PAGE
IDS
Federal
Income
Fund
1994 semiannual report
The goals of IDS
Federal Income
Fund, Inc. are
to provide
shareholders with
a high level of
current income and
safety of principal
consistent with
investment in
U.S. government
and government
agency securities.
Distributed by
American Express
Financial Advisors Inc.
<PAGE>
PAGE
(icon of) federal building
A comfortable
compromise
Balancing risk and reward is something all investors must consider. In
the fixed-income area, intermediate-term securities issued by the
federal government and its agencies offer a good middle ground. These
securities, which form the core of Federal Income Fund, normally
provide greater investment stability than long-term bonds, while still
offering a yield higher than that of guaranteed investments such as
bank CDs. For a conservative investor, that can be a rewarding
combination.
Contents
From the president 3
From the portfolio manager 3
Financial statements 5
Notes to financial statements 8
Investments in securities 17
Directors and officers 20
IDS mutual funds 21
<PAGE>
PAGE
To our shareholders
(Picture of William R. Pearce)
William R. Pearce
President of the fund
(Picture of William R. Pearce)
James W. Snyder
Portfolio manager
From the president
All of the funds in the IDS MUTUAL FUND GROUP held shareholder
meetings on Nov. 9, 1994. The meetings, which were well-attended,
approved all of the proposals advanced by management. Among the
proposals were:
The election of directors and the selection of KPMG Peat Marwick LLP
as independent auditors for each of the funds in the group.
A new investment management agreement that will become effective for
each fund when it begins offering multiple classes of shares, now
planned to occur in March 1995.
A change in investment policy that will permit the funds to adopt a
master/feeder structure if and when the board of each fund determines
that it is in the best interest of the shareholders.
And, finally, changes to the funds' -fundamental investment policies-
that, among other things, allow the board to
modify them should it deem appropriate.
No other business was presented at the meeting, which was concluded by
a report to shareholders from the American Express Financial
Corporation Investment Department.
Thanks to all of you for your effort in reviewing the proxy material
and voting your proxies.
William R. Pearce
From the portfolio manager
Despite an environment of rising short-term interest rates, IDS
Federal Income Fund managed to provide shareholders with a positive
return during the six-month period.
This was accomplished by slightly repositioning the portfolio in
response to continued increases in short-term interest rates. The
Federal Reserve began pushing short rates higher back in February 1994
to head off potential increases in inflation. That strategy continued
into the second half of the year. Rising interest rates drive down
bond prices, and that often has a negative effect on overall
performance.
However, we made three key adjustments throughout the period. First,
we reduced our position in adjustable-rate mortgage securities, which
continued to perform poorly throughout the first part of the year.
Second, we increased our holdings of short Treasuries (one- to
two-year maturities) and direct-agency debt, which are bonds issued by
government agencies such as Freddie Mac and Fannie Mae. We also added
to our positions of pass-through mortgages - pools of mortgages in
which principal and interest are passed through to investors.
The addition of these mortgages helped boost the fund's dividend.
Third, we reduced our positions in derivative instruments to provide
us with the flexibility to buy other securities when opportunities
arose.
The fund uses small amounts of derivatives, which have proved to be
beneficial to the fund by providing an attractive total return with
minimal fluctuations in net asset value. As of this writing, less than
7.5% of the portfolio was invested in interest-only and principal-only
instruments. Approximately 2.5% was invested in derivatives known as
inverse floaters. We plan to continue to use these instruments only
when we feel we can benefit the fund without taking undue risk.
Because of this cautious approach, the fund was not greatly affected
by the many derivative problems that drove down values of similar
types of funds last year.
Overall fund strategy remains intact
The fund continues to focus on a "barbell strategy" that we think is
beneficial to shareholders. This strategy involves buying
securities with very short maturities - including Treasuries and
mortgage securities - and combining them with longer-maturity
securities. This investment strategy minimizes the fund's net asset
value sensitivity to rising short-term rates, which have been
extremely volatile due to the tighter monetary policy of the Federal
Reserve.
Looking ahead, we expect the bond market to remain unsettled
throughout the first half of the year. However,
we anticipate that the interest-rate hikes by the Federal Reserve will
temper the growth of the economy during the second half of the year. A
slower-growing economy means that inflation should be held in check,
which is positive for the bond market.
