AXP(SM)
Utilities
Income Fund
1999 SEMIANNUAL REPORT
American Express (R) Funds
(icon of) magnifying glass
AXP Utilities Income Fund seeks to provide shareholders with a high level of
current income. Secondary goals are growth of income and capital.
AMERICAN EXPRESS
<PAGE>
Dependable Dividends
Making money in the stock market isn't limited to trying to find stockswith
rising prices. Many investorsprefer 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.
Contents
From the Chairman 3
From the Portfolio Manager 3
Fund Facts 5
The 10 Largest Holdings 6
Financial Statements 7
Notes to Financial Statements 10
Investments in Securities 19
<PAGE>
(picture of) Arne H. Carlson
Arne H. Carlson
Chariman of the board
From the Chairman
We are in an extraordinary period for investing in financial assets, with many
stocks at their all-time highs. Looking at year 2000, American Express Financial
Corporation, the Fund's investment manager, expects the economy to continue to
grow and long-term interest rates to rise only slightly. This is a great time to
take a close look at your goals and investments. We encourage you to:
o Consult a professional investment adviser who can help you cut through
mountains of data.
o Set financial goals that extend beyond those achievable through
retirement plans of your employer.
o Learn as much as you can about your current investments.
The portfolio manager's letter that follows provides a review of the Fund's
investment strategies and performance. The annual report contains other valuable
information as well. The Fund's prospectus describes its investment objectives
and how it intends to achieve those objectives. As experienced investors know,
information is vital to making good investment decisions.
So, take a moment and decide again whether the Fund's investment objectives and
management style fit with your other investments to help you reach your
financial goals. And make it a practice on a regular basis to assess your
investment options.
Arne H. Carlson
(picture of) Bernhard Fleming
Bernhard Fleming
Portfolio manager
From the Portfolio Manager
The past six months was a positive period for U.S. utilities stocks, although
rising interest rates and comparatively weak earnings tempered their
performance. For AXP Utilities Income Fund's Class A shares, the result was a
gain of 2.86% (excluding the sales charge) during the first half of the fiscal
year (July through December 1999).
Although the Federal Reserve Board had raised short-term rates only once (in
June), investors' concern about potentially rising inflation had already taken
longer-term rates considerably higher by mid-summer. Thus, the interest-rate
headwind was in full force when the period began.
Because of their sensitivity to changes in interest rates, utilities stocks,
especially those of electric companies, experienced substantial selling
pressure. Adding to the difficult environment was utilities' profit performance,
which, while positive, paled in comparison to the strong gains of some companies
in other industries. For the Fund, the net result of the negative conditions was
a loss of more than 5% through September.
A STRONG FINISH
From that point, though, the situation improved quickly. With the U.S. stock
market rallying furiously, utilities stocks got caught up in the advance. This
set the stage for the Fund to register a sharp gain in October, which erased
most of the ground lost earlier, and go on to finish the period in the plus
column.
Looking at utilities sectors, electrics were clearly the weakest performers,
registering a double-digit loss for the six months. Among others, holdings among
natural gas companies were up moderately overall, and U.S. telephone stocks were
down somewhat, partly because of concerns about a price war among long-distance
service providers.
But the big winner for the Fund was the foreign telephone sector, composed
largely of European stocks, which enjoyed extraordinarily good gains overall. To
the Fund's benefit, I substantially increased those holdings during the period,
while concurrently reducing investments in U.S. electric companies.
Looking toward the second half of the fiscal year, I think U.S. telephone,
electric and natural gas companies are poised to enjoy improved performance,
especially if the stock market remains volatile. I'm also optimistic about the
outlook for foreign phone companies and plan to maintain a healthy exposure to
that group.
