THE ALLIANCE FUND
SEMI-ANNUAL REPORT
MAY 31, 1997
ALLIANCE CAPITAL
LETTER TO SHAREHOLDERS THE ALLIANCE FUND
_______________________________________________________________________________
June 30, 1997
Dear Shareholder:
We are pleased to provide the semi-annual report to shareholders of the The
Alliance Fund for the six-month period ended May 31, 1997. In the table below,
the Fund's performance is compared with that of the S&P 500 Stock Index, a
common measure of the overall U.S. stock market, and the Russell 1000 Growth
Index, which tracks performance of large growth-oriented companies.
INVESTMENT RESULTS*
TOTAL RETURNS FOR THE PERIODS ENDED
MAY 31, 1997
6 MONTHS 12 MONTHS
---------- -----------
THE ALLIANCE FUND
Class A 10.46% 19.78%
Class B 9.98 18.63
Class C 9.83 18.63
S&P 400 MIDCAP INDEX 10.03 18.16
S&P 500 STOCK INDEX 13.18 29.44
RUSSELL 1000 GROWTH INDEX 12.70 26.46
* TOTAL RETURNS ARE BASED ON NET ASSET VALUE. TOTAL RETURNS FOR ADVISOR CLASS
SHARES WILL DIFFER DUE TO DIFFERENT EXPENSES. THE S&P AND RUSSELL INDICES ARE
UNMANAGED.
CHANGE IN PORTFOLIO MANAGEMENT
As of January 1997, there was a change in the Fund's portfolio manager. Alden
Stewart, an Executive Vice President of Alliance Capital and head of Alliance's
Hudson River Trust Group, was named manager of the Fund. Mr. Stewart has been
in the investment business for 26 years and has managed portfolios for over 20
years.
We are also introducing a new benchmark, the S&P 400 Midcap Index, which we
believe is a better benchmark for the Fund than the larger-cap S&P 500 Index.
The S&P 400 Midcap measures the performance of 400 companies with
capitalizations generally in the $2 to $7 billion range. The Fund will continue
to make investments across the capitalization spectrum, in large-, mid-, and
small-cap companies, but the portfolio will focus primarily on mid-cap stocks.
U.S. EQUITY MARKET AND ECONOMIC REVIEW
In many respects, the economic backdrop for equity prices is very positive.
Economic growth remains adequate but not excessive. Interest rates have
declined somewhat over the past several months and, most importantly, inflation
remains in check. In this environment of modest earnings growth, we have
experienced a substantial increase in price to earnings ratios.
Equity valuations, however, are high by any standard. The price/earnings ratio
on S&P 500 is now 20 times our estimate of 1997 earnings, and the S&P 500
dividend yield of 1.8% is the lowest in recorded history. At these high
valuation levels it is extremely important to focus on company earnings growth
as further increases in equity valuations will be very difficult to achieve.
INVESTMENT STRATEGY
We have made major shifts in The Alliance Fund portfolio during the first half
of 1997. Profits were taken on most of the large-capitalization issues with
high price/earning (P/E) ratios held in the portfolio, as well as many of the
small-cap stocks. The proceeds of these sales were redeployed into more
attractively valued mid-cap companies. Our focus is to own the best and most
rapidly growing companies, while at the same time, being cognizant of valuation
risk.
At the present time, we have large investments in several financial companies
such as MBNA and Merrill Lynch, which offer excellent growth with relatively
attractive valuations. In the telecommunications sector, we bought large
positions early this year in Teleport and WorldCom. Both companies are
alternative telephone service providers with low cost structures and high
growth rates.
Thirdly, the Fund purchased shares in several oil service companies where
industry supply and demand characteristics are very strong. Finally, the Fund
owns several special situations such as Loews and Republic Industries. Loews is
a multi-industry company with major interests in insurance, energy, and
tobacco, which is selling at a P/E ratio considerably less than it's expected
growth rate. Republic Industries is at the leading edge of what we believe to
be a major restructuring of automobile distrib
1
THE ALLIANCE FUND
_______________________________________________________________________________
ution in the United States. The company has already become the nation's largest
automobile retailer and sells at a P/E ratio based on predicted 1998 earnings,
which are well under its growth rate.
