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This is filed pursuant to Rule 497(e).
File Nos. 2-11023 and 811-00126
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(LOGO) ALLIANCE GROWTH AND INCOME 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, 2000
________________________________________________________________
This Statement of Additional Information is not a prospectus
but supplements and should be read in conjunction with the
current Prospectus, dated February 1, 2000, for Alliance Growth
and Income Fund, Inc. (the "Fund") that offers Class A, Class B
and Class C shares of the Fund and the current Prospectus, dated
February 1, 2000, 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, the "Prospectus"). Copies of such
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
________________________________________________________________
Alliance Growth and Income Fund, Inc. (the "Fund) is a
diversified, open-end investment company. Except as otherwise
indicated, the 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 Board of Directors without a
shareholder vote. However, the Fund will not change its
investment policies without contemporaneous written notice to its
shareholders. There can be, of course, no assurance that the Fund
will achieve its investment objective.
Investment Objectives
It is the policy of the Fund to seek to balance the
objectives of reasonable current income and reasonable
opportunity for appreciation through investments primarily in
dividend-paying common stocks of good quality. Its portfolio is
presently so constituted, although it may invest whenever the
economic outlook is unfavorable for common stock investments in
other types of securities, such as bonds, convertible bonds,
preferred stocks, convertible preferred stocks, etc. The Fund
cannot deviate from this objective and policy without shareholder
approval.
How the Fund Pursues its Objective
Purchases and sales of portfolio securities are made at
such times and in such amounts as deemed advisable in light of
market, economic and other conditions, irrespective of the volume
of portfolio turnover. The Fund engages primarily in holding
securities for investment and not for trading purposes.
Investment in Covered Call Options. Subject to market
conditions, the Fund may try to realize income by writing covered
call option contracts provided that the option is listed on a
domestic securities exchange and that no option will be written
if, as a result, more than 25% of the Fund's assets are subject
to call options. A covered call option is an option on a
security which the Fund owns or can acquire by converting a
convertible security it owns. The purchaser of the option
acquires the right to buy the security from the Fund at a fixed
exercise price at any time prior to the expiration of the option,
regardless of the market price of the security at that time. A
security on which an option has been written will be held in
escrow by the Fund's custodian until the option expires, is
exercised, or a closing purchase transaction is made.
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The Fund thus forgoes the opportunity to profit from an
increase in the market price in the underlying security above the
exercise price, in return for the premium it receives from the
purchaser of the option. The Fund's management believes that
such premiums will increase the Fund's income without subjecting
it to substantial risks.
The Fund will purchase call options only to close out a
position in an option written by it. In order to close out a
position, the Fund will make a "closing purchase transaction" if
such is available. In such a transaction, the Fund will purchase
a call option on the same security with the same exercise price
and expiration date as the call option which it has previously
written. When a security is sold from the Fund's portfolio
against which a call option has been written, the Fund will
effect a closing purchase transaction so as to close out any
existing call option on that security. The Fund will realize a
profit or loss from a closing purchase transaction if the amount
paid to purchase a call option is less or more than the amount
received as a premium from the writing thereof. A closing
purchase transaction cannot be made if trading in the option has
been suspended.
The premium received by the Fund upon writing a call
option will increase the Fund's assets, and a corresponding
liability will be recorded and subsequently adjusted from day to
day to the current value of the option written. For example, if
the current value of the option exceeds the premium received, the
excess would be an unrealized loss and, conversely, if the
premium exceeds the current value, such excess would be an
unrealized gain. The current value of the option will be the
last sales price on the principal exchange on which the option is
traded or, in the absence of any transactions, the mean between
the closing bid and asked price.
Except as stated above, the Fund may not purchase or
sell puts or calls or combinations thereof.
Foreign Securities. The Fund may invest in foreign
securities but, although not a fundamental policy, will not make
any such investments unless such securities are listed on a
national securities exchange. The purchase of foreign securities
entails certain political and economic risks, and accordingly,
the Fund has restricted its investments in securities in this
category to issues of high quality. Payment of interest and
principal upon these obligations may also be affected by
governmental action in the country of domicile (generally
referred to as "sovereign risk"). Examples of governmental
actions would be the imposition of currency controls, interest
limitations, seizure of assets, or the declaration of a
moratorium. In addition, evidences of ownership of portfolio
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securities may be held outside of the U.S., and the Fund may be
subject to the risks associated with the holding of such property
overseas.
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 Alliance Capital
Management L.P., the Fund's Adviser (the "Adviser"), will try to
limit these risks.
Portfolio Turnover. The Adviser anticipates that the
Fund's annual rate of portfolio turnover will not be in excess of
100% in future years. A 100% turnover rate would occur, for
example, if all the securities in the Fund's portfolio were
replaced once in a period of one year. A portfolio turnover rate
approximating 100% involves correspondingly greater brokerage
commission expenses than would a lower rate, which must be borne
by the Fund and its shareholders.
Securities Ratings. The ratings of securities by S&P,
Moody's, Duff & Phelps and Fitch are a generally accepted
barometer of credit risk. They are, however, subject to certain
limitations from an investor's standpoint. The rating of an
issuer is heavily weighted by past developments and does not
necessarily reflect probable future conditions. There is
frequently a lag between the time a rating is assigned and the
time it is updated. In addition, there may be varying degrees of
difference in credit risk of securities within each rating
category.
Securities rated Aaa by Moody's and AAA by S&P, Duff &
Phelps and Fitch are considered to be of the highest quality;
capacity to pay interest and repay principal is extremely strong.
Securities rated Aa by Moody's and AA by S&P, Duff & Phelps and
Fitch are considered to be high quality; capacity to repay
principal is considered very strong, although elements may exist
that make risks appear somewhat larger than exist with securities
rated Aaa or AAA. Securities rated A are considered by Moody's to
possess adequate factors giving security to principal and
interest. S&P, Duff & Phelps and Fitch consider such securities
to have a strong capacity to pay interest and repay principal.
Such securities are more susceptible to adverse changes in
economic conditions and circumstances than higher-rated
securities.
Securities rated Baa by Moody's and B by S&P, Duff &
Phelps and Fitch are considered to have an adequate capacity to
pay interest and repay principal. Such securities are considered
to have speculative characteristics and share some of the same
characteristics as lower-rated securities. Sustained periods of
deteriorating economic conditions or of rising interest rates are
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more likely to lead to a weakening in the issuer's capacity to
pay interest and repay principal than in the case of higher-rated
securities. Securities rated Ba by Moody's and by S&P, Duff &
Phelps and Fitch are considered to have speculative
characteristics with respect to capacity to pay interest and
repay principal over time; their future cannot be considered as
well-assured. Securities rated B by Moody's, S&P, Duff & Phelps
and Fitch are considered to have highly speculative
characteristics with respect to capacity to pay interest and
repay principal. Assurance of interest and principal payments or
of maintenance of other terms of the contract over any long
period of time may be small.
Securities rated Caa by Moody's and CCC by S&P, Duff &
Phelps and Fitch are of poor standing and there is a present
danger with respect to payment of principal or interest.
Securities rated Ca by Moody's and CC by S&P and Fitch are
minimally protected, and default in payment of principal or
interest is probable. Securities rated C by Moody's, S&P and
Fitch are in imminent default in payment of principal or interest
and have extremely poor prospects of ever attaining any real
investment standing. Securities rated D by S&P and Fitch are in
default. The issuer of securities rated by Duff & Phelps is
under an order of liquidation.
Certain Fundamental Investment Policies
The following investment policies of the Fund may not be
changed without affirmative shareholder action:
The Fund may not:
(1) purchase the securities of any issuer (other
than the United States Government) if upon such purchase more
than 5% of the Fund's net assets would consist of the securities
of such issuer or the Fund would own more than 10% of the
outstanding voting securities of such issuer;
(2) purchase the securities of any other investment
company except in a regular transaction in the open market;
(3) purchase the securities of any issuer the
business of which has been in continuous operation for less than
three years;
(4) retain investments in the securities of any
issuer if directors or officers of the Fund or certain other
"interested persons" own more than 5% of such securities;
(5) issue any securities senior to the capital
stock offered hereby; or
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(6) purchase any securities on margin, borrow money
or sell securities short, except that the Fund may borrow in an
amount up to 10% of its total assets to meet redemption requests
and for the clearance of purchases and sales of portfolio
securities (this borrowing provision is not for investment
leverage but solely to facilitate management of the portfolio to
enable the Fund to meet redemption requests where the liquidation
of portfolio securities is deemed to be disadvantageous or
inconvenient and to obtain such short-term credits as may be
necessary for the clearance of purchases and sales of portfolio
securities; all borrowings at any time outstanding will be repaid
before any additional investments are made; the Fund will not
mortgage, pledge or hypothecate any assets in connection with any
such borrowing in excess of 15% of the Fund's total assets). The
Fund does not invest in other companies for the purpose of
exercising control of management.
