ALLIANCE
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UTILITY
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INCOME
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FUND
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Annual Report
November 30, 1998
ALLIANCE CAPITAL [LOGO](R)
<PAGE>
LETTER TO SHAREHOLDERS Alliance Utility Income Fund
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January 7, 1999
Dear Shareholder:
This annual shareholder report reviews investment results and market activity
for Alliance Utility Income Fund for the six- and 12-month periods ended
November 30, 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
Standard & Poor's 500 Stock Index (the "S&P 500"), and the Lipper Utility Funds
Average ("Lipper Average").
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INVESTMENT RESULTS*
Periods Ended November 30, 1998
Total Returns
6 Months 12 Months
------------- -------------
Alliance Utility Income Fund
Class A 10.77% 24.99%
Class B 10.44% 24.02%
Class C 10.42% 24.16%
NYSE Utility Index 12.74% 29.32%
S&P 500 Stock Index 7.48% 23.68%
Lipper Utility Funds Average 5.15% 17.75%
* 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 returns 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 384 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 both the six- and 12-month periods ended November 30,
1998, the Lipper Average consisted of 101 funds. 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.
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PERFORMANCE REVIEW
For the six- and 12-month periods ended November 30, 1998 your Fund
underperformed the NYSE Utility Index, but outperformed the S&P 500 and its peer
group as represented by 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 half of 1998 marked a reduction of
Asian tensions and a return to higher comfort levels, and therefore, utilities
did not keep up with the consequent overall rise in the broader market.
In August of 1998, a renewed bout of nervousness due to the Russian debt crisis
and domestic hedge fund problems caused the broad market to plummet, but the
perceived safe haven nature of utilities again bolstered the sector. For that
month, the S&P 500 dropped 14.5% while your Fund's decline was 5.2%. Finally,
the market's subsequent rebound caused the S&P 500 to outperform the utility
sector once again.
Your Fund's underperformance relative to its benchmark, the NYSE Utility Index,
is largely due to the 5% weighting in the index of Lucent Technologies, the
communications technology company spun out of AT&T Corporation. Lucent stock,
which is not a holding of your Fund, appreciated 95% over the past 12 months.
INVESTMENT OUTLOOK
Three factors will converge in 1999 that may point to continued good performance
of the utility sector. First, the global turmoil evident in 1998 has moderated,
but has not disappeared. Any intensification of the emerging markets financial
crisis in 1999 will once again highlight the safe haven nature of utilities.
Second, in its successful attempt to calm the markets, the Federal Reserve has
begun to ease. Historically, easing has led to reduced long-term interest rates
which are typically favorable for utility stock performance. Third, corporate
earnings growth is liable to slow in 1999 as global economic problems dampen
domestic business activity. Utility earnings growth is normally low relative to
the broad market, but 1999 may see utility earnings growing more comparably to
the broad market.
Thank you for your continued interest in Alliance Utility Income Fund. We look
forward to reporting to you on
1
<PAGE>
Alliance Utility Income Fund
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market activity and your Fund's investment results in the coming periods.
Sincerely,
/s/ John D. Carifa
John D. Carifa
Chairman and President
/s/ Paul Rissman
Paul Rissman
Senior Vice President
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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.
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2
<PAGE>
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.
INVESTMENT RESULTS
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NAV and SEC Average Annual Total Returns as of November 30, 1998
--------------------
CLASS A SHARES
--------------------
Without With
Sales Charge Sales Charge
------------------------------
One Year 24.99% 19.71%
Five Years 13.68% 12.70%
Since Inception* 13.16% 12.22%
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CLASS B SHARES
--------------------
Without With
Sales Charge Sales Charge
------------------------------
One Year 24.02% 20.02%
Five Years 12.88% 12.88%
Since Inception* 12.36% 12.36%
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CLASS C SHARES
--------------------
Without With
Sales Charge Sales Charge
------------------------------
One Year 24.16% 23.16%
Five Years 12.90% 12.90%
Since Inception* 12.40% 12.40%
SEC Average Annual Total Returns as of the most recent quarter-end (September
30, 1998)
Class A Class B Class C
--------- --------- ---------
1 Year 24.36% 24.90% 27.96%
Since Inception* 11.83% 12.01% 12.04%
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.
