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This is filed pursuant to Rule 497(c).
File Nos. 2-10768 and 811-00204.
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THE ALLIANCE FUND, INC.
____________________________________________________________
c/o Alliance Fund Services, Inc.
P.O. Box 1520, Secaucus, New Jersey 07096-1520
Toll Free (800) 221-5672
For Literature: Toll Free (800) 227-4618
____________________________________________________________
STATEMENT OF ADDITIONAL INFORMATION
February 1, 1999
(as amended November 1, 1999)
____________________________________________________________
This Statement of Additional Information is not a
prospectus but supplements and should be read in conjunction with
the current Prospectus for The Alliance Fund, Inc. (the "Fund")
that offers Class A, Class B and Class C shares of the Fund and
the current Prospectus for the Fund that offers the Advisor Class
shares of the Fund (the "Advisor Class Prospectus" and, together
with the Prospectus for the Fund that offers the Class A,
Class B, and Class C shares of the Fund, the "Prospectus").
Copies of the Prospectuses may be obtained by contacting Alliance
Fund Services, Inc. at the address or the "For Literature"
telephone number shown above.
TABLE OF CONTENTS
PAGE
DESCRIPTION OF THE FUND...............................
MANAGEMENT OF THE FUND................................
EXPENSES OF THE FUND..................................
PURCHASE OF SHARES....................................
REDEMPTION AND REPURCHASE OF SHARES...................
SHAREHOLDER SERVICES..................................
NET ASSET VALUE.......................................
DIVIDENDS, DISTRIBUTIONS AND TAXES....................
PORTFOLIO TRANSACTIONS................................
GENERAL INFORMATION...................................
REPORT OF INDEPENDENT ACCOUNTANTS AND FINANCIAL
STATEMENTS..........................................
APPENDIX A: CERTAIN EMPLOYEE BENEFIT PLANS........... A-1
________________________
(R) This registered service mark used under license from the
owner, Alliance Capital Management L.P.
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_______________________________________________________________
DESCRIPTION OF THE FUND
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The Alliance Fund, Inc. (the "Fund") is a diversified,
open-end investment company. Except as otherwise indicated,
investment policies of the Fund are not "fundamental policies"
within the meaning of the Investment Company Act of 1940, as
amended (the "1940 Act"), and may, therefore, be changed by the
Fund's Board of Directors without a shareholder vote. However,
the Fund will not change its investment policies without
contemporaneous written notice to shareholders. The Fund's
investment objective may not be changed without shareholder
approval. There can be, of course, no assurance that the Fund
will achieve its investment objective.
Investment Objective
The Fund's investment objective is long-term growth of
capital and income primarily through investment in common stocks.
Investments will be made based on their potential for
appreciation.
How The Fund Pursues its Objective
The Fund will normally invest substantially all of its
assets in common stocks which it believes will appreciate in
value. However, when appropriate in the opinion of Alliance
Capital Management L.P., the Fund's investment manager (the
"Manager"), it may also invest in other types of securities such
as convertible preferred stocks and debentures, high grade bonds,
debentures and preferred stocks, securities issued, created or
fully guaranteed by the United States Government and other high-
quality short-term securities such as repurchase agreements,
bankers' acceptances, domestic certificates of deposit and other
evidences of indebtedness maturing in less than one year. For
temporary defensive purposes, the Fund may invest a substantial
portion of its assets in such U.S. Government and other short-
term securities. The Fund may also invest in foreign securities
and the Fund has not adopted any limitation on the percentage of
net assets that may be invested in such securities.
Although the diversification and generally high quality
of the Fund's investments cannot prevent fluctuations in the
market value of the Fund's assets, they do tend to limit
investment risk and should contribute to achieving the Fund's
objective.
It is not the Fund's policy to effect portfolio
transactions for the purpose of realizing short-term trading
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profits or for the purpose of exercising control. The Fund does
not invest in puts, calls (except as discussed below), straddles,
spreads, or any combination thereof, nor in oil, gas or other
mineral exploration or development programs. Furthermore, it
will not invest more than 5% of its gross assets, taken at
market, in securities the disposition of which would be subject
to restrictions under the federal securities laws, except Rule
144A securities.
The above investment policies can be changed by the
Board of Directors if in its judgment the change is in the
interest of the Fund.
Additional Investment Policies and Practices
Options. The Fund may write covered call options which
are traded on national securities exchanges with respect to
common stocks in its portfolio (the Fund must at all times have
in its portfolio the securities which it may be obligated to
deliver if the option is exercised). The Fund may write covered
call options on these common stocks in an attempt to realize a
greater current return than would be realized on the securities
alone or to provide greater flexibility in disposing of such
securities. A "call option" gives the holder the right to
purchase the underlying securities from the Fund at a specified
price (the "exercise price") for a stated period of time. Prior
to the expiration of the option, the seller (the "writer") of the
option has an obligation to sell the underlying security to the
holder of the option at the exercise price regardless of the
market price of the security at the time the option is exercised.
The premium received by the Fund is recorded as a liability and
is subsequently adjusted to the current market value of the
option written. Premiums received from writing options which
expire unexercised are treated by the Fund on the expiration date
as realized capital gains. The difference between the premium
and the amount paid upon executing a closing purchase
transaction, including brokerage commissions, is also treated as
a gain, or if the premium is less than the amount paid for the
closing purchase transaction, as a loss. If a call option is
exercised, the premium is added to the proceeds from the sale in
determining whether the Fund has realized a gain or loss. All
options written will be "covered", which means that the Fund will
own the securities underlying the option or securities
convertible into or carrying rights to acquire such securities,
which securities will be segregated and held under an escrow
arrangement with or through the custodian for the Fund's
securities. Management will be instructed initially to cease
writing options if, and so long as, 25% of total assets are
subject to outstanding option contracts or if required under
applicable regulations of state securities administrators. In
the event the option is exercised, the writer may either deliver
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the underlying securities at the exercise price or if it does not
wish to deliver its own securities, purchase new securities at a
cost to the writer, which may be more than the exercise price
plus premium received and deliver the new securities for the
exercised option.
The Fund may purchase or write options on securities of
the types in which it is permitted to invest in privately
negotiated (i.e., over-the-counter) transactions. The Fund will
effect such transactions only with investment dealers and other
financial institutions (such as commercial banks or savings and
loan institutions) deemed creditworthy by the Adviser, and the
Adviser has adopted procedures for monitoring the
creditworthiness of such entities.
In view of its investment objective, the Fund generally
would write covered call options only in circumstances where the
Manager does not anticipate significant appreciation of the
underlying securities in the near future or has otherwise
determined to dispose of the securities. In the event an option
is exercised, the Fund's potential for gain is limited to the
difference between the exercise price plus the premium less the
cost of the security. Alternatively, the option's position could
be closed out by purchasing a like option. Although the writing
of covered call options only on national securities exchanges
increases the likelihood of the Fund being able to make closing
purchase transactions, there is no assurance that the Fund will
be able to effect closing purchase transactions at any particular
time or at an acceptable price. If the price of a security
declines below the amount to be received from the exercise price
less the amount of the call premium received and if the option
could not be closed, the Fund would hold a security which might
otherwise have been sold to protect against depreciation. The
writing of covered call options could result in increases in the
Fund's portfolio turnover rate, especially during periods when
market prices of the underlying securities appreciate.
Loans of Portfolio Securities. The Fund may make
secured loans of its portfolio securities to brokers, dealers and
financial institutions provided that liquid assets or bank
letters of credit equal to at least 100% of the market value of
the securities loaned is deposited and maintained by the borrower
with the Fund and is adjusted (marked-to-market) with the
borrower each day the securities are on loan to provide for price
fluctuations. The risks in lending portfolio securities, as with
other extensions of credit, consist of possible loss of rights in
the collateral should the borrower fail financially. In
determining whether to lend securities to a particular borrower,
the Manager (subject to review by the Directors) will consider
all relevant facts and circumstances, including the
creditworthiness of the borrower. While securities are on loan,
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the borrower will pay the Fund any income earned thereon and the
Fund may invest any cash collateral in portfolio securities,
thereby earning additional income, or receive an agreed upon
amount of income from a borrower who has delivered equivalent
collateral. The Fund will not lend its portfolio securities if
such loans are not permitted by the laws or regulations of any
state within which its shares are qualified for sale. Loans will
be subject to termination by the Fund in the normal settlement
time, currently five business days after notice, or by the
borrower on one day's notice. Although voting rights may pass
with the loaned securities, if a material event affecting the
investment is to be voted on, the loan must be terminated and the
securities voted by the Fund. Borrowed or equivalent securities
must be returned when the loan is terminated. Any gain or loss
in the market price of the borrowed securities that occurs during
the term of the loan inures to the Fund and its shareholders.
The Fund may pay reasonable finders', administrative and
custodial fees in connection with a loan. The Fund will not lend
portfolio securities in excess of 25% of the value of its total
assets nor will the Fund lend its portfolio securities to any
officer, director, employee or affiliate of either the Fund or
the Manager.
Repurchase Agreements. A "repurchase agreement" is an
instrument whereby the Fund acquires an underlying money market
instrument subject to resale at a fixed price. These
transactions will be entered into only with commercial banks.
The Fund advances cash to the banks which the banks collateralize
with securities, owned by the banks, issued or guaranteed by the
U.S. Government or its agencies or instrumentalities. Repurchase
agreements usually are for short periods. The Fund will not
enter into repurchase agreements of more than one week in
duration. Repurchase agreements together with the purchase of
restricted securities and any securities which do not have
readily available market quotations cannot amount to more than
10% of the Fund's net assets. Repurchase agreements could
involve certain risks in the event of bankruptcy or other
defaults by the seller, including possible delays and expenses in
liquidating the collateral, decline in collateral value and loss
of interest.
Foreign Securities. The Fund may invest in securities
of foreign issuers. Foreign securities investments may be
affected by changes in currency rates or exchange control
regulations, application of foreign tax laws, changes in
governmental administration or economic or monetary policy (in
the United States and abroad) or changed circumstances in
dealings between nations. Costs may be incurred in connection
with conversions between various currencies held by the Fund. In
addition, there may be less publicly available information about
foreign issuers than about domestic issuers, and foreign issuers
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may not be subject to accounting, auditing and financial
reporting standards and requirements comparable to those of
domestic issuers. Securities of some foreign issuers are less
liquid and more volatile than securities of comparable domestic
issuers, and foreign brokerage commissions are generally higher
than in the United States. Foreign securities markets may also
be less liquid, more volatile and less subject to governmental
supervision than in the United States. Investments in foreign
countries could be affected by other factors not present in the
United States, including expropriation, confiscatory taxation and
potential difficulties in enforcing contractual obligations.
Securities of Other Investment Companies. The Fund will
not invest in securities of other investment companies except by
purchase in the open market where no commission or profit to a
sponsor or dealer results from such purchase other than the
customary broker's commission (the Fund has no current intention
to invest in securities of other investment companies), or except
when such purchase, though not made in the open market, is part
of a plan of merger or consolidation.
Portfolio Turnover. There can be no assurance that the
Fund will achieve its investment objectives since market risks
are inherent in all securities to varying degrees, although the
Manager will try to limit these risks. Ordinarily, the annual
portfolio turnover rate will not exceed 100%. A portfolio
turnover rate of approximately 100% involves correspondingly
greater brokerage commission expenses than would a lower rate,
which must be borne by the Fund and its shareholders.
Certain Fundamental Investment Policies
The following restrictions may not be changed without
the affirmative vote of the holders of a majority of the Fund's
outstanding voting securities, which means (1) 67% or more of the
shares represented at a meeting at which more than 50% of the
outstanding shares are present in person or by proxy or (2) more
than 50% of the outstanding shares, whichever is less. The Fund
may not:
1. Invest more than 5% of its total assets in the
securities of any one issuer (other than the U.S.
Government);
2. Acquire more than 10% of the voting or other
securities of any one issuer;
3. Buy securities of any company that (including its
predecessors) has not been in business at least
three continuous years;
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4. Borrow money;
5. Mortgage or pledge any of its assets except in
connection with the writing of covered call
options (see below);
6. Purchase securities on margin or sell short;
7. Lend any of its assets other than (i) through the
purchase of notes, bonds, certificates of
deposit, or evidences of indebtedness of a type
commonly distributed publicly or privately to
financial institutions (except that it will not
purchase any such privately offered securities
under circumstances in which it will become an
"underwriter" as defined in the Securities Act of
1933, as amended (the "Securities Act")),
(ii) through fully collateralized loans of
portfolio securities or (iii) through loans to
banks against such obligations as repurchase
agreements (see below);
8. Underwrite or participate in any underwriting of
securities (the Fund might be deemed to be an
underwriter if it sells restricted securities);
9. Invest more than 25% of the value of its assets
in securities of issuers in any one industry;
10. Buy or sell any securities from, to or through
its officers or directors or other "interested
persons" except for purchases or sales of Fund
shares, or in transactions on a securities
exchange including only regular exchange
commissions and charges;
11. Buy or hold securities of any issuer if any
officer or director of the Fund, the Manager or
any officer, director or 10% shareholder of the
Manager owns individually 1/2 of 1% of a class of
securities of such issuer, and such persons
together own beneficially more than 5% of such
securities; or
12. Buy or sell any real estate, commodities or
commodity contracts including commodity futures
contracts.
In connection with the qualification or registration of
the Fund's shares for sale under the securities laws of certain
states the Fund has agreed, in addition to the foregoing
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investment restrictions, that it (i) will not invest more than 5%
of its net assets in warrants nor more than 2% of its net assets
in unlisted warrants; (ii) will not invest in real estate or
interests therein, excluding readily marketable securities of
companies which invest in real estate; and (iii) will not invest
in oil, gas or other mineral leases.
Whenever any investment policy or restriction states a
minimum or maximum percentage of the Fund's assets which may be
invested in any security or other asset, it is intended that such
minimum or maximum percentage limitation be determined
immediately after and as a result of the Fund's acquisition of
such security or other asset. Accordingly, any later increase or
decrease in percentage beyond the specified limitations resulting
from a change in values or net assets will not be considered a
violation of any such maximum.
_______________________________________________________________
MANAGEMENT OF THE FUND
_______________________________________________________________
Manager
Alliance Capital Management L.P., a Delaware limited
partnership with principal offices at 1345 Avenue of the
Americas, New York, New York 10105, has been retained under an
investment management agreement (the "Management Agreement") to
provide investment advice and, in general, to conduct the
management and investment program of the Fund under the
supervision of the Fund's Board of Directors (see "Management of
the Fund" in the Prospectus).
The Manager is a leading international investment
manager managing client accounts with assets as of September 30,
1999 totaling more than $317 billion (of which more than $143
billion represented assets of investment companies). As of
September 30, 1999, the Manager managed retirement assets for
many of the largest public and private employee benefit plans
(including 28 of the nation's FORTUNE 100 companies), for public
employee retirement funds in 31 states, for investment companies,
and for foundations, endowments, banks and insurance companies
worldwide. The 52 registered investment companies managed by the
Manager, comprising 118 separate investment portfolios, currently
have approximately 4.8 million shareholder accounts.
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Alliance Capital Management Corporation ("ACMC")
is the general partner of the Manager and a wholly owned
subsidiary of The Equitable Life Assurance Society of
the United States ("Equitable"). Equitable, one of the
largest life insurance companies in the United States,
is the beneficial owner of an approximately 55.4%
partnership interest in the Manager. Alliance Capital
Management Holding L.P. ("Alliance Holding") owns an
approximately 41.9% partnership interest in the Manager.*
Equity interests in Alliance Holding are traded on the
New York Stock Exchange in the form of units.
Approximately 98% of such interests are owned by the
public and management or employees of the Manager and
approximately 2% are owned by Equitable. Equitable is a
wholly owned subsidiary of AXA Financial, Inc.
("AXA Financial"), a Delaware corporation whose shares
are traded on the New York Stock Exchange. AXA Financial
serves as the holding company for the Adviser, Equitable
and Donaldson, Lufkin & Jenrette, Inc., an integrated
investment and merchant bank. As of June 30, 1999, AXA,
a French insurance holding company, owned approximately
58.2% of the issued and outstanding shares of common
stock of AXA Financial.
________________________
* Until October 29, 1999, Alliance Holding served as
the investment manager to the Fund. On that date,
Alliance Holding reorganized by transferring its business
to the Manager. Prior thereto, the Manager had no
material business operations. One result of the
reorganization was that the Advisory Agreement, then
between the Fund and Alliance Holding, was transferred
to the Manager by means of a technical assignment, and
ownership of Alliance Fund Distributors, Inc. and Alliance
Fund Services, Inc., the Fund's principal underwriter and
transfer agent, respectively, also was transferred to
the Manager.
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The Management Agreement provides that the Manager shall
manage the investment and reinvestment of the assets of the Fund
and administer its business and affairs, subject to the overall
supervision of the Fund's Board of Directors. In addition the
Manager furnishes the Fund with office space and clerical and
bookkeeping services and payroll compensation of the Fund's
officers and those directors who are affiliated persons of the
Manager.
The Fund has, under the Management Agreement, assumed
the obligation for payment of all of its other expenses. As to
the obtaining of services other than those specifically provided
to the Fund by the Manager, the Fund may employ its own
personnel. For such services, it also may utilize personnel
employed by the Adviser or by other subsidiaries of Equitable
and, in such event, the services will be provided to the Fund at
cost and the payments therefore must be specifically approved by
the Fund's Directors. The Fund paid to the Manager a total of
$124,000 in respect of such services during the fiscal year of
the Fund ended in 1998.
The Management Agreement became effective on April 20,
1993. For its services under the Management Agreement, the
Manager receives a monthly fee at an annualized rate of .75% of
the first $500 million of the Fund's average daily net assets,
.65% of the excess over $500 million of such net assets up to
$1 billion and .55% of the excess over $1 billion of such net
assets. During the fiscal years of the Fund ended in 1996, 1997
and 1998, the Fund paid the Manager total management fees of
$6,794,888, $7,855,807 and $8,274,404, respectively.
In order to provide the Manager with access to
supplemental research and security and economic analyses provided
by brokers and of use to the Fund, and to maintain good business
relationships with brokers who are important block traders or who
have special knowledge of potential buyers and sellers in
securities the Fund may wish to buy or sell, the Management
Agreement authorizes the Manager to allocate brokerage business
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to such brokers even though they execute transactions at higher
rates to the Fund than may be available from other brokers who
are providing only execution service.
