THE ALLIANCE FUND
SEMI-ANNUAL REPORT
MAY 31, 1995
Alliance
Mutual funds without the Mystery.
(Cover)
LETTER TO SHAREHOLDERS
THE ALLIANCE FUND
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July 10, 1995
Dear Shareholder:
We are pleased to provide you with an update of The Alliance Fund's performance
and investment activity during its fiscal semi-annual reporting period ended
May 31, 1995. The following table compares your Fund's total returns over the
period with that of the overall U.S. stock market, represented by the unmanaged
S&P 500-stock Index, and with the Russell 1000 Index, also unmanaged, which is
composed of the 1,000 largest U.S. stocks as measured by price-to-book ratios.
Six Months Ended May 31, 1995
Total Return Ending NAV
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THE ALLIANCE FUND
Class A +15.01% $6.44
Class B +14.36% $6.27
Class C +14.36% $6.27
S&P 500 +19.17%
RUSSELL 1000 +18.41%
The Fund's total returns are based on the net asset values of each class of
shares as of May 31; additional investment results appear on page 3.
MARKET OVERVIEW
Evidence of a substantial slowing in economic activity has emerged over the
last few months as a result of restrictive Federal Reserve policy and a
slowdown in trade. In the months immediately ahead, the slowdown is expected to
continue as businesses attempt to reduce unwanted inventories by trimming
production schedules and employment.
We have reduced our growth expectations to reflect these trends, however, we do
not believe that the economy is headed into a recession. The trade picture
seems to be stabilizing, domestic consumers seem able and willing to spend, and
the Federal Reserve recently trimmed short-term interest rates as inflation
fears have abated. The budget debate, which won't be resolved until September
or October, is important in this regard; and for now we're optimistic that real
progress toward deficit reduction will be made.
Thus, the near-term economic outlook is for slower but steady and extended
growth, coupled with diminished inflation fears. This suggests slightly lower
interest rates and moderately high (16-18x) price earnings rates for common
stocks.
PORTFOLIO STRATEGY
During the more difficult equity market of 1994, we consistently viewed the
Federal Reserve's actions as positive for equities because it gave us the
chance to benefit from an extended economic cycle in 1995 and hopefully beyond.
We continue to see advances in corporate profits and cash flow, and are
particularly impressed with the balance sheet improvements that have developed.
The U.S. dollar remains low, placing our assets at an attractive level in world
markets. Additionally, the more conservative fiscal dialogue in Washington
helps investor confidence and should sustain price earnings multiples at
current or better levels.
After the market's advance we will be particularly watchful that today's
economic slowdown does not slip into a mild recession (which we do not expect),
and that the stock market's enthusiasm for certain sectors such as technology
is not taken to extreme.
DISCIPLINED INVESTING FOR LONG-TERM GOALS
Because your Fund's primary investment objective is to seek long-term capital
appreciation, we believe that a dollar-cost averaging approach to investing in
its shares may be particularly appropriate. Dollar-cost averaging involves
investing the same amount of money at regular intervals, enabling you to buy
more shares when prices decline or fewer when prices are high. Historically,
dollar-cost averaging has resulted in an overall lower price per share for
mutual fund investors, however, it is a long-term investment strategy and
cannot guarantee a profit or remove the risk of a loss in declining markets.
1
THE ALLIANCE FUND
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We appreciate your investment in The Alliance Fund and look forward to updating
you on its progress later in the year.
Sincerely,
John D. Carifa
Chairman and President
Alfred HarrisonExecutive Vice President2Investment Results
The Alliance Fund
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Average Annual Total Return as of May 31, 1995
CLASS A SHARES Without With
Sales Charge Sales Charge
--------------------------------
. One Year +14.32% +9.40%
. Five Years +12.08 +11.10
. Ten Years +11.07 +10.98
CLASS B SHARES
Without With
Sales Charge Sales Charge
--------------------------------
. One Year +13.31% +9.49%
. Since Inception* +11.80 +11.80
CLASS C SHARES
. One Year +13.31%
. Since Inception* +11.32
The average annual total returns reflect investment of dividends and/or capital
gains distributions in additional shares-with and without the effect of the
4.25% maximum front-end sales charge for Class A or applicable contingent
deferred sales charge for Class B (4% year 1, 3% year 2, 2% year 3, 1% year 4);
Class C shares are not subject to front-end or 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: 3/4/91, Class B; 5/3/93, Class C.
