ALLIANCE UTILITY INCOME FUND
SEMI-ANNUAL REPORT
MAY 31, 1996
LETTER TO SHAREHOLDERS ALLIANCE UTILITY INCOME FUND
_______________________________________________________________________________
July 8, 1996
Dear Shareholder:
We are pleased to report to you on the investment performance and activities of
Alliance Utility Income Fund for the six months ended May 31, 1996. While
utility issues generally advanced in the opening month of the period, concerns
about a rise in interest rates, the specter of higher inflation, and the
effects of increased competition among electric utilities took their toll from
December 31, 1995, through May 31, 1996. Both the Philadelphia Utility Index
and the Lehman Brothers Long-Term Government Bond Index registered declines,
losing 7.9% and 8.6%, respectively. By contrast, during the utility industry's
five-month retreat, your Fund posted gains of 1.92% (Class A), 1.76% (Class B),
and 1.66% (Class C).+ While outperforming those key measures over the first
five months of 1996, Alliance Utility Income Fund's six-month return was
slightly below the results achieved by its comparative benchmark, the NYSE
Utility Index (see the table below).
INVESTMENT RESULTS*
SIX MONTHS ENDED MAY 31, 1996
CUMULATIVE ENDING
TOTAL RETURN NAV
------------ --------
ALLIANCE UTILITY INCOME FUND
Class A 3.24% $10.28
Class B 3.02% $10.27
Class C 2.92% $10.28
S&P 500-STOCK INDEX 11.76%
NYSE UTILITY INDEX 3.25%
* THE FUND'S INVESTMENT RESULTS ARE CUMULATIVE TOTAL RETURNS FOR THE PERIOD
AND ARE BASED ON THE NET ASSET VALUE OF EACH CLASS OF SHARES AS OF 5/31/96. ALL
FEES AND EXPENSES RELATED TO THE OPERATION OF THE FUND HAVE BEEN DEDUCTED, BUT
NO ADJUSTMENT HAS BEEN MADE FOR SALES CHARGES THAT MAY APPLY WHEN SHARES ARE
PURCHASED OR REDEEMED. RETURNS FOR THE FUND AND ITS COMPARATIVE INDICES INCLUDE
THE REINVESTMENT OF ANY DISTRIBUTIONS PAID DURING THE PERIOD. ALL COMPARATIVE
INDICES ARE UNMANAGED.
ADDITIONAL PERFORMANCE INFORMATION APPEARS ON PAGE 3.
THE STRATEGY BEHIND OUR PERFORMANCE
We attribute the Fund's results in this difficult period to our decision to
underweight our holdings of electric utilities and to avoid owning corporate or
government bonds. As the economy began demonstrating signs of accelerating
growth and the risk of inflation surprises increased, we reduced our exposure
to interest-rate sensitive securities and raised our cash position. For most of
the first half of 1996, the Fund had a larger-than-normal cash position of
approximately 10%. This posture helped when the Philadelphia Electric Utility
Index slid lower and when yields on long-term bonds rose from approximately 6%
to 7%, causing the Lehman Brothers Long-Term Government/Corporate Index to
report a loss of approximately 9% from December 31, 1995, through May 31, 1996.
LOOKING AHEAD: IMPROVED POTENTIAL FOR STRONG ABSOLUTE PERFORMANCE
While the financial markets continue to worry about an overheating economy,
accelerating inflation, and higher interest rates, we believe that the economy
will slow and that interest rates will fall during the second half of 1996. We
also feel that valuations have improved in both the electric utility and the
telecommunication sectors. As a result, we are reducing our cash position and
increasing our exposure to both.
Our belief that interest rates will decline in the second half of 1996 is
supported by the following forecasts: 1) slower consumer spending as consumer
debt levels and credit delinquencies continue to rise; 2) an easing of
corporate capital spending in 1996 as a result of flat-to-lower earnings among
the S&P 500 companies; 3) an increase in government capital expenditures in the
range of 2% to 3% versus the 8% to 10% increases that have sparked growth in
previous election years; and 4) the persistence of moderate-to-low export
demand as both Germany and Japan continue to experience weak economic activity.