Bernhard Fleming
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Fund Facts
Class A -- 6-month performance
(All figures per share)
Net asset value (NAV)
Dec. 31, 1999 $9.35
June 30, 1999 $9.91
Decrease $0.56
Distributions -- July 1, 1999 - Dec. 31, 1999
From income $0.25
From capital gains $0.58
Total distributions $0.83
Total return* +2.86%**
Class B -- 6-month performance
(All figures per share)
Net asset value (NAV)
Dec. 31, 1999 $9.35
June 30, 1999 $9.91
Decrease $0.56
Distributions -- July 1, 1999 - Dec. 31, 1999
From income $0.21
From capital gains $0.58
Total distributions $0.79
Total return* +2.48%**
Class Y -- 6-month performance
(All figures per share)
Net asset value (NAV)
Dec. 31, 1999 $9.34
June 30, 1999 $9.91
Decrease $0.57
Distributions -- July 1, 1999 - Dec. 31, 1999
From income $0.26
From capital gains $0.58
Total distributions $0.84
Total return* +2.87%**
*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.
<PAGE>
The 10 Largest Holdings
Percent Value
(of net assets) (as of Dec. 31, 1999)
BCE 3.89% $81,168,749
MCI WorldCom 3.81 79,593,749
BellSouth 3.59 74,900,000
SBC Communications 3.27 68,250,000
AT&T 3.16 65,975,000
ALLTEL 2.77 57,881,250
Enron 2.76 57,687,500
Bell Atlantic 2.65 55,406,250
Calpine 2.45 51,200,000
U S WEST Communications Group 2.41 50,400,000
For further detail about these holdings, please refer to the section entitled
"Investments in Securities."
(icon of) pie chart
The 10 holdings listed here
make up 30.76% of net assets
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<TABLE>
<CAPTION>
Financial Statements
Statement of assets and liabilities
AXP Utilities Income Fund, Inc.
Dec. 31, 1999 (Unaudited)
Assets
Investments in securities, at value (Note 1)
<S> <C>
(identified cost $1,790,908,417) $2,112,168,106
Cash in bank demand deposit 89,264
Dividends and accrued interest receivable 5,253,136
Receivable for investment securities sold 9,008,530
---------
Total assets 2,126,519,036
-------------
Liabilities
Dividends payable to shareholders 551,696
Payable upon return of securities loaned (Note 4) 34,160,000
Payable for investment securities purchased 4,090,356
Accrued investment management services fee 32,595
Accrued distribution fee 26,124
Accrued service fee 2
Accrued transfer agency fee 6,713
Accrued administrative services fee 1,891
Other accrued expenses 399,156
-------
Total liabilities 39,268,533
----------
Net assets applicable to outstanding capital stock $2,087,250,503
==============
Represented by
Capital stock -- $.01 par value (Note 1) $ 2,232,870
Additional paid-in capital 1,746,388,134
Undistributed net investment income 272,697
Accumulated net realized gain (loss) 17,099,504
Unrealized appreciation (depreciation) on investments and on translation
of assets and liabilities in foreign currencies 321,257,298
-----------
Total -- representing net assets applicable to outstanding capital stock $2,087,250,503
==============
Net assets applicable to outstanding shares: Class A $1,493,672,218
Class B $ 592,910,395
Class Y $ 667,890
Net asset value per share of outstanding capital stock: Class A shares 159,780,639 $ 9.35
Class B shares 63,434,932 $ 9.35
Class Y shares 71,473 $ 9.34
------ --------------
See accompanying notes to financial statements.
</TABLE>
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<CAPTION>
Statement of operations
AXP Utilities Income Fund, Inc.
Six months ended Dec. 31, 1999 (Unaudited)
Investment income
Income:
<S> <C>
Dividends $26,510,212
Interest 3,316,916
Less foreign taxes withheld (27,559)
-------
Total income 29,799,569
----------
Expenses (Note 2):
Investment management services fee 5,608,001
Distribution fee
Class A 1,767,730
Class B 2,604,263
Transfer agency fee 1,038,001
Incremental transfer agency fee
Class A 82,357
Class B 59,462
Service fee-- Class Y 294
Administrative services fees and expenses 336,263
Compensation of board members 6,098
Custodian fees 160,065
Printing and postage 116,538
Registration fees 195,313
Audit fees 13,250
Other 32,400
------
Total expenses 12,020,035
Earnings credits on cash balances (Note 2) (29,241)
-------
Total net expenses 11,990,794
----------
Investment income (loss) -- net 17,808,775
----------
Realized and unrealized gain (loss) -- net
Net realized gain (loss) on:
Security transactions (Note 3) 44,455,974
Foreign currency transactions (44,562)
-------
Net realized gain (loss) on investments 44,411,412
Net change in unrealized appreciation (depreciation) on investments
and on translation of assets and liabilities in foreign currencies (2,617,917)
----------
Net gain (loss) on investments and foreign currencies 41,793,495
----------
Net increase (decrease) in net assets resulting from operations $59,602,270
===========
See accompanying notes to financial statements.
