ALLIANCE UTILITY INCOME FUND
SEMI-ANNUAL REPORT
MAY 31, 1998
ALLIANCE CAPITAL
LETTER TO SHAREHOLDERS ALLIANCE UTILITY INCOME FUND
_______________________________________________________________________________
July 27, 1998
Dear Shareholder:
This semi-annual shareholder report reviews investment results and market
activity for Alliance Utility Income Fund for the six and 12-month periods
ended May 31, 1998. Total returns for your Fund are provided in the following
table. For comparison, we have also supplied performance data for the Fund's
benchmark, the New York Stock Exchange (NYSE) Utility Index, and for the S&P
500 Stock Index (S&P 500), and the Lipper Utility Funds Average (Lipper
Average).
INVESTMENT RESULTS*
Periods Ended May 31, 1998
TOTAL RETURNS
6 MONTHS 12 MONTHS
--------- ---------
ALLIANCE UTILITY INCOME FUND
Class A 12.83% 35.92%
Class B 12.29% 34.88%
Class C 12.44% 35.04%
NYSE UTILITY INDEX 14.71% 34.40%
S&P 500 STOCK INDEX 15.07% 30.06%
LIPPER UTILITY FUNDS AVERAGE 11.92% 27.63%
* THE FUND'S INVESTMENT RESULTS ARE TOTAL RETURNS FOR THE PERIODS AND ARE
BASED ON THE NET ASSET VALUE OF EACH CLASS OF SHARES. 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. TOTAL RETURN FOR ADVISOR CLASS SHARES WILL DIFFER DUE TO DIFFERENT
EXPENSES ASSOCIATED WITH THAT CLASS. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE
RESULTS.
THE NYSE UTILITY INDEX IS COMPRISED OF 373 UTILITY STOCKS AND IS ONE OF FOUR
SUBGROUP INDICES OF THE NYSE COMPOSITE INDEX. THE NYSE COMPOSITE INDEX IS A
CAPITALIZATION-WEIGHTED PRICE ONLY INDICATOR THAT MEASURES THE CHANGES IN
AGGREGATE MARKET VALUE OF NYSE COMMON STOCKS, ADJUSTED TO ELIMINATE THE EFFECTS
OF CAPITALIZATION CHANGES, NEW LISTINGS AND DELISTINGS. THE LIPPER UTILITY
FUNDS AVERAGE (LIPPER AVERAGE) CONSISTS OF FUNDS WITH SIMILAR INVESTMENT
OBJECTIVES TO THE ALLIANCE UTILITY INCOME FUND, ALTHOUGH THE INVESTMENT
POLICIES OF FUNDS WITHIN THE LIPPER UNIVERSE MAY DIFFER. FOR THE SIX AND
12-MONTH PERIODS ENDED MAY 31, 1998, THE LIPPER AVERAGE CONSISTED OF 105 AND 95
FUNDS, RESPECTIVELY. THE S&P 500 STOCK INDEX IS AN UNMANAGED INDEX OF 500 U.S.
COMPANIES, AND IS A COMMON MEASURE OF THE PERFORMANCE OF THE OVERALL U.S. STOCK
MARKET. AN INVESTOR CANNOT INVEST DIRECTLY IN AN INDEX OR AN AVERAGE.
PERFORMANCE REVIEW
For the six-month period ended May 31, 1998 your Fund underperformed the NYSE
Utility Index and the S&P 500, but outperformed its peer group as represented
by the Lipper Average. For the 12-month period ended May 31, 1998, your Fund
outperformed the NYSE Utility Index, the S&P 500, and the Lipper Average.
Utility stocks tend to perform well during times of market stress. The fourth
quarter of 1997 witnessed the relatively sharp outperformance of utilities
brought on by the Asian crisis. The first quarter of 1998 marked a reduction of
Asian tensions and a return to higher comfort levels, and therefore, the
utilities did not keep up with the consequent overall rise in the broader
market. Telephone utilities outperformed electric utilities during the period,
and as your Fund is underweighted in telephones relative to the NYSE Utility
Index, your Fund's performance lagged that of its benchmark during the six
months ended May 31, 1998.
