<PAGE>
PAGE 1
IDS Federal Income Fund
1995 annual report
(prospectus enclosed)
[graphic of the Capitol dome]
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.
(This annual report includes a prospectus that describes in detail
the fund's objective, investment policies, risks, sales charges,
fees and other matters of interest. Please read the prospectus
carefully before you invest or send money.)
Distributed by American Express Financial Advisors Inc.
<PAGE>
PAGE 2
[graphic of the Capitol dome]
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.
<PAGE>
PAGE 3
Contents
[graphic of two nested, open booklets]
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.
1995 annual report
From the president 4
From the portfolio manager 4
Making the most of your fund 6
Long-term performance 7
Independent auditors' report 8
Financial statements 9
Notes to financial statements 12
Investments in securities 20
IDS mutual funds 24
Federal income tax information 27
1995 prospectus
The fund in brief
Goals 3p
Types of fund investments and their risks 3p
Manager and distributor 3p
Portfolio manager 3p
Alternative sales arrangements 3p
Sales charge and fund expenses 4p
Performance
Financial highlights 6p
Total returns 7p
Yield 8p
Key terms 9p
Investment policies and risks
Facts about investments and their risks 10p
Alternative investment option 13p
Valuing assets 13p
How to buy, exchange or sell shares
Alternative sales arrangements 14p
How to buy shares 16p
How to exchange shares 19p
How to sell shares 19p
Reductions and waivers of the sales charge 23p
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PAGE 4
Special shareholder services
Services 27p
Quick telephone reference 27p
Distributions and taxes
Dividend and capital gain distributions 27p
Reinvestments 29p
Taxes 30p
How the fund is organized
Shares 33p
Voting rights 33p
Shareholder meetings 33p
Directors and officers 33p
Investment manager and transfer agent 35p
Distributor 36p
About American Express Financial Corporation
General information 37p
Appendix
Descriptions of derivative instruments 38p
(This annual report is not part of the prospectus.)<PAGE>
PAGE 5
To our shareholders
[photo of William Pearce]
William R. Pearce
President of the fund
[photo of James Snyder]
James W. Snyder
Portfolio manager
From the president
As I indicated in the fund's previous reports, new agreements
between the fund and American Express Financial Corporation were
approved by shareholders in November 1994. The new agreements
became effective when the fund began offering multiple classes of
shares on March 20, 1995.
The advantage of offering more than a single class of shares is
that investors may choose how they wish to pay sales charges.
These charges compensate your American Express financial advisor
(formerly called your IDS planner), who is committed to providing
you with outstanding services.
Adding new classes of mutual fund shares does make the presentation
of financial information in this report more complex. However, we
will continue our effort to make the reports easier to read and
understand. Meanwhile, your American Express financial advisor is
available to answer your questions.
[signature]
William R. Pearce
From the portfolio manager
IDS Federal Income Fund capitalized on a recovering bond market to
post a solid total return -- including regular dividends and
capital gains -- for the past fiscal year (July 1994 through June
1995).
The period was characterized by distinct contrast. Much of the
first half of the fiscal year was dominated by higher interest
rates prompted by the Federal Reserve's desire to temper economic
growth and thereby curb inflation. Because rising rates depress
bond prices, fixed-income funds such as this one suffered eroding
net asset values.
Defensive strategies
Still, we were able to temper the decline by: reducing the average
maturity level of the portfolio; increasing our holdings of short-
term Treasury notes (one- to two-year maturities) and direct-agency
securities, which are bonds issued by government agencies such as
GNMA (Ginnie Mae) and FNMA (Fannie Mae); and also reducing our
positions in derivative instruments to provide us with the
flexibility to buy when opportunities arose.
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PAGE 6
(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 4% of the portfolio was invested in interest-only and
principal-only instruments. Approximately 4% 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, which
centers on using derivatives to hedge risk, this fund was not
greatly affected by the derivative problems that drove down the
values of similar types of funds last year.)
New year, new environment
By the time 1995 rolled around, the investment environment had
changed markedly. With the Federal Reserve taking a hands-off
approach, interest rates were falling and the bond market was
enjoying a strong rally.
