000,000 13,000,000
03-04-97 5.44 10,000,000 10,000,000
03-12-97 5.60 10,000,000 10,000,000
04-15-97 5.90 5,000,000 5,000,000
06-03-97 5.90 10,000,000 10,000,000
_____________________________________________________________________________________________________________________________
Total certificates of deposit
(Cost: $137,991,321) 137,991,321
_____________________________________________________________________________________________________________________________
Commercial paper (72.6%)
_____________________________________________________________________________________________________________________________
Banks and savings & loans (12.2%)
ABN Amro North American Finance
08-22-96 5.07 20,000,000 19,942,250
BBV Finance Delaware
08-09-96 5.39 20,000,000 19,976,133
Ciesco LP
08-16-96 5.43 18,100,000 18,059,426
08-21-96 5.40 9,200,000 (b) 9,172,655
09-03-96 5.33 8,700,000 8,657,732
First Bank
08-05-96 5.35 20,000,000 20,000,000
First Union Bank
06-06-97 5.95 5,000,000 5,000,000
See accompanying notes to investments in securities.
<PAGE>
PAGE 40
Fleet Funding
08-01-96 5.40 23,548,000 (b) 23,548,000
08-08-96 5.42 5,472,000 (b) 5,466,265
08-09-96 5.40 15,965,000 (b) 15,945,948
08-30-96 5.32 15,000,000 (b) 14,935,958
08-30-96 5.33 21,300,000 (b) 21,209,061
09-04-96 5.34 11,584,000 (b) 11,525,797
Kredietbank
North American Finance
08-05-96 5.41 26,200,000 26,184,309
10-15-96 5.49 8,000,000 7,909,500
10-29-96 5.50 8,500,000 8,385,895
11-18-96 5.47 15,000,000 14,757,475
Natl Australia Funding
Delaware
10-01-96 5.46 15,000,000 14,862,496
Natl Bank Detroit
08-12-96 5.40 15,000,000 14,975,342
NationsBank
09-04-96 5.40 20,000,000 20,000,000
PNC Bank
12-20-96 5.41 10,000,000 (c) 9,998,506
Societe Generale North America
08-08-96 5.43 15,000,000 14,984,221
_____________
Total 325,496,969
_____________________________________________________________________________________________________________________________
Brokers dealers (12.5%)
Goldman Sachs Group
08-05-96 5.36 19,000,000 18,988,769
08-08-96 5.39 6,300,000 6,293,434
08-23-96 5.39 25,000,000 24,918,569
09-09-96 5.50 18,000,000 17,893,725
10-21-96 5.53 27,800,000 27,457,852
Merrill Lynch
08-22-96 5.42 12,000,000 11,962,410
08-22-96 5.43 12,400,000 12,360,940
08-29-96 5.42 9,900,000 9,858,574
08-30-96 5.41 20,000,000 19,913,483
09-10-96 5.50 15,000,000 14,909,167
09-16-96 5.45 20,000,000 19,862,000
10-10-96 5.44 10,000,000 9,896,944
10-17-96 5.52 23,500,000 23,226,062
Morgan Stanley
Group
08-01-96 5.38 13,600,000 13,600,000
08-14-96 5.40 8,100,000 8,084,293
09-03-96 5.35 38,000,000 37,814,687
09-04-96 5.35 14,500,00 14,427,009
09-05-96 5.37 40,000,000 39,792,333
_____________
Total 331,260,251
_____________________________________________________________________________________________________________________________
Commercial finance (0.5%)
PACCAR Financial
08-02-96 5.42 14,150,000 14,147,878
_____________________________________________________________________________________________________________________________
Consumer finance -- personal loans (3.8%)
Avco Financial
08-01-96 5.40 2,000,000 2,000,000
08-27-96 5.34 13,300,000 13,249,379
10-17-96 5.53 5,000,000 4,941,608
10-30-96 5.49 19,600,000 19,334,420
10-30-96 5.52 8,000,000 7,891,000
11-01-96 5.51 10,900,000 10,748,466
Household Finance
08-26-96 5.42 20,000,000 19,925,417
10-01-96 5.47 24,500,000 24,274,995
_____________
Total 102,365,285
_____________________________________________________________________________________________________________________________
Energy (1.5%)
Chevron Transport
08-21-96 5.43 10,000,000 (b) 9,970,111
08-28-96 5.35 10,000,000 (b) 9,960,400
09-16-96 5.45 10,000,000 (b) 9,931,000
10-21-96 5.50 10,000,000 (b) 9,877,825
_____________
Total 39,739,336
_____________________________________________________________________________________________________________________________
<PAGE>
PAGE 41
Financial services (19.3%)
American General Capital Services
08-26-96 5.44 20,000,000 19,925,139
Associates
North America
08-06-96 5.39 6,000,000 5,995,525
08-23-96 5.45 20,000,000 19,933,755
08-26-96 5.43 9,000,000 8,966,375
08-29-96 5.37 15,500,000 15,435,623
08-30-96 5.38 19,000,000 18,918,115
09-03-96 5.35 14,000,000 13,931,727
09-09-96 5.40 25,000,000 24,854,563
09-25-96 5.42 15,000,000 14,876,937
Beneficial
08-15-96 5.40 15,000,000 14,968,617
08-29-96 5.35 20,000,000 19,917,089
09-12-96 5.39 15,500,000 15,403,254
CAFCO
08-20-96 5.34 6,000,000 5,983,312
CIT Group Holdings
08-22-96 5.43 6,100,000 6,080,821
Commercial Credit
08-08-96 5.39 18,000,000 17,981,205
08-14-96 5.40 10,500,000 10,479,601
Dean Witter, Discover & Co.
