This is filed pursuant to Rule 497(c).
File Nos. 2-10988 and 811-00134.
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(LOGO)(R) ALLIANCE BALANCED SHARES, INC.
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P.O. Box 1520, Secaucus, New Jersey 07096-1520
Toll Free (800) 221-5672
For Literature: Toll Free (800) 221-5672
_________________________________________________________________
STATEMENT OF ADDITIONAL INFORMATION
November 1, 1995
_________________________________________________________________
This Statement of Additional Information is not a prospectus but
supplements and should be read in conjunction with the current
Prospectus. Copies of such Prospectus may be obtained by
contacting Alliance Fund Services, Inc. at the address or the
"Literature" telephone number shown above.
TABLE OF CONTENTS
Page
Description of the Fund....................................2
Management of the Fund.....................................7
Expenses of the Fund.......................................15
Purchase of Shares.........................................18
Redemption and Repurchase of Shares........................34
Shareholder Services ......................................37
Net Asset Value............................................44
Dividends, Distributions and Taxes.........................45
Portfolio Transactions.....................................46
General Information........................................48
Report of Independent Accountants and Financial
Statements.................................................52
Appendix A: Futures Contracts, Options on Futures
Contracts and Options on Foreign Currencies................A-1
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(R): This registered service mark used under license from the
owner, Alliance Capital Management L.P.
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_________________________________________________________________
DESCRIPTION OF THE FUND
_________________________________________________________________
Except as otherwise indicated, the investment policies
of Alliance Balanced Shares, Inc. (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 Objective
The investment objective of the Fund is to achieve a
high return through a combination of current income and capital
appreciation.
How the Fund Pursues its Objective
The Fund has adopted as a fundamental policy that it be
a "balanced fund"; this fundamental policy cannot be changed
without the approval of shareholders. As an investment policy,
the Fund will not purchase a security if as a result of such
purchase less than 25% of its total assets will be in fixed-
income senior securities (including short- and long-term debt
securities, preferred stocks, and convertible debt securities and
preferred stocks to the extent their values is attributable to
their fixed-income characteristics); this investment policy may
be changed by the Fund's Board of Directors but only with 60
days' prior shareholder notice and in accordance with the 1940
Act and the Securities and Exchange Commission (the
"Commission"). Subject to such restrictions, the percentage of
the Fund's assets invested in each type of security at any time
shall be in accordance with the judgment of the management.
Additional Investment Policies and Practices
The following additional investment policies supplement
those set forth above.
The Fund's assets are invested in U.S. Government and
agency obligations, bonds whether convertible or nonconvertible
(except that only that portion of the value of the convertible
bonds attributable to their fixed-income characteristics shall be
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used for purposes of meeting the 25% fixed-income securities
requirement), senior debt securities (as listed above), and
preferred and common stocks in such proportions and of such type
as are deemed best adapted to the current economic and market
outlooks. At July 31, 1995, the amount invested in common stocks
was approximately 52.8% of the total assets. The Fund engages
primarily in holding securities for investment and not for
trading purposes. Purchases and sales of portfolio securities
are made at such times and in such amounts as are deemed
advisable in the light of market, economic and other conditions,
irrespective of the volume of portfolio turnover.
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.
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.
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
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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 put or call options on securities or combinations of put and
call options on securities.
Foreign Securities. The Fund may invest up to 15% of
the value of its total assets in foreign equity and fixed income
securities eligible for purchase by the Fund under the investment
policies described above. Foreign securities investments are
affected by exchange control regulations as well as by changes in
governmental administration, economic or monetary policy (in the
United States and abroad) and changed circumstances in dealings
between nations. Currency exchange rate movements will increase
or reduce the U.S. dollar value of the Fund's net assets and
income attributable to foreign securities. Costs will be
incurred in connection with the conversion of currencies held by
the Fund. There may be less publicly available information about
foreign issuers than about domestic issuers, and foreign issuers
may not be subject to accounting, auditing and financial
reporting standards and requirements comparable to those of
domestic issuers. Securities of some foreign issuers are less
liquid and more volatile than securities of comparable domestic
issuers, and foreign brokerage commissions are generally higher
than in the United States. Foreign securities markets may also
be less liquid, more volatile, and less subject to governmental
supervision than in the United States. Investments in foreign
countries could be affected by other factors not present in the
United States, including expropriation, confiscatory taxation and
potential difficulties in enforcing contractual obligations.
Options on Foreign Currencies. For additional
information on the use, risks and costs of options on foreign
currencies, see Appendix A.
Forward Foreign Currency Exchange Contracts. The Fund
may purchase or sell forward foreign currency exchange contracts
("forward contracts"). While these contracts are not currently
regulated by the Commodity Futures Trading Commission ("CFTC"),
the CFTC may in the future assert authority to regulate forward
contracts. In such event the Fund's ability to utilize forward
contracts in the manner set forth in the Prospectus may be
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restricted. Forward contracts will reduce the potential gain
from a positive change in the relationship between the U.S.
Dollar and the foreign currencies that are the subject of the
forward contracts. Unanticipated changes in currency prices may
result in poorer overall performance for the Fund than if it had
not entered into such contracts. The use of foreign currency
forward contracts will not eliminate fluctuations in the
underlying U.S. Dollar equivalent value of the proceeds of or
rates of return on the Fund's foreign currency-denominated
portfolio securities and the use of such techniques will subject
the Fund to certain risks, as discussed below.
The matching of the increase in value of a forward
contract and the decline in the U.S. Dollar equivalent value of
the foreign-currency denominated asset that is the subject of the
hedge generally will not be precise. In addition, the Fund may
not always be able to enter into foreign currency forward
contracts at attractive prices and this will limit the Fund's
ability to use such contracts to hedge or cross-hedge its assets.
In addition, with regard to the Fund's use of cross-hedges, there
can be no assurance that historical correlations between the
movement of certain foreign currencies relative to the U.S.
Dollar will continue. Thus, at any time poor correlation may
exist between movements in the exchange rates of the foreign
currencies underlying the Fund's cross-hedges and the movements
in the exchange rates of the foreign currencies in which the
Fund's assets that are the subject of such cross-hedges are
denominated. To the extent required by applicable law, the
Fund's Custodian will place cash not available for investment in
U.S. Government Securities or other liquid high-quality debt
securities in a separate account of the Fund having a value equal
to the aggregate amount of the Fund's commitments under forward
contracts entered into with respect to position hedges and cross-
hedges. If the value of the securities placed in a separate
account declines, additional cash or securities will be placed in
the account on a daily basis so that the value of the account
will equal the amount of the Fund's commitments with respect to
such contracts. As an alternative to maintaining all or part of
the separate account, the Fund may purchase a call option
permitting the Fund to purchase the amount of foreign currency
being hedged by a forward sale contract at a price no higher than
the forward contract price or the Fund may purchase a put option
permitting the Fund to sell the amount of foreign currency
subject to a forward purchase contract at a price as high or
higher than the forward contract price. In addition, the Fund
may use such other methods of "cover" as are permitted by
applicable law.
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General. There can be no assurance that the Fund will
achieve its investment objective 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. Ordinarily, the annual portfolio
turnover rate will not exceed 200%. A portfolio turnover rate
approximating 200% involves correspondingly greater brokerage
commission expenses than would a lower rate, which must be borne
directly by the Fund and its shareholders. The annual portfolio
turnover rates of securities of the Fund for its 1994 and 1995
fiscal years were 116% and 179%, respectively.
Fundamental Investment Policies
The Fund is also subject to the following restrictions
in implementing its investment policies which cannot be changed
without the approval of the holders of a majority of the Fund's
outstanding voting securities. The Fund may not: (1) purchase
any security of any issuer (other than the United States
Government) if as a result more than 5% of the value of its total
assets would consist of the securities of such issuer or the Fund
would own more than 10% of the outstanding voting securities of
any 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) invest in other
companies for the purpose of exercising control of management;
(6) purchase 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);
(7) make loans to other persons except certain call loans upon
collateral security (the Fund does not intend to make such loans;
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the acquisition of publicly distributed bonds, debentures and
other debt securities is not considered a loan); (8) concentrate
its investments in any one industry by investment of more than
25% of the value of its total assets in such industry;
(9) underwrite securities issued by other persons; (10) purchase
any securities as to which it would be deemed a statutory
underwriter under the Securities Act of 1933, as amended;
(11) purchase or sell commodities or commodity contracts; or (12)
issue any securities senior to the capital stock offered hereby.
The Fund has not engaged in the investment practice
described in restriction (6) above during its last fiscal year
and has no current intention of doing so in the foreseeable
future.
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; make
loans to any person or individual; purchase a security, if as a
result (unless the security is acquired pursuant to a plan of
reorganization or an offer of exchange) the Fund would own any
securities of an open-end investment company, or more than 3% of
the total outstanding voting stock of any closed-end investment
company or more than 5% of the value of the Fund's assets would
be invested in securities of any one or more closed-end
investment companies, or more than 10% of the value of the Fund's
total assets would be invested in securities of closed-end
investment companies in the aggregate; invest only in investment
grade fixed income securities; 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 or the American Stock Exchange; 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; limit its investments in illiquid securities together
with restricted securities (excluding 144A securities) to no more
than 15% of the Fund's average net assets.
7
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_________________________________________________________________
MANAGEMENT OF THE FUND
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Adviser
Alliance Capital Management L.P., (the "Adviser"), 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") as the Fund's Adviser (see "Management of the Fund"
in the Prospectus).
The Adviser is a leading international investment
manager supervising client accounts with assets as of
September 30, 1995 of more than $140 billion (of which more than
$47 billion represented the assets of investment companies). The
Adviser's clients are primarily major corporate employee benefit
funds, public employee retirement systems, investment companies,
foundations and endowment funds and included, as of September 30,
1995, 29 of the FORTUNE 100 Companies. As of that date, the
Adviser and its subsidiaries employed approximately 1,350
employees who operated out of domestic offices and the overseas
offices of subsidiaries in Bombay, Istanbul, London, Sydney,
Tokyo, Toronto, Bahrain, Luxembourg and Singapore. The 50
registered investment companies comprising 104 separate
investment portfolios managed by the Adviser currently have more
than two million shareholders.
Alliance Capital Management Corporation, the sole
general partner of, and the owner of a 1% general partnership
interest in, the Adviser, is an indirect wholly-owned subsidiary
of The Equitable Life Assurance Society of the United States
("Equitable"), one of the largest life insurance companies in the
United States and a wholly-owned subsidiary of The Equitable
Companies Incorporated ("ECI"), a holding company controlled by
AXA, a French insurance holding company. As of June 30, 1995,
ACMC, Inc. and Equitable Capital Management Corporation, each a
wholly-owned direct or indirect subsidiary of Equitable, together
with Equitable, owned in the aggregate approximately 59% of the
issued and outstanding units representing assignments of
beneficial ownership of limited partnership interests in the
Adviser ("Units"). As of June 30, 1995 approximately 33% and 8%
of the Units were owned by the public and employees of the
Adviser and its subsidiaries, respectively, including employees
of the Adviser who serve as Directors of the Fund.
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AXA owns approximately 60% of the outstanding voting
shares of common stock of ECI. AXA is the holding company for an
international group of insurance and related financial services
companies. AXA's insurance operations are comprised of
activities in life insurance, property and casualty insurance and
reinsurance. The insurance operations are diverse geographically
with activities in France, the United States, the United Kingdom,
Canada and other countries, principally in Europe. AXA is also
engaged in asset management, investment banking and brokerage,
real estate and other financial services activities in the United
States and Europe. Based on information provided by AXA, as of
January 1, 1995, 42.3% of the issued shares (representing 54.7%
of the voting power) of AXA were owned by Midi Participations, a
French corporation that is a holding company. The voting shares
of Midi Participations are in turn owned 60% by Finaxa, a French
corporation that is a holding company, and 40% by subsidiaries of
Assicurazioni Generali S.p.A., an Italian corporation
("Generali") (one of which, Belgica Insurance Holding S.A., a
Belgian corporation, owned 34.1%). As of January 1, 1995, 62.1%
of the issued shares (representing 75.7% of the voting power) of
Finaxa were owned by five French mutual insurance companies (the
"Mutuelles AXA") (one of which, AXA Assurances I.A.R.D. Mutuelle,
owned 31.8% of the issued shares) (representing 39.0% of the
voting power), and 26.5% of the issued shares (representing 16.6%
of the voting power) of Finaxa were owned by Banque Paribas, a
French bank ("Paribas"). Including the shares owned by Midi
Participations, as of January 1, 1995, the Mutuelles AXA directly
or indirectly owned 51.3% of the issued shares (representing
65.8% of the voting power) of AXA. In addition, certain
subsidiaries of AXA own 0.4% of the shares of AXA which are not
entitled to be voted. Acting as a group, the Mutuelles AXA
control AXA, Midi Participations and Finaxa.
