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1996 ANNUAL REPORT
IDS Utilities Income Fund
(prospectus enclosed)
(Icon of) A light bulb
The primary goal of IDS Utilities Income Fund, Inc. is a high level
of current income. Secondary goals are growth of income and
capital. The Fund invests primarily in securities of public
utility companies.
(This annual report includes a prospectus that describes in detail
the Fund's objective, investment policies, risks, sales charges,
fees and other matters of interest. Please read the prospectus
carefully before you invest or send money.)
AMERICAN
EXPRESS
Financial
Advisors
Distributed by American Express Financial Advisors Inc.
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(Icon of) A light bulb
Dependable dividends
Making money in the stock market isn't limited to trying to find
stocks with rising prices. Many investors prefer to focus on the
steady income stream provided by securities that pay substantial
dividends. And perhaps no segment of the market has a more
consistent record of paying dividends than the utilities industry-
the companies that provide basics such as electricity, water and
telephone service.
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Contents
(Icon of) One open book inside of another.
The purpose of this annual report is to tell investors how the Fund
performed.
The prospectus, which is bound into the middle of this annual
report, describes the Fund in detail.
1996 annual report
From the president 4
From the portfolio manager 4
Ten largest holdings 6
Making the most of the Fund 7
Long-term performance 8
Independent auditors' report 9
Financial statements 10
Notes to financial statements 13
Investments in securities 24
IDS mutual funds 27
Federal income tax information 30
1996 prospectus
The Fund in brief 3p
Goals 3p
Types of Fund investments and their risks 3p
Manager and distributor 3p
Portfolio manager 3p
Alternative purchase arrangements 3p
Sales charge and Fund expenses 4p
Performance 6p
Financial highlights 6p
Total returns 8p
Investment policies and risks 10p
Facts about investments and their risks 10p
Alternative investment option 15p
Valuing Fund shares 15p
How to purchase, exchange or redeem shares 16p
Alternative purchase arrangements 16p
How to purchase shares 18p
How to exchange shares 21p
How to redeem shares 21p
Reductions and waivers of the sales charge 25p
Special shareholder services 29p
Services 29p
Quick telephone reference 29p
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Distributions and taxes 30p
Dividend and capital gain distributions 30p
Reinvestments 30p
Taxes 31p
How to determine the correct TIN 33p
How the Fund is organized 34p
Shares 34p
Voting rights 34p
Shareholder meetings 34p
Board members and officers 34p
Investment manager and transfer agent 36p
Distributor 37p
About American Express Financial Corporation 38p
General information 38p
Appendix 39p
Descriptions of derivative instruments 39p
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To our shareholders
(Photo of) William R. Pearce, President of the Fund
(Photo of) Bernhard M. Fleming, Portfolio manager
From the president
If you're an experienced investor, you know that 1995 and the
opening months of 1996 were an unusually strong period for the U.S.
financial markets. Perhaps just as important, you also know that
history shows that bull markets don't last forever. Though they're
often unpredictable, declines -- whether they're brief or long-
lasting, moderate or substantial -- are always a possibility.
That fact reinforces the need for investors to periodically review
their long-term goals and examine whether their investment program
remains on track to achieving them. Your quarterly investment
statements are one part of that monitoring process. The other is a
meeting with your American Express financial advisor. That becomes
even more important if there's a major change in your financial
situation or in the financial markets.
William R. Pearce
From the portfolio manager
A restructured portfolio and a better environment for utility
stocks resulted in IDS Utilities Income Fund's strongest
performance in several years. For the fiscal year (July 1995
through June 1996), the Fund generated a total return (net asset
value change plus distributions) of approximately 20% for investors
in Class A shares.
While the 12 months were clearly productive overall, there were
distinct differences between the first and second halves of the
period. As is normally the case, the primary influence on utility
stocks' performance was the trend of long-term interest rates.
(Falling rates usually are positive for prices of utility stocks,
especially electric utilities, while rising rates often have the
opposite effect.)
Rate drop fuels price rise
Prompted by a modestly growing economy and an ongoing low rate of
inflation, long-term rates continued to decline during the first
six months of the fiscal year (July through December 1995). In the
process, utility stock prices rose substantially, boosting the
Fund's net asset value along the way. Also proving beneficial,
though to a lesser degree, was a lessening of the concern about
heightened competition resulting from the deregulation trend in the
utilities industry.
Against that backdrop, I made several shifts in the portfolio's
asset mix. They included: lowering the cash reserves and putting
the money to work in telephone utility stocks, which provided a
much better return (telephones, in fact, were the industry's best-
performing sector for all of 1995); selling some of the Fund's
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holdings among real estate investment trusts, which had been a drag
on Fund performance for some time; selling some utility bonds,
which had reached their price-appreciation potential, and
reinvesting the money in telephone utility stocks; and lastly,
reducing the exposure to foreign utilities in favor of higher-
returning domestic holdings. Collectively, these strategies had a
highly positive effect on Fund performance.
Second-half slowdown
The second six months of the period, though still productive,
proved to be something of a struggle as long-term interest rates
began reversing course in January, rising more than a full
percentage point by the end of June. In addition, non-utility
stocks were attracting a greater share of investors' attention
during the late winter and spring. Shares of natural gas utilities
managed to buck the trend, however, as severe weather prompted
considerable buying and, ultimately, sharply higher stock prices.
While I don't foresee anything like a repeat of last year's return
on the horizon, I do think utility stocks have some things in their
favor in this new fiscal year. First, they've historically been
less volatile than other types of stocks, and given the market's
lofty level (as of mid-July) they could well attract more interest
from conservative investors. Second, I think long-term interest
rates will come down before the fiscal year is out, which would be
good for utility stock prices. And third, utilities' earnings,
particularly those of telephone and electric companies, are likely
to be healthy in the months ahead. If that scenario proves to be
reasonably accurate, I look for the Fund to respond positively.