INVESTMENT OUTLOOK
The stock market is navigating between a very strong domestic economy, in which
interest rates threaten to rise to head off inflation, and a very weak
situation in Asia. Equities are priced as though these two forces will balance,
slowing the U.S. economy enough to keep interest rates low, but continuing to
allow for decent earnings growth. This would extend the nearly perfect economic
conditions of 1995, 1996 and 1997, which saw the S&P 500 increase by almost
150% since the end of 1994. If the balance tilts toward economic strength and
rising interest rates, we would expect utilities stocks to resume their
underperformance relative to the broader market. If the economy slows to a
greater extent than currently envisioned, however, utilities may continue to
benefit from the same factors that have led to their recent strength.
1
ALLIANCE UTILITY INCOME FUND
_______________________________________________________________________________
Thank you for your continued interest in the Alliance Utility Income Fund. We
look forward to reporting to you on market activity and your Fund's investment
results in the coming periods.
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 Utility 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
_______________________________________________________________________________
NAV AND SEC AVERAGE ANNUAL TOTAL RETURNS AS OF MAY 31, 1998
CLASS A SHARES
WITHOUT WITH
SALES CHARGE SALES CHARGE
------------ ------------
One Year 35.92% 30.11%
Since Inception* 12.18% 11.14%
CLASS B SHARES
WITHOUT WITH
SALES CHARGE SALES CHARGE
------------ ------------
One Year 34.88% 30.88%
Since Inception* 11.37% 11.37%
CLASS C SHARES
WITHOUT WITH
SALES CHARGE SALES CHARGE
------------ ------------
One Year 35.04% 34.04%
Since Inception* 11.42% 11.42%
SEC AVERAGE ANNUAL TOTAL RETURNS
AS OF THE MOST RECENT QUARTER-END (MARCH 31, 1998)
CLASS A CLASS B CLASS C
--------- --------- ---------
1 Year 42.41% 43.74% 46.64%
Since Inception* 12.76% 13.05% 13.08%
The Fund's investment results represent Average Annual Total Returns. The NAV
and SEC returns reflect reinvestment of dividends and/or capital gains
distributions in additional shares without (NAV) and with (SEC) 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 returns for Advisor Class shares will differ due to
different expenses associated with that class.
SEC Average Annual Total Returns as of the most recent quarter-end reflect
reinvestment of all distributions and deduction of the maximum 4.25% front-end
sales charges and applicable contingent deferred sales charges.
Past performance does not guarantee future results. Investment return and
principal value will fluctuate so that an investor's shares, when redeemed, may
be worth more or less than their original cost.
* Inception: 10/18/93 Class A, Class B; 10/27/93 Class C.
n/a: not applicable.
3
TEN LARGEST HOLDINGS
MAY 31, 1998 (UNAUDITED) ALLIANCE UTILITY INCOME FUND
_______________________________________________________________________________
PERCENT OF
COMPANY COUNTRY VALUE NET ASSETS
- -------------------------------------------------------------------------------
Energy East Corp. United States $ 1,503,125 5.0%
FPL Group, Inc. United States 1,388,487 4.6
Pinnacle West Capital Corp. United States 1,370,594 4.5
BellSouth Corp. United States 1,328,700 4.4
AES Trust I Series A 5.375% cv. pfd. United States 1,194,000 4.0
TCI Communications, Inc.
Series A cv. pfd. United States 1,158,750 3.8
Williams Cos., Inc. 3.50% pfd. United States 1,140,938 3.8
CMS Energy Corp. United States 1,123,912 3.7
Ameritech Corp. United States 1,111,862 3.7
Merrill Lynch "Cox" STRYPES United States 1,108,125 3.6
$12,428,493 41.1%
MAJOR PORTFOLIO CHANGES
SIX MONTHS ENDED MAY 31, 1998 (UNAUDITED)
_______________________________________________________________________________
SHARES*
HOLDINGS
PURCHASES COUNTRY BOUGHT 5/31/98
- -------------------------------------------------------------------------------
AES Trust I Series A 5.375% cv. pfd. United States 16,000 16,000
Ameritech Corp. United States 19,600 26,200
BellSouth Corp. United States 10,000 20,600
Consolidated Edison, Inc. United States 22,300 22,300
FPL Group, Inc. United States 5,000 22,600
NTL, Inc. United States 20,137 20,137
Pinnacle West Capital Corp. United States 10,400 30,500
Telefonos de Mexico SA Series L (ADR) Mexico 5,000 15,600
U.S. West Communications Group United States 13,300 13,300
HOLDINGS
SALES SOLD 5/31/98
- -------------------------------------------------------------------------------
Allegheny Energy, Inc. United States 25,900 -0-
Edison International United States 31,000 -0-
* Adjusted for a Stock Split.
