<PAGE>
PAGE 1
1996 Annual Report
IDS Extra Income Fund
(prospectus enclosed)
(Icon of) Coins
The primary goal of IDS Extra Income Fund, Inc. is to provide high
current income. Capital growth is a secondary goal.
(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.)
AMERICAN
EXPRESS
Financial
Advisors
Distributed by American Express Financial Advisors Inc.
<PAGE>
PAGE 2
(Icon of) Coins
Bonds with something extra
Bonds aren't necessarily conservative securities strictly for
people willing to settle for modest returns. High-yield corporate
bonds, for example, are actually quite aggressive investments,
offering high potential returns to investors willing to take more
risk.
These are the bonds that Extra Income Fund invests in. High-yield
bonds are issued by a wide range of companies - from well-
established ones that might be experiencing financial difficulty to
new, rapidly growing ones that have yet to build a credit history.
Importantly, the Fund spreads its investments among many bonds
representing many types of businesses. This helps to reduce the
investment risk for shareholders.<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
Ten largest holdings 6
Making the most of the Fund 7
Long-term performance 8
Independent auditors' report 9
Financial statements 10
Notes to financial statements 13
Investments in securities 22
IDS mutual funds 35
Federal income tax information 38
1996 prospectus
The Fund in brief 3p
Goals 3p
Investment policies and risks 3p
Structure of the Fund 4p
Manager and distributor 4p
Portfolio manager 4p
Alternative purchase arrangements 4p
Sales charge and Fund expenses 5p
Performance 7p
Financial highlights 7p
Total returns 9p
Yield 10p
Investment policies and risks 11p
Facts about investments and their risks 11p
Valuing Fund shares 16p
How to purchase, exchange or redeem shares 17p
Alternative purchase arrangements 17p
How to purchase shares 19p
How to exchange shares 22p
How to redeem shares 22p
Reductions and waivers of the sales charge 27p
Special shareholder services 31p
Services 31p
Quick telephone reference 31p
Distributions and taxes 32p
Dividend and capital gain distributions 32p
Reinvestments 33p<PAGE>
PAGE 4
Taxes 33p
How to determine the correct TIN 35p
How the Fund is organized 36p
Shares 36p
Voting rights 36p
Shareholder meetings 36p
Special considerations regarding
master/feeder structure 37p
Board members and officers 39p
Investment manager 41p
Administrator and Transfer Agent 41p
Distributor 42p
About American Express Financial Corporation 43p
General information 43p
Appendices 44p
Description of corporate bond ratings 44p
Descriptions of derivative instruments 46p
<PAGE>
PAGE 5
To our shareholders
(Photo of William Pearce)
Williarm R. Pearce
President of the Fund
(Photo of Jack Utter)
Jack Utter
Portfolio manager
From the president
If you're an experienced investor, you know that 1995 was an
unusually strong year for the U.S. financial markets. Perhaps just
as important, you also know that history shows that bull markets
don't last forever. Though they're often unpredictable, declines -
whether they're brief or long-lasting, moderate or substantial -
are always a possibility.
That fact reinforces the need for investors to review periodically
their long-term goals and assets whether their investment program
remains on track to achieving them. Your quarterly investment
statements are one part of that monitoring process. The other is a
meeting with your American Express financial advisor. That becomes
even more important if there's a major change in your financial
situatiion or in the financial markets.
(signature)
William R. Pearce
From the portfolio manager
A largely positive environment for high-yield bonds prevailed
during the past fiscal period, thanks to the favorable forces of
moderage economic growth, a low rate of inflation and, for part of
the nine months, declining long-term interest rates. Taking good
advantage of the conditions, IDS Extra Income Fund provided
investors with a total return of 11.7% on Class A shares for the
September 1995 through May 1996 period.
Shaking off early concerns about recession, the economy continued
to move more slowly forward during the period, while inflation
remained low. Those factors bolstered the spirits of fixed-income
investors, who became increasingly attracted the relatively
generous real (minus inflation) returns offered by high-yield
bonds. The trend was reflected by strong cash flows into high-
yield mutual funds throughout the nine months. As is always the
case, the increased buying drove up bond prices and, consequently,
the net asset value of mutual funds such as this one.
<PAGE>
PAGE 6
The Fed lends a hand
The market found further support in the form of two reductions in
short-term interest rates by the Federal Reserve, which were taken
by investors as an indication that inflation was remaining well
under control. Long-term rates followed suit, declining through
the end of 1995 and providing a boost to bond prices. Also working
in the bond market's favor, at least last fall, was the possibility
of an agreement between Congress and the Clinton administration to
balance the federal budget.
In that environment, I made only one noteworthy change to the
portfolio. After enjoying strong performance from bonds of
paper/packaging companies, I reduced our holdings in that sector
because of weakening business conditions in that industry. More
important to Fund performance, I maintained a substantial exposure
to bonds of gaming, telecommunications and media companies, which
continued to perform very well. On the other hand, I continued to
hold relatively few bonds in the retailing and industrial cyclical
(steel and chemicals, for example) sectors. This proved to be an
appropriate strategy, as those issues were relatively poor
performers during the nine months.
Outlook OK, but repeat performance unlikely
Looking to the new fiscal year, I remain basically optimistic about
prospects for the bond market and high-yield securities, but I
don't expect a repeat of the market's spectacular 1995 performance.
While the outlook for important fundamentals such as economic
growth and inflation continues to be favorable, long-term interest
rates nevertheless rose early in 1996 and, while I expect them to
move lower before year-end, a substantial decline seems unlikely.
Moreover, because of potential uncertainty surrounding the
presidential election, the market may have another reason to become
unsettled at times. Still, barring any major negative events, I
think the positive market fundamentals will ultimately prevail.
(signature)
Jack Utter
Class A
9-month performance
(all figures per share)
Net asset value (NAV)
May 31, 1996 $ 4.34
Aug. 31, 1995 $ 4.15
Increase $ 0.19
Distributions
Sept. 1, 1995 - May 31, 1996
From Income $ 0.29
From capital gains $ --
Total distributions $ 0.29
Total return* + 11.7%**<PAGE>
PAGE 7
Class B
9-month performance
(All figures per share)
Net asset value (NAV)
May 31, 1996 $ 4.34
Aug. 31, 1995 $ 4.15
Increase $ 0.19
Distributions
Sept. 1, 1995 - May 31, 1996
From Income $ 0.26
From capital gains $ --
Total distributions $ 0.26
Total return* + 11.1%**
Class Y
9-month performance
(all figures per share)
Net asset value (NAV)
May 31, 1996 $ 4.34
Aug. 31, 1995 $ 4.15
Increase $ 0.19
Distributions
Sept. 1, 1995 - May 31, 1996
From income $ 0.29
From capital gains $ --
Total distributions $ 0.29
Total return* +11.8%**
* 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
<TABLE>
<CAPTION>
The Fund's ten largest holdings
(Pie chart)
The ten holdings here make up 11.87% of the Fund's total net assets.
_____________________________________________________________________________________
Percent Value
(of Fund's net assets) (as of May 31, 1996)
_____________________________________________________________________________________
<S> <C> <C>
Trump Atlantic City Funding 1.57% $37,829,906
11.25% 1st Mtge 2006
Echostar Satellite Broadcasting 1.37 32,988,375
Zero Coupon 2000
Gaylord Container 1.22 29,540,000
12.75% Sr Sub Disc Deb 2005
Adelphia Communications 1.21 29,246,306
9.50% Pay-in-kind 2004
Plitt Theatres 1.17 28,337,375
10.875% 2004
Cablevision Systems 1.16 28,037,947
11.125% Pay-in-kind
Alliance Entertainment 1.08 26,193,750
11.25% Sr Sub Nts 2005
Intermedia Communications of Florida 1.06 25,536,875
13.50% Sr Nts 2005
Revlon Worldwide 1.02 24,712,500
Zero Coupon Sr Disc Nts 1998
Specialty Equipment 1.01 24,348,500
11.375% Sr Sub Nts 2003
</TABLE>
<PAGE>
PAGE 9
Making the most of the Fund
Average annual total return
(as of May 31, 1996)
1 year 5 year 10 years or
since inception
Class A +9.80% +13.81% +8.94%
Class B* +10.12% --% +12.44%
Class Y* +15.72% --% +19.04%
* 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 A and Class B reflect the effect of the maximum
5% sales charge. This was a period of widely fluctuation security
prices. Past performance is no guarantee of future results.