As always, we thank you for your interest and investment in The Alliance Fund,
and we look forward to reporting future progress.
Sincerely,
John D. Carifa
Chairman and President
Alden M. Stewart
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 flexibility to invest
without limit in foreign securities.
INVESTMENT RESULTS
_______________________________________________________________________________
AVERAGE ANNUAL TOTAL RETURN AS OF MAY 31, 1997
CLASS A SHARES
WITHOUT WITH
SALES CHARGE SALES CHARGE
------------ ------------
. One Year +19.78% +14.62%
. Five Years +17.35% +16.34%
. Ten Years +13.41% +12.93%
CLASS B SHARES
WITHOUT WITH
SALES CHARGE SALES CHARGE
------------ ------------
. One Year +18.63% +14.63%
. Five Years +16.39% +16.39%
. Since Inception* +15.30% +15.30%
CLASS C SHARES
WITHOUT WITH
SALES CHARGE SALES CHARGE
------------ ------------
. One Year +18.63% +17.63%
. Since Inception* +16.96% +16.96%
The 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 or applicable contingent
deferred sales charge for Class B (4% year 1, 3% year 2, 2% year 3, 1% year 4);
and for Class C shares (1% year 1). Returns for Class A shares do not reflect
the imposition of the 1 year 1% contingent deferred sales charge for accounts
over $1,000,000. Total returns for Advisor Class shares will differ due to
different expenses associated with that class.
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, 1997 (UNAUDITED) THE ALLIANCE FUND
_______________________________________________________________________________
COMPANY VALUE PERCENT OF NET ASSETS
- -------------------------------------------------------------------------------
Republic Industries, Inc. $60,483,500 5.5%
MBNA Corp. 59,281,250 5.4
Cisco Systems, Inc. 55,555,000 5.1
Merrill Lynch & Co., Inc. 44,520,000 4.0
Halliburton Co. 37,913,750 3.4
Rowan Cos., Inc. 35,748,937 3.3
Northwest Airlines Corp. Cl.A 35,168,750 3.2
Continental Airlines, Inc. 35,000,000 3.2
Columbia HCA/Healthcare Corp. 33,878,125 3.1
WorldCom, Inc. 33,476,250 3.0
$431,025,562 39.2%
MAJOR PORTFOLIO CHANGES
SIX MONTHS ENDED MAY 31, 1997 (UNAUDITED)
_______________________________________________________________________________
SHARES
------------------------------------
PURCHASES BOUGHT HOLDINGS 5/31/97
- -------------------------------------------------------------------------------
Continental Airlines, Inc. 1,000,000 1,000,000
Diamond Offshore Drilling, Inc. 440,000 440,000
Halliburton Co. 490,000 490,000
Loews Corp. 330,000 330,000
MBNA Corp. 1,324,000 1,750,000
Northwest Airlines Corp. Cl.A 612,000 850,000
Republic Industries, Inc. 2,513,600 2,513,600
Rowan Cos., Inc. 1,545,900 1,545,900
Teleport Communications Group, Inc. Cl.A 850,700 1,000,000
United States Cellular Corp. 836,700 836,700
SALES SOLD HOLDINGS 5/31/97
- -------------------------------------------------------------------------------
AirTouch Communications, Inc. 1,123,000 -0-
Amgen, Inc. 315,500 -0-
