-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, PR0sS9SDhBE1WBMwKTZ8XEHVDzPKNOg+mDtj2Dz33vYrTXPRiwB3lchYDfUyGs/v FlvbRMt9hmBjQHYDd6zWEQ== 0000820027-95-000524.txt : 19951101 0000820027-95-000524.hdr.sgml : 19951101 ACCESSION NUMBER: 0000820027-95-000524 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19950831 FILED AS OF DATE: 19951031 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: IDS EXTRA INCOME FUND INC CENTRAL INDEX KEY: 0000728374 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] IRS NUMBER: 411458705 STATE OF INCORPORATION: MN FISCAL YEAR END: 0831 FILING VALUES: FORM TYPE: N-30D SEC ACT: 1940 Act SEC FILE NUMBER: 811-03848 FILM NUMBER: 95585918 BUSINESS ADDRESS: STREET 1: 80 SOUTH 8TH STREET STREET 2: T33/52 CITY: MINNEAPOLIS STATE: MN ZIP: 55440 BUSINESS PHONE: 6123722772 N-30D 1 IDS EXTRA INCOME FUND, INC. PAGE 1 IDS Extra Income Fund 1995 annual report (prospectus enclosed) (Icon of) cornucopia The primary goal of IDS Extra Income Fund, Inc. is to provide high current income. Capital growth is a secondary goal. The Fund invests primarily, and may invest all of its assets, in long-term corporate bonds in the lower-rating categories, commonly known as junk bonds. These securities generally have greater price fluctuations than higher-rated securities and are more likely to experience a default. Investors should carefully consider these risks before investing. See the prospectus sections entitled "Types of Fund investments and their risks" and "Facts about investments and their risks." (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 2 (Icon of) cornucopia Bonds with something extra Bonds aren't necessarily conservative securities strictly for people willing to settle for modest returns. High-yield corporate bonds, for example, are actually quite aggressive investments, offering high potential returns to investors willing to take more risk. These are the bonds that Extra Income Fund invests in. High-yield bonds are issued by a wide range of companies - from well- established ones that might be experiencing financial difficulty to new, rapidly growing ones that have yet to build a credit history. Importantly, the Fund spreads its investments among many bonds representing many types of businesses. This helps to reduce the investment risk for shareholders. PAGE 3 Contents (Icon of) One open book inside of another. The purpose of this annual report is to tell investors how the Fund performed. The prospectus, which is bound into the middle of this annual report, describes the Fund in detail. 1995 annual report From the president 4 From the portfolio manager 4 Ten largest holdings 6 Making the most of your Fund 7 Long-term performance 8 Independent auditors' report 9 Financial statements 10 Notes to financial statements 13 Investments in securities 23 IDS mutual funds 35 Federal income tax information 38 1995 prospectus The Fund in brief Goals 3p Types of Fund investments and their risks 3p Proposed conversion to master/feeder structure 3p Manager and distributor 3p Portfolio manager 3p Alternative purchase arrangements 3p Sales charge and Fund expenses 4p Performance Financial highlights 6p Total returns 7p Yield 9p Investment policies and risks Facts about investments and their risks 10p Valuing Fund shares 15p How to purchase, exchange or redeem shares Alternative purchase arrangements 16p How to purchase shares 19p How to exchange shares 22p How to redeem shares 22p Reductions and waivers of the sales charge 27p Special shareholder services Services 31p Quick telephone reference 31p PAGE 4 Distributions and taxes Dividend and capital gain distributions 32p Reinvestments 33p Taxes 33p How to determine the correct TIN 35p How the Fund is organized Shares 36p Voting rights 36p Shareholder meetings 36p Special considerations regarding master/feeder structure 37p Directors and officers 39p Investment manager and transfer agent 41p Distributor 42p About American Express Financial Corporation General information 43p Appendices Description of corporate bond ratings 44p Descriptions of derivative instruments 46p (This annual report is not part of the prospectus.) PAGE 5 To our shareholders (Picture of William Pearce) William R. Pearce President of the fund (Picture of Jack Utter) Jack Utter Portfolio manager From the president As I indicated in the Fund's previous reports, new agreements between the Fund and American Express Financial Corporation (AEFC) 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. A portion of these charges compensates 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 After enduring one of its worst years in history during 1994, the bond market took the turning of the calendar as a cue to stage a strong recovery during 1995. The Fund was in a good position to benefit from the upturn, and ultimately rewarded patient shareholders with a substantial total return for the fiscal year (September 1994 through August 1995). The period began with bonds still suffering from the impact of its number-one nemesis - higher interest rates, which had plagued the market since early 1994. (Rising interest rates depress bond values, while falling rates enhance them. Bond mutual funds are similarly affected.) While high-yield bonds are less sensitive to interest-rate changes than other sectors of the market, they nevertheless were affected. A welcome relief Much to the relief of bond investors, January ushered in not only a new year but a new psychology in the bond market. The change was both rapid and remarkable. Late last year, talk centered on the possibility of strong economic growth leading to even higher interest rates. However, the new year brought new talk: the economy might gradually slow down, take the upward pressure off inflation and allow interest rates to find some relative stability. PAGE 6 Very soon, money began flowing back into the bond market, and prices responded quickly and positively. At first, the upswing was driven by professional investors such as mutual fund managers, many of whom were holding substantial supplies of cash generated by their bond-selling in previous months. Mutual fund investors then began moving back into the market, fostering even more buying and, naturally, still-higher bond prices. Casinos, 'zeros' gain ground The positive forces remained in place throughout most of the spring and summer. Particularly productive during the upswing were the Fund's holdings among bonds issued by casinos and communications companies, as well as zero coupon bonds. Complementing them were gains from bonds of paper/packaging and chemical companies, as well as a modest amount of mortgage-backed instruments. In other categories, bonds issued by retailers and restaurants were relatively poor performers, but because of the portfolio's minor exposure to those areas, Fund performance was largely unaffected. As it has for some time, the fund maintained an essentially fully invested portfolio - that is, it held only a small amount of cash reserves, preferring instead to keep the great majority of assets invested in high-yield bonds. As we begin a new fiscal year, I'm encouraged by prospects for a continuation of the positive framework the market has recently enjoyed: modest economic growth, low inflation and a less restrictive interest-rate policy by the Federal Reserve. I expect those factors to remain in place in the months ahead, which would bode well for the bond market as a whole, including high-yield assets. (signature) Jack Utter Class A 12-month performance (All figures per share) Net asset value (NAV) - ------------------------------ Aug. 31, 1995 $4.15 Aug. 31, 1994 $4.02 Increase $0.13 Distributions Sept. 1, 1994 - Aug. 31, 1995 - ------------------------------ From income $0.39 From capital gains $ -- Total distributions $0.39 Total return** +14.2%*** PAGE 7 Class B March 20, 1995 - Aug. 31, 1995 (All figures per share) Net asset value (NAV) - ------------------------------ Aug. 31, 1995 $4.15 March 20, 1995* $3.93 Increase $0.22 Distributions March 20, 1995* - Aug. 31, 1995 - ------------------------------ From income $0.17 From capital gains $ -- Total distributions $0.17 Total return** +9.9%*** Class Y March 20, 1995 - Aug. 31, 1995 (All figures per share) Net asset value (NAV) - ------------------------------ Aug. 31, 1995 $4.15 March 20, 1995* $3.93 Increase $0.22 Distributions March 20, 1995* - Aug. 31, 1995 - ------------------------------ From income $0.19 From capital gains $ -- Total distributions $0.19 Total return** +10.4%*** *Inception date. **The prospectus discusses the effect of sales charges, if any, on the various classes. ***The total return is a hypothetical investment in the Fund with all distributions reinvested. (This annual report is not part of the prospectus.) PAGE 8
