ALLIANCE UTILITY INCOME FUND
SEMI-ANNUAL REPORT
MAY 31, 1997
ALLIANCE CAPITAL
LETTER TO SHAREHOLDERS ALLIANCE UTILITY INCOME FUND
_______________________________________________________________________________
July 11, 1997
Dear Shareholder:
We are pleased to report to you on the investment performance and activities of
the Alliance Utility Income Fund for the period ended May 31, 1997. Total
returns for your Fund are listed in the table below. For comparison, we have
also shown the performance of the New York Stock Exchange (NYSE) Utility Index
and the S&P 500 Stock Index.
INVESTMENT RESULTS*
TOTAL RETURNS FOR THE
PERIODS ENDED MAY 31, 1997
6 MONTHS 12 MONTHS
---------- -----------
ALLIANCE UTILITY INCOME FUND
Class A 2.19% 7.37%
Class B 1.86 6.61
Class C 1.76 6.60
NYSE UTILITY INDEX 4.62 10.06
S&P 500 STOCK INDEX 13.18 29.44
* TOTAL RETURNS ARE BASED ON NET ASSET VALUE. TOTAL RETURNS FOR ADVISER CLASS
SHARES WILL DIFFER DUE TO DIFFERENT EXPENSES. THE NYSE & S&P INDICES ARE
UNMANAGED.
PERFORMANCE REVIEW
Income-producing securities performed poorly versus the broad
large-capitalization market largely due to interest rates and earnings.
Interest rates rose during most of the first six months of the fiscal year.
This situation was a response to very strong first quarter GDP growth and
attendant Fed tightening in February. As a result, utility stocks, which
generally perform in inverse fashion to interest rates, suffered.
In addition, the winter of 1996-1997 was very mild. Electrical generation and
natural gas prices were negatively affected. These effects showed up in poor
earnings for the electric and gas utility companies.
The best performing group of stocks was the regional Bells. These stocks
benefited from continued strong earnings growth from the addition of second
telephone lines and high levels of communications traffic. In addition, the
opening of the local telephone monopoly was postponed by court activity.
The Alliance Utility Income Fund has avoided the regional Bells because we
believe the Bells' monopoly will soon be forced open, causing margins and
earnings to suffer. This avoidance has led to near-term underperformance,
however. Your Fund lagged the returns of the NYSE Utilities Index, while it
exceeded the returns of both the Dow Jones Utilities Index and the Standard &
Poor's Utilities Index, which returned -3.22% and
- -1.36%, respectively, for the six-month period ended May 31, 1997. The
difference is that in the NYSE Index, the regional Bells are well represented,
while they are absent from the other indices.
While the Fund does not own any of the regional Bells, over 13% of the
portfolio's assets are invested in telephone companies. We believe that several
of the Fund's telephone holdings are well positioned to take advantage of
deregulation.
INVESTMENT OUTLOOK
The market has been underpinned by a remarkable period of strong earnings
growth coupled with declining inflation rates. The six-year long era of
moderate economic growth has not yet resulted in bottlenecks that foster higher
prices, but the economy cannot grow above its trend for long without causing
the inflation rate to reverse its course and begin to increase. The prices of
many stocks do not incorporate anything but perfection going forward, and we
would expect these stocks to suffer disproportionately in the face of
unforeseen bad news.
1
ALLIANCE UTILITY INCOME FUND
_______________________________________________________________________________
We have maintained our focus upon stocks that have the most reasonable
valuations. We continue to seek a defensive dividend yield and a high degree of
sector and industry diversification. Finally, we continue to rely on Alliance's
internal research capabilities in selecting stocks that we expect to deliver
superior performance.
Thank you for your interest and investment in the Alliance Utility Income Fund.