Bernhard Fleming
Class A
12-month performance
(All figures per share)
Net Asset Value (NAV)
June 30, 1996 $ 7.24
June 30, 1995 $ 6.26
Increase $ 0.98
Distribution
July 1, 1995 - June 30, 1996
From income $ 0.28
From capital gain $ --
Total distributions $ 0.28
Total return* +20.2%**
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Class B
12-month performance
(All figures per share)
Net Asset Value (NAV)
June 30, 1996 $ 7.23
June 30, 1995 $ 6.26
Increase $ 0.97
Distribution
July 1, 1995 - June 30, 1996
From income $ 0.22
From capital gain $ --
Total distributions $ 0.22
Total return* +19.3%**
Class Y
12-month performance
(All figures per share)
Net Asset Value (NAV)
June 30, 1996 $ 7.24
June 30, 1995 $ 6.26
Increase $ 0.98
Distribution
July 1, 1995 - June 30, 1996
From income $ 0.29
From capital gain $ --
Total distributions $ 0.29
Total return* +20.4%**
* 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.
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<TABLE>
<CAPTION>
IDS Utilities Income Fund, Inc.
The Fund's ten largest holdings
(Pie chart) The ten holdings listed here make up 23.74% of the Fund's net assets
Percent Value
of Fund's net assets) (as of June 30, 1996)
<S> <C> <C>
GTE 2.93% $21,256,250
The corporation's two major business segments are
telephone operations and telecommunications
products and services.
Ameritech 2.87 20,781,250
A leading global supplier of full-service communications
and advanced information services.
Cincinnati Bell 2.81 20,328,750
A holding company with principal subsidiaries divided
into three industry segments: telephone operations,
information systems and marketing services.
BellSouth 2.78 20,128,125
Provides telecommunication services to Florida,
Georgia, Louisiana, Tennessee, North Carolina,
Alabama, South Carolina, Kentucky and Mississippi.
Telefonica de Espana 2.20 15,986,250
BCE 2.18 15,800,000
A diversified Canadian holding company with interests in
telecommunications services and communications equipment
manufacturing. Through its Bell Canada unit, the company
is the largest supplier of telecommunication services in
Canada. Northern Telecom, which is 52% owned by BCE,Inc.,
is the second largest maker of telecommunications equipment
in North America.
Columbia Gas System 2.16 15,637,500
One of the nation's largest natural gas systems. The company's
subsidiaries are engaged in the exploration, production, purchase,
marketing, storage, transmission and distribution of natural gas,
as well as other energy operations such as cogeneration.
Airtouch Communications 1.95 14,125,000
A subsidiary of Pacific Telesis, AirTouch Communications is engaged
in non-regulated wireless communication operations, with cellular
interest in the United States,Germany,Japan,Italy,South Korea and
Belgium.
NIPSCO Inds 1.94 14,087,500
A holding company for Northern Indiana Public Service Company that
supplies electricity and gas to residential, steel and industrial
customers in the northern third of Indiana.
CMS Energy 1.92 13,893,750
A holding company for a number energy related subsidiaries:
Consumers Power Company is a combination electric and gas utility,
CMS Generation is a multinational independent power producer,
NOMECO is an oil and gas exploration and production company, and
CMS Gas Transmission and Storage is self-explanatory with considerable
gas storage in Michigan.
</TABLE>
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Making the most of the Fund
Average annual total return
(as of June 30, 1996)
1 year 5 years Since
inception
Class A* +14.22% +11.71% +11.90%
Class B** +14.38% --% +18.23%
Class Y** +20.42% --% +22.09%
* Inception date was Aug. 1, 1988.
**Inception date was March 20, 1995.
The performance of Class A and Class Y will vary from the
performance of Class B based on differences in sales charges and
fees.
Your investment and return values fluctuate so that your shares,
when redeemed, may be worth more or less than the original cost.
Figures for Class A and Class B reflect the effect of the maximum
5% sales charge. This was a period of widely fluctuating security
prices. Past performance is no guarantee of future results.
Build your assets systematically
One of the best ways to invest in the Fund is by dollar-cost
averaging -- a time-tested strategy that can make market
fluctuations work for you. To dollar-cost average, simply invest a
fixed amount of money regularly. You'll automatically buy more
shares when the Fund's share price is low, fewer shares when it is
high.
This does not ensure a profit or avoid a loss if the market
declines. But, if you can continue to invest regularly through
changing market conditions, it can be an effective way to
accumulate shares to meet your long-term goals.
How dollar-cost averaging works
Month Amount Per-share Number of shares purchased
invested market price
Jan $100 $20 5.00 XXXXX
Feb 100 18 5.56 XXXXXx
March 100 17 5.88 XXXXXx
April 100 15 6.67 XXXXXXx
May 100 16 6.25 XXXXXXx
June 100 18 5.56 XXXXXx
July 100 17 5.88 XXXXXx
Aug 100 19 5.26 XXXXXx
Sept 100 21 4.76 XXXXx
Oct 100 20 5.00 XXXXX
(footnotes to table) By investing an equal number of dollars each
month...
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(arrow in table pointing to April) you automatically buy more
shares when the per share market price is low...
(arrow in table pointing to September) and fewer shares when the
per share market price is high.
You have paid an average price of only $17.91 per share over the 10
months, while the average market price actually was $18.10.
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The Fund's long-term performance
Three ways to benefit from a mutual fund:
o your shares increase in value when the Fund's investments do
well
o you receive capital gains when the gains on investments sold
by the Fund exceed losses
o you receive income when the Fund's stock dividends, interest
and short-term gains exceed its expenses.
All three make up your total return. And you potentially can
increase your investment if, like most investors, you reinvest your
dividends and capital gain distributions to buy additional shares
of the Fund or another fund.
