THE ALLIANCE FUND
SEMI-ANNUAL REPORT
MAY 31, 1996
LETTER TO SHAREHOLDERS THE ALLIANCE FUND
_______________________________________________________________________________
July 15, 1996
Dear Shareholder:
We began your Fund's fiscal year with a generally favorable view of economic
and corporate developments and with a belief in the stock market's potential to
reward investors with another year of double-digit returns. At the same time,
we indicated that the market's advance might be erratic. For the six months
ended May 31, 1996, the equity market lived up to our expectations as reflected
in the performance of both the S&P 500-Stock Index and the Russell 1000
Growth-Stock Index, which registered gains of 11.76% and 11.37%, respectively.
These results take into account several steep market swings, including a
171-point drop in the Dow Jones Industrial Average on March 8, 1996.
We are pleased to report that The Alliance Fund also appreciated during the
period, although more modestly than its comparative indices. Class A shares,
for example, produced a cumulative total return of 7.42%. The table below
provides the results for each class of shares and describes more completely the
benchmarks used for comparison.
INVESTMENT RESULTS*
SIX MONTHS ENDED MAY 31, 1996
CUMULATIVE ENDING
TOTAL RETURN NAV
------------ -------
THE ALLIANCE FUND
Class A 7.42% $7.11
Class B 7.05% $6.86
Class C 6.90% $6.86
S&P 500-STOCK INDEX 11.76%
RUSSELL 1000 GROWTH-STOCK INDEX 11.37%
* 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 5/31/96. ALL
FEES AND EXPENSES RELATED TO THE OPERATION OF THE FUND HAVE BEEN DEDUCTED, BUT
NO ADJUSTMENT HAS BEEN MADE FOR SALES CHARGES THAT MAY APPLY WHEN SHARES ARE
PURCHASED OR REDEEMED. RETURNS FOR THE FUND AND ITS COMPARATIVE INDICES INCLUDE
THE REINVESTMENT OF ANY DISTRIBUTIONS PAID DURING THE PERIOD.
ALL COMPARATIVE INDICES ARE UNMANAGED AND REFLECT NO FEES OR EXPENSES. THE
RUSSELL 1000 GROWTH-STOCK INDEX TRACKS THE RETURNS OF THE LARGEST 1000 U.S.
STOCKS WITH THE HIGHEST PRICE-TO-BOOK RATIO (A DEFINING MEASURE OF GROWTH
STOCKS). THE S&P 500-STOCK INDEX IS A COMMON MEASURE OF THE PERFORMANCE OF THE
OVERALL U.S. STOCK MARKET.
FACTORS AFFECTING YOUR FUND'S PERFORMANCE
As you know, The Alliance Fund seeks long-term growth of capital and income
through investments in common stocks. During the six-month period ended May 31,
1996, the Fund's holdings emphasized large-company issues, where prices and
fundamentals suggested attractive growth opportunities. Our selections within
that sector generally performed well despite the market's preference for
small-capitalization stocks. There were disappointments among our investments,
however. Our emphasis on financial companies, which are sensitive to
interest-rate movements, dampened performance when concern about an
accelerating economy pushed rates higher. Several technology stocks also
squeezed returns. That sector experienced a significant correction in the
opening months of the period. In particular, our position in Applied Materials
hurt the Fund's overall total return.
A POSITIVE ECONOMIC AND MARKET OUTLOOK
The four underpinnings to our positive attitude remain unchanged from our last
report to you. First, we continue to see solid earnings, cash flow, and balance
sheet improvement at many of the companies we analyze. There is nothing on the
horizon to suggest that the prospects for these companies will change
materially. Second, the broad economic view, both domestically and worldwide,
is for a continuation of moderate growth and moderate inflation. One can argue
shades around this, but nothing approaching boom or recession seems likely. The
third reason for our positive outlook is that the competitiveness of the U.S.
continues to impress us. A decade of painful cost cutting, growing
technological leadership, and a still undervalued dollar suggest that the
ability of the U.S. to succeed in world markets should not be underrated. This
is especially true since the nation's competitiveness is built on traditional
democratic and capitalistic strengths and on solid legal and accounting
structures. Finally, and perhaps most important, we are enjoying the elixir of
both an orthodox monetary policy, led by Alan Greenspan, and a conservative
fiscal policy that has been embraced by both political parties and by the
general electorate. Indeed, the deficit worries of a few years ago have proven
to be of little import in relation to a multi-trillion-dollar gross domestic
product.
1
THE ALLIANCE FUND
_______________________________________________________________________________
INVESTMENT STRATEGY
Our bullish position and our investment strategy going forward must be
tempered, however, by the fact that stocks have been trading at more than 16
times our estimate of 1996 earnings. In our opinion, an appropriate range for
the stock market is 14 to 18 times earnings. At the beginning of 1995, the
market was priced at just under 14 times projected earnings, and we were very
bullish. We also recognize that the equity market's advance has lasted 15 years
and that recent gains have been fueled by enormous injections of money into
mutual funds. For these reasons, we shall continue to keep our
portfolio-weighted price-earnings multiple as low as possible while still
striving for above-average growth.
