ALLIANCE UTILITY INCOME FUND
ANNUAL REPORT
NOVEMBER 30, 1997
ALLIANCE CAPITAL
LETTER TO SHAREHOLDERS ALLIANCE UTILITY INCOME FUND
_______________________________________________________________________________
December 9, 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 November 30, 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
NOVEMBER 30, 1997
6 MONTHS 12 MONTHS
--------- ---------
ALLIANCE UTILITY INCOME FUND
Class A 20.47% 23.10%
Class B 20.11 22.35
Class C 20.09 22.21
NYSE UTILITY INDEX 17.17 22.59
S&P 500 STOCK INDEX 13.54 28.50
* RETURNS FOR ADVISOR CLASS SHARES WILL DIFFER DUE TO DIFFERENT EXPENSES
CHARGED. THE NYSE AND S&P INDICES ARE UNMANAGED.
THE FUND'S INVESTMENT RESULTS ARE CUMULATIVE TOTAL RETURNS FOR THE PERIODS
SHOWN AND ARE BASED ON THE NET ASSET VALUE OF EACH CLASS OF SHARES AS OF
NOVEMBER 30, 1997. TOTAL RETURNS FOR ADVISOR CLASS SHARES WILL DIFFER DUE TO
DIFFERENT EXPENSES ASSOCIATED WITH THAT CLASS. ALL FEES AND EXPENSES RELATED TO
THE OPERATION OF THE FUND HAVE BEEN DEDUCTED, BUT NO ADJUSTMENT HAS BEEN MADE
FOR SALES CHARGES THAT MAY APPLY WHEN SHARES ARE PURCHASED OR REDEEMED. RETURNS
FOR THE FUND AND ITS BENCHMARKS INCLUDE THE REINVESTMENT OF ANY DISTRIBUTIONS
PAID DURING THE PERIOD.
PERFORMANCE REVIEW
For the six-month period ended November 30, 1997, your Fund outperformed both
its benchmark index, the New York Stock Exchange Utilities Index, and the broad
market as represented by the S&P 500 Index. Fund performance for the 12-month
period essentially tracked that of the benchmark index, while it lagged that of
the broader market.
Utility stocks, which generally pay greater-than-average rates of current
income, tend to trail the market when periods of strong earnings growth
translates into capital appreciation. This is what happened during most of the
fiscal year, as the S&P 500 left the NYSE Utilities Index in the dust. In
October, however, uncertainty arose over Asian economic growth, causing capital
flight to U.S. businesses and stocks that are more insulated from slowing
earnings growth. Hence, the NYSE Utilities Index rose strongly against the
broader market in October and November, helping the Fund to outperform in the
second part of the fiscal year.
Our performance relative to the NYSE Index relates primarily to our holdings in
the electric sector. Electric companies lagged other utilities in the early
part of the year, but surpassed them in the latter half. As we were
overweighted in these stocks, our performance reflected that phenomenon.
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 rapidly weakening
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 the first half of 1997, which saw the S&P 500
increase by almost 120% from the end of 1994. If the balance tilts toward
economic strength and rising interest rates, we would expect utility 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.
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
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, 1997
CLASS A SHARES
WITHOUT WITH
SALES CHARGE SALES CHARGE
------------ ------------
. One Year 23.10% 17.87%
. Since Inception* 10.47% 9.32%
CLASS B SHARES
WITHOUT WITH
SALES CHARGE SALES CHARGE
------------ ------------
. One Year 22.35% 18.35%
. Since Inception* 9.70% 9.70%
CLASS C SHARES
WITHOUT WITH
SALES CHARGE SALES CHARGE
------------ ------------
. One Year 22.21% 21.21%
. Since Inception* 9.72% 9.72%
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.
