LETTER TO SHAREHOLDERS ALLIANCE UTILITY INCOME FUND
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July 12, 1995
Dear Shareholder:
We are pleased to provide you with an update of Alliance Utility Income Fund's
performance and investment activity during its fiscal semi-annual period ended
May 31, 1995. The following table compares your Fund's total returns over the
six months with that of the overall U.S. stock market, represented by the
unmanaged S&P 500-stock Index, and with the New York Stock Exchange (NYSE)
Utility Index, also unmanaged, which is composed of all utility issues traded
on the Exchange.
Six Months Ended May 31, 1995
Total Return Ending NAV
------------ ----------
ALLIANCE UTILITY INCOME FUND
Class A +9.71% $9.61
Class B +9.31% $9.60
Class C +9.41% $9.61
S&P 500 +19.23%
NYSE UTILITY INDEX +10.96%
The Fund's total returns are based on the net asset values of each class of
shares as of May 31; additional investment results appear on page 4.
In the past, we have compared your Fund's performance with benchmark utility
indices including the Dow Jones Utility Index, the Standard and Poor's (S&P)
Utility Index, and the Morgan Stanley Capital International (MSCI) Utility
Index (investment results shown nearby). Going forward, however, given the
Fund's current portfolio structure and expected future asset allocation, we
have concluded that the NYSE Utility Index would be a more appropriate
benchmark for your Fund. Therefore, from now on, your Fund's performance will
be compared with the S&P 500 and the NYSE Utility Index.
Six Months Ended May 31, 1995
Total Return
------------
DOW JONES UTILITY INDEX +18.85%
S&P UTILITY INDEX +14.99%
MSCI UTILITY INDEX +10.10%
MARKET OVERVIEW
The general underperformance of utility stocks versus the S&P 500 over the past
six months reflects continued investor uncertainty regarding the pace of
deregulation within both the electric and telecommunications industries. We
believe this relative underperformance presents investors with the opportunity
to purchase utilities at attractive valuations. In addition, we believe
regulatory risk of asset write-downs has lessened, reducing the level of
downside exposure.
On March 29, 1995, the Federal Energy Regulatory Commission (FERC) issued its
Mega Notice of Proposed Rulemaking (NOPR). Essentially, the Mega NOPR advocates
a slower approach to competition in the retail markets, which includes
industrial, commercial and residential customers. The Mega NOPR also set
guidelines for stranded asset recovery, suggesting that utilities can recover
all stranded assets within the wholesale market that are considered '. . .
prudent, verifiable and legitimate.' In addition, the FERC requires that if
wholesale customers, which includes municipalities, co-ops, and other
utilities, leave their current utility provider they would have to pay these
stranded costs. Stranded assets are defined as the utility's lost revenues from
customers who leave the system, less revenues received for redistributing the
power. As a result, the Mega NOPR proposal is a significant positive for
utility stock investors because it reduces the risk of asset write-offs and
makes it prohibitive for wholesale customers to leave their current electric
provider.
1
ALLIANCE UTILITY INCOME FUND
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Another major event occurred on May 25, 1995, when the California Public
Utility Commission (CPUC) passed a proposal advocating a 'Poolco' approach to
opening the California electric power market to competition. The Poolco
proposal advocates a centrally organized entity that controls and manages the
transmission of power and determines which generators can dispatch power into
the power pool. In addition, the Poolco approach requires a two- to three-year
development period before allowing competition into the retail electricity
market. More importantly, the CPUC supported the FERC's position that stranded
assets will be recoverable. The combination of the FERC's Mega NOPR and the
CPUC proposal has provided the entire industry with a boost of confidence that
competition is not imminent. Since many industry regulators and legislators
have considered California the strongest proponent of utility de-regulation,
the CPUC proposal may also encourage other states to follow California's lead
and delay retail competition.
Both of these major events helped reduce earnings and dividend risk associated
with a competitive electricity market. As a result, the near term outlook for
earnings, cash flow and dividends has improved for many electric utilities.