How your $10,000 has grown in IDS Utilities Income Fund
$24,365
Utilities
Income Fund
Class A
S&P 500
Stock Index
$9,500
'88 '89 '90 '91 '92 '93 '94 '95 '96
Average annual total return
(as of Juny 30, 1996)
1 year 5 years Since
inception
Class A* +14.22% +11.71% +11.90%
Class B** +14.38% --% +18.23%
Class Y** +20.42% --% +22.09%
* Inception date was Aug. 1, 1988.
**Inception date was March 20, 1995.
Assumes: Holding period from 8/1/88 to 6/30/96. Returns do not
reflect taxes payable on distributions. Reinvestment of all income
and capital gain distributions for the Fund, with a value of
$24,365. Also see "Performance" in the Fund's current prospectus.
Standard & Poor's 500 Stock Index (S&P 500), an unmanaged list of
common stocks, is frequently used as a general measure of market
performance. However, the S&P 500 companies are generally larger
than those in which the Fund invests.
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On the graph above you can see how the Fund's total return compared
to a widely cited performance index, the S&P 500. In comparing
Utilities Income Fund to 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 individual
stocks, any brokerage commissions 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.
This was a period of widely fluctuating security prices. Past
performance is no guarantee of future results.
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IDS Utilities Income Fund, Inc.
Annual Financial Information
___________________________________________________________________
Independent auditors' report
The board and shareholders
IDS Utilities Income Fund, Inc.:
We have audited the accompanying statement of assets and
liabilities, including the schedule of investments in securities,
of IDS Utilities Income Fund, Inc. as of June 30, 1996, 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 then ended, and the financial highlights for each
of the years in the seven-year period ended June 30, 1996, and for
the period from August 1, 1988 (commencement of operations) to
June 30, 1989. 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
Utilities Income Fund, Inc. at June 30, 1996, 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 then ended, and
the financial highlights for the periods stated in the first
paragraph above, in conformity with generally accepted accounting
principles.
KPMG Peat Marwick LLP
Minneapolis, Minnesota
August 2, 1996
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<TABLE>
<CAPTION>
Financial statements
Statement of assets and liabilities
IDS Utilities Income Fund, Inc.
June 30, 1996
_____________________________________________________________________________________________________________
Assets
_____________________________________________________________________________________________________________
<S> <C>
Investments in securities, at value (Note 1)
(identified cost $638,168,203) $730,217,543
Receivable for investment securities sold 10,625,879
Dividends and accrued interest receivable 2,854,020
U.S. government securities held as collateral (Note 4) 5,504,985
_____________________________________________________________________________________________________________
Total assets 749,202,427
_____________________________________________________________________________________________________________
Liabilities
_____________________________________________________________________________________________________________
Disbursements in excess of cash on demand deposit 218,007
Dividends payable to shareholders 197,593
Payable for investment securities purchased 7,211,507
Unrealized depreciation on foreign contracts held, at value (Notes 1 and 7) 10,917
Payable upon return of securities loaned (Note 4) 16,943,085
Accrued investment management services fee 10,059
Accrued distribution fee 934
Accrued service fee 3,367
Accrued transfer agency fee 2,490
Accrued administrative services fee 742
Other accrued expenses 89,685
_____________________________________________________________________________________________________________
Total liabilities 24,688,386
_____________________________________________________________________________________________________________
Net assets applicable to outstanding capital stock $724,514,041
_____________________________________________________________________________________________________________
Represented by
_____________________________________________________________________________________________________________
Capital stock -- authorized 10,000,000,000 shares of $.01 par value $ 1,001,312
Additional paid-in capital 620,541,505
Undistributed net investment income 122,768
Accumulated net realized gain (Note 1) 10,787,016
Unrealized appreciation of investments and on translation
of assets and liabilities in foreign currencies (Note 1 and 7) 92,061,440
_____________________________________________________________________________________________________________
Total -- representing net assets applicable to outstanding capital stock $724,514,041
_____________________________________________________________________________________________________________
Net assets applicable to outstanding shares: Class A $677,447,050
Class B $ 46,893,007
Class Y $ 173,984
Net asset value per share of outstanding capital stock: Class A shares 93,625,162 $ 7.24
Class B shares 6,481,989 $ 7.23
Class Y shares 24,045 $ 7.24
See accompanying notes to financial statements.
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Financial statements
Statement of operations
IDS Utilities Income Fund, Inc.
Year ended June 30, 1996
_____________________________________________________________________________________________________________
Investment income
_____________________________________________________________________________________________________________
Income:
Dividends (net of foreign taxes withheld of $189,114) $ 25,072,654
Interest 7,941,962
_____________________________________________________________________________________________________________
Total income 33,014,616
_____________________________________________________________________________________________________________
Expenses (Note 2):
Investment management services fee 3,508,256
Distribution fee -- Class B 196,471
Transfer agency fee 898,359
Incremental transfer agency fee -- Class B 3,068
Service fee
Class A 1,116,764
Class B 45,829
Administrative services fee 259,316
Compensation of board members 15,684
Compensation of officers 6,306
Custodian fees 126,246
Postage 36,854
Registration fees 39,367
Reports to shareholders 5,280
Audit fees 23,500
Administrative 940
Other 22,188
_____________________________________________________________________________________________________________
Total expenses 6,304,428
Earnings credits on cash balances (Note 2) (24,516)
_____________________________________________________________________________________________________________
Total net expenses 6,279,912
_____________________________________________________________________________________________________________
Investment income -- net 26,734,704
_____________________________________________________________________________________________________________
Realized and unrealized gain -- net
_____________________________________________________________________________________________________________
Net realized gain on security and foreign currency transactions (including loss of $10,978
from foreign currency transactions) (Note 3) 24,124,935
Net realized gain on expired option contracts written (Note 5) 78,247
_____________________________________________________________________________________________________________
Net realized gain on investments and foreign currency 24,203,182
Net change in unrealized appreciation or depreciation of investments and on
translation of assets and liabilities in foreign currencies 70,831,629
_____________________________________________________________________________________________________________
Net gain on investments and foreign currency 95,034,811
_____________________________________________________________________________________________________________
Net increase in net assets resulting from operations $121,769,515
_____________________________________________________________________________________________________________
See accompanying notes to financial statements.
