<PAGE>
As filed with the Securities and Exchange
Commission on June 1, 1995
Registration Nos. 33-12988
811-5088
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________________________________
Form N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No.
Post-Effective Amendment No. 16 X
REGISTRATION STATEMENT UNDER THE INVESTMENT
COMPANY ACT OF 1940
Amendment No. 18 X
___________________________________
THE ALLIANCE PORTFOLIOS
(Exact Name of Registrant as Specified in Charter)
1345 Avenue of the Americas, New York, New York 10019
(Address of Principal Executive Offices)
800-221-5672
(Registrant's Telephone Number, including Area Code)
___________________________________
EDMUND P. BERGAN, JR.
Alliance Capital Management L.P.
1345 Avenue of the Americas
New York, New York 10105
(Name and Address of Agent for Service)
It is proposed that this filing will become effective
(check appropriate box):
X immediately upon filing pursuant to paragraph (b)
_____ on (date) pursuant to paragraph (b)
_____ 60 days after filing pursuant to paragraph (a)(i)
<PAGE>
_____ on (date) pursuant to paragraph (a)(i)
_____ 75 days after filing pursuant to paragraph (a)(ii)
_____ on (date) pursuant to paragraph (a)(ii) of Rule 485.
If appropriate, check the following box:
_____ this post-effective amendment designates a new
effective date for a previously filed post-effective
amendment
The Registrant has previously registered an indefinite number
or amount of its shares of beneficial interest pursuant to Rule
24f-2. The Registrant filed a Rule 24f-2 Notice with respect to
the Registrant's fiscal year ended April 30, 1994 on June 30,
1994. The Registrant filed a Rule 24f-2 Notice with respect to
the Alliance Strategic Balanced Fund's fiscal year ended July 31,
1994 on September 26, 1994, the Alliance Short-Term U.S.
Government Fund's fiscal year ended August 31, 1994 on October
25, 1994, and the Alliance Growth Fund's fiscal year ended
October 31, 1994 on December 29, 1994.
<PAGE>
Cross Reference Sheet for
Alliance Strategic Balanced Fund
Alliance Conservative Investors Fund
Alliance Growth Investors Fund
Alliance Short-Term U.S. Government Fund
Alliance Growth Fund
_________________________________________
ITEM NUMBER OF FROM N-1A PROSPECTUS LOCATION OR CAPTION
________________________ ______________________________
PART A
1. Cover Page Front Cover Page
2. Synopsis Expense Information
3. Condensed Financial Financial Highlights
Information
4. General Description of General Information;
Registrant Description of The Funds
5. Management of the Trust Management of The Funds; Back
Cover Page; General
Information
5A. Management's Discussion Not applicable
of Fund Performance
6. Capital Stock and Other General Information;
Securities Dividends, Distributions and
Taxes
7. Purchase of Securities Purchase and Sale of Shares;
Being Offered General Information;
Management of the Funds
8. Redemption or Repurchase Purchase and Sale of Shares
9. Legal Proceedings Not applicable
<PAGE>
Cross Reference Sheet for
Alliance Strategic Balanced Fund
Alliance Conservative Investors Fund
Alliance Growth Investors Fund
Alliance Short-Term U.S. Government Fund
Alliance Growth Fund
_________________________________________
ITEM NUMBER OF FORM N-1A STATEMENT OF ADDITIONAL
PART B INFORMATION LOCATION OR
________________________ CAPTION
_______________________
10. Cover Page Cover Page
11. Table of Contents Table of Contents
12. General Information and Not Applicable
History
13. Investment Objectives and Investment Objectives and
Policies Policies; Investment
Techniques; Investment
14. Management of the Fund Management of the Trust
15. Control Persons and General Information
Principal Holders of
Securities
16. Investment Advisory and Management of the Trust;
Other Services Expenses of the Funds
17. Brokerage Allocation and Portfolio Transactions;
Other Services Expenses of the Funds
18. Capital Stock and Other General Information
Securities
19. Purchase, Redemption and Purchase and Redemption of
Pricing of Securities Shares; Net Asset Value
Being Offered
20. Tax Status Dividends, Distribution and
Taxes
21. Underwriters Expenses of the Funds;
Purchase and Redemption of
Shares
22. Calculation of General Information
Performance Data
<PAGE>
23. Financial Statements Financial Statements
<PAGE>
Alliance Capital [Logo] The Alliance Stock Funds
_________________________________________________________________
June [ ], 1995
Supplement to Prospectus dated February 1, 1995
This supplement sets forth unaudited per share income and
capital change information for the periods indicated for Alliance
All-Asia Investment Fund, Inc. ("All-Asia Fund"), pursuant to the
requirements of the Securities and Exchange Commission applicable
to registered investment companies in their first year of
operations and for Alliance International Fund ("International
Fund"), Alliance Worldwide Privatization Fund, Inc. ("Worldwide
Privatization Fund"), Alliance New Europe Fund, Inc. ("New Europe
Fund"), Alliance Global Small Cap Fund, Inc. ("Global Small Cap
Fund"), Strategic Balanced Fund and Alliance Balanced Shares,
Inc. ("Balanced Shares") (collectively, the "Funds"). Unaudited
financial statements and related notes as of the same dates for
the respective Funds have also been added to the Statement of
Additional Information for each Fund.
The following information supplements the information under
the heading "Financial Information" on pages 7 through 15 of the
Prospectus.
<PAGE>
<TABLE>
<CAPTION>
Net Realized
and Net Increase
Net Asset Unrealized (Decrease) Dividends Distributions
Value Net Gain in Net Asset from Net from Net
Beginning Investment (Loss) on Value from Investment Realized
Fiscal Period of Period Income (Loss) Investments Operations Income Gains
_____________ _________ _____________ ___________ ____________ ___________ _____________
<S> <C> <C> <C> <C> <C> <C>
International Fund
Class A
Six months
ended 12/31/94.... $18.38 $(.05) $(.26) $(.31) $0.00 $(1.62)
Class B
Six months
ended 12/31/94.... $17.90 $(.06)(b) $(.31) $(.37) $0.00 $(1.62)
Class C
Six months
ended 12/31/94.... $17.91 $(.03) $(.34) $(.37) $0.00 $(1.62)
Worldwide
Privatization Fund
Class A
Six months
ended 12/31/94.... $9.75 $(.01) $.24 $.23 $0.00 $0.00
Class B
Six months
ended 12/31/94.... $9.74 $(.03) $.23 $.20 $0.00 $0.00
New Europe Fund
Class A
Six months
ended 1/31/95..... $12.66 $(.07) $.23 $.16 $(.09) $0.00
Class B
Six months
ended 1/31/95..... $12.41 $(.11) $.22 $.11 $(.09) $0.00
Class C
Six months
ended 1/31/95..... $12.42 $(.12) $.23 $.11 $(.09) $0.00
All Asia Fund
Class A
11/28/94**
- 4/30/95......... $10.00 $.11(c) $.13 $.24 $0.00 $0.00
Class B
11/18/94**
2
<PAGE>
- 4/30/95......... $10.00 $.09(c) $.13 $.22 $0.00 $0.00
Class C
11/28/94**
- 4/30/95......... $10.00 $.08(c) $.16 $.24 $0.00 $0.00
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
Total Net Assets Ratio of Net
Total Net Asset Investment At End of Ratio Of Investment
Dividends Value Return Based Period Expenses Income (Loss)
And End of On Net Asset (000's) To Average To Average Portfolio
Distributions Period Value (a) omitted) Net Assets Net Assets Turnover Rate
_____________ _________ _____________ ____________ ____________ ___________ _____________
<C> <C> <C> <C> <C> <C> <C>
$(1.62) $16.45 (1.57)% $176,845 1.77%* (.46)%* 57%
$(1.62) $15.91 (1.94)% $49,532 2.56%* (1.32)%* 57%
$(1.62) $15.92 (1.94)% $29,173 2.56%* (1.29)%* 57%
$0.00 $9.98 2.36% $14,226 2.30%* (.04)%* 16%
$0.00 $9.94 2.05% $81,181 2.99%* (.75)%* 16%
$(.09) $12.73 1.29% $76,095 2.04%* (.89)%* 39%
$(.09) $12.43 .91% $29,978 2.74%* (1.59)%* 39%
$(.09) $12.44 .91% $8,863 2.73%* (1.59)%* 39%
$0.00 $10.24 2.40% $1,917 .19%*(d) 3.44%* 51%
$0.00 $10.22 2.20% $3,019 .90%*(d) 2.73%* 51%
4
<PAGE>
$0.00 $10.24 2.40% $185 .71%*(d) 2.87%* 51%
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
Net Realized
and Net Increase
Net Asset Unrealized (Decrease) Dividends Distributions
Value Net Gain in Net Asset from Net from Net
Beginning Investment (Loss) on Value from Investment Realized
Fiscal Period of Period Income (Loss) Investments Operations Income Gains
_____________ _________ ____________ ____________ ____________ ___________ _____________
<S> <C> <C> <C> <C> <C> <C>
Global Small
Cap Fund
Class A
Six months
ended 1/31/95..... $11.08 $(.04)(b) $(.23) $(.27) $(2.11) $0.00
Class B
Six months
ended 1/31/95..... $10.78 $(.02) $(.28) $(.30) $(2.11) $0.00
Class C
Six months
ended 1/31/95..... $10.79 $(.09) $(.22) $(.31) $(2.11) $0.00
Strategic
Balanced Fund
Class A
Six months
ended 1/31/95..... $16.26 $.18(c) $(.47) $(.29) $(.22) $(.04)
Class B
Six months
ended 1/31/95..... $14.10 $.11(c) $(.40) $(.29) $(.12) $(.04)
Class C
Six months
ended 1/31/95..... $14.11 $.10(c) $(.39) $(.29) $(.12) $(.04)
Balanced Shares
Class A
Six months
ended 1/31/95..... $13.38 $.23 $(.23) $0.00 $(.20) $(.02)
Class B
Six months
ended 1/31/95..... $13.23 $.16 $(.21) $(.05) $(.16) $(.02)
Class C
Six months
ended 1/31/95..... $13.24 $.16 $(.21) $(.05) $(.16) $(.02)
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
Total Net Assets Ratio of Net
Total Net Asset Investment At End of Ratio Of Investment
Dividends Value Return Based Period Expenses Income (Loss)
And End of On Net Asset (000's) To Average To Average Portfolio
Distributions Period Value (a) omitted) Net Assets Net Assets Turnover Rate
_____________ _________ _____________ ____________ ____________ ___________ _____________
<C> <C> <C> <C> <C> <C> <C>
$(2.11) $8.70 (2.26)% $53,830 2.52%* (1.24)%* 65%
$(2.11) $8.37 (2.61)% $4,574 3.24%* (2.00)%* 65%
$(2.11) $8.37 (2.73)% $1,131 3.21%* (1.96)%* 65%
$(.26) $15.71 (1.79)% $9,102 1.40%*(d) 2.14%* 34%
$(.16) $13.65 (2.07)% $39,008 2.10%*(d) 1.44%* 34%
$(.16) $13.66 (2.07)% $4,119 2.10%*(d) 1.45%* 34%
$(.22) $13.16 .09% $146,840 1.26%* 3.36%* 61%
$(.18) $13.00 (.32)% $13,350 2.04%* 2.58%* 61%
$(.18) $13.01 (.32)% $4,690 2.03%* 2.56%* 61%
___________________________________________
* Annualized
** Commencement of operations
(a) 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 the net asset value
during the period, and a redemption on the last day of the period. Initial sales charge or
7
<PAGE>
contingent deferred sales charge is not reflected in the calculation of total investment return.
Total investment returns calculated for periods of less than one year are not annualized.
(b) Based on average shares outstanding.
(c) Net of fee waived and expenses reimbursed by Alliance
(d) Net of expenses waived/reimbursed. If All-Asia Fund had borne all expenses, the expense ratios
would have been, with respect to Class A shares 11.71% (annualized), with respect to Class B shares
12.35% (annualized) and with respect to Class C shares 11.80% (annualized). If Strategic Balanced
Fund had borne all expenses, the expense ratios would have been, with respect to Class A shares
1.59% (annualized) and with respect to Class B and Class C shares 2.29% (annualized).
</TABLE>
Additionally, as of May 1, 1995, the portfolio manager of
Strategic Balanced Fund is Bruce W. Calvert. Mr. Calvert is a
Vice Chairman and the Chief Investment Officer of Alliance
Capital Management Corporation, the sole general partner of
Alliance Capital Management L.P., with which he has been
associated since prior to 1990.
8
<PAGE>
The following documents are incorporated herein by reference:
(1) The Trust's Prospectus relating to the Alliance
Conservative Investors Fund and the Alliance Growth
Investors Fund contained in Post-Effective Amendment No. 12
to the Trust's Registration Statement (File Nos. 33-12988,
811-5088) filed on July 8, 1994;
(2) The Trust's Prospectus relating to the Alliance Short-Term
U.S. Government Fund contained in Post-Effective Amendment
No. 14 to the Trust's Registration Statement (File Nos. 33-
12988, 811-5088) filed on October 31, 1994;
(3) The Trust's Prospectus relating to the Alliance Growth Fund
and the Alliance Strategic Balanced Fund contained in Post-
Effective Amendment No. 15 to the Trust's Registration
Statement (File Nos. 33-12988, 811-5088) filed on January
27, 1995; and
(4) The Trust's Statement of Additional Information (including
the reports of independent accountants and financial
statements contained therein), to the extent it relates to
the Alliance Growth Investors Fund, the Alliance
Conservative Investors Fund and the Alliance Short-Term
U.S. Government Fund, contained in Post-Effective Amendment
No. 14 to the Trust's Registration Statement (File Nos. 33-
12988, 811-5088) filed on October 31, 1994.
9
00250157.AT6
<PAGE>
ALLIANCE CAPITAL
(LOGO)(R) THE ALLIANCE PORTFOLIOS-
Alliance Strategic Balanced Fund
Alliance Growth Fund
P.O. Box 1520, Secaucus, New Jersey 07096-1520
Toll Free (800) 221-5672
For Literature Toll Free (800) 227-4618
STATEMENT OF ADDITIONAL INFORMATION
February 1, 1995 (amended June 1, 1995)
This Statement of Additional Information is not a prospectus and
should be read in conjunction with the Funds' current Prospectus.