The Fund may not make loans to other persons except
certain call loans upon collateral security. The Fund does not
intend to make such call loans.
It is the Fund's policy not to concentrate its
investments in any one industry by investment of more than 25% of
the value of its total assets in such industry, underwrite
securities issued by other persons, purchase any securities as to
which it might be deemed a statutory underwriter under the
Securities Act of 1933, as amended (the "Securities Act"),
purchase or sell commodities or commodity contracts (except
financial forward and futures contracts and options on such
contracts) or engage in the business of purchasing and selling
real estate.
In addition, the Fund has undertaken with the securities
administrators of certain states where the Fund's shares are sold
not to invest any part of its total assets in interests in oil,
gas, or other mineral exploration or development programs, that
it will not maintain more than 15% of its average net assets in
illiquid securities (excluding Rule 144A securities), that it
will not purchase or sell real property (including limited
partnership interests, but excluding readily marketable interests
in real estate investment trusts or readily marketable securities
of companies which invest in real estate), that it will not
invest in warrants (other than warrants acquired by the Fund as a
part of a unit or attached to securities at the time of
purchase), if as a result such warrants valued at the lower of
cost or market, would exceed 5% of the value of the Fund's assets
at the time of purchase provided that not more than 2% of the
Fund's net assets at the time of purchase may be invested in
warrants not listed on the New York Stock Exchange (the
"Exchange") or the American Stock Exchange and that it will
invest only in investment grade fixed income securities.
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________________________________________________________________
MANAGEMENT OF THE FUND
________________________________________________________________
Adviser
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 advisory agreement (the "Advisory 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 Adviser is a leading international adviser managing
client accounts with assets as of December 31, 1999 totaling more
than $368 billion (of which more than $169 billion represented
assets of investment companies). As of December 31, 1999, the
Adviser managed retirement assets for many of the largest public
and private employee benefit plans (including 31 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 Adviser,
comprising 105 separate investment portfolios, currently have
approximately 5 million shareholder accounts.
Alliance Capital Management Corporation ("ACMC") is the
general partner of the Adviser 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 Adviser.
Alliance Capital Management Holding L.P. ("Alliance Holding")
owns an approximately 41.9% partnership interest in the Adviser.*
Equity interests in Alliance Holding are traded on the New York
____________________
* Until October 29, 1999, Alliance Holding served as the
investment adviser to the Fund. On that date, Alliance
Holding reorganized by transferring its business to the
Adviser. Prior thereto, the Adviser had no material
business operations. One result of the organization was
that the Advisory Agreement, then between the Fund and
Alliance Holding, was transferred to the Adviser 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 Adviser.
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Stock Exchange in the form of units. Approximately 98% of such
interests are owned by the public and management or employees of
the Adviser 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.
Under the Advisory Agreement, the Adviser furnishes
advice and recommendations with respect to the Fund's portfolio
of securities and investments and provides persons satisfactory
to the Board of Directors to act as officers and employees of the
Fund. Such officers and employees, as well as certain Directors
of the Fund may be employees of the Adviser or its affiliates.
The Adviser is, under the Advisory Agreement,
responsible for certain expenses incurred by the Fund, including,
for example, office facilities and certain administrative
services, and any expenses incurred in promoting the sale of Fund
shares (other than the portion of the promotional expenses borne
by the Fund in accordance with an effective plan pursuant to Rule
12b-1 under the 1940 Act, and the costs of printing Fund
prospectuses and other reports to shareholders and fees related
to registration with the Securities and Exchange Commission (the
"Commission")and with state regulatory authorities).
The Fund has, under the Advisory 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 Adviser, the Fund may employ its own personnel.
For such services, it also may utilize personnel employed by the
Adviser or 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 Adviser a total of $130,000 in
respect of such services during the fiscal year of the Fund ended
in 1999.
For the services rendered by the Adviser under the
Advisory Agreement, the Fund pays the Adviser at the annual rate
of .625 of 1% of the first $200 million, .50% of the excess over
$200 million up to $400 million and .45 of 1% of the excess over
$400 million of the average daily value of the Fund's net assets.
The fee is accrued daily and paid monthly. For the fiscal years
of the Fund ended in 1999, 1998 and 1997, the Adviser received
from the Fund advisory fees of $13,402,371, $8,033,332 and
$5,444,322, respectively.
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The Advisory Agreement became effective on July 22,
1992. The Advisory Agreement was approved by the unanimous vote,
cast in person, of the Fund's Directors (including the Directors
who are not parties to the Advisory Agreement or interested
persons, as defined in the 1940 Act, of any such party) at a
meeting called for the purpose and held on October 14, 1991. At
a meeting held on June 11, 1992, a majority of the outstanding
voting securities of the Fund approved the Advisory Agreement.
The Advisory Agreement will remain in effect for
successive twelve-month periods (computed from each November 1)
provided that such continuance is specifically approved at least
annually by the Fund's Directors or by 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 Advisory Agreement, or interested persons, as defined in the
1940 Act, of any such party, at a meeting in person called for
the purpose of voting on such matter. The Advisory Agreement was
approved for another annual term by the Directors of the Fund
including a majority of the Directors who are not "interested
persons" as defined in the 1940 Act, at their Regular Meeting
held on July 14, 1999.
The Advisory Agreement may be terminated 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 Adviser on 60 days' written notice,
and will automatically terminate in the event of its assignment.
The Advisory Agreement provides that the Adviser shall not be
liable under the Advisory Agreement for any mistake of judgment
or in any event whatsoever, except for lack of good faith,
provided that the Adviser shall be liable to the Fund and
security holders by reason of willful misfeasance, bad faith or
gross negligence, or of reckless disregard of its obligations and
duties under the Advisory Agreement.
Certain other clients of the Adviser may have investment
objectives and policies similar to those of the Fund. The Adviser
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
sold, there may be an adverse effect on price or quantity. It is
the policy of the Adviser to allocate advisory recommendations
and the placing of orders in a manner which is deemed equitable
by the Adviser to the accounts involved, including the Fund.
When two or more of the clients of the Adviser (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.
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The Adviser 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
Disciplined Value Fund, Inc., 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 Fund, Inc. and The Alliance Portfolios, 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 trustee, director or officer
of other registered investment companies sponsored by the
Adviser. Unless otherwise specified, the address of each of the
following persons is 1345 Avenue of the Americas, New York, New
York 10105.
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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 1995.
RUTH BLOCK, 69, 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 1995.
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 1995. 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 1995. 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 1995. 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
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.
____________________
** An "interested person" of the Fund as defined in the 1940
Act.
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Officers
JOHN D. CARIFA, Chairman and President, see biography
above.
KATHLEEN A. CORBET, Senior Vice President, 39, is an
Executive Vice President of ACMC, with which she has been
associated since prior to 1995.
PAUL C. RISSMAN, Senior Vice President, 43, is a Senior
Vice President of ACMC, with which he has been associated since
prior to 1995.
THOMAS J. BARDONG, Vice President, 54, is a Senior Vice
President of ACMC, with which he has been associated since prior
to 1995.
FRANK V. CARUSO, Vice President, 43, is a Senior Vice
President of Shields/ACMC, with which he has been associated
since prior to 1995.
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 1995.
ANDREW L. GANGOLF, Assistant Secretary, 45, is a Vice
President and Assistant General Counsel of AFD, with which he has
been associated since prior to 1995..
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 1995.
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 1995.
VINCENT S. NOTO, Controller, 35, is a Vice President of
AFS, with which he has been associated since prior to 1995.
The aggregate compensation paid by the Fund to each of
the Directors during its fiscal year ended October 31, 1999, the
aggregate compensation paid to each of the Directors during
calendar year 1999 by all of the registered investment companies
to which the Adviser 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
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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 of
Total Number Investment
of Investment Portfolios
Companies in Within the
the Alliance Alliance
Total Fund Complex, Fund Complex,
Compensation Including the 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- 50 103
RUTH BLOCK $3,617 $154,263 38 80
DAVID H. DIEVLER $3,735 $210,188 45 87
JOHN H. DOBKIN $3,737 $206,488 42 84
WILLIAM H. FOULK, JR. $3,738 $246,413 45 98
DR. JAMES M. HESTER $3,740 $164,138 39 81
CLIFFORD L. MICHEL $3,740 $183,388 39 83
DONALD J. ROBINSON $2,984 $154,313 41 92
As of January 5, 2000, 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.
