ALLIANCE HIGH YIELD FUND
SEMI-ANNUAL REPORT
FEBRUARY 28, 1998
ALLIANCE CAPITAL
LETTER TO SHAREHOLDERS ALLIANCE HIGH YIELD FUND
_______________________________________________________________________________
April 27, 1998
Dear Shareholder:
This semi-annual report contains investment results and market commentary for
the period ended February 28, 1998.
INVESTMENT RESULTS
Alliance High Yield Fund's performance continues to be excellent. For the six
month period ended February 28, 1998, your Fund's Class A share total return at
net asset value (NAV) was 12.40%, while its benchmark, the First Boston High
Yield Index returned 6.21%. Your Fund also outperformed its benchmark from its
inception on April 22, 1997 through February 28, 1998, posting a 29.62% return.
The Fund's outperformance of its benchmark was due, in large part, to three key
positioning decisions. First, greater emphasis has been placed upon single B
rated credits, which we believe offer more relative value and yield potential.
Second, we overweighted the Fund's positions in the media and
telecommunications sectors which have been the best performing. Third, we have
been opportunistically taking advantage of the new issue calendar because in a
demand driven market, new issues tend to be more visible and trade better than
secondary issues. In addition, Alliance's commitment to extensive research
continues to serve investors well by helping to avoid credit problems which is
fundamental to our success in high yield fixed income investing.
INVESTMENT RESULTS*
Periods ended February 28, 1998
TOTAL RETURNS
6 MONTHS SINCE INCEPTION*
---------- ----------------
ALLIANCE HIGH YIELD FUND
Class A 12.40% 29.62%
Class B 12.07% 28.95%
Class C 12.07% 28.95%
FIRST BOSTON HIGH YIELD INDEX 6.21% 12.75%
* 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 FEBRUARY 28,
1998. THE FUND'S "SINCE INCEPTION" DATA IS FROM THE PERIOD APRIL 22, 1997
THROUGH FEBRUARY 28, 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. THE BENCHMARK'S "SINCE
INCEPTION" DATA IS FROM THE PERIOD END CLOSEST TO THE FUND'S INCEPTION DATE,
WHICH WOULD BE APRIL 30, 1997. AN INVESTOR CANNOT INVEST DIRECTLY IN THE INDEX.
ADDITIONAL INVESTMENT RESULTS APPEAR ON PAGE 3.
MARKET OUTLOOK
The high yield corporate bond market has started 1998 strongly. Record levels
of new bond issuance and robust mutual fund inflows are continuing to dominate
the market thus far. Investors continue to look for both spread and yield in
the current benign macro-economic environment.
Presently, we feel quite positive about the high yield market. Demand should
persist as more sophisticated investors allocate more money to the high yield
asset class, which offers added diversification to an investor's overall
portfolio because of its relatively low correlation with other asset classes. A
healthy economy, low inflation and relatively stable interest rates should
continue to bode well for the high yield market, and for your investment in
Alliance High Yield Fund.
1
ALLIANCE HIGH YIELD FUND
_______________________________________________________________________________
SECTOR DIVERSIFICATION
Alliance High Yield Fund's portfolio continues to offer broad diversification.
As of February 28, 1998 the Fund's portfolio included holdings from 23
different industries including 16.6% invested in the communications sector and
12.0% invested in the industrial sector. The Fund's top 10 holdings for the
period ended February 28, 1998 are illustrated below. A more complete listing
of all of the Fund's holdings can be found in the Portfolio of Investments
beginning on page 4.
