ALLIANCE HIGH YIELD FUND
ANNUAL REPORT
AUGUST 31, 1998
ALLIANCE CAPITAL
LETTER TO SHAREHOLDERS ALLIANCE HIGH YIELD FUND
_______________________________________________________________________________
October 26, 1998
Dear Shareholder:
This annual report contains investment results and market commentary for the
period ended August 31, 1998.
INVESTMENT RESULTS
The recent market environment has been difficult for high yield fixed income
securities. The slowing of the U.S. economy and forced selling by highly
leveraged hedge funds has caused corporate bond spreads to widen dramatically
versus Treasuries. This "flight to quality" has left inventories of high yield
bonds "high on the street" during the six-month period ended August 31, 1998
and ultimately resulted in a negative total return for the market of -4.48% as
measured by the First Boston High Yield Index. Your Fund is focused primarily
on the "B-rated" area of the market, as we believe it offers the greatest total
return potential versus other areas of the high yield market. Unfortunately,
this "B-rated" area has been the area of the high yield market most affected
over the short-term. As a result, your Fund has moderately underperformed its
benchmark giving back -5.33% over the last six months.
During the 12-month period ended August 31, 1998, our strategy has indeed paid
off, as we maintained a "B-rated" profile in the Fund and had excellent credit
selection. The result has been a significant outperformance by the Fund of
6.42% over its benchmark which returned 1.45%. This "B-rated" profile is a
strategy we have used over the years and is one we continue to employ in
today's market. We believe that after the recent turmoil begins to fade,
investors will start focusing on the attractive spread levels reached in the
high yield market, and we will be poised to take advantage of that interest.
INVESTMENT RESULTS*
Period ended August 31, 1998
TOTAL RETURNS
6 MONTHS 12 MONTHS
-------- ---------
ALLIANCE HIGH YIELD FUND
Class A -5.33% 6.42%
Class B -5.70% 5.69%
Class C -5.70% 5.69%
FIRST BOSTON HIGH YIELD INDEX -4.48% 1.45%
* THE FUND'S INVESTMENT RESULTS ARE CUMULATIVE TOTAL RETURNS FOR THE PERIOD
AND ARE BASED ON THE NET ASSET VALUE OF EACH CLASS OF SHARES AS OF AUGUST 31,
1998. ALL FEES AND EXPENSES RELATED TO THE OPERATION OF THE FUND HAVE BEEN
DEDUCTED, BUT NO ADJUSTMENT HAS BEEN MADE FOR SALES CHARGES THAT MAY APPLY WHEN
SHARES ARE PURCHASED OR REDEEMED. TOTAL RETURN FOR ADVISOR CLASS SHARES WILL
DIFFER DUE TO DIFFERENT EXPENSES CHARGED TO THAT CLASS. PAST PERFORMANCE IS NO
GUARANTEE OF FUTURE RESULTS.
THE FIRST BOSTON HIGH YIELD INDEX IS AN UNMANAGED, TRADER PRICED PORTFOLIO
CONSTRUCTED TO MIRROR THE HIGH YIELD DEBT MARKET. AN INVESTOR CANNOT INVEST
DIRECTLY IN THE INDEX.
ADDITIONAL INVESTMENT RESULTS APPEAR ON PAGE 3.
ECONOMIC REVIEW
Recently, well-publicized events in Asia, Russia and the emerging markets have
created a ripple effect that has spilled over into the domestic equity and high
yield markets. As investors grew increasingly skittish about the equity market
and the emerging market sector, they sold not only their emerging market
holdings, but anything else with credit exposure, including U.S. high yield
debt and even domestic investment grade corporate debt.
The slowdown in global growth has caused U.S. investors to question corporate
profits. This has increased volatility and pushed down prices in the equity
markets. As a result, prices in the high yield sector were further depressed.
In light of this negative confluence of events, the case can and should be made
for the high yield sector.
MARKET OUTLOOK
In spite of the recent market turmoil, our outlook for the high yield sector
continues to be constructive. The U.S. economy remains fundamentally strong.
Although some of the economy's statistics have retreated somewhat, moderate
growth should continue, inflation is low and consumer spending remains strong.
Volatility should remain elevated over the short-term as the markets grapple
with the effects of the crisis in the emerging markets. In addition, the
ongoing de-leveraging in the market, particularly from hedge funds, may keep
downward pressure
1
ALLIANCE HIGH YIELD FUND
_______________________________________________________________________________
on the high yield sector over the near-term. However, once these factors unwind
themselves, and as some stability returns to the equity markets, we expect
investors to re-evaluate the high yield sector and find compelling reasons to
invest.
PORTFOLIO STRATEGY
We are finding good value in the market as high yield spreads (to Treasuries),
which were near record lows early this year, have widened back out to levels
not seen since the early 1990s. Spreads are now approaching 600-650 basis
points for single "B" credits as compared to 400-450 basis points just two
months ago. We continue to emphasize the industrial and communications sectors
but have scaled back exposure to cyclicals. Default levels, which have been at
historic lows, may begin to show a modest uptick. Therefore, we have reduced
our exposure to lower rated securities (CCC and below--less than 5% of the
portfolio as of August 31, 1998). We find the most attractive opportunities in
the "B-rated" segment of the market which has experienced the most dramatic
spread widening in the recent sell-off. Cash remains approximately 10% of the
portfolio, as we become more selective putting new money to work. We will
continue to emphasize a fundamental, bottom up approach to analyzing individual
issues, and we believe that security selection will remain critical in the
future.
SECTOR DIVERSIFICATION
Alliance High Yield Fund's portfolio continues to offer broad diversification.
As of August 31, 1998 the Fund's portfolio included holdings from 27 different
industries, including its largest weighting of 16.2% in the communications
sector. The Fund's top 10 sectors for the period ended August 31, 1998 are
illustrated in the next column. A more complete listing of all of the Fund's
holdings can be found in the Portfolio of Investments beginning on page 5.