A copy of the Funds' Prospectus may be obtained by contacting
Alliance Fund Services, Inc. at the address or telephone numbers
shown above.
TABLE OF CONTENTS
INVESTMENT POLICIES AND RESTRICTIONS....................... 2
ADDITIONAL INVESTMENT TECHNIQUES OF THE FUNDS.............. 10
MANAGEMENT OF THE FUNDS.................................... 36
PORTFOLIO TRANSACTIONS..................................... 42
EXPENSES OF THE FUNDS...................................... 45
PURCHASE OF SHARES......................................... 49
REDEMPTION AND REPURCHASE OF SHARES........................ 63
SHAREHOLDER SERVICES....................................... 66
NET ASSET VALUE............................................ 72
DIVIDENDS, DISTRIBUTIONS AND TAXES......................... 73
GENERAL INFORMATION........................................ 75
APPENDIX................................................... A-1
FINANCIAL STATEMENTS
REPORT OF INDEPENDENT ACCOUNTANTS
(R): This registered service mark used under license from the
owner, Alliance Capital Management L.P.
<PAGE>
INVESTMENT POLICIES AND RESTRICTIONS
The following investment policies and restrictions
supplement and should be read in conjunction with the information
set forth in the Prospectus of Alliance Strategic Balanced Fund
(the "Strategic Balanced Fund," formerly Alliance Balanced Fund)
and Alliance Growth Fund (the "Growth Fund"), each a series of
The Alliance Portfolios (the "Trust"), under the heading
"Investment Objective and Policies." In addition to the
investment techniques described in this section for each of the
Funds, the Funds also may engage in the investment techniques
described below under the sub-heading "Additional Investment
Techniques of the Funds."
INVESTMENT OBJECTIVE AND POLICIES OF THE STRATEGIC BALANCED FUND
GENERAL. The Fund's investment objective is to provide
a high long-term total return by investing in a combination of
equity and debt securities. The portion of the Fund's assets
invested in each type of security will vary in accordance with
economic conditions, the general level of common stock prices,
interest rates and other relevant considerations, including the
risks associated with each investment medium. Thus although the
Fund seeks to reduce the risks associated with any one investment
medium by utilizing a variety of investments, performance will
depend upon the additional factors of timing and mix and the
ability of Alliance Capital Management L.P. (the "Adviser") to
judge and react to changing market conditions.
The Fund's equity securities will generally consist of
dividend-paying common stocks but may also include other equity-
type securities such as warrants, preferred stocks and
convertible debt instruments. The Fund's equity investments will
primarily be in companies with favorable outlooks for earnings
and whose rates of growth are expected by the Adviser to exceed
that of the United States' economy over time.
The Fund's debt securities will consist primarily of
securities such as bonds, notes, debentures and money market
instruments. The Fund's debt investments may include securities
issued or guaranteed by the U.S. Government or its agencies and
instrumentalities (including zero-coupon securities), as well as
securities issued by private corporations. The Fund may also
invest in mortgage-backed securities, adjustable rate securities
and asset-backed securities. The average dollar-weighted
maturity of debt securities held by the Fund will vary according
to market conditions and interest rate cycles and will range
between 1 year and 30 years under normal market conditions.
It is a fundamental policy of the Fund that it will
invest at least 25% of its total assets in fixed-income
2
<PAGE>
securities. For this purpose, fixed-income securities include
debt securities, preferred stocks and that portion of the value
of securities convertible into common stock, including
convertible preferred stock and convertible debt, which is
attributable to the fixed- income characteristics of those
securities.
The Fund's debt securities will generally consist of
investment grade securities, that is securities rated at the time
of purchase at least Baa by Moody's Investors Service, Inc.
("Moody's") or BBB by Standard & Poor's Corporation ("S&P"),
Fitch Investors Service, Inc. ("Fitch") or Duff & Phelps Credit
Rating Co. ("Duff & Phelps") or will be unrated securities deemed
to be of comparable quality by the Adviser. (For a further
description of these bond ratings, see Appendix A to this
Statement of Additional Information.) Securities rated Baa by
Moody's or BBB by S&P, Fitch or Duff & Phelps have speculative
characteristics, and changes in economic conditions or other
circumstances are more likely to lead to a weakened capacity to
make principal and interest payments on such obligations than in
the case of higher-rated securities. In the event that the
rating of any debt securities held by the Fund falls below Baa by
Moody's and/or BBB by S&P, Fitch or Duff & Phelps (or in the case
of unrated securities, such securities are no longer determined
by the Adviser to be of investment grade), the Fund will not be
obligated to dispose of such obligations and may continue to hold
such obligations if, in the opinion of the Adviser, such
investment is considered appropriate under the circumstances. For
temporary defensive purposes, the Fund may invest in money market
instruments.
MORTGAGE-BACKED SECURITIES. Interest and principal
payments (including prepayments) on the mortgages underlying
mortgage- backed securities are passed through to the holders of
the mortgage-backed security. Prepayments occur when the
mortgagor on an individual mortgage prepays the remaining
principal before the mortgage's scheduled maturity date. As a
result of the pass-through of prepayments of principal on the
underlying securities, mortgage-backed securities are often
subject to more rapid prepayment of principal than their stated
maturity would indicate. Because the prepayment characteristics
of the underlying mortgages vary, it is not possible to predict
accurately the realized yield or average life of a particular
issue of pass-through certificates. Prepayments are important
because of their effect on the yield and price of the mortgage-
backed securities. During periods of declining interest rates,
such prepayments can be expected to accelerate and the Fund would
be required to reinvest the proceeds at the lower interest rates
then available. In addition, prepayments of mortgages which
underlie securities purchased at a premium could result in
capital losses.
ADJUSTABLE RATE SECURITIES. Adjustable rate securities
are securities that have interest rates that are reset at
3
<PAGE>
periodic intervals, usually by reference to some interest rate
index or market interest rate. Some adjustable rate securities
are backed by pools of mortgage loans. Although the rate
adjustment feature may act as a buffer to reduce sharp changes in
the value of adjustable rate securities, these securities are
still subject to changes in value based on changes in market
interest rates or changes in the issuer's creditworthiness.
Because the interest rate is reset only periodically, changes in
the interest rate on adjustable rate securities may lag behind
changes in prevailing market interest rates. Also, some
adjustable rate securities (or the underlying mortgages) are
subject to caps or floors that limit the maximum change in
interest rate during a specified period or over the life of the
security.
ZERO-COUPON AND PAYMENT-IN-KIND BONDS. The Fund may at
times invest in so-called "zero-coupon" bonds and "payment-in-
kind" bonds. Zero-coupon bonds are issued at a significant
discount from their principal amount in lieu of paying interest
periodically. Payment-in-kind bonds allow the issuer, at its
option, to make current interest payments on the bonds either in
cash or in additional bonds. Because zero-coupon bonds do not
pay current interest, their value is generally subject to greater
fluctuation in response to changes in market interest rates than
bonds which pay interest currently. Both zero-coupon and
payment-in-kind bonds allow an issuer to avoid the need to
generate cash to meet current interest payments. Accordingly,
such bonds may involve greater credit risks than bonds paying
interest currently. Even though such bonds do not pay current
interest in cash, the Fund is nonetheless required to accrue
interest income on such investments and to distribute such
amounts at least annually to shareholders. Thus, the Fund could
be required at times to liquidate other investments in order to
satisfy its dividend requirements.
FOREIGN CURRENCY EXCHANGE TRANSACTIONS. The Fund may
engage in foreign currency exchange transactions to protect
against uncertainty in the level of future currency exchange
rates. The Adviser expects to engage in foreign currency
exchange transactions in connection with the purchase and sale of
portfolio securities ("transaction hedging") and to protect
against changes in the value of specific portfolio positions
("position hedging").
The Fund may engage in transaction hedging to protect
against a change in foreign currency exchange rates between the
date on which the Fund contracted to purchase or sell a security
and the settlement date, or to "lock in" the U.S. dollar
equivalent of a dividend or interest payment in a foreign
currency. The Fund may purchase or sell a foreign currency on a
spot (or cash) basis at the prevailing spot rate in connection
with the settlement of transactions in portfolio securities
denominated in that foreign currency.
4
<PAGE>
If conditions warrant, the Fund may also enter into
contracts to purchase or sell foreign currencies at a future date
("forward contracts"), and may purchase and sell foreign currency
futures contracts, as a hedge against changes in foreign currency
exchange rates between the trade and settlement dates on
particular transactions and not for speculation. A foreign
currency forward contract is a negotiated agreement to exchange
currency at a future time at a rate or rates that may be higher
or lower than the spot rate. Foreign currency futures contracts
are standardized exchange-traded contracts and have margin
requirements.
For transactions hedging purposes, the Fund may also
purchase and sell call and put options on foreign currency
futures contracts and on foreign currencies.
The Fund may engage in position hedging to protect
against a decline in value relative to the U.S. dollar of the
currencies in which its portfolio securities are denominated or
quoted (or an increase in value of a currency in which securities
the Fund intends to buy are denominated, when the Fund holds cash
or short-term investments). For position hedging purposes, the
Fund may purchase or sell foreign currency futures contracts,
foreign currency forward contracts, and options on foreign
currency futures contracts and on foreign currencies. In
connection with position hedging, the Fund may also purchase or
sell foreign currency on a spot basis.
The Fund's currency hedging transactions may call for
the delivery of one foreign currency in exchange for another
foreign currency and may at times not involve currencies in which
its portfolio securities are then denominated. The Adviser will
engage in such "cross hedging" activities when it believes that
such transactions provide significant hedging opportunities for
the Fund.
CONVERTIBLE SECURITIES. The Fund may invest in
convertible securities. These securities normally provide a
higher yield than the underlying stock but lower than a fixed-
income security without the convertible feature. Also, the price
of the convertible security will normally vary to some degree
with changes in the price of the underlying stock although in
some market conditions the higher yield tends to make the
convertible security less volatile than the underlying common
stock. In addition, the price of the convertible security will
also vary to some degree inversely with interest rates. For a
description of these risks, see "High-Yield Securities" above.
INVESTMENT OBJECTIVE AND POLICIES OF THE GROWTH FUND
GENERAL. The Fund's investment objective is to provide
long-term growth of capital. Current income is only an incidental
consideration. The Fund attempts to achieve its objective by
investing primarily in equity securities of companies with a
5
<PAGE>
favorable outlook for earnings and whose rate of growth is
expected to exceed that of the United States economy over time.
The Fund invests primarily in common stocks and
securities convertible into common stocks such as convertible
bonds, convertible preferred stocks and warrants convertible into
common stocks. Because the values of fixed-income securities are
expected to vary inversely with changes in interest rates
generally, when the Adviser expects a general decline in interest
rates, the Fund may also invest for capital growth in fixed-
income securities. The Fund may invest up to 25% of its total
assets in fixed-income securities rated at the time of purchase
below investment grade, that is, securities rated Ba or lower by
Moody's or BB or lower by S&P, Fitch or Duff & Phelps or in
unrated fixed-income securities determined by the Adviser to be
of comparable quality. For a description of the ratings referred
to above, see Appendix A to this Statement of Additional
Information. For temporary defensive purposes, the Fund may
invest in money market instruments.
HIGH-YIELD SECURITIES. The Fund may invest in high-
yield, high-risk, fixed-income and convertible securities rated
at the time of purchase Ba or lower by Moody's or BB or lower by
S&P, or, if unrated, judged by the Adviser to be of comparable
quality ("High-Yield Securities"). The Fund will generally
invest in securities with a minimum rating of Caa- by Moody's or
CCC- by S&P or Fitch or CCC by Duff & Phelps or in unrated
securities judged by the Adviser to be of comparable quality.
However, from time to time, the Fund may invest in securities
rated in the lowest grades of Moody's (C), S&P (D), Fitch (D) or
Duff & Phelps (DD) or in unrated securities judged by the Adviser
to be of comparable quality, if the Fund's management determines
that there are prospects for an upgrade or a favorable conversion
into equity securities (in the case of convertible securities).
Securities rated Ba or BB or lower (and comparable unrated
securities) are commonly referred to as "junk bonds." Securities
rated D by S&P or Fitch and DD by Duff & Phelps are in default.
During the fiscal year ended October 31, 1994, the Fund did not
invest in any High-Yield Securities.
As with other fixed-income securities, High-Yield
Securities are subject to credit risk and market risk and their
yields may fluctuate. Market risk relates to changes in a
security's value as a result of changes in interest rates.
Credit risk relates to the ability of the issuer to make payments
of principal and interest. High-Yield Securities are subject to
greater credit risk (and potentially greater incidences of
default) than comparable higher-rated securities because issuers
are more vulnerable to economic downturns, higher interest rates
or adverse issuer-specific developments. In addition, the prices
of High-Yield Securities are generally subject to greater market
risk and therefore react more sharply to changes in interest
rates. The value and liquidity of High-Yield Securities may be
diminished by adverse publicity and investor perceptions.
6
<PAGE>
Because High-Yield Securities are frequently traded only
in markets where the number of potential purchasers and sellers,
if any, is limited, the ability of the Fund to sell High-Yield
Securities at their fair value either to meet redemption requests
or to respond to changes in the financial markets may be limited.
Thinly traded High-Yield Securities may be more difficult to
value accurately for the purpose of determining the Fund's net
asset value. Also, because the market for certain High-Yield
Securities is relatively new, that market may be particularly
sensitive to an economic downturn or a general increase in
interest rates. In addition, under such circumstances the values
of such securities may be more volatile.
Some High-Yield Securities in which the Fund may invest
may be subject to redemption or call provisions that may limit
increases in market value that might otherwise result from lower
interest rates while increasing the risk that the Fund may be
required to reinvest redemption or call proceeds during a period
of relatively low interest rates.