3
TEN LARGEST HOLDINGS
MAY 31, 1995 (UNAUDITED) THE ALLIANCE FUND
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COMPANY VALUE PERCENT OF NET ASSETS
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Philip Morris Cos., Inc. $ 47,689,400 5.7%
Intel Corp. 46,538,850 5.5
United Healthcare, Inc. 35,476,900 4.2
Motorola, Inc. 33,589,875 4.0
Norwest Corp. 31,382,750 3.7
UAL Corp. 29,284,750 3.5
Tele-Communications, Inc. Cl.A 25,269,725 3.0
General Motors Corp. (common & Cl.H) 24,669,000 3.0
Nokia Corp. (ADR) 24,645,000 2.9
Hewlett-Packard Co. 23,725,650 2.8
$322,271,900 38.3%
MAJOR PORTFOLIO CHANGES
MAY 31, 1995 (UNAUDITED)
SHARES*
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PURCHASES BOUGHT HOLDINGS 5/31/95
Air-Touch Communications, Inc. 439,100 688,000
Dow Chemical Co. 195,000 230,000
Hewlett-Packard Co. 358,800 358,800
McDonald's Corp. 356,200 356,200
Nokia Corp. (ADR) 530,000 530,000
Pfizer, Inc. 125,000 125,000
Philip Morris Cos., Inc. 654,400 654,400
Viacom, Inc. Cl.B 288,500 348,498
Walt Disney Co. 402,000 402,000
Xerox Corp. 129,900 129,900
SALES SOLD HOLDINGS 5/31/95
AMR Corp. 219,400 25,000
Chrysler Corp. 592,400 -0-
Conrail, Inc. 175,000 146,500
Du Pont (E.I.) de Nemours & Co. 150,000 151,500
Federal National Mortgage Assn. 357,100 -0-
General Motors Corp. 290,000 463,000
Intel Corp. 268,000 414,600
MCI Communications Corp. 432,900 140,000
Merrill Lynch & Co., Inc. 640,000 294,200
Travelers, Inc. 306,057 75,000
* Adjusted for stock splits.
4
PORTFOLIO OF INVESTMENTS
MAY 31, 1995 (UNAUDITED) THE ALLIANCE FUND
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COMPANY SHARES VALUE
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COMMON STOCKS-98.4%
CONSUMER PRODUCTS & SERVICES-38.0%
AIRLINES-3.7%
AMR Corp.* 25,000 $ 1,706,250
UAL Corp. 254,650 29,284,750
30,991,000
BROADCASTING & CELLULAR-10.4%
AirTouch Communications, Inc.* 688,000 18,748,000
Bell Cablemedia Plc. (ADR)(a)* 70,000 1,321,250
Cablevision Systems Corp. Cl.A* 97,000 5,807,875
Comcast Corp. Cl.A (SPL) 400,000 7,000,000
CommNet Cellular, Inc.* 90,000 2,418,750
Cox Communications, Inc.* 100,000 1,625,000
Jones Intercable, Inc. Cl.A* 230,000 3,133,750
Millicom International Cellular S.A.* 4,000 99,500
New World Communications Group, Inc.* 120,000 2,505,000
Tele-Communications, Inc. Cl.A* 1,196,200 25,269,725
Viacom, Inc.*
Cl.B* 348,498 16,248,719
Cl.B rights, 9/29/95* 793,100 1,040,944
Vodafone Plc (ADR)(a) 65,000 2,185,625
87,404,138
BUILDING & BUILDING PRODUCTS-0.1%
Owens-Corning Fiberglass Corp.* 20,000 725,000
DRUGS, HOSPITAL SUPPLIES & MEDICAL SERVICES-7.7%
Astra, AB
Series A(b) 20,000 586,070
Series A (ADR)(c) 20,000 585,768
Columbia/HCA Healthcare Corp. 159,400 6,515,475
Merck & Co., Inc. 110,000 5,183,750
Pfizer, Inc. 125,000 11,015,625
U.S. Healthcare, Inc. 50,000 1,553,125
United Healthcare, Inc. 952,400 35,476,900
Upjohn Co. 60,000 2,182,500
WARNER LAMBERT CO. 25,000 2,071,875
65,171,088
ENTERTAINMENT & LEISURE-3.1%
Cinergi Pictures Entertainment, Inc.* 100,000 712,500
Eastman Kodak Co. 50,000 3,018,750
Walt Disney Co. 402,000 22,361,250
26,092,500
FOOD, BEVERAGES & TOBACCO-5.7%
Philip Morris Cos., Inc. 654,400 47,689,400
HOUSEHOLD PRODUCTS-0.2%
Gillette Co. 20,000 1,687,500