SECTOR DIVERSIFICATION
OTHER 23.8%
COMMUNICATIONS 16.6%
INDUSTRIAL 12.0%
TRANSPORTATION 8.4%
FOOD/BEVERAGES/TOBACCO 7.8%
CONSUMER MANUFACTURING 6.7%
BUSINESS SERVICES 6.3%
MEDIA 5.4%
ENERGY 4.5%
PAPER/PACKAGING 4.4%
RETAIL 4.1%
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
AVERAGE ANNUAL TOTAL RETURNS AS OF FEBRUARY 28, 1998
CLASS A SHARES
WITHOUT WITH
SALES CHARGE SALES CHARGE
------------ ------------
Since Inception* 29.62% 24.16%
SEC Yield** 7.97%
CLASS B SHARES
WITHOUT WITH
SALES CHARGE SALES CHARGE
------------ ------------
Since Inception* 28.95% 24.95%
SEC Yield** 7.62%
CLASS C SHARES
WITHOUT WITH
SALES CHARGE SALES CHARGE
------------ ------------
Since Inception* 28.95% 27.95%
SEC Yield** 7.61%
SEC AVERAGE ANNUAL TOTAL RETURNS AS OF THE MOST RECENT QUARTER-END
(DECEMBER 31, 1997)
CLASS A CLASS B CLASS C
--------- --------- ---------
Since Inception*** 18.99% 19.69% 22.69%
Average annual total returns reflect reinvestment of dividends and/or capital
gains distributions in additional shares with and without the effect of the
4.25% maximum front-end sales charge for Class A 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. SEC average
annual total returns for the period shown reflect reinvestment of all
distributions and deduction of the maximum 4.25% front-end sales charges and
applicable contingent deferred sales charges.
Past performance does not guarantee future results. Investment return and
principal value will fluctuate so that an investor's shares, when redeemed, may
be worth more or less than their original cost.
* Inception: 4/22/97 for all share classes.
** SEC Yields are based on SEC guidelines and are calculated on 30 days ended
February 28, 1998.
*** Not annualized.
3
PORTFOLIO OF INVESTMENTS
FEBRUARY 28, 1998 (UNAUDITED) ALLIANCE HIGH YIELD FUND
_______________________________________________________________________________
SHARES OR
PRINCIPAL
AMOUNT
(000) U.S. $ VALUE
- -------------------------------------------------------------------------------
CORPORATE DEBT OBLIGATIONS-97.5%
BUILDING / REAL ESTATE-0.7%
Reliant Building Products
10.875%, 5/01/04 (a) $1,000 $ 1,057,500
BUSINESS SERVICES-6.3%
ATC Group Services, Inc.
12.00%, 1/15/08 (a) 1,000 1,005,000
Dialog Corp. PLC
11.00%, 11/15/07 (a) 2,000 2,190,000
Employee Solutions, Inc.
10.00%, 10/15/04 (a) 2,000 1,940,000
Federal Data Corp.
10.125%, 8/01/05 500 520,000
International Logistics, Ltd.
9.75%, 10/15/07 (a) 1,000 1,010,000
MSX International, Inc.
11.375%, 1/15/08 (a) 2,000 2,065,000
T/SF Communications Corp.
10.375%, 11/01/07 (a) 1,000 1,015,000
------------
9,745,000
CABLE-3.9%
Knology Holdings, Inc.
11.875%, 10/15/07 (b)(c) 1,500 836,250
OpTel, Inc. Series B
13.00%, 2/15/05 (d) 2,000 2,190,000
United International Holdings
10.75%, 2/15/08 (a)(b) 5,000 3,056,250
------------
6,082,500
CHEMICALS-2.7%
AEP Industries, Inc.
9.875%, 11/15/07 (a) 1,000 1,062,500
Climachem, Inc.
10.75%, 12/01/07 (a) 2,000 2,115,000
Koppers Industries, Inc.
9.875%, 12/01/07 (a) 1,000 1,045,000
------------
4,222,500
COMMUNICATIONS-14.9%
DTI Holdings, Inc.
12.50%, 3/01/08 (a)(b)(e) 4,000 2,180,000
Echostar DBS Corp.
12.50%, 7/01/02 2,000 2,225,000
Econophone, Inc.
13.50%, 7/15/07 (a)(b) 5,000 2,850,000
GST Equipment Funding
13.25%, 5/01/07 750 883,125
InterAmericas Communications Corp.
14.00%, 10/27/07 (a)(f) 1,500 1,533,750
Ionica Group PLC
15.00%, 5/01/07 (b)(g) 4,000 1,580,000
Iridium LLC/Capital Corp. Series B
14.00%, 7/15/05 1,500 1,713,750
Metronet Communications Corp.