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
GROWTH OF A $10,000 INVESTMENT
10/31/93* TO 11/30/97
$22,000
$20,000
$18,000
$16,000
$14,000
$12,000
$10,000
$8,000
10/31/93 11/30/93 11/30/94 11/30/95 11/30/96 11/30/97
S&P 500 STOCKINDEX: $22,515
UTILITY INCOME FUND CLASS A: $14,436
NYSE UTILITY INDEX: $13,270
This chart illustrates the total value of an assumed $10,000 investment in
Alliance Utility Income Fund Class A shares (from 10/31/93 to 11/30/97) as
compared to the performance of an appropriate broad-based index. The chart
reflects the deduction of the maximum 4.25% sales charge from the initial
$10,000 investment in the Fund and assumes the reinvestment of dividends and
capital gains. 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 & Poor's 500 Stock Index includes 500 U.S. stocks and is
a common measure of the performance of the overall U.S. stock market.
The NYSEUtility Index is an unmanaged index comprised of utility stocks traded
on the New YorkStock Exchange.
When comparing Alliance Utuility Income Fund to the indices shown above, you
should note that no charges or expenses are reflected in the performance of the
indices.
Utility Income Fund
Standard &Poor's 500 Stock Index
NYSEUtility Index
* Month-end nearest to Fund's inception date of 10/18/93.
3
TEN LARGEST HOLDINGS
NOVEMBER 30, 1997 ALLIANCE UTILITY INCOME FUND
_______________________________________________________________________________
PERCENT OF
COMPANY COUNTRY VALUE NET ASSETS
- -------------------------------------------------------------------------------
New York State Electric & Gas Corp. United States $1,137,750 5.1%
American Electric Power, Inc. United States 1,115,156 5.0
CMS Energy Corp. United States 1,015,875 4.5
CINergy Corp. United States 1,004,625 4.5
FPL Group, Inc. United States 984,500 4.4
AT&T Corp. United States 966,637 4.3
The Williams Cos., Inc. 3.50% pfd. United States 941,250 4.2
NIPSCO Industries, Inc. United States 936,250 4.2
Merrill Lynch "Cox" STRYPES United States 870,000 3.9
TCI Communications, Inc. pfd. United States 850,312 3.8
$9,822,355 43.9%
MAJOR PORTFOLIO CHANGES
SIX MONTHS ENDED NOVEMBER 30, 1997
_______________________________________________________________________________
SHARES OR PRINCIPAL
-----------------------
HOLDINGS
PURCHASES COUNTRY BOUGHT 11/30/97
- -------------------------------------------------------------------------------
Ameritech Corp. United States 6,600 6,600
Bell Atlantic Corp. United States 9,200 9,200
BellSouth Corp. United States 10,600 10,600
CINergy Corp. United States 6,900 28,200
CMS Energy Corp. United States 4,000 25,800
HOLDINGS
SALES SOLD 11/30/97
- -------------------------------------------------------------------------------
3Com Corp. 10.25%, 11/01/01 United States $400,000 -0-
AirTouch Communications, Inc. Cl.C
4.25% cv. pfd. United States 7,300 13,500
Baltimore Gas & Electric, Inc. United States 9,800 -0-
Carolina Power & Light Co. United States 14,900 -0-
DQE, Inc. United States 11,200 -0-
4
PORTFOLIO OF INVESTMENTS
NOVEMBER 30, 1997 ALLIANCE UTILITY INCOME FUND
_______________________________________________________________________________
COMPANY SHARES VALUE
- -------------------------------------------------------------------------
COMMON STOCKS & OTHER INVESTMENTS-94.5%
UNITED STATES INVESTMENTS-88.7%
UTILITIES-68.0%
ELECTRIC & GAS UTILITY-49.3%
AGL Resources, Inc. 9,700 $ 190,363
Allegheny Energy, Inc. 25,900 785,094
American Electric Power, Inc. 22,500 1,115,156
CINergy Corp. 28,200 1,004,625
CMS Energy Corp. 25,800 1,015,875
DPL, Inc. 22,800 598,500
Edison International 31,000 831,187
FPL Group, Inc. 17,600 984,500
KeySpan Energy Corp. 7,300 243,181
MCN Corp. 7,400 282,587
New Jersey Resources Corp. 7,000 243,688
New York State Electric & Gas Corp. 37,000 1,137,750
NIPSCO Industries, Inc. 20,000 936,250
Northwest Natural Gas Co. 8,400 235,200
Pacific Enterprises 6,500 229,938
People's Energy Corp. 5,700 208,763
Pinnacle West Capital Corp. 20,100 775,106
Questar Corp. 5,500 215,531
------------
11,033,294
TELEPHONE UTILITY-18.7%
Ameritech Corp. 6,600 508,613
AT&T Corp. 17,300 966,637
Bell Atlantic Corp. 9,200 821,100
BellSouth Corp. 10,600 580,350
Frontier Corp. 10,000 245,000
Teleport Communications
Group, Inc. Cl.A (a) 11,800 578,200
WorldCom, Inc. (a) 15,000 480,000
------------
4,179,900
------------
15,213,194
CONSUMER SERVICES-6.8%
BROADCASTING & CABLE-3.7%
AirTouch Communications,
Inc. Cl.C 4.25% cv. pfd. 13,500 816,750
ENTERTAINMENT & LEISURE-3.1%
Cablevision Systems Corp.