4
PORTFOLIO OF INVESTMENTS
MAY 31, 1998 (UNAUDITED) ALLIANCE UTILITY INCOME FUND
_______________________________________________________________________________
COMPANY SHARES VALUE
- -------------------------------------------------------------------------
COMMON STOCKS & OTHER INVESTMENTS-91.6%
UNITED STATES INVESTMENTS-86.6%
UTILITIES-61.1%
ELECTRIC & GAS UTILITY-39.1%
AGL Resources, Inc. 9,700 $ 194,000
American Electric Power, Inc. 22,500 1,020,937
CINergy Corp. 28,200 911,212
CMS Energy Corp. 25,800 1,123,912
Consolidated Edison, Inc. 22,300 954,719
DPL, Inc. 34,200 589,950
Energy East Corp. 37,000 1,503,125
FPL Group, Inc. 22,600 1,388,487
KeySpan Energy Corp. 7,300 245,919
MCN Corp. 7,400 266,400
New Jersey Resources Corp. 7,000 251,563
NIPSCO Industries, Inc. 40,000 1,075,000
Northwest Natural Gas Co. 8,400 231,000
Pacific Enterprises 6,500 247,406
People's Energy Corp. 5,700 210,188
Pinnacle West Capital Corp. 30,500 1,370,594
Questar Corp. 5,500 223,094
------------
11,807,506
TELEPHONE UTILITY-22.0%
Ameritech Corp. 26,200 1,111,862
AT&T Corp. 17,300 1,053,138
Bell Atlantic Corp. 9,200 842,950
BellSouth Corp. 20,600 1,328,700
Frontier Corp. 10,000 304,375
Teleport Communications Group, Inc. Cl.A (a) 11,800 660,063
U.S. West Communications Group 13,300 674,975
WorldCom, Inc. (a) 15,000 682,500
------------
6,658,563
------------
18,466,069
CONSUMER SERVICES-16.2%
BROADCASTING & CABLE-16.2%
AirTouch Communications,
Inc. Cl.C 4.25% cv. pfd. 13,500 939,937
Cablevision Systems Corp.
Series I 8.50% cv. pfd. 20,000 885,000
Merrill Lynch "Cox" STRYPES 30,000 1,108,125
NTL, Inc. (a) 20,137 818,066
TCI Communications, Inc.
Series A cv. pfd. 15,000 1,158,750
------------
4,909,878
ENERGY-8.5%
DOMESTIC PRODUCERS-4.5%
Washington Gas Light Co. 8,900 231,956
Williams Cos., Inc. 3.50% pfd. 7,500 1,140,938
------------
1,372,894
MISCELLANEOUS-4.0%
AES Trust I Series A 5.375% cv. pfd. 16,000 1,194,000
------------
2,566,894
MULTI INDUSTRY COMPANY-0.8%
Southwest Gas Corp. 11,100 242,812
Total United States Investments
(cost $19,317,650) 26,185,653
5
PORTFOLIO OF INVESTMENTS (CONTINUED) ALLIANCE UTILITY INCOME FUND
_______________________________________________________________________________
COMPANY SHARES VALUE
- -------------------------------------------------------------------------
FOREIGN INVESTMENTS-5.0%
BRAZIL-1.1%
Telecomunicacoes Brasilieras SA (ADR) 3,000 $ 319,875
MEXICO-2.4%
Telefonos de Mexico SA Series L (ADR) 15,600 740,025
PHILIPPINES-1.3%
Philippine Long Distance Telephone Co.
3.50% cv. pfd. (GDS) 7,800 385,125
SOUTH KOREA-0.2%
Korea Electric Power Corp. 6,890 69,023
Total Foreign Investments
(cost $1,470,758) 1,514,048
Total Common Stocks & Other Investments
(cost $20,788,408) 27,699,701
PRINCIPAL
AMOUNT
COMPANY (000) VALUE
- -------------------------------------------------------------------------
SHORT-TERM INVESTMENTS-8.9%
COMMERCIAL PAPER-8.9%
American Express Co.
