THE ALLIANCE FUND
SEMI-ANNUAL REPORT
MAY 31, 1999
ALLIANCE CAPITAL
LETTER TO SHAREHOLDERS THE ALLIANCE FUND
_______________________________________________________________________________
July 15, 1999
Dear Shareholder:
This semi-annual shareholder report reviews investment results and market
activity for The Alliance Fund (the "Fund") for the six- and twelve-month
periods ended May 31, 1999. In the following table, the Fund's performance is
compared with that of the S&P MidCap 400 Index, which is a measure of mid-cap
stock performance, and the Russell 1000 Growth Stock Index, which tracks the
performance of large, growth-oriented companies.
INVESTMENT RESULTS
During the six-month period ended May 31, 1999, your Fund strongly outperformed
its benchmarks, while the Fund's twelve-month returns lagged the benchmark
indices. After a difficult 1998, largely resulting from poor performance in
consumer cyclical and energy holdings, the first half of 1999 saw a substantial
rebound. Our investments in telecommunication stocks, travel-related companies
and the energy sector significantly benefited your Fund's performance.
INVESTMENT RESULTS*
Periods Ended May 31, 1999
TOTAL RETURNS
6 MONTHS 12 MONTHS
-------- ---------
THE ALLIANCE FUND
Class A 24.97% 6.58%
Class B 24.47% 5.68%
Class C 24.52% 5.36%
S&P MIDCAP 400 INDEX 13.71% 11.93%
RUSSELL 1000 GROWTH STOCK INDEX 12.53% 26.22%
* THE FUND'S INVESTMENT RESULTS ARE TOTAL RETURNS FOR THE PERIODS AND ARE
BASED ON THE NET ASSET VALUE OF EACH CLASS OF SHARES. ALL FEES AND EXPENSES
RELATED TO THE OPERATION OF THE FUND HAVE BEEN DEDUCTED, BUT NO ADJUSTMENT HAS
BEEN MADE FOR SALES CHARGES THAT MAY APPLY WHEN SHARES ARE PURCHASED OR
REDEEMED. TOTAL RETURN FOR ADVISOR CLASS SHARES WILL DIFFER DUE TO DIFFERENT
EXPENSES ASSOCIATED WITH THAT CLASS. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE
RESULTS.
THE S&P MIDCAP 400 INDEX IS AN UNMANAGED INDEX OF 400 U.S. COMPANIES THAT
ARE CHOSEN FOR THEIR MARKET SIZE, LIQUIDITY AND INDUSTRY GROUP REPRESENTATION.
IT IS A MARKET-VALUE WEIGHTED INDEX REPRESENTING APPROXIMATELY 10% OF THE
AGGREGATE MARKET VALUE OF U.S. DOMESTIC COMPANIES. THE UNMANAGED RUSSELL 1000
GROWTH STOCK INDEX CONSISTS OF 1000 OF THE LARGEST STOCKS REPRESENTING
APPROXIMATELY 87% OF THE U.S. MARKET. AN INVESTOR CANNOT INVEST DIRECTLY IN AN
INDEX.
ADDITIONAL INVESTMENT RESULTS APPEAR ON PAGE 3.
REVIEW OF INVESTMENT STRATEGY
The Alliance Fund continues to focus on the mid-cap area of the market with an
average market capitalization at approximately $5 billion. At present, holdings
in the portfolio generally range from $2 billion to $20 billion in market
capitalization. Our approach is to seek to identify the most rapidly growing
companies in this segment of the marketplace, and to buy and hold them at
attractive valuation levels.
We currently have large holdings in the telecommunications sector, with
positions in Global Telesystems Group, Inc., a medium-sized telecommunications
company with rapidly growing operations in Europe; Millicom International
Cellular SA, an international wireless service provider; and United States
Cellular Corp., a fast growing domestic wireless company.
In the consumer area, we continue to have large holdings in cruise companies,
airlines and specialty retailers. The cruise industry, with Royal Caribbean
Cruises, Ltd. and Carnival Corp. as core holdings, remains a major focus.
Clearly benefiting from demographics trends, the cruise industry is the fastest
growing major travel segment in the economy. Continental Airlines, Inc. remains
our largest airline holding as traffic growth and Continental's large stock
buyback program continue.
Financial stocks also continue to be important in the portfolio. MBNA Corp. is
one of the nation's leading issuers of credit cards and has produced a stellar
long-term growth record while selling at a price earnings ratio less than the
market.
Lastly, health care stocks have been increased in the portfolio. We now have
large holdings in Healthsouth
1
THE ALLIANCE FUND
_______________________________________________________________________________
Corp. and Health Management Associates, Inc. The health care services industry
offers attractive growth opportunities at relatively low valuations.