We were able to take full advantage of the advance thanks to our
longer-than-average portfolio maturity. (The longer the maturity,
the greater the gain from an interest-rate decline. We lengthened
our maturity structure in late 1994 and early 1995.) Beyond that,
we shifted our emphasis among derivatives, reducing our exposure to
interest-only securities while adding to our holdings of inverse
floaters. Lastly, we lessened our exposure to mortgage-backed
securities, which were relatively weak performers, in favor of
intermediate- and short-term Treasurys. All of these strategies
benefitted fund performance.
Our outlook for the new fiscal year remains positive, as we expect
interest rates to decline further. Given that forecast, we are
holding to a longer-than-average maturity, maintaining a relatively
high level of Treasury securities and increasing our exposure to
intermediate-term bonds. If our expectations prove accurate, we
think we can look forward to another productive period in the
months ahead.
[signature]
James W. Snyder
Class A
12-month performance
(All figures per share)
Net asset value (NAV)
June 30, 1995 $4.97
June 30, 1994 $4.85
Increase $0.12
Distributions
July 1, 1994 - June 30, 1995
From income $0.31
From capital gains $ --
Total distributions $0.31
Total return** +9.3%***
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PAGE 7
Class B
March 20, 1995 - June 30, 1995
(All figures per share)
Net asset value (NAV)
June 30, 1995 $4.96
March 20, 1995* $4.87
Increase $0.09
Distributions
March 20, 1995* - June 30, 1995
From income $0.11
From capital gains $ --
Total distributions $0.11
Total return** +4.1%***
Class Y
March 20, 1995 - June 30, 1995
(All figures per share)
Net asset value (NAV)
June 30, 1995 $4.97
March 20, 1995* $4.87
Increase $0.10
Distributions
March 20, 1995* - June 30, 1995
From income $0.12
From capital gains $ --
Total distributions $0.12
Total return** +4.5%***
*Inception date.
**The prospectus discusses the effects of sales charge, if any, on
the various classes.
***The total return is a hypothetical investment in the fund with
all distributions reinvested.
<PAGE>
PAGE 8
Making the most of your fund
Average annual total return
(as of June 30, 1995)
Class A
1 year 5 years Since inception*
+3.79% +6.31% +7.58%
*Aug. 19, 1985
Total returns for Class A, Class B and Class Y for the period from
March 20, 1995 to June 30, 1995 were -0.7%, -0.9% and +4.5%,
respectively. March 20, 1995 was the inception date for Class B
and Class Y. Total return for Class A is shown for comparative
purposes. 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 reflect the deduction of the maximum 5% sales
charge. This was a period of widely fluctuating security prices.
Past performance is no guarantee of future results.
Build your assets systematically
To keep your assets growing steadily, 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
Mar 100 17 5.88 XXXXXx
Apr 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
[3-part caption in margin:]
By investing an equal number of dollars each month...
you automatically buy more shares when the per share market price
is low [arrow pointing to "Apr" line in table above]
and fewer shares when the per share market price is high. [arrow
pointing to "Sept" line in table above]
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 9
Your 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 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.
Class A*
How your $10,000 has grown in IDS Federal Income Fund
Average annual total return
(as of June 30, 1995)
1 year 5 years Since 8/19/85
+3.79% +6.31% +7.58%
$20,000 [graph consisting of three lines plotting the
growth of a $10,000 investment in Lehman
Aggregate Bond Index, Lehman Treasury Index
and Federal Income Fund, with each investment
$9,500 generally out-performing those which follow
it in the list above.]
'85 '86 '87 '88 '89 '90 '91 '92 '93 '94 '95
* The graph above is for Class A only. Class B and Class Y are not
shown. Total returns for Class A, Class B and Class Y for the
period form march 20, 1995 to June 30, 1995 were -0.7%, -0.9%,
+4.5% respectively. March 20, 1995 was the inception date for
Class B and Class Y. Total return for Class A is shown for
comparative purposes. The performance of Class B and Class Y will
vary from the performance of Class A based on differences in sales
charges and fees.