Your fund's ten largest holdings (Pie chart) The ten holdings listed here make up 13.69% of the Fund's net assets _____________________________________________________________________________________ Percent Value (of fund's net assets) (as of Aug. 31, 1995) _____________________________________________________________________________________ Comcast Cellular 1.96% $37,312,500 Zero Coupon 2000 G-I Holdings 1.92 36,375,000 Zero Coupon Sr Nts 1998 Gaylord Container 1.47 28,000,000 Zero Coupon Sr Sub Disc Deb 1996 Adelphia Communications 1.41 26,735,372 Pay-in-Kind 2004 Trump Taj Mahal Funding 1.33 25,269,402 Pay-in-Kind 1999 Mesa Capital 1.22 23,125,000 7.312 2005 Kash n' Karry Food Stores 1.41 21,738,544 Common Stock Tenet Healthcare 1.11 21,050,000 10.125% Sr Sub Nts 2005 PT Indah Kiat Pulp & Paper 1.09 20,625,000 11.875% 2002 Intermedia Communications of Florida 1.04 19,769,672 11% 2015 Total
PAGE 9 Making the most of your fund Average annual total return (as of Aug. 31, 1995) Class A 1 year 5 years 10 years +8.45% +14.02% +9.58% Total returns for Class A, Class B and Class Y for the period from March 20, 1995 to Aug. 31, 1995 were +4.85%, 5.01% and +10.41%, 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 use 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 Feb 100 18 5.56 Mar 100 17 5.88 Apr 100 15 6.67 May 100 16 6.25 June 100 18 5.56 July 100 17 5.88 Aug 100 19 5.26 Sept 100 21 4.76 Oct 100 20 5.00 (footnotes to table) By investing an equal number of dollars each month... (arrow in table pointing to April) you automatically buy more shares when the per share market price is low (arrow in table pointing to August) and fewer shares when the per share market price is high. PAGE 10 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. 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 Extra Income Fund Average annual total return (as of Aug. 31, 1995) X 1 year 5 years 10 years $24,982 Extra Income +8.45% +14.02% +9.58% Fund --- Lehman Aggregate Bond Index x $9,500 (line graph showing Extra Income Fund tracking slightly below Lehman Aggregate Bond Index) '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 from March 20, 1995 to Aug. 31, 1995 were +4.85%, +5.01% and +10.41%, 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 two paragraphs appear in the margin next to the graph:) Assumes: -Holding period from 8/31/85 to 8/31/95. -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 $16,964. The Lehman Aggregate Bond Index is made up of a representative list of government and corporate bonds as well as asset-backed securities and mortgage-backed securities. The index is frequently used as a general measure of bond market performance. However, the securities used to create the index may not be representative of the bonds held in Extra Income Fund. PAGE 11 On the graph above you can see how the Fund's total return compared to a widely cited performance measure, the Lehman Aggregate Bond Index. In comparing Extra Income Fund with this index, you should take into account the fact that the Fund's performance reflects the maximum sales charge of 5%, while such charges are not reflected in the performance of the index. If you were actually to buy either individual bonds or bond mutual funds, any sales charges that you pay would reduce your total return as well. Your investment and return values fluctuate so that your shares, when redeemed, may be worth more or less than the original cost. Average annual total return figures reflect the deduction of the maximum sales charge as discussed in the prospectus. This was a period of widely fluctuating security prices. Past performance is no guarantee of future results. PAGE 12 Independent auditors' report The board of directors and shareholders IDS Extra Income Fund, Inc.: We have audited the accompanying statement of assets and liabilities, including the schedule of investments in securities, of IDS Extra Income Fund, Inc. as of August 31, 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 August 31, 1995, and the financial highlights for each of the years in the ten-year period ended August 31, 1995. These financial statements and the financial highlights are the responsibility of fund management. Our responsibility is to express an opinion on these financial statements and the financial highlights based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and the financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Investment securities held in custody are confirmed to us by the custodian. As to securities purchased but not received and securities on loan, we request confirmations from brokers, and where replies are not received, we carry out other appropriate auditing procedures. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of IDS Extra Income Fund, Inc. at August 31, 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 August 31, 1995, and the financial highlights for the periods stated in the first paragraph above, in conformity with generally accepted accounting principles. KPMG Peat Marwick LLP Minneapolis, Minnesota October 6, 1995 PAGE 13 Financial statements Statement of assets and liabilities IDS Extra Income Fund, Inc. Aug. 31, 1995
_____________________________________________________________________________________________________________ Assets _____________________________________________________________________________________________________________ Investments in securities, at value (Note 1): Investments in securities of unaffiliated issuers (identified cost $1,832,716,421) $1,852,428,126 Investments in securities of affiliated issuers (identified cost $31,062,250) 24,919,677 Cash in bank on demand deposit 4,764,166 Dividends and accrued interest receivable 40,046,061 _____________________________________________________________________________________________________________ Total assets 1,922,158,030 _____________________________________________________________________________________________________________ Liabilities _____________________________________________________________________________________________________________ Dividends payable to shareholders 2,863,256 Payable for investment securities purchased 8,479,267 Payable upon return of securities loaned (Note 4) 11,030,250 Accrued investment management services fee 60,120 Accrued distribution fee 3,071 Accrued service fee 18,183 Accrued transfer agency fee 8,820 Accrued administrative services fee 4,953 Other accrued expenses 223,042 _____________________________________________________________________________________________________________ Total liabilities 22,690,962 _____________________________________________________________________________________________________________ Net assets applicable to outstanding capital stock $1,899,467,068 _____________________________________________________________________________________________________________ Represented by _____________________________________________________________________________________________________________ Capital stock -- authorized 10,000,000,000 shares of $.01 par value; $ 4,574,280 Additional paid-in capital 2,158,133,020 Undistributed net investment income 7,554,854 Accumulated net realized loss (Notes 1 and 7) (284,364,218) Unrealized appreciation 13,569,132 _____________________________________________________________________________________________________________ Total -- representing net assets applicable to outstanding capital stock $1,899,467,068 _____________________________________________________________________________________________________________ Net assets applicable to outstanding shares: Class A $1,821,708,761 Class B $ 76,174,216 Class Y $ 1,584,091 Net asset value per share of outstanding capital stock: Class A shares 438,700,879 $ 4.15 Class B shares 18,345,617 $ 4.15 Class Y shares 381,486 $ 4.15 See accompanying notes to financial statements. PAGE 14 Financial statements Statement of operations IDS Extra Income Fund, Inc. Year ended Aug. 31, 1995 _____________________________________________________________________________________________________________ Investment income _____________________________________________________________________________________________________________ Income: Interest $170,484,760 Dividends (net of foreign taxes withheld of $22,018) 9,157,336 _____________________________________________________________________________________________________________ Total income 179,642,096 _____________________________________________________________________________________________________________ Expenses (Note 2): Investment management services fee 9,856,787 Distribution fee Class A 375,920 Class B 113,608 Transfer agency fee 1,786,047 Incremental transfer agency fee - Class B 1,228 Service fee Class A 1,379,500 Class B 26,508 Administrative services fee 384,474 Compensation of directors 33,343 Compensation of officers 19,349 Custodian fees 108,157 Postage 257,898 Registration fees 154,536 Reports to shareholders 107,662 Audit fees 36,500 Administrative 17,909 Other 26,362 _____________________________________________________________________________________________________________ Total expenses 14,685,788 _____________________________________________________________________________________________________________ Investment income -- net 164,956,308 _____________________________________________________________________________________________________________ Realized and unrealized gain (loss) -- net _____________________________________________________________________________________________________________ Net realized loss on security and foreign currency transactions (including loss of $415 from foreign currency transactions)(Note 3) (94,618,530) Net change in unrealized appreciation or depreciation 154,638,498 _____________________________________________________________________________________________________________ Net gain on investments and foreign currency 60,019,968 _____________________________________________________________________________________________________________ Net increase in net assets resulting from operations $224,976,276 _____________________________________________________________________________________________________________ See accompanying notes to financial statements. /TABLE PAGE 15 Financial statements Statements of changes in net assets IDS Extra Income Fund, Inc. Year ended Aug. 31,
_____________________________________________________________________________________________________________ Operations and distributions 1995 1994 _____________________________________________________________________________________________________________ Investment income -- net $ 164,956,308 $ 163,697,253 Net realized gain (loss) on investments and foreign currency (94,618,530) 31,955,638 Net change in unrealized appreciation or depreciation 154,638,498 (206,694,603) _____________________________________________________________________________________________________________ Net increase (decrease) in net assets resulting from operations 224,976,276 (11,041,712) _____________________________________________________________________________________________________________ Distributions to shareholders from: Net investment income Class A (163,086,676) (161,824,143) Class B (1,285,639) -- Class Y (64,716) -- _____________________________________________________________________________________________________________ Total distributions (164,437,031) (161,824,143) _____________________________________________________________________________________________________________ Capital share transactions (Note 5) _____________________________________________________________________________________________________________ Proceeds from sales Class A shares (Note 2) 386,116,539 557,279,130 Class B shares 76,560,620 -- Class Y shares 2,243,811 -- Reinvestment of distributions at net asset value Class A shares 105,087,318 103,446,970 Class B shares 977,944 -- Class Y shares 60,615 -- Payments for redemptions Class A shares (354,557,559) (409,030,424) Class B shares (Note 2) (2,378,996) -- Class Y shares (807,210) -- _____________________________________________________________________________________________________________ Increase in net assets from capital share transactions 213,303,082 251,695,676 _____________________________________________________________________________________________________________ Total increase in net assets 273,842,327 78,829,821 Net assets at beginning of year 1,625,624,741 1,546,794,920 _____________________________________________________________________________________________________________ Net assets at end of year (including undistributed net investment income of $7,554,854 and $7,035,992) $1,899,467,068 $1,625,624,741 _____________________________________________________________________________________________________________ See accompanying notes to financial statements
PAGE 16 Notes to financial statements IDS Extra Income Fund, Inc. ___________________________________________________________________ 1. Summary of significant accounting policies The Fund is registered under the Investment Company Act of 1940 (as amended) as a diversified, open-end management investment company. The Fund 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 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) differs among classes. Income, expenses (other than class specific expenses) and realized and unrealized gains or losses on investments are allocated to each class of shares based upon its relative net assets. Significant accounting policies followed by the Fund are summarized below: Valuation of securities All securities are valued at the close of each business day. Securities traded on national securities exchanges or included in national market systems are valued at the last quoted sales price; securities for which market quotations are not readily available, including illiquid securities, are valued at fair value according to methods selected in good faith by the board 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. Option transactions In order to produce incremental earnings, protect gains, and facilitate buying and selling of securities for investment purposes, the Fund may buy or write options traded on any U.S. or foreign exchange or in the over-the-counter market where the completion of the obligation is dependent upon the credit standing of the other party. The Fund also may buy and sell put and call options and write covered call options on portfolio securities and may write cash-secured put