Build your assets systematically
One of the best ways to invest in the Fund is by dollar-cost
averaging - a time-tested strategy that can make market
fluctuations work for you. To dollar-cost average, simply invest a
fixed amount of money regularly. You'll automatically buy more
shares when the Fund's share price is low, fewer shares when it is
high.
This does not ensure a profit or avoid a loss if the market
declines. But, if you can continue to invest regularly through
changing market conditions, it can be an effective way to
accumulate shares to meet your long-term goals.
How dollar-cost averaging works
Month Amount Per-share Number of shares purchased
invested market price
Jan $100 $20 5.00 XXXXX
Feb 100 18 5.56 XXXXXx
March 100 17 5.88 XXXXXx
April 100 15 6.67 XXXXXXx
May 100 16 6.25 XXXXXXx
June 100 18 5.56 XXXXXx
July 100 17 5.88 XXXXXx
Aug 100 19 5.26 XXXXXx
Sept 100 21 4.76 XXXXx
Oct 100 20 5.00 XXXXX
(footnotes to table) By investing an equal number of dollars each
month...
(arrow in table pointing to April) you automatically buy more
shares when the per share market price is low.<PAGE>
PAGE 10
(arrow in table pointing to September) and fewer shares when the
per share market price is high.
You have paid an average price of only $17.91 per share over the 10
months, while the average market price actually was $18.10.
<PAGE>
PAGE 11
The Fund's long term performance
Three ways to benefit from a mutual fund:
o your shares increase in value when the Fund's investments do
well
o you receive capital gains when the gains on investments sold
by the Fund exceed losses
o you receive income when the Fund's stock dividends, interest
and short-term gains exceed its expenses.
All three make up your total return. And you potentially can
increase your investment if, like most investors, you reinvest your
dividends and capital gain distributions to buy additional shares
of the Fund or another fund.
<TABLE><CAPTION>
How your $10,000 has grown in IDS Extra Income Fund
<S> <C> <C>
$23,562
$20,000 Extra Income
Fund
Lehman Aggregate Class A
Bond Index
$9,500
'86 '87 '88 '89 '90 '91 '92 '93 '94 '95 '96
</TABLE>
(the following two paragraphs appear in the margin next to the
graph:)
Assumes: *Holding period from 6/1/86 to 5/31/96.
*Returns do not reflect taxes payable on distributions.
*Reinvestment of all income and capital gain distributions
for the Fund, with a value of $15,868. Also see
"Performance" in the Fund's current prospectus.
The Lehman Aggregate Bond Index is made up of a representative list
of government and corporate bonds as well as asset-backed
securities and mortgage-backed securities. The index is frequently
used as a general measure of bond market performance. However, the
securities used to create the index may not be representative of
the bonds held in Extra Income Fund.
Average annual total return
(as of May 31, 1996)
1 year 5 years 10 years or
since inception
Class A + 9.80% + 13.81% + 8.94%
Class B* + 10.12% --% + 12.44%
Class Y* + 15.72% --% + 19.04%
*Inception date was March 20, 1995.<PAGE>
PAGE 12
On the graph above you can see how the Fund's total return compared
to a widely cited performance measure, the Lehman Aggregate Bond
Index. In comparing Extra Income Fund with this index, you should
take into account the fact that the Fund's performance reflects the
maximum sales charge of 5%, while such charges are not reflected in
the performance of the index. If you were actually to buy either
individual bonds or bond mutual funds, any sales charges that you
pay would reduce your total return as well.
Your investment and return values fluctuate so that your shares,
when redeemed, may be worth more or less than the original cost.
Average annual total return figures reflect the deduction of the
maximum 5% sales charge, if any. This was a period of widely
fluctuating security prices. Past performance is no guarantee of
future results.
<PAGE>
PAGE 13
Independent auditors' report
The board and shareholders
IDS Extra Income Fund, Inc.:
We have audited the accompanying statement of assets and
liabilities, including the schedule of investments in securities,
of IDS Extra Income Fund, Inc. as of May 31, 1996, and the related
statements of operations and changes in net assets, and the
financial highlights for the nine months then ended and the
statement of changes in net assets for the year ended August 31,
1995 and the financial highlights for each of the years in the
nine-year period ended August 31, 1995. 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. As to securities purchased and
sold but not received or delivered and securities on loan, we
request confirmations from brokers, and where replies are not
received, we carry out other appropriate auditing procedures. 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
Extra Income Fund, Inc. at May 31, 1996, and the results of its
operations and changes in its net assets for the nine months then
ended and the changes in its net assets for the year ended August
31, 1995, 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
July 5, 1996
<PAGE>
PAGE 14
<TABLE>
<CAPTION>
Financial statements
Statement of assets and liabilities
IDS Extra Income Fund, Inc.
May 31, 1996
_____________________________________________________________________________________________________________
Assets
_____________________________________________________________________________________________________________
<S> <C>
Investments in securities, at value (Note 1):
Investments in securities of unaffiliated issuers
(identified cost $2,305,677,559) $2,387,373,389
Investments in securities of affiliated issuers
(identified cost $30,962,600) 26,687,448
Cash in bank on demand deposit 4,370,148
Dividends and accrued interest receivable 48,040,917
Receivable for investment securities sold 31,022,257
U.S. government securities held as collateral (Note 5) 1,006,887
_____________________________________________________________________________________________________________
Total assets 2,498,501,046
_____________________________________________________________________________________________________________
Liabilities
_____________________________________________________________________________________________________________
Dividends payable to shareholders 1,982,497
Payable for investment securities purchased 78,797,268
Payable upon return of securities loaned (Note 5) 2,006,887
Accrued investment management services fee 37,601
Accrued distribution fee 5,475
Accrued service fee 11,522
Accrued transfer agency fee 6,171
Accrued administrative services fee 3,043
Other accrued expenses 432,119
_____________________________________________________________________________________________________________
Total liabilities 83,282,583
_____________________________________________________________________________________________________________
Net assets applicable to outstanding capital stock $2,415,218,463
_____________________________________________________________________________________________________________
Represented by
_____________________________________________________________________________________________________________
Capital stock -- authorized 10,000,000,000 shares of $.01 par value $ 5,564,019
Additional paid-in capital 2,578,603,209
Undistributed net investment income 6,778,069
Accumulated net realized loss (Notes 1 and 8) (253,147,512)
Unrealized appreciation of investments 77,420,678
_____________________________________________________________________________________________________________
Total -- representing net assets applicable to outstanding capital stock $2,415,218,463
_____________________________________________________________________________________________________________
Net assets applicable to outstanding shares: Class A $2,145,455,185
Class B $ 269,754,238
Class Y $ 9,040
Net asset value per share of outstanding capital stock: Class A shares 494,251,079 $4.34
Class B shares 62,148,719 $4.34
Class Y shares 2,082 $4.34
See accompanying notes to financial statements.
<PAGE>
PAGE 15
Financial statements
Statement of operations
IDS Extra Income Fund, Inc.