Chrysler Corp. 864,000 -0-
COMPAQ Computer Corp. 356,300 -0-
Intel Corp. 467,100 -0-
Merck & Co., Inc. 183,500 -0-
Microsoft Corp. 165,650 -0-
Pfizer, Inc. 295,000 -0-
Philip Morris Cos., Inc. 524,400 -0-
UAL Corp. 556,600 -0-
4
PORTFOLIO OF INVESTMENTS
MAY 31, 1997 (UNAUDITED) THE ALLIANCE FUND
_______________________________________________________________________________
COMPANY SHARES VALUE
- -------------------------------------------------------------------------
COMMON STOCKS-99.7%
CONSUMER PRODUCTS & SERVICES-26.4%
AIRLINES-9.0%
America West Holding Corp. (a) 750,000 $11,531,250
Continental Airlines, Inc. (a) 1,000,000 35,000,000
KLM Royal Dutch Air 420,000 12,337,500
Northwest Airlines Corp. Cl.A (a) 850,000 35,168,750
Southwest Airlines Co. 200,000 5,150,000
------------
99,187,500
BIOTECHNOLOGY-2.2%
Biogen, Inc. (a) 100,000 3,318,750
Centocor, Inc. (a) 200,000 7,050,000
GelTex Pharmaceuticals, Inc. (a) 450,000 8,550,000
Human Genome Sciences, Inc. (a) 132,800 5,146,000
MedImmune, Inc. (a) 13,900 215,450
------------
24,280,200
BROADCASTING & CABLE-3.6%
Millicom International Cellular, S.A. (a)(b) 240,000 10,890,000
Telephone & Data Systems, Inc. 650,000 25,228,125
Vanguard Cellular Systems, Inc. (a) 250,000 3,281,250
------------
39,399,375
MEDICAL SERVICES-3.1%
Columbia HCA/Healthcare Corp. 925,000 33,878,125
RESTAURANTS & LODGING-2.0%
Host Marriott Corp. 600,000 10,575,000
Marriot International, Inc. 200,000 11,550,000
------------
22,125,000
RETAILING-3.2%
Circuit City Stores, Inc. (a) 500,000 7,250,000
CompUSA, Inc. (a) 250,000 5,812,500
Dave & Busters, Inc. (a) 100,000 2,275,000
Home Depot, Inc. 200,000 12,600,000
Nine West Group, Inc. (a) 180,000 6,930,000
------------
34,867,500
TEXTILE PRODUCTS-0.4%
Tommy Hilfiger Corp. (a) 100,000 4,450,000
TOBACCO-2.9%
Loews Corp. 330,000 32,092,500
------------
290,280,200
SCIENCE & TECHNOLOGY-24.4%
COMMUNICATIONS EQUIPMENT-3.9%
360 Communications Co. (a) 100,000 1,887,500
ADC Telecommunications, Inc. (a) 150,000 5,137,500
Sterling Commerce, Inc. (a) 55,741 1,853,388
WorldCom, Inc. (a) 1,130,000 33,476,250
------------
42,354,638
COMPUTER HARDWARE-0.7%
Micron Electronics, Inc. (a) 530,000 8,049,375
COMPUTER PERIPHERALS-0.2%
United States Robotics Corp. 30,000 2,520,000
COMPUTER SOFTWARE & SERVICES-1.8%
Applied Magnetics Corp. (a) 200,000 4,975,000
First Data Corp. 375,000 15,000,000
------------
19,975,000
5
PORTFOLIO OF INVESTMENTS (CONTINUED) THE ALLIANCE FUND
_______________________________________________________________________________
COMPANY SHARES VALUE
- -------------------------------------------------------------------------
NETWORK SOFTWARE-9.9%
3Com Corp. (a) 180,000 $ 8,730,000
America Online, Inc. (a) 250,000 13,812,500
Cascade Communications Corp. (a) 725,000 27,731,250
Cisco Systems, Inc. (a) 820,000 55,555,000
Fore Systems, Inc. (a) 150,000 2,484,375
-------------
108,313,125
SEMI-CONDUCTORS & RELATED-3.0%
Micron Technology, Inc. 475,000 20,187,500
