<PAGE>
ABT UTILITY INCOME FUND, INC.
Schedule of Investments (Unaudited) May 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares Value
----------- -------------
<S> <C> <C> <C>
COMMON STOCKS -- 95.6%
Oil - Integrated 20,000 Atlantic Richfield Co. $ 2,322,500
4.2% 40,000 Chevron Corp. 1,965,000
-------------
4,287,500
-------------
Utilities - Electric 90,000 American Electric Power Co., Inc. 3,082,500
41.0% 75,000 Central & South West Corp. 1,931,250
82,500 Cinergy Corp. 2,196,563
25,000 Delmarva Power & Light 503,125
80,000 Entergy Corp. 1,980,000
100,000 FPL Group, Inc. 3,925,000
70,000 General Public Utilities Corp. 2,100,000
100,000 Houston Industries, Inc. 4,312,500
237,000 Northeast Utilities 5,658,375
20,000 *Powergen PLC ADR(Partially Paid) 270,000
90,400 Public Service Co. of Colorado 2,960,600
171,000 Public Service Enterprise Group, Inc. 5,087,250
100,000 Texas Utilities Co. 3,612,500
60,000 Utilicorp United, Inc. 1,710,000
80,000 Western Resources, Inc. 2,520,000
-------------
41,849,663
-------------
Utilities - Natural Gas 60,000 Enron Corp. 2,190,000
7.8% 170,000 MCN Corp. 3,187,500
75,000 Williams Cos., Inc. 2,550,000
-------------
7,927,500
-------------
Utilities - 74,000 AT&T Corp. 3,755,500
Telecommunications 55,000 Bell Atlantic Corp. 3,066,250
23.7% 20,000 BellSouth Corp. 1,227,500
95,000 Frontier Corp. 2,161,250
150,000 GTE Corp. 5,006,250
20,000 NYNEX Corp. 835,000
100,000 Southern New England Telecommunications Corp. 3,362,500
70,000 Sprint Corp. 2,345,000
60,000 U.S. West Inc. 2,475,000
-------------
24,234,250
-------------
Other 50,000 Chemed Corp. 1,693,750
18.9% 115,000 Hanson PLC 2,185,000
125,300 IES Industries, Inc. 2,772,262
115,000 Meditrust 3,665,625
60,000 Philip Morris Cos., Inc. 4,372,500
80,000 Storage Trust Reality 1,610,000
22,500 Storage USA Inc. 638,438
55,000 UST Inc. 2,390,000
-------------
19,327,575
-------------
Total Common Stocks (Cost $91,383,532) 97,626,488
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Shares Value
----------- -------------
<S> <C> <C> <C>
CONVERTIBLE PREFERRED STOCKS -- 1.6%
30,000 Glendale Federal Bank, Series E, 8.75% 1,095,000
20,000 Oasis Residential, CV PFD, 9.00% 507,500
2,000 Sprint Corp., PFD, 8.25% 66,500
-------------
Total Convertible Preferred Stocks
(Cost $1,589,000) $1,669,000
<CAPTION>
Face
Amount
-----------
<S> <C> <C> <C>
CORPORATE BONDS -- 3.0%
$ 1,000,000 Duke Power Co., 7.00%, 9/01/05 1,003,546
1,000,000 Pacific Telephone & Telegraph, 7.25%, 2/01/08 982,500
1,000,000 Virgina Electric & Power, 7.57%, 12/09/02 1,040,339
-------------
Total Corporate Bonds (Cost $2,759,242) 3,026,385
-------------
TOTAL INVESTMENTS (Cost $95,731,774) - 100.2% 102,321,873
Other Assets, less liabilities - (0.2)% (230,306)
-------------
TOTAL NET ASSETS - 100.00% $102,091,567
=============
</TABLE>
*Non-income producing
See notes to financial statements
<PAGE>
<TABLE>
<CAPTION>
ABT UTILITY INCOME FUND, INC.
Statement of Assets and Liabilities (Unaudited)
May 31, 1995
- ------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Investments in securities at value
(cost $95,731,774) $ 102,321,873
Receivables:
Investment securities sold 1,550,582
Capital stock sold 26,647
Dividends 614,995
Interest 73,110
---------------
Total assets 104,587,207
---------------
LIABILITIES
Payables:
Investment securities purchased 1,136,213
Capital stock repurchased 475,270
Accrues expenses 98,796
Other liabilities 785,361
---------------
Total liabilities 2,495,640
---------------
NET ASSETS
Source of Net Assets:
Net capital paid in
on shares of
capital stock $ 99,920,227
Undistributed net
investment income 270,335
Accumulated net
realized gain (loss) (4,689,094)
Net unrealized appreciation 6,590,099
--------------
Total net assets $ 102,091,567
===============
Shares outstanding (Note 2) 8,812,319
Net asset value and redemption
price per share (total net assets
divided by shares outstanding) $11.59
Offering price per share (net asset
value divided by 95.25%)* $12.17
<CAPTION>
Statement of Operations (Unaudited)
Six months ended May 31, 1995
- ------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME
Income:
Dividends $ 2,975,171
Interest 134,549
--------------
Total income 3,109,720
--------------
Expenses:
Investment advisory fees (Note 3) 252,294
Distribution Fees (Note 3) 75,688
Transfer agent fees and expenses 107,223
Administrative fees 43,585
Accounting fees 27,421
Custodian fees 11,837
Registration fees and expenses 18,386
Directors' fees and expenses 23,012
Insurance 11,135
Audit fees and expenses 11,477
Printing and shareholder
communications 7,480
Legal fees and expenses 9,974
Other 14,644
--------------
Total expenses 614,156
--------------
Net investment gain 2,495,564
REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS
Net realized gain (loss)
on investments $ (1,726,748)
Change in unrealized
appreciation 9,814,256
--------------
Net gain on
investments 8,087,508
Net increase in net
assets from operations $10,583,072
==============
</TABLE>
*The sales charge is 4.75% on a single sale of less than $100,000, reduced on
sales of $100,000 or more and certain other sales.