12.00%, 8/15/07 1,500 1,740,000
Warrants, expiring
8/15/07 (h) 1,500 3,750
Nextel Communications, Inc.
9.95%, 2/15/08 (a)(b) 2,000 1,230,000
Nextlink Communications
9.00%, 3/15/08 (a) 1,000 1,001,250
Price Communications Wireless, Inc.
11.75%, 7/15/07 1,250 1,387,500
Primus Telecommunications Group, Inc.
11.75%, 8/01/04 1,000 1,120,000
Warrants, expiring
8/01/04 (h) 1,000 1,000
SBA Communications Corp.
12.00%, 3/01/08 (a)(b) 3,000 1,680,000
Star Choice Communications, Inc.
13.00%, 12/15/05 (a)(i) 2,000 2,090,000
------------
23,219,125
4
ALLIANCE HIGH YIELD FUND
_______________________________________________________________________________
SHARES OR
PRINCIPAL
AMOUNT
(000) U.S. $ VALUE
- -------------------------------------------------------------------------------
CONGLOMERATES-0.7%
Insilco Corp.
10.25%, 8/15/07 $ 1,000 $ 1,075,000
CONSUMER MANUFACTURING-6.7%
E&S Holdings Corp.
10.375%, 10/01/06 2,000 1,805,000
Galey & Lord, Inc.
9.125%, 3/01/08 (a) 500 501,615
Hedstrom Corp.
10.00%, 6/01/07 1,000 1,030,000
Outsourcing Services Group
10.875%, 3/01/06 (a) 2,000 2,040,000
11.625%, 1/20/99 (a)(j) 2,000 1,960,000
Sealy Mattress Co.
9.875%, 12/15/07 (a) 1,000 1,060,000
Sweetheart Cup
9.625%, 9/01/00 2,000 2,010,000
------------
10,406,615
ENERGY-4.5%
Gothic Energy Corp. Series B
12.25%, 9/01/04 1,000 995,000
Warrants, expiring
9/01/04 (h) 14,000 28,000
Hvide Marine, Inc.
8.375%, 2/15/08 (a) 2,000 1,970,000
Southwest Royalties, Inc.
10.50%, 10/15/04 (a) 2,000 1,810,000
Transamerican Energy
11.50%, 6/15/02 1,500 1,518,750
Universal Compression, Inc.
9.875%, 2/15/08 (a)(b) 1,000 620,000
------------
6,941,750
FINANCIAL-4.0%
Amresco, Inc. Series 98-A
9.875%, 3/15/05 1,000 1,005,000
Metris Companies, Inc.
10.00%, 11/01/04 (a) 2,000 2,095,000
Nationwide Credit, Inc.
10.25%, 1/15/08 (a) 2,000 2,075,000
Wilshire Financial Services Group, Inc.
13.00%, 8/15/04 (a) 1,000 1,065,000
------------
6,240,000
FOOD / BEVERAGES / TOBACCO-7.8%
Colorado Prime Corp.
12.50%, 5/01/04 500 505,000
Warrants, expiring
12/31/03 (h) 500 1,000
Cuddy International Corp.
10.75%, 12/01/07 (a) 1,000 1,027,500
Di Giorgio Corp. Series B
10.00%, 6/15/07 2,000 1,997,500
Grupo Azucarero Mexico, SA de CV
11.50%, 1/15/05 (a) 2,000 2,010,000
Imperial Holly Corp.
9.75%, 12/15/07 (a) 1,000 1,030,000
Iowa Select Farm / ISF Finance
10.75%, 12/01/05 (a) 2,000 1,970,000
Richmont Marketing Specialists
10.125%, 12/15/07 (a) 1,000 1,040,000
Specialty Foods Corp. Series B
11.125%, 10/01/02 1,500 1,537,500
Tom's Foods, Inc.