In the months ahead, we intend to adhere to our strategy of emphasizing
investment in the telecommunications-equipment sector, which we believe will
benefit from five significant trends. One trend is the globalization, privati-
+ Cumulative total return, net of fees and expenses, but not adjusted for
sales charges.
1
ALLIANCE UTILITY INCOME FUND
_______________________________________________________________________________
zation, and deregulation of existing monopolies; another, the prospect for
higher capacity- and higher bandwidth-driven applications. The transformation
from analog to digital information systems and a truly seamless and ubiquitous
convergence of computing and communications technologies are also expected to
enhance the sector's performance. Falling barriers to entry for companies
providing end-to-end communication service may further accelerate the sector's
growth and profitability. We expect these five trends to lead to a spending
cycle that could last 7 to 10 years. Given this scenario, the
telecommunications-equipment sector should present investors with an
opportunity for substantial long-term capital growth.
We are confident that the second half of 1996 holds improved potential for the
Fund's strong absolute performance. Led by telecommunications-equipment stocks
and fueled by declining interest rates, the stocks of both electric utilities
and telecommunications companies could prove winners in the months ahead.
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
Gregory G. Allison
Portfolio Manager
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, GUARANTEED OR ENDORSED
BY, ANY BANK; FURTHER, SUCH SHARES ARE NOT FEDERALLY INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY.
SHARES OF THE FUND INVOLVE INVESTMENT RISKS, INCLUDING THE POSSIBLE LOSS OF
PRINCIPAL.
2
INVESTMENT OBJECTIVE AND POLICIES ALLIANCE UTILITY INCOME FUND
_______________________________________________________________________________
Alliance Utilitiy Income Fund is an open-end, diversified investment company
that seeks current income and capital appreciation through investments
primarily in the equity and fixed-income securities of companies in the
utilities industry. The Fund has the flexibility to purchase foreign as well as
U.S. securities, and may hold up to 35% of its total assets in
non-utility-related securities, such as U.S. Government securities, foreign
government securities, and foreign and domestic corporate bonds.
INVESTMENT RESULTS
_______________________________________________________________________________
AVERAGE ANNUAL TOTAL RETURN AS OF MAY 31, 1996
CLASS A SHARES
WITHOUT WITH
SALES CHARGE SALES CHARGE
------------ ------------
. One Year 12.28% 7.47%
. Since Inception* 6.01% 4.28%
CLASS B SHARES
WITHOUT WITH
SALES CHARGE SALES CHARGE
------------ ------------
. One Year 11.60% 7.60%
. Since Inception* 5.26% 4.56%
CLASS C SHARES
. One Year 11.58%
. Since Inception* 5.30%
Average annual total returns reflect investment of dividends and/or capital
gain 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; and 1%-Year
4). Class C shares purchased prior to July 1, 1996, are not subject to
front-end or contingent deferred sales charges. Class C shares purchased on or
after July 1, 1996, are subject to a contingent deferred sales charge of 1% on
redemptions made within the first year after purchase.
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.