The credit ratings issued by Moody's, S&P, Fitch and
Duff & Phelps, a description of which is included as Appendix A
to this Statement of Additional Information, are subject to
various limitations. For example, while such ratings evaluate
credit risk, they ordinarily do not evaluate the market risk of
High-Yield Securities. In certain circumstances, the ratings may
not reflect in a timely fashion adverse developments affecting an
issuer. For these reasons, the Adviser conducts its own
independent credit analysis of High-Yield Securities. When the
Fund invests in securities in the lower rating categories, the
achievement of the Fund's goals is more dependent on the
Adviser's ability than would be the case if the Fund were
investing in higher rated securities.
In the event that the credit rating of a High-Yield
Security held by the Fund falls below its rating at the time of
purchase (or, in the case of unrated securities, the Adviser
determines that the quality of such security has deteriorated
since purchased by the Fund), the Fund will not be obligated to
dispose of such security and may continue to hold the obligation
if, in the opinion of the Adviser, such investment is considered
appropriate in the circumstances.
Securities rated Baa by Moody's or BBB by S&P, Fitch, or
Duff & Phelps or judged by the Adviser to be of comparable
quality share some of the speculative characteristics of
High-Yield Securities described above.
CONVERTIBLE SECURITIES. The Fund may invest in
convertible securities. These securities normally provide a
higher yield than the underlying stock but lower than a fixed-
income security without the convertible feature. Also, the price
of the convertible security will normally vary to some degree
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with changes in the price of the underlying stock although in
some market conditions the higher yield tends to make the
convertible security less volatile than the underlying common
stock. In addition, the price of the convertible security will
also vary to some degree inversely with interest rates.
Convertible debt securities that are rated below BBB (S&P),
Fitch, or Duff & Phelps, or Baa (Moody's) or comparable unrated
securities as determined by the Adviser may share some or all of
the risks of High-Yield Securities. For a description of these
risks, see "High-Yield Securities" above.
ZERO-COUPON AND PAYMENT-IN-KIND BONDS. The Fund may at
times invest in so-called "zero-coupon" bonds and "payment-in-
kind" bonds. Zero-coupon bonds are issued at a significant
discount from their principal amount in lieu of paying interest
periodically. Payment-in-kind bonds allow the issuer, at its
option, to make current interest payments on the bonds either in
cash or in additional bonds. Because zero-coupon bonds do not
pay current interest, their value is generally subject to greater
fluctuation in response to changes in market interest rates than
bonds which pay interest currently. Both zero-coupon and
payment-in-kind bonds allow an issuer to avoid the need to
generate cash to meet current interest payments. Accordingly,
such bonds may involve greater credit risks than bonds paying
interest currently. Even though such bonds do not pay current
interest in cash, the Fund is nonetheless required to accrue
interest income on such investments and to distribute such
amounts at least annually to shareholders. Thus, the Fund could
be required at times to liquidate other investments in order to
satisfy its dividend requirements.
FOREIGN CURRENCY EXCHANGE TRANSACTIONS. The Fund may
engage in foreign currency exchange transactions to protect
against uncertainty in the level of future currency exchange
rates. The Adviser expects to engage in foreign currency
exchange transactions in connection with the purchase and sale of
portfolio securities ("transaction hedging") and to protect
against changes in the value of specific portfolio positions
("position hedging").
The Fund may engage in transaction hedging to protect
against a change in foreign currency exchange rates between the
date on which the Fund contracted to purchase or sell a security
and the settlement date, or to "lock in" the U.S. dollar
equivalent of a dividend or interest payment in a foreign
currency. The Fund may purchase or sell a foreign currency on a
spot (or cash) basis at the prevailing spot rate in connection
with the settlement of transactions in portfolio securities
denominated in that foreign currency.
If conditions warrant, the Fund may also enter into
contracts to purchase or sell foreign currencies at a future date
("forward contracts"), and may purchase and sell foreign currency
futures contracts, as a hedge against changes in foreign currency
8
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exchange rates between the trade and settlement dates on
particular transactions and not for speculation. A foreign
currency forward contract is a negotiated agreement to exchange
currency at a future time at a rate or rates that may be higher
or lower than the spot rate. Foreign currency futures contracts
are standardized exchange-traded contracts and have margin
requirements.
For transactions hedging purposes, the Fund may also
purchase and sell call and put options on foreign currency
futures contracts and on foreign currencies.
The Fund may engage in position hedging to protect
against a decline in value relative to the U.S. dollar of the
currencies in which its portfolio securities are denominated or
quoted (or an increase in value of a currency in which securities
the Fund intends to buy are denominated, when the Fund holds cash
or short-term investments). For position hedging purposes, the
Fund may purchase or sell foreign currency futures contracts,
foreign currency forward contracts, and options on foreign
currency futures contracts and on foreign currencies. In
connection with position hedging, the Fund may also purchase or
sell foreign currency on a spot basis.
The Fund's currency hedging transactions may call for
the delivery of one foreign currency in exchange for another
foreign currency and may at times not involve currencies in which
its portfolio securities are then denominated. The Adviser will
engage in such "cross hedging" activities when it believes that
such transactions provide significant hedging opportunities for
the Fund.
PORTFOLIO MANAGEMENT
The Adviser manages each Fund's portfolio by buying and
selling securities to help attain its investment objective. The
portfolio turnover rate for each Fund is included under
"Financial Highlights" in the Funds' Prospectus. A high
portfolio turnover rate will involve greater costs to a Fund
(including brokerage commissions and transaction costs) and may
also result in the realization of taxable capital gains,
including short-term capital gains taxable at ordinary income
rates. See "Dividends, Distributions and Taxes" and "Portfolio
Transactions" below.
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ADDITIONAL INVESTMENT TECHNIQUES OF THE FUNDS
REPURCHASE AGREEMENTS
The repurchase agreements referred to in the Funds'
Prospectus are agreements by which a Fund purchases a security
and obtains a simultaneous commitment from the seller to
repurchase the security at an agreed upon price and date. The
resale price is in excess of the purchase price and reflects an
agreed upon market rate unrelated to the coupon rate on the
purchased security. The purchased security serves as collateral
for the obligation of the seller to repurchase the security and
the value of the purchased security is initially greater than or
equal to the amount of the repurchase obligation and the seller
is required to furnish additional collateral on a daily basis in
order to maintain with the purchaser securities with a value
greater than or equal to the amount of the repurchase obligation.
Such transactions afford the Funds the opportunity to earn a
return on temporarily available cash. While at times the
underlying security may be a bill, certificate of indebtedness,
note, or bond issued by an agency, authority or instrumentality
of the United States Government, the obligation of the seller is
not guaranteed by the U.S. Government and there is a risk that
the seller may fail to repurchase the underlying security,
whether because of the seller's bankruptcy or otherwise. In such
event, the Funds would attempt to exercise their rights with
respect to the underlying security, including possible
disposition in the market. However, the Funds may be subject to
various delays and risks of loss, including (a) possible declines
in the value of the underlying security during the period while
the Funds seek to enforce their rights thereto, (b) possible
reduced levels of income and lack of access to income during this
period and (c) inability to enforce rights and the expenses
involved in the attempted enforcement.
NON-PUBLICLY TRADED SECURITIES
The Funds may invest in securities which are not
publicly traded, including securities sold pursuant to Rule 144A
under the Securities Act of 1933 ("Rule 144A Securities"). The
sale of these securities is usually restricted under Federal
securities laws, and market quotations may not be readily
available. As a result, a Fund may not be able to sell these
securities (other than Rule 144A Securities) unless they are
registered under applicable Federal and state securities laws, or
may have to sell such securities at less than fair market value.
Investment in these securities is restricted to 5% of a Fund's
total assets (excluding, to the extent permitted by applicable
law, Rule 144A Securities) and is also subject to the restriction
against investing more than 15% of total assets in "illiquid"
securities. To the extent permitted by applicable law, Rule 144A
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Securities will not be treated as "illiquid" for purposes of the
foregoing restriction so long as such securities meet the
liquidity guidelines established by the Trust's Board of
Trustees. Pursuant to these guidelines, the Adviser will monitor
the liquidity of a Fund's investment in Rule 144A Securities.
FOREIGN SECURITIES
The Funds may invest without limit in securities of
foreign issuers which are not publicly traded in the United
States, although each of these Funds generally will not invest
more than 15% of its total assets in such securities. The
Strategic Balanced Fund may also purchase certificates of deposit
issued by foreign branches of domestic banks without regard to
the 15% limit. These certificates of deposit are not insured by
an agency or instrumentality of the U.S. Government. Investment
in foreign issuers or securities principally outside the United
States may involve certain special risks due to foreign economic,
political, diplomatic and legal developments, including favorable
or unfavorable changes in currency exchange rates, exchange
control regulations (including currency blockage), expropriation
of assets or nationalization, confiscatory taxation, imposition
of withholding taxes on dividend or interest payments, and
possible difficulty in obtaining and enforcing judgments against
foreign entities. Furthermore, issuers of foreign securities are
subject to different, often less comprehensive, accounting,
reporting and disclosure requirements than domestic issuers. The
securities of some foreign companies and foreign securities
markets are less liquid and at times more volatile than
securities of comparable U.S. companies and U.S. securities
markets, and foreign securities markets may be subject to less
regulation than U.S. securities markets. The laws of some
foreign countries may limit the Funds' abilities to invest in
securities of certain issuers located in these countries.
Foreign brokerage commissions and other fees are also generally
higher than in the United States. There are also special tax
considerations which apply to securities of foreign issuers and
securities principally traded overseas. Foreign settlement
procedures and trade regulations may involve certain risks (such
as delay in payment or delivery of securities or in the recovery
of the Fund's assets held abroad) and expenses not present in the
settlement of domestic investments. The Fund may invest a
portion of its assets in developing countries or in countries
with new or developing capital markets. The risks noted above
are generally intensified for these investments. These countries
may have relatively unstable governments, economies based on only
a few industries or securities markets that trade a small number
of securities. Securities of issuers located in these countries
tend to have volatile prices and may offer significant potential
for loss as well as gain.
The value of foreign investments measured in U.S.
dollars will rise or fall because of decreases or increases,
respectively, in the value of the U.S. dollar in comparison to
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the value of the currency in which the foreign investment is
denominated. The Fund may buy or sell foreign currencies,
options on foreign currencies, foreign currency futures contracts
(and related options) and deal in forward foreign currency
exchange contracts in connection with the purchase and sale of
foreign investments. See "Investment Objective and Policies of
the Strategic Balanced Fund - Foreign Currency Exchange
Transactions" above.
DESCRIPTIONS OF CERTAIN MONEY MARKET SECURITIES IN WHICH
THE FUNDS MAY INVEST
CERTIFICATES OF DEPOSIT, BANKERS' ACCEPTANCES AND BANK
TIME DEPOSITS. Certificates of deposit are receipts issued by a
bank in exchange for the deposit of funds. The issuer agrees to
pay the amount deposited plus interest to the bearer of the
receipt on the date specified on the certificate. The
certificate usually can be traded in the secondary market prior
to maturity.
Bankers' acceptances typically arise from short-term
credit arrangements designed to enable businesses to obtain funds
to finance commercial transactions. Generally, an acceptance is
a time draft drawn on a bank by an exporter or an importer to
obtain a stated amount of funds to pay for specific merchandise.
The draft is then "accepted" by another bank that, in effect,
unconditionally guarantees to pay the face value of the
instrument on its maturity date. The acceptance may then be held
by the accepting bank as an earning asset or it may be sold in
the secondary market at the going rate of discount for a specific
maturity. Although maturities for acceptances can be as long as
270 days, most maturities are six months or less.
Bank time deposits are funds kept on deposit with a bank
for a stated period of time in an interest bearing account. At
present, bank time deposits maturing in more than seven days are
not considered by the Adviser to be readily marketable.
COMMERCIAL PAPER. Commercial paper consists of short-
term (usually from 1 to 270 days) unsecured promissory notes
issued by entities in order to finance their current operations.
VARIABLE NOTES. Variable amount master demand notes and
variable amount floating rate notes are obligations that permit
the investment of fluctuating amounts by a Fund at varying rates
of interest pursuant to direct arrangements between a Fund, as
lender, and the borrower. Master demand notes permit daily
fluctuations in the interest rate while the interest rate under
variable amount floating rate notes fluctuates on a weekly basis.
These notes permit daily changes in the amounts borrowed. The
Funds have the right to increase the amount under these notes at
any time up to the full amount provided by the note agreement, or
to decrease the amount, and the borrower may repay up to the full
amount of the note without penalty. Because these types of notes
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are direct lending arrangements between the lender and the
borrower, it is not generally contemplated that such instruments
will be traded and there is no secondary market for these notes.
Master demand notes are redeemable (and, thus, immediately
repayable by the borrower) at face value, plus accrued interest,
at any time. Variable amount floating rate notes are subject to
next-day redemption 14 days after the initial investment therein.
With both types of notes, therefore, the Funds' right to redeem
depends on the ability of the borrower to pay principal and
interest on demand. In connection with both types of note
arrangements, the Funds consider earning power, cash flow and
other liquidity ratios of the issuer. These notes, as such, are
not typically rated by credit rating agencies. Unless they are
so rated, a Fund may invest in them only if at the time of an
investment the issuer has an outstanding issue of unsecured debt
rated Aa or better by Moody's or AA or better by S&P, Fitch, or
Duff & Phelps.
ASSET-BACKED SECURITIES
The Funds may invest in asset-backed securities
(unrelated to first mortgage loans) which represent fractional
interests in pools of retail installment loans, leases or
revolving credit receivables, both secured (such as Certificates
for Automobile Receivables or "CARS") and unsecured (such as
Credit Card Receivable Securities or "CARDS"). These assets are
generally held by a trust and payments of principal and interest
or interest only are passed through monthly or quarterly to
certificate holders and may be guaranteed up to certain amounts
by letters of credit issued by a financial institution affiliated
or unaffiliated with the trustee or originator of the trust.