SECTOR DIVERSIFICATION
BUSINESS SERVICES 4.4%
CABLE 3.6%
COMMUNICATIONS 16.2%
CONSUMER MANUFACTURING 7.7%
ENERGY 5.6%
FOOD/BEV/TOBACCO 3.7%
INDUSTRIAL 4.1%
LEISURE/ENTERTAINMENT 3.7%
MEDIA 3.7%
METAL/MINERAL 4.4%
OTHER 42.9%
Thank you for your continued investment in Alliance High Yield Fund. We look
forward to reporting the Fund's investment results in upcoming periods.
Sincerely,
John D. Carifa
Chairman and President
Nelson Jantzen
Senior Vice President
Wayne Tappe
Senior Vice President
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, GUARANTEED OR ENDORSED
BY, ANY BANK; FURTHER, SUCH SHARES ARE NOT FEDERALLY INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY.
SHARES OF THE FUND INVOLVE INVESTMENT RISKS, INCLUDING THE POSSIBLE LOSS OF
PRINCIPAL.
2
INVESTMENT OBJECTIVE AND POLICIES ALLIANCE HIGH YIELD FUND
_______________________________________________________________________________
Alliance High Yield Fund is a diversified, open-end fund which seeks high total
return by maximizing current income and, to the extent consistent with that
objective, capital appreciation. The Fund will pursue this objective by
investing primarily in a diversified mix of high yield, below investment-grade
fixed income securities involving greater volatility of price and risk of loss
of principal and income than higher-quality fixed income securities.
INVESTMENT RESULTS
_______________________________________________________________________________
NAV AND SEC TOTAL RETURNS AS OF AUGUST 31, 1998
CLASS A SHARES
WITHOUT WITH
SALES CHARGE SALES CHARGE
------------ ------------
One Year 6.42% 1.86%
Since Inception* 14.64% 11.06%
SEC Yield** 10.04%
CLASS B SHARES
WITHOUT WITH
SALES CHARGE SALES CHARGE
------------ ------------
One Year 5.69% 1.84%
Since Inception* 13.88% 11.77%
SEC Yield** 9.74%
CLASS C SHARES
WITHOUT WITH
SALES CHARGE SALES CHARGE
------------ ------------
One Year 5.69% 4.73%
Since Inception* 13.88% 13.88%
SEC Yield** 9.74%
SEC TOTAL RETURNS AS OF THE MOST RECENT QUARTER-END (JUNE 30, 1998)
CLASS A CLASS B CLASS C
------- ------- -------
One Year 15.02% 15.31% 18.31%
Since Inception*** 21.91% 23.13% 25.55%
The Fund's investment results represent 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 shares or applicable contingent deferred
sales charge for Class B shares (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 returns and
principal value will fluctuate so that an investor's shares, when redeemed, may
be worth more or less than their original cost.
* Inception: 4/22/97 for all share classes.
** SEC Yields are based on SEC guidelines and are calculated on 30 days ended
August 31, 1998.
*** Not annualized.
3
ALLIANCE HIGH YIELD FUND
_______________________________________________________________________________
ALLIANCE HIGH YIELD FUND
GROWTH OF A $10,000 INVESTMENT
4/30/97* TO 8/31/98
$12,000
$11,000
$10,000
$9,000
HIGH YIELD FUND CLASS A: $11,507
FIRST BOSTON HIGH YIELD INDEX: $10,770
4/30/97 8/31/97 8/31/98
This chart illustrates the total value of an assumed $10,000 investment in
Alliance High Yield Fund Class A shares (from 4/30/97 to 8/31/98) as compared
to the performance of an appropriate broad-based index. The chart reflects the
deduction of the maximum 4.25% sales charge from the initial $10,000 investment
in the Fund and assumes the reinvestment of dividends and capital gains.
Performance for Class B, Class C and Advisor Class shares will vary from the
results shown above due to differences in expenses charged to those classes.
Past performance is not indicative of future results, and is not representative
of future gain or loss in capital value or dividend income.
The First Boston High Yield Index includes 26 industry sectors and represents
the daily behavior of the high yield markets.
When comparing Alliance High Yield Fund to the index shown above, you should
note that no charges or expenses are reflected in the performance of the index.
Alliance High Yield Fund
First Boston High Yield Index
* Month-end nearest to Fund's inception date of 4/22/97.
4
PORTFOLIO OF INVESTMENTS
AUGUST 31, 1998 ALLIANCE HIGH YIELD FUND
_______________________________________________________________________________
SHARES OR
PRINCIPAL
AMOUNT
(000) U.S. $ VALUE
- -------------------------------------------------------------------------------
CORPORATE DEBT OBLIGATIONS-82.5%
AEROSPACE & DEFENSE-1.0%
Pacific Aerospace &
Electronics, Inc.
11.25%, 8/01/05 (a) $ 4,000 $ 3,820,000
AIRLINES-2.3%
Aircraft Service
International Group, Inc.
11.00%, 8/15/05 (a) 3,500 3,395,000
Canadian Airlines Corp.
10.00%, 5/01/05 2,200 2,090,000
Trans World Airlines, Inc.
11.375%, 3/01/06 (a) 2,000 1,910,000
11.50%, 12/15/04 1,000 1,015,000
------------
8,410,000
APPAREL-0.5%
Norton McNaughton, Inc.
12.50%, 6/01/05 (a) 2,000 1,890,000
BUILDING/REAL ESTATE-0.7%
LNR Property Corp.
9.375%, 3/15/08 (a) 2,000 1,790,000
Reliant Building
Products, Inc.
Series B
10.875%, 5/01/04 1,000 935,000
------------
2,725,000
BUSINESS SERVICES-4.3%
ATC Group Services, Inc.
12.00%, 1/15/08 2,000 1,770,000
Dialog Corp. Plc.
Series A
11.00%, 11/15/07 2,000 2,110,000
Employee Solutions, Inc.
Series B
10.00%, 10/15/04 2,000 1,880,000
Geologistics Corp.
9.75%, 10/15/07 1,000 915,000
MSX International, Inc.
11.375%, 1/15/08 2,000 1,950,000
TM Group Holdings Plc.
11.00%, 5/15/08 (a) 5,000 4,962,500
T/SF Communications
Corp.