[the following three paragraphs appear in the margin next to the
graph:]
Assumes: -Holding period from 9/1/85 to 6/30/95. -Returns do not
reflect taxes payable on distributions. -Also see "Performance" in
the fund's current prospectus. -Reinvestment of all income and
capital gain distributions for the fund, with a value of $11,178.
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 the fund.
Lehman Treasury Bond Index is made up of a representative list of
government bonds that includes all publicly issued obligations of
the U.S. Treasury. 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 debt
securities held in the fund.
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. This was a period of widely fluctuating
security prices. Past performance is no guarantee of future
results.
On the chart above you can see how the fund's total return compared
to two widely cited performance indexes, Lehman Treasury Index and
Lehman Aggregate Bond Index. In comparing Federal Income Fund to
the two indexes, 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 indexes.
If you were actually to buy either individual stocks or growth
mutual funds, any sales charges that you pay would reduce your
total return as well.
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PAGE 10
Independent auditors' report
The board of directors and shareholders
IDS Federal Income Fund, Inc.:
We have audited the accompanying statement of assets and
liabilities, including the schedule of investments in securities,
of IDS Federal Income Fund, Inc. as of June 30, 1995, and the
related statement of operations for the year then ended and the
statements of changes in net assets for each of the years in the
two-year period ended June 30, 1995, and the financial highlights
for each of the years in the nine-year period ended June 30, 1995,
and for the period from August 19, 1985 (commencement of
operations), to June 30, 1986. 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
Federal Income Fund, Inc. at June 30, 1995, and the results of its
operations for the year then ended and the changes in its net
assets for each of the years in the two-year period ended June 30,
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
August 4, 1995
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PAGE 11
<TABLE>
<CAPTION>
Financial statements
Statement of assets and liabilities
IDS Federal Income Fund, Inc.
June 30, 1995
________________________________________________________________________________________________
Assets
________________________________________________________________________________________________
<S> <C>
Investments in securities, at value (Note 1)
(identified cost $1,281,797,084) $1,312,311,439
Accrued interest receivable 11,254,923
Receivable for investment securities sold 154,067,961
U.S. government securities held as collateral (Note 4) 31,368,435
________________________________________________________________________________________________
Total assets 1,509,002,758
________________________________________________________________________________________________
Liabilities
________________________________________________________________________________________________
Disbursements in excess of cash on demand deposit 5,744,516
Dividends payable to shareholders 858,890
Payable for investment securities purchased 107,580,812
Payable upon return of securities loaned (Note 4) 31,368,435
Accrued investment management services fee 436,773
Accrued distribution fee 133,354
Accrued service fee 162,695
Accrued transfer agency fee 102,258
Accrued administrative services fee 41,429
Other accrued expenses 188,506
Open option contracts written, at value
(premium received $3,100,628)(Note 6) 7,628,448
________________________________________________________________________________________________
Total liabilities 154,246,116
________________________________________________________________________________________________
Net assets applicable to outstanding capital stock $1,354,756,642
________________________________________________________________________________________________
Represented by
________________________________________________________________________________________________
Capital stock -- authorized 10,000,000,000 shares of $.01 par value; $ 2,727,705
Additional paid-in capital 1,386,164,844
Undistributed net investment income 668,460
Accumulated net realized loss (Notes 1 and 9) (57,644,807)
Unrealized appreciation (Note 5) 22,840,440
________________________________________________________________________________________________
Total -- representing net assets applicable to outstanding
capital stock $1,354,756,642
________________________________________________________________________________________________
Net assets applicable to outstanding shares: Class A $ 977,243,350
Class B $ 292,031,307
Class Y $ 85,481,985
Net asset value per share of outstanding capital stock:
Class A shares 196,735,958 $ 4.97
Class B shares 58,824,204 $ 4.96
Class Y shares 17,210,263 $ 4.97
________________________________________________________________________________________________
See accompanying notes to financial statements.<PAGE>
PAGE 12
Financial statements
Statement of operations
IDS Federal Income Fund, Inc.