Like mortgages underlying mortgage-backed securities,
underlying automobile sales contracts or credit card receivables
are subject to prepayment, which may reduce the overall return to
certificate holders. Nevertheless, principal repayment rates
tend not to vary too much with interest rates, and the short-term
nature of the underlying car loans or receivables tends to dampen
the impact of any change in the prepayment level. Certificate
holders may also experience delays in payment if the full amounts
due on underlying sales contracts or receivables are not realized
by the trust holding the obligations because of unanticipated
legal or administrative costs of enforcing the contracts or
because of depreciation or damage to the collateral (usually
automobiles) securing certain contracts, or other factors. If
consistent with their investment objectives and policies, the
Funds may invest in other asset-backed securities that may be
developed in the future.
The staff of the Securities and Exchange Commission (the
"SEC") is of the view that certain asset-backed securities may
constitute investment companies under the Investment Company Act
of 1940 (the "1940 Act"). The Funds intend to conduct their
operations in a manner consistent with this view; therefore, the
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Funds generally may not invest more than 10% of their total
assets in such securities without obtaining appropriate
regulatory relief.
LENDING OF SECURITIES
The Funds may seek to increase income by lending
portfolio securities. Under present regulatory policies,
including those of the Board of Governors of the Federal Reserve
System and the SEC, such loans may be made only to member firms
of the New York Stock Exchange (the "Exchange") and would be
required to be secured continuously by collateral in cash, cash
equivalents, or U.S. Treasury Bills maintained on a current basis
at an amount at least equal to the market value of the securities
loaned. A Fund would have the right to call a loan and obtain
the securities loaned at any time on five days' notice. During
the existence of a loan, a Fund would continue to receive the
equivalent of the interest or dividends paid by the issuer on the
securities loaned and would also receive compensation based on
investment of the collateral. A Fund would not, however, have
the right to vote any securities having voting rights during the
existence of the loan but would call the loan in anticipation of
an important vote to be taken among holders of the securities or
of the giving or withholding of their consent on a material
matter affecting the investment. As with other extensions of
credit there are risks of delay in recovery or even loss of
rights in the collateral should the borrower of the securities
fail financially. However, the loans would be made only to firms
deemed by the Adviser to be of good standing, and when, in the
judgment of the Adviser, the consideration that can be earned
currently from securities loans of this type justifies the
attendant risk. If the Adviser determines that a Fund should
make securities loans, it is not intended that the value of the
securities loaned would exceed 25% of the value of such Fund's
total assets.
FORWARD COMMITMENTS AND WHEN-ISSUED AND DELAYED DELIVERY
SECURITIES
Each of the Funds may enter into forward commitments for
the purchase of securities and may purchase securities on a
"when-issued" or "delayed delivery" basis. Agreements for such
purchases might be entered into, for example, when a Fund
anticipates a decline in interest rates and is able to obtain a
more advantageous yield by committing currently to purchase
securities to be issued later. When a Fund purchases securities
in this manner (i.e., on a forward commitment, when-issued or
delayed delivery basis), it does not pay for the securities until
they are received, and a Fund is required to create a segregated
account with the Trust's custodian and to maintain in that
account cash, U.S. Government securities or other liquid high-
grade debt obligations in an amount equal to or greater than, on
a daily basis, the amount of the Fund's forward commitments and
when-issued or delayed delivery commitments.
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A Fund will enter into forward commitments and make
commitments to purchase securities on a when-issued or delayed
delivery basis only with the intention of actually acquiring the
securities. However, a Fund may sell these securities before the
settlement date if it is deemed advisable as a matter of
investment strategy.
Although neither of the Funds intends to make such
purchases for speculative purposes and each Fund intends to
adhere to the provisions of SEC policies, purchases of securities
on such bases may involve more risk than other types of
purchases. For example, by committing to purchase securities in
the future, a Fund subjects itself to a risk of loss on such
commitments as well as on its portfolio securities. Also, a Fund
may have to sell assets which have been set aside in order to
meet redemptions. In addition, if a Fund determines it is
advisable as a matter of investment strategy to sell the forward
commitment or "when-issued" or "delayed delivery" securities
before delivery, that Fund may incur a gain or loss because of
market fluctuations since the time the commitment to purchase
such securities was made. Any such gain or loss would be treated
as a capital gain or loss and would be treated for tax purposes
as such. When the time comes to pay for the securities to be
purchased under a forward commitment or on a "when-issued" or
"delayed delivery" basis, a Fund will meet its obligations from
the then available cash flow or the sale of securities, or,
although it would not normally expect to do so, from the sale of
the forward commitment or "when-issued" or "delayed delivery"
securities themselves (which may have a value greater or less
than a Fund's payment obligation).
OPTIONS
OPTIONS ON SECURITIES. The Funds may write call options
and may purchase call and put options on securities. Each Fund
intends to write only covered options. In addition to the
methods of "cover" described in the Prospectus, this means that
so long as a Fund is obligated as the writer of a call option, it
will own the underlying securities subject to the option or
securities convertible into such securities without additional
consideration (or for additional cash consideration held in a
segregated account by the custodian). In the case of call
options on U.S. Treasury Bills, a Fund might own U.S. Treasury
Bills of a different series from those underlying the call
option, but with a principal amount and value corresponding to
the option contract amount and a maturity date no later than that
of the securities deliverable under the call option. A Fund will
be considered "covered" with respect to a put option it writes,
if, so long as it is obligated as the writer of a put option, it
deposits and maintains with its custodian in a segregated account
cash, U.S. Government securities or other liquid high-grade debt
obligations having a value equal to or greater than the exercise
price of the option.
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Effecting a closing transaction in the case of a written
call option will permit a Fund to write another call option on
the underlying security with either a different exercise price or
expiration date or both, or in the case of a written put option
will permit a Fund to write another put option to the extent that
the exercise price thereof is secured by deposited cash or short-
term securities. Such transactions permit a Fund to generate
additional premium income, which will partially offset declines
in the value of portfolio securities or increases in the cost of
securities to be acquired. Also, effecting a closing transaction
will permit the cash or proceeds from the concurrent sale of any
securities subject to the option to be used for other investments
by a Fund, provided that another option on such security is not
written. If a Fund desires to sell a particular security from
its portfolio on which it has written a call option, it will
effect a closing transaction in connection with the option prior
to or concurrent with the sale of the security.
A Fund will realize a profit from a closing transaction
if the premium paid in connection with the closing of an option
written by the Fund is less than the premium received from
writing the option, or if the premium received in connection with
the closing of an option purchased by the Fund is more than the
premium paid for the original purchase. Conversely, a Fund will
suffer a loss if the premium paid or received in connection with
a closing transaction is more or less, respectively, than the
premium received or paid in establishing the option position.
Because increases in the market price of a call option will
generally reflect increases in the market price of the underlying
security, any loss resulting from the repurchase of a call option
previously written by a Fund is likely to be offset in whole or
in part by appreciation of the underlying security owned by the
Fund.
A Fund may purchase a security and then write a call
option against that security or may purchase a security and
concurrently write an option on it. The exercise price of the
call a Fund determines to write will depend upon the expected
price movement of the underlying security. The exercise price of
a call option may be below ("in-the-money"), equal to ("at-the-
money") or above ("out-of-the-money") the current value of the
underlying security at the time the option is written. In-the-
money call options may be used when it is expected that the price
of the underlying security will decline moderately during the
option period. Out-of-the-money call options may be written when
it is expected that the premiums received from writing the call
option plus the appreciation in the market price of the
underlying security up to the exercise price will be greater than
the appreciation in the price of the underlying security alone.
If the call options are exercised in such transactions, a Fund's
maximum gain will be the premium received by it for writing the
option, adjusted upwards or downwards by the difference between
the Fund's purchase price of the security and the exercise price.
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If the options are not exercised and the price of the underlying
security declines, the amount of such decline will be offset in
part, or entirely, by the premium received.
The writing of covered put options is similar in terms
of risk/return characteristics to buy-and-write transactions. If
the market price of the underlying security rises or otherwise is
above the exercise price, the put option will expire worthless
and a Fund's gain will be limited to the premium received. If
the market price of the underlying security declines or otherwise
is below the exercise price, a Fund may elect to close the
position or retain the option until it is exercised, at which
time the Fund will be required to take delivery of the security
at the exercise price; the Fund's return will be the premium
received from the put option minus the amount by which the market
price of the security is below the exercise price, which could
result in a loss. Out-of-the-money put options may be written
when it is expected that the price of the underlying security
will decline moderately during the option period. In-the-money
put options may be used when it is expected that the premiums
received from writing the put option plus the appreciation in the
market price of the underlying security up to the exercise price
will be greater than the appreciation in the price of the
underlying security alone.
Each of the Funds may also write combinations of put and
call options on the same security, known as "straddles," with the
same exercise and expiration date. By writing a straddle, a Fund
undertakes a simultaneous obligation to sell and purchase the
same security in the event that one of the options is exercised.
If the price of the security subsequently rises above the
exercise price, the call will likely be exercised and the Fund
will be required to sell the underlying security at a below
market price. This loss may be offset, however, in whole or
part, by the premiums received on the writing of the two options.
Conversely, if the price of the security declines by a sufficient
amount, the put will likely be exercised. The writing of
straddles will likely be effective, therefore, only where the
price of the security remains stable and neither the call nor the
put is exercised. In those instances where one of the options is
exercised, the loss on the purchase or sale of the underlying
security may exceed the amount of the premiums received.
By writing a call option, a Fund limits its opportunity
to profit from any increase in the market value of the underlying
security above the exercise price of the option. By writing a
put option, a Fund assumes the risk that it may be required to
purchase the underlying security for an exercise price above its
then current market value, resulting in a capital loss unless the
security subsequently appreciates in value. Where options are
written for hedging purposes, such transactions constitute only a
partial hedge against declines in the value of portfolio
securities or against increases in the value of securities to be
acquired, up to the amount of the premium.
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Each of the Funds may purchase put options to hedge
against a decline in the value of portfolio securities. If such
decline occurs, the put options will permit the Fund to sell the
securities at the exercise price or to close out the options at a
profit. By using put options in this way, a Fund will reduce any
profit it might otherwise have realized in the underlying
security by the amount of the premium paid for the put option and
by transaction costs.
A Fund may purchase call options to hedge against an
increase in the price of securities that the Fund anticipates
purchasing in the future. If such increase occurs, the call
option will permit the Fund to purchase the securities at the
exercise price, or to close out the options at a profit. The
premium paid for the call option plus any transaction costs will
reduce the benefit, if any, realized by a Fund upon exercise of
the option, and, unless the price of the underlying security
rises sufficiently, the option may expire worthless to the Fund
and the Fund will suffer a loss on the transaction to the extent
of the premium paid.
OPTIONS ON SECURITIES INDEXES. Each of the Funds may
write (sell) covered call and put options on securities indexes
and purchase call and put options on securities indexes. A call
option on a securities index is considered covered if, so long as
a Fund is obligated as the writer of the call, the Fund holds in
its portfolio securities the price changes of which are, in the
option of the Adviser, expected to replicate substantially the
movement of the index or indexes upon which the options written
by the Fund are based. A put on a securities index written by a
Fund will be considered covered if, so long as it is obligated as
the writer of the put, the Fund segregates with its custodian
cash, U.S. Government securities or other liquid high-grade debt
obligations having a value equal to or greater than the exercise
price of the option.
A Fund may also purchase put options on securities
indexes to hedge its investments against a decline in value. By
purchasing a put option on a securities index, a Fund will seek
to offset a decline in the value of securities it owns through
appreciation of the put option. If the value of a Fund's
investments does not decline as anticipated, or if the value of
the option does not increase, the Fund's loss will be limited to
the premium paid for the option. The success of this strategy
will largely depend on the accuracy of the correlation between
the changes in value of the index and the changes in value of a
Fund's security holdings.
The purchase of call options on securities indexes may
be used by a Fund to attempt to reduce the risk of missing a
broad market advance, or an advance in an industry or market
segment, at a time when the Fund holds uninvested cash or
short-term debt securities awaiting investment. When purchasing
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call options for this purpose, a Fund will also bear the risk of
losing all or a portion of the premium paid if the value of the
index does not rise. The purchase of call options on stock
indexes when a Fund is substantially fully invested is a form of
leverage, up to the amount of the premium and related transaction
costs, and involves risks of loss and of increased volatility
similar to those involved in purchasing calls on securities the
Fund owns.
FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS
FUTURES CONTRACTS. The Funds may enter into interest
rate futures contracts, index futures contracts and foreign
currency futures contracts. (Unless otherwise specified,
interest rate futures contracts, index futures contracts and
foreign currency futures contracts are collectively referred to
as "Futures Contracts.") Such investment strategies will be used
as a hedge and not for speculation.
Purchases or sales of stock or bond index futures
contracts are used for hedging purposes to attempt to protect a
Fund's current or intended investments from broad fluctuations in
stock or bond prices. For example, a Fund may sell stock or bond
index futures contracts in anticipation of or during a market
decline to attempt to offset the decrease in market value of the
Fund's portfolio securities that might otherwise result. If such
decline occurs, the loss in value of portfolio securities may be
offset, in whole or part, by gains on the futures position. When
a Fund is not fully invested in the securities market and
anticipates a significant market advance, it may purchase stock
or bond index futures contracts in order to gain rapid market
exposure that may, in part or entirely, offset increases in the
cost of securities that the Fund intends to purchase. As such
purchases are made, the corresponding positions in stock or bond
index futures contracts will be closed out.
Interest rate futures contracts are purchased or sold
for hedging purposes to attempt to protect against the effects of
interest rate changes on a Fund's current or intended investments
in fixed income securities. For example, if a Fund owned long-
term bonds and interest rates were expected to increase, that
Fund might sell interest rate futures contracts. Such a sale
would have much the same effect as selling some of the long-term
bonds in that Fund's portfolio. However, since the futures
market is more liquid than the cash market, the use of interest
rate futures contracts as a hedging technique allows a Fund to
hedge its interest rate risk without having to sell its portfolio
securities. If interest rates did increase, the value of the
debt securities in the portfolio would decline, but the value of
that Fund's interest rate futures contracts would be expected to
increase at approximately the same rate, thereby keeping the net
asset value of that Fund from declining as much as it otherwise
would have. On the other hand, if interest rates were expected
to decline, interest rate futures contracts could be purchased to
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hedge in anticipation of subsequent purchases of long-term bonds
at higher prices. Because the fluctuations in the value of the
interest rate futures contracts should be similar to those of
long-term bonds, a Fund could protect itself against the effects
of the anticipated rise in the value of long-term bonds without
actually buying them until the necessary cash became available or
the market had stabilized. At that time, the interest rate
futures contracts could be liquidated and that Fund's cash
reserves could then be used to buy long-term bonds on the cash
market.