5.50%, 6/01/98 $ 800 $ 800,000
Prudential Funding Corp.
5.55%, 6/02/98 1,900 1,899,707
Total Short-Term Investments
(amortized cost $2,699,707) 2,699,707
TOTAL INVESTMENTS-100.5%
(cost $23,488,115) 30,399,408
Other assets less liabilities-(0.5%) (148,576)
NET ASSETS-100% $30,250,832
(a) Non-income producing security.
Glossary of Terms:
ADR - American Depositary Receipt.
GDS - Global Depositary Shares.
STRYPES - Structured yield product exchangeable for stock.
See notes to financial statements.
6
STATEMENT OF ASSETS AND LIABILITIES
MAY 31, 1998 (UNAUDITED) ALLIANCE UTILITY INCOME FUND
_______________________________________________________________________________
ASSETS
Investments in securities, at value (cost $23,488,115) $30,399,408
Cash, at value (cost $48,898) 48,816
Receivable for capital stock sold 154,310
Dividends receivable 76,724
Deferred organization expenses 16,509
Total assets 30,695,767
LIABILITIES
Payable for investment securities purchased 296,187
Distribution fee payable 22,085
Payable for capital stock redeemed 103
Accrued expenses 126,560
Total liabilities 444,935
NET ASSETS $30,250,832
COMPOSITION OF NET ASSETS
Capital stock, at par $ 2,262
Additional paid-in capital 22,991,310
Undistributed net investment income 82,710
Accumulated net realized gain on investments and
foreign currency transactions 263,339
Net unrealized appreciation of investments and
foreign currency denominated assets and liabilities 6,911,211
$30,250,832
CALCULATION OF MAXIMUM OFFERING PRICE
CLASS A SHARES
Net asset value and redemption price per share ($6,195,499/
462,106 shares of capital stock issued and outstanding) $13.41
Sales charge--4.25% of public offering price .60
Maximum offering price $14.01
CLASS B SHARES
Net asset value and offering price per share ($19,744,265/
1,477,337 shares of capital stock issued and outstanding) $13.36
CLASS C SHARES
Net asset value and offering price per share ($4,258,581/
318,144 shares of capital stock issued and outstanding) $13.39
ADVISOR CLASS SHARES
Net asset value, redemption and offering price per share
($52,487 / 3,914 shares of capital stock issued and outstanding) $13.41
See notes to financial statements.
7
STATEMENT OF OPERATIONS
SIX MONTHS ENDED MAY 31, 1998 (UNAUDITED) ALLIANCE UTILITY INCOME FUND
_______________________________________________________________________________
INVESTMENT INCOME
Dividends (net of foreign taxes withheld $2,711) $ 441,609
Interest 79,439 $521,048
EXPENSES
Advisory fee 102,828
Distribution fee - Class A 7,974
Distribution fee - Class B 90,297
Distribution fee - Class C 19,985
Custodian 44,640
Administrative 39,217
Audit and legal 32,070
Registration 29,573
Transfer agency 21,800
Amortization of organization expenses 14,245
Printing 12,405
Directors' fees 12,000
Miscellaneous 1,264
Total expenses 428,298
Less: expenses waived and assumed by the Adviser
(see Note B) (144,028)
Less: expense offset arrangement (see Note B) (1,474)
Net expenses 282,796
Net investment income 238,252
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
AND FOREIGN CURRENCY TRANSACTIONS
Net realized gain on investment transactions 266,197
Net realized gain on foreign currency transactions 393
Net change in unrealized appreciation (depreciation) of:
Investments 2,477,222
Foreign currency denominated assets and liabilities (82)
Net gain on investments and foreign currency transactions 2,743,730
NET INCREASE IN NET ASSETS FROM OPERATIONS $2,981,982
See notes to financial statements.