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 space and certain other equipment, investment
advisory and 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
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shareholders and fees related to registration with the Securities
and Exchange 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 utilize personnel employed
by the Adviser or by affiliates of the Adviser. The Fund may
employ its own personnel or contract for services to be performed
by third parties. The Advisory Agreement provides that the Board
of Directors may approve the payment of compensation to others
for consulting services, supplemental research and economic
analysis.
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.
The Advisory Agreement provides that the Adviser will
refund to the Fund the amount by which net expenses (excluding
interest, taxes, brokerage, expenses pursuant to the Distribution
Services Agreement described below, and extraordinary expenses,
all to the extent permitted by applicable state securities laws
and regulations) which in any year exceed the limits prescribed
by any state in which the Fund's shares are qualified for sale.
The Fund may not qualify its shares for sale in every State. The
Fund believes that at present the most restrictive state expense
ratio limitation imposed by any state in which the Fund has
qualified its shares for sale is 2.5% of the first $30 million of
its average net assets, 2.0% of the next $70 million of its
average net assets and 1.5% of its average net assets in excess
of $100 million.
At their Regular Meeting held on July 19, 1994, the
Board of Directors, including a majority of the Directors who are
not "interested persons" as defined in the 1940 Act, voted
unanimously to a change in the fiscal year end from September 30
to July 31. In this regard, for the fiscal years ended
September 30, 1993, July 31, 1994 and July 31, 1995, the Adviser
received from the Fund advisory fees of $1,064,560, $958,914 and
$1,044,023 respectively.
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
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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 continues in effect for
successive twelve-month periods (computed from each October 1)
provided that such continuance is specifically approved at least
annually by the Fund's Directors or by a majority vote of the
holders of the outstanding voting securities of the Fund and, in
either case, by a majority of the Directors who are not parties
to the 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. Most recently,
continuance of the Agreement was approved for the period ending
September 30, 1995 by the Board of Directors, including a
majority of the Directors who are not "interested persons" as
defined in the 1940 Act, at their Regular Meeting held on July
18, 1995.
The Advisory Agreement may be terminated without penalty
on 60 days' written notice by a vote of a majority of the
outstanding voting securities, by a vote of the majority of the
Directors, or by the Adviser on 60 days' written notice, and will
automatically terminate in the event of 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
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security on a given day from the same broker-dealer, such
transactions may be averaged as to price.
The Adviser may act as an investment adviser to other
persons, firms or corporations, including investment companies,
and is investment adviser to the following registered investment
companies: ACM Institutional Reserves, Inc., AFD Exchange
Reserves, Inc., The Alliance Fund, Alliance All-Asia Investment
Fund, Inc., Alliance Balanced Shares, Inc., Alliance Bond Fund,
Inc., Alliance Capital Reserves, Alliance Counterpoint Fund,
Alliance Developing Markets Fund, Inc., Alliance Global Dollar
Government Fund, Inc., Alliance Global Small Cap Fund, Inc.,
Alliance Government Reserves, Alliance Growth and Income Fund,
Inc., Alliance Income Builder Fund, Inc., Alliance International
Fund, Alliance Money Market Fund, Alliance Mortgage Securities
Income Fund, Inc., Alliance Mortgage Strategy Trust, 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 Short-Term
Multi-Market Trust, Inc., Alliance Technology Fund, Inc.,
Alliance Utility Income Fund, Inc., Alliance Variable Products
Series Fund, Inc., Alliance World Income Trust, Inc., Alliance
Worldwide Privatization Fund, Inc., The Alliance Portfolios,
Fiduciary Management Associates and The Hudson River Trust, all
registered open-end investment companies; and to ACM Government
Income Fund, Inc., ACM Government Securities Fund, Inc., ACM
Government Spectrum Fund, Inc., ACM Government Opportunity Fund,
Inc., ACM Managed Income Fund, Inc., ACM Managed Dollar Income
Fund, Inc., ACM Municipal Securities Income Fund, Inc., Alliance
All-Market Advantage Fund, Inc., Alliance Global Environment
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 closed-end investment companies.
Directors and Officers
The Directors and officers of the Fund, their ages and
their primary occupations during the past five years are set
forth below. Each such Director and officer is also a director,
trustee or officer of other registered investment companies
sponsored by the Adviser. Unless otherwise specified, the
address of each such person is 1345 Avenue of the Americas, New
York, New York 10105.
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Directors
JOHN D. CARIFA*, 50, Chairman of the Board, is the
President and Chief Operating Officer, the Chief Financial
Officer and a Director of ACMC, with which he has been associated
since prior to 1990.
RUTH BLOCK, 64, was formerly Executive Vice President
and the Chief Insurance Officer of The Equitable Life Assurance
Society of the United States ("Equitable"). She is a Director of
Ecolab Incorporated (specialty chemicals) and Amoco Corporation
(oil and gas). Her address is Box 4653, Stamford, Connecticut
06903.
DAVID H. DIEVLER, 65, was formerly a Senior Vice
President of ACMC, with which he had been associated since prior
to 1990 through 1994. He is currently an independent consultant.
His address is P. O. Box 167, Spring Lake, New Jersey 07762.
JOHN H. DOBKIN, 53, has been the President of Historic
Hudson Valley (historic preservation) since 1990. Previously, he
was Director of the National Academy of Design. From 1987 to
1992, he was a Director of ACMC. His address is 105 West 55th
Street, New York, New York 10019.
WILLIAM H. FOULK, JR., 62, was formerly a Senior Manager
of Barrett Associates, Inc., a registered investment advisory
firm, with which he had been associated since prior to 1990. He
was formerly President of Competrol (BVI) Limited and Cresent
Diversified Limited (private investments). His address is 2
Hekma Road, Greenwich, CT 06831.
____________________
* An "interested person" of the Fund as defined in the 1940 Act.
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DR. JAMES M. HESTER, 71, is President of the Harry Frank
Guggenheim Foundation and a Director of Union Carbide
Corporation, with which he has been associated since prior to
1990. He was formerly President of New York University, the New
York Botanical Garden and Rector of the United Nations
University. His address is 45 East 89th Street, New York, New
York 10128.
CLIFFORD L. MICHEL, 56, is a partner in the law firm of
Cahill Gordon & Reindel, with which he has been associated since
prior to 1990. He is Chief Executive Officer of Wenonah
Development Company (investments) and a Director of Placer Dome,
Inc. and Faber-Castell Corporation (writing products). His
address is St. Bernard's Road, Gladstone, NJ 07934.
ROBERT C. WHITE, 74, is an independent consultant. For
nine years ending in 1994, he was Vice President and Chief
Financial Officer of the Howard Hughes Medical Institute. Prior
thereto, he was Assistant Treasurer of Ford Motor Company. His
address is 30835 River Crossing, Bingham Farms, Michigan 48025.
Officers
JOHN D. CARIFA, President, Chairman and President, see
Biography, above.
BRUCE W. CALVERT, Executive Vice President-Investments,
48, is Vice Chairman of the Board and Chief Investment Officer of
ACMC, with which he has been associated since prior to 1990.
THOMAS J. BARDONG, Vice President, 50, is a Senior Vice
President of ACMC, with which he has been associated since 1990.
MATTHEW BLOOM, Vice President, 39, is a Vice President
of ACMC, with which he has been associated since prior to 1990.
EDMUND P. BERGAN, JR., Secretary, 45, is a Senior Vice
President and the General Counsel of Alliance Fund Distributors,
Inc. and Alliance Fund Services, Inc. and Vice President and
Assistant General Council of ACMC, with which he has been
associated since prior to 1990.
DOMENICK PUGLIESE, Assistant Secretary, 34, is a Vice
President and Associate General Counsel of Alliance Fund
Services, Inc., with which he has been associated since May 1995.
Previously, he was Vice President and Counsel of Concord Holding
Corporation since 1994, Vice President and Associate General
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<PAGE>
Counsel of Prudential Securities since 1991 and an associate with
Battle Fowler since prior to 1990.
MARK D. GERSTEN, Treasurer and Chief Financial Officer,
44, is a Senior Vice President of Alliance Fund Services, Inc.,
with which he has been associated since prior to 1990.
PATRICK J. FARRELL, Controller, 35, is a Vice President
of Alliance Fund Services, Inc., with which he has been
associated since prior to 1990.
MELVIN J. OLIVER, Assistant Controller, 37, is an
Accounting Manager of Mutual Funds for Alliance Fund Services,
Inc. since prior to 1990.
JOSEPH J. MANTINEO, Assistant Controller, 36, has been a
Vice President of Alliance Fund Services, Inc. since prior to
1990.
The aggregate compensation paid by the Fund to each of
the Directors during its fiscal year ended July 31, 1995, the
aggregate compensation paid to each of the Directors during
calendar year 1994 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 funds in the Alliance Fund Complex with respect to which each
of the Directors serves as a director or trustee, are set forth
below. Neither the Fund nor any other fund in the Alliance Fund
Complex provides compensation in the form of pension or
retirement benefits to any of its directors or trustees.
15
<PAGE>
Total Number
of Funds in
the Alliance
Total Complex,
Compensation Including the
From the Fund, as to
Alliance Fund which the
Aggregate Complex, Director is a
Name of Director Compensation Including the Director or
of the Fund From the Fund Fund Trustee
________________ _____________ _____________ ______________
John D. Carifa $ -0- $ -0- 42
Ruth Block $3,054 $157,000 31
David H. Dievler $2,625 $ -0- 49
John H. Dobkin $3,054 $110,750 29
William H. Foulk, Jr. $3,054 $141,500 30
Dr. James M. Hester $3,054 $154,500 32
Clifford L. Michel $2,678 $120,500 31
Robert C. White $3,054 $133,500 36
As of October 5, 1995, the Directors and officers of the Fund as
a group owned less than 1% of the 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 Fund directly or indirectly to pay
expenses associated with the distribution of its shares in
accordance with a plan of distribution which is included in the
Agreement and has been duly adopted and approved in accordance
with Rule 12b-1 adopted by the Securities and Exchange Commission
under the 1940 Act.
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
16
<PAGE>
initial sales charge, and, in the case of Class C shares, without
the assessment of a contingent deferred sales charge, and at the
same time to permit the Principal Underwriter to compensate
broker-dealers in connection with the sale of such shares. In
this regard the purpose and function of the combined contingent
deferred sales charge and distribution services fee on the Class
B shares, and the distribution services fee on the Class C
shares, are the same as those of the initial sales charge (or
contingent deferred sales charge, when applicable) and
distribution services fee with respect to the Class A shares in
that in each case the sales charge and/or distribution services
fee provide for the financing of the distribution of the Fund's
shares.
Under the Agreement, the Treasurer of the Fund reports
the amounts expended under the Rule 12b-1 Plan and the purposes
for which such expenditures were made to the Directors of the
Fund for their review on a quarterly basis. Also, the Agreement
provides that the selection and nomination of Directors who are
not "interested persons" of the Fund (as defined in the 1940
Act), are committed to the discretion of such disinterested
Directors then in office.
The Agreement became effective on July 22, 1992 and was
amended as of April 30, 1993 to permit distribution of an
additional class of Shares, Class C Shares. The amendment to the
Agreement was approved by the unanimous vote, cast in person, of
the disinterested Directors at a meeting called for that purpose
held on February 23, 1993, and by initial holder of Class C
shares of the Fund on April 30, 1993.
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.
During the Fund's fiscal year ended July 31, 1995, the
Fund paid distribution services fees for expenditures under the
Agreement, with respect to Class A shares, in amounts aggregating
$355,462, which constituted .24% of the 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 $233,499. Of the $588,960 paid by the Fund and the
Adviser under the Plan, $53,365 was spent on advertising, $5,132
on the printing and mailing of prospectuses for persons other
than current shareholders, $341,973 for compensation to
17
<PAGE>
broker-dealers and other financial intermediaries (including
$124,322 to the Fund's Principal Underwriter), $8,662 for
compensation to sales personnel and $179,829 was spent on the
printing of sales literature, travel, entertainment, due
diligence and other promotional expenses.
