LETTER TO SHAREHOLDERS Alliance Utility Income Fund
- -------------------------------------------------------------------------------
January 16, 1995
Dear Shareholder:
For the twelve months ended November 30, 1994, Alliance Utility Income Fund
returned -4.86% (Class A), -5.59% (Class B) and -5.58% (Class C), based on
the net asset value. Over the same period, the Dow Jones 15 Utilities Index
declined 20.90%, the Standard & Poor's 40 Utilities Index declined 13.00%,
and the Morgan Stanley Capital International Utilities Index declined 10.3%.
These are all unmanaged benchmark indexes for your Fund. Additional
investment results for your Fund appear on page 2.
MARKET ENVIRONMENT
The weak performance of utilities stocks over the past 18 months reflects a
combination of cyclical economic recovery, attendant rising interest rates,
and continuing evidence of secular competitive pressures arising from
increased deregulation. This was reinforced last August when the staff of
the New York Public Service Commission proposed that rates of the state's
largest utilities, Consolidated Edison and Niagara Mohawk, be reduced
significantly.
We expect that a number of state commissions and/or legislatures will
authorize increased competition for utilities in their states or will
continue serious investigations regarding industry restructuring in 1995. On
a national level, the Republican majority in Congress could accelerate the
deregulation of the electric utility industry. The GOP has typically
championed increased competition in a variety of industries. The GOP's
ascendance could speed the introduction of companion legislation to the Nation
al Energy Policy of 1992 that would allow interstate competition at the
retail level in the utility industry.
Against this backdrop, we intend to employ a two-pronged strategy in the
Fund. First, we have established core positions in U.S. electric utilities
with low production costs, a competitive dividend yield and good dividend
growth potential. Examples include DPL Inc., Duke Power Co., NIPSCO
Industries and PacifiCorp. Utilities with these attributes should fare well
over the longer term in a more competitive utility industry. Second, the
Fund is made up of a number of utility stocks that have high dividend yields
in relation to their risks. For example, American Electric Power Company,
Oklahoma Gas & Electric and Puget Sound Power & Light each have dividend
yields in excess of 7%, generate strong cash flow and are low-cost producers
of power. In another area of opportunity, we have recently added to the
Fund's telecommunications exposure with purchases of Sprint, Bellsouth, GTE,
and U.S. West.
Although we believe that there are a number of relatively dynamic growth
opportunities among the foreign utilities, we presently have only a modest
offshore exposure with 14.9% of the Fund invested outside of the United
States as of January 16. Moreover, this foreign exposure is broadly spread
with 0.9% in Canada, 1.3% in New Zealand, 2.7% in Europe, 2.9% in Mexico,
3.4% in Asia and 3.7% in Latin America.
We appreciate your investment in Alliance Utility Income Fund and look
forward to reporting its progress to you later in the year.
Sincerely,
(Signature)
John D. Carifa
Chairman and President
<PAGE>
INVESTMENT RESULTS Alliance Utility Income Fund
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AVERAGE ANNUAL TOTAL RETURN AS OF NOVEMBER 30, 1994
CLASS A SHARES
WITHOUT WITH
SALES CHARGE SALES CHARGE
* One Year -4.86% -8.90%
* Since Inception* -5.03 -8.62
CLASS B SHARES
WITHOUT WITH
SALES CHARGE SALES CHARGE
* One Year -5.59% -9.21%
* Since Inception* -5.77 -8.19
CLASS C SHARES
* One Year -5.58%
* Since Inception* -5.68
The average annual total returns reflect investment of dividends and/or
capital gains distributions in additional shares--with and without the effect
of the 4.25% maximum sales charge (Class A) or 4% contingent deferred sales
charge (Class B); Class C shares are not subject to front-end or contingent
deferred sales charges. Past performance does not guarantee future results.
Investment return and principal value will fluctuate so that an investor's
shares, when redeemed, may be worth more or less than their original cost.
*Inception: 10/18/93.
<PAGE>
Alliance Utility Income Fund
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ALLIANCE UTILITY INCOME FUND
$10,000 INVESTMENT OVER LIFE OF FUND:
10/31/93 TO 11/30/94
(Mountain chart)
Utility S&P 40
Income Fund S&P 500 Utilities Index
10000 10000 10000
9810 10003 9480
9510 9650 8700
8760 9700 8700
8890 10170 8750
9060 9970 8610
This chart illustrates the total value of an assumed investment in
Alliance Utility Income Fund Class A shares (since inception) after
deducting the maximum 4.25% sales charge, and with dividends and capital
gains reinvested. Performance for Class B and Class C shares will vary from
the results shown above due to differences in expenses charged to those
classes. Past performance is not indicative of future results, and is not rep
resentative of future gain or loss in capital value or dividend income.