The Funds may purchase and sell foreign currency futures
contracts for hedging purposes to attempt to protect its current
or intended investments from fluctuations in currency exchange
rates. Such fluctuations could reduce the dollar value of
portfolio securities denominated in foreign currencies, or
increase the cost of foreign-denominated securities to be
acquired, even if the value of such securities in the currencies
in which they are denominated remains constant. The Funds may
sell futures contracts on a foreign currency, for example, when
it holds securities denominated in such currency and it
anticipates a decline in the value of such currency relative to
the dollar. In the event such decline occurs, the resulting
adverse effect on the value of foreign-denominated securities may
be offset, in whole or in part, by gains on the futures
contracts. However, if the value of the foreign currency
increases relative to the dollar, the Fund's loss on the foreign
currency futures contract may or may not be offset by an increase
in the value of the securities because a decline in the price of
the security stated in terms of the foreign currency may be
greater than the increase in value as a result of the change in
exchange rates.
Conversely, the Funds could protect against a rise in
the dollar cost of foreign-denominated securities to be acquired
by purchasing futures contracts on the relevant currency, which
could offset, in whole or in part, the increased cost of such
securities resulting from a rise in the dollar value of the
underlying currencies. When a Fund purchases futures contracts
under such circumstances, however, and the price of securities to
be acquired instead declines as a result of appreciation of the
dollar, the Fund will sustain losses on its futures position
which could reduce or eliminate the benefits of the reduced cost
of portfolio securities to be acquired.
The Funds may also engage in currency "cross hedging"
when, in the opinion of the Adviser, the historical relationship
among foreign currencies suggests that a Fund may achieve
protection against fluctuations in currency exchange rates
similar to that described above at a reduced cost through the use
of a futures contract relating to a currency other than the U.S.
dollar or the currency in which the foreign security is
denominated. Such "cross hedging" is subject to the same risks
as those described above with respect to an unanticipated
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increase or decline in the value of the subject currency relative
to the dollar.
OPTIONS ON FUTURES CONTRACTS. The writing of a call
option on a Futures Contract constitutes a partial hedge against
declining prices of the securities in the Fund's portfolio. If
the futures price at expiration of the option is below the
exercise price, a 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 securities or other instruments
required to be delivered under the terms of the Futures Contract.
If the futures price at expiration of the put option is higher
than the exercise price, a Fund will retain the full amount of
the option premium, which provides a partial hedge against any
increase in the price of securities which the Fund intends to
purchase. If a put or call option a 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 options on futures
positions, a Fund's losses from exercised options on futures may
to some extent be reduced or increased by changes in the value of
portfolio securities.
The Funds may purchase options on Futures Contracts for
hedging purposes instead of purchasing or selling the underlying
Futures Contracts. For example, where a decrease in the value of
portfolio securities is anticipated as a result of a projected
market-wide decline or changes in interest or exchange rates, a
Fund could, in lieu of selling Futures Contracts, purchase put
options thereon. In the event that such decrease occurs, it may
be offset, in whole or part, by a profit on the option. If the
market decline does not occur, the Fund will suffer a loss equal
to the price of the put. Where it is projected that the value of
securities to be acquired by a Fund will increase prior to
acquisition, due to a market advance or changes in interest or
exchange rates, a Fund could purchase call options on Futures
Contracts, rather than purchasing the underlying Futures
Contracts. If the market advances, the increased cost of
securities to be purchased may be offset by a profit on the call.
However, if the market declines, the Fund will suffer a loss
equal to the price of the call, but the securities which the Fund
intends to purchase may be less expensive.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
The Funds may enter into forward foreign currency
exchange contracts ("Forward Contracts") to attempt to minimize
the risk to the Fund from adverse changes in the relationship
between the U.S. dollar and foreign currencies. The Funds intend
to enter into Forward Contracts for hedging purposes similar to
those described above in connection with their transactions in
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foreign currency futures contracts. In particular, a Forward
Contract to sell a currency may be entered into in lieu of the
sale of a foreign currency futures contract where a Fund seeks to
protect against an anticipated increase in the exchange rate for
a specific currency which could reduce the dollar value of
portfolio securities denominated in such currency. Conversely, a
Fund may enter into a Forward Contract to purchase a given
currency to protect against a projected increase in the dollar
value of securities denominated in such currency which the Fund
intends to acquire. A Fund also may enter into a Forward
Contract in order to assure itself of a predetermined exchange
rate in connection with a security denominated in a foreign
currency. The Funds may engage in currency "cross hedging" when,
in the opinion of the Adviser, the historical relationship among
foreign currencies suggests that a Fund may achieve the same
protection for a foreign security at a reduced cost through the
use of a Forward Contract relating to a currency other than the
U.S. dollar or the foreign currency in which the security is
denominated.
If a hedging transaction in Forward Contracts is
successful, the decline in the value of portfolio securities or
the increase in the cost of securities to be acquired may be
offset, at least in part, by profits on the Forward Contract.
Nevertheless, by entering into such Forward Contracts, a Fund may
be required to forego all or a portion of the benefits which
otherwise could have been obtained from favorable movements in
exchange rates.
Each Fund has established procedures consistent with SEC
policies concerning purchases of foreign currency through Forward
Contracts. Since those policies currently recommend that an
amount of a Fund's assets equal to the amount of the purchase be
held aside or segregated to be used to pay for the commitment, a
Fund will always have cash, U.S. Government securities or other
liquid, high-grade debt securities available sufficient to cover
any commitments under these contracts or to limit any potential
risk.
OPTIONS ON FOREIGN CURRENCIES
The Funds may purchase and write options on foreign
currencies for hedging purposes. 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 Funds 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.
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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, these
Funds 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 a Fund derived 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, a 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 Funds may write options on foreign currencies for
the same types of hedging purposes or to increase return. For
example, where the Fund anticipates a decline in the dollar value
of foreign-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, 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, a 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
will 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, a 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.
RISK FACTORS IN OPTIONS, FUTURES AND FORWARD TRANSACTIONS
RISK OF IMPERFECT CORRELATION OF HEDGING INSTRUMENTS
WITH A FUND'S PORTFOLIO. The Funds' abilities effectively to
hedge all or a portion of their portfolios through transactions
in options, Futures Contracts, options on Futures Contracts,
Forward Contracts and options on foreign currencies depend on the
degree to which price movements in the underlying index or
instrument correlate with price movements in the securities that
are the subject of the hedge. In the case of futures and options
based on an index, the portfolio will not duplicate the
components of the index, and in the case of futures and options
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on fixed income securities, the portfolio securities which are
being hedged may not be the same type of obligation underlying
such contract. As a result, the correlation, to the extent it
exists, probably will not be exact.
It should be noted that stock index futures contracts or
options based upon a narrower index of securities, such as those
of a particular industry group, may present greater risk than
options or futures based on a broad market index. This is due to
the fact that a narrower index is more susceptible to rapid and
extreme fluctuations as a result of changes in the value of a
small number of securities.
The trading of futures and options entails the
additional risk of imperfect correlation between movements in the
futures or option price and the price of the underlying index or
instrument. The anticipated spread between the prices may be
distorted due to the differences in the nature of the markets,
such as differences in margin requirements, the liquidity of such
markets and the participation of speculators in the futures
market. In this regard, trading by speculators in futures and
options has in the past occasionally resulted in market
distortions, which may be difficult or impossible to predict,
particularly near the expiration of such contracts.
The trading of options on Futures Contracts 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.
The risk of imperfect correlation, however, generally tends to
diminish as the maturity date of the Futures Contract or
expiration date of the option approaches.
Further, with respect to options on securities, options
on foreign currencies, options on stock indexes and options on
Futures Contracts, the Funds are subject to the risk of market
movements between the time that the option is exercised and the
time of performance thereunder. This could increase the extent
of any loss suffered by a Fund in connection with such
transactions.
If a Fund purchases futures or options in order to hedge
against a possible increase in the price of securities before the
Fund is able to invest its cash in such securities, the Fund
faces the risk that the market may instead decline. If the Fund
does not then invest in such securities because of concern as to
possible further market declines or for other reasons, the Fund
may realize a loss on the futures or option contract that is not
offset by a reduction in the price of securities purchased.
In writing a call option on a security, foreign
currency, index or futures contract, a Fund also incurs the risk
that changes in the value of the assets used to cover the
position will not correlate closely with changes in the value of
the option or underlying index or instrument. For example, when
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<PAGE>
a Fund writes a call option on a stock index, the securities used
as "cover" may not match the composition of the index, and the
Fund may not be fully covered. As a result, the Fund could
suffer a loss on the call which is not entirely offset or offset
at all by an increase in the value of the Fund's portfolio
securities.
The writing of options on securities, options on stock
indexes or options on Futures Contracts constitutes only a
partial hedge against fluctuations in the value of a Fund's
portfolio. When a Fund writes an option, it will receive premium
income in return for the holder's purchase of the right to
acquire or dispose of the underlying security or future or, in
the case of index options, cash. In the event that the price of
such obligation does not rise sufficiently above the exercise
price of the option, in the case of a call, or fall below the
exercise price, in the case of a put, the option will not be
exercised and the Fund will retain the amount of the premium,
which will constitute a partial hedge against any decline that
may have occurred in the Fund's portfolio holdings, or against
the increase in the cost of the instruments to be acquired.
When the price of the underlying obligation moves
sufficiently in favor of the holder to warrant exercise of the
option, however, and the option is exercised, the Fund will incur
a loss which may only be partially offset by the amount of the
premium the Fund received. Moreover, by writing an option, a
Fund may be required to forego the benefits which might otherwise
have been obtained from an increase in the value of portfolio
securities or a decline in the value of securities to be
acquired.
In the event of the occurrence of any of the foregoing
adverse market events, a Fund's overall return may be lower than
if it had not engaged in the transactions described above.
With respect to the writing of straddles on securities,
a Fund incurs the risk that the price of the underlying security
will not remain stable, that one of the options written will be
exercised and that the resulting loss will not be offset by the
amount of the premiums received. Such transactions, therefore,
while creating an opportunity for increased return by providing a
Fund with two simultaneous premiums on the same security,
nonetheless involve additional risk, because the Fund may have an
option exercised against it regardless of whether the price of
the security increases or decreases.
POTENTIAL LACK OF A LIQUID SECONDARY MARKET. Prior to
exercise or expiration, a futures or option position can be
terminated only by entering into a closing purchase or sale
transaction. This requires a secondary market for such
instruments on the exchange on which the initial transaction was
entered into. While the Funds will enter into options or futures
positions only if there appears to be a liquid secondary market
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<PAGE>
therefor, there can be no assurance that such a market will exist
for any particular contracts at any specific time. In that
event, it may not be possible to close out a position held by a
Fund, and the Fund could be required to purchase or sell the
instrument underlying an option, make or receive a cash
settlement or meet ongoing variation margin requirements. Under
such circumstances, if the Fund has insufficient cash available
to meet margin requirements, it may be necessary to liquidate
portfolio securities at a time when it is disadvantageous to do
so. The inability to close out options and futures positions,
therefore, could have an adverse impact on the Funds' ability to
effectively hedge their portfolios, and could result in trading
losses.
The liquidity of a secondary market in a Futures
Contract or option thereon may be adversely affected by "daily
price fluctuation limits," established by exchanges, which limit
the amount of fluctuation in the price of a contract during a
single trading day. Once the daily limit has been reached in the
contract, no trades may be entered into at a price beyond the
limit, thus preventing the liquidation of open futures or option
positions and requiring traders to make additional margin
deposits. Prices have in the past moved to the daily limit on a
number of consecutive trading days.
The trading of Futures Contracts and options (including
options on Futures Contracts) is also subject to the risk of
trading halts, suspensions, exchange or clearing house equipment
failures, government intervention, insolvency of a brokerage firm
or clearing house or other disruptions of normal trading
activity, which could at times make it difficult or impossible to
liquidate existing positions or to recover excess variation
margin payments.
The staff of the SEC has taken the position that over-
the-counter options and the assets used as cover for over-the-
counter options are illiquid securities, unless certain
arrangements are made with the other party to the option
contract, permitting the prompt liquidation of the option
position. The Funds will enter into those special arrangements
only with primary U.S. Government securities dealers recognized
by the Federal Reserve Bank of New York ("primary dealers").
Under these special arrangements, the Trust will enter into
contracts with primary dealers which provide that each Fund has
the absolute right to repurchase an option it writes at any time
at a repurchase price which represents fair market value, as
determined in good faith through negotiation between the parties,
but which in no event will exceed a price determined pursuant to
a formula contained in the contract. Although the specific
details of the formula may vary between contracts with different
primary dealers, the formula will generally be based on a
multiple of the premium received by the Fund for writing the
option, plus the amount, if any, by which the option is "in-the-
money." The formula will also include a factor to account for
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<PAGE>
the difference between the price of the security and the strike
price of the option if the option is written out-of-the-money.
Under such circumstances the Fund only needs to treat as illiquid
that amount of the "cover" assets equal to the amount by which
(i) the formula price exceeds (ii) any amount by which the market
value of the security subject to the option exceeds the exercise
price of the option (the amount by which the option is "in-the-
money"). Although each agreement will provide that the Fund's
repurchase price shall be determined in good faith (and that it
shall not exceed the maximum determined pursuant to the formula),
the formula price will not necessarily reflect the market value
of the option written; therefore, the Fund might pay more to
repurchase the option contract than the Fund would pay to close
out a similar exchange-traded option.
MARGIN. Because of low initial margin deposits made
upon the opening of a futures position and the writing of an
option, such transactions involve substantial leverage. As a
result, relatively small movements in the price of the contract
can result in substantial unrealized gains or losses. However,
to the extent the Funds purchase or sell Futures Contracts and
options on Futures Contracts and purchase and write options on
securities and securities indexes for hedging purposes, any
losses incurred in connection therewith should, if the hedging
strategy is successful, be offset, in whole or in part, by
increases in the value of securities held by the Fund or
decreases in the prices of securities the Fund intends to
acquire. When a Fund writes options on securities or options on
stock indexes for other than hedging purposes, the margin
requirements associated with such transactions could expose the
Fund to greater risk.