Teradyne, Inc. (a) 300,000 12,300,000
------------
32,487,500
UTILITY/TELEPHONE-4.9%
Deutsche Telekom AG (ADR) (a)(c) 50,000 1,137,500
Teleport Communications Group, Inc. Cl.A (a) 1,000,000 30,250,000
United States Cellular Corp. (a) 836,700 23,009,250
-------------
54,396,750
-------------
268,096,388
FINANCIAL SERVICES-21.1%
BANKING & CREDIT-1.6%
First Union Corp. 210,000 18,033,750
BROKERAGE-6.6%
Edwards (A.G.), Inc. 50,000 1,856,250
Legg Mason, Inc. 160,000 7,380,000
Merrill Lynch & Co., Inc. 420,000 44,520,000
Morgan Stanley Group, Inc. 280,000 18,900,000
-------------
72,656,250
INSURANCE-5.8%
CNA Financial Corp. (a) 200,000 20,475,000
Conseco, Inc. 150,000 6,000,000
IPC Holdings Ltd. 112,100 2,858,550
Life Re Corp. 100,000 4,300,000
NAC Re Corp. 63,300 2,524,088
Travelers Group, Inc. 500,000 27,437,500
-------------
63,595,138
MISCELLANEOUS-7.1%
American Express Co. 100,000 6,950,000
Dean Witter, Discover & Co. 280,000 11,550,000
MBNA Corp. 1,750,000 59,281,250
-------------
77,781,250
-------------
232,066,388
ENERGY-17.2%
DOMESTIC PRODUCERS-0.5%
Brown (Tom), Inc. (a) 193,500 3,894,188
Gulf Canada Resources, Ltd. (a) 200,000 1,825,000
------------
5,719,188
OIL & GAS-12.3%
Baker Hughes, Inc. 280,000 10,500,000
BJ Services Co. (a) 59,600 3,292,900
Ensco International, Inc. (a) 100,000 4,987,500
Halliburton Co. 490,000 37,913,750
Nabors Industries, Inc. (a) 270,000 6,058,125
Noble Drilling Corp. (a) 750,000 16,312,500
Parker Drilling Co. (a) 1,310,000 12,608,750
Rowan Cos., Inc. (a) 1,545,900 35,748,937
Transocean Offshore, Inc. 120,000 8,280,000
------------
135,702,462
MISCELLANEOUS-4.4%
Diamond Offshore Drilling, Inc. (a) 440,000 31,295,000
Ultramar Diamond Shamrock 500,000 16,500,000
------------
47,795,000
------------
189,216,650
CONSUMER MANUFACTURING-6.7%
AEROSPACE-0.7%
General Motors Corp. Cl.H 150,000 8,268,750
AUTO & RELATED-5.5%
Republic Industries, Inc. (a) 2,513,600 60,483,500
6
THE ALLIANCE FUND
_______________________________________________________________________________
COMPANY SHARES VALUE
- -------------------------------------------------------------------------
MISCELLANEOUS-0.5%
Industrie Natuzzi S.p.A. (ADR) (d) 209,800 $ 5,297,450
-------------
74,049,700
BASIC INDUSTRIES-2.1%
BUILDING MATERIALS-0.4%
Shaw Industries, Inc. 320,000 4,000,000
MACHINERY-1.3%
Mannesmann AG (c) 35,000 14,212,158
TRANSPORTATION-0.4%
Knightsbridge Tankers, Ltd. 175,000 4,309,375
-------------
22,521,533
BUSINESS SERVICES-1.3%
MISCELLANEOUS-1.3%
CUC International, Inc. (a) 630,000 $ 14,490,000
MULTI INDUSTRY-0.5%
ITT Corp. (a) 100,000 5,962,500
TOTAL INVESTMENTS-99.7%
(cost $996,436,357) 1,096,683,359
Other assets less liabilities-0.3% 3,116,878
NET ASSETS-100% $1,099,800,237
(a) Non-income producing security.
(b) Country of origin--Luxembourg.
(c) Country of origin--Germany.
(d) Country of origin--Italy.
Glossary:
ADR - American depository receipt.
See notes to financial statements.