________________________________________________________________
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 Fund's shares and to permit the Fund to pay distribution
services fees to defray expenses associated with the distribution
of its Class A shares, Class B shares and Class C shares in
accordance with a plan of distribution which is included in the
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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 October 31, 1999,
the Fund paid distribution services fees for expenditures under
the Agreement, with respect to Class A shares, in amounts
aggregating $3,081,790 which constituted .25%, 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 $2,472,681. Of the
$5,554,471 paid by the Fund and the Adviser under the Rule 12b-1
Plan with respect to the Class A shares, $164,729 was spent on
advertising, $64,685 on the printing and mailing of prospectuses
for persons other than current shareholders, $3,153,084 for
compensation to broker-dealers and other financial intermediaries
(including, $389,340 to the Fund's Principal Underwriter),
$717,794 for compensation to sales personnel, $1,454,179 was
spent on printing of sales literature, travel, entertainment, due
diligence and other promotional expenses.
During the Fund's fiscal year ended October 31, 1999,
the Fund paid distribution services fees for expenditures under
the Agreement, with respect to Class B shares, in amounts
aggregating $12,625,937, 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
$33,659,746. Of the $46,285,683 paid by the Fund and the Adviser
under the Rule 12b-1 Plan with respect to the Class B shares,
$298,692 was spent on advertising, $114,069 on the printing and
mailing of prospectuses for persons other than current
shareholders, $41,642,328 for compensation to broker-dealers and
other financial intermediaries (including, $746,396 to the Fund's
Principal Underwriter), $655,186 for compensation to sales
personnel, $1,476,602 was spent on printing of sales literature,
travel, entertainment, due diligence and other promotional
expenses, and $2,098,806 was spent on interest on Class B shares
financing.
During the Fund's fiscal year ended October 31, 1999,
the Fund paid distribution services fees for expenditures under
the Agreement, with respect to Class C shares, in amounts
aggregating $3,197,078, 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 $2,510,753.
Of the $5,707,831 paid by the Fund and the Adviser under the
Rule 12b-1 Plan with respect to the Class C shares, $89,675 was
spent on advertising, $32,490 on the printing and mailing of
prospectuses for persons other than current shareholders,
$4,824,172 for compensation to broker-dealers and other financial
14
<PAGE>
intermediaries (including, $226,396 to the Fund's Principal
Underwriter), $209,679 for compensation to sales personnel,
$448,115 was spent on printing of sales literature, travel,
entertainment, due diligence and other promotional expenses, and
$103,700 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 charges and
distribution services fees on the Class B 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.
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, respectively,
$55,277,710 (3.00% of the net assets of Class B) and $4,475,791
(.86% 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
15
<PAGE>
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 Rule 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 Adviser 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 November 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. The Agreement
was approved for another annual term 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
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.
16
<PAGE>
Transfer Agency Agreement
AFS, an indirect wholly-owned subsidiary of the Adviser
located at 500 Plaza Drive, Secaucus, New Jersey 07094, receives
a transfer agency fee per account holder of each of the Class A
shares, Class B shares, Class C shares 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 fee 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 October 31, 1999, the Fund
paid AFS $3,157,091 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
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)
17
<PAGE>
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.
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
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.
18
<PAGE>
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 5:00 p.m. Eastern time. The
selected dealer, 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
19
<PAGE>
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
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 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,
20
<PAGE>
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 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***
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
____________________
*** Advisor Class shares are sold only to investors described
above in this section under "General."
21
<PAGE>
deferred sales charge and the ineligibility of certain such plans
to purchase 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
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 1999, 1998 and
1997, the aggregate amounts of underwriting commission payable
with respect to shares of the Fund were $12,819,129, $5,137,865
and $3,034,249, respectively. Of that amount, the Principal
22
<PAGE>
Underwriter received the amounts of, respectively, $887,635,
$220,637 and $137,615, 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 1999, 1998 and 1997, the Principal Underwriter received
contingent deferred sales charges of $44,509, $35,339 and $995,
respectively, on Class A shares, $2,030,158, $790,434 and
$485,137, respectively, on Class B shares, and $93,970, $48,382
and $25,439, 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.
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
23
<PAGE>
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 Adviser may,
pursuant to the Distribution Services Agreement described above,
pay such dealers or agents from its own resources a fee of up to
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
24
<PAGE>
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
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 Disciplined Value Fund, Inc.
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.
25
<PAGE>
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.
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
26
<PAGE>
(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
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
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<PAGE>
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
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
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<PAGE>
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 transactions. 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.
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 a contingent deferred sales charge to certain
categories of investors including: (i) investment management
clients of the Adviser 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 Adviser; present or retired full-time employees of the
Adviser, 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 Adviser, the Principal
Underwriter, Alliance Fund Services, Inc. and their affiliates;
and certain employee benefit plans for employees of the Adviser,
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 advisory or administrative services; and
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<PAGE>
(vi) 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.
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
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<PAGE>
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).
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--Systemic Withdrawal Plan" below).
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<PAGE>
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 will occur on the basis of the
relative net asset values of the two classes, without the
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
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<PAGE>
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.
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 Adviser 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
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<PAGE>
"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
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.
34
<PAGE>
Redemption
Subject only to the limitations described below, the
Fund's Articles of Incorporation require that the Fund redeem 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 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.
35
<PAGE>
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
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 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. The
Fund reserves the right to suspend or terminate its telephone
36
<PAGE>
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 Adviser, the Principal Underwriter or Alliance Fund Services,
Inc. will be 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 days' 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
37
<PAGE>
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.
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
38
<PAGE>
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.
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 Adviser).
In addition, (i) present officers and full-time employees of the
Adviser, (ii) present Directors or Trustees of any Alliance
Mutual Fund and (iii) certain employee benefit plans for
employees of the Adviser, 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
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(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
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 following
Fund business day prior thereto.
None of the Alliance Mutual Funds, the Adviser, 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
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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, 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
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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
on or before December 15 in any year, all Class B or
Class C shares of the Fund held by such 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
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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.
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
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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%
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
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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.
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 Adviser 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 indicated
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
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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.
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
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suspension of the right of redemption or a postponement of the
date of payment on redemption.
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 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
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
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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 investment
company taxable income 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, in the year
declared, and not in the subsequent calendar year in which the
shareholders actually receive the dividend.
Dividends of the Fund's net ordinary income and
distributions of any net realized short-term capital gain are
taxable to shareholders as ordinary income. 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.
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.
Any dividend or distribution received by a shareholder
on shares of the Fund will have the effect of reducing the net
asset value of such shares by the amount of such dividend or
distribution. Furthermore, a dividend or distribution made
shortly after the purchase of such shares by a shareholder,
although in effect a return of capital to that particular
shareholder, would be taxable to him as described above.
Dividends are taxable in the manner discussed regardless of
whether they are paid to the shareholder in cash or are
reinvested in additional shares of the Fund.
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After the end of the taxable year, the Fund will notify
shareholders of the federal income tax status of any
distributions made by the Fund to shareholders during such year.
Any gain or loss arising from a sale or redemption of
Fund shares generally will be capital gain or loss except in the
case of a dealer or a financial institution, and will be long-
term capital gain or loss if the shareholder has held such shares
for more than one year at the time of the sale or redemption;
otherwise it will be short-term capital gain or loss. If a
shareholder has held shares in the Fund for six months or less
and during that period has received a distribution of net capital
gain, any loss recognized by the shareholder on the sale of those
shares during the six-month period will be treated as a long-term
capital loss to the extent of the distribution. In determining
the holding period of such shares for this purpose, any period
during which a shareholder's risk of loss is offset by means of
options, short sales or similar transactions is not counted.
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.
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 identification 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.
The foregoing discussion relates only to United States
federal income tax law as it affects shareholders who are United
States citizens or residents or United States corporations. The
effects of federal income tax law on shareholders who are non-
resident alien individuals or foreign corporations may be
substantially different. Foreign investors should therefore
consult their counsel for further information as to the United
States tax consequences of receipt of income from the Fund.