The Management Agreement also permits the Board of
Directors to authorize the payment by the Fund of additional
compensation to others for consulting services, supplemental
research, and security and economic analyses. Such outside
research would supplement the research of the Manager and make it
possible to obtain the benefit of information or expert opinion
not otherwise available to the Fund or the Manager. The payment
for such outside research in cash might be in lieu of brokerage
commissions, which are now charged to principal and would be in
addition to the management fee. The Board may determine that such
payment be charged to the extent permitted by generally accepted
accounting principles to principal or income of the Fund as it
deems appropriate.
The Management Agreement continues in force for
successive twelve-month periods (computed from each August 1),
provided that such continuance is specifically approved at least
annually by the Fund's Directors or by a majority vote of the
holders of the outstanding voting securities of the Fund, and, in
either case, by a majority of the Directors who are not parties
to the Management Agreement or interested persons as defined in
the 1940 Act of any such party. Most recently, the continuance
of the Management Agreement until July 31, 2000 was approved by a
vote, cast in person, of the Directors, including a majority of
the Directors who are not parties to the Management Agreement or
interested persons of any such party, at a meeting called for
that purpose and held on July 14, 1999.
The Management Agreement is terminable without penalty
on 60 days' written notice by a vote of a majority of the Fund's
outstanding voting securities or by a vote of a majority of the
Fund's Directors, or by the Manager on any January 1 on not less
than 60 days' written notice to the Fund, and will automatically
terminate in the event of its assignment. The Management
Agreement provides that in the absence of willful misfeasance,
bad faith or gross negligence on the part of the Manager, or of
reckless disregard of its obligations thereunder, the Manager
shall not be liable for any action or failure to act in
accordance with its duties thereunder.
Certain other clients of the Manager may have investment
objectives and policies similar to those of the Fund. The Manager
may, from time to time, make recommendations which result in the
purchase or sale of a particular security by its other clients
simultaneously with the Fund. If transactions on behalf of more
than one client during the same period increase the demand for
securities being purchased or the supply of securities being
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sold, there may be an adverse effect on price or quantity. It is
the policy of the Manager to allocate management recommendations
and the placing of orders in a manner which is deemed equitable
by the Manager to the accounts involved, including the Fund.
When two or more of the clients of the Manager (including the
Fund) are purchasing or selling the same security on a given day
from the same broker-dealer, such transactions may be averaged as
to price.
The Manager may act as an investment adviser to other
persons, firms or corporations, including investment companies,
and is investment adviser to AFD Exchange Reserves, Alliance All-
Asia Investment Fund, Inc., Alliance Balanced Shares, Inc.,
Alliance Bond Fund, Inc., Alliance Capital Reserves, Alliance
Global Dollar Government Fund, Inc., Alliance Global Environment
Fund, Inc., Alliance Global Small Cap Fund, Inc., Alliance Global
Strategic Income Trust, Inc., Alliance Government Reserves,
Alliance Greater China '97 Fund, Inc., Alliance Growth and Income
Fund, Inc., Alliance Health Care Fund, Inc., Alliance High Yield
Fund, Inc., Alliance Institutional Funds, Inc., Alliance
Institutional Reserves, Inc., Alliance International Fund,
Alliance International Premier Growth Fund, Inc., Alliance
Limited Maturity Government Fund, Inc., Alliance Money Market
Fund, Alliance Mortgage Securities Income Fund, Inc., Alliance
Multi-Market Strategy Trust, Inc., Alliance Municipal Income
Fund, Inc., Alliance Municipal Income Fund II, Alliance Municipal
Trust, Alliance New Europe Fund, Inc., Alliance North American
Government Income Trust, Inc., Alliance Premier Growth Fund,
Inc., Alliance Quasar Fund, Inc., Alliance Real Estate Investment
Fund, Inc., Alliance Select Investor Series, Inc., Alliance
Technology Fund, Inc., Alliance Utility Income Fund, Inc.,
Alliance Variable Products Series Fund, Inc., Alliance Worldwide
Privatization Fund, Inc., The Alliance Portfolios and The Hudson
River Trust, all registered open-end investment companies; and to
ACM Government Income Fund, Inc., ACM Government Securities Fund,
Inc., ACM Government Spectrum Fund, Inc., ACM Government
Opportunity Fund, Inc., ACM Managed Income Fund, Inc., ACM
Managed Dollar Income Fund, Inc., ACM Municipal Securities Income
Fund, Inc., Alliance All-Market Advantage Fund, Inc., Alliance
World Dollar Government Fund, Inc., Alliance World Dollar
Government Fund II, Inc., The Austria Fund, Inc., The Korean
Investment Fund, Inc., The Southern Africa Fund, Inc., and The
Spain Fund, Inc., all registered closed-end investment
companies.
Directors and Officers
The business and affairs of the Fund are managed
under the direction of the Board of Directors. The Directors
and principal officers of the Fund, their ages and their
principal occupations during the past five years are set
forth below. Each such Director and officer is also a
director, trustee or officer of other registered investment
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companies sponsored by the Manager. Unless otherwise specified,
the address of each of the following persons is 1345 Avenue of
the Americas, New York, New York 10105.
Directors
JOHN D. CARIFA,* 54, Chairman of the Board, is the
President, Chief Operating Officer and a Director of ACMC, with
which he has been associated since prior to 1994.
RUTH BLOCK, 68, was formerly an Executive Vice President
and the Chief Insurance Officer of Equitable. She is a Director
of Ecolab Incorporated (specialty chemicals) and BP Amoco
Corporation (oil and gas). Her address is P.O. Box 4623,
Stamford, Connecticut 06903.
DAVID H. DIEVLER, 70, is an independent consultant. He
was formerly a Senior Vice President of ACMC until December 1994.
His address is P.O. Box 167, Spring Lake, New Jersey 07762.
JOHN H. DOBKIN, 57, has been the President of Historic
Hudson Valley (historic preservation) since prior to 1994.
Previously, he was Director of the National Academy of Design.
His address is 150 White Plains Road, Tarrytown, New York 10591.
WILLIAM H. FOULK, JR., 67, is an Investment Adviser and
an independent consultant. He was formerly Senior Manager of
Barrett Associates, Inc., a registered investment adviser, with
which he had been associated since prior to 1994. His address is
Room 100, 2 Greenwich Plaza, Greenwich, Connecticut 06830.
DR. JAMES M. HESTER, 75, has been President of the Harry
Frank Guggenheim Foundation, with which he has been associated
since prior to 1994. He was formerly President of New York
University, the New York Botanical Garden and Rector of the
United Nations University. His address is 25 Cleveland Lane,
Princeton, New Jersey 08540.
CLIFFORD L. MICHEL, 60, is a member of the law firm of
Cahill Gordon & Reindel, with which he has been associated since
prior to 1994. He is President and Chief Executive Officer of
Wenonah Development Company (investments) and a Director of
Placer Dome, Inc. (mining). His address is St. Bernard's Road,
Gladstone, New Jersey 07934.
DONALD J. ROBINSON, 65, is Senior Counsel to the law
firm of Orrick, Herrington & Sutcliffe and was formerly a senior
____________________
* An "interested person" of the Fund as defined in the 1940
Act.
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partner and a member of the Executive Committee of that firm. He
was also a Trustee of the Museum of the City of New York from
1977 to 1995. His address is 98 Hell's Peak Road, Weston,
Vermont 05161.
Officers
JOHN D. CARIFA, Chairman and President, see biography
above.
ALDEN M. STEWART, Executive Vice President, 53, is an
Executive Vice President of ACMC, with which he has been
associated since prior to 1994.
KATHLEEN A. CORBET, Senior Vice President, 39, is an
Executive Vice President of ACMC, with which she has been
associated since prior to 1994.
THOMAS J. BARDONG, Vice President, 54, is a Senior Vice
President of ACMC, with which he has been associated since prior
to 1994.
RANDALL E. HAASE, Vice President, 36, is a Senior Vice
President of ACMC, with which he has been associated since prior
to 1994.
EDMUND P. BERGAN, JR., Secretary, 49, is a Senior Vice
President and the General Counsel of Alliance Fund Distributors,
Inc. ("AFD") and Alliance Fund Services, Inc. ("AFS"), with which
he has been associated since prior to 1994.
ANDREW L. GANGOLF, Assistant Secretary, 45, is a Vice
President and Assistant General Counsel of AFD, with which he has
been associated since December 1994. Prior thereto, he was a
Vice President and Assistant Secretary of Delaware Management
Co., Inc. since prior to 1994.
DOMENICK PUGLIESE, Assistant Secretary, 38, is a Vice
President and Assistant General Counsel of AFD, with which he has
been associated since May 1995. Prior thereto, he was a Vice
President and Counsel of Concord Holding Corporation since prior
to 1994.
EMILIE D. WRAPP, Assistant Secretary, 43, is a Vice
President and Assistant General Counsel of AFD, with which she
has been associated since prior to 1994.
MARK D. GERSTEN, Treasurer and Chief Financial Officer,
49, is a Senior Vice President of AFS and a Vice President of
AFD, with which he has been associated since prior to 1994.
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VINCENT S. NOTO, Controller, 34, is a Vice President of
AFS, with which he has been associated since prior to 1994.
The aggregate compensation paid by the Fund to each of
the Directors during its fiscal year ended November 30, 1998, the
aggregate compensation paid to each of the Directors during
calendar year 1998 by all of the registered investment companies
to which the Manager provides investment advisory services
(collectively, the "Alliance Fund Complex") and the total number
of registered investment companies (and separate investment
portfolios within those companies) in the Alliance Fund Complex
with respect to which each of the Directors serves as a director
or trustee, are set forth below. Neither the Fund nor any other
registered investment company in the Alliance Fund Complex
provides compensation in the form of pension or retirement
benefits to any of its directors or trustees. Each of the
Directors is a director or trustee of one or more other
registered investment companies in the Alliance Fund Complex.
Total Number Total Number
of Investment of Investment
Companies in Portfolios
the Alliance Within the
Total Fund Complex, Alliance Fund
Compensation Including the Complex Including
From the Fund, as to the Fund, as
Alliance Fund which the to which the
Aggregate Complex, Director is a Director is
Compensation Including the Director or a Director or
Name of Director From the Fund Fund Trustee Trustee
John D. Carifa $-0- $ -0- 50 114
Ruth Block $3,923 $180,763 37 77
David H. Dievler $3,923 $216,288 43 80
John H. Dobkin $3,926 $185,363 41 91
William H. Foulk, Jr. $3,920 $241,003 45 109
Dr. James M. Hester $3,926 $172,913 37 74
Clifford L. Michel $3,926 $187,763 38 90
Donald J. Robinson $3,851 $193,709 41 103
As of October 8, 1999, the Directors and officers of the
Fund as a group owned less than 1% of the shares of any other
class of shares of the Fund.
14
<PAGE>
_______________________________________________________________
EXPENSES OF THE FUND
_______________________________________________________________
Distribution Services Agreement
The Fund has entered into a Distribution Services
Agreement (the "Agreement") with Alliance Fund Distributors,
Inc., the Fund's principal underwriter (the "Principal
Underwriter"), to permit the Principal Underwriter to distribute
the Funds shares and to permit the Fund to pay distribution
services fees to defray expenses associated with distribution of
its Class A, Class B and Class C shares in accordance with a plan
of distribution which is included in the Agreement and has been
duly adopted and approved in accordance with Rule 12b-1 under
the 1940 Act (the "Rule 12b-1 Plan").
During the Fund's fiscal year ended November 30, 1998,
the Fund paid distribution services fees for expenditures under
the Agreement, with respect to Class A shares, in amounts
aggregating $2,217,958 which constituted .20%, annualized, of the
Fund's aggregate average daily net assets attributable to Class A
shares during the period, and the Adviser made payments from its
own resources as described above aggregating $648,918. Of the
$2,866,876 paid by the Fund and the Adviser under the Rule 12b-1
Plan with respect to the Class A, $120,435 was spent on
advertising, $25,012 on the printing and mailing of prospectuses
for persons other than current shareholders, $2,160,881 for
compensation to broker-dealers and other financial intermediaries
(including, $262,621 to the Fund's Principal Underwriters),
$102,407 for compensation to sales personnel, $458,141 was spent
on printing of sales literature, travel, entertainment, due
diligence and other promotional expenses.
During the Fund's fiscal year ended November 30, 1998,
the Fund paid distribution services fees for expenditures under
the Agreement, with respect to Class B shares, in amounts
aggregating $879,957, which constituted 1.00%, annualized, of the
Fund's aggregate average daily net assets attributable to Class B
shares during the period, and the Adviser made payments from its
own resources as described above aggregating $1,748,400. Of the
$2,628,357 paid by the Fund and the Adviser under the Rule 12b-1
Plan with respect to the Class B shares, $104,637 was spent on
advertising, $22,421 on the printing and mailing of prospectuses
for persons other than current shareholders, $2,031,420 for
compensation to broker-dealers and other financial intermediaries
(including, $233,880 to the Fund's Principal Underwriters), $37,363
for compensation to sales personnel, $330,074 was spent on
printing of sales literature, travel, entertainment, due
15
<PAGE>
diligence and other promotional expenses, and $102,442 was spent
on interest on Class B shares financing.
During the Fund's fiscal year ended November 30, 1998,
the Fund paid distribution services fees for expenditures under
the Agreement, with respect to Class C shares, in amounts
aggregating $248,458, which constituted 1.00%, annualized, of the
Fund's aggregate average daily net assets attributable to Class C
shares during the period, and the Adviser made payments from its
own resources as described above aggregating $180,433. Of the
$428,891 paid by the Fund and the Adviser under the Rule 12b-1
Plan with respect to the Class C shares, $24,774 was spent on
advertising, $5,632 on the printing and mailing of prospectuses
for persons other than current shareholders, $280,341 for
compensation to broker-dealers and other financial intermediaries
(including, $56,019 to the Fund's Principal Underwriters), $9,084
for compensation to sales personnel, $79,341 was spent on
printing of sales literature, travel, entertainment, due
diligence and other promotional expenses, and $29,719 was spent
on interest on Class C shares financing.
Distribution services fees are accrued daily and paid
monthly and are charged as expenses of the Fund as accrued. The
distribution services fees attributable to the Class B shares and
Class C shares are designed to permit an investor to purchase
such shares through broker-dealers without the assessment of an
initial sales charge, and at the same time to permit the
Principal Underwriter to compensate broker-dealers in connection
with the sale of such shares. In this regard the purpose and
function of the combined contingent deferred sales charge and
distribution services fee on the Class B shares and Class C
shares are the same as those of the initial sales charge and
distribution services fee with respect to the Class A shares in
that in each case the sales charge and distribution services fee
provide for the financing of the distribution of the relevant
class of the Fund's shares.
With respect to Class A shares of the Fund, distribution
expenses accrued by AFD in one fiscal year may not be paid from
distribution services fees received from the Fund in subsequent
fiscal years. AFD's compensation with respect to Class B and
Class C shares for any given year, however, will probably exceed
the distribution services fee payable under the Rule 12b-1 Plan
with respect to the class involved and, in the case of Class B
and Class C shares, payments received from contingent deferred
sales charges ("CDSCs"). The excess will be carried forward by
AFD and reimbursed from distribution services fees payable under
the Rule 12b-1 Plan with respect to the class involved and, in
the case of Class B and Class C shares, payments subsequently
received through CDSCs, so long as the Rule 12b-1 Plan is in
effect.
16
<PAGE>
Unreimbursed distribution expenses incurred as of the
end of the Fund's most recently completed fiscal year, and
carried over for reimbursement in future years in respect of the
Class B and Class C shares for the Fund were, $5,530,463 (6.47%
of the net assets of Class B) and $1,205,589 (5.68% of the net
assets of Class C).
The Rule 12b-1 Plan is in compliance with rules of the
National Association of Securities Dealers, Inc. which
effectively limit the annual asset-based sales charges and
service fees that a mutual fund may pay on a class of shares to
.75% and .25%, respectively, of the average annual net assets
attributable to that class. The rules also limit the aggregate
of all front-end, deferred and asset-based sales charges imposed
with respect to a class of shares by a mutual fund that also
charges a service fee to 6.25% of cumulative gross sales of
shares of that class, plus interest at the prime rate plus 1% per
annum.
In approving the 12b-1 Plan, the Directors of the Fund
determined that there was a reasonable likelihood that the Rule
12b-1 Plan would benefit the Fund and its shareholders. The
distribution services fee of a particular class will not be used
to subsidize the provision of distribution services with respect
to any other class.
The Manager may from time to time and from its own funds
or such other resources as may be permitted by rules of the
Commission make payments for distribution services to the
Principal Underwriter; the latter may in turn pay part or all of
such compensation to brokers or other persons for their
distribution assistance.
The Agreement will continue in effect for successive
twelve-month periods (computed from each August 1), provided,
however, that such continuance is specifically approved at least
annually by the Directors of the Fund or by vote of the holders
of a majority of the outstanding voting securities (as defined in
the 1940 Act) of that class, and, in either case, by a majority
of the Directors of the Fund who are not parties to the Agreement
or interested persons, as defined in the 1940 Act, of any such
party (other than as directors of the Fund) and who have no
direct or indirect financial interest in the operation of the
Rule 12b-1 Plan or any agreement related thereto. Most recently
the continuance of the Agreement until July 31, 2000 was approved
by a vote, cast in person, of the Directors, including a majority
of the Directors who are not "interested persons", as defined in
the 1940 Act, at their meeting held on July 14, 1999.
In the event that the Rule 12b-1 Plan is terminated or
not continued with respect to the Class A shares, Class B shares
17
<PAGE>
or Class C shares, (i) no distribution services fees (other than
current amounts accrued but not yet paid) would be owed by the
Fund to the Principal Underwriter with respect to that class, and
(ii) the Fund would not be obligated to pay the Principal
Underwriter for any amounts expended under the Agreement not
previously recovered by the Principal Underwriter from
distribution services fees in respect of shares of such class or
through deferred sales charges.
The Glass-Steagall Act and other applicable laws may
limit the ability of a bank or other depository institution to
become an underwriter or distributor of securities. However, in
the opinion of the Fund's management, based on the advice of
counsel, these laws do not prohibit such depository institutions
from providing services for investment companies such as the
administrative, accounting and other services referred to in the
Agreements. In the event that a change in these laws prevented a
bank from providing such services, it is expected that other
services arrangements would be made and that shareholders would
not be adversely affected.