Series I 8.50% cv. pfd. 20,000 702,500
------------
1,519,250
ENERGY-5.3%
DOMESTIC PRODUCERS-5.3%
Williams Cos., Inc.
3.50% pfd. 7,500 941,250
Washington Gas Light Co. 8,900 238,631
------------
1,179,881
FINANCE-3.9%
BROKERAGE & MONEY MANAGEMENT-3.9%
Merrill Lynch "Cox" STRYPES 30,000 870,000
TECHNOLOGY-3.8%
COMMUNICATIONS EQUIPMENT-3.8%
TCI Communications, Inc. cv. pfd. 15,000 850,312
MULTI INDUSTRY COMPANIES-0.9%
Southwest Gas Corp. 11,100 206,738
Total United States Investments
(cost $15,522,957) 19,839,375
5
PORTFOLIO OF INVESTMENTS (CONTINUED) ALLIANCE UTILITY INCOME FUND
_______________________________________________________________________________
COMPANY SHARES VALUE
- -------------------------------------------------------------------------
FOREIGN INVESTMENTS-5.8%
BRAZIL-1.4%
Telecomunicacoes Brasileras SA (ADR) 3,000 $ 313,125
MEXICO-2.3%
Telefonos de Mexico SA Series L (ADR) 10,600 524,700
PHILIPPINES-1.7%
Philippine Long Distance Telephone Co.
Series III 3.50% cv. pfd. (GDS) 7,800 379,275
SOUTH KOREA-0.4%
Korea Electric Power ADR 6,890 77,767
Total Foreign Investments
(cost $1,208,895) 1,294,867
Total Common Stocks &Other Investments
(cost $16,731,852) 21,134,242
PRINCIPAL
AMOUNT
COMPANY (000) VALUE
- -------------------------------------------------------------------------
CORPORATE BOND-2.9%
International Cabletel, Inc. cv.
7.25%, 4/15/05 (b)
(cost $608,650) $ 555 $ 640,331
SHORT-TERM INVESTMENT-1.8%
American Express Co.
5.46%, 12/01/97
(amortized cost $400,000) 400 400,000
TOTAL INVESTMENTS-99.2%
(cost $17,740,502) 22,174,573
Other assets less liabilities-0.8% 179,368
NET ASSETS-100% $22,353,941
(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, 1997, this security
amounted to $640,331 or 2.9% of net assets.