3
TEN LARGEST HOLDINGS
MAY 31, 1996 (UNAUDITED) ALLIANCE UTILITY INCOME FUND
_______________________________________________________________________________
PERCENT OF
COMPANY COUNTRY VALUE NET ASSETS
- -------------------------------------------------------------------------------
AT & T Corp. United States $1,041,662 5.1%
AirTouch Communications, Inc. United States 841,500 4.1
Motorola, Inc. United States 687,525 3.4
Nokia Corp. (ADR) Finland 665,550 3.3
Union Pacific Corp. United States 617,100 3.0
Public Service Company of New Mexico United States 607,500 3.0
MCI Communications Corp. United States 594,150 2.9
Central & South West Corp. United States 593,937 2.9
Portland General Corp. United States 590,000 2.9
FPL Group, Inc. United States 581,400 2.9
$6,820,324 33.5%
MAJOR PORTFOLIO CHANGES
SIX MONTHS ENDED MAY 31, 1996 (UNAUDITED)
_______________________________________________________________________________
SHARES
-----------------------
HOLDINGS
PURCHASES COUNTRY BOUGHT 5/31/96
- -------------------------------------------------------------------------------
American Electric Power, Inc. United States 14,200 14,200
Carolina Power & Light Co. United States 16,000 16,000
Central & South West Corp. United States 21,500 21,500
Ericsson (L.M.) Telephone Co. (ADR) Sweden 19,200 19,200
Glenayre Technologies, Inc. United States 8,900 8,900
Illinova Corp. United States 15,000 15,000
Ipalco Enterprises, Inc. United States 17,400 17,400
Light Servicos de Eletricid, S.A. Brazil 1,600,000 1,600,000
Telefonos de Mexico, S.A. Series L(ADR) Mexico 11,200 11,200
Union Pacific Corp. United States 6,200 8,800
HOLDINGS
SALES SOLD 5/31/96
- -------------------------------------------------------------------------------
Baltimore Gas & Electric Co. United States 10,800 9,800
Compania de Telecomunicacion Chile(ADR) Chile 2,600 2,100
Enersis, S.A. (ADR) Chile 8,000 -0-
FPL Group, Inc. United States 5,400 13,600
Northern Telecom, Ltd. Canada 7,200 3,900
Oklahoma Gas & Electric Co. United States 14,000 -0-
Public Service Company of New Mexico United States 15,200 32,400
Scientific-Atlanta, Inc. United States 13,200 -0-
U.S. West, Inc. United States 17,600 -0-
Western Atlas, Inc. United States 9,500 -0-
4
PORTFOLIO OF INVESTMENTS
MAY 31, 1996 (UNAUDITED) ALLIANCE UTILITY INCOME FUND
_______________________________________________________________________________
COMPANY SHARES VALUE
- -------------------------------------------------------------------------
COMMON STOCKS &OTHERINVESTMENTS-93.1%
UNITED STATES INVESTMENTS-76.4%
PUBLIC UTILITIES-76.4%
ELECTRIC-37.9%
Allegheny Power Systems, Inc. 15,400 $ 452,375
American Electric Power, Inc. 14,200 569,775
Baltimore Gas & Electric Co. 9,800 268,275
Carolina Power & Light Co. 16,000 578,000
Central & South West Corp. 21,500 593,937
CMS Energy Corp. 14,800 425,500
DPL, Inc. 11,000 247,500
FPL Group, Inc. 13,600 581,400
Houston Industries, Inc. 26,000 568,750
Illinova Corp. 15,000 393,750
Ipalco Enterprises, Inc. 17,400 437,175
New York State Electric & Gas Corp. 25,100 574,163
Pinnacle West Capital Corp. 9,700 257,050
Portland General Corp. 20,000 590,000
Public Service Company of New Mexico 32,400 607,500
Texas Utilities Co. 14,100 576,337
------------
7,721,487
GAS-0.9%
Enron Corp. 4,700 188,000
RAILROAD TRANSPORTATION-4.8%
Southern Pacific Rail Corp.* 14,900 363,188
Union Pacific Corp. 8,800 617,100
------------
980,288
TELEPHONE-32.8%
AirTouch Communications, Inc.* 26,400 $841,500
AT & T Corp. 16,700 1,041,662
Brooks Fiber Properties, Inc.* 3,900 131,625
DSC Communications Corp.* 16,300 491,037
General Instrument Corp.* 7,900 243,913
Glenayre Technologies, Inc.* 8,900 438,325
MCI Communications Corp. 20,400 594,150
Motorola, Inc. 10,300 687,525
Nynex Corp. 4,100 189,113
TCI Group, Series A* 27,800 524,725
Telephone & Data Systems, Inc. 10,700 466,787