Year ended June 30, 1995
________________________________________________________________________________________________
Investment income
________________________________________________________________________________________________
Income:
Interest $ 80,861,516
________________________________________________________________________________________________
Expenses (Note 2):
Investment management services fee 5,683,320
Distribution fee
Class A 340,515
Class B 533,614
Transfer agency fee 1,322,478
Incremental transfer agency fee -- Class B 6,890
Service fee
Class A 471,523
Class B 123,631
Administrative services fee 177,341
Compensation of directors 24,265
Compensation of officers 12,393
Custodian fees 91,165
Postage 204,881
Registration fees 169,016
Reports to shareholders 28,463
Audit fees 35,000
Administrative 11,125
Other 18,588
________________________________________________________________________________________________
Total expenses 9,254,208
________________________________________________________________________________________________
Investment income -- net 71,607,308
________________________________________________________________________________________________
Realized and unrealized gain (loss) -- net
________________________________________________________________________________________________
Net realized loss on security transactions (4,572,250)
Net realized loss on closed interest rate futures contracts (22,114,909)
Net realized gain on closed, exercised or expired option contracts written (Note 6) 3,020,852
________________________________________________________________________________________________
Net realized loss on investments (23,666,307)
Net change in unrealized appreciation or depreciation 52,857,972
________________________________________________________________________________________________
Net gain on investments 29,191,665
________________________________________________________________________________________________
Net increase in net assets resulting from operations $ 100,798,973
________________________________________________________________________________________________
See accompanying notes to financial statements.
/TABLE
<PAGE>
PAGE 13
<TABLE>
<CAPTION>
Financial statements
Statements of changes in net assets
IDS Federal Income Fund, Inc.
Year ended June 30,
________________________________________________________________________________________________
Operations and distributions 1995 1994
________________________________________________________________________________________________
<S> <C> <C>
Investment income -- net $ 71,607,308 $ 57,385,576
Net realized loss on investments (23,666,307) (24,752,055)
Net change in unrealized appreciation or depreciation 52,857,972 (38,009,969)
________________________________________________________________________________________________
Net increase (decrease) in net assets resulting from operations 100,798,973 (5,376,448)
________________________________________________________________________________________________
Distributions to shareholders from:
Net investment income
Class A (64,225,838) (57,139,239)
Class B (4,334,929) --
Class Y (1,938,661) --
Net realized gain
Class A -- (28,095,757)
________________________________________________________________________________________________
Total distributions (70,499,428) (85,234,996)
________________________________________________________________________________________________
Capital share transactions (Note 7)
________________________________________________________________________________________________
Proceeds from sales
Class A shares (Note 2) 641,569,225 671,874,642
Class B shares 138,024,110 --
Class Y shares 89,538,242 --
Fund merger (Note 8)
Class A shares 3,521,950 --
Class B shares 213,190,532 --
Reinvestment of distributions at net asset value
Class A shares 54,545,686 73,532,781
Class B shares 4,222,182 --
Class Y shares 1,657,604 --
Payments for redemptions
Class A shares (771,657,740) (654,662,328)
Class B shares (Note 2) (68,176,074) --
Class Y shares (7,300,426) --
________________________________________________________________________________________________
Increase in net assets from capital share transactions 299,135,291 90,745,095
________________________________________________________________________________________________
Total increase in net assets 329,434,836 133,651
Net assets at beginning of year 1,025,321,806 1,025,188,155
________________________________________________________________________________________________
Net assets at end of year
(including undistributed net investment income of
$668,460 and $(439,420) $1,354,756,642 $1,025,321,806
________________________________________________________________________________________________
See accompanying notes to financial statements.
</TABLE>
<PAGE>
PAGE 14
IDS Federal Income Fund, Inc.
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.
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, which the
fund began offering on March 20, 1995, may be subject to a
contingent deferred sales charge. Class B shares automatically
convert to Class A shares after eight years. Class Y shares, which
the fund also began offering on March 20, 1995, 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) differ 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:
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<PAGE>
PAGE 15
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.
<PAGE>
PAGE 16
On the statement of assets and liabilities, as a result of
permanent book-to-tax differences, accumulated net realized loss
has been decreased by $1,294 resulting in a reclassification
adjustment to decrease paid in capital by $1,294.