STRATEGIC OUTLOOK
We continue to believe that as industrial and commercial customer lobby groups
become more organized they will force de-regulation upon the electric
utilities. We also expect numerous state legislatures and commissions to
continue debating proposals for de-regulation, which will cause continued
uncertainty with regards to the timing and magnitude of de-regulation. Given
this market environment, we believe that stock selection will be critical and
are therefore focused on companies that are making the greatest strides toward
becoming successful players in a competitive market place.
With attractive valuations and an improving regulatory environment with regard
to the risk of asset write-downs, we believe electric utilities could be poised
to outperform the bond market in 1995, and potentially the S&P 500.
We continue to focus on attractively priced domestic electric utilities which
have the following characteristics:
* Favorable regulatory environment
* Low-cost electric provider
* Low risk to market share loss
* Strong management
* Minimal risk to asset write-downs/stranded costs
A few of our favorite electric utilities include Portland General, FPL Group,
Houston Industries, DPL, Baltimore Gas and Electric and Oklahoma Gas & Electric.
Another attractive area which we believe offers increasing investment
opportunities is telecommunications. We have recently increased the Fund's
exposure to the telecommunications area due to improving fundamentals and
increased earnings visibility. In addition, the broad telecommunications market
has lagged the S&P 500 for the better part of the past 18 months, significantly
improving valuations. We believe that Fund holdings such as AT&T, AirTouch,
Nynex, U.S. Cellular, U.S. West and Telephone & Data Systems are poised to
outperform the market.
Although we continue to believe foreign utilities offer solid investment
opportunities along with diversification benefits, we are currently being very
selective. At the time of writing, only 12% of the Fund's total net assets were
invested in international utilities. Foreign exposure is spread broadly with no
more than 2.6% in any one country and no more than 1.4% in any single
international position. Our favorite names continue to be Cable & Wireless,
Repsol, Korea Electric Power Corp., Central Constanera and Compania Boliviana
De Energia Electrica.
On a note concerning your Fund's portfolio management, we are pleased to
announce that Alliance Utility Income Fund is now being managed by Alan Levi
and Greg Allison. Mr. Levi is a senior vice president of Alliance and is the
firm's Director of Equity Research. He joined Alliance in 1973, and received
his B.A. degree from John Hopkins University and an M.B.A. from the University
of Chicago. Mr. Allison joined Alliance in
2
ALLIANCE UTILITY INCOME FUND
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January of this year as an industry analyst covering the electric utility, gas,
oil service and railroad sectors. Prior to joining Alliance, he was an industry
analyst responsible for telecommunications research at Gabelli & Co. in Rye,
New York. Mr. Allison received an M.B.A. from Columbia Business School.
We appreciate your investment in Alliance Utility Income Fund and look forward
to reporting its progress to you later in the year.
Sincerely,
John D. Carifa
Chairman and President
Alan E. Levi
Portfolio Manager
Gregory G. Allison
Portfolio Manager
3
INVESTMENT RESULTS ALLIANCE UTILITY INCOME FUND
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AVERAGE ANNUAL TOTAL RETURN AS OF MAY 31, 1995
CLASS A SHARES
WITHOUT WITH
SALES CHARGE SALES CHARGE
------------ ------------
. One Year +9.65% +4.99%
. Since Inception* +2.31 -0.37
CLASS B SHARES
WITHOUT WITH
SALES CHARGE SALES CHARGE
------------ ------------
. One Year +8.80% +4.80%
. Since Inception* +1.53 -0.24
CLASS C SHARES
. One Year +8.91%
. Since Inception* +1.60
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 front-end sales charge for Class A or applicable contingent
deferred sales charge for Class B (4% year 1, 3% year 2, 2% year 3, 1% year 4);
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.