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.
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* Inception: 10/18/93 Class A and Class B; 10/27/93 Class C.
3
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Alliance Utility Income Fund
================================================================================
ALLIANCE UTILITY INCOME FUND
GROWTH OF A $10,000 INVESTMENT
10/31/93* TO 11/30/98
[GRAPHIC OMITTED]
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 11/30/98) as
compared to the performance of appropriate broad-based indices. 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 S&P 500 Stock Index includes 500 U.S. stocks and is a common
measure of the performance of the overall 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 indices shown above,
you should note that no charges or expenses are reflected in the performance of
the indices.
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* Month-end nearest to Fund's inception date of 10/18/93.
4
<PAGE>
TEN LARGEST HOLDINGS
November 30, 1998 Alliance Utility Income Fund
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<TABLE>
<CAPTION>
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COMPANY COUNTRY VALUE PERCENT OF NET ASSETS
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<S> <C> <C> <C>
BellSouth Corp. United States $ 2,381,925 4.5%
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U.S. West, Inc. United States 2,303,250 4.3
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GPU, Inc. United States 2,234,437 4.2
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Ameritech Corp. United States 2,035,100 3.8
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Energy East Corp. United States 1,963,312 3.7
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Pinnacle West Capital Corp. United States 1,954,631 3.7
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Consolidated Edison, Inc. United States 1,946,119 3.7
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CMS Energy Corp. United States 1,828,125 3.4
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AT&T Corp. United States 1,771,357 3.3
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NIPSCO Industries, Inc. United States 1,729,437 3.3
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$20,147,693 37.9%
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</TABLE>
MAJOR PORTFOLIO CHANGES
Six Months Ended November 30, 1998
================================================================================
<TABLE>
<CAPTION>
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SHARES
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PURCHASES COUNTRY BOUGHT HOLDINGS 11/30/98
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<S> <C> <C> <C>
Ameritech Corp. United States 11,400 37,600
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Consolidated Edison, Inc. United States 16,000 38,300
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GPU, Inc. United States 51,000 51,000
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GTE Corp. United States 27,000 27,000
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MediaOne Group, Inc. United States 25,600 25,600
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Omnipoint Corp. 7.00% cv. pfd. United States 14,000 14,000
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Pinnacle West Capital Corp. United States 12,400 42,900
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Qualcomm Financial Trust I 5.75% cv. pfd. United States 22,000 22,000
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United States West, Inc. United States 23,700 37,000
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<CAPTION>
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SALES SOLD HOLDINGS 11/30/98
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<S> <C> <C> <C>
Airtouch Communications, Inc. Cl.C
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4.25% cv. pfd. United States 13,500 -0-
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FPL Group, Inc. United States 5,800 16,800
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KeySpan Energy Corp. United States 7,300 14,800
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NTL Inc. United States 20,137 -0-
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Pacific Enterprises Co. United States 6,500 -0-
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Telecomunicacoes Brasileiras, SA (ADR) United States 3,000 -0-
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Teleport Communications United States 11,800 -0-
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</TABLE>
5
<PAGE>
PORTFOLIO OF INVESTMENTS
November 30, 1998 Alliance Utility Income Fund
