UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number: 811-7916
AllianceBernstein Utility Income Fund, Inc.
(Exact name of registrant as specified in charter)
1345 Avenue of the Americas, New York, New York 10105
(Address of principal executive offices) (Zip code)
Mark R. Manley
Alliance Capital Management, L.P.
1345 Avenue of the Americas
New York, New York 10105
(Name and address of agent for service)
Registrant's telephone number, including area code: (800) 221-5672
Date of fiscal year end: November 30, 2003
Date of reporting period: November 30, 2003
ITEM 1. REPORTS TO STOCKHOLDERS.
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Specialty Equity
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AllianceBernstein [LOGO](SM)
Investment Research and Management
AllianceBernstein Utility Income Fund
Annual Report -- November 30, 2003
Investment Products Offered
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o Are Not FDIC Insured
o May Lose Value
o Are Not Bank Guaranteed
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This shareholder report must be preceded or accompanied by the Fund's
prospectus for individuals who are not current shareholders of the Fund.
You may obtain a description of the Fund's proxy voting policies and
procedures, without charge, upon request by visiting Alliance Capital's web
site at www.investor.alliancecapital.com or on the Securities and Exchange
Commission's web site at http://www.sec.gov, or by calling Alliance Capital at
(800) 227-4618.
AllianceBernstein Investment Research and Management, Inc. is an affiliate of
Alliance Capital Management L.P., the manager of the funds, and is a member of
the NASD.
January 26, 2004
Annual Report
This report provides management's discussion of fund performance for
AllianceBernstein Utility Income Fund (the "Fund") for the annual reporting
period ended November 30, 2003.
Investment Objective And Policies
This open-end fund seeks current income and capital appreciation primarily
through investments in the equity and fixed-income securities of companies in
the utilities industry.
Investment Results
The following table provides performance data for the Fund and its new
benchmark, the Standard & Poor's ("S&P") 500 GICS Utilities Composite (the
"Composite"), as well as for its previous benchmark, the New York Stock
Exchange (NYSE) Utility Index, for the six- and 12-month periods ended November
30, 2003. The NYSE has dissolved its NYSE Utility Index. Therefore, the
Composite will be the Fund's benchmark going forward. In addition, performance
data for the Lipper Utility Funds Average (the "Lipper Average") is also
included. Funds in the Lipper Average have generally similar investment
objectives to the Fund, although some may have different investment policies
and sales and management fees.
INVESTMENT RESULTS*
Periods Ended November 30, 2003
---------------------------------
Returns
---------------------------------
6 Months 12 Months
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AllianceBernstein
Utility Income Fund
Class A 3.50% 14.89%
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Class B 3.02% 13.99%
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Class C 3.10% 14.06%
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S&P 500 GICS
Utilities Composite 1.80% 23.13%
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NYSE Utility Index 0.63% 4.75%
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Lipper Utility
Funds Average 3.65% 16.73%
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* The Fund's investment results are for the periods shown and are based on the
net asset value (NAV) of each class of shares as of November 30, 2003. Returns
do not reflect the deduction of taxes that a shareholder would pay on fund
distributions or the redemption of fund 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.
Returns for Advisor Class shares will vary due to different expenses associated
with this class. Returns for the Fund include the reinvestment of any
distributions paid during each period. During the reporting period, the Advisor
waived a portion of its advisory fee or reimbursed the Fund for a portion of
its expenses to the extent necessary to limit the Fund's expenses to 1.50% for
Class A, 2.20% for Class B, 2.20% for Class C and 1.20% for Advisor Class. This
waiver extends through the Fund's current fiscal year and may be extended by
the Advisor for additional one-year terms. Without the waiver, the Fund's
expenses would have been higher and its performance would have been lower than
that shown above. Past performance is no guarantee of future results.
Neither the unmanaged S&P 500 GICS Utilities Composite nor the NYSE Utility
Index reflects fees and expenses associated with the
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ALLIANCEBERNSTEIN UTILITY INCOME FUND o 1
active management of a mutual fund portfolio. The S&P 500 GICS Utilities
Composite encompasses those companies considered gas, electric or water
utilities, or companies that operate as independent producers and/or
distributors of power, including both nuclear and non-nuclear facilities. The
NYSE Utility Index is comprised of utility stocks traded on the New York Stock
Exchange. The Lipper Utility Funds Average consists of funds with similar
investment objectives to that of the AllianceBernstein Utility Income Fund,
although some funds included in the Lipper Average may have different
investment policies and sales and management fees. For the six- and 12-month
periods ended November 30, 2003, the Lipper Average consisted of 85 and 84
funds, respectively. An investor cannot invest directly in an index, average,
or composite, and its results are not indicative of the performance for any
specific investment, including AllianceBernstein Utility Income Fund.
Additional investment results appear on page 6.
The Fund outperformed its new benchmark, the S&P 500 GICS Utilities Composite
("the Composite"), for the six-month period ended November 30, 2003, but
underperformed the Composite for the 12-month period ended November 30, 2003.
The Fund's Class A shares returned 14.89% over the 12-month period and returned
3.50% over the six-month period. The Composite, which encompasses those
companies considered electric, gas or water utilities, or companies that
operate as independent producers and/or distributors of power (but does not
encompass telephone or telecommunication equipment), had a gain of 23.13% over
the 12-month period and 1.80% over the six-month period.
The Fund's relative underperformance for the fiscal year was principally
attributed to its overweight position in high quality, more defensive electric
names. As we look deeper in the electric sector, we find that the electric
utilities with weaker fundamentals outperformed the electrics with stronger
fundamentals in 2003. The reason for this was that most of these companies
received refinancing from their banks, thus easing their short-term liquidity
problems and preventing them from filing for bankruptcy. Most of these
fundamentally weak companies abandoned their growth business models and
returned to "back-to-basic" strategies.
So far, these companies have restored some credibility in management and have
started to execute on fundamentals and cash flow improvement. As the market
begins to focus on high quality companies with strong fundamentals, performance
should improve. In fact, this improvement can be seen in the Fund's six-month
performance, which outpaced its benchmark by approximately 170 basis points.
Market Review and Investment Strategy
We regard 2003 as a rebuilding year for the utility sector, as most companies
aggressively improved their balance sheets by selling non-core assets, cutting
capital expenditures,
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2 o ALLIANCEBERNSTEIN UTILITY INCOME FUND
issuing equity, paying down debt, and exiting from some non-regulated
businesses. The most encouraging aspect was the sector's improving free cash
flow and more disciplined capital deployment. Separately, utilities benefited
from a number of macro trends in 2003, including the improved credit
environment, rising gas and power prices, the reduction of tax rates on
dividends, and very low long-term interest rates.
We continued to focus the Fund's investments on high quality names with
attractive valuations. Within the electric utilities, we focused on the
regulated integrated utilities instead of the non-regulated electric power
marketers and generators. We remained cautious of the telephone utilities,
primarily because of their fundamental uncertainties and competitive pressures.
On the electric side, we remained cautious of the non-regulated generation and
marketing sectors. While the sectors have improving balance sheets and easing
liquidity concerns, management execution skills are still questionable.
However, we are positive on the traditional regulated integrated utilities due
to their earnings stability, high dividend yields and reasonable valuations.
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ALLIANCEBERNSTEIN UTILITY INCOME FUND o 3
PERFORMANCE UPDATE
ALLIANCEBERNSTEIN UTILITY INCOME FUND CLASS A
GROWTH OF A $10,000 INVESTMENT
11/30/93 - 11/30/03
AllianceBernstein Utility Income Fund Class A: $19,171
S&P 500 GICS Utilities Composite: $14,754
NYSE Utility Index: $10,979
[THE FOLLOWING TABLE WAS DEPICTED BY A MOUNTAIN CHART IN THE PRINTED MATERIAL.]