Series B
10.375%, 11/01/07 2,000 1,960,000
------------
15,547,500
CABLE-3.6%
EchoStar DBS Corp.
12.50%, 7/01/02 2,000 2,030,000
Knology Holdings, Inc.
11.875%, 10/15/07 (b) 1,500 765,000
Warrants, expiring 10/15/02 (c) 1,500 6,000
Optel, Inc.
11.50%, 7/01/08 (a) 4,000 3,820,000
Optel, Inc.
Series B
13.00%, 2/15/05 (d) 2,000 2,010,000
TRICOM, SA
11.375%, 9/01/04 2,000 1,615,000
United International
Holdings, Inc.
Series B
10.75%, 2/15/08 (b) 5,000 2,725,000
------------
12,971,000
CHEMICALS-3.3%
Aqua Chemical, Inc.
11.25%, 7/01/08 (a) 5,000 4,850,000
Brunner Mond Group Plc.
11.00%, 7/15/08 (a) 4,000 3,620,000
Climachem, Inc.
Series B
10.75%, 12/01/07 2,000 1,960,000
Trans-Resources, Inc.
Series B
10.75%, 3/15/08 1,500 1,477,500
------------
11,907,500
5
PORTFOLIO OF INVESTMENTS (CONTINUED) ALLIANCE HIGH YIELD FUND
_______________________________________________________________________________
SHARES OR
PRINCIPAL
AMOUNT
(000) U.S. $ VALUE
- -------------------------------------------------------------------------------
COMMUNICATIONS-15.5%
American Communications
Lines LLC/ACL
10.25%, 6/30/08 (a) $ 3,000 $ 2,917,500
American Mobile Satellite
Warrants, expiring 4/01/08 (c) 5,000 35,000
AMSC Acquisition Co. Inc.
Series B
12.25%, 4/01/08 5,000 3,375,000
CapRock Communications
Corp.
12.00%, 7/15/08 (a) 1,500 1,462,500
Cellco Finance NV
15.00%, 8/01/05 (a) 3,000 2,257,500
Dobson Wireline Co.
12.25%, 6/15/08 (a) 4,000 3,720,000
DTI Holdings, Inc.
12.50%, 3/01/08 (a)(b) 3,000 1,275,000
Warrants, expiring 3/01/08 (c) 15,000 6,270
Econophone, Inc.
11.00%, 2/15/08 (b) 5,000 2,662,500
Exodus Communications,
Inc.
11.25%, 7/01/08 (a) 3,000 2,865,000
Firstworld
Communications, Inc.
13.00%, 4/15/08 (b)(e) 3,250 991,250
ICO Global
Communications
Holdings, Ltd.
15.00%, 8/01/05 (f) 5,000 4,600,000
InterAmericas
Communications Corp.
14.00%, 10/27/07 (a)(g) 1,500 1,417,500
Ionica Group Plc.
13.50%, 8/15/06 2,000 710,000
15.00%, 5/01/07 (b)(h) 4,000 220,000
Level 3 Communications,
Inc.
9.125%, 5/01/08 2,500 2,237,500
Long Distance International,
Inc.
12.25%, 4/15/08 (a)(i) 2,000 1,920,000
Metronet Communications
Warrants, expiring 8/15/07 (c) 1,500 4,500
Northeast Optical Network,
Inc.
12.75%, 8/15/08 4,000 3,800,000
Onepoint Communications
Corp.
14.50%, 6/01/08 (a)(j) 2,000 1,670,000
Pathnet, Inc.
12.25%, 4/15/08 (a)(e) 2,000 1,810,000
Price Communications
Cellular Holdings, Inc.
11.25%, 8/15/08 (k) 4,000 3,580,000
Primus Telecommunications
Warrants, expiring 8/01/04 (c) 1,000 500
Startec Global
Communications Corp.
12.00%, 5/15/08 (a)(l) 3,000 2,685,000
US Xchange LLC
15.00%, 7/01/08 (a) 4,000 4,000,000
Versatel Telecom BV
13.25%, 5/15/08 (a) 2,000 1,930,000
Warrants, expiring 5/15/08 (c) 2,000 3,000
Winstar Communications,
Inc.
10.00%, 3/15/08 (a) 5,000 4,125,000
------------
56,280,520
CONGLOMERATES-1.4%
Wesco Distribution, Inc.
9.125%, 6/01/08 (a) 4,000 3,560,000
Wesco International, Inc.
11.125%, 6/01/08 (a)(b) 3,000 1,530,000
------------
5,090,000
6
ALLIANCE HIGH YIELD FUND
_______________________________________________________________________________
SHARES OR
PRINCIPAL
AMOUNT
(000) U.S. $ VALUE
- -------------------------------------------------------------------------------
CONSUMER MANUFACTURING-7.5%
AAI Fostergrant, Inc.
10.75%, 7/15/06 (a) $ 5,000 $ 4,700,000
Bell Sports, Inc.
11.00%, 8/15/08 (a) 5,000 4,800,000
E&S Holdings Corp.
Series B
10.375%, 10/01/06 2,500 1,343,750
Evenflo Co., Inc.
11.75%, 8/15/06 (a) 3,000 2,910,000
Hedstrom Corp.
10.00%, 6/01/07 1,000 975,000
Imperial Home Decorating
Group
11.00%, 3/15/08 (a) 2,000 1,910,000
Ntex, Inc.
11.50%, 6/01/06 (a) 3,000 2,925,000
Outsourcing Services
Group, Inc.
10.875%, 3/01/06 (a) 2,000 1,910,000
Samsonite Corp.,
10.75%, 6/15/08 (a) 5,000 3,925,000
Sweetheart Cup, Inc.
9.625%, 9/01/00 2,000 1,780,000
------------
27,178,750
ENERGY-5.5%
Bayard Drilling
Technologies, Inc.
11.00%, 6/30/05 (a) 2,000 1,875,000
Chesapeake Energy Corp.
9.625%, 5/01/05 (a) 5,000 4,125,000
Dailey International, Inc.
Series B
9.50%, 2/15/08 1,000 810,000
Eagle Geophysical, Inc.