Transfer Agency Agreement
Alliance Fund Services, Inc. ("AFS"), an indirect
wholly-owned subsidiary of the Manager located at 500 Plaza
Drive, Secaucus, New Jersey 07094, receives a transfer agency fee
per account holder of each of the Class A, Class B, Class C and
Advisor Class shares of the Fund, plus reimbursement for out-of-
pocket expenses. The transfer agency fee with respect to the
Class B and Class C shares is higher than the transfer agency
costs with respect to the Class A and Advisor Class shares,
reflecting the additional costs associated with the Class B and
Class C contingent deferred sales charges. For the fiscal year
ended November 30, 1998, the Fund paid AFS $900,389 pursuant to
the Transfer Agency Agreement.
_______________________________________________________________
PURCHASE OF SHARES
_______________________________________________________________
The following information supplements that set forth in
the Fund's Prospectus under the heading "Purchase and Sale of
Shares--How to Buy Shares."
General
Shares of the Fund are offered on a continuous basis at
a price equal to their net asset value plus an initial sales
charge at the time of purchase ("Class A shares"), with a
contingent deferred sales charge ("Class B shares"), without any
18
<PAGE>
initial sales charge and, as long as the shares are held for one
year or more, without any contingent deferred sales charge
("Class C shares"), or, to investors eligible to purchase Advisor
Class shares, without any initial, contingent deferred or asset-
based sales charge, in each case as described below. Shares of
the Fund that are offered subject to a sales charge are offered
through (i) investment dealers that are members of the National
Association of Securities Dealers, Inc. and have entered into
selected dealer agreements with the Principal Underwriter
("selected dealers"), (ii) depository institutions and other
financial intermediaries or their affiliates, that have entered
into selected agent agreements with the Principal Underwriter
("selected agents") and (iii) the Principal Underwriter.
Advisor Class shares of the Fund may be purchased and
held solely (i) through accounts established under fee-based
programs, sponsored and maintained by registered broker-dealers
or other financial intermediaries and approved by the Principal
Underwriter, (ii) through self-directed defined contribution
employee benefit plans (e.g., 401(k) plans) that have at least
1,000 participants or $25 million in assets (iii) by the
categories of investors described in clauses (i) through (iv)
below under "--Sales at Net Asset Value" (other than officers,
directors and present and full-time employees of selected dealers
or agents, or relatives of such person, or any trust, individual
retirement account or retirement plan account for the benefit of
such relative, none of whom is eligible on the basis solely of
such status to purchase and hold Advisor Class shares), or
(iv) by directors and present or retired full-time employees of
CB Richard Ellis, Inc. Generally, a fee-based program must
charge an asset-based or other similar fee and must invest at
least $250,000 in Advisor Class shares of the Fund in order to be
approved by the Principal Underwriter for investment in Advisor
Class shares.
Investors may purchase shares of the Fund either through
selected broker-dealers, agents, financial intermediaries or
other financial representatives or directly through the Principal
Underwriter. A transaction, service, administrative or other
similar fee may be charged by your broker-dealer, agent,
financial intermediary or other financial representative with
respect to the purchase, sale or exchange of Class A, Class B,
Class C or Advisor Class shares made through such financial
representative. Such financial representative may also impose
requirements with respect to the purchase, sale or exchange of
shares that are different from, or in addition to, those imposed
by the Fund, including requirements as to the minimum initial and
subsequent investment amounts. Sales personnel of selected
dealers and agents distributing the Fund's shares may receive
differing compensation for selling Class A, Class B, Class C or
Advisor Class shares.
19
<PAGE>
The Fund may refuse any order for the purchase of
shares. The Fund reserves the right to suspend the sale of its
shares to the public in response to conditions in the securities
markets or for other reasons.
The public offering price of shares of the Fund is their
net asset value, plus, in the case of Class A shares, a sales
charge which will vary depending on the purchase alternative
chosen by the investor, as shown in the table below under
"--Class A Shares." On each Fund business day on which a
purchase or redemption order is received by the Fund and trading
in the types of securities in which the Fund invests might
materially affect the value of Fund shares, the per share net
asset value is computed in accordance with the Fund's Articles of
Incorporation and By-Laws as of the next close of regular trading
on the New York Stock Exchange (the "Exchange") (currently 4:00
p.m. Eastern time) by dividing the value of the Fund's total
assets, less its liabilities, by the total number of its shares
then outstanding. A Fund business day is any day on which the
Exchange is open for trading.
The respective per share net asset values of the
Class A, Class B, Class C and Advisor Class shares are expected
to be substantially the same. Under certain circumstances,
however, the per share net asset values of the Class B and
Class C shares may be lower than the per share net asset values
of the Class A and Advisor Class shares, as a result of the
differential daily expense accruals of the distribution and
transfer agency fees applicable with respect to those classes of
shares. Even under those circumstances, the per share net asset
values of the four classes eventually will tend to converge
immediately after the payment of dividends, which will differ by
approximately the amount of the expense accrual differential
among the classes.
The Fund will accept unconditional orders for its shares
to be executed at the public offering price equal to their net
asset value next determined (plus applicable Class A sales
charges), as described below. Orders received by the Principal
Underwriter prior to the close of regular trading on the Exchange
on each day the Exchange is open for trading are priced at the
net asset value computed as of the close of regular trading on
the Exchange on that day (plus applicable Class A sales charges).
In the case of orders for purchase of shares placed through
selected dealers, agents or financial representatives, as
applicable, the applicable public offering price will be the net
asset value as so determined, but only if the selected dealer,
agent or financial representative receives the order prior to the
close of regular trading on the Exchange and transmits it to the
Principal Underwriter prior to its close of business that same
day (normally 5:00 p.m. Eastern time). The selected dealer,
20
<PAGE>
agent or financial representative, as applicable, is responsible
for transmitting such orders by 5:00 p.m. Eastern time (certain
selected dealers, agents or financial representatives may enter
into operating agreements permitting them to transmit purchase
information to the Principal Underwriter after 5:00 p.m. Eastern
time and receive that day's net asset value). If the selected
dealer, agent or financial representative fails to do so, the
investor's right to that day's closing price must be settled
between the investor and the selected dealer, agent or financial
representative, as applicable. If the selected dealer, agent or
financial representative, as applicable, receives the order after
the close of regular trading on the Exchange, the price will be
based on the net asset value determined as of the close of
regular trading on the Exchange on the next day it is open for
trading.
Following the initial purchase of Fund shares, a
shareholder may place orders to purchase additional shares by
telephone if the shareholder has completed the appropriate
portion of the Subscription Application or an "Autobuy"
application obtained by calling the "For Literature" telephone
number shown on the cover of this Statement of Additional
Information. Except with respect to certain omnibus accounts,
telephone purchase orders may not exceed $500,000. Payment for
shares purchased by telephone can be made only by Electronic
Funds Transfer from a bank account maintained by the shareholder
at a bank that is a member of the National Automated Clearing
House Association ("NACHA"). If a shareholder's telephone
purchase request is received before 3:00 p.m. Eastern time on a
Fund business day, the order to purchase shares is automatically
placed the following Fund business day, and the applicable public
offering price will be the public offering price determined as of
the close of business on such following business day.
Full and fractional shares are credited to a
subscriber's account in the amount of his or her subscription.
As a convenience to the subscriber, and to avoid unnecessary
expense to the Fund, share certificates representing shares of
the Fund are not issued except upon written request to the Fund
by the shareholder or his or her authorized selected dealer or
agent. This facilitates later redemption and relieves the
shareholder of the responsibility for and inconvenience of lost
or stolen certificates. No certificates are issued for
fractional shares, although such shares remain in the
shareholder's account on the books of the Fund.
In addition to the discount or commission paid to
dealers or agents, the Principal Underwriter from time to time
pays additional cash or other incentives to dealers or agents in
connection with the sale of shares of the Fund. Such additional
amounts may be utilized, in whole or in part to provide
21
<PAGE>
additional compensation to registered representatives who sell
shares of the Fund. On some occasions, such cash or other
incentives may take the form of payment for attendance at
seminars, meals, sporting events or theater performances, or
payment for travel, lodging and entertainment incurred in
connection with travel taken by persons associated with a dealer
or agent to locations within or outside the United States. Such
dealer or agent may elect to receive cash incentives of
equivalent amount in lieu of such payments.
Class A, Class B, Class C and Advisor Class shares each
represent an interest in the same portfolio of investments of the
Fund, have the same rights and are identical in all respects,
except that (i) Class A shares bear the expense of the initial
sales charge (or contingent deferred sales charge, when
applicable) and Class B and Class C shares bear the expense of
the contingent deferred sales charge, (ii) Class B shares and
Class C shares each bear the expense of a higher distribution
services fee than that borne by Class A shares, and Advisor Class
shares do not bear such a fee, (iii) Class B shares and Class C
shares bear higher transfer agency costs than those borne by Class A
shares and Advisor Class shares, (iv) each of Class A, Class B and
Class C has exclusive voting rights with respect to provisions of
the Rule 12b-1 Plan pursuant to which its distribution services
fee is paid and other matters for which separate class voting is
appropriate under applicable law, provided that, if the Fund
submits to a vote of the Class A shareholders, an amendment to
the Rule 12b-1 Plan that would materially increase the amount to
be paid thereunder with respect to the Class A shares, then such
amendment will also be submitted to the Class B shareholders and
the Advisor Class shareholders and the Class A, Class B, and
Advisor Class shareholders will vote separately by class and
(v) Class B shares and Advisor Class shares are subject to a
conversion feature. Each class has different exchange privileges
and certain different shareholder service options available.
The Directors of the Fund have determined that currently
no conflict of interest exists between or among the Class A,
Class B, Class C and Advisor Class shares. On an ongoing basis,
the Directors of the Fund, pursuant to their fiduciary duties
under the 1940 Act and state law, will seek to ensure that no
such conflict arises.
Alternative Retail Purchase Arrangements -- Class A, Class B and
Class C Shares**
____________________
** Advisor Class shares are sold only to investors described
above in this section under "--General."
22
<PAGE>
The alternative purchase arrangements available with
respect to Class A, Class B and Class C shares permit an investor
to choose the method of purchasing shares that is most beneficial
given the amount of the purchase, the length of time the investor
expects to hold the shares, and other circumstances. Investors
should consider whether, during the anticipated life of their
investment in the Fund, the accumulated distribution services fee
and contingent deferred sales charge on Class B shares prior to
conversion, or the accumulated distribution services fee and
contingent deferred sales charge on Class C shares, would be less
than the initial sales charge and accumulated distribution
services fee on Class A shares purchased at the same time, and to
what extent such differential would be offset by the higher
return of Class A shares. Class A shares will normally be more
beneficial than Class B shares to the investor who qualifies for
reduced initial sales charges on Class A shares, as described
below. In this regard, the Principal Underwriter will reject any
order (except orders from certain retirement plans and certain
employee benefit plans) for more than $250,000 for Class B
shares. (See Appendix A for information concerning the
eligibility of certain employee benefit plans to purchase Class B
shares at net asset value without being subject to a contingent
deferred sales charge and the ineligibility of certain such plans
to purchases Class A shares.) Class C shares will normally not
be suitable for the investor who qualifies to purchase Class A
shares at net asset value. For this reason, the Principal
Underwriter will reject any order for more than $1,000,000 for
Class C shares.
Class A shares are subject to a lower distribution
services fee and, accordingly, pay correspondingly higher
dividends per share than Class B shares or Class C shares.
However, because initial sales charges are deducted at the time
of purchase, investors purchasing Class A shares would not have
all their funds invested initially and, therefore, would
initially own fewer shares. Investors not qualifying for reduced
initial sales charges who expect to maintain their investment for
an extended period of time might consider purchasing Class A
shares because the accumulated continuing distribution charges on
Class B shares or Class C shares may exceed the initial sales
charge on Class A shares during the life of the investment.
Again, however, such investors must weigh this consideration
against the fact that, because of such initial sales charges, not
all their funds will be invested initially.
Other investors might determine, however, that it would
be more advantageous to purchase Class B shares or Class C shares
in order to have all their funds invested initially, although
remaining subject to higher continuing distribution charges and
being subject to a contingent deferred sales charge for a four-
year and one-year period, respectively. For example, based on
23
<PAGE>
current fees and expenses, an investor subject to the 4.25%
initial sales charge on Class A shares would have to hold his or
her investment approximately seven years for the Class C
distribution services fee to exceed the initial sales charge plus
the accumulated distribution services fee of Class A shares. In
this example, an investor intending to maintain his or her
investment for a longer period might consider purchasing Class A
shares. This example does not take into account the time value
of money, which further reduces the impact of the Class C
distribution services fees on the investment, fluctuations in net
asset value or the effect of different performance assumptions.
Those investors who prefer to have all of their funds
invested initially but may not wish to retain Fund shares for the
four-year period during which Class B shares are subject to a
contingent deferred sales charge may find it more advantageous to
purchase Class C shares.
During the Fund's fiscal years ended in 1998, 1997 and
1996, the aggregate amount of underwriting commission payable
with respect to shares of the Fund were $1,198,508,, $180,526 and
$362,677, respectively. Of that amount, the Principal
Underwriter received the amounts of $95,833, $9,940 and $48,517,
respectively, representing that portion of the sales charges paid
on shares of the Fund sold during the year which was not
reallowed to selected dealers (and was, accordingly, retained by
the Principal Underwriter). During the Fund's fiscal years ended
in 1998, 1997 and 1996, the Principal Underwriter received
contingent deferred sales charges of $6,052, $3 and $0,
respectively, on Class A shares, $128,714, $154,336 and $60,344,
respectively, on Class B shares, and $9,172, $0 and $360,
respectively on Class C shares.
Class A Shares
The public offering price of Class A shares is the net
asset value plus a sales charge, as set forth below.
24
<PAGE>
Sales Charge
Discount or
Commission
As % of to Dealers
As % of the Public or Agents
Amount of Net Amount Offering as % of
Purchase Invested Price Offering Price
Less than
$100,000 4.44% 4.25% 4.00%
$100,000 but less
than $250,000 3.36 3.25 3.00
$250,000 but less
than $500,000 2.30 2.25 2.00
$500,000 but less
than $1,000,000* 1.78 1.75 1.50
________________
* There is no initial sales charge on transactions of $1,000,000
or more.
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 equal to 1% of the lesser of the
cost of the shares being redeemed or their net asset value at the
time of redemption. Accordingly, no sales charge will be imposed
on increases in net asset value above the initial purchase price.
In addition, no charge will be assessed on shares derived from
reinvestment of dividends or capital gains distributions. The
contingent deferred sales charge on Class A shares will be waived
on certain redemptions, as described below under "--Class B
Shares." In determining the contingent deferred sales charge
applicable to a redemption of Class A shares, it will be assumed
that the redemption is, first, of any shares that are not subject
to a contingent deferred sales charge (for example, because an
initial sales charge was paid with respect to the shares, or they
have been held beyond the period during which the charge applies
or were acquired upon the reinvestment of dividends or
distributions) and, second, of shares held longest during the
time they are subject to the sales charge. Proceeds from the
contingent deferred sales charge on Class A shares are paid to
the Principal Underwriter and are used by the Principal
Underwriter to defray the expenses of the Principal Underwriter
related to providing distribution-related services to the Fund in
connection with the sales of Class A shares, such as the payment
of compensation to selected dealers and agents for selling
Class A shares. With respect to purchases of $1,000,000 or more
made through selected dealers and agents, the Manager may,
pursuant to the Distribution Services Agreement described above,
pay such dealers or agents from its own resources a fee of up to
25
<PAGE>
1% of the amount invested to compensate such dealers or agents
for their distribution assistance in connection with such
purchases.
No initial sales charge is imposed on Class A shares
issued (i) pursuant to the automatic reinvestment of income
dividends or capital gains distributions, (ii) in exchange for
Class A shares of other "Alliance Mutual Funds" (as that term is
defined under "Combined Purchase Privilege" below), except that
an initial sales charge will be imposed on Class A shares issued
in exchange for Class A shares of AFD Exchange Reserves ("AFDER")
that were purchased for cash without the payment of an initial
sales charge and without being subject to a contingent deferred
sales charge or (iii) upon the automatic conversion of Class B
shares or Advisor Class shares as described below under "Class B
Shares-Conversion Feature" and "--Conversion of Advisor Class
Shares to Class A Shares." The Fund receives the entire net
asset value of its Class A shares sold to investors. The
Principal Underwriter's commission is the sales charge shown
above less any applicable discount or commission "reallowed" to
selected dealers and agents. The Principal Underwriter will
reallow discounts to selected dealers and agents in the amounts
indicated in the table above. In this regard, the Principal
Underwriter may elect to reallow the entire sales charge to
selected dealers and agents for all sales with respect to which
orders are placed with the Principal Underwriter. A selected
dealer who receives reallowance in excess of 90% of such a sales
charge may be deemed to be an "underwriter" under the Securities
Act.
Investors choosing the initial sales charge alternative
may under certain circumstances be entitled to pay (i) no initial
sales charge (but may be subject in most such cases to a
contingent deferred sales charge) or (ii) a reduced initial sales
charge. The circumstances under which such investors may pay a
reduced initial sales charge are described below.
Combined Purchase Privilege. Certain persons may
qualify for the sales charge reductions indicated in the schedule
of such charges above by combining purchases of shares of the
Fund into a single "purchase," if the resulting "purchase" totals
at least $100,000. The term "purchase" refers to: (i) a single
purchase by an individual, or to concurrent purchases, which in
the aggregate are at least equal to the prescribed amounts, by an
individual, his or her spouse and their children under the age of
21 years purchasing shares of the Fund for his, her or their own
account(s); (ii) a single purchase by a trustee or other
fiduciary purchasing shares for a single trust, estate or single
fiduciary account although more than one beneficiary is involved;
or (iii) a single purchase for the employee benefit plans of a
single employer. The term "purchase" also includes purchases by
26
<PAGE>
any "company," as the term is defined in the 1940 Act, but does
not include purchases by any such company which has not been in
existence for at least six months or which has no purpose other
than the purchase of shares of the Fund or shares of other
registered investment companies at a discount. The term
"purchase" does not include purchases by any group of individuals
whose sole organizational nexus is that the participants therein
are credit card holders of a company, policy holders of an
insurance company, customers of either a bank or broker-dealer or
clients of an investment adviser. A "purchase" may also include
shares, purchased at the same time through a single selected
dealer or agent, of any other "Alliance Mutual Fund." Currently,
the Alliance Mutual Funds include:
AFD Exchange Reserves
Alliance All-Asia Investment Fund, Inc.
Alliance Balanced Shares, Inc.
Alliance Bond Fund, Inc.
-Corporate Bond Portfolio
-Quality Bond Portfolio
-U.S. Government Portfolio
Alliance Global Dollar Government Fund, Inc.
Alliance Global Environment Fund, Inc.