Our best forecast and, indeed, our greatest hope is that the market will
continue to move upward, but slowly. We are concerned that deep, sharp swings
in the market at its current valuation level could lead to increased
speculation and added risk. For the last six months, the market has been
obsessed with the performance of high-technology stocks. We believe a better
approach to consistent long-term growth is to invest in a broad mixture of
stocks drawn from a variety of different industries. We have therefore
positioned your Fund's portfolio to take advantage of the growth potential we
see in certain consumer, financial, and industrial companies. While we always
have a growth bias, we are committed to keeping our stock selection as diverse
as possible.
Thank you for your interest and investment in The Alliance Fund. We look
forward to reporting its progress to you in the coming period.
Sincerely,
John D. Carifa
Chairman and President
Alfred Harrison
Executive 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 THE ALLIANCE FUND
_______________________________________________________________________________
The Alliance Fund is an open-end, diversified investment company that seeks
long-term growth of capital and income primarily through investments in common
stocks. While the Fund normally invests substantially all of its assets in
equities that Alliance believes will appreciate in value, it may invest in a
variety of securities, including convertible bonds, U.S. Government securities,
and other high-quality instruments. The Fund has the flexibilty to invest
without limit in foreign securities.
INVESTMENT RESULTS
_______________________________________________________________________________
AVERAGE ANNUAL TOTAL RETURNS AS OF MAY 31, 1996
CLASS A SHARES
WITHOUT WITH
SALES CHARGE SALES CHARGE
------------ ------------
. One Year 28.78% 23.23%
. Five Years 15.32% 14.30%
. Ten Years 13.00% 12.51%
CLASS B SHARES
WITHOUT WITH
SALES CHARGE SALES CHARGE
------------ ------------
. One Year 27.88% 23.88%
. Five Years 14.44% 14.44%
. Since Inception* 14.68% 14.68%
CLASS C SHARES
. One Year 27.88%
. Since Inception* 16.42%
Average annual total returns reflect investment of dividends and/or capital
gain 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 purchased prior to July 1, 1996, are not subject to front-end or
contingent deferred sales charges. Class C shares purchased on or after July 1,
1996, are subject to a contingent deferred sales charge of 1% on redemptions
made within the first year after purchase.
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, 1996 (UNAUDITED) THE ALLIANCE FUND
_______________________________________________________________________________
COMPANY VALUE PERCENT OF NET ASSETS
- ---------------------------------------------------------------------------
Philip Morris Cos., Inc. $ 51,615,375 5.1%
AirTouch Communications, Inc. 35,795,625 3.6
Applied Materials, Inc. 34,895,800 3.5
UAL, Corp. 33,223,900 3.3
Norwest Corp. 32,887,125 3.3
Merrill Lynch & Co., Inc. 31,468,500 3.1
Hewlett-Packard Co. 22,865,850 2.3
United Healthcare, Inc. 21,971,950 2.2
Federal Home Loan Mortgage Corp. 21,565,125 2.1
PepsiCo, Inc. 20,914,250 2.1
$307,203,500 30.6%
MAJOR PORTFOLIO CHANGES
SIX MONTHS ENDED MAY 31, 1996 (UNAUDITED)
_______________________________________________________________________________
SHARES
----------------------------
PURCHASES BOUGHT HOLDINGS 5/31/96
- ----------------------------------------------------------------------
AirTouch Communications, Inc. 320,000 1,123,000
Aluminum Co. of America 137,400 137,400
Amgen, Inc. 194,000 260,500
Applied Materials, Inc. 410,000 936,800
Ford Motor Co. 370,000 370,000
General Electric Co. 145,000 145,000
General Motors Corp. 240,000 240,000
International Business Machines Corp. 69,500 69,500
Merck & Co., Inc. 178,500 178,500
