ALLIANCE UTILITY INCOME FUND
ANNUAL REPORT
NOVEMBER 30, 1996
LETTER TO SHAREHOLDERS ALLIANCE UTILITY INCOME FUND
_______________________________________________________________________________
December 13, 1996
Dear Shareholder:
We are pleased to report to you on the investment performance and activities of
the Alliance Utility Income Fund for the fiscal year ended November 30, 1996.
As you can see in the table below, 6- and 12-month performance essentially
tracked that of the Fund's primary benchmark, the NYSE Utility Index.
INVESTMENT RESULTS*
TOTAL RETURN FOR THE
PERIODS ENDED NOVEMBER 30, 1996
6 MONTHS 12 MONTHS
------------ -------------
ALLIANCE UTILITY INCOME FUND
Class A 5.07% 8.47%
Class B 4.66 7.82
Class C 4.75 7.81
NYSE UTILITY INDEX 5.19 8.61
S&P 500 STOCK INDEX 14.37 27.85
THE NYSE AND S&P INDICES ARE UNMANAGED.
* THE FUND'S INVESTMENT RESULTS ARE CUMULATIVE TOTAL RETURNS FOR EACH PERIOD
AND ARE BASED ON THE NET ASSET VALUE AS OF 11/30/96. TOTAL RETURNS FOR ADVISOR
CLASS SHARES WILL DIFFER DUE TO DIFFERENT EXPENSES. RETURNS FOR THE FUND AND
ITS COMPARATIVE INDICES INCLUDE THE REINVESTMENT OF ANY DISTRIBUTIONS PAID
DURING THE PERIOD. ADDITIONAL PERFORMANCE RESULTS APPEAR ON PAGE 3.
MARKET REVIEW
Fund performance was enhanced in the first half of the fiscal year by
underweighting the electric utility sector and maintaining a large cash
position in the face of the bond market's retreat. During the second half of
the fiscal year, this cash was redeployed into stocks, mainly in the natural
gas pipeline and distribution sector.
Performance in the second half of the fiscal year was negatively affected by
the Fund's holdings in several communications technology stocks reporting
earnings below expectations. These positions have since been eliminated. While
our large position in AT&T also adversely impacted performance, we are
maintaining this holding based on its attractive valuation. These detrimental
influences were largely offset by the positive performance of our natural gas
holdings and our large positions in Teleport Communications and MCI
Communications.
INVESTMENT STRATEGY
The near-term direction of the economy will be the single largest determinant
of utility stock prices over the next 12 months. Economic data suggests little
change from the current environment of modest growth and low inflation. If
these conditions persist, moderate increases in corporate profits could propel
the stock market into higher territory.
However, the economy seldom behaves as expected. A reacceleration of economic
growth will exert upward pressure on interest rates, causing bond prices as
well as utility stock prices to suffer. On the other hand, if the economy slows
enough to cause declines in corporate earnings, utility stocks, with their
inherent stability, may outperform the broader market averages.
For now, we believe the economy is unlikely to pick up speed in the near term.
Therefore, we remain fully invested in the electric, gas, and telephone
utilities areas, and continue to reduce our exposure to the telecommunications
equipment sector, as well as to the more volatile foreign markets.
We appreciate the confidence you have placed in us and look forward to
reporting the Fund's progress in the future.
Sincerely,
John D. Carifa
Chairman and President
Paul Rissman
Vice President
1
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 NOVEMBER 30, 1996
CLASS A SHARES
WITHOUT WITH
SALES CHARGE SALES CHARGE
------------ ------------
. One Year 8.47% 3.90%
. Since Inception* 6.70% 5.24%
CLASS B SHARES
WITHOUT WITH
SALES CHARGE SALES CHARGE
------------ ------------
. One Year 7.82% 3.82%
. Since Inception* 5.94% 5.65%
CLASS C SHARES
WITHOUT WITH
SALES CHARGE SALES CHARGE
------------ ------------
. One Year 7.81% 6.81%
. Since Inception* 6.00% 6.00%
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.