================================================================================
Company Shares Value
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COMMON & PREFERRED STOCKS-81.0%
UNITED STATES INVESTMENTS-76.9%
UTILITIES-59.4%
ELECTRIC & GAS UTILITY-32.6%
AGL Resources, Inc. ................................. 9,700 $ 209,156
American Electric Power, Inc. ....................... 22,500 1,043,437
CINergy Corp. ....................................... 28,200 974,663
CMS Energy Corp. .................................... 37,500 1,828,125
Consolidated Edison, Inc. ........................... 38,300 1,946,119
DPL, Inc. ........................................... 34,200 684,000
Energy East Corp. ................................... 37,000 1,963,312
FPL Group, Inc. ..................................... 16,800 1,029,000
GPU, Inc. ........................................... 51,000 2,234,437
KeySpan Energy Corp. ................................ 14,800 439,375
MCN Energy Group, Inc. .............................. 7,400 140,138
New Jersey Resources Corp. .......................... 7,000 272,563
NIPSCO Industries, Inc. ............................. 59,000 1,729,437
Northwest Natural Gas Co. ........................... 8,400 238,350
People's Energy Corp. ............................... 5,700 214,819
Pinnacle West Capital Corp. ......................... 42,900 1,954,631
Questar Corp. ....................................... 11,000 211,063
Sempra Energy ....................................... 9,774 244,961
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17,357,586
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TELEPHONE UTILITY-26.8%
Ameritech Corp. ..................................... 37,600 2,035,100
AT&T Corp. .......................................... 28,427 1,771,357
Bell Atlantic Corp. ................................. 18,400 1,023,500
BellSouth Corp. ..................................... 27,300 2,381,925
Frontier Corp. ...................................... 10,000 301,250
GTE Corp. ........................................... 27,000 1,674,000
MCI Worldcom, Inc. (a) .............................. 22,500 1,327,500
SBC Communications, Inc. ............................ 30,000 1,438,125
U.S. West, Inc. ..................................... 37,000 2,303,250
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14,256,007
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31,613,593
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CONSUMER SERVICES-10.6%
BROADCASTING & CABLE-8.3%
MediaOne Group, Inc. ................................ 25,600 1,436,800
Merrill Lynch "Cox" STRYPES ......................... 30,000 1,312,500
Omnipoint Corp. 7.00% cv. pfd. (a)(b) ............... 14,000 301,000
TCI Communications, Inc. Series A cv. pfd ........... 15,000 1,336,875
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4,387,175
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ENTERTAINMENT & LEISURE-2.3%
CSC Holdings, Inc. Series I 8.50% cv. pfd .......... 20,000 1,250,000
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5,637,175
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ENERGY-4.4%
DOMESTIC PRODUCERS-2.3%
Washington Gas Light Co. ............................ 8,900 226,950
Williams Cos., Inc. 3.50% pfd ....................... 7,500 1,013,906
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1,240,856
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MISCELLANEOUS-2.1%
AES Trust I Series A 5.375% cv. pfd ................. 16,000 1,082,000
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2,322,856
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TECHNOLOGY-2.0%
MISCELLANEOUS-2.0%
Qualcomm Financial Trust I 5.75% cv. pfd ............ 22,000 1,050,500
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6
<PAGE>
Alliance Utility Income Fund
================================================================================
Company Shares Value
- --------------------------------------------------------------------------------
MULTI INDUSTRY COMPANY-0.5%
Southwest Gas Corp. ................................ 11,100 $ 263,625
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Total United States Investments
(cost $31,577,735) ............................... 40,887,749
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FOREIGN INVESTMENTS-4.1%
ARGENTINA-1.8%
Telecom Argentina, SA .............................. 15,000 457,500
Telefonica De Argentina ............................ 15,000 485,625
-----------
Total Argentina .................................... 943,125
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MEXICO-1.4%
Telefonos de Mexico SA Series L (ADR) .............. 15,600 726,375
-----------
PHILIPPINES-0.7%
Philippine Long Distance Telephone Co.