Nine months ended May 31, 1996
_____________________________________________________________________________________________________________
Investment income
_____________________________________________________________________________________________________________
<S> <C>
Income:
Interest $150,747,464
Dividends 7,042,024
_____________________________________________________________________________________________________________
Total income 157,789,488
_____________________________________________________________________________________________________________
Expenses (Note 2):
Investment management services fee 9,170,111
Distribution fee -- Class B 907,154
Transfer agency fee 1,538,421
Incremental transfer agency fee -- Class B 8,608
Service fee
Class A 2,552,021
Class B 211,334
Administrative services fee 749,696
Compensation of board members 37,776
Compensation of officers 15,052
Custodian fees 129,746
Postage 254,139
Registration fees 267,428
Reports to shareholders 26,235
Audit fees 36,500
Administrative 10,141
Other 42,853
_____________________________________________________________________________________________________________
Total expenses 15,957,215
Earnings credits on cash balances (Note 2) (77,789)
_____________________________________________________________________________________________________________
Total net expenses 15,879,426
_____________________________________________________________________________________________________________
Investment income -- net 141,910,062
_____________________________________________________________________________________________________________
Realized and unrealized gain -- net
_____________________________________________________________________________________________________________
Net realized gain on security transactions (Note 3) 30,517,451
Net realized gain on sale of affiliated security 69,732
Net change in unrealized appreciation or depreciation of investments 63,851,546
_____________________________________________________________________________________________________________
Net gain on investments 94,438,729
_____________________________________________________________________________________________________________
Net increase in net assets resulting from operations $236,348,791
_____________________________________________________________________________________________________________
See accompanying notes to financial statements.
<PAGE>
PAGE 16
Financial statements
Statements of changes in net assets
IDS Extra Income Fund, Inc.
_____________________________________________________________________________________________________________
Operations and distributions May 31, 1996 Aug. 31, 1995
_____________________________________________________________________________________________________________
<S> <C> <C>
Nine months ended Year ended
Investment income -- net $141,910,062 $164,956,308
Net realized gain (loss) on investments and foreign currency 30,587,183 (94,618,530)
Net change in unrealized appreciation or depreciation of investments 63,851,546 154,638,498
_____________________________________________________________________________________________________________
Net increase in net assets resulting from operations 236,348,791 224,976,276
_____________________________________________________________________________________________________________
Distributions to shareholders from:
Net investment income
Class A (131,968,668) (163,086,676)
Class B (10,053,530) (1,285,639)
Class Y (35,126) (64,716)
_____________________________________________________________________________________________________________
Total distributions (142,057,324) (164,437,031)
_____________________________________________________________________________________________________________
Capital share transactions (Note 6)
_____________________________________________________________________________________________________________
Proceeds from sales
Class A shares (Note 2) 409,958,480 386,116,539
Class B shares 211,284,632 76,560,620
Class Y shares 281,250 2,243,811
Reinvestment of distributions at net asset value
Class A shares 88,685,134 105,087,318
Class B shares 8,360,841 977,944
Class Y shares 26,891 60,615
Payments for redemptions
Class A shares (262,062,635) (354,557,559)
Class B shares (Note 2) (33,183,891) (2,378,996)
Class Y shares (1,890,774) (807,210)
_____________________________________________________________________________________________________________
Increase in net assets from capital share transactions 421,459,928 213,303,082
_____________________________________________________________________________________________________________
Total increase in net assets 515,751,395 273,842,327
Net assets at beginning of period 1,899,467,068 1,625,624,741
_____________________________________________________________________________________________________________
Net assets at end of period
(including undistributed net investment income of
$6,778,069 and $7,554,854) $2,415,218,463 $1,899,467,068
_____________________________________________________________________________________________________________
See accompanying notes to financial statements.
</TABLE>
<PAGE>
PAGE 17
Notes to financial statements
IDS Extra Income Fund, Inc.
___________________________________________________________________
1. Summary of significant accounting policies
The Fund is registered under the Investment Company Act of 1940 (as
amended) as a diversified, open-end management investment company.
The Fund invests primarily, and may invest all of its assets, in
long-term corporate bonds in the lower-rating categories, commonly
known as junk bonds. The Fund offers Class A, Class B and Class Y
shares. Class A shares are sold with a front-end 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, transfer agency fee and service 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.
<PAGE>
PAGE 18
Valuation of securities
All securities are valued at the close of each business day.
Securities traded on national securities exchanges or included in
national market systems are valued at the last quoted sales price;
securities for which market quotations are not readily available,
including illiquid securities, are valued at fair value according
to methods selected in good faith by the board. Determination of
fair value involves, among other things, reference to market
indexes, matrixes and data from independent brokers. Short-term
securities maturing in more than 60 days from the valuation date
are valued at the market price or approximate market value based on
current interest rates; those maturing in 60 days or less are
valued at amortized cost.
Option transactions
In order to produce incremental earnings, protect gains, and
facilitate buying and selling of securities for investment
purposes, the Fund may buy or write options traded on any U.S. or
foreign exchange or in the over-the-counter market where the
completion of the obligation is dependent upon the credit standing
of the other party. The Fund also may buy and sell put and call
options and write covered call options on portfolio securities and
may write cash-secured put options. The risk in writing a call
option is that the Fund gives up the opportunity of profit if the
market price of the security increases. The risk in writing a put
option is that the Fund may incur a loss if the market price of the
security decreases and the option is exercised. The risk in buying
an option is that the Fund pays a premium whether or not the option
is exercised. The Fund also has the additional risk of not being
able to enter into a closing transaction if a liquid secondary
market does not exist.
<PAGE>
PAGE 19
Option contracts are valued daily at the closing prices on their
primary exchanges and unrealized appreciation or depreciation is
recorded. The Fund will realize a gain or loss upon expiration or
closing of the option transaction. When options on debt securities
or futures are exercised, the Fund will realize a gain or loss.
When other options are exercised, the proceeds on sales for a
written call option, the purchase cost for a written put option or
the cost of a security for a purchased put or call option is
adjusted by the amount of premium received or paid.
Futures transactions
In order to gain exposure to or protect itself from changes in the
market, the Fund may buy and sell interest rate futures contracts
traded on any U.S. or foreign exchange. The Fund also may buy or
write put and call options on these futures contracts. Risks of
entering into futures contracts and related options include the
possibility that there may be an illiquid market and that a change
in the value of the contract or option may not correlate with
changes in the value of the underlying securities.
Upon entering into a futures contract, the Fund is required to
deposit either cash or securities in an amount (initial margin)
equal to a certain percentage of the contract value. Subsequent
payments (variation margin) are made or received by the Fund each
day. The variation margin payments are equal to the daily changes
in the contract value and are recorded as unrealized gains and
losses. The Fund recognizes a realized gain or loss when the
contract is closed or expires.
<PAGE>
PAGE 20
Foreign currency translations and foreign currency contracts
Securities and other assets and liabilities denominated in foreign
currencies are translated daily into U.S. dollars at the closing
rate of exchange. Foreign currency amounts related to the purchase
or sale of securities and income and expenses are translated at the
exchange rate on the transaction date. The effect of changes in
foreign exchange rates on realized and unrealized security gains or
losses is reflected as a component of such gains or losses. In the
statement of operations, net realized gains or losses from foreign
currency transactions may arise from sales of foreign currency,
closed forward contracts, exchange gains or losses realized between
the trade date and settlement dates on securities transactions, and
other translation gains or losses on dividends, interest income and
foreign withholding taxes.
The Fund may enter into forward foreign currency exchange contracts
for operational purposes and to protect against adverse exchange
rate fluctuation. The net U.S. dollar value of foreign currency
underlying all contractual commitments held by the Fund and the
resulting unrealized appreciation or depreciation are determined
using foreign currency exchange rates from an independent pricing
service. The Fund is subject to the credit risk that the other
party will not complete the obligations of the contract.
<PAGE>
PAGE 21
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.
Net investment income (loss) and net realized gains (losses) may
differ for financial statement and tax purposes primarily because
of the deferral of losses on certain futures contracts, the
recognition of certain foreign currency gains (losses) as ordinary
income (loss) for tax purposes and losses deferred due to "wash
sale" transactions. 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, undistributed net investment
income has been decrease by $629,523 resulting in a net
reclassification adjustment to decrease accumulated net realized
loss by $629,523.
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. Capital gains, when available, are
distributed along with the last income dividend of the calendar
year.