During the Fund's fiscal year ended July 31, 1995, the
Fund paid distribution services fees for expenditures under the
Agreement, with respect to Class B shares, in amounts aggregating
$138,872 which constituted 1.00% of the 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 $142,982. Of the $281,854 paid by the Fund and the
Adviser under the Plan, $21,269 were spent on advertising, $3,548
on the printing and mailing of prospectuses for persons other
than current shareholders, $170,467 for compensation to
broker-dealers and other financial intermediaries (including,
$44,986 to the Fund's Principal Underwriter), $3,572 for
compensation to sales personnel and $82,998 was spent on the
printing of sales literature, travel, entertainment, due
diligence and other promotional expenses.
During the Fund's fiscal year ended July 31, 1995, the
Fund paid distribution services fees for expenditures under the
Agreement, with respect to Class C shares, in amounts aggregating
$50,470 which constituted 1.00%, annualized, of the 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 $82,096. Of the $132,566 paid by the Fund and
the Adviser under the Plan, with respect to Class C shares
$11,774 was spent on advertising, $2,042 on the printing and
mailing of prospectuses for persons other than current
shareholders, $77,042 for compensation to broker-dealers and
other financial intermediaries (including $26,796 to the Fund's
Principal Underwriter), $1,990 for compensation to sales
personnel and $39,718 was spent on the printing of sales
literature, travel, entertainment, due diligence and other
promotional expenses.
The Agreement will continue in effect for successive
twelve-month periods (computed from each October 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
18
<PAGE>
direct or indirect financial interest in the operation of the
Rule 12b-1 Plan or any agreement related thereto. Most recently
the continuance of the Agreement until September 30, 1995 was
approved by a vote, cast in person, of the Directors, including a
majority of the Directors who are not "interested persons", as
defined in the 1940 Act, at their meeting held on July 18, 1995.
In the event that the Agreement 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.
All material amendments to the Agreement must be
approved by a vote of the Directors or the holders of the Fund's
outstanding voting securities, voting separately by class, and in
either case, by a majority of the disinterested Directors, cast
in person at a meeting called for the purpose of voting on such
approval; and the Agreement may not be amended in order to
increase materially the costs that a particular class, may bear
pursuant to the Agreement without the approval of a majority of
the holders of the outstanding voting shares of the class
affected. The Agreement may be terminated (a) by the Fund
without penalty at any time by a majority vote of the holders of
the outstanding voting securities of the Fund, voting separately
by class or by a majority vote of the Directors who are not
"interested persons" as defined in the 1940 Act, or (b) by the
Principal Underwriter. To terminate the Agreement, any party
must give the other parties 60 days' written notice; to terminate
the Rule 12b-1 Plan only, the Fund need give no notice to the
Principal Underwriter. The Agreement will terminate
automatically in the event of its assignment.
Transfer Agency Agreement
Alliance Fund Services, Inc., an indirect wholly-owned
subsidiary of the Adviser, receives a transfer agency fee per
account holder of each of the Class A shares, Class B shares and
Class C shares of the Fund, plus reimbursement for out-of-pocket
expenses. The transfer agency fee with respect to the Class B
shares is higher than the transfer agency costs attributable to
the Class A shares or the Class C shares reflecting the
additional costs associated with the Class B contingent deferred
19
<PAGE>
sales charges. For the fiscal year ended July 31, 1995, the Fund
paid Alliance Fund Services, Inc. $198,299 for transfer agency
services.
_________________________________________________________________
PURCHASE OF SHARES
_________________________________________________________________
The following information supplements that set forth in
the Fund's Prospectus under the headings "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 (the "initial sales charge
alternative"), with a contingent deferred sales charge (the
"deferred sales charge alternative"), or without any initial or
contingent deferred sales charge (the "asset-based sales charge
alternative"), as described below. Shares of the Fund are
offered on a continuous basis 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"), or (iii) the
Principal Underwriter. The minimum for initial investments is
$250; subsequent investments (other than reinvestments of
dividends and capital gains distributions in shares) must be in
the minimum amount of $50. As described under "Shareholder
Services," the Fund offers an automatic investment program and a
403(b)(7) retirement plan which permit investments of $25 or
more. The subscriber may use the Subscription Application found
in the Prospectus for his or her initial investment. Sales
personnel of selected dealers and agents distributing the Fund's
shares may receive differing compensation for selling Class A,
Class B or Class C shares.
Investors may purchase shares of the Fund in the United
States either through selected dealers or agents or directly
through the Principal Underwriter. Shares may also be sold in
foreign countries where permissible. 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.
20
<PAGE>
The public offering price of shares of the Fund is their
net asset value, plus, in the case of most purchases of Class A
shares, a sales charge which will vary depending on the purchase
alternative chosen by the investor and the amount of the
purchase, as shown in the table below. 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 as of the next close of regular
trading on the New York Stock Exchange (the "Exchange")
(currently 4:00 p.m. New York time) by dividing the value of the
Fund's total assets, less its liabilities, by the total number of
its shares then outstanding. The respective per share net asset
values of the Class A, Class B and Class C 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 value of the Class A
shares as a result of the daily expense accruals of the
distribution and transfer agency fees applicable with respect to
the Class B and Class C shares. Even under those circumstances,
the per share net asset values of the three 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. A Fund business day is
any weekday, exclusive of national holidays on which the Exchange
is closed and Good Friday. For purposes of this computation, the
securities in the Fund's portfolio are valued at their current
market value determined on the basis of market quotations or, if
such quotations are not readily available, such other methods as
the Directors believe would accurately reflect fair market value.
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 or agents, the applicable public offering price
will be the net asset value as so determined, but only if the
selected dealer or agent receives the order prior to the close of
regular trading on the Exchange and transmits it to the Principal
Underwriter prior to its close of business that same day
(normally 5:00 p.m. New York time). The selected dealer or agent
is responsible for transmitting such orders by 5:00 p.m. If the
21
<PAGE>
selected dealer or agent fails to do so, the investor's right to
that day's closing price must be settled between the investor and
the selected dealer or agent. If the selected dealer or agent
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 "Literature" telephone number
shown on the cover of this Statement of Additional Information.
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. New York
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, stock 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 amount paid to
dealers or agents, the Principal Underwriter from time to time
pays additional cash bonuses or other incentives to dealers or
agents, including Equico Securities, Inc., an affiliate of the
Principal Underwriter, 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 will be conditioned upon the sale
of a specified minimum dollar amount of the shares of the Fund
and/or other Alliance Mutual Funds, as defined below, during a
specific period of time. On some occasions, such cash or other
incentives may take the form of payment for attendance at
22
<PAGE>
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 and their immediate family members to urban or resort
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.
Alternative Purchase Arrangements
The Fund issues three classes of shares: Class A shares
are sold to investors choosing the initial sales charge
alternative, Class B shares are sold to investors choosing the
deferred sales charge alternative, and Class C shares are sold to
investors choosing the asset-based sales charge alternative. The
three classes of 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 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 and, in the case of Class B shares
transfer agency costs, (iii) each class has exclusive voting
rights with respect to provisions of the Rule 12b-1 Plan pursuant
to which its distribution services fee is paid which relates to a
specific class and other matters for which separate class voting
is appropriate under applicable law, provided that, if the Fund
submits to a vote of both the Class A shareholders and the Class
B 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, the Class A shareholders and the Class B
shareholders will vote separately by Class, and (iv) only the
Class B shares are subject to a conversion feature. Each class
has different exchange privileges and certain different
shareholder service options available.
The alternative purchase arrangements 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 charges on Class B shares prior to
conversion, or the accumulated distribution services fee 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
23
<PAGE>
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) for more than $250,000 for Class B 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 $5,000,000 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, most 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,
in the case of Class B shares, being subject to a contingent
deferred sales charge for a four-year period. For example, based
on current fees and expenses, an investor subject to the 4.25%
initial sales charge 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
24
<PAGE>
contingent deferred sales charge may find it more advantageous to
purchase Class C shares.
The Directors of the Fund have determined that currently
no conflict of interest exists between or among the Class A,
Class B and Class C shares. On an ongoing basis, the Directors
of the Fund, pursuant to their fiduciary duties under the 1940
Act and state laws, will seek to ensure that no such conflict
arises.
Initial Sales Charge Alternative--Class A Shares
The public offering price of Class A shares for
purchasers choosing the initial sales charge alternative is the
net asset value plus a sales charge, as set forth below.
Initial Sales Charge
Discount Or
Charge Commission
Sale Charge 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 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
25
<PAGE>
reinvestment of dividends or capital gains distributions. The
contingent deferred sales charge on Class A shares will be waived
on certain redemptions, and such charge will be applied to
redemptions of shares by shareholders who hold both Class A and
Class B shares, as described below under "Deferred Sales Charge
Alternative--Class B Shares." Proceeds from the contingent
deferred sales charge on Class A shares are paid to the Principal
Underwriter and are used by 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 or agents for selling Class A
Shares. With respect to purchases of $1,000,000 or more made
through selected dealers or agents, the Manager may, pursuant to
the 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, or (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. 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 of 1933, as
amended.
Set forth below is an example of the method of computing
the offering price of the Class A shares. The example assumes a
purchase of Class A shares of the Fund aggregating less than
$100,000 subject to the schedule of sales charges set forth above
at a price based upon the net asset value of Class A shares of
the Fund at July 31, 1995.
26
<PAGE>
Net Asset Value per Class A share at
July 31, 1995 $15.08
Class A Per Share Sales Charge -
4.25% of offering price (4.44% of
net asset value per share) $ .67
______
Class A Per Share Offering Price
to the Public
$15.75
======
During the Fund's fiscal years ended July 31, 1995,
July 31, 1994 and September 30, 1993, the Principal Underwriter
received the amounts of $4,819, $13,639 and $30,435,
respectively, representing that portion of the sales charges paid
on shares of the Fund sold during the year which was not
reallowed to selected dealers (and was, accordingly, retained by
the Principal Underwriter). For the fiscal years ended July 31,
1995, July 31, 1994 and September 30, 1993, the Principal
Underwriter received $71,604, $33,317 and $23,124 in contingent
deferred sales charges with respect to Class B share redemptions.
An investor choosing the initial sales charge
alternative may under certain circumstances be entitled to pay a
reduced initial sales charge or no initial sales charge but
subject in most cases to a contingent deferred sales charge. The
circumstances under which an investor may pay a reduced initial
sales charge or no 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
27
<PAGE>
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.
The Alliance Fund, Inc.
Alliance Bond Fund, Inc.
-Corporate Bond Portfolio
-U.S. Government Portfolio
Alliance Counterpoint Fund
Alliance Developing Markets Fund, Inc.
Alliance Global Dollar Government Fund, Inc.
Alliance Global Small Cap Fund, Inc.
Alliance Growth and Income Fund, Inc.
Alliance Income Builder Fund, Inc.
Alliance International Fund
Alliance Money Market Fund
Alliance Mortgage Securities Income Fund, Inc.
Alliance Mortgage Strategy Trust, Inc.
Alliance Multi-Market Income Trust, Inc.
Alliance Multi-Market Strategy Trust, Inc.
Alliance Municipal Income Fund, Inc.
-California Portfolio
-Insured California Portfolio
-Insured National Portfolio
-National Portfolio
-New York Portfolio
Alliance Municipal Income Fund II
-Arizona Portfolio
-Florida Portfolio
-Massachusetts Portfolio
-Michigan Portfolio
-Minnesota Portfolio
-New Jersey Portfolio
-Ohio Portfolio
-Pennsylvania Portfolio
-Virginia Portfolio
Alliance New Europe Fund, Inc.
Alliance North American Government Income Trust, Inc.
Alliance Premier Growth Fund, Inc.
28
<PAGE>
Alliance Quasar Fund, Inc.
Alliance Short-Term Multi-Market Trust, Inc.
Alliance Technology Fund, Inc.
Alliance Utility Income Fund, Inc.
Alliance World Income Trust, Inc.
Alliance Worldwide Privatization Fund, Inc.
The Alliance Portfolios.
-The Alliance Growth Fund
-The Alliance Conservative Investors Fund
-The Alliance Growth Investors Fund
-The Alliance Strategic Balanced Fund
-The 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 "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 Class A, Class B
and Class C shares of the Fund held by the
investor and (b) all shares of any other
Alliance Mutual Fund held by the investor; and
(iii) the net asset value of all shares described in
paragraph (ii) owned by another shareholder
eligible to combine his or her purchase with
that of the investor into a single "purchase"
(see above).
For example, if an investor owned shares of an Alliance
Mutual Fund worth $200,000 at their then current net asset value
and, subsequently, purchased Class A shares of the Fund worth an
additional $100,000, the initial sales charge for the $100,000
purchase would be at the 2.25% rate applicable to a single
$300,000 purchase of shares of the Fund, rather than the 3.25%
rate.