4
TEN LARGEST HOLDINGS
MAY 31, 1995 (UNAUDITED) ALLIANCE UTILITY INCOME FUND
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COMPANY COUNTRY VALUE PERCENT OF NET ASSETS
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NIPSCO Industries, Inc. United States $345,000 3.0%
FPL Group, Inc. United States 341,475 2.9
DPL, Inc. United States 338,800 2.9
Portland General Corp. United States 329,875 2.8
AirTouch Communications, Inc. United States 307,925 2.7
GTE Corp. United States 300,375 2.6
Motorola, Inc. United States 299,375 2.6
Baltimore Gas & Electric Co. United States 293,800 2.5
Southern Co. United States 287,625 2.5
Duke Power Co. United States 279,725 2.4
$3,123,975 26.9%
MAJOR PORTFOLIO CHANGES
SIX MONTHS ENDED MAY 31, 1995 (UNAUDITED)
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SHARES
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PURCHASES COUNTRY BOUGHT HOLDINGS 5/31/95
AirTouch Communications, Inc. United States 11,300 11,300
AT & T Corp. United States 5,400 5,400
DPL, Inc. United States 9,800 15,400
GTE Corp. United States 7,800 9,000
Motorola, Inc. United States 5,000 5,000
Pacific Gas & Electric Co. United States 8,400 8,400
Portland General Corp. United States 11,300 14,500
Teco Energy, Inc. United States 12,700 12,700
Telephone & Data Systems, Inc. United States 5,500 5,500
U.S. West, Inc. United States 5,800 5,800
SALES SOLD HOLDINGS 5/31/95
Cinergy Corp. United States 5,600 -0-
Delmarva Power & Light Co. United States 6,300 -0-
Dominion Resources, Inc. of Virginia United States 3,000 -0-
IES Industries, Inc. United States 4,500 -0-
Nevada Power Co. United States 5,600 -0-
New York State Electric & Gas Corp. United States 4,700 -0-
Northeast Utilities United States 5,800 -0-
Pacific Telesis Group United States 3,800 -0-
Telefonos de Mexico S.A. Cl.L (ADS) Mexico 3,300 -0-
Texas Utilities Co. United States 5,700 -0-
5
PORTFOLIO OF INVESTMENTS
MAY 31, 1995 (UNAUDITED) ALLIANCE UTILITY INCOME FUND
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COMPANY SHARES VALUE
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COMMON STOCKS & OTHER INVESTMENTS-93.8%
UNITED STATES INVESTMENTS-80.3%
PUBLIC UTILITIES-76.8%
ELECTRIC-52.8%
American Electric Power, Inc. 8,100 $277,425
Baltimore Gas & Electric Co. 11,300 293,800
CMS Energy Corp. 10,300 248,487
DPL, Inc. 15,400 338,800
Duke Power Co. 6,700 279,725
FPL Group, Inc. 8,700 341,475
General Public Utilities Corp. 3,700 111,000
Hawaiian Electric Inds., Inc. 5,100 182,325
Louisiana Gas & Electric Energy Corp. 7,000 278,250
NIPSCO Industries, Inc. 10,000 345,000
Northern States Power Co. of Montana 3,700 175,288
Oklahoma Gas & Electric Co. 4,700 165,675
Pacific Gas & Electric Co. 8,400 243,600
PacifiCorp 10,700 211,325
Peco Energy Capital LP 4,400 114,950
Peco Energy Co. 6,300 177,188
Pinnacle West Cap Corp. 11,400 262,200
Portland General Corp. 14,500 329,875
Public Service Co. of Colorado 8,460 277,065
Public Service Company of New Mexico* 14,000 199,500
Public Service Enterprise Group, Inc. 700 20,825