See notes to financial statements
<PAGE>
ABT UTILITY INCOME FUND, INC.
Statements of Changes in Net Assets (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six month ended Year ended
May 31, 1995 November 30, 1994
--------------- -----------------
<S> <C> <C>
Change in net assets from operations
Net investment income $ 2,495,564 $ 5,770,318
Net realized gain (loss) on investments (1,726,748) (2,962,346)
Unrealized appreciation (depreciation)
for the period 9,814,256 (17,252,068)
--------------- ---------------
Net increase (decrease) in net assets
from operations 10,583,072 (14,444,096)
--------------- ---------------
Distributions to shareholders from:
Net investment income (2,782,968) (6,649,221)
Net realized gain 0 (6,791,278)
Fund share transactions (Note 2 )
Net proceeds from sale of shares 883,924 3,908,680
Proceeds from distributions reinvested 2,073,544 10,351,847
Cost of shares redeemed (11,056,805) (26,643,987)
--------------- ---------------
Net increase (decrease) in net assets from
Fund share transactions (8,099,337) (12,383,460)
--------------- ---------------
Total increase (decrease) (299,233) (40,268,055)
Net Assets:
Beginning of period 102,390,800 142,658,855
--------------- ---------------
End of period $ 102,091,567 $ 102,390,800
=============== ===============
</TABLE>
See notes to financial statements
<PAGE>
ABT UTILITY INCOME FUND, INC.
Financial Highlights (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months Years ended November 30,
Per share operating performance Ended ----------------------------------------------------
(For a share outstanding throughout the period) May 31, 1995 1994 1993 1992+ 1991 1990+
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 10.73 $ 13.38 $ 12.85 $ 12.42 $ 12.09 $ 13.38
- -----------------------------------------------------------------------------------------------------------------------------------
Income from investment operations
Net investment income 0.27 0.57 0.64 0.63 0.59 0.66
Net realized and unrealized
gain (loss) 0.89 (1.93) 0.77 0.71 0.85 (0.76)
-------- -------- -------- -------- -------- --------
Total from investment operations 1.16 (1.36) 1.41 1.34 1.44 (0.10)
-------- -------- -------- -------- -------- --------
Less distributions
Dividends from net investment income (0.30) (0.65) (0.63) (0.61) (0.65) (0.74)
Distributions from net realized gains (0.64) (0.25) (0.30) (0.46) (0.45)
-------- -------- -------- -------- -------- --------
(0.30) (1.29) (0.88) (0.91) (1.11) (1.19)
-------- -------- -------- -------- -------- --------
Change in net asset value for period 0.86 (2.65) 0.53 0.43 0.33 (1.29)
- -----------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 11.59 $ 10.73 $ 13.38 $ 12.85 $ 12.42 $ 12.09
- -----------------------------------------------------------------------------------------------------------------------------------
Total Return* 10.97% (11.00)% 11.23% 11.48% 12.80% (0.82)%
Ratios/supplemental data
Net assets, end of year $ 102,092 $ 102,391 $ 142,659 $ 140,294 $ 146,309 $ 140,678
Ratio to average net assets of:
Expenses 1.22%** 1.05% 1.09% 1.17% 1.24% 1.25%
Net investment income 4.95%** 4.77% 4.63% 5.10% 5.42% 5.31%
Portfolio Turnover 27%** 50% 29% 47% 38% 33%
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
+ Based on the average of the number of shares outstanding during the year.
* Does not reflect sales load.
** Annualized.
See notes to financial statements
<PAGE>
ABT UTILITY INCOME FUND, INC.
NOTES TO FINANCIAL STATEMENTS May 31, 1995
- --------------------------------------------------------------------------------
1. SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
ABT Utility Income Fund, Inc. (the Fund) is a Maryland corporation. The
Fund is registered under the Investment Company Act of 1940 as an open-end,
diversified management investment company. The following is a summary of
significant accounting policies followed in the preparation of it financial
statements.