options. The risk in writing a call option is that the Fund gives up the opportunity of profit if the market price of the security increases. The risk in writing a put PAGE 17 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. Option contracts are valued daily at the closing prices on their primary exchanges and unrealized appreciation or depreciation is recorded. The Fund will realize a gain or loss upon expiration or closing of the option transaction. When options on debt securities or futures are exercised, the Fund will realize a gain or loss. When other options are exercised, the proceeds on sales for a written call option, the purchase cost for a written put option or the cost of a security for a purchased put or call option is adjusted by the amount of premium received or paid. Futures transactions In order to gain exposure to or protect itself from changes in the market, the Fund may buy and sell interest rate futures contracts traded on any U.S. or foreign exchange. The Fund also may buy or write put and call options on these futures contracts. Risks of entering into futures contracts and related options include the possibility that there may be an illiquid market and that a change in the value of the contract or option may not correlate with changes in the value of the underlying securities. Upon entering into a futures contract, the Fund is required to deposit either cash or securities in an amount (initial margin) equal to a certain percentage of the contract value. Subsequent payments (variation margin) are made or received by the Fund each day. The variation margin payments are equal to the daily changes in the contract value and are recorded as unrealized gains and losses. The Fund recognizes a realized gain or loss when the contract is closed or expires. Foreign currency translations and foreign currency contracts Securities and other assets and liabilities denominated in foreign currencies are translated daily into U.S. dollars at the closing rate of exchange. Foreign currency amounts related to the purchase or sale of securities and income and expenses are translated at the exchange rate on the transaction date. The effect of changes in foreign exchange rates on realized and unrealized security gains or losses is reflected as a component of such gains or losses. In the statement of operations, net realized gains or losses from foreign currency transactions may arise from sales of foreign currency, closed forward contracts, exchange gains or losses realized between the trade date and settlement dates on securities transactions, and other translation gains or losses on dividends, interest income and foreign withholding taxes. The Fund may enter into forward foreign currency exchange contracts for operational purposes and to protect against adverse exchange rate fluctuation. The net U.S. dollar value of foreign currency underlying all contractual commitments held by the Fund and the PAGE 18 resulting unrealized appreciation or depreciation are determined using foreign currency exchange rates from an independent pricing service. The Fund is subject to the credit risk that the other party will not complete the obligations of the contract. Federal taxes Since the Fund's policy is to comply with all sections of the Internal Revenue Code applicable to regulated investment companies and to distribute all of its taxable income to shareholders, no provision for income or excise taxes is required. Net investment income (loss) and net realized gains (losses) may differ for financial statement and tax purposes primarily because of the deferral of losses on certain futures contracts, the recognition of certain foreign currency gains (losses) as ordinary income (loss) for tax purposes, and losses deferred due to "wash sale" transactions. The character of distributions made during the year from net investment income or net realized gains may differ from their ultimate characterization for federal income tax purposes. Also, due to the timing of dividend distributions, the fiscal year in which amounts are distributed may differ from the year that the income or realized gains (losses) were recorded by the Fund. On the statement of assets and liabilities, as a result of permanent book-to-tax differences, undistributed net investment income has been decreased by $415 resulting in a net reclassification adjustment to decrease accumulated net realized loss by $415. 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. Dividend income is recognized on the ex-dividend date. For U.S. dollar denominated bonds, interest income includes level-yield amortization of premium and discount. For foreign bonds, except for original issue discount, the Fund does not amortize premium and discount. Interest income, including level-yield amortization of premium and discount, is accrued daily. ___________________________________________________________________ 2. Expenses and sales charges Under terms of a prior agreement that ended March 19, 1995, the Fund paid 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 PAGE 19 combined net assets of all non-money market Funds in the IDS MUTUAL FUND GROUP and an individual annual asset charge of 0.21% 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 0.59% to 0.465% annually. Under an Administrative Services Agreement, the fund pays AEFC for administration and accounting services at a percentage of the fund's average daily net assets in reducing percentages from 0.05% to 0.025% annually. Under a separate Transfer Agency Agreement, AEFC maintains shareholder accounts and records. The Fund pays AEFC an annual fee per shareholder account for this service as follows: o Class A $15.50 o Class B $16.50 o Class Y $15.50 Also effective March 20, 1995, the Fund entered into agreements with American Express Financial Advisors Inc. for distribution and shareholder servicing-related services as follows: Under a Plan and Agreement of Distribution, the Fund pays a distribution fee at an annual rate of 0.75% of the Fund's average daily net assets attributable to Class B shares for distribution-related services. Under a Shareholder Service Agreement, the Fund pays a fee for service provided to shareholders by financial advisors and other servicing agents. The fee is calculated at a rate of 0.175% of the Fund's average daily net assets attributable to Class A and Class B shares. AEFC will assume and pay any expenses (except taxes and brokerage commissions) that exceed the most restrictive applicable state expense limitation. Sales charges by American Express Financial Advisors Inc. for distributing Fund shares were $7,919,077 for Class A and $3,236 for Class B for the year ended Aug. 31, 1995. 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 PAGE 20 but the Fund recognizes the cost of payments during the time the directors serve on the board. The retirement plan expense amounted to $9,546 for the year ended Aug. 31, 1995. ___________________________________________________________________ 3. Securities transactions Cost of purchases and proceeds from sales of securities (other than short-term obligations) aggregated $1,343,222,071 and $1,128,488,834, respectively, for the year ended Aug. 31, 1995. Realized gains and losses are determined on an identified cost basis. ___________________________________________________________________ 4. Lending of portfolio securities At Aug. 31, 1995, securities valued at $10,753,225 were on loan to brokers. For collateral, the Fund received $11,030,250 in cash. Income from securities lending amounted to $122,931 for the year ended Aug. 31, 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. Capital share transactions Transactions in shares of capital stock for the periods indicated are as follows:
Period ended Aug. 31, 1995 Year ended 8/31/94 Class A Class B* Class Y* Class A ______________________________________________________________________________ Sold 97,298,897 18,688,995 565,786 126,616,129 Issued for reinvested 26,443,241 236,714 14,823 23,746,710 distributions Redeemed (89,533,246) (580,092) (199,123) (94,149,106) ______________________________________________________________________________ Net increase 34,208,892 18,345,617 381,486 56,213,733 ______________________________________________________________________________ *Inception date was March 20, 1995.
___________________________________________________________________ 6. Illiquid securities At Aug. 31, 1995, investments in securities included issues that are illiquid. The Fund currently limits investments in illiquid securities to 10% of the net assets, at market value, at the time of purchase. The aggregate value of such securities at Aug. 31, PAGE 21 1995 was $33,122,797, representing 1.7% of net assets. Pursuant to guidelines adopted by the Fund's board of directors, certain unregistered securities are determined to be liquid and are not included within the 10% limitation specified above. ___________________________________________________________________ 7. Capital loss carryover For federal income tax purposes, the Fund had a capital loss carryover of $289,111,735 at Aug. 31, 1995, that will expire in 2002 to 2004 if not offset by subsequent capital gains. It is unlikely the board of directors will authorize a distribution of any net realized capital gains until the available capital loss carryover has been offset or expires. ___________________________________________________________________ 8. Financial highlights "Financial highlights" showing per share data and selected information is presented on page 6 of the prospectus. PAGE 22
Investments in securities (Percentages represent value of IDS Extra Income Fund, Inc. investments compared to net assets) Aug. 31, 1995 Investments in securities of unaffiliated issuers _____________________________________________________________________________________________________________________________ Bonds (88.1%) _____________________________________________________________________________________________________________________________ Issuer Coupon Maturity Principal Value(a) rate year amount _____________________________________________________________________________________________________________________________ Mortgage-backed securities (2.2%) Federal Home Loan Mtge Corp 6.875% 1995-2017 $ 7,804 (b) $ 7,969 Collateralized Mtge Obligation 3.24 2023 9,550,866 4,999,019 Inverse Floater 5.39 2023 3,352,980 (l) 2,666,994 6.012 2023 4,000,000 (l) 2,660,920 6.061 2023 4,543,459 (l) 3,323,631 6.108 2023 1,855,844 1,504,310 6.356 2023 9,000,000 (l) 5,625,000 7.227 2023 4,407,829 (l) 2,972,420 7.262 2024 9,865,946 (l) 6,459,827 8.015 2022 7,643,243 (l) 6,233,752 Resolution Trust 8.00 2026 7,010,013 5,397,710 ______________ Total 41,851,552 _____________________________________________________________________________________________________________________________ Financial (3.5%) Banks and savings & loans (0.3%) First Nationwide Holdings Sr Nts 12.25 2001 6,000,000 6,427,500 _____________________________________________________________________________________________________________________________ Financial services (0.7%) Malan Realty Investors REIT Cv Sub Deb 9.50 2004 2,750,000 2,437,188 Olympic Financial Sr Nts 13.00 2000 9,500,000 (m) 10,034,375 ______________ Total 12,471,563 _____________________________________________________________________________________________________________________________ Insurance (2.5%) Americo Life Sr Sub Nts 9.25 2005 15,000,000 13,856,250 I.C.H. Sr Sub Nts 11.25 1996 17,000,000 (d) 12,218,750 Life Partners Sr Sub Nts 12.75 2002 10,000,000 11,037,500 Reliance Group Holdings Sr Sub Deb 9.75 2003 10,000,000 (m) 9,762,500 _____________ Total 46,875,000 _____________________________________________________________________________________________________________________________ Industrial (68.9%) Aerospace & defense (1.7%) Alliant Techsystems Sr Sub Nts 11.75 2003 8,000,000 8,700,000 Sequa Sr Sub Nts 9.375 2003 16,000,000 14,900,000 TransDigm Sr Secured Nts 13.00 2000 8,950,000 (e) 8,189,250 ______________ Total 31,789,250 _____________________________________________________________________________________________________________________________ Automotive & related (0.5%) Penda Sr Nts 10.75 2004 10,000,000 8,912,500 _____________________________________________________________________________________________________________________________ Beverages & tobacco (0.6%) Liggett Group 11.50 1999 15,000,000 10,875,000 _____________________________________________________________________________________________________________________________ See accompanying notes to investments in securities. PAGE 23 Building materials (2.6%) Amer Standard Zero Coupon Sr Sub Disc Deb 10.46 1998 15,000,000 (f) 11,625,000 MDC Holdings 11.125 2003 4,000,000 3,595,000 Peters (JM) Sr Nts 12.75 2002 6,000,000 5,407,500 Schuller Intl Group Sr Nts 10.875 2004 12,000,000 13,230,000 Southdown Sr Sub Nts 14.00 2001 5,000,000 5,637,500 Walter Inds Sr Nts 12.19 2000 10,000,000 10,150,000 ______________ Total 49,645,000 _____________________________________________________________________________________________________________________________ Chemicals (1.3%) Harris Chemical North Amer Sr Sub Nts 10.75 2003 10,000,000 8,537,500 Huntsman 1st Mtge 11.00 2004 15,000,000 16,481,250 ______________ Total 25,018,750 _____________________________________________________________________________________________________________________________ Communications equipment (2.6%) Celcaribe Zero Coupon 14.874 2004 9,650,000 (c,f) 7,177,250 Cencall Communications Zero Coupon Sr Nts 10.09 1999 18,000,000 (f) 9,337,500 Communications & Power Inds Sr Sub Nts 12.00 2005 7,500,000 (c) 7,584,375 Panamsat Zero Coupon 12.63 1998 22,000,000 (f) 16,912,500 Pegasus Media & Communications Gtd Sr Nts 12.50 2005 7,500,000 (c) 7,612,500 U.S. Cellular Zero Coupon Cv 6.00 2015 3,800,000 (f) 1,344,250 ______________ Total 49,968,375 _____________________________________________________________________________________________________________________________ Computers & office equipment (0.4%) Anacomp 12.25 1997 3,160,000 (e) 3,128,400 Dictaphone Sr Sub Nts 11.75 2005 4,500,000 4,516,875 ______________ Total 7,645,275 _____________________________________________________________________________________________________________________________ Energy (2.9%) Chesapeake Energy 12.00 2001 7,000,000 6,956,250 Harcor Energy Sr Nts 14.875 2002 7,500,000 (c) 7,275,000 Mesa Capital 12.75 1998 25,000,000 (j) 23,125,000 Triton Energy Zero Coupon Sr Nts 9.68 1996 7,500,000 (f) 6,787,500 Wainoco Oil Sr Sub Nts 12.00 2002 10,800,000 10,867,500 ______________ Total 55,011,250 _____________________________________________________________________________________________________________________________ Food (1.7%) Chiquita Brands Intl Sr Nts 9.625 2004 8,500,000 8,351,250 Specialty Foods 10.25 2001 5,000,000 (c) 5,031,250 11.25 2003 11,000,000 (c) 10,945,000 Zero Coupon 12.96 1999 17,000,000 (c,f) 8,755,000 ______________ Total 33,082,500 _____________________________________________________________________________________________________________________________ Health care (2.4%) Amerisource Distribution Pay-in-Kind -- 2005 8,101,539 (n) 8,678,774 Hillhaven Sr Sub Nts 10.125 2001 5,000,000 5,443,750 Tenet Healthcare Sr Sub Nts 10.125 2005 20,000,000 21,050,000 Total Renal Care 12.00 2004 11,500,000 10,580,000 ______________ Total 45,752,524 _____________________________________________________________________________________________________________________________ PAGE 24 Health