To qualify for the Combined Purchase Privilege or to
obtain the Cumulative Quantity Discount on a purchase through a
selected dealer or agent, the investor or selected dealer or
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<PAGE>
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 initial 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 and/or
Class C 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 be necessary to invest
only 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% initial sales charge on the total amount being invested
(the initial sales charge applicable to an investment of
$100,000).
The Statement of Intention is not a binding obligation
upon the investor to purchase the full amount indicated. The
minimum initial investment under a Statement of Intention is 5%
of such amount. Shares purchased with the first 5% of such
amount will be held in escrow (while remaining registered in the
name of the investor) to secure payment of the higher initial
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
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<PAGE>
of Intention and qualifies for a further reduced sales charge,
the initial sales charge will be adjusted for the entire amount
purchased at the end of the 13-month period. The difference in
the initial sales charge will be used to purchase additional
shares of the Fund subject to the rate of the initial 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 initial sales
charge on a monthly basis during the 13-month period following
such a plan's initial purchase. The initial sales charge
applicable to such initial purchase of shares of the Fund will be
that normally applicable, under the schedule of the initial 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 current month's purchase
multiplied by the number of months (including the current month)
remaining in the 13-month period, and (ii) the total purchase
previously made during 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 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 such
reinvestment is made within 120 calendar days after the
redemption or repurchase date. 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 tax
purposes except that no loss will be recognized to the extent
that the proceeds are reinvested in shares of the Fund. The
31
<PAGE>
reinstatement privilege may be used by the shareholder only once,
irrespective of the number of shares redeemed or repurchased,
except that the privilege may be used without limit in connection
with transactions whose sole purpose is to transfer a
shareholder's interest in the Fund to his or her individual
retirement account or other qualified retirement plan account.
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 any initial sales
charge) and without any contingent deferred sales charge to
certain categories of investors including: (i) investment
advisory clients of the Investment 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 Investment Adviser, present or retired
full-time employees of the Investment 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 and 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) certain employee benefit plans for employees of the
Investment Adviser, the Principal Underwriter, Alliance Fund
Services, Inc. and their affiliates; (iv) persons participating
in a fee-based program, sponsored and maintained by a registered
broker-dealer and approved by the Principal Underwriter, pursuant
to which such persons pay an asset-based fee to such broker-
dealer, or its affiliate or agent, for services in the nature of
investment advisory or administrative services; (v) persons who
establish to the Principal Underwriter's satisfaction that they
are investing within such time period as may be designated by the
Principal Underwriter, proceeds of redemption of shares of such
other registered investment companies as may be designated from
time to time by the Principal Underwriter; and (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
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<PAGE>
programs sponsored by administrators or other persons that have
been approved by the Principal Underwriter.
Deferred Sales Charge Alternative--Class B Shares
Investors choosing the deferred sales charge alternative
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 which
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, 1995
an investor purchased 100 Class B shares at $10 per share (at a
cost of $1,000) and in the second year after purchase, the net
asset value per share is $12 and, during such time, the investor
has acquired 10 additional Class B shares upon dividend
reinvestment. If at such time the investor makes his or her
first redemption of 50 Class B shares (proceeds of $600), 10
Class B shares will not be subject to the charge because of
dividend reinvestment. With respect to the remaining 40 Class B
shares, the charge is applied only to the original cost of $10
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<PAGE>
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
Year before on or after
Since Purchase November 19, 1993 November 19, 1993
First 5.50% 4.00%
Second 4.50% 3.00%
Third 3.50% 2.00%
Fourth 2.50% 1.00%
Fifth 1.50% None
Sixth 0.50% None
In determining the contingent deferred sales charge
applicable to a redemption, it will be assumed, in the case of
Class B shares purchased on or after November 19, 1993, that the
redemption is first of any shares in the Shareholder's Fund
account that are not subject to a contingent deferred sales
charge, second of Class B shares held for over three years and
third of Class A shares held shortest during the one-year period
during which such shares are subject to the sales charge. When
Class B shares acquired in an exchange are redeemed, the
applicable contingent deferred sales charge and conversion
schedules will be the schedules that applied to Class B shares of
the Alliance Mutual Fund originally purchased by the shareholder
at the time of their purchase.
The contingent deferred sales charges on Class A and
Class B shares are 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
34
<PAGE>
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).
Conversion Feature. At the end of the period ending
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 be 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 (i) the assessment of the higher distribution
services fee and transfer agency costs with respect to Class B
shares does not result in the Fund's dividends or distributions
constituting "preferential dividends" under the Code, and (ii)
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.
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<PAGE>
Asset-Based Sales Charge Alternative--Class C Shares
Investors choosing the asset-based sales charge
alternative 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 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 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.
Class C shares do not convert to any other class of shares of the
Fund and incur higher distribution services fees than Class A
shares, and will thus have a higher expense ratio and pay
correspondingly lower dividends than Class A shares.
_________________________________________________________________
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."
Redemption
Subject only to the limitations described below, the
Fund redeems the shares tendered to it, as described below, at a
redemption price equal to their net asset value as next computed
following the receipt of shares tendered for redemption in proper
form. Except for any contingent deferred sales charge which may
be applicable to Class A shares and Class B 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.
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 New York Stock Exchange (the "Exchange") is
closed (other than customary weekend and holiday closings) or
during which the Securities and Exchange Commission determines
that trading thereon is restricted, or for any period during
which an emergency (as determined by the Securities and Exchange
36
<PAGE>
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 Securities and Exchange 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 B 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 institution that is an "eligible guarantor" as
defined in Rule 17Ad-15 under the Securities Exchange Act of
1934, as amended.
Telephone Redemption By Electronic Funds Transfer.
Requests for redemption of shares for which no stock certificates
have been issued can also be made 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 must be for
at least $500 and may not exceed $100,000, and must be made
between 9:00 a.m. and 4:00 p.m. New York 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. Except as noted below,
each Fund shareholder is eligible to request redemption, once in
any 30-day period, of Fund shares by telephone at (800) 221-5672
before 4:00 p.m. New York 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.
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<PAGE>
Telephone redemption by check is not available with respect to
shares (i) for which certificates have been issued, (ii) held in
nominee or "street name" accounts, (iii) purchased within 15
calendar days prior to the redemption request, (iv) held by a
shareholder who has changed his or her address of record within
the preceding 30 calendar days or (v) held in any retirement plan
account. 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.
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 redemption service at
any time without notice. 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.
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
38
<PAGE>
signature or signatures on the assignment form must be guaranteed
in the manner described above.
Repurchase
The Fund may repurchase shares through the Principal
Underwriter 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 shares and
Class B 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. New York time). The
selected dealer or agent is responsible for transmitting the
request to the Principal Underwriter by 5:00 p.m. If the
selected dealer or agent fails to do so, the shareholder's right
to receive that day's closing price must be settled between the
shareholder and the dealer or agent. A shareholder may offer
shares of the Fund to the Principal Underwriter either directly
or through a selected dealer or agent. Neither the Fund nor the
Principal Underwriter charges a fee or commission in connection
with the repurchase of shares (except for the contingent deferred
sales charge, if any, with respect to Class A shares and Class B
shares). Normally, if shares of the Fund are offered through a
selected dealer or agent, the repurchase is settled by the
shareholder as an ordinary transaction with or through the
selected dealer or agent, who may charge the shareholder for this
service. The repurchase of shares of the Fund as described above
is a voluntary service of the Fund and the Fund may suspend or
terminate this practice at any time.
General
The Fund reserves the right to close out an account that
through redemption has remained below $200 for at least 60 days
after at least 30 days' written notice to the shareholder
subsequent to such period. 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.
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<PAGE>
_________________________________________________________________
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 all three classes of shares of the
Fund.
Automatic Investment Program
Investors may purchase shares of the Fund through an
automatic investment program utilizing "pre-authorized check"
drafts 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. Drafts may be
made in paper form or, if the investor's bank is a member of the
NACHA, in electronic form. If made in paper form, the draft is
normally made on the 20th day of each month, or the next business
day thereafter. If made in electronic form, drafts can be made
on or about a date each month selected by the shareholder.
Investors wishing to establish an automatic investment program in
connection with their initial investment should complete the
appropriate portion of the Subscription Application found in the
Prospectus. Current shareholders should contact Alliance Fund
Services, Inc. at the address or telephone numbers shown on the
cover of this Statement of Additional Information to establish an
automatic investment program.
Exchange Privilege
Class A shareholders of the Fund can exchange their
Class A shares for Class A shares of any other Alliance Mutual
Fund that offers Class A shares and for shares of Alliance World
Income Trust, Inc. without the payment of any sales or service
charges. For purposes of applying any applicable contingent
deferred sales charge upon the newly acquired Class A shares, the
period of time the Class A shares surrendered in the exchange
have been held is added to the period of time the newly acquired
shares have been held. Prospectuses for each Alliance Mutual
Fund and Alliance Cash Management Fund (each an "Alliance Fund"),
may be obtained by contacting Alliance Fund Services, Inc. at the
address shown on the cover of this Statement of Additional
40
<PAGE>
Information or by telephone at (800) 227-4618 or, in Illinois,
(800) 227-4170.
Class B shareholders of the Fund can exchange their
Class B shares ("original Class B shares") for Class B shares of
any other Alliance Mutual Fund that offers Class B shares ("new
Class B shares") without the payment of any contingent deferred
sales or service charges. For purposes of computing both the
time remaining before the new Class B shares convert to Class A
shares of that fund and the contingent deferred sales charge
payable upon disposition of the new Class B shares, the period of
time for which the original Class B shares have been held is
added to the period of time for which the new Class B shares have
been held, and the original fund's contingent deferred sales
charge schedule is applied.
Class C shareholders of the Fund can exchange their
Class C shares for Class C shares of any other Alliance Mutual
Fund that offers Class C shares.
All exchanges are subject to the minimum investment
requirements and any other applicable terms set forth in the
Prospectus for the Alliance Mutual Fund whose shares are being
acquired. An exchange is effected through the redemption of the
shares tendered for exchange and the purchase of shares being
acquired at their respective net asset values as next determined
following receipt by the Alliance Mutual Fund whose shares are
being exchanged of (i) proper instructions and all necessary
supporting documents as described in such fund's Prospectus, or
(ii) a telephone request for such exchange in accordance with the
procedures set forth in the following paragraph. Exchanges
involving the redemption of shares recently purchased by check
will be permitted only after the Alliance Mutual Fund whose
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 or agent, 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
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<PAGE>
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
between 9:00 a.m. and 4:00 p.m., New York time, on a Fund
business day as defined above. Telephone requests for exchange
received before 4:00 p.m. New York 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.
Neither the Alliance Funds nor 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
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
exchanges.
The exchange privilege is available only in states where
shares of the Alliance Mutual Funds 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.
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<PAGE>
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 "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.
If the aggregate net asset value of shares of the
Alliance Mutual Funds held by a qualified plan investing through
the Alliance Premier Retirement Program reaches $5 million on or
before December 15 in any year, all Class B shares and C shares
of the Fund held by such plan can be exchanged, without any sales
charge, for Class A shares of such Fund shortly before the end of
the calendar year in which the $5 million level is attained. The
Fund waives any contingent deferred sales charge applicable to
redemptions of Class B shares by qualified plans investing
through the Alliance Premier Retirement Program.
43
<PAGE>
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
retirements 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 The Equitable Life Assurance Society of the United
States, 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 or Class C Fund account, a Class A, Class
B or Class C account with one or more other Alliance Mutual Funds
may direct that income dividends and/or capital gains paid on his
or her Class A, Class B or Class C 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
"Literature" telephone number shown on the cover of this
Statement of Additional Information. Investors wishing to
establish a dividend direction plan in connection with their
initial investment should complete the appropriate section of the
Subscription Application found in the Prospectus. Current
shareholders should contact Alliance Fund Services, Inc. to
establish a dividend direction plan.
44
<PAGE>
Systematic Withdrawal Plan
General. Any shareholder who owns or purchases shares
of the Fund having a current net asset value of at least $4,000
(for quarterly or less frequent payments), $5,000 (for bi-monthly
payments) or $10,000 (for monthly payments) may establish a
systematic withdrawal plan under which the shareholder will
periodically receive a payment in a stated amount of not less
than $50 on a selected date. Systematic withdrawal plan
participants must elect to have their dividends and distributions
from the Fund automatically reinvested in additional shares of
the Fund.
Shares of the Fund owned by a participant in the Fund's
systematic withdrawal plan will be redeemed as necessary to meet
withdrawal payments and such withdrawal 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
45
<PAGE>
the "Literature" telephone number shown on the cover of this
Statement of Additional Information.