U.S. Cellular Corp.* 14,700 464,888
U.S. West Communications Group 17,600 574,200
------------
6,689,450
Total United States Investments
(cost $15,308,864) 15,579,225
FOREIGN INVESTMENTS-16.7%
BRAZIL-3.9%
Light Participacoes, S.A.*(a) 1,600,000 54,492
Electric
Light Servicos de Eletricid, S.A. 1,600,000 525,694
Electric
Telecomunicacoes Brasileiras, S.A. (ADR) 3,300 212,438
Telephone Utility
------------
792,624
CANADA-1.0%
Northern Telecom, Ltd. 3,900 211,575
Telephone Utility
5
PORTFOLIO OF INVESTMENTS (CONTINUED) ALLIANCE UTILITY INCOME FUND
_______________________________________________________________________________
COMPANY SHARES VALUE
- -------------------------------------------------------------------------
CHILE-0.9%
Compania de Telecomunicacion Chile (ADR) 2,100 $ 191,625
Telephone Utility
FINLAND-3.3%
Nokia Corp. (ADR) 15,300 665,550
Electronics
HONG KONG-0.9%
Consolidated Electric Power Asia (ADR) 100,000 171,894
Electric & Gas Utility
KOREA-1.6%
Korea Electric Power Corp. (ADR)* 8,390 321,566
Electric
MEXICO-1.8%
Telefonos de Mexico, S.A. Series L (ADR) 11,200 369,600
Telephone Utility
PERU-1.1%
Telefonica del Peru 117,000 231,482
Communication Services
SHARES OR
PRINCIPAL
AMOUNT
COMPANY (000) VALUE
- -------------------------------------------------------------------------
SWEDEN-2.2%
Ericsson (L.M.) Telephone Co. (ADR) 19,200 $ 442,800
Telephone Utility
Total Foreign Investments
(cost $3,334,009) 3,398,716
Total Common Stocks & Other Investments
(cost $18,642,873) 18,977,941
SHORT-TERM INVESTMENTS-5.4%
Merrill Lynch & Co., Inc.
5.32%, 6/07/96 $600 599,468
Prudential Funding Corp.
5.29%, 6/06/96 500 499,633
Total Short-Term Investments
(amortized cost $1,099,101) 1,099,101
TOTAL INVESTMENTS-98.5%
(cost $19,741,974) 20,077,042
Other assets less liabilities-1.5% 299,484
NET ASSETS-100% $20,376,526
* Non-income producing security.
(a) Security is exempt from registration under Rule 144A of the Securities Act
of 1933. This security may be resold in transactions exempt from registration,
normally to qualified institutional buyers. At May 31, 1996, this security
amounted to $54,492 or .27% of net assets.
Glossary:
ADR - American Depository Receipt
See notes to financial statements.
6
STATEMENT OF ASSETS AND LIABILITIES
MAY 31, 1996 (UNAUDITED) ALLIANCE UTILITY INCOME FUND
_______________________________________________________________________________
ASSETS
Investments in securities, at value (cost $19,741,974) $20,077,042
Cash, at value (cost $83,482) 77,260
Receivable for capital stock sold 193,288
Deferred organization expenses 75,750
Dividends receivable 34,317
Receivable from Adviser 18,324
Total assets 20,475,981
LIABILITIES
Distribution fee payable 14,940
Payable for capital stock redeemed 4,761
Accrued expenses and other liabilities 79,754
Total liabilities 99,455
NET ASSETS $20,376,526
COMPOSITION OF NET ASSETS
Capital stock, at par $ 1,984
Additional paid-in capital 19,020,297
Distributions in excess of net investment income (354,147)
Accumulated net realized gain on investments and foreign
currency denominated assets and liabilities 1,379,546
Net unrealized appreciation of investments and foreign
currency denominated assets and liabilities 328,846
------------
$20,376,526
CALCULATION OF MAXIMUM OFFERING PRICE
CLASS A SHARES
Net asset value and redemption price per share($2,911,280/
283,213 shares of capital stock issued and outstanding) $10.28
Sales charge-4.25% of public offering price .46
Maximum offering price $10.74
CLASS B SHARES
Net asset value and offering price per share($12,933,506/
1,259,650 shares of capital stock issued and outstanding) $10.27
CLASS C SHARES
Net asset value, redemption and offering price per share($4,531,740
/440,807 shares of capital stock issued and outstanding) $10.28
See notes to financial statements.