CURRENT OUTLOOK
While mid-cap indices have continued to underperform larger-cap indices such as
the S&P 500, there are signs of market broadening. Concerns about global
economic weakness, so pronounced just six months ago, have eased. The Federal
Reserve Board appears to have done its job well, easing when appropriate last
fall and holding the line to possibly tightening a little this summer. With the
global economy looking better, smaller- and intermediate-capitalization stocks
should show relative improvement. Valuations in the mid-cap sector seem
attractive and, hopefully, our stock selections will produce positive results.
Thank you for your continued interest in The Alliance Fund. We look forward to
reporting to you on market activity and your Fund's investment results in the
coming periods.
Sincerely,
John D. Carifa
Chairman and President
Alden 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
NAV AND SEC AVERAGE ANNUAL TOTAL RETURNS AS OF MAY 31, 1999
CLASS A SHARES
WITHOUT WITH
SALES CHARGE SALES CHARGE
------------ ------------
One Year 6.58% 2.06%
Five Years 19.20% 18.16%
Ten Years 15.35% 14.85%
CLASS B SHARES
WITHOUT WITH
SALES CHARGE SALES CHARGE
------------ ------------
One Year 5.68% 1.75%
Five Years 18.21% 18.21%
Since Inception* 15.46% 15.46%
CLASS C SHARES
WITHOUT WITH
SALES CHARGE SALES CHARGE
------------ ------------
One Year 5.36% 4.39%
Five Years 18.16% 18.16%
Since Inception* 16.60% 16.60%
SEC AVERAGE ANNUAL TOTAL RETURNS AS OF THE MOST RECENT QUARTER-END
(MARCH 31, 1999)
CLASS A CLASS B CLASS C
------- ------- -------
1 Year -13.30% -13.68% -11.45%
5 Years 16.13% 16.14% 16.06%
10 Years 14.84% 14.38%* 15.16%*
The Fund's investment results represent Average Annual Total Returns. The NAV
and SEC returns reflect reinvestment of dividends and/or capital gains
distributions in additional shares without (NAV) and with (SEC) the effect of
the 4.25% maximum front-end sales charge for Class A 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.
* Since Inception: 3/4/91 Class b; 5/3/93 Class c.
3
TEN LARGEST HOLDINGS
MAY 31, 1999 (UNAUDITED) THE ALLIANCE FUND
_______________________________________________________________________________
PERCENT OF
COMPANY VALUE NET ASSETS
- -------------------------------------------------------------------------------
Global Telesystems Group, Inc. $ 70,300,000 5.8%
MBNA Corp. 62,846,875 5.2
Continental Airlines, Inc. 59,856,250 4.9
CNA Financial Corp. 57,771,875 4.8
Autonation, Inc. 57,312,500 4.7
Legg Mason, Inc. 51,094,068 4.2
Royal Caribbean Cruises, Ltd. 50,666,875 4.2
Millicom International Cellular, SA 43,920,000 3.6
Northwest Airlines Corp. Cl. A 41,326,425 3.4
United States Cellular Corp. 39,806,250 3.3
$534,901,118 44.1%
MAJOR PORTFOLIO CHANGES
SIX MONTHS ENDED MAY 31, 1999 (UNAUDITED)
_______________________________________________________________________________
SHARES*
- -------------------------------------------------------------------------------
HOLDINGS
PURCHASES BOUGHT 5/31/99
- -------------------------------------------------------------------------------
Ace Ltd. 660,000 660,000
Health Management Associates 1,000,000 1,000,000
Kerr-McGee Corp. 440,000 500,000
Legg Mason, Inc. 438,400 1,511,100
Millicom International Cellular, SA 720,000 1,220,000
Nextel Communications, Inc. 500,000 500,000
Nielsen Media Research, Inc. 780,000 780,000
NTL, Inc. 375,100 400,000
Seagate Technology, Inc. 500,000 500,000
Winstar Communications, Inc. 300,000 300,000
HOLDINGS
SALES SOLD 5/31/99
- -------------------------------------------------------------------------------
Altera Corp. 350,000 -0-
Carnival Corp. Cl.A 711,500 663,500
Centocor, Inc. 546,900 -0-
MedImmune, Inc. 400,000 -0-
Network Associates, Inc. 500,000 -0-
Philips Electronics NV (ADR) 350,000 -0-
Telephone and Data Systems, Inc. 595,000 525,000
Tommy Hilfiger Corp. 297,400 322,600
United States Filter Corp. 1,105,000 -0-
Xilinx, Inc. 291,100 -0-
* Adjusted for stock splits.