The Standard and Poor's 500-stock index is an unmanaged index that
includes 500 U.S. stocks. It is a common measure of the performance of the
U.S. stock market.
The S&P 40 Utilities Index is an unmanaged index comprised of 40
utility stocks followed by Standard & Poor.
When comparing Alliance Utility Income Fund to the two indexes shown
above, you should note that the Fund's performance reflects the maximum sales
charge of 4.25% while no such charges are reflected in the performance of the
indexes.
<PAGE>
TEN LARGEST HOLDINGS
NOVEMBER 30, 1994 Alliance Utility Income Fund
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<TABLE>
<CAPTION>
COMPANY COUNTRY VALUE PERCENT OF NET ASSETS
<S> <C> <C> <C>
PECO Energy Co. (common & pfd. stock) United States $ 219,875 3.6%
Texas Utilities Co. United States 185,962 3.1%
Telefonos de Mexico S.A. Mexico 174,900 2.9%
Duke Power Co. United States 167,075 2.7%
Oklahoma Gas & Electric Co. United States 124,925 2.1%
Cinergy Corp. United States 124,600 2.1%
Northeast Utilities United States 123,975 2.0%
FPL Group, Inc. United States 120,275 2.0%
Public Service Enterprise Group, Inc. United States 119,813 2.0%
Enron Corp. Capital LLC (common & pfd. stock) United States 118,275 1.9%
$1,479,675 24.4%
</TABLE>
MAJOR PORTFOLIO CHANGES
SIX MONTHS ENDED NOVEMBER 30, 1994
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES
PURCHASES COUNTRY BOUGHT HOLDINGS 11/30/94
<S> <C> <C> <C>
Telefonos de Mexico S.A. Mexico 2,300 3,300
Enron Corp. Capital LLC United States 3,900 3,900
Baltimore Gas & Electric United States 5,000 5,000
PECO Energy Co. Pfd. United States 4,400 4,400
American Electric Power United States 3,100 3,100
CMS Energy Corp. United States 4,300 4,300
Louisville Gas & Electric Energy Corp. United States 2,500 2,500
Public Service Co. of New Mexico United States 7,000 7,000
Duke Power Co. United States 2,000 4,100
Transportadora Gas SUR (ADR) Argentina 5,000 5,000
SALES COUNTRY SOLD HOLDINGS 11/30/94
Long Island Lighting Co. United States 5,100 -0-
Utilicorp United States 1,900 -0-
British Telecommunications (ADR) United Kingdom 1,000 -0-
Long Island Lighting Co. Pfd. United States 1,800 -0-
Niagra Mohawk Power United States 6,000 -0-
Enterra Corp. United States 500 -0-
Consolidated Electric Power Asia United States 500 -0-
</TABLE>
<PAGE>
PORTFOLIO OF INVESTMENTS
NOVEMBER 30, 1994 Alliance Utility Income Fund
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COMPANY SHARES VALUE
- ----------------------------------------------------------
COMMON & PREFERRED STOCKS-83.7%
UNITED STATES INVESTMENTS-68.8%
COMMON STOCKS-64.3%
PUBLIC UTILITIES-60.5%
ELECTRIC-53.5%
American Electric Power ....... 3,100 $ 102,300
Baltimore Gas & Electric ...... 5,000 112,500
CMS Energy Corp ............... 4,300 95,675
Delmarva Power & Light Co ..... 6,300 116,550
Dominion Resources, Inc.