8
STATEMENT OF CHANGES IN NET ASSETS ALLIANCE UTILITY INCOME FUND
_______________________________________________________________________________
SIX MONTHS ENDED YEAR ENDED
MAY 31,1998 NOV. 30,
(UNAUDITED) 1997
------------ ------------
INCREASE IN NET ASSETS FROM OPERATIONS
Net investment income $ 238,252 $ 488,583
Net realized gain on investments and
foreign currency transactions 266,590 850,732
Net change in unrealized appreciation
(depreciation) of investments and foreign
currency denominated assets and liabilities 2,477,140 2,862,563
Net increase in net assets from operations 2,981,982 4,201,878
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income
Class A (61,717) (111,424)
Class B (162,690) (338,258)
Class C (36,514) (82,571)
Advisor Class (620) (1,240)
Net realized gain on investments
Class A (157,473) (39,294)
Class B (561,587) (161,376)
Class C (128,179) (40,093)
Advisor Class (1,582) (394)
CAPITAL STOCK TRANSACTIONS
Net increase (decrease) 6,025,271 (1,337,490)
Total increase 7,896,891 2,089,738
NET ASSETS
Beginning of year 22,353,941 20,264,203
End of period (including undistributed net
investment income of $82,710 and $105,999,
respectively) $30,250,832 $22,353,941
See notes to financial statements.
9
NOTES TO FINANCIAL STATEMENTS
MAY 31, 1998 (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% 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 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 expenses. Advisor Class shares are offered to investors
participating in fee-based programs and to certain retirement plan 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
financial statements have been prepared in conformity with generally accepted
accounting principles which require management to make certain estimates and
assumptions that affect the reported amounts of assets and liabilities in the
financial statements and amounts of income and expenses during the reporting
period. Actual results could differ from those estimates. The following is a
summary of significant accounting policies followed by the Fund.
1. SECURITY VALUATION
Portfolio securities traded on a national securities exchange or on a foreign
securities exchange (other than foreign securities exchanges whose operations
are similar to those of the United States over-the-counter market) are
generally valued at the last reported sales price or if no sale occurred, at
the mean of the closing bid and asked prices on that day. Readily marketable
securities traded in the over-the-counter market, securities listed on a
foreign securities exchange whose operations are similar to the U.S.
over-the-counter market, and securities listed on a national securities
exchange whose primary market is believed to be over-the-counter, are valued at
the mean of the current bid and asked price. U.S. government and fixed income
securities which mature in 60 days or less are valued at amortized cost, unless
this method does not represent fair value. Securities for which current market
quotations are not readily available are valued at their fair value as
determined in good faith by, or in accordance with procedures adopted by, the
Board of Directors. Fixed income securities may be valued on the basis of
prices obtained from a pricing service when such prices are believed to reflect
the fair market value of such securities.
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 into U.S.
dollars at the rates of exchange prevailing when such securities were acquired
or sold. Income and expenses are translated into U.S. dollars at rates of
exchange prevailing when accrued.
Net realized foreign currency gains and losses represent foreign exchange gains
and losses from sales and maturities of debt securities and foreign exchange
currency contracts, currency gains and losses realized between the trade and
settlement dates on security transactions and the difference between the
amounts of intererst recorded on the Fund's books and the U.S. dollar
equivalent amounts actually received or paid. The Fund does not isolate the
effect of fluctuations in foreign currency exchange rates when determining the
gain or loss upon the sale of equity securities. Net currency gains and losses
from valuing foreign currency denominated assets and liabilities at period end
exchange rates are reflected as a component of net unrealized appreciation of
investments and foreign currency denominated assets and liabilities.
10
ALLIANCE UTILITY INCOME FUND
_______________________________________________________________________________
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 any, 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. The Fund accretes discounts as adjustments to interest
income. Investment gains and losses are determined on the identified cost
basis.
6. INCOME AND EXPENSES
All income earned and expenses incurred by the Fund are borne on a pro-rata
basis by each outstanding class of shares, based on the proportionate interest
in the Fund represented by the net assets of such class, except that the Fund's
Class B and Class C shares bear higher distribution and transfer agent fees
than Class A shares and the Advisory Class shares have no distribution fees.
7. DIVIDENDS AND DISTRIBUTIONS
Dividends and distributions to shareholders are recorded on the ex-dividend
date.