Class B CDSC Waiver for Shares Acquired After July 1,
1995. 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 shares in a shareholder's account acquired after
July 1, 1995 may be redeemed free of any contingent deferred
sales charge. Class B shares acquired after July 1, 1995 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 these limitations.
Remaining Class B shares acquired after July 1, 1995 that are
held the longest will be redeemed next. Redemptions of Class B
shares acquired after July 1, 1995 in excess of the foregoing
limitations and redemptions of Class B shares acquired before
July 1, 1995 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, Price Waterhouse
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 net asset value per share is computed in accordance
with the Fund's Articles of Incorporation and By-Laws, at the
next close of regular trading on the Exchange (currently
4:00 p.m. New York time) following receipt of a purchase or
redemption order (and on such other days as the Directors of the
Fund deem 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 its total assets, less its liabilities, by
the total number of its shares then outstanding. The net asset
value is calculated at the close of business on each Fund
business day. For this purpose, a Fund's business day is any
weekday exclusive of national holidays on which the Exchange is
closed and Good Friday. Portfolio securities which are traded
46
<PAGE>
over-the-counter and on a national securities exchange are valued
in the market which the Board of Directors determines is the
broadest and most representative. When securities are valued in
the over-the-counter market, valuations are at the mean of the
closing bid and asked prices. When Exchange valuations are used,
the valuation is the last quoted sales price as of the close of
the Exchange on the day of valuation; if there have been no sales
during the day, the mean value of the closing bid and asked
prices is used. If no quotations are available, securities will
be valued at fair value as determined in good faith by the Board
of Directors. The Board of Directors has further determined that
the value of certain portfolio debt securities, other than
temporary investments in short-term securities, be determined by
reference to valuations obtained from a pricing service which
takes into account appropriate factors such as institution-size
trading in similar groups of securities, yield, quality, coupon
rate, maturity, type of issue, trading characteristics and other
market data in determining valuations of such securities, without
exclusive reliance upon quoted prices, since such valuations are
believed by the Board more accurately to reflect the fair value
of such securities. At the present time, the Fund is employing a
pricing service. Several pricing services are available, and the
Board of Directors may authorize the use of another such service.
In addition, the Board has directed the officers of the Fund
periodically to compare valuations obtained from the pricing
service with quotations from bond dealers. Temporary investments
in short-term securities having a maturity of 60 days or less are
valued at original cost which, when combined with amortized
discount or accrued interest receivable, approximates market.
The assets belonging to the Class A shares, the Class B
shares and the Class C shares will be invested together in a
single portfolio. The net asset value of each class will be
determined separately by subtracting the accrued expenses and
liabilities allocated to that class from the assets belonging to
that class pursuant to an order issued by the Securities and
Exchange Commission.
_________________________________________________________________
DIVIDENDS, DISTRIBUTIONS AND TAXES
_________________________________________________________________
The Fund intends to qualify as a regulated investment
company under the Internal Revenue Code for each taxable year.
Qualification as a regulated investment company under the
Internal Revenue Code requires, among other things, that (a) at
least 90% of the Fund's annual gross income, without offset for
47
<PAGE>
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; (b) the Fund derive less than 30%
of its gross income from gains (without offset for losses) from
the sale or other disposition of securities or options thereon
held for less than three months; and (c) 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 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). If the Fund qualifies
as a regulated investment company for any taxable year and makes
timely distributions to the Fund's shareholders of 90% or more of
its net investment income for that year (calculated without
regard to its net capital gain, i.e., the excess of its net
long-term capital gain over its net short-term capital loss) it
will not be subject to federal income tax on the portion of its
taxable income for the year (including any net capital gain) that
it distributes to its shareholders. The Fund will also avoid the
nondeductible 4% federal excise tax that would otherwise apply to
certain undistributed income for a given calendar year if it
makes timely distributions to its shareholders which meet certain
minimum distribution requirements. For this purpose, income or
gain retained by the Fund which is subject to corporate income
tax will be considered to have been distributed by year-end. In
addition, dividends declared in October, November or December
payable to shareholders of record as of a specified date during
such month and paid in the following January will be treated as
having been paid by the Fund and received by shareholders in
December.
Gains or losses on sales of securities by the Fund
generally will be long-term capital gains or losses if the
securities have been held by it for more than one year. Other
gains or losses on the sale of securities will be short-term
capital gains or losses. If an option written by the Fund lapses
or is terminated through a closing transaction, such as a
repurchase by the Fund of the option of its holder, the Fund may
realize a short-term capital gain or loss, depending on whether
the premium income is greater or less than the amount paid by the
Fund in the closing transaction. If securities are sold by the
Fund pursuant to the exercise of a call option written by it, the
Fund will add the premium received to the sale price of the
securities delivered in determining the amount of gain or loss on
48
<PAGE>
the sale. The requirement that the Fund derive no more than 30%
of its gross income from gains from the sale of securities held
for less than three months may limit the Fund's ability to write
options.
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 and control of the
Directors of the Fund, the Adviser makes the Fund's portfolio
decisions and determines the broker to be used in each specific
transaction with the objective of negotiating best price and
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.
Consistent with the Rules of Fair Practice of the National
Association of Securities Dealers, Inc., and subject to seeking
best execution, the Fund may consider sales of shares of the Fund
as a factor in the selection of brokers to execute portfolio
transactions for the Fund.
Neither the Fund nor the Adviser has entered into
agreements or understandings with any brokers regarding the
placement of securities transactions because of research or
statistical 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. While it is
impossible to place an actual dollar value on such investment
information, its receipt by the Adviser probably 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
49
<PAGE>
Act of 1934 and is designed to augment the Adviser's own internal
research and investment strategy capabilities. Research and
statistical 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 but not all such services may
be used by the Adviser in connection with the Fund.
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.
With respect to orders placed with Donaldson, Lufkin &
Jenrette Securities Corporation for execution on a national
securities exchange, 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 year ended July 31, 1995 brokerage
commissions paid by the Fund on the purchase and sale of the
portfolio securities were $308,733 for transactions totaling
$596,999,899. Of this amount, -0- was paid to brokers utilizing
the services of the Pershing Division of Donaldson, Lufkin &
Jenrette Securities Corporation. Additionally, approximately 0%
of this amount went to brokers who rendered research services to
the Fund. During the fiscal year ended July 31, 1994, brokerage
commissions paid by the Fund on the purchase and sale of
portfolio securities were $294,990 for transactions totaling
$408,687,665. Of this amount, none was paid to brokers utilizing
the services of the Pershing Division of Donaldson, Lufkin &
Jenrette Securities Corporation, an affiliated broker-dealer.
Additionally, approximately 100% of this amount went to brokers
who rendered research services to the Fund. During the fiscal
year ended September 30, 1993, brokerage commissions paid by the
Fund on the purchase and sale of the portfolio securities were
50
<PAGE>
$192,704 for transactions totaling $622,234,712. Of this amount,
none was paid to brokers utilizing the services of the Pershing
Division of Donaldson, Lufkin & Jenrette Securities Corporation.
Additionally, approximately 100% of this amount went to brokers
who rendered research services to the Fund.
____________________________________________________________
GENERAL INFORMATION
____________________________________________________________
Capitalization
The Fund's capital stock of the Fund currently consists
of 60,000,000 shares of Class A Common Stock, 60,000,000 shares
of Class B Common Stock and 60,000,000 shares of Class C Common
Stock each having a par value $.01 per share. 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 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. An order has been received
from the Securities and Exchange Commission permitting the
issuance and sale of three classes of shares representing
interests in the Fund. The issuance and sale of any additional
classes will require an additional order from the Securities and
Exchange Commission. There is no assurance that such exemptive
relief would be granted.
51
<PAGE>
At October 13, 1995 there were 9,447,744 shares of
common stock of the Fund outstanding including 7,993,038 Class A
shares, 1,066,328 Class B shares and 388,380 Class C shares. To
the knowledge of the Fund, the following persons owned of record,
and no person owned beneficially, 5% or more of the outstanding
shares of the Fund as of October 13, 1995:
No. of % of
Name and Address Class Shares Class
BTR Inc. 401K Plan
9 Riverside Road
Weston, MA 02193 A 594,682 7.44%
Merrill Lynch
4800 Deer Lake Dr. East
Jacksonville, FL 32266 B 134,784 12.64%
Merrill Lynch
4800 Deer Lake Dr. East
Jacksonville, FL 32266 C 74,452 19.17%
Custodian
State Street Bank and Trust Company, 225 Franklin
Street, Boston, Massachusetts 02110, acts as custodian for the
securities and cash of the Fund but plays no part in deciding the
purchase or sale of portfolio 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. Alliance Fund
Distributors, Inc. is not obligated to sell any specific amount
of shares and will purchase shares for resale only against orders
for shares. Under the Agreement between the Fund and the
Principal Underwriter, 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 of 1933, as
amended.
52
<PAGE>
Counsel
Legal matters in connection with the issuance of the
common stock offered hereby are passed upon by Seward & Kissel,
One Battery Park Plaza, New York, New York 10004. Seward &
Kissel has relied upon the opinion of Venable, Baetjer & Howard,
LLP, 1800 Mercantile Bank & Trust Building, 2 Hopkins Plaza,
Baltimore, Maryland 21201, for matters relating to Maryland law.
Independent Accountants
Price Waterhouse LLP, 1177 Avenue of the Americas, New York,
New York 10036, has been appointed as independent accountants for
the Fund and has registered as a Registered Limited Liability
Partnership under the laws of the State of Delaware. All
references to Price Waterhouse in the Prospectus and Statement of
Additional Information are to Price Waterhouse LLP.
Total Return Quotations
From time to time the Fund advertises its "total
return." 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 (or the period since the Fund's
inception). The Fund's total return for such a period is
computed, through the use of a formula prescribed by the
Securities and Exchange Commission, by finding the average annual
compounded rate of return over the period that would equate an
assumed initial amount invested to the value of 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 will include
performance data for Class A, Class B and Class C shares in any
advertisement or information including performance data of the
Fund.
The Fund's average annual compounded total return for
Class A shares for the year ended July 31, 1995 was 11.09%; for
the five year period ended July 31, 1995 was 8.64%; and for the
ten year period ended July 31, 1995 was 10.46%. The Fund's
average annual compounded total return for Class B shares for the
year ended July 31, 1995 was 11.07%; and for the period from
February 4, 1991 (commencement of distribution) through July 31,
1995 was 8.55%. The Fund's average annual compounded total
return for Class C shares for the year ended July 31, 1995 was
53
<PAGE>
15.06%; and for the period from May 3, 1993 (commencement of
distribution) through July 31, 1995 was 7.37%.
The Fund's total return is not fixed and will fluctuate
in response to prevailing market conditions or as a function of
the type and quality of the securities in the Fund's portfolio
and the Fund's expenses. Total return information is useful in
reviewing the Fund's performance but such information may not
provide a basis for comparison with bank deposits or other
investments which pay a fixed return for a stated period of time.
An investor's principal invested in the Fund is not fixed and
will fluctuate in response to prevailing market conditions.
Advertisements quoting performance ratings of the Fund
as measured by financial publications or by independent
organizations such as Lipper Analytical Services, Inc. and
advertisements presenting the historical record of payments of
income dividends by the Fund may also from time to time be sent
to investors or placed in newspapers and magazines such as The
New York Times, The Wall Street Journal, Barrons, Investor's
Daily, Money Magazine, Changing Times, Business Week and Forbes
or other media on behalf of the Fund.
Additional Information
Any shareholder inquiries may be directed to the
shareholder's broker or other financial adviser or to Alliance
Fund Services, Inc. at the address or telephone numbers shown on
the front cover of this Statement of Additional Information. This
Statement of Additional Information does not contain all the
information set forth in the Registration Statement filed by the
Fund with the Securities and Exchange Commission under the
Securities Act of 1933, as amended. Copies of the Registration
Statement may be obtained at a reasonable charge from the
Securities and Exchange Commission or may be examined, without
charge, at the offices of the Securities and Exchange Commission
in Washington, D.C.