PRINTING & PUBLISHING-0.5%
Aamulehti Yhtymae OY-II*(d) 150,000 2,909,259
Multimedia, Inc.* 40,000 1,530,000
4,439,259
RESTAURANTS & LODGING-2.4%
Host Marriott Corp. 180,000 1,912,500
John Q. Hammons Hotels, Inc.* 150,000 2,118,750
Marriott International, Inc. 80,000 2,710,000
McDonald's Corp. 356,200 13,491,075
20,232,325
RETAILING-3.0%
Dillard Department Stores, Inc. 30,000 862,500
Fingerhut Cos., Inc. 230,000 3,162,500
5
PORTFOLIO OF INVESTMENTS (CONTINUED) THE ALLIANCE FUND
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COMPANY SHARES VALUE
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Home Depot, Inc. 231,000 $9,615,375
Home Shopping Network, Inc.* 140,000 980,000
Magna International, Inc. 50,000 1,900,000
Payless Cashways, Inc.* 270,000 1,957,500
Price/Costco, Inc.* 85,000 1,200,625
Wal-Mart Stores, Inc. 216,400 5,410,000
25,088,500
TELEPHONE UTILITY-0.9%
MCI Communications Corp. 140,000 2,835,000
Petersburg Long Distance, Inc.* 130,000 731,250
Sprint Corp. 55,000 1,842,500
Telephone and Data Systems, Inc. 55,000 2,076,250
7,485,000
TEXTILE PRODUCTS-0.2%
Cone Mills Corp.* 140,000 1,767,500
OTHER-0.1%
Ideon Group, Inc. 100,000 975,000
319,748,210
SCIENCE & TECHNOLOGY-23.7%
AEROSPACE-0.5%
General Motors Corp. Cl.H 60,000 2,445,000
Rockwell International Corp. 30,000 1,368,750
3,813,750
COMMUNICATIONS EQUIPMENT-3.8%
General Instrument Corp.* 120,000 3,705,000
Nokia AB(d) 40,000 1,828,677
Nokia Corp. (ADR)(e) 530,000 24,645,000
Scientific-Atlanta, Inc. 85,000 1,583,125
31,761,802
COMPUTER HARDWARE-2.6%
Bay Networks, Inc.* 80,000 2,920,000
COMPAQ Computer Corp.* 441,300 17,265,862
SCI Systems, Inc.* 100,000 2,075,000
22,260,862
COMPUTER SOFTWARE & SERVICES-4.1%
Ceridian Corp. 40,000 1,290,000
cisco Systems, Inc.* 70,000 3,062,500
Compuware Corp.* 80,000 2,380,000
Lotus Development Corp.* 60,000 1,830,000
Micro Warehouse, Inc.* 44,200 1,712,750
Microsoft Corp.* 210,350 17,814,016
Oracle System Corp.* 180,000 6,255,000
34,344,266
SEMI-CONDUCTORS & RELATED-10.8%
Advanced Micro Devices, Inc.* 70,000 2,301,250
Intel Corp. 414,600 46,538,850
Motorola, Inc. 561,000 33,589,875
National Semiconductor Corp.* 300,000 7,500,000
Teradyne, Inc.* 25,000 1,353,125
91,283,100
OTHER-1.9%
Cyrk, Inc.* 65,000 560,625
Intergraph Corp.* 50,000 675,000
Xerox Corp. 129,900 14,727,413
15,963,038
199,426,818
BASIC INDUSTRIES-20.9%
AUTOMOTIVE-2.6%
General Motors Corp. 463,000 22,224,000
6
THE ALLIANCE FUND
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COMPANY SHARES VALUE
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CHEMICALS-4.6%
Dow Chemical Co. 230,000 $16,876,250
Du Pont (E.I.) de Nemours & Co. 151,500 10,283,062
Hercules, Inc. 60,000 3,150,000
IMC Fertilizer Group, Inc. 10,000 450,000
Lubrizol Corp. 20,000 697,500
Monsanto Co 35,000 2,913,750
Union Carbide Corp. 75,000 2,193,750
WELLMAN, INC. 85,000 2,135,625
38,699,937
ELECTRICAL EQUIPMENT-0.2%
Duracell International, Inc. 35,000 1,513,750
ELECTRONICS-2.8%
Hewlett-Packard Co. 358,800 23,725,650
MACHINERY-2.8%
Allied-Signal, Inc. 55,000 2,220,625
Case Corp. 80,000 2,070,000
Caterpillar, Inc. 265,500 15,996,375
Coltec Industries, Inc.* 160,000 2,840,000
23,127,000
MINING & METALS-0.8%