AllianceBernstein S&P 500 GICS
Utility Income Utilities NYSE
Fund Composite Utility Index
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11/30/93 $ 9,575 $ 10,000 $ 10,000
11/30/94 $ 9,110 $ 8,879 $ 8,761
11/30/95 $ 10,894 $ 11,205 $ 10,561
11/30/96 $ 11,817 $ 12,613 $ 11,470
11/30/97 $ 14,547 $ 14,520 $ 14,061
11/30/98 $ 18,182 $ 17,405 $ 18,183
11/30/99 $ 21,868 $ 16,131 $ 21,855
11/30/00 $ 24,961 $ 23,403 $ 19,066
11/30/01 $ 21,029 $ 17,359 $ 14,132
11/30/02 $ 16,686 $ 11,982 $ 10,481
11/30/03 $ 19,171 $ 14,754 $ 10,979
This chart illustrates the total value of an assumed $10,000 investment in
AllianceBernstein Utility Income Fund Class A shares (from 11/30/93 to
11/30/03) as compared to the performance of appropriate broad-based indices.
Returns do not reflect the deduction of taxes that a shareholder would pay on
fund distributions or the redemption of fund shares. The chart reflects the
deduction of the maximum 4.25% sales charge from the initial $10,000 investment
in the Fund and assumes the reinvestment of dividends and capital gains.
Performance for Class B, Class C and Advisor Class shares will vary from the
results shown above due to differences in expenses charged to these classes.
Past performance is not indicative of future results, and is not representative
of future gain or loss in capital value or dividend income.
Neither the unmanaged S&P 500 GICS Utilities Composite nor the NYSE Utility
Index reflects fees and expenses associated with the active management of a
mutual fund portfolio. The S&P 500 GICS Utilities Composite encompasses those
companies considered gas, electric or water utilities, or companies that
operate as independent producers and/or distributors of power, including both
nuclear and non-nuclear facilities. The NYSE Utility Index is comprised of
utility stocks traded on the New York Stock Exchange. An investor cannot invest
directly in an index or composite, and its results are not indicative of any
specific investment, including AllianceBernstein Utility Income Fund.
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4 o ALLIANCEBERNSTEIN UTILITY INCOME FUND
PORTFOLIO SUMMARY
November 30, 2003
INCEPTION DATES
Class A Shares
10/18/93
Class B Shares
10/18/93
Class C Shares
10/27/93
PORTFOLIO STATISTICS
Net Assets ($mil): $196.9
SECTOR BREAKDOWN
Utilities
71.0% Electric & Gas Utility
16.8% Telephone Utility
Energy
2.3% Pipelines [PIE CHART OMITTED]
Consumer Services
8.8% Cellular Communications
1.1% Broadcasting & Cable
All data as of November 30, 2003. The Fund's sector breakdown is expressed as a
percentage of total investments (excluding security lending collateral) and may
vary over time.
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ALLIANCEBERNSTEIN UTILITY INCOME FUND o 5
INVESTMENT RESULTS
AVERAGE ANNUAL RETURNS AS OF NOVEMBER 30, 2003
Class A Shares
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Without Sales Charge With Sales Charge
1 Year 14.89% 10.00%
5 Years 1.07% 0.20%
10 Years 7.19% 6.73%
Class B Shares
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Without Sales Charge With Sales Charge
1 Year 13.99% 9.99%
5 Years 0.34% 0.34%
10 Years(a) 6.58% 6.58%
Class C Shares
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Without Sales Charge With Sales Charge
1 Year 14.06% 13.06%
5 Years 0.34% 0.34%
10 Years 6.44% 6.44%
SEC AVERAGE ANNUAL RETURNS (WITH SALES CHARGES)
AS OF THE MOST RECENT QUARTER-END (DECEMBER 31, 2003)
Class A Class B Class C
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1 Year 14.28% 14.42% 17.47%
5 Years 0.02% 0.18% 0.19%
10 Years 6.79% 6.66%(a) 6.52%
The Fund's investment results represent average annual returns. Returns do not
reflect the deduction of taxes that a shareholder would pay on fund
distributions or the redemption of fund shares. The returns reflect
reinvestment of dividends and/or capital gains distributions in additional
shares without and with 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. Returns for
Advisor Class shares will vary due to different expenses associated with this
class.
The Fund can invest in foreign securities, which may magnify fluctuations due
to changes in foreign exchange rates and the possibility of substantial
volatility due to political and economic uncertainties in foreign countries.
The Fund concentrates its investments in the utilities industries and may
therefore be subject to greater risks and volatility than a fund with a more
diversified portfolio.
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.
(a) Assumes conversion of Class B shares into Class A shares after 8 years.
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6 o ALLIANCEBERNSTEIN UTILITY INCOME FUND
TEN LARGEST HOLDINGS
November 30, 2003
Percent of
Company Country Value Net Assets
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Exelon Corp. United States $ 8,877,352 4.5%
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Vodafone Group Plc (ADR) United Kingdom 7,131,090 3.6
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Dominion Resources, Inc. United States 7,051,590 3.6
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FPL Group, Inc. United States 6,469,390 3.3
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NSTAR United States 5,675,115 2.9
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American Movil S.A. de C.V.
Series L (ADR) Mexico 5,461,320 2.8
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Sprint Corp. (FON Group) United States 5,432,376 2.8
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Alliant Energy Corp. United States 5,305,650 2.7
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Entergy Corp. United States 5,286,000 2.7
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PPL Corp. United States 5,052,768 2.5
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$ 61,742,651 31.4%
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ALLIANCEBERNSTEIN UTILITY INCOME FUND o 7
PORTFOLIO OF INVESTMENTS
November 30, 2003
Company Shares Value
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COMMON & PREFERRED STOCKS-99.4%
UNITED STATES INVESTMENTS-84.3%
Utilities-78.6%
Electric & Gas Utility-66.2%
AES Corp.(a) 409,300 $ 3,630,491
AGL Resources, Inc. 76,700 2,178,280
Alliant Energy Corp. 217,000 5,305,650
Ameren Corp. 100,000 4,413,000
American Electric Power Co., Inc.