Sincerely,
John D. Carifa
Chairman and President
Paul Rissman
Senior Vice President
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 portfolio
that seeks current income and capital appreciation primarily through
investments 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 RETURNS AS OF MAY 31, 1997
CLASS A SHARES
WITHOUT WITH
SALES CHARGE SALES CHARGE
------------ ------------
. One Year 7.37% 2.78%
. Since Inception* 6.38% 5.12%
CLASS B SHARES
WITHOUT WITH
SALES CHARGE SALES CHARGE
------------ ------------
. One Year 6.61% 2.61%
. Since Inception* 5.63% 5.39%
CLASS C SHARES
WITHOUT WITH
SALES CHARGE SALES CHARGE
------------ ------------
. One Year 6.60% 5.60%
. Since Inception* 5.66% 5.66%
The average annual total returns reflect reinvestment 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);
and for Class C shares (1% year 1). Returns for Class A shares do not reflect
the imposition of the 1 year 1% contingent deferred sales charge for accounts
over $1,000,000. Total return for Advisor Class shares will differ due to
different expenses associated with that class.
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 Class A and B:10/18/93, Class C: 10/27/93.
3
TEN LARGEST HOLDINGS
MAY 31, 1997 (UNAUDITED) ALLIANCE UTILITY INCOME FUND
_______________________________________________________________________________
PERCENT OF
COMPANY COUNTRY VALUE NET ASSETS
- -------------------------------------------------------------------------------
AirTouch Communications, Inc.
Cl.C 4.25% cv. pfd. United States $1,008,800 5.1%
American Electric Power, Inc. United States 916,875 4.6
FPL Group, Inc. United States 818,400 4.1
New York State Electric & Gas Corp. United States 804,750 4.1
The Williams Cos., Inc. 3.50% pfd. United States 786,094 4.0
CINergy Corp. United States 745,500 3.8
CMS Energy Corp. United States 733,025 3.7
Edison International United States 724,625 3.7
Allegheny Power Systems, Inc. United States 676,637 3.4
TCI Communications, Inc. pfd. United States 647,813 3.3
$7,862,519 39.8%
MAJOR PORTFOLIO CHANGES
SIX MONTHS ENDED MAY 31, 1997 (UNAUDITED)
_______________________________________________________________________________
SHARES OR PRINCIPAL
- -------------------------------------------------------------------------------
HOLDINGS
PURCHASES COUNTRY BOUGHT 5/31/97
- -------------------------------------------------------------------------------
American Electric Power, Inc. United States 6,000 22,500
Cablevision Systems Corp. 8.50% cv. pfd. United States 20,000 20,000
Frontier Corp. United States 10,000 10,000
Illinova Corp. United States 5,800 20,000
International Cabletel, Inc. 7.25%,
4/15/05 United States $370,000 $555,000
Merrill Lynch & Co., Inc. United States 30,000 30,000
New York State Electric & Gas Corp. United States 37,000 37,000
NIPSCO Industries, Inc. United States 10,000 10,000
TCI Communications, Inc. pfd. United States 5,000 15,000
WorldCom, Inc. United States 15,000 15,000
HOLDINGS
SALES SOLD 5/31/97
- -------------------------------------------------------------------------------
AT & T Corp. United States 7,500 17,300
Consolidated Electric Power Asia (ADR) Hong Kong 100,000 -0-
Ericsson (L.M.) Telephone Co. (ADR) Sweden 9,600 -0-
Houston Industries, Inc. United States 33,500 -0-
Light Particapacoes, S.A. Brazil 1,600,000 -0-
MCI Communications Corp. United States 14,800 -0-
Nokia Corp. (ADR) Finland 7,200 -0-
Telephone & Data Systems, Inc. United States 9,800 -0-
Teleport Communications Group, Inc.