Income dividends and capital gains distributions are determined in accordance
with federal tax regulations and may differ from those determined in accordance
with generally accepted accounting principles. To the extent these differences
are permanent, such amounts are reclassified within the capital accounts based
on their federal tax basis treatment; temporary differences, do not require
such reclassification.
NOTE B: ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Under the terms of an investment advisory agreement, the Fund pays Alliance
Capital Management L.P. (the "Adviser"), an advisory fee at an annual rate of
.75% of the Fund's average daily net assets. The fee is accrued daily and paid
monthly. The Adviser has agreed to voluntarily waive its 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,
1998, such reimbursement amounted to $144,028. The Adviser may terminate the
voluntary waiver at any time.
Pursuant to the advisory agreement, the Fund paid $39,217 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, 1998.
The Fund compensates Alliance Fund Services, Inc., a wholly-owned subsidiary of
the Adviser, under a Transfer Agency Agreement for providing personnel and
facilities to perform transfer agency services for the Fund. Such compensation
amounted to $11,475 for the six months ended May 31, 1998.
In addition, for the six months ended May 31, 1998, the Fund's expenses were
reduced by $1,474 under an expense offset arrangement with Alliance Fund
Services. Transfer Agency fees reported in the statement of operations excludes
these credits.
Alliance Fund Distributors, Inc., (the "Distributor"), a wholly-owned
subsidiary of the Adviser, serves as the Distributor of the Fund's shares. The
Distributor received front-end sales charges of $1,794 from the sale of Class A
shares and $15,967 and $133 in contingent deferred sales charges imposed upon
redemptions by shareholders of Class B and Class C shares, respectively, for
the six months ended May 31, 1998.
Brokerage commissions paid on investment transactions for the six months ended
May 31, 1998 amounted to $8,505, 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.
11
NOTES TO FINANCIAL STATEMENTS (CONTINUED) ALLIANCE UTILITY INCOME FUND
_______________________________________________________________________________
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 the Fund's average daily net assets attributable to Class
A shares and 1% of the average daily net assets attributable to both Class B
and Class C shares. There is no distribution fee on the Advisor Class shares.
The fees are 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
$1,733,809 and $487,783 for Class B and Class 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 $5,387,433 and $2,205,724,
respectively, for the six months ended May 31, 1998. There were no purchases or
sales of U.S. government and government agency obligations for the six months
ended May 31, 1998.
At May 31, 1998, the cost of investments for federal income tax purposes was
substantially the same as the cost for financial reporting purposes.
Accordingly, gross unrealized appreciation of investments was $7,193,770 and
gross unrealized depreciation of investments was $282,477 resulting in net
unrealized appreciation of $6,911,293.
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:
<TABLE>
<CAPTION>
SHARES AMOUNT
------------------------------- -------------------------------
SIX MONTHS ENDED YEAR ENDED SIX MONTHS ENDED YEAR ENDED
MAY 31, 1998 NOVEMBER 30, MAY 31, 1998 NOVEMBER 30,
(UNAUDITED) 1997 (UNAUDITED) 1997
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
CLASS A
Shares sold 135,680 1,730,017 $ 1,771,315 $ 18,036,414
Shares issued in reinvestment of
dividends and distributions 15,329 10,445 193,098 111,231
Shares converted from Class B 19,568 30,673 260,322 341,346
Shares redeemed (38,231) (1,752,374) (501,780) (18,288,355)
Net increase 132,346 18,761 $ 1,722,955 $ 200,636
CLASS B
Shares sold 471,973 213,929 $ 6,111,057 $ 2,341,751
Shares issued in reinvestment of