Certain listed options are considered "section 1256
contracts" for federal income tax purposes. Section 1256
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contracts held by the Fund at the end of each taxable year will
be "marked to market" and treated for federal income tax purposes
as though sold for fair market value on the last business day of
such taxable year. Gain or loss realized by the Fund on section
1256 contracts generally will be considered 60% long-term and 40%
short-term capital gain or loss. The Fund can elect to exempt
its section 1256 contracts which are part of a "mixed straddle"
(as described below) from the application of section 1256.
With respect to options traded over-the-counter or on
certain foreign exchanges, gain or loss realized by the Fund upon
the lapse or sale of such options held by the Fund will be either
long-term or short-term capital gain or loss depending upon the
Fund's holding period with respect to such option. However, gain
or loss realized upon the lapse or closing out of such options
that are written by the Fund will be treated as short-term
capital gain or loss. In general, if the Fund exercises an
option, or an option that the Fund has written is exercised, gain
or loss on the option will not be separately recognized but the
premium received or paid will be included in the calculation of
gain or loss upon disposition of the property underlying the
option.
Any option or other position entered into or held by the
Fund in conjunction with any other position held by the Fund may
constitute a "straddle" for federal income tax purposes. A
straddle of which at least one, but not all, the positions are
section 1256 contracts may constitute a "mixed straddle". In
general, straddles are subject to certain rules that may affect
the character and timing of the Fund's gains and losses with
respect to straddle positions by requiring, among other things,
that (i) loss realized on disposition of one position of a
straddle not be recognized to the extent that the Fund has
unrealized gains with respect to the other position in such
straddle; (ii) the Fund's holding period in straddle positions be
suspended while the straddle exists (possibly resulting in gain
being treated as short-term capital gain rather than long-term
capital gain); (iii) losses recognized with respect to certain
straddle positions which are part of a mixed straddle and which
are non-section 1256 positions be treated as 60% long-term and
40% short-term capital loss; (iv) losses recognized with respect
to certain straddle positions which would otherwise constitute
short-term capital losses be treated as long-term capital losses;
and (v) the deduction of interest and carrying charges
attributable to certain straddle positions may be deferred. The
Treasury Department is authorized to issue regulations providing
for the proper treatment of a mixed straddle where at least one
position is ordinary and at least one position is capital. No
such regulations have yet been issued. Various elections are
available to the Fund which may mitigate the effects of the
straddle rules, particularly with respect to mixed straddles. In
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general, the straddle rules described above do not apply to any
straddles held by the Fund all of the offsetting positions of
which consist of section 1256 contracts.
Income received by the Fund also may be subject to
state, local and foreign income taxes, including taxes withheld
at the source. The United States has entered into tax treaties
with many foreign countries which entitle the Fund to a reduced
rate of such taxes or exemption from taxes on such income. It is
impossible to determine the effective rate of foreign tax in
advance since the amount of the Fund's assets to be invested
within various countries is not known.
It is the present policy of the Fund to distribute to
shareholders all net investment income quarterly 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.
________________________________________________________________
PORTFOLIO TRANSACTIONS
________________________________________________________________
Subject to the general supervision of the Board of
Directors of the Fund, the Adviser is responsible for the
investment decisions and the placing of orders for portfolio
transactions for the Fund. The Adviser determines the broker to
be used in each specific transaction with the objective of
negotiating a combination of the most favorable commission and
the best price obtainable on each transaction (generally defined
as best execution). When consistent with the objective of
obtaining best execution, brokerage may be directed to persons or
firms supplying investment information to the Adviser. There may
be occasions where the transaction cost charged by a broker may
be greater than that which another broker may charge if the Fund
determines in good faith that the amount of such transaction cost
is reasonable in relation to the value of the brokerage, research
and statistical services provided by the executing broker.
Neither the Fund nor the Adviser has entered into
agreements or understandings with any brokers regarding the
placement of securities transactions because of research services
they provide. To the extent that such persons or firms supply
investment information to the Adviser for use in rendering
investment advice to the Fund, such information may be supplied
at no cost to the Adviser and, therefore, may have the effect of
reducing the expenses of the Adviser in rendering advice to the
Fund. While it is impossible to place an actual dollar value on
such investment information, its receipt by the Adviser probably
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does not reduce the overall expenses of the Adviser to any
material extent.
The investment information provided to the Adviser is of
the type described in Section 28(e)(3) of the Securities Exchange
Act of 1934 and is designed to augment the Adviser's own internal
research and investment strategy capabilities. Research services
furnished by brokers through which the Fund effects securities
transactions are used by the Adviser in carrying out its
investment management responsibilities with respect to all its
client accounts.
The Fund may deal in some instances in securities which
are not listed on a national stock exchange but are traded in the
over-the-counter market. The Fund may also purchase listed
securities through the third market, i.e., from a dealer which is
not a member of the exchange on which a security is listed.
Where transactions are executed in the over-the-counter market or
third market, the Fund will seek to deal with the primary market
makers; but when necessary in order to obtain the best price and
execution, it will utilize the services of others. In all cases,
the Fund will attempt to negotiate best execution.
The extent to which commissions that will be charged by
broker-dealers selected by the Fund may reflect an element of
value for research cannot presently be determined. To the extent
that research services of value are provided by broker-dealers
with or through whom the Fund places portfolio transactions, the
Adviser may be relieved of expenses which it might otherwise
bear. Research services furnished by broker-dealers could be
useful and of value to the Adviser in servicing its other clients
as well as the Fund; but, on the other hand, certain research
services obtained by the Adviser as a result of the placement of
portfolio brokerage of other clients could be useful and of value
to it in serving the Fund. Consistent with the Conduct Rules of
the National Association of Securities Dealers, Inc. and subject
to seeking best execution, the Fund may consider sales of shares
of the Fund or other investment companies managed by the Adviser
as a factor in the selection of brokers to execute portfolio
transactions for the Fund.
The Fund may from time to time place orders for the
purchase or sale of securities (including listed call options)
with Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ"),
an affiliate of the Adviser, and with brokers which may have
their transactions cleared or settled, or both, by the Pershing
Division of DLJ. 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 Adviser. With respect to orders
placed with DLJ for execution on a national securities exchange,
52
<PAGE>
commissions received must conform to Section 17(e)(2)(A) of the
1940 Act and Rule 17e-1 thereunder, which permit an affiliated
person of a registered investment company (such as the Fund), or
any affiliated person of such person, to receive a brokerage
commission from such registered investment company provided that
such commission is reasonable and fair compared to the
commissions received by other brokers in connection with
comparable transactions involving similar securities during a
comparable period of time.
During the fiscal years ended October 31, 1999, 1998 and
1997, the Fund incurred brokerage commissions amounting in the
aggregate to $5,724,116, $3,594,269 and $2,342,114. During the
fiscal years ended October 31, 1999, 1998 and 1997, brokerage
commissions amounting in the aggregate to $288,596, $3,115 and
$11,820, respectively, were paid to DLJ and brokerage commissions
amounting in the aggregate to $0, $3,500 and $0, respectively,
were paid to brokers utilizing the Pershing Division of DLJ.
During the fiscal year ended October 31, 1999, the brokerage
commissions paid to DLJ constituted 5.04%% of the Fund's
aggregate brokerage commissions and the brokerage commissions
paid to brokers utilizing the Pershing Division of DLJ
constituted 0% of the Fund's aggregate brokerage commissions.
During the fiscal year ended October 31, 1999, of the Fund's
aggregate dollar amount of brokerage transactions involving the
payment of commissions, 5.04% were effected through DLJ and 0%
were effected through brokers utilizing the Pershing Division of
DLJ. During the fiscal year ended October 31, 1999, transactions
in portfolio securities of the Fund aggregating $4,081,342,538
with associated brokerage commissions of approximately $2,143,050
were allocated to persons or firms supplying research services to
the Fund or the Adviser.
________________________________________________________________
GENERAL INFORMATION
________________________________________________________________
Capitalization
The Fund was organized as a corporation in Maryland in
1932 under the name "Dividend Shares, Inc." The authorized
capital stock of the Fund 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
$.01 par value.