</TABLE>
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<TABLE>
<CAPTION>
Financial statements
Statements of changes in net assets
IDS Utilities Income Fund, Inc.
Year ended June 30,
_____________________________________________________________________________________________________________
Operations and distributions 1996 1995
_____________________________________________________________________________________________________________
<S> <C> <C>
Investment income -- net $ 26,734,704 $ 29,402,883
Net realized gain (loss) on investments and foreign currency 24,203,182 (8,844,144)
Net change in unrealized appreciation or depreciation of investments
and on translations of assets and liabilities in foreign currencies 70,831,629 29,413,576
_____________________________________________________________________________________________________________
Net increase in net assets resulting from operations 121,769,515 49,972,315
_____________________________________________________________________________________________________________
Distributions to shareholders from:
Net investment income
Class A (24,688,076) (30,549,688)
Class B (739,354) (26,477)
Class Y (6,149) (1,817)
Net realized gain
Class A (299,241) (15,343,476)
Class B (11,873) --
Class Y (78) --
Excess distribution of realized gain
Class A -- (499,143)
_____________________________________________________________________________________________________________
Total distributions (25,744,771) (46,420,601)
_____________________________________________________________________________________________________________
Capital share transactions (Note 6)
_____________________________________________________________________________________________________________
Proceeds from sales
Class A shares (Note 2) 78,592,388 70,513,564
Class B shares 40,903,798 6,697,079
Class Y shares 89,357 131,967
Reinvestment of distributions at net asset value
Class A shares 23,707,598 41,919,286
Class B shares 723,097 25,491
Class Y shares 6,227 1,812
Payments for redemptions
Class A shares (118,878,052) (165,371,929)
Class B shares (Note 2) (4,737,386) (202,128)
Class Y shares (75,904) (6,879)
_____________________________________________________________________________________________________________
Increase (decrease) in net assets from capital share transactions 20,331,123 (46,291,737)
_____________________________________________________________________________________________________________
Total increase (decrease) in net assets 116,355,867 (42,740,023)
Net assets at beginning of year 608,158,174 650,898,197
_____________________________________________________________________________________________________________
Net assets at end of year
(including undistributed net investment income of
$122,768 and $31,279) $ 724,514,041 $ 608,158,174
_____________________________________________________________________________________________________________
See accompanying notes to financial statements.
</TABLE>
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Notes to financial statements
IDS Utilities Income Fund, Inc.
___________________________________________________________________
1. Summary of significant accounting policies
The Fund is registered under the Investment Company Act of 1940 (as
amended) as a diversified, open-end management investment company.
The Fund invests primarily in securities of public utilities
companies. 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 maybe subject to a contingent deferred sales charge. Class B
shares automatically convert to Class A after eight years. Class Y
shares, have no sales charge and are offered only to qualifying
institutional investors.
All classes of shares have identical voting, dividend, liquidation
and other rights, and the same terms and conditions, except that
the level of distribution fee, transfer agency fee and service fee
(class specific expenses) differs among classes. Income, expenses
(other than class specific expenses) and realized and unrealized
gains or losses on investments are allocated to each class of
shares based upon its relative net assets.
Significant accounting policies followed by the Fund are summarized
below:
Use of estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of increase and decrease in net assets from
operations during the period. Actual results could differ from
those estimates.
Valuation of securities
All securities are valued at the close of each business day.
Securities traded on national securities exchanges or included in
national market systems are valued at the last quoted sales price;
securities for which market quotations are not readily available,
including illiquid securities, are valued at fair value according
to methods selected in good faith by the board. Determination of
fair value involves, among other things, reference to market
indexes, matrixes and data from independent brokers. Short-term
securities maturing in more than 60 days from the valuation date
are valued at the market price or approximate market value based on
current interest rates; those maturing in 60 days or less are
valued at amortized cost.
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PAGE 18
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 the portfolio securities
and may write cash-secured put options. The risk in writing a call
option is that the Fund gives up the opportunity of profit if the
market price of the security increases. The risk in writing a put
option is that the Fund may incur a loss if the market price of the
security decreases and the option is exercised. The risk in buying
an option is that the Fund pays a premium whether or not the option
is exercised. The Fund also has the additional risk of not being
able to enter into a closing transaction if a liquid secondary
market does not exist.
Futures transactions
In order to gain exposure to or protect itself from changes in the
market, the Fund may buy and sell stock index and 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 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 for 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 dividend, interest income and
foreign withholding taxes.
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PAGE 19
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 $1,209,636 and accumulated net
realized gain has been increased by $206,373 resulting in a net
reclassification adjustment to increase paid-in-capital by
$1,003,263.
Dividends to shareholders
Dividends from net investment income, declared and paid each
calendar quarter, 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 and interest income, including level-yield amortization of
premium and discount, is accrued daily.
___________________________________________________________________
2. Expenses and sales charges
Effective March 20, 1995, the Fund entered into agreements with
American Express Financial Corporation (AEFC) for managing its
portfolio, providing administrative services and serving as
transfer agent. 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 0.53% to 0.40% 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 0.04%
to 0.02% annually.
<PAGE>
PAGE 20
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
o Class B $16
o Class Y $15
Also effective March 20, 1995, the Fund entered into agreements
with American Express Financial Advisors Inc. for distribution and
shareholder servicing related services. Under a Plan and Agreement
of Distribution, the Fund pays a distribution fee at an annual rate
of 0.75% of the Fund's average daily net assets attributable to
Class B shares for distribution-related services.
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 received by American Express Financial Advisors Inc.
for distributing Fund shares were $1,775,123 for Class A and
$16,891 for Class B for the year ended June 30, 1996. The Fund also
pays custodian fees to American Express Trust Company, an affiliate
of AEFC.