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
ALLIANCE UTILITY INCOME FUND
_______________________________________________________________________________
ALLIANCE UTILITY INCOME FUND
$10,000 INVESTMENT OVER LIFE OF FUND:
10/31/93* TO 11/30/96
$18,000
$17,000
$16,000
$15,000
$14,000
$13,000
$12,000
$11,000
$10,000
$9,000
$8,000
S&P 500 STOCK INDEX: $17,472
NYSE UTILITY INDEX: $15,361
UTILITY INCOME FUND
CLASS A: $11,727
10/31/93 12/31/93 12/31/94 12/31/95 11/30/96
This chart illustrates the total value of an assumed investment in Alliance
Utility Income Fund Class A shares (since inception) after deducting the
maximum 4.25% sales charge, and with dividends and capital gains reinvested.
Performance for Class B, Class C, and Advisor Class shares will vary from the
results shown above due to differences in expenses charged to those classes.
Past performance is not indicative of future results, and is not representative
of future gain or loss in capital value or dividend income.
The unmanaged Standard and Poor's 500 Stock Index is a common measure of the
performance of the U.S. stock market. The NYSE Utility Index is an unmanaged
index comprised of utility stocks traded on the New York Stock Exchange.
When comparing Alliance Utility Income Fund to the two indexes shown above, you
should note that the Fund's performance reflects the maximum sales charge of
4.25% while no such charges are reflected in the performance of the indices.
Utility Income Fund
S&P 500 Stock Index
NYSE Utility Index
* Month-end nearest to Fund inception date (10/18/93.)
3
TEN LARGEST HOLDINGS
NOVEMBER 30, 1996 ALLIANCE UTILITY INCOME FUND
_______________________________________________________________________________
PERCENT OF
COMPANY COUNTRY VALUE NET ASSETS
- -------------------------------------------------------------------------------
AT & T Corp. United States $ 973,400 4.8%
AirTouch Communications, Inc.
Cl.C 4.25% cv. pfd. United States 956,800 4.7
3Com Corp., 10.25%, 11/01/01 United States 907,000 4.5
FPL Group, Inc. United States 811,800 4.0
Allegheny Power Systems, Inc. United States 786,712 3.9
Teleport Communications Group, Inc. United States 755,250 3.7
Houston Industries, Inc. United States 737,000 3.6
CINergy Corp. United States 713,550 3.5
CMS Energy Corp. United States 708,500 3.5
American Electric Power, Inc. United States 684,750 3.4
$8,034,762 39.6%
MAJOR PORTFOLIO CHANGES
SIX MONTHS ENDED NOVEMBER 30, 1996
_______________________________________________________________________________
SHARES OR PRINCIPAL
- -------------------------------------------------------------------------------
HOLDINGS
PURCHASES COUNTRY BOUGHT 11/30/96
- -------------------------------------------------------------------------------
3Com Corp., 10.25%, 11/01/01 United States $400,000 $400,000
AirTouch Communications, Inc.
Cl.C 4.25% cv. pfd. United States 20,800 20,800
Allegheny Power Systems, Inc. United States 10,500 25,900
CINergy Corp. United States 21,300 21,300
DQE, Inc. United States 11,200 11,200
Edison International United States 31,000 31,000
Pinnacle West Capital Corp. United States 10,400 20,100
TCI Communications, Inc. pfd. United States 10,000 10,000
Teleport Communications Group, Inc. United States 22,800 22,800
The Williams Cos., Inc. 3.50% pfd. United States 7,500 7,500
HOLDINGS
SALES SOLD 11/30/96
- -------------------------------------------------------------------------------
AirTouch Communications, Inc. United States 26,400 -0-
Central & South West Corp. United States 21,500 -0-
Light Servicos de Eletricid, S.A. Brazil 1,600,000 -0-
Motorola, Inc. United States 10,300 -0-
New York State Electric & Gas Corp. United States 25,100 -0-
Portland General Corp. United States 20,000 -0-
TCI Group, Series A United States 27,800 -0-