Although we expect a better bond market in the second half of the
year, we don't plan on making any major changes to the structure of
the portfolio. In fact, we believe that our present structure allows
us to move assets quickly, if need be, and that allows us to
capitalize on any investment opportunities that might become
available.
James W. Snyder
6-month performance
(All figures per share)
Net asset value (NAV)
Dec. 31, 1994 $ 4.77
June 30, 1994 $ 4.85
Decrease $(0.08)
Distributions
July 1, 1994 - Dec. 31, 1994
From income $ 0.14
From capital gains $ .-
Total distributions $ 0.14
Total return* +1.5%
*If you purchased shares in the fund during this period, your return
also would have been affected by the sales charge, as described in the
prospectus.<PAGE>
PAGE
<TABLE>
<CAPTION>
Financial statements
Statement of assets and liabilities
IDS Federal Income Fund, Inc.
Dec. 31, 1994
_____________________________________________________________________________________________________________
Assets
_____________________________________________________________________________________________________________
<S> <C>
(Unaudited)
Investments in securities, at value (Note 1)
(identified cost $1,041,408,171) $1,005,977,430
Accrued interest receivable 12,495,575
Receivable for investment securities sold 378,812
_____________________________________________________________________________________________________________
Total assets 1,018,851,817
_____________________________________________________________________________________________________________
Liabilities
_____________________________________________________________________________________________________________
Disbursements in excess of cash on demand deposit 4,690,750
Dividends payable to shareholders 1,070,374
Payable for investment securities purchased 26,266
Accrued investment management and services fee 431,579
Accrued distribution fee 38,827
Accrued transfer agency fee 99,223
Other accrued expenses 195,027
Open option contracts written, at value
(premium received $1,774,554)(Note 5) 1,809,842
_____________________________________________________________________________________________________________
Total liabilities 8,361,888
_____________________________________________________________________________________________________________
Net assets applicable to outstanding capital stock $1,010,489,929
_____________________________________________________________________________________________________________
Represented by
_____________________________________________________________________________________________________________
Capital stock -- authorized 10,000,000,000 shares of $.01 par value;
outstanding 211,642,136 shares $ 2,116,421
Additional paid-in capital 1,084,144,749
Undistributed net investment income 635,653
Accumulated net realized loss (Notes 1 and 6) (40,542,374)
Unrealized depreciation (Note 4) (35,864,520)
_____________________________________________________________________________________________________________
Total -- representing net assets applicable to outstanding capital stock $1,010,489,929
_____________________________________________________________________________________________________________
Net asset value per share of outstanding capital stock $ 4.77
_____________________________________________________________________________________________________________
See accompanying notes to financial statements.<PAGE>
PAGE
Financial statements
Statement of operations
IDS Federal Income Fund, Inc.
Six months ended Dec. 31, 1994
_____________________________________________________________________________________________________________
Investment income
_____________________________________________________________________________________________________________
(Unaudited)
Income:
Interest $35,557,502
_____________________________________________________________________________________________________________
Expenses (Note 2):
Investment management and services fee 2,668,208
Distribution fee 238,489
Transfer agency fee 612,067
Compensation of directors 8,701
Compensation of officers 5,462
Custodian fees 55,075
Postage 124,011
Registration fees 43,417
Reports to shareholders 24,709
Audit fees 15,750
Administrative 8,440
Other 8,929
_____________________________________________________________________________________________________________
Total expenses 3,813,258
_____________________________________________________________________________________________________________
Investment income -- net 31,744,244
_____________________________________________________________________________________________________________
Realized and unrealized gain (loss) -- net
_____________________________________________________________________________________________________________
Net realized loss on security transactions (13,173,379)
Net realized gain on closed interest rate futures contracts 3,069,142
Net realized gain on closed or expired option contracts written (Note 5) 1,831,044
_____________________________________________________________________________________________________________
Net realized loss on investments (8,273,193)
Net change in unrealized appreciation or depreciation (7,759,151)
_____________________________________________________________________________________________________________
Net loss on investments (16,032,344)
_____________________________________________________________________________________________________________
Net increase in net assets resulting from operations $15,711,900
_____________________________________________________________________________________________________________
See accompanying notes to financial statements.