Cl.A United States 11,000 11,800
Texas Utilities Co. United States 14,100 -0-
4
PORTFOLIO OF INVESTMENTS
MAY 31, 1997 (UNAUDITED) ALLIANCE UTILITY INCOME FUND
_______________________________________________________________________________
COMPANY SHARES VALUE
- -------------------------------------------------------------------------
COMMON STOCKS AND OTHER INVESTMENTS-89.7%
UNITED STATES INVESTMENTS-84.2%
PUBLIC UTILITIES-84.2%
BROADCASTING & CABLE-8.8%
Cablevision Systems Corp. 8.50% cv. pfd. 20,000 $ 452,500
Merrill Lynch "Cox" STRYPES 30,000 641,250
TCI Communications, Inc. pfd. 15,000 647,813
------------
1,741,563
ELECTRIC-47.6%
Allegheny Power Systems, Inc. 25,900 676,637
American Electric Power, Inc. 22,500 916,875
Baltimore Gas & Electric Co. 9,800 257,250
Carolina Power & Light Co. 14,900 517,775
CINergy Corp. 21,300 745,500
CMS Energy Corp. 21,800 733,025
DPL, Inc. 22,800 544,350
DQE, Inc. 11,200 315,000
Edison International 31,000 724,625
FPL Group, Inc. 17,600 818,400
Illinova Corp. 20,000 437,500
Ipalco Enterprises, Inc. 17,400 541,575
New York State Electric & Gas Corp. 37,000 804,750
NIPSCO Industries, Inc. 10,000 405,000
Pinnacle West Capital Corp. 20,100 590,437
Public Service Co. of New Mexico 22,300 393,038
------------
9,421,737
GAS-14.5%
AGL Resources, Inc. 9,700 185,513
Brooklyn Union Gas Co. 7,300 203,487
MCN Corp. 7,400 219,225
New Jersey Resources Corp. 7,000 217,875
Northwest Natural Gas Co. 8,400 204,750
Pacific Enterprises 6,500 212,875
People's Energy Corp. 5,700 202,350
Questar Corp. 5,500 215,875
Southwest Gas Corp. 11,100 190,088
The Williams Cos., Inc. 3.50% pfd. 7,500 786,094
Washington Gas Light Co. 8,900 219,162
------------
2,857,294
TELEPHONE-13.3%
AirTouch Communications, Inc.
Cl.C 4.25% cv. pfd. 20,800 1,008,800
AT & T Corp. 17,300 637,938
Frontier Corp. 10,000 183,750
Teleport Communications Group, Inc. Cl.A (a) 11,800 356,950
WorldCom, Inc. (a) 15,000 444,375
------------
2,631,813
Total United States Investments
(cost $15,856,031) 16,652,407
FOREIGN INVESTMENTS-5.5%
BRAZIL-2.1%
Telecomunicacoes Brasileiras, S.A. (ADR) 3,000 412,125
KOREA-1.0%
Korea Electric Power Corp. (ADR) 6,890 212,535
5
PORTFOLIO OF INVESTMENTS (CONTINUED) ALLIANCE UTILITY INCOME FUND
_______________________________________________________________________________
SHARES OR
PRINCIPAL
AMOUNT
COMPANY (000) VALUE
- -------------------------------------------------------------------------
MEXICO-2.4%
Telefonos de Mexico, S.A. Series L (ADR) 10,600 $ 470,375
Total Foreign Investments
(cost $803,393) 1,095,035
Total Common Stocks and Other Investments
(cost $16,659,424) 17,747,442
CORPORATE BONDS-5.6%
3Com Corp.
10.25%, 11/01/01 (b) $ 400 538,500
International Cabletel, Inc.
7.25%, 4/15/05 555 565,406
Total Corporate Bonds
(cost $1,228,650) 1,103,906
SHORT TERM INVESTMENTS-5.1%
General Electric Capital Corp.
5.60%, 6/09/97 $ 500 $499,378
Prudential Funding Corp.
5.53%, 6/03/97 500 499,846
Total Short Term Investments
(amortized cost $999,224) 999,224
TOTAL INVESTMENTS -100.4%
(cost $18,887,298) 19,850,572
Other assets less liabilities-(0.4%) (73,314)
NET ASSETS-100% $19,777,258
(a) Non-income producing security.
(b) 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, 1997, this security
amounted to $538,500 or 2.7% of net assets.
Glossary of Terms:
ADR - American depository receipt
STRYPES - Structured yield product exchangable for stock.
See notes to financial statements.