Union Pacific Corp. United States 8,800 -0-
U.S. Cellular Corp. United States 14,700 -0-
U.S. West Communications Group United States 17,600 -0-
4
PORTFOLIO OF INVESTMENTS
NOVEMBER 30, 1996 ALLIANCE UTILITY INCOME FUND
_______________________________________________________________________________
COMPANY SHARES U.S. $ VALUE
- -------------------------------------------------------------------------
COMMON STOCKS & OTHER INVESTMENTS-91.0%
UNITED STATES INVESTMENTS-79.2%
PUBLIC UTILITIES-79.2%
ELECTRIC-45.5%
Allegheny Power Systems, Inc. 25,900 $ 786,712
American Electric Power, Inc. 16,500 684,750
Baltimore Gas & Electric Co. 9,800 273,175
Carolina Power & Light Co. 14,900 545,713
CINergy Corp. 21,300 713,550
CMS Energy Corp. 21,800 708,500
DPL, Inc. 22,800 555,750
DQE, Inc. 11,200 330,400
Edison International 31,000 616,125
FPL Group, Inc. 17,600 811,800
Houston Industries, Inc. 33,500 737,000
Illinova Corp. 14,200 376,300
Ipalco Enterprises, Inc. 17,400 474,150
Pinnacle West Capital Corp. 20,100 625,612
Public Service Co. of New Mexico 22,300 426,488
Texas Utilities Co. 14,100 556,950
------------
9,222,975
GAS-14.5%
AGL Resources, Inc. 9,700 204,913
Brooklyn Union Gas Co. 7,300 228,125
Enron Corp. 4,700 215,025
MCN Corp. 7,400 212,750
New Jersey Resources Corp. 7,000 207,375
Northwest Natural Gas Co. 8,400 210,000
Pacific Enterprises 6,500 199,063
People's Energy Corp. 5,700 206,625
Questar Corp. 5,500 215,187
Southwest Gas Corp. 11,100 216,450
The Williams Cos., Inc. 3.50% pfd. 7,500 618,750
Washington Gas Light Co. 8,900 212,487
------------
2,946,750
TELEPHONE-19.2%
AirTouch Communications, Inc.
Cl.C 4.25% cv. pfd. 20,800 956,800
AT & T Corp. 24,800 973,400
MCI Communications Corp. 14,800 451,400
TCI Communications, Inc. pfd. 10,000 383,750
Telephone & Data Systems, Inc. 9,800 366,275
Teleport Communications Group, Inc. (a) 22,800 755,250
------------
3,886,875
Total United States Investments
(cost $15,241,860) 16,056,600
FOREIGN INVESTMENTS-11.8%
BRAZIL-2.6%
Light Particapacoes, S.A. (a) 1,600,000 300,639
Electric
Telecomunicacoes Brasileiras, S.A. (ADR) 3,000 227,250
Telephone Utility
------------
527,889
CHILE-0.8%
Cia. de Telecomunicaciones de Chile S.A.
(ADR) 1,700 161,712
Telephone Utility
FINLAND-2.0%
Nokia Corp. (ADR) 7,200 404,100
Electronics
HONG KONG-1.2%
Consolidated Electric Power Asia (ADR) 100,000 235,385
Electric & Gas Utility
KOREA-1.1%
Korea Electric Power Corp. (ADR) 6,890 220,261
Electric
5
PORTFOLIO OF INVESTMENTS (CONTINUED) ALLIANCE UTILITY INCOME FUND
_______________________________________________________________________________
COMPANY SHARES U.S. $ VALUE
- -------------------------------------------------------------------------
MEXICO-1.6%
Telefonos de Mexico S.A. Series L (ADR) 10,600 $ 321,975
Telephone Utility
PERU-1.0%
Telefonica del Peru 108,000 211,863
Communication Services
SWEDEN-1.5%
Ericsson (L.M.) Telephone Co. (ADR) 9,600 296,400
Electronics
Total Foreign Investments
(cost $1,909,081) 2,379,585
Total Common Stocks & Other Investments
(cost $17,150,941) 18,436,185
PRINCIPAL
AMOUNT
COMPANY (000) U.S. $ VALUE
- -------------------------------------------------------------------------------
CORPORATE BONDS-5.5%
3Com Corp.
10.25%, 11/01/01 (b) $400 $ 907,000
International Cabletel, Inc.
7.25%, 4/15/05 (b) 185 205,350
Total Corporate Bonds
(cost $819,800) 1,112,350
SHORT TERM INVESTMENT-2.4%
Prudential Funding Corp.
5.35%, 12/02/96
(amortized cost $499,926) 500 499,926
TOTAL INVESTMENTS -98.9%
(cost $18,470,667) 20,048,461
Other assets less liabilities-1.1% 215,742
NET ASSETS-100% $20,264,203
(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 November 30, 1996, such
securities amounted to $1,112,350 or 5.5% of net assets.
Glossary:
ADR - American Depository Receipt
See notes to financial statements.