3.50% cv. pfd. (GDS) ............................. 7,800 374,400
-----------
SOUTH KOREA-0.2%
Korea Electric Power Corp. ......................... 6,890 132,713
-----------
Total Foreign Investments (cost $1,993,197) ........ 2,176,613
-----------
Total Common & Preferred Stocks
(cost $33,570,932) ............................... 43,064,362
-----------
Principal
Amount
Company (000) Value
- --------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS-18.8%
COMMERCIAL PAPER-18.8%
American Express Co. 4.69%, 12/01/98 ................ $2,320 $ 2,320,000
Ford Motor Credit Corp. 5.01%, 12/07/98 ............. 2,300 2,298,079
General Electric Capital Corp. 4.75%, 12/02/98 ...... 2,700 2,699,644
Prudential Funding Corp. 5.00%, 12/03/98 ............ 2,700 2,699,250
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Total Short-Term Investments (cost $10,016,973) ..... 10,016,973
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TOTAL INVESTMENTS-99.8%
(cost $43,587,905) ............................... 53,081,335
Other assets less liabilities-0.2% .................. 82,954
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NET ASSETS-100% ..................................... $53,164,289
===========
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(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,
1998, this security amounted to $301,000 or 0.6% 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.
7
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
November 30, 1998 Alliance Utility Income Fund
================================================================================
<TABLE>
<S> <C>
ASSETS
Investments in securities, at value (cost $43,587,905)........................... $ 53,081,335
Cash ............................................................................ 34,305
Receivable for capital stock sold................................................ 362,736
Dividends receivable............................................................. 93,853
Receivable from Adviser.......................................................... 10,188
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Total assets..................................................................... 53,582,417
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LIABILITIES
Payable for investment securities purchased...................................... 122,572
Payable for capital stock redeemed............................................... 91,796
Distribution fee payable......................................................... 36,457
Accrued expenses................................................................. 167,303
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Total liabilities................................................................ 418,128
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NET ASSETS......................................................................... $ 53,164,289
=============
COMPOSITION OF NET ASSETS
Capital stock, at par............................................................ $ 3,631
Additional paid-in capital....................................................... 42,171,100
Undistributed net investment income.............................................. 78,086
Accumulated net realized gain on investments and foreign currency transactions... 1,418,042
Net unrealized appreciation of investments....................................... 9,493,430
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$ 53,164,289
=============
CALCULATION OF MAXIMUM OFFERING PRICE
Class A Shares
Net asset value and redemption price per share
($9,792,606 / 666,952 shares of capital stock issued and outstanding).......... $14.68
Sales charge--4.25% of public offering price..................................... .65
------
Maximum offering price........................................................... $15.33
======
Class B Shares
Net asset value and offering price per share
($35,550,363 / 2,430,987 shares of capital stock issued and outstanding)....... $14.62
======
Class C Shares
Net asset value and offering price per share
($7,297,878 / 498,293 shares of capital stock issued and outstanding).......... $14.65
======
Advisor Class Shares
Net asset value, redemption and offering price per share
($523,442 / 35,611 shares of capital stock issued and outstanding)............. $14.70
======
</TABLE>
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See notes to financial statements.
8
<PAGE>
STATEMENT OF OPERATIONS
Year Ended November 30, 1998 Alliance Utility Income Fund
================================================================================
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Dividends (net of foreign taxes withheld $6,009).................. $ 1,023,587
Interest.......................................................... 216,634 $ 1,240,221
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EXPENSES
Advisory fee...................................................... 248,119
Distribution fee - Class A........................................ 19,852
Distribution fee - Class B........................................ 216,783
Distribution fee - Class C........................................ 46,693
Administrative.................................................... 120,000
Custodian......................................................... 97,239
Audit and legal................................................... 67,396
Transfer agency................................................... 61,200
Registration...................................................... 56,491
Amortization of organization expenses............................. 30,804
Directors' fees................................................... 27,000
Printing.......................................................... 16,790
Miscellaneous..................................................... 3,675
------------
Total expenses.................................................... 1,012,042
Less: expenses waived and reimbursed by the Adviser (see Note B).. (331,912)
------------
Net expenses...................................................... 680,130
------------
Net investment income............................................. 560,091
------------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
AND FOREIGN CURRENCY TRANSACTIONS
Net realized gain on investment transactions...................... 1,421,293
Net realized gain on foreign currency transactions................ 315
Net change in unrealized appreciation of investments.............. 5,059,359
------------
Net gain on investments and foreign currency transactions......... 6,480,967
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NET INCREASE IN NET ASSETS FROM OPERATIONS.......................... $ 7,041,058
============
</TABLE>
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See notes to financial statements.