6
STATEMENT OF ASSETS AND LIABILITIES
MAY 31, 1997 (UNAUDITED) ALLIANCE UTILITY INCOME FUND
_______________________________________________________________________________
ASSETS
Investments in securities, at value (cost $18,887,298) $19,850,572
Cash 249,093
Dividends and interest receivable 66,255
Deferred organization expenses 45,077
Receivable from Adviser 22,379
Total assets 20,233,376
LIABILITIES
Payable for investment securities purchased 391,875
Distribution fee payable 14,482
Payable for capital stock redeemed 9,568
Accrued expenses 40,193
Total liabilities 456,118
NET ASSETS $19,777,258
COMPOSITION OF NET ASSETS
Capital stock, at par $ 1,885
Additional paid-in capital 17,987,731
Distributions in excess of net investment income (41,399)
Accumulated net realized gain on investments and foreign
currency transactions 865,767
Net unrealized appreciation of investments 963,274
$19,777,258
CALCULATION OF MAXIMUM OFFERING PRICE
CLASS A SHARES
Net asset value and redemption price per share ($3,570,581/
339,819 shares of capital stock issued and outstanding) $10.51
Sales charge--4.25% of public offering price .47
Maximum offering price $10.98
CLASS B SHARES
Net asset value and offering price per share ($12,972,242/
1,237,030 shares of capital stock issued and outstanding) $10.49
CLASS C SHARES
Net asset value and offering price per share ($3,195,381/
304,291 shares of capital stock issued and outstanding) $10.50
ADVISOR CLASS SHARES
Net asset value, redemption and offering price per share ($39,054
/3,716 shares of capital stock issued and outstanding) $10.51
See notes to financial statements.
7
STATEMENT OF OPERATIONS
SIX MONTHS ENDED MAY 31, 1997 (UNAUDITED) ALLIANCE UTILITY INCOME FUND
_______________________________________________________________________________
INVESTMENT INCOME
Dividends (net of foreign taxes withheld $606) $ 395,660
Interest 61,040 $ 456,700
EXPENSES
Advisory fee 74,639
Distribution fee - Class A 5,105
Distribution fee - Class B 65,915
Distribution fee - Class C 16,413
Administrative 69,500
Custodian 45,465
Audit and legal 31,591
Registration 28,716
Transfer agency 18,881
Director's fees 15,000
Amortization of organization expenses 14,752
Printing 7,112
Miscellaneous 4,479
Total expenses 397,568
Less: expenses waived and assumed by the Adviser
(Note B) (190,694)
Net expenses 206,874
Net investment income 249,826
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain on investment transactions 728,861
Net realized loss on foreign currency transactions (8,841)
Net change in unrealized appreciation (depreciation) of:
Investments (614,520)
Foreign currency denominated assets and liabilities 6,286
Net gain on investments and foreign currency transactions 111,786
NET INCREASE IN NET ASSETS FROM OPERATIONS $ 361,612
See notes to financial statements.
8
STATEMENT OF CHANGES IN NET ASSETS ALLIANCE UTILITY INCOME FUND
_______________________________________________________________________________
SIX MONTHS ENDED YEAR ENDED
MAY 31, 1997 NOVEMBER 30,
(UNAUDITED) 1996
------------ ------------
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS
Net investment income $ 249,826 $ 205,930
Net realized gain on investments and
foreign currency transactions 720,020 750,010
Net changes in unrealized appreciation
(depreciation) of investments and foreign
currency denominated assets and liabilities (608,234) 530,942
Net increase in net assets from operations 361,612 1,486,882
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income
Class A (56,818) (131,703)
Class B (187,577) (488,174)
Class C (46,211) (150,651)
Advisor Class (619) -0-
Net realized gain on investments
Class A (39,294) -0-
Class B (161,376) -0-
Class C (40,093) -0-
Advisor Class (394) -0-
CAPITAL STOCK TRANSACTIONS
Net increase (decrease) (316,175) 2,312,181
Total increase (decrease) (486,945) 3,028,535
NET ASSETS
Beginning of year 20,264,203 17,235,668
End of period $19,777,258 $20,264,203
See notes to financial statements.