6
STATEMENT OF ASSETS AND LIABILITIES
NOVEMBER 30, 1996 ALLIANCE UTILITY INCOME FUND
_______________________________________________________________________________
ASSETS
Investments in securities, at value (cost $18,470,667) $20,048,461
Cash, at value (cost $60,507) 54,231
Receivable for investment securities sold 114,206
Dividends and interest receivable 68,126
Deferred organization expenses 59,829
Receivable for capital stock sold 50,372
Receivable from Adviser 19,333
Total assets 20,414,558
LIABILITIES
Distribution fee payable 14,657
Payable for capital stock redeemed 11,136
Accrued expenses 124,562
Total liabilities 150,355
NET ASSETS $20,264,203
COMPOSITION OF NET ASSETS
Capital stock, at par $ 1,916
Additional paid-in capital 18,303,875
Accumulated net realized gain on investments and foreign
currency denominated assets and liabilities 386,904
Net unrealized appreciation of investments and foreign
currency denominated assets and liabilities 1,571,508
$20,264,203
CALCULATION OF MAXIMUM OFFERING PRICE
CLASS A SHARES
Net asset value and redemption price per share ($3,293,681/
310,999 shares of capital stock issued and outstanding) $10.59
Sales charge--4.25% of public offering price .47
Maximum offering price $11.06
CLASS B SHARES
Net asset value and offering price per share ($13,561,373/
1,282,570 shares of capital stock issued and outstanding) $10.57
CLASS C SHARES
Net asset value and offering price per share ($3,376,043/
318,868 shares of capital stock issued and outstanding) $10.59
ADVISOR CLASS SHARES
Net asset value, redemption and offering price per share
($33,106 / 3,125 shares of capital stock issued and outstanding) $10.59
See notes to financial statements.
7
STATEMENT OF OPERATIONS
YEAR ENDED NOVEMBER 30, 1996 ALLIANCE UTILITY INCOME FUND
_______________________________________________________________________________
INVESTMENT INCOME
Dividends (net of foreign taxes withheld $6,503) $ 532,559
Interest 79,960 $ 612,519
EXPENSES
Advisory fee 145,817
Distribution fee - Class A 8,863
Distribution fee - Class B 125,638
Distribution fee - Class C 39,218
Administrative 139,000
Custodian 90,166
Audit and legal 56,730
Amortization of organization expenses 37,800
Registration 35,421
Transfer agency 34,749
Directors' fees 30,000
Printing 18,747
Miscellaneous 9,552
Total expenses 771,701
Less: expenses waived and assumed by the Adviser
(Note B) (365,112)
Net expenses 406,589
Net investment income 205,930
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain on investments 752,743
Net realized loss on foreign currency transactions (2,733)
Net change in unrealized appreciation (depreciation) of:
Investments 531,142
Foreign currency denominated assets and liabilities (200)
Net gain on investments 1,280,952
NET INCREASE IN NET ASSETS FROM OPERATIONS $1,486,882
See notes to financial statements.
8
STATEMENT OF CHANGES IN NET ASSETS ALLIANCE UTILITY INCOME FUND
_______________________________________________________________________________
YEAR ENDED YEAR ENDED
NOVEMBER 30, NOVEMBER 30,
1996 1995
------------ ------------
INCREASE IN NET ASSETS FROM OPERATIONS
Net investment income $ 205,930 $ 228,785
Net realized gain on investments and foreign
currency transactions 750,010 548,961
Net changes in unrealized appreciation
(depreciation) of investments and foreign
currency denominated assets and liabilities 530,942 1,340,494
Net increase in net assets from operations 1,486,882 2,118,240
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income
Class A (131,703) (101,893)
Class B (488,174) (236,075)
Class C (150,651) (137,196)
CAPITAL STOCK TRANSACTIONS
Net increase 2,312,181 9,520,734
Total increase 3,028,535 11,163,810
NET ASSETS
Beginning of year 17,235,668 6,071,858
End of year $20,264,203 $17,235,668
See notes to financial statements.
9
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 1996 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. On April 15,
1996 the Board of Directors approved the creation of a fourth class of shares,
Advisor Class Shares. 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%. 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 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 principally
to investors participating in fee-based programs. 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. 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. RECLASSIFICATION OF NET ASSETS
At November 30, 1996 the Fund reclassed certain components of net assets. The
reclassification resulted in a net decrease to accumulated net realized gains
on investments and foreign currency transactions and a net increase to net
investment income of $564,598.