4
PORTFOLIO OF INVESTMENTS
MAY 31, 1999 (UNAUDITED) THE ALLIANCE FUND
_______________________________________________________________________________
COMPANY SHARES VALUE
- -------------------------------------------------------------------------
COMMON STOCKS-98.6%
CONSUMER SERVICES-24.4%
AIRLINES-9.8%
Alaska Air Group, Inc. (a) 420,000 $ 17,430,000
Continental Airlines, Inc. (a) 1,525,000 59,856,250
Northwest Airlines Corp. Cl.A (a) 1,242,900 41,326,425
------------
118,612,675
ENTERTAINMENT & LEISURE-6.4%
Carnival Corp. Cl.A 663,500 27,203,500
Royal Caribbean Cruises, Ltd. 1,295,000 50,666,875
------------
77,870,375
RESTAURANTS & LODGING-2.6%
Extended Stay America, Inc. (a) 1,500,000 15,937,500
Starbucks Corp. (a) 400,000 14,750,000
Sun International Hotels Ltd. (a) 7,000 309,313
------------
30,996,813
RETAIL - GENERAL MERCHANDISE-3.8%
Home Depot, Inc. 55,000 3,128,125
Industrie Natuzzi SpA (ADR) (Italy) 334,000 6,346,000
Saks, Inc. (a) 163,600 4,519,450
Tiffany & Co. 100,000 8,287,500
Tommy Hilfiger Corp. (a) 322,600 24,215,162
------------
46,496,237
TOYS-0.1%
Hasbro, Inc. 50,000 1,431,250
MISCELLANEOUS-1.7%
Nielsen Media Research, Inc. 780,000 20,865,000
------------
296,272,350
FINANCE-21.3%
BANKING - MONEY CENTER-0.5%
Bank of Tokyo-Mitsubishi,
Ltd. (ADR) (Japan) 500,000 6,750,000
BANKING - REGIONAL-0.1%
Bank One Corp. 13,500 763,594
BROKERAGE & MONEY MANAGEMENT-6.3%
Edwards (A.G.), Inc. 600,000 20,175,000
Goldman Sachs Group Inc. (a) 37,200 2,527,275
James Raymond Financial, Inc. 112,400 2,486,850
Legg Mason, Inc. 1,511,100 51,094,068
------------
76,283,193
INSURANCE-7.7%
Ace Ltd. 660,000 20,130,000
CNA Financial Corp. (a) 1,330,000 57,771,875
PMI Group, Inc. 250,000 14,625,000
Travelers Property Casualty
Corp. Cl.A 20,000 790,000
------------
93,316,875
REAL ESTATE-1.5%
Prime Retail, Inc. 1,600,000 14,300,000
Vornado Reality Trust 100,000 3,881,250
------------
18,181,250
MISCELLANEOUS-5.2%
MBNA Corp. 2,275,000 62,846,875
------------
258,141,787
UTILITIES-18.5%
TELEPHONE UTILITY-18.5%
Global Telesystems Group, Inc. (a) 925,000 70,300,000
Hyperion Telecommunications, Inc. (a) 105,000 1,771,875
5
PORTFOLIO OF INVESTMENTS (CONTINUED) THE ALLIANCE FUND
_______________________________________________________________________________
COMPANY SHARES VALUE
- -------------------------------------------------------------------------
Millicom International
Cellular, SA (a) (Luxembourg) 1,220,000 $ 43,920,000
Nextel Communications, Inc. (a) 500,000 18,437,500
Telephone and Data Systems, Inc. 525,000 35,306,250
United States Cellular Corp. (a) 825,000 39,806,250
Winstar Communications, Inc. (a) 300,000 14,831,250
------------
224,373,125
CONSUMER MANUFACTURING-9.3%
AUTO & RELATED-7.6%
Autonation, Inc. (a) 3,500,000 57,312,500
Budget Group, Inc. (a) 1,000,000 13,375,000
Dana Corp. 117,500 6,065,938
Dollar Thrifty Automotive
Group, Inc. (a) 746,700 15,867,375
------------
92,620,813
BUILDING & RELATED-0.2%
Masco Corp. 100,000 2,856,250
TEXTILE PRODUCTS-1.5%
Unifi, Inc. 1,074,400 17,727,600
------------
113,204,663
TECHNOLOGY-8.6%
COMMUNICATION EQUIPMENT-4.0%
NTL, Inc. (a) 400,000 37,775,000
Tele Celular Sul Participacoes, SA
(ADR)(Brazil) 8,000 150,500
Tele Centro Oeste Celular Participacoes,
SA (ADR) (Brazil) 26,666 93,331
Tele Centro Sul Participacoes, SA
(ADR)(Brazil) 16,000 864,000
Telemig Celular Participacoes, SA
(ADR) (Brazil) 61,100 1,886,463
Tele Nordeste Celular Participacoes, SA
(ADR) (Brazil) 15,000 453,750
Tele Norte Leste Participacoes, SA
(ADR) (Brazil) 80,000 1,310,000
Tele Sudeste Celular Participacoes, SA
(ADR) (Brazil) 150,000 3,656,250
Telesp Celular Participacoes, SA
(ADR) (Brazil) 127,800 2,979,337
------------
49,168,631
COMPUTER PERIPHERALS-1.5%
Seagate Technology, Inc. (a) 500,000 15,093,750
TheStreet.com. (a) 85,000 3,038,750
------------
18,132,500
COMPUTER SERVICES-2.6%
DBT Online, Inc. (a) 114,000 4,104,000
First Data Corp. 600,000 26,962,500
------------
31,066,500
MISCELLANEOUS-0.5%