10.50%, 11/01/04 (a) 1,000 1,005,000
------------
12,123,500
5
PORTFOLIO OF INVESTMENTS (CONTINUED) ALLIANCE HIGH YIELD FUND
_______________________________________________________________________________
SHARES OR
PRINCIPAL
AMOUNT
(000) U.S. $ VALUE
- -------------------------------------------------------------------------------
HEALTHCARE-1.9%
Healthcore Holdings, Inc.
11.00%, 12/01/04 (a) $1,000 $ 1,012,500
Universal Hospital Services, Inc.
10.25%, 3/01/08 (a) 2,000 2,020,000
------------
3,032,500
INDUSTRIAL-11.2%
Anchor Lamina, Inc.
9.875%, 2/01/08 (a) 1,000 1,010,000
Eagle-Picher Industries
9.375%, 3/01/08 (a) 1,000 1,007,500
Elgar Holdings, Inc.
9.875%, 2/01/08 (a) 2,000 2,060,000
Elgin National Industries
11.00%, 11/01/07 (a) 1,000 1,065,000
Glasstech, Inc. Series B
12.75%, 7/01/04 750 761,250
Warrants, expiring
6/30/04 (h) 750 750
MCMS, Inc.
9.75%, 3/01/08 (a) 1,300 1,300,000
MVE, Inc.
12.50%, 2/15/02 (k) 2,000 2,030,000
Orbital Imaging Corp.
11.625%, 3/01/05 (a)(l) 900 929,250
Panaco, Inc. Series B
10.625%, 10/01/04 1,000 1,015,000
Prestolite Electric, Inc.
9.625%, 2/01/08 (a) 1,000 1,031,250
Scovill Fasteners, Inc.
11.25%, 11/30/07 (a) 2,000 2,100,000
Walbro Corp.
10.125%, 12/15/07 (a) 1,075 1,120,688
Zeta Consumer Products Corp.
11.25%, 11/30/07 (a) 2,000 2,040,000
------------
17,470,688
LEISURE / ENTERTAINMENT-1.3%
Trump AC Association/Funding, Inc.
11.25%, 5/01/06 2,000 2,070,000
MEDIA-5.4%
Central European Media Enterprises, Ltd.
9.375%, 8/15/04 1,000 1,000,000
Diva Systems Corp.
12.625%, 3/01/08 (a)(b) 3,000 1,657,500
Fox Kids Worldwide, Inc.
9.25%, 11/01/07 (a) 2,000 1,985,000
Lin Holdings Corp.
10.00%, 3/01/08 (a)(b) 3,000 1,845,000
NBC Acquisition Corp.
10.75%, 2/15/09 (a)(b) 1,000 595,000
Perry-Judd
10.625%, 12/15/07 (a) 1,250 1,306,250
------------
8,388,750
METALS / MINERALS-3.9%
Acme Metals, Inc.
10.875%, 12/15/07 (a) 2,000 2,030,000
Centaur Mining & Exploration, Ltd.
11.00%, 12/01/07 (a) 2,000 2,035,000
Glencore Nickel Property, Ltd.
9.00%, 12/01/14 (a) 2,000 1,970,000
------------
6,035,000
MINING-0.7%
AEI Holding Co., Inc.
10.00%, 11/15/07 1,000 1,057,500
OIL & GAS-0.6%
Dailey International, Inc.
9.50%, 2/15/08 (a) 1,000 1,025,000
6
ALLIANCE HIGH YIELD FUND
_______________________________________________________________________________
PRINCIPAL
AMOUNT
(000) U.S. $ VALUE
- -------------------------------------------------------------------------------
PAPER / PACKAGING-4.4%
Bear Island LLC/Finance
10.00%, 12/01/07 (a) $1,000 $ 1,025,000
Gaylord Container Corp.
9.375%, 6/15/07 (a) 1,000 982,500
9.875%, 2/15/08 (a) 1,000 972,500
Graham Packaging/CPC Capital Corp.
8.75%, 1/15/08 (a) 1,000 1,025,000
Precise Technology, Inc. Series B
11.125%, 6/15/07 750 776,250
Riverwood International Corp.
10.625%, 8/01/07 1,000 1,058,750
10.875%, 4/01/08 1,000 1,005,000
------------
6,845,000
RETAIL-4.1%
Big 5 Corp.