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 year ended November 30, 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%, 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 year ended November 30, 1996, such reimbursement amounted
to $365,112. Pursuant to the Advisory Agreement, the Fund paid $139,000 to the
Adviser representing the cost of certain legal and accounting services provided
to the Fund by the Adviser for the year ended November 30, 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
$20,240. 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 $1,299 from the sale of Class A shares and
$16,140 in contingent deferred sales charges were imposed upon redemptions by
shareholders of Class B shares for the year ended November 30, 1996.
Brokerage commissions paid on securities transactions for the year ended
November 30, 1996, amounted to $51,676, 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
$1,114,037 and $406,214 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 $19,738,494 and $17,743,431,
respectively, for the year ended November 30, 1996. At November 30, 1996, the
cost of securities for federal income tax purposes was $18,483,419.
Accordingly, gross unrealized appreciation of investments was $1,912,245 and
gross unrealized depreciation of investments was $347,203, resulting in net
unrealized appreciation of $1,565,042 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
-------------------------- ------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
NOVEMBER 30, NOVEMBER 30, NOVEMBER 30, NOVEMBER 30,
1996 1995 1996 1995
------------ ------------ -------------- --------------
Shares sold 107,112 280,485 $ 1,085,933 $ 2,562,935
Shares issued in
reinvestment of
dividends 5,811 5,656 58,387 52,789
Shares converted
from Class B 8,864 -0- 88,508 -0-
Shares redeemed (79,786) (136,178) (807,878) (1,281,378)
Net increase 42,001 149,963 $ 424,950 $ 1,334,346
CLASS B
Shares sold 583,527 1,060,967 $ 5,950,969 $10,085,756
Shares issued in
reinvestment of
dividends 20,642 13,786 207,489 130,190
Shares converted
to Class A (8,872) -0- (88,508) -0-
Shares redeemed (390,151) (259,756) (3,946,622) (2,433,366)
Net increase 205,146 814,997 $ 2,123,328 $ 7,782,580
CLASS C
Shares sold 198,044 152,939 $ 2,016,294 $ 1,435,226
Shares issued in
reinvestment of
dividends 11,022 12,020 110,869 112,263
Shares redeemed (232,815) (117,943) (2,394,921) (1,143,681)
Net increase(decrease) (23,749) 47,016 $ (267,758) $ 403,808
OCT. 2,1996* OCT. 2,1996*
TO TO
NOV. 30,1996 NOV. 30,1996
------------ ------------
ADVISOR CLASS
Shares sold 3,142 $ 31,836
Shares issued in
reinvestment of
dividends -0- -0-
Shares redeemed (17) (175)
Net increase 3,125 $ 31,661
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.
* Commencement of distribution.
12
FINANCIAL HIGHLIGHTS ALLIANCE UTILITY INCOME FUND
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
CLASS A
---------------------------------------------------
OCT. 18,1993(A)
YEAR ENDED NOVEMBER 30, TO
------------------------------------ NOVEMBER 30,
1996 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 (b) .18(c) .27(c) .42 .02
Net realized and unrealized gain (loss)
on investments .65 1.43 (.89) (.10)
Net increase (decrease) in net asset
value from operations .83 1.70 (.47) (.08)
LESS: DIVIDEND
Dividends from net investment income (.46) (.45) (.48) -0-
Net asset value, end of period $10.59 $10.22 $8.97 $9.92
TOTAL RETURN
Total investment return based on net
asset value (d) 8.47% 19.58% (4.86)% (.80)%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $3,294 $2,748 $1,068 $229
Ratio to average net assets of:
Expenses, net of waivers/reimbursements 1.50% 1.50% 1.50% 1.50%(e)
Expenses, before waivers/reimbursements 3.38% 4.86% 13.72% 145.63%(e)
Net investment income, net of waivers/
reimbursements 1.67% 2.48% 4.13% 2.35%(e)
Portfolio turnover rate 98% 162% 30% 11%
Average commission rate (f) $.0536 -- -- --
</TABLE>
See footnote summary on page 16.