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<CAPTION>
Statements of changes in net assets
AXP Utilities Income Fund, Inc.
Dec. 31,1999 June 30,1999
Six months ended Year ended
(Unaudited)
Operations and distributions
<S> <C> <C>
Investment income (loss)-- net $ 17,808,775 $ 29,706,562
Net realized gain (loss) on investments 44,411,412 136,833,664
Net change in unrealized appreciation (depreciation) on investments
and on translation of assets and liabilities in foreign currencies (2,617,917) 103,859,098
---------- -----------
Net increase (decrease) in net assets resulting from operations 59,602,270 270,399,324
---------- -----------
Distributions to shareholders from:
Net investment income
Class A (14,223,586) (25,253,790)
Class B (3,305,477) (4,445,156)
Class Y (6,431) (6,159)
Net realized gain
Class A (107,789,577) (68,741,354)
Class B (42,653,415) (18,236,859)
Class Y (47,745) (22,739)
------- -------
Total distributions (168,026,231) (116,706,057)
------------ ------------
Capital share transactions (Note 5)
Proceeds from sales
Class A shares (Note 2) 197,033,879 354,422,867
Class B shares 163,474,205 258,289,871
Class Y shares 116,213 481,539
Reinvestment of distributions at net asset value
Class A shares 110,948,910 86,756,980
Class B shares 44,949,407 22,163,425
Class Y shares 54,104 28,759
Payments for redemptions
Class A shares (107,501,111) (160,550,110)
Class B shares (Note 2) (46,644,742) (56,002,953)
Class Y shares (15,227) (33,608)
------- -------
Increase (decrease) in net assets from capital share transactions 362,415,638 505,556,770
----------- -----------
Total increase (decrease) in net assets 253,991,677 659,250,037
Net assets at beginning of period 1,833,258,826 1,174,008,789
------------- -------------
Net assets at end of period $2,087,250,503 $1,833,258,826
============== ==============
Undistributed (excess of distributions over) net investment income $ 272,697 $ (584)
-------------- --------------
See accompanying notes to financial statements.
</TABLE>
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Notes to Financial Statements
AXP 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 has 10 billion
authorized shares of capital stock. The Fund invests primarily in securities of
public utilities companies.
The Fund offers Class A, Class B and Class Y shares.
o Class A shares are sold with a front-end sales charge.
o Class B shares may be subject to a contingent deferred sales charge and
automatically convert to Class A shares during the ninth calendar year of
ownership.
o Class Y shares have no sales charge and are offered only to qualifying
institutional investors.
All classes of shares have identical voting, dividend and liquidation rights.
The distribution fee, incremental 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.
The Fund's significant accounting policies are summarized below:
Use of estimates
Preparing financial statements that conform to generally accepted accounting
principles requires management to make estimates (e.g., on assets and
liabilities) that could differ from actual results.
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. Debt securities are generally traded in
the over-the-counter market and are valued at a price that reflects fair value
as quoted by dealers in these securities or by an independent pricing service.
Securities for which market quotations are not readily available are valued at
fair value according to methods selected in good faith by the board. Short-term
securities maturing in more than 60 days from the valuation date are valued at
the market price or approximate market value based on current interest rates;
those maturing in 60 days or less are valued at amortized cost.
Option transactions
To produce incremental earnings, protect gains, and facilitate buying and
selling of securities for investments, the Fund may buy and write options traded
on any U.S. or foreign exchange or in the over-the-counter market where
completing the obligation depends upon the credit standing of the other party.