9
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS Alliance Utility Income Fund
================================================================================
<TABLE>
<CAPTION>
Year Ended Year Ended
November 30, November 30,
1998 1997
------------- -------------
<S> <C> <C>
INCREASE IN NET ASSETS FROM OPERATIONS
Net investment income................................................ $ 560,091 $ 488,583
Net realized gain on investments and foreign currency transactions... 1,421,608 850,732
Net change in unrealized appreciation (depreciation) of investments
and foreign currency denominated assets and liabilities............ 5,059,359 2,862,563
------------- -------------
Net increase in net assets from operations........................... 7,041,058 4,201,878
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income
Class A............................................................ (145,708) (111,424)
Class B............................................................ (362,844) (338,258)
Class C............................................................ (78,247) (82,571)
Advisor Class...................................................... (1,520) (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).............................................. 25,206,430 (1,337,490)
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Total increase....................................................... 30,810,348 2,089,738
NET ASSETS
Beginning of year.................................................... 22,353,941 20,264,203
------------- -------------
End of year (including undistributed net investment income of
$78,086 and $105,999, respectively)................................ $ 53,164,289 $ 22,353,941
============= =============
</TABLE>
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See notes to financial statements.
10
<PAGE>
NOTES TO FINANCIAL STATEMENTS
November 30, 1998 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 had been deferred and were
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 dividends and interest 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 would be reflected as a component of net unrealized appreciation
of investments and foreign currency denominated assets and liabilities.
11
<PAGE>
NOTES TO FINANCIAL STATEMENTS (continued) 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 Advisor 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. During the current fiscal year, permanent differences,
primarily due to foreign currency reclasses, 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, 1998,
such reimbursement amounted to $331,912. The Adviser may terminate the voluntary
waiver at any time.
Pursuant to the advisory agreement, the Fund paid $120,000 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, 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 $24,603 for the year ended November 30, 1998.
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 $5,701 from the sale of Class A shares and
$52,306 and $1,252 in contingent deferred sales charges imposed upon redemptions
by shareholders of Class B and Class C shares, respectively, for the year ended
November 30, 1998.
Brokerage commissions paid on investment transactions for the year ended
November 30, 1998 amounted to $23,651, 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.
12
<PAGE>
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 $2,335,170 and
$528,453 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 $19,435,693 and $4,627,216,
respectively, for the year ended November 30, 1998. There were no purchases or
sales of U.S. government and government agency obligations for the year ended
November 30, 1998.
At November 30, 1998, the cost of investments for federal income tax purposes
was substantially the same as the cost for financial reporting purposes. Gross
unrealized appreciation of investments was $10,172,723 and gross unrealized
depreciation of investments was $679,293 resulting in net unrealized
appreciation of $9,493,430.