10.875%, 11/15/07 (a) 1,000 1,025,000
Discovery Zone, Inc.
13.50%, 8/01/02 (a) 500 502,500
Frank's Nursery & Crafts
10.125%, 3/01/08 (a) 2,000 1,993,000
Tuesday Morning Corp.
11.00%, 12/15/07 (a) 1,000 1,032,500
United Auto Group, Inc. Series A
11.00%, 7/15/07 2,000 1,890,000
------------
6,443,000
SUPERMARKETS-0.7%
The Pantry, Inc.
10.25%, 10/15/07 1,000 1,037,500
TECHNOLOGY-0.7%
Concentric Network Corp.
12.75%, 12/15/07 (m) 1,000 1,152,500
TRANSPORTATION-8.4%
Avaition Sales Co.
8.125%, 2/15/08 (a) 2,000 1,995,000
Chemical Leaman Corp.
10.375%, 6/15/05 750 802,500
Equimar Shipholdings, Ltd.
9.875%, 7/01/07 1,500 1,432,500
First Wave Marine, Inc.
11.00%, 2/01/08 1,000 1,035,000
GS Superhighway Holdings
10.25%, 8/15/07 1,500 1,155,000
Kitty Hawk, Inc.
9.95%, 11/15/04 (a) 1,000 1,055,000
Navigator Gas Transport PLC
12.00%, 6/30/07 (a)(n) 500 572,500
Panoceanic Bulk Carriers, Ltd.
12.00%, 12/15/07 (a) 2,000 1,910,000
Trans World Airlines, Inc.
11.375%, 3/01/06 (a) 2,000 2,012,500
11.50%, 12/15/04 (a) 1,000 1,075,000
------------
13,045,000
UTILITIES-2.0%
ESI Tractebel Acquiring Corp.
7.99%, 12/30/11 (a) 1,000 1,008,750
Trench Electric Holdings & Trench, Inc.
10.25%, 12/15/07 (a) 2,000 2,070,000
------------
3,078,750
Total Corporate Debt Obligations
(cost $148,676,148) 151,794,678
7
PORTFOLIO OF INVESTMENTS (CONTINUED) ALLIANCE HIGH YIELD FUND
_______________________________________________________________________________
SHARES U.S. $ VALUE
- -------------------------------------------------------------------------------
NON-CONVERTIBLE PREFERRED STOCKS-2.4%
Dobson Communications Corp.
12.25% (a)(o) 1,000 $ 1,045,000
Eagle-Picher Holdings
11.75% (a)(h) 200 1,140,000
Nextel Communications, Inc.
11.125% (a)(o) 1,500 1,533,750
Total Non-Convertible Preferred Stocks
(cost $3,672,540) 3,718,750
PRINCIPAL
AMOUNT
(000) U.S. $ VALUE
- -------------------------------------------------------------------------------
TIME DEPOSIT-1.2%
Bank of New York
5.125%, 3/02/98
(cost $1,821,548) $1,822 $ 1,821,548
TOTAL INVESTMENTS-101.1%
(cost $154,170,236) 157,334,976
Other assets less liabilities-(1.1)% (1,757,310)
NET ASSETS-100% $ 155,577,666
(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 February 28, 1998,
these securities amounted to $108,525,803 or 69.8% 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) Security trades with warrants expiring October 15, 2007.
(d) Consists of $2,000,000 senior notes and 1,635 shares of common stock.
(e) Security trades with warrants expiring March 1, 2008.
(f) Security trades with warrants expiring October 27, 2007.
(g) Security trades with warrants expiring August 15, 2006.
(h) Non-income producing security.
(i) Security trades with warrants expiring December 15, 2005.
(j) Floating Rate Note.
(k) Security trades with warrants expiring February 15, 2002.
(l) Security trades with warrants expiring March 1, 2001.
(m) Security trades with warrants expiring December 15, 2007.
(n) Security trades with warrants expiring June 30, 2007.
(o) PIK preferred, quarterly stock payments.