7
STATEMENT OF OPERATIONS
SIX MONTHS ENDED MAY 31, 1996 (UNAUDITED) ALLIANCE UTILITY INCOME FUND
_______________________________________________________________________________
INVESTMENT INCOME
Dividends (net of foreign taxes withheld $3,714) $ 232,939
Interest 35,352 $ 268,291
EXPENSES
Advisory fee 71,111
Distribution fee - Class A 4,321
Distribution fee - Class B 61,186
Distribution fee - Class C 19,225
Administrative 55,859
Custodian 45,223
Audit and legal 29,939
Registration 21,800
Amortization of organization expenses 21,140
Transfer agency 17,255
Director's fees 13,082
Printing 3,463
Miscellaneous 4,673
Total expenses 368,277
Less: expenses waived and assumed by the Adviser
(Note B) (171,159)
Net expenses 197,118
Net investment income 71,173
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain on investments 1,179,491
Net realized loss on foreign currency denominated
assets and liabilities (1,437)
Net change in unrealized appreciation (depreciation) of:
Investments (711,584)
Foreign currency denominated assets and liabilities (136)
Net gain on investments 466,334
NET INCREASE IN NET ASSETS FROM OPERATIONS $537,507
See notes to financial statements.
8
STATEMENT OF CHANGES IN NET ASSETS ALLIANCE UTILITY INCOME FUND
_______________________________________________________________________________
SIX MONTHS ENDED
MAY 31,1996 YEAR ENDED
(UNAUDITED) NOV. 30,1995
------------ ------------
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS
Net investment income $ 71,173 $ 228,785
Net realized gain on investments and foreign
currency transactions 1,178,054 548,961
Net changes in unrealized appreciation
(depreciation) of investments and foreign
currency denominated assets and liabilities (711,720) 1,340,494
Net increase in net assets from operations 537,507 2,118,240
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income
Class A (72,812) (101,893)
Class B (272,402) (236,075)
Class C (80,106) (137,196)
CAPITAL STOCK TRANSACTIONS
Net increase 3,028,671 9,520,734
Total increase 3,140,858 11,163,810
NET ASSETS
Beginning of year 17,235,668 6,071,858
End of period $20,376,526 $17,235,668
See notes to financial statements.
9
NOTES TO FINANCIAL STATEMENTS
MAY 31, 1996 (UNAUDITED) 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 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 currently sold without an initial or contingent deferred sales
charge. Class C shares purchased on or after July 1, 1996, are subject to a
contingent deferred sales charge of 1% on redemptions made within the first
year after puchase. 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 $189,000 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 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 dividends recorded on
the Fund's books and the U.S. dollar equivalent amounts actually received or
paid. Net unrealized currency gains and losses from valuing foreign currency
denominated assets and liabilities at period end exchange rates are reflected
as a component of unrealized appreciation 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.
10
ALLIANCE UTILITY INCOME FUND
_______________________________________________________________________________
7. CONCENTRATION OF RISK
The investments in utility companies may be subject to a variety of risks
depending, in part, on such factors as the type of utility involved and its
geographic location. The revenues of domestic and foreign utilities companies
generally reflect the economic growth and development in the geographic areas
in which they do business.
