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1997 ANNUAL REPORT
IDS
Utilities
Income
Fund
(prospectus enclosed)
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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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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.
1997 annual report
From the president 4
From the portfolio manager 4
The Fund's ten largest holdings 6
Making the most of the Fund 7
The Fund's long-term performance 8
Independent auditors' report 9
Financial statements 10
Notes to financial statements 13
Investments in securities 22
IDS mutual funds 25
Federal income tax information 29
1997 prospectus
The Fund in brief 3p
Goals 3p
Investment policies and 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 investmentoption 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
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 36p
Administrator and transfer agent 36p
Distributor 37p
About American Express Financial Corporation 38p
General information 38p
Appendix 39p
Description of derivative instruments 39p
(This annual report is not part of the prospectus.)
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To our shareholder
(Photo of) William R. Pearce, President of the Fund
(Photo of) Bernhard Fleming, Portfolio manager
From the president
If you're an experienced investor, you know that the past two years have
been unusually strong for the financial markets. Perhaps just as
important, you also know that history shows that bull markets don't last
forever. Though they're often unpredictable, market 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
Aided by a strong stock market and generally low interest rates, IDS
Utilities Income Fund produced a healthy return during the past fiscal
year. For the period -- July 1996 through June 1997 -- the total return
from the Fund's Class A shares was 18.1%.
The stock market enjoyed an almost-ideal environment during the past 12
months, highlighted by low inflation, steady economic growth, healthy
corporate profits and, for the most part, low long-term interest rates.
With such solid underpinnings, the market mounted a determined advance
that was interrupted by only one meaningful setback. That came last
spring, when fear of a potential increase in inflation drove up
interest rates, which in turn caused stocks to stumble. But the market
regained its footing within weeks, and, with the resilience that has bee
its hallmark in recent years, more than made up for the decline with a
surge in May and June.
True to their nature, utilities stocks could not keep up with the powerful
pace set by the stock market as a whole during the fiscal year.
(Conversely, utilities stocks usually hold up better when the market
struggles.) Nevertheless, they were consistently good performers, as
evidenced by the fact that the Fund recorded gains in nine of the 12
months.
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Natural gas strong in '96
All major utilities groups -- natural gas, telephone and electric
companies -- produced a positive return for the Fund. During the early
months of the period, natural gas companies led the way. The chief reason
was a favorable supply/demand situation for most of the period,
complemented by the expansion by some natural gas companies into related,
but non-regulated, businesses. Late last winter, as the weather turned
milder, I reduced holdings in this sector.
Electric utilities were relatively lackluster performers throughout the
fiscal year, as fierce competition restrained their stock prices.
Although they comprised only a small portion of the Fund's investments,
holdings among real estate investment trusts (REITs) paid off quite well.
These non-utility issues were added mainly to enhance the Fund's yield,
but as it turned out, they provided considerable price appreciation as
well. I sold all of those investments by period-end because I thought
their potential for gain had largely been reached.
Phones wakeup performance
The Fund received its biggest performance boost from its telephone
holdings, a substantial portion of which were in foreign countries,
including Canada, Spain, the United Kingdom and Brazil. Several of these
foreign stocks generated exceptionally good returns, more than 50% in some
cases. By comparison, the Fund's U.S. telephone utility holdings recorded
mediocre results as uncertainty regarding regulation in the telephone
industry created uneasiness among investors. Over the year, I increased
the investment in phones, using the proceeds from the sale of natural gas
and REIT holdings.
As we begin a new fiscal year, I plan to keep the portfolio mix -- an
emphasis on telephone utilities, supported by electric and natural gas
stocks -- basically intact. Specifically, I will stress companies that
appear less vulnerable to competitive pressure and have above-average
growth potential. In general, I'm encouraged that the utilities companies
as a whole are focusing their attention on efficient management of
capital, which is vital to their stock performance. While this doesn't
guarantee positive results for the stocks and the Fund in the months
ahead, I think it will position the companies for improved performance in
the long run.
Bernhard Fleming
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Class
12-month performance
(All figures per share)
Net asset value (NAV)
June 30, 1997 $8.04
June 30, 1996 $7.24
Increase $0.80
Distributions
July 1, 1996 - June 30, 1997
From income $0.24
From capital gains $0.22
Total distributions $0.46
Total return* +18.1%**
Class B
12-month performance
(All figures per share)
Net asset value (NAV)
June 30, 1997 $8.04
June 30, 1996 $7.23
Increase $0.81
Distributions
July 1, 1996 - June 30, 1997
From income $0.19
From capital gains $0.22
Total distributions $0.41
Total return* +17.3%**
Class Y
12-month performance
(All figures per share)
Net asset value (NAV)
June 30, 1997 $8.04
June 30, 1996 $7.24
Increase $0.80
Distributions
July 1, 1996 - June 30, 1997
From income $0.26
From capital gains $0.22
Total distributions $0.48
Total return* +18.3%**
* 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.)