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 a prior agreement that ended March 19, 1995, the
fund paid American Express Financial Corporation (AEFC) a fee for
managing its investments, recordkeeping and other specified
services. The fee was 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.
Also under the terms of a prior agreement, the fund paid AEFC 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 was reduced by
earnings on monies pending shareholder redemptions.
Effective March 20, 1995, when the fund began offering multiple
classes of shares, the fund entered into agreements with 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
0.52% to 0.395% 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
<PAGE>
PAGE 17
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 the
Distribution Agreement, 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.
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 deducted by American Express Financial Advisors Inc.
for distributing fund shares were $22,590,635 for Class A and
$86,206 for Class B for the year ended June 30, 1995. The fund also
pays custodian fees to American Express Trust Company, an affiliate
of AEFC.
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 $10,673 for the year ended June 30, 1995.
___________________________________________________________________
3. Securities transactions
Cost of purchases and proceeds from sales of securities (other than
short-term obligations) aggregated $2,661,670,903 (including
$164,420,370 that was acquired in the fund merger as described in
Note 8) and $2,427,083,375, respectively, for the year ended June
30, 1995. Realized gains and losses are determined on an identified
cost basis.
___________________________________________________________________
4. Lending of portfolio securities
At June 30, 1995, securities valued at $29,440,000 were on loan to
brokers. For collateral, the fund received U.S. government
securities valued at $31,368,435. Income from securities lending
amounted to $66,317 for the year ended June 30, 1995. 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.
___________________________________________________________________
5. Interest rate futures contracts
At June 30, 1995, investments in securities included securities
valued at $33,083,900 that were pledged as collateral to cover<PAGE>
PAGE 18
initial margin deposit on 979 open sale contracts. The market value
of the open contracts at June 30, 1995, was $111,147,094 with a net
unrealized loss of $3,146,094.
___________________________________________________________________
6. Options contracts written
The number of contracts and premium amounts associated with options
contracts written is as follows:
<TABLE>
<CAPTION>
Year ended June 30, 1995
__________________________________________________________________________
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 15,284 11,140,779 20,168 14,241,862 67,500,000 305,859
Closed (9,945) (8,282,626) (14,591) (8,870,700) (98,500,000) (451,172)
Exercised (1,207) (482,963) (2,251) (2,351,400) -- --
Expired (3,007) (1,265,959) (2,310) (1,117,591) -- --
__________________________________________________________________________________________________
Balance June 30, 1995 1,325 $ 1,198,457 1,016 $ 1,902,171 $ -- $ --
__________________________________________________________________________________________________
</TABLE>
___________________________________________________________________
7. Capital share transactions
Transactions in shares of capital stock for the periods indicated
are as follows:
<TABLE>
<CAPTION>
Period ended June 30, 1995 Year ended
06/30/94
Class A Class B* Class Y* Class A
<S> <C> <C> <C> <C>
_____________________________________________________________________________
Sold 132,313,514 28,069,540 18,364,074 132,557,506
Fund Merger 723,045 43,767,303 -- --
Issued for reinvested
distributions 11,239,784 856,748 336,591 14,452,759
Redeemed (159,116,207) (13,869,387) (1,490,402) (128,743,048)
_____________________________________________________________________________
Net increase (decrease) (14,839,864) 58,824,204 17,210,263 18,267,217
_____________________________________________________________________________
*Commencement of operations was March 20, 1995.
</TABLE>
___________________________________________________________________
8. Fund merger
On March 17, 1995, IDS Federal Income Fund acquired the assets and
assumed the identified liabilities of IDS Strategy - Short-Term
Income Fund.
<PAGE>
PAGE 19
The aggregate net assets of IDS Federal Income Fund immediately
before the aquisition was $1,015,587,336.
The merger was accomplished by a tax-free exchange of 219,863,326
shares of IDS Strategy - Short-Term Income Fund valued at
$216,712,482.