/TABLE
<PAGE>
PAGE
<TABLE>
<CAPTION>
Financial statements
Statements of changes in net assets
IDS Federal Income Fund, Inc.
_____________________________________________________________________________________________________________
Operations and distributions Dec. 31, 1994 June 30, 1994
_____________________________________________________________________________________________________________
<S> <C> <C>
Six months ended Year ended
(Unaudited)
Investment income -- net $ 31,744,244 $ 57,385,576
Net realized loss on investments (8,273,193) (24,752,055)
Net change in unrealized appreciation or depreciation (7,759,151) (38,009,969)
_____________________________________________________________________________________________________________
Net increase (decrease) in net assets resulting from operations 15,711,900 (5,376,448)
_____________________________________________________________________________________________________________
Distributions to shareholders from:
Net investment income (30,669,171) (57,139,239)
Net realized gain -- (28,095,757)
_____________________________________________________________________________________________________________
Total distributions (30,669,171) (85,234,996)
_____________________________________________________________________________________________________________
Capital share transactions
_____________________________________________________________________________________________________________
Proceeds from sales of
69,323,106 and 132,557,506 shares (Note 2) 334,411,156 671,874,642
Net asset value of 5,415,855 and 14,452,759 shares
issued in reinvestment of distributions 26,100,505 73,532,781
Payments for redemptions of
74,672,647 and 128,743,048 shares (360,386,267) (654,662,328)
_____________________________________________________________________________________________________________
Increase in net assets from capital share transactions
representing net addition of
66,314 and 18,267,217 shares 125,394 90,745,095
_____________________________________________________________________________________________________________
Total increase (decrease) in net assets (14,831,877) 133,651
Net assets at beginning of period 1,025,321,806 1,025,188,155
_____________________________________________________________________________________________________________
Net assets at end of period
(including undistributed net investment income of
$635,653 and $(439,420)) $1,010,489,929 $1,025,321,806
_____________________________________________________________________________________________________________
See accompanying notes to financial statements.
/TABLE
<PAGE>
PAGE
IDS Federal Income Fund, Inc.
(Unaudited as to Dec. 31, 1994)
Notes to financial statements
______________________________________________________________________________
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. Significant accounting
policies followed by the fund are summarized below:
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 are valued at fair value according
to methods selected in good faith by the board of
directors. 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.
Options transactions
In order to produce incremental earnings, protect
gains, and facilitate buying and selling of
securities for investment purposes, the fund may buy
and sell put and call options and write covered call
options on portfolio securities and may write
cash-secured put options on U.S. government
securities. The fund also may purchase mortgage-
backed security (MBS) put spread options and write
covered MBS call spread options. MBS spread options
are based upon the changes in the price spread
between a specified mortgage-backed security and a
like-duration Treasury security. 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. The fund
also may write over-the-counter options where the
completion of the obligation is dependent upon the
credit standing of the other party.
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. 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.
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.
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.
Other
Security transactions are accounted for on the date
securities are purchased or sold. Interest income,
including level-yield amortization of premium and
discount is accrued daily.
______________________________________________________________________________
2. Expenses and sales charges
Under terms of an agreement dated Nov. 14, 1991, the
fund pays American Express Financial Corporation a
fee for managing its investments, recordkeeping and
other specified services. The fee is a percentage of
the fund's average daily net assets consisting of a
group asset charge in reducing percentages from 0.46%
to 0.32% annually on the combined net assets of all
non-money market funds in the IDS MUTUAL FUND GROUP
and an individual annual asset charge of 0.13% of
average daily net assets.
The fund also pays American Express Financial
Corporation a distribution fee at an annual rate of
$6 per shareholder account and a transfer agency fee
at an annual rate of $15.50 per shareholder account.
The transfer agency fee is reduced by earnings on
monies pending shareholder redemptions.
American Express Financial Corporation 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 $11,748,505
for the six months ended Dec. 31, 1994. The fund also
pays custodian fees to American Express Trust
Company, an affiliate of American Express Financial
Corporation.
The fund has a retirement plan for its independent
directors. Upon retirement, directors receive monthly
payments equal to one-half of the retainer fee for as
many months as they served as directors up to 120
months. There are no death benefits. The plan is not
funded but the fund recognizes the cost of payments
during the time the directors serve on the board. The
retirement plan expense amounted to $8,409 for the
six months ended Dec. 31, 1994.