7
STATEMENT OF ASSETS AND LIABILITIES
MAY 31, 1997 (UNAUDITED) THE ALLIANCE FUND
_______________________________________________________________________________
ASSETS
Investments in securities, at value (cost $996,436,357) $1,096,683,359
Cash, at value (cost $135,985) 131,523
Receivable for investment securities sold 9,213,792
Dividends receivable 427,625
Receivable for capital stock sold 176,721
Prepaid expense 47,646
Total assets 1,106,680,666
LIABILITIES
Payable for investment securities purchased 4,500,987
Unclaimed dividends 1,005,964
Management fee payable 622,070
Payable for capital stock redeemed 374,612
Distribution fee payable 213,599
Accrued expenses 163,197
Total liabilities 6,880,429
NET ASSETS $1,099,800,237
COMPOSITION OF NET ASSETS
Capital stock, at par $ 1,513,634
Additional paid-in capital 769,700,841
Distributions in excess of net investment income (1,241,296)
Accumulated net realized gain on investments and foreign
currency transactions 229,584,518
Net unrealized appreciation of investments and foreign
currency denominated assets and liabilities 100,242,540
$1,099,800,237
CALCULATION OF MAXIMUM OFFERING PRICE
CLASS A SHARES
Net asset value and redemption price per share ($1,024,652,359/
140,594,500 shares of capital stock issued and outstanding) $7.29
Sales charge--4.25% of public offering price .32
Maximum offering price $7.61
CLASS B SHARES
Net asset value and offering price per share ($50,785,014/
7,317,600 shares of capital stock issued and outstanding) $6.94
CLASS C SHARES
Net asset value and offering price per share ($15,669,890/
2,256,305 shares of capital stock issued and outstanding) $6.94
ADVISOR CLASS SHARES
Net asset value, redemption and offering price per share($8,692,974
/1,194,994 shares of capital stock issued and outstanding) $7.27
See notes to financial statements.
8
STATEMENT OF OPERATIONS
SIX MONTHS ENDED MAY 31, 1997 (UNAUDITED) THE ALLIANCE FUND
_______________________________________________________________________________
INVESTMENT INCOME
Dividends (net of foreign taxes withheld
of $31,264) $4,186,424
Interest 483,448 $ 4,669,872
EXPENSES
Management fee 3,618,336
Distribution fee - Class A 929,899
Distribution fee - Class B 231,303
Distribution fee - Class C 71,642
Transfer agency 449,369
Custodian 121,369
Printing 82,383
Administrative 70,000
Audit and legal 54,526
Registration 54,048
Taxes 25,254
Directors' fees 16,500
Miscellaneous 14,610
Total expenses 5,739,239
Net investment loss (1,069,367)
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain on investment transactions 232,035,034
Net realized loss on foreign currency transactions (142,763)
Net change in unrealized appreciation of:
Investments (127,449,167)
Foreign currency denominated assets and liabilities (4,631)
Net gain on investments and foreign currency transactions 104,438,473
NET INCREASE IN NET ASSETS FROM OPERATIONS $103,369,106
See notes to financial statements.
9
STATEMENT OF CHANGES IN NET ASSETS THE ALLIANCE FUND
_______________________________________________________________________________
SIX MONTHS ENDED YEAR ENDED
MAY 31, 1997 NOVEMBER 30,
(UNAUDITED) 1996
---------------- ---------------
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS
Net investment income (loss) $ (1,069,367) $ 2,471,666
Net realized gain on investments and
foreign currency transactions 231,892,271 143,836,346
Net change in unrealized appreciation
of investments and foreign currency
denominated assets and liabilities (127,453,798) 4,238,507
Net increase in net assets from operations 103,369,106 150,546,519
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income
Class A (2,584,179) (2,437,233)
Advisor Class (4,914) -0-
Net realized gain on investments
Class A (136,315,610) (129,777,164)
Class B (6,355,169) (4,556,157)
Class C (1,970,589) (1,766,904)
Advisor Class (148,119) -0-
CAPITAL STOCK TRANSACTIONS
Net increase 85,310,260 59,364,620
Total increase 41,300,786 71,373,681
NET ASSETS
Beginning of year 1,058,499,451 987,125,770
End of period (including undistributed
net investment income of $2,417,164
at November 30, 1996) $1,099,800,237 $1,058,499,451
See notes to financial statements.