In exchange for the IDS Strategy - Short-Term Income Fund shares
and assets, IDS Federal Income Fund issued the following number of
shares:
Class A 723,045
Class B 43,767,303
IDS Strategy - Short-Term Income Fund's net assets at that date
were as follows, which include the following amounts of capital
stock, unrealized depreciation, and accumulated net realized loss
that was combined with IDS Federal Income Fund.
Total net Capital stock Unrealized Accumulated
assets depreciation net realized
loss
___________________________________________________________________
Class A 3,521,950 3,580,826 (31,076) (27,800)
Class B 213,190,532 216,754,432 (1,881,087) (1,682,813)
___________________________________________________________________
9. Capital loss carryover
For federal income tax purposes, the fund had a capital loss
carryover of $47,903,664 at June 30, 1995, that if not offset by
subsequent capital gains, will expire in 2002 and 2003. The
carryover includes $1,992,072 acquired in connection with the IDS
Strategy - Short-Term Income Fund merger (Note 8). There is no
limitation on the ability to utilize these losses, however, if not
offset by subsequent capital gains, they will expire in 2002. It is
unlikely the board of directors will authorize a distribution of
any net realized gains until the available capital loss carryover
has been offset or expired.
___________________________________________________________________
10. Financial highlights
"Financial highlights" showing per share data and selected
information is presented on page 6 of the prospectus.
<PAGE>
PAGE 20
<TABLE>
<CAPTION>
Investments in securities
IDS Federal Income Fund, Inc. (Percentages represent value of
June 30, 1995 investments compared to net assets)
_______________________________________________________________________________________________________________________
Bonds (95.8%)
_______________________________________________________________________________________________________________________
Issuer Coupon Maturity Principal Value(a)
rate year amount
_______________________________________________________________________________________________________________________
<S> <C> <C> <C> <C>
U.S. government obligations (28.6%)
U.S. Treasury 4.00 % 1996 $ 25,000,000 $ 24,763,500
5.25 1998 60,160,000 59,054,259
5.625 1997 19,000,000 18,945,090
5.75 1997 20,000,000 19,955,000
6.25 2000 16,200,000 16,368,966
6.875 2000 22,900,000 23,704,248
7.25 2016 4,000,000 4,249,520
7.50 2005-24 23,490,000 (h) 25,841,054
7.875 1996 5,000,000 5,063,550
8.125 2019 16,000,000 18,642,400
Zero Coupon 6.50 1999 25,500,000 (b) 20,334,975
Resolution Funding Corp
8.125 2019 8,000,000 9,218,560
Zero Coupon 6.06 2001 20,863,000 (b) 14,969,620
Zero Coupon 6.70 1999 20,000,000 (b) 15,991,600
Zero Coupon 7.17 2018 38,250,000 (b) 7,702,785
Zero Coupon 7.18 2009 16,000,000 (b) 6,147,680
Zero Coupon 7.34 2007 83,120,000 (b) 37,784,690
Zero Coupon 7.87 2018 7,500,000 (b) 1,480,950
Zero Coupon 7.87 2019 16,500,000 (b) 3,201,825
Zero Coupon 7.94 2012 89,150,000 (b) 28,231,130
Zero Coupon 8.04 2012 8,400,000 (b) 2,557,632
Zero Coupon 8.09 2012 74,200,000 (b) 23,097,718
______________
Total 387,306,752
_______________________________________________________________________________________________________________________
Mortgage-backed securities (67.1%)
Federal Home Loan Bank Note (0.8%) 7.32 1997 10,490,000 10,778,370
_______________________________________________________________________________________________________________________
Federal Home Loan Mortgage Corporation (18.7%)
6.50 2003-10 32,455,733 32,016,004
7.50 2024 9,712,194 9,757,744
8.00 2023-24 53,712,902 54,803,811
8.50 2025 14,639,534 15,124,542
10.00 2009 17,723,852 18,704,158
11.50 2024 6,088,961 6,761,182
12.00 2016 5,584,386 6,270,205
Collateralized Mtge Obligation 7.00 2021 10,000,000 9,937,500
7.612 2023 24,078,648 19,503,705
8.25 2023 27,516,793 27,898,175