See notes to financial statements.
8
STATEMENT OF ASSETS AND LIABILITIES
FEBRUARY 28, 1998 (UNAUDITED) ALLIANCE HIGH YIELD FUND
_______________________________________________________________________________
ASSETS
Investments in securities, at value (cost $154,170,236) $ 157,334,976
Cash, at value (cost $24,336) 24,391
Receivable for investment securities sold 5,752,193
Receivable for capital stock sold 5,393,049
Interest receivable 2,701,023
Deferred organization expenses 236,459
Total assets 171,442,091
LIABILITIES
Payable for investment securities purchased 13,895,278
Dividends payable 845,953
Payable for capital stock redeemed 761,904
Distribution fee payable 103,029
Advisory fee payable 85,605
Accrued expenses 172,656
Total liabilities 15,864,425
NET ASSETS $ 155,577,666
COMPOSITION OF NET ASSETS
Capital stock, at par $ 13,078
Additional paid-in capital 148,050,848
Undistributed net investment income 5,355
Accumulated net realized gain on investments and foreign
currency transactions 4,343,590
Net unrealized appreciation of investments and foreign
currency denominated assets and liabilities 3,164,795
$ 155,577,666
CALCULATION OF MAXIMUM OFFERING PRICE
CLASS A SHARES
Net asset value and redemption price per share ($20,875,174/
1,754,731 shares of capital stock issued and outstanding) $11.90
Sales charge--4.25% of public offering price .53
Maximum offering price $12.43
CLASS B SHARES
Net asset value and offering price per share ($112,690,486/
9,472,979 shares of capital stock issued and outstanding) $11.90
CLASS C SHARES
Net asset value and offering price per share ($20,886,555/
1,755,678 shares of capital stock issued and outstanding) $11.90
ADVISOR CLASS SHARES
Net asset value, redemption and offering price per share
($1,125,451/94,600 shares of capital stock issued
and outstanding $11.90
9
See notes to financial statements.
STATEMENT OF OPERATIONS
SIX MONTHS ENDED FEBRUARY 28, 1998 (UNAUDITED) ALLIANCE HIGH YIELD FUND
_______________________________________________________________________________
INVESTMENT INCOME
Interest $ 4,962,249
EXPENSES
Advisory fee $ 366,694
Distribution fee - Class A 17,909
Distribution fee - Class B 364,497
Distribution fee - Class C 61,671
Administrative 45,644
Transfer agency 42,945
Custodian 28,611
Registration 28,577
Amortization of organization expenses 28,483
Audit and legal 22,118
Printing 8,503
Directors' fees 7,747
Miscellaneous 452
Total expenses 1,023,851
Less: expenses waived and reimbursed by
the Adviser (see note B) (39,000)
Net expenses 984,851
Net investment income 3,977,398
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain on investment transactions 5,216,492
Net change in unrealized appreciation
of investments 1,641,633
Net gain on investments 6,858,125
NET INCREASE IN NET ASSETS FROM OPERATIONS $ 10,835,523
See notes to financial statements.
10
STATEMENT OF CHANGES IN NET ASSETS ALLIANCE HIGH YIELD FUND
_______________________________________________________________________________
SIX MONTHS ENDED APRIL 22, 1997*
FEBRUARY 28, 1998 TO
(UNAUDITED) AUGUST 31, 1997
----------------- -----------------
INCREASE IN NET ASSETS FROM OPERATIONS
Net investment income $ 3,977,398 $ 701,404
Net realized gain on
investment transactions 5,216,492 307,747
Net change in unrealized appreciation
of investments 1,641,633 1,523,162
Net increase in net assets
from operations 10,835,523 2,532,313
DIVIDENDS AND DISTRIBUTIONS TO
SHAREHOLDERS FROM:
Net investment income
Class A (506,162) (100,429)
Class B (2,873,970) (573,256)
Class C (485,363) (97,883)
Advisor Class (27,219) (9,165)
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 92,733,473 55,230,153
Total increase 98,495,633 56,981,733
NET ASSETS
Beginning of period 57,082,033 100,300
End of period (including undistributed
net investment income of $5,355
at February 28, 1998) $ 155,577,666 $ 57,082,033
* Commencement of operations.