San Diego Gas & Electric Co. 4,800 108,600
SCEcorp 10,700 185,912
Southern Co. 13,000 287,625
Teco Energy, Inc. 12,700 279,400
Unicom Corp. 8,800 239,800
Western Resources, Inc. 4,800 151,200
6,126,315
GAS-3.4%
Enron Corp. 3,900 142,350
Enron Global Power Pipelines 9,200 227,700
Louisiana Land & Exploration Co. 500 19,375
389,425
TELEPHONE-20.6%
AirTouch Communications, Inc.* 11,300 307,925
AT & T Corp. 5,400 274,050
Bellsouth Corp. 3,500 214,812
GTE Corp. 9,000 300,375
Intelcom Group, Inc. 4,100 36,388
LCI International, Inc. 4,300 113,950
LDDS Communications Inc. Georgia 4,400 115,500
MCI Communications Corp. 9,400 190,350
MFS Communications, Inc.* 3,700 109,150
Nynex Corp. 4,000 167,000
Sprint Corp. 3,300 110,550
Telephone & Data Systems, Inc. 5,500 207,625
U.S. West, Inc. 5,800 239,250
2,386,925
8,902,665
TECHNOLOGY-2.6%
ELECTRONICS-2.6%
Motorola, Inc. 5,000 299,375
ENERGY-0.9%
OIL SERVICES-0.9%
Western Atlas, Inc.* 2,400 108,300
Total United States Investments
(cost $8,701,358) 9,310,340
FOREIGN INVESTMENTS-13.5%
ARGENTINA-1.7%
Central Costanera S.A. (a) 2,850 82,665
Electric & gas utility
Metrogas 5,700 50,588
Gas
Telecom Argentina Stet France (a)* 1,300 64,187
Telephone Utility
197,440
BOLIVIA-1.0%
Compania Boliviana De Energia Electrica SA (ADR) 4,500 117,563
Electric
6
ALLIANCE UTILITY INCOME FUND
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COMPANY SHARES VALUE
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BRAZIL-0.9%
Companhia Energetica De Minas (a) 4,650 $106,950
Electric
CANADA-1.0%
Renaissance Energy, Ltd.* 4,900 106,883
Domestic Producers
CHILE-0.2%
Enersis S.A. (ADS) 875 25,266
Electric & gas utility
DENMARK-0.9%
TeleDanmark (ADR) 3,800 108,300
Telephone Utility
GERMANY-0.9%
Veba AG 280 106,449
Miscellaneous
HONG KONG-1.3%
China Light & Power Co. 16,500 90,229
Electric & gas utility
Consolidate Electric Power Asia (ADR) (a) 2,600 61,100
Electric
151,329
INDONESIA-0.9%
Indonesian Satellite Corp. (ADR) 2,590 102,305
Computer Peripherals
ITALY-0.9%
Stet Societa Finanziaria Tele 3,600 103,754
Telephone
SHARES OR
PRINCIPLE
AMOUNT
COMPANY (000) VALUE
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KOREA-1.0%
Korea Electric Power Corp. (ADR) 5,300 $ 118,588
Electric
SPAIN-1.3%
Repsol SA (ADS) 4,700 153,337
Energy
UNITED KINGDOM-1.5%
Cable & Wireless Pub Ltd. Co. 8,350 171,175
Telephone
Total Foreign Investments
(cost $1,403,174) 1,569,339
Total Common Stocks & Other Investments
(cost $10,104,532) 10,879,679
SHORT TERM INVESTMENTS-5.2%
U.S. GOVERNMENT OBLIGATIONS-5.2%
Federal National
Mortgage Assn.
5.84%, 6/02/95 $ 200 199,968
5.86%, 6/06/95 400 399,674
Total Short Term Investments
(cost $599,642) 599,642
TOTAL INVESTMENTS-99.0%
(cost $10,704,174) 11,479,321
Other assets less liabilities-1.0% 114,730
NET ASSETS-100% $11,594,051
* 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 May 31, 1995 these
securities amounted to $314,902 or 2.7% of net assets.
Glossary of Terms:
ADR - American Depository Receipt
ADS - American Depository Security
See notes to financial statements.