8.50 2022 9,150,000 9,808,251
8.60 2008 6,331,388 5,698,249
Interest Only 10.00 2020 778,845 (c) 131,220
Inverse Floater 4.74 2008 6,373,780 (d) 5,002,015
5.525 2024 10,642,081 (d) 7,738,123
5.601 2023 3,956,343 (d) 2,729,877
7.758 2022 5,798,581 (d) 4,731,280
12.962 2021 9,375,769 (d) 9,513,476
13.895 2023 10,514,507 (d) 6,676,712
______________
Total 252,806,229
_______________________________________________________________________________________________________________________
Federal National Mortgage Association (43.1%)
6.00 2023 14,252,370 13,392,810
6.50 2010-24 172,255,830 (e,f) 167,914,798
7.00 2023 22,928,418 22,577,384
8.00 2021 6,128,681 6,253,154
8.50 2007-23 159,382,476 (e,f) 164,736,584
9.00 2023-24 21,245,624 22,168,534
12.00 2016 6,572,389 7,490,617
<PAGE>
PAGE 21
Collateralized Mtge Obligation 9.515 2023 9,266,931 7,332,459
3.00 2019 11,250,000 9,221,963
4.50 2010 8,204,208 6,860,769
4.70 2022 12,732,716 12,565,026
5.50 2008 13,306,859 12,665,735
6.00 2008 10,166,690 9,901,136
6.50 2017 3,554,593 3,544,001
6.367 2024 6,376,908 5,340,660
7.00 2012 7,658,672 7,678,814
8.50 2021 12,350,000 13,007,020
11.20 2021 11,661,558 11,851,058
Interest Only 8.00 2024 5,913,635 (c) 4,357,796
9.50 2018-22 9,727,932 (c) 6,706,345
10.00 2018-23 37,076,017 (c) 35,454,386
10.50 2021 6,240,492 (c) 5,470,438
Inverse Floater .971 2021 8,972,902 (d) 5,899,683
5.107 2023 2,282,734 (d) 1,793,373
5.476 2023 4,728,370 (d) 3,447,277
5.736 2023 2,144,513 (d) 1,590,960
6.877 2023 3,456,299 (d) 2,361,084
8.156 2022 6,800,000 (d) 6,532,216
8.82 2022 5,000,000 (d) 4,050,000
14.00 2023 1,855,845 (d) 1,482,356
Principal Only 12.568 2021 1,196,215 (g) 915,476
______________
Total 584,563,912
_______________________________________________________________________________________________________________________
Government National Mortgage Association (4.5%)
6.00 2025 29,400,002 29,454,882
9.00 2022 10,238,270 10,766,155
11.00 2010-19 18,268,967 20,319,223
______________
Total 60,540,260
_______________________________________________________________________________________________________________________
Other mortgage-backed securities (--%)
Daiwa Securities
Collateralized Mtge Obligation
Inverse Floater 12.00 2009 161,697 (d) 161,801
_______________________________________________________________________________________________________________________
Financial services (0.1%)
Beneficial 9.35 1995 1,900,000 1,902,318
_______________________________________________________________________________________________________________________
Total bonds
(Cost: $1,267,551,600) $ 1,298,059,642
_______________________________________________________________________________________________________________________
</TABLE>
<TABLE>
<CAPTION>
Short-term securities (1.0%)
__________________________________________________________________________________
Issuer Annualized Amount Value(a)
yield on payable
date of at
purchase maturity
__________________________________________________________________________________
<S> <C> <C> <C>
U.S. government agency (0.3%)
Federal Home Loan
Mtge Corp Disc Note
07-17-95 5.91% $ 4,400,000 $ 4,388,502
__________________________________________________________________________________
Commercial paper (0.7%)
Commerzbank US Finance
11-20-95 6.39 10,100,000 9,863,295
__________________________________________________________________________________
Total short-term securities
(Cost: $14,245,484) $ 14,251,797
__________________________________________________________________________________
Total investments in securities
(Cost: $1,281,797,084)(i) $1,312,311,439
__________________________________________________________________________________
</TABLE>
<PAGE>
PAGE 22
Notes to investments in securities
___________________________________________________________________
(a) Securities are valued by procedures described in Note 1 to the
financial statements.