Bethlehem Steel Corp.* 180,000 2,655,000
Kaiser Aluminum Corp.* 160,000 1,860,000
Lukens, Inc. 70,000 2,362,500
6,877,500
OIL & GAS-2.7%
Brown (Tom), Inc.* 150,000 2,193,750
Camco International, Inc. 80,000 1,770,000
ENSERCH Corp. 110,000 1,911,250
Enterra Corp.* 65,000 1,243,125
Louis Dreyfus Natural Gas Corp. 215,000 3,036,875
Louisiana Land & Exploration Co. 80,000 3,100,000
Mitchell Energy & Development Corp. CL.B 78,500 1,373,750
Noble Affiliates, Inc. 100,000 2,712,500
Occidental Petroleum Corp. 35,000 805,000
Seagull Energy Corp.* 100,000 1,937,500
United Meridian Corp.* 191,600 2,921,900
23,005,650
PAPER & FOREST PRODUCTS-1.3%
Georgia-Pacific Corp. 88,500 6,880,875
Jefferson Smurfit Corp.* 130,000 1,722,500
Rayonier, Inc. 60,000 2,062,500
10,665,875
SERVICES-0.5%
Ryder System, Inc. 160,000 4,060,000
SURFACE TRANSPORTATION-2.0%
Conrail, Inc. 146,500 7,911,000
GATX Corp. 75,000 3,178,138
Illinois Central Corp. 70,000 2,476,250
Southern Pacific Rail Corp.* 120,000 1,905,000
Xtra Corp. 28,000 1,351,000
16,821,388
OTHER-0.6%
Sea Containers, Ltd. Cl.A 125,000 1,828,125
WMX Technologies, Inc. 120,000 3,270,000
5,098,125
175,818,875
FINANCIAL SERVICES-15.8%
BANKING & CREDIT-6.7%
Charter One Financial, Inc. 120,000 3,030,000
First Bank Systems, Inc. 326,000 13,692,000
Household International, Inc. 35,000 1,728,125
MBNA Corp. 80,000 2,700,000
NationsBank Corp. 65,000 3,680,625
Norwest Corp. 1,106,000 31,382,750
56,213,500
7
PORTFOLIO OF INVESTMENTS (CONTINUED) THE ALLIANCE FUND
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COMPANY SHARES VALUE
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BANKING & INSURANCE-0.4%
TIG Holdings, Inc. 160,000 $ 3,760,000
BROKERAGE-2.2%
Edwards (A.G.), Inc. 100,000 2,262,500
Legg Mason, Inc. 90,000 2,430,000
Merrill Lynch & Co., Inc. 294,200 13,827,400
18,519,900
INSURANCE-3.2%
Aetna Life & Casualty Co 30,000 1,788,750
American International Group, Inc. 83,100 9,452,625
Emphesys Financial Group, Inc. 17,500 441,875
Home State Holdings, Inc.* 57,400 559,650
John Alden Financial Corp. 110,000 2,007,500
Life Partners Group, Inc. 165,000 3,093,750
NAC Re Corp. 85,000 2,496,875
Progressive Corp. (Ohio) 40,000 1,520,000
Transatlantic Holdings, Inc. 35,000 2,222,500
TRAVELERS, INC. 75,000 3,168,750
26,752,275
SHARES OR
PRINCIPAL
AMOUNT
COMPANY (000) VALUE
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REAL ESTATE-0.8%
Avalon Properties, Inc. 100,000 $ 1,975,000
JP Realty, Inc. 80,000 1,630,000
Simon Property Group, Inc. 100,000 2,487,500
Spieker Properties, Inc. 40,000 865,000
6,957,500
OTHER-2.5%
American Express Co. 55,000 1,959,375
Federal Home Loan Mortgage Corp. 261,000 17,780,625
MGIC Investment Corp. 30,000 1,410,000
21,150,000
133,353,175
Total Common Stocks
(cost $670,214,177) 828,347,078
COMMERCIAL PAPER-2.1%
Ford Motor Credit Corp.
6.10%, 6/01/95
(amortized cost $17,711,000) $17,711 17,711,000
TOTAL INVESTMENTS-100.5%
(cost $687,925,177) 846,058,078
Other assets less liabilities-(0.5%) (4,185,831)
NET ASSETS-100% $841,872,247
* Non-income producing.
See notes to financial statements.
(a) Country of origin - United Kingdom.
(b) Swiss holding.
(c) Country of origin - Sweden.
(d) Finnish holding.
(e) Country of origin - Finland.