<PAGE>
PAGE 22
Other
Security transactions are accounted for on the date securities are
purchased or sold. Dividend income is recognized on the ex-dividend
date. For U.S. dollar denominated bonds, interest income includes
level-yield amortization of premium and discount. For foreign
bonds, except for original issue discount, the Fund does not
amortize premium and discount. Interest income, including
level-yield amortization of premium and discount, is accrued daily.
__________________________________________________________________
2. Expenses and sales charges
Effective March 20, 1995, the Fund entered into agreements with
American Express Financial Corporation (AEFC) for managing its
portfolio, providing administrative services and serving as
transfer agent as follows: 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 0.59% to 0.465%
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 0.05%
to 0.025% 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 $15.50
o Class B $16.50
o Class Y $15.50
Also effective March 20, 1995, the Fund entered into agreements
with American Express Financial Advisors Inc. for distribution and
shareholder servicing-related services as follows: 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 23
Under a Shareholder Service Agreement, the Fund pays a fee for
service provided to shareholders by financial advisors and other
servicing agents. The fee is calculated at a rate of 0.175% of the
Fund's average daily net assets attributable to Class A and Class B
shares.
AEFC will assume and pay any expenses (except taxes and brokerage
commissions) that exceed the most restrictive applicable state
expense limitation.
Sales charges by American Express Financial Advisors Inc. for
distributing Fund shares were $8,627,557 for Class A and $87,595
for Class B for the period ended May 31, 1996.
During the period ended May 31, 1996, the Fund's custodian and
transfer agency fees were reduced by $77,789 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 $14,979 for the period. The
total liability for the plan is $86,231, which will be paid out at
some future date.
___________________________________________________________________
3. Securities transactions
Cost of purchases and proceeds from sales of securities (other than
short-term obligations) aggregated $1,670,881,472 and
$1,255,528,927, respectively, for the fiscal period ended May 31,
1996. Realized gains and losses are determined on an identified
cost basis.
<PAGE>
PAGE 24
___________________________________________________________________
4. Change of Fund's fiscal year
The By-Laws of the Fund were amended on Jan. 10 - 11, 1996,
changing its fiscal year-end from Aug. 31 to May 31, effective
1996.
___________________________________________________________________
5. Lending of portfolio securities
At May 31, 1996, securities valued at $1,853,700 were on loan to
brokers. For collateral, the Fund received $1,000,000 in cash and
U.S. government securities valued at $1,006,887. Income from
securities lending amounted to $126,108 for the fiscal period ended
May 31, 1996. The risks to the Fund of securities lending are that
the borrower may not provide additional collateral when required or
return the securities when due.
6. Capital share transactions
Transactions in shares of capital stock for the periods indicated
are as follows:
<TABLE>
<CAPTION>
Nine months ended May 31, 1996
Class A Class B Class Y
<S> <C> <C> <C>
_____________________________________________________________________
Sold 96,295,627 49,606,436 67,241
Issued for reinvested 20,843,375 1,956,298 6,442
distributions
Redeemed (61,588,802) (7,759,632) (453,087)
_____________________________________________________________________
Net increase (decrease) 55,550,200 43,803,102 (379,404)
______________________________________________________________________
Year ended Aug. 31, 1995
Class A Class B* Class Y*
_____________________________________________________________________
Sold 97,298,897 18,688,995 565,786
Issued for reinvested 26,443,241 236,714 14,823
distributions
Redeemed (89,533,246) (580,092) (199,123)
_____________________________________________________________________
Net increase 34,208,892 18,345,617 381,486
_____________________________________________________________________
*Inception date was March 20, 1995.
</TABLE>
<PAGE>
PAGE 25
7. Illiquid securities
At May 31, 1996, investments in securities included issues that are
illiquid. The Fund currently limits investments in illiquid
securities to 10% of the net assets, at market value, at the time
of purchase. The aggregate value of such securities at May 31, 1996
was $51,322,481 representing 2.1% of net assets. Pursuant to
guidelines adopted by the Fund's board, certain unregistered
securities are determined to be liquid and are not included within
the 10% limitation specified above.
___________________________________________________________________
8. Capital loss carryover
For federal income tax purposes, the Fund had a capital loss
carryover of $257,355,361 at May 31, 1996, that will expire in 1999
through 2004 if not offset by subsequent capital gains. It is
unlikely the board will authorize a distribution of any net
realized capital gains until the available capital loss carryover
has been offset or expires.
___________________________________________________________________
9. Subsequent event
The Fund invested its assets in a master portfolio, called the High
Yield Portfolio, on June 10, 1996. The portfolio is a separate
investment company, but has the same goals and investment policies
as the Fund. Additional information on investment policies may be
found in the prospectus and Statement of Additional Information
(SAI).
___________________________________________________________________
10. Financial highlights
"Financial highlights" showing per share data and selected
information is presented on pages 7 and 8 of the prospectus.
<PAGE>
PAGE 26
<TABLE>
<CAPTION>
Investments in securities (Percentages represent value of
IDS Extra Income Fund, Inc. investments compared to net assets)
May 31, 1996
Investments in securities of unaffiliated issuers
_____________________________________________________________________________________________________________________________
Bonds (88.0%)
_____________________________________________________________________________________________________________________________
Issuer Coupon Maturity Principal Value(a)
rate year amount
_____________________________________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C>
Mortgage-backed securities (1.0%)
Federal Home Loan Mtge Corp 6.875% 2017 $ 6,696 (b) $ 6,822
Inverse Floater 7.26 2024 9,865,946 (l) 7,374,696
8.72 2023 4,407,829 (l) 3,374,855
Merrill Lynch Mtge Investors 8.29 2021 9,717,850 (c) 8,598,779
Resolution Trust 8.00 2026 6,438,924 5,070,653
______________
Total 24,425,805
_____________________________________________________________________________________________________________________________
Financial (3.1%)
Banks and savings & loans (0.4%)
First Nationwide Bank
Sr Nts 12.50 2003 10,250,000 (c) 10,660,000
_____________________________________________________________________________________________________________________________
Financial services (1.0%)
Homeside
Sr Nts 11.25 2003 6,375,000 (c) 6,534,375
Malan Realty Investors REIT
Cv Sub Deb 9.50 2004 2,750,000 2,530,000
Olympic Financial
Sr Nts 13.00 2000 14,500,000 15,895,625
______________
Total 24,960,000
_____________________________________________________________________________________________________________________________
Insurance (1.7%)