Alliance Global Small Cap Fund, Inc.
Alliance Global Strategic Income Trust, Inc.
Alliance Greater China '97 Fund, Inc.
Alliance Growth and Income Fund, Inc.
Alliance Health Care Fund, Inc.
Alliance High Yield Fund, Inc.
Alliance International Fund
Alliance International Premier Growth Fund, Inc.
Alliance Limited Maturity Government Fund, Inc.
Alliance Mortgage Securities Income Fund, Inc.
Alliance Multi-Market Strategy Trust, Inc.
Alliance Municipal Income Fund, Inc.
-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
Alliance New Europe Fund, Inc.
27
<PAGE>
Alliance North American Government Income Trust, Inc.
Alliance Premier Growth Fund, Inc.
Alliance Quasar Fund, Inc.
Alliance Real Estate Investment Fund, Inc.
Alliance Technology Fund, Inc.
Alliance Utility Income Fund, Inc.
Alliance Worldwide Privatization Fund, Inc.
The Alliance Fund, Inc.
The Alliance Portfolios
-Alliance Growth Fund
-Alliance Conservative Investors Fund
-Alliance Growth Investors Fund
-Alliance Short-Term U.S. Government Fund
Prospectuses for the Alliance Mutual Funds may be
obtained without charge by contacting Alliance Fund Services,
Inc. at the address or the "For Literature" telephone number
shown on the front cover of this Statement of Additional
Information.
Cumulative Quantity Discount (Right of Accumulation). An
investor's purchase of additional Class A shares of the Fund may
qualify for a Cumulative Quantity Discount. The applicable sales
charge will be based on the total of:
(i) the investor's current purchase;
(ii) the net asset value (at the close of business on
the previous day) of (a) all shares of the Fund
held by the investor and (b) all shares of any
other Alliance Mutual Fund held by the investor;
and
(iii) the net asset value of all shares described in
paragraph (ii) owned by another shareholder
eligible to combine his or her purchase with that
of the investor into a single "purchase" (see
above).
For example, if an investor owned shares of an Alliance
Mutual Fund worth $200,000 at their then current net asset value
and, subsequently, purchased Class A shares of the Fund worth an
additional $100,000, the initial sales charge for the $100,000
purchase would be at the 2.25% rate applicable to a single
$300,000 purchase of shares of the Fund, rather than the 3.25%
rate.
To qualify for the Combined Purchase Privilege or to
obtain the Cumulative Quantity Discount on a purchase through a
selected dealer or agent, the investor or selected dealer or
agent must provide the Principal Underwriter with sufficient
28
<PAGE>
information to verify that each purchase qualifies for the
privilege or discount.
Statement of Intention. Class A investors may also
obtain the reduced sales charges shown in the table above by
means of a written Statement of Intention, which expresses the
investor's intention to invest not less than $100,000 within a
period of 13 months in Class A shares (or Class A, Class B,
Class C and/or Advisor Class shares) of the Fund or any other
Alliance Mutual Fund. Each purchase of shares under a Statement
of Intention will be made at the public offering price or prices
applicable at the time of such purchase to a single transaction
of the dollar amount indicated in the Statement of Intention. At
the investor's option, a Statement of Intention may include
purchases of shares of the Fund or any other Alliance Mutual Fund
made not more than 90 days prior to the date that the investor
signs the Statement of Intention; however, the 13-month period
during which the Statement of Intention is in effect will begin
on the date of the earliest purchase to be included.
Investors qualifying for the Combined Purchase Privilege
described above may purchase shares of the Alliance Mutual Funds
under a single Statement of Intention. For example, if at the
time an investor signs a Statement of Intention to invest at
least $100,000 in Class A shares of the Fund, the investor and
the investor's spouse each purchase shares of the Fund worth
$20,000 (for a total of $40,000), it will only be necessary to
invest a total of $60,000 during the following 13 months in
shares of the Fund or any other Alliance Mutual Fund, to qualify
for the 3.25% sales charge on the total amount being invested
(the sales charge applicable to an investment of $100,000).
The Statement of Intention is not a binding obligation
upon the investor to purchase the full amount indicated. The
minimum initial investment under a Statement of Intention is 5%
of such amount. Shares purchased with the first 5% of such
amount will be held in escrow (while remaining registered in the
name of the investor) to secure payment of the higher sales
charge applicable to the shares actually purchased if the full
amount indicated is not purchased, and such escrowed shares will
be involuntarily redeemed to pay the additional sales charge, if
necessary. Dividends on escrowed shares, whether paid in cash or
reinvested in additional Fund shares, are not subject to escrow.
When the full amount indicated has been purchased, the escrow
will be released. To the extent that an investor purchases more
than the dollar amount indicated on the Statement of Intention
and qualifies for a further reduced sales charge, the sales
charge will be adjusted for the entire amount purchased at the
end of the 13-month period. The difference in the sales charge
will be used to purchase additional shares of the Fund subject to
29
<PAGE>
the rate of the sales charge applicable to the actual amount of
the aggregate purchases.
Investors wishing to enter into a Statement of Intention
in conjunction with their initial investment in Class A shares of
the Fund should complete the appropriate portion of the
Subscription Application found in the Prospectus while current
Class A shareholders desiring to do so can obtain a form of
Statement of Intention by contacting Alliance Fund Services, Inc.
at the address or telephone numbers shown on the cover of this
Statement of Additional Information.
Certain Retirement Plans. Multiple participant payroll
deduction retirement plans may also purchase shares of the Fund
or any other Alliance Mutual Fund at a reduced sales charge on a
monthly basis during the 13-month period following such a plan's
initial purchase. The sales charge applicable to such initial
purchase of shares of the Fund will be that normally applicable,
under the schedule of sales charges set forth in this Statement
of Additional Information, to an investment 13 times larger than
such initial purchase. The sales charge applicable to each
succeeding monthly purchase will be that normally applicable,
under such schedule, to an investment equal to the sum of (i) the
total purchase previously made during the 13-month period and
(ii) the current month's purchase multiplied by the number of
months (including the current month) remaining in the 13-month
period. Sales charges previously paid during such period will
not be retroactively adjusted on the basis of later purchases.
Reinstatement Privilege. A shareholder who has caused
any or all of his or her Class A or Class B shares of the Fund to
be redeemed or repurchased may reinvest all or any portion of the
redemption or repurchase proceeds in Class A shares of the Fund
at net asset value without any sales charge, provided that
(i) such reinvestment is made within 120 calendar days after the
redemption or repurchase date, and (ii) for Class B shares, a
contingent deferred sales charge has been paid and the Principal
Underwriter has approved, at its discretion, the reinvestment of
such shares. Shares are sold to a reinvesting shareholder at the
net asset value next determined as described above. A
reinstatement pursuant to this privilege will not cancel the
redemption or repurchase transaction; therefore, any gain or loss
so realized will be recognized for federal income tax purposes
except that no loss will be recognized to the extent that the
proceeds are reinvested in shares of the Fund within 30 calendar
days after the redemption or repurchase transaction. Investors
may exercise the reinstatement privilege by written request sent
to the Fund at the address shown on the cover of this Statement
of Additional Information.
30
<PAGE>
Sales at Net Asset Value. The Fund may sell its Class A
shares at net asset value (i.e., without an initial sales charge)
and without contingent deferred sales charge to certain
categories of investors including: (i) investment management
clients of the Manager or its affiliates; (ii) officers and
present or former Directors of the Fund; present or former
directors and trustees of other investment companies managed by
the Manager; present or retired full-time employees of the
Manager, the Principal Underwriter, Alliance Fund Services, Inc.
and their affiliates; officers and directors of ACMC, the
Principal Underwriter, Alliance Fund Services, Inc. and their
affiliates; officers, directors and present, full-time employees
of selected dealers or agents; or the spouse, sibling, direct
ancestor or direct descendant (collectively "relatives") of any
such person; or any trust, individual retirement account or
retirement plan account for the benefit of any such person or
relative; or the estate of any such person or relative, if such
shares are purchased for investment purposes (such shares may not
be resold except to the Fund); (iii) the Manager, the Principal
Underwriter, Alliance Fund Services, Inc. and their affiliates;
and certain employee benefit plans for employees of the Manager,
the Principal Underwriter, Alliance Fund Services, Inc. and their
affiliates; (iv) registered investment advisers or other
financial intermediaries who charge a management, consulting or
other fee for their services and who purchase shares through a
broker or agent approved by the Principal Underwriter and clients
of such registered investment advisers or financial
intermediaries whose accounts are linked to the master account of
such investment adviser or financial intermediary on the books of
such approved broker or agent; (v) persons participating in a
fee-based program, sponsored and maintained by a registered
broker-dealer or other financial intermediary and approved by the
Principal Underwriter, pursuant to which such persons pay an
asset-based fee to such broker-dealer or financial intermediary,
or its affiliates or agents, for services in the nature of
investment management or administrative services; (vi) persons
who establish to the Principal Underwriter's satisfaction that
they are investing within such time period as may be designated
by the Principal Underwriter, proceeds of redemption of shares of
such other registered investment companies as may be designated
from time to time by the Principal Underwriter; and
(vii) employer-sponsored qualified pension or profit-sharing
plans (including Section 401(k) plans), custodial accounts
maintained pursuant to Section 403(b)(7) retirement plans and
individual retirement accounts (including individual retirement
accounts to which simplified employee pension ("SEP")
contributions are made), if such plans or accounts are
established or administered under programs sponsored by
administrators or other persons that have been approved by the
Principal Underwriter.
31
<PAGE>
Class B Shares
Investors may purchase Class B shares at the public
offering price equal to the net asset value per share of the
Class B shares on the date of purchase without the imposition of
a sales charge at the time of purchase. The Class B shares are
sold without an initial sales charge so that the Fund will
receive the full amount of the investor's purchase payment.
Proceeds from the contingent deferred sales charge on
the Class B shares are paid to the Principal Underwriter and are
used by the Principal Underwriter to defray the expenses of the
Principal Underwriter related to providing distribution-related
services to the Fund in connection with the sale of the Class B
shares, such as the payment of compensation to selected dealers
and agents for selling Class B shares. The combination of the
contingent deferred sales charge and the distribution services
fee enables the Fund to sell the Class B shares without a sales
charge being deducted at the time of purchase. The higher
distribution services fee incurred by Class B shares will cause
such shares to have a higher expense ratio and to pay lower
dividends than those related to Class A shares.
Contingent Deferred Sales Charge. Class B shares that
are redeemed within four years of purchase will be subject to a
contingent deferred sales charge at the rates set forth below
charged as a percentage of the dollar amount subject thereto.
The charge will be assessed on an amount equal to the lesser of
the cost of the shares being redeemed or their net asset value at
the time of redemption. Accordingly, no sales charge will be
imposed on increases in net asset value above the initial
purchase price. In addition, no charge will be assessed on shares
derived from reinvestment of dividends or capital gains
distributions.
To illustrate, assume that on or after November 19, 1993
an investor purchased 100 Class B shares at $10 per share (at a
cost of $1,000) and in the second year after purchase, the net
asset value per share is $12 and, during such time, the investor
has acquired 10 additional Class B shares upon dividend
reinvestment. If at such time the investor makes his or her first
redemption of 50 Class B shares (proceeds of $600), 10 Class B
shares will not be subject to the charge because of dividend
reinvestment. With respect to the remaining 40 Class B shares,
the charge is applied only to the original cost of $10 per share
and not to the increase in net asset value of $2 per share.
Therefore, $400 of the $600 redemption proceeds will be charged
at a rate of 3.0% (the applicable rate in the second year after
purchase as set forth below).
32
<PAGE>
The amount of the contingent deferred sales charge, if
any, will vary depending on the number of years from the time of
payment for the purchase of Class B shares until the time of
redemption of such shares.
Contingent Deferred Sales Charge as a %
of Dollar Amount Subject to Charge
Shares Purchased Shares Purchased
Years before on or after
Since Purchase November 19, 1993 November 19, 1993
First 5.5% 4.0%
Second 4.5% 3.0%
Third 3.5% 2.0%
Fourth 2.5% 1.0%
Fifth 1.5% None
Sixth 0.5% None
Seventh and thereafter None None
In determining the contingent deferred sales charge
applicable to a redemption of Class B shares, it will be assumed
that the redemption is, first, of any shares that were acquired
upon the reinvestment of dividends or distributions and, second,
of shares held longest during the time they are subject to the
sales charge. When shares acquired in an exchange are redeemed,
the applicable contingent deferred sales charge and conversion
schedules will be the schedules that applied at the time of the
purchase of shares of the corresponding class of the Alliance
Mutual Fund originally purchased by the shareholder.
The contingent deferred sales charge is waived on
redemptions of shares (i) following the death or disability, as
defined in the Internal Revenue Code of 1986, as amended (the
"Code"), of a shareholder, (ii) to the extent that the redemption
represents a minimum required distribution from an individual
retirement account or other retirement plan to a shareholder who
has attained the age of 70-1/2, (iii) that had been purchased by
present or former Directors of the Fund, by the relative of any
such person, by any trust, individual retirement account or
retirement plan account for the benefit of any such person or
relative, or by the estate of any such person or relative, or
(iv) pursuant to a systematic withdrawal plan (see "Shareholder
Services--Systematic Withdrawal Plan" below).
Conversion Feature. Eight years after the end of the
calendar month in which the shareholder's purchase order was
accepted, Class B shares will automatically convert to Class A
shares and will no longer be subject to a higher distribution
services fee. Such conversion occurs on the basis of the
relative net asset values of the two classes, without the
33
<PAGE>
imposition of any sales load, fee or other charge. The purpose
of the conversion feature is to reduce the distribution services
fee paid by holders of Class B shares that have been outstanding
long enough for the Principal Underwriter to have been
compensated for distribution expenses incurred in the sale of
such shares.
For purposes of conversion to Class A, Class B shares
purchased through the reinvestment of dividends and distributions
paid in respect of Class B shares in a shareholder's account will
be considered to be held in a separate sub-account. Each time
any Class B shares in the shareholder's account (other than those
in the sub-account) convert to Class A, an equal pro-rata portion
of the Class B shares in the sub-account will also convert to
Class A.
The conversion of Class B shares to Class A shares is
subject to the continuing availability of an opinion of counsel
to the effect that the conversion of Class B shares to Class A
shares does not constitute a taxable event under federal income
tax law. The conversion of Class B shares to Class A shares may
be suspended if such an opinion is no longer available at the
time such conversion is to occur. In that event, no further
conversions of Class B shares would occur, and shares might
continue to be subject to the higher distribution services fee
for an indefinite period which may extend beyond the period
ending eight years after the end of the calendar month in which
the shareholder's purchase order was accepted.
Class C Shares
Investors may purchase Class C shares at the public
offering price equal to the net asset value per share of the
Class C shares on the date of purchase without the imposition of
a sales charge either at the time of purchase or, as long as the
shares are held for one year or more, upon redemption. Class C
shares are sold without an initial sales charge so that the Fund
will receive the full amount of the investor's purchase payment
and, as long as the shares are held for one year or more,
without a contingent deferred sales charge so that the investor
will receive as proceeds upon redemption the entire net asset
value of his or her Class C shares. The Class C distribution
services fee enables the Fund to sell Class C shares without
either an initial or contingent deferred sales charge, as long as
the shares are held for one year or more. Class C shares do not
convert to any other class of shares of the Fund and incur higher
distribution services fees and transfer agency costs than Class A
shares and Advisor Class shares, and will thus have a higher
expense ratio and pay correspondingly lower dividends than
Class A shares and Advisor Class shares.
34
<PAGE>
Class C shares that are redeemed within one year of
purchase will be subject to a contingent deferred sales charge of
1%, charged as a percentage of the dollar amount subject thereto.
The charge will be assessed on an amount equal to the lesser of
the cost of the shares being redeemed or their net asset value at
the time of redemption. Accordingly, no sales charge will be
imposed on increases in net asset value above the initial
purchase price. In addition, no charge will be assessed on
shares derived from reinvestment of dividends or capital gains
distributions. The contingent deferred sales charge on Class C
shares will be waived on certain redemptions, as described above
under "--Class B Shares." In determining the contingent deferred
sales charge applicable to a redemption of Class C shares, it
will be assumed that the redemption is, first, of any shares that
are not subject to a contingent deferred sales charge (for
example, because the shares have been held beyond the period
during which the charge applies or were acquired upon the
reinvestment of dividends or distributions) and, second, of
shares held longest during the time they are subject to the sales
charge.
Proceeds from the contingent deferred sales charge are
paid to the Principal Underwriter and are used by the Principal
Underwriter to defray the expenses of the Principal Underwriter
related to providing distribution-related services to the Fund in
connection with the sale of the Class C shares, such as the
payment of compensation to selected dealers and agents for
selling Class C shares. The combination of the contingent
deferred sales charge and the distribution services fee enables
the Fund to sell the Class C shares without a sales charge being
deducted at the time of purchase. The higher distribution
services fee incurred by Class C shares will cause such shares to
have a higher expense ratio and to pay lower dividends than those
related to Class A shares and Advisor Class shares.
Conversion of Advisor Class Shares to Class A Shares
Advisor Class shares may be held solely through the fee-
based program accounts and employee benefit plans and registered
investment advisory or other financial intermediary relationships
described above under "Purchase of Shares--General" and by
investment advisory clients of, and by certain other persons
associated with, the Manager and its affiliates or the Fund. If
(i) a holder of Advisor Class shares ceases to participate in the
fee-based program or plan, or to be associated with the
investment adviser or financial intermediary, in each case, that
satisfies the requirements to purchase shares set forth under
"Purchase of Shares--General" or (ii) the holder is otherwise no
longer eligible to purchase Advisor Class shares as described in
the Advisor Class Prospectus and this Statement of Additional
Information (each, a "Conversion Event"), then all Advisor Class
35
<PAGE>
shares held by the shareholder will convert automatically to
Class A shares of the Fund during the calendar month following
the month in which the Fund is informed of the occurrence of the
Conversion Event. The Fund will provide the Shareholder with at
least 30 days' notice of the conversion. The failure of a
shareholder or a fee-based program to satisfy the minimum
investment requirements to purchase Advisor Class shares will not
constitute a Conversion Event. The conversion would occur on the
basis of the relative net asset values of the two classes and
without the imposition of any sales load, fee or other charge.
Class A shares currently bear a .30% distribution services fee.
Advisor Class shares do not have any distribution services fee.
As a result, Class A shares have a higher expense ratio and may
pay correspondingly lower dividends and have a lower net asset
value than Advisor Class shares.