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
NOVEMBER 30, 1997 ALLIANCE UTILITY INCOME FUND
_______________________________________________________________________________
ASSETS
Investments in securities, at value (cost $17,740,502) $ 22,174,573
Cash 182,375
Receivable for capital stock sold 85,990
Receivable from Adviser 71,481
Dividends and interest receivable 57,827
Deferred organization expenses 22,029
Total assets 22,594,275
LIABILITIES
Payable for capital stock redeemed 69,540
Distribution fee payable 15,412
Accrued expenses 155,382
Total liabilities 240,334
NET ASSETS $ 22,353,941
COMPOSITION OF NET ASSETS
Capital stock, at par $ 1,793
Additional paid-in capital 16,966,508
Undistributed net investment income 105,999
Accumulated net realized gain on investments and
foreign currency transactions 845,570
Net unrealized appreciation of investments 4,434,071
$ 22,353,941
CALCULATION OF MAXIMUM OFFERING PRICE
CLASS A SHARES
Net asset value and redemption price per share ($4,117,003/
329,760 shares of capital stock issued and outstanding) $12.48
Sales charge--4.25% of public offering price .55
Maximum offering price $13.03
CLASS B SHARES
Net asset value and offering price per share ($14,782,109/
1,186,710 shares of capital stock issued and outstanding) $12.46
CLASS C SHARES
Net asset value and offering price per share ($3,412,604/
273,560 shares of capital stock issued and outstanding) $12.47
ADVISOR CLASS SHARES
Net asset value, redemption and offering price per share
($42,225/3,382 shares of capital stock issued
and outstanding) $12.49
See notes to financial statements.
7
STATEMENT OF OPERATIONS
YEAR ENDED NOVEMBER 30, 1997 ALLIANCE UTILITY INCOME FUND
_______________________________________________________________________________
INVESTMENT INCOME
Dividends (net of foreign taxes withheld $1,811) $ 804,214
Interest 107,860 $ 912,074
EXPENSES
Advisory fee 153,604
Distribution fee - Class A 11,010
Distribution fee - Class B 134,676
Distribution fee - Class C 33,051
Administrative 126,464
Custodian 94,130
Registration 75,948
Audit and legal 72,846
Transfer agency 40,478
Amortization of organization expenses 37,800
Printing 36,534
Director's fees 26,000
Miscellaneous 7,166
Total expenses 849,707
Less: expenses waived and assumed by
the Adviser (Note B) (426,216)
Net expenses 423,491
Net investment income 488,583
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain on investment transactions 859,573
Net realized loss on foreign currency transactions (8,841)
Net change in unrealized appreciation of:
Investments 2,856,277
Foreign currency denominated assets and liabilities 6,286
Net gain on investments and foreign
currency transactions 3,713,295
NET INCREASE IN NET ASSETS FROM OPERATIONS $4,201,878
See notes to financial statements.
8
STATEMENT OF CHANGES IN NET ASSETS ALLIANCE UTILITY INCOME FUND
_______________________________________________________________________________
YEAR ENDED YEAR ENDED
NOVEMBER 30, NOVEMBER 30,
1997 1996
------------ ------------
INCREASE IN NET ASSETS FROM OPERATIONS
Net investment income $ 488,583 $ 205,930
Net realized gain on investments and foreign
currency transactions 850,732 750,010
Net changes in unrealized appreciation
(depreciation) of investments and foreign
currency denominated assets and liabilities 2,862,563 530,942
Net increase in net assets from operations 4,201,878 1,486,882
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income
Class A (111,424) (131,703)
Class B (338,258) (488,174)
Class C (82,571) (150,651)
Advisor Class (1,240) -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) (1,337,490) 2,312,181
Total increase 2,089,738 3,028,535
NET ASSETS
Beginning of year 20,264,203 17,235,668
End of year (including undistributed net
investment income of $105,999) $ 22,353,941 $ 20,264,203
See notes to financial statements.
9
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 1997 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
following is a summary of the 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 prices. 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
Fund's Board of Directors. Fixed income securities may be valued on the basis
of prices obtained from a pricing service when such prices are beleived to
reflect the fair 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 earned or accrued.
Net realized foreign currency gains and losses represent foreign exchange gains
and losses from sales and maturities of debt securities, 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 on 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 year 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 any, to
shareholders. Therefore, no provisions for federal income or excise taxes are
required.
10
ALLIANCE UTILITY INCOME FUND
_______________________________________________________________________________
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 amortizes premium and accretes discounts as adjustments to
interest income.
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. 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. During the current fiscal year, permanent differences,
primarily due to reclassification of distributions resulted in a net increase
in undistributed net investment income and a corresponding decrease in
accumulated net realized gain on investments and foreign currency transactions.
This reclassification had no effect on net assets.
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 year ended November 30, 1997,
such reimbursement amounted to $426,216. The Adviser may terminate the
voluntary waiver at any time.