Americo Life
Sr Sub Nts 9.25 2005 15,000,000 14,587,500
Life Partners
Sr Sub Nts 12.75 2002 10,000,000 10,925,000
Reliance Group Holdings
Sr Sub Deb 9.75 2003 15,000,000 15,300,000
_____________
Total 40,812,500
_____________________________________________________________________________________________________________________________
Industrial (71.2%)
Aerospace & defense (1.9%)
Alliant Techsystems
Sr Sub Nts 11.75 2003 9,250,000 (c) 10,059,375
Sequa 9.625 1999 3,000,000 3,067,500
Sr Sub Nts 9.375 2003 20,750,000 20,698,125
TransDigm
Sr Secured Nts 13.00 2000 14,030,000 (e) 12,837,450
______________
Total 46,662,450
_____________________________________________________________________________________________________________________________
Automotive & related (0.7%)
Harvard Inds
Sr Nts 12.00 2004 7,000,000 6,982,500
Penda
Sr Nts 10.75 2004 12,000,000 10,890,000
______________
Total 17,872,500
_____________________________________________________________________________________________________________________________
Building materials & construction (1.7%)
American Standard
Zero Coupon Sr Sub Disc Deb 10.46 1998 15,000,000 (g) 12,900,000
Peters (JM)
Sr Nts 12.75 2002 10,500,000 9,948,750
<PAGE>
PAGE 27
Schuller Intl Group
Sr Nts 10.875 2004 12,000,000 13,020,000
Southdown
Sr Sub Nts 10.00 2006 4,700,000 (c) 4,741,125
______________
Total 40,609,875
_____________________________________________________________________________________________________________________________
Communications equipment & services (8.1%)
American Communication Services
Zero Coupon 14.64 2000 10,000,000 (c,g) 5,625,000
Celcaribe
Zero Coupon 10.42 1998 3,800,000 (c,g) 3,914,000
Zero Coupon 13.44 1998 7,350,000 (g) 5,806,500
Cencall Communications
Zero Coupon Sr Nts 10.09 1999 8,000,000 (g) 4,980,000
Comcast Cellular
Zero Coupon Series A 11.73 2000 33,000,000 (f) 23,182,500
Zero Coupon Series B 7.08 2000 10,000,000 (f) 7,025,000
Geotek Communications
Cv 12.00 2001 5,000,000 (e) 7,575,000
Zero Coupon 17.41 2000 26,250,000 (g) 16,143,750
GST Telecommunications
Zero Coupon 12.01 2000 20,880,000 (c,g) 13,154,400
Horizon Cellular
Zero Coupon 10.28 1997 16,000,000 (g) 14,320,000
Intermedia Communications of Florida
Sr Nts 13.50 2005 22,750,000 (c) 25,536,875
Nextlink Communications
Sr Nts 12.50 2006 15,000,000 (c) 15,225,000
Pagemart Nationwide
Zero Coupon Sr Nts 15.80 2000 23,000,000 (c,g) 15,180,000
Peoples Telephone
Sr Nts 12.25 2002 7,000,000 6,720,000
Pronet
Sr Sub Nts 10.875 2006 6,100,000 6,100,000
Western Wireless
Sr Sub Nts 10.50 2006 5,000,000 5,037,500
Winstar Communications
Zero Coupon 14.50 2000 30,000,000 (c,g) 18,800,000
______________
Total 194,325,525
_____________________________________________________________________________________________________________________________
Computers & office equipment (1.9%)
Anacomp -- 1997 727 (e) 727
Dictaphone
Sr Sub Nts 11.75 2005 14,500,000 14,028,750
Softkey
Cv Sr Nts 5.50 2000 2,500,000 (c) 2,168,750
Unisys
Sr Nts 10.625 1999 3,500,000 3,561,250
Sr Nts 12.00 2003 8,000,000 (c) 8,260,000
Credit Sensitive Nts 15.00 1997 15,600,000 (j) 16,653,000
______________
Total 44,672,477
_____________________________________________________________________________________________________________________________
Energy (1.6%)
Chesapeake Energy 12.00 2001 7,000,000 7,560,000
Harcor Energy
Sr Nts 14.875 2002 5,000,000 (c) 5,300,000
Petroleum Heat & Power
Sub Deb 9.375 2006 10,000,000 9,550,000
<PAGE>
PAGE 28
TransTexas Gas
Sr Secured Nts 11.50 2002 10,000,000 9,750,000
United Meridian
Sr Sub Nts 10.375 2005 5,800,000 6,003,000
______________
Total 38,163,000
_____________________________________________________________________________________________________________________________
Food (1.1%)
Chiquita Brands Intl
Sr Nts 9.625 2004 8,500,000 8,415,000
Specialty Foods 11.25 2003 19,000,000 (c) 15,200,000
Twin Laboratories
Sr Sub Nts 10.25 2006 4,000,000 (c) 4,060,000
______________
Total 27,675,000
_____________________________________________________________________________________________________________________________
Health care (2.4%)
Dade Intl
Sr Sub Nts 11.125 2006 5,850,000 (c) 6,054,750
Magellan Health Services
Sr Sub Nts Cl A 11.25 2004 12,500,000 (c) 13,750,000
Merit Behavioral 11.50 2005 5,500,000 (c) 5,788,750
Tenet Healthcare
Sr Sub Nts 10.125 2005 20,000,000 21,350,000
Total Renal Care
Zero Coupon 15.46 1997 10,388,000 (g) 10,232,180
______________
Total 57,175,680
_____________________________________________________________________________________________________________________________
Industrial equipment & services (2.3%)
ACF Inds 11.60 2000 3,020,000 3,027,550
Borg-Warner Security
Sr Sub Nts 9.125 2003 10,000,000 9,337,500
Envirodyne Inds
Sr Nts 12.00 2000 7,000,000 7,210,000
Interlake
Sr Sub Deb 12.125 2002 11,000,000 10,945,000
Specialty Equipment
Sr Sub Nts 11.375 2003 23,300,000 24,348,500
______________
Total 54,868,550
_____________________________________________________________________________________________________________________________
Leisure time & entertainment (12.8%)
Alliance Entertainment
Sr Sub Nts 11.25 2005 27,500,000 (c) 26,193,750
Bally's Health & Tennis
Sr Sub Nts 13.00 2003 5,000,000 4,350,000
Bally's Park Place Funding
1st Mtge Nts 9.25 2004 11,000,000 11,110,000
Cinemark (USA)
Sr Sub Nts 12.00 2002 7,500,000 8,156,250
Coast Hotels & Casino
1st Mtge 13.00 2002 19,800,000 (c) 21,111,750
Cobblestone Golf Group
Sr Nts 11.50 2003 4,550,000 (c) 4,618,250
Cobblestone Holdings
Zero Coupon Units 13.50 2004 10,250,000 (c,f) 3,766,875
Grand Casinos
1st Mtge 10.125 2003 15,000,000 15,450,000
Hollywood Casino
Sr Nts 12.75 2003 12,800,000 12,608,000
<PAGE>
PAGE 29
IHF Holdings
Zero Coupon Sr Disc Nts 13.44 1999 15,000,000 (g) 10,425,000
Lady Luck Gaming
1st Mtge 11.875 2001 5,000,000 4,968,750
Marvel Holdings
Zero Coupon 13.57 1998 15,150,000 (f) 12,006,375
Marvel Parent Holdings
Zero Coupon Sr Nts 14.82 1998 7,100,000 (f) 5,626,750
MGM Grand Hotel Finance 11.75 1999 10,000,000 10,612,500
12.00 2002 14,000,000 15,400,000
Mohegan Tribal Gaming
Sr Nts 13.50 2002 13,400,000 (c) 16,750,000
Plitt Theatres 10.875 2004 27,850,000 28,337,375
Resorts Intl
Mtge Nts 11.00 2003 8,000,000 8,320,000
Showboat Marina
1st Mtge 13.50 2003 5,000,000 (c) 5,400,000
Trump Atlantic City Funding
1st Mtge 11.25 2006 37,225,000 37,829,906
Trump Castle Funding
Mtge Nts 11.75 2003 19,711,250 19,809,806
Trump Holdings
Sr Nts 15.50 2005 10,000,000 11,650,000
United Artists 11.50 2002 6,000,000 (c) 6,345,000
United Artists Theatres
Pass Thru Certs 9.30 2015 10,000,000 (c) 9,500,000
______________
Total 310,346,337
_____________________________________________________________________________________________________________________________
Media (11.2%)
Ackerley Communications
Sr Secured Nts 10.75 2003 13,500,000 (c) 14,107,500
Adelphia Communications
Pay-in-kind 9.50 2004 33,093,415 (n) 29,246,306
Sr Deb 11.875 2004 5,000,000 5,050,000
American Telecasting
Zero Coupon 16.69 1999 9,606,320 (g) 6,916,550
Zero Coupon Sr Disc Nts 12.14 2000 10,000,000 (e,g) 6,325,000
Bell & Howell
Zero Coupon 11.08 2000 21,750,000 (g) 14,898,750
Big Flower Press
Sr Sub Nts 10.75 2003 4,673,000 (c) 4,708,048
CAI Wireless Systems
Sr Nts 12.25 2002 11,250,000 11,896,875
Continental Cablevision
Sr Sub Deb 11.00 2007 6,800,000 7,616,000
CS Wireless Systems
Zero Coupon 11.375 2001 3,250,000 (c,g) 6,857,500
Echostar Satellite Broadcasting
Zero Coupon 13.13 2000 49,700,000 (c,g) 32,988,375
Grupo Televisa