See notes to financial statements.
11
NOTES TO FINANCIAL STATEMENTS
FEBRUARY 28, 1998 (UNAUDITED) 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 market 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. 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.
3. ORGANIZATION EXPENSES
Organization costs of $285,600 have been deferred and are being amortized on a
straight-line basis through April, 2002.
4. 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.
12
ALLIANCE HIGH YIELD FUND
_______________________________________________________________________________
5. 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.
6. 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.
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 six months ended February 28, 1998,
the Adviser voluntarily agreed to waive its fees in the amount of $39,000 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 $26,302 for the six months ended February 28, 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 $11,880 from the sale of Class A shares, and
$85,987 and $10,555 in contingent deferred sales charges imposed upon
redemptions by shareholders of Class B and Class C shares, respectively, for
the six months ended February 28, 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 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 $4,205,727 and $221,100, 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 $306,486,545 and $213,256,123,
respectively, for the six months ended February 28, 1998. There were no
purchases or sales of U.S. government or government agency obligations for the
six months ended February 28, 1998.
13
NOTES TO FINANCIAL STATEMENTS (CONTINUED) ALLIANCE HIGH YIELD FUND
_______________________________________________________________________________
At February 28, 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 $4,206,110 and gross unrealized
depreciation of investments was $1,041,370, resulting in net unrealized
appreciation of $3,164,740 (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
--------------------------- ------------------------------
SIX MONTHS APRIL 22, SIX MONTHS APRIL 22,
ENDED 1997(A) ENDED 1997(A)
FEB. 28, 1998 TO FEB. 28, 1998 TO
(UNAUDITED) AUG. 31, 1997 (UNAUDITED) AUG. 31, 1997
------------ ------------ -------------- --------------
CLASS A
Shares sold 1,567,994 662,265 $ 18,271,327 $ 7,166,202
Shares issued in
reinvestment of
dividends and
distributions 25,941 5,192 302,561 57,153
Shares converted
from Class B 8,518 800 98,499 8,899
Shares redeemed (375,121) (140,868) (4,468,011) (1,561,101)
Net increase 1,227,332 527,389 $ 14,204,376 $ 5,671,153
CLASS B
Shares sold 6,483,065 3,983,130 $ 75,447,650 $ 43,164,351
Shares issued in
reinvestment of
dividends and
distributions 81,172 13,930 945,931 153,591
Shares converted
to Class A (8,518) (800) (98,499) (8,899)
Shares redeemed (960,485) (118,525) (11,092,046) (1,302,901)
Net increase 5,595,234 3,877,735 $ 65,203,036 $ 42,006,142
CLASS C
Shares sold 1,530,429 708,988 $ 17,821,846 $ 7,691,629
Shares issued in
reinvestment of
dividends 16,474 3,959 191,701 43,572
Shares redeemed (469,679) (34,503) (5,455,840) (378,081)
Net increase 1,077,224 678,444 $12,557,707 $7,357,120
ADVISOR CLASS
Shares sold 71,381 18,485 $ 832,627 $ 193,285
Shares issued in
reinvestment of
dividends and
distributions 1,606 380 18,785 4,153
Shares redeemed (7,098) (154) (83,058) (1,700)
Net increase 65,889 18,711 $ 768,354 $ 195,738
(a) Commencement of operations.
14
FINANCIAL HIGHLIGHTS ALLIANCE HIGH YIELD FUND
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
CLASS A
------------------------------------
SIX MONTHS ENDED APRIL 22, 1997(A)
FEBRUARY 28, 1998 TO
(UNAUDITED) AUGUST 31, 1997
----------------- -----------------
Net asset value, beginning of period $11.17 $10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income (b) .49 .37
Net realized and unrealized gain on
investment transactions .87 1.15
Net increase in net asset value
from operations 1.36 1.52
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (.49) (.35)
Distributions from net realized gains (.14) -0-
Total dividends and distributions (.63) (.35)
Net asset value, end of period $11.90 $11.17
TOTAL RETURN
Total investment return based on
net asset value (c) 12.40% 15.33%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $20,875 $5,889
Ratio to average net assets:
Expenses, net of waivers/
reimbursements (d) 1.40% 1.70%
Expenses, before waivers/
reimbursements (d) 1.48% 3.11%
Net investment income, net of
waivers/reimbursements (d) 8.75% 8.04%
Portfolio turnover rate 220% 73%
See footnote summary on page 18.