9.25% cv. preferred stock 94,200 3,965,820
American Electric Power Co., Inc. 141,000 3,904,290
Black Hills Corp. 51,000 1,645,260
Cinergy Corp. 9.50% cv. preferred stock 16,000 970,720
Cinergy Corp. 116,100 4,243,455
Consolidated Edison, Inc. 48,000 1,934,400
Constellation Energy Group 65,000 2,446,600
Dominion Resources, Inc. 117,000 7,051,590
DTE Energy Co. 8.75% cv. preferred stock 83,200 2,035,904
Duke Energy Corp. 171,000 3,084,840
Energy East Corp. 74,000 1,702,740
Entergy Corp. 100,000 5,286,000
Equitable Resources, Inc. 89,400 3,683,280
Exelon Corp. 143,600 8,877,352
FirstEnergy Corp. 103,300 3,579,345
FPL Group, Inc. 101,800 6,469,390
FPL Group, Inc. 8.00% cv. preferred stock 83,300 4,612,737
KeySpan Corp. 56,900 2,004,587
KeySpan Corp. 8.75% cv. preferred stock 82,000 4,214,800
New Jersey Resources Corp. 96,350 3,699,840
NSTAR 119,100 5,675,115
Pepco Holdings, Inc. 36,300 666,468
PG&E Corp.(a) 157,000 3,943,840
PPL Corp. 123,600 5,052,768
Progress Energy, Inc. 89,000 3,899,980
Public Service 10.25% cv. preferred stock 79,000 4,582,000
Public Service Enterprise Group, Inc. 26,000 1,066,520
Questar Corp. 11,000 375,320
Sempra Energy 8.50% cv. preferred stock 91,500 2,450,370
Southern Co. 69,700 2,040,119
TXU Corp. 91,000 2,014,740
TXU Corp. 8.75% cv. preferred stock 122,000 3,916,200
Wisconsin Energy Corp. 46,500 1,520,550
Xcel Energy, Inc. 133,000 2,221,100
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130,365,461
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8 o ALLIANCEBERNSTEIN UTILITY INCOME FUND
Company Shares Value
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Telephone Utility-12.4%
ALLTEL Corp. 88,000 $ 3,996,080
AT&T Corp. 92,000 1,824,360
BellSouth Corp. 187,900 4,891,037
CenturyTel, Inc. 59,000 1,929,300
Citizens Communications Co.(a) 176,000 1,911,360
Sprint Corp. (FON Group) 362,400 5,432,376
Verizon Communications, Inc. 132,100 4,328,917
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24,313,430
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154,678,891
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Consumer Services-3.4%
Broadcasting & Cable-1.0%
Comcast Corp. Cl.A(a) 66,065 2,073,120
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Cellular Communications-2.4%
Nextel Communications, Inc. Cl.A(a) 102,000 2,583,660
Nextel Partners, Inc. Cl.A(a) 112,700 1,328,733
Sprint Corp. (PCS Group)(a) 174,000 798,660
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4,711,053
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6,784,173
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Energy-2.3%
Pipelines-2.3%
Kinder Morgan, Inc. 18,000 981,000
ONEOK, Inc. 77,000 1,525,370
Southern Union Co. 5.75% cv. preferred stock 33,100 1,952,900
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4,459,270
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Total United States Investments
(cost $148,567,547) 165,922,334
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FOREIGN INVESTMENTS-15.1%
France-2.0%
France Telecom, SA (ADR) 151,000 3,901,840
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Hong Kong-2.5%
Hong Kong and China Gas Co., Ltd. 2,253,000 3,366,260
Hong Kong Electric Holdings, Ltd. 406,000 1,631,583
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Total Hong Kong 4,997,843
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Mexico-5.2%
America Movil S.A. de C.V. Series L (ADR) 213,000 5,461,320
Telefonos de Mexico, SA Series L (ADR) 142,300 4,708,707
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Total Mexico 10,170,027
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ALLIANCEBERNSTEIN UTILITY INCOME FUND o 9
Company Shares Value
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Peoples Republic of China-1.8%
China Resources Power Holdings Co., Ltd.(a) 4,290,000 $ 1,588,633
Huaneng Power International, Inc. (ADR) 34,000 1,975,400
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Total Peoples Republic of China 3,564,033
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United Kingdom-3.6%
Vodafone Group Plc (ADR) 305,400 7,131,090
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Total Foreign Investments
(cost $24,151,023) 29,764,833
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Total Common & Preferred Stocks
(cost $172,718,570) 195,687,167
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Total Investments Before Security Lending
Collateral-99.4%
(cost $172,718,570) 195,687,167
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INVESTMENT OF CASH COLLATERAL
FOR SECURITIES LOANED*-0.4%
Short-Term Investment-0.4%
UBS Private Money Market Fund, LLC, 1.02%
(cost $909,700) 909,700 909,700
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Total Investments-99.8%
(cost $173,628,270) 196,596,867
Other assets less liabilities-0.2% 300,265
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Net Assets-100% $ 196,897,132
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* See Note E for securities lending information.
(a) Non-income producing security.
Glossary:
ADR - American Depositary Receipt
See notes to financial statements.
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10 o ALLIANCEBERNSTEIN UTILITY INCOME FUND
STATEMENT OF ASSETS & LIABILITIES
November 30, 2003
ASSETS
Investments in securities, at value
(cost $173,628,270--including investment of
cash collateral for securities loaned of $909,700) $ 196,596,867(a)
Cash 677,427
Foreign cash, at value (cost $65,188) 65,220
Receivable for investment securities sold 2,966,773
Dividends and interest receivable 581,586
Receivable for capital stock sold 214,852
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Total assets 201,102,725
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LIABILITIES
Payable for investment securities purchased 2,121,535
Payable for collateral on securities loaned 909,700
Payable for capital stock redeemed 621,606
Advisory fee payable 182,619
Distribution fee payable 130,737
Accrued expenses 239,396
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Total liabilities 4,205,593
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Net Assets $ 196,897,132
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COMPOSITION OF NET ASSETS
Capital stock, at par $ 16,025
Additional paid-in capital 283,262,614
Undistributed net investment income 1,673,128
Accumulated net realized loss on investment and
foreign currency transactions (111,023,264)
Net unrealized appreciation of investments and
foreign currency denominated assets and liabilities 22,968,629
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$ 196,897,132
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CALCULATION OF MAXIMUM OFFERING PRICE
Class A Shares
Net asset value and redemption price per share
($52,187,834 / 4,213,654 shares of capital stock
issued and outstanding) $12.39
Sales charge--4.25% of public offering price .55
------
Maximum offering price $12.94
======
Class B Shares
Net asset value and offering price per share
($109,716,900 / 8,961,144 shares of capital stock
issued and outstanding) $12.24
======
Class C Shares
Net asset value and offering price per share
($32,680,133 / 2,663,838 shares of capital stock
issued and outstanding) $12.27
======
Advisor Class Shares
Net asset value, redemption and offering price per share
($2,312,265 / 185,935 shares of capital stock
issued and outstanding) $12.44
======
(a) Includes securities on loan with a value of $873,790 (see Note E).
See notes to financial statements.
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ALLIANCEBERNSTEIN UTILITY INCOME FUND o 11
STATEMENT OF OPERATIONS
Year Ended November 30, 2003
INVESTMENT INCOME
Dividends (net of foreign taxes withheld
of $37,241) $ 8,268,145
Interest 166,201 $ 8,434,346
------------
EXPENSES
Advisory fee 1,475,596
Distribution fee--Class A 151,683
Distribution fee--Class B 1,104,921
Distribution fee--Class C 328,679
Transfer agency 767,218
Custodian 142,457
Administrative 135,000
Printing 105,113
Audit and legal 83,484
Registration 57,477
Directors' fees 23,000
Miscellaneous 21,632
------------
Total expenses 4,396,260
Less: expense offset arrangement
(see Note B) (269)
Less: expenses waived and reimbursed
by the Adviser (see Note B) (449,754)
------------
Net expenses 3,946,237
------------
Net investment income 4,488,109
------------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENT AND FOREIGN CURRENCY
TRANSACTIONS
Net realized gain (loss) on:
Investment transactions 1,657,056
Foreign currency transactions (63,523)
Net change in unrealized
appreciation/depreciation of:
Investments 19,637,496
Foreign currency denominated assets
and liabilities (151)
------------
Net gain on investment and foreign
currency transactions 21,230,878
------------
NET INCREASE IN NET ASSETS FROM
OPERATIONS $ 25,718,987
============
See notes to financial statements.
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12 o ALLIANCEBERNSTEIN UTILITY INCOME FUND
STATEMENT OF CHANGES IN NET ASSETS
Year Ended Year Ended
November 30, November 30,
2003 2002
============== ==============
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS
Net investment income $ 4,488,109 $ 4,283,325
Net realized gain (loss) on investment
and foreign currency transactions 1,593,533 (90,505,904)
Net change in unrealized
appreciation/depreciation of
investments and foreign currency
denominated assets and liabilities 19,637,345 22,936,866
------------- -------------
Net increase (decrease) in net assets from
operations 25,718,987 (63,285,713)
DIVIDENDS TO SHAREHOLDERS FROM
Net investment income
Class A (1,053,772) (1,432,318)
Class B (1,365,509) (2,055,504)
Class C (403,638) (570,887)
Advisor Class (67,781) (76,104)
CAPITAL STOCK TRANSACTIONS
Net decrease (21,787,316) (44,697,655)
------------- -------------
Total increase (decrease) 1,040,971 (112,118,181)
NET ASSETS
Beginning of period 195,856,161 307,974,342
------------- -------------
End of period (including undistributed net
investment income of $1,673,128 and
$139,242, respectively) $ 196,897,132 $ 195,856,161
============= =============
See notes to financial statements.
_______________________________________________________________________________
ALLIANCEBERNSTEIN UTILITY INCOME FUND o 13
NOTES TO FINANCIAL STATEMENTS
November 30, 2003
NOTE A
Significant Accounting Policies
AllianceBernstein 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 may 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 accounting principles generally accepted in the United States 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. Additional information about some of the
items discussed in these Notes to Financial Statements is contained in the
Fund's Statement of Additional Information, which is available upon request.
The following is a summary of significant accounting policies followed by the
Fund.