Sr Nts 11.875 2006 4,500,000 (c) 4,601,250
Zero Coupon 13.25 2001 18,000,000 (c,g) 9,720,000
Heritage Media Services
Sr Sub Nts 8.75 2006 5,000,000 4,762,500
Outdoor Systems
Sr Nts 10.75 2003 11,000,000 11,330,000
Paramount Communications
Sub Deb 7.00 2003 15,000,000 13,790,850
<PAGE>
PAGE 30
Paxson Communications
Sr Sub Nts 11.625 2002 12,000,000 (c) 12,720,000
Pegasus Media & Communications
Cl B 12.50 2005 7,500,000 (c) 8,025,000
People's Choice TV
Zero Coupon 13.12 2000 23,500,000 (g) 14,276,250
Scandinavian Broadcasting
Cv Sub Deb 7.25 2005 4,000,000 4,340,000
United Intl Holdings
Zero Coupon Disc Nts 11.99 1999 12,500,000 (f) 8,156,250
Universal Outdoor
Sr Nts 11.00 2003 13,000,000 13,325,000
Zero Coupon 12.34 1999 12,934,000 (g) 9,538,825
Viacom
Sub Deb 8.00 2006 8,000,000 7,440,000
Wireless One
Units 13.00 2003 7,750,000 8,253,750
______________
Total 270,890,579
_____________________________________________________________________________________________________________________________
Metals (2.5%)
Bar Technologies
Units 13.50 2001 10,000,000 (c) 10,050,000
Carbide/Graphite Group
Sr Nts 11.50 2003 9,091,000 9,886,463
EnviroSource
Sr Nts 9.75 2003 18,750,000 17,109,375
NS Group
Units 13.50 2003 14,000,000 (m) 13,440,000
Republic Engineered Steel
1st Mtge 9.875 2001 10,000,000 9,150,000
_____________
Total 59,635,838
_____________________________________________________________________________________________________________________________
Multi-industry conglomerates (3.9%)
Communications & Power Inds
Sr Sub Nts 12.00 2005 10,000,000 (c) 10,575,000
G-I Holdings
Sr Nts 10.00 2006 22,214,220 22,408,594
Zero Coupon Sr Nts 9.55 1998 29,484,000 (f) 23,808,330
Saul (BF) REIT
Sr Nts 11.625 2002 9,300,000 (c) 9,579,000
Talley Inds
Zero Coupon Sr Disc Deb 11.80 1998 24,000,000 (g) 18,690,000
Talley Mfg & Technology
Sr Nts 10.75 2003 8,500,000 8,606,250
_____________
Total 93,667,174
_____________________________________________________________________________________________________________________________
Paper & packaging (4.9%)
Florida Coast Paper 12.75 2003 10,000,000 (c) 10,275,000
Gaylord Container
Sr Sub Disc Deb 12.75 2005 28,000,000 29,540,000
Plastic Container
Sr Secured Nts 10.75 2001 14,200,000 14,448,500
Silgan
Sr Sub Nts 11.75 2002 7,500,000 7,950,000
Zero Coupon 13.25 1996 20,000,000 (g) 19,850,000
<PAGE>
PAGE 31
Stone Container
Sr Nts 12.625 1998 4,500,000 4,786,875
Sweetheart Cup
Sr Sub Nts 10.50 2003 13,500,000 13,500,000
Warren (SD)
Sr Nts 12.00 2004 16,500,000 (c) 17,325,000
______________
Total 117,675,375
_____________________________________________________________________________________________________________________________
Restaurants & lodging (1.1%)
Flagstar
Sr Nts 10.875 2002 10,000,000 8,925,000
Sr Sub Deb 11.25 2004 10,000,000 7,200,000
Hammons (John Q) Hotels
1st Mtge 8.875 2004 12,000,000 11,460,000
______________
Total 27,585,000
_____________________________________________________________________________________________________________________________
Retail (7.9%)
Apparel Retail
Zero Coupon 12.21 1998 14,500,000 (c,g) 11,455,000
Dairy Mart Convenience Stores
Sr Sub Nts 10.25 2004 20,700,000 19,302,750
Di Giorgio
Sr Nts 12.00 2003 16,000,000 15,080,000
Dr Structured Finance
Pass Thru Certs 8.55 2019 10,000,000 8,400,000
Hill Stores
Sr Nts 12.50 2003 5,250,000 (c) 5,368,125
Jitney-Jungle Stores
Sr Nts 12.00 2006 15,000,000 15,525,000
Kash n' Karry Food Stores
Pay-in-kind 11.50 2003 17,501,290 (n) 17,588,796
Musicland Group
Sr Sub Nts 9.00 2003 20,375,000 13,855,000
Parisian
Sr Sub Nts 9.875 2003 2,150,000 2,053,250
Pathmark Stores
Zero Coupon Jr Sub Nts 12.83 1999 13,500,000 (g) 8,572,500
Penn Traffic
Sr Sub Nts 9.625 2005 26,000,000 21,970,000
Pueblo Xtra Intl
Sr Nts 9.50 2003 19,140,000 17,273,850
Ralphs Grocery
Sr Nts 10.45 2004 10,000,000 9,675,000
Specialty Retailers 10.00 2000 2,000,000 1,972,500
Sr Sub Nts 11.00 2003 6,750,000 6,716,250
Stater Brothers Holdings
Sr Nt 11.00 2001 14,500,000 15,152,500
______________
Total 189,960,521
_____________________________________________________________________________________________________________________________
Soaps & cosmetics (1.3%)
Coty
Sr Sub Nts 10.25 2005 7,000,000 7,332,500
Revlon Worldwide
Zero Coupon Sr Disc Nts 11.50 1998 30,000,000 (c,f) 24,712,500
______________
Total 32,045,000
<PAGE>
PAGE 32
_____________________________________________________________________________________________________________________________
Textiles & apparel (1.3%)
CMI Inds
Sr Sub Nts 9.50 2003 5,000,000 4,262,500
Dominion Textiles
Sr Nts 8.875 2003 5,000,000 4,912,500
Hat Brand Holdings
Zero Coupon -- 2002 5,000,000 (d,e,f) 3,500,000
Hosiery Corp of America 13.75 2002 9,993,175 10,692,697
US Leather
Sr Nts 10.25 2003 10,000,000 8,400,000
___________
Total 31,767,697
_____________________________________________________________________________________________________________________________
Miscellaneous (2.6%)
Adams Outdoor Advertising 10.75 2006 10,700,000 (c) 10,887,250
Benedek Communications
Zero Coupon 13.25 2001 9,500,000 (c,g) 4,987,500
Darling-Delaware
Sr Sub Nts 11.00 2000 9,932,000 9,857,510
ECM Funding LP 11.92 2002 2,735,472 (e,j) 3,009,019
KinderCare Learning Centers
Sr Nts 10.375 2001 6,000,000 6,232,500
Norcal Waste Systems
Sr Nts 12.50 2005 20,300,000 (c,j) 21,441,875
SC Intl
Sr Sub Nts 13.00 2005 6,000,000 6,465,000
______________
Total 62,880,654
_____________________________________________________________________________________________________________________________
Transportation (0.8%)
Braniff
Sr Reset Nts -- 1999 5,000,000 (d,e,h,j) --
GPA Delaware 8.75 1998 10,000,000 (d) 10,047,600
Trans Ocean Container 12.25 2004 8,750,000 9,034,375
______________
Total 19,081,975
_____________________________________________________________________________________________________________________________
Utilities (3.1%)
Electric (2.0%)
California Energy
Ltd Resource Sr Secured Nts 9.875 2003 7,000,000 7,140,000
First Palo Verde Funding 10.15 2016 6,150,000 6,426,750
Midland Funding II 11.75 2005 5,000,000 5,281,250
13.25 2006 12,500,000 13,812,500
Niagara Mohawk Power
1st Mtge 9.75 2005 9,000,000 8,868,510
Texas-New Mexico Power
Secured Deb 10.75 2003 7,000,000 7,385,000
______________
Total 48,914,010
_____________________________________________________________________________________________________________________________
Telephone (1.1%)
Millicom Intl Cellular
Zero Coupon 13.50 2000 28,125,000 (c,g) 15,117,187
Mobil Telecommunications Technology
Sr Nts 13.50 2002 10,000,000 10,475,000
______________
Total 25,592,187
<PAGE>
PAGE 33
_____________________________________________________________________________________________________________________________
Foreign (8.8%)
Asian Pulp & Paper
(U.S. Dollar) 11.75 2005 6,600,000 6,864,000
Banco Nacional de Comercio Exterior
(U.S. Dollar) 7.25 2004 14,300,000 11,583,000
Cable Systems
(U.S. Dollar) 10.75 1999 2,716,120 (e) 2,688,959
Caguas Humacas
(U.S. Dollar) 10.50 1998 10,528,492 (e) 10,265,280
Clearnet Communications
(U.S. Dollar) Zero Coupon 11.56 2000 10,800,000 (g) 6,750,000
Dom's Telecable
(U.S. Dollar) 10.50 1996 1,617,555 (e) 1,601,379
Doman Inds
(U.S. Dollar) 8.75 2004 10,500,000 9,660,000
Fresh Delmonte
(U.S. Dollar) 10.00 2003 22,000,000 20,790,000
Gulf Canada Resources
(U.S. Dollar) 9.25 2004 13,500,000 13,500,000
Imexsa Export Trust
(U.S. Dollar) 10.125 2003 10,000,000 9,987,500
Intl Cabletel
(U.S. Dollar) Zero Coupon 15.25 2001 31,000,000 (c,g) 18,367,500
Repap New Brunswick
(U.S. Dollar) Sr Nts 10.625 2005 15,000,000 13,987,500