Harman International Industries, Inc. 135,000 5,990,625
------------
104,358,256
ENERGY-6.4%
DOMESTIC INTEGRATED-1.9%
Kerr-McGee Corp. 500,000 23,250,000
DOMESTIC PRODUCERS-0.2%
Murphy Oil Corp. 50,000 2,453,125
6
THE ALLIANCE FUND
_______________________________________________________________________________
SHARES OR
PRINCIPAL
AMOUNT
COMPANY (000) VALUE
- -------------------------------------------------------------------------
OIL SERVICE-3.6%
IRI International Corp. (a) 200,000 $ 1,000,000
Noble Drilling Corp. (a) 1,300,000 23,562,500
Santa Fe International Corp. 905,800 18,342,450
------------
42,904,950
MISCELLANEOUS-0.7%
Stolt Comex Seaway, SA 20,700 230,288
(ADR) (a) (Norway) 800,000 8,600,000
------------
8,830,288
------------
77,438,363
HEALTH CARE-5.7%
BIOTECHNOLOGY-1.2%
GelTex Pharmaceuticals, Inc. (a) 450,000 7,650,000
Human Genome Sciences, Inc. (a) 135,000 5,703,750
Millennium Pharmaceuticals (a) 24,200 916,575
------------
14,270,325
MEDICAL SERVICES-4.5%
Health Management Associates (a) 1,000,000 13,000,000
Healthsouth Corp. (a) 2,600,000 34,775,000
Tenet Healthcare Corp. (a) 300,000 7,350,000
------------
55,125,000
------------
69,395,325
MULTI INDUSTRY COMPANIES-2.2%
Korn/Ferry International (a) 672,000 8,904,000
Modis Professional Services, Inc. (a) 500,000 7,375,000
U.S. Industries, Inc. 600,000 10,575,000
------------
26,854,000
CONSUMER STAPLES-1.2%
FOOD-0.6%
Tyson Foods, Inc. Cl.A 290,000 6,670,000
HOUSEHOLD PRODUCTS-0.6%
Viad Corp. 260,000 7,735,000
------------
14,405,000
CAPITAL GOODS-0.6%
POLLUTION CONTROL-0.6%
Republic Services Inc. (a) 300,000 7,050,000
TRANSPORTATION-0.3%
MISCELLANEOUS-0.3%
Knightsbridge Tankers, Ltd. 175,000 3,150,000
Marine Transport Corp. 60,000 258,750
------------
3,408,750
BASIC INDUSTRY-0.1%
CHEMICALS-0.1%
Lyondell Chemical Co. 50,000 953,125
Total Common Stocks
(cost $976,839,580) 1,195,854,744
SHORT-TERM INVESTMENT-2.2%
TIME DEPOSIT-2.2%
State Street Cayman Islands
4.50%, 6/01/99
(amortized cost $25,887,000) $ 25,887 25,887,000
TOTAL INVESTMENTS-100.8%
(cost $1,002,726,580) 1,221,741,744
Other assets less liabilities-(0.8%) (9,108,169)
NET ASSETS-100% $1,212,633,575
(a) Non-income producing security.
Glossary:
ADR - American Depositary Receipt.
See notes to financial statements.
7
STATEMENT OF ASSETS AND LIABILITIES
MAY 31, 1999 (UNAUDITED) THE ALLIANCE FUND
_______________________________________________________________________________
ASSETS
Investments in securities, at value (cost $1,002,726,580) $1,221,741,744
Cash 119
Receivable for investment securities sold 18,805,898
Dividends and interest receivable 784,933
Receivable for capital stock sold 467,540
Prepaid expenses 59,755
Total assets 1,241,859,989
LIABILITIES
Payable for investment securities purchased 26,624,574
Unclaimed dividends 1,005,679
Management fee payable 694,036
Payable for capital stock redeemed 299,439
Distribution fee payable 296,790
Accrued expenses 305,896
Total liabilities 29,226,414
NET ASSETS $1,212,633,575
COMPOSITION OF NET ASSETS
Capital stock, at par $ 1,755,966
Additional paid-in capital 913,243,562
Accumulated net investment loss (2,724,806)
Accumulated net realized gain on investments and
foreign currency transactions 81,343,689
Net unrealized appreciation of investments 219,015,164
$1,212,633,575
CALCULATION OF MAXIMUM OFFERING PRICE
CLASS A SHARES
Net asset value and redemption price per share
($1,075,098,597 / 154,174,809 shares of capital stock
issued and outstanding) $6.97
Sales charge--4.25% of public offering price .31
Maximum offering price $7.28
CLASS B SHARES
Net asset value and offering price per share
($94,466,126 / 14,819,502 shares of capital stock
issued and outstanding) $6.37
CLASS C SHARES
Net asset value and offering price per share
($31,427,314 / 4,937,665 shares of capital stock
issued and outstanding) $6.36
ADVISOR CLASS SHARES
Net asset value, redemption and offering price per share
($11,641,538 / 1,664,261 shares of capital stock
issued and outstanding) $7.00
See notes to financial statements.