care services (0.7%) Charter Medical Sr Sub Nts 11.25 2004 12,500,000 13,500,000 _____________________________________________________________________________________________________________________________ Household products (1.0%) Darling-Delaware Sr Sub Nts 11.00 2000 9,932,000 9,919,585 Playtex Family Products Sr Sub Nts 9.00 2003 10,000,000 9,437,500 ______________ Total 19,357,085 _____________________________________________________________________________________________________________________________ Industrial equipment & services (2.9%) ACF Inds 11.60 2000 3,802,000 3,830,515 Borg-Warner Security Sr Sub Nts 9.125 2003 10,000,000 8,862,500 Fairchild Inds Sr Secured Nts 12.25 1999 15,000,000 15,281,250 Sr Sub Nts 12.25 1996 5,400,000 5,393,250 Specialty Equipment Sr Sub Nts 11.375 2003 15,500,000 16,042,500 Terex 13.75 2002 6,000,000 (c) 4,620,000 ______________ Total 54,030,015 _____________________________________________________________________________________________________________________________ Leisure time & entertainment (9.0%) Alliance Entertainment Sr Sub Nts 11.25 2005 10,000,000 (c) 10,037,500 AMC Entertainment Sr Nts 11.875 2000 5,000,000 5,450,000 Bally's Grand 1st Mtge 10.375 2003 10,000,000 (m) 9,775,000 Bally's Health & Tennis Sr Sub Nts 13.00 2003 10,000,000 9,050,000 Bally's Park Place Funding 1st Mtge Nts 9.25 2004 15,000,000 14,118,750 Cinemark (USA) Sr Sub Nts 12.00 2002 7,500,000 8,109,375 GNF Bally 10.625 2003 5,000,000 4,343,750 Hollywood Casino 14.00 1998 6,500,000 7,158,125 Hollywood Casino-Tunica 13.50 1998 16,000,000 19,060,000 MGM Grand Hotel Finance 11.75 1999 10,000,000 10,687,500 12.00 2002 14,000,000 15,382,500 Plitt Theatres 10.875 2004 14,850,000 14,515,875 Trump Castle Funding Mtge Nts 11.75 2003 14,711,250 11,860,945 Trump Taj Mahal Funding Pay-in-Kind -- 1999 30,082,622 (n) 25,269,402 United Artists 11.50 2002 6,000,000 (c) 6,397,500 ______________ Total 171,216,222 _____________________________________________________________________________________________________________________________ Media (12.0%) Ackerley Communications Sr Secured Nts 10.75 2003 7,000,000 (c) 7,358,750 Adelphia Communications Pay-in-Kind -- 2004 31,592,759 (n) 26,735,372 Sr Deb 11.875 2004 5,000,000 5,031,250 Amer Telecasting Zero Coupon 12.50 2004 8,000,000 (f) 4,620,000 Benedek Broadcasting Sr Nts 11.875 2005 10,625,000 (c) 11,222,656 Big Flower Press Sr Sub Nts 10.75 2003 7,000,000 (c) 7,026,250 Cablevision Systems Sr Sub Deb 9.875 2013 8,000,000 8,720,000 Sr Sub Deb 10.75 2004 11,500,000 12,261,875 Comcast Cellular Zero Coupon 11.73 2000 50,000,000 (f) 37,312,500 Continental Cablevision Sr Sub Deb 11.00 2007 9,800,000 10,829,000 Outdoor Systems Sr Nts 10.75 2003 8,500,000 8,213,125 Paramount Communications Sub Deb 7.00 2003 15,000,000 14,287,950 People's Choice TV Zero Coupon 7.21 2004 20,500,000 (f,m) 9,583,750 Robin Media Group 11.125 1997 8,250,000 7,971,563 11.625 1999 5,000,000 4,918,750 PAGE 25 Scandinavian Broadcasting Cv Sub Deb 7.25 2005 4,000,000 4,350,000 U.S. Banknote Sr Nts 11.625 2002 13,000,000 9,880,000 Universal Outdoor Sr Nts 11.00 2003 13,000,000 12,756,250 Viacom Sub Deb 8.00 2006 20,000,000 19,500,000 Videotron Holdings Zero Coupon Sr Disc Nts 5.43 2005 10,000,000 (f,m) 5,875,000 ______________ Total 228,454,041 _____________________________________________________________________________________________________________________________ Metals (2.4%) Carbide/Graphite Group Sr Nts 11.50 2003 10,000,000 10,550,000 EnviroSource Sr Nts 9.75 2003 8,000,000 7,320,000 Kaiser Aluminum & Chemical Sr Nts 9.875 2002 11,500,000 11,543,125 NS Group 13.50 2003 14,000,000 13,370,000 Sahaviriya Steel Inds Cv 3.50 2005 3,000,000 (c) 3,030,000 _____________ Total 45,813,125 _____________________________________________________________________________________________________________________________ Multi-industry conglomerates (3.7%) G-I Holdings Zero Coupon Sr Nts 11.37 1998 50,000,000 (f) 36,375,000 Saul (BF) REIT Sr Nts 11.625 2002 9,300,000 8,695,500 Talley Inds Zero Coupon Sr Disc Deb 12.20 1998 24,000,000 (f) 16,800,000 Talley Mfg & Technology Sr Nts 10.75 2003 8,500,000 8,500,000 _____________ Total 70,370,500 _____________________________________________________________________________________________________________________________ Paper & packaging (5.8%) Gaylord Container Zero Coupon Sr Sub Disc Deb 12.66 1996 28,000,000 (f) 28,000,000 Ivex Holdings Zero Coupon Sr Deb 14.02 2000 10,000,000 (f) 5,662,500 Plastic Containers Sr Secured Nts 10.75 2001 9,000,000 9,236,250 Repap Wisconsin Sr Secured Nts 9.875 2006 7,500,000 7,462,500 Sappi BVI Finance Cv 7.50 2002 3,000,000 (c) 3,093,750 Silgan Zero Coupon 13.19 1995 20,000,000 (f) 18,625,000 Stone Container Sr Nts 11.50 2004 4,500,000 4,848,750 Sr Nts 12.625 1998 4,500,000 4,950,000 Sr Sub Nts 11.00 1999 6,500,000 6,751,875 Sweetheart Cup Sr Sub Nts 10.50 2003 13,500,000 13,230,000 Warren (SD) Sr Nts 12.00 2004 6,500,000 7,255,625 ______________ Total 109,116,250 _____________________________________________________________________________________________________________________________ Restaurants & lodging (2.1%) Flagstar Sr Sub Deb 11.25 2004 15,000,000 11,681,250 Hammons (John Q) Hotels 1st Mtge 8.875 2004 12,000,000 11,370,000 Santa Fe Hotel 1st Mtge 11.00 2000 13,805,000 11,044,000 Trump Plaza Funding 1st Mtge 10.875 2001 7,000,000 (m) 6,475,000 ______________ Total 40,570,250 _____________________________________________________________________________________________________________________________ Retail (8.5%) Apparel Retail Zero Coupon 12.67 2005 11,500,000 (f) 7,144,375 Big V Supermarkets Sr Sub Nts 11.00 2004 6,000,000 4,927,500 Dairy Mart Convenience Stores Sr Sub Nts 10.25 2004 19,700,000 16,540,250 PAGE 26 Di Giorgio Sr Nts 12.00 2003 16,000,000 12,060,000 GND Holdings Zero Coupon -- 1999 579,120 (d,e,f) -- Zero Coupon Jr Sub Nt -- 1999 3,370,437 (d,e,f) -- Grand Union Sr Nts 12.00 2004 12,500,000 11,937,500 Kash n' Karry Food Stores Pay-in-kind -- 2003 16,549,690 (n) 16,715,187 Pathmark Stores Sr Sub Nts 9.625 2003 10,000,000 10,000,000 Zero Coupon Jr Sub Nts 11.71 1999 13,500,000 (f) 8,910,000 Penn Traffic Sr Sub Nts 9.625 2005 20,000,000 16,200,000 Pueblo Xtra Intl Sr Nts 9.50 2003 14,040,000 13,478,400 Ralphs Grocery Sr Nts 10.45 2004 10,000,000 9,800,000 Sr Sub Nts 11.00 2005 3,500,000 3,303,125 Service Merchandise Sr Sub Deb 9.00 2004 7,000,000 5,906,250 Stater Brothers Holdings Sr Nt 11.00 2001 14,500,000 14,481,875 Super Rite Foods Sr Sub Nts 10.625 2002 9,500,000 10,307,500 ______________ Total 161,711,962 _____________________________________________________________________________________________________________________________ Soaps & cosmetics (1.2%) Coty Sr Sub Nts 10.25 2005 10,000,000 10,362,500 Revlon Consumer Products Sr Nts 9.375 2001 2,500,000 2,481,250 Sr Nts 9.50 1999 10,000,000 10,050,000 ______________ Total 22,893,750 _____________________________________________________________________________________________________________________________ Textiles & apparel (2.0%) Dominion Textiles Sr Nts 8.875 2003 5,000,000 4,981,250 Hat Brand Holdings 12.625 2002 5,000,000 (e) 5,375,000 Hosiery Corp of America 13.75 2002 10,000,000 10,370,000 WestPoint Stevens Sr Sub Deb 9.375 2005 18,000,000 17,550,000 ___________ Total 38,276,250 _____________________________________________________________________________________________________________________________ Miscellaneous (0.9%) ECM Funding LP 11.918 2002 3,030,092 (e) 3,333,102 KinderCare Learning Centers Sr Nts 10.375 2001 6,000,000 6,217,500 Samsonite Sr Sub Nts 11.125 2005 7,500,000 (c) 7,659,375 ______________ Total 17,209,977 _____________________________________________________________________________________________________________________________ Transportation (1.4%) Braniff Sr Reset Nts -- 1999 5,000,000 (d,e,h,j) -- GPA Delaware 8.75 1998 10,000,000 8,900,000 GPA Group 7.00 1997 1,301,192 (e,o) 1,236,132 7.25 1997 1,032,961 (e,o) 981,313 7.50 1997 2,135,619 (e,o) 2,028,838 7.562 1997 3,362,590 (e,o) 3,194,461 7.75 1997 492,220 (e,o) 467,609 7.875 1997 447,473 (e,o) 425,099 Trans Ocean Container 12.25 2004 8,750,000 8,892,188 ______________ Total 26,125,640 _____________________________________________________________________________________________________________________________ Utilities (4.4%) Electric (1.8%) California Energy Ltd Resource Sr Secured Nts 9.875 2003 7,000,000 (m) 7,078,750 First Palo Verde Funding 10.15 2016 6,150,000 6,284,193 Midland Funding II 13.25 2006 12,500,000 13,234,375 Texas-New Mexico Power Secured Deb 10.75 2003 7,000,000 7,446,250 ______________ Total 34,043,568 _____________________________________________________________________________________________________________________________ PAGE 27 Gas (0.6%) TransTexas Gas Sr Secured Nts 11.50 2002 10,000,000 10,525,000 _____________________________________________________________________________________________________________________________ Telephone (2.0%) Geotek Communications Zero Coupon 7.38 2005 20,750,000 (c,f) 10,375,000 Intermedia Communications of Florida Sr Nts 13.50 2005 19,750,000 (c) 19,769,672 Pagemart Nationwide (Warrants Attached) Zero Coupon Sr Nts 7.67 2000 14,500,000 (c,f) 8,700,000 ______________ Total 38,844,672 _____________________________________________________________________________________________________________________________ Foreign (7.7%)(g) Argentina Republic Euro (U.S. Dollar) 7.312 2005 22,750,000 13,920,156 Doman Inds (U.S. Dollar) 8.75 2004 16,500,000 16,025,625 Fresh Delmonte (U.S. Dollar) 10.00 2003 11,000,000 9,033,750 Gulf Canada Resources (U.S. Dollar) 9.25 2004 13,500,000 13,348,125 Mexican Cetes Treasury Bill (Mexican Peso) Zero Coupon 45.94 1996 17,281,150 (f) 2,329,309 Poland Discount (U.S. Dollar) 7.125 2024 5,000,000 3,806,250 Poland PDI Euro (U.S. Dollar) 3.25 2014 10,000,000 6,118,750 PT Indah Kiat Pulp & Paper (U.S. Dollar) 11.875 2002 20,000,000 20,625,000 Repap New Brunswick (U.S. Dollar) Sr Nts 10.625 2005 6,000,000 6,082,500 Republic of Brazil (U.S. Dollar) 7.31 2012 6,500,000 3,432,812 Rogers Cablesystems (U.S. Dollar) Sr Secured Nts 9.625 2002 5,000,000 5,075,000 Rogers Cantel (U.S. Dollar) Sr Sub Nts 11.125 2002 10,000,000 10,437,500 Sherritt (U.S. Dollar) 10.50 2014 10,000,000 10,262,500 Tarkett Intl (U.S. Dollar) 9.00 2002 10,000,000 10,125,000 Tjiwi Kimia (U.S. Dollar) 13.25 2001 15,000,000 16,143,750 ______________ Total 146,766,027 _____________________________________________________________________________________________________________________________ Total bonds (Cost: $1,642,843,562) $1,674,150,373 _____________________________________________________________________________________________________________________________ /TABLE PAGE 28
Stocks and other (7.8%) _____________________________________________________________________________________________________________________________ Issuer Shares Value(a) _____________________________________________________________________________________________________________________________ Amer Telecasting Warrants 40,000 40,000 Berg Electronics Common 770,400 (d) 4,237,200 Pay-in-kind 404,759 (c,n) 11,130,872 Celcaribe Common 951,210 (c,d) 1,236,573 Cherokee Warrants 44,107 3,867 Chevy Chase Savings 13% Preferred 180,000 5,197,500 Communications & Power Inds Common 3,500 (c,d) 354,375 14% Preferred 50,000 (c) 4,650,000 Crown Packaging Warrants 10,000 200,000 Dial Page Warrants 18,902 189 Dr. Pepper Bottling Holdings Common 100,000 (d) 425,000 EnviroSource 7.25% Cv Preferred 112,000 14,560,000 EUA Power Contingent Interest Certificates 5,000 (d,e,h) -- Federated Dept Stores Warrants 72,890 314,338 First Chicago 2.875% Cv Preferred 50,000 3,025,000 First Nationwide Bank 11.50% Preferred 106,500 11,448,750 Foodmaker Warrants 7,000 129,500 Gaylord Container Common 437,500 (d) 5,140,625 Warrants 562,500 5,484,375 Great Bay Power Common 75,553 (d) 623,304 Harcor Energy Warrants 165,000 (c) 189,750 Harvard Inds Pay-in-Kind 438,224 (n) 10,955,600 Hat Brand Holdings Warrants 90,346 (e) 993,802 Hemmetter Enterprises Warrants 36,000 (c) 54,000 Homestead Savings Warrants 42,500 (d,h) -- Hosiery Corp of Amer Warrants 10,000 (c) 30,000 Houlihan's Restaurant Warrants 5,886 29,430 IFINT Diversified Holdings Common 42,418 (e) 1,696,720 Intermedia Communications Warrants 19,750 197,763 K-III Communications Pay-in-Kind Sr Exchangeable 106,168 (n) 10,192,148 Maryland Cable Common 378,000 (d) 3,780 Methanex Common 200,000 (d) 1,475,000 MFS Communications Common 4,111 (d) 153,216 2.68% Cv Preferred 210,000 8,715,000 Natl Health Investors 8.50% Cv Preferred 60,000 1,597,500 NVR Common 100,000 (d) 981,250 Olympic Financial Common 100,000 (d) 2,287,500 Pagemart Common 50,750 (c,d) 507,500 PAGE 29 Panamsat Pay-in-kind 10,297 (n) 11,432,244 Pantry Pride 14.875% Preferred 100,000 9,800,000 Pullman Common 273,141 (d) 2,185,128 Reliance Group Holdings Warrants 277,791 555,582 Southdown Warrants 50,000 (e) 225,000 Specialty Foods Acquisition Common 300,000 (d) 525,000 Supermarket General Pay-in-Kind Cv 275,000 (n) 7,975,000 Tele-Communications 6% Preferred 75,000 4,650,000 TransDigm Warrants 7,500 (e) 749,968 Triangle Wire & Cable Common 548,889 (d,e) 1,097,778 Webcraft Technology Common 32,502 (d,e) 325 WestFed Holdings Non-Voting Common 21,699 (d,e,h) -- Pay-in-Kind Cm Sr 71,264 (d,e,h,n) -- _____________________________________________________________________________________________________________________________ Total stocks and other Cost: $159,052,558) $ 147,457,452 _____________________________________________________________________________________________________________________________
Short-term securities (1.6%) _____________________________________________________________________________________________________________________________ Issuer Annualized Amount Value(a) yield on payable at date of maturity purchase _____________________________________________________________________________________________________________________________ U.S. government agency (0.1%) Federal Natl Mtge Assn Disc Notes 09-14-95 5.68% $ 100,000 99,795 09-19-95 5.72 1,700,000 1,695,164 ______________ Total 1,794,959 _____________________________________________________________________________________________________________________________ Commercial paper (1.5%) Cafco 09-18-95 5.76 8,500,000 8,477,041 Colgate-Palmolive 09-18-95 5.78 1,100,000 (i) 1,097,013 Metlife Funding 09-21-95 5.76 4,100,000 4,086,948 PACCAR Financial 09-20-95 5.75 5,500,000 5,483,396 09-22-95 5.75 900,000 896,997 Reed Elsevier 09-13-95 5.75 7,600,000 (i) 7,585,509 Southwestern Bell Telephone 09-08-95 5.77 1,400,000 1,398,438 ______________ Total 29,025,342 _____________________________________________________________________________________________________________________________ Total short-term securities (Cost: $30,820,301) $ 30,820,301 _____________________________________________________________________________________________________________________________ Total investments in securities of unaffiliated issuers (Cost: $1,832,716,421) $1,852,428,126 _____________________________________________________________________________________________________________________________
PAGE 30