Morgan Stanley Group, Inc. 217,900 217,900
SALES SOLD HOLDINGS 5/31/96
- ------------------------------------------------------------------------
First Bank Systems, Inc. 193,200 -0-
General Motors Corp. Cl.E 351,100 -0-
General Re Corp. 102,700 -0-
Gillette Co. 195,000 124,800
Intel Corp. 555,000 275,700
McDonald's Corp. 230,000 334,200
Micron Technology, Inc. 150,000 -0-
Motorola, Inc. 291,200 -0-
Oracle Systems Corp. 160,300 50,000
Philip Morris Cos., Inc. 100,000 519,400
4
PORTFOLIO OF INVESTMENTS
MAY 31, 1996 (UNAUDITED) THE ALLIANCE FUND
_______________________________________________________________________________
COMPANY SHARES VALUE
- -------------------------------------------------------------------------
COMMON STOCKS-97.4%
CONSUMER PRODUCTS & SERVICES-42.2%
AIRLINES-5.6%
AMR Corp.* 96,000 $ 9,060,000
Delta Airlines, Inc. 25,000 2,071,875
KLM Royal Dutch Air 321,700 11,420,350
UAL, Corp.* 581,600 33,223,900
------------
55,776,125
AUTO & RELATED-1.3%
Ford Motor Co. 370,000 13,505,000
BIOTECHNOLOGY-1.5%
Amgen, Inc.* 260,500 15,499,750
BROADCASTING & CABLE-10.7%
AirTouch Communications, Inc.* 1,123,000 35,795,625
Bell Cablemedia Plc. (ADR)* (a) 70,000 1,260,000
Cablevision Systems Corp. Cl.A* 90,000 4,320,000
Comcast Corp. Cl.A (SPL) 200,000 3,475,000
CommNet Cellular, Inc.* 85,000 2,921,875
Cox Communications, Inc.* 381,100 8,574,750
Jones Intercable, Inc. Cl.A* 240,000 3,240,000
Millicom International Cellular S.A.* 40,000 1,925,000
Mobilemedia Corp.* 125,000 2,390,625
New World Communications Group, Inc. * 50,000 825,000
Nynex Cablecomms Group Plc (ADR)* (a) 110,000 2,062,500
TCI Group Series A* 1,037,500 19,582,813
Tele-Communications International,
Inc. Cl.A* 120,000 2,265,000
Tele-Communications-Liberty Media Cl.A* 369,050 11,071,500
Telephone & Data Systems, Inc. 80,000 3,490,000
Viacom, Inc. Cl.B* 1 42
Vodafone Group Plc (ADR)* (a) 50,000 1,981,250
Western Wireless Corp.* 113,200 2,773,400
------------
107,954,380
DRUGS, HOSPITAL SUPPLIES & MEDICAL SERVICES-9.1%
Baxter International, Inc. 135,000 5,973,750
Centocor, Inc.* 77,100 2,727,413
Columbia HCA Healthcare Corp. 306,600 16,518,075
Johnson & Johnson Co. 50,000 4,868,750
Merck & Co., Inc. 178,500 11,535,562
Pfizer, Inc. 250,000 17,687,500
Pharmacia & Upjohn, Inc. 40,000 1,635,000
Revco D.S., Inc.* 125,000 2,968,750
United Healthcare, Inc. 400,400 21,971,950
Value Health, Inc.* 65,000 1,771,250
Warner Lambert Co. 60,000 3,360,000
------------
91,018,000
ENTERTAINMENT & LEISURE-2.4%
Circus Circus Enterprises, Inc.* 39,900 1,660,837
Cyrk, Inc.* 75,000 956,250
Eastman Kodak Co. 11,000 818,125
Harrahs Entertainment, Inc.* 55,000 1,849,375
Walt Disney Co. 310,600 18,868,950
------------
24,153,537
FOOD, BEVERAGES & TOBACCO-7.2%
PepsiCo, Inc. 629,000 20,914,250
Philip Morris Cos., Inc. 519,400 51,615,375
------------
72,529,625
5
PORTFOLIO OF INVESTMENTS (CONTINUED) THE ALLIANCE FUND
_______________________________________________________________________________
COMPANY SHARES VALUE
- -------------------------------------------------------------------------
HOUSEHOLD PRODUCTS-0.7%
Gillette Co. 124,800 $ 7,378,800
PRINTING & PUBLISHING-0.3%
Aamulehti Yhtymae OY-II (b) 110,000 2,918,515
RESTAURANTS & LODGING-2.2%
Host Marriott Corp.* 190,000 2,493,750
John Q. Hammons Hotels, Inc.* 170,000 1,848,750
Marriot International, Inc. 40,000 1,900,000
McDonald's Corp. 334,200 16,083,375
------------
22,325,875
RETAILING-1.2%
Fingerhut Cos., Inc. 230,000 3,536,250
Home Depot, Inc. 60,000 3,067,500
Home Shopping Network, Inc.* 20,000 287,500
Payless Cashways, Inc.* 270,000 1,282,500
Sears, Roebuck & Co. 30,000 1,526,250
Wal-Mart Stores, Inc. 75,000 1,940,625
------------
11,640,625
------------
424,700,232
FINANCIAL SERVICES-21.0%
BANKING & CREDIT-6.7%
Citicorp 100,000 8,400,000
First Union Corp. 60,000 3,667,500