- --------------------------------------------------------------------------------
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
--------------------------- ------------------------------
Year Ended Year Ended Year Ended Year Ended
November 30, November 30, November 30, November 30,
1998 1997 1998 1997
------------ ----------- ------------- -------------
<S> <C> <C> <C> <C>
Class A
Shares sold...................... 468,890 1,730,017 $ 6,379,213 $ 18,036,414
Shares issued in reinvestment of
dividends and distributions.... 20,981 10,445 269,518 111,231
Shares converted from Class B.... 40,217 30,673 545,405 341,346
Shares redeemed.................. (192,896) (1,752,374) (2,611,790) (18,288,355)
----------- ----------- ------------- -------------
Net increase..................... 337,192 18,761 $ 4,582,346 $ 200,636
=========== =========== ============= =============
Class B
Shares sold...................... 1,941,311 213,929 $ 26,650,389 $ 2,341,751
Shares issued in reinvestment of
dividends and distributions.... 36,970 22,683 472,569 239,712
Shares converted to Class A...... (40,339) (30,725) (545,405) (341,346)
Shares redeemed.................. (693,665) (301,747) (9,518,629) (3,266,806)
----------- ----------- ------------- -------------
Net increase (decrease).......... 1,244,277 (95,860) $ 17,058,924 $ (1,026,689)
=========== =========== ============= =============
</TABLE>
13
<PAGE>
NOTES TO FINANCIAL STATEMENTS (continued) Alliance Utility Income Fund
================================================================================
<TABLE>
<CAPTION>
--------------------------- ------------------------------
SHARES AMOUNT
--------------------------- ------------------------------
Year Ended Year Ended Year Ended Year Ended
November 30, November 30, November 30, November 30,
1998 1997 1998 1997
------------ ----------- ------------- -------------
<S> <C> <C> <C> <C>
Class C
Shares sold...................... 297,300 49,448 $ 4,120,508 $ 526,128
Shares issued in reinvestment of
dividends and distributions.... 14,697 9,866 187,278 104,557
Shares redeemed.................. (87,264) (104,622) (1,199,168) (1,144,329)
------------ ----------- ------------- -------------
Net increase (decrease).......... 224,733 (45,308) $ 3,108,618 $ (513,644)
============ =========== ============= =============
Advisor Class
Shares sold...................... 34,635 627 $ 491,497 $ 6,498
Shares issued in reinvestment of
dividends and distributions.... 228 154 2,921 1,633
Shares redeemed.................. (2,634) (524) (37,876) (5,924)
------------ ----------- ------------- -------------
Net increase..................... 32,229 257 $ 456,542 $ 2,207
============ =========== ============= =============
</TABLE>
- --------------------------------------------------------------------------------
NOTE F: Concentration of Risk
Investing in securities of foreign companies involves special risks which
include the possibility of future political and economic developments which
could adversely affect the value of such securities. Moreover, securities of
many foreign companies and their markets may be less liquid and their prices
more volatile than those of United States companies.
The investments in utility companies may be subject to a variety of risks
depending, in part, on such factors as the type of utility involved and its
geographic location. The revenues of domestic and foreign utilities companies
generally reflect the economic growth and development in the geographic areas in
which they do business.
- --------------------------------------------------------------------------------
NOTE G: Bank Borrowing
A number of open-end mutual funds managed by the Adviser, including the Fund,
participate in a $750 million revolving credit facility (the "Facility")
intended to provide short-term financing if necessary, subject to certain
restrictions, in connection with abnormal redemption activity. Commitment fees
related to the Facility are paid by the participating funds and are included in
miscellaneous expenses in the statement of operations. The Fund did not utilize
the Facility during the year ended November 30, 1998.
14
<PAGE>
FINANCIAL HIGHLIGHTS Alliance Utility Income Fund
================================================================================
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Year
<TABLE>
<CAPTION>
---------------------------------------------------------------
CLASS A
---------------------------------------------------------------
Year Ended November 30,
---------------------------------------------------------------
1998 1997 1996 1995 1994
------------ ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year............. $12.48 $10.59 $10.22 $ 8.97 $ 9.92
------ ------ ------ ------ ------
Income From Investment Operations
Net investment income (a)...................... .30(b) .32(b) .18(b) .27(b) .42
Net realized and unrealized gain (loss) on
investment transactions...................... 2.69 2.04 .65 1.43 (.89)
------ ------ ------ ------ ------
Net increase (decrease) in net asset value
from operations.............................. 2.99 2.36 .83 1.70 (.47)
------ ------ ------ ------ ------
Less: Dividends and Distributions
Dividends from net investment income........... (.32) (.34) (.46) (.45) (.48)
Distributions from net realized gains.......... (.47) (.13) -0- -0- -0-
------ ------ ------ ------ ------
Total dividends and distributions.............. (.79) (.47) (.46) (.45) (.48)
------ ------ ------ ------ ------
Net asset value, end of year................... $14.68 $12.48 $10.59 $10.22 $ 8.97
====== ====== ====== ====== ======
Total Return
Total investment return based on net asset
value (c) ................................... 24.99% 23.10% 8.47% 19.58% (4.86)%
Ratios/Supplemental Data
Net assets, end of year (000's omitted)........ $9,793 $4,117 $3,294 $2,748 $1,068
Ratios to average net assets of:
Expenses, net of waivers/reimbursements...... 1.50% 1.50% 1.50% 1.50% 1.50%
Expenses, before waivers/reimbursements...... 2.48% 3.55% 3.38% 4.86% 13.72%
Net investment income........................ 2.23% 2.89% 1.67% 2.48% 4.13%
Portfolio turnover rate........................ 16% 37% 98% 162% 30%
</TABLE>
- --------------------------------------------------------------------------------
See footnote summary on page 18.