The conversion of Advisor Class shares to Class A shares
is subject to the continuing availability of an opinion of
counsel to the effect that the conversion of Advisor Class shares
to Class A shares does not constitute a taxable event under
federal income tax law. The conversion of Advisor Class shares
to Class A shares may be suspended if such an opinion is no
longer available at the time such conversion is to occur. In
that event, the Advisor Class shareholder would be required to
redeem his Advisor Class shares, which would constitute a taxable
event under federal income tax law.
_______________________________________________________________
REDEMPTION AND REPURCHASE OF SHARES
_______________________________________________________________
The following information supplements that set forth in
the Fund's Prospectus under the heading "Purchase and Sale of
Shares--How to Sell Shares." If you are an Advisor Class
shareholder through an account established under a fee-based
program your fee-based program may impose requirements with
respect to the purchase, sale or exchange of Advisor Class shares
of the Fund that are different from those described herein. A
transaction fee may be charged by your financial representative
with respect to the purchase, sale or exchange of Advisor Class
shares made through such financial representative.
Redemption
Subject only to the limitations described below, the
Fund's Articles of Incorporation require that the Fund redeems
the shares tendered to it, as described below, at a redemption
price equal to their net asset value as next computed following
the receipt of shares tendered for redemption in proper form.
Except for any contingent deferred sales charge which may be
36
<PAGE>
applicable to Class A, Class B or Class C shares, there is no
redemption charge. Payment of the redemption price will be made
within seven days after the Fund's receipt of such tender for
redemption. If a shareholder is in doubt about what documents
are required by his or her fee-based program or employee benefit
plan, the shareholder should contact his or her financial
representative.
The right of redemption may not be suspended or the date
of payment upon redemption postponed for more than seven days
after shares are tendered for redemption, except for any period
during which the Exchange is closed (other than customary weekend
and holiday closings) or during which the Commission determines
that trading thereon is restricted, or for any period during
which an emergency (as determined by the Commission) exists as a
result of which disposal by the Fund of securities owned by it is
not reasonably practicable or as a result of which it is not
reasonably practicable for the Fund fairly to determine the value
of its net assets, or for such other periods as the Commission
may by order permit for the protection of security holders of the
Fund.
Payment of the redemption price will be made in cash.
The value of a shareholder's shares on redemption or repurchase
may be more or less than the cost of such shares to the
shareholder, depending upon the market value of the Fund's
portfolio securities at the time of such redemption or
repurchase. Redemption proceeds on Class A, Class B and Class C
shares will reflect the deduction of the contingent deferred
sales charge, if any. Payment received by a shareholder upon
redemption or repurchase of his shares, assuming the shares
constitute capital assets in his hands, will result in long-term
or short-term capital gains (or loss) depending upon the
shareholder's holding period and basis in respect of the shares
redeemed.
To redeem shares of the Fund for which no stock
certificates have been issued, the registered owner or owners
should forward a letter to the Fund containing a request for
redemption. The signature or signatures on the letter must be
guaranteed by an "eligible guarantor institution" as defined in
Rule 17Ad-15 under the Securities Exchange Act of 1934, as
amended.
To redeem shares of the Fund represented by stock
certificates, the investor should forward the appropriate stock
certificate or certificates, endorsed in blank or with blank
stock powers attached, to the Fund with the request that the
shares represented thereby, or a specified portion thereof, be
redeemed. The stock assignment form on the reverse side of each
stock certificate surrendered to the Fund for redemption must be
37
<PAGE>
signed by the registered owner or owners exactly as the
registered name appears on the face of the certificate or,
alternatively, a stock power signed in the same manner may be
attached to the stock certificate or certificates or, where
tender is made by mail, separately mailed to the Fund. The
signature or signatures on the assignment form must be guaranteed
in the manner described above.
Telephone Redemption By Electronic Funds Transfer. Each
Fund shareholder is entitled to request redemption by electronic
funds transfer of shares for which no stock certificates have
been issued by telephone at (800) 221-5672 by a shareholder who
has completed the appropriate portion of the Subscription
Application or, in the case of an existing shareholder, an
"Autosell" application obtained from Alliance Fund Services, Inc.
A telephone redemption request by electronic funds transfer may
not exceed $100,000 (except for certain omnibus accounts) and
must be made by 4:00 p.m. Eastern time on a Fund business day as
defined above. Proceeds of telephone redemptions will be sent by
Electronic Funds Transfer to a shareholder's designated bank
account at a bank selected by the shareholder that is a member of
the NACHA.
Telephone Redemption By Check. Each Fund shareholder is
eligible to request redemption by check of Fund shares for which
no stock certificates have been issued by telephone at (800) 221-
5672 before 4:00 p.m. Eastern time on a Fund business day in an
amount not exceeding $50,000. Proceeds of such redemptions are
remitted by check to the shareholder's address of record. A
shareholder otherwise eligible for telephone redemption by check
may cancel the privilege by written instruction to Alliance Fund
Services, Inc., or by checking the appropriate box on the
Subscription Application found in the Prospectus.
Telephone Redemptions - General. During periods of
drastic economic or market developments, such as the market break
of October 1987, it is possible that shareholders would have
difficulty in reaching AFS by telephone (although no such
difficulty was apparent at any time in connection with the 1987
market break). If a shareholder were to experience such
difficulty, the shareholder should issue written instructions to
Alliance Fund Services, Inc. at the address shown on the cover of
this Statement of Additional Information. The Fund reserves the
right to suspend or terminate its telephone redemption service at
any time without notice. Telephone redemption is not available
with respect to shares (i) for which certificates have been
issued, (ii) held in nominee or "street name" accounts,
(iii) held by a shareholder who has changed his or her address of
record within the preceding 30 calendar days or (iv) held in any
retirement plan account. Neither the Fund nor the Manager, the
Principal Underwriter or Alliance Fund Services, Inc. will be
38
<PAGE>
responsible for the authenticity of telephone requests for
redemptions that the Fund reasonably believes to be genuine. The
Fund will employ reasonable procedures in order to verify that
telephone requests for redemptions are genuine, including, among
others, recording such telephone instructions and causing written
confirmations of the resulting transactions to be sent to
shareholders. If the Fund did not employ such procedures, it
could be liable for losses arising from unauthorized or
fraudulent telephone instructions. Selected dealers or agents
may charge a commission for handling telephone requests for
redemptions.
Repurchase
The Fund may repurchase shares through the Principal
Underwriter, selected financial intermediaries or selected
dealers or agents. The repurchase price will be the net asset
value next determined after the Principal Underwriter receives
the request (less the contingent deferred sales charge, if any,
with respect to the Class A, Class B and Class C shares), except
that requests placed through selected dealers or agents before
the close of regular trading on the Exchange on any day will be
executed at the net asset value determined as of such close of
regular trading on that day if received by the Principal
Underwriter prior to its close of business on that day (normally
5:00 p.m. Eastern time). The financial intermediary or selected
dealer or agent is responsible for transmitting the request to
the Principal Underwriter by 5:00 p.m. Eastern time (certain
selected dealers, agents or financial representatives may enter
into operating agreements permitting them to transmit purchase
information to the Principal Underwriter after 5:00 p.m. Eastern
time and receive that day's net asset value). If the financial
intermediary or selected dealer or agent fails to do so, the
shareholder's right to receive that day's closing price must be
settled between the shareholder and the dealer or agent. A
shareholder may offer shares of the Fund to the Principal
Underwriter either directly or through a selected dealer or
agent. Neither the Fund nor the Principal Underwriter charges a
fee or commission in connection with the repurchase of shares
(except for the contingent deferred sales charge, if any, with
respect to Class A, Class B and Class C shares). Normally, if
shares of the Fund are offered through a financial intermediary
selected dealer or agent, the repurchase is settled by the
shareholder as an ordinary transaction with or through the
selected dealer or agent, who may charge the shareholder for this
service. The repurchase of shares of the Fund as described above
is a voluntary service of the Fund and the Fund may suspend or
terminate this practice at any time.
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<PAGE>
General
The Fund reserves the right to close out an account that
through redemption has remained below $200 for 90 days.
Shareholders will receive 60 days' written notice to increase the
account value before the account is closed. No contingent
deferred sales charge will be deducted from the proceeds of this
redemption. In the case of a redemption or repurchase of shares
of the Fund recently purchased by check, redemption proceeds will
not be made available until the Fund is reasonably assured that
the check has cleared, normally up to 15 calendar days following
the purchase date.
_______________________________________________________________
SHAREHOLDER SERVICES
_______________________________________________________________
The following information supplements that set forth in
the Fund's Prospectus under the heading "Purchase and Sale of
Shares--Shareholder Services." The shareholder services set
forth below are applicable to Class A, Class B, Class C and
Advisor Class shares unless otherwise indicated. If you are an
Advisor Class shareholder through an account established under a
fee-based program your fee-based program may impose requirements
with respect to the purchase, sale or exchange of Advisor Class
shares of the Fund that are different from those described
herein. A transaction fee may be charged by your financial
representative with respect to the purchase, sale or exchange of
Advisor Class shares made through such financial representative.
Automatic Investment Program
Investors may purchase shares of the Fund through an
automatic investment program utilizing electronic funds transfer
drawn on the investor's own bank account. Under such a program,
pre-authorized monthly drafts for a fixed amount (at least $25)
are used to purchase shares through the selected dealer or
selected agent designated by the investor at the public offering
price next determined after the Principal Underwriter receives
the proceeds from the investor's bank. In electronic form,
drafts can be made on or about a date each month selected by the
shareholder. Investors wishing to establish an automatic
investment program in connection with their initial investment
should complete the appropriate portion of the Subscription
Application found in the Prospectus. Current shareholders should
contact Alliance Fund Services, Inc. at the address or telephone
numbers shown on the cover of this Statement of Additional
Information to establish an automatic investment program.
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Exchange Privilege
You may exchange your investment in the Fund for shares
of the same class of other Alliance Mutual Funds (including AFD
Exchange Reserves, a money market fund managed by the Manager).
In addition, (i) present officers and full-time employees of the
Manager, (ii) present Directors or Trustees of any Alliance
Mutual Fund and (iii) certain employee benefit plans for
employees of the Manager, the Principal Underwriter, Alliance
Fund Services, Inc. and their affiliates may, on a tax-free
basis, exchange Class A shares of the Fund for Advisor Class
shares of the Fund. Exchanges of shares are made at the net
asset value next determined and without sales or service charges.
Exchanges may be made by telephone or written request. Telephone
exchange requests must be received by Alliance Fund Services,
Inc. by 4:00 p.m. Eastern time on a Fund business day in order to
receive that day's net asset value.
Shares will continue to age without regard to exchanges
for purpose of determining the CDSC, if any, upon redemption and,
in the case of Class B shares, for the purpose of conversion to
Class A shares. After an exchange, your Class B shares will
automatically convert to Class A shares in accordance with the
conversion schedule applicable to the Class B shares of the
Alliance Mutual Fund you originally purchased for cash ("original
shares"). When redemption occurs, the CDSC applicable to the
original shares is applied.
Please read carefully the prospectus of the mutual fund
into which you are exchanging before submitting the request.
Call Alliance Fund Services, Inc. at (800) 221-5672 to exchange
uncertificated shares. Except with respect to exchanges of
Class A shares of the Fund for Advisor Class shares of the Fund,
exchanges of shares as described above in this section are
taxable transactions for federal income tax purposes. The
exchange service may be changed, suspended, or terminated on 60
days' written notice.
All exchanges are subject to the minimum investment
requirements and any other applicable terms set forth in the
prospectus for the Alliance Mutual Fund whose shares are being
acquired. An exchange is effected through the redemption of the
shares tendered for exchange and the purchase of shares being
acquired at their respective net asset values as next determined
following receipt by the Alliance Mutual Fund whose shares are
being exchanged of (i) proper instructions and all necessary
supporting documents as described in such fund's prospectus, or
(ii) a telephone request for such exchange in accordance with the
procedures set forth in the following paragraph. Exchanges
involving the redemption of shares recently purchased by check
will be permitted only after the Alliance Mutual Fund whose
41
<PAGE>
shares have been tendered for exchange is reasonably assured that
the check has cleared, normally up to 15 calendar days following
the purchase date. Exchanges of shares of Alliance Mutual Funds
will generally result in the realization of a capital gain or
loss for federal income tax purposes.
Each Fund shareholder and the shareholder's selected
dealer, agent or financial representative, as applicable, are
authorized to make telephone requests for exchanges unless
Alliance Fund Services, Inc., receives written instruction to the
contrary from the shareholder, or the shareholder declines the
privilege by checking the appropriate box on the Subscription
Application found in the Prospectus. Such telephone requests
cannot be accepted with respect to shares then represented by
stock certificates. Shares acquired pursuant to a telephone
request for exchange will be held under the same account
registration as the shares redeemed through such exchange.
Eligible shareholders desiring to make an exchange
should telephone Alliance Fund Services, Inc. with their account
number and other details of the exchange, at (800) 221-5672
before 4:00 p.m., Eastern time, on a Fund business day as defined
above. Telephone requests for exchange received before 4:00 p.m.
Eastern time on a Fund business day will be processed as of the
close of business on that day. During periods of drastic
economic or market developments, such as the market break of
October 1987, it is possible that shareholders would have
difficulty in reaching Alliance Fund Services, Inc. by telephone
(although no such difficulty was apparent at any time in
connection with the 1987 market break). If a shareholder were to
experience such difficulty, the shareholder should issue written
instructions to Alliance Fund Services, Inc. at the address shown
on the cover of this Statement of Additional Information.
A shareholder may elect to initiate a monthly "Auto
Exchange" whereby a specified dollar amount's worth of his or her
Fund shares (minimum $25) is automatically exchanged for shares
of another Alliance Mutual Fund. Auto Exchange transactions
normally occur on the 12th day of each month, or the Fund
business day prior thereto.
None of the Alliance Mutual Funds, the Manager, the
Principal Underwriter or Alliance Fund Services, Inc. will be
responsible for the authenticity of telephone requests for
exchanges that the Fund reasonably believes to be genuine. The
Fund will employ reasonable procedures in order to verify that
telephone requests for exchanges are genuine, including, among
others, recording such telephone instructions and causing written
confirmations of the resulting transactions to be sent to
shareholders. If the Fund did not employ such procedures, it
could be liable for losses arising from unauthorized or
42
<PAGE>
fraudulent telephone instructions. Selected dealers, agents or
financial representatives, as applicable, may charge a commission
for handling telephone requests for exchanges.
The exchange privilege is available only in states where
shares of the Alliance Mutual Fund being acquired may be legally
sold. Each Alliance Mutual Fund reserves the right, at any time
on 60 days' notice to its shareholders, to reject any order to
acquire its shares through exchange or otherwise to modify,
restrict or terminate the exchange privilege.
Retirement Plans
The Fund may be a suitable investment vehicle for part
or all of the assets held in various types of retirement plans,
such as those listed below. The Fund has available forms of such
plans pursuant to which investments can be made in the Fund and
other Alliance Mutual Funds. Persons desiring information
concerning these plans should contact Alliance Fund Services,
Inc. at the "For Literature" telephone number on the cover of
this Statement of Additional Information, or write to:
Alliance Fund Services, Inc.
Retirement Plans
P.O. Box 1520
Secaucus, New Jersey 07096-1520
Individual Retirement Account ("IRA"). Individuals who
receive compensation, including earnings from self-employment,
are entitled to establish and make contributions to an IRA.
Taxation of the income and gains paid to an IRA by the Fund is
deferred until distribution from the IRA. An individual's
eligible contribution to an IRA will be deductible if neither the
individual nor his or her spouse is an active participant in an
employer-sponsored retirement plan. If the individual or his or
her spouse is an active participant in an employer-sponsored
retirement plan, the individual's contributions to an IRA may be
deductible, in whole or in part, depending on the amount of the
adjusted gross income of the individual and his or her spouse.
Employer-Sponsored Qualified Retirement Plans. Sole
proprietors, partnerships and corporations may sponsor qualified
money purchase pension and profit-sharing plans, including
Section 401(k) plans ("qualified plans"), under which annual tax-
deductible contributions are made within prescribed limits based
on compensation paid to participating individuals. The minimum
initial investment requirement may be waived with respect to
certain of these qualified plans.
If the aggregate net asset value of shares of the
Alliance Mutual Funds held by a qualified plan reaches $1 million
43
<PAGE>
on or before December 15 in any year, all Class B or Class C
shares of the Fund held by the plan can be exchanged, at the
plan's request, without any sales charge, for Class A shares of
the Fund.
Simplified Employee Pension Plan ("SEP"). Sole
proprietors, partnerships and corporations may sponsor a SEP
under which they make annual tax-deductible contributions to an
IRA established by each eligible employee within prescribed
limits based on employee compensation.
403(b)(7) Retirement Plan. Certain tax-exempt
organizations and public educational institutions may sponsor
retirement plans under which an employee may agree that monies
deducted from his or her compensation (minimum $25 per pay
period) may be contributed by the employer to a custodial account
established for the employee under the plan.
The Alliance Plans Division of Frontier Trust Company, a
subsidiary of Equitable, which serves as custodian or trustee
under the retirement plan prototype forms available from the
Fund, charges certain nominal fees for establishing an account
and for annual maintenance. A portion of these fees is remitted
to Alliance Fund Services, Inc. as compensation for its services
to the retirement plan accounts maintained with the Fund.
Distributions from retirement plans are subject to
certain Code requirements in addition to normal redemption
procedures. For additional information please contact Alliance
Fund Services, Inc.
Dividend Direction Plan
A shareholder who already maintains, in addition to his
or her Class A, Class B, Class C or Advisor Class Fund account, a
Class A, Class B, Class C or Advisor Class account with one or
more other Alliance Mutual Funds may direct that income dividends
and/or capital gains paid on the shareholder's Class A, Class B,
Class C or Advisor Class Fund shares be automatically reinvested,
in any amount, without the payment of any sales or service
charges, in shares of the same class of such other Alliance
Mutual Fund(s). Further information can be obtained by
contacting Alliance Fund Services, Inc. at the address or the
"For Literature" telephone number shown on the cover of this
Statement of Additional Information. Investors wishing to
establish a dividend direction plan in connection with their
initial investment should complete the appropriate section of the
Subscription Application found in the Prospectus. Current
shareholders should contact Alliance Fund Services, Inc. to
establish a dividend direction plan.