8
STATEMENT OF OPERATIONS
SIX MONTHS ENDED MAY 31, 1999 (UNAUDITED) THE ALLIANCE FUND
_______________________________________________________________________________
INVESTMENT INCOME
Dividends (net of foreign taxes withheld
of $46,562) $ 3,634,494
Interest 157,659 $ 3,792,153
EXPENSES
Management fee 3,845,285
Distribution fee - Class A 1,051,918
Distribution fee - Class B 437,766
Distribution fee - Class C 128,473
Transfer agency 648,780
Custodian 105,772
Printing 79,462
Registration 72,664
Administrative 54,000
Audit and legal 38,005
Directors' fees 11,031
Miscellaneous 43,803
Total expenses 6,516,959
Net investment loss (2,724,806)
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
AND FOREIGN CURRENCY TRANSACTIONS
Net realized gain on investment transactions 84,690,409
Net realized loss on foreign currency transactions (12,054)
Net change in unrealized appreciation of:
Investments 167,640,496
Foreign currency denominated assets and liabilities (49)
Net gain on investments and foreign currency
transactions 252,318,802
NET INCREASE IN NET ASSETS FROM OPERATIONS $249,593,996
See notes to financial statements.
9
STATEMENT OF CHANGES IN NET ASSETS THE ALLIANCE FUND
_______________________________________________________________________________
SIX MONTHS ENDED YEAR ENDED
MAY 31, 1999 NOVEMBER 30,
(UNAUDITED) 1998
---------------- ---------------
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS
Net investment loss $ (2,724,806) $ (5,345,928)
Net realized gain on investments and
foreign currency transactions 84,678,355 83,635,019
Net change in unrealized appreciation of
investments and foreign currency
denominated assets and liabilities 167,640,447 (180,389,548)
Net increase (decrease) in net assets
from operations 249,593,996 (102,100,457)
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net realized gain on investments
Class A (60,713,546) (297,697,708)
Class B (5,904,028) (19,042,143)
Class C (1,431,253) (5,056,456)
Advisor Class (728,071) (2,587,444)
CAPITAL STOCK TRANSACTIONS
Net increase (decrease) (39,357,256) 196,615,939
Total increase (decrease) 141,459,842 (229,868,269)
NET ASSETS
Beginning of year 1,071,173,733 1,301,042,002
End of period $1,212,633,575 $1,071,173,733
See notes to financial statements.
10
NOTES TO FINANCIAL STATEMENTS
MAY 31, 1999 (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 may 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 are subject to a contingent deferred sales charge of 1% on redemptions
made within the first year after purchase. Advisor Class shares are sold
without an initial or contingent deferred sales charge and are not subject to
ongoing distribution expenses. Advisor Class shares are offered to investors
participating in fee-based programs and to certain retirement plan accounts.
All four classes of shares have identical voting, dividend, liquidation and
other rights, except that each class bears different distribution expenses and
has exclusive voting rights with respect to its distribution plan. The
financial statements have been prepared in conformity with generally accepted
accounting principles which require management to make certain estimates and
assumptions that affect the reported amounts of assets and liabilities in the
financial statements and amounts of income and expenses during the reporting
period. Actual results could differ from those estimates. The following is a
summary of significant accounting policies followed by the Fund.
1. SECURITY VALUATION
Portfolio securities traded on a national securities exchange or on a foreign
securities exchange (other than foreign securities exchanges whose operations
are similar to those of the United States over-the-counter market) are
generally valued at the last reported sales price or if no sale occurred, at
the mean of the closing bid and asked prices on that day. Readily marketable
securities traded in the over-the-counter market, securities listed on a
foreign securities exchange whose operations are similar to the U.S.
over-the-counter market, and securities listed on a national securities
exchange whose primary market is believed to be over-the-counter, are valued at
the mean of the current bid and asked price. U.S. government and fixed income
securities which mature in 60 days or less are valued at amortized cost, unless
this method does not represent fair value. Securities for which current market
quotations are not readily available are valued at their fair value as
determined in good faith by, or in accordance with procedures adopted by, the
Board of Directors. Fixed income securities may be valued on the basis of
prices obtained from a pricing service when such prices are believed to reflect
the fair market value of such securities.
2. CURRENCY TRANSLATION
Assets and liabilities denominated in foreign currencies and commitments under
forward exchange currency contracts are translated into U.S. dollars at the
mean of the quoted bid and asked prices of such currencies against the U.S.
dollar. Purchases and sales of portfolio securities are translated into U.S.
dollars at the rates of exchange prevailing when such securities were acquired
or sold. Income and expenses are translated into U.S. dollars at rates of
exchange prevailing when accrued.