10.75%, 7/15/08 (a) 2,000 1,870,000
Gothic Energy Corp.
Warrants, expiring 9/01/04 (c) 14,000 14,000
Gothic Production Corp.
Series B
11.125%, 5/01/05 2,000 1,610,000
Michael Petroleum Corp.
11.50%, 4/01/05 (a) 1,000 935,000
National Energy Group, Inc.
Series D
10.75%, 11/01/06 2,000 1,270,000
Northern Offshore ASA
10.00%, 5/15/05 (a) 1,000 837,500
Petroleos Mexicanos
9.25%, 3/30/18 (a) 2,000 1,480,000
Queens Sand Resources, Inc.
12.50%, 7/01/08 (a) 2,000 1,895,000
Seven Seas Petroleum, Inc.
12.50%, 5/15/05 (a) 1,000 940,000
Southwest Royalties, Inc.
Series B
10.50%, 10/15/04 2,000 1,310,000
Transamerican Energy
Series B
11.50%, 6/15/02 1,500 922,500
------------
19,894,000
FINANCIAL-2.6%
BF Saul Real Estate
Investment Trust
Series B
9.75%, 4/01/08 1,000 930,000
Metris Companies, Inc.
10.00%, 11/01/04 2,000 2,080,000
Nationwide Credit, Inc.
10.25%, 1/15/08 (a) 2,000 1,910,000
Ocwen Asset Investment
Corp.
11.50%, 7/01/05 (a) 4,000 3,540,000
Wilshire Financial Services
Group, Inc.
Series B
13.00%, 8/15/04 1,000 955,000
------------
9,415,000
7
PORTFOLIO OF INVESTMENTS (CONTINUED) ALLIANCE HIGH YIELD FUND
_______________________________________________________________________________
SHARES OR
PRINCIPAL
AMOUNT
(000) U.S. $ VALUE
- -------------------------------------------------------------------------------
FOOD/BEVERAGES/TOBACCO-3.6%
Colorado Prime
Warrants, expiring 12/31/03 (c) 500 $ 1,000
Favorite Brands
International, Inc.
10.75%, 5/15/06 (a) $ 5,000 3,675,000
Fresh Foods, Inc.
10.75%, 6/01/06 (a) 3,000 2,745,000
Grupo Azucarero Mexico,
SA de CV
11.50%, 1/15/05 (a) 2,000 1,200,000
Mastellone Hermanos, SA
11.75%, 4/01/08 (a) 2,000 1,405,000
RAB Enterprises, Inc.
10.50%, 5/01/05 (a) 3,000 2,865,000
Specialty Foods Corp.
Series B
11.125%, 10/01/02 1,500 1,301,250
------------
13,192,250
HEALTHCARE-0.5%
Fountain View, Inc.
11.25%, 4/15/08 (a) 2,000 1,850,000
INDUSTRIAL-4.0%
Generac Portable
Products LLC
11.25%, 7/01/06 (a) 3,000 2,977,500
Glasstech, Inc.
Series B
12.75%, 7/01/04 750 678,750
Warrants, expiring 6/30/04 (c) 750 937
Insilco Corp.
10.25%, 8/15/07 1,000 1,010,000
Moll Industries, Inc.
10.50%, 7/01/08 (a) 2,000 1,875,000
Morris Materials Handling
9.50%, 4/01/08 (a) 2,000 1,550,000
MVE, Inc.
12.50%, 2/15/02 (m) 2,000 1,920,000
Penhall Acquisition Corp.
12.00%, 8/01/06 (a) 3,000 2,782,500
Scovill Fasteners, Inc.
Series B
11.25%, 11/30/07 2,000 1,930,000
------------
14,724,687
LEISURE/ENTERTAINMENT-3.6%
Epic Resorts LLC
13.00%, 6/15/05 (a) 2,500 2,387,500
Warrants, expiring 6/15/05 (c) 2,500 25
HMV Media Group Plc.
10.25%, 5/15/08 (a) 5,000 4,625,000
TVN Entertainment Corp.
14.00%, 8/01/08 (n) 5,000 4,750,000
V2 Music Holdings Plc.
14.00%, 4/15/08 (a)(b)(e) 2,500 1,225,000
------------
12,987,525
MANUFACTURING-3.4%
Amtrol, Inc.
10.625%, 12/31/06 5,000 4,800,000
Dyersburg Corp.
Series B
9.75%, 9/01/07 2,000 1,730,000
Goss Graphic Systems, Inc.
12.00%, 10/15/06 4,500 4,072,500
Windmere-Durable
Holdings, Inc.
10.00%, 7/31/08 2,000 1,930,000
------------
12,532,500
MEDIA-3.6%
Innova S de R.L.
12.875%, 4/01/07 2,000 1,565,000
Jones International
Networks, Ltd.
11.75%, 7/01/05 (a) 5,000 4,737,500
Radio Unica Corp.
11.75%, 8/01/06 (a)(b) 4,000 2,340,000
Regional Independent
Media Group Plc.
10.50%, 7/01/08 (a) 2,500 2,468,750
8
ALLIANCE HIGH YIELD FUND
_______________________________________________________________________________
SHARES OR
PRINCIPAL
AMOUNT
(000) U.S. $ VALUE
- -------------------------------------------------------------------------------
Source Media, Inc.
12.00%, 11/01/04 $ 2,000 $ 1,980,000
------------
13,091,250
METALS/MINERALS-4.3%
Acme Metals, Inc.
10.875%, 12/15/07 3,500 2,222,500
Centaur Mining &
Exploration, Ltd.
11.00%, 12/01/07 5,000 4,625,000
DOE Run Resources Corp.
11.25%, 3/15/05 (a) 1,000 955,000
Ormet Corp.
11.00%, 8/15/08 (a) 3,000 2,865,000
P&L Coal Holdings Corp.
9.625%, 5/15/08 (a) 2,000 1,910,000
Pen Holdings, Inc.
9.875%, 6/15/08 (a) 3,000 2,925,000
------------
15,502,500
PAPER/PACKAGING-1.4%
Millar Western Forest
Products
9.875%, 5/15/08 (a) 3,000 2,325,000
Plainwell, Inc.