9
NOTES TO FINANCIAL STATEMENTS
MAY 31, 1997 (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, Class C and Advisor Class shares. Class A shares are sold
with a front-end sales charge of up to 4.25% for purchases not exceeding
$1,000,000. With respect to purchases of $1,000,000 or more, Class A shares
redeemed within one year of purchase will be subject to a contingent deferred
sales charge of 1%. Class B shares are currently 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 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.
Advisor Class shares are sold without an initial or contingent deferred sales
charge and are not subject to ongoing distribution expense. Advisor Class
shares are offered to investors participating in fee-based programs and to
certain retirement plans accounts. All four classes of shares have identical
voting, dividend, liquidation and other rights, 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 such 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 currency losses represents foreign exchange gains and losses from
sales and maturities of securities, currency 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 INVESTMENT TRANSACTIONS
Dividend income is recorded on the ex-dividend date. Interest income is accrued
daily. Investment transactions are accounted for on the date securities are
purchased or sold. Investment 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 and are determined in accordance with income tax regulations.
10
ALLIANCE UTILITY INCOME FUND
_______________________________________________________________________________
For federal income tax purposes, the Fund's distributions of income and capital
gains are subject to recharacterization, which may include a tax return of
capital, at the end of the year to reflect the final investment results for
that year.
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. For the six months ended May 31, 1997 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%, 2.20% and 1.20% of the daily
average net assets for the Class A, Class B, Class C and Advisor Class shares,
respectively. For the six months ended May 31, 1997, such reimbursement
amounted to $190,694. Pursuant to the Advisory Agreement, the Fund paid $69,500
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, 1997. 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
$10,358. 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 $445 from the sale of Class A shares and
$7,234 and $1,238 in contingent deferred sales charges were imposed upon
redemptions by shareholders of Class B and Class C shares, respectively, for
the six months ended May 31, 1997.
Brokerage commissions paid on investments transactions for the six months ended
May 31, 1997, amounted to $13,811, 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. There is no distribution fee on the Advisor Class 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
$1,276,960 and $431,660 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.
NOTE D: INVESTMENT TRANSACTIONS
Purchases and sales of investment securities, (excluding short-term investments
and U.S. government securities), aggregated $4,436,241 and $5,247,807,
respectively, for the six months ended May 31, 1997. There were no purchases or
sales of U.S. government or government agency obligations for the six months
ended May 31, 1997.
At May 31, 1997, the cost of investments for federal income tax purposes was
$18,888,042. Accordingly, gross unrealized appreciation of investments was
$1,461,614 and gross unrealized depreciation of investments was $499,084,
resulting in net unrealized appreciation of $962,530 excluding foreign currency.
11
NOTES TO FINANCIAL STATEMENTS (CONTINUED) ALLIANCE UTILITY INCOME FUND
_______________________________________________________________________________
NOTE E: CAPITAL STOCK
There are 12,000,000,000 shares of $.001 par value capital stock authorized,
divided into four classes, designated Class A, Class B, Class C and Advisor
Class 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, 1997 NOVEMBER 30, MAY 31, 1997 NOVEMBER 30,
(UNAUDITED) 1996 (UNAUDITED) 1996
------------ ------------ -------------- --------------
CLASS A
Shares sold 1,096,481 107,112 $ 11,293,057 $ 1,085,933
Shares issued in
reinvestment of
dividends and
distributions 6,123 5,811 63,391 58,387
Shares converted
from Class B 8,104 8,864 82,917 88,508
Shares redeemed (1,081,888) (79,786) (11,138,862) (807,878)
Net increase 28,820 42,001 $ 300,503 $ 424,950
CLASS B
Shares sold 85,100 583,527 $ 883,746 $ 5,950,969
Shares issued in
reinvestment of
dividends and
distributions 16,179 20,642 167,775 207,489
Shares converted
to Class A (8,121) (8,872) (82,917) (88,508)
Shares redeemed (138,698) (390,151) (1,431,167) (3,946,622)
Net increase(decrease) (45,540) 205,146 $ (462,563) $ 2,123,328
CLASS C
Shares sold 34,398 198,044 $ 351,314 $ 2,016,294
Shares issued in
reinvestment of
dividends and
distributions 6,837 11,022 71,004 110,869
Shares redeemed (55,812) (232,815) (582,483) (2,394,921)
Net decrease (14,577) (23,749) $ (160,165) $ (267,758)
OCT. 2, 1996(A) OCT. 2, 1996(A)
TO TO
NOV. 30, 1996 NOV. 30, 1996
-------------- ---------------
ADVISOR CLASS
Shares sold 523 3,142 $ 5,348 $ 31,836
Shares issued in
reinvestment of
dividends and
distributions 98 -0- 1,012 -0-
Shares redeemed (30) (17) (310) (175)
Net increase 591 3,125 $ 6,050 $ 31,661
(a) Commencement of distribution.