of Virginia .................. 3,000 111,375
DPL, Inc ...................... 5,600 114,100
Duke Power Co ................. 4,100 167,075
Entergy Corp .................. 3,558 80,055
FPL Group, Inc ................ 3,400 120,275
Hawaiian Electric Inds., Inc .. 3,600 114,300
IES Industries, Inc ........... 4,500 117,563
Louisville Gas & Electric
Energy Corp .................. 2,500 94,063
Nevada Power Co ............... 5,600 111,300
New York State Electric &
Gas Corp ..................... 4,700 87,538
NIPSCO Industries, Inc ........ 2,800 81,900
Northeast Utilities ........... 5,800 123,975
Oklahoma Gas &
Electric Co .................. 3,800 124,925
PacifiCorp .................... 4,100 75,850
PECO Energy Co ................ 4,600 110,975
Portland General Corp ......... 3,200 60,800
Public Service Co. of
Colorado ..................... 4,100 116,850
Public Service Co. of New
Mexico* ...................... 7,000 86,625
Public Service Enterprise
Group, Inc .................... 4,500 119,813
Puget Sound Power &
Light Co ..................... 3,100 63,550
Rochester Gas &
Electric Corp ................ 4,900 102,287
San Diego Gas &
Electric Co .................. 5,800 114,550
SCEcorp ....................... 2,900 $ 40,600
Southern Co ................... 5,400 112,050
Texas Utilities Co ............ 5,700 185,962
Western Resources, Inc ........ 3,800 106,875
Wisconsin Energy Corp ......... 3,000 78,000
3,250,256
GAS-1.7%
Enron Corp. Capital LLC ....... 3,900 105,300
TELEPHONE-5.3%
BCE, Inc ...................... 1,500 50,063
GTE Corp ...................... 1,200 36,750
MCI Communications Corp ....... 4,800 93,600
Pacific Telesis Group ......... 3,800 110,200
Philippine Long Distance
Telephone Co ................. 600 30,750
321,363
3,676,919
ENERGY-1.7%
OIL SERVICE-1.7%
Western Atlas, Inc.* .......... 2,400 104,700
MULTI-INDUSTRY-2.1%
Cinergy Corp .................. 5,600 124,600
Total Common Stocks
(cost $4,200,060) ............ 3,906,219
PREFERRED STOCKS-4.5%
Arizona Public Service Co.,
pfd. callable at
7.25%, 12/01/98 .............. 600 12,225
Consumers Power Co. Cl.A.
pfd .......................... 3,300 75,900
Enron Corp. Capital LLC
cum. pfd. callable at
8.00%, 11/30/98 .............. 600 12,975
Mississippi Power & Light Co.,
pfd. callable at
8.36%, 10/01/97 .............. 500 46,875
Montana Power Co.,
pfd. callable at
6.875%, 11/01/13 ............. 200 16,000
<PAGE>
PORTFOLIO OF INVESTMENTS (continued) Alliance Utility Income Fund
- -------------------------------------------------------------------------------
Company Shares Value
- ---------------------------------------------------------
PECO Energy Co.
cum. pfd. Series A. callable at
9.00% .......................... 4,400 $ 108,900
Total Preferred Stocks
(cost $291,275) ................ 272,875
Total United States Investments
(cost $4,491,335) .............. 4,179,094
FOREIGN INVESTMENTS-14.9%
ARGENTINA-1.3%
Central Costanera S.A.
(ADS)(a) ....................... 100 3,125
Electric & gas utility
Central Puerto S.A.
(ADS)(a) ....................... 300 8,775
Electric & gas utility
Telefonica de Argentina S.A.
(ADR) .......................... 200 11,125
Telephone utility
Transportadora Gas SUR
(ADR)(a) ....................... 5,000 55,625
Multi-industry company
78,650
BOLIVIA-0.6%
Compania Boliviana De
Energia Electrica S.A.
(ADR) .......................... 1,600 36,800
Electric & gas utility
Brazil-0.8%
Companhia Energetica de Sao
Paolo (ADR)*(a) ................ 1,500 23,250
Electric & gas utility
Telecomunicacoes Brasileiras
S.A. (ADR) ..................... 511 24,400
Telephone utility
47,650
CANADA-0.9%
Renaissance Energy Ltd ......... 2,500 53,153
Domestic producers
CHILE-1.0%
Enersis S.A. (ADS) ............. 2,000 $ 59,750
Electric & gas utility
Denmark-1.3%
TeleDanmark (ADR)* ............. 3,000 77,625
Telephone utility
HONG KONG-0.8%
China Light & Power Co ......... 4,500 19,375
Electric & gas utility
Consolidated Electric
Power Asia* .................... 14,000 30,321
Electric & gas utility
49,696
INDONESIA-0.3%
Indonesia Satellite Corp.
(ADR) .......................... 490 18,620
Computer peripherals
MALAYSIA-0.7%
Tenaga Nasional Berhad ......... 10,000 43,044
Electric & gas utility
MEXICO-2.9%
Telefonos de Mexico S.A.