08-26-96 5.32 27,100,000 27,000,256
Ford Motor Credit
08-15-96 5.37 30,000,000 29,937,582
08-23-96 5.43 20,000,000 19,934,243
09-13-96 5.39 14,700,000 14,606,063
General Electric
Capital
08-28-96 5.44 10,000,000 9,959,575
08-29-96 5.32 18,000,000 17,925,800
General Electric
Capital Services
08-08-96 5.42 13,000,000 12,986,350
08-20-96 5.38 11,500,000 11,467,711
08-22-96 5.43 25,000,000 24,921,542
Toyota Motor Credit
08-01-96 5.39 13,600,000 13,600,000
08-26-96 5.39 17,300,000 17,235,605
Transamerica Financial
08-02-96 5.40 9,000,000 8,998,655
08-09-96 5.42 12,000,000 11,985,600
08-19-96 5.35 7,700,000 7,679,671
08-21-96 5.44 15,000,000 14,955,082
08-26-96 5.43 10,000,000 9,962,638
08-27-96 5.46 4,800,000 4,781,210
09-09-96 5.44 5,200,000 5,169,580
09-16-96 5.42 16,500,000 16,386,571
______________
Total 513,145,392
_____________________________________________________________________________________________________________________________
Food (3.1%)
Cargill Financial Services
08-01-96 5.65 1,500,000 1,500,000
10-08-96 5.53 12,000,000 11,876,240
CPC Intl
08-16-96 5.38 10,000,000 (b) 9,977,917
09-06-96 5.35 8,400,000 (b) 8,355,312
09-27-96 5.48 12,500,000 (b) 12,392,729
10-17-96 5.49 29,500,000 (b) 29,158,013
10-22-96 5.49 8,400,000 (b) 8,296,297
______________
Total 81,556,508
_____________________________________________________________________________________________________________________________
Health care (2.9%)
Becton Dickinson
08-28-96 5.44 22,000,000 21,910,900
Sandoz
08-02-96 5.35 10,000,000 (b) 9,998,533
09-05-96 5.41 12,000,000 11,937,350
09-10-96 5.47 12,100,000 (b) 12,027,131
09-11-96 5.40 15,000,000 14,908,262
09-11-96 5.41 6,200,000 (b) 6,162,082
SmithKline
08-13-96 5.40 1,100,000 1,098,027
______________
Total 78,042,285
<PAGE>
PAGE 42
Industrial equipment & services (1.4%)
Mobil Australia Finance
Delaware
08-02-96 5.35 9,000,000 (b) 8,998,675
08-09-96 5.39 16,879,000 (b) 16,858,933
09-17-96 5.39 11,098,000 (b) 11,020,483
______________
Total 36,878,091
_____________________________________________________________________________________________________________________________
Insurance (3.6%)
American General
Finance
08-13-96 5.41 30,000,000 29,946,300
08-23-96 5.42 15,200,000 15,150,119
09-27-96 5.42 13,500,000 13,385,216
Metlife
08-16-96 5.40 25,502,000 25,445,152
SAFECO Credit
08-21-96 5.42 11,000,000 10,967,183
______________
Total 94,893,970
_____________________________________________________________________________________________________________________________
Media (3.2%)
Gannett
10-11-96 5.54 7,600,000 (b) 7,518,011
10-16-96 5.54 8,300,000 (b) 8,204,153
10-17-96 5.54 17,800,000 (b) 17,591,745
10-18-96 5.54 15,000,000 (b) 14,822,225
Reed Elsevier
08-26-96 5.42 6,200,000 (b) 6,176,793
09-06-96 5.49 10,000,000 (b) 9,945,800
09-11-96 5.44 11,600,000 (b) 11,528,660
09-20-96 5.44 8,500,000 (b) 8,436,250
______________
Total 84,223,637
_____________________________________________________________________________________________________________________________
Retail (1.0%)
Penney (JC) Funding
08-27-96 5.37 20,000,000 19,922,867
09-24-96 5.41 7,700,000 7,638,092
______________
Total 27,560,959
_____________________________________________________________________________________________________________________________
Utilities -- electric (0.7%)
Northern States Power
08-26-96 5.43 19,500,000 19,427,146
_____________________________________________________________________________________________________________________________
Utilities -- gas (0.5%)
Southern California Gas
08-08-96 5.37 6,500,000 (b) 6,493,301
10-29-96 5.53 7,000,000 (b) 6,905,512
______________
Total 13,398,813
_____________________________________________________________________________________________________________________________
Utilities -- telephone (4.5%)
Ameritech
08-13-96 5.40 7,500,000 7,486,625
11-25-96 5.43 10,000,000 9,829,544
Ameritech Capital
08-05-96 5.36 25,000,000 (b) 24,985,222
AT&T
08-28-96 5.43 43,700,000 43,524,007
BellSouth Capital Funding
09-03-96 5.42 16,000,000 15,921,093
U S WEST Communications
08-12-96 5.43 16,000,000 15,973,698
10-07-96 5.50 3,100,000 3,068,614
______________
Total 120,788,803
_____________________________________________________________________________________________________________________________
Miscellaneous (1.9%)
Canadian Wheat Board
08-22-96 4.94 6,400,000 6,381,557
Chevron UK
08-27-96 5.43 10,000,000 9,961,145
10-31-96 5.56 10,000,000 9,861,478
Natl West Canada
10-29-96 5.33 25,000,000 24,663,160
______________
Total 50,867,340
<PAGE>
PAGE 43
Total commercial paper
(Cost: $1,933,792,663) 1,933,792,663
_____________________________________________________________________________________________________________________________
Letters of credit (19.8%)
ABN Amro-
Omnicom Finance
08-14-96 5.43 10,000,000 9,980,464
Bank of America-
Hyundai Motor Finance
09-30-96 5.45 30,000,000 29,730,000
Bank of New York-
River Fuel
09-04-96 5.39 23,975,000 (b) 23,853,407
Barclays Bank-
Banco Real
10-01-96 5.43 12,000,000 11,892,234
Barclays Bank-
Centerior Fuel
08-06-96 5.43 12,440,000 12,430,670
Barclays Bank-
Petrobras
08-22-96 5.44 12,000,000 11,962,620
Canadian Imperial Bank-
Commed Fuel
08-16-96 5.43 8,285,000 8,266,359
08-20-96 5.43 5,750,000 5,733,704
Chase Manhattan-
Somerset Rail
08-23-96 5.40 12,300,000 12,259,560
Chemical Bank-
Somerset Rail
08-07-96 5.45 13,400,000 13,387,873
Credit Agricole-
Louis Dreyfus
08-07-96 5.42 22,000,000 21,980,200
08-07-96 5.44 25,000,000 24,977,416
08-08-96 5.45 10,000,000 9,989,461
08-23-96 5.43 14,100,000 14,053,556
Credit Suisse-
CAFCO Capital
08-07-96 5.39 15,000,000 14,986,650
08-19-96 5.45 15,000,000 14,959,500
08-26-96 5.41 10,000,000 9,962,917
Credit Suisse-
Commed Fuel
08-12-96 5.43 13,843,000 13,820,244
Credit Suisse-
North American Finance
09-10-96 5.49 13,000,000 12,921,278
Credit Suisse-
Sinochem
08-02-96 5.39 10,000,000 9,998,517
08-06-96 5.35 12,300,000 12,290,945
08-20-96 5.36 10,000,000 9,972,081
Credit Suisse-
Sunkyong