Glossary of Terms:
ADR - American Depository Receipt
ADS - American Depository Security
8
STATEMENT OF ASSETS AND LIABILITIES
MAY 31, 1995 (UNAUDITED) THE ALLIANCE FUND
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ASSETS
Investments in securities, at value (cost $687,925,177) $846,058,078
Cash, at value (cost $15,997) 15,671
Receivable for investment securities sold 10,491,430
Dividends and interest receivable 1,266,577
Receivable for capital stock sold 255,506
Prepaid expenses and other assets 27,838
Total assets 858,115,100
LIABILITIES
Payable for investment securities purchased 13,079,698
Payable for capital stock redeemed 1,373,833
Unclaimed dividends 1,006,095
Management fee payable 501,594
Distribution fee payable 153,991
Accrued expenses 127,642
Total liabilities 16,242,853
NET ASSETS $841,872,247
COMPOSITION OF NET ASSETS
Capital stock, at par $1,308,604
Additional paid-in capital 646,193,634
Undistributed net investment income 1,406,567
Accumulated net realized gain 34,830,867
Net unrealized appreciation of investments, foreign currency
transactions and other assets and liabilities 158,132,575
$841,872,247
CALCULATION OF MAXIMUM OFFERING PRICE
CLASS A SHARES
Net asset value and redemption price per share ($812,401,299/
126,163,427 shares of capital stock issued and outstanding) $6.44
Sales charge-4.25% of public offering price .29
Maximum offering price $6.73
CLASS B SHARES
Net asset value and offering price per share ($22,603,338/ 3,602,
315 shares of capital stock issued and outstanding) $6.27
CLASS C SHARES
Net asset value, redemption and offering price per share ($6,867,610/
1,094,653 shares of capital stock issued and outstanding) $6.27
See notes to financial statements.
9
STATEMENT OF OPERATIONS
SIX MONTHS ENDED MAY 31, 1995 (UNAUDITED) THE ALLIANCE FUND
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INVESTMENT INCOME
Dividends (net of foreign taxes withheld of $9,347) $5,679,830
Interest 326,708 $6,006,538
EXPENSES
Management fee 2,793,403
Distribution fee-Class A 718,799
Distribution fee-Class B 98,792
Distribution fee-Class C 32,041
Transfer agency 376,548
Administrative 73,720
Printing 62,902
Custodian 61,459
Registration 56,809
Taxes 46,136
Audit and legal 42,447
Directors' fees 13,545
Miscellaneous 17,205
Total expenses 4,393,806
Net investment income 1,612,732
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain on investments 38,296,291
Net realized loss on foreign currency transactions (840,011)
Net change in unrealized appreciation (depreciation) of:
Securities 71,113,441
Foreign currency transactions (326)
Net gain on investments 108,569,395
NET INCREASE IN NET ASSETS FROM OPERATIONS $110,182,127
See notes to financial statements.
10
STATEMENT OF CHANGES IN NET ASSETS THE ALLIANCE FUND
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SIX MONTHS ENDED JAN. 1,1994*
MAY 31, 1995 TO
(UNAUDITED) NOV.30,1994
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INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS
Net investment income $1,612,732 $1,421,289
Net realized gain on investments 37,456,280 117,472,711
Net change in unrealized appreciation
of investments 71,113,115 (146,186,786)
Net increase (decrease) in net assets
from operations 110,182,127 (27,292,786)
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income
Class A (1,599,712) -0-
Net realized gain on investments
Class A (114,265,138) -0-
Class B (2,789,853) -0-
Class C (972,583) -0-
CAPITAL STOCK TRANSACTIONS
Net increase (decrease) 66,270,566 (35,882,976)
Total increase (decrease) 56,825,407 (63,175,762)
NET ASSETS
Beginning of period 785,046,840 848,222,602
End of period $841,872,247 $785,046,840
* The Fund changed its fiscal year end from December 31 to November 30.
See notes to financial statements.
11
NOTES TO FINANCIAL STATEMENTS
MAY 31, 1995 (UNAUDITED) THE ALLIANCE FUND
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NOTE A: SIGNIFICANT ACCOUNTING POLICIES
The Alliance Fund, Inc. (the 'Fund') is registered under the Investment Company
Act of 1940 as a diversified, open-end management investment company. On
February 23, 1993, the creation of a third class of shares, Class C shares, was
approved by the Board of Directors. The Fund offers Class A, Class B and Class
C shares. Class A shares are sold with a front-end sales charge of up to 4.25%.
Class B shares are 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 sold without an initial
or contingent deferred sales charge. All three 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. Distribution of Class C shares commenced on May 3, 1993.
The following is a summary of significant accounting policies followed by the
Fund.
1. SECURITY VALUATION
Securities traded on national securities exchanges are valued at the last
reported sales price, or, if no sale occurred, at the mean of the bid and asked
price at the close of the New York Stock Exchange. Over-the-counter securities
not traded on national securities exchanges are valued at the closing bid
price. Debt securities are valued at the mean of the bid and asked price except
that debt securities maturing within 60 days are valued at amortized cost which
approximates market value. Securities for which current market quotations are
not readily available (including investments which are subject to limitations
as to their sale) are valued at their fair value as determined in good faith by
the Board of Directors.