dividends and distributions 28,067 22,683 352,385 239,712
Shares converted to Class A (19,629) (30,725) (260,322) (341,346)
Shares redeemed (189,784) (301,747) (2,475,819) (3,266,806)
Net increase (decrease) 290,627 (95,860) $ 3,727,301 $ (1,026,689)
</TABLE>
12
ALLIANCE UTILITY INCOME FUND
_______________________________________________________________________________
<TABLE>
<CAPTION>
SHARES AMOUNT
------------------------------- -------------------------------
SIX MONTHS ENDED YEAR ENDED SIX MONTHS ENDED YEAR ENDED
MAY 31, 1998 NOVEMBER 30, MAY 31, 1998 NOVEMBER 30,
(UNAUDITED) 1997 (UNAUDITED) 1997
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
CLASS C
Shares sold 52,168 49,448 $ 680,345 $ 526,128
Shares issued in reinvestment of
dividends and distributions 11,933 9,866 149,926 104,557
Shares redeemed (19,517) (104,622) (262,218) (1,144,329)
Net increase (decrease) 44,584 (45,308) $ 568,053 $ (513,644)
ADVISOR CLASS
Shares sold 483 627 $ 6,475 $ 6,498
Shares issued in reinvestment of
dividends and distributions 175 154 2,201 1,633
Shares redeemed (126) (524) (1,714) (5,924)
Net increase 532 257 $ 6,962 $ 2,207
</TABLE>
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, 1998 ------------------------------------------------- NOVEMBER 30,
(UNAUDITED) 1997 1996 1995 1994 1993
--------------- ----------- ----------- ----------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $12.48 $10.59 $10.22 $ 8.97 $9.92 $10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income (b) .15(c) .32(c) .18(c) .27(c) .42 .02
Net realized and unrealized gain (loss)
on investment transactions 1.41 2.04 .65 1.43 (.89) (.10)
Net increase (decrease) in net asset
value from operations 1.56 2.36 .83 1.70 (.47) (.08)
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (.16) (.34) (.46) (.45) (.48) -0-
Distributions from net realized gains (.47) (.13) -0- -0- -0- -0-
Total dividends and distributions (.63) (.47) (.46) (.45) (.48) -0-
Net asset value, end of period $13.41 $12.48 $10.59 $10.22 $8.97 $ 9.92
TOTAL RETURN
Total investment return based on net
asset value (d) 12.83% 23.10% 8.47% 19.58% (4.86)% (.80)%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $6,196 $4,117 $3,294 $2,748 $1,068 $229
Ratios to average net assets of:
Expenses, net of waivers/reimbursements 1.51%(e)(f) 1.50% 1.50% 1.50% 1.50% 1.50%(e)
Expenses, before waivers/reimbursements 2.53%(e) 3.55% 3.38% 4.86% 13.72% 145.63%(e)
Net investment income 2.30%(e) 2.89% 1.67% 2.48% 4.13% 2.35%(e)
Portfolio turnover rate 9% 37% 98% 162% 30% 11%
</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 B
--------------------------------------------------------------------------------
OCTOBER 18,
SIX MONTHS 1993(A)
ENDED YEAR ENDED NOVEMBER 30, TO
MAY 31, 1998 ------------------------------------------------- NOVEMBER 30,
(UNAUDITED) 1997 1996 1995 1994 1993
--------------- ----------- ----------- ----------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $12.46 $10.57 $10.20 $8.96 $9.91 $10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income (b) .11(c) .25(c) .10(c) .18(c) .37 .01
Net realized and unrealized gain (loss)
on investment transactions 1.38 2.04 .67 1.45 (.91) (.10)
Net increase (decrease) in net asset
value from operations 1.49 2.29 .77 1.63 (.54) (.09)
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (.12) (.27) (.40) (.39) (.41) -0-
Distributions from net realized gains (.47) (.13) -0- -0- -0- -0-
Total dividends and distributions (.59) (.40) (.40) (.39) (.41) -0-
Net asset value, end of period $13.36 $12.46 $10.57 $10.20 $8.96 $9.91
TOTAL RETURN
Total investment return based on net
asset value (d) 12.29% 22.35% 7.82% 18.66% (5.59)% (.90)%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $19,744 $14,782 $13,561 $10,988 $2,353 $244
Ratios to average net assets of:
Expenses, net of waivers/reimbursements 2.21%(e)(f) 2.20% 2.20% 2.20% 2.20% 2.20%(e)
Expenses, before waivers/reimbursements 3.26%(e) 4.28% 4.08% 5.34% 14.42% 133.62%(e)
Net investment income 1.60%(e) 2.27% .95% 1.60% 3.53% 2.84%(e)
Portfolio turnover rate 9% 37% 98% 162% 30% 11%