09-10-96 5.50 12,000,000 11,928,000
Dresdner Bank-
Galicia Buenos Aires Funding
10-21-96 5.52 20,000,000 (b) 19,754,750
First Chicago-
Commed Fuel
09-06-96 5.44 14,822,000 14,742,109
Societe Generale-
China Intl Marine Container
09-26-96 5.48 10,000,000 9,915,689
Societe Generale-
Natl Bank
10-01-96 5.47 15,000,000 14,862,242
Societe Generale-
Natl Finaceria
08-05-96 5.43 10,000,000 9,994,000
Swiss Bank-
Pemex Capital
10-10-96 5.52 10,000,000 9,894,028
Union Bank Switzerland-
Southwest Gas
08-01-96 5.66 27,400,000 27,400,000
09-09-96 5.49 15,537,000 15,445,435
<PAGE>
PAGE 44
Westdeutsche Landesbank-
Beal Cayman Brazil
08-22-96 5.38 11,000,000 10,965,863
08-26-96 5.44 15,000,000 14,943,854
08-27-96 5.48 15,000,000 14,941,174
Westdeutsche Landesbank-
Hillsborough County
08-27-96 5.42 20,000,000 19,922,144
09-24-96 5.50 13,615,000 13,504,106
Westdeutsche Landesbank-
Unibanco
09-18-96 5.46 10,000,000 9,927,867
_____________________________________________________________________________________________________________________________
Total letters of credit
(Cost: $527,550,917) 527,550,917
_____________________________________________________________________________________________________________________________
Total investments in securities
(Cost: $2,644,249,896)(d) $2,644,249,896
_____________________________________________________________________________________________________________________________
Notes to investments in securities
_____________________________________________________________________________________________________________________________
(a) Securities are valued by procedures described in Note 1 to the financial statements.
(b) Commercial paper sold within terms of a private placement memorandum, exempt from registration under Section 4(2) of the
Securities Act of 1933, as amended, and may be sold only to dealers in that program or other "accredited investors."
This security has been determined to be liquid under guidelines established by the board.
(c) Interest rate varies to reflect current market conditions; rate shown is the effective rate on July 31, 1996.
(d) Also represents the cost of securities for federal income tax purposes at July 31, 1996.
</TABLE>
<PAGE>
PAGE 45
IDS mutual funds
Cash equivalent investments
These money market funds have three main goals: conservation of
capital, constant liquidity and the highest possible current income
consistent with these objectives. Very limited risk.
IDS Cash Management Fund
Invests in such money market securities as high quality commercial
paper, bankers' acceptances, certificates of deposits (CDs) and
other bank securities.
(icon of) piggy bank
IDS Tax-Free Money Fund
Invests primarily in short-term bonds and notes issued by state and
local governments to seek high current income exempt from federal
income taxes.
(icon of) shield with piggy bank enclosed
Income investments
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 Global Bond Fund
Invests primarily in debt securities of U.S. and foreign issuers to
seek high total return through income and growth of capital.
(icon of) globe
IDS Extra Income Fund
Invests mainly in long-term, high-yielding corporate fixed-income
securities in the lower rated, higher risk bond categories to seek
high current income. Secondary objective is capital growth.
(icon of) coins
IDS Bond Fund
Invests mainly in corporate bonds, at least 50% in the higher
rated, lower risk bond categories, or the equivalent, and in
government bonds.
(icon of) greek column
<PAGE>
PAGE 46
IDS Selective Fund
Invests in high-quality corporate bonds and other highly rated debt
instruments including government securities and short-term
investments. Seeks current income and preservation of capital.
(icon of) skyline
IDS Federal Income Fund
Invests primarily in securities issued or guaranteed as to the
timely payment of principal and interest by the U.S. government,
its agencies and instrumentalities. Seeks a high level of current
income and safety of principal consistent with its type of
investments.
(icon of) shield with eagle head enclosed
Tax-exempt income investments
These funds provide tax-free income by investing in municipal
bonds. The income is generally free from federal income tax. Risk
varies by bond quality.
IDS High Yield Tax-Exempt Fund
Invests primarily in medium- and lower-quality municipal bonds and
notes. Lower-quality securities generally involve greater risk of
principal and income.
(icon of) shield with basket of apples enclosed
IDS State Tax-Exempt Funds
(CA, MA, MI, MN, NY, OH)
Invests primarily in high- and medium-grade municipal securities to
provide income to residents of each respective state that is exempt
from federal, state and local income taxes. (New York is the only
state that is exempt at the local level.)
(icon of) shield with U.S. enclosed
IDS Tax-Exempt Bond Fund
Invests mainly in bonds and notes of state or local government
units, with at least 75% in the four highest rated, lowest risk
bond categories.
(icon of) shield with Greek column enclosed
IDS Insured Tax-Exempt Fund
Invests primarily in municipal securities that are insured as to
the timely payment of principal and interest. The insurance
feature minimizes credit risk of the fund but does not guarantee
the market value of the fund's shares.
(icon of) shield with star enclosed
<PAGE>
PAGE 47
Growth and income investments
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. Moderate risk.
IDS International Fund
Invests primarily in common stocks of foreign companies that offer
potential for superior growth. The fund may invest up to 20% of
its assets in the U.S. market.
(icon of) three flags
IDS Managed Allocation Fund
Invests in U.S. equity securities, U.S. and foreign debt
securities, foreign equity securities and money market instruments.
The fund provides diversification among these major investment
categories and has a target mix that represents the way the fund's
investments will be allocated over the long term. Seeks maximum
total return.