2. INVESTMENT INCOME AND SECURITY TRANSACTIONS
Security transactions are accounted for on the trade date and dividend income
is recorded on the ex-dividend date. Interest income is recorded on the accrual
basis. The Fund accretes discounts on debt securities owned. Security gains and
losses are determined on the identified cost basis.
3. CURRENCY TRANSLATION
Assets and liabilities denominated in foreign currencies and commitments under
forward exchange currency contracts are translated into U.S. dollars at the
mean of the quoted bid and asked price of such currencies against the U.S.
dollar. Purchases and sales of portfolio securities are translated into U.S.
dollars at the rates of exchange prevailing when such securities were acquired
or sold. Income and expenses are translated into U.S. dollars at rates of
exchange prevailing when accrued.
Foreign exchange gains and losses from sales and maturities of securities,
holdings of foreign currencies exchange gains and losses realized between the
trade and settlement dates on security transactions, and the difference between
the amounts of interest recorded on the Fund's books and the U.S. dollar
equivalent amounts actually received or paid are reflected as a component ofnet
realized loss on investments. Net 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 of
investments.
4. TAXES
It is the Fund's policy to meet the requirements of the Internal Revenue Code
applicable to regulated investment companies and to distribute all of its
investment company taxable income and net realized gains, if any, to
shareholders. Therefore, no provisions for federal income or excise taxes are
required.
5. DIVIDENDS AND DISTRIBUTIONS
Dividends and distributions to shareholders are recorded on the ex-dividend
date. Income dividends and capital gain distributions are determined in
accordance with income tax regulations, which may differ from generally
accepted accounting principles.
6. CHANGE OF YEAR END
The Fund changed its fiscal year end from December 31 to November 30.
Accordingly, the statement of changes in net assets and financial highlights
reflect the period from January 1 to November 30, 1994.
12
THE ALLIANCE FUND
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NOTE B: MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Under the terms of the management agreement, the Fund pays its manager,
Alliance Capital Management L.P., a fee at an annual rate of 0.75% on the first
$500 million of average daily net assets, 0.65% on the next $500 million of
average daily net assets and 0.55% on average daily net assets in excess of $1
billion. The fee is accrued daily and paid monthly.
Pursuant to the management agreement, the Fund paid $73,720 to the Manager
representing the cost of certain legal and accounting services provided to the
Fund by the Manager for the six months ended May 31, 1995.
The Fund compensates Alliance Fund Services, Inc. (a wholly-owned subsidiary of
the Manager) for providing personnel and facilities to perform transfer agency
services for the Fund. Such compensation amounted to $263,319 for the six
months ended May 31, 1995.
The Manager has agreed to reimburse the Fund to the extent that the Fund's
aggregate annual expenses (exclusive of interest, taxes, brokerage,
distribution fee and extraordinary expenses) exceed the limits prescribed by
any state in which the Fund's shares are qualified for sale. The Manager
believes that the most restrictive expense ratio limitation imposed by any state
is 2 1/2% of the first $30 million of its average daily net assets, 2% of the
next $70 million of its average daily net assets, and 1 1/2% of its average
daily net assets in excess of $100 million. No such reimbursement was required
for the six months ended May 31, 1995.
Alliance Fund Distributors, Inc. (a wholly-owned subsidiary of the Manager)
serves as the Distributor of the Fund's shares. The Distributor received
front-end sales charges of $21,575 from the sale of Class A shares and $20,124
in contingent deferred sales charges imposed upon redemptions by shareholders
of Class B shares for the six months ended May 31, 1995.
Brokerage commissions paid for the six months ended May 31, 1995 on securities
transactions amounted to $948,166, none of which was paid to brokers utilizing
the services of the Pershing Division of Donaldson, Lufkin & Jenrette
Securities Corp., ('DLJ') nor to DLJ directly, an affiliate of the Manager.
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
the Class A shares and 1% of the average daily net assets attributable to the
Class B and Class C 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 $1,597,025 and $462,021, for Class B and 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 Manager 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)
aggregated $322,770,642 and $337,947,225, respectively, for the six months
ended May 31, 1995. At May 31, 1995, the cost of securities for federal income
tax purposes was $688,281,577. Accordingly, gross unrealized appreciation of
investments was $174,266,573 and gross unrealized depreciation of investments
was $16,490,072, resulting in net unrealized appreciation of $157,776,501.