Household International, Inc. 34,000 2,354,500
MBNA Corp. 65,000 1,990,625
NationsBank Corp. 217,800 17,669,025
Norwest Corp. 943,000 32,887,125
------------
66,968,775
BROKERAGE-5.0%
Edwards (A.G.), Inc. 50,000 1,281,250
Green Tree Financial Corp. 143,500 4,699,625
Legg Mason, Inc. 60,000 1,995,000
Merrill Lynch & Co., Inc. 486,000 31,468,500
Morgan Stanley Group, Inc. 217,900 10,786,050
------------
50,230,425
INSURANCE-5.5%
Aetna Life & Casualty Co. 60,000 $4,425,000
American International Group, Inc. 204,500 19,274,125
Equitable of Iowa Cos. 30,000 1,106,250
Home State Holdings, Inc.* 57,400 480,725
IPC Holdings Ltd. 112,100 2,312,063
John Alden Financial Corp. 90,000 2,013,750
Life Partners Group, Inc. 60,000 1,267,500
MGIC Investment Corp. 70,000 4,112,500
NAC Re Corp. 70,000 2,275,000
Progressive Corp 43,000 1,988,750
TIG Holdings, Inc. 125,000 3,750,000
Transatlantic Holdings, Inc. 35,000 2,248,750
Travelers Group, Inc. 240,000 9,960,000
------------
55,214,413
MORTGAGE BANKING-3.5%
Federal Home Loan Mortgage Corp. 261,000 21,565,125
Federal National Mortgage Assn. 440,600 13,603,525
------------
35,168,650
REAL ESTATE-0.3%
Avalon Properties, Inc. 80,000 1,710,000
Simon Property Group, Inc. 70,000 1,697,500
------------
3,407,500
------------
210,989,763
SCIENCE & TECHNOLOGY-18.1%
COMMUNICATIONS EQUIPMENT-2.4%
3Com Corp.* 60,000 2,955,000
Bay Networks, Inc.* 110,000 3,190,000
cisco Systems, Inc.* 60,000 3,285,000
DSC Communications Corp.* 70,000 2,108,750
Ericsson (L.M.) Telephone Co. (ADR) (c) 273,510 6,307,824
Nokia Corp. (ADR) (d) 90,000 3,915,000
Scientific-Atlanta, Inc. 140,000 2,642,500
------------
24,404,074
6
THE ALLIANCE FUND
_______________________________________________________________________________
COMPANY SHARES VALUE
- -------------------------------------------------------------------------
COMPUTER HARDWARE-5.4%
Ceridian Corp.* 75,000 $ 3,965,625
COMPAQ Computer Corp.* 256,300 12,462,587
Digital Equipment Corp.* 58,000 3,023,250
Hewlett-Packard Co. 214,200 22,865,850
Intergraph Corp.* 150,000 1,968,750
International Business Machines Corp. 69,500 7,419,125
SCI Systems, Inc.* 50,000 2,250,000
------------
53,955,187
COMPUTER PERIPHERALS-0.3%
Seagate Technology* 60,000 3,525,000
COMPUTER SOFTWARE & SERVICES-3.1%
First Data Corp. 33,000 2,631,750
Informix Corp.* 145,000 3,298,750
Microsoft Corp.* 165,650 19,670,938
Oracle Systems Corp.* 50,000 1,656,250
Softkey International Inc.* 20,000 497,500
Sterling Software, Inc.* 38,000 3,059,000
------------
30,814,188
ELECTRICAL EQUIPMENT-0.2%
Linear Technology Corp. 70,000 2,415,000
SEMI-CONDUCTORS & RELATED-6.7%
Altera Corp.* 40,000 1,935,000
Applied Materials, Inc.* 936,800 34,895,800
Intel Corp. 275,700 20,815,350
National Semiconductor Corp.* 230,000 3,737,500
Teradyne, Inc.* 140,000 2,817,500
Texas Instruments, Inc. 48,000 2,700,000
------------
66,901,150
------------
182,014,599
BASIC INDUSTRIES-8.5%
CHEMICALS-1.0%
Freeport McMoran, Inc. 53,902 1,886,570
IMC Fertilizer Group, Inc. 60,000 2,197,500
Monsanto Co. 22,000 3,341,250
Olin Corp 22,000 2,035,000
------------
9,460,320
MACHINERY-2.2%
Allied-Signal, Inc. 45,000 2,463,750
Case Corp. 166,100 8,325,763
Cincinnati Milacron, Inc. 55,000 1,320,000
Coltec Industries, Inc.* 200,000 2,650,000
Deere & Co. 138,800 5,777,550
Pentair, Inc. 50,000 1,337,500
------------
21,874,563
MINING & METALS-1.2%
Aluminum Co. of America 137,400 8,467,275
Kaiser Aluminum Corp.* 180,000 2,295,000
Lukens, Inc. 55,000 1,478,125
------------
12,240,400
OIL & GAS-2.2%
Brown (Tom), Inc.* 140,000 2,415,000
Camco International, Inc. 50,000 1,643,750
ENSERCH Corp. 80,000 1,730,000
Louis Dreyfus Natural Gas Corp.* 180,000 2,520,000
Louisiana Land & Exploration Co. 52,000 2,801,500
Mitchell Energy & Development Corp. Cl.B 60,800 1,124,800
Noble Affiliates, Inc. 80,000 2,710,000
Reading & Bates Corp.* 30,000 660,000