(icon of) bird in a nest
IDS Equity Select Fund
Invests primarily in a combination of moderate growth stocks,
higher-yielding equities and bonds. Seeks growth of capital and
income.
(icon of) three pine trees
IDS Blue Chip Advantage Fund
Invests in selected stocks from a major market index. Securities
purchased are those recommended by our research analysts as the
best from each industry represented on the index. Offers potential
for long-term growth as well as dividend income.
(icon of) ribbon
IDS Stock Fund
Invests in common stock of companies representing many sectors of
the economy. Seeks current income and growth of capital.
(icon of) building with columns
IDS Equity Value Fund
Invests primarily in undervalued common stocks that offer potential
for growth of capital and income.
(icon of) three growing flowers
<PAGE>
PAGE 48
IDS Utilities Income Fund
Invests primarily in the stocks of public utility companies to seek
high current income and growth of income and capital with reduced
volatility.
(icon of) light bulb
IDS Diversified Equity Income Fund
Invests primarily in high-yielding common stocks to seek high
current income and, secondarily, to benefit from the growth
potential offered by stock investments.
(icon of) two puzzle pieces
IDS Mutual
Invests in a balance between common stocks and senior securities
(preferred stocks and bonds). Seeks a balance of growth of capital
and current income.
(icon of) scale of justice
Growth investments
Funds in this group seek capital growth, primarily from common
stocks. They are high risk mutual funds with a potential for high
reward.
IDS Discovery Fund
Invests in small- and medium-size, growth-oriented companies
emphasizing technological innovation and productivity enhancement.
Buys and holds larger growth-oriented stocks.
(icon of) ship
IDS Small Company Index Fund
Invests in all or a representative group of the equity securities
comprising the S&P SmallCap 600 Index, as it strives to provide
long-term capital appreciation.
(icon of) office building
IDS Progressive Fund
Invests primarily in undervalued common stocks. The fund holds
stocks for the long term with the goal of capital growth.
(icon of) shooting star
<PAGE>
PAGE 49
IDS Global Growth Fund
Invests in stocks of companies throughout the world that are
positioned to meet market needs in a changing world economy. These
companies offer above-average potential for long-term growth.
(icon of) world
IDS Strategy Aggressive Fund
Invests primarily in common stocks of companies that are selected
for their potential for above-average growth. Above-average means
that their growth potential is better, in the opinion of the
portfolio's investment manager, than the Standard & Poor's
Corporation (S&P) 500 Stock Index.
(icon of) chess piece
IDS Research Opportunities Fund
Invests primarily in equity securities of companies included in the
S&P 500 Index that are believed to have strong growth potential.
The Portfolio is managed using a research methodology by the
Research Department of AEFC. Goal is long-term appreciation.
(icon of) magnifying glass
IDS Growth Fund
Invests primarily in companies that have above-average potential
for long-term growth as a result of new management, marketing
opportunities or technological superiority.
(icon of) trees
IDS New Dimensions Fund
Invests primarily in companies with significant growth potential
due to superiority in technology, marketing or management. The
fund frequently changes its industry mix.
(icon of) dimension
Specialty growth investment
This fund aggressively seeks capital growth as a hedge against
inflation.
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. This is the most aggressive and most
speculative IDS mutual fund.
(icon of) cart of precious gems
<PAGE>
PAGE 50
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.
<PAGE>
PAGE 51
Federal income tax information
IDS Cash Management Fund
___________________________________________________________________
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. Some of the dividends listed below were
reported to you on a Form 1099-DIV, Dividends and Distributions,
last January. Dividends paid to you since the end of last year
will be reported to you on a tax statement sent in January.
Shareholders should consult a tax advisor on how to report
distributions for state and local purposes.
IDS Cash Management Fund
Fiscal year ended July 31, 1996
Class A
Income distributions -- taxable as dividend income, none qualifying
for deduction by corporations.
Payable date Per share
Aug. 28, 1995 $0.00432
Sept. 27, 1995 0.00459
Oct. 27, 1995 0.00428
Nov. 28, 1995 0.00456
Dec. 28, 1995 0.00425
Jan. 26, 1996 0.00405
Feb. 28, 1996 0.00443
March 28, 1996 0.00380
April 29, 1996 0.00394
May 29, 1996 0.00414
June 27, 1996 0.00374
July 29, 1996 0.00394
Total distributions $0.05004
Class B
Income distributions -- taxable as dividend income, none qualifying
for deduction by corporations.
Payable date Per share
Aug. 28, 1995 $0.00371
Sept. 27, 1995 0.00393
Oct. 27, 1995 0.00366
Nov. 28, 1995 0.00390
Dec. 28, 1995 0.00363
Jan. 26, 1996 0.00345
Feb. 28, 1996 0.00375
March 28, 1996 0.00320
<PAGE>
PAGE 52
April 29, 1996 0.00332
May 29, 1996 0.00348
June 27, 1996 0.00314
July 29, 1996 0.00332
Total distributions $0.04249
Class Y
Income distributions -- taxable as dividend income, none qualifying
for deduction by corporations.
Payable date Per share
Aug. 28, 1995 $0.00432
Sept. 27, 1995 0.00459
Oct. 27, 1995 0.00428
Nov. 28, 1995 0.00456
Dec. 28, 1995 0.00424
Jan. 26, 1996 0.00405
Feb. 28, 1996 0.00443
March 28, 1996 0.00380
April 29, 1996 0.00394
May 29, 1996 0.00414
June 27, 1996 0.00374
July 29, 1996 0.00394
Total distributions $0.05003
<PAGE>
PAGE 53
Quick telephone reference
American Express Telephone Transaction Service
Redemptions and exchanges, dividend payments or reinvestments and
automatic payment arrangements
National/Minnesota: 800-437-3133
Mpls./St. Paul area: 671-3800
American Express Shareholder Service
Fund performance, objectives and account inquiries
612-671-3733
TTY Service
For the hearing impaired
800-846-4852
American Express Infoline
Automated account information (TouchToneR phones only), including
current fund prices and performance, account values and recent
account transactions
National/Minnesota: 800-272-4445
Mpls./St. Paul area: 671-1630
AMERICAN
EXPRESS
Financial
Advisors
IDS Cash Management Fund
IDS Tower 10
Minneapolis, MN 55440-0010
<PAGE>
PAGE 54
STATEMENT OF ADDITIONAL INFORMATION
FOR
IDS CASH MANAGEMENT FUND
Sept. 27, 1996
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 Sept. 27, 1996, and it is to be used with the
prospectus dated Sept. 27, 1996, and the Annual Report for the
fiscal year ended July 31, 1996.