10
NOTES TO FINANCIAL STATEMENTS
MAY 31, 1997 (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, 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
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. Advisor Class shares are sold without an initial or contingent
deferred sales charge and are not subject to ongoing principally 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 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 such 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 INVESTMENT TRANSACTIONS
Investment 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. Investment 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 currency losses represent foreign exchange gains and losses from
sales and maturities of securities, currency 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 and are determined in accordance with income tax regulations.
For federal income tax purposes, the Fund's distributions of income and capital
gains are subject to recharacterization, which may include a tax return of
capital, at the end of the year to reflect the final investment results for
that year.
11
NOTES TO FINANCIAL STATEMENTS (CONTINUED) THE ALLIANCE FUND
_______________________________________________________________________________
NOTE B: MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Under the terms of the management agreement, the Fund pays Alliance Capital
Management L.P., (the "Manager") 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 $70,000 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, 1997.
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 $357,301 for the six
months ended May 31, 1997.
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 $25,612 from the sale of Class A shares and $2,464,
$40,754 and $712 in contingent deferred sales charges imposed upon redemptions
by shareholders of Class A, Class B and Class C shares, respectively, for the
six months ended May 31, 1997.
Brokerage commissions paid for the six months ended May 31, 1997 on investment
transactions amounted to $2,205,748, of which $2,500 was paid to brokers
utilizing the services of the Pershing Division of Donaldson, Lufkin & Jenrette
Securities Corp., ("DLJ"), and $22,000 was paid to DLJ directly. Both are
affiliates 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. 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
$3,165,356 and $937,663, 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
and U.S. government securities) aggregated $1,107,626,308 and $1,114,230,285,
respectively, for the six months ended May 31, 1997. There were no purchases
but there were sales of $27,445,724 of U.S. government or government agency
obligations for the six months ended May 31, 1997. At May 31, 1997, the cost of
investments for federal income tax purposes was $1,007,324,436. Accordingly,
gross unrealized appreciation of investments was $123,091,609 and gross
unrealized depreciation of investments was $33,732,686, resulting in net
unrealized appreciation of $89,358,923, excluding foreign currency.
12
THE ALLIANCE FUND
_______________________________________________________________________________
NOTE E: CAPITAL STOCK
There are 900,000,000 shares of $0.01 par value capital stock authorized,
divided into four classes, designated Class A, Class B, Class C and Advisor
Class shares. Class A shares consists of 300,000,000 shares. Class B and Class
C shares each consist of 150,000,000 shares and Advisor Class shares consist of
300,000,000 shares. Transactions in capital stock were as follows:
SHARES AMOUNT
--------------------------- ------------------------------
SIX MONTHS ENDED YEAR ENDED SIX MONTHS ENDED YEAR ENDED
MAY 31, 1997 NOVEMBER 30, MAY 31, 1997 NOVEMBER 30,
(UNAUDITED) 1996 (UNAUDITED) 1996
------------ ------------ -------------- --------------
CLASS A
Shares sold 2,217,599 4,150,468 $ 15,031,161 $ 28,384,296
Shares issued in
reinvestment of
dividends and
distributions 16,635,533 15,446,742 106,301,087 100,712,758
Shares converted
from Class B 105,919 118,728 697,060 823,774
Shares redeemed (7,928,637) (12,552,838) (54,576,421) (86,836,564)
Net increase 11,030,414 7,163,100 $ 67,452,887 $ 43,084,264
CLASS B
Shares sold 1,627,312 2,617,216 $ 10,673,258 $ 17,347,199
Shares issued in
reinvestment of
distributions 865,267 586,032 5,286,869 3,697,861
Shares converted
to Class A (105,919) (123,214) (697,060) (823,774)
Shares redeemed (1,072,709) (1,311,534) (6,982,872) (8,719,518)
Net increase 1,313,951 1,768,500 $8,280,195 $ 11,501,768
CLASS C
Shares sold 853,120 1,402,282 $ 5,615,877 $ 9,611,884
Shares issued in
reinvestment of
distributions 248,531 175,223 1,518,527 1,105,657
Shares redeemed (721,369) (1,045,876) (4,752,557) (6,946,611)
Net increase 380,282 531,629 $ 2,381,847 $ 3,770,930
OCT. 2,1996(A) OCT. 2,1996(A)
TO TO
NOV. 30,1996 NOV. 30,1996
------------- --------------
ADVISOR CLASS
Shares sold 1,178,587 140,391 $ 8,033,280 $ 1,007,658
Shares issued in
reinvestment of
dividends and
distributions 22,857 -0- 145,601 -0-
Shares redeemed (146,841) -0- (983,550) -0-
Net increase 1,054,603 140,391 $ 7,195,331 $ 1,007,658
(a) Commencement of distribution.