Pursuant to the advisory agreement, the Fund paid $126,464 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, 1997.
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 $19,303 for the year ended November 30, 1997.
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 $707 from the sales of Class A
shares and $20,323 and $1,261 in contingent deferred sales charges imposed upon
redemptions by shareholders of Class B and Class C shares, respectively, for
the year ended November 30, 1997.
Brokerage commissions paid on investments transactions for the year ended
November 30, 1997, amounted to $21,809, none of which was paid to Donaldson,
Lufkin & Jenrette Securities Corp. ("DLJ"), an affiliate of the Adviser.
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 the
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
11
NOTES TO FINANCIAL STATEMENTS (CONTINUED) ALLIANCE UTILITY INCOME FUND
_______________________________________________________________________________
reimbursed by the Fund in the amount of $1,400,456 and $456,135 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 $7,321,811 and $8,811,659,
respectively, for the year ended November 30, 1997. There were no purchases or
sales of U.S. government and government agency obligations for the year ended
November 30, 1997.
At November 30, 1997, the cost of investments for federal income tax purposes
was $17,740,502. Accordingly, gross unrealized appreciation of investments was
$4,693,207 and gross unrealized depreciation of investments was $259,136,
resulting in net unrealized appreciation of $4,434,071.
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
NOV. 30, NOV. 30, NOV. 30, NOV. 30,
1997 1996 1997 1996
------------ ------------ -------------- --------------
CLASS A
Shares sold 1,730,017 107,112 $ 18,036,414 $ 1,085,933
Shares issued in
reinvestment of
dividends and
distributions 10,445 5,811 111,231 58,387
Shares converted
from Class B 30,673 8,864 341,346 88,508
Shares redeemed (1,752,374) (79,786) (18,288,355) (807,878)
Net increase 18,761 42,001 $ 200,636 $ 424,950
CLASS B
Shares sold 213,929 583,527 $ 2,341,751 $ 5,950,969
Shares issued in
reinvestment of
dividends and
distributions 22,683 20,642 239,712 207,489
Shares converted
to Class A (30,725) (8,872) (341,346) (88,508)
Shares redeemed (301,747) (390,151) (3,266,806) (3,946,622)
Net increase
(decrease) (95,860) 205,146 $ (1,026,689) $ 2,123,328
CLASS C
Shares sold 49,448 198,044 $ 526,128 $ 2,016,294
Shares issued in
reinvestment of
dividends and
distributions 9,866 11,022 104,557 110,869
Shares redeemed (104,622) (232,815) (1,144,329) (2,394,921)
Net decrease (45,308) (23,749) $ (513,644) $ (267,758)
12
ALLIANCE UTILITY INCOME FUND
_______________________________________________________________________________
SHARES AMOUNT
--------------------------- ------------------------------
YEAR ENDED OCT. 2,1996(A) YEAR ENDED OCT. 2,1996(A)
NOV. 30, TO NOV. 30, TO
1997 NOV. 30, 1996 1997 NOV. 30, 1996
------------ ------------ -------------- --------------
ADVISOR CLASS
Shares sold 627 3,142 $ 6,498 $ 31,836
Shares issued in
reinvestment of
dividends and
distributions 154 -0- 1,633 -0-
Shares redeemed (524) (17) (5,924) (175)
Net increase 257 3,125 $ 2,207 $ 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.
(a) Commencement of distribution.