Seagull Energy Corp.* 60,000 1,350,000
Transocean AS (e) 100,000 2,651,910
United Meridian Corp.* 100,000 2,850,000
------------
22,456,960
POLLUTION CONTROL-0.4%
WMX Technologies, Inc. 110,000 3,877,500
7
PORTFOLIO OF INVESTMENTS (CONTINUED) THE ALLIANCE FUND
_______________________________________________________________________________
COMPANY SHARES VALUE
- -------------------------------------------------------------------------
SURFACE TRANSPORTATION-0.9%
Burlington Northern Santa Fe 20,000 $ 1,695,000
GATX Corp. 60,000 2,700,000
Illinois Central Corp. 80,000 2,390,000
Southern Pacific Rail Corp.* 100,000 2,437,500
------------
9,222,500
TRUCKING & SHIPPING-0.4%
Ryder System, Inc. 90,000 2,632,500
Sea Containers, Ltd. Cl.A 80,000 1,530,000
------------
4,162,500
OTHER-0.2%
Xtra Corp. 45,000 2,086,875
------------
85,381,618
UTILITIES-2.7%
TELEPHONE UTILITIES-2.7%
AT & T Corp. 265,900 16,585,513
MCI Communications Corp. 360,000 10,485,000
------------
27,070,513
CONSUMER MANUFACTURING-1.9%
AUTO & RELATED-1.6%
First Brands Corp. 38,200 945,450
General Motors Corp. 240,000 13,230,000
Magna International, Inc. 40,000 1,930,000
------------
16,105,450
SHARES OR
PRINCIPAL
AMOUNT
COMPANY (000) VALUE
- -------------------------------------------------------------------------
BUILDING & RELATED-0.2%
American Standard Cos., Inc.* 70,000 $ 2,073,750
TEXTILE PRODUCTS-0.1%
Cone Mills Corp.* 100,000 1,162,500
------------
19,341,700
MULTI INDUSTRY-1.6%
ITT Corp.* 265,000 16,297,500
CAPITAL GOODS-1.2%
ELECTRICAL EQUIPMENT-1.2%
General Electric Co. 145,000 11,998,750
DIVERSIFIED-0.2%
United Dominion Industries Ltd. (f) 60,000 1,432,500
Total Common Stocks
(cost $786,827,216) 979,227,175
COMMERCIAL PAPER-1.8%
General Electric Capital Corp.
5.40%, 6/03/96
(amortized cost $18,667,398) $18,673 18,667,398
TOTAL INVESTMENTS-99.2%
(cost $805,494,614) 997,894,573
Other assets less
liabilities-0.8% 7,619,735
NET ASSETS-100% $1,005,514,308
* Non-income producing security.
(a) Country of origin - United Kingdom.
(b) Finnish holding.
(c) Country of origin - Sweden.
(d) Country of origin - Finland.
(e) Norwegian holding.
(f) Canadian holding.
Glossary:
ADR - American Depository Receipt
See notes to financial statements.
8
STATEMENT OF ASSETS AND LIABILITIES
MAY 31, 1996 (UNAUDITED) THE ALLIANCE FUND
_______________________________________________________________________________
ASSETS
Investments in securities, at value (cost $805,494,614) $ 997,894,573
Cash, at value (cost $24,325) 23,413
Receivable for investment securities sold 13,172,781
Dividends receivable 689,986
Receivable for capital stock sold 223,554
Prepaid expense 40,992
Total assets 1,012,045,299
LIABILITIES
Payable for investment securities purchased 4,428,480
Unclaimed dividends 1,005,964
Management fee payable 587,710
Distribution fee payable 194,623
Payable for capital stock redeemed 109,003
Accrued expenses 205,211
Total liabilities 6,530,991
NET ASSETS $1,005,514,308
COMPOSITION OF NET ASSETS
Capital stock, at par $ 1,416,250
Additional paid-in capital 712,524,290
Undistributed net investment income 879,139
Accumulated net realized gain 98,295,582
Net unrealized appreciation of investments and foreign
currency denominated assets and liabilities 192,399,047
--------------
$1,005,514,308
CALCULATION OF MAXIMUM OFFERING PRICE
CLASS A SHARES
Net asset value and redemption price per share($952,789,505/
133,940,210 shares of capital stock issued and outstanding) $7.11
Sales charge-4.25% of public offering price .32
Maximum offering price $7.43
CLASS B SHARES
Net asset value and offering price per share($39,398,791/
5,742,417 shares of capital stock issued and outstanding) $6.86
CLASS C SHARES
Net asset value, redemption and offering price per share($13,326,012
/1,942,344 shares of capital stock issued and outstanding) $6.86
See notes to financial statements.