TRADING AND POSITION LIMITS. The exchanges on which
futures and options are traded may impose limitations governing
the maximum number of positions on the same side of the market
and involving the same underlying instrument which may be held by
a single investor, whether acting alone or in concert with others
(regardless of whether such contracts are held on the same or
different exchanges or held or written in one or more accounts or
through one or more brokers). In addition, the Commodity Futures
Trading Commission (the "CFTC") and the various contract markets
have established limits referred to as "speculative position
limits" on the maximum net long or net short position which any
person may hold or control in a particular futures or option
contract. An exchange may order the liquidation of positions
found to be in violation of these limits and may impose other
sanctions or restrictions. The Adviser does not believe that
these trading and position limits will have any adverse impact on
the strategies for hedging the portfolios of the Funds.
RISKS OF OPTIONS ON FUTURES CONTRACTS. The amount of
risk a Fund assumes when it purchases an option on a Futures
Contract is the premium paid for the option, plus related
transaction costs. In order to profit from an option purchased,
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however, it may be necessary to exercise the option and to
liquidate the underlying Futures Contract, subject to the risks
of the availability of a liquid offset market described herein.
The writer of an option on a Futures Contract is subject to the
risks of commodity futures trading, including the requirement of
initial and variation margin payments, as well as the additional
risk that movements in the price of the option may not correlate
with movements in the price of the underlying security, index,
currency or Futures Contract.
RISKS OF FORWARD CONTRACTS, FOREIGN CURRENCY FUTURES
CONTRACTS AND OPTIONS THEREON, OPTIONS ON FOREIGN CURRENCIES AND
OVER-THE-COUNTER OPTIONS ON SECURITIES. Transactions in Forward
Contracts, as well as futures and options on foreign currencies,
are subject to all of the correlation, liquidity and other risks
outlined above. In addition, however, such transactions are
subject to the risk of governmental actions affecting trading in
or the prices of currencies underlying such contracts, which
could restrict or eliminate trading and could have a substantial
adverse effect on the value of positions held by a Fund. In
addition, the value of such positions could be adversely affected
by a number of other complex political and economic factors
applicable to the countries issuing the underlying currencies.
Further, unlike trading in most other types of
instruments, there is no systematic reporting of last sale
information with respect to the foreign currencies underlying
contracts thereon. As a result, the available information on
which trading decisions will be based may not be as complete as
the comparable data on which a Fund makes investment and trading
decisions in connection with other transactions. Moreover,
because the foreign currency market is a global, twenty-four hour
market, events could occur on that market which will not be
reflected in the forward, futures or options markets until the
following day, thereby preventing the Funds from responding to
such events in a timely manner.
Settlements of exercises of over-the-counter Forward
Contracts or foreign currency options generally must occur within
the country issuing the underlying currency, which in turn
requires traders to accept or make delivery of such currencies in
conformity with any United Sates or foreign restrictions and
regulations regarding the maintenance of foreign banking
relationships and fees, taxes or other charges.
Unlike transactions entered into by the Funds in Futures
Contracts and exchange-traded options, options on foreign
currencies, Forward Contracts and over-the-counter options on
securities and securities indexes are not traded on contract
markets regulated by the CFTC or (with the exception of certain
foreign currency options) the SEC. Such instruments are instead
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
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Exchange and the Chicago Board Options Exchange, subject to SEC
regulation. 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 could lose amounts
substantially in excess of the initial investment, due to the
margin and collateral requirements associated with such
positions.
In addition, over-the-counter transactions can be
entered into only with a financial institution willing to take
the opposite side, as principal, of a Fund's position unless the
institution acts as broker and is able to find another
counterparty willing to enter into the transaction with the Fund.
Where no such counterparty is available, it will not be possible
to enter into a desired transaction. There also may be no liquid
secondary market in the trading of over-the-counter contracts,
and a Fund could be required to retain options purchased or
written, or Forward Contracts entered into, until exercise,
expiration or maturity. This in turn could limit the Fund's
ability to profit from open positions or to reduce losses
experienced, and could result in greater losses.
Further, over-the-counter transactions are not subject
to the guarantee of an exchange clearing house, and a Fund will
therefore be subject to the risk of default by, or the bankruptcy
of, the financial institution serving as its counterparty. A
Fund will enter into an over-the-counter transaction only with
parties whose creditworthiness has been reviewed and found
satisfactory by the Adviser.
Transactions in over-the-counter options on foreign
currencies are subject to a number of conditions regarding the
commercial purpose of the purchaser of such option. The Funds
are not able to determine at this time whether or to what extent
additional restrictions on the trading of over-the-counter
options on foreign currencies may be imposed at some point in the
future, or the effect that any such restrictions may have on the
hedging strategies to be implemented by them.
As discussed below, CFTC regulations require that a Fund
not enter into transactions in commodity futures contracts or
commodity option contracts for other than "bona fide" hedging
purposes, unless the aggregate initial margin and premiums do not
exceed 5% of the fair market value of the Fund's assets.
Premiums paid to purchase over-the-counter options on foreign
currencies, and margins paid in connection with the writing of
such options, are required to be included in determining
compliance with this requirement, which could, depending upon the
existing positions in Futures Contracts and options on Futures
29
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Contracts already entered into by a Fund, limit the Fund's
ability to purchase or write options on foreign currencies.
Conversely, the existence of open positions in options on foreign
currencies could limit the ability of the Fund to enter into
desired transactions in other options or futures contracts.
While Forward Contracts are not presently subject to
regulation by the CFTC, the CFTC may in the future assert or be
granted authority to regulate such instruments. In such event,
the Fund's ability to utilize Forward Contracts in the manner set
forth above could be restricted.
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 a 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, the
margining of options written, the nature of the foreign currency
market, 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, if
it determines that foreign governmental restrictions or taxes
would prevent the orderly settlement of foreign currency option
exercises, or would result in undue burdens on the OCC or its
clearing member, the OCC may 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.
RESTRICTIONS ON THE USE OF FUTURES AND OPTION CONTRACTS
Under applicable regulations, when a Fund enters into
transactions in Futures Contracts and options on Futures
Contracts other than for bona fide hedging purposes, that Fund
maintains with its custodian in a segregated account cash, short-
term U.S. Government securities or high quality United States
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dollar denominated money market instruments, which, together with
any initial margin deposits, are equal to the aggregate market
value of the Futures Contracts and options on Futures Contracts
that it purchases. In addition, a Fund may not purchase or sell
such instruments for other than bona fide hedging purposes if,
immediately thereafter, the sum of the amount of initial margin
deposits on such futures and options positions and premiums paid
for options purchased would exceed 5% of the market value of the
Fund's total assets.
Each Fund has adopted the additional restriction that it
will not enter into a Futures Contract if, immediately
thereafter, the value of securities and other obligations
underlying all such Futures Contracts would exceed 50% of the
value of such Fund's total assets. Moreover, a Fund will not
purchase put and call options if as a result more than 10% of its
total assets would be invested in such options.
ECONOMIC EFFECTS AND LIMITATIONS
Income earned by a Fund from its hedging activities will
be treated as capital gain and, if not offset by net realized
capital losses incurred by a Fund, will be distributed to
shareholders in taxable distributions. Although gain from such
transactions may hedge against a decline in the value of a Fund's
portfolio securities, that gain, to the extent not offset by
losses, will be distributed in light of certain tax
considerations and will constitute a distribution of that portion
of the value preserved against decline.
No Fund will "over-hedge," that is, a Fund will not
maintain open short positions in futures or options contracts if,
in the aggregate, the market value of its open positions exceeds
the current market value of its securities portfolio plus or
minus the unrealized gain or loss on such open positions,
adjusted for the historical volatility relationship between the
portfolio and futures and options contracts.
Each Fund's ability to employ the options and futures
strategies described above will depend on the availability of
liquid markets in such instruments. Markets in financial futures
and related options are still developing. It is impossible to
predict the amount of trading interest that may hereafter exist
in various types of options or futures. Therefore no assurance
can be given that a Fund will be able to use these instruments
effectively for the purposes set forth above.
The Funds' ability to use options, futures and forward
contracts may be limited by tax considerations. In particular,
tax rules might affect the length of time for which the Funds can
hold such contracts and the character of the income earned on
such contracts. In addition, differences between each Fund's
book income (upon the basis of which distributions are generally
made) and taxable income arising from its hedging activities may
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<PAGE>
result in return of capital distributions, and in some
circumstances, distributions in excess of the Fund's book income
may be required in order to meet tax requirements.
FUTURE DEVELOPMENTS
The above discussion relates to each Fund's proposed use
of Futures Contracts, options and options on Futures Contracts
currently available. As noted above, the relevant markets and
related regulations are evolving. In the event of future
regulatory or market developments, each Fund may also use
additional types of futures contracts or options and other
investment techniques for the purposes set forth above.
INVESTMENT RESTRICTIONS
Except as described below and except as otherwise
specifically stated in the Funds' Prospectus or this Statement of
Additional Information, the investment policies of each Fund set
forth in the Prospectus and in this Statement of Additional
Information are not fundamental and may be changed without
shareholder approval.
The following is a description of restrictions on the
investments to be made by the Funds, which restrictions may not
be changed without the approval of a majority of the outstanding
voting securities of the relevant Fund.
Neither of the Funds will:
(1) Borrow money in excess of 10% of the value (taken
at the lower of cost or current value) of its total
assets (not including the amount borrowed) at the
time the borrowing is made, and then only from
banks as a temporary measure to facilitate the
meeting of redemption requests (not for leverage)
which might otherwise require the untimely
disposition of portfolio investments or pending
settlement of securities transactions or for
extraordinary or emergency purposes.
(2) Underwrite securities issued by other persons
except to the extent that, in connection with the
disposition of its portfolio investments, it may be
deemed to be an underwriter under certain federal
securities laws.
(3) Purchase or retain real estate or interests in real
estate, although each Fund may purchase securities
which are secured by real estate and securities of
companies which invest in or deal in real estate.
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<PAGE>
(4) Make loans to other persons except by the purchase
of obligations in which such Fund may invest
consistent with its investment policies and by
entering into repurchase agreements, or by lending
its portfolio securities representing not more than
25% of its total assets.
(5) Issue any senior security (as that term is defined
in the 1940 Act), if such issuance is specifically
prohibited by the 1940 Act or the rules and
regulations promulgated thereunder. For the
purposes of this restriction, collateral
arrangements with respect to options, Futures
Contracts and Options on Futures Contracts and
collateral arrangements with respect to initial and
variation margins are not deemed to be the issuance
of a senior security. (There is no intention to
issue senior securities except as set forth in
paragraph 1 above.)
It is also a fundamental policy of each Fund that it may
purchase and sell futures contracts and related options.
In addition, the following is a description of operating
policies which the Trust has adopted on behalf of the Funds but
which are not fundamental and are subject to change without
shareholder approval.
Neither of the Funds will:
(a) Pledge, mortgage, hypothecate or otherwise encumber
an amount of its assets taken at current value in
excess of 15% of its total assets (taken at the
lower of cost or current value) and then only to
secure borrowings permitted by restriction (1)
above. For the purpose of this restriction, the
deposit of securities and other collateral
arrangements with respect to reverse repurchase
agreements, options, Futures Contracts, Forward
Contracts and options on foreign currencies, and
payments of initial and variation margin in
connection therewith are not considered pledges or
other encumbrances.
(b) Purchase securities on margin, except that each
Fund may obtain such short-term credits as may be
necessary for the clearance of purchases and sales
of securities, and except that each Fund may make
margin payments in connection with Futures
Contracts, Options on Futures Contracts, options,
Forward Contracts or options on foreign currencies.
33
<PAGE>
(c) Make short sales of securities or maintain a short
position for the account of such Fund unless at all
times when a short position is open it owns an
equal amount of such securities or unless by virtue
of its ownership of other securities it has at all
such times a right to obtain securities (without
payment of further consideration) equivalent in
kind and amount to the securities sold, provided
that if such right is conditional the sale is made
upon equivalent conditions and further provided
that no Fund will make such short sales with
respect to securities having a value in excess of
5% of its total assets.
(d) Write, purchase or sell any put or call option or
any combination thereof, provided that this shall
not prevent a Fund from writing, purchasing and
selling puts, calls or combinations thereof with
respect to securities, indexes of securities or
foreign currencies, and with respect to Futures
Contracts.
(e) Purchase voting securities of any issuer if such
purchase, at the time thereof, would cause more
than 10% of the outstanding voting securities of
such issuer to be held by such Fund; or purchase
securities of any issuer if such purchase at the
time thereof would cause more than 10% of any class
of securities of such issuer to be held by such
Fund. For this purpose all indebtedness of an
issuer shall be deemed a single class and all
preferred stock of an issuer shall be deemed a
single class.
(f) Invest in securities of any issuer if, to the
knowledge of the Trust, officers and Trustees of
the Trust and officers and directors of the Adviser
who beneficially own more than 0.5% of the shares
of securities of that issuer together own more than
5%.
(g) Purchase securities issued by any other registered
investment company or investment trust except
(A) by purchase in the open market where no
commission or profit to a sponsor or dealer results
from such purchase other than the customary
broker's commission, or (B) where no commission or
profit to a sponsor or dealer results from such
purchase, or (C) when such purchase, though not
made in the open market, is part of a plan of
merger or consolidation; provided, however, that a
Fund will not purchase such securities if such
purchase at the time thereof would cause more than
5% of its total assets (taken at market value) to
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<PAGE>
be invested in the securities of such issuers; and,
provided further, that a Fund's purchases of
securities issued by an open-end investment company
will be consistent with the provisions of the 1940
Act.
(h) Make investments for the purpose of exercising
control or management.
(i) Participate on a joint or joint and several basis
in any trading account in securities.