Net realized foreign currency gains and losses represent foreign exchange gains
and losses from sales and maturities of debt securities and foreign exchange
currency contracts, currency gains and losses realized between the trade and
settlement dates on security transactions and the difference between the
amounts of dividends and interest recorded on the Fund's books and the U.S.
dollar equivalent amounts actually received or paid. The Fund does not isolate
the effect of fluctuations in foreign currency exchange rates when determining
the gain or loss upon the sale of equity securities. 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.
3. TAXES
It is the Fund's policy to meet the requirements of the Internal Revenue Code
applicable to regulated investment companies and to distribute all of its
investment
11
NOTES TO FINANCIAL STATEMENTS (CONTINUED) THE ALLIANCE FUND
_______________________________________________________________________________
company taxable income and net realized gains, if any, to shareholders.
Therefore, no provisions for federal income or excise taxes are required.
4. INVESTMENT INCOME AND INVESTMENT TRANSACTIONS
Dividend income is recorded on the ex-dividend date. Interest income is accrued
daily. Investment transactions are accounted for on the date securities are
purchased or sold. The Fund accretes discounts as adjustments to interest
income. Investment gains and losses are determined on the identified cost basis.
5. INCOME AND EXPENSES
All income earned and expenses incurred by the Fund are borne on a pro-rata
basis by each outstanding class of shares, based on the proportionate interest
in the Fund represented by the net assets of such class, except that the Fund's
Class B and Class C shares bear higher distribution and transfer agent fees
than Class A shares and the Advisor Class shares have no distribution fees.
6. DIVIDENDS AND DISTRIBUTIONS
Dividends and distributions to shareholders are recorded on the ex-dividend
date.
Income dividends and capital gains distributions are determined in accordance
with federal tax regulations and may differ from those determined in accordance
with generally accepted accounting principles. To the extent these differences
are permanent, such amounts are reclassified within the capital accounts based
on their federal tax basis treatment; temporary differences, do not require
such reclassification.
NOTE B: 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 $54,000 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, 1999.
The Fund compensates Alliance Fund Services, Inc., a wholly-owned subsidiary of
the Manager, under a Transfer Agency Agreement for providing personnel and
facilities to perform transfer agency services for the Fund. Such compensation
amounted to $482,448 for the six months ended May 31, 1999.
For the six months ended May 31, 1999, the Fund's expenses were reduced by
$52,297 under an expense offset arrangement with Alliance Fund Services.
Alliance Fund Distributors, Inc., (the "Distributor"), a wholly-owned
subsidiary of the Manager, serves as the Distributor of the Fund's shares. The
Distributor received front-end sales charges of $38,826 from the sale of Class
A shares and $1,686, $113,014 and $4,308 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, 1999.
Brokerage commissions paid on investment transactions for the six months ended
May 31, 1999 amounted to $1,883,851, none of which was paid to Donaldson,
Lufkin & Jenrette Securities Corp., 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 the Fund's average daily net assets attributable to Class
A shares and 1% of the average daily net assets attributable to both Class B
and Class C shares. There is no distribution fee on the Advisor Class shares.
The fees are 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
12
THE ALLIANCE FUND
_______________________________________________________________________________
reimbursed by the Fund in the amount of $5,827,867 and $1,353,680, for Class B
and Class C shares, respectively; such costs may be recovered from the Fund in
future periods so long as the Agreement is in effect. In accordance with the
Agreement, there is no provision for recovery of unreimbursed distribution
costs incurred by the Distributor beyond the current fiscal year for Class A
shares. The Agreement also provides that the 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 $596,189,776 and $694,348,558,
respectively, for the six months ended May 31, 1999. There were no purchases or
sales of U.S. government or government agency obligations for the six months
ended May 31, 1999. At May 31, 1999, the cost of investments for federal income
tax purposes was substantially the same as the cost for financial reporting
purposes. Gross unrealized appreciation of investments was $244,077,428 and
gross unrealized depreciation of investments was $25,062,264, resulting in net
unrealized appreciation of $219,015,164.
NOTE E: CAPITAL STOCK
There are 12,000,000,000 shares of $0.01 par value capital stock authorized,
divided into four classes, designated Class A, Class B, Class C and Advisor
Class shares. Each class consists of 3,000,000,000 authorized shares.