<PAGE>
PAGE 55
TABLE OF CONTENTS
Goal and Investment Policies.........................See Prospectus
Additional Investment Policies................................p.
Security Transactions.........................................p.
Brokerage Commissions Paid to Brokers Affiliated with
American Express Financial Corporation........................p.
Performance Information.......................................p.
Valuing Fund Shares...........................................p.
Investing in the Fund.........................................p.
Redeeming Shares..............................................p.
Pay-out Plans.................................................p.
Taxes.........................................................p.
Agreements....................................................p.
Board Members and Officers....................................p.
Custodian.....................................................p.
Independent Auditors..........................................p.
Financial Statements..............................See Annual Report
Prospectus....................................................p.
Appendix A: Description of Money Market Securities...........p.
Appendix B: Dollar-Cost Averaging............................p.
<PAGE>
PAGE 56
ADDITIONAL INVESTMENT POLICIES
These are investment policies in addition to those presented in the
prospectus. Unless holders of a majority of the outstanding voting
securities agree to make the change the Fund will not:
'Invest in a company to control or manage it.
'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.
'Invest in exploration or development programs, such as oil, gas or
mineral leases.
'Invest more than 5% of its total assets in securities of
companies, including any predecessors, that have a record of less
than three years continuous operations.
'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.
'Buy on margin, sell short or deal in options to buy or sell
securities.
'Buy or sell real estate, commodities or commodity contracts. For
purposes of this policy, real estate includes real estate limited
partnerships.
'Purchase securities of an issuer if the board members and officers
of the Fund and of American Express Financial Corporation (AEFC)
hold more than a certain percentage of the issuer's outstanding
securities. If the holdings of all board members and officers of
the Fund and of AEFC who own more than 0.5% of an issuer's
securities are added together, and if in total they own more than
5%, the Fund will not purchase securities of that issuer.
'Lend Fund securities in excess of 30% of its net assets, at market
value. If the Fund were to make long- or short-term loans, it will
get 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
<PAGE>
PAGE 57
collateral on a daily basis. The risks are that the borrower may
not provide additional collateral when required or return the
securities when due. Loans will not be made unless the investment
manager believes the opportunity for additional income outweighs
these risks. During the existence of the loan, the Fund receives
cash payments equivalent to all interest or other distributions
paid on the loaned securities. The Fund has no present intention
of loaning securities.
'Purchase common stocks, preferred stocks, warrants, other equity
securities, corporate bonds or debentures, state bonds, municipal
bonds or industrial revenue bonds.
'Purchase securities of other open-end investment companies or
invest more than 10% of the market value of its assets in closed-
end funds. If the Fund ever makes such an investment, purchases
will occur only on the open market where the dealer's or sponsor's
profit is limited to a regular commission. The Fund has no present
intention of investing in other registered investment companies.
Unless changed by the board, the Fund will not:
'Invest more than 10% of its net assets in securities that are
illiquid whether or not registration or the filing of a
notification under the Securities Act of 1933 or the taking of
similar action under other securities laws relating to the sale of
securities is required. A risk of any such investment is that it
might not be able to be easily liquidated. For the purpose of this
policy, repurchase agreements with maturities greater than seven
days and non-negotiable fixed time deposits will be treated as
illiquid securities.
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 Fund may invest in commercial paper rated in the highest rating
category by at least two nationally recognized statistical rating
organizations (or by one, if only one rating is assigned) and in
unrated paper determined by the board to be of comparable quality.
The Fund also may invest up to 5% of its total assets in commercial
paper receiving the second highest rating or in unrated paper
determined to be of comparable quality.
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 money market securities, see Appendix A.<PAGE>
PAGE 58
SECURITY TRANSACTIONS
Subject to policies set by the board, 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.
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 adversely affect the price or volume purchased or sold by the
Fund, the Fund hopes to gain an overall advantage in execution.
The Fund paid total brokerage commissions of $0 for the fiscal year
ended July 31, 1996, $0 for fiscal year 1995, and $0 for fiscal
year 1994. Substantially all firms through whom transactions were
executed provide research services.
No transactions were directed to brokers because of research
services they provided to the Fund.
As of the fiscal year ended July 31, 1996, the Fund held 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.
As of the fiscal year ended July 31, 1996, the Fund held securities
of its regular brokers or dealers of the parent of those brokers or
dealers that derived more than 15% of gross revenue from
securities-related activities as presented below:
<PAGE>
PAGE 59
Value of Securities
Owned at End of
Name of Issuer Fiscal Year
Nations Bank $ 20,000,000
Goldman Sachs Group 95,552,349
Merrill Lynch 121,989,580
Morgan Stanley Group 113,718,322
Dean Witter 27,000,256
Chemical Bank 13,387,873
First Chicago 14,742,109
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 the 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.
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 a class 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:<PAGE>
PAGE 60
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 a class 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 for a
class based on a seven-day period.
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 4.95% for Class A, 4.20% for
Class B and 4.94% for Class Y and its compound yield was 5.05% for
Class A, 4.27% for Class B and 5.05% for Class Y on July 31, 1996,
the last day of the Fund's fiscal year.
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
<PAGE>
PAGE 61
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, 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 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 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 portfolio 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
<PAGE>
PAGE 62
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 New York Stock Exchange (the Exchange), AEFC and the Fund will
be closed on the following holidays: New Year's Day, Presidents'
Day, Good Friday, 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 $1,000 for the Fund
(except payroll deduction plans), with a minimum additional
purchase of $25.
Systematic Investment Programs
After you make your initial investment of $2,000 for the Fund, you
can arrange to make additional payments of $100 or more on a
regular basis. These minimums do not apply to all systematic
investment programs. You decide how often to make payments -
monthly, quarterly or semiannually. You are not obligated to make
any payments. 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? 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 B.