44
<PAGE>
Systematic Withdrawal Plan
General. Any shareholder who owns or purchases shares
of the Fund having a current net asset value of at least $4,000
(for quarterly or less frequent payments), $5,000 (for bi-monthly
payments) or $10,000 (for monthly payments) may establish a
systematic withdrawal plan under which the shareholder will
periodically receive a payment in a stated amount of not less
than $50 on a selected date. Systematic withdrawal plan
participants must elect to have their dividends and distributions
from the Fund automatically reinvested in additional shares of
the Fund.
Shares of the Fund owned by a participant in the Fund's
systematic withdrawal plan will be redeemed as necessary to meet
withdrawal payments and such payments will be subject to any
taxes applicable to redemptions and, except as discussed below,
any applicable contingent deferred sales charge. Shares acquired
with reinvested dividends and distributions will be liquidated
first to provide such withdrawal payments and thereafter other
shares will be liquidated to the extent necessary, and depending
upon the amount withdrawn, the investor's principal may be
depleted. A systematic withdrawal plan may be terminated at any
time by the shareholder or the Fund.
Withdrawal payments will not automatically end when a
shareholder's account reaches a certain minimum level.
Therefore, redemptions of shares under the plan may reduce or
even liquidate a shareholder's account and may subject the
shareholder to the Fund's involuntary redemption provisions. See
"Redemption and Repurchase of Shares--General." Purchases of
additional shares concurrently with withdrawals are undesirable
because of sales charges when purchases are made. While an
occasional lump-sum investment may be made by a holder of Class A
shares who is maintaining a systematic withdrawal plan, such
investment should normally be an amount equivalent to three times
the annual withdrawal or $5,000, whichever is less.
Payments under a systematic withdrawal plan may be made
by check or electronically via the Automated Clearing House
("ACH") network. Investors wishing to establish a systematic
withdrawal plan in conjunction with their initial investment in
shares of the Fund should complete the appropriate portion of the
Subscription Application found in the Prospectus, while current
Fund shareholders desiring to do so can obtain an application
form by contacting Alliance Fund Services, Inc. at the address or
the "For Literature" telephone number shown on the cover of this
Statement of Additional Information.
CDSC Waiver for Class B and Class C Shares. Under a
systematic withdrawal plan, up to 1% monthly, 2% bi-monthly or 3%
45
<PAGE>
quarterly of the value at the time of redemption of the Class B
or Class C shares in a shareholder's account may be redeemed free
of any contingent deferred sales charge.
With respect to Class B shares, the waiver applies only
with respect to shares acquired after July 1, 1995. Class B
shares that are not subject to a contingent deferred sales charge
(such as shares acquired with reinvested dividends or
distributions) will be redeemed first and will count toward the
foregoing limitations. Remaining Class B shares that are held
the longest will be redeemed next. Redemptions of Class B shares
in excess of the foregoing limitations will be subject to any
otherwise applicable contingent deferred sales charge.
With respect to Class C shares, shares held the longest
will be redeemed first and will count toward the foregoing
limitations. Redemptions in excess of those limitations will be
subject to any otherwise applicable contingent deferred sales
charge.
Statements and Reports
Each shareholder of the Fund receives semi-annual and
annual reports which include a portfolio of investments,
financial statements and, in the case of the annual report, the
report of the Fund's independent accountants,
PricewaterhouseCoopers LLP, as well as a confirmation of each
purchase and redemption. By contacting his or her broker or
Alliance Fund Services, Inc., a shareholder can arrange for
copies of his or her account statements to be sent to another
person.
_______________________________________________________________
NET ASSET VALUE
_______________________________________________________________
The per share net asset value is computed in accordance
with the Fund's Articles of Incorporation and By-Laws at the next
close of regular trading on the Exchange (ordinarily 4:00 p.m.
Eastern time) following receipt of a purchase or redemption order
by the Fund on each Fund business day on which such an order is
received and on such other days as the Board of Directors deems
appropriate or necessary in order to comply with Rule 22c-1 under
the 1940 Act. The Fund's per share net asset value is calculated
by dividing the value of the Fund's total assets, less its
liabilities, by the total number of its shares then outstanding.
A Fund business day is any weekday on which the Exchange is open
for trading.
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<PAGE>
In accordance with applicable rules under the 1940 Act,
portfolio securities are valued at current market value or at
fair value as determined in good faith by the Board of Directors.
The Board of Directors has delegated to the Manager certain of
the Board's duties with respect to the following procedures.
Readily marketable securities listed on the 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 valued, except as indicted
below, at the last sale price reflected on the consolidated tape
at the close of the Exchange or, in the case of a foreign
securities exchange, at the last quoted sale price, in each case
on the business day as of which such value is being determined.
If there has been no sale on such day, the securities are valued
at the mean of the closing bid and asked prices on such day. If
no bid or asked prices are quoted on such day, then the security
is valued in good faith at fair value by, or in accordance with
procedures established by, the Board of Directors. Readily
marketable securities not listed on the Exchange or on a foreign
securities exchange but listed on other United States national
securities exchanges or traded on The Nasdaq Stock Market, Inc.
are valued in like manner. Portfolio securities traded on the
Exchange and on one or more foreign or other national securities
exchanges, and portfolio securities not traded on the Exchange
but traded on one or more foreign or other national securities
exchanges are valued in accordance with these procedures by
reference to the principal exchange on which the securities are
traded.
Readily marketable securities traded in the over-the-
counter market, securities listed on a foreign securities
exchange whose operations are similar to those of the United
States over-the-counter market, and securities listed on a U.S.
national securities exchange whose primary market is believed to
be over-the-counter (but excluding securities traded on The
Nasdaq Stock Market, Inc.), are valued at the mean of the current
bid and asked prices as reported by Nasdaq or, in the case of
securities not quoted by Nasdaq, the National Quotation Bureau or
another comparable sources.
Listed put or call options purchased by the Fund are
valued at the last sale price. If there has been no sale on that
day, such securities will be valued at the closing bid prices on
that day.
Open futures contracts and options thereon will be
valued using the closing settlement price or, in the absence of
such a price, the most recent quoted bid price, If there are no
quotations available for the day of valuations, the last
available closing settlement price will be used.
47
<PAGE>
U.S. Government securities and other debt instruments
having 60 days or less remaining until maturity are valued at
amortized cost if their original maturity was 60 days or less, or
by amortizing their fair value as of the 61st day prior to
maturity if their original term to maturity exceeded 60 days
(unless in either case the Board of Directors determines that
this method does not represent fair value).
Fixed-income securities may be valued on the basis of
prices provided by a pricing service when such prices are
believed to reflect the fair market value of such securities.
The prices provided by pricing service take into account many
factors, including institutional size trading in similar groups
of securities and any developments related to specific
securities.
All other assets of the Fund are valued in good faith at
fair value by, or in accordance with procedures established by,
the Board of Directors.
Trading in securities on Far Eastern and European
securities exchanges and over-the-counter markets is normally
completed well before the close of business of each Fund business
day. In addition, trading in foreign markets may not take place
on all Fund business days. Furthermore, trading may take place
in various foreign markets on days that are not Fund business
days. The Fund's calculation of the net asset value per share,
therefore, does not always take place contemporaneously with the
most recent determination of the prices of portfolio securities
in these markets. Events affecting the values of these portfolio
securities that occur between the time their prices are
determined in accordance with the above procedures and the close
of the Exchange will not be reflected in the Fund's calculation
of net asset value unless it is believed that these prices do not
reflect current market value, in which case the securities will
be valued in good faith by, or in accordance with procedures
established by, the Board of Directors at fair value.
The Board of Directors may suspend the determination of
the Fund's, net asset value (and the offering and sale of
shares), subject to the rules of the Commission and other
governmental rules and regulations, at a time when: (1) the
Exchange is closed, other than customary weekend and holiday
closings, (2) an emergency exists as a result of which it is not
reasonably practicable for the Fund to dispose of securities
owned by it or to determine fairly the value of its net assets,
or (3) for the protection of shareholders, the Commission by
order permits a suspension of the right of redemption or a
postponement of the date of payment on redemption.
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<PAGE>
For purposes of determining the Fund's net asset value
per share, all assets and liabilities initially expressed in a
foreign currency will be converted into U.S. dollars at the mean
of the current bid and asked prices of such currency against the
U.S. dollar last quoted by a major bank that is a regular
participant in the relevant foreign exchange market or on the
basis of a pricing service that takes into account the quotes
provided by a number of such major banks. If such quotations are
not available as of the close of the Exchange, the rate of
exchange will be determined in good faith by, or under the
direction of, the Board of Directors.
The assets attributable to the Class A shares, Class B
shares, Class C shares and Advisor Class shares will be invested
together in a single portfolio. The net asset value of each
class will be determined separately by subtracting the
liabilities allocated to that class from the assets belonging to
that class in conformance with the provisions of a plan adopted
by the Fund in accordance with Rule 18f-3 under the 1940 Act.
_______________________________________________________________
DIVIDENDS, DISTRIBUTIONS AND TAXES
_______________________________________________________________
Dividends paid by the Fund, if any, with respect to
Class A, Class B, Class C and Advisor Class shares will be
calculated in the same manner at the same time on the same day
and will be in the same amount, except that the higher
distribution services applicable to Class B and C shares, and any
incremental transfer agency costs relating to Class B and Class C
shares, will be borne exclusively by the class to which they
relate.
The Prospectus describes generally the tax treatment of
dividends and distributions by the Fund. This section of the
Statement of Additional Information includes additional
information concerning Federal taxes.
The Fund intends for each taxable year to qualify to be
taxed as a "regulated investment company" under the Code.
Qualification as a regulated investment company under the Code
requires, among other things, that (a) at least 90% of the Fund's
annual gross income, without offset for losses from the sale or
other disposition of securities, be derived from interest,
payments with respect to securities loans, dividends and gains
from the sale or other disposition of securities or options
thereon and certain other qualifying income; and (b) the Fund
diversify its holdings so that, at the end of each quarter of the
taxable year, (i) at least 50% of the market value of the Fund's
assets is represented by cash, government securities and other
49
<PAGE>
securities limited in respect of any one issuer to an amount not
greater than 5% of the Fund's assets and 10% of the outstanding
voting securities of such issuer, and (ii) not more than 25% of
the value of its assets is invested in the securities of any one
issuer (other than government securities).
In addition, in order to qualify to be taxed as a
regulated investment company, the Fund must distribute to its
shareholders as ordinary dividends at least 90% of its net
investment income other than net capital gain earned in each
year. The Fund intends to declare and distribute dividends in
the amounts and at the times necessary to meet this requirement.
The Fund also intends to declare and distribute dividends in the
amounts and at the times necessary to avoid the application of
the 4% Federal excise tax imposed on certain undistributed income
of regulated investment companies. For Federal income and excise
tax purposes, dividends declared and payable to shareholders of
record as of a date in October, November or December but actually
paid during the following January will be treated as having been
distributed by the Fund, and will be taxable to these
shareholders, for the year declared, and not in the subsequent
calendar year in which the shareholders actually receive the
dividend.
In the case of corporate shareholders, a portion of the
Fund's dividends may be eligible for the dividends-received
deduction. The amount eligible for the deduction is limited to
the amount of qualifying dividends received by the Fund. A
corporation's dividends-received deduction generally will be
disallowed unless the corporation holds shares in the Fund at
least 46 days during the 90-day period beginning 45 days before
the date on which the corporation becomes entitled to receive the
dividend. Furthermore, the dividends-received deduction will be
disallowed to the extent a corporation's investment in shares of
the Fund is financed with indebtedness.
A dividend or capital gains distribution with respect to
shares of the Fund held by a tax-deferred or qualified plan, such
as an individual retirement account, 403(b)(7) retirement plan or
corporate pension or profit-sharing plan, generally will not be
taxable to the plan. Distributions from such plans will be
taxable to individual participants under applicable tax rules
without regard to the character of the income earned by the
qualified plan.
It is the present policy of the Fund to distribute to
shareholders all net investment income semi-annually and to
distribute net realized capital gains, if any, annually. The
amount of any such distributions must necessarily depend upon the
realization by the Fund of income and capital gains from
investments.
50
<PAGE>
The Fund may be required to withhold United States
federal income tax at the rate of 31% of all distributions
payable to shareholders who fail to provide the Fund with their
correct taxpayer identifications numbers or to make required
certifications, or who have been notified by the Internal Revenue
Service that they are subject to backup withholding. Corporate
shareholders and certain other types of shareholders specified in
the Code are exempt from such backup withholding. Backup
withholding is not an additional tax; any amounts so withheld may
be credited against a shareholder's United States federal income
tax liability or refunded.
Gains or losses on sales of securities by the Fund will
be long-term capital gains or losses if the securities have been
held by it for more than one year, except in certain cases where
the Fund has written a call option thereon. Other gains or
losses on the sale of securities will be short-term capital gains
or losses. If an option written by the Fund lapses or is
terminated through a closing transaction, such as a repurchase by
the Fund of the option from its holder, the Fund may realize a
short-term capital gain or loss, depending on whether the premium
income is greater or less than the amount paid by the Fund in the
closing transaction. If securities are sold by the Fund pursuant
to the exercise of a call option written by it, the Fund will add
the premium received to the sale price of the securities
delivered in determining the amount of gain or loss on the sale.
Distributions of net capital gain (i.e., the excess of net long-
term capital gain over net short-term capital loss) are taxable
as long-term capital gain, regardless of how long a shareholder
has held shares in the Fund.
________________________________________________________________
PORTFOLIO TRANSACTIONS
________________________________________________________________
It is the policy of the Fund to place portfolio
transactions where the Manager believes it can obtain the most
favorable price and execution and to deal directly with a
principal market maker in connection with over-the-counter
transactions. To obtain best execution means primarily to obtain
the most favorable net price but also includes such factors as
confidential treatment, good clearance facilities, promptness,
reliability, knowledge of a particular market, appropriate
capitalization and proven ability to handle the particular type
of transaction involved. When this primary consideration is met,
the Manager may place the Fund's brokerage business with brokers
partly on the basis of other factors such as the furnishing of
supplemental research and other services deemed to be of value in
managing the Fund.
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<PAGE>
Investment decisions for the Fund are made independently
from those of other investment companies which are also managed
by the Manager, and those of private accounts advised by the
Manager. When these entities and accounts are simultaneously
engaged in the purchase or sale of the same securities, the
transactions are averaged as to price and allocated as to amount
in accordance with a formula deemed equitable to each. In some
cases this system may adversely affect the price paid or received
by the Fund or the size of the position obtainable for the Fund.
Consistent with the Conduct Rules of the National
Association of Securities Dealers, Inc. and subject to seeking
the most favorable price and execution available and such other
policies as the Directors may determine, the Manager may consider
sales of shares of the Fund as a factor in the selection of
broker-dealers to execute portfolio transactions for the Fund.
The Management Agreement authorizes the Manager, subject
to review by the Board of Directors, to place orders with brokers
in return for supplemental research and other services and for
special execution services of benefit to the Fund, even though
the rates at which such orders may be executed are higher than
those charged for execution only. These various services may also
be useful to the Manager in connection with its services to other
clients and not all such services may be used in connection with
the Fund.
The Fund may from time to time place orders for the
purchase or sale of securities with Donaldson Lufkin and Jenrette
Securities Corporation, an affiliate of the Manager ("DLJ"), and
with brokers which may have their transactions cleared or
settled, or both, by the Pershing Division of DLJ, for which DLJ
may receive a portion of the brokerage commissions. In such
instances, the placement of orders with such brokers would be
consistent with the Fund's objective of obtaining best execution
and would not be dependent upon the fact that DLJ is an affiliate
of the Manager.
During the fiscal years ended November 30, 1998, 1997
and 1996, the Fund incurred brokerage commissions amounting in
the aggregate to $3,941,458, $3,707,259 and $1,682,047. During
the fiscal years ended November 30, 1998, 1997 and 1996,
brokerage commissions amounting in the aggregate to $55,430,
$26,805 and $0, respectively, were paid to DLJ and brokerage
commissions amounting in the aggregate to $55,430, $2,500 and $0,
respectively, were paid to brokers utilizing the Pershing
Division of DLJ. During the fiscal year ended November 30, 1998,
the brokerage commissions paid to DLJ constituted 0% of the
fund's aggregate brokerage commissions and the brokerage
commissions paid to brokers utilizing the Pershing Division of
DLJ constituted .01% of the Fund's aggregate brokerage
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<PAGE>
commissions. During the fiscal year ended November 30, 1998, of
the Fund's aggregate dollar amount of brokerage transactions
involving the payment of commissions 0% were effected through DLJ
and 0% were effected through brokers utilizing the Pershing
Division of DLJ. During the fiscal year ended November 30, 1998,
transactions in the portfolio securities of the Fund aggregating
$2,755,138,275 with associated brokerage commissions of
approximately $1,192,307 were allocated to persons or firms
supplying research services to the Fund or the Manager.
_______________________________________________________________
GENERAL INFORMATION
________________________________________________________________
Capitalization
The Fund was organized as a Maryland corporation in 1979
under the name "Chemical Fund, Inc." and is the successor to a
Delaware corporation of the same name organized in 1938. The
name of the Fund became "The Alliance Fund, Inc." on March 13,
1987.
The authorized capital stock of the Fund currently
consists of 3,000,000,000 shares of Class A Common Stock,
3,000,000,000 shares of Class B Common Stock, 3,000,000,000
shares of Class C Common Stock and 3,000,000,000 shares of
Advisor Class Common Stock, each having a par value of $.01 per
share.
The Board of Directors is authorized to reclassify and
issue any unissued shares to any number of additional series and
classes without shareholder approval. Accordingly, the Board in
the future, for reasons such as the desire to establish one or
more additional portfolios of the Fund with different investment
objectives, policies or restrictions, may create additional
series of shares. Any issuance of shares of another series would
be governed by the 1940 Act and the law of the State of Maryland.
If shares of another series were issued in connection with the
creation of a second portfolio, each share of either portfolio
would normally be entitled to one vote for all purposes.
Generally, shares of both portfolios would vote as a single
series for the election of Directors and on any other matter that
affected both portfolios in substantially the same manner. As to
matters affecting each portfolio differently, such as approval of
the Management Agreement and changes in investment policy, shares
of each portfolio would vote as separate series.
Procedures for calling a shareholder's meeting for the
removal of Directors of the Fund, similar to those set forth in
Section 16(c) of the 1940 Act, are available to shareholders of
53
<PAGE>
the Fund. Meetings of shareholders may be called by 10% of the
Fund's outstanding shareholders. The rights of the holders of
shares of a series may not be modified except by the vote of a
majority of the outstanding shares of such series.
It is anticipated that annual shareholder meetings will
not be held; shareholder meetings will be held only when required
by federal or state law. Shareholders have available certain
procedures for the removal of Directors.