Transactions in capital stock were as follows:
SHARES AMOUNT
--------------------------- ------------------------------
SIX MONTHS ENDED YEAR ENDED SIX MONTHS ENDED YEAR ENDED
MAY 31, 1999 NOVEMBER 30, MAY 31, 1999 NOVEMBER 30,
(UNAUDITED) 1998 (UNAUDITED) 1998
------------ ------------ -------------- --------------
CLASS A
Shares sold 27,458,148 19,105,150 $176,233,617 $127,532,913
Shares issued in
reinvestment of
distributions 8,843,429 36,393,823 48,373,805 236,559,827
Shares converted
from Class B 166,198 195,410 1,074,458 1,290,096
Shares redeemed (41,884,055) (34,273,913) (265,529,916) (226,164,435)
Net increase
(decrease) (5,416,280) 21,420,470 $(39,848,036) $139,218,401
CLASS B
Shares sold 2,420,782 8,241,290 $ 14,195,628 $ 52,183,984
Shares issued in
reinvestment of
distributions 1,096,523 2,936,987 5,504,608 17,768,641
Shares converted
to Class A (181,653) (210,591) (1,074,458) (1,290,096)
Shares redeemed (4,015,283) (4,012,134) (22,773,820) (23,782,439)
Net increase
(decrease) (679,631) 6,955,552 $ (4,148,042) $ 44,880,090
CLASS C
Shares sold 23,861,889 40,005,443 $137,233,393 $228,800,301
Shares issued in
reinvestment of
distributions 276,365 783,141 1,384,667 4,745,791
Shares redeemed (23,058,054) (39,217,160) (132,607,774) (225,320,097)
Net increase 1,080,200 1,571,424 $ 6,010,286 $ 8,225,995
13
NOTES TO FINANCIAL STATEMENTS (CONTINUED) THE ALLIANCE FUND
_______________________________________________________________________________
SHARES AMOUNT
--------------------------- ------------------------------
SIX MONTHS ENDED YEAR ENDED SIX MONTHS ENDED YEAR ENDED
MAY 31, 1999 NOVEMBER 30, MAY 31, 1999 NOVEMBER 30,
(UNAUDITED) 1998 (UNAUDITED) 1998
------------ ------------ -------------- --------------
ADVISOR CLASS
Shares sold 158,607 1,262,591 $ 973,521 $ 8,223,010
Shares issued in
reinvestment of
distributions 131,889 394,506 722,752 2,560,344
Shares redeemed (516,475) (948,689) (3,067,737 (6,491,901)
Net increase
(decrease) (225,979) 708,408 $(1,371,464) $ 4,291,453
14
FINANCIAL HIGHLIGHTS THE ALLIANCE FUND
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
CLASS A
- -----------------------------------------------------------------------------------------------------------------------------------
SIX MONTHS JANUARY 1,
ENDED 1994
MAY 31, YEAR ENDED NOVEMBER 30, TO YEAR ENDED
1999 ------------------------------------------ NOV. 30, DEC. 31,
(UNAUDITED) 1998 1997 1996 1995 1994(A) 1993
----------- --------- -------- ---------- -------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 5.97 $ 8.70 $ 7.71 $ 7.72 $ 6.63 $ 6.85 $ 6.68
INCOME FROM INVESTMENT OPERATIONS
Net investment income (loss) (.01)(b) (.02)(b) (.02)(b) .02 .02(b) .01 .02
Net realized and unrealized gain
(loss) on investments and foreign
currency transactions 1.40 (.54) 2.09 1.06 2.08 (.23) .93
Net increase (decrease) in net asset
value from operations 1.39 (.56) 2.07 1.08 2.10 (.22) .95
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment
income -0- -0- (.02) (.02) (.01) -0- (.02)
Distributions from net realized gains (.39) (2.17) (1.06) (1.07) (1.00) -0- (.76)
Total dividends and distributions (.39) (2.17) (1.08) (1.09) (1.01) -0- (.78)
Net asset value, end of period $ 6.97 $ 5.97 $ 8.70 $ 7.71 $ 7.72 $ 6.63 $ 6.85
TOTAL RETURN
Total investment return based on net
asset value (c) 24.97% (8.48)% 31.82% 16.49% 37.87% (3.21)% 14.26%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(000's omitted) $1,075,099 $953,181 $1,201,435 $999,067 $945,309 $760,679 $831,814
Ratio of expenses to average net
assets 1.08%(d) 1.03% 1.03% 1.04% 1.08% 1.05%(d) 1.01%
Ratio of net investment income (loss)
to average net assets (.40)%(d) (.36)% (.29)% .30% .31% .21%(d) .27%
Portfolio turnover rate 53% 106% 158% 80% 81% 63% 66%
</TABLE>
See footnote summary on page 18.
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 JANUARY 1,
ENDED 1994
MAY 31, YEAR ENDED NOVEMBER 30, TO YEAR ENDED
1999 ------------------------------------------ NOV. 30, DEC. 31,
(UNAUDITED) 1998 1997 1996 1995 1994(A) 1993
----------- ---------- -------- ---------- -------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 5.51 $ 8.25 $ 7.40 $ 7.49 $ 6.50 $ 6.76 $ 6.64
INCOME FROM INVESTMENT OPERATIONS
Net investment loss (.04)(b) (.07)(b) (.08)(b) (.01) (.03)(b) (.03) (.03)
Net realized and unrealized gain (loss)
on investments and foreign
currency transactions 1.29 (.50) 1.99 .99 2.02 (.23) .91
Net increase (decrease) in net asset
value from operations 1.25 (.57) 1.91 .98 1.99 (.26) .88
LESS: DISTRIBUTIONS
Distributions from net realized gains (.39) (2.17) (1.06) (1.07) (1.00) -0- (.76)
Net asset value, end of period $ 6.37 $ 5.51 $ 8.25 $ 7.40 $ 7.49 $ 6.50 $ 6.76
TOTAL RETURN
Total investment return based on net
asset value (c) 24.47% (9.27)% 30.74% 15.47% 36.61% (3.85)% 13.28%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(000's omitted) $94,466 $85,456 $70,461 $44,450 $31,738 $18,138 $12,402
Ratio of expenses to average net
assets 1.90%(d) 1.84% 1.85% 1.87% 1.90% 1.89%(d) 1.90%
Ratio of net investment loss
to average net assets (1.22)%(d) (1.17)% (1.12)% (.53)% (.53)% (.60)%(d) (.64)%
Portfolio turnover rate 53% 106% 158% 80% 81% 63% 66%
</TABLE>
See footnote summary on page 18.