(a) VALUATION OF INVESTMENTS. Securities listed or trade on a recognized
national stock exchange or NASDAQ are valued at the last reported sales prices
on the principal exchange on which the securities are traded. Over-the-counter
securities and listed securities for which no sale is reported are valued at the
last current bid price. Securities for which market quotations are not readily
available are valued at fair value as determined by management and approved in
good faith by the Board of Directors. Securities with a remaining maturity of 60
days or less are valued at amortized cost, which approximates market value.
(b) INVESTMENT TRANSACTIONS AND RELATED INVESTMENT INCOME. Investment
transactions are accounted for on trade date basis. Interest income is recorded
on a daily basis and dividend income is recorded on ex-dividend date.
(c) INCOME TAXES. It is the Fund's intention to comply with the provisions of
the Internal Revenue Code applicable to regulated investment companies and to
distribute all of its taxable income to its shareholders. Therefore, no
provision has been made for federal income taxes. Distributions to shareholders
are recorded on the ex-dividend date. Income and capital gain distributions are
determined in accordance with income tax regulations.
2. TRANSACTIONS IN SHARES OF
BENEFICIAL INTEREST
As of May 31, 1995, there were 400 millions shares at $0.10 par value
authorized. Transactions are summarized as follows:
<TABLE>
<CAPTION>
Six months
ended Year ended
May 31, November 30,
1995 1994
------------ --------------
<S> <C> <C>
Shares sold 80,881 328,593
Shares issued on
reinvestment of
distributions 190,736 853,590
Shares redeemed (1,005,983) (2,293,836)
------------ --------------
Net increase
(decrease) in
shares
outstanding (734,366) (1,111,653)
============ ==============
</TABLE>
3. INVESTMENT ADVISORY FEES AND
OTHER TRANSACTIONS WITH AFFILIATES
The Fund pays monthly an investment advisory fee to Palm Beach Capital
Management, Inc. (the Adviser) [formerly Palm Beach Capital Management, Ltd.]
equal on an annual basis to 0.50% of the average daily net assets of the Fund.
ABT Financial Services, Inc. (ABT), an affiliate of the Adviser, serves as
the Fund's principal underwriter and distributor. During the six months ended
May 31, 1995, ABT received $ for underwriting concessions on sales of shares
and $ in commissions as broker.
The Fund has adopted a distribution plan (12b-1 Plan) pursuant to which the
Fund reimburses ABT monthly (subject to a limit of 0.25% per annum of the Fund's
average daily net assets) for ABT's costs and expenses in connection with any
activity that is primarily intended to result in a sale of Fund shares. Such
distribution fees are set forth in the Statement of Operations.
During the year ended November 30, 1994, The Bank of New York provided
administrative and accounting services for the Fund, for which they received the
fees shown in the Statement of Operations.
<PAGE>
ABT UTILITY INCOME FUND
NOTES TO FINANCIAL STATEMENTS May 31, 1995
- --------------------------------------------------------------------------------
Effective December 1, 1994, administrative and accounting services are being
provided by the Adviser, and all fees for these services will be paid to the
Adviser.
Certain officers and a director of the Fund are also officers and/or
directors of the Adviser and ABT.
4. INVESTMENT TRANSACTIONS
During the six months ended May 31, 1995, the cost of purchases and the
proceeds from sales of investment securities other than short-term obligations
were $13,597,175 and $20,557,845, The cost of securities for federal income tax
purposes is the same as that shown in the investment portfolio. Realized gains
and losses are reported on an identified cost basis.
At May 31, 1995, the aggregate gross unrealized appreciation and
depreciation of portfolio securities, based on cost for federal income tax
purposes, was as follows:
<TABLE>
<S> <C>
Unrealized appreciation
Unrealized depreciation
--------------
Net unrealized appreciation $ 6,590,099
==============
</TABLE>
5. CAPITAL LOSS CARRYFORWARD
At November 30, 1994, the Fund had a net realized capital loss carry
forward of $2,962,346, which may be utilized to offset future capital gains.
Unless utilized, such loss carryforward expires in 2002.
6. RECLASSIFICATION
During the year ended November 30, 1994, the Fund adopted AICPA Statement
of Position, Determination, Disclosure and Financial Statement Presentation of
Income, Capital Gain, and Return of Capital Distributions by Investment
Companies. Accordingly, cumulative permanent book and tax basis differences
have been reclassified as of the beginning of the fiscal year to reflect a
decrease in undistributed net investment income, and increase in accumulated net
realized gain of $132,215. These reclassifications did not affect net
investment income, net realized gain or net assets for the year ended November
30, 1994.
7. REORGANIZATION
On March 3, 1995, the Adviser and certain of its affiliates entered into an
Asset Purchase Agreement with First Union National Bank (First Union) pursuant
to which First Union would acquire subtantially all of the assets of the Adviser
(the Acquisition). On March 15, 1995, in connection with the Acqisition, the
Fund, entered into an Agreement and Plan of Reorganization (the Plan) with First
Union Funds, on behalf of First Union Utility Portfolio (the Portfolio). The
Plan provides that the Fund will transfer substantially all of its assets in
exchange for Class A shares of beneficial interest of the Portfolio, a
diversified series of First Union Funds, on a tax-free basis. It is anticipated
that the Plan will be consummated at the close of business on June 30, 1995.