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 in the same class of the Fund. Dividend and
capital gain distributions, if any, paid by the Fund may be used to
automatically purchase shares of another fund in the IDS MUTUAL
FUND GROUP available in your state. Dividends may be directed to
existing accounts only. Dividends declared by the Fund are
exchanged the following day. Dividends can be exchanged into one
fund but cannot be split to make purchases in two or more funds.
Automatic directed dividends are available between accounts of any
ownership except:<PAGE>
PAGE 63
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 should read its
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 of $100 or more are available for shareholders of
the Fund. 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
not yet 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: Telephone redemptions are available for
shareholders of the Fund. 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
<PAGE>
PAGE 64
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.
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 (the 1940 Act), as amended, 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.
For this Fund, participants in these qualified plans may be subject
to a deferred sales charge on certain redemptions. The deferred
sales charge on certain redemptions will be waived if the
redemption is a result of a participant's death, disability,
retirement, attaining age 59 1/2, loans or hardship withdrawals.
The deferred sales charge varies depending on the number of
participants in the qualified plan and total plan assets as
follows:
<PAGE>
PAGE 65
Deferred sales Charge
Number of Participants
Total Plan Assets 1-99 100 or more
Less than $1 million 4% 0%
$1 million or more 0% 0%
PAY-OUT PLANS
Shareholders of IDS Cash Management Fund can use any of several
pay-out plans to redeem their investment in regular installments.
If you redeem Class B shares you may be subject to a contingent
deferred sales charge as discussed in the prospectus. While the
plans differ on how the pay-out is figured, they all are based on
the redemption of the investment. Net investment income dividends
and any capital gain distributions will automatically be
reinvested, unless you elect to receive them in cash. If a tax-
qualified plan account for which American Express Trust Company
acts as custodian is being redeemed, an election may be made to
receive dividends and other distributions in cash when permitted by
law. If an IRA or a qualified retirement account is redeemed,
certain restrictions, federal tax penalties and special federal
income tax reporting requirements may apply. You should consult
your tax advisor about this complex area of the tax law.
To start any of these plans, please write or call American Express
Shareholder Service, P.O. Box 534, Minneapolis, MN 55440-0534,
612-671-3733. 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.
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.
<PAGE>
PAGE 66
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 the 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
Retirement Accounts
If you have a nonqualified investment in the Fund, you may move
part or all of those shares to an IRA or qualified retirement
account in the Fund. However, this type of exchange is considered
a sale of shares and may result in a gain or loss for tax purposes.
Since the Fund invests only in money market securities, all income
is from interest or short-term capital gains. Accordingly,
distributions of net investment income do not qualify for the 70%
dividends-received deduction for corporations.
Under federal tax law, by the end of a calendar year the Fund must
declare and pay dividends representing 98% of ordinary income for
that calendar year and 98% of net capital gains (both long-term and
short-term) for the 12-month period ending Oct. 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 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:<PAGE>
PAGE 67
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 July 31, 1996, the daily rate applied to the Fund's net assets
was equal to 0.286% 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.
The management fee is paid monthly. The total amount paid was
$6,557,898 for the year ended July 31, 1996, $4,733,219 for 1995,
and $3,600,005 for 1994.
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; Fund
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. The Fund paid nonadvisory expenses of $1,851,127 for
the year ended July 31, 1996, $1,001,686 for 1995, and $580,091 for
1994.
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 0.50 0.027
Next 0.50 0.025
Next 0.50 0.022
Over 2.5 0.020
On July 31, 1996, the daily rate applied to the Fund's net assets
was equal to 0.026% 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
$612,417 for the fiscal period ended July 31, 1996.
<PAGE>
PAGE 68
Transfer Agency Agreement
The Fund has a Transfer Agency Agreement with AEFC. This agreement
governs AEFC'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, AEFC will earn a fee from the
Fund determined by multiplying the number of shareholder accounts
at the end of the day by a rate determined for each class and
dividing by the number of days in the year. The rate for Class A
and Class Y is $20 per year and for Class B is $21 per year. The
fees paid to AEFC may be changed from time to time upon agreement
of the parties without shareholder approval. Under the agreement,
the Fund paid fees of $5,068,228 for the fiscal year ended July 31,
1996.
Distribution Agreement
For an explanation of the Fund's Distribution Agreement, please see
your prospectus.
Additional information about commissions and compensation for the
last fiscal year paid by the Fund is contained in the following
table:
<TABLE>
<CAPTION>
(1) (2) (3) (4) (5)
Net Compensation
Name of Underwriting on Redemption
Principal Discounts and and Brokerage Other
Underwriter Commissions Repurchases Commissions Compensation
<S> <C> <C> <C> <C>
American
Express
Financial
Advisors $463,819 None None $1,389,698*
</TABLE>
*Distribution fees paid pursuant to the Plan and Agreement of
Distribution.
Plan and Agreement of Distribution
For Class B shares, to help American Express Financial Advisors
defray the cost of distribution and servicing, not covered by the
sales charges received under the Distribution Agreement, the Fund
and American Express Financial Advisors entered into a Plan and
Agreement of Distribution (Plan). These costs cover almost all
aspects of distributing the Fund shares except compensation to the
sales force. A substantial portion of the costs are not
specifically identified to any one fund in the IDS MUTUAL FUND
GROUP. Under the Plan, American Express Financial Advisors is paid
a fee at an annual rate of 0.75% of the Fund's average daily net
assets attributable to Class B shares.
<PAGE>
PAGE 69
The Plan must be approved annually by the board, including a
majority of the disinterested board members, if it is to continue
for more than a year. At least quarterly, the board must review
written reports concerning the amounts expended under the Plan and
the purposes for which such expenditures were made. The Plan and
any agreement related to it may be terminated at any time by vote
of a majority of board members who are not interested persons of
the Fund and have no direct or indirect financial interest in the
operation of the Plan or in any agreement related to the Plan, or
by vote of a majority of the outstanding voting securities of the
Fund's Class B shares or by American Express Financial Advisors.