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 Adviser 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. For the six
months ended May 31, 1996 the Adviser voluntarily agreed to waive its Advisory
fees and bear certain expenses so that total expenses do not exceed an annual
basis of 1.50%, 2.20% and 2.20% of the daily average net assets for the Class
A, Class B and Class C shares, respectively. For the six months ended May 31,
1996, such reimbursement amounted to $171,159. Pursuant to the Advisory
Agreement, the Fund paid $55,859 to the Adviser representing the cost of
certain legal and accounting services provided to the Fund by the Adviser for
the six months ended May 31, 1996. 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 $10,176. 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 $714 from
the sale of Class A shares and $9,397 in contingent deferred sales charges were
imposed upon redemptions by shareholders of Class B shares for the six months
ended May 31, 1996.
Brokerage commissions paid on securities transactions for the six months ended
May 31, 1996, amounted to $26,566, 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. Such fee is accrued daily and paid monthly. 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 $959,214 and $340,945 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 effect. 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.
11
NOTES TO FINANCIAL STATEMENTS (CONTINUED) ALLIANCE UTILITY INCOME FUND
_______________________________________________________________________________
NOTE D: INVESTMENT TRANSACTIONS
Purchases and sales of investment securities, (excluding short-term
investments), aggregated $8,844,570 and $6,604,123, respectively, for the six
months ended May 31, 1996. At May 31, 1996, the cost of securities for federal
income tax purposes was $19,766,586. Accordingly, gross unrealized appreciation
of investments was $1,208,305 and gross unrealized depreciation of investments
was $897,849, resulting in net unrealized appreciation of $310,456 excluding
foreign currency.
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 ENDED YEAR ENDED SIX MONTHS ENDED YEAR ENDED
MAY 31,1996 NOVEMBER 30, MAY 31,1996 NOVEMBER 30,
(UNAUDITED) 1995 (UNAUDITED) 1995
------------ ------------ -------------- --------------
CLASS A
Shares sold 58,264 280,485 $ 592,906 $ 2,562,935
Shares issued in
reinvestment of
dividends 3,222 5,656 32,354 52,789
Shares converted from
Class B to Class A 2,362 -0- 24,066 -0-
Shares redeemed (49,633) (136,178) (502,177) (1,281,378)
Net increase 14,215 149,963 $ 147,149 $ 1,334,346
CLASS B
Shares sold 404,029 1,060,967 $4,132,352 $10,085,756
Shares issued in
reinvestment of
dividends 11,474 13,786 115,294 130,190
Shares converted from
Class B to Class A (2,361) -0- (24,066) -0-
Shares redeemed (230,916) (259,756) (2,347,208) (2,433,366)
Net increase 182,226 814,997 $1,876,372 $ 7,782,580
CLASS C
Shares sold 167,134 152,939 $1,703,025 $ 1,435,226
Shares issued in
reinvestment of
dividends 6,443 12,020 64,785 112,263
Shares redeemed (75,387) (117,943) (762,660) (1,143,681)
Net increase 98,190 47,016 $1,005,150 $ 403,808
12
FINANCIAL HIGHLIGHTS ALLIANCE UTILITY INCOME FUND
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
CLASS A
-----------------------------------------------------
SIX MONTHS OCTOBER 18,
ENDED YEAR ENDED NOVEMBER 30, 1993(F) TO
MAY 31, 1996 ------------------------ NOVEMBER 30,
(UNAUDITED) 1995 1994 1993
------------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $10.22 $ 8.97 $ 9.92 $10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income (d) .07(c) .27(c) .42 .02
Net realized and unrealized gain (loss)
on investments .25 1.43 (.89) (.10)
Net increase (decrease) in net asset
value from operations .32 1.70 (.47) (.08)
LESS: DISTRIBUTIONS
Dividends from net investment income (.26) (.45) (.48) -0-
Net asset value, end of period $10.28 $10.22 $ 8.97 $ 9.92
TOTAL RETURN
Total investment return based on net
asset value (a) 3.24% 19.58% (4.86)% (.80)%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period(000's omitted) $2,911 $2,748 $1,068 $229
Ratio to average net assets of:
Expenses, net of waivers/reimbursements 1.50%(b) 1.50% 1.50% 1.50%(b)
Expenses, before waivers/reimbursements 3.28%(b) 4.86% 13.72% 145.63%(b)
Net investment income, net of waivers/
reimbursements 1.34%(b) 2.48% 4.13% 2.35%(b)
Portfolio turnover rate 38% 162% 30% 11%
Average commission rate (e) $.0528 $ -0- $ -0- $ -0-
</TABLE>
See footnote summary on page 15.