15
<PAGE>
FINANCIAL HIGHLIGHTS (continued) Alliance Utility Income Fund
================================================================================
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Year
<TABLE>
<CAPTION>
---------------------------------------------------------------
CLASS B
---------------------------------------------------------------
Year Ended November 30,
---------------------------------------------------------------
1998 1997 1996 1995 1994
------------ ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year............. $12.46 $10.57 $10.20 $ 8.96 $ 9.91
------ ------ ------ ------ ------
Income From Investment Operations
Net investment income (a)...................... .21(b) .25(b) .10(b) .18(b) .37
Net realized and unrealized gain (loss) on
investment transactions....................... 2.67 2.04 .67 1.45 (.91)
------ ------ ------ ------ ------
Net increase (decrease) in net asset value
from operations............................... 2.88 2.29 .77 1.63 (.54)
------ ------ ------ ------ ------
Less: Dividends and Distributions
Dividends from net investment income........... (.25) (.27) (.40) (.39) (.41)
Distributions from net realized gains.......... (.47) (.13) -0- -0- -0-
------ ------ ------ ------ ------
Total dividends and distributions.............. (.72) (.40) (.40) (.39) (.41)
------ ------ ------ ------ ------
Net asset value, end of year................... $14.62 $12.46 $10.57 $10.20 $ 8.96
====== ====== ====== ====== ======
Total Return
Total investment return based on net asset
value (c) ................................... 24.02% 22.35% 7.82% 18.66% (5.59)%
Ratios/Supplemental Data
Net assets, end of year (000's omitted)........ $35,550 $14,782 $13,561 $10,988 $2,353
Ratios to average net assets of:
Expenses, net of waivers/reimbursements...... 2.20% 2.20% 2.20% 2.20% 2.20%
Expenses, before waivers/reimbursements...... 3.21% 4.28% 4.08% 5.34% 14.42%
Net investment income........................ 1.56% 2.27% .95% 1.60% 3.53%
Portfolio turnover rate........................ 16% 37% 98% 162% 30%
</TABLE>
- --------------------------------------------------------------------------------
See footnote summary on page 18.
16
<PAGE>
Alliance Utility Income Fund
================================================================================
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Year
<TABLE>
<CAPTION>
---------------------------------------------------------------
CLASS C
---------------------------------------------------------------
Year Ended November 30,
---------------------------------------------------------------
1998 1997 1996 1995 1994
------------ ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year............. $12.47 $10.59 $10.22 $ 8.97 $ 9.92
------ ------ ------ ------ ------
Income From Investment Operations
Net investment income (a)...................... .21(b) .25(b) .11(b) .18(b) .39
Net realized and unrealized gain (loss) on
investment transactions...................... 2.69 2.03 .66 1.46 (.93)
------ ------ ------ ------ ------
Net increase (decrease) in net asset value
from operations.............................. 2.90 2.28 .77 1.64 (.54)
------ ------ ------ ------ ------
Less: Dividends and Distributions
Dividends from net investment income........... (.25) (.27) (.40) (.39) (.41)
Distributions from net realized gains.......... (.47) (.13) -0- -0- -0-
------ ------ ------ ------ ------
Total dividends and distributions.............. (.72) (.40) (.40) (.39) (.41)
------ ------ ------ ------ ------
Net asset value, end of year................... $14.65 $12.47 $10.59 $10.22 $ 8.97
====== ====== ====== ====== ======
Total Return
Total investment return based on net asset
value (c) ................................... 24.16% 22.21% 7.81% 18.76% (5.58)%
Ratios/Supplemental Data
Net assets, end of year (000's omitted)........ $7,298 $3,413 $3,376 $3,500 $2,651
Ratios to average net assets of:
Expenses, net of waivers/reimbursements..... 2.20% 2.20% 2.20% 2.20% 2.20%
Expenses, before waivers/reimbursements..... 3.22% 4.28% 4.07% 5.99% 14.42%
Net investment income....................... 1.54% 2.27% .94% 1.88% 3.60%
Portfolio turnover rate........................ 16% 37% 98% 162% 30%
</TABLE>
- --------------------------------------------------------------------------------
See footnote summary on page 18.