54
00250027.AE2
<PAGE>
PORTFOLIO OF INVESTMENTS
JULY 31, 1995 ALLIANCE BALANCED SHARES
- -------------------------------------------------------------------------------
COMPANY SHARES VALUE
- ----------------------------------------------------------------------
COMMON STOCKS-58.1%
CONSUMER PRODUCTS & SERVICES-22.9%
BROADCASTING & CABLE-1.6%
Comcast Corp. Cl.A (SPL) 80,000 $1,615,000
Cox Communications, Inc.Cl.A* 32,500 658,125
2,273,125
COSMETICS-1.5%
Gillette Co. 50,000 2,187,500
DRUGS, HOSPITAL SUPPLIES & MEDICAL SERVICES-7.7%
Abbott Laboratories 40,000 1,600,000
Columbia HCA Healthcare Corp. 45,000 2,205,000
Merck & Co., Inc. 45,000 2,323,125
Pfizer, Inc. 40,000 2,020,000
Schering-Plough Corp. 40,000 1,860,000
United Healthcare Corp. 20,000 905,000
10,913,125
ENTERTAINMENT & LEISURE TIME-2.3%
Carnival Corp. 40,000 905,000
Walt Disney Co. 40,000 2,345,000
3,250,000
FOOD & BEVERAGES-2.1%
McDonald's Corp. 30,000 1,158,750
PepsiCo, Inc. 40,000 1,875,000
3,033,750
HOUSEHOLD PRODUCTS-1.2%
Colgate-Palmolive Co. 25,000 1,750,000
MULTI-INDUSTRY-0.9%
ITT Corp. 11,000 1,320,000
RETAILING-2.2%
AutoZone, Inc.* 50,000 $1,300,000
Home Depot, Inc. 40,000 1,755,000
3,055,000
TOBACCO-2.9%
Philip Morris Cos., Inc. 50,000 3,581,250
UST, Inc. 20,000 545,000
4,126,250
OTHER-0.5%
Duracell International, Inc. 15,000 690,000
32,598,750
SCIENCE & TECHNOLOGY-10.5%
BIOTECHNOLOGY-0.8%
Amgen, Inc.* 14,000 1,190,000
COMMUNICATION EQUIPMENT-0.8%
General Instrument Corp.* 30,000 1,106,250
COMPUTER HARDWARE-1.5%
Compaq Computer Corp.* 26,000 1,319,500
Silicon Graphics, Inc.* 20,000 840,000
2,159,500
COMPUTER SOFTWARE-3.2%
cisco Systems, Inc.* 20,000 1,113,750
General Motors Corp. Cl.E 40,000 1,760,000
Oracle System Corp.* 40,000 1,675,000
4,548,750
SEMI-CONDUCTORS & RELATED-3.5%
Intel Corp. 50,000 3,250,000
Motorola, Inc. 22,000 1,685,750
4,935,750
TELECOMMUNICATION EQUIPMENT-0.1%
Scientific-Atlanta, Inc. 10,000 215,000
7
PORTFOLIO OF INVESTMENTS (CONTINUED) ALLIANCE BALANCED SHARES
- -------------------------------------------------------------------------------
COMPANY SHARES VALUE
- ----------------------------------------------------------------------
OTHER-0.6%
Xerox Corp. 7,000 $ 833,875
14,989,125
FINANCIAL SERVICES-8.7%
BANKING & CREDIT-2.5%
Citicorp 20,000 1,247,500
MBNA Corp. 40,000 1,435,000
NationsBank Corp. 15,000 841,875
3,524,375
BROKERAGE-1.3%
Dean Witter, Discover & Co. 15,000 757,500
Merrill Lynch & Co., Inc. 20,000 1,110,000
1,867,500
INSURANCE-4.9%
American International Group, Inc. 30,000 2,250,000
General Re Corp. 8,000 1,061,000
MGIC Investment Corp. 12,000 609,000
NAC Re Corp. 30,000 1,102,500
Travelers, Inc. 40,000 1,895,000
6,917,500
12,309,375
BASIC INDUSTRIES-7.6%
AUTO PARTS-0.6%
Magna International, Inc.
Cl.A 20,000 920,000
CHEMICALS-2.9%
Morton International, Inc.* 60,000 1,800,000
Rohm & Haas Co. 40,000 2,330,000
4,130,000
ELECTRICAL EQUIPMENT-1.7%
General Electric Co. 40,000 2,360,000
MACHINERY-0.6%
Coltec Industries, Inc.* 60,000 915,000
SHARES OR
PRINCIPAL
AMOUNT
COMPANY (000) VALUE
- ----------------------------------------------------------------------
OTHER-1.8%
Alco Standard Corp. 8,000 $ 651,000
AlliedSignal, Inc. 40,000 1,870,000
2,521,000
10,846,000
PUBLIC UTILITIES-3.2%
TELEPHONE-3.2%
AirTouch Communications, Inc.* 60,000 1,890,000
AT & T Corp. 20,000 1,055,000
MCI Communications Corp. 70,000 1,675,625
4,620,625
ENERGY-1.0%
OIL & GAS SERVICES-1.0%
Enron Corp. 40,000 1,390,000
TRANSPORTATION-0.7%
RAILROAD-0.7%
Conrail, Inc. 15,000 926,250
OTHER-3.5%
G.T. Greater Europe Fund 150,000 1,912,500
Scudder New Asia Fund, Inc.* 80,000 1,270,000
The France Growth Fund, Inc. 160,000 1,740,000
4,922,500
Total Common Stocks (cost $68,872,144) 82,602,625
CORPORATE BONDS-9.7%
COMMUNICATIONS-1.6%
Tele-Communications, Inc.
9.80%, 2/01/12 $2,000 2,210,800
INDUSTRIAL-6.3%
Borden, Inc.
Zero Coupon, 5/22/97(a) 4,000 3,510,000
P T Alatief Freeport Finance
9.75%, 4/15/01 3,325 3,358,250
Time Warner, Inc.
9.15%, 2/01/23 2,050 2,110,639
8,978,889
OTHER-1.8%
Republic of Italy
6.875%, 9/27/23 3,000 2,620,290
Total Corporate Bonds (cost $13,942,300) 13,809,979
MORTGAGE RELATED SECURITIES-7.1%
Federal Home Loan Mortgage Corp.
7.00%, 7/01/25 2,958 2,886,801
Federal National Mortgage Association
6.00%, 4/01/09-6/01/09 7,574 7,287,415
TotalMortgageRelated Securities
(cost $10,287,487) 10,174,216
U.S. GOVERNMENT OBLIGATIONS-17.6%
U.S. Treasury Bond
7.50%, 11/15/24 1,050 1,130,881
8
ALLIANCE BALANCED SHARES
- -------------------------------------------------------------------------------
PRINCIPAL
AMOUNT
COMPANY (000) VALUE
- ----------------------------------------------------------------------
U.S. Treasury Notes
6.75%, 4/30/00 $ 600 $ 613,314
7.125%, 9/30/99 6,200 6,413,094
7.50%, 2/15/05 5,255 5,632,677
7.875%, 4/15/98 10,750 11,240,415
Total U.S.Government Obligations
(cost $24,718,498) 25,030,381
COMMERCIAL PAPER-6.4%
Merrill Lynch & Co., Inc.
5.85%, 8/01/95
(amortized cost $9,079,000) 9,079 9,079,000
TOTALINVESTMENTS-98.9%
(cost $126,899,429) 140,696,201
Other assets less
liabilities-1.1% 1,523,772
NET ASSETS-100% $142,219,973
* Non-income producing security.
(a) Security exempt from Registration under Rule 144A of the Securities Act of
1933. This security may be resold in transactions exempt from registration,
normally to certain qualified buyers. At July 31, 1995, the aggregate market
value of this security amounted to $3,510,000 representing 2.5% of net assets.
See notes to financial statements.
9
STATEMENT OF ASSETS AND LIABILITIES
JULY 31, 1995 ALLIANCE BALANCED SHARES
- -------------------------------------------------------------------------------
ASSETS
Investments in securities, at value (cost $126,899,429) $140,696,201
Cash 546,955
Receivable for investment securities sold 4,945,182
Dividends and interest receivable 876,135
Receivable for capital stock sold 34,826
Total assets 147,099,299
LIABILITIES
Payable for investment securities purchased 4,322,587
Payable for capital stock redeemed 191,909
Advisory fee payable 75,176
Distribution fee payable 41,867
Accrued expenses 247,787
Total liabilities 4,879,326
NET ASSETS $142,219,973
COMPOSITION OF NET ASSETS
Capital stock, at par $94,502
Additional paid-in capital 117,830,925
Undistributed net investment income 1,022,661
Accumulated net realized gain 9,475,113
Net unrealized appreciation of investments 13,796,772
$142,219,973
CALCULATION OF MAXIMUM OFFERING PRICE
CLASS A SHARES
Net asset value and redemption price per share($122,032,621/8,093,872
shares of capital stock issued and outstanding) $15.08
Sales charge-4.25% of public offering price .67
Maximum offering price $15.75
CLASS B SHARES
Net asset value and offering price per share ($15,079,578/1,013,382
shares of capital stock issued and outstanding) $14.88
CLASS C SHARES
Net asset value, redemption and offering price per share ($5,107,774/
342,976 shares of capital stock issued and outstanding) $14.89
See notes to financial statements.
10
STATEMENT OF OPERATIONS
YEAR ENDED JULY 31, 1995 ALLIANCE BALANCED SHARES
- -------------------------------------------------------------------------------
INVESTMENT INCOME
Interest $5,392,426
Dividends (net of foreign taxes withheld of $2,260) 2,015,640
$ 7,408,066
EXPENSES
Advisory fee 1,044,023
Distribution fee - Class A 355,461
Distribution fee - Class B 138,872
Distribution fee - Class C 50,477
Transfer agency 274,247
Administrative 167,029
Registration 86,906
Audit and legal 84,292
Custodian 68,535
Printing 31,302
Directors' fees 24,000
Miscellaneous 32,954
Total expenses 2,358,098
Net investment income 5,049,968
REALIZED AND UNREALIZED GAIN ON INVESTMENTS & FOREIGN CURRENCY
Net realized gain on security transactions 9,860,942
Net realized gain on foreign currency transactions 76
Net realized gain on options transactions 113,966
Net change in unrealized appreciation on securities 9,246,257
Net gain on investments 19,221,241
NET INCREASE IN NET ASSETS FROM OPERATIONS $24,271,209
See notes to financial statements.
11
STATEMENT OF CHANGES IN NET ASSETS ALLIANCE BALANCED SHARES
- -------------------------------------------------------------------------------
YEAR ENDED OCT. 1, 1993
JULY 31, THROUGH
1995 JULY 31,1994*
------------- -------------
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS
Net investment income $ 5,049,968 $ 3,727,437
Net realized gain on investments 9,974,984 1,521,330
Net change in unrealized appreciation
of investments 9,246,257 (11,401,870)
Net increase (decrease) in net assets
from operations 24,271,209 (6,153,103)
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income
Class A (4,018,825) (3,328,864)
Class B (288,412) (209,253)
Class C (105,151) (94,432)
Net realized gain on investments
Class A (264,146) (3,450,935)
Class B (24,685) (236,079)
Class C (8,478) (106,940)
CAPITAL STOCK TRANSACTIONS
Net increase (decrease) (55,580,660) 5,057,935
Total decrease (36,019,148) (8,521,671)
NET ASSETS
Beginning of period 178,239,121 186,760,792
End of period (including undistributed net
investment income of $1,022,661 and $396,666,
respectively) $142,219,973 $178,239,121
* The Fund changed its fiscal year end from September 30 to July 31.
See notes to financial statements.
12
NOTES TO FINANCIAL STATEMENTS
JULY 31, 1995 ALLIANCE BALANCED SHARES
- -------------------------------------------------------------------------------
NOTE A: SIGNIFICANT ACCOUNTING POLICIES
Alliance Balanced Shares, Inc. (the "Fund") is registered under the Investment
Company Act of 1940, as a diversified, open end management investment company.
The Fund offers Class A, Class B and Class C shares. Class A shares are sold
with a front end sales charge of up to 4.25%. Class B shares are 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 sold without an initial or contingent deferred
sales charge. All three classes of shares have identical voting, dividend,
liquidation and other rights, except that each class bears different
distribution expenses and has exclusive voting rights with respect to its
distribution plan. The following is a summary of significant accounting
policies followed by the Fund.
1. SECURITY VALUATION
Portfolio securities traded on national securities exchanges are valued at the
last sales price or, if no sale occurred, at the mean of the bid and asked
price at the regular close of the New York Stock Exchange. Securities traded
on the over the counter market are valued at the mean of the closing bid and
asked price. Securities for which current market quotations are not readily
available (including investments which are subject to limitations as to their
sale) are valued at their fair value as determined in good faith by the Board
of Directors. The Board of Directors has further determined that the value of
certain portfolio debt securities, other than temporary investments in short
term securities, be determined by reference to valuations obtained from a
pricing service. Securities which mature in 60 days or less are valued at
amortized cost, which approximates market value. The ability of issuers of debt
securities held by the Fund to meet their obligations may be affected by
economic developments in a specific industry or region.