13
FINANCIAL HIGHLIGHTS (CONTINUED) ALLIANCE UTILITY INCOME FUND
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
CLASS B
-----------------------------------------------------
SIX MONTHS OCTOBER 18,
ENDED YEAR ENDED NOVEMBER 30, 1993(F) TO
MAY 31, 1996 ------------------------ NOVEMBER 30,
(UNAUDITED) 1995 1994 1993
------------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $10.20 $ 8.96 $ 9.91 $10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income (d) .04(c) .18(c) .37 .01
Net realized and unrealized gain (loss)
on investments .26 1.45 (.91) (.10)
Net increase (decrease) in net asset
value from operations .30 1.63 (.54) (.09)
LESS: DISTRIBUTIONS
Dividends from net investment income (.23) (.39) (.41) -0-
Net asset value, end of period $10.27 $10.20 $ 8.96 $ 9.91
TOTAL RETURN
Total investment return based on net
asset value (a) 3.02% 18.66% (5.59)% (.90)%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period(000's omitted) $12,934 $10,988 $2,353 $244
Ratio to average net assets of:
Expenses, net of waivers/reimbursements 2.20%(b) 2.20% 2.20% 2.20%(b)
Expenses, before waivers/reimbursements 3.99%(b) 5.34% 14.42% 133.62%(b)
Net investment income, net of waivers/
reimbursements .64%(b) 1.60% 3.53% 2.84%(b)
Portfolio turnover rate 38% 162% 30% 11%
Average commission rate (e) $.0528 $ -0- $ -0- $ -0-
</TABLE>
See footnote summary on page 15.
14
ALLIANCE UTILITY INCOME FUND
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
CLASS C
-----------------------------------------------------
SIX MONTHS OCTOBER 27,
ENDED YEAR ENDED NOVEMBER 30, 1993(F) TO
MAY 31, 1996 ------------------------ NOVEMBER 30,
(UNAUDITED) 1995 1994 1993
------------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $10.22 $ 8.97 $ 9.92 $10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income (d) .06(c) .18(c) .39 .01
Net realized and unrealized gain (loss)
on investments .23 1.46 (.93) (.09)
Net increase (decrease) in net asset
value from operations .29 1.64 (.54) (.08)
LESS: DISTRIBUTIONS
Dividends from net investment income (.23) (.39) (.41) -0-
Net asset value, end of period $10.28 $10.22 $ 8.97 $ 9.92
TOTAL RETURN
Total investment return based on net
asset value (a) 2.92% 18.76% (5.58)% (.80)%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period(000's omitted) $4,532 $3,500 $2,651 $18
Ratio to average net assets of:
Expenses, net of waivers/reimbursements 2.20%(b) 2.20% 2.20% 2.20%(b)
Expenses, before waivers/reimbursements 4.00%(b) 5.99% 14.42% 148.03%(b)
Net investment income, net of waivers/
reimbursements .66%(b) 1.88% 3.60% 3.08%(b)
Portfolio turnover rate 38% 162% 30% 11%
Average commisson rate (e) $.0528 $ -0- $ -0- $ -0-
</TABLE>
(a) 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 charge 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.
(b) Annualized.
(c) Based on average shares outstanding.
(d) Net of fee waived and expenses reimbursed by the Adviser.
(e) For fiscal years beginning on or after September 1, 1995, a fund is
required to disclose its average commission rate per share for trades on which
commissions are charged.
(f) Commencement of distributions.