1. Security Valuation
In accordance with Pricing Policies adopted by the Board of Directors of the
Fund (the "Pricing Policies") and applicable law, portfolio securities are
valued at current market value or at fair value. The Board of Directors has
delegated to Alliance Capital Management L.P. (the "Adviser"), subject to the
Board's continuing oversight, certain responsibilities with respect to the
implementation of the Pricing Policies. Pursuant to the Pricing Policies,
securities for which market quotations are readily available are valued at
their current market value. In general, the market value of these securities is
determined as follows:
Securities listed on a national securities exchange or on a foreign securities
exchange are valued at the last sale price at the close of the exchange or
foreign securities exchange. If there has been no sale on such day, the
securities are valued at the mean of the closing bid and asked prices on such
day. If no bid or asked prices are quoted on such day, then the security is
valued in good faith at fair value in accordance with the Pricing Policies.
Securities listed on more than
_______________________________________________________________________________
14 o ALLIANCEBERNSTEIN UTILITY INCOME FUND
one exchange are valued by reference to the principal exchange on which the
securities are traded; securities not listed on an exchange but traded on The
Nasdaq Stock Market, Inc. ("NASDAQ") are valued in accordance with the NASDAQ
Official Closing Price; listed put or call options are valued at the last sale
price. If there has been no sale on that day, such securities will be valued at
the closing bid prices on that day; open futures contracts and options thereon
are valued using the closing settlement price or, in the absence of such a
price, the most recent quoted bid price. If there are no quotations available
for the day of valuations, the last available closing settlement price is used;
securities traded in the over-the-counter market, (but excluding securities
traded on NASDAQ) are valued at the mean of the current bid and asked prices as
reported by the National Quotation Bureau or other comparable sources; U.S.
Government securities and other debt instruments having 60 days or less
remaining until maturity are valued at amortized cost if their original
maturity was 60 days or less, or by amortizing their fair value as of the 61st
day prior to maturity if their original term to maturity exceeded 60 days;
fixed-income securities, including mortgage backed and asset backed securities,
may be valued on the basis of prices provided by a pricing service or at a
price obtained from one or more of the major broker/dealers. In cases where
broker/dealer quotes are obtained, the Pricing Policies provide that the
Adviser may establish procedures whereby changes in market yields or spreads
are used to adjust, on a daily basis, a recently obtained quoted price on a
security; and OTC and other derivatives are valued on the basis of a quoted bid
price or spread from a major broker/dealer in such security. Securities for
which market quotations are not readily available are valued at fair value in
accordance with the Pricing Policies.
2. 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 prices 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 gain or loss on foreign currency transactions represents foreign
exchange gains and losses from sales and maturities of foreign fixed income
investments, foreign currency exchange contracts, holding of foreign
currencies, currency gains or losses realized between the trade and settlement
dates on foreign investment transactions, and the difference between the
amounts of dividends, interest and foreign withholding taxes recorded on the
Fund's books and the U.S. dollar equivalent amounts actually received or paid.
Net unrealized currency gains and losses from valuing foreign currency
denominated assets and liabilities at period end exchange rates are reflected
as a component of net unrealized appreciation or depreciation of investments
and foreign currency denominated assets and liabilities.
_______________________________________________________________________________
ALLIANCEBERNSTEIN UTILITY INCOME FUND o 15
3. Taxes
It is the policy of the Fund 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.
4. 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 trade date securities
are purchased or sold. Investment gains and losses are determined on the
identified cost basis. The Fund accretes discounts as adjustments to interest
income.
5. 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 Advisor Class shares. Advisor Class shares have no
distribution fees.
6. Dividends and Distributions
Dividends and distributions to shareholders, if any, 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 accounting principles generally accepted in the
United States. To the extent these differences are permanent, such amounts are
reclassified within the capital accounts based on their federal tax basis
treatment; temporary differences do not require such reclassification.
NOTE B
Advisory Fee and Other Transactions With Affiliates
Under the terms of an investment advisory agreement, the Fund pays 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.
Effective January 1, 2004, the Adviser began waiving a portion of its advisory
fee so as to charge the Fund at the reduced annual rate of .55% of the first
$2.5 billion, .45% of the next $2.5 billion and .40% in excess of $5 billion,
of the average daily net assets of the Fund. The amount of the fee waiver may
increase or decrease as a result of a final, definitive agreement with the New
York Attorney General's Office ("NYAG"). For a more complete discussion of the
Adviser's settlement with the NYAG, please see "Subsequent Events" below.
The Adviser has agreed to waive its fees and bear certain expenses to the
extent necessary to limit total operating expenses on an annual basis to 1.50%,
2.20%,
_______________________________________________________________________________
16 o ALLIANCEBERNSTEIN UTILITY INCOME FUND
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, 2003,
such reimbursement amounted to $449,754.
Pursuant to the advisory agreement, the Fund paid $135,000 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, 2003.
The Fund compensates Alliance Global Investor Services, Inc. (AGIS), 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 $493,696 for the year ended November 30,
2003.
For the year ended November 30, 2003, the Fund's expenses were reduced by $269
under an expense offset arrangement with AGIS.
AllianceBernstein Investment Research and Management, Inc. (the "Distributor"),
formerly Alliance Fund Distributors, Inc., a wholly-owned subsidiary of the
Adviser, serves as the distributor of the Fund's shares. The Distributor has
advised the Fund that it has retained front-end sales charges of $8,612 from
the sale of Class A shares and received $5,945, $285,686 and $6,054 in
contingent deferred sales charges imposed upon redemptions by shareholders of
Class A, Class B and Class C shares, respectively, for the year ended November
30, 2003.
Brokerage commissions paid on investment transactions for the year ended
November 30, 2003 amounted to $687,928 of which $29,250 was paid to Sanford C.
Bernstein & Co. LLC, 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 distribution and servicing fees 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 are no distribution and
servicing fees 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 advised the Fund that it has incurred expenses in excess of the
distribution costs reimbursed by the Fund in the amount of $8,872,737 and
$1,527,059 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 Dis-
_______________________________________________________________________________
ALLIANCEBERNSTEIN UTILITY INCOME FUND o 17
tributor 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)
for the year ended November 30, 2003, were as follows:
Purchases Sales
============== ==============
Investment securities (excluding
U.S. government securities) $ 139,721,198 $ 143,787,171
U.S. government securities -0- -0-
The cost of investments for federal income tax purposes, gross unrealized
appreciation and unrealized depreciation (excluding foreign currency
transactions) are as follows:
Cost $ 175,169,167
=============
Gross unrealized appreciation $ 26,454,648
Gross unrealized depreciation (5,026,948)
-------------
Net unrealized appreciation $ 21,427,700
=============
NOTE E
Securities Lending
The Fund has entered into a securities lending agreement with AG Edwards &
Sons, Inc. (the "Lending Agent"). Under the terms of the agreement, the Lending
Agent, on behalf of the Fund, administers the lending of portfolio securities
to certain broker-dealers. In return, the Fund receives fee income from the
lending transactions or it retains a portion of interest on the investment of
any cash received as collateral. The Fund also continues to receive dividends
or interest on the securities loaned. Unrealized gain or loss on the value of
the securities loaned that may occur during the term of the loan will be
reflected in the accounts of the Fund. All loans are continuously secured by
collateral exceeding the value of the securities loaned. All collateral
consists of either cash or U.S. government securities. The Lending Agent
invests the cash collateral received in an eligible money market vehicle in
accordance with the investment restrictions of the Fund. The Lending Agent will
indemnify the Fund for any loss resulting from a borrowers's failure to return
a loaned security when due. As of November 30, 2003, the Fund had loaned
securities with a value of $873,790 and received cash collateral of $909,700,
which was invested in a money market fund as included in the accompanying
portfolio of investments. For the year ended November 30, 2003, the Fund earned
fee income of $10,368 which is included in interest income in the accompanying
statement of operations.
_______________________________________________________________________________
18 o ALLIANCEBERNSTEIN UTILITY INCOME FUND
NOTE F
Capital Stock
There are 12,000,000,000 shares of $.001 par value capital stock authorized,
divided into four classes, designated Class A, Class B, Class C and Advisor
Class shares. Each class consists of 3,000,000,000 authorized shares.