Cl.L (ADS) ..................... 3,300 174,900
Telephone utility
New Zealand-1.3%
Telecom Corp. of New
Zealand, Ltd. (ADS) ............ 1,500 81,187
Communication equipment
PHILIPPINES-0.9%
International Container Terminal
Services, Inc .................. 4,500 3,632
Multi-Industry company
Manila Electric Co., U.B ....... 4,000 54,088
Electric & gas utility
57,720
SPAIN-1.4%
Empresa Nacional De
Electric S.A. (ADS) ............ 900 40,725
Electrical equipment
<PAGE>
Alliance Utility Income Fund
- -------------------------------------------------------------------------------
SHARES OR
PRINCIPAL
AMOUNT
COMPANY (000) VALUE
- ----------------------------------------------------------------
Repsol S.A. (ADR) .................. 1,600 $ 46,200
Energy
86,925
THAILAND-0.7%
Advanced Information
Services Plc ....................... 2,700 41,166
Communication equipment
Total Foreign Investments
(cost $885,778) ................... 906,886
Total Common & Preferred Stocks
(cost $5,377,113) ................. 5,085,980
CORPORATE BONDS-1.8%
CORPORATE-0.8%
General Media Senior
Secured Notes
10.625%, 12/31/00 ................. $ 50 47,000
ELECTRIC & GAS-1.0%
Korean Electric Power Note
6.375%, 12/01/03 (b) .............. 20 16,893
PRINCIPAL
AMOUNT
COMPANY (000) VALUE
- ----------------------------------------------------------------
Midland Cogeneration Vent
Senior Secured Lease
Obligation
10.33%, 7/23/02 ................... $ 48 $ 45,539
62,432
Total Corporate Bonds
(cost $118,227) ................... 109,432
SHORT-TERM INVESTMENTS-18.8%
U.S. GOVERNMENT
OBLIGATIONS-18.8%
Federal National Mortgage
Association
5.35%, 12/02/94 ................... 400 399,941
5.38%, 12/01/94 ................... 740 740,000
Total Short-Term Investments
(amortized cost $1,139,941) ....... 1,139,941
TOTAL INVESTMENTS-104.3%
(cost $6,635,281) ................. 6,335,353
Other assets less liabilities-(4.3)% (263,495)
NET ASSETS-100% .................... $ 6,071,858
* Non-income producing security.
(a) Securities are exempt from registration under Rule 144A of the Securities
Act of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At November 30, 1994
these securities amounted to $90,775 or 1.5% of net assets.
(b) Foreign corporate bond.
Glossary of terms:
ADR - American Depository Receipt
ADS - American Depository Security
See notes to financial statements.
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
NOVEMBER 30, 1994 Alliance Utility Income Fund
- -------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments in securities, at value (cost $6,635,281) .............. $ 6,335,353
Cash ............................................................... 60,786
Receivable for capital stock sold .................................. 218,779
Deferred organization expenses ..................................... 200,322
Receivable from Adviser ............................................ 174,098
Dividends and interest receivable .................................. 29,486
Total assets ....................................................... 7,018,824
LIABILITIES
Payable for investment securities purchased ........................ 672,643
Payable for capital stock redeemed ................................. 68,182
Advisory fee payable ............................................... 7,870
Distribution fee payable ........................................... 4,051
Unclaimed dividends ................................................ 349
Accrued expenses ................................................... 193,871
Total liabilities .................................................. 946,966
NET ASSETS ............................................................... $ 6,071,858
COMPOSITION OF NET ASSETS
Capital stock, at par .............................................. $ 677
Additional paid-in capital ......................................... 6,472,199
Accumulated net realized loss on investments and
foreign currency denominated assets and liabilities ............... (101,090)
Net unrealized depreciation of investments ......................... (299,928)
$ 6,071,858
CALCULATION OF MAXIMUM OFFERING PRICE
CLASS A SHARES
Net asset value and redemption price per share
($1,068,230/119,035 shares of capital stock issued and outstanding) $ 8.97
Sales charge-4.25% of public offering price ........................ .40
Maximum offering price ............................................. $ 9.37
CLASS B SHARES
Net asset value and offering price per share
($2,352,470/262,427 shares of capital stock issued and outstanding) $ 8.96
CLASS C SHARES
Net asset value, redemption and offering price per share
($2,651,158/295,601 shares of capital stock issued and outstanding) $ 8.97
</TABLE>
See notes to financial statements.