11.00%, 3/01/08 (a) 1,000 915,000
Riverwood International
Corp.
10.625%, 8/01/07 1,000 915,000
Zeta Consumer Products
11.25%, 11/30/07 (a) 2,000 900,000
------------
5,055,000
RESTAURANTS-2.2%
Ne Restaurant Co., Inc.
10.75%, 7/15/08 (a) 5,000 4,625,000
Planet Hollywood
International, Inc.
12.00%, 4/01/05 2,000 1,400,000
Romacorp, Inc.
12.00%, 7/01/06 (a) 2,000 1,950,000
------------
7,975,000
RETAIL-1.2%
Discovery Zone, Inc.
13.50%, 8/01/02 500 435,000
Warrants, expiring 8/01/07 (c) 500 125
Spin Cycle, Inc.
12.75%, 5/01/05 (a)(b)(o) 2,000 1,170,000
United Auto Group, Inc.
Series A
11.00%, 7/15/07 3,000 2,730,000
------------
4,335,125
SUPERMARKETS-1.8%
Di Giorgio Corp.
Series B
10.00%, 6/15/07 2,000 1,865,000
Pantry, Inc.
10.25%, 10/15/07 1,000 985,000
Richmont Marketing
Specialists, Inc.
10.125%, 12/15/07 (a) 4,000 3,700,000
------------
6,550,000
TECHNOLOGY-2.4%
CHS Electronics, Inc.
9.875%, 4/15/05 5,000 4,575,000
Concentric Network Corp.
Warrants, expiring 12/15/07 (c) 1,000 7,000
Elgar Holdings, Inc.
9.875%, 2/01/08 (a) 2,000 1,790,000
Phase Metrics, Inc.
10.75%, 2/01/05 (a) 3,000 2,250,000
------------
8,622,000
TRANSPORTATION-1.8%
GS Superhighway Holdings
10.25%, 8/15/07 1,500 738,750
Millenium Seacarriers, Inc.
12.00%, 7/15/05 (a)(p) 3,000 2,715,000
9
PORTFOLIO OF INVESTMENTS (CONTINUED) ALLIANCE HIGH YIELD FUND
_______________________________________________________________________________
SHARES OR
PRINCIPAL
AMOUNT
(000) U.S. $ VALUE
- -------------------------------------------------------------------------------
MTL, Inc.
10.00%, 6/15/06 (a) $ 2,000 $ 1,895,000
Panoceanic Bulk Carriers,
Ltd.
12.00%, 12/15/07 2,000 1,410,000
------------
6,758,750
UTILITIES-0.5%
Cathay International, Ltd.
13.00%, 4/15/08 (a) 3,000 2,025,000
Total Corporate Debt Obligations
(cost $337,361,294) 300,330,857
NON-CONVERTIBLE PREFERRED STOCKS-1.1%
Dobson Communications
Corp.
12.25% (q) 1,059 1,088,123
HH Acquisition Corp.
13.50% (a) 3,000 2,850,000
Total Non-Convertible Preferred Stocks
(cost $4,061,198) 3,938,123
TIME DEPOSIT-13.8%
Bank of New York
5.125%, 9/01/98
(cost $50,134,000) 50,134 50,134,000
TOTAL INVESTMENTS-97.4%
(cost $391,556,492) 354,402,980
Other assets less liabilities-2.6% 9,575,463
NET ASSETS-100% $ 363,978,443
(a) Securities are exempt from registration under Rule 144A of the Securities
Act of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At August 31, 1998,
these securities amounted to $190,163,750 or 52.2% of net assets.
(b) Indicates a security that has a zero coupon that remains in effect until a
predetermined date at which time the stated coupon rate becomes effective.
(c) Non-income producing security.
(d) Consists of $2,000,000 senior notes and 1,635 shares of common stock.
(e) Security trades with warrants expiring April 15, 2008.
(f) Security trades with warrants expiring August 1, 2005.
(g) Security trades with warrants expiring October 27, 2007.
(h) Security trades with warrants expiring May 1, 2007.
(i) Security trades with warrants expiring April 13, 2008.
(j) Security trades with warrants expiring June 1, 2008.
(k) Paid-in-kind (PIK) Bond.
(l) Security trades with warrants expiring May 15, 2008.
(m) Security trades with warrants expiring February 15, 2002.
(n) Security trades with warrants expiring August 1, 2008.
(o) Security trades with warrants expiring May 1, 2005.
(p) Security trades with warrants expiring July 15, 2005.
(q) PIK preferred, quarterly stock payments.
See notes to financial statements.
10
STATEMENT OF ASSETS AND LIABILITIES
AUGUST 31, 1998 ALLIANCE HIGH YIELD FUND
_______________________________________________________________________________
ASSETS
Investments in securities, at value (cost $391,556,492) $ 354,402,980
Cash, at value (cost $7,093,864) 7,094,868
Interest receivable 8,195,803
Receivable for capital stock sold 7,257,781
Deferred organization expenses 207,819
Total assets 377,159,251
LIABILITIES
Payable for investment securities purchased 9,286,131
Payable for capital stock redeemed 2,161,470
Dividends payable 995,927
Distribution fee payable 281,067
Advisory fee payable 232,667
Accrued expenses 223,546
Total liabilities 13,180,808
NET ASSETS $ 363,978,443
COMPOSITION OF NET ASSETS
Capital stock, at par $ 33,859
Additional paid-in capital 394,073,918
Distributions in excess of net investment income (341,284)
Accumulated net realized gain on investments and foreign
currency transactions 7,364,458
Net unrealized depreciation of investments and foreign
currency denominated assets and liabilities (37,152,508)
$ 363,978,443
CALCULATION OF MAXIMUM OFFERING PRICE
CLASS A SHARES
Net asset value and redemption price per share
($43,959,671/4,087,243 shares of capital stock
issued and outstanding) $10.76
Sales charge--4.25% of public offering price .48
Maximum offering price $11.24
CLASS B SHARES
Net asset value and offering price per share
($269,425,908/25,065,287 shares of capital stock
issued and outstanding) $10.75
CLASS C SHARES
Net asset value and offering price per share
($48,336,522/4,496,759 shares of capital stock
issued and outstanding) $10.75
ADVISOR CLASS SHARES
Net asset value, redemption and offering price per share
($2,256,342/209,729 shares of capital stock
issued and outstanding $10.76
See notes to financial statements.