15
ALLIANCE UTILITY INCOME FUND
_______________________________________________________________________________
BOARD OF DIRECTORS
JOHN D. CARIFA, CHAIRMAN AND PRESIDENT
RUTH BLOCK (1)
DAVID H. DIEVLER (1)
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
ALAN E. LEVI, SENIOR VICE PRESIDENT
THOMAS BARDONG, VICE PRESIDENT
DANIEL V. PANKER, VICE PRESIDENT
EDMUND P. BERGAN, JR., SECRETARY
MARK D. GERSTEN, TREASURER & CHIEF FINANCIAL OFFICER
VINCENT S. NOTO, 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
(1) Member of the Audit Committee.
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.
16
THE ALLIANCE FAMILY OF MUTUAL FUNDS
_______________________________________________________________________________
FIXED INCOME
Alliance Bond Fund
U.S. Government Portfolio
Corporate Bond Portfolio
Alliance Global Dollar Government Fund
Alliance Global Strategic Income Trust
Alliance Mortgage Securities Income Fund
Alliance Limited Maturity Government Fund
Alliance Multi-Market Strategy Trust
Alliance North American Government Income Trust
Alliance Short-Term Multi-Market Trust
Alliance Short-Term U.S. Government Fund
Alliance World Income Trust
TAX-FREE INCOME
Alliance Municipal Income Fund
California Portfolio
Insured California Portfolio
Insured National Portfolio
National Portfolio
New York Portfolio
Alliance Municipal Income Fund II
Arizona Portfolio
Florida Portfolio
Massachusetts Portfolio
Michigan Portfolio
Minnesota Portfolio
New Jersey Portfolio
Ohio Portfolio
Pennsylvania Portfolio
Virginia Portfolio
MONEY MARKET
AFD Exchange Reserves
GROWTH
The Alliance Fund
Alliance Global Small Cap Fund
Alliance Growth Fund
Alliance Premier Growth Fund
GROWTH & INCOME
Alliance Strategic Balanced Fund
Alliance Balanced Shares
Alliance Conservative Investors Fund
Alliance Growth & Income Fund
Alliance Growth Investors Fund
Alliance Income Builder Fund
Alliance Utility Income Fund
AGGRESSIVE GROWTH
Alliance Quasar Fund
Alliance Technology Fund
INTERNATIONAL
Alliance All-Asia Investment Fund
Alliance International Fund
Alliance New Europe Fund
Alliance Worldwide Privatization Fund
CLOSED-END FUNDS
Alliance All-Market Advantage Fund
Alliance Global Environment Fund
ACM Government Income Fund
ACM Government Opportunity Fund
ACM Government Securities Fund
ACM Government Spectrum Fund
ACM Managed Dollar Income Fund
ACM Managed Income Fund
ACM Municipal Securities Income Fund
Alliance World Dollar Government Fund
Alliance World Dollar Government Fund II
The Austria Fund
The Korean Investment Fund
The Spain Fund
The Southern Africa Fund
CASH MANAGEMENT SERVICES
ACM Institutional Reserves
Government Portfolio
Prime Portfolio
Tax-Free Portfolio
Trust Portfolio
Alliance Capital Reserves
Alliance Government Reserves
Alliance Insured Account
Alliance Money Reserves
Alliance Municipal Trust
California Portfolio
Connecticut Portfolio
Florida Portfolio
General Portfolio
New Jersey Portfolio
New York Portfolio
Virginia Portfolio
Alliance Treasury Reserves
Alliance Money Market Fund
Prime Portfolio
Government Portfolio
General Municipal Portfolio
17
ALLIANCE UTILITY INCOME FUND
1345 Avenue of the Americas
New York, NY 10105
(800) 221-5672
ALLIANCECAPITAL
INVESTING WITHOUT THE MYSTERY.
THIS REPORT IS INTENDED SOLELY FOR DISTRIBUTION TO CURRENT SHAREHOLDERS
OF THE FUND.
R THESE REGISTERED SERVICE MARKS USED UNDER LICENSE FROM THE OWNER,
ALLIANCE CAPITAL MANAGEMENT L.P.
UIFSR