13
FINANCIAL HIGHLIGHTS THE ALLIANCE FUND
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
CLASS A
------------------------------------------------------------------------------
SIX MONTHS JAN. 1,1994
ENDED YEAR ENDED NOVEMBER 30, TO YEAR ENDED DECEMBER 31,
MAY 31, 1997 ------------------------ NOVEMBER 30, -----------------------
(UNAUDITED) 1996 1995 1994(A) 1993 1992
------------- ----------- ----------- ------------ ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $7.71 $7.72 $6.63 $6.85 $6.68 $6.29
INCOME FROM INVESTMENT OPERATIONS
Net investment income (loss) (.01)(b) .02 .02(b) .01 .02 .05
Net realized and unrealized gain (loss)
on investments .67 1.06 2.08 (.23) .93 .87
Net increase (decrease) in net asset
value from operations .66 1.08 2.10 (.22) .95 .92
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (.02) (.02) (.01) -0- (.02) (.05)
Distributions from net realized gains (1.06) (1.07) (1.00) -0- (.76) (.48)
Total dividends and distributions (1.08) (1.09) (1.01) -0- (.78) (.53)
Net asset value, end of period $7.29 $7.71 $7.72 $6.63 $6.85 $6.68
TOTAL RETURN
Total investment return based on net
asset value (c) 10.46% 16.49% 37.87% (3.21)% 14.26% 14.70%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period(000's omitted) $1,024,652 $999,067 $945,309 $760,679 $831,814 $794,733
Ratio of expenses to average net assets 1.05%(d) 1.04% 1.08% 1.05%(d) 1.01% .81%
Ratio of net investment income (loss)
to average net assets (.16)%(d) .30% .31% .21%(d) .27% .79%
Portfolio turnover rate 107% 80% 81% 63% 66% 58%
Average commission rate (e) $.0559 $.0646 -- -- -- --
</TABLE>
See footnote summary on page 17.