7
STATEMENT OF ASSETS AND LIABILITIES
MAY 31, 1995 (UNAUDITED) ALLIANCE UTILITY INCOME FUND
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ASSETS
Investments in securities, at value (cost $10,704,174) $11,479,321
Cash, at value (cost $19,682) 19,733
Receivable for investment securities sold 386,295
Deferred organization expenses 191,589
Receivable for capital stock sold 183,632
Receivable from Adviser 64,786
Dividends and interest receivable 42,848
Other assets 501
Total assets 12,368,705
LIABILITIES
Payable for investment securities purchased 503,468
Advisory fee payable 21,278
Distribution fee payable 7,919
Payable for capital stock redeemed 5,622
Unclaimed dividends 363
Accrued expenses 236,004
Total liabilities 774,654
NET ASSETS $11,594,051
COMPOSITION OF NET ASSETS
Capital stock, at par $ 1,206
Additional paid-in capital 11,219,264
Distributions in excess of net investment income (60,322)
Accumulated net realized loss on investments and foreign
currency denominated assets and liabilities (341,300)
Net unrealized appreciation of investments and foreign
currency denominated assets and liabilities 775,203
$11,594,051
CALCULATION OF MAXIMUM OFFERING PRICE
CLASS A SHARES
Net asset value and redemption price per share ($2,510,262 /
261,131 shares of capital stock issued and outstanding) $ 9.61
Sales charge-4.25% of public offering price .43
Maximum offering price $10.04
CLASS B SHARES
Net asset value and offering price per share ($5,580,389 /
581,087 shares of capital stock issued and outstanding) $ 9.60
CLASS C SHARES
Net asset value, redemption and offering price per share ($3,503,400
/ 364,396 shares of capital stock issued and outstanding) $ 9.61
See notes to financial statements.
8
STATEMENT OF OPERATIONS
SIX MONTHS ENDED MAY 31, 1995 (UNAUDITED) ALLIANCE UTILITY INCOME FUND
- -------------------------------------------------------------------------------
INVESTMENT INCOME
Dividends (net of foreign taxes withheld of $1,792) $202,572
Interest 33,992 $236,564
EXPENSES
Advisory fee 35,666
Distribution fee - Class A 3,100
Distribution fee - Class B 21,139
Distribution fee - Class C 16,087
Administrative 112,989
Amortization of organization expenses 23,011
Audit and legal 22,622
Transfer agency 22,505
Printing 21,986
Custodian 19,616
Registration 19,391
Director's fees 10,803
Miscellaneous 16,055
Total expenses 344,970
Less: expenses waived and assumed by the Adviser
(See Note B) (247,162)
Net expenses 97,808
Net investment income 138,756
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized loss on investments (251,799)
Net realized gain on foreign currency denominated
assets and liabilities 11,589
Net change in unrealized depreciation of investments and
foreign currency denominated assets and liabilities 1,075,131
Net gain on investments 834,921
NET INCREASE IN NET ASSETS FROM OPERATIONS $ 973,677
See notes to financial statements.
9
STATEMENT OF CHANGES IN NET ASSETS ALLIANCE UTILITY INCOME FUND
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SIX MONTHS ENDED YEAR ENDED
MAY 31, 1995 NOV. 30,
(UNAUDITED) 1994
------------ -----------
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS
Net investment income $138,756 $133,020
Net realized loss on investments and
foreign currency transactions (240,210) (102,949)
Net change in unrealized depreciation
of investments and foreign currency denominated
assets and liabilities 1,075,131 (299,065)
Net increase (decrease) in net assets from operations 973,677 (268,994)
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income
Class A (43,734) (39,724)
Class B (85,602) (65,322)
Class C (69,742) (42,339)
CAPITAL STOCK TRANSACTIONS
Net increase 4,747,594 5,996,770
Total increase 5,522,193 5,580,391
NET ASSETS
Beginning of year 6,071,858 491,467
End of period $11,594,051 $6,071,858
See notes to financial statements.