Transactions in capital stock were as follows:
Shares Amount
--------------------------- ------------------------------
Year Ended Year Ended Year Ended Year Ended
November 30, November 30, November 30, November 30,
2003 2002 2003 2002
------------ ------------ -------------- --------------
CLASS A
Shares sold 1,182,136 2,432,678 $ 13,698,054 $ 31,769,267
- -------------------------------------------------------------------------------
Shares issued in
reinvestment of
dividends 72,066 91,551 832,537 1,143,371
- -------------------------------------------------------------------------------
Shares converted
from Class B 129,591 151,651 1,529,720 1,871,964
- -------------------------------------------------------------------------------
Shares redeemed (1,610,708) (3,422,345) (18,667,507) (42,404,727)
- -------------------------------------------------------------------------------
Net decrease (226,915) (746,465) $ (2,607,196) $ (7,620,125)
===============================================================================
CLASS B
Shares sold 1,438,187 2,131,294 $ 16,471,374 $ 26,813,552
- -------------------------------------------------------------------------------
Shares issued in
reinvestment of
dividends 83,669 115,696 954,114 1,433,112
- -------------------------------------------------------------------------------
Shares converted
to Class A (132,588) (153,482) (1,529,720) (1,871,964)
- -------------------------------------------------------------------------------
Shares redeemed (2,764,371) (4,729,233) (31,299,270) (56,561,673)
- -------------------------------------------------------------------------------
Net decrease (1,375,103) (2,635,725) $(15,403,502) $(30,186,973)
===============================================================================
CLASS C
Shares sold 685,304 1,014,029 $ 7,865,021 $ 12,790,132
- -------------------------------------------------------------------------------
Shares issued in
reinvestment of
dividends 21,901 30,038 250,438 372,941
- -------------------------------------------------------------------------------
Shares redeemed (982,406) (1,622,614) (11,275,720) (19,547,347)
- -------------------------------------------------------------------------------
Net decrease (275,201) (578,547) $ (3,160,261) $ (6,384,274)
===============================================================================
ADVISOR CLASS
Shares sold 242,378 130,484 $ 2,761,640 $ 1,656,667
- -------------------------------------------------------------------------------
Shares issued in
reinvestment of
dividends 2,890 2,041 33,690 25,497
- -------------------------------------------------------------------------------
Shares redeemed (291,010) (174,119) (3,411,687) (2,188,447)
- -------------------------------------------------------------------------------
Net decrease (45,742) (41,594) $ (616,357) $ (506,283)
===============================================================================
_______________________________________________________________________________
ALLIANCEBERNSTEIN UTILITY INCOME FUND o 19
NOTE G
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 comparable 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 H
Joint Credit Facility
A number of open-end mutual funds managed by the Adviser, including the Fund,
participate in a $500 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, 2003.
NOTE I
Distributions to Shareholders
The tax character of distributions paid during the fiscal years ended November
30, 2003 and November 30, 2002 were as follows:
2003 2002
============= =============
Distributions paid from:
Ordinary income $ 2,890,700 $ 4,134,813
------------- -------------
Total taxable distributions 2,890,700 4,134,813
Tax return of capital -0- -0-
------------- -------------
Total distributions paid $ 2,890,700 $ 4,134,813
============= =============
_______________________________________________________________________________
20 o ALLIANCEBERNSTEIN UTILITY INCOME FUND
As of November 30, 2003, the components of accumulated earnings/(deficit) on a
tax basis were as follows:
Accumulated capital and other losses $ (109,482,367)(a)
Undistributed ordinary income 1,673,128
Unrealized appreciation/(depreciation) 21,427,732(b)
--------------
Total accumulated earnings/(deficit) $ (86,381,507)
--------------
(a) On November 30, 2003, the Fund had a net capital loss carryforward of
$109,482,367, of which $21,143,136 expires in the year 2009 and $88,339,231
which expires in the year 2010. During the fiscal year, the Fund utilized
capital loss carryforwards of $609,306.
(b) The difference between book-basis and tax-basis unrealized
appreciation/(depreciation) is attributable primarily to the tax deferral of
losses on wash sales.
During the current fiscal year, permanent differences, primarily due to foreign
currency transactions, resulted in a net decrease in undistributed net
investment income and a corresponding decrease in accumulated net investment
loss on investments and foreign currency transactions.
NOTE J
Legal Proceedings
As has been previously reported in the press, the Staff of the U.S. Securities
and Exchange Commission ("SEC") and the NYAG have been investigating practices
in the mutual fund industry identified as "market timing" and "late trading" of
mutual fund shares. Certain other regulatory authorities have also been
conducting investigations into these practices within the industry and have
requested that Alliance Capital Management L.P. ("Alliance Capital"), the
Fund's Adviser, provide information to them. Alliance Capital has been
cooperating and will continue to cooperate with all of these authorities.
Please see "Subsequent Events" below for a description of the agreements
reached by Alliance Capital and the SEC and NYAG in connection with the
investigations mentioned above.
The special committee of Alliance Capital's Board of Directors, comprised of
the members of Alliance Capital's Audit Committee and the other independent
member of the Board, is continuing to direct and oversee an internal
investigation and a comprehensive review of the facts and circumstances
relevant to the SEC's and the NYAG's investigations.
In addition, the Independent Directors of the Fund (the "Independent
Directors") have initiated an investigation of the above-mentioned matters with
the advice of an independent economic consultant and independent counsel. The
Independent Directors have formed a special committee to supervise the
investigation.
On October 2, 2003, a putative class action complaint entitled Hindo et al. v.
AllianceBernstein Growth & Income Fund et al. (the "Hindo Complaint") was
_______________________________________________________________________________
ALLIANCEBERNSTEIN UTILITY INCOME FUND o 21
filed against Alliance Capital; Alliance Capital Management Holding L.P.;
Alliance Capital Management Corporation; AXA Financial, Inc.; certain of the
AllianceBernstein Mutual Funds, including the Fund; Gerald Malone; Charles
Schaffran (collectively, the "Alliance Capital defendants"); and certain other
defendants not affiliated with Alliance Capital. The Hindo Complaint was filed
in the United States District Court for the Southern District of New York by
alleged shareholders of two of the AllianceBernstein Mutual Funds. The Hindo
Complaint alleges that certain of the Alliance Capital defendants failed to
disclose that they improperly allowed certain hedge funds and other
unidentified parties to engage in late trading and market timing of
AllianceBernstein Fund securities, violating Sections 11 and 15 of the
Securities Act, Sections 10(b) and 20(a) of the Exchange Act, and Sections 206
and 215 of the Advisers Act. Plaintiffs seek an unspecified amount of
compensatory damages and rescission of their contracts with Alliance Capital,
including recovery of all fees paid to Alliance Capital pursuant to such
contracts.
Since October 2, 2003, approximately forty additional lawsuits making factual
allegations similar to those in the Hindo Complaint were filed against Alliance
Capital and certain other defendants, some of which name the Fund as a
defendant. All of these lawsuits seek an unspecified amount of damages.
As a result of the matters more fully discussed in the note entitled
"Subsequent Events" below, investors in the AllianceBernstein Mutual Funds may
choose to redeem their investments. This may require the AllianceBernstein
Mutual Funds to sell investments held by those funds to provide for sufficient
liquidity and could also have an adverse effect on the investment performance
of the AllianceBernstein Mutual Funds.