<PAGE>
STATEMENT OF OPERATIONS
YEAR ENDED NOVEMBER 30, 1994 Alliance Utility Income Fund
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C>
INVESTMENT INCOME
Dividends (net of foreign taxes withheld of $399) ...................... $ 184,310
Interest ............................................................... 22,171 $ 206,481
EXPENSES
Advisory fee ........................................................... 27,038
Distribution fee-Class A ............................................... 2,506
Distribution fee-Class B ............................................... 16,549
Distribution fee-Class C ............................................... 11,147
Administrative ......................................................... 144,829
Audit and legal ........................................................ 69,982
Amortization of organization expenses .................................. 51,600
Printing ............................................................... 44,332
Registration ........................................................... 39,338
Custodian .............................................................. 28,366
Directors' fees ........................................................ 23,566
Transfer agency ........................................................ 15,396
Miscellaneous .......................................................... 39,252
Total expenses ......................................................... 513,901
Less: expenses waived and assumed by advisor (see Note B) .............. (440,440)
Net expenses ........................................................... 73,461
Net investment income .................................................. 133,020
REALIZED AND UNREALIZED (LOSS) ON INVESTMENTS
Net realized loss on investments ....................................... (100,190)
Net realized loss on foreign currency denominated assets and liabilities (2,759)
Net change in unrealized depreciation of investments
and foreign currency denominated assets and liabilities ............... (299,065)
Net loss on investments ................................................ (402,014)
NET DECREASE IN NET ASSETS FROM OPERATIONS ................................... $(268,994)
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 18, 1993*
NOVEMBER 30, TO
1994 NOVEMBER 30, 1993
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS
Net investment income .......................................... $133,020 $ 910
Net realized loss on investments and foreign currency transactions (102,949) (900)
Net change in unrealized depreciation of investments
and foreign currency denominated assets and liabilities....... (299,065) (863)
Net decrease in net assets from operations ..................... (268,994) (853)
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income
Class A ...................................................... (39,724) -0-
Class B ...................................................... (65,322) -0-
Class C ...................................................... (42,339) -0-
CAPITAL STOCK TRANSACTIONS
Net increase ................................................... 5,996,770 392,320
Total increase ................................................. 5,580,391 391,467
NET ASSETS
Beginning of year .............................................. 491,467 100,000
End of year .................................................... $6,071,858 $491,467
</TABLE>
* Commencement of operations.
See notes to financial statements.
<PAGE>
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 1994 Alliance Utility Income Fund
- -------------------------------------------------------------------------------
NOTE A: SIGNIFICANT ACCOUNTING POLICIES
Alliance Utility Income Fund, Inc. (the "Fund") organized as a Maryland
corporation on July 28, 1993, is registered under the Investment Company Act
of 1940 as a diversified, open-end management investment company. The Fund
had no operations other than the sale to Alliance Capital Management L.P.
(the "Adviser") of 10,000 shares of Class A shares for $100,000 on September
13, 1993. Class A and B shares commenced operations on October 18, 1993 and
Class C shares distribution commenced on October 27, 1993. The Fund offers
Class A, Class B and Class C shares. Class A shares are sold with a
front-end sales charge of up to 4.25%. Class B shares are sold with a
contingent deferred sales charge which declines from 4.00% to zero depending
on the period of time the shares are held. Class B shares will automatically
convert to Class A shares eight years after the end of the calendar month of
purchase. Class C shares are sold without an initial or contingent deferred
sales charge. All three classes of shares have identical voting, dividend,
liquidation and other rights and the same terms and conditions, except that
each class bears different distribution expenses and has exclusive voting
rights with respect to its distribution plan. The following is a summary of
the significant accounting policies followed by the Fund.
1. SECURITY VALUATION
Portfolio securities traded on national securities exchanges are valued at
the last reported sales price, or, if no sale occurred, at the last bid price
quoted at the regular close of the New York Stock Exchange. Over-the-counter
securities not traded on national securities exchanges are valued at the mean
of the closing bid and asked price. Securities which mature in 60 days or
less are valued at amortized cost, which approximates market value.
Securities for which current market quotations are not readily available
(including investments which are subject to limitations as to their sale) are
valued at their fair value as determined in good faith by the Board of
Directors.
2. ORGANIZATION EXPENSES
Organization expenses of approximately $258,000 have been deferred and are
being amortized on a straight-line basis through October, 1998.
3. CURRENCY TRANSLATION
Assets and liabilities denominated in foreign currencies and commitments
under forward exchange currency contracts are translated into U.S. dollars at
the mean of the quoted bid and asked price of such currencies against the
U.S. dollar. Purchases and sales of portfolio securities are translated at
the rates of exchange prevailing when such securities were acquired or sold.
Income and expenses are translated at rates of exchange prevailing when
accrued.
Net foreign exchange losses of $2,759 represents foreign exchange gains and
losses from sales and maturities of securities, holdings of foreign
currencies exchange gains and losses realized between the trade and
settlement dates on security transactions, and the difference between the
amounts of interest recorded on the Fund's books and the U.S. dollar
equivalent amounts actually received or paid. Net currency gains and losses
from valuing foreign currency denominated assets and liabilities at period
end exchange rates are reflected as a component of unrealized depreciation of
investments and foreign currency denominated assets and liabilities.