The Fund also may buy and sell put and call options and write covered call
options on portfolio securities as well as write cash-secured put options. The
risk in writing a call option is that the Fund gives up the opportunity for
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 being unable to enter into a closing transaction if a
liquid secondary market does not exist.
Option contracts are valued daily at the closing prices on their primary
exchanges and unrealized appreciation or depreciation is recorded. The Fund will
realize a gain or loss when the option transaction expires or closes. 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.
Futures transactions
To gain exposure to or protect itself from market changes, the Fund may buy and
sell financial futures contracts traded on any U.S. or foreign exchange. The
Fund also may buy and write put and call options on these futures contracts.
Risks of entering into futures contracts and related options include the
possibility of 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. 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, if any, may arise from sales
of foreign currency, closed forward contracts, exchange gains or losses realized
between the trade date and settlement date on securities transactions, and other
translation gains or losses on dividend, interest income and foreign withholding
taxes.
The Fund may enter into forward foreign currency exchange contracts for
operational purposes and to protect against adverse exchange rate fluctuation.
The net U.S. dollar value of foreign currency underlying all contractual
commitments held by the Fund and the 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 its contract obligations.
Federal taxes
The Fund's policy is to comply with all sections of the Internal Revenue Code
that apply to regulated investment companies and to distribute substantially all
of its taxable income to shareholders. No provision for income or excise taxes
is thus required.
Net investment income (loss) and net realized gains (losses) may differ for
financial statement and tax purposes primarily because of deferred losses on
certain futures contracts, the recognition of certain foreign currency gains
(losses) as ordinary income (loss) for tax purposes and losses deferred due to
"wash sale" transactions. The character of distributions made during the year
from net investment income or net realized gains may differ from their ultimate
characterization for federal income tax purposes. Also, due to the timing of
dividend distributions, the fiscal year in which amounts are distributed may
differ from the year that the income or realized gains (losses) were recorded by
the Fund.
Dividends to shareholders
Dividends from net investment income, declared 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
The Fund has agreements with American Express Financial Corporation (AEFC) to
manage its portfolio and provide administrative services. Under an 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 0.61% to 0.48% annually.
The fee will be adjusted upward or downward by a performance incentive
adjustment based on a comparison of the performance of Class A shares of AXP
Utilities Income Fund to the Lipper Utility Fund Index. The maximum adjustment
is 0.08% of the Fund's average daily net assets after deducting 1% from the
performance difference. If the difference is less than 1%, the adjustment will
be zero. The first adjustment will be made on Jan. 1, 2000 and will cover the
six-month period beginning July 1, 1999.
Under an Administrative Services Agreement, the Fund pays AEFC a fee 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. A minor
portion of additional administrative service expenses paid by the Fund are
consultants' fees and fund office expenses. Under this agreement, the Fund also
pays taxes, audit and certain legal fees, registration fees for shares,
compensation of board members, corporate filing fees and any other expenses
properly payable by the Fund and approved by the board.
Under a separate Transfer Agency Agreement, American Express Client Service
Corporation (AECSC) maintains shareholder accounts and records. The Fund pays
AECSC an annual fee per shareholder account for this service as follows:
o Class A $19
o Class B $20
o Class Y $17
The Fund has agreements with American Express Financial Advisors Inc. (the
Distributor) for distribution and shareholder services. Under a Plan and
Agreement of Distribution, the Fund pays a distribution fee at an annual rate of
up to 0.25% of the Fund's average daily net assets attributable to Class A
shares and up to 1.00% for Class B shares.
Under a Shareholder Service Agreement, the Fund's Class Y shares pay a fee for
service provided to shareholders by financial advisors and other servicing
agents. The fee is calculated at a rate of 0.10% of the Fund's average daily net
assets attributable to Class Y shares.
Sales charges received by the Distributor for distributing Fund shares were
$3,380,176 for Class A and $220,786 for Class B for the six months ended Dec.
31, 1999.