All shares of the Fund, when issued, are fully paid and
non-assessable. The Directors are authorized to reclassify and
issue any unissued shares to any number of additional series and
53
<PAGE>
classes without shareholder approval. Accordingly, the Directors
in the future, for reasons such as the desire to establish one or
more additional portfolios with different investment objectives,
policies or restrictions, may create additional classes or series
of shares. Any issuance of shares of another class or 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 on matters, such as the election of Directors, that
affected both portfolios in substantially the same manner. As to
matters affecting each portfolio differently, such as approval of
the Advisory Agreement and changes in investment policy, shares
of each portfolio would vote as a separate series. Procedures for
calling a shareholders' meeting for the removal of Directors of
the Fund, similar to those set forth in Section 16(c) of the 1940
Act will be available to shareholders of the Fund. 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
54
<PAGE>
Directors and, in liquidation of the Fund, are entitled to
receive the net assets of the Fund.
At January 5, 2000 there were 1,168,881,022 shares of
common stock of the Fund outstanding including 441,327,789
Class A shares, 554,613,121 Class B shares, 160,336,478 Class C
shares and 12,603,634 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
January 5, 2000:
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 34,107,583 7.74%
4800 Deer Lake Dr. East 136,657,899 24.75%
2nd Floor 49,187,094 30.99%
Jacksonville, FL 5,425,914 43.25%
32246-6484
Bank of New York
AFM and EPW Fund 9
1 Wall Street
New York, NY 10005-2500 1,755,686 14.00%
Amalg. Bank of New York
C/F TWU PVT BUS LINES
Pension Trust-Amivest
Discretionary Investment
Manager
P.O. Box 370 Cooper Station
New York, NY 10276-0370 1,003,241 8.00%
Trust for Profit Sharing
For Alliance Capital
Employees
1345 Avenue of the Americas
New York, NY 10105 1,417,480 11.30%
Custodian
State Street Bank and Trust Company, 225 Franklin
Street, Boston, Massachusetts 02110, acts as 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
55
<PAGE>
into sub-custodial agreements for the holding of the Fund's
foreign securities.
Principal Underwriter
Alliance Fund Distributors, Inc., 1345 Avenue of the
Americas, New York, New York 10105, serves as the Fund's
Principal Underwriter, and as such may solicit orders from the
public to purchase shares of the Fund. Under the Distribution
Services Agreement, the Fund has agreed to indemnify the
Principal Underwriter, 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.
Independent Accountants
PricewaterhouseCoopers LLP, New York, New York, has been
appointed independent accountants for the Fund.
Performance Information
From time to time, the Fund advertises its "yield,"
"actual distribution rate" and "total return." Computed
separately for each class, the Fund's yield for any 30-day (or
one month) period is computed by dividing the net investment
income per share earned during such period by the maximum public
offering price per share on the last day of the period, and then
annualizing such 30-day (or one month) yield in accordance with a
formula prescribed by the Commission which provides for
compounding on a semi-annual basis. The Fund's "actual
distribution rate," which may be advertised in items of sales
literature, is computed in the same manner as yield except that
actual income dividends declared per share during the period in
question is substituted for net investment income per share.
Computed separately for each class, the Fund's "total return" is
its average annual compounded total return for recent one-, five-
and ten-year periods. The Fund's actual distribution rate is
computed separately for Class A, Class B and Class C shares. The
Fund's total return for such a 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
56
<PAGE>
such 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 received and the maximum sales charge applicable
to purchases of Fund shares is 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.
The average annual total return based on net asset value
for each class of shares for the one-, five- and ten-year periods
ended October 31, 1999 (or since inception through that date, as
noted) was as follows:
Year Ended 5 Years Ended 10 Years Ended
10/31/99 10/31/99 10/31/99
Class A 20.48% 22.69% 15.10%
Class B 19.56% 21.77% 15.18%*
Class C 19.56% 21.76% 17.44%*
Advisor Class 21.03% 22.70%* N/A
* Inception dates: Class B shares - February 8, 1991
Class C shares - May 3, 1993
Advisor Class shares - October 2, 1996
57
<PAGE>
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 performance of the Fund
may also from time to time be sent to investors or placed in
newspapers and magazines such as Barrons, Business Week, Changing
Times, Forbes, Investor's Daily, Money Magazine, The New York
Times and 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 number shown on
the front cover of this Statement of Additional Information.
This Statement of Additional Information does not contain all the
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>
ALLIANCE GROWTH & INCOME FUND
ANNUAL REPORT
OCTOBER 31, 1999
ALLIANCE CAPITAL
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1999 ALLIANCE GROWTH & INCOME FUND
_______________________________________________________________________________
COMPANY SHARES VALUE
- -------------------------------------------------------------------------
COMMON & PREFERRED STOCKS-93.9%
FINANCE-19.8%
BANKING - MONEY CENTERS-4.6%
Chase Manhattan Corp. 811,000 $ 70,861,125
Citigroup, Inc. 2,036,250 110,212,031
------------
181,073,156
BANKING - REGIONAL-5.9%
Bank One Corp. 1,039,000 39,027,437
Bank of America Corp. 2,275,000 146,453,125
Wells Fargo Co. 911,000 43,614,125
------------
229,094,687
BROKERAGE & MONEY MANAGEMENT-0.9%
Merrill Lynch & Co., Inc. 440,000 34,540,000
INSURANCE-1.4%
PMI Group, Inc. 528,820 27,432,538
The Hartford Financial Services
Group, Inc. 220,000 11,398,750
Travelers Property Casualty
Corp. C1.A 391,900 14,108,400
------------
52,939,688
REAL ESTATE-1.4%
AvalonBay Communities, Inc. 299,957 9,692,361
Crescent Real Estate Equities Co. 168,700 2,815,181
Equity Office Properties Trust 907,700 20,082,862
MeriStar Hospitality Corp. 600,000 9,637,500
ProLogis Trust 400,000 7,725,000
Public Storage, Inc. 205,600 4,960,100
Regency Realty Corp. 19,200 380,400
------------
55,293,404
MISCELLANEOUS-5.6%
Associates First Capital Corp. C1.A 575,000 20,987,500
Household International, Inc. 3,600,000 160,650,000
MBNA Corp. 765,000 21,133,125
Newcourt Credit Group, Inc. (Canada) 324,700 5,337,256
The CIT Group, Inc. C1.A 520,100 12,417,388
------------
220,525,269
------------
773,466,204
TECHNOLOGY-14.3%
COMMUNICATION EQUIPMENT-3.3%
Morgan Stanley Group, Inc. Reset PERQS,
7.0% due 5/22/00 (a) 19,600 38,953,334
Motorola, Inc. 600,000 58,462,500
Nortel Networks Corp. 276,600 17,131,912
Tellabs, Inc. (b) 250,000 15,804,688
------------
130,352,434
COMPUTER HARDWARE-0.3%
Compaq Computer Corp. 545,600 10,366,400
COMPUTER PERIPHERALS-0.4%
Seagate Technology, Inc. (b) 496,000 14,601,000
COMPUTER SERVICES-5.1%
Computer Sciences Corp. (b) 958,000 65,802,625
Electronic Data Systems Corp. 550,300 32,192,550
First Data Corp. 2,250,000 102,796,875
------------
200,792,050
COMPUTER SOFTWARE-0.6%
Oracle Corp. (b) 510,000 24,272,812
SEMI-CONDUCTOR COMPONENTS-1.6%
Altera Corp. (b) 730,400 35,515,700
Atmel Corp. (b) 704,100 27,173,859
------------
62,689,559
6
ALLIANCE GROWTH & INCOME FUND
_______________________________________________________________________________
COMPANY SHARES VALUE
- -------------------------------------------------------------------------
MISCELLANEOUS-3.0%
Sanmina Corp. (b) 646,900 $ 58,241,216
Solectron Corp. (b) 760,200 57,205,050
------------
115,446,266
------------
558,520,521
CONSUMER SERVICES-11.4%
AIRLINES-1.2%
Continental Airlines, Inc. CI. B (b) 415,000 16,807,500
Delta Air Lines, Inc. 558,000 30,376,125
------------
47,183,625
BROADCASTING & CABLE-3.6%
A.H. Belo Corp. Series A 988,700 20,144,763
Cablevision Systems Corp. Cl.A (b) 363,286 24,544,510
MediaOne Group, Inc. (b) 897,600 63,785,700
Media One Group, Inc.