10
NOTES TO FINANCIAL STATEMENTS
MAY 31, 1995 (UNAUDITED) ALLIANCE UTILITY INCOME FUND
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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 $11,589 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.
11
NOTES TO FINANCIAL STATEMENTS (CONTINUED) ALLIANCE UTILITY INCOME FUND
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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 six months ended May 31, 1995. 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 $247,162. Pursuant to the Advisory Agreement, the Adviser
provides to the Fund certain legal and accounting services. For the six months
ended May 31, 1995, 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 transfer agency services for the Fund. Such
compensation amounted to $7,653. 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 $1,435 from the
sale of Class A shares and $7,262 in contingent deferred sales charges were
imposed upon redemptions by shareholders of Class B shares for the six months
ended May 31, 1995.
Brokerage commissions paid on securities transactions for the six months ended
May 31, 1995, amounted to $38,252, 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 $382,626 and $276,364 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.
12
ALLIANCE UTILITY INCOME FUND
- -------------------------------------------------------------------------------
NOTE D: INVESTMENT TRANSACTIONS
Purchases and sales of investment securities, (excluding short-term
investments), aggregated $10,866,739 and $5,333,108, respectively, for the six
months ended May 31, 1995. At May 31, 1995, 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 $830,806 and
gross unrealized depreciation of investments was $55,659, resulting in net
unrealized appreciation of $775,147.
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:
SHARES AMOUNT
------------------------- ------------------------
SIX MONTHS YEAR SIX MONTHS YEAR
ENDED ENDED ENDED ENDED
MAY 31, 1995 NOV.30, MAY 31, 1995 NOV.30,
(UNAUDITED) 1994 (UNAUDITED) 1994
----------- ----------- ----------- -----------
CLASS A
Shares sold 237,026 155,996 $2,131,755 $1,525,830
Shares issued in
reinvestment of dividends 3,088 3,544 27,432 32,263
Shares redeemed (98,018) (63,588) (903,408) (616,988)
Net increase 142,096 95,952 $1,255,779 $ 941,105
CLASS B
Shares sold 474,850 325,292 $4,288,240 $3,102,363
Shares issued in
reinvestment of dividends 6,138 5,345 54,578 48,378
Shares redeemed (162,328) (92,803) (1,470,804) (854,700)
Net increase 318,660 237,834 $2,872,014 $2,296,041
CLASS C
Shares sold 97,577 333,565 $ 883,669 $3,126,974
Shares issued in
reinvestment of dividends 6,473 2,937 57,511 26,528
Shares redeemed (35,255) (42,784) (321,379) (393,878)
Net increase 68,795 293,718 $ 619,801 $2,759,624
13
FINANCIAL HIGHLIGHTS ALLIANCE UTILITY INCOME FUND
- -------------------------------------------------------------------------------
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
CLASS A
--------------------------------------
SIX MONTHS OCT. 18,1993*
ENDED YEAR ENDED TO
MAY 31, 1995 NOV. 30, NOV. 30,
(UNAUDITED) 1994 1993
------------ --------- ------------
Net asset value, beginning of period $8.97 $9.92 $10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income .20** .42** .02**
Net realized and unrealized gain (loss)
on investments .67 (.89) (.10)
Net increase (decrease) in net asset value
from operations .87 (.47) (.08)
LESS: DISTRIBUTIONS
Dividends from net investment income (.23) (.48) -0-
Net asset value, end of period $9.61 $8.97 $ 9.92
TOTAL RETURN
Total investment return based
on net asset value (b) 9.71% (4.86)% (.80)%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $2,510 $1,068 $229
Ratio to average net assets of:
Expenses, net of waivers/reimbursements 1.50%(a) 1.50% 1.50%(a)
Expenses, before waivers/reimbursements 6.70%(a) 13.72% 145.63%(a)
Net investment income, net
of waivers/reimbursements 3.42%(a) 4.13% 2.35%(a)
Net investment income,
before waivers/reimbursements (1.78)%(a) (8.09)% (141.77)%(a)
Portfolio turnover rate 63% 30% 11%
See footnote summary on page 16.