</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
<TABLE>
<CAPTION>
CLASS C
--------------------------------------------------------------------------------
OCTOBER 27,
SIX MONTHS 1993(G)
ENDED YEAR ENDED NOVEMBER 30, TO
MAY 31, 1998 ------------------------------------------------- NOVEMBER 30,
(UNAUDITED) 1997 1996 1995 1994 1993
--------------- ----------- ----------- ----------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $12.47 $10.59 $10.22 $ 8.97 $9.92 $10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income (b) .10(c) .25(c) .11(c) .18(c) .39 .01
Net realized and unrealized gain (loss)
on investment transactions 1.41 2.03 .66 1.46 (.93) (.09)
Net increase (decrease) in net asset
value from operations 1.51 2.28 .77 1.64 (.54) (.08)
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (.12) (.27) (.40) (.39) (.41) -0-
Distributions from net realized gains (.47) (.13) -0- -0- -0- -0-
Total dividends and distributions (.59) (.40) (.40) (.39) (.41) -0-
Net asset value, end of period $13.39 $12.47 $10.59 $10.22 $8.97 $ 9.92
TOTAL RETURN
Total investment return based on net
asset value (d) 12.44% 22.21% 7.81% 18.76% (5.58)% (.80)%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $4,259 $3,413 $3,376 $3,500 $2,651 $18
Ratios to average net assets of:
Expenses, net of waivers/reimbursements 2.21%(e)(f) 2.20% 2.20% 2.20% 2.20% 2.20%(e)
Expenses, before waivers/reimbursements 3.28%(e) 4.28% 4.07% 5.99% 14.42% 148.03%(e)
Net investment income 1.59%(e) 2.27% .94% 1.88% 3.60% 3.08%(e)
Portfolio turnover rate 9% 37% 98% 162% 30% 11%
</TABLE>
See footnote summary on page 16.
16
ALLIANCE UTILITY INCOME FUND
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
ADVISOR CLASS
------------------------------------------
OCTOBER 2,
SIX MONTHS 1996(G)
ENDED YEAR ENDED TO
MAY 31, 1998 NOV. 30, NOV. 30,
(UNAUDITED) 1997 1996
---------------- ---------- ------------
<S> <C> <C> <C>
Net asset value, beginning of period $12.49 $10.59 $ 9.95
INCOME FROM INVESTMENT OPERATIONS
Net investment income (b)(c) .17 .36 .03
Net realized and unrealized gain
on investment transactions 1.40 2.04 .61
Net increase in net asset
value from operations 1.57 2.40 .64
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (.18) (.37) -0-
Distributions from net realized gains (.47) (.13) -0-
Total dividends and distributions (.65) (.50) -0-
Net asset value, end of period $13.41 $12.49 $10.59
TOTAL RETURN
Total investment return based on net
asset value (d) 12.88% 23.57% 6.33%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $52 $42 $33
Ratios to average net assets of:
Expenses, net of waivers/reimbursements 1.21%(e)(f) 1.20% 1.20%(e)
Expenses, before waivers/reimbursements 2.27%(e) 3.29% 3.48%(e)
Net investment income 2.59%(e) 3.28% 4.02%(e)
Portfolio turnover rate 9% 37% 98%
</TABLE>
(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 charges or contingent
deferred sales charges are not reflected in the calculation of total investment
return. Total investment return calculated for a period of less than one year
is not annualized.
(e) Annualized.
(f) Ratio reflects expenses grossed up for expense offset arrangement with the
Transfer Agent. For the six month ended May 31, 1998, the ratios of expenses
net of waivers/reimbursements to average net assets were 1.50%, 2.20%, 2.20%
and 1.20% for Class A, B, C and Advisor Class shares, respectively.
(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
KATHLEEN A. CORBET, SENIOR VICE PRESIDENT
PAUL C. RISSMAN, SENIOR VICE PRESIDENT
THOMAS J. BARDONG, VICE PRESIDENT
DANIEL V. PANKER, VICE PRESIDENT
ANNIE TSAO, 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 Environment 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 Global Small Cap Fund
Alliance Quasar Fund
Alliance Technology Fund
INTERNATIONAL
Alliance All-Asia Investment Fund
Alliance Greater China '97 Fund
Alliance International Fund
Alliance International Premier Growth Fund
Alliance New Europe Fund
Alliance Worldwide Privatization Fund
CLOSED-END FUNDS
Alliance All-Market Advantage 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