4. TAXES
It is the Fund's policy to meet the requirements of the Internal Revenue Code
applicable to regulated investment companies and to distribute all of its
investment company taxable income and net realized gains, if applicable, to
shareholders. Therefore, no provisions for federal income or excise taxes
are required.
5. INVESTMENT INCOME AND SECURITY TRANSACTIONS
Dividend income is recorded on the ex-dividend date. Interest income is
accrued daily. Security transactions are accounted for on the date
securities are purchased or sold. Security gains and losses are determined on
the identified cost basis. The Fund accretes discounts as adjustments to
interest income.
6. DIVIDENDS AND DISTRIBUTIONS
Dividends and distributions to shareholders are recorded on the ex-dividend
date. Income dividends and capital gain distributions are determined in
accordance with income tax regulations, which may differ from generally
accepted accounting principles.
<PAGE>
Alliance Utility Income Fund
- -------------------------------------------------------------------------------
7. CHANGES IN ACCOUNTING FOR DISTRIBUTIONS TO SHAREHOLDERS
During the year ended November 30, 1994, the Fund adopted Statement of
Position 93-2 Determination, Disclosure, and Financial Statement Presentation
of Income, Capital Gain, and Return of Capital Distributions by Investment
Companies. Accordingly, permanent book and tax basis differences relating
to shareholder distributions have been reclassified to paid-in-capital. As
of November 30, 1994, the cumulative effect of such differences totaling
$13,455 and $2,759 was reclassified from distributions in excess of net
investment income and accumulated net realized loss on investments and
foreign currency denominated assets and liabilities, respectively, to
additional paid-in-capital. Net investment income, net realized gains and
net assets were not affected by this change.
NOTE B: ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Under the terms of an investment advisory agreement, the Fund pays its
Adviser, Alliance Capital Management L.P., an advisory fee at an annual rate
of .75 of 1% of the Fund's average daily net assets. The fee is accrued
daily and paid monthly. The Adviser has agreed, under the terms of the
investment advisory agreement, to reimburse the Fund to the extent that its
aggregate expenses (exclusive of interest, taxes, brokerage, distribution
fees and extraordinary expenses) exceed the limits prescribed by any state in
which the Fund's shares are qualified for sale. The Fund believes that the
most restrictive expense limitation imposed by any state is 2.5% of the first
$30 million of its average daily net assets, 2% of the next $70 million of its
average daily net assets and 1.5% of its average daily net assets in excess
of $100 million. No such reimbursement was required for the year ended
November 30, 1994. For the same period the Adviser voluntarily agreed to
waive it's fees. In addition, the Adviser agreed to reimburse the Fund for
operating expenses. Such fees and expenses amounted to $440,440. Pursuant
to the Advisory Agreement, the Adviser provides to the Fund certain legal and
accounting services. For the year ended November 30, 1994, the Adviser
voluntarily agreed to waive its fees for such services. The Fund compensates
Alliance Fund Services, Inc. (a wholly-owned subsidiary of the Adviser) under
a Services Agreement for providing personnel and facilities to perform transfe
r agency services for the Fund. Such compensation amounted to $3,731.
Alliance Fund Distributors, Inc. (a wholly-owned subsidiary of the Adviser)
serves as the Distributor of the Fund's shares. The Distributor received
front-end sales charges of $661 from the sale of Class A shares and $3,887 in
contingent deferred sales charges were imposed upon redemptions by
shareholders of Class B shares for the year ended November 30, 1994.
Brokerage commissions paid on securities transactions for the year ended
November 30, 1994, amounted to $11,345, none of which was paid to brokers
utilizing the services of the Pershing Division of Donaldson, Lufkin &
Jenrette Securities Corp., ("DLJ") an affiliate of the Adviser, nor to DLJ
directly.
NOTE C: DISTRIBUTION SERVICES AGREEMENT
The Fund has adopted a Distribution Services Agreement (the "Agreement")
pursuant to Rule 12b-1 under the Investment Company Act of 1940. Under the
Agreement, the Fund pays a distribution fee, to the Distributor at an annual
rate of up to .30 of 1% of the Fund's average daily net assets attributable
to the Class A shares and 1% of the average daily net assets attributable
to both Class B and C shares. The Agreement provides that the Distributor
will use such payments in their entirety for distribution assistance and
promotional activities. The Distributor has incurred expenses in excess of
the distribution costs reimbursed by the Fund in the amount of $248,868 and
$236,172 for Class B and C shares, respectively; such costs may be recovered
from the Fund in future periods as long as the Agreement is in affect. In
accordance with the Agreement, there is no provision for recovery of
unreimbursed distribution costs, incurred by the Distributor, beyond the
current fiscal year for Class A shares. The Agreement also provides that the
Adviser may use its own resources to finance the distribution of the Fund's
shares.