14
ALLIANCE UTILITY INCOME FUND
- -------------------------------------------------------------------------------
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
CLASS B
--------------------------------------
SIX MONTHS OCT.18,1993*
ENDED YEAR ENDED TO
MAY 31, 1995 NOV. 30, NOV. 30,
(UNAUDITED) 1994 1993
------------ --------- ------------
Net asset value, beginning of period $8.96 $9.91 $10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income .15** .37** .01**
Net realized and unrealized gain (loss)
on investments .69 (.91) (.10)
Net increase (decrease) in net asset value
from operations .84 (.54) (.09)
LESS: DISTRIBUTIONS
Dividends from net investment income (.20) (.41) -0-
Net asset value, end of period $9.60 $8.96 $ 9.91
TOTAL RETURN
Total investment return based
on net asset value (b) 9.31% (5.59)% (.90)%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $5,580 $2,353 $244
Ratio to average net assets of:
Expenses, net of waivers/reimbursements 2.20%(a) 2.20% 2.20%(a)
Expenses, before waivers/reimbursements 7.41%(a) 14.42% 133.62%(a)
Net investment income,
net of waivers/reimbursements 2.74%(a) 3.53% 2.84%(a)
Net investment income,
before waivers/reimbursements (2.45)%(a) (8.69)% (128.58)%(a)
Portfolio turnover rate 63% 30% 11%
See footnote summary on page 16.
15
FINANCIAL HIGHLIGHTS (CONTINUED) ALLIANCE UTILITY INCOME FUND
- -------------------------------------------------------------------------------
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
CLASS C
-------------------------------------
SIX MONTHS OCT.27,1993*
ENDED YEAR ENDED TO
MAY 31, 1995 NOV. 30, NOV. 30,
(UNAUDITED) 1994 1993
----------- --------- ------------
Net asset value, beginning of period $8.97 $9.92 $10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income .13** .39** .01**
Net realized and unrealized gain (loss)
on investments .71 (.93) (.09)
Net increase (decrease) in net asset value
from operations .84 (.54) (.08)
LESS: DISTRIBUTIONS
Dividends from net investment income (.20) (.41) -0-
Net asset value, end of period $9.61 $8.97 $9.92
TOTAL RETURN
Total investment return based
on net asset value (b) 9.41% (5.58)% (.80)%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $3,504 $2,651 $18
Ratio to average net assets of:
Expenses, net of waivers/reimbursements 2.20%(a) 2.20% 2.20%(a)
Expenses, before waivers/reimbursements 7.40%(a) 14.42% 148.03%(a)
Net investment income,
net of waivers/reimbursements 2.83%(a) 3.60% 3.08%(a)
Net investment income,
before waivers/reimbursements (2.37)%(a) (8.62)% (142.75)%(a)
Portfolio turnover rate 63% 30% 11%
* 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.
16
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
THOMAS BARDONG, 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
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
TRANSFER AGENT
ALLIANCE FUND SERVICES, INC.
P.O. Box 1520
Secaucus, NJ 07096-1520
Toll-Free 1-(800) 221-5672
INDEPENDENT ACCOUNTANTS
PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, NY 10036
The financial information included herein is taken from the records of the fund
without audit by independent accountants who do not express an opinion thereon.
(1) Member of the Audit Committee.
17
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18
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19
BULK RATE
U.S. POSTAGE
PAID
New York, NY
Permit No. 7131
ALLIANCE UTILITY INCOME FUND
1345 Avenue of the Americas
New York, NY 10105
(800) 221-5672
Alliance Capital
Mutual funds without the Mystery.
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.
UIFSR
ALLIANCE UTILITY INCOME FUND
SEMI-ANNUAL REPORT
MAY 31, 1995
Alliance
Mutual funds without the Mystery.