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The ten holdings listed here make up 29.31% of the Fund's net assets
The Fund's ten largest holdings
Percent Value
(of Fund's net assets) (as of June 30, 1997)
Ameritech 4.28% $35,667,187
BellSouth 4.17 34,781,250
BCE 4.03 33,600,000
NYNEX 3.11 25,931,250
SBC Communications 2.60 21,656,250
Duke Energy 2.30 19,175,000
Telecomunicacoes Brasileiras -
Telebras ADR 2.27 18,968,750
British Telecommunications ADR 2.22 18,562,500
Northern Telecom 2.18 18,200,000
TECO Energy 2.15 17,893,750
(This annual report is not part of the prospectus.)
<PAGE>
Making the most of the Fund
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.
Using this strategy does not ensure a profit or avoid a loss if the market
declines, and requires that you be able to keep on investing on a regular
basis, even when the price of your shares falls or the market declines.
Investing in this manner can be an effective way to accumulate shares to
meet your long-term goals.
How dollar-cost averaging works
Month Amount Per-share Number of shares purchased
invested market price
Jan $100 $20 5.00 XXXXX
Feb 100 18 5.56 XXXXXx
March 100 17 5.88 XXXXXx
April 100 15 6.67 XXXXXXx
May 100 16 6.25 XXXXXXx
June 100 18 5.56 XXXXXx
July 100 17 5.88 XXXXXx
Aug 100 19 5.26 XXXXXx
Sept 100 21 4.76 XXXXx
Oct 100 20 5.00 XXXXX
(footnotes to table) By investing an equal number of dollars each month...
(arrow in table pointing to April) you automatically buy more shares when th
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
(This annual report is not part of the prospectus.)
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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
$40,000
$30,000 $28,779
Utilities
Income Fund
Class A
$20,000
S&P 500
Stock Indx
$10,000
9,500
8/1/88 '89 '90 '91 '92 '93 '94 '95 '96 '97
Average annual total return
(as of June 30, 1997)
1 year 5 years Since inception
Class A +12.21 +11.52% +12.58%*
Class B* +13.27% --% +18.17%**
Class Y* +18.30% --% +20.65%**
*Inception date was Aug. 1, 1988.
**Inception date was March 20, 1995.
(footnote to Tables)
Assumes: oHolding period from 8/1/88 to 6/30/97.
oReturns do not reflect taxes payable on distributions.
oReinvestment of all income and capital gain distributions for
the Fund, with a value of $13,564. 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.
On the graph above you can see how the Fund's total return compared
to two widely cited performance indexes, the S&P 500. In comparing
Utilities Income Fund (Class A) 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.
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 retur
figures reflect the impact of the applicable sales charge up to a maximum of 5%.
This was a period of widely fluctuating security prices. Past performance is not
guarantee of future results.
(This annual report is not part of the prospectus.)
The financial statements contained in Post-Effective Amendment #18 to
Registration Statement No. 33-20872 filed on or about Aug. 29, 1997 are
incorporated by reference.
<PAGE>
IDS mutual funds
Global/International funds
Funds in this group seek capital growth and/or income by investing
primarily in foreign securities. Foreign investments may be
subject to currency fluctuations and political and economic risks
of the countries in which the investments are made. They are high
risk mutual funds with a potential for high reward.
IDS Emerging Markets Fund
Invests in a Portfolio comprised primarily of stocks of companies
in developing countries throughout the world that are believed to
offer growth potential. Seeks to provide long-term growth of
capital.
(icon of) world with countries
IDS Global Growth Fund
Invests in a Portfolio comprised primarily of 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.
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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.
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IDS Global Balanced Fund
Invests in stocks and bonds in, for the most part, major markets
throughout the world, including the U.S. Seeks to provide a
balance of growth of capital and current income.
(icon of) scale holding two worlds
IDS Global Bond Fund
Invests in a Portfolio comprised primarily of debt securities of
U.S. and foreign issuers to seek high total return through income
and growth of capital.
(icon of) globe
Growth funds
Funds in this group seek capital growth, primarily from common
stocks. They are high risk mutual funds with a potential for high
reward.
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. A highly aggressive and speculative fund
that seeks long-term growth of capital.
(icon of) cart of precious gems
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.
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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.
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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.
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IDS Research Opportunities Fund
Invests in a Portfolio comprised primarily of 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.
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(This annual report is not part of the prospectus.
<PAGE>
IDS Growth Fund
Invests in a Portfolio comprised primarily of companies that have
above-average potential for long-term growth as a result of new
management, marketing opportunities or technological superiority.
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IDS New Dimensions Fund
Invests in a Portfolio comprised primarily of 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
Growth & income funds
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. Foreign investments
may be subject to currency fluctuations and political and economic
risks of the countries in which the investments are made.