<PAGE>
NOTES TO FINANCIAL STATEMENTS (continued) Alliance Utility Income Fund
- -------------------------------------------------------------------------------
NOTE D: INVESTMENT TRANSACTIONS
Purchases and sales of investment securities, (excluding short-term
investments), aggregated $6,183,753 and $956,066, respectively, for the year
ended November 30, 1994. At November 30, 1994, the cost of securities for
federal income tax purposes was the same as the cost for financial reporting
purposes. Accordingly, gross unrealized appreciation of investments was
$123,701 and gross unrealized depreciation of investments was $423,629,
resulting in net unrealized depreciation of $299,928.
The Fund may be able to use up to $101,090 of the Fund's capital loss
carryforward to offset future realized gains which expire through 2002.
NOTE E: CAPITAL STOCK
There are 9,000,000,000 shares of $.001 par value capital stock authorized,
divided into three classes, designated Class A, Class B and Class C shares.
Each class consists of 3,000,000,000 authorized shares. Transactions in
capital stock were as follows:
<TABLE>
<CAPTION>
Shares Amount
---------------------------------- ----------------------------------
Year ended October 18, 1993* Year ended October 18, 1993*
November 30, to November 30, to
1994 November 30, 1993 1994 November 30, 1993
<S> <C> <C> <C> <C>
CLASS A
Shares sold....................... 155,996 13,083 $1,525,830 $130,313
Shares issued in reinvestment of dividends 3,544 -0- 32,263 -0-
Shares redeemed................... (63,588) -0- (616,988) -0-
Net increase...................... 95,952 13,083 $ 941,105 $130,313
CLASS B
Shares sold....................... 325,292 24,593 $3,102,363 $243,406
Shares issued in reinvestment of dividends 5,345 -0- 48,378 -0-
Shares redeemed................... (92,803) -0- (854,700) -0-
Net increase...................... 237,834 24,593 $2,296,041 $243,406
Year ended October 27, 1993** Year ended October 27, 1993**
November 30, to November 30, to
1994 November 30, 1993 1994 November 30, 1993
CLASS C
Shares sold....................... 333,565 1,883 $3,126,974 $18,601
Shares issued in reinvestment of dividends 2,937 -0- 26,528 -0-
Shares redeemed................... (42,784) -0- (393,878) -0-
Net increase...................... 293,718 1,883 $2,759,624 $18,601
</TABLE>
* Commencement of operations.
** Commencement of distribution.
<PAGE>
FINANCIAL HIGHLIGHTS Alliance Utility Income Fund
- -------------------------------------------------------------------------------
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
Class A Class B
------------------------------- --------------------------------
Year ended October 18, 1993* Year ended October 18, 1993*
November 30, to November 30, to
1994 November 30, 1993 1994 November 30, 1993
<S> <C> <C> <C> <C>
Net asset value, beginning of period .... $ 9.92 $ 10.00 $ 9.91 $ 10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income ................... .42** .02** .37** .01**
Net realized and unrealized loss
on investments ........................ (.89) (.10) (.91) (.10)
Net decrease in net asset value
from operations ....................... (.47) (.08) (.54) (.09)
LESS: DISTRIBUTIONS
Dividends from net investment income .... (.48) -0- (.41) -0-
Net asset value, end of period .......... $ 8.97 $ 9.92 $ 8.96 $ 9.91
TOTAL RETURN
Total investment return based on
net asset value(b) .................... (4.86)% (.80)% (5.59)% (.90)%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(000's omitted) ....................... $1,068 $ 229 $2,353 $ 244
Ratio to average net assets of:
Expenses, net of waivers/reimbursements 1.50% 1.50%(a) 2.20% 2.20%(a)
Expenses, before waivers/reimbursements 13.72% 145.63%(a) 14.42% 133.62%(a)
Net investment income, net of
waivers/reimbursements .............. 4.13% 2.35%(a) 3.53% 2.84%(a)
Net investment income, before
waivers/reimbursements .............. (8.09)% (141.77)% (8.69)% (128.58)%
Portfolio turnover rate ................. 30% 11% 30% 11%
</TABLE>
See footnote summary on page 14.