11
STATEMENT OF OPERATIONS
YEAR ENDED AUGUST 31, 1998 ALLIANCE HIGH YIELD FUND
_______________________________________________________________________________
INVESTMENT INCOME
Interest $18,770,099
Dividends 66,922 $ 18,837,021
EXPENSES
Advisory fee 1,369,676
Distribution fee - Class A 70,152
Distribution fee - Class B 1,329,240
Distribution fee - Class C 249,621
Transfer agency 186,169
Registration 137,014
Administrative 132,015
Custodian 113,198
Audit and legal 67,229
Amortization of organization expenses 57,123
Printing 30,442
Directors' fees 19,561
Miscellaneous 2,669
Total expenses 3,764,109
Less: expenses waived and reimbursed
by the Adviser (See Note B) (44,000)
Net expenses 3,720,109
Net investment income 15,116,912
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
AND FOREIGN CURRENCY TRANSACTIONS
Net realized gain on investment transactions 8,237,360
Net realized loss on foreign currency
transactions (45,958)
Net change in unrealized appreciation of:
Investments (38,676,674)
Foreign currency denominated assets and
liabilities 1,004
Net loss on investments and foreign currency
transactions (30,484,268)
DECREASE IN NET ASSETS FROM OPERATIONS $(15,367,356)
See notes to financial statements.
12
STATEMENT OF CHANGES IN NET ASSETS ALLIANCE HIGH YIELD FUND
_______________________________________________________________________________
YEAR ENDED APRIL 22, 1997(A)
AUGUST 31, TO
1998 AUGUST 31, 1997
------------ ------------------
INCREASE (DECREASE)IN NET ASSETS
FROM OPERATIONS
Net investment income $ 15,116,912 $ 701,404
Net realized gain on investments and
foreign currency transactions 8,191,402 307,747
Net change in unrealized appreciation
of investments and foreign currency
denominated assets and liabilities (38,675,670) 1,523,162
Net increase (decrease) in net assets
from operations (15,367,356) 2,532,313
DIVIDENDS AND DISTRIBUTIONS TO
SHAREHOLDERS FROM:
Net investment income
Class A (2,079,155) (100,429)
Class B (10,873,437) (573,256)
Class C (2,039,187) (97,883)
Advisor Class (125,133) (9,165)
Distributions in excess of net
investment income
Class A (4,665) -0-
Class B (171,932) -0-
Class C (38,955) -0-
Advisor Class (445) -0-
Net realized gain on investments
Class A (138,240) -0-
Class B (888,367) -0-
Class C (148,083) -0-
Advisor Class (5,959) -0-
CAPITAL STOCK TRANSACTIONS
Net increase 338,777,324 55,230,153
Total increase 306,896,410 56,981,733
NET ASSETS
Beginning of period 57,082,033 100,300
End of period $363,978,443 $57,082,033
(a) Commencement of operations.
See notes to financial statements.
13
NOTES TO FINANCIAL STATEMENTS
AUGUST 31, 1998 ALLIANCE HIGH YIELD FUND
_______________________________________________________________________________
NOTE A: SIGNIFICANT ACCOUNTING POLICIES
Alliance High Yield Fund, Inc. (the "Fund") was incorporated in the state of
Maryland on December 19, 1996 as a diversified, open-end management investment
company. Prior to commencement of operations on April 22, 1997, the Fund had no
operations other than the sale to Alliance Capital Management L.P. (the
"Adviser") of 10 shares each of Class A, Class B and Class C and 10,000 shares
of Advisor Class for the aggregate amount of $100 each on Class A, Class B and
Class C shares and $100,000 on the Advisor Class shares on February 26, 1997.
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 sale price or, if there was no sale on
such day, the last bid price quoted on such day. If no bid prices are quoted,
then the security is valued at the mean of the bid and asked prices as obtained
on that day from one or more dealers regularly making a market in that
security. Securities traded on the over-the-counter market, securities listed
on a foreign securities exchange whose operations are similar to the United
States 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 closing bid and asked prices provided by two or more dealers
regularly making a market in such securities. U.S. government securities and
other debt securities which mature in 60 days or less are valued at amortized
cost unless this method does not represent fair value. Securities for which
market quotations are not readily available are valued at fair value as
determined in good faith by, or in accordance with procedures approved by, the
Board of Directors. Fixed income securities may be valued on the basis of
prices provided by a pricing service when such prices are believed to reflect
the fair market value of such securities.
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 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 exchange gains and losses represent foreign exchange gains
and losses from sales and maturities of debt securities and forward currency
exchange contracts, holding of foreign currencies, exchange gains or losses
realized between the trade and settlement dates on security transactions, and
the difference between the amounts of dividends, interest and foreign taxes
receivable recorded on the Fund's books and the U.S. dollar equivalent amounts
actually received or paid. Net currency gains and losses from valuing foreign
currency denominated assets and liabilities at year end exchange
14
ALLIANCE HIGH YIELD FUND
_______________________________________________________________________________
rates are reflected as a component of net unrealized depreciation of
investments and foreign currency denominated assets and liabilities.
3. 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.
4. ORGANIZATION EXPENSES
Organization costs of $285,600 have been deferred and are being amortized on a
straight-line basis through April, 2002.
5. INVESTMENT INCOME AND INVESTMENT TRANSACTIONS
Interest income is accrued daily. Dividend income is recorded on ex-dividend
date. Investment transactions are accounted for on the date the securities are
purchased or sold. Investment gains and losses are determined on the identified
cost basis. The Fund accretes discount as adjustment to interest income.
6. INCOME AND EXPENSES
All income earned and expenses incurred by the Fund are borne on a pro-rata
basis by each settled class of shares, based on the proportionate interest in
the Fund represented by the shares of such class, except that each class's
transfer agent fees and distribution fees, if any, are charged only against the
assets of that class.