Premium Income Exchangeable Notes
6.25%, due 8/15/01 (c) 320,000 33,280,000
------------
141,754,973
ENTERTAINMENT & LEISURE-2.2%
Carnival Corp. 959,300 42,688,850
Royal Caribbean Cruises, Ltd. 359,500 19,075,969
7.25% preferred stock Series A 147,000 23,520,000
------------
85,284,819
PRINTING & PUBLISHING-1.4%
Gannett Co., Inc. 713,000 54,990,125
RETAIL-GENERAL MERCHANDISE-3.0%
Dayton Hudson Corp. 304,000 19,646,000
Saks, Inc. (b) 3,850,300 66,177,031
Tommy Hilfiger Corp. (b) 1,067,400 30,154,050
------------
115,977,081
------------
445,190,623
HEALTH CARE-10.4%
DRUGS-4.1%
Bristol-Myers Squibb Co. 913,000 70,129,813
Schering-Plough Corp. 1,812,000 89,694,000
------------
159,823,813
MEDICAL PRODUCTS-1.5%
Abbott Laboratories 1,450,000 58,543,750
MEDICAL SERVICES-4.8%
Columbia HCA/Healthcare Corp. 1,500,000 36,187,500
Health Management Associates, Inc.
Cl. A (b) 4,079,500 36,205,562
Tenet Healthcare Corp. (b) 5,920,100 115,071,944
------------
187,465,006
------------
405,832,569
CONSUMER STAPLES-10.1%
BEVERAGES-3.1%
Coca-Cola Enterprises, Inc. 1,030,000 26,329,375
Pepsi Bottling Group, Inc. 5,230,000 95,120,625
------------
121,450,000
COSMETICS-0.9%
Avon Products, Inc. 1,110,000 35,797,500
FOOD-1.7%
General Mills, Inc. 168,000 14,647,500
Heinz (H.J.) Co. 270,000 12,892,500
Nabisco Group Holdings Corp. 1,933,900 24,778,094
Tyson Foods, Inc. C1.A 800,000 12,200,000
------------
64,518,094
HOUSEHOLD PRODUCTS-1.7%
Colgate-Palmolive Co. 1,100,000 66,550,000
RETAIL-FOOD & DRUG-2.0%
Kroger Co. (b) 3,701,000 77,027,063
TOBACCO-0.7%
Philip Morris Cos., Inc. 1,097,250 27,636,984
------------
392,979,641
7
PORTFOLIO OF INVESTMENTS (CONTINUED) ALLIANCE GROWTH & INCOME FUND
_______________________________________________________________________________
COMPANY SHARES VALUE
- -------------------------------------------------------------------------
ENERGY-9.4%
DOMESTIC INTEGRATED-4.4%
Atlantic Richfield Co. 400,000 $ 37,275,000
Kerr-McGee Corp. 679,300 36,512,375
USX-Marathon Group 3,370,000 98,151,250
------------
171,938,625
DOMESTIC PRODUCERS-1.7%
Murphy Oil Corp. 306,500 17,183,156
Shell Transport & Trading Co.
(ADR) (United Kingdom) 1,100,000 50,462,500
------------
67,645,656
INTERNATIONAL-0.6%
Repsol S.A. (ADR) (Spain) 1,196,800 24,534,400
OIL SERVICE-2.2%
Noble Drilling Corp. (b) 2,969,400 65,883,563
Transocean Offshore, Inc. 730,000 19,846,875
------------
85,730,438
MISCELLANEOUS-0.5%
AES Corp. (b) 316,300 17,851,181
------------
367,700,300
UTILITIES-8.5%
ELECTRIC & GAS UTILITY-5.0%
CMS Energy Corp. 620,000 22,862,500
Consolidated Edison, Inc. 1,490,300 56,910,831
Duke Power Energy Corp. 630,000 35,595,000
FPL Group, Inc. 918,000 46,186,875
GPU, Inc. 530,000 17,986,875
Pinnacle West Capital Corp. 415,000 15,303,125
------------
194,845,206
TELEPHONE UTILITY-3.5%
AT&T Corp. 956,923 44,736,150
BellSouth Corp. 1,560,000 70,200,000
MCI WorldCom, Inc. (b) 251,950 21,612,586
------------
136,548,736
------------
331,393,942
MULTI-INDUSTRY
COMPANIES-4.6%
Honeywell, Inc. 255,000 26,886,562
Tyco International Ltd. 3,060,000 122,208,750
U.S. Industries, Inc. 2,069,200 30,650,025
------------
179,745,337
BASIC INDUSTRY-2.6%
CHEMICALS-2.6%
Dow Chemical Co. 180,000 21,285,000
Eastman Chemical Co. 350,000 13,496,875
Lyondell Chemical Co. 3,840,000 46,560,000
Solutia, Inc. 1,075,000 18,476,563
------------
99,818,438
CAPITAL GOODS-1.3%
MISCELLANEOUS-1.3%
Allied-Signal, Inc. 101,000 5,750,688
United Technologies Corp. 748,200 45,266,100
------------
51,016,788
CONSUMER MANUFACTURING-1.0%
BUILDING & RELATED-1.0%
Masco Corp. 1,270,000 38,735,000
TRANSPORTATION-0.5%
RAILROAD-0.5%
Union Pacific Capital Trust
6.25%, 4/01/28
Convertible preferred stock (d) 444,000 21,478,500
Total Common & Preferred Stocks
(cost $3,310,867,078) 3,665,877,863
------------
8
ALLIANCE GROWTH & INCOME FUND
_______________________________________________________________________________
PRINCIPAL
AMOUNT
COMPANY (000) VALUE
- -------------------------------------------------------------------------
SHORT-TERM INVESTMENTS-6.0%
COMMERCIAL PAPER-3.1%
Prudential Funding Corp.
5.18%, 11/01/99 $ 30,000 $ 30,000,000
5.22%, 11/15/99 45,000 44,908,650
5.25%, 11/01/99 45,000 45,000,000
Total Commercial Paper
(cost $119,908,650) 119,908,650
TIME DEPOSIT-2.9%
State Street Euro Dollar
4.875%, 11/01/99
(cost $115,939,000) 115,939 115,939,000
Total Short-Term Investments
(cost $235,847,650) 235,847,650
TOTAL INVESTMENTS-99.9%
(cost $3,546,714,728) $3,901,725,513
Other assets less liabilities-0.1% 2,117,685
NET ASSETS-100% $3,903,843,198
(a) Reset performance equity-linked redemption quarterly pay security. Based
on Nokia 7.00%, 5/22/00 convertible bond.
(b) Non-income producing security.
(c) Premium Income Exchangeable note which is convertible to Vodafone Airtouch
PLC until 8/15/01 at a rate of 2.0253 shares of Vodafone Airtouch for every
share of the exchangeable note.
(d) Security is exempt from registration under Rule 144A of the Securities Act
of 1933. This security may be resold in transactions exempt from registration,
normally to qualified institutional buyers. At October 31, 1999, this security
amounted to $21,478,500 or 0.5% of net assets.
Glossary:
ADR - American Depositary Receipt
See notes to financial statements.
9
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1999 ALLIANCE GROWTH & INCOME FUND
_______________________________________________________________________________
ASSETS
Investments in securities, at value (cost $3,546,714,728) $3,901,725,513
Cash 606
Receivable for investment securities sold 46,536,933
Receivable for capital stock sold 30,808,598
Dividends and interest receivable 3,727,973
Total assets 3,982,799,623
LIABILITIES
Payable for investment securities purchased 66,479,251
Payable for capital stock redeemed 8,779,354
Advisory fee payable 1,442,134
Distribution fee payable 784,635
Accrued expenses and other liabilities 1,471,051
Total liabilities 78,956,425
NET ASSETS $3,903,843,198
COMPOSITION OF NET ASSETS
Capital stock, at par $ 10,626,192
Additional paid-in capital 3,356,658,377
Accumulated net realized gain on investments and foreign
currency transactions 181,547,844
Net unrealized appreciation of investments 355,010,785
$3,903,843,198
CALCULATION OF MAXIMUM OFFERING PRICE
CLASS A SHARES
Net asset value and redemption price per share
($1,503,873,725/406,370,981 shares of capital stock
issued and outstanding) $3.70
Sales charge--4.25% of public offering price .16
Maximum offering price $3.86
CLASS B SHARES
Net asset value and offering price per share
($1,842,045,354/503,914,159 shares of capital stock
issued and outstanding) $3.66
CLASS C SHARES
Net asset value and offering price per share
($518,184,744/141,615,022 shares of capital stock
issued and outstanding) $3.66
ADVISOR CLASS SHARES
Net asset value, redemption and offering price per share
($39,739,375/10,719,077 shares of capital stock issued
and outstanding) $3.71
See notes to financial statements.