2. CURRENCY TRANSLATION
Assets and liabilities denominated in foreign currencies are translated into
U.S. dollars at the mean of the quoted bid and asked price of the respective
currency against the U.S. dollar on the valuation date. Purchases and sales of
portfolio securities are translated at the rates of exchange prevailing when
such securities were acquired or sold. Income and expenses are translated at
rates of exchange prevailing when earned or accrued.
Net realized gain on foreign currency transactions of $76 for the Fund,
represents net foreign exchange gains and losses from holdings of foreign
currencies, currency gains or losses realized between the trade and settlement
dates on security transactions, and the difference between the amounts of
dividends and foreign taxes recorded on the Fund's books and the U.S. dollar
equivalent amounts actually received or paid. Net unrealized currency gains and
losses from valuing foreign currency denominated assets and liabilities at
fiscal year end exchange rates are reflected as a component of unrealized
appreciation on investments and foreign currency denominated assets and
liabilities.
3. OPTIONS TRANSACTIONS
For hedging purposes, the Fund purchases and writes (sells) put and call
options on U.S. securities that are traded on U.S. 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 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 is added to the proceeds from the sale of the underlying
security or currency in
13
NOTES TO FINANCIAL STATEMENTS (CONTINUED) ALLIANCE BALANCED SHARES
- -------------------------------------------------------------------------------
determining whether the Fund has realized a gain or loss. If a put option is
exercised, the premium reduces the cost basis of the security or currency
purchased by the Fund. In writing an option, the Fund bears the market risk of
an unfavorable change in the price of the security or currency underlying the
written option. Exercise of an option written by the Fund could result in the
Fund selling or buying a security or currency at a price different from the
current market value.
Transactions in options written for the year ended July 31, 1995 were as
follows:
NUMBER OF
CONTRACTS PREMIUMS
--------- --------
Options outstanding at beginning of period -0- $ -0-
Options written 870 179,209
Options terminated in closing purchase transactions (200) (64,398)
Options expired (550) (82,985)
Options exercised (120) (31,826)
Options outstanding at end of period -0- $ -0-
4. TAXES
It is the Fund's policy to meet the requirements of the Internal Revenue Code
applicable to regulated investment companies and to distribute all of its
investment company taxable income and net realized gains, if any, to
shareholders. Therefore, no provisions for federal income or excise taxes are
required.
5 INVESTMENT INCOME AND SECURITY TRANSACTIONS
Dividend income is recorded on the ex dividend date. Interest income is
accrued daily. Security transactions are accounted for on the date securities
are purchased or sold. Security gains and losses are determined on the
identified cost basis. The Fund accretes discounts as adjustments to interest
income.
6. DIVIDENDS AND DISTRIBUTIONS
Dividends and distributions to shareholders are recorded on the ex dividend
date. Income dividends and capital gain distributions are determined in
accordance with income tax regulations, which may differ from generally
accepted accounting principles.
NOTE B: ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Under the terms of an investment advisory agreement, the Fund pays its Adviser,
Alliance Capital Management L.P., an advisory fee at an annual rate of .625% of
the first $200 million, .50% of the next $200 million and .45% of the excess
over $400 million of the average daily net assets of the Fund. Such fee is
accrued daily and paid monthly. The Adviser has agreed, under the terms of the
investment advisory agreement, to reimburse the Fund to the extent that its
aggregate expenses (exclusive of interest, taxes, brokerage, distribution fees
and extraordinary expenses) exceed the limits prescribed by any state in which
the Fund's shares are qualified for sale. The Adviser believes that the most
restrictive expense ratio limitation imposed by any state is 2.5% of the first
$30 million of its average daily net assets, 2% of the next $70 million of its
average daily net assets and 1.5% of its average daily net assets in excess of
$100 million. No reimbursement was required for the year ended July 31, 1995.
Pursuant to the Advisory Agreement, the Fund reimburses the Adviser for the
cost of certain legal and accounting services provided to the Fund by the
Adviser. For the year ended July 31, 1995, such reimbursement amounted to
$167,029.
The Fund compensates Alliance Fund Services, Inc. (a wholly-owned subsidiary of
the Adviser) in accordance with a Services Agreement for providing personnel
and facilities to perform transfer agency services for the Fund. Such
compensation amounted to $198,299 for the year ended July 31, 1995.
Alliance Fund Distributors, Inc. (a wholly owned subsidiary of the Adviser)
serves as the Distributor of the
14
ALLIANCE BALANCED SHARES
- -------------------------------------------------------------------------------
Fund's shares. The Distributor received front end sales charges of $4,819 from
the sale of Class A shares and $71,604 in contingent deferred sales charges
imposed upon redemptions by shareholders of Class B shares for the year ended
July 31, 1995.
Brokerage commissions paid on securities transactions for the year ended July
31, 1995 amounted to $308,733, none of which was paid to brokers utilizing the
services of the Pershing Division of Donaldson, Lufkin & Jenrette Securities
Corp. ("DLJ"), an affiliate of the Adviser, nor to DLJ directly.
NOTE C: DISTRIBUTION SERVICES AGREEMENT
The Fund has adopted a Distribution Services Agreement (the "Agreement")
pursuant to Rule 12b 1 under the Investment Company Act of 1940. Under the
Agreement, the Fund pays a distribution fee to the Distributor at an annual
rate of up to .30% of the Fund's average daily net assets attributable to the
Class A shares and 1% of the average daily net assets attributable to both
Class B shares and Class C shares. The Agreement provides that the Distributor
will use such payments in their entirety for distribution assistance and
promotional activities. The Distributor has incurred expenses in excess of the
distribution costs reimbursed by the Fund in the amount of $965,505 and
$262,338, for Class B and C shares, respectively; such costs may be recovered
from the Fund in future periods. 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)
aggregated $276,640,775 and $320,359,124, respectively, for the year ended July
31, 1995. There were purchases of $130,654,963 and sales of $128,406,105 of
U.S. Government and government agency obligations for the year ended July 31,
1995. At July 31, 1995, the cost of securities for federal income tax purposes
was $126,969,994. Accordingly gross unrealized appreciation of investments was
$15,252,805 and gross unrealized depreciation of investments was $1,526,598
resulting in net unrealized appreciation of $13,726,207.
15
NOTES TO FINANCIAL STATEMENTS (CONTINUED) ALLIANCE BALANCED SHARES
- -------------------------------------------------------------------------------
NOTE E: CAPITAL STOCK
There are 180,000,000 shares of $.01 par value capital stock authorized,
divided into three classes, designated Class A, Class B and Class C shares.
Each class consists of 60,000,000 authorized shares. Prior to February 23, 1993
there were 60,000,000 shares of $1.00 par value capital stock authorized,
divided into two classes designated Class A and Class B shares. Transactions in
capital stock were as follows:
SHARES AMOUNT
------------------------ ----------------------------
YEAR ENDED OCT. 1,1993 YEAR ENDED OCT. 1,1993
JULY 31, THROUGH JULY 31, THROUGH
1995 JULY 31,1994* 1995 JULY 31,1994*
----------- ----------- ------------- -------------
CLASS A
Shares sold 833,994 876,506 $ 11,355,969 $ 12,195,964
Shares issued in
reinvestment of
dividends and
distributions 258,708 407,717 3,476,710 5,628,682
Shares redeemed (4,776,892) (1,481,275) (67,754,957) (20,511,243)
Net decrease (3,684,190) (197,052) $(52,922,278) $(2,686,597)
CLASS B
Shares sold 253,480 564,263 $ 3,417,128 $ 7,799,514
Shares issued in
reinvestment of
dividends and
distributions 19,426 27,387 257,488 374,239
Shares redeemed (343,847) (403,295) (4,616,970) (5,657,858)
Net increase (decrease) (70,941) 188,355 $ (942,354) $ 2,515,895
CLASS C
Shares sold 100,113 481,248 $ 1,340,570 $ 6,765,099
Shares issued in
reinvestment of
dividends and
distributions 5,947 11,554 78,834 157,982
Shares redeemed (235,619) (124,424) (3,135,432) (1,694,444)
Net increase (decrease) (129,559) 368,378 $(1,716,028) $ 5,228,637
NOTE F: RECLASSIFICATION OF COMPONENTS OF NET ASSETS
In accordance with Statement of Position 93-2 Determination, Disclosure, and
Financial Statement Presentation of Income, Capital Gain, and Return of Capital
Distributions by Investment Companies, permanent book and tax differences
relating to shareholder distributions have been reclassified to additional
paid-in capital. As of July 31, 1995, the cumulative effect of such differences
totaling $11,585 and ($69,033) were reclassified from undistributed net
investment income and undistributed net realized gains, respectively, to
additional paid in capital. Net investment income, net realized gains and net
assets were not affected by this change.
* The Fund changed its fiscal year end from September 30 to July 31.
16
FINANCIAL HIGHLIGHTS ALLIANCE BALANCED SHARES
- -------------------------------------------------------------------------------
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
CLASS A
-------------------------------------------------------------
OCT. 1,1993
YEAR ENDED THROUGH YEAR ENDED SEPTEMBER 30,
JULY 31, JULY 31, -----------------------------------
1995 1994* 1993 1992 1991
---------- -------------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $13.38 $14.40 $13.20 $12.64 $10.41
INCOME FROM INVESTMENT OPERATIONS
Net investment income .46 .29 .34 .44 .46
Net realized and unrealized gain (loss) on investments 1.62 (.74) 1.29 .57 2.17
Net increase (decrease) in net asset value from operations 2.08 (.45) 1.63 1.01 2.63
LESS: DISTRIBUTIONS
Dividends from net investment income (.36) (.28) (.43) (.45) (.40)
Distributions from net realized gains (.02) (.29) -0- -0- -0-
Total dividends and distributions (.38) (.57) (.43) (.45) (.40)
Net asset value, end of period $15.08 $13.38 $14.40 $13.20 $12.64
TOTAL RETURN
Total investment return based on net asset value (b) 15.99% (3.21)% 12.52% 8.14% 25.52%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $122,033 $157,637 $172,484 $143,883 $154,230
Ratio of expenses to average net assets 1.32% 1.27%(c) 1.35% 1.40% 1.44%
Ratio of net investment income to average net assets 3.12% 2.50%(c) 2.50% 3.26% 3.75%
Portfolio turnover rate 179% 116% 188% 204% 70%
</TABLE>
See footnote summary on page 19.
17
FINANCIAL HIGHLIGHTS (CONTINUED) ALLIANCE BALANCED SHARES
- -------------------------------------------------------------------------------
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
CLASS B
----------------------------------------------------------------
OCT. 1,1993
YEAR ENDED THROUGH YEAR ENDED SEPTEMBER 30,
JULY 31, JULY 31, -------------------------------------
1995 1994* 1993 1992 1991(A)
---------- -------------- --------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $13.23 $14.27 $13.13 $12.61 $11.84
INCOME FROM INVESTMENT OPERATIONS
Net investment income .30 .22 .29 .37 .25
Net realized and unrealized gain (loss) on investments 1.65 (.75) 1.22 .54 .80
Net increase (decrease) in net asset value from operations 1.95 (.53) 1.51 .91 1.05
LESS: DISTRIBUTIONS
Dividends from net investment income (.28) (.22) (.37) (.39) (.28)
Distribution from net realized gains (.02) (.29) -0- -0- -0-
Total dividends and distributions (.30) (.51) (.37) (.39) (.28)
Net asset value, end of period $14.88 $13.23 $14.27 $13.13 $12.61
TOTAL RETURN
Total investment return based on net asset value (b) 15.07% (3.80)% 11.65% 7.32% 8.96%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $15,080 $14,347 $12,789 $6,499 $1,830
Ratio of expenses to average net assets 2.11% 2.05%(c) 2.13% 2.16% 2.13% (c)
Ratio of net investment income to average net assets 2.30% 1.73%(c) 1.72% 2.46% 3.19% (c)
Portfolio turnover rate 179% 116% 188% 204% 70%
</TABLE>
See footnote summary on page 19.