7. DIVIDENDS AND DISTRIBUTIONS
Dividends and distributions to shareholders are recorded on the ex-dividend
date. Income 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 losses, resulted in a net increase in
accumulated net realized gain on investments and foreign currency transactions
and a corresponding increase in distributions in excess of net investment
income. This reclassification had no affect 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 1% of the average daily net assets of the Fund. Such fee is accrued
daily and paid monthly.
Pursuant to the advisory agreement, the Adviser provides certain legal and
accounting services for the Fund. For the year ended August 31, 1998, the
Adviser voluntarily agreed to waive its fees in the amount of $44,000 for such
services.
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 $130,783 for the year ended August 31, 1998.
Alliance Fund Distributors, Inc. (a wholly-owned subsidiary of the Adviser)
serves as the Distributor of the Fund's shares. The Distributor received
front-end sales charges of $44,762 from the sale of Class A shares, and
$251,624 and $48,433 in contingent deferred sales charges imposed upon
redemptions by shareholders of Class B and Class C shares, respectively, for
the year ended August 31, 1998.
NOTE C: DISTRIBUTION SERVICES AGREEMENT
The Fund has adopted a Distribution Services Agreement (the "Agreement")
pursuant to Rule 12b-1 under the Investment Company Act of 1940. Under the
Agreement, the Fund pays a distribution fee to the Distributor at an annual
rate of up to .30 of 1% of the Fund's average daily net assets attributable to
Class A shares and 1% of the Fund's average daily net assets attributable to
the Class B and Class C shares. There is no distribution fee on the Advisor
Class shares. Such fee is accrued daily
15
NOTES TO FINANCIAL STATEMENTS (CONTINUED) ALLIANCE HIGH YIELD FUND
_______________________________________________________________________________
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 $11,190,075 and $523,224, for
Class B and Class C shares, respectively; such costs may be recovered from the
Fund in future periods so 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 obligations) aggregated $811,386,580 and $531,514,874,
respectively, for the year ended August 31, 1998. There were no purchases or
sales of U.S. government or government agency obligations for the year ended
August 31, 1998.
At August 31, 1998, the cost of investments for federal income tax purposes was
the same as the cost for financial reporting purposes. Accordingly, gross
unrealized appreciation of investments was $299,293 and gross unrealized
depreciation of investments was $37,452,805, resulting in net unrealized
depreciation of $37,153,512 (excluding foreign currency transactions).
NOTE E: CAPITAL STOCK
There are 12,000,000,000 shares of $.001 par value capital stock authorized,
divided into four classes, designated Class A, Class B, Class C and Advisor
Class shares. Each class consists of 3,000,000,000 authorized shares.
Transactions in capital stock were as follows:
SHARES AMOUNT
--------------------------- ------------------------------
APRIL 22, APRIL 22,
YEAR ENDED 1997(A) YEAR ENDED 1997(A)
AUG. 31, TO AUG. 31, TO
1998 AUG. 31, 1997 1998 AUG. 31, 1997
------------ ------------ -------------- --------------
CLASS A
Shares sold 5,027,959 662,265 $ 59,133,579 $ 7,166,202
Shares issued in
reinvestment of
dividends and
distributions 112,980 5,192 1,324,915 57,153
Shares converted
from Class B 64,645 800 748,102 8,899
Shares redeemed (1,645,740) (140,868) (19,212,486) (1,561,101)
Net increase 3,559,844 527,389 $ 41,994,110 $ 5,671,153
CLASS B
Shares sold 24,230,640 3,983,130 $284,787,774 $ 43,164,351
Shares issued
in reinvestment
of dividends and
distributions 344,031 13,930 4,028,181 153,591
Shares converted
to Class A (64,645) (800) (748,102) (8,899)
Shares redeemed (3,322,484) (118,525) (38,535,879) (1,302,901)
Net increase 21,187,542 3,877,735 $249,531,974 $ 42,006,142
(a) Commencement of operations.
16
ALLIANCE HIGH YIELD FUND
_______________________________________________________________________________
SHARES AMOUNT
--------------------------- ------------------------------
APRIL 22, APRIL 22,
YEAR ENDED 1997(A) YEAR ENDED 1997(A)
AUG. 31, TO AUG. 31, TO
1998 AUG. 31, 1997 1998 AUG. 31, 1997
------------ ------------ -------------- --------------
CLASS C
Shares sold 6,268,114 708,988 $ 73,913,613 $ 7,691,629
Shares issued
in reinvestment
of dividends and
distributions 74,074 3,959 868,654 43,572
Shares redeemed (2,523,883) (34,503) (29,681,577) (378,081)
Net increase 3,818,305 678,444 $ 45,100,690 $ 7,357,120
ADVISOR CLASS
Shares sold 224,696 18,485 $ 2,660,506 $ 193,285
Shares issued
in reinvestment
of dividends and
distributions 8,780 380 103,247 4,153
Shares redeemed (52,458) (154) (613,203) (1,700)
Net increase 181,018 18,711 $ 2,150,550 $ 195,738
NOTE F: 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") 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 the
miscellaneous expenses in the statement of operations. The Fund did not utilize
the Facility during the year ended August 31, 1998.
(a) Commencement of operations.
17
FINANCIAL HIGHLIGHTS ALLIANCE HIGH YIELD FUND
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
CLASS A
--------------------------------
APRIL 22,
1997(A)
YEAR ENDED TO
AUGUST 31, AUGUST 31,
1998 1997
---------- ----------
Net asset value, beginning of period $11.17 $10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income (b) 1.03 .37
Net realized and unrealized gain (loss)
on investments and foreign currency
transactions (.27) 1.15
Net increase in net asset value from
operations .76 1.52
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (1.02) (.35)
Distributions in excess of net investment
income (.01) -0-
Distributions from net realized gains (.14) -0-
Total dividends and distributions (1.17) (.35)
Net asset value, end of period $10.76 $11.17
TOTAL RETURN
Total investment return based on net
asset value (c) 6.42% 15.33%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $43,960 $5,889
Ratio to average net assets:
Expenses, net of waivers/reimbursements 1.43% 1.70%(d)
Expenses, before waivers/reimbursements 1.46% 3.11%(d)
Net investment income, net of waivers/
reimbursements 8.89% 8.04%(d)
Portfolio turnover rate 311% 73%
See footnote summary on page 21.