During the year ended June 30, 1996 the Fund's custodian and
transfer agency fees were reduced by $24,516 as a result of earning
credits from overnight cash balances.
Prior to April 30, 1996 the Fund had a retirement for its
independent board members. The plan was terminated April 30, 1996.
The retirement plan expense amounted to $3,014 for the year. The
total liability for the plan is $20,820, which will be paid out at
some future date.
___________________________________________________________________
3. Securities transactions
Cost of purchases and proceeds from sales of securities (other than
short-term obligations) aggregated $563,626,399 and $541,217,165,
respectively, for the year ended June 30, 1996. Realized gains and
losses are determined on an identified cost basis.
Brokerage commissions paid to brokers affiliated with AEFC were
$34,136 for the year ended June 30, 1996.
<PAGE>
PAGE 21
___________________________________________________________________
4. Lending of portfolio securities
At June 30, 1996, securities valued at $16,541,565 were on loan to
brokers. For collateral, the Fund received $11,438,100 in cash and
U.S. government securities valued at $5,504,985. Income from
securities lending amounted to $82,363 for the year ended June 30,
1996. The risks to the Fund of securities lending are that the
borrower may not provide additional collateral when required or
return the securities when due.
___________________________________________________________________
5. Option contracts written
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 an option is 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.
The number of contracts and premium amounts associated with
option contracts written is as follows:
<TABLE>
<CAPTION>
Year ended June 30, 1996
_____________________________________________________
Calls Puts
Contracts Premium Contracts Premium
_____________________________________________________________________________
<S> <C> <C> <C> <C>
Balance June 30, 1995 -- $ -- -- $ --
Opened 2,000 140,245 1,000 35,999
Exercised (1,000) (97,997) -- --
Expired (1,000) (42,248) (1,000) (35,999)
_____________________________________________________________________________
Balance June 30, 1996 -- $ -- -- $ --
_____________________________________________________________________________
</TABLE>
<PAGE>
PAGE 22
___________________________________________________________________
6. Capital share transactions
Transactions in shares of capital stock for the periods indicated
are as follows:
<TABLE>
<CAPTION>
_________________________________________________________________________________
Year ended June 30, 1996
Class A Class B Class Y
_________________________________________________________________________________
<S> <C> <C> <C>
Sold 11,579,426 6,000,487 13,089
Issued for reinvested 3,446,251 103,780 940
distributions
Redeemed (17,487,689) (682,226) (11,172)
_________________________________________________________________________________
Net increase (decrease) (2,462,014) 5,422,041 2,857
_________________________________________________________________________________
_________________________________________________________________________________
_________________________________________________________________________________
Year ended June 30, 1995
Class A Class B* Class Y*
_________________________________________________________________________________
Sold 11,454,333 1,088,208 22,020
Issued for reinvested 6,941,920 4,084 292
distributions
Redeemed (26,793,598) (32,344) (1,124)
_________________________________________________________________________________
Net increase (decrease) (8,397,345) 1,059,948 21,188
_________________________________________________________________________________
*Inception date was March 20, 1995.
</TABLE>
___________________________________________________________________
7. Foreign currency contracts
The Fund may enter into forward foreign currency exchange contracts
for operational purposes and to protect against adverse exchange
rate fluctuation. The net U.S. dollar value of foreign currency
underlying all contractual commitments held by the Fund and the
resulting unrealized appreciation or depreciation are determined
using foreign currency exchange rates from an independent pricing
service. The Fund is subject to the credit risk that the other
party will not complete the obligations of the contract.
At June 30, 1996, the Fund had entered into a foreign currency
exchange contract that obligates the Fund to deliver currency at a
specified future date. The unrealized appreciation and/or
depreciation on this contract is included in the accompanying
financial statements. The terms of the open contract are as
follows:
<TABLE><CAPTION>
Exchange date Currency to be Currency to be Unrealized
delivered received depreciation
______________________________________________________________________________
<S> <C> <C> <C>
July 3, 1996 925,146 1,427,037 $10,917
British Pound U.S. Dollar
______________________________________________________________________________
</TABLE>
<PAGE>
PAGE 23
___________________________________________________________________
8. Financial highlights
"Financial highlights" showing per share data and selected
information is presented on pages 6 and 7 of the prospectus.
<PAGE>
PAGE 24
<TABLE>
<CAPTION>
Investments in securities
IDS Utilities Income Fund, Inc.