10
STATEMENT OF OPERATIONS
YEAR ENDED OCTOBER 31, 1999 ALLIANCE GROWTH & INCOME FUND
_______________________________________________________________________________
INVESTMENT INCOME
Dividends (net of foreign taxes withheld
of $105,344) $ 44,981,207
Interest 6,797,826 $ 51,779,033
EXPENSES
Advisory fee 13,402,371
Distribution fee - Class A 3,081,790
Distribution fee - Class B 12,625,937
Distribution fee - Class C 3,197,078
Transfer agency 4,465,567
Registration 658,192
Printing 553,878
Custodian 279,891
Taxes 171,750
Audit and legal 137,603
Administrative 130,000
Directors' fees 40,000
Miscellaneous 110,394
Total expenses 38,854,451
Net investment income 12,924,582
REALIZED AND UNREALIZED GAIN ON
INVESTMENT TRANSACTIONS
Net realized gain on investments and
foreign currency transactions 192,308,395
Net change in unrealized appreciation
of investments and other assets 178,150,302
Net gain on investments 370,458,697
NET INCREASE IN NET ASSETS FROM OPERATIONS $383,383,279
See notes to financial statements.
11
STATEMENT OF CHANGES IN NET ASSETS ALLIANCE GROWTH & INCOME FUND
_______________________________________________________________________________
YEAR ENDED YEAR ENDED
OCTOBER 31, OCTOBER 31,
1999 1998
-------------- --------------
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS
Net investment income $ 12,924,582 $ 10,090,007
Net realized gain on investments and
foreign currency transactions 192,308,395 208,599,998
Net change in unrealized appreciation
of investments and other assets 178,150,302 (20,404,838)
Net increase in net assets from
operations 383,383,279 198,285,167
DIVIDENDS AND DISTRIBUTIONS TO
SHAREHOLDERS FROM:
Net investment income
Class A (10,978,013) (11,056,910)
Class B (1,193,038) (3,430,012)
Class C (340,026) (790,836)
Advisor Class (413,505) (59,998)
Distributions in excess of net
investment income
Class A (2,635,795) -0-
Class B (4,325,312) -0-
Class C (1,051,612) -0-
Advisor Class (68,102) -0-
Net realized gain on investments
Class A (101,835,187) (104,156,500)
Class B (83,069,507) (62,542,206)
Class C (18,905,921) (14,674,879)
Advisor Class (2,466,651) (419,910)
CAPITAL STOCK TRANSACTIONS
Net increase 1,768,774,181 624,116,466
Total increase 1,924,874,791 625,270,382
NET ASSETS
Beginning of year 1,978,968,407 1,353,698,025
End of year (including undistributed net
investment income of $392,954 at
October 31, 1998) $3,903,843,198 $1,978,968,407
See notes to financial statements.
12
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 1999 ALLIANCE GROWTH & INCOME FUND
_______________________________________________________________________________
NOTE A: SIGNIFICANT ACCOUNTING POLICIES
Alliance Growth and Income 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 C shares 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 prices. 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. 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.
3. 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 the 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.
4. 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.
5. 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,
13
NOTES TO FINANCIAL STATEMENTS (CONTINUED) ALLIANCE GROWTH & INCOME FUND
_______________________________________________________________________________
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 a distribution reclass, resulted in a net increase in
undistributed net investment income and a corresponding decrease in accumulated
net realized gain on investment and foreign currency transactions. This
reclassification had no effect on net assets.
NOTE B: ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Under the terms of an advisory agreement, the Fund pays Alliance Capital
Management L.P. (the "Adviser"), an advisory fee at an annual rate of .625% of
the first $200 million, .50% of the next $200 million and .45% in excess of
$400 million of the average daily net assets of the Fund. Such fee is accrued
daily and paid monthly.
Pursuant to the advisory agreement, the Fund paid $130,000 to the Adviser
representing the cost of certain legal and accounting services provided to the
Fund by the Adviser for the year ended October 31, 1999.
The Fund compensates Alliance Fund Services, Inc., a wholly-owned subsidiary of
the Adviser, under a Transfer Agency Agreement for providing personnel and
facilities to perform transfer agency services for the Fund. Such compensation
amounted to $3,157,091 for the year ended October 31, 1999.
For the year ended October 31, 1999, the Fund's expenses were reduced by
$233,735 under an expense offset arrangement with Alliance Fund Services, Inc.
Alliance Fund Distributors, Inc., (the "Distributor"), a wholly-owned
subsidiary of the Adviser, serves as the Distributor of the Fund's shares. The
Distributor has advised the Fund that it has received front-end sales charges
of $887,635 from the sale of Class A shares and $44,509, $2,030,158 and $93,970
contingent deferred sales charges imposed upon redemptions by shareholders of
Class A, Class B and Class C shares, respectively, for the year ended October
31, 1999.
Brokerage commissions paid on investment transactions for the year ended
October 31, 1999 amounted to $5,724,116 of which $288,596 was paid to
Donaldson, Lufkin & Jenrette ("DLJ"), none was paid to brokers utilizing the
services of the Pershing Division of DLJ, an affiliate of the Adviser.
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 distribution and servicing fees 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 are no distribution and
servicing fees 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 advised the Fund that it has incurred expenses in excess of the
distribution costs reimbursed by the Fund in the amount of $55,277,710 and
$4,475,791 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 Adviser
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 $2,773,470,247 and $1,307,872,291,
respectively, for the year ended October 31, 1999. There were no purchases and
sales of U.S. government and government agency obligations for the year ended
October 31, 1999.
14
ALLIANCE GROWTH & INCOME FUND
_______________________________________________________________________________
At October 31, 1999, the cost of investments for federal income tax purposes
was $3,546,714,728. Gross unrealized appreciation of investments was
$582,606,308 and gross unrealized depreciation of investments was $227,595,523
resulting in net unrealized appreciation of $355,010,785.
1. OPTION TRANSACTIONS
For hedging purposes, the Fund purchases and writes (sells) put and call
options on U.S. and foreign government securities and foreign currencies that
are traded on U.S. and foreign securities exchanges and over-the-counter
markets.
The risk associated with purchasing an option is that the Fund pays a premium
whether or not the option is exercised. Additionally, the Fund bears the risk
of loss of premium and change in market value should the counterparty not
perform under the contract. Put and call options purchased are accounted for in
the same manner as portfolio securities. The cost of securities acquired
through the exercise of call options is increased by premiums paid. The
proceeds from securities sold through the exercise of put options are decreased
by the premiums paid.
When the Fund writes an option, 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 recorded by the Fund on the expiration date as realized gains from option
transactions. The difference between the premium received and the amount paid
on effecting a closing purchase transaction, including brokerage commissions,
is also treated as a realized gain, or if the premium is less than the amount
paid for the closing purchase transaction, as a realized loss. If a call option
is exercised, the premium received is added to the proceeds from the sale of
the underlying security or currency in determining whether the Fund has
realized a gain or loss. If a put option is exercised, the premium received
reduces the cost basis of the security or currency purchased by the Fund. The
risk involved in writing an option is that, if the option was exercised the
underlying security could then be purchased or sold by the Fund at a
disadvantageous price.
For the year ended October 31, 1999, the Fund did not engage in any option
transactions.
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
--------------------------- ------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31,
1999 1998 1999 1998
------------ ------------ -------------- --------------
CLASS A
Shares sold 266,731,095 98,222,812 $ 985,863,971 $ 334,903,712
Shares issued in
reinvestment of
dividends and
distributions 29,166,983 29,831,349 95,788,917 93,523,259
Shares converted
from Class B 8,428,713 8,647,040 30,944,166 29,353,090
Shares redeemed (185,377,812) (75,720,075) (679,918,852) (257,505,502)
Net increase 118,948,979 60,981,126 $ 432,678,202 $ 200,274,559
15
NOTES TO FINANCIAL STATEMENTS (CONTINUED) ALLIANCE GROWTH & INCOME FUND
_______________________________________________________________________________
SHARES AMOUNT
--------------------------- ------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31,
1999 1998 1999 1998
------------ ------------ -------------- --------------
CLASS B
Shares sold 315,902,586 121,143,305 $1,159,077,903 $ 410,581,531
Shares issued in
reinvestment of
dividends and
distributions 25,381,823 19,847,882 82,271,405 61,492,874
Shares converted
to Class A (8,521,989) (8,725,071) (30,944,166) (29,353,090)
Shares redeemed (60,128,994) (33,250,320) (216,203,721) (109,755,296)
Net increase 272,633,426 99,015,796 $ 994,201,421 $ 332,966,019
CLASS C
Shares sold 118,343,783 33,804,199 $ 434,581,429 $ 114,565,500
Shares issued in
reinvestment of
dividends and
distributions 5,905,999 4,670,589 19,162,910 14,469,664
Shares redeemed (35,284,710) (16,673,562) (127,778,856) (55,675,053)
Net increase 88,965,072 21,801,226 $ 325,965,483 $ 73,360,111
ADVISOR CLASS
Shares sold 8,361,148 7,117,703 $ 31,420,736 $ 22,635,129
Shares issued in
reinvestment of
dividends and
distributions 880,164 143,377 2,915,175 450,418
Shares redeemed (5,138,358) (1,567,478) (18,406,836) (5,569,770)
Net increase 4,102,954 5,693,602 $ 15,929,075 $ 17,515,777
NOTEF: BANK BORROWING
A number of open-end mutual funds managed by the Adviser, including the Fund,
participate in a $750 million revolving credit facility (the "Facility")
intended to provide short-term financing if necessary, subject to certain
restrictions in connection with abnormal redemption activity. Commitment fees
related to the Facility are paid by the participating funds and are included in
miscellaneous expense in the statement of operations. The Fund did not utilize
the Facility during the year ended October 31, 1999.