Investments in securities of affiliated issuers (k) _____________________________________________________________________________________________________________________________ Common stocks (1.3%) _____________________________________________________________________________________________________________________________ Issuer Shares Value(a) _____________________________________________________________________________________________________________________________ Envirodyne Inds 727,116 (d) $ 3,181,133 Kash n' Karry Food Stores 828,135 (d) 21,738,544 _____________________________________________________________________________________________________________________________ Total investments in securities of affiliated issuers (Cost: $31,062,250) $ 24,919,677 _____________________________________________________________________________________________________________________________ Total investments in securities (Cost: $1,863,778,671)(p) $1,877,347,803 _____________________________________________________________________________________________________________________________ Notes to investments in securities _____________________________________________________________________________________________________________________________ (a) Securities are valued by procedures described in Note 1 to the financial statements. (b) Adjustable rate mortgage; interest rate varies to reflect current market conditions; rate shown is the effective rate on Aug. 31, 1995. (c) Represents a security sold under Rule 144A, which is exempt from registration under the Securities Act of 1933, as amended. Unless otherwise noted, this security has been determined to be liquid under guidelines established by the board of directors. (d) Presently non-income producing. For long-term debt securities, item identified is in default as to payment of interest and/or principal. (e) Identifies issues considered to be illiquid (see Note 6 to the financial statements). Information concerning such security holdings at Aug. 31, 1995 is as follows: Security Acquisition Cost dates _____________________________________________________________________________________________ Anacomp 12.25% 1997 08-25-92 $3,321,950 Braniff 15% Sr Reset Nts 04-03-89 4,550,000 ECM Funding LP 11.918% 2002 04-13-92 3,030,092 EUA Power Contingent Interest Certificates 05-25-90 -- GND Holdings Zero Coupon 12% 1999 11-03-93 492,252 Zero Coupon Jr Sub Nt 6.18% 1999 04-14-92 2,224,487 GPA Group 7% 1997 07-20-95 1,301,192 7.25% 1997 07-17-95 1,032,961 7.50% 1997 07-17-95 2,135,619 7.562% 1997 07-17-95 3,362,590 7.75% 1997 07-20-95 492,220 7.875% 1997 08-18-95 447,473 Hat Brand Holdings 12.625% 2002 09-03-92 5,000,000 Warrants 09-03-92 -- IFINT Diversified Holdings Common 08-18-94 749,736 Southdown Warrants 10-30-91 150,000 TransDigm 13% Sr Secured Nts 2000 09-29-93 thru 07-25-95 8,146,642 Warrants 09-29-93 thru 07-25-95 701,646 Triangle Wire & Cable Common 01-13-92 13,000,117 Webcraft Technology Common 12-22-86 16,874 WestFed Holdings Non-Voting Common 09-30-88 655 Pay-in-Kind Cm Sr 09-30-88 thru 06-11-93 5,995,474 (f) For zero coupon bonds, the interest rate disclosed represents the annualized effective yield on the date of acquisition. (g) Foreign security values are stated in U.S. dollars. For debt securities, principal amounts are denominated in the currency indicated. (h) Presently negligible market value. (i) Commercial paper sold within terms of a private placement memorandum, exempt from registration under Section 4(2) of the Securities Act of 1933, as amended, and may be sold only to dealers in that program or other "accredited investors." This security has been determined to be liquid under guidelines established by the board of directors. (j) Interest rate varies to reflect current market conditions; rate shown is the effective rate on Aug. 31, 1995. (k) Investments representing 5% or more of the outstanding voting securities of the issuer. PAGE 31 (l) Inverse floaters represent securities that pay interest at a rate that increases (decreases) in the same magnitude as, or in a multiple of, a decline (increase) in the LIBOR (London InterBank Offered Rate) Index. Interest rate disclosed is the rate in effect on Aug. 31, 1995. Inverse floaters in the aggregate represent 1.7% of the Fund's net assets as of Aug. 31, 1995. (m) Security is partially or fully on loan. See note 4 to the financial statements. (n) Pay-in-kind securities are securities in which the issuer has the option to make interest payments in cash or in additional securities. The securities issued as interest usually have the same terms, including maturity date, as the pay-in-kind securities. (o) The fund is committed, if requested by the investee company, to invest additional amounts. At Aug. 31, 1995, the outstanding commitment is $599,973. (p) At Aug. 31, 1995, the cost of securities for federal income tax purposes was $1,859,031,154 and the aggregate gross unrealized appreciation and depreciation based on that cost was: Unrealized appreciation $97,081,929 Unrealized depreciation (78,765,280) ___________________________________________________________________________________________ Net unrealized appreciation $18,316,649 ___________________________________________________________________________________________
PAGE 32 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 33 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 34 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 35 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 36 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 37 Federal income tax information IDS Extra Income Fund, Inc. ___________________________________________________________________ The Fund is required by the Internal Revenue Code of 1986 to tell its shareholders about the tax treatment of the dividends it pays during its fiscal year. Some of the dividends listed below were reported to you on a Form 1099-DIV, Dividends and Distributions, last January. Dividends paid to you since the end of last year will be reported to you on a tax statement sent next January. Shareholders should consult a tax advisor on how to report distributions for state and local purposes. IDS Extra Income Fund, Inc. Fiscal year ended Aug. 31, 1995 Class A Income distributions taxable as dividend income, 5.48% qualifying for deduction by corporations Payable date Per share Sept. 28, 1994 $0.03500 Oct. 27, 1994 0.03500 Nov. 29, 1994 0.04000 Dec. 29, 1994 0.03500 Jan. 26, 1994 0.03250 Feb. 24, 1994 0.03000 March 29, 1995 0.03100 April 27, 1995 0.03101 May 26, 1995 0.03103 June 27, 1995 0.03105 July 27, 1995 0.03107 Aug. 28, 1995 0.03046 Total distributions $0.39312 Class B Income distributions taxable as dividend income, 5.48% qualifying for deduction by corporations. Payable date Per share March 29, 1995 $0.03062 April 27, 1995 0.02880 May 26, 1995 0.02864 June 27, 1995 0.02838 July 27, 1995 0.02853 Aug. 28, 1995 0.02790 Total distributions $0.17287 PAGE 38 Class Y Income distributions taxable as dividend income, 5.48% qualifying for deduction by corporations. Payable date Per share March 29, 1995 $0.03117 April 27, 1995 0.03157 May 26, 1995 0.03159 June 27, 1995 0.03168 July 27, 1995 0.03166 Aug. 28, 1995 0.03105 Total distributions $0.18872 PAGE 39 Quick telephone reference American Express Telephone Transaction Service Redemptions and exchanges, dividend payments or reinvestments and automatic payment arrangements National/Minnesota: 800-437-3133 Mpls./St. Paul area: 671-3800 American Express Shareholder Service Fund performance, objectives and account inquiries 612-671-3733 TTY Service For the hearing impaired 800-846-4852 American Express Infoline Automated account information (TouchToneR phones only), including current fund prices and performance, account values and recent account transactions National/Minnesota: 800-272-4445 Mpls./St. Paul area: 671-1630 AMERICAN EXPRESS FINANCIAL ADVISORS IDS EXTRA INCOME FUND, INC. IDS Tower 10 Minneapolis, MN 55440-0010 PAGE 40 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. -----END PRIVACY-ENHANCED MESSAGE-----