______________________________________________________________________________
3. Securities transactions
Cost of purchases and proceeds from sales of
securities (other than short-term obligations)
aggregated $873,756,539 and $874,016,542,
respectively, for the six months ended Dec. 31, 1994.
Realized gains and losses are determined on an
identified cost basis.
Income from securities lending amounted to $57,975
for the six months ended Dec. 31, 1994.
______________________________________________________________________________
4. Interest rate futures contracts
At Dec. 31, 1994, investments in securities included
securities valued at $8,818,750 that were pledged as
collateral to cover initial margin deposit on 300
open purchase contracts and 1,184 open sale
contracts. The market value of the open contracts at
Dec. 31, 1994, was $147,431,469 with a net unrealized
loss of $398,491.
______________________________________________________________________________
5. Options contracts written
The number of contracts and premium amounts
associated with options contracts written is as
follows:
<TABLE>
<CAPTION>
Six months ended Dec. 31, 1994
__________________________________________________________________________
Puts Calls MBS Calls
__________________________________________________________________________
Contracts Premium Contracts Premium Notional Premium
_________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C> <C>
Balance June 30, 1994 200 $ 89,226 -- $ -- $ 31,000,000 $ 145,313
Opened 4,548 2,872,768 4,987 3,885,492 -- --
Closed (1,712) (1,290,877) (2,657) (1,674,454) (31,000,000) (145,313)
Exercised (1,205) (482,661) (502) (589,268) -- --
Expired (977) (401,461) (1,278) (634,211) -- --
_________________________________________________________________________________________________
Balance Dec. 31, 1994 854 $ 786,995 550 $ 987,559 $ -- $ --
_________________________________________________________________________________________________
</TABLE>
______________________________________________________________________________
6. Capital loss carryover
For federal income tax purposes, the fund had a
capital loss carryover of approximately $41,265,000
at Dec. 31, 1994, that if not offset by subsequent
capital gains, will expire in 2003.
<TABLE>
<CAPTION>
IDS Federal Income Fund, Inc.
Notes to financial statements (continued)
______________________________________________________________________________
7. Financial highlights
The table below shows certain important financial
information for evaluating the fund's results.
Fiscal period ended June 30,
Per share income and capital changes*
1994** 1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C> <C>
Net asset value, $4.85 $5.30 $5.19 $5.10 $5.00 $5.02
beginning of period
Income from investment operations:
Net investment income .15 .29 .32 .36 .42 .42
Net gains (losses) (.09) (.31) .13 .09 .09 (.02)
(both realized
and unrealized)
Total from investment .06 (.02) .45 .45 .51 .40
operations
Less distributions:
Dividends from net (.14) (.29) (.32) (.36) (.41) (.42)
investment income
Distributions from -- (.14) (.02) -- -- --
realized gains
Total distributions (.14) (.43) (.34) (.36) (.41) (.42)
Net asset value, $4.77 $4.85 $5.30 $5.19 $5.10 $5.00
end of period
Ratios/supplemental data
1994** 1994 1993 1992 1991 1990
Net assets, end of period $1,010 $1,025 $1,025 $834 $397 $234
(in millions)
Ratio of expenses to .75%*** .76% .77% .79% .80% .82%
average daily net assets
Ratio of net income to 6.22%*** 5.64% 6.03% 6.93% 8.20% 8.53%
average daily net assets
Portfolio turnover rate 88% 304% 227% 104% 52% 104%
(excluding short-term
securities)
Total return+ 1.5%++ (0.5%) 9.0% 9.0% 10.8% 8.3%
*For a share outstanding throughout the period. Rounded to the nearest cent.
**Six months ended Dec. 31, 1994, (Unaudited).
***Adjusted to an annual basis.
+Total return does not reflect payment of a sales charge.
++For the fiscal period ended Dec. 31, 1994, the annualized total return is 3.1%.