18
ALLIANCE HIGH YIELD FUND
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
CLASS B
----------------------------
APRIL 22,
1997(A)
YEAR ENDED TO
AUGUST 31, AUGUST 31,
1998 1997
---------- ----------
Net asset value, beginning of period $11.17 $10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income (b) .96 .31
Net realized and unrealized gain (loss)
on investments and foreign currency
transactions (.28) 1.19
Net increase in net asset value from
operations .68 1.50
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (.95) (.33)
Distributions in excess of net investment
income (.01) -0-
Distributions from net realized gains (.14) -0-
Total dividends and distributions (1.10) (.33)
Net asset value, end of period $10.75 $11.17
TOTAL RETURN
Total investment return based on net
asset value (c) 5.69% 15.07%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $269,426 $43,297
Ratio to average net assets:
Expenses, net of waivers/reimbursements 2.13% 2.40%(d)
Expenses, before waivers/reimbursements 2.16% 3.85%(d)
Net investment income, net of waivers/
reimbursements 8.18% 7.19%(d)
Portfolio turnover rate 311% 73%
See footnote summary on page 21.
19
FINANCIAL HIGHLIGHTS (CONTINUED) ALLIANCE HIGH YIELD FUND
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
CLASS C
----------------------------
APRIL 22,
1997(A)
YEAR ENDED TO
AUGUST 31, AUGUST 31,
1998 1997
---------- ----------
Net asset value, beginning of period $11.17 $10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income (b) .96 .32
Net realized and unrealized gain (loss)
on investments and foreign currency
transactions (.28) 1.18
Net increase in net asset value from
operations .68 1.50
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (.95) (.33)
Distributions in excess of net investment
income (.01) -0-
Distributions from net realized gains (.14) -0-
Total dividends and distributions (1.10) (.33)
Net asset value, end of period $10.75 $11.17
TOTAL RETURN
Total investment return based on net
asset value (c) 5.69% 15.07%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $48,337 $7,575
Ratio to average net assets:
Expenses, net of waivers/reimbursements 2.13% 2.40%(d)
Expenses, before waivers/reimbursements 2.16% 3.84%(d)
Net investment income, net of waivers/
reimbursements 8.17% 7.24%(d)
Portfolio turnover rate 311% 73%
See footnote summary on page 21.
20
ALLIANCE HIGH YIELD FUND
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
ADVISOR CLASS
------------------------------
APRIL 22,
1997(A)
YEAR ENDED TO
AUGUST 31, AUGUST 31,
1998 1997
---------- ----------
Net asset value, beginning of period $11.17 $10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income (b) 1.11 .40
Net realized and unrealized gain (loss)
on investments and foreign currency
transactions (.32) 1.13
Net increase in net asset value from
operations .79 1.53
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (1.05) (.36)
Distributions in excess of net investment
income (.01) -0-
Distributions from net realized gains (.14) -0-
Total dividends and distributions (1.20) (.36)
Net asset value, end of period $10.76 $11.17
TOTAL RETURN
Total investment return based on net
asset value (c) 6.68% 15.44%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $2,256 $321
Ratio to average net assets:
Expenses, net of waivers/reimbursements 1.14% 1.40%(d)
Expenses, before waivers/reimbursements 1.16% 2.82%(d)
Net investment income, net of waivers/
reimbursements 9.25% 8.20%(d)
Portfolio turnover rate 311% 73%
(a) Commencement of operations.
(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 charge or contingent
deferred sales charge is 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) Annualized.
21
REPORT OF ERNST & YOUNG LLP
INDEPENDENT AUDITORS ALLIANCE HIGH YIELD FUND
_______________________________________________________________________________
TO THE SHAREHOLDERS AND BOARD OF DIRECTORS
ALLIANCE HIGH YIELD FUND, INC.
We have audited the accompanying statement of assets and liabilities of
Alliance High Yield Fund, Inc. (the "Fund"), including the portfolio of
investments, as of August 31, 1998, and the related statement of operations for
the year then ended, and the statement of changes in net assets and financial
highlights for the year then ended and for the period from April 22, 1997
(commencement of operations) to August 31, 1997. These financial statements and
financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
August 31, 1998, by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Alliance High Yield Fund, Inc. at August 31, 1998, the results of its
operations for the year then ended, and the changes in its net assets and the
financial highlights for the year then ended and for the period from April 22,
1997 to August 31, 1997, in conformity with generally accepted accounting
principles.
New York, New York
October 7, 1998
22
ALLIANCE HIGH YIELD 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
NELSON JANTZEN, SENIOR VICE PRESIDENT
WAYNE C. TAPPE, VICE PRESIDENT
EDMUND P. BERGAN, JR., SECRETARY
MARK D. GERSTEN, TREASURER & CHIEF FINANCIAL OFFICER
JUAN J. RODRIGUEZ, CONTROLLER
CUSTODIAN
THE BANK OF NEW YORK
48 Wall Street
New York, NY 10286
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
INDEPENDENT AUDITORS
ERNST & YOUNG LLP
787 Seventh Avenue
New York, NY 10019
TRANSFER AGENT
ALLIANCE FUND SERVICES, INC.
P.O. Box 1520
Secaucus, NJ 07096-1520
Toll-Free 1-(800) 221-5672
(1) Member of the Audit Committee.
23
ALLIANCE HIGH YIELD FUND
1345 Avenue of the Americas
New York, NY 10105
(800) 221-5672
ALLIANCE CAPITAL
THIS REPORT IS INTENDED SOLELY FOR DISTRIBUTION TO CURRENT SHAREHOLDERS
OF THE FUND.
R THESE REGISTERED SERVICE MARKS USED UNDER LICENSE FROM THE OWNER,
ALLIANCE CAPITAL MANAGEMENT L.P.
HYFAR