9
STATEMENT OF OPERATIONS
SIX MONTHS ENDED MAY 31, 1996 (UNAUDITED) THE ALLIANCE FUND
_______________________________________________________________________________
INVESTMENT INCOME
Dividends(net of foreign taxes withheld of $80,362) $5,545,634
Interest 636,897 $ 6,182,531
EXPENSES
Advisory fee 3,400,128
Distribution fee - Class A 876,445
Distribution fee - Class B 175,836
Distribution fee - Class C 58,108
Transfer agency 365,778
Custodian 112,944
Administrative 73,806
Audit and legal 60,663
Printing 35,164
Registration 33,840
Taxes 28,562
Directors' fees 12,276
Miscellaneous 15,480
Total expenses 5,249,030
Net investment income 933,501
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain on investments 99,656,197
Net realized loss on foreign currency transactions (352)
Net change in unrealized appreciation of:
Investments (31,056,659)
Foreign currency denominated assets and liabilities (2,125)
Net gain on investments 68,597,061
NET INCREASE IN NET ASSETS FROM OPERATIONS $69,530,562
See notes to financial statements.
10
STATEMENT OF CHANGES IN NET ASSETS THE ALLIANCE FUND
_______________________________________________________________________________
SIX MONTHS ENDED
MAY 31,1996 YEAR ENDED
(UNAUDITED) NOV. 30,1995
-------------- -------------
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS
Net investment income $ 933,501 $ 2,382,706
Net realized gain on investments 99,655,845 137,577,216
Net change in unrealized appreciation of
investments (31,058,784) 136,438,371
Net increase in net assets from operations 69,530,562 276,398,293
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income
Class A (2,437,233) (1,599,712)
Net realized gain on investments
Class A (129,782,675) (114,265,138)
Class B (4,556,157) (2,789,853)
Class C (1,766,904) (972,583)
CAPITAL STOCK TRANSACTIONS
Net increase 87,400,945 45,307,923
Total increase 18,388,538 202,078,930
NET ASSETS
Beginning of year 987,125,770 785,046,840
End of period (including undistributed net
investment income of $879,139 and
$2,382,871, respectively) $1,005,514,308 $987,125,770
See notes to financial statements.
11
NOTES TO FINANCIAL STATEMENTS
MAY 31, 1996 (UNAUDITED) THE ALLIANCE FUND
_______________________________________________________________________________
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. 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 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 currently sold without an initial or contingent
deferred sales charge. Class Cshares purchased on or after July 1, 1996, are
subject to a contingent deferred sales charge of 1% on redemptions made within
the first year after purchase. 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. 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.
Net foreign exchange losses represents 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. 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 and foreign currency
denominated assets and liabilities.
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.
12
THE ALLIANCE FUND
_______________________________________________________________________________
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 .75% on the first
$500 million of average daily net assets, .65% on the next $500 million of
average daily net assets and .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 $73,806 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, 1996.
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 $263,463 for the six
months ended May 31, 1996.
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 2.5% of the first $30 million of its average daily net assets, 2% of
the next $70 million of its average daily net assets, and 1.5% of its average
daily net assets in excess of $100 million. No such reimbursement was required
for the six months ended May 31, 1996.
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 $21,677 from the sale of Class A shares and $27,519
in contingent deferred sales charges imposed upon redemptions by shareholders
of Class B shares for the six months ended May 31, 1996.
Brokerage commissions paid for the six months ended May 31, 1996 on securities
transactions amounted to $949,777, 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 $2,413,355 and $678,863, 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 $408,421,145 and $461,703,738, respectively, for the six months
ended May 31, 1996. At May 31, 1996, the cost of securities for federal income
tax purposes was $806,053,475. Accordingly, gross unrealized appreciation of
investments was $211,540,798 and gross unrealized depreciation of investments
was $19,699,700, resulting in net unrealized appreciation of $191,841,098.