During the six months ended Dec. 31, 1999, the Fund's custodian and transfer
agency fees were reduced by $29,241 as a result of earnings credits from
overnight cash balances. The Fund also pays custodian fees to American Express
Trust Company, an affiliate of AEFC.
3. SECURITIES TRANSACTIONS
Cost of purchases and proceeds from sales of securities (other than short-term
obligations) aggregated $910,919,141 and $694,231,123, respectively, for the six
months ended Dec. 31, 1999. Realized gains and losses are determined on an
identified cost basis.
Brokerage commissions paid to brokers affiliated with AEFC were $141,399 for the
six months ended Dec. 31, 1999.
4. LENDING OF PORTFOLIO SECURITIES
As of Dec. 31, 1999, securities valued at $32,850,000 were on loan to brokers.
For collateral, the Fund received $34,160,000 in cash. Income from securities
lending amounted to $85,911 for the six months ended Dec. 31, 1999. The risks to
the Fund of securities lending are that the borrower may not provide additional
collateral when required or return the securities when due.
5. CAPITAL SHARE TRANSACTIONS
Transactions in shares of capital stock for the periods indicated are as
follows:
Six months ended Dec. 31, 1999
Class A Class B Class Y
Sold 20,417,555 16,926,981 12,100
Issued for reinvested distributions 12,097,406 4,905,047 5,902
Redeemed (11,140,770) (4,849,149) (1,579)
----------- ---------- ------
Net increase (decrease) 21,374,191 16,982,879 16,423
Year ended June 30, 1999
Class A Class B Class Y
Sold 37,982,525 27,645,905 51,479
Issued for reinvested distributions 9,383,887 2,397,429 3,099
Redeemed (17,294,027) (5,998,584) (3,590)
----------- ---------- ------
Net increase (decrease) 30,072,385 24,044,750 50,988
6. BANK BORROWINGS
The Fund has a revolving credit agreement with U.S. Bank, N.A., whereby the Fund
is permitted to have bank borrowings for temporary or emergency purposes to fund
shareholder redemptions. The Fund must have asset coverage for borrowings not to
exceed the aggregate of 333% of advances equal to or less than five business
days plus 367% of advances over five business days. The agreement, which enables
the Fund to participate with other American Express mutual funds, permits
borrowings up to $200 million, collectively. Interest is charged to each Fund
based on its borrowings at a rate equal to the Federal Funds Rate plus 0.30% or
the Eurodollar Rate (Reserve Adjusted) plus 0.20%. Borrowings are payable up to
90 days after such loan is executed. The Fund also pays a commitment fee equal
to its pro rata share of the amount of the credit facility at a rate of 0.05%
per annum. The Fund had no borrowings outstanding during the six months ended
Dec. 31, 1999.
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<CAPTION>
7. FINANCIAL HIGHLIGHTS
The tables below show certain important financial information for evaluating the
Fund's results.
Fiscal period ended June 30,
Per share income and capital changesa
Class A
1999b 1999 1998 1997 1996
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $9.91 $8.98 $8.04 $7.24 $6.26
Income from investment operations:
Net investment income (loss) .10 .21 .24 .25 .30
Net gains (losses) (both realized and unrealized) .17 1.52 1.93 1.01 .96
Total from investment operations .27 1.73 2.17 1.26 1.26
Less distributions:
Dividends from net investment income (.10) (.21) (.23) (.24) (.28)
Distributions from realized gains (.73) (.59) (1.00) (.22) --
Total distributions (.83) (.80) (1.23) (.46) (.28)
Net asset value, end of period $9.35 $9.91 $8.98 $8.04 $7.24
Ratios/supplemental data
Net assets, end of period (in millions) $1,494 $1,372 $973 $740 $677
Ratio of expenses to average daily net assetsc 1.04%d .86% .86% .89% .90%
Ratio of net investment income (loss)
to average daily net assets 2.04%d 2.23% 2.81% 3.42% 4.03%
Portfolio turnover rate
(excluding short-term securities) 37% 71% 83% 90% 84%
Total returne 2.86% 20.15% 28.40% 18.12% 20.28%
a For a share outstanding throughout the period. Rounded to the nearest cent.
b Six months ended Dec. 31, 1999 (Unaudited).
c Effective fiscal year 1996, expense ratio is based on total expenses of the
Fund before reduction of earnings credits on cash balances.
d Adjusted to an annual basis.
e Total return does not reflect payment of a sales charge.