12
ALLIANCE UTILITY INCOME FUND
_______________________________________________________________________________
NOTE F: 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.
13
FINANCIAL HIGHLIGHTS ALLIANCE UTILITY INCOME FUND
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
CLASS A
-----------------------------------------------------------------
OCTOBER 18,
SIX MONTHS 1993(A)
ENDED YEAR ENDED NOVEMBER 30, TO
MAY 31, 1997 ------------------------------------- NOVEMBER 30,
(UNAUDITED) 1996 1995 1994 1993
------------ ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $10.59 $10.22 $ 8.97 $9.92 $10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income (b) .16(c) .18(c) .27(c) .42 .02
Net realized and unrealized gain (loss)
on investments .07 .65 1.43 (.89) (.10)
Net increase (decrease) in net asset
value from operations .23 .83 1.70 (.47) (.08)
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (.18) (.46) (.45) (.48) -0-
Distributions from net realized gains (.13) -0- -0- -0- -0-
Total dividends and distributions (.31) (.46) (.45) (.48) -0-
Net asset value, end of period $10.51 $10.59 $10.22 $8.97 $ 9.92
TOTAL RETURN
Total investment return based on net
asset value (d) 2.19% 8.47% 19.58% (4.86)% (.80)%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $3,571 $3,294 $2,748 $1,068 $229
Ratio to average net assets of:
Expenses, net of waivers/reimbursements 1.50%(e) 1.50% 1.50% 1.50% 1.50%(e)
Expenses, before waivers/reimbursements 3.41%(e) 3.38% 4.86% 13.72% 145.63%(e)
Net investment income, net of waivers/
reimbursements 3.06%(e) 1.67% 2.48% 4.13% 2.35%(e)
Portfolio turnover rate 23% 98% 162% 30% 11%
Average commission rate (f) $.0411 $.0536 -- -- --
</TABLE>
See footnote summary on page 17.
14
ALLIANCE UTILITY INCOME FUND
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
CLASS B
-----------------------------------------------------------------
OCTOBER 18,
SIX MONTHS 1993(A)
ENDED YEAR ENDED NOVEMBER 30, TO
MAY 31, 1997 ------------------------------------- NOVEMBER 30,
(UNAUDITED) 1996 1995 1994 1993
------------ ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $10.57 $10.20 $ 8.96 $9.91 $10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income (b) .12(c) .10(c) .18(c) .37 .01
Net realized and unrealized gain (loss)
on investments .08 .67 1.45 (.91) (.10)
Net increase (decrease) in net asset
value from operations .20 .77 1.63 (.54) (.09)
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (.15) (.40) (.39) (.41) -0-
Distributions from net realized gains (.13) -0- -0- -0- -0-
Total dividends and distributions (.28) (.40) (.39) (.41) -0-
Net asset value, end of period $10.49 $10.57 $10.20 $8.96 $ 9.91
TOTAL RETURN
Total investment return based on net
asset value (d) 1.86% 7.82% 18.66% (5.59)% (.90)%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $12,972 $13,561 $10,988 $2,353 $244
Ratio to average net assets of:
Expenses, net of waivers/reimbursements 2.20%(e) 2.20% 2.20% 2.20% 2.20%(e)
Expenses, before waivers/reimbursements 4.12%(e) 4.08% 5.34% 14.42% 133.62%(e)
Net investment income, net of waivers/
reimbursements 2.40%(e) .95% 1.60% 3.53% 2.84%(e)
Portfolio turnover rate 23% 98% 162% 30% 11%
Average commission rate (f) $.0411 $.0536 -- -- --
</TABLE>
See footnote summary on page 17.