13
NOTES TO FINANCIAL STATEMENTS (CONTINUED) THE ALLIANCE FUND
-------------------------------------------------------------------------------
NOTE E: CAPITAL STOCK
There are 600,000,000 shares of $0.01 par value capital stock authorized,
divided into three classes, designated Class A, Class B and Class C shares.
Class A shares consists of 300,000,000 shares. Class B and Class C shares each
consist of 150,000,000 shares. Transactions in capital stock were as follows:
SHARES AMOUNT
--------------------------- --------------------------
SIX MONTHS ELEVEN MONTHS SIX MONTHS ELEVEN MONTHS
ENDED ENDED ENDED ENDED
MAY 31,1995 NOVEMBER 30, MAY 31,1995 NOVEMBER 30,
(UNAUDITED) 1994** (UNAUDITED) 1994*
----------- ------------- ------------- -------------
CLASS A
Shares sold 6,365,350 4,326,797 $40,111,634 $ 29,295,693
Shares issued in
reinvestment of dividends
and distributions 16,140,922 -0- 88,936,504 -0-
Shares redeemed (11,211,314) (10,990,633) (68,013,019) (74,078,822)
Net increase (decrease) 11,294,958 (6,663,836) $61,035,119 $(44,783,129)
CLASS B
Shares sold 1,023,135 1,460,913 $5,976,409 $9,756,379
Shares issued in
reinvestment of
distributions 429,040 -0- 2,312,524 -0-
Shares redeemed (640,273) (502,655) (3,783,484) (3,332,022)
Net increase 811,902 958,258 $4,505,449 $6,424,357
CLASS C
Shares sold 408,244 905,525 $2,340,938 $6,039,305
Shares issued in
reinvestment of
distributions 116,466 -0- 627,736 -0-
Shares redeemed (387,652) (539,376) (2,238,676) (3,563,509)
Net increase 137,058 366,149 $729,998 $2,475,796
* The Fund changed its fiscal year end from December 31 to November 30.
14
FINANCIAL HIGHLIGHTS THE ALLIANCE FUND
-------------------------------------------------------------------------------
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
CLASS A
----------------------------------------------------------------------------
SIX MONTHS ELEVEN MONTHS
ENDED ENDED YEAR ENDED DECEMBER 31,
MAY 31, 1995 NOVEMBER 30, ----------------------------------------------
(UNAUDITED) 1994** 1993 1992 1991 1990
------------- ------------- ---------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $6.63 $6.85 $6.68 $6.29 $5.22 $6.87
INCOME FROM INVESTMENT OPERATIONS
Net investment income .01 .01 .02 .05 .07 .09
Net realized and unrealized gain
(loss) on investments .81 (.23) .93 .87 1.70 (.32)
Net increase (decrease) in net asset
value from operations .82 (.22) .95 .92 1.77 (.23)
LESS: DISTRIBUTIONS
Dividends from net investment income (.01) -0- (.02) (.05) (.07) (.18)
Distributions from net realized gains (1.00) -0- (.76) (.48) (.63) (1.24)
Total dividends and distributions (1.01) -0- (.78) (.53) (.70) (1.42)
Net asset value, end of period $6.44 $6.63 $6.85 $6.68 $6.29 $5.22
TOTAL RETURN
Total investment return based on
net asset value (c) 15.01% (3.21)% 14.26% 14.70% 33.91% (4.36)%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $812,401 $760,679 $831,814 $794,733 $748,226 $620,374
Ratio of expenses to average net assets 1.07%(d) 1.05%(d) 1.01% .81% .83% .81%
Ratio of net investment income to
average net assets .44%(d) .21%(d) .27% .79% 1.03% 1.56%
Portfolio turnover rate 41% 63% 66% 58% 74% 71%
</TABLE>
See footnote summary on page 17.
15
FINANCIAL HIGHLIGHTS (CONTINUED) THE ALLIANCE FUND
-------------------------------------------------------------------------------
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
CLASS B
SIX MONTHS ELEVEN MONTHS
ENDED ENDED YEAR ENDED DECEMBER 31,
MAY 31,1995 NOVEMBER 30, ------------------------------------
(UNAUDITED) 1994** 1993 1992 1991*
------------ ------------ ---------- ------------ ----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $6.50 $6.76 $6.64 $6.27 $6.14
INCOME FROM INVESTMENT OPERATIONS
Net investment income (loss) .05 (.03) (.03) (.01)(b) .01(b)
Net realized and unrealized gain (loss)
on investments .72 (.23) .91 .87 .79
Net increase (decrease) in net asset
value from operations .77 (.26) .88 .86 .80
LESS: DISTRIBUTIONS
Dividends from net investment income -0- -0- -0- (.01) (.04)
Distributions from net realized gains (1.00) -0- (.76) (.48) (.63)
Total dividends and distributions (1.00) -0- (.76) (.49) (.67)
Net asset value, end of period $6.27 $6.50 $6.76 $6.64 $6.27
TOTAL RETURN
Total investment return based on
net asset value (c) 14.36% (3.85)% 13.28% 13.75% 13.10%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $22,603 $18,138 $12,402 $3,825 $852
Ratio of expenses to average net assets 1.88%(d) 1.89%(d) 1.90% 1.64% 1.64%(d)
Ratio of net investment income (loss) to
average net assets (.32)%(d) (.60)%(d) (.64)% (.04)% .10%(d)
Portfolio turnover rate 41% 63% 66% 58% 74%
</TABLE>
See footnote summary on page 17.