15
FINANCIAL HIGHLIGHTS (CONTINUED) ALLIANCE HIGH YIELD FUND
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
CLASS B
------------------------------------
SIX MONTHS ENDED APRIL 22, 1997(A)
FEBRUARY 28, 1998 TO
(UNAUDITED) AUGUST 31, 1997
----------------- -----------------
Net asset value, beginning of period $11.17 $10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income (b) .46 .31
Net realized and unrealized gain on
investment transactions .87 1.19
Net increase in net asset value
from operations 1.33 1.50
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (.46) (.33)
Distributions from net realized gains (.14) -0-
Total dividends and distributions (.60) (.33)
Net asset value, end of period $11.90 $11.17
TOTAL RETURN
Total investment return based on
net asset value (c) 12.07% 15.07%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $112,690 $43,297
Ratio to average net assets:
Expenses, net of waivers/
reimbursements (d) 2.11% 2.40%
Expenses, before waivers/
reimbursements (d) 2.19% 3.85%
Net investment income, net of
waivers/reimbursements (d) 8.04% 7.19%
Portfolio turnover rate 220% 73%
See footnote summary on page 18.
16
ALLIANCE HIGH YIELD FUND
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
CLASS C
------------------------------------
SIX MONTHS ENDED APRIL 22, 1997(A)
FEBRUARY 28, 1998 TO
(UNAUDITED) AUGUST 31, 1997
----------------- -----------------
Net asset value, beginning of period $11.17 $10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income (b) .45 .32
Net realized and unrealized gain on
investment transactions .88 1.18
Net increase in net asset value
from operations 1.33 1.50
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (.46) (.33)
Distributions from net realized gains (.14) -0-
Total dividends and distributions (.60) (.33)
Net asset value, end of period $11.90 $11.17
TOTAL RETURN
Total investment return based on
net asset value (c) 12.07% 15.07%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $20,887 $7,575
Ratio to average net assets:
Expenses, net of waivers/
reimbursements (d) 2.11% 2.40%
Expenses, before waivers/
reimbursements (d) 2.19% 3.84%
Net investment income, net of
waivers/reimbursements (d) 8.03% 7.24%
Portfolio turnover rate 220% 73%
See footnote summary on page 18.
17
FINANCIAL HIGHLIGHTS (CONTINUED) ALLIANCE HIGH YIELD FUND
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
ADVISOR CLASS
------------------------------------
SIX MONTHS ENDED APRIL 22, 1997(A)
FEBRUARY 28, 1998 TO
(UNAUDITED) AUGUST 31, 1997
----------------- -----------------
Net asset value, beginning of period $11.17 $10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income (b) .53 .40
Net realized and unrealized gain
on investment transactions .85 1.13
Net increase in net asset value
from operations 1.38 1.53
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (.51) (.36)
Distributions from net realized gains (.14) -0-
Total dividends and distributions (.65) (.36)
Net asset value, end of period $11.90 $11.17
TOTAL RETURN
Total investment return based on
net asset value (c) 12.54% 15.44%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $1,125 $321
Ratio to average net assets:
Expenses, net of waivers/
reimbursements (d) 1.12% 1.40%
Expenses, before waivers/
reimbursements (d) 1.19% 2.82%
Net investment income, net of
waivers/reimbursements (d) 9.22% 8.20%
Portfolio turnover rate 220% 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.
18
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
NELSON JANTZEN, SENIOR VICE PRESIDENT
KATHLEEN A. CORBET, SENIOR VICE PRESIDENT
WAYNE D. LYSKI, 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.
19
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.
HYFSR