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 Managed Allocation Fund
Invests in a Portfolio comprised primarily of 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) gyroscope
IDS Stock Fund
Invests in a Portfolio comprised primarily of 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
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 in a Portfolio comprised primarily of 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 Portfolio that seeks to 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
(This annual report is not part of the prospectus.)
<PAGE>
Income funds
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 Extra Income Fund
Invests in a Portfolio comprised mainly of long-term, high-yielding
corporate fixed-income securities in the lower rated, higher risk
bond categories to seek high current income. Secondary objective
is capital growth.
(icon of) coins
IDS Bond Fund
Invests mainly in corporate bonds, at least 50% in the higher
rated, lower risk bond categories, or the equivalent, and in
government bonds.
(icon of) greek column
IDS Selective Fund
Invests in a Portfolio comprised primarily of 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 in a Portfolio comprised primarily of 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 funds
These funds provide tax-free income by investing in municipal
bonds. The income is generally free from federal income tax, but a
portion of the income may be subject to state and local taxes.
Risk varies by bond quality.
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
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 High Yield Tax-Exempt Fund
Invests in a Portfolio comprised primarily of 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 Intermediate Tax-Exempt Fund
Invests in mainly investment-grade bonds and other debt securities
with intermediate-term maturities issued by state and local
government units. Goal is to seek a high level of current income
exempt from federal taxes.
(icon of) shield with a tree enclosed
(This annual report is not part of the prospectus.)
<PAGE>
Money market funds
These money market funds have three main goals: conservation of
capital, constant liquidity and the highest possible current income
consistent with these objectives. An investment in these funds is
neither insured nor guaranteed by the U.S. government, and there
can be no assurance that these funds will be able to maintain a
stable net asset value of $1.00 per share. Very limited risk.
IDS Cash Management Fund
Invests in such money market securities as high quality commercial
paper, bankers' acceptances, certificates of deposit (CDs) and
other bank securities.
(icon of) piggy bank
IDS Tax-Free Money Fund
Invests primarily in short-term bonds and notes issued by state and
local governments to seek high current income exempt from federal
income taxes.
(icon of) shield with piggy bank enclosed
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.
(This annual report is not part of the prospectus.)
<PAGE>
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, 1997
Class A
Income distributions
taxable as dividend income, 65.51% qualifying for deduction by corporations.
Payable date Per share
Sept. 26, 1996 $0.04925
Dec. 27, 1996 0.06399
March 27, 1997 0.06882
June 27, 1997 0.06256
Total $0.24462
Capital gain distribution
taxable as long-term capital gain.
Payable date Per shar
Dec. 27, 1996 $0.21849
Total distributions $0.46311
The distribution of $0.28248 per share, payable Dec. 27, 1996, consisted of
$0.06399 derived from net investment income and $0.21849 from net long-term
capital gains.
(This annual report is not part of the prospectus.)
<PAGE>
Class B
Income distributions
taxable as dividend income, 65.51% qualifying for deduction by corporations.
Payable date Per share
Sept. 26, 1996 $0.03588
Dec. 27, 1996 0.04974
March 27, 1997 0.05432
June 27, 1997 0.04795
Total $0.18789
Capital gain distribution
taxable as long-term capital gain.
Payable date Per share
Dec. 27, 1996 $0.21849
Total distributions $0.40638
The distribution of $0.26823 per share, payable Dec. 27, 1996, consisted of
$0.04974 derived from net investment income and $0.21849 from net long-term
capital gains.
Class Y
Income distributions
taxable as dividend income, 65.51% qualifying for deduction by corporations.
Payable date Per share
Sept. 26, 1996 $0.05229
Dec. 27, 1996 0.06721
March 27, 1997 0.07208
June 27, 1997 0.06483
Total $0.25641
Capital gain distribution
taxable as long-term capital gain.
Payable date Per share
Dec. 27, 1996 $0.21849
Total distributions $0.47490
The distribution of $0.28570 per share, payable Dec. 27, 1996, consisted of
$0.06721 derived from net investment income and $0.21849 from net long-term
capital gains.
(This annual report is not part of the prospectus.
<PAGE>
Quick telephone reference
_________________________________________________________________
American Express Financial Advisors 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
_________________________________________________________________
TTY Service
For the hearing impaired
800-846-4852
_________________________________________________________________
American Express Financial Advisors Easy Access Line
Automated account information (TouchToneR phones only), including
current fund prices and performance, account values and recent
account transactions
800-862-7919
AMERICAN
EXPRESS
Financial
Advisors
IDS Utilities Income Fund
IDS Tower 10
Minneapolis, MN 55440-0010
<PAGE>
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 are
placed in a blue strip
at the top of the page.
3) There are pictures, icons 3) Each picture, icon and
and graphs throughout the graph is described in
annual report. 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.