June 30, 1996 (Percentages represent value of
investments compared to net assets)
_____________________________________________________________________________________________________________________________
Common stocks (86.6%)
_____________________________________________________________________________________________________________________________
Issuer Shares Value(a)
_____________________________________________________________________________________________________________________________
<S> <C> <C>
Automotive & related (0.9%)
Chrysler 100,000 $ 6,200,000
_____________________________________________________________________________________________________________________________
Communications equipment & services (1.6%)
Andrew 210,000 (b) 11,287,500
_____________________________________________________________________________________________________________________________
Energy (0.9%)
Chevron 50,000 2,950,000
Texaco 40,000 3,355,000
___________
Total 6,305,000
_____________________________________________________________________________________________________________________________
Real estate investment trusts (4.9%)
Avalon Property 250,000 5,437,500
Duke Realty Investments 150,000 4,537,500
Home Properties 260,000 5,265,000
LTC Properties 300,000 4,950,000
Security Capital 200,000 3,525,000
Simon Property Group 250,000 6,125,000
Summit Properties 300,000 5,887,500
____________
Total 35,727,500
_____________________________________________________________________________________________________________________________
Utilities - electric (31.0%)
Baltimore Gas & Electric 200,000 5,675,000
Carolina Power & Light 300,000 11,400,000
Central & South West 200,000 5,800,000
CMS Energy 450,000 13,893,750
CMS Energy Cl G 120,000 2,250,000
DPL 550,000 13,406,250
DQE 300,000 8,250,000
Duke Power 200,000 10,250,000
Edison Intl 550,000 9,693,750
Enova 250,000 5,781,250
Entergy 150,000 4,256,250
FPL Group 300,000 13,800,000
General Public Utilities 300,000 10,575,000
Houston Inds 300,000 7,387,500
LG&E Energy 430,000 9,836,250
MDU Resources Group 262,500 5,643,750
NIPSCO Inds 350,000 14,087,500
Northern States Power 200,000 9,875,000
PECO Energy 350,000 9,100,000
Pinnacle West Capital 375,000 11,390,625
Portland General 300,000 9,262,500
Public Service Co of Colorado 150,000 5,512,500
Sierra Pacific Resources 200,000 5,075,000
SIGCORP 73,000 2,527,625
TECO Energy 425,000 10,731,250
Union Electric 225,000 9,056,250
____________
Total 224,517,000
_____________________________________________________________________________________________________________________________
Utilities - gas (13.9%)
Coastal 200,000 8,350,000
Columbia Gas System 300,000 15,637,500
Consolidated Natural Gas 50,000 2,612,500
Enron 250,000 10,218,750
KN Energy 225,000 7,537,500
MCN 82,200 2,003,625
Natl Fuel Gas 150,000 5,400,000
New Jersey Resources 300,000 8,625,000
NICOR 225,000 6,384,375
Northwest Natural Gas 158,400 5,544,000
PanEnergy 325,000 10,684,375
See accompanying notes to investments in securities.
<PAGE>
PAGE 25
Sonat 100,000 4,500,000
Washington Gas & Light 250,000 5,500,000
WICOR 200,000 7,550,000
____________
Total 100,547,625
_____________________________________________________________________________________________________________________________
Utilities - telephone (17.9%)
AirTouch Communications 500,000 (b) 14,125,000
Ameritech 350,000 20,781,250
BellSouth 475,000 20,128,125
Century Telephone Enterprises 316,700 10,094,812
Cincinnati Bell 390,000 20,328,750
GTE 475,000 21,256,250
MIDCOM Communications 250,000 (b) 3,593,750
SBC Communications 138,000 6,796,500
Southern New England Telecom 300,000 12,600,000
____________
Total 129,704,437
_____________________________________________________________________________________________________________________________
Miscellaneous (0.8%)
American Water Works 150,000 6,037,500
______________________________________________________________________________________________________________________________
Foreign (12.5%)(c)
Alberta Energy 200,000 3,772,202
BCE 400,000 15,800,000
Enersis ADR 200,000 6,200,000
Ericsson (LM) ADR 300,000 6,450,000
Iberdrola 700,000 7,189,160
News Corp Preferred ADR 250,000 (d) 5,031,250
Nokia Preferred 75,000 2,775,000
Northern Telecom 200,000 10,875,000
Philippine Long Distance Telephone ADR 100,000 (d) 5,812,500
Repsol ADR 100,000 (d) 3,475,000
Telecomunicacoes Brasileiras ADR 150,000 10,443,750
Telefonica de Espana ADR 290,000 15,986,250
Transport adora de Gas del Sur 400,000 (d) 4,900,000
Veba 150,000 (d) 7,976,656
____________
Total 106,686,768
_____________________________________________________________________________________________________________________________
Total common stocks
(Cost: $540,334,383) $627,013,330
_____________________________________________________________________________________________________________________________
Preferred stocks (5.3%)
_____________________________________________________________________________________________________________________________
Issuer Shares Value(a)
_____________________________________________________________________________________________________________________________
California Energy Tides
6.25% Cv 114,200 (f) 6,059,681
Cointel
5.04% Cv 150,000 (e) 8,775,000
Kaiser Aluminum 275,000 (e) 2,921,875
MCN Finance
8.75% Cv 218,000 (b) 5,559,000
MFS Communications
2.68% Cv 140,000 8,890,000
Morgan Stanley-AESC
5% Cv 247,500 6,311,250
_____________________________________________________________________________________________________________________________
Total preferred stocks
(Cost: $33,844,770) $ 38,516,806
_____________________________________________________________________________________________________________________________
Bonds (4.0%)
_____________________________________________________________________________________________________________________________
Issuer and Principal Value(a)
coupon rate amount
_____________________________________________________________________________________________________________________________
Domestic (1.9%)
Bell Telephone Pennsylvania
7.375% 2033 5,000,000 $ 4,760,450
Tele-Communications
9.875% 2022 4,500,000 4,849,470
Texas Utilities
7.375% 2025 5,000,000 4,616,250
____________
Total 14,226,170
_____________________________________________________________________________________________________________________________
See accompanying notes to investments in securities.<PAGE>
PAGE 26
Foreign (2.1%)(c)
Eskom
(South African Rand)
11% 2008 39,875,000 7,200,104
Hydro-Quebec
(Canadian Dollar)
8.50% 2029 5,000,000 5,332,050
TransCanada Pipeline
(U.S. Dollar)
9.875% 2021 2,000,000 2,412,500
____________
Total 14,944,654
_____________________________________________________________________________________________________________________________
Total bonds
(Cost: $28,472,467) $ 29,170,824
_____________________________________________________________________________________________________________________________
</TABLE>
<TABLE>
<CAPTION>
Short-term securities (4.9%)
_____________________________________________________________________________________________________________________________
Issuer Annualized Amount Value(a)
yield on payable at
date of maturity
purchase
_____________________________________________________________________________________________________________________________
<S> <C> <C> <C>
U.S. government agency (0.5%)
Federal Natl Mtge Assn
Disc Notes
07-19-96 5.29% $2,500,000 $ 2,492,667
07-24-96 5.31 1,100,000 1,095,959
__________
Total 3,588,626
_____________________________________________________________________________________________________________________________
Commercial paper (3.7%)
A.I. Credit
07-01-96 5.32 5,400,000 5,398,410
Gannett
07-26-96 5.37 4,500,000 (g) 4,481,944
Merrill Lynch
07-19-96 5.39 4,000,000 3,988,067
07-26-96 5.42 2,900,000 2,888,255
Metlife Funding
07-09-96 5.32 3,800,000 3,794,405
PACCAR
07-22-96 5.37 2,200,000 2,192,480
Sandoz
07-10-96 5.32 3,400,000 3,394,494
TransAmerica Finance
07-10-96 5.33 800,000 798,702
___________
Total 26,936,757
_____________________________________________________________________________________________________________________________
Letter of credit (0.7%)
Bank of America-
Barbers Point AES
07-11-96 5.31 5,000,000 4,991,200
______________________________________________________________________________________________________________________________
Total short-term securities
(Cost: $35,516,583) $ 35,516,583
_____________________________________________________________________________________________________________________________
Total investments in securities
(Cost: $638,168,203)(h) $730,217,543
_______________________________________________________________________________________________________________________________
See accompanying notes to investments in securities.