</TABLE>
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<CAPTION>
Fiscal period ended June 30,
Per share income and capital changesa
Class B Class Y
1999b 1999 1998 1997 1996 1999b 1999 1998 1997 1996
Net asset value,
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
beginning of period $9.91 $8.98 $8.04 $7.23 $6.26 $9.91 $8.98 $8.04 $7.24 $6.26
Income from investment operations:
Net investment
income (loss) .06 .14 .17 .19 .23 .11 .22 .24 .26 .31
Net gains (losses)
(both realized and unrealized) .17 1.52 1.94 1.03 .96 .16 1.52 1.94 1.02 .96
Total from investment
operations .23 1.66 2.11 1.22 1.19 .27 1.74 2.18 1.28 1.27
Less distributions:
Dividends from net
investment income (.06) (.14) (.17) (.19) (.22) (.11) (.22) (.24) (.26) (.29)
Distributions from
realized gains (.73) (.59) (1.00) (.22) -- (.73) (.59) (1.00) (.22) --
Total distributions (.79) (.73) (1.17) (.41) (.22) (.84) (.81) (1.24) (.48) (.29)
Net asset value, end
of period $9.35 $9.91 $8.98 $8.04 $7.23 $9.34 $9.91 $8.98 $8.04 $7.24
Ratios/supplemental data
Net assets, end of
period (in millions) $593 $460 $201 $93 $47 $-- $-- $-- $-- $--
Ratio of expenses to
average daily
net assetsc 1.80%d 1.63% 1.62% 1.65% 1.68% .88%d .79% .79% .74% .73%
Ratio of net investment
income (loss) to average
daily net assets1 .29%d 1.45% 2.01% 2.66% 3.05% 2.21%d 2.18% 3.02% 3.57% 4.13%
Portfolio turnover rate
(excluding short-term
securities) 37% 71% 83% 90% 84% 37% 71% 83% 90% 84%
Total returne 2.48% 19.29% 27.47% 17.27% 19.38% 2.87% 20.25% 28.43% 18.30% 20.48%
a For a share outstanding throughout the period. Rounded to the nearest cent.
b Six months ended Dec. 31, 1999 (Unaudited).
c Effective fiscal year 1996, expense ratio is based on total expenses of the
Fund before reduction of earnings credits on cash balances.
d Adjusted to an annual basis.
e Total return does not reflect payment of a sales charge.
</TABLE>
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<TABLE>
<CAPTION>
Investments in Securities
AXP Utilities Income Fund, Inc.