NOTE K
Subsequent Events
On December 18, 2003, Alliance Capital, the Fund's Adviser, confirmed that it
had reached terms with the SEC and the NYAG for the resolution of regulatory
claims relating to the practice of "market timing" mutual fund shares in some
of the AllianceBernstein Mutual Funds. The agreement with the SEC is reflected
in an Order of the Commission ("SEC Order"). The agreement with the NYAG is
subject to final, definitive documentation. Among the key provisions of these
agreements are the following:
(i) Alliance Capital agreed to establish a $250 million fund (the
"Reimbursement Fund") to compensate mutual fund shareholders for the adverse
effects of market timing attributable to market timing relationships described
in the SEC Order. According to the SEC Order, the Reimbursement Fund is to be
paid, in order of priority, to fund investors based on (i) their aliquot share
of losses suffered by the fund due to market timing, and (ii) a proportionate
share of advisory fees paid by such fund during the period of such market
timing;
_______________________________________________________________________________
22 o ALLIANCEBERNSTEIN UTILITY INCOME FUND
(ii) Alliance Capital agreed to reduce the advisory fees it receives from
some of the AllianceBernstein long-term, open-end retail funds, commencing
January 1, 2004, for a period of at least five years. The determination of
which funds will have their fees reduced and to what degree is subject to the
terms of the definitive agreement with the NYAG; and
(iii) Alliance Capital agreed to implement changes to its governance and
compliance procedures. Additionally, the SEC Order contemplates that Alliance
Capital's registered investment company clients, including the Fund, will
introduce governance and compliance changes.
In anticipation of final, definitive documentation and effective January 1,
2004, the Adviser began waiving a portion of its advisory fee. For a more
complete description of this waiver, please see "Advisory Fee and Other
Transactions with Affiliates" above.
_______________________________________________________________________________
ALLIANCEBERNSTEIN UTILITY INCOME FUND o 23
FINANCIAL HIGHLIGHTS
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
Class A
---------------------------------------------------------------
Year Ended November 30,
---------------------------------------------------------------
2003 2002 2001 2000 1999
----------- ----------- ----------- ----------- -----------
Net asset value,
beginning of period $11.01 $14.17 $17.90 $16.91 $14.68
INCOME FROM INVESTMENT
OPERATIONS
Net investment income(a) .32(b) .27(b) .23 1.40 .36(b)
Net realized and unrealized
gain (loss) on investment
and foreign currency
transactions 1.30 (3.17) (2.88) .85 2.53
Net increase (decrease)
in net asset value from
operations 1.62 (2.90) (2.65) 2.25 2.89
LESS: DIVIDENDS AND
DISTRIBUTIONS
Dividends from net
investment income (.24) (.26) (.97) (.32) (.32)
Tax return of capital -0- -0- (.11) -0- -0-
Distributions from
net realized gain on
investment transactions -0- -0- -0- (.94) (.34)
Total dividends and
distributions (.24) (.26) (1.08) (1.26) (.66)
Net asset value, end of
period $12.39 $11.01 $14.17 $17.90 $16.91
TOTAL RETURN
Total investment return
based on net asset
value(c) 14.89% (20.65)% (15.75)% 14.14% 20.27%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(000's omitted) $52,188 $48,908 $73,487 $52,172 $29,841
Ratio to average net assets of:
Expenses, net of waivers/
reimbursements 1.50% 1.50% 1.46% 1.46% 1.50%
Expenses, before waivers/
reimbursements 1.70% 1.61% 1.46% 1.46% 1.73%
Net investment income 2.79%(b) 2.18%(b) 1.38% 8.08% 2.26%(b)
Portfolio turnover rate 74% 99% 21% 24% 19%
See footnote summary on page 28.
_______________________________________________________________________________
24 o ALLIANCEBERNSTEIN UTILITY INCOME FUND
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
Class B
---------------------------------------------------------------
Year Ended November 30,
---------------------------------------------------------------
2003 2002 2001 2000 1999
----------- ----------- ----------- ----------- -----------
Net asset value,
beginning of period $10.87 $13.98 $17.72 $16.80 $14.62
INCOME FROM INVESTMENT
OPERATIONS
Net investment income(a) .24(b) .18(b) .11 1.30 .25(b)
Net realized and unrealized
gain (loss) on investment
and foreign currency
transactions 1.27 (3.12) (2.84) .81 2.52
Net increase (decrease)
in net asset value from
operations 1.51 (2.94) (2.73) 2.11 2.77
LESS: DIVIDENDS AND
DISTRIBUTIONS
Dividends from net
investment income (.14) (.17) (.90) (.25) (.25)
Tax return of capital -0- -0- (.11) -0- -0-
Distributions from
net realized gain on
investment transactions -0- -0- -0- (.94) (.34)
Total dividends and
distributions (.14) (.17) (1.01) (1.19) (.59)
Net asset value,
end of period $12.24 $10.87 $13.98 $17.72 $16.80
TOTAL RETURN
Total investment return
based on net asset
value(c) 13.99% (21.18)% (16.38)% 13.32% 19.45%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(000's omitted) $109,717 $112,372 $181,338 $142,975 $80,806
Ratio to average net assets of:
Expenses, net of waivers/
reimbursements 2.20% 2.20% 2.17% 2.18% 2.20%
Expenses, before waivers/
reimbursements 2.44% 2.34% 2.17% 2.18% 2.44%
Net investment income 2.08%(b) 1.49%(b) .67% 7.63% 1.55%(b)
Portfolio turnover rate 74% 99% 21% 24% 19%
See footnote summary on page 28.
_______________________________________________________________________________
ALLIANCEBERNSTEIN UTILITY INCOME FUND o 25
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
Class C
---------------------------------------------------------------
Year Ended November 30,
---------------------------------------------------------------
2003 2002 2001 2000 1999
----------- ----------- ----------- ----------- -----------
Net asset value,
beginning of period $10.89 $14.00 $17.74 $16.82 $14.65
INCOME FROM INVESTMENT
OPERATIONS
Net investment income(a) .24(b) .18(b) .11 1.30 .25(b)
Net realized and unrealized
gain (loss) on investment
and foreign currency
transactions 1.28 (3.12) (2.84) .81 2.51
Net increase (decrease)
in net asset value from
operations 1.52 (2.94) (2.73) 2.11 2.76
LESS: DIVIDENDS AND
DISTRIBUTIONS
Dividends from net
investment income (.14) (.17) (.90) (.25) (.25)
Tax return of capital -0- -0- (.11) -0- -0-
Distributions from
net realized gain on
investment transactions -0- -0- -0- (.94) (.34)
Total dividends and
distributions (.14) (.17) (1.01) (1.19) (.59)
Net asset value,
end of period $12.27 $10.89 $14.00 $17.74 $16.82
TOTAL RETURN
Total investment return
based on net asset
value(c) 14.06% (21.15)% (16.36)% 13.30% 19.34%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(000's omitted) $32,680 $32,013 $49,259 $34,253 $20,605
Ratio to average net assets of:
Expenses, net of waivers/
reimbursements 2.20% 2.20% 2.17% 2.18% 2.20%
Expenses, before waivers/
reimbursements 2.42% 2.33% 2.17% 2.18% 2.44%
Net investment income 2.09%(b) 1.50%(b) .68% 7.64% 1.56%(b)
Portfolio turnover rate 74% 99% 21% 24% 19%
See footnote summary on page 28.
_______________________________________________________________________________
26 o ALLIANCEBERNSTEIN UTILITY INCOME FUND
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
Advisor Class
---------------------------------------------------------------
Year Ended November 30,
---------------------------------------------------------------
2003 2002 2001 2000 1999
----------- ----------- ----------- ----------- -----------
Net asset value,
beginning of period $11.07 $14.23 $17.97 $16.95 $14.70
INCOME FROM INVESTMENT
OPERATIONS
Net investment income(a) .37(b) .33(b) .27 1.54 .42(b)
Net realized and unrealized
gain (loss) on investment
and foreign currency
transactions 1.28 (3.19) (2.89) .77 2.52
Net increase (decrease)
in net asset value from
operations 1.65 (2.86) (2.62) 2.31 2.94
LESS: DIVIDENDS AND
DISTRIBUTIONS
Dividends from net
investment income (.28) (.30) (1.00) (.35) (.35)
Tax return of capital -0- -0- (.12) -0- -0-
Distributions from
net realized gain on
investment transactions -0- -0- -0- (.94) (.34)
Total dividends and
distributions (.28) (.30) (1.12) (1.29) (.69)
Net asset value,
end of period $12.44 $11.07 $14.23 $17.97 $16.95
TOTAL RETURN
Total investment return based
on net asset value(c) 15.12% (20.32)% (15.58)% 14.49% 20.62%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(000's omitted) $2,312 $2,563 $3,890 $2,016 $1,532
Ratio to average net assets of:
Expenses, net of waivers/
reimbursements 1.20% 1.20% 1.16% 1.17% 1.20%
Expenses, before waivers/
reimbursements 1.41% 1.31% 1.16% 1.17% 1.41%
Net investment income 3.21%(b) 2.49%(b) 1.65% 8.64% 2.55%(b)
Portfolio turnover rate 74% 99% 21% 24% 19%
See footnote summary on page 28.