<PAGE>
PAGE 27
Notes to investments in securities
_____________________________________________________________________________________________________________________________
(a) Securities are valued by procedures described in Note 1 to the financial statements.
(b) Presently non-income producing.
(c) Foreign security values are stated in U.S. dollars. For debt securities, principal amounts are denominated
in the currency indicated.
(d) Security is partially or fully on loan. See Note 4 to the financial statements.
(e) PRIDES - Preferred Redeemed Increased Dividend Equity Securities are structured as convertible
preferred securities issued by a company. Investors receive an enhanced yield but based upon a specific
formula, potential appreciation is limited. PRIDES pay dividends, have voting rights, are noncallable
for three years and upon maturity, convert into shares of common stocks.
(f) Represents a security sold under Rule 144A, which is exempt from registration under the Securities Act
of 1933, as amended. This security has been determined to be liquid under guidelines established by
the board.
(g) 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.
(h) At June 30, 1996, the cost of securities for federal income tax purposes was $637,624,108
and the aggregate gross unrealized appreciation and depreciation based on
that cost was:
Unrealized appreciation $98,331,374
Unrealized depreciation (5,737,939)
______________________________________________________
Net unrealized appreciation $92,593,435
______________________________________________________
</TABLE>
<PAGE>
PAGE 28
IDS mutual funds
Cash equivalent investments
These money market funds have three main goals: conservation of
capital, constant liquidity and the highest possible current income
consistent with these objectives. Very limited risk.
IDS Cash Management Fund
Invests in such money market securities as high quality commercial
paper, bankers' acceptances, certificates of deposits (CDs) and
other bank securities.
(icon of) piggy bank
IDS Tax-Free Money Fund
Invests primarily in short-term bonds and notes issued by state and
local governments to seek high current income exempt from federal
income taxes.
(icon of) shield with piggy bank enclosed
Income investments
The funds in this group invest their assets primarily in corporate
bonds or government securities to seek interest income. Secondary
objective is capital growth. Risk varies by bond quality.
IDS Global Bond Fund
Invests primarily in debt securities of U.S. and foreign issuers to
seek high total return through income and growth of capital.
(icon of) globe
IDS Extra Income Fund
Invests mainly in long-term, high-yielding corporate fixed-income
securities in the lower rated, higher risk bond categories to seek
high current income. Secondary objective is capital growth.
(icon of) coins
IDS Bond Fund
Invests mainly in corporate bonds, at least 50% in the higher
rated, lower risk bond categories, or the equivalent, and in
government bonds.
(icon of) greek column
<PAGE>
PAGE 29
IDS Selective Fund
Invests in high-quality corporate bonds and other highly rated debt
instruments including government securities and short-term
investments. Seeks current income and preservation of capital.
(icon of) skyline
IDS Federal Income Fund
Invests primarily in securities issued or guaranteed as to the
timely payment of principal and interest by the U.S. government,
its agencies and instrumentalities. Seeks a high level of current
income and safety of principal consistent with its type of
investments.
(icon of) shield with eagle head enclosed
Tax-exempt income investments
These funds provide tax-free income by investing in municipal
bonds. The income is generally free from federal income tax. Risk
varies by bond quality.
IDS High Yield Tax-Exempt Fund
Invests primarily in medium- and lower-quality municipal bonds and
notes. Lower-quality securities generally involve greater risk of
principal and income.
(icon of) shield with basket of apples enclosed
IDS State Tax-Exempt Funds
(CA, MA, MI, MN, NY, OH)
Invests primarily in high- and medium-grade municipal securities to
provide income to residents of each respective state that is exempt
from federal, state and local income taxes. (New York is the only
state that is exempt at the local level.)
(icon of) shield with U.S. enclosed
IDS Tax-Exempt Bond Fund
Invests mainly in bonds and notes of state or local government
units, with at least 75% in the four highest rated, lowest risk
bond categories.
(icon of) shield with Greek column enclosed
IDS Insured Tax-Exempt Fund
Invests primarily in municipal securities that are insured as to
the timely payment of principal and interest. The insurance
feature minimizes credit risk of the fund but does not guarantee
the market value of the fund's shares.
(icon of) shield with star enclosed
<PAGE>
PAGE 30
Growth and income investments
These funds focus on securities of medium to large, well-
established companies that offer long-term growth of capital and
reasonable income from dividends and interest. Moderate risk.
IDS International Fund
Invests primarily in common stocks of foreign companies that offer
potential for superior growth. The fund may invest up to 20% of
its assets in the U.S. market.
(icon of) three flags
IDS Managed Allocation Fund
Invests in U.S. equity securities, U.S. and foreign debt
securities, foreign equity securities and money market instruments.
The fund provides diversification among these major investment
categories and has a target mix that represents the way the fund's
investments will be allocated over the long term. Seeks maximum
total return.