17
<PAGE>
FINANCIAL HIGHLIGHTS (continued) Alliance Utility Income Fund
================================================================================
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
<TABLE>
<CAPTION>
------------------------------------
ADVISOR CLASS
------------------------------------
October 2,
1996(d)
Year Ended November 30, to
----------------------- November 30,
1998 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 (a)(b).............................. .37 .36 .03
Net realized and unrealized gain on investment
transactions........................................... 2.66 2.04 .61
------ ------ ------
Net increase in net asset value from
operations.............................................. 3.03 2.40 .64
------ ------ ------
Less: Dividends and Distributions
Dividends from net investment income...................... (.35) (.37) -0-
Distributions from net realized gains..................... (.47) (.13) -0-
------ ------ ------
Total dividends and distributions......................... (.82) (.50) -0-
------ ------ ------
Net asset value, end of period............................ $14.70 $12.49 $10.59
====== ====== ======
Total Return
Total investment return based on net asset value (c)...... 25.34% 23.57% 6.33%
Ratios/Supplemental Data
Net assets, end of period (000's omitted)................. $523 $42 $33
Ratios to average net assets of:
Expenses, net of waivers/reimbursements................. 1.20% 1.20% 1.20%(e)
Expenses, before waivers/reimbursements................. 2.21% 3.29% 3.48%(e)
Net investment income................................... 2.83% 3.28% 4.02%(e)
Portfolio turnover rate................................... 16% 37% 98%
</TABLE>
- --------------------------------------------------------------------------------
(a) Net of fees waived and expenses reimbursed by the Adviser.
(b) Based on average shares outstanding.
(c) 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.
(d) Commencement of distribution.
(e) Annualized.
18
<PAGE>
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, 1998, 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, 1998 by correspondence with the custodian and brokers, provide a
reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
New York, New York
January 8, 1999
TAX INFORMATION (unaudited)
================================================================================
In order to meet certain requirements of the Internal Revenue Code we are
advising you that $198,549 and $127,508 of the capital gain distributions paid
by the Fund during the fiscal year November 30, 1998 are subject to the maximum
tax rates of 28% and 20% respectively. Shareholders should not use the above
information to prepare their tax returns. The information necessary to complete
your income tax returns will be included with your Form 1099 DIV which will be
sent to you separately in January 1999.
19
<PAGE>
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
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
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, NY 10036
- --------------------------------------------------------------------------------
(1) Member of the Audit Committee.
20
<PAGE>
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 U.S. Government Fund
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
Select Investors Series - Premier Portfolio
Growth & Income
Alliance Balanced Shares
Alliance Conservative Investors Fund
Alliance Growth & Income Fund
Alliance Growth Investors 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
Institutional
Premier Growth
Quasar
Real Estate Investment
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
21
<PAGE>
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<PAGE>
(This page left intentionally blank.)
<PAGE>
ALLIANCE UTILITY INCOME FUND
1345 Avenue of the Americas
New York, NY 10105
(800) 221-5672
Alliance Capital [LOGO](R)
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