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 ENDED YEAR ENDED SIX MONTHS ENDED YEAR ENDED
MAY 31,1996 NOVEMBER 30, MAY 31,1996 NOVEMBER 30,
(UNAUDITED) 1995 (UNAUDITED) 1995
------------ ------------ ------------- --------------
CLASS A
Shares sold 2,783,332 11,552,553 $18,856,093 $ 76,332,241
Shares issued in
reinvestment of
dividends and
distributions 15,446,742 16,140,922 100,712,758 88,936,504
Shares converted from
Class B to Class A 47,373 -0- 318,580 -0-
Shares redeemed (6,738,223) (19,990,291) (46,481,907) (131,496,755)
Net increase 11,539,224 7,703,184 $73,405,524 $ 33,771,990
CLASS B
Shares sold 1,684,541 2,132,283 $11,106,178 $ 13,861,804
Shares issued in
reinvestment of
distributions 586,032 429,040 3,697,861 2,312,524
Shares converted from
Class B to Class A (45,722) -0- (318,580) -0-
Shares redeemed (717,583) (1,117,997) (4,728,127) (7,184,000)
Net increase 1,507,268 1,443,326 $ 9,757,332 $ 8,990,328
CLASS C
Shares sold 946,107 904,787 $ 6,530,122 $ 5,865,193
Shares issued in
reinvestment of
distributions 175,223 116,466 1,105,657 627,754
Shares redeemed (523,380) (634,972) (3,397,690) (3,947,342)
Net increase 597,950 386,281 $ 4,238,089 $ 2,545,605
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 YEAR ENDED ENDED YEAR ENDED DECEMBER 31,
MAY 31,1996 NOVEMBER 30, NOVEMBER 30, -----------------------------------
(UNAUDITED) 1995 1994(G) 1993 1992 1991
------------ ------------ ------------ ----------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $7.72 $6.63 $6.85 $6.68 $6.29 $5.22
INCOME FROM INVESTMENT OPERATIONS
Net investment income .01(b) .02(b) .01 .02 .05 .07
Net realized and unrealized gain (loss)
on investments .47 2.08 (.23) .93 .87 1.70
Net increase (decrease) in net asset
value from operations .48 2.10 (.22) .95 .92 1.77
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (.02) (.01) -0- (.02) (.05) (.07)
Distributions from net realized gains (1.07) (1.00) -0- (.76) (.48) (.63)
Total dividends and distributions (1.09) (1.01) -0- (.78) (.53) (.70)
Net asset value, end of period $7.11 $7.72 $6.63 $6.85 $6.68 $6.29
TOTAL RETURN
Total investment return based on net
asset value (c) 7.42% 37.87% (3.21)% 14.26% 14.70% 33.91%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period(000's omitted) $952,789 $945,309 $760,679 $831,814 $794,733 $748,226
Ratio of expenses to average net assets 1.04%(d) 1.08% 1.05%(d) 1.01% .81% .83%
Ratio of net investment income to
average net assets .23%(d) .31% .21%(d) .27% .79% 1.03%
Portfolio turnover rate 43% 81% 63% 66% 58% 74%
Average commission rate (e) $.0679 $ -0- $ -0- $ -0- $ -0- $ -0-
</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 YEAR ENDED ENDED YEAR ENDED DECEMBER 31,
MAY 31,1996 NOVEMBER 30, NOVEMBER 30, --------------------------------------
(UNAUDITED) 1995 1994(G) 1993 1992 1991
------------ ------------ ------------- ---------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $7.49 $6.50 $6.76 $6.64 $6.27 $6.14
INCOME FROM INVESTMENT OPERATIONS
Net investment income (loss) (.02)(b) (.03)(b) (.03) (.03) (.01)(b) .01(b)
Net realized and unrealized gain(loss)
on investments .46 2.02 (.23) .91 .87 .79
Net increase (decrease) in net asset
value from operations .44 1.99 (.26) .88 .86 .80
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income -0- -0- -0- -0- (.01) (.04)
Distributions from net realized gains (1.07) (1.00) -0- (.76) (.48) (.63)
Total dividends and distributions (1.07) (1.00) -0- (.76) (.49) (.67)
Net asset value, end of period $6.86 $7.49 $6.50 $6.76 $6.64 $6.27
TOTAL RETURN
Total investment return based on net
asset value (c) 7.05% 36.61% (3.85)% 13.28% 13.75% 13.10%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period(000's omitted) $39,399 $31,738 $18,138 $12,402 $3,825 $852
Ratio of expenses to average net assets 1.87%(d) 1.90% 1.89%(d) 1.90% 1.64% 1.64%(d)
Ratio of net investment income (loss)
to average net assets (.60)%(d) (.53)% (.60)%(d) (.64)% (.04)% .10%(d)
Portfolio turnover rate 43% 81% 63% 66% 58% 74%
Average commission rate (e) $.0679 $ -0- $ -0- $ -0- $ -0- $ -0-
</TABLE>
See footnote summary on page 17.
16
THE ALLIANCE FUND
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
CLASS C
-------------------------------------------------------
SIX MONTHS ELEVEN MONTHS MAY 3,
ENDED YEAR ENDED ENDED 1993(A) TO
MAY 31,1996 NOVEMBER 30, NOVEMBER 30, DECEMBER 31,
(UNAUDITED) 1995 1994(G) 1993
------------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $7.50 $6.50 $6.77 $6.67
INCOME FROM INVESTMENT OPERATIONS
Net investment loss (.02)(b) (.03)(b) (.03) (.02)
Net realized and unrealized gain(loss)
on investments .45 2.03 (.24) .88
Net increase (decrease) in net asset
value from operations .43 2.00 (.27) .86
LESS: DISTRIBUTIONS
Distributions from net realized gains (1.07) (1.00) -0- (.76)
Net asset value, end of period $6.86 $7.50 $6.50 $6.77
TOTAL RETURN
Total investment return based on net
asset value (c) 6.90% 36.79% (3.99)% 13.95%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period(000's omitted) $13,326 $10,078 $6,230 $4,006
Ratio of expenses to average net assets 1.86%(d) 1.89% 1.87%(d) 1.94%(d)
Ratio of net investment loss to
average net assets (.59)%(d) (.51)% (.59)%(d) (.74)%(d)
Portfolio turnover rate 43% 81% 63% 66%
Average commission rate (e) $.0679 $ -0- $ -0- $ -0-
</TABLE>
(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.