<PAGE>
FINANCIAL HIGHLIGHTS (continued) Alliance Utility Income Fund
- -------------------------------------------------------------------------------
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
Class C
-------------------------------------
Year ended October 27, 1993*
November 30, to
1994 November 30, 1993
<S> <C> <C>
Net asset value, beginning of period ................. $ 9.92 $10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income ................................ .39** .01**
Net realized and unrealized loss
on investments ..................................... (.93) (.09)
Net decrease in net asset value
from operations .................................... (.54) (.08)
LESS: DISTRIBUTIONS
Dividends from net investment income ................. (.41) -0-
Net asset value, end of period ....................... $ 8.97 $ 9.92
TOTAL RETURN
Total investment return based on
net asset value(b) ................................. (5.58)% (.80)%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(000's omitted) .................................... $2,651 $18
Ratio to average net assets of:
Expenses, net of waivers/reimbursements ............ 2.20% 2.20%(a)
Expenses, before waivers/reimbursements ............ 14.42% 148.03%(a)
Net investment income, net of waivers/reimbursements 3.60% 3.08%(a)
Net investment income, before waivers/reimbursements (8.62)% (142.75)%
Portfolio turnover rate .............................. 30% 11%
</TABLE>
* Commencement of distributions.
** Net of fee waived and expenses reimbursed by the Adviser.
(a) Annualized.
(b) Total investment return is calculated assuming an initial investment
made at the net asset value at the beginning of the period, reinvestment of
all dividends and distributions at net asset value during the period, and
redemption on the last day of the period. Initial sales charges or
contingent deferred sales charges are not reflected in the calculation of
total investment return. Total investment return calculated for period of
less than one year is not annualized.
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS Alliance Utility Income Fund
- -------------------------------------------------------------------------------
TO THE BOARD OF DIRECTORS AND SHAREHOLDERS
of Alliance Utility Income Fund, INC.
In our opinion, the accompanying statement of assets and liabilities,
including the portfolio of investments, and the related statements of
operations and of changes in net assets and the financial highlights present
fairly, in all material respects, the financial position of Alliance Utility
Income Fund, Inc. (the "Fund") at November 30, 1994, the result of its
operations for the year then ended and the changes in its net assets and the
financial highlights for the year then ended and for the period October 18,
1993 (commencement of operations) to November 30, 1993, in conformity with
generally accepted accounting principles. These financial statements and
financial highlights (hereafter referred to as "financial statements") are
the responsibility of the Fund's management; our responsibility is to express
an opinion on these financial statements based on our audits. We conducted
our audits of these financial statements in accordance with generally
accepted auditing standards which require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits, which included confirmation of securities at
November 30, 1994 by correspondence with the custodian and brokers, provide
a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
New York, New York
January 20, 1995
<PAGE>
Alliance Utility Income Fund
- -------------------------------------------------------------------------------
BOARD OF DIRECTORS
JOHN D. CARIFA, CHAIRMAN AND PRESIDENT
RUTH BLOCK (1)
DAVID H. DIEVLER
JOHN H. DOBKIN (1)
WILLIAM H. FOULK, JR. (1)
DR. JAMES M. HESTER (1)
CLIFFORD L. MICHEL (1)
ROBERT C. WHITE (1)
OFFICERS
ANDREW M. ARAN, SENIOR VICE PRESIDENT
DANIEL V. PANKER, VICE PRESIDENT
EDMUND P. BERGAN, JR., SECRETARY
MARK D. GERSTEN, TREASURER & CHIEF FINANCIAL OFFICER
PATRICK J. FARRELL, CONTROLLER
CUSTODIAN
STATE STREET BANK & TRUST COMPANY
225 Franklin Street
Boston, MA 02110
TRANSFER AGENT
ALLIANCE FUND SERVICES, INC.
P.O. Box 1520
Secaucus, NJ 07096-1520
Toll-Free 1-(800) 221-5672
PRINCIPAL UNDERWRITER
ALLIANCE FUND DISTRIBUTORS, INC.
1345 Avenue of the Americas
New York, NY 10105
LEGAL COUNSEL
SEWARD & KISSEL
One Battery Park Plaza
New York, NY 10004
INDEPENDENT ACCOUNTANTS
PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, NY 10036
(1) Member of the Audit Committee.
<PAGE>
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<PAGE>
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<PAGE>
BULK RATE
U.S. POSTAGE
PAID
New York, NY.
Permit No. 8048
Alliance
Utility
Income
Fund
Annual Report
November 30, 1994
(White Alliance Logo(R))
Mutual funds without the Mystery(SM)
Alliance Utility Income fund
1345 Avenue of the Americas
New York, NY 10105
(800) 221-5672
(Alliance Capital Logo(R))
Mutual funds without the Mystery(SM)
This report is distributed solely to shareholders of the Fund
and is not to be used as sales literature.
(R) These registered service marks used under license from the owner,
Alliance Capital Management L.P.
UIFAR