_______________________________________________________________________________
ALLIANCEBERNSTEIN UTILITY INCOME FUND o 27
(a) Based on average shares outstanding.
(b) Net of fees waived and expenses reimbursed by the Adviser.
(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 return does not reflect the deduction of taxes that a shareholder
would pay on Fund distributions or the redemption of Fund shares. Total
investment return calculated for a period of less than one year is not
annualized.
_______________________________________________________________________________
28 o ALLIANCEBERNSTEIN UTILITY INCOME FUND
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors and Shareholders of AllianceBernstein 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 AllianceBernstein Utility Income
Fund, Inc., 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 five years in the period then ended, in
conformity with accounting principles generally accepted in the United States
of America. 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 auditing standards generally accepted in the
United States of America, 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, 2003 by
correspondence with the custodian and brokers, provide a reasonable basis for
our opinion.
PricewaterhouseCoopers LLP
New York, New York
January 23, 2004
TAX INFORMATION (unaudited)
For the fiscal year ended November 30, 2003 certain dividends paid by the Fund
may be subject to a maximum tax rate of 15%, as provided for by the Jobs and
Growth Tax Relief Reconciliation Act of 2003. The Fund designates a maximum
amount of $6,832,095 as qualified dividend income, which is taxed at a maximum
rate of 15%.
For corporate shareholders, 100% of the total ordinary income distribution paid
during the current fiscal year ended November 30, 2003 qualifies for the
corporate dividends received deduction.
The information and distributions reported herein may differ from the
information and distributions taxable to the shareholders for the calendar year
ending December 31, 2003. Complete information will be computed and reported in
conjunction with your 2003 Form 1099-DIV.
_______________________________________________________________________________
ALLIANCEBERNSTEIN UTILITY INCOME FUND o 29
BOARD OF DIRECTORS
William H. Foulk, Jr.(1), Chairman
Marc O. Mayer, President
Ruth Block(1)
David H. Dievler(1)
John H. Dobkin(1)
Clifford L. Michel(1)
Donald J. Robinson(1)
OFFICERS
Paul C. Rissman(2), Senior Vice President
Thomas J. Bardong, Vice President
Annie Tsao(2), Vice President
Mark R. Manley, 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
AllianceBernstein Investment Research and Management, Inc.
1345 Avenue of the Americas
New York, NY 10105
Legal Counsel
Seward & Kissel LLP
One Battery Park Plaza
New York, NY 10004
Transfer Agent
Alliance Global Investor Services, Inc.
P.O. Box 786003
San Antonio, TX 78278-6003
Toll-free (800) 221-5672
Independent Auditors
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York 10036
(1) Member of the Audit Committee.
(2) Mr. Rissman and Ms. Tsao are the persons primarily responsible for the
day-to-day management of the Fund's investment portfolio.
_______________________________________________________________________________
30 o ALLIANCEBERNSTEIN UTILITY INCOME FUND
MANAGEMENT OF THE FUND
Board of Directors Information
The business and affairs of the Fund are managed under the direction of the
Board of Directors. Certain information concerning the Fund's Directors is set
forth below.
PORTFOLIOS
IN FUND OTHER
NAME, AGE OF DIRECTOR, PRINCIPAL COMPLEX DIRECTORSHIP
ADDRESS OCCUPATION(S) OVERSEEN BY HELD BY
(YEARS OF SERVICE*) DURING PAST 5 YEARS DIRECTOR DIRECTOR
- ------------------------------------------------------------------------------------------------------------
DISINTERESTED DIRECTORS
William H. Foulk, Jr., #+, 71 Investment adviser and an inde- 116 None
2 Sound View Drive pendent consultant. He was
Suite 100 formerly Senior Manager of
Greenwich, CT 06830 Barrett Associates, Inc., a
(10) registered investment adviser,
Chairman of the Board with which he had been associ-
ated since prior to 1999. He was
formerly Deputy Comptroller and
Chief Investment Officer of the
State of New York and, prior
thereto, Chief Investment Officer
of the New York Bank for Savings.
Ruth Block, #+, 73 Formerly Executive Vice 96 None
500 SE Mizner Blvd. President and Chief Insurance
Boca Raton, FL 33432 Officer of The Equitable Life
(10) Assurance Society of the United
States; Chairman and Chief Executive
Officer of Evlico; Director of
Avon, BP (oil and gas), Ecolab
Incorporated (specialty chemicals),
Tandem Financial Group and
Donaldson, Lufkin & Jenrette
Securities Corporation; former
Governor at Large National
Association of Securities
Dealers, Inc.
David H. Dievler, #+, 74 Independent consultant. Until 100 None
P.O. Box 167 December 1994 he was Senior
Spring Lake, NJ 07762 Vice President of Alliance Capital
(10) Management Corporation ("ACMC")
responsible for mutual fund administration.
Prior to joining ACMC in
1984 he was Chief Financial Officer
of Eberstadt Asset Management
since 1968. Prior to that he
was a Senior Manager at Price
Waterhouse & Co. Member of
American Institute of Certified
Public Accountants since 1953.
_______________________________________________________________________________
ALLIANCEBERNSTEIN UTILITY INCOME FUND o 31
PORTFOLIOS
IN FUND OTHER
NAME, AGE OF DIRECTOR, PRINCIPAL COMPLEX DIRECTORSHIP
ADDRESS OCCUPATION(S) OVERSEEN BY HELD BY
(YEARS OF SERVICE*) DURING PAST 5 YEARS DIRECTOR DIRECTOR
- ------------------------------------------------------------------------------------------------------------
DISINTERESTED DIRECTORS
(continued)
John H. Dobkin, #+, 61 Consultant. Formerly President 98 None
P.O. Box 12 of Save Venice, Inc. (preservation
Annandale, NY 12504 organization) from 2001-2002,
(10) a Senior Advisor from June 1999
-June 2000 and President of
Historic Hudson Valley (historic
preservation) from December 1989
-May 1999. Previously, Director of
the National Academy of Design
and during 1988 - 1992, he was
Director and Chairman of the Audit
Committee of ACMC.
Clifford L. Michel, #+, 64 Senior Counsel of the law firm 97 Placer Dome,
15 St. Bernard's Road of Cahill Gordon & Reindel since Inc.
Gladstone, NJ 07934 February 2001 and a partner of
(10) that firm for more than twenty-five
years prior thereto. He is President
and Chief Executive Officer of
Wenonah Development Company
(investments) and a Director of
Placer Dome, Inc. (mining).
Donald J. Robinson, #+, 69 Senior Counsel to the law firm of 96 None
98 Hell's Peak Road Orrick, Herrington & Sutcliffe LLP
Weston, VT 05161 since prior to 1999. Formerly a
(7) senior partner and a member of
the Executive Committee of that
firm. He was also a member and
Chairman of the Municipal Securities
Rulemaking Board and Trustee
of the Museum of the City of
New York.
INTERESTED DIRECTOR
Marc O. Mayer, ++, 46 Executive Vice President of ACMC 68 None
1345 Avenue of the since 2001; prior thereto, Chief
Americas Executive Officer of Sanford C.
New York, NY 10105 Bernstein & Co., LLC and its
(Elected November 18, predecessor since prior to 1999.
2003)
* There is no stated term of office for the Fund's Directors.
# Member of the Audit Committee.
+ Member of the Nominating Committee.
++ Mr. Mayer is an "interested director", as defined in the 1940 Act, due to
his position as Executive Vice President of ACMC.