/TABLE
<PAGE>
<TABLE>
<CAPTION>
Investments in securities
IDS Federal Income Fund, Inc. (Percentages represent value of
Dec. 31, 1994 (Unaudited) investments compared to net assets)
_____________________________________________________________________________________________________________________________
Bonds (97.8%)
_____________________________________________________________________________________________________________________________
Issuer Coupon Maturity Principal Value(a)
rate year amount
_____________________________________________________________________________________________________________________________
<S> <C> <C> <C> <C>
U.S. government obligations (11.6%)
U.S. Treasury 4.00 % 1996 $ 14,000,000 $ 13,518,960
5.125 1998 10,800,000 9,978,552
5.75 1997 15,000,000 14,231,099
6.875 1996-99 66,000,000 63,951,598
7.50 1996 15,000,000 15,035,249
______________
Total 116,715,458
_____________________________________________________________________________________________________________________________
Mortgage-backed securities (86.2%)
Federal Home Loan Bank Notes (17.1%)
5.91 1996 24,500,000 24,028,128
7.27 1997 39,500,000 38,516,841
7.32 1997 8,490,000 8,291,163
7.89 1997 46,040,000 45,588,803
8.00 2014 12,200,000 (b) 11,583,900
8.05 1997 45,250,000 45,083,475
______________
Total 173,092,310
_____________________________________________________________________________________________________________________________
Federal Home Loan Mortgage Corporation (17.0%)
8.00 2008-24 73,337,674 70,933,455
9.50 2024 29,279,891 30,139,987
10.00 2009 19,983,324 20,994,979
11.50 2024 6,763,881 7,457,179
12.00 2016 6,290,742 6,982,724
Collateralized Mtge Obligation 7.00 2021 10,000,000 8,897,600
7.50 2020 10,151,248 9,927,109
8.50 2022 9,150,000 8,856,926
Interest Only 3.00 2018 1,196,810 (c) 989,200
10.00 2020 836,085 (c) 171,513
Inverse Floater 12.785 2021 6,588,582 (d) 6,077,967
______________
Total 171,428,639
_____________________________________________________________________________________________________________________________
See accompanying notes to investments in securities.<PAGE>
PAGE
Investments in securities
IDS Federal Income Fund, Inc. (Percentages represent value of
Dec. 31, 1994 (Unaudited) investments compared to net assets)
_____________________________________________________________________________________________________________________________
Bonds (continued)
_____________________________________________________________________________________________________________________________
Issuer Coupon Maturity Principal Value(a)
rate year amount
_____________________________________________________________________________________________________________________________
Mortgage-backed securities (cont'd)
Federal National Mortgage Association (52.0%)
5.60 % 1995 $ 16,000,000 $ 15,707,678
6.00 2023 33,191,880 28,275,333
6.50 2008-24 106,075,901 (e,f) 94,525,733
7.00 2023 23,391,599 21,279,045
8.00 2021 6,454,637 6,196,452
8.50 2007-23 139,861,616 137,852,564
9.00 2023-24 89,037,661 89,677,619
10.00 2011 4,602,618 4,838,502
12.00 2016 7,279,755 8,162,426
Collateralized Mtge Obligation 3.00 2019 11,250,000 8,402,573
6.168 2023 2,285,226 1,433,980
7.00 2012 7,658,672 6,873,275
8.50 2021 12,350,000 11,882,059
14.00 2023 1,855,847 1,231,818
Interest Only 7.00 2023 36,168,813 (c) 39,198,765
8.00 2024 6,228,505 (c) 6,367,265
9.50 2018-22 10,370,967 (c) 9,114,383
10.00 2018-22 13,600,853 (c) 13,422,888
10.50 2021 1,908,162 (c) 1,973,059
Inverse Floater 1.34 2023 296,029 (d) 52,730
5.592 2008 6,737,200 (d) 3,842,629
7.991 2020 5,235,382 (d) 4,423,898
8.281 2022 6,000,000 (d) 5,249,580
10.181 2021 5,000,000 (d) 4,512,500
Interest Only 2.031 2007 850,781 (i) 330,469
Principal Only 12.568 2021 1,318,820 (g) 845,641
Trust Series Z 6.00 2024 43,573 (h) 24,713
______________
Total 525,697,577
_____________________________________________________________________________________________________________________________
Government National Mortgage Association (0.1%)
11.00 2019 638,391 678,689
_____________________________________________________________________________________________________________________________
Other mortgage-backed securities (--%)
Daiwa Securities
Collateralized Mtge Obligation
Inverse Floater 14.50 2009 282,022 (d) 278,666
_____________________________________________________________________________________________________________________________
Total bonds
(Cost: $1,022,978,330) $ 987,891,339
_____________________________________________________________________________________________________________________________
See accompanying notes to investments in securities.<PAGE>
PAGE
Investments in securities
IDS Federal Income Fund, Inc. (Percentages represent value of