Republic of Brazil
(U.S. Dollar) 6.875 2012 6,500,000 (j) 4,257,500
Rogers Cablesystems
(U.S. Dollar) Sr Secured Nts 9.625 2002 5,000,000 4,987,500
Rogers Cantel
(U.S. Dollar) Sr Sub Nts 11.125 2002 10,000,000 10,650,000
Tarkett Intl
(U.S. Dollar) 9.00 2002 10,000,000 (c) 10,387,500
Telewest
(U.S. Dollar) Zero Coupon 11.00 2000 20,000,000 (g) 12,000,000
Tjiwi Kimia
(U.S. Dollar) 13.25 2001 10,000,000 11,125,000
United Mexican States
(U.S. Dollar) 11.50 2026 6,669,000 6,167,758
Venezuela
(U.S. Dollar) Front Loaded Interest Reduction 6.81 2007 16,000,000 11,330,000
Viridian
(U.S. Dollar) 9.75 2003 3,500,000 3,657,500
(U.S. Dollar) 10.50 2014 10,000,000 10,937,500
______________
Total 211,545,376
_____________________________________________________________________________________________________________________________
Total bonds
(Cost: $2,047,998,654) $2,124,471,085
_____________________________________________________________________________________________________________________________
Stocks and other (8.5%)
_____________________________________________________________________________________________________________________________
Issuer Shares Value(a)
_____________________________________________________________________________________________________________________________
American Communication Services
Warrants 15,200 (c) 1,672,000
American Telecasting
Warrants 85,225 383,513
<PAGE>
PAGE 34
Benedek Broadcasting
Units Preferred 7,000 7,000,000
Berg Electronics
Common 90,121 (c,d) 2,331,881
Cablevision Systems
11.125% Pay-in-kind 289,051 (c,n) 28,037,947
11.75% Preferred Cv 106,134 (c) 10,666,467
Calenergy Capital Trust
6.25% Cv Preferred 60,000 (c) 3,330,000
Celcaribe
Common 1,195,110 (c,d) 1,876,323
Cherokee
Warrants 44,107 3,867
Chevy Chase Savings
13% Preferred 180,000 5,445,000
Communications & Power Inds
14% Preferred 51,595 (c,d) 5,231,733
Warrants 3,500 (c) 366,625
Crown Packaging
Warrants 10,000 70,000
Dairy Mart Convenience Stores
Warrants 311,333 414,073
Dr. Pepper Bottling Holdings
Common 100,000 (d) 550,000
Earthwatch
12% Preferred 700,000 (c) 7,000,000
Echostar Satellite Broadcasting
Common 100,000 (d) 3,450,000
El Paso Electric
11.40% Pay-in-kind 30,000 (c,n) 3,030,000
First Nationwide Bank
11.50% Preferred 166,500 18,315,000
Foodmaker
Warrants 7,000 154,000
Gaylord Container
Common 437,500 (d) 3,910,156
Warrants 562,500 4,992,187
Geotek Communications
Warrants 872,500 5,671,250
Harcor Energy
Warrants 110,000 (c) 297,000
Harvard Inds
Pay-in-Kind 14.25% Preferred 438,224 (n) 11,448,602
Hat Brand Holdings
Warrants 90,345 (e) --
Hemmeter Enterprises
Warrants 36,000 (c,e) 58,500
Hosiery Corp of America
Warrants 10,000 (c) 50,000
Houlihan's Restaurant
Warrants 5,886 30,166
IFINT Diversified Holdings
Common 42,418 (e) 1,018,032
<PAGE>
PAGE 35
Intermedia Communications
Warrants 22,750 (d) 1,023,750
K-III Communications
10% Preferred 75,000 (c) 6,975,000
Pay-in-Kind Sr Exchangeable 115,695 (n) 11,685,216
Kelley Oil & Gas
$2.625 Cv Preferred 100,000 2,050,000
Lady Luck Gaming
Common 200,000 (d) 653,125
MFS Communications
Common 2,264 (d) 78,674
Natl Health Investors
8.50% Cv Preferred 60,000 1,833,750
Nextel Communications
Warrants 18,902 189
Pagemart
Common 50,750 (c,d) 475,781
Panamsat
Common 150,000 (d) 4,237,500
Pay-in-kind 12.75% Cv Preferred 11,312 (n) 12,618,536
Pantry Pride
14.875% Preferred 100,000 10,000,000
Pegasus Media Communications
Common 750 (d) 450,000
Pullman
Common 273,141 (d) 2,321,699
Reliance Group Holdings
Warrants 277,791 581,625
Riggs Natl
Series B Preferred 72,825 2,039,100
Southdown
Warrants 50,000 (e) 418,750
Specialty Foods Acquisition
Common 300,000 (d) 150,000
Station Casinos
7% Cv Preferred 50,000 2,968,750
Supermarket General
Pay-in-kind Cv 275,000 (n) 6,875,000
Time Warner
Pay-in-kind Preferred 8,750 (c,n) 8,706,250
TransDigm
Warrants 11,195 (e) 1,533,671
Triangle Wire & Cable
Common 548,889 (d,e) 548,889
Webcraft Technology
Common 32,502 (d,e) 325
Wireless One
Common 25,000 (d) 462,500
Warrants 23,250 162,750
_____________________________________________________________________________________________________________________________
Total stocks and other
(Cost: $200,431,753) $ 205,655,152
<PAGE>
PAGE 36
_____________________________________________________________________________________________________________________________
Short-term securities (2.4%)
_____________________________________________________________________________________________________________________________
Issuer Annualized Amount Value(a)
yield on payable at
date of maturity
purchase
_____________________________________________________________________________________________________________________________
U.S. government agency (0.3%)
Federal Home Loan Mtge Corp Disc Nts
06-20-96 5.22% $4,000,000 $ 3,989,022
06-20-96 5.24 2,000,000 1,994,490
______________
Total 5,983,512
_____________________________________________________________________________________________________________________________
Commercial paper (2.1%)
Albertson's
06-27-96 5.29 6,000,000 5,977,163
BellSouth Telephone
06-05-96 5.31 4,500,000 4,497,360
Commerzbank US Finance
06-17-96 5.30 2,900,000 2,893,195
Dean Witter, Discover & Co
06-24-96 5.30 2,500,000 2,491,567
06-25-96 5.30 5,600,000 5,580,288
Fleet Funding
07-01-96 5.31 3,800,000 (i) 3,783,280
General Electric Capital
07-08-96 5.30 3,100,000 3,083,209
Met Life
06-03-96 5.30 7,300,000 7,297,859
Mobil Australia Finance
06-12-96 5.32 3,600,000 (i) 3,594,170
Reed Elsevier
06-21-96 5.30 4,800,000 (i) 4,785,920
Sandoz
07-11-96 5.30 2,800,000 2,783,604
USL Capital
06-07-96 5.33 4,500,000 4,496,025
______________
Total 51,263,640
_____________________________________________________________________________________________________________________________
Total short-term securities
(Cost: $57,247,152) $ 57,247,152
_____________________________________________________________________________________________________________________________
Total investments in securities of unaffiliated issuers
(Cost: $2,305,677,559) $2,387,373,389
_____________________________________________________________________________________________________________________________
Investments in securities of affiliated issuers (k)
_____________________________________________________________________________________________________________________________
Common stocks (1.1%)
_____________________________________________________________________________________________________________________________
Issuer Shares Value(a)
_____________________________________________________________________________________________________________________________
Envirodyne Inds 727,116 (d) $ 3,453,801
Kash n' Karry Food Stores 822,430 (d) 23,233,647
_____________________________________________________________________________________________________________________________
Total investments in securities of affiliated issuers
(Cost: $30,962,600) $ 26,687,448
_____________________________________________________________________________________________________________________________
Total investments in securities
(Cost: $2,336,640,159)(o) $2,414,060,837
<PAGE>
PAGE 37
_____________________________________________________________________________________________________________________________
Notes to investments in securities
_____________________________________________________________________________________________________________________________
(a) Securities are valued by procedures described in Note 1 to the financial statements.