15
FINANCIAL HIGHLIGHTS (CONTINUED) ALLIANCE UTILITY INCOME FUND
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
CLASS C
-----------------------------------------------------------------
OCTOBER 27,
SIX MONTHS 1993(G)
ENDED YEAR ENDED NOVEMBER 30, TO
MAY 31, 1997 ------------------------------------- NOVEMBER 30,
(UNAUDITED) 1996 1995 1994 1993
------------ ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $10.59 $10.22 $ 8.97 $9.92 $10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income (b) .12(c) .11(c) .18(c) .39 .01
Net realized and unrealized gain (loss)
on investments .07 .66 1.46 (.93) (.09)
Net increase (decrease) in net asset
value from operations .19 .77 1.64 (.54) (.08)
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (.15) (.40) (.39) (.41) -0-
Distributions from net realized gains (.13) -0- -0- -0- -0-
Total dividends and distributions (.28) (.40) (.39) (.41) -0-
Net asset value, end of period $10.50 $10.59 $10.22 $8.97 $ 9.92
TOTAL RETURN
Total investment return based on net
asset value (d) 1.76% 7.81% 18.76% (5.58)% (.80)%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $3,195 $3,376 $3,500 $2,651 $18
Ratio to average net assets of:
Expenses, net of waivers/reimbursements 2.20%(e) 2.20% 2.20% 2.20% 2.20%(e)
Expenses, before waivers/reimbursements 4.11%(e) 4.07% 5.99% 14.42% 148.03%(e)
Net investment income, net of waivers/
reimbursements 2.39%(e) .94% 1.88% 3.60% 3.08%(e)
Portfolio turnover rate 23% 98% 162% 30% 11%
Average commisson rate (f) $.0411 $.0536 -- -- --
</TABLE>
See footnote summary on page 17.
16
ALLIANCE UTILITY INCOME FUND
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
ADVISOR CLASS
---------------------------
OCTOBER 2,
SIX MONTHS 1996(G)
ENDED TO
MAY 31, 1997 NOVEMBER 30,
(UNAUDITED) 1996
------------ ------------
Net asset value, beginning of period $10.59 $ 9.95
INCOME FROM INVESTMENT OPERATIONS
Net investment income (b)(c) .18 .03
Net realized and unrealized gain on investments .07 .61
Net increase in net asset value from operations .25 .64
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (.20) -0-
Distributions from net realized gains (.13) -0-
Total dividends and distributions (.33) -0-
Net asset value, end of period $10.51 $10.59
TOTAL RETURN
Total investment return based on net asset value (d) 2.35% 6.33%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $39 $33
Ratio to average net assets of:
Expenses, net of waivers/reimbursements (e) 1.20% 1.20%
Expenses, before waivers/reimbursements (e) 3.14% 3.48%
Net investment income, net of waivers/
reimbursements (e) 3.45% 4.02%
Portfolio turnover rate 23% 98%
Average commisson rate $.0411 $.0536
(a) Commencement of operations.
(b) Net of fees waived and expenses reimbursed by the Adviser.
(c) Based on average shares outstanding.
(d) 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.
(e) Annualized.
(f) 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.
(g) Commencement of distribution.
17
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)
DONALD J. ROBINSON (1)
OFFICERS
PAUL RISSMAN, 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.
18
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 High Yield Fund
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
Alliance/Regent Sector Opportunity 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 Real Estate Investment 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
Massachusetts Portfolio
New Jersey Portfolio
New York Portfolio
Virginia Portfolio
Alliance Treasury Reserves
Alliance Money Market Fund
Prime Portfolio
Government Portfolio
General Municipal Portfolio
19
ALLIANCE UTILITY INCOME FUND
1345 Avenue of the Americas
New York, NY 10105
(800) 221-5672
ALLIANCE CAPITAL
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