Dec. 31, 1994 (Unaudited) investments compared to net assets)
_____________________________________________________________________________________________________________________________
Options purchased (--%)
_____________________________________________________________________________________________________________________________
Issuer Number Exercise Expiration Value(a)
of contracts price date
_____________________________________________________________________________________________________________________________
Put
MBS 7,500 $2 Jan. 1995 $ 19,531
5,000 3 Jan. 1995 7,813
_____________________________________________________________________________________________________________________________
Total options purchased
(Cost: $371,094) $ 27,344
_____________________________________________________________________________________________________________________________
</TABLE>
<TABLE>
<CAPTION>
Short-term securities (1.8%)
_____________________________________________________________________________________________________________________________
Issuer Annualized Amount Value(a)
yield on payable
date of at
purchase maturity
_____________________________________________________________________________________________________________________________
<S> <C> <C> <C>
U.S. government agencies (1.7%)
Federal Home Loan
Mtge Corp Disc Notes
01-06-95 5.51% $2,200,000 $ 2,197,983
01-11-95 5.81 2,200,000 2,196,101
01-27-95 5.83 3,100,000 3,086,515
Federal Natl Mtge
Assn Disc Notes
01-05-95 5.81 7,500,000 7,493,958
02-01-95 5.85 2,000,000 1,989,671
______________
Total 16,964,228
_____________________________________________________________________________________________________________________________
Commercial paper (0.1%)
Commerzbank US Finance
01-30-95 6.01 1,100,000 1,094,519
_____________________________________________________________________________________________________________________________
Total short-term securities
(Cost: $18,058,747) $ 18,058,747
_____________________________________________________________________________________________________________________________
Total investments in securities
(Cost: $1,041,408,171)(j) $1,005,977,430
_____________________________________________________________________________________________________________________________
See accompanying notes to investments in securities.<PAGE>
PAGE
Investments in securities
IDS Federal Income Fund, Inc.
Dec. 31, 1994 (Unaudited)
_____________________________________________________________________________________________________________________________
Notes to investments in securities
_____________________________________________________________________________________________________________________________
(a) Securities are valued by procedures described in Note 1 to the
financial statements.
(b) Interest rate varies, rate shown is the effective rate on Dec. 31, 1994.
(c) Principal amounts and interest rates disclosed for interest-only
securities represent amortized cost and coupon rates, respectively.
(d) 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 Dec. 31, 1994.
(e) Partially pledged as initial deposit on the following open interest
rate futures contracts (see Note 4 to the financial statements):
Type of security Notional amount
________________________________________________________________
Purchase contracts
U.S. Treasury March 95, 5-year notes $ 30,000,000
Sale contracts
U.S. Treasury Bonds March 95 118,100,000
U.S. Treasury March 95, 10-year notes 300,000
(f) At Dec. 31, 1994, securities valued at $8,818,750 were held to cover
open call options written as follows:
Issuer Number of Exercise Expiration Value(a)
contracts price date
______________________________________________________________________
U.S. Treasury Bonds March 95 450 $ 98 Jan. 1995 $717,187
U.S. Treasury Bonds March 95 100 100 Jan. 1995 50,000
At Dec. 31, 1994, cash or short-term securities were designated to
cover open put options written as follows:
Issuer Number of Exercise Expiration Value(a)
contracts price date
______________________________________________________________________
U.S. Treasury Bonds March 95 100 $ 98 Jan. 1995 $ 43,750
U.S. Treasury Bonds March 95 250 99 Jan. 1995 199,218
U.S. Treasury Bonds March 95 100 96 Feb. 1995 42,187
U.S. Treasury Bonds March 95 404 100 Feb. 1995 757,500
(g) Principal only represents securities that entitle holders to receive
only principal payments on the underlying mortgages. The yield to
maturity of a principal only is sensitive to the rate of principal
payments on the underlying mortgage assets. A slow (rapid) rate of
principal repayments may have an adverse (positive) effect on yield
to maturity. Interest rate disclosed represents current yield based
upon the current cost basis and estimated timing of future cash flows.