A shareholder will be entitled to share pro rata with
other holders of the same class of shares all dividends and
distributions arising from the Fund's assets and, upon redeeming
shares, will receive the then current net asset value of the Fund
represented by the redeemed shares less any applicable CDSC. The
Fund is empowered to establish, without shareholder approval,
additional portfolios, which may have different investment
objectives and policies than those of the Fund, and additional
classes of shares within the Fund. If an additional portfolio or
class were established in the Fund, each share of the portfolio
or class would normally be entitled to one vote for all purposes.
Generally, shares of each portfolio and class would vote together
as a single class on matters, such as the election of Directors,
that affect each portfolio and class in substantially the same
manner. Class A, B, C and Advisor Class shares have identical
voting, dividend, liquidation and other rights, except that each
class bears its own transfer agency expenses, each of Class A,
Class B and Class C shares of the Fund bears its own distribution
expenses and Class B shares and Advisor Class shares convert to
Class A shares under certain circumstances. Each class of shares
of the Fund votes separately with respect to the Fund's Rule 12b-
1 distribution plan and other matters for which separate class
voting is appropriate under applicable law. Shares are freely
transferable, are entitled to dividends as determined by the
Directors and, in liquidation of the Fund, are entitled to
receive the net assets of the Fund.
On October 8, 1999 there were 174,556,331 shares of
common stock of the Fund outstanding including 151,904,132
Class A shares, 15,135,859 Class B shares, 5,752,863 Class C
shares and 1,763,477 Advisor Class shares. To the knowledge of
the Fund, the following persons owned of record or beneficially,
5% or more of a class of the outstanding shares of the Fund as of
October 8, 1999:
54
<PAGE>
No. of % of
Shares % of % of % of Advisor
Name and Address of Class Class A Class B Class C Class
MLPF&S
For the Sole Benefit
of Its Customers
4800 Deer Lake Dr. East
2nd Floor 1,210,193 7.99%
Jacksonville, FL 32246-6484 577,544 13.45%
Bank of New York
Equity League Pension Trust
1 Wall Street
New York, NY 10005-2502 435,400 24.69%
Trust for Profit Sharing
For Alliance Capital
Employees
1345 Avenue of the Americas
New York, NY 10105 1,032,583 58.55%
Custodian
State Street Bank and Trust Company, 225 Franklin
Street, Boston, Massachusetts 02110, will act as the Fund's
custodian for the assets of the Fund but plays no part in
deciding the purchase or sale of portfolio securities. Subject
to the supervision of the Fund's Directors, State Street Bank and
Trust Company may enter into sub-custodial agreements for the
holding of the Fund's foreign securities.
Principal Underwriter
Alliance Fund Distributors, Inc., an indirect wholly-
owned subsidiary of the Adviser, located at 1345 Avenue of the
Americas, New York, New York 10105, is the principal underwriter
of shares of the Fund. Under the Distribution Services Agreement
in the absence of its willful misfeasance, bad faith, gross
negligence or reckless disregard of its obligations thereunder,
against certain civil liabilities, including liabilities under
the Securities Act.
Counsel
Legal matters in connection with the issuance of the
shares of Common Stock offered hereby are passed upon by Seward &
Kissel LLP, New York, New York. Seward & Kissel LLP has relied
upon the opinion of Venable, Baetjer and Howard, LLP, Baltimore,
Maryland for matters relating to Maryland law.
55
<PAGE>
Independent Accountants
PricewaterhouseCoopers LLP, New York, New York has been
appointed as the independent accountants for the Fund.
Performance Information
From time to time, the Fund advertises its "total
return," which is computed separately for Class A, Class B, Class
C and Advisor Class shares. Such advertisements disclose the
Fund's average annual compounded total return for the periods
prescribed by the Commission. The Fund's total return for each
such period is computed by finding, through the use of a formula
prescribed by the Commission, the average annual compounded rate
of return over the period that would equate an assumed initial
amount invested to the value of the investment at the end of the
period. For purposes of computing total return, income dividends
and capital gains distributions paid on shares of the Fund are
assumed to have been reinvested when paid and the maximum sales
charges applicable to purchases and redemptions of the Fund's
shares are assumed to have been paid.
The Fund calculates average annual total return
information in the Performance Table in the Risk/Return Summary
according to the Commission formula as described above. In
accordance with Commission guidelines, total return information
is presented for each class for the same time periods, i.e., the
1, 5 and 10 years (or over the life of the Fund, if the Fund is
less than 10 years old) ending on the last day of the most recent
calendar year. Since different classes may have first been sold
on different dates ("Actual Inception Dates"), in some cases this
can result in return information being presented for a class for
periods prior to its Actual Inception Date. Where return
information is presented for periods prior to the Actual
Inception Date of a Class (a "Younger Class"), such information
is calculated by using the historical performance of the class
with the earliest Actual Inception Date (the "Oldest Class").
For this purpose, the Fund calculates the difference in total
annual fund operating expenses (as a percentage of average net
assets) between the Younger Class and the Oldest Class, divides
the difference by 12, and subtracts the result from the monthly
performance at net asset value (including reinvestment of all
dividends and distributions) of the Oldest Class for each month
prior to the Younger Class's Actual Inception Date for which
performance information is to be shown. The resulting "pro
forma" monthly performance information is used to calculate the
Younger Class's average annual returns for these periods. Any
conversion feature applicable to the Younger Class is assumed to
occur in accordance with the Actual Inception Date for that
class, not its hypothetical inception date.
56
<PAGE>
The average annual total return based on net asset
value for each class of shares for the one-, five- and ten-year
periods ended May 31, 1999 (or since inception through that date,
as noted) was as follows:
12 Months
Ended 5 Years Ended 10 Years Ended
5/31/99 5/31/99 5/31/99
_________ _____________ ______________
Class A 6.58% 19.20% 15.35%
Class B 5.68% 18.21% 15.46%*
Class C 5.36% 18.16% 16.60%*
Advisor Class 7.02% 21.39%* N/A
*Inception Dates: Class B - March 4, 1991
Class C - May 3, 1993
Advisor Class - October 2, 1996
The Fund's total return is computed separately for
Class A, Class B, Class C and Advisor Class shares. The Fund's
total return is not fixed and will fluctuate in response to
prevailing market conditions or as a function of the type and
quality of the securities in the Fund's portfolio and the Fund's
expenses. Total return information is useful in reviewing the
Fund's performance but such information may not provide a basis
for comparison with bank deposits or other investments which pay
a fixed return for a stated period of time. An investor's
principal invested in the Fund is not fixed and will fluctuate in
response to prevailing market conditions.
Advertisements quoting performance rankings of the Fund
as measured by financial publications or independent
organizations such as Lipper, Inc. and Morningstar, Inc. and
advertisements presenting the historical record of payments of
income dividends by the Fund may also from time to time be sent
to investors or placed in magazines such as Barron's, Business
Week, Changing Times, Fortune, Forbes and Money Magazine,
newspapers such as The New York Times or The Wall Street Journal
or other media on behalf of the Fund.
Additional Information
Any shareholder inquiries may be directed to the
shareholder's broker or other financial adviser or to Alliance
Fund Services, Inc. at the address or telephone numbers shown on
the front cover of this Statement of Additional Information. This
Statement of Additional Information does not contain all the
57
<PAGE>
information set forth in the Registration Statement filed by the
Fund with the Commission. Copies of the Registration Statement
may be obtained at a reasonable charge from the Commission or may
be examined, without charge, at the offices of the Commission in
Washington, D.C.
58
<PAGE>
______________________________________________________________
REPORT OF INDEPENDENT ACCOUNTANTS AND
FINANCIAL STATEMENTS
______________________________________________________________
59
<PAGE>
THE ALLIANCE FUND
SEMI-ANNUAL REPORT
MAY 31, 1999
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
<PAGE>
THE ALLIANCE FUND
ANNUAL REPORT
NOVEMBER 30, 1998
ALLIANCE CAPITAL
PORTFOLIO OF INVESTMENTS
NOVEMBER 30, 1998 THE ALLIANCE FUND
_______________________________________________________________________________
COMPANY SHARES VALUE
- -------------------------------------------------------------------------
COMMON STOCKS-97.3%
CONSUMER SERVICES-20.3%
AIRLINES-8.8%
Alaska Air Group, Inc. (a) 250,300 $ 9,370,606
America West Holdings Corp. Cl.B (a) 300,000 4,237,500
Continental Airlines, Inc. Cl.B (a) 1,520,000 53,675,000
Northwest Airlines Corp. Cl.A (a) 1,058,300 26,523,644
------------
93,806,750
APPAREL-0.4%
Nautica Enterprises, Inc. (a) 130,400 2,567,250
Wolverine World Wide, Inc. 104,700 1,426,537
------------
3,993,787
BROADCASTING & CABLE-1.3%
CBS Corp. 400,000 11,925,000
Fox Entertainment Group, Inc. (a) 70,700 1,670,287
TCI Group Series A (a) 2,959 125,018
------------
13,720,305
ENTERTAINMENT & LEISURE-7.9%
Carnival Corp. Cl.A 1,375,000 47,437,500
Royal Caribbean Cruises, Ltd. 1,240,000 37,665,000
------------
85,102,500
RESTAURANTS & LODGING-1.2%
Extended Stay America, Inc. (a) 1,200,000 12,000,000
Suburban Lodges of America, Inc. (a) 98,000 784,000
------------
12,784,000
RETAIL-GENERAL MERCHANDISE-0.0%
Dickson Concepts International, Ltd. (b) 357,500 385,526
MISCELLANEOUS-0.7%
Newell Co. 175,000 7,743,750
------------
217,536,618
FINANCE-19.5%
BROKERAGE & MONEY MANAGEMENT-4.8%
Edwards (A.G.), Inc. 520,000 19,175,000
Legg Mason, Inc. 1,072,700 31,979,869
------------
51,154,869
INSURANCE-7.3%
CNA Financial Corp. (a) 1,275,000 54,506,250
IPC Holdings, Ltd. 112,100 2,732,437
NAC Re Corp. 100,000 4,775,000
PMI Group, Inc. 250,000 13,671,875
Travelers Property Casualty Corp. Cl.A 75,000 2,582,813
------------
78,268,375
MORTGAGE BANKING-0.2%
Washington Mutual, Inc. 57,120 2,213,400
REAL ESTATE-1.6%
Excel Legacy Corp. (a) 158,000 533,250
New Plan Excel Realty Trust, Inc. (a) 189,600 4,147,500
Prime Retail, Inc. 1,200,000 12,675,000
------------
17,355,750
MISCELLANEOUS-5.6%
MBNA Corp. 2,500,000 56,718,750
Newcourt Credit Group, Inc. (c) 80,000 2,830,000
------------
59,548,750
------------
208,541,144
6
THE ALLIANCE FUND
_______________________________________________________________________________
COMPANY SHARES VALUE
- -------------------------------------------------------------------------
TECHNOLOGY-18.2%
COMMUNICATION EQUIPMENT-5.7%
Embratel Participacoes, SA (ADR) (a)(d) 80,000 $ 1,280,000
Global Telesystems Group, Inc. (a) 1,000,000 43,406,250
NTL, Inc. (a) 24,900 1,386,619
PairGain Technologies, Inc. (a) 884,400 8,954,550
Tele Celular Sul Participacoes,
SA (ADR) (a)(d) 8,000 182,000
Tele Centro Oeste Celular Participacoes,
SA (ADR) (a)(d) 26,640 126,540
Tele Centro Sul Participacoes,
SA (ADR) (a)(d) 16,000 913,000
Tele Leste Celular Participacoes,
SA (ADR) (a)(d) 1,600 66,900
Tele Nordeste Celular Participacoes,
SA (ADR) (a)(d) 4,000 104,750
Tele Norte Celular Participacoes,
SA (ADR) (a)(d) 1,600 65,500
Tele Norte Leste Participacoes,
SA (ADR) (a)(d) 80,000 1,360,000
Tele Sudeste Celular Participacoes,
SA (ADR) (a)(d) 16,000 432,000
Telemig Celular Participacoes,
SA (ADR) (a)(d) 4,000 123,500
Telesp Celular Participacoes,
SA (ADR) (a)(d) 32,000 840,000
Telesp Participacoes, SA (ADR) (a)(d) 80,000 2,140,000
------------
61,381,609
COMPUTER SERVICES-1.2%
DBT Online, Inc. (a) 114,000 1,945,125
First Data Corp. 420,000 11,208,750
------------
13,153,875
COMPUTER SOFTWARE-6.3%
HBO & Co. 1,417,800 35,356,387
Network Associates, Inc. (a) 500,000 25,437,500
Novell, Inc. (a) 400,000 6,625,000
------------
67,418,887
NETWORKING SOFTWARE-0.2%
Fore Systems, Inc. (a) 120,000 1,815,000
SEMI-CONDUCTOR COMPONENTS-4.0%
Altera Corp. (a) 350,000 17,171,875
Micron Technology, Inc. (a) 250,000 10,328,125
Xilinx, Inc. (a) 291,100 14,773,325
------------
42,273,325
MISCELLANEOUS-0.8%
Sanmina Holdings Corp. (a) 169,000 8,418,313
------------
194,461,009
CONSUMER MANUFACTURING-10.0%
AUTO & RELATED-5.7%
Budget Group, Inc. Cl.A (a) 250,000 3,125,000
7
PORTFOLIO OF INVESTMENTS (CONTINUED) THE ALLIANCE FUND
_______________________________________________________________________________
COMPANY SHARES VALUE
- -------------------------------------------------------------------------
Dollar Thrifty Automotive Group, Inc. (a) 746,700 $ 9,333,750
Republic Industries, Inc. (a) 2,865,000 48,705,000
------------
61,163,750
TEXTILE PRODUCTS-3.9%
Tommy Hilfiger Corp. (a) 620,000 37,510,000
Unifi, Inc. 200,200 3,853,850
------------
41,363,850
MISCELLANEOUS-0.4%
Industrie Natuzzi SpA (ADR) (e) 209,800 4,641,825
------------
107,169,425
UTILITIES-8.9%
TELEPHONE UTILITY-8.9%
Hyperion Telecommunications, Inc. Cl.A (a) 105,000 1,141,875
Millicom International Cellular, SA (a)(f) 500,000 16,687,500
Telecomunicacoes Brasilieras, SA (ADR) (d) 80,000 13,750
Telephone and Data Systems, Inc. 1,120,000 47,880,000
United States Cellular Corp. (a) 780,000 29,396,250
------------
95,119,375
HEALTH CARE-8.5%
BIOTECHNOLOGY-6.3%
Centocor, Inc. (a) 546,900 22,149,450
GelTex Pharmaceuticals, Inc. (a) 500,000 11,937,500
Genzyme Corp. (a) 150,000 6,309,375
Genzyme Molecular Oncology (a) 16,207 56,724
MedImmune, Inc. (a) 400,000 26,750,000
------------
67,203,049
MEDICAL SERVICES-2.2%
Healthsouth Corp. (a) 1,800,000 24,187,500
------------
91,390,549
ENERGY-5.3%
DOMESTIC INTEGRATED-1.3%
Kerr-McGee Corp. 60,000 2,370,000
USX-Marathon Group 407,000 11,548,625
------------
13,918,625
OIL SERVICE-3.3%
IRI International Corp. (a) 200,000 875,000
Noble Drilling Corp. (a) 2,150,000 24,859,375
Santa Fe International Corp. 800,000 9,950,000
------------
35,684,375
MISCELLANEOUS-0.7%
AES Corp. (a) 50,000 2,287,500
Stolt Comex Seaway, SA 20,700 174,656
(ADR) (a)(h) 620,000 4,417,500
------------
6,879,656
------------
56,482,656
CAPITAL GOODS-4.6%
ELECTRICAL EQUIPMENT-2.3%
Philips Electronics NV (ADR) (g) 350,000 22,159,375
Western Wireless Corp. Cl.A (a) 120,000 2,175,000
------------
24,334,375
POLLUTION CONTROL-2.3%
United States Filter Corp. (a) 1,105,000 24,448,125
------------
48,782,500
CONSUMER STAPLES-0.8%
FOOD-0.6%
Tyson Foods, Inc. Cl.A 320,000 6,620,000
8
THE ALLIANCE FUND
_______________________________________________________________________________
SHARES OR
PRINCIPAL
AMOUNT
COMPANY (000) VALUE
- -------------------------------------------------------------------------
HOUSEHOLD PRODUCTS-0.2%
Viad Corp. 105,000 $ 2,447,813
---------------
9,067,813
TRANSPORTATION-0.5%
SHIPPING-0.2%
OMI Corp. (a) 600,000 1,875,000
MISCELLANEOUS-0.3%
Knightsbridge Tankers, Ltd. 175,000 3,718,750
Marine Transport Corp. 60,000 123,750
---------------
3,842,500
---------------
5,717,500
AEROSPACE & DEFENSE-0.4%
DEFENSE ELECTRONICS-0.4%
Loral Space & Communications, Ltd. (a) 250,000 4,593,750
BASIC INDUSTRY-0.3%
CHEMICALS-0.3%
Crompton & Knowles Corp. 146,700 2,842,313
Total Common Stocks
(cost $990,329,984) 1,041,704,652
SHORT-TERM INVESTMENT-2.0%
COMMERCIAL PAPER-2.0%
Prudential Funding Corp.
5.25%, 12/01/98
(amortized cost $21,450,000) $ 21,450 21,450,000
TOTAL INVESTMENTS-99.3%
(cost $1,011,779,984) 1,063,154,652
Other assets less liabilities-0.7% 8,019,081
NET ASSETS-100% $1,071,173,733
(a) Non-income producing security.
(b) Country of origin--Hong Kong.
(c) Country of origin--Canada.
(d) Country of origin--Brazil.
(e) Country of origin--Italy.
(f) Country of origin--Luxembourg.
(g) Country of origin--Netherlands.
(h) Country of origin--Norway.
Glossary:
ADR - American Depositary Receipt.
See notes to financial statements.