16
FINANCIAL HIGHLIGHTS ALLIANCE GROWTH & INCOME FUND
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH YEAR
<TABLE>
<CAPTION>
CLASS A
---------------------------------------------------------------
YEAR ENDED OCTOBER 31,
---------------------------------------------------------------
1999 1998 1997 1996 1995
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $3.44 $3.48 $3.00 $2.71 $2.35
INCOME FROM INVESTMENT OPERATIONS
Net investment income .03(a) .03(a) .04(a) .05 .02
Net realized and unrealized gain on
investment transactions .62 .43 .87 .50 .52
Net increase in net asset value
from operations .65 .46 .91 .55 .54
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (.03) (.04) (.05) (.05) (.06)
Distributions in excess of net
investment income (.01) -0- -0- -0- -0-
Distributions from net realized gains (.35) (.46) (.38) (.21) (.12)
Total dividends and distributions (.39) (.50) (.43) (.26) (.18)
Net asset value, end of year $3.70 $3.44 $3.48 $3.00 $2.71
TOTAL RETURN
Total investment return based on
net asset value (b) 20.48% 14.70% 33.28% 21.51% 24.21%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000's omitted) $1,503,874 $988,965 $787,566 $553,151 $458,158
Ratio of expenses to average net assets .93% .93%(c) .92%(c) .97% 1.05%
Ratio of net investment income to
average net assets .87% .96% 1.39% 1.73% 1.88%
Portfolio turnover rate 48% 89% 88% 88% 142%
</TABLE>
See footnote summary on page 20.
17
FINANCIAL HIGHLIGHTS (CONTINUED) ALLIANCE GROWTH & INCOME FUND
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH YEAR
<TABLE>
<CAPTION>
CLASS B
---------------------------------------------------------------
YEAR ENDED OCTOBER 31,
---------------------------------------------------------------
1999 1998 1997 1996 1995
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $3.41 $3.45 $2.99 $2.69 $2.34
INCOME FROM INVESTMENT OPERATIONS
Net investment income -0-(a) .01(a) .02(a) .03 .01
Net realized and unrealized gain on
investment transactions .62 .43 .85 .51 .49
Net increase in net asset value
from operations .62 .44 .87 .54 .50
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income -0- (.02) (.03) (.03) (.03)
Distributions in excess of net
investment income (.02) -0- -0- -0- -0-
Distributions from net realized gains (.35) (.46) (.38) (.21) (.12)
Total dividends and distributions (.37) (.48) (.41) (.24) (.15)
Net asset value, end of year $3.66 $3.41 $3.45 $2.99 $2.69
TOTAL RETURN
Total investment return based on
net asset value (b) 19.56% 14.07% 31.83% 21.20% 22.84%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000's omitted) $1,842,045 $787,730 $456,399 $235,263 $136,758
Ratio of expenses to average net assets 1.70% 1.72%(c) 1.72%(c) 1.78% 1.86%
Ratio of net investment income to
average net assets .09% .17% .56% .91% 1.05%
Portfolio turnover rate 48% 89% 88% 88% 142%
</TABLE>
See footnote summary on page 20.
18
ALLIANCE GROWTH & INCOME FUND
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH YEAR
<TABLE>
<CAPTION>
CLASS C
---------------------------------------------------------------
YEAR ENDED OCTOBER 31,
---------------------------------------------------------------
1999 1998 1997 1996 1995
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $3.41 $3.45 $2.99 $2.70 $2.34
INCOME FROM INVESTMENT OPERATIONS
Net investment income -0-(a) .01(a) .02(a) .03 .01
Net realized and unrealized gain on
investment transactions .62 .43 .85 .50 .50
Net increase in net asset value
from operations .62 .44 .87 .53 .51
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income -0- (.02) (.03) (.03) (.03)
Distributions in excess of net
investment income (.02) -0- -0- -0- -0-
Distributions from net realized gains (.35) (.46) (.38) (.21) (.12)
Total dividends and distributions (.37) (.48) (.41) (.24) (.15)
Net asset value, end of year $3.66 $3.41 $3.45 $2.99 $2.70
TOTAL RETURN
Total investment return based on
net asset value (b) 19.56% 14.07% 31.83% 20.72% 23.30%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000's omitted) $518,185 $179,487 $106,526 $61,356 $35,835
Ratio of expenses to average net assets 1.69% 1.72%(c) 1.71%(c) 1.76% 1.84%
Ratio of net investment income to
average net assets .11% .18% .58% .93% 1.04%
Portfolio turnover rate 48% 89% 88% 88% 142%
</TABLE>
See footnote summary on page 20.
19
FINANCIAL HIGHLIGHTS (CONTINUED) ALLIANCE GROWTH & INCOME FUND
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
ADVISOR CLASS
----------------------------------------------------
OCTOBER 2,
YEAR ENDED OCTOBER 31, 1996(D) TO
------------------------------------- OCTOBER 31,
1999 1998 1997 1996
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $3.44 $3.48 $3.00 $2.97
INCOME FROM INVESTMENT OPERATIONS
Net investment income .04(a) .04(a) .05(a) -0-
Net realized and unrealized gain on
investment transactions .63 .43 .87 .03
Net increase in net asset value
from operations .67 .47 .92 .03
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (.04) (.05) (.06) -0-
Distributions in excess of net
investment income (.01) -0- -0- -0-
Distributions from net realized gains (.35) (.46) (.38) -0-
Total dividends and distributions (.40) (.51) (.44) -0-
Net asset value, end of period $3.71 $3.44 $3.48 $3.00
TOTAL RETURN
Total investment return based on
net asset value (b) 21.03% 14.96% 33.61% 1.01%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $39,739 $22,786 $3,207 $87
Ratio of expenses to average net assets .68% .76%(c) .71%(c) .37%(e)
Ratio of net investment income to
average net assets 1.12% 1.14% 1.42% 3.40%(e)
Portfolio turnover rate 48% 89% 88% 88%
</TABLE>
(a) Based on average shares outstanding.
(b) 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.
(c) Ratios reflect expenses grossed up for expense offset arrangement with the
transfer agent. For the periods shown below, the net expense ratios were as
follows:
YEAR ENDED OCTOBER 31,
-----------------------
1998 1997
---------- ----------
Class A .92% .91%
Class B 1.71% 1.71%
Class C 1.71% 1.70%
Advisor Class .75% .70%
(d) Commencement of distribution.
(e) Annualized.
20
REPORT OF INDEPENDENT ACCOUNTANTS ALLIANCE GROWTH & INCOME FUND
_______________________________________________________________________________
TO THE BOARD OF DIRECTORS AND SHAREHOLDERS OF
ALLIANCE GROWTH AND INCOME 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 Alliance Growth and Income Fund,
Inc. (the "Fund") at October 31, 1999, 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
presented, 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 October 31, 1999 by correspondence with the custodian and
brokers, provide a reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
New York, New York
December 16, 1999
TAX INFORMATION
_______________________________________________________________________________
In order to meet certain requirements of the Internal Revenue Code we are
advising you that the Fund paid $182,768,676 of capital gain distributions
during the fiscal year ended October 31, 1999, which are subject to a maximum
tax rate of 20%.
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 2000.
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 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
A-1
<PAGE>
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
00250050.AY3