13
FINANCIAL HIGHLIGHTS (CONTINUED) ALLIANCE UTILITY INCOME FUND
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
CLASS B
---------------------------------------------------
OCT. 18,1993(A)
YEAR ENDED NOVEMBER 30, TO
------------------------------------ NOVEMBER 30,
1996 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 (b) .10(c) .18(c) .37 .01
Net realized and unrealized gain (loss)
on investments .67 1.45 (.91) (.10)
Net increase (decrease) in net asset
value from operations .77 1.63 (.54) (.09)
LESS: DIVIDEND
Dividends from net investment income (.40) (.39) (.41) -0-
Net asset value, end of period $10.57 $10.20 $8.96 $9.91
TOTAL RETURN
Total investment return based on net
asset value (d) 7.82% 18.66% (5.59)% (.90)%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $13,561 $10,988 $2,353 $244
Ratio to average net assets of:
Expenses, net of waivers/reimbursements 2.20% 2.20% 2.20% 2.20%(e)
Expenses, before waivers/reimbursements 4.08% 5.34% 14.42% 133.62%(e)
Net investment income, net of waivers/
reimbursements .95% 1.60% 3.53% 2.84%(e)
Portfolio turnover rate 98% 162% 30% 11%
Average commission rate (f) $.0536 -- -- --
</TABLE>
See footnote summary on page 16.
14
ALLIANCE UTILITY INCOME FUND
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
CLASS C
---------------------------------------------------
OCT. 27,1993(A)
YEAR ENDED NOVEMBER 30, TO
------------------------------------ NOVEMBER 30,
1996 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 (b) .11(c) .18(c) .39 .01
Net realized and unrealized gain (loss)
on investments .66 1.46 (.93) (.09)
Net increase (decrease) in net asset
value from operations .77 1.64 (.54) (.08)
LESS: DIVIDEND
Dividends from net investment income (.40) (.39) (.41) -0-
Net asset value, end of period $10.59 $10.22 $8.97 $9.92
TOTAL RETURN
Total investment return based on net
asset value (d) 7.81% 18.76% (5.58)% (.80)%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $3,376 $3,500 $2,651 $18
Ratio to average net assets of:
Expenses, net of waivers/reimbursements 2.20% 2.20% 2.20% 2.20%(e)
Expenses, before waivers/reimbursements 4.07% 5.99% 14.42% 148.03%(e)
Net investment income, net of waivers/
reimbursements .94% 1.88% 3.60% 3.08%(e)
Portfolio turnover rate 98% 162% 30% 11%
Average commisson rate (f) $.0536 -- -- --
</TABLE>
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
ADVISOR CLASS
------------------
OCTOBER 2, 1996(A)
TO
NOVEMBER 30, 1996
------------------
Net asset value, beginning of period $9.95
INCOME FROM INVESTMENT OPERATIONS
Net investment income (b) .03(c)
Net realized and unrealized gain on investments .61
Net increase in net asset value from operations .64
Net asset value, end of period $10.59
TOTAL RETURN
Total investment return based on net asset value (d) 6.33%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $33
Ratio to average net assets of:
Expenses, net of waivers/reimbursements 1.20%(e)
Expenses, before waivers/reimbursements 3.48%(e)
Net investment income, net of waivers/reimbursements 4.02%(e)
Portfolio turnover rate 98%
Average commisson rate (f) $.0536
(a) Commencement of distributions.
(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.
16
REPORT OF INDEPENDENT ACCOUNTANTS ALLIANCE UTILITY INCOME FUND
_______________________________________________________________________________
TO THE BOARD OF DIRECTORS AND SHAREHOLDERS OF
ALLIANCE UTILITY INCOME FUND, INC.
In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Alliance Utility Income Fund, Inc.
(the "Fund") at November 30, 1996, the results of its operations for the year
then ended, the changes in its net assets for each of the two years in the
period then ended and the financial highlights for the three years then ended
and for the period October 18, 1993 (commencement of operations) to November
30, 1993, in conformity with generally accepted accounting principles. These
financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Fund's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with generally accepted auditing standards which require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits, which included confirmation
of securities at November 30, 1996 by correspondence with the custodian and
brokers and the application of alternative auditing procedures where
confirmations from brokers were not received, provide a reasonable basis for
the opinion expressed above.
PRICE WATERHOUSE LLP
New York, New York
January 17, 1997
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
ANDREW M. ARAN, SENIOR VICE PRESIDENT
ALAN E. LEVI, SENIOR VICE PRESIDENT
THOMAS BARDONG, VICE PRESIDENT
DANIEL V. PANKER, VICE PRESIDENT
PAUL RISSMAN, 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.
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 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
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
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.
UIFAR