The Plan (or any agreement related to it) will terminate in the
event of its assignment, as that term is defined in the 1940 Act,
as amended. The Plan may not be amended to increase the amount to
be spent for distribution without shareholder approval, and all
material amendments to the Plan must be approved by a majority of
the board members, including a majority of the board members who
are not interested persons of the Fund and who do not have a
financial interest in the operation of the Plan or any agreement
related to it. The selection and nomination of disinterested board
members is the responsibility of the other disinterested board
members. No board member who is not an interested person, has any
direct or indirect financial interest in the operation of the Plan
or any related agreement. For the fiscal year ended July 31, 1996,
the Fund paid fees of $1,389,698.
Total fees and expenses
Total fees and nonadvisory expenses cannot exceed the most
restrictive applicable state limitation. Currently, the most
restrictive applicable state expense limitation, subject to
exclusion of certain expenses, is 2.5% of the first $30 million of
the Fund's average daily net assets, 2% of the next $70 million and
1.5% of average daily net assets over $100 million, on an annual
basis. At the end of each month, if the fees and expenses of the
Fund exceed this limitation for the Fund's fiscal year in progress,
AEFC will assume all expenses in excess of the limitation. AEFC
then may bill the Fund for such expenses in subsequent months up to
the end of that fiscal year, but not after that date. No interest
charges are assessed by AEFC for expenses it assumes. The Fund
paid total fees and nonadvisory expenses of $15,479,368 for the
fiscal year ended July 31, 1996.
BOARD MEMBERS AND OFFICERS
The following is a list of the Fund's board members who, except for
Mr. Dudley, also are board members of all other funds in the IDS
MUTUAL FUND GROUP. Mr. Dudley is a board member of the 34 publicly
offered funds. All shares have cumulative voting rights with
respect to the election of board members.
<PAGE>
PAGE 70
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, the Interpublic Group of Companies, Inc.
(advertising), and FPL Group, Inc. (holding company for Florida
Power and Light).
William H. Dudley**
Born in 1932.
2900 IDS Tower
Minneapolis, MN
Executive vice president and director of AEFC.
Robert F. Froehlke+
Born in 1922.
1201 Yale Place
Minneapolis, MN
Former president of all funds in the IDS MUTUAL FUND GROUP.
Director, the ICI Mutual Insurance Co., Institute for Defense
Analyses, Marshall Erdman and Associates, Inc. (architectural
engineering) and Public Oversight Board of the American Institute
of Certified Public Accountants.
David R. Hubers+**
Born in 1943.
2900 IDS Tower
Minneapolis, MN
President, chief executive officer 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
Former 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>
PAGE 71
Melvin R. Laird
Born in 1922.
Reader's Digest Association, Inc.
1730 Rhode Island Ave., N.W.
Washington, D.C.
Senior counsellor for national and international affairs, The
Reader's Digest Association, Inc. Former nine-term congressman,
secretary of defense and presidential counsellor. Director, Martin
Marietta Corp., Metropolitan Life Insurance Co., The Reader's
Digest Association, Inc., Science Applications International Corp.,
Wallace Reader's Digest Funds and Public Oversight Board (SEC
Practice Section, American Institute of Certified Public
Accountants).
William R. Pearce+*
Born in 1927.
901 S. Marquette Ave.
Minneapolis, MN
President of all funds in the IDS MUTUAL FUND GROUP since June
1993. Former vice chairman of the board, Cargill, Incorporated
(commodity merchants and processors).
Edson W. Spencer+
Born in 1926.
4900 IDS Center
80 S. 8th St.
Minneapolis, MN
President, Spencer Associates Inc. (consulting). Former 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 and director of AEFC.
Wheelock Whitney+
Born in 1926.
1900 Foshay Tower
821 Marquette Ave.
Minneapolis, MN
Chairman, Whitney Management Company (manages family assets).
<PAGE>
PAGE 72
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 president, the Fund's other
officers are:
Leslie L. Ogg
Born in 1938.
901 S. Marquette Ave.
Minneapolis, MN
Vice president, general counsel and secretary of all funds in the
IDS MUTUAL FUND GROUP.
Officers who also are officers and/or employees of AEFC
Peter J. Anderson
Born in 1942.
IDS Tower 10
Minneapolis, MN
Vice president-investments of all funds in the IDS MUTUAL FUND
GROUP. Director and senior vice president-investments of AEFC.
Melinda S. Urion
Born in 1953.
IDS Tower 10
Minneapolis, MN
Treasurer of all funds in the IDS MUTUAL FUND GROUP. Director,
senior vice president and chief financial officer of AEFC.
Director and executive vice president and controller of IDS Life
Insurance Company.
<PAGE>
PAGE 73
Members of the board who are not officers of the Fund or of AEFC
receive an annual fee of $2,100. They also receive attendance and
other fees, the cost of which the Fund shares with the other funds
in the IDS MUTUAL FUND GROUP. These fees include attendance of
meetings of the Board, $1,000; meetings of the Contracts Committee,
$750; meetings of the Audit, Executive or Investment Review
Committees, $500; meetings of the Personnel Committee, $300; out-
of-state, $500; and Chair of the Contracts Committee, $5,000.
Expenses for attending those meetings are also reimbursed.
During the fiscal year ended July 31, 1996, the members of the
board, for attending up to 23 meetings, received the following
compensation:
<TABLE>
<CAPTION>
Compensation Table
Aggregate Retirement Estimated Total cash
compensation benefits annual compensation
from the accrued as benefit on from the IDS
Board member Fund Fund expenses* retirement MUTUAL FUND GROUP
<S> <C> <C> <C> <C>
Lynne V. Cheney $2,084 $8,499 $1,050 $69,300
Robert F. Froehlke 2,091 1,615 1,050 69,600
Heinz F. Hutter 2,093 580 508 69,300
Anne P. Jones 2,123 335 1,050 70,800
Donald M. Kendall 1,483 3,019 1,050 51,000
(Part of Year)
Melvin R. Laird 2,175 966 1,050 72,900
Lewis W. Lehr 1,547 2,741 1,024 53,500
(Part of Year)
Edson W. Spencer 2,233 168 560 75,100
Wheelock Whitney 2,108 594 1,050 70,300
C. Angus Wurtele 2,025 617 1,041 66,800
</TABLE>
On July 31, 1996, the Fund's board members and officers as a group
owned less than 1% of the outstanding shares. During the fiscal
year ended July 31, 1996, no board member or officer earned more
than $60,000 from this Fund. All board members and officers as a
group earned $74,476, including $19,134 of retirement plan
benefits, from this Fund.