9
STATEMENT OF ASSETS AND LIABILITIES
NOVEMBER 30, 1998 THE ALLIANCE FUND
_______________________________________________________________________________
ASSETS
Investments in securities, at value (cost $1,011,779,984) $1,063,154,652
Cash 3,788
Receivable for investment securities sold 36,273,777
Dividends receivable 439,303
Receivable for capital stock sold 376,521
Total assets 1,100,248,041
LIABILITIES
Payable for investment securities purchased 17,377,026
Payable for capital stock redeemed 9,385,467
Unclaimed dividends 1,005,679
Management fee payable 616,968
Distribution fee payable 261,201
Accrued expenses 427,967
Total liabilities 29,074,308
NET ASSETS $1,071,173,733
COMPOSITION OF NET ASSETS
Capital stock, at par $ 1,808,379
Additional paid-in capital 952,548,405
Accumulated net realized gain on investments and foreign
currency transactions 65,442,232
Net unrealized appreciation of investments and foreign
currency denominated assets and liabilities 51,374,717
$1,071,173,733
CALCULATION OF MAXIMUM OFFERING PRICE
CLASS A SHARES
Net asset value and redemption price per share ($953,181,401/
159,591,089 shares of capital stock issued and outstanding) $5.97
Sales charge-4.25% of public offering price .26
Maximum offering price $6.23
CLASS B SHARES
Net asset value and offering price per share ($85,456,190/
15,499,133 shares of capital stock issued and outstanding) $5.51
CLASS C SHARES
Net asset value and offering price per share ($21,230,850/
3,857,465 shares of capital stock issued and outstanding) $5.50
ADVISOR CLASS SHARES
Net asset value, redemption and offering price per share
($11,305,292/1,890,240 shares of capital stock issued
and outstanding) $5.98
See notes to financial statements.
10
STATEMENT OF OPERATIONS
YEAR ENDED NOVEMBER 30, 1998 THE ALLIANCE FUND
_______________________________________________________________________________
INVESTMENT INCOME
Dividends (net of foreign taxes withheld
of $150,176) $7,830,475
Interest 433,100 $ 8,263,575
EXPENSES
Management fee 8,274,404
Distribution fee-Class A 2,217,958
Distribution fee-Class B 879,957
Distribution fee-Class C 248,458
Transfer agency 1,130,195
Custodian 238,036
Printing 162,479
Administrative 124,000
Registration 109,571
Taxes 100,800
Audit and legal 74,105
Directors' fees 30,000
Miscellaneous 19,540
Total expenses 13,609,503
Net investment loss (5,345,928)
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
AND FOREIGN CURRENCY TRANSACTIONS
Net realized gain on investment transactions 83,664,602
Net realized loss on foreign currency transactions (29,583)
Net change in unrealized appreciation of:
Investments (180,389,597)
Foreign currency denominated assets and liabilities 49
Net loss on investments and foreign currency transactions (96,754,529)
NET DECREASE IN NET ASSETS FROM OPERATIONS $(102,100,457)
See notes to financial statements.
11
STATEMENT OF CHANGES IN NET ASSETS THE ALLIANCE FUND
_______________________________________________________________________________
YEAR ENDED YEAR ENDED
NOVEMBER 30, NOVEMBER 30,
1998 1997
--------------- ---------------
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS
Net investment loss $ (5,345,928) $ (3,938,274)
Net realized gain on investments and
foreign currency transactions 83,635,019 312,544,907
Net change in unrealized appreciation
of investments and foreign currency
denominated assets and liabilities (180,389,548) 4,067,927
Net increase (decrease) in net assets
from operations (102,100,457) 312,674,560
DIVIDENDS AND DISTRIBUTIONS TO
SHAREHOLDERS FROM:
Net investment income
Class A -0- (2,584,179)
Advisor Class -0- (4,914)
Net realized gain on investments
Class A (297,697,708) (136,315,610)
Class B (19,042,143) (6,355,169)
Class C (5,056,456) (1,970,589)
Advisor Class (2,587,444) (148,119)
CAPITAL STOCK TRANSACTIONS
Net increase 196,615,939 77,246,571
Total increase (decrease) (229,868,269) 242,542,551
NET ASSETS
Beginning of year 1,301,042,002 1,058,499,451
End of year $1,071,173,733 $1,301,042,002
See notes to financial statements.
12
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 1998 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 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 company taxable income and net realized gains, if any, to
shareholders. Therefore, no provisions for federal income or excise taxes are
required.
13
NOTES TO FINANCIAL STATEMENTS (CONTINUED) THE ALLIANCE FUND
_______________________________________________________________________________
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. During the current fiscal year, permanent differences,
primarily due to net operating losses resulted in a net increase in
undistributed net investment income and accumulated net realized gain on
investments and foreign currency transactions and a corresponding decrease in
additional paid-in capital. This reclassification had no effect on net assets.
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 $124,000 to the Manager
representing the cost of certain legal and accounting services provided to the
Fund by the Manager for the year ended November 30, 1998.
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 $900,389 for the year ended November 30, 1998.
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 $95,833 from the sale of Class
A shares and $6,052, $128,714 and $9,172 in contingent deferred sales charges
imposed upon redemptions by shareholders of Class A, Class B and Class C
shares, respectively, for the year ended November 30, 1998.
Brokerage commissions paid on investment transactions for the year ended
November 30, 1998 amounted to $3,941,458, of which $55,430 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
14
THE ALLIANCE FUND
_______________________________________________________________________________
reimbursed by the Fund in the amount of $5,530,463 and $1,205,589, 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 $1,296,496,226 and $1,458,642,049,
respectively, for the year ended November 30, 1998. There were no purchases or
sales of U.S. government or government agency obligations for the year ended
November 30, 1998. At November 30, 1998, 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
$137,207,509 and gross unrealized depreciation of investments was $85,832,841,
resulting in net unrealized appreciation of $51,374,668.
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:
<TABLE>
<CAPTION>
SHARES AMOUNT
---------------------------- ----------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
NOVEMBER 30, NOVEMBER 30, NOVEMBER 30, NOVEMBER 30,
1998 1997 1998 1997
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
CLASS A
Shares sold 19,105,150 6,987,684 $127,532,913 $ 57,214,484
Shares issued in reinvestment of
dividends and distributions 36,393,823 16,635,560 236,559,827 106,301,324
Shares converted from Class B 195,410 212,659 1,290,096 1,657,992
Shares redeemed (34,273,913) (15,229,370) (226,164,435) (116,622,533)
Net increase 21,420,470 8,606,533 $139,218,401 $ 48,551,267
CLASS B
Shares sold 8,241,290 4,424,115 $ 52,183,984 $ 33,748,548
Shares issued in reinvestment of
distributions 2,936,987 865,292 17,768,641 5,287,064
Shares converted to Class A (210,591) (223,476) (1,290,096) (1,657,992)
Shares redeemed (4,012,134) (2,525,999) (23,782,439) (18,835,577)
Net increase 6,955,552 2,539,932 $ 44,880,090 $ 18,542,043
CLASS C
Shares sold 40,005,443 2,634,424 $228,800,301 $ 20,389,284
Shares issued in reinvestment of
distributions 783,141 248,536 4,745,791 1,518,562
Shares redeemed (39,217,160) (2,472,942) (225,320,097) (19,320,033)
Net increase 1,571,424 410,018 $ 8,225,995 $ 2,587,813
</TABLE>
15
NOTES TO FINANCIAL STATEMENTS (CONTINUED) THE ALLIANCE FUND
_______________________________________________________________________________
<TABLE>
<CAPTION>
SHARES AMOUNT
---------------------------- ----------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
NOVEMBER 30, NOVEMBER 30, NOVEMBER 30, NOVEMBER 30,
1998 1997 1998 1997
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
ADVISOR CLASS
Shares sold 1,262,591 2,621,487 $ 8,223,010 $ 21,634,966
Shares issued in reinvestment of
dividends and distributions 394,506 22,857 2,560,344 145,601
Shares redeemed (948,689) (1,602,903) (6,491,901) (14,215,119)
Net increase 708,408 1,041,441 $ 4,291,453 $ 7,565,448
</TABLE>
16
FINANCIAL HIGHLIGHTS THE ALLIANCE FUND
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
CLASS A
------------------------------------------------------------------------------------
JAN. 1, 1994
YEAR ENDED NOVEMBER 30, TO YEAR ENDED
------------------------------------------------------- NOVEMBER 30, DECEMBER 31,
1998 1997 1996 1995 1994(A) 1993
------------ -------------- ----------- ------------ ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $8.70 $7.71 $7.72 $6.63 $6.85 $6.68
INCOME FROM INVESTMENT OPERATIONS
Net investment income (loss) (.02)(b) (.02)(b) .02 .02(b) .01 .02
Net realized and unrealized gain (loss)
on investments and foreign currency
transactions (.54) 2.09 1.06 2.08 (.23) .93
Net increase (decrease) in net asset
value from operations (.56) 2.07 1.08 2.10 (.22) .95
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income -0- (.02) (.02) (.01) -0- (.02)
Distributions from net realized gains (2.17) (1.06) (1.07) (1.00) -0- (.76)
Total dividends and distributions (2.17) (1.08) (1.09) (1.01) -0- (.78)
Net asset value, end of period $5.97 $8.70 $7.71 $7.72 $6.63 $6.85
TOTAL RETURN
Total investment return based on net
asset value (c) (8.48)% 31.82% 16.49% 37.87% (3.21)% 14.26%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $953,181 $1,201,435 $999,067 $945,309 $760,679 $831,814
Ratio of expenses to average net assets 1.03% 1.03% 1.04% 1.08% 1.05%(d) 1.01%
Ratio of net investment income (loss)
to average net assets (.36)% (.29)% .30% .31% .21%(d) .27%
Portfolio turnover rate 106% 158% 80% 81% 63% 66%
</TABLE>
See footnote summary on page 20.
17
FINANCIAL HIGHLIGHTS (CONTINUED) THE ALLIANCE FUND
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
CLASS B
------------------------------------------------------------------------------------
JAN. 1, 1994
YEAR ENDED NOVEMBER 30, TO YEAR ENDED
------------------------------------------------------- NOVEMBER 30, DECEMBER 31,
1998 1997 1996 1995 1994(A) 1993
------------ -------------- ----------- ------------ ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $8.25 $7.40 $7.49 $6.50 $6.76 $6.64
INCOME FROM INVESTMENT OPERATIONS
Net investment loss (.07)(b) (.08)(b) (.01) (.03)(b) (.03) (.03)
Net realized and unrealized gain (loss)
on investments and foreign currency
transactions (.50) 1.99 .99 2.02 (.23) .91
Net increase (decrease) in net asset
value from operations (.57) 1.91 .98 1.99 (.26) .88
LESS: DISTRIBUTIONS
Distributions from net realized gains (2.17) (1.06) (1.07) (1.00) -0- (.76)
Net asset value, end of period $5.51 $8.25 $7.40 $7.49 $6.50 $6.76
TOTAL RETURN
Total investment return based on net
asset value (c) (9.27)% 30.74% 15.47% 36.61% (3.85)% 13.28%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $85,456 $70,461 $44,450 $31,738 $18,138 $12,402
Ratio of expenses to average net assets 1.84% 1.85% 1.87% 1.90% 1.89%(d) 1.90%
Ratio of net investment loss
to average net assets (1.17)% (1.12)% (.53)% (.53)% (.60)%(d) (.64)%
Portfolio turnover rate 106% 158% 80% 81% 63% 66%
</TABLE>
See footnote summary on page 20.
18
THE ALLIANCE FUND
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
CLASS C
-------------------------------------------------------------------------------
JANUARY 1, MAY 3,
1994 1993(E)
YEAR ENDED NOVEMBER 30, TO TO
--------------------------------------------------- NOVEMBER 30, DECEMBER 31,
1998 1997 1996 1995 1994(A) 1993
------------ ----------- ----------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $8.26 $7.41 $7.50 $6.50 $6.77 $6.67
INCOME FROM INVESTMENT OPERATIONS
Net investment loss (.07)(b) (.08)(b) (.02) (.03)(b) (.03) (.02)
Net realized and unrealized gain (loss)
on investments and foreign currency
transactions (.52) 1.99 1.00 2.03 (.24) .88
Net increase (decrease) in net asset
value from operations (.59) 1.91 .98 2.00 (.27) .86
LESS: DISTRIBUTIONS
Distributions from net realized gains (2.17) (1.06) (1.07) (1.00) -0- (.76)
Net asset value, end of period $5.50 $8.26 $7.41 $7.50 $6.50 $6.77
TOTAL RETURN
Total investment return based on net
asset value (c) (9.58)% 30.72% 15.48% 36.79% (3.99)% 13.95%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $21,231 $18,871 $13,899 $10,078 $6,230 $4,006
Ratio of expenses to average net assets 1.84% 1.83% 1.86% 1.89% 1.87%(d) 1.94%(d)
Ratio of net investment loss
to average net assets (1.18)% (1.10)% (.51)% (.51)% (.59)%(d) (.74)%(d)
Portfolio turnover rate 106% 158% 80% 81% 63% 66%
</TABLE>
See footnote summary on page 20.
19
FINANCIAL HIGHLIGHTS (CONTINUED) THE ALLIANCE FUND
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
ADVISOR CLASS
-----------------------------------
OCT. 2,
1996(E)
YEAR ENDED NOVEMBER 30, TO
------------------------ NOV. 30,
1998 1997 1996
----------- ----------- ----------
Net asset value, beginning of period $8.69 $7.71 $6.99
INCOME FROM INVESTMENT OPERATIONS
Net investment income (loss) (.01)(b) (.02)(b) -0-
Net realized and unrealized gain (loss)
on investments and foreign currency
transactions (.53) 2.10 .72
Net increase in net asset
value from operations (.54) 2.08 .72
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income -0- (.04) -0-
Distributions from net realized gains (2.17) (1.06) -0-
Total dividends and distributions (2.17) (1.10) -0-
Net asset value, end of period $5.98 $8.69 $7.71
TOTAL RETURN
Total investment return based on net
asset value (c) (8.19)% 32.00% 10.30%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $11,305 $10,275 $1,083
Ratio of expenses to average net assets .83% .83% .89%(d)
Ratio of net investment income (loss)
to average net assets (.16)% (.21)% .38%(d)
Portfolio turnover rate 106% 158% 80%
(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.
20
REPORT OF INDEPENDENT ACCOUNTANTS THE ALLIANCE FUND
_______________________________________________________________________________
TO THE BOARD OF DIRECTORS AND SHAREHOLDERS OF THE ALLIANCE FUND, INC.
In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of The Alliance Fund, Inc. (the
"Fund") at November30, 1998, the results of its operations for the year then
ended, the changes in its net assets for each of the two years in the period
then ended and the financial highlights for each of the periods indicated, in
conformity with generally accepted accounting principles. These financial
statements and financial highlights (hereafter referred to as "financial
statements") are the responsibility of the Fund's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement
presentation. We believe that our audits, which included confirmation of
securities at November 30, 1998 by correspondence with the custodian and
brokers, provide a reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
New York, New York
January 8, 1999
TAX INFORMATION (UNAUDITED)
_______________________________________________________________________________
In order to meet certain requirements of the Internal Revenue Code we are
advising you that $182,453,983 and $26,919,440 of the capital gain
distributions paid by the Fund during the fiscal year November 30, 1998 are
subject to the maximum tax rates of 28% and 20% respectively. Shareholders
should not use the above information to prepare their tax returns. The
information necessary to complete your income tax returns will be included with
your Form 1099 DIV which will be sent to you separately in January 1999.
21
<PAGE>
______________________________________________________________
APPENDIX A:
CERTAIN EMPLOYEE BENEFIT PLANS
______________________________________________________________
Employee benefit plans described below which are
intended to be tax-qualified under section 401(a) of the Internal
Revenue Code of 1986, as amended ("Tax Qualified Plans"), for
which Merrill Lynch, Pierce, Fenner & Smith Incorporated or an
affiliate thereof ("Merrill Lynch") is recordkeeper (or with
respect to which recordkeeping services are provided pursuant to
certain arrangements as described in paragraph (ii) below)
("Merrill Lynch Plans") are subject to specific requirements as
to the Fund shares which they may purchase. Notwithstanding
anything to the contrary contained elsewhere in this Statement of
Additional Information, the following Merrill Lynch Plans are not
eligible to purchase Class A shares and are eligible to purchase
Class B shares of the Fund at net asset value without being
subject to a contingent deferred sales charge:
(i) Plans for which Merrill Lynch is the recordkeeper on a
daily valuation basis, if when the plan is established
as an active plan on Merrill Lynch's recordkeeping
system:
(a) the plan is one which is not already
investing in shares of mutual funds or
interests in other commingled investment
vehicles of which Merrill Lynch Asset
Management, L.P. is investment adviser or
manager ("MLAM Funds"), and either (A) the
aggregate assets of the plan are less than
$3 million or (B) the total of the sum of
(x) the employees eligible to participate in
the plan and (y) those persons, not
including any such employees, for whom a
plan account having a balance therein is
maintained, is less than 500, each of (A)
and (B) to be determined by Merrill Lynch in
the normal course prior to the date the plan
is established as an active plan on Merrill
Lynch's recordkeeping system (an "Active
Plan"); or
(b) the plan is one which is already investing
in shares of or interests in MLAM Funds and
the assets of the plan have an aggregate
value of less than $5 million, as determined
A-1
<PAGE>
by Merrill Lynch as of the date the plan
becomes an Active Plan.
For purposes of applying (a) and (b), there
are to be aggregated all assets of any Tax-
Qualified Plan maintained by the sponsor of
the Merrill Lynch Plan (or any of the
sponsor's affiliates) (determined to be such
by Merrill Lynch) which are being invested
in shares of or interests in MLAM Funds,
Alliance Mutual Funds or other mutual funds
made available pursuant to an agreement
between Merrill Lynch and the principal
underwriter thereof (or one of its
affiliates) and which are being held in a
Merrill Lynch account.
(ii) Plans for which the recordkeeper is not Merrill Lynch,
but which are recordkept on a daily valuation basis by
a recordkeeper with which Merrill Lynch has a
subcontracting or other alliance arrangement for the
performance of recordkeeping services, if the plan is
determined by Merrill Lynch to be so eligible and the
assets of the plan are less than $3 million.
Class B shares of the Fund held by any of the above-
described Merrill Lynch Plans are to be replaced at Merrill
Lynch's direction through conversion, exchange or otherwise by
Class A shares of the Fund on the earlier of the date that the
value of the plan's aggregate assets first equals or exceeds $5
million or the date on which any Class B share of the Fund held
by the plan would convert to a Class A share of the Fund as
described under "Purchase of Shares" and "Redemption and
Repurchase of Shares."
Any Tax Qualified Plan, including any Merrill Lynch
Plan, which does not purchase Class B shares of the Fund without
being subject to a contingent deferred sales charge under the
above criteria is eligible to purchase Class B shares subject to
a contingent deferred sales charge as well as other classes of
shares of the Fund as set forth above under "Purchase of Shares"
and "Redemption and Repurchase of Shares."
A-2
00250430.at5