(icon of) bird in a nest
IDS Equity Select Fund
Invests primarily in a combination of moderate growth stocks,
higher-yielding equities and bonds. Seeks growth of capital and
income.
(icon of) three pine trees
IDS Blue Chip Advantage Fund
Invests in selected stocks from a major market index. Securities
purchased are those recommended by our research analysts as the
best from each industry represented on the index. Offers potential
for long-term growth as well as dividend income.
(icon of) ribbon
IDS Stock Fund
Invests in common stock of companies representing many sectors of
the economy. Seeks current income and growth of capital.
(icon of) building with columns
IDS Equity Value Fund
Invests primarily in undervalued common stocks that offer potential
for growth of capital and income.
(icon of) three growing flowers
<PAGE>
PAGE 31
IDS Utilities Income Fund
Invests primarily in the stocks of public utility companies to seek
high current income and growth of income and capital with reduced
volatility.
(icon of) light bulb
IDS Diversified Equity Income Fund
Invests primarily in high-yielding common stocks to seek high
current income and, secondarily, to benefit from the growth
potential offered by stock investments.
(icon of) two puzzle pieces
IDS Mutual
Invests in a balance between common stocks and senior securities
(preferred stocks and bonds). Seeks a balance of growth of capital
and current income.
(icon of) scale of justice
Growth investments
Funds in this group seek capital growth, primarily from common
stocks. They are high risk mutual funds with a potential for high
reward.
IDS Discovery Fund
Invests in small- and medium-size, growth-oriented companies
emphasizing technological innovation and productivity enhancement.
Buys and holds larger growth-oriented stocks.
(icon of) ship
IDS Small Company Index Fund
Invests in all or a representative group of the equity securities
comprising the S&P SmallCap 600 Index, as it strives to provide
long-term capital appreciation.
(icon of) office building
IDS Progressive Fund
Invests primarily in undervalued common stocks. The fund holds
stocks for the long term with the goal of capital growth.
(icon of) shooting star
<PAGE>
PAGE 32
IDS Global Growth Fund
Invests in stocks of companies throughout the world that are
positioned to meet market needs in a changing world economy. These
companies offer above-average potential for long-term growth.
(icon of) world
IDS Strategy Aggressive Fund
Invests primarily in common stocks of companies that are selected
for their potential for above-average growth. Above-average means
that their growth potential is better, in the opinion of the
portfolio's investment manager, than the Standard & Poor's
Corporation (S&P) 500 Stock Index.
(icon of) chess piece
IDS Research Opportunities Fund
Invests primarily in equity securities of companies included in the
S&P 500 Index that are believed to have strong growth potential.
The Portfolio is managed using a research methodology by the
Research Department of AEFC. Goal is long-term appreciation.
(icon of) magnifying glass
IDS Growth Fund
Invests primarily in companies that have above-average potential
for long-term growth as a result of new management, marketing
opportunities or technological superiority.
(icon of) trees
IDS New Dimensions Fund
Invests primarily in companies with significant growth potential
due to superiority in technology, marketing or management. The
fund frequently changes its industry mix.
(icon of) dimension
Specialty growth investment
This fund aggressively seeks capital growth as a hedge against
inflation.
IDS Precious Metals Fund
Invests primarily in the securities of foreign or domestic
companies that explore for, mine and process or distribute gold and
other precious metals. This is the most aggressive and most
speculative IDS mutual fund.
(icon of) cart of precious gems
<PAGE>
PAGE 33
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 34
Federal income tax information
IDS Utilities 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 Utilities Income Fund, Inc.
Fiscal year ended June 30, 1996
Class A
Income distributions -- taxable as dividend income, 72.79%
qualifying for deduction by corporations.
Payable date Per share
___________________________________________________
Sept. 27, 1995 $0.08054
Dec. 28, 1995 0.07179
March 28, 1996 0.06335
June 27, 1996 0.05682
___________________________________________________
Total $0.27250
___________________________________________________
Capital gain distribution -- taxable as long-term capital gain.
Payable date Per share
___________________________________________________
Dec. 28, 1995 $0.00315
___________________________________________________
Total distributions $0.27565
___________________________________________________
The distribution of $0.07494 per share, payable Dec. 29, 1995,
consisted of $0.07179 derived from net investment income and
$0.00315 from net long-term capital gains.
<PAGE>
PAGE 35
Class B
Income distributions -- taxable as dividend income, 72.79%
qualifying for deduction by corporations.
Payable date Per share
___________________________________________________
Sept. 27, 1995 $0.06844
Dec. 28, 1995 0.05909
March 28, 1996 0.05007
June 27, 1996 0.04355
___________________________________________________
Total $0.22115
___________________________________________________
Capital gain distribution -- taxable as long-term capital gain.
Payable date Per share
___________________________________________________
Dec. 28, 1995 $0.00315
___________________________________________________
Total distributions $0.22430
___________________________________________________
The distribution of $0.06224 per share, payable Dec. 29, 1995,
consisted of $0.05909 derived from net investment income and
$0.00315 from net long-term capital gains.
Class Y
Income distributions -- taxable as dividend income, 72.79%
qualifying for deduction by corporations.
Payable date Per share
___________________________________________________
Sept. 27, 1995 $0.08336
Dec. 28, 1995 0.07471
March 28, 1996 0.06636
June 27, 1996 0.05983
___________________________________________________
Total $0.28426
___________________________________________________
Capital gain distribution -- taxable as long-term capital gain.
Payable date Per share
___________________________________________________
Dec. 28, 1995 $0.00315
___________________________________________________
Total distributions $0.28741
___________________________________________________
The distribution of $0.07786 per share, payable Dec. 29, 1995,
consisted of $0.07471 derived from net investment income and
$0.00315 from net long-term capital gains.
<PAGE>
PAGE 36
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 Utilities Income Fund
IDS Tower 10
Minneapolis, MN 55440-0010
<PAGE>
PAGE 37
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.