(e) For fiscal year beginning on or after September 1, 1995, a fund is
required to disclose its average commission rate per share for trades on which
commissions are charged.
(f) For the period March 4, 1991 (commencement of distribution) to December
31, 1991.
(g) The Fund changed its fiscal year end from December 31 to November 30.
17
THE ALLIANCE 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)
ROBERT C. WHITE (1)
OFFICERS
ALFRED HARRISON, EXECUTIVE VICE PRESIDENT
PAUL H. JENKEL, SENIOR VICE PRESIDENT
THOMAS BARDONG, VICE PRESIDENT
DANIEL V. PANKER, VICE PRESIDENT
EDMUND P. BERGAN, JR., SECRETARY
MARK D. GERSTEN, TREASURER & CHIEF FINANCIAL OFFICER
VINCENT S. NOTO, CONTROLLER
CUSTODIAN
STATE STREET BANK & TRUST COMPANY
225 Franklin Street
Boston, MA 02110
PRINCIPAL UNDERWRITER
ALLIANCE FUND DISTRIBUTORS, INC.
1345 Avenue of the Americas
New York, NY 10105
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
(1) Member of the Audit Committee.
The financial information included therein is taken from the records of
the Fund without audit by independent accountants who do not express an opinion
thereon.
18
THE ALLIANCE FAMILY OF MUTUAL FUNDS
_______________________________________________________________________________
FIXED INCOME
Alliance Bond Fund
U.S. Government Portfolio
Corporate Bond Portfolio
Alliance Global Dollar Government Fund
Alliance Global Strategic Income Trust
Alliance Mortgage Securities Income Fund
Alliance Limited Maturity Government Fund
Alliance Multi-Market Strategy Trust
Alliance North American Government Income Trust
Alliance Short-Term Multi-Market Trust
Alliance Short-Term U.S. Government Fund
Alliance World Income Trust
TAX-FREE INCOME
Alliance Municipal Income Fund
California Portfolio
Insured California Portfolio
Insured National Portfolio
National Portfolio
New York Portfolio
Alliance Municipal Income Fund II
Arizona Portfolio
Florida Portfolio
Massachusetts Portfolio
Michigan Portfolio
Minnesota Portfolio
New Jersey Portfolio
Ohio Portfolio
Pennsylvania Portfolio
Virginia Portfolio
MONEY MARKET
AFD Exchange Reserves
GROWTH
The Alliance Fund
Alliance Global Small Cap Fund
Alliance Growth Fund
Alliance Premier Growth Fund
GROWTH & INCOME
Alliance Strategic Balanced Fund
Alliance Balanced Shares
Alliance Conservative Investors Fund
Alliance Growth & Income Fund
Alliance Growth Investors Fund
Alliance Income Builder Fund
Alliance Utility Income Fund
AGGRESSIVE GROWTH
Alliance Quasar Fund
Alliance Technology Fund
INTERNATIONAL
Alliance All-Asia Investment Fund
Alliance International Fund
Alliance New Europe Fund
Alliance Worldwide Privatization Fund
CLOSED-END FUNDS
Alliance All-Market Advantage Fund
Alliance Global Environment Fund
ACM Government Income Fund
ACM Government Opportunity Fund
ACM Government Securities Fund
ACM Government Spectrum Fund
ACM Managed Dollar Income Fund
ACM Managed Income Fund
ACM Municipal Securities Income Fund
Alliance World Dollar Government Fund
Alliance World Dollar Government Fund II
The Austria Fund
The Korean Investment Fund
The Spain Fund
The Southern Africa Fund
CASH MANAGEMENT SERVICES
ACM Institutional Reserves
Government Portfolio
Prime Portfolio
Tax-Free Portfolio
Trust Portfolio
Alliance Capital Reserves
Alliance Government Reserves
Alliance Insured Account
Alliance Money Reserves
Alliance Municipal Trust
California Portfolio
Connecticut Portfolio
Florida Portfolio
General Portfolio
New Jersey Portfolio
New York Portfolio
Virginia Portfolio
Alliance Treasury Reserves
Alliance Money Market Fund
Prime Portfolio
Government Portfolio
General Municipal Portfolio
19
THE ALLIANCE FUND
1345 Avenue of the Americas
New York, NY 10105
(800) 221-5672
ALLIANCE CAPITAL
INVESTING 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