(h) This security is a collateralized mortgage obligation that pays no
interest or principal during its initial accrual period until payment
of a previous series within the trust has been paid off. Interest is
accrued at an effective yield; similar to a zero coupon bond.
(i) Inverse interest-only represents securities that entitle holders to
receive only interest payments on the underlying mortgages. Interest
is paid at a rate that increases (decreases) with a decline (increase)
in the specified index. The yield to maturity of a inverse interest-only
is sensitive to the rate of principal payments on the underlying mortgage
assets. A rapid (slow) rate of principal repayments may have an adverse
(positive) effect on yield to maturity. Principal amounts and interest
rates discolsed for interest-only securities represent amortized cost
and coupon rates, respectively.
(j) At Dec. 31, 1994, the cost of securities for federal income tax
purposes was approximately $1,041,356,000 and the approximate aggregate
gross unrealized appreciation and depreciation based on that cost was:
Unrealized appreciation $ 3,807,000
Unrealized depreciation (39,186,000)
____________________________________________________________
Net unrealized depreciation $(35,379,000)
____________________________________________________________
</TABLE>
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Directors and officers
Directors and officers of the fund
_____________________________________________________________________
President and interested director
William R. Pearce
President of all funds in the IDS MUTUAL FUND GROUP.
_____________________________________________________________________
Independent directors
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.
Donald M. Kendall
Former chairman and chief executive officer, PepsiCo, Inc.
Melvin R. Laird
Senior counsellor for national and international affairs,
The Reader's Digest Association, Inc.
Lewis W. Lehr
Former chairman and chief executive officer,
Minnesota Mining and Manufacturing Company (3M).
Edson W. Spencer
Former chairman and chief executive officer, Honeywell, Inc.
Wheelock Whitney
Chairman, Whitney Management Company.
C. Angus Wurtele
Chairman of the board and chief executive officer, The Valspar Corporation.
_____________________________________________________________________
Interested directors who are officers and/or employees of American
Express Financial Corporation.
William H. Dudley
Exective vice president, American Express Financial Corporation.
David R. Hubers
President and chief executive officer, American Express Fianacial
Corporation.
John R. Thomas
Senior vice president, American Express Financial Corporation.
_____________________________________________________________________
Other officer
Leslie L. Ogg
Vice president of all funds in the IDS MUTUAL FUND GROUP and general
counsel and treasurer of the publicly offered funds.<PAGE>
PAGE
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 deposit (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.
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PAGE
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 Strategy, Income Fund
Invests primarily in corporate and government bonds to seek high
current income while conserving capital. Also may seek capital
appreciation when consistent with its primary goals.
(icon of) chess piece
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) federal building
IDS Strategy, Short-Term Income Fund
Invests primarily in short-term and intermediate-term bonds and notes
to seek a high level of current income.
(icon of) chess piece
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.
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IDS State Tax-Exempt Funds
(CA, MA, MI, MN, NY, OH)
Invests primarily in high- and medium-grade municipal securities
to provide income to residents of each respective state that is
exempt from federal, state and local income taxes. (New York
is the only state that is exempt at the local level.)
(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
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 eagle head
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 Strategy, Worldwide Growth Fund
Invests primarily in common stocks of companies throughout the world
that offer potential for superior growth. Holdings may range from
small- to large- capitalization stocks, including those of companies
involved in areas of rapid economic growth.
(icon of) chess piece
IDS Managed Retirement Fund
Invests in a combination of common stocks, fixed-income
investments and money market securities to seek a maximum total
return through a combination of growth of capital and current income.
(icon of) bird in a nest
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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 apple 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 stocks of companies representing many
sectors of the economy. Seeks current income and growth of capital.
(icon of) building with columns
IDS Strategy, Equity Fund
Invests primarily in undervalued common stocks that offer potential
for growth of capital and income.
(icon of) chess piece
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) electrical cord
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) four 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.
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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 Equity 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) flower
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 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
<PAGE>
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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
planner 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>
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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 (TouchTone 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 Federal Income Fund
IDS Tower 10
Minneapolis, MN 55440-0010