*The Fund had a retirement plan for its independent board members.
The plan was terminated April 30, 1996.
CUSTODIAN
The Fund's securities and cash are held by American Express Trust
Company, 1200 Northstar Center West, 625 Marquette Ave.,
Minneapolis, MN 55402-2307, 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.
INDEPENDENT AUDITORS
The financial statements contained in the Annual Report to
shareholders for the fiscal year ended July 31, 1996, were audited
by independent auditors, KPMG Peat Marwick LLP, 4200 Norwest
<PAGE>
PAGE 74
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 July 31, 1996, pursuant to
Section 30(d) of the Investment Company Act of 1940, as amended,
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 Cash Management Fund dated Sept. 27, 1996,
is hereby incorporated in this SAI by reference.
<PAGE>
PAGE 75
APPENDIX A
DESCRIPTION OF MONEY MARKET SECURITIES
The types of instruments that form the major part of the Fund's
investments are described below.
Certificates of Deposit -- A certificate of deposit is a negotiable
receipt issued by a bank or savings and loan association in
exchange for the deposit of funds. The issuer agrees to pay the
amount deposited, plus interest, on the date specified on the
certificate.
Time Deposit -- A time deposit is a non-negotiable deposit in a
bank for a fixed period of time.
Bankers' Acceptances -- A bankers' acceptance arises from a short-
term credit arrangement designed to enable businesses to obtain
funds to finance commercial transactions. It is a time draft drawn
on a bank by an exporter or an importer to obtain a stated amount
of funds to pay for specific merchandise. The draft is then
"accepted" by a bank that, in effect, unconditionally guarantees to
pay the face value of the instrument on its maturity date.
Commercial Paper -- Commercial paper is generally defined as
unsecured short-term notes issued in bearer form by large well-
known corporations and finance companies. Maturities on commercial
paper range from one day to nine months.
Commercial paper rated A by Standard & Poor's Corporation has the
following characteristics: Liquidity ratios are better than the
industry average. Long-term senior debt rating is "A" or better.
The issuer has access to at least two additional channels of
borrowing. Basic earnings and cash flow have an upward trend with
allowances made for unusual circumstances. Typically, the issuer's
industry is well established, the issuer has a strong position
within its industry and the reliability and quality of management
is unquestioned. Issuers rated A are further rated by use of
numbers 1, 2 and 3 to denote relative strength within this highest
classification.
A Prime rating is the highest commercial paper rating assigned by
Moody's Investors Services Inc. Issuers rated Prime are further
rated by use of numbers 1, 2 and 3 to denote relative strength
within this highest classification. Among the factors considered
by Moody's in assigning ratings for an issuer are the following:
(1) management; (2) economic evaluation of the industry and an
appraisal of speculative type risks which may be inherent in
certain areas; (3) competition and customer acceptance of products;
(4) liquidity; (5) amount and quality of long-term debt; (6) ten
year earnings trends; (7) financial strength of a parent company
and the relationships which exist with the issuer; and (8)
recognition by management of obligations which may be present or
may arise as a result of public interest questions and preparations
to meet such obligations.<PAGE>
PAGE 76
Letters of Credit -- A letter of credit is a short-term note issued
in bearer form with a bank letter of credit which provides that the
bank pay to the bearer the amount of the note upon presentation.
U.S. Treasury Bills -- Treasury bills are issued with maturities of
any period up to one year. Three-month and six-month bills are
currently offered by the Treasury on 13-week and 26-week cycles
respectively and are auctioned each week by the Treasury. Treasury
bills are issued in book entry form and are sold only on a discount
basis, i.e., the difference between the purchase price and the
maturity value constitutes interest income for the investor. If
they are sold before maturity, a portion of the income received may
be a short-term capital gain.
U.S. Government Agency Securities -- Federal agency securities are
debt obligations which principally result from lending programs of
the U.S. government. Housing and agriculture have traditionally
been the principal beneficiaries of Federal credit programs, and
agencies involved in providing credit to agriculture and housing
account for the bulk of the outstanding agency securities.
Repurchase Agreements -- A repurchase agreement involves the
acquisition of securities by the Fund, with the concurrent
agreement by a bank (or securities dealer if permitted by law or
regulation), to reacquire the securities at the Fund's cost, plus
interest, within a specified time. The Fund thereby receives a
fixed rate of return on this investment, one that is insulated from
market and rate fluctuations during the holding period. In these
transactions, the securities acquired by the Fund have a total
value equal to or in excess of the value of the repurchase
agreement and are held by the Fund's custodian until required.
Floating rate instruments -- These instruments pay interest at a
rate tied to an external interest rate. The rate changes whenever
there is a change in the external interest rate.
If AEFC becomes aware that a security owned by the Fund is
downgraded below the second highest rating, AEFC will either sell
the security or recommend to the Fund's board why it should not be
sold.
<PAGE>
PAGE 77
APPENDIX B
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 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 through changing market
conditions to accumulate shares in a fund to meet long-term goals.
Dollar-cost averaging
___________________________________________________________________
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
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>
PAGE 78
STATEMENT OF DIFFERENCES
Difference Description
1) The layout is different 1) Some of the layout in the
throughout the prospectus. prospectus to shareholders
is in two columns.
2) The layout is different 2) Some of the layout in the
throughout the annual report. annual report to
shareholders is in two
columns.
3) Headings. 3) The headings in the
annual report and
prospectus are placed
in blue strip at the top
of the page.
4) There are pictures, icons 4) Each picture, icon and
and graphs throughout the graph is described in
annual report and prospectus. parentheses.
5) Footnotes for charts and 5) The footnotes for each
graphs are described at chart or graph are typed
the left margin. below the description of
the chart or graph.
6) The page numbers in the 6) The prospectus begins on
electronic document do not page 1; however, it is
correspond to the prospectus numbered as page 13. The
sent to the shareholders. annual report resumes on
page 36 of the electronic
document after the
completion of the
prospectus.
7) Financial Information. 7) One of the figures in the
Financial highlights has
been adjusted.