(b) For zero coupon bonds, the interest rate disclosed represents
the annualized effective yield on the date of acquisition.
(c) Interest-only represents securities that entitle holders to
receive only interest payments on the underlying mortgages. The
yield to maturity of an interest-only is extremely 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.
(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 June 30, 1995.
(e) Partially pledged as initial deposit on the following open
interest rate futures contracts (see Note 5 to the financial
statements):
Type of security Notional amount
________________________________________________________________
Sale contracts
U.S. Treasury Bonds Sept. 95 $97,900,000
________________________________________________________________
(f) At June 30, 1995, securities valued at $36,499,060 were held to
cover open call options written as follows:
<TABLE>
<CAPTION>
Issuer Number of Exercise Expiration Value(a)
contracts price date
_____________________________________________________________________________________
<S> <C> <C> <C> <C>
U.S. Treasury Bonds Sept. 95 576 $104 Aug. 1995 $5,498,997
U.S. Treasury Bonds Sept. 95 240 114 Aug. 1995 371,249
U.S. Treasury Bonds Sept. 95 200 115 July 1995 118,750
</TABLE>
At June 30, 1995, cash or short-term securities were designated to
cover open put options written as follows:
<TABLE>
<CAPTION>
Issuer Number of Exercise Expiration Value(a)
contracts price date
_____________________________________________________________________________________
<S> <C> <C> <C> <C>
U.S. Treasury Bonds Sept. 95 900 $112 Aug. 1995 $1,012,500
U.S. Treasury Bonds Sept. 95 225 113 July 1995 214,452
U.S. Treasury Bonds Sept. 95 200 115 July 1995 412,500
</TABLE>
(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<PAGE>
PAGE 23
represents current yield based upon the current cost basis and
estimated timing of future cash flows.
(h) Security is partially or fully on loan. See Note 4 to the
financial statements.
(i) At June 30, 1995, the cost of securities for federal income tax
purposes was $1,281,725,449 and the aggregate gross unrealized
appreciation and depreciation based on that cost was:
Unrealized appreciation $ 45,534,851
Unrealized depreciation (14,948,861)
____________________________________________
Net unrealized appreciation $(30,585,990)
____________________________________________
<PAGE>
PAGE 24
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) cornucopia
IDS Bond Fund
Invests mainly in corporate bonds, at least 50% in the higher
rated, lower risk bond categories, or the equivalent, and in
government bonds.
(icon of) greek column
<PAGE>
PAGE 25
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
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
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
<PAGE>
PAGE 26
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
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
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 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 27
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.
(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) flower
<PAGE>
PAGE 28
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
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 29
Federal income tax information
IDS Federal 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 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 Federal Income Fund, Inc.
Fiscal year ended June 30, 1995
Class A
Income distributions -- taxable as dividend income,
none qualifying for deductions by corporations.
Payable date Per share
July 27, 1994 $0.02050
Aug. 29, 1994 0.02410
Sept. 28, 1994 0.02490
Oct. 27, 1994 0.02260
Nov. 29, 1994 0.02667
Dec. 29, 1994 0.02579
Jan. 26, 1995 0.02356
Feb. 24, 1995 0.02487
March 29, 1995 0.03050
April 27, 1995 0.02997
May 26, 1995 0.02847
June 27, 1995 0.02875
Total distributions $0.31068
Class B
Income distributions -- taxable as dividend income,
none qualifying for deductions by corporations.
March 29, 1995 0.02960
April 27, 1995 0.02699
May 26, 1995 0.02545
June 27, 1995 0.02541
Total distributions $0.10745
<PAGE>
PAGE 30
Class Y
Income distributions -- taxable as dividend income,
none qualifying for deductions by corporations.
March 29, 1995 0.03071
April 27, 1995 0.03060
May 26, 1995 0.02909
June 27, 1995 0.02947
Total distributions $0.11987
<PAGE>
PAGE 31
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
Your IDS financial advisor:
IDS Federal Income Fund
IDS Tower 10
Minneapolis, MN 55440-0010
<PAGE>
PAGE 32
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 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.