16
THE ALLIANCE FUND
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
CLASS C
- -----------------------------------------------------------------------------------------------------------------------------------
SIX MONTHS JANUARY 1, MAY 3,
ENDED 1994 1993(E)
MAY 31, YEAR ENDED NOVEMBER 30, TO TO
1999 ---------------------------------------- NOV. 30, DEC. 31,
(UNAUDITED) 1998 1997 1996 1995 1994(A) 1993
----------- ---------- -------- ---------- -------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 5.50 $ 8.26 $ 7.41 $ 7.50 $ 6.50 $ 6.77 $ 6.67
INCOME FROM INVESTMENT OPERATIONS
Net investment loss (.03)(b) (.07)(b) (.08)(b) (.02) (.03)(b) (.03) (.02)
Net realized and unrealized gain (loss)
on investments and foreign
currency transactions 1.28 (.52) 1.99 1.00 2.03 (.24) .88
Net increase (decrease) in net asset
value from operations 1.25 (.59) 1.91 .98 2.00 (.27) .86
LESS: DISTRIBUTIONS
Distributions from net realized gains (.39) (2.17) (1.06) (1.07) (1.00) -0- (.76)
Net asset value, end of period $ 6.36 $ 5.50 $ 8.26 $ 7.41 $ 7.50 $ 6.50 $ 6.77
TOTAL RETURN
Total investment return based on net
asset value (c) 24.52% (9.58)% 30.72% 15.48% 36.79% (3.99)% 13.95%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(000's omitted) $31,427 $21,231 $18,871 $13,899 $10,078 $6,230 $4,006
Ratio of expenses to average net
assets 1.87%(d) 1.84% 1.83% 1.86% 1.89% 1.87%(d) 1.94%(d)
Ratio of net investment loss
to average net assets (1.21)%(d) (1.18)% (1.10)% (.51)% (.51)% (.59)%(d) (.74)%(d)
Portfolio turnover rate 53% 106% 158% 80% 81% 63% 66%
</TABLE>
See footnote summary on page 18.
17
FINANCIAL HIGHLIGHTS (CONTINUED) THE ALLIANCE FUND
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
ADVISOR CLASS
- ----------------------------------------------------------------------------------------------
SIX MONTHS OCTOBER 2,
ENDED 1996(E)
MAY 31, YEAR ENDED NOVEMBER 30, TO
1999 ------------------------ NOVEMBER 30,
(UNAUDITED) 1998 1997 1996
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $5.98 $8.69 $7.71 $6.99
INCOME FROM INVESTMENT OPERATIONS
Net investment loss (.01)(b) (.01)(b) (.02)(b) -0-
Net realized and unrealized gain (loss)
on investments and foreign
currency transactions 1.42 (.53) 2.10 .72
Net increase (decrease) in net asset
value from operations 1.41 (.54) 2.08 .72
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment
income -0- -0- (.04) -0-
Distributions from net realized gains (.39) (2.17) (1.06) -0-
Total dividends and distributions (.39) (2.17) (1.10) -0-
Net asset value, end of period $7.00 $5.98 $8.69 $7.71
TOTAL RETURN
Total investment return based on net
asset value (c) 25.28% (8.19)% 32.00% 10.30%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(000's omitted) $11,642 $11,305 $10,275 $1,083
Ratio of expenses to average net
assets .87%(d) .83% .83% .89%(d)
Ratio of net investment income (loss)
to average net assets (.19)%(d) (.16)% (.21)% .38%(d)
Portfolio turnover rate 53% 106% 158% 80%
</TABLE>
(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 return calculated for a period of less than one year
is not annualized.
(d) Annualized.
(e) Commencement of distribution.
18
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
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
PRICEWATERHOUSECOOPERS LLP
1177 Avenue of the Americas
New York, NY 10036
LEGAL COUNSEL
SEWARD & KISSEL LLP
One Battery Park Plaza
New York, NY 10004
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 SHSAREHOLDERS
OF THE FUND.
R THESE REGISTERED SERVICE MSARKS USED UNDER LICENSE FROM THE OWNER,
ALLIANCE CAPITAL MANAGEMENT L.P.
ALLSR599