(b) Adjustable rate mortgage; interest rate varies to reflect current market conditions; rate shown is the effective rate
on May 31, 1996.
(c) Represents a security sold under Rule 144A, which is exempt from registration under the Securities Act of 1933, as
amended. This security has been determined to be liquid under guidelines established by the board.
(d) Presently non-income producing. For long-term debt securities, item identified is in default as to payment of
interest and/or principal.
(e) Identifies issues considered to be illiquid (see Note 7 to the financial statements). Information concerning such
security holdings at May 31, 1996 is as follows:
Security Acquisition Cost
dates
_____________________________________________________________________________________________
American Telecasting
Zero Coupon Sr Disc Nts 01-25-96 thru 03-08-96 $ 6,488,125
Anacomp
1997 03-21-96 727
Braniff
Sr Reset Nts 04-03-89 4,550,000
Cable Systems
(U.S. Dollar) 02-09-96 2,716,120
Caguas Humacas
(U.S. Dollar) 02-05-96 10,141,781
Dom's Telecable
(U.S. Dollar) 02-05-96 1,558,142
ECM Funding LP 04-03-89 3,030,092
Geotek Communications
Cv 03-04-96 5,000,000
Hat Brand Holdings
Warrants 09-03-92 --
Zero Coupon 2002 09-03-92 5,000,000
Hemmeter Enterprises
Warrants 06-21-95 120,000
IFINT Diversified Holdings
Common 08-18-94 35,493
Southdown
Warrants 10-30-91 150,000
TransDigm
Sr Secured Nts 09-29-93 thru 04-24-96 12,722,817
Warrants 09-29-93 thru 04-24-96 1,027,809
Triangle Wire & Cable
Common 01-13-92 13,000,117
Webcraft Technology
Common 12-22-86 16,874
<PAGE>
PAGE 38
IDS Extra Income Fund, Inc.
May 31, 1996
Notes to investments in securities
(f) For zero coupon bonds, the interest rate disclosed represents the annualized effective yield on the date of acquisition.
(g) For those zero coupon bonds that become coupon paying at a future date, the interest rate disclosed represents the
annualized effective yield from the date of acquisition to interest reset date disclosed.
(h) Presently negligible market value.
(i) 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.
(j) Interest rate varies either based on a predetermined schedule or to reflect current market conditions; rate shown is the
effective rate on May 31, 1996.
(k) Investments representing 5% or more of the outstanding voting securities of the issuer.
(l) Inverse floaters represent securities that pay interest at a rate that increases (decreases) in the same magnitude as, or
in a multiple of, a decline (increase) in the LIBOR (London InterBank Offering Rate) Index. Interest rate disclosed is the
rate in effect on May 31, 1996. Inverse floaters in the aggregate represent 0.4% of the Fund's net assets as of May 31,
1996.
(m) Security is partially or fully on loan. See note 5 to the financial statements.
(n) Pay-in-kind securities are securities in which the issuer has the option to make interest payments in cash or in additional
securities. These securities issued as interest usually have the same terms, including maturity date, as the pay-in-kind
securities.
(o) At May 31, 1996, the cost of securities for federal income tax purposes was $2,332,432,310 and the
aggregate gross unrealized appreciation and depreciation based on that cost was:
Unrealized appreciation $130,421,535
Unrealized depreciation (48,793,608)
___________________________________________________________________________________________
Net unrealized appreciation $81,628,527
___________________________________________________________________________________________
</TABLE>
<PAGE>
PAGE 39
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
IDS Selective Fund
Invests in high-quality corporate bonds and other highly rated debt
instruments including government securities and short-term<PAGE>
PAGE 40
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
<PAGE>
PAGE 41
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
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 Retirement Fund
<PAGE>
PAGE 42
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.
(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 43
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 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 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 Global Growth Fund<PAGE>
PAGE 44
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 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
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
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
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 45
Federal income tax information
IDS Extra Income Fund, Inc.
_____________________________________________________
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 next January. Shareholders should consult a tax
advisor on how to report distributions for state and
local purposes.
IDS Extra Income Fund, Inc.
Fiscal period ended May 31, 1996
Class A
Income distributions
taxable as dividend income, 4.98% qualifying for
deduction by corporations.
Payable date Per share
Sept. 27, 1995 $0.03272
Oct. 27, 1995 0.03253
Nov. 28, 1995 0.03090
Dec. 28, 1995 0.03067
Jan. 26, 1996 0.02966
Feb. 28, 1996 0.03129
March 28, 1996 0.03110
April 29, 1996 0.03110
May 29, 1996 0.03735
Total distributions $0.28732
<PAGE>
PAGE 46
Class B
Income distributions
taxable as dividend income, 4.98% qualifying for
deduction by corporations.
Payable date Per share
Sept. 27, 1995 $0.02998
Oct. 27, 1995 0.02995
Nov. 28, 1995 0.02815
Dec. 28, 1995 0.02808
Jan. 26, 1996 0.02713
Feb. 28, 1996 0.02837
March 28, 1996 0.02851
April 29, 1996 0.02843
May 29, 1996 0.03450
Total distributions $0.26310
Class Y
Income distributions
taxable as dividend income, 4.98% qualifying for
deduction by corporations.
Payable date Per share
Sept. 27, 1995 $0.03335
Oct. 27, 1995 0.03312
Nov. 28, 1995 0.03153
Dec. 28, 1995 0.02963
Jan. 26, 1996 0.03024
Feb. 28, 1996 0.03197
March 28, 1996 0.03166
April 29, 1996 0.03171
May 29, 1996 0.03799
Total distributions $0.29120
<PAGE>
PAGE 47
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 Extra Income Fund
IDS Tower 10
Minneapolis, MN 55440-0010
<PAGE>
PAGE 48
STATEMENT OF DIFFERENCES
Difference Description
1) The layout is different 1) Some of the layout in the
throughout the annual report. annual report to
shareholders is in two
columns.
2) Headings. 2) The headings in the
annual report and
prospectus are placed
in a blue strip at the
top of the page.
3) There are pictures, icons 3) Each picture, icon and
and graphs throughout the graph is described in
annual report and prospectus. parentheses.
4) Footnotes for charts and 4) The footnotes for each
graphs are described at chart or graph are typed
the left margin. below the description of
the chart or graph.