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,
1993(A)
YEAR ENDED NOVEMBER 30, TO
-------------------------------------------------- NOVEMBER 30,
1997 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) .32(c) .18(c) .27(c) .42 .02
Net realized and unrealized gain (loss)
on investment transactions 2.04 .65 1.43 (.89) (.10)
Net increase (decrease) in net asset
value from operations 2.36 .83 1.70 (.47) (.08)
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (.34) (.46) (.45) (.48) -0-
Distributions from net realized gains (.13) -0- -0- -0- -0-
Total dividends and distributions (.47) (.46) (.45) (.48) -0-
Net asset value, end of period $12.48 $10.59 $10.22 $ 8.97 $ 9.92
TOTAL RETURN
Total investment return based on
net asset value (d) 23.10% 8.47% 19.58% (4.86)% (.80)%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $4,117 $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% 1.50%(e)
Expenses, before waivers/reimbursements 3.55% 3.38% 4.86% 13.72% 145.63%(e)
Net investment income, net
of waivers/reimbursements 2.89% 1.67% 2.48% 4.13% 2.35%(e)
Portfolio turnover rate 37% 98% 162% 30% 11%
Average commission rate (f) $.0442 $.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,
1993(A)
YEAR ENDED NOVEMBER 30, TO
-------------------------------------------------- NOVEMBER 30,
1997 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) .25(c) .10(c) .18(c) .37 .01
Net realized and unrealized gain (loss)
on investment transactions 2.04 .67 1.45 (.91) (.10)
Net increase (decrease) in net asset
value from operations 2.29 .77 1.63 (.54) (.09)
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (.27) (.40) (.39) (.41) -0-
Distributions from net realized gains (.13) -0- -0- -0- -0-
Total dividends and distributions (.40) (.40) (.39) (.41) -0-
Net asset value, end of period $12.46 $10.57 $10.20 $ 8.96 $ 9.91
TOTAL RETURN
Total investment return based on
net asset value (d) 22.35% 7.82% 18.66% (5.59)% (.90)%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $14,782 $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% 2.20%(e)
Expenses, before waivers/reimbursements 4.28% 4.08% 5.34% 14.42% 133.62%(e)
Net investment income, net
of waivers/reimbursements 2.27% .95% 1.60% 3.53% 2.84%(e)
Portfolio turnover rate 37% 98% 162% 30% 11%
Average commission rate (f) $.0442 $.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,
1993(G)
YEAR ENDED NOVEMBER 30, TO
-------------------------------------------------- NOVEMBER 30,
1997 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) .25(c) .11(c) .18(c) .39 .01
Net realized and unrealized gain (loss)
on investment transactions 2.03 .66 1.46 (.93) (.09)
Net increase (decrease) in net asset
value from operations 2.28 .77 1.64 (.54) (.08)
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (.27) (.40) (.39) (.41) -0-
Distributions from net realized gains (.13) -0- -0- -0- -0-
Total dividends and distributions (.40) (.40) (.39) (.41) -0-
Net asset value, end of period $12.47 $10.59 $10.22 $ 8.97 $ 9.92
TOTAL RETURN
Total investment return based
on net asset value (d) 22.21% 7.81% 18.76% (5.58)% (.80)%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $3,413 $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% 2.20%(e)
Expenses, before waivers/reimbursements 4.28% 4.07% 5.99% 14.42% 148.03%(e)
Net investment income, net
of waivers/reimbursements 2.27% .94% 1.88% 3.60% 3.08%(e)
Portfolio turnover rate 37% 98% 162% 30% 11%
Average commisson rate (f) $.0442 $.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,
1996(G)
YEAR ENDED TO
NOVEMBER 30, NOVEMBER 30,
1997 1996
------------ ------------
Net asset value, beginning of period $10.59 $ 9.95
INCOME FROM INVESTMENT OPERATIONS
Net investment income (b)(c) .36 .03
Net realized and unrealized gain on
investment transactions 2.04 .61
Net increase in net asset value from operations 2.40 .64
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (.37) -0-
Distributions from net realized gains (.13) -0-
Total dividends and distributions (.50) -0-
Net asset value, end of period $12.49 $10.59
TOTAL RETURN
Total investment return based on
net asset value (d) 23.57% 6.33%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $42 $33
Ratio to average net assets of:
Expenses, net of waivers/reimbursements 1.20% 1.20%(e)
Expenses, before waivers/reimbursements 3.29% 3.48%(e)
Net investment income, net
of waivers/reimbursements 3.28% 4.02%(e)
Portfolio turnover rate 37% 98%
Average commisson rate $.0442 $.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
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, 1997, 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 each of the periods
indicated, 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, 1997 by correspondence with the custodian, provide a
reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
New York, New York
January 9, 1998
18
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.
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.
UIFAR