(j) Invest in interests in oil, gas, or other mineral
exploration or development programs, although each
Fund may purchase securities which are secured by
such interests and may purchase securities of
issuers which invest in or deal in oil, gas or
other mineral exploration or development programs.
(k) Purchase warrants, if, as a result, a Fund would
have more than 5% of its total assets invested in
warrants or more than 2% of its total assets
invested in warrants which are not listed on the
New York Stock Exchange or the American Stock
Exchange.
(l) Purchase commodities or commodity contracts,
provided that this shall not prevent a Fund from
entering into interest rate futures contracts,
securities index futures contracts, foreign
currency futures contracts, forward foreign
currency exchange contracts and options (including
options on any of the foregoing) to the extent such
action is consistent with such Fund's investment
objective and policies.
(m) Purchase additional securities in excess of 5% of
the value of its total assets until all of a Fund's
outstanding borrowings (as permitted and described
in Restriction No. 1 above) have been repaid.
Whenever any investment restriction states a maximum
percentage of a Fund's assets which may be invested in any
security or other asset, it is intended that such maximum
percentage limitation be determined immediately after and as a
result of such Fund's acquisition of such securities or other
assets. Accordingly, any later increase or decrease beyond the
specified limitation resulting from a change in value or net
asset value will not be considered a violation of such percentage
limitation.
35
<PAGE>
MANAGEMENT OF THE FUNDS
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 "Investment
Advisory Contract") to provide investment advice and, in general,
to conduct the management and investment program of the Trust
under the supervision of the Trust's Board of Trustees.
The Adviser is a leading international investment
manager supervising client accounts with assets as of December
31, 1994 of more than $121 billion (of which more than $36
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 December 31,
1994, 29 of the FORTUNE 100 Companies. As of that date, the
Adviser and its subsidiaries employed approximately 1,450
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 51
registered investment companies comprising 103 separate
investment portfolios managed by the Adviser currently have more
than one million shareholders.
Alliance Capital Management Corporation (ACMC*), 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
December 31, 1994, ACMC, Inc. and Equitable Capital Management
Corporation, each a wholly-owned direct or indirect subsidiary of
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 December 31, 1994, approximately 32% and 9% 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.
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
36
<PAGE>
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.
INVESTMENT ADVISORY CONTRACT AND EXPENSES
The Adviser serves as investment manager and adviser of
each of the Funds and furnishes continuously an investment
program for each Fund and manages, supervises and conducts the
affairs of each Fund. The Investment Advisory Contract also
provides that the Adviser will furnish or pay the expenses of the
Trust for office space, facilities and equipment, services of
executive and other personnel of the Trust and certain
administrative services. The Adviser is compensated for its
__________________________
* For purposes of this Statement of Additional Information,
ACMC refers to Alliance Capital Management Corporation, the
sole general partner of the Adviser, and to the predecessor
general partner of the Adviser of the same name.
37
<PAGE>
services to the Funds at an annual rate of .75% of each Fund's
average daily net assets. The Adviser has voluntarily undertaken
until further notice to waive its fees in respect of each Fund
and has agreed to bear certain expenses of the Class A, Class B
and Class C shares of each Fund to the extent that expenses
exceed an annual rate of 1.40% for Class A shares and 2.10% for
Class B and Class C shares. The management fees of the Funds are
higher than those paid by most mutual funds.
The Investment Advisory Contract became effective on
July 23, 1993. The Investment Advisory Contract replaced an
earlier agreement (the "First Investment Advisory Contract")
between the Trust and Equitable Capital Management Corporation
with respect to the Funds. The First Investment Advisory
Agreement terminated because of its technical assignment in
connection with the transfer of substantially all of the assets
comprising Equitable Capital's business to the Adviser and
certain of its subsidiaries in exchange for newly issued limited
partnership interests in the Adviser and the assumption by the
Adviser and such subsidiaries of certain liabilities of Equitable
Capital. Equitable Capital was compensated for its services as
investment manager of the Funds at the same rates as are
currently paid by the Funds to the Adviser.
In anticipation of the assignment of the First
Investment Advisory Contract, the Investment Advisory Contract
was approved by the vote of the Trust's Trustees, including the
Trustees who are not parties to the Investment Advisory Contract
or interested persons of any such party, at meetings called for
the purpose and held on February 16, 1993 and March 31, 1993. At
a meeting held on April 8, 1993, a majority of the outstanding
voting securities of the Funds approved the Investment Advisory
Contract.
Prior to July 22, 1992, Equitable served as investment
manager to the Growth Fund and the Strategic Balanced Fund and
Equitable Capital served as sub-adviser to such Funds. Equitable
was compensated for its services as investment manager to such
Funds at the same rates as are currently paid by such Funds to
the Adviser. Equitable Capital was compensated for its services
as sub-adviser to such Funds by Equitable at an annual rate equal
to .45% of the average daily net assets of such Funds.
During the period May 1, 1994 through July 31, 1994, the
Adviser earned $108,893 in management fees from the Strategic
Balanced Fund (an additional $81,067 in fees were waived).
During the period May 1, 1994 through October 31, 1994, the
Adviser earned $2,953,562 in management fees from the Growth
Fund. During the period July 23, 1993 through the fiscal year
ended April 30, 1994, the Adviser earned $1,425,457 in management
fees from the Growth Fund (an additional $56,371 in fees were
waived) and $280,948 from the Strategic Balanced Fund (an
additional $136,242 in fees were waived). During the period
May 1, 1993 to July 22, 1993, Equitable Capital earned $145,980
38
<PAGE>
in management fees from the Growth Fund (an additional $20,951 in
fees were waived) and $82,736 from the Strategic Balanced Fund
(an additional $21,623 in fees were waived). During the period
July 22, 1992 through the fiscal year ended April 30, 1993,
Equitable Capital earned $156,843 in management fees from the
Growth Fund (an additional $331,325 in fees were waived) and
$95,111 from the Strategic Balanced Fund (an additional $250,354
in fees were waived). During the period May 1, 1992 through
July 21, 1992, Equitable earned $50,103 in management fees from
the Growth Fund (an additional $80,760 in fees were waived) and
$44,788 from the Strategic Balanced Fund (an additional $67,021
in fees were waived). Equitable has informed the Trust that
Equitable Capital earned from Equitable during the period May 1,
1992 through July 21, 1992, $30,062 in sub-advisory fees with
respect to the Growth Fund (an additional $48,457 in fees were
waived) and $26,873 with respect to the Strategic Balanced Fund
(an additional $40,213 in fees were waived).
The Investment Advisory Contract provides that it will
continue in effect for two years from its date of execution and
thereafter from year to year if its continuance is approved at
least annually (i) by the Board of Trustees or by vote of a
majority of the outstanding voting securities of the relevant
Fund, and (ii) by vote of a majority of the Trustees who are not
interested persons of the Adviser cast in person at a meeting
called for the purpose of voting on such approval. Any amendment
to the Investment Advisory Contract must be approved by vote of a
majority of the outstanding voting securities of the relevant
Fund and by vote of a majority of the Trustees who are not such
interested persons, cast in person at a meeting called for the
purpose of voting on such approval. The Investment Advisory
Contract may be terminated without penalty by the Adviser, by
vote of the Trustees or by vote of a majority of the outstanding
voting securities of the relevant Fund upon sixty days' written
notice, and it terminates automatically in the event of its
assignment. The Adviser controls the word "Alliance" in the
names of the Trust and each Fund, and if Alliance should cease to
be the investment manager of any Fund, the Trust and such Fund
may be required to change their names and delete that word.
The Investment Advisory Contract provides that Alliance
shall not be subject to any liability in connection with the
performance of its services thereunder in the absence of willful
misfeasance, bad faith, gross negligence or reckless disregard of
its obligations and duties.
TRUSTEES AND OFFICERS
The Trustees and principal officers of the Trust, their
age as of the date of this Statement of Additional Information
and their primary occupations during the past five years are set
forth below.
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<PAGE>
TRUSTEES
*John D. Carifa, 49, is Chairman of the Board and
President, is the President, Chief Operating Officer, and a
Director of Alliance Capital Management Corporation, the general
partner of the Adviser. His address is 1345 Avenue of the
Americas, New York, New York 10105.
Alberta B. Arthurs, 62, is the Director for Arts and
Humanities for The Rockefeller Foundation. Her address is 1133
Avenue of the Americas, New York, New York 10036.
Ruth Block, 64, was formerly an Executive Vice President
and the Chief Insurance Officer of The Equitable Life Assurance
Society of the United States. She is a Director of Ecolab
Incorporated (specialty chemicals) and Amoco Corporation (oil and
gas). Her address is Box 4653, Stamford, Connecticut 06903.
Richard W. Couper, 72, is President Emeritus and Trustee
of The Woodrow Wilson Fellowship Foundation and President
Emeritus of the New York Public Library. His address is Box 345,
Clinton, New York, 13323-0345.
Brenton W. Harries, 67, is a Director of Enhance
Reinsurance Co. and was formerly the President and Chief
Executive of Global Electronic Markets Company. His address is
14 Point Road, Wilson Point, South Norwalk, Connecticut 06854.
Donald J. Robinson, 61, was formerly a partner at
Orrick, Herrington & Sutcliffe and is currently of counsel to
that firm. His address is 599 Lexington Avenue, 26th Floor, New
York, New York 10022.
The Trust pays no compensation to its officers or to the
Trustee listed above who is an interested person of the Trust.
The Trustees who are not interested persons of the Trust receive
an annual fee of $20,000 and a fee of $1,000 for each meeting of
the Board of Trustees attended and $500 for each committee
meeting of the Board of Trustees attended ($750 in the case of
the chairman of the committee). Trustees are also reimbursed for
any expenses incurred in attending meetings of the Board of
Trustees. The aggregate compensation expected to be paid to each
of the Trustees during the fiscal year ended October 31, 1995 for
the Growth Fund and the fiscal year ended July 31, 1995 for the
Strategic Balanced Fund and the aggregate compensation paid to
_____________________
* An "interested person" of the Trust, as defined by the 1940
Act.
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<PAGE>
each of the Trustees during calendar year 1994 by the Trust and
by all of the registered investment companies to which the
Adviser provides investment advisory services (collectively, the
"Alliance Fund Complex"), are set forth below. Neither the Trust
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.
Total Number of
Total Funds in the
Aggregate Compensation Alliance Fund
Compensation from the Complex, Including
Aggregate from the Alliance the Trust, as to
Compensation Strategic Fund Complex, which the Trustee
from the Balanced Including is a Director or
Name+ Growth Fund* Fund** the Trust*** Trustee
_____ ____________ ____________ _______________ __________________
John D. Carifa $-0- $-0- $-0- 42
Alberta B. Arthurs $2,600 $1,200 $26,500 1
Ruth Block $2,600 $1,200 $157,000 31
Richard W. Couper $2,600 $1,200 $27,500 1
Brenton W. Harries $2,600 $1,200 $25,000 1
Donald J. Robinson $2,600 $1,200 $27,000 1
__________________________
+ For calendar year 1994, the Trust paid Trustee fees (including amounts
deferred) as follows: Carifa, none; Arthurs, $26,500; Block, $27,500;
Cooper, $27,500; Harries, $25,000; and Robinson, $27,000. The total
amount of deferred compensation payable by the Trust to Ms. Arthurs is
$26,500.
* The information in this column represents amounts estimated to be paid for
the fiscal year ending October 31, 1995, assuming the individual attends
each regularly scheduled Trustee and committee meeting.
** The information in this column represents amounts estimated to be paid for
the fiscal year ending July 31, 1995, assuming the individual attends each
regularly scheduled Trustee and committee meeting.
*** The information in this column represents amounts actually paid during
calendar year 1994. There are 103 investment companies or portfolios
thereof in the Alliance Fund Complex.
41
<PAGE>
OFFICERS
John D. Carifa, President, see biography above.
Edmund P. Bergan, Jr., 44, Clerk, is a Senior Vice
President and General Counsel of Alliance Fund Distributors, Inc.
His address is 1345 Avenue of the Americas, New York, New York
10105.
Mark D. Gersten, 44, Treasurer and Chief Financial
Officer, is a Senior Vice President of Alliance Fund Services,
Inc. His address is 500 Plaza Drive, Secaucus, New Jersey 07094.
Patrick J. Farrell, 35, Controller and Chief Accounting
Officer, is a Vice President of Alliance Fund Services, Inc. His
address is 500 Plaza Drive, Secaucus, New Jersey 07094.
Franklin Kennedy, III, 52, Vice President, is, since
July 23, 1993, Senior Vice President of Alliance Capital
Management Corporation, the general partner of Alliance Capital
Management L.P. Mr. Kennedy was formerly employed by Equitable
Capital. His address is 1345 Avenue of the Americas, New York,
New York 10150.
Barbara J. Krumsiek, 42, Vice President - Marketing, is,
since July 23, 1993, a Senior Vice President of Alliance Fund
Distributors, Inc. She was formerly an Investment Officer of
Equitable, Senior Vice President of Equitable Capital and Vice
President of Equitable Variable Life Insurance Company. Her
address is 1345 Avenue of the Americas, New York, New York 10105.
Kathleen A. Corbet, 34, Vice President, is, since July
23, 1993, Senior Vice President of Alliance Capital Management
Corporation, General Partner of Alliance Capital Management L.P.
Ms. Corbet was formerly employed by Equitable Capital. Her
address is 1345 Avenue of the Americas, New York, NY 10105.
As of the date of this Statement of Additional
Information, the Trust believes that the officers and Trustees of
the Trust as a group owned beneficially less than 1.00% of the
outstanding shares of any Fund or of the Trust as a whole.
The Trust undertakes to provide assistance to
shareholders in communications concerning the removal of any
Trustee of the Trust in accordance with Section 16 of the 1940
Act.