Dec. 31, 1999 (Unaudited)
(Percentages represent value of investments compared to net assets)
Common stocks (89.8%)
Issuer Shares Value(a)
Communications equipment & services (4.8%)
<S> <C> <C>
Cable & Wireless ADR 380,000(c) $20,116,250
China Telecom ADR 150,000(b,c) 19,284,375
Covad Communications Group 300,000(b) 16,781,250
Motorola 125,000 18,406,250
Nortel Networks 200,000(c) 20,200,000
Tellabs 100,000(b) 6,418,750
Total 101,206,875
Computers & office equipment (2.9%)
America Online 138,400(b) 10,440,550
Cisco Systems 125,000(b) 13,390,625
EMC 100,000(b) 10,925,000
Equant 221,000(b,c) 24,752,000
Total 59,508,175
Electronics (0.6%)
Corning 100,000 12,893,750
Energy (1.7%)
Chevron 100,000 8,662,500
Conoco Cl B 300,000 7,462,500
Exxon Mobil 132,015 10,635,458
Texaco 150,000 8,146,875
Total 34,907,333
Media (0.7%)
USA Networks 275,000(b) 15,193,750
Utilities -- electric (25.1%)
AES 300,000 22,425,000
Allegheny Energy 1,000,000 26,937,500
American Water Works 385,500 8,191,875
Calpine 800,000(b) 51,200,000
CMS Energy 1,000,000 31,187,500
Constellation Energy Group 500,000 14,500,000
DPL 1,000,000 17,312,500
DQE 700,000 24,237,500
DTE Energy 900,000 28,237,500
Duke Energy 700,000 35,087,500
Edison Intl 1,500,000 39,281,250
ENEL SpA ADR 110,000(b,c) 4,537,500
Florida Progress 200,000 8,462,500
FPL Group 550,000 23,546,875
Illinova 200,000 6,950,000
LG&E Energy 1,000,000 17,437,500
MDU Resources Group 600,000 12,000,000
Montana Power 300,000 10,818,750
Northern States Power 700,000 13,650,000
NSTAR 300,000 12,150,000
Pinnacle West Capital 700,000 21,393,750
Reliant Energy 1,000,000 22,875,000
Scottish Power 1,300,000(c) 9,848,485
Scottish Power ADR 232,000(c) 6,496,000
Sempra Energy 600,000 10,425,000
Southern Co 1,000,000 23,500,000
Texas Utilities 600,000 21,337,500
Total 524,026,985
Utilities -- gas (11.2%)
Coastal 800,000 28,350,000
Columbia Energy Group 300,000 18,975,000
Consolidated Natural Gas 450,000 29,221,875
Dynegy 209,900 5,103,194
Eastern Enterprises 100,000 5,743,750
El Paso Energy 900,000 34,931,250
Enron 1,300,000 57,687,500
Equitable Resources 400,000 13,350,000
KeySpan 300,000 6,956,250
New Jersey Resources 400,000 15,625,000
NICOR 250,000 8,125,000
TransCanada PipeLines 250,000(c,f) 2,187,500
Washington Gas Light 300,000 8,250,000
Total 234,506,319
Utilities -- telephone (42.8%)
ALLTEL 700,000 57,881,250
AT&T 1,300,000 65,975,000
BCE 900,000(c) 81,168,749
Bell Atlantic 900,000 55,406,250
BellSouth 1,600,000 74,900,000
British Telecommunications 800,000(c) 19,551,593
BroadWing 700,000 25,812,500
CenturyTel 700,000 33,162,500
COLT Telecom Group ADR 100,000(b,c) 20,400,000
Deutsche Telekom 250,000(b,c) 17,804,905
France Telecom 150,000(b,c) 19,839,751
GTE 650,000 45,865,625
Intermedia Communications 10,118(b) 392,705
MCI WorldCom 1,500,000(b) 79,593,749
Nippon Telegraph & Telephone 2,170(c) 37,168,445
Royal PTT Nederland ADR 100,000(c) 9,612,500
SBC Communications 1,400,000 68,250,000
Sprint 100,000 6,731,250
Sprint PCS 300,000(b,f) 30,750,000
Telecom Italia 800,000(c) 11,282,316
Telecomunicacoes Brasileiras 100,000(c) 12,850,000
Telefonica de Espana ADR 400,000(b,c) 31,525,000
Telefonos de Mexico ADR Cl L 100,000(c) 11,250,000
U S WEST Communications Group 700,000 50,400,000
United States Cellular 150,000(b) 15,140,625
Vodafone AirTouch ADR 200,000(c) 9,900,000
Total 892,614,713
Total common stocks
(Cost: $1,575,285,141) $1,874,857,900
Preferred stocks (6.0%)
Issuer Shares Value(a)
Adelphia Communications
5.50% Cv Series D 50,000 $9,406,250
Coastal
6.63% Cv 400,000 9,325,000