14
THE ALLIANCE FUND
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
CLASS B
-------------------------------------------------------------------------------
SIX MONTHS JAN. 1, 1994
ENDED YEAR ENDED NOVEMBER 30, TO YEAR ENDED DECEMBER 31,
MAY 31, 1997 ------------------------ NOVEMBER 30, -----------------------
(UNAUDITED) 1996 1995 1994(A) 1993 1992
------------- ----------- ----------- ------------- --------- ------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $7.40 $7.49 $6.50 $6.76 $6.64 $6.27
INCOME FROM INVESTMENT OPERATIONS
Net investment loss (.03)(b) (.01) (.03)(b) (.03) (.03) (.01)(b)
Net realized and unrealized gain (loss)
on investments .63 .99 2.02 (.23) .91 .87
Net increase (decrease) in net asset
value from operations .60 .98 1.99 (.26) .88 .86
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income -0- -0- -0- -0- -0- (.01)
Distributions from net realized gains (1.06) (1.07) (1.00) -0- (.76) (.48)
Total dividends and distributions (1.06) (1.07) (1.00) -0- (.76) (.49)
Net asset value, end of period $6.94 $7.40 $7.49 $6.50 $6.76 $6.64
TOTAL RETURN
Total investment return based on net
asset value (c) 9.98% 15.47% 36.61% (3.85)% 13.28% 13.75%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $50,785 $44,450 $31,738 $18,138 $12,402 $3,825
Ratio of expenses to average net assets 1.88%(d) 1.87% 1.90% 1.89%(d) 1.90% 1.64%
Ratio of net investment loss to
average net assets (.99)%(d) (.53)% (.53)% (.60)%(d) (.64)% (.04)%
Portfolio turnover rate 107% 80% 81% 63% 66% 58%
Average commission rate (e) $.0559 $.0646 -- -- -- --
</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 C
--------------------------------------------------------------------
SIX MONTHS JAN. 1, 1994 MAY 3,
ENDED YEAR ENDED NOVEMBER 30, TO 1993(F) TO
MAY 31, 1997 ------------------------ NOVEMBER 30, DECEMBER 31,
(UNAUDITED) 1996 1995 1994(A) 1993
------------- ----------- ----------- ------------- ------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $7.41 $7.50 $6.50 $6.77 $6.67
INCOME FROM INVESTMENT OPERATIONS
Net investment loss (.03)(b) (.02) (.03)(b) (.03) (.02)
Net realized and unrealized gain (loss)
on investments .62 1.00 2.03 (.24) .88
Net increase (decrease) in net asset
value from operations .59 .98 2.00 (.27) .86
LESS: DISTRIBUTIONS
Distributions from net realized gains (1.06) (1.07) (1.00) -0- (.76)
Net asset value, end of period $6.94 $7.41 $7.50 $6.50 $6.77
TOTAL RETURN
Total investment return based on net
asset value (c) 9.83% 15.48% 36.79% (3.99)% 13.95%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $15,670 $13,899 $10,078 $6,230 $4,006
Ratio of expenses to average net assets 1.86%(d) 1.86% 1.89% 1.87%(d) 1.94%(d)
Ratio of net investment loss to
average net assets (.97)%(d) (.51)% (.51)% (.59)%(d) (.74)%(d)
Portfolio turnover rate 107% 80% 81% 63% 66%
Average commission rate (e) $.0559 $.0646 -- -- --
</TABLE>
See footnote summary on page 17.
16
THE ALLIANCE FUND
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
ADVISOR CLASS
--------------------------
OCTOBER 2,
SIX MONTHS 1996(F)
ENDED TO
MAY 31, 1997 NOVEMBER 30,
(UNAUDITED) 1996
------------ ------------
Net asset value, beginning of period $7.71 $6.99
INCOME FROM INVESTMENT OPERATIONS
Net investment loss (.01)(b) -0-
Net realized and unrealized gain on investments .67 .72
Net increase in net asset value from operations .66 .72
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (.04) -0-
Distributions from net realized gains (1.06) -0-
Total dividends and distributions (1.10) -0-
Net asset value, end of period $7.27 $7.71
TOTAL RETURN
Total investment return based on net
asset value (c) 10.43% 10.30%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $8,693 $1,083
Ratio of expenses to average net assets (d) .89% .89%
Ratio of net investment income (loss) to
average net assets (d) (.19)% .38%
Portfolio turnover rate 107% 80%
Average commission rate $.0559 $.0646
(a) The Fund changed its fiscal year end from December 31 to November 30.
(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) Commencement of distribution.
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)
DONALD J. ROBINSON (1)
OFFICERS
ALDEN M. STEWART, EXECUTIVE VICE PRESIDENT
KATHLEEN A. CORBET, SENIOR VICE PRESIDENT
THOMAS J. BARDONG, VICE PRESIDENT
RANDALL E. HAASE, 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 High Yield Fund
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
Alliance/Regent Sector Opportunity 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 Real Estate Investment 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
Massachusetts 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
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