18
ALLIANCE BALANCED SHARES
- -------------------------------------------------------------------------------
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
CLASS C
-----------------------------------
AUGUST 2,
YEAR ENDED OCT. 1,1993 1993(D)
JULY 31, THROUGH TO APR. 30,
1995 JULY 31,1994* 1994
---------- ------------ -----------
Net asset value, beginning of period $13.24 $14.28 $13.63
INCOME FROM INVESTMENT OPERATIONS
Net investment income .30 .24 .11
Net realized and unrealized gain (loss)
on investments 1.65 (.77) .71
Net increase (decrease) in net asset value
from operations 1.95 (.53) .82
LESS: DISTRIBUTIONS
Dividends from net investment income (.28) (.22) (.17)
Distributions from net realized gains (.02) (.29) -0-
Total dividends and distributions (.30) (.51) (.17)
Net asset value, end of period $14.89 $13.24 $14.28
TOTAL RETURN
Total investment return based on
net asset value (b) 15.06% (3.80)% 6.01%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $5,108 $6,254 $1,487
Ratios of expenses to average net assets 2.09% 2.03%(c) 2.29%(c)
Ratios of net investment income to average
net assets 2.32% 1.81%(c) 1.47%(c)
Portfolio turnover rate 179% 116% .188%
* The Fund changed its fiscal year end from September 30 to July 31.
(a) For the period February 4, 1991 (commencement of distribution) to
September 30, 1991.
(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) Annualized.
(d) Commencement of distribution.
19
REPORT OF INDEPENDENT ACCOUNTANTS ALLIANCE BALANCED SHARES
- -------------------------------------------------------------------------------
TO THE BOARD OF DIRECTORS AND SHAREHOLDERS OF ALLIANCE BALANCED SHARES, INC.
In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, the related statement of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Alliance Balanced Shares, Inc. at
July 31, 1995, the results of its operations for the year then ended, the
changes in its net assets for the year then ended and for the period October 1,
1993 through July 31, 1994 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 July 31, 1995 by correspondence with the custodian and brokers
and the application of alternative auditing procedures where confirmations from
brokers were not received, provide a reasonable basis for the opinion expressed
above.
PRICE WATERHOUSE LLP
New York, New York
September 27, 1995
20
<PAGE>
________________________________________________________________
APPENDIX A: FUTURES CONTRACTS, OPTIONS ON FUTURES CONTRACTS
AND OPTIONS ON FOREIGN CURRENCIES
________________________________________________________________
Futures Contracts.
The Fund may enter into contracts for the purchase or
sale for future delivery of foreign currencies. U.S. futures
contracts have been designed by exchanges which have been
designated "contracts markets" by the Commodity Futures Trading
Commission ("CFTC"), and must be executed through a futures
commission merchant, or brokerage firm, which is a member of the
relevant contract market. Futures contracts trade on a number of
exchange markets, and, through their clearing corporations, the
exchanges guarantee performance of the contracts as between the
clearing members of the exchange.
At the same time a futures contract is purchased or
sold, the Fund must allocate cash or securities as a deposit
payment ("initial deposit"). It is expected that the initial
deposit would be approximately 1 1/2% to 5% of a contract's face
value. Daily thereafter, the futures contract is valued and the
payment of "variation margin" may be required, since each day the
Fund would provide or receive cash that reflects any decline or
increase in the contract's value.
At the time of delivery of securities pursuant to such a
contract, adjustments are made to recognize differences in value
arising from the delivery of securities with a different price or
interest rate from that specified in the contract. In some (but
not many) cases, securities called for by a futures contract may
not have been issued when the contract was written.
Although futures contracts by their terms call for the
actual delivery or acquisition of securities, in most cases the
contractual obligation is fulfilled before the date of the
contract without having to make or take delivery of the
securities. The offsetting of a contractual obligation is
accomplished by buying (or selling, as the case may be) on a
commodities exchange an identical futures contract calling for
delivery in the same month. Such a transaction, which is
effected through a member of an exchange, cancels the obligation
to make or take delivery of the securities. Since all
transactions in the futures market are made, offset or fulfilled
through a clearinghouse associated with the exchange on which the
A-1
<PAGE>
contracts are traded, the Fund will incur brokerage fees when it
purchases or sells futures contracts.
Options on Futures Contracts
The Fund intends to purchase and write options on
futures contracts for hedging purposes. The Fund is not a
commodity pool and all transactions in futures contracts and
options on futures contracts engaged in by the Fund must
constitute bona fide hedging or other permissible transactions in
accordance with the rules and regulations promulgated by the
CFTC. The purchase of a call option on a futures contract is
similar in some respects to the purchase of a call option on an
individual foreign currency. Depending on the pricing of the
option compared to either the price of the futures contract upon
which it is based or the price of the underlying debt securities,
it may or may not be less risky than ownership of the futures
contract or underlying debt securities. As with the purchase of
futures contracts, when the Fund is not fully invested it may
purchase a call option on a futures contract to hedge against
adverse market conditions.
The writing of a call option on a futures contract
constitutes a partial hedge against declining prices of the
foreign currency which is deliverable upon exercise of the
futures contract. If the futures price at expiration of the
option is below the exercise price, the Fund will retain the full
amount of the option premium which provides a partial hedge
against any decline that may have occurred in the Fund's
portfolio holdings. The writing of a put option on a futures
contract constitutes a partial hedge against increasing prices of
the foreign currency which is deliverable upon exercise of the
futures contract. If the futures price at expiration of the
option is higher than the exercise price, the Fund will retain
the full amount of the option premium which provides a partial
hedge against any increase in the price of a foreign currency
which the Fund intends to purchase. If a put or call option the
Fund has written is exercised, the Fund will incur a loss which
will be reduced by the amount of the premium it receives.
Depending on the degree of correlation between changes in the
value of its portfolio securities and changes in the value of its
futures positions, the Fund's losses from existing options on
futures may to some extent be reduced or increased by changes in
the value of portfolio securities.
The purchase of a put option on a futures contract is
similar in some respects to the purchase of protective put
options on portfolio securities. For example, the Fund may
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purchase a put option on a futures contract to hedge the Fund's
portfolio against the risk of rising interest rates.
The amount of risk the Fund assumes when it purchases an
option on a futures contract is the premium paid for the option
plus related transaction costs. In addition to the correlation
risks discussed above, the purchase of an option also entails the
risk that changes in the value of the underlying futures contract
will not be fully reflected in the value of the option purchased.
Options on Foreign Currencies
The Fund may purchase and write options on foreign
currencies for hedging purposes in a manner similar to that in
which futures contracts on foreign currencies, or forward
contracts, will be utilized. For example, a decline in the
dollar value of a foreign currency in which portfolio securities
are denominated will reduce the dollar value of such securities,
even if their value in the foreign currency remains constant. In
order to protect against such diminutions in the value of
portfolio securities, the Fund may purchase put options on the
foreign currency. If the value of the currency does decline, the
Fund will have the right to sell such currency for a fixed amount
in dollars and will thereby offset, in whole or in part, the
adverse effect on its portfolio which otherwise would have
resulted.
Conversely, where a rise in the dollar value of a
currency in which securities to be acquired are denominated is
projected, thereby increasing the cost of such securities, the
Fund may purchase call options thereon. The purchase of such
options could offset, at least partially, the effects of the
adverse movements in exchange rates. As in the case of other
types of options, however, the benefit to the Fund deriving from
purchases of foreign currency options will be reduced by the
amount of the premium and related transaction costs. In
addition, where currency exchange rates do not move in the
direction or to the extent anticipated, the Fund could sustain
losses on transactions in foreign currency options which would
require it to forego a portion or all of the benefits of
advantageous changes in such rates.
The Fund may write options on foreign currencies for the
same types of hedging purposes. For example, where the Fund
anticipates a decline in the dollar value of foreign currency
denominated securities due to adverse fluctuations in exchange
rates it could, instead of purchasing a put option, write a call
option on the relevant currency. If the expected decline occurs,
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the option will most likely not be exercised, and the diminution
in value of portfolio securities will be offset by the amount of
the premium received.
Similarly, instead of purchasing a call option to hedge
against an anticipated increase in the dollar cost of securities
to be acquired, the Fund could write a put option on the relevant
currency which, if rates move in the manner projected, will
expire unexercised and allow the Fund to hedge such increased
cost up to the amount of the premium. As in the case of other
types of options, however, the writing of a foreign currency
option will constitute only a partial hedge up to the amount of
the premium, and only if rates move in the expected direction. If
this does not occur, the option may be exercised and the Fund
would be required to purchase or sell the underlying currency at
a loss which may not be offset by the amount of the premium.
Through the writing of options on foreign currencies, the Fund
also may be required to forego all or a portion of the benefits
which might otherwise have been obtained from favorable movements
in exchange rates.
The Fund intends to write covered call options on
foreign currencies. A call option written on a foreign currency
by the Fund is "covered" if the Fund owns the underlying foreign
currency covered by the call or has an absolute and immediate
right to acquire that foreign currency without additional cash
consideration (or for additional cash consideration held in a
segregated account by its Custodian) upon conversation or
exchange of other foreign currency held in its portfolio. A call
option is also covered if the Fund has a call on the same foreign
currency and in the same principal amount as the call written
where the exercise price of the call held (a) is equal to or less
than the exercise price of the call written or (b) is greater
than the exercise price of the call written if the difference is
maintained by the Fund in cash, U.S. Government Securities and
other high-grade liquid debt securities in a segregated account
with its Custodian.
The Fund also intends to write call options on foreign
currencies for cross-hedging purposes. An option that is
cross-hedged is not covered, but is designed to provide a hedge
against a decline in the U.S. dollar value of a security which
the Fund owns or has the right to acquire and which is
denominated in the currency underlying the option due to an
adverse change in the exchange rate. In such circumstances, the
Fund collateralizes the option by maintaining in a segregated
account with the Fund's Custodian, cash or U.S. Government
Securities or other high-grade liquid debt securities in an
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amount not less than the value of the underlying foreign currency
in U.S. dollars marked to market daily.
Additional Risks of Options on Futures Contracts, Forward
Contracts and Options on Foreign Currencies
Unlike transactions entered into by the Fund in futures
contracts, options on foreign currencies and forward contracts
are not traded on contract markets regulated by the CFTC or (with
the exception of certain foreign currency options) by the SEC. To
the contrary, such instruments are traded through financial
institutions acting as market-makers, although foreign currency
options are also traded on certain national securities exchanges,
such as the Philadelphia Stock Exchange and the Chicago Board
Options Exchange, subject to SEC regulation. Similarly, options
on securities may be traded over-the-counter. In an over-the-
counter trading environment, many of the protections afforded to
exchange participants will not be available. For example, there
are no daily price fluctuation limits, and adverse market
movements could therefore continue to an unlimited extent over a
period of time. Although the purchaser of an option cannot lose
more than the amount of the premium plus related transaction
costs, this entire amount could be lost. Moreover, the option
writer and a trader of forward contracts could lose amounts
substantially in excess of their initial investments, due to the
margin and collateral requirements associated with such
positions.
Options on foreign currencies traded on national
securities exchanges are within the jurisdiction of the SEC, as
are other securities traded on such exchanges. As a result, many
of the protections provided to traders on organized exchanges
will be available with respect to such transactions. In
particular, all foreign currency option positions entered into on
a national securities exchange are cleared and guaranteed by the
Options Clearing Corporation ("OCC"), thereby reducing the risk
of counterparty default. Further, a liquid secondary market in
options traded on a national securities exchange may be more
readily available than in the over-the-counter market,
potentially permitting the Fund to liquidate open positions at a
profit prior to exercise or expiration, or to limit losses in the
event of adverse market movements.
The purchase and sale of exchange-traded foreign
currency options, however, is subject to the risks of the
availability of a liquid secondary market described above, as
well as the risks regarding adverse market movements, margining
of options written, the nature of the foreign currency market,
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possible intervention by governmental authorities and the effects
of other political and economic events. In addition, exchange-
traded options on foreign currencies involve certain risks not
presented by the over-the-counter market. For example, exercise
and settlement of such options must be made exclusively through
the OCC, which has established banking relationships in
applicable foreign countries for this purpose. As a result, the
OCC may, if it determines that foreign governmental restrictions
or taxes would prevent the orderly settlement of foreign currency
option exercise, or would result in undue burdens on the OCC or
its clearing member, impose special procedures on exercise and
settlement, such as technical changes in the mechanics of
delivery of currency, the fixing of dollar settlement prices or
prohibitions on exercise.
In addition, futures contracts, options on futures
contracts, forward contracts and options on foreign currencies
may be traded on foreign exchanges. Such transactions are
subject to the risk of governmental actions affecting trading in
or the prices of foreign currencies or securities. The value of
such positions also could be adversely affected by (i) other
complex foreign political and economic factors, (ii) lesser
availability than in the United States of data on which to make
trading decisions, (iii) delays in the Fund's ability to act upon
economic events occurring in foreign markets during nonbusiness
hours in the United States, (iv) the imposition of different
exercise and settlement terms and procedures and margin
requirements than in the United States, and (v) lesser trading
volume.
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