16
THE ALLIANCE FUND
-------------------------------------------------------------------------------
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
CLASS C
-------------------------------------
SIX MONTHS ELEVEN MONTHS
ENDED ENDED MAY 3,1993(A)
MAY 31,1995 NOV. 30, TO DEC. 31,
(UNAUDITED) 1994** 1993
----------- ---------- ------------
Net asset value, beginning of period $6.50 $6.77 $6.67
INCOME FROM INVESTMENT OPERATIONS
Net investment loss (.10) (.03) (.02)
Net realized and unrealized gain (loss)
on investments .87 (.24) .88
Net increase (decrease) in net asset
value from operations .77 (.27) .86
LESS: DISTRIBUTIONS
Distributions from net realized gains (1.00) -0- (.76)
Net asset value, end of period $6.27 $6.50 $6.77
TOTAL RETURN
Total investment return based on
net asset value (c) 14.36% (3.99)% 13.95%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $6,868 $6,230 $4,006
Ratio of expenses to average net assets 1.91%(d) 1.87%(d) 1.94%(d)
Ratio of net investment income (loss)
to average net assets (.38)%(d) (.59)%(d) (.74)%(d)
Portfolio turnover rate 41% 63% 66%
* For the period March 4, 1991 (commencement of distribution) to December
31, 1991.
** The Fund changed its fiscal year end from December 31 to November 30.
(a) Commencement of distribution.
(b) Based on average shares outstanding.
(c) Total investment return is calculated assuming an initial investment made
at the net asset value at the beginning of the period, reinvestment of all
dividends and distributions at net asset value during the period, and
redemption on the last day of the period. Initial sales charges or contingent
deferred sales charges are not reflected in the calculation of total investment
return. Total investment returns calculated for periods of less than one year
are not annualized.
(d) Annualized.
17
THE ALLIANCE FUND
-------------------------------------------------------------------------------
BOARD OF DIRECTORS
JOHN D. CARIFA, CHAIRMAN AND PRESIDENT
RUTH BLOCK (1)
DAVID H. DIEVLER
JOHN H. DOBKIN (1)
WILLIAM H. FOULK, JR. (1)
DR. JAMES M. HESTER (1)
CLIFFORD L. MICHEL (1)
ROBERT C. WHITE (1)
OFFICERS
ALFRED HARRISON, EXECUTIVE VICE PRESIDENT
PAUL H. JENKEL, SENIOR VICE PRESIDENT
THOMAS BARDONG, VICE PRESIDENT
EDMUND P. BERGAN, JR., SECRETARY
MARK D. GERSTEN, TREASURER & CHIEF FINANCIAL OFFICER
PATRICK J. FARRELL, CONTROLLER
CUSTODIAN
STATE STREET BANK & TRUST COMPANY
225 Franklin Street
Boston, MA 02110
PRINCIPAL UNDERWRITER
ALLIANCE FUND DISTRIBUTORS, INC.
1345 Avenue of the Americas
New York, NY 10105
TRANSFER AGENT
ALLIANCE FUND SERVICES, INC.
P.O. Box 1520
Secaucus, NJ 07096-1520
Toll-Free 1-(800) 221-5672
INDEPENDENT ACCOUNTANTS
PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, NY 10036-2798
LEGAL COUNSEL
SEWARD & KISSEL
One Battery Park Plaza
New York, NY 10004
The financial information included herein is taken from the records of the fund
without audit by independent accountants who do not express an opinion thereon.
(1) Member of the Audit Committee.
18
THE ALLIANCE FUND
1345 Avenue of the Americas
New York, NY 10105
(800) 221-5672
Alliance Capital
Mutual funds without the Mystery.
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.
ALLSR
BULK RATE
U.S. POSTAGE
PAID
New York, NY
Permit No. 7131
20