_______________________________________________________________________________
32 o ALLIANCEBERNSTEIN UTILITY INCOME FUND
Officer Information
Certain information concerning the Fund's Officers is listed below.
NAME, POSITION(S) PRINCIPAL OCCUPATION
ADDRESS* AND AGE HELD WITH FUND DURING PAST 5 YEARS**
- --------------------------------------------------------------------------------------------------------------
Marc O. Mayer, 46 President Executive Vice President of Alliance
Capital Management Corporation
("ACMC")** since 2001; prior thereto,
Chief Executive Officer of Sanford C.
Bernstein & Co., LLC and its
predecessor since prior to 1999.
Paul C. Rissman, 47 Senior Vice President Executive Vice President of Alliance
Capital Management Corporation
ACMC, ** with which he has been
associated since prior to 1999.
Thomas J. Bardong, 58 Vice President Senior Vice President of ACMC, ** with
which he has been associated since
prior to 1999.
Annie Tsao, 51 Vice President Senior Vice President of ACMC,** with
which she has been associated since
prior to 1999.
Mark R. Manley, 41 Secretary Senior Vice President and Acting
General Counsel of ACMC, ** with
which he has been associated since
prior to 1999.
Mark D. Gersten, 53 Treasurer and Chief Senior Vice President of Alliance Global
Financial Officer Investor Services, Inc. ("AGIS"),**
with which he has been associated since
prior to 1999.
Vincent S. Noto, 39 Controller Vice President of AGIS, ** with which
he has been associated since prior to
1999.
* The address for each of the Fund's officers is 1345 Avenue of the Americas,
New York, NY 10105.
** ACMC and AGIS are affiliates of the Fund.
The Fund's Statement of Additional Information ("SAI") has additional
information about the Fund's Directors and Officers and is available without
charge upon request. Contact your financial representative or Alliance Capital
at (800) 227-4618 for a free prospectus or SAI.
_______________________________________________________________________________
ALLIANCEBERNSTEIN UTILITY INCOME FUND o 33
ALLIANCEBERNSTEIN FAMILY OF FUNDS
- --------------------------------------------
Wealth Strategies Funds
- --------------------------------------------
Balanced Wealth Strategy
Wealth Appreciation Strategy
Wealth Preservation Strategy
Tax-Managed Balanced Wealth Strategy*
Tax-Managed Wealth Appreciation Strategy
Tax-Managed Wealth Preservation Strategy**
- --------------------------------------------
Blended Style Series
- --------------------------------------------
U.S. Large Cap Portfolio
- --------------------------------------------
Growth Funds
- --------------------------------------------
Domestic
Growth Fund
Health Care Fund
Mid-Cap Growth Fund
Premier Growth Fund
Small Cap Growth Fund +
Technology Fund
Global & International
All-Asia Investment Fund
Global Small Cap Fund
Greater China '97 Fund
International Premier Growth Fund
New Europe Fund
Worldwide Privatization Fund
Select Investor Series
Biotechnology Portfolio
Premier Portfolio
Technology Portfolio
- --------------------------------------------
Value Funds
- --------------------------------------------
Domestic
Balanced Shares
Disciplined Value Fund
Growth & Income Fund
Real Estate Investment Fund
Small Cap Value Fund
Utility Income Fund
Value Fund
Global & International
Global Value Fund
International Value Fund
- --------------------------------------------
Taxable Bond Funds
- --------------------------------------------
Americas Government Income Trust
Corporate Bond Portfolio
Emerging Market Debt Fund
Global Strategic Income Trust
High Yield Fund
Multi-Market Strategy Trust
Quality Bond Portfolio
Short Duration Portfolio
U.S. Government Portfolio
- --------------------------------------------
Municipal Bond Funds
- --------------------------------------------
National
Insured National
Arizona
California
Insured California
Florida
Massachusetts
Michigan
Minnesota
New Jersey
New York
Ohio
Pennsylvania
Virginia
- --------------------------------------------
Intermediate Municipal Bond Funds
- --------------------------------------------
Intermediate California
Intermediate Diversified
Intermediate New York
- --------------------------------------------
Closed-End Funds
- --------------------------------------------
All-Market Advantage Fund
ACM Income Fund
ACM Government Opportunity Fund
ACM Managed Dollar Income Fund
ACM Managed Income Fund
ACM Municipal Securities Income Fund
California Municipal Income Fund
National Municipal Income Fund
New York Municipal Income Fund
The Spain Fund
World Dollar Government Fund
World Dollar Government Fund II
We also offer Exchange Reserves,++ which serves as the money market fund
exchange vehicle for the AllianceBernstein mutual funds.
For more complete information on any AllianceBernstein mutual fund, including
investment objectives and policies, sales charges, expenses, risks and other
matters of importance to prospective investors, visit our web site at
www.alliancebernstein.com or call us at (800) 227-4618 for a current
prospectus. Please read the prospectus carefully before you invest or send
money.
* Formerly Growth Investors Fund.
** Formerly Conservative Investors Fund.
+ Quasar Fund changed its name to Small Cap Growth Fund on 11/3/03.
++ An investment in the Fund is not a deposit in a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency. Although the Fund seeks to preserve the value of your investment at
$1.00 per share, it is possible to lose money by investing in the Fund.
_______________________________________________________________________________
34 o ALLIANCEBERNSTEIN UTILITY INCOME FUND
NOTES
_______________________________________________________________________________
ALLIANCEBERNSTEIN UTILITY INCOME FUND o 35
NOTES
_______________________________________________________________________________
36 o ALLIANCEBERNSTEIN UTILITY INCOME FUND
ALLIANCEBERNSTEIN UTILITY INCOME FUND
1345 Avenue of the Americas
New York, NY 10105
(800) 221-5672
AllianceBernstein [LOGO](SM)
Investment Research and Management
(SM) This service mark used under license from the owner, Alliance Capital
Management L.P.
ACBVIUIFAR1103
ITEM 2. CODE OF ETHICS.
(a) The registrant has adopted a code of ethics that applies to its principal
executive officer, principal financial officer and principal accounting
officer. A copy of the registrant's code of ethics is filed herewith as
Exhibit 10(a)(1).
(b) During the period covered by this report, no amendments were made to the
provisions of the code of ethics adopted in 2(a) above.
(c) During the period covered by this report, no implicit or explicit waivers
to the provisions of the code of ethics adopted in 2(a) above were granted.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
The registrant's Board of Directors has determined that independent directors
David H. Dievler and William H. Foulk, Jr. qualify as audit committee financial
experts.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Form N-CSR disclosure requirement not yet effective with respect to the
registrant.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable to the registrant.
ITEM 6. [RESERVED]
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable to the registrant.
ITEM 8. [RESERVED]
ITEM 9. CONTROLS AND PROCEDURES.
(a) The registrant's principal executive officer and principal financial
officer have concluded that the registrant's disclosure controls and procedures
(as defined in Rule 30a-2(c) under the Investment Company Act of 1940, as
amended) are effective at the reasonable assurance level based on their
evaluation of these controls and procedures as of a date within 90 days of the
filing date of this document.
(b) There were no significant changes in the registrant's internal controls
that could significantly affect these controls subsequent to the date of their
evaluation, including any corrective actions with regard to significant
deficiencies and material weaknesses.
ITEM 10. EXHIBITS.
The following exhibits are attached to this Form N-CSR:
EXHIBIT NO. DESCRIPTION OF EXHIBIT
10 (a) (1) Code of ethics that is subject to the disclosure of Item 2
hereof
10 (b) (1) Certification of Principal Executive Officer Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002
10 (b) (2) Certification of Principal Financial Officer Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002
10 (c) Certification of Principal Executive Officer and Principal
Financial Officer Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant): AllianceBernstein Utility Income Fund, Inc.
By: /s/ Marc O. Mayer
------------------
Marc O. Mayer
President
Date: January 29, 2004
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By: /s/ Marc O. Mayer
------------------
Marc O. Mayer
President
Date: January 29, 2004
By: /s/ Mark D. Gersten
--------------------
Mark D. Gersten
Treasurer and Chief Financial Officer
Date: January 29, 2004