Cox Communications
7.00% Cm Cv 216,000 14,688,000
Enron
7.00% Cv 497,000 9,318,750
Global Crossing
6.38% Cv 100,000 (d) 12,637,500
Global TeleSystems Group
7.25% Cm Cv 475,000(d) 26,956,250
Intermedia Communications
7.00% Cm Cv Series F 300,000 7,987,500
7.00% Cv Series F 350,000(d) 9,318,750
SBH-Cincinnati Bell
6.25% Cv 150,000 16,200,000
Sprint
8.25% Cv 112,675 8,366,119
Total preferred stocks
(Cost: $103,617,517) $124,204,119
See accompanying notes to investments in securities.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Bonds (1.3%)
Issuer Coupon Principal Value(a)
rate amount
Communications equipment & services (0.1%)
Versatel Telecom
(European Monetary Unit)
<S> <C> <C> <C>
12-17-04 4.00% 1,250,000(c,d) $1,274,171
Media (0.4%)
Telewest Communication
(British Pound) Cv
02-19-07 5.25 4,080,000(c,d) 7,513,084
Utilities -- telephone (0.8%)
Bell Atlantic Financial Services
(U.S. Dollar) Cv
04-01-03 5.75 7,000,000(d) 7,073,500
France Telecom
(European Monetary Unit)
11-18-04 4.13 10,000,000(c,d) 10,778,641
Total 17,852,141
Total bonds
(Cost: $25,484,943) $26,639,396
Short-term securities (4.1%)
Issuer Annualized Amount Value(a)
yield on date payable at
of purchase maturity
U.S. government agencies (2.3%)
Federal Home Loan Bank Disc Nt
02-25-00 5.66% $8,900,000 $8,808,490
Federal Home Loan Mtge Corp Disc Nts
01-14-00 5.63 6,600,000 6,585,575
02-15-00 5.69 1,000,000 992,078
02-18-00 5.60 1,900,000 1,883,173
03-07-00 5.66 4,100,000 4,056,124
03-09-00 5.75 4,600,000 4,549,304
Federal Natl Mtge Assn Disc Nts
02-24-00 5.63 6,000,000 5,940,356
02-24-00 5.69 3,000,000 2,970,178
03-02-00 5.70 9,400,000 9,306,915
03-09-00 5.87 1,100,000 1,087,877
Total 46,180,070
Commercial paper (1.8%)
Alcoa
01-24-00 6.02 4,500,000 4,482,000
American General Finance
02-18-00 6.05 5,000,000 4,959,166
Pfizer
02-02-00 6.03 5,000,000(e) 4,972,500
Procter & Gamble
01-14-00 5.88 2,500,000 2,494,293
Toyota Motor Credit
01-31-00 6.01 4,700,000 4,675,797
World Bank Disc Nt
01-31-00 5.58 18,800,000 18,702,865
Total 40,286,621
Total short-term securities
(Cost: $86,520,816) $86,466,691
Total investments in securities
(Cost: $1,790,908,417)(g) $2,112,168,106
See accompanying notes to investments in securities.
</TABLE>
<PAGE>
Notes to investments in securities
(a) Securities are valued by procedures described in Note 1 to the financial
statements.
(b) Non-income producing.
(c) Foreign security values are stated in U.S. dollars. For debt securities,
principal amounts are denominated in the currency indicated. As of Dec. 31,
1999, the value of foreign securities represented 18.65% of net assets.
(d) 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.
(e) 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.
(f) Security is partially or fully on loan. See Note 4 to the financial
statements.
(g) At Dec. 31, 1999, the cost of securities for federal income tax purposes was
approximately $1,790,908,000 and the approximate aggregate gross unrealized
appreciation and depreciation based on that cost was:
Unrealized appreciation $397,459,000
Unrealized depreciation (76,199,000)
-----------
Net unrealized appreciation $321,260,000
<PAGE>
PRSRT STD AUTO
U.S. POSTAGE
PAID
SPENCER, IA
PERMIT NO. 85
S-6342 M (2/00)
Ticker Symbol Class A: INUTX Class B: IUTBX Class Y: N/A
Distributed by American Express Financial Advisors Inc. Member NASD. American
Express Company is separate from American Express Financial Advisors Inc. and is
not a broker-dealer.
AXP Utilities Income Fund
IDS Tower 10
Minneapolis, MN 55440-0010
American Express(R) Funds