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<PAGE>
PORTFOLIO TRANSACTIONS
Under the general supervision of the Board of Trustees,
the Adviser makes the Funds' portfolio decisions and determines
the broker to be used in each specific transaction with the
objective of negotiating a combination of the most favorable
commission and the best price obtainable on each transaction
(generally defined as best execution). When consistent with the
objective of obtaining best execution, brokerage may be directed
to persons or firms supplying investment information to the
Adviser. Neither the Funds nor the Adviser have entered into
agreements or understandings with any brokers regarding the
placement of securities transactions because of research services
they provide. To the extent that such persons or firms supply
investment information to the Adviser for use in rendering
investment advice to the Funds, such information may be supplied
at no cost to the Adviser and, therefore, may have the effect of
reducing the expenses of the Adviser in rendering advice to the
Funds. 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) of the Securities Exchange
Act of 1934, as amended, and is designed to augment the Adviser's
own internal research and investment strategy capabilities.
Research services furnished by brokers through which the Funds
effect securities transactions are used by the Adviser in
carrying out its investment management responsibilities with
respect to all its clients' accounts. There may be occasions
where the transaction cost charged by a broker may be greater
than that which another broker may charge if it is determined in
good faith that the amount of such transaction cost is reasonable
in relation to the value of brokerage and research services
provided by the executing broker.
The Funds may deal in some instances in securities which
are not listed on a national securities exchange but are traded
in the over-the-counter market. They may also purchase listed
securities through the third market. Where transactions are
executed in the over-the-counter market or third market, the
Funds will seek to deal with the primary market makers; but when
necessary in order to obtain best execution, they will utilize
the services of others.
Aggregate securities transactions for the Strategic
Balanced Fund during the period May 1, 1994 through July 31, 1994
were $23,515,672, and, in connection therewith, brokerage
commissions of $33,604 (100%) were allocated to persons or firms
supplying research information. Aggregate securities
43
<PAGE>
transactions for the Growth Fund during the period May 1, 1994
through October 31, 1994 were $729,539,979, and in connection
therewith, brokerage commissions of $909,509 (100%) were
allocated to persons or firms supplying research information.
For the period May 1, 1994 through July 31, 1994, the Strategic
Balanced Fund paid an aggregate of $33,604 in brokerage
commissions. For the period May 1, 1994 through October 31,
1994, the Growth Fund paid an aggregate of $909,509 in brokerage
commissions. For the fiscal year ended April 30, 1994, the
Growth Fund paid an aggregate of $1,235,459 in brokerage
commissions, and the Strategic Balanced Fund paid an aggregate of
$101,939 in brokerage commissions. For the fiscal year ended
April 30, 1993, the Growth Fund paid an aggregate of $195,924 in
brokerage commissions, and the Strategic Balanced Fund paid an
aggregate of $80,724 in brokerage commissions.
The Funds may from time to time place orders for the
purchase or sale of securities (including listed call options)
with Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ")
and with brokers which may have their transactions cleared or
settled, or both, by the Pershing Division of DLJ, for which DLJ
may receive a portion of the brokerage commission in accordance
with the requirements of Section 11(a) of the Securities Exchange
Act of 1934, as amended. In such instances, the placement of
orders with such brokers would be consistent with the Funds'
objective of obtaining the best execution and would not be
dependent upon the fact that DLJ is an affiliate of the Adviser.
With respect to orders placed with DLJ for execution on a
national securities exchange, 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 Trust), 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.
Pursuant to Section 11(a) of the Securities Exchange Act
of 1934, as amended, DLJ and its affiliates are restricted as to
the nature and extent of the brokerage services they may perform
for the Funds. Consistent with such restrictions, DLJ and its
affiliates may receive compensation relating to transactions in
portfolio securities of the Funds. The Adviser may effect
transactions in portfolio securities of the Funds through DLJ and
through unaffiliated brokers for which the Pershing Division of
DLJ provides clearance and settlement services and is compensated
for such services.
The brokerage transactions engaged in by the Funds with
DLJ and its affiliates during the fiscal years ended April 30,
1994 for both Funds, July 31, 1994 for the Strategic Balanced
Fund and October 31, 1994 for the Growth Fund are set forth
below:
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<PAGE>
% of Fund's % of Fund's
Amount of Aggregate Aggregate Dollar
Fiscal Year Brokerage Brokerage Amount of
Ended Fund Commissions Commissions Transactions
___________ ____ ___________ ___________ ________________
October 31, 1994 Growth Fund None None None
July 31, 1994 Strategic Balanced None None None
April 30, 1994 Growth Fund $1,500 .12% .06%
Neither Fund engaged in brokerage transactions during
fiscal 1993 with DLJ or its affiliates.
EXPENSES OF THE FUNDS
In addition to the payments to the Adviser under the
Investment Advisory Contract described above, the Trust pays
certain other costs including (a) brokerage and commission
expenses, (b) Federal, state and local taxes, including issue and
transfer taxes incurred by or levied on a Fund, (c) interest
charges on borrowing, (d) fees and expenses of registering the
shares of the Funds under the appropriate Federal securities laws
and of qualifying shares of the Funds under applicable state
securities laws including expenses attendant upon renewing and
increasing such registrations and qualifications, (e) expenses of
printing and distributing the Funds' prospectuses and other
reports to shareholders, (f) costs of proxy solicitations,
(g) transfer agency fees described below, (h) charges and
expenses of the Trust's custodian, (i) compensation of the
Trust's officers, Trustees and employees who do not devote any
part of their time to the affairs of the Adviser or its
affiliates, (j) costs of stationery and supplies, and (k) such
promotional expenses as may be contemplated by the Distribution
Services Agreement described below.
DISTRIBUTION ARRANGEMENTS
Rule 12b-1 adopted by the SEC under the 1940 Act permits
an investment company to directly or indirectly pay expenses
associated with the distribution of its shares in accordance with
a duly adopted and approved plan. The Trust has adopted a plan
for each class of shares of the Funds pursuant to Rule 12b-1
(each a "Plan" and collectively the "Plans"). Pursuant to the
Plans, each Fund pays Alliance Fund Distributors, Inc. (the
"Principal Underwriter") a Rule 12b-1 distribution services fee
which may not exceed an annual rate of .50% of a Fund's aggregate
average daily net assets attributable to the Class A shares,
1.00% of a Fund's aggregate average daily net assets attributable
45
<PAGE>
to the Class B shares and 1.00% of a Fund's aggregate average
daily net assets attributable to the Class C shares to compensate
the Principal Underwriter for distribution expenses. The
Trustees currently limit payments under the Class A Plan to .30%
of a Fund's aggregate average daily net assets attributable to
the Class A shares. The Plans provide that a portion of the
distribution services fee in an amount not to exceed .25% of the
aggregate average daily net assets of a Fund attributable to each
of the Class A shares, Class B shares and Class C shares
constitutes a service fee that the Principal Underwriter will use
for personal service and/or the maintenance of shareholder
accounts. The Plans also provide that the Adviser may use its
own resources, which may include management fees received by the
Adviser from the Trust or other investment companies which it
manages and the Adviser's past profits, to finance the
distribution of the Funds' shares.
Each Plan may be terminated with respect to the class of
shares of any Fund to which the Plan relates by vote of a
majority of the Trustees who are not "interested persons" of the
Trust and who have no direct or indirect financial interest in
the operation of the Plans or in any agreement related to the
Plans (the "Qualified Trustees"), or by vote of a majority of the
outstanding voting securities of that class. Each Plan may be
amended by vote of the Trustees, including a majority of the
Qualified Trustees, cast in person at a meeting called for that
purpose. Any change in a Plan that would materially increase the
distribution costs to the class of shares of any Fund to which
the Plan relates requires approval by the affected class of
shareholders of that Fund. The Trustees review quarterly a
written report of such distribution costs and the purposes for
which such costs have been incurred with respect to each Fund's
Class A, Class B and Class C shares. For so long as the Plans
are in effect, selection and nomination of those Trustees who are
not interested persons of the Trust shall be committed to the
discretion of such disinterested persons.
The Plans may be terminated with respect to any Fund or
class of shares thereof at any time on 60 days' written notice
without payment of any penalty by the Principal Underwriter or by
vote of a majority of the outstanding voting securities of that
Fund or that class (as appropriate) or by vote of a majority of
the Qualified Trustees.
The Plans will continue in effect with respect to each
Fund and each class of shares thereof for successive one-year
periods, provided that each such continuance is specifically
approved (i) by the vote of a majority of the Qualified Trustees
and (ii) by the vote of a majority of the entire Board of
Trustees cast in person at a meeting called for that purpose.
For services rendered by the Principal Underwriter in
connection with the distribution of Class A shares pursuant to
the Plan applicable to such shares, the Principal Underwriter
46
<PAGE>
received $6,332 with respect to the Class A shares of the
Strategic Balanced Fund and $27,148 with respect to the Class A
shares of Growth Fund for the periods May 1, 1994 through
July 31, 1994 and May 1 through October 31, 1994, respectively.
For services rendered by the Principal Underwriter in
connection with the distribution of Class B shares pursuant to
the Plan applicable to such shares, the Principal Underwriter
received $29,204 with respect to the Class B shares of the
Strategic Balanced Fund and $184,574 with respect to the Class B
Shares of the Growth Fund for the periods May 1, 1994 through
July 31, 1994 and May 1 through October 31, 1994, respectively.
For services rendered by the Principal Underwriter in
connection with the distribution of Class C shares pursuant to
the Plan applicable to such shares, the Principal Underwriter
received $7,862 with respect to the Class C shares of the
Strategic Balanced Fund and $30,222 with respect to the Class C
shares of the Growth Fund for the periods May 1, 1994 through
July 31, 1994 and May 1 through October 31, 1994, respectively.
The Principal Underwriter has informed the Trust that
expenses incurred by it and costs allocated to it in connection
with activities primarily intended to result in the sale of
Class A, Class B, and Class C shares, respectively, were as
follows for the periods indicated:
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<PAGE>
STRATEGIC BALANCED FUND
Amount of Expense and Allocated Cost
Class A Shares Class B Shares Class C Shares
(For the Fiscal (For the Fiscal (For the Fiscal
year ended year ended year ended
Category of Expense July 31, 1994) July 31, 1994) July 31, 1994)
___________________ _______________ _______________ ________________
Advertising/Marketing $2,672 $12,600 $3,687
Printing and Mailing of $1,272 $6,729 $1,922
Prospectuses and Semi-Annual
and Annual Reports to Other
than Current Shareholders
Compensation to Underwriters $6,332 $29,204 $7,862
Compensation to Dealers $6,079 $115,470 $10,489
Compensation to Sales $926 $5,155 $1,379
Personnel
Interest, Carrying or Other -0- -0- -0-
Financing Charges
Other (includes personnel
costs of those home office
employees involved in the
distribution effort and the
travel-related expenses
incurred by the marketing
personnel conducting
seminars) $9,647 $34,219 $10,129
______ _______ _______
$26,928 $203,377 $35,468
_______ ________ _______
_______ ________ _______
48
<PAGE>
GROWTH FUND
Amount of Expense and Allocated Cost
Class A Shares Class B Shares Class C Shares
(For the Fiscal (For the Fiscal (For the Fiscal
year ended year ended year ended
October 31, October 31, October 31,
Category of Expense 1994) 1994) 1994)
___________________ _______________ _______________ ________________
Advertising/Marketing $12,064 $80,938 $13,305
Printing and Mailing of
Prospectuses and Semi-Annual
and Annual Reports to Other
than Current Shareholders $20,866 $41,659 $21,064
Compensation to Underwriters $27,148 $184,574 $30,222
Compensation to Dealers $158,472 $13,344,410 $437,247
Compensation to Sales
Personnel $58,239 $553,547 $94,116
Interest, Carrying or Other
Financing Charges -0- -0- -0-
Other (includes personnel
costs of those home office
employees involved in the
distribution effort and the
travel-related expenses
incurred by the marketing
personnel conducting
seminars) $120,024 $239,504 $62,778
________ ________ _______
$396,813 $14,444,632 $658,732
________ ___________ ________
________ ___________ ________
CUSTODIAL ARRANGEMENTS
State Street Bank and Trust Company, 225 Franklin
Street, Boston, MA, 02110 ("State Street Bank") is the Trust's
custodian.
49
<PAGE>
TRANSFER AGENCY ARRANGEMENTS
Alliance Fund Services, Inc., an indirect wholly-owned
subsidiary of the Adviser, receives a transfer agency fee per
account holder of the Funds, plus reimbursement for out-of-pocket
expenses.
PURCHASE OF SHARES
The following information supplements that set forth in
the Funds' Prospectus under the heading "Purchase and Sale of
Shares --How To Buy Shares."
GENERAL
Shares of the Funds 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 Funds 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 Funds offer 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 Funds'
shares may receive differing compensation for selling Class A,
Class B or Class C shares.
Investors may purchase shares of the Funds 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 Funds may refuse any
order for the purchase of shares. The Funds reserve the right to
suspend the sale of their shares to the public in response to
conditions in the securities markets or for other reasons.
The public offering price of shares of the Funds is
their net asset value, plus, in the case of most purchases of
50
<PAGE>
Class A shares, a sales charge which will vary depending on the
amount of the purchase, as shown in the table in the Prospectus.
On each Fund business day on which a purchase or redemption order
is received by a Fund and trading in the types of securities in
which the Fund invests might materially affect the value of Fund
shares, the per share net asset value is computed in accordance
with the Trust's Agreement and Declaration of Trust and By-Laws
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 total assets attributable to a class,
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 a 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 Trustees believe would accurately reflect fair market value.
The Funds will accept unconditional orders for their
shares to be executed at the public offering price equal to their
net asset value next determined (plus applicable Class A sales
charges). 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 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.
51
<PAGE>
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, share certificates representing shares of
the Fund are not issued except upon written request to the Fund
by the shareholder or his or her authorized selected dealer or
agent. This facilitates later redemption and relieves the
shareholder of the responsibility for and inconvenience of lost
or stolen certificates. No certificates are issued for
fractional shares, although such shares remain in the
shareholder's account on the books of the Fund.
In addition to the discount or commission 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, an affiliate of the
Principal Underwriter, in connection with the sale of shares of
the Funds. Such additional amounts may be utilized, in whole or
in part, to provide additional compensation to registered
representatives who sell shares of the Funds. On some occasions,
such cash or other incentives will be conditioned upon the sale
of a specified minimum dollar amount of the shares of a Fund
and/or other Alliance Mutual Funds, as defined below, during a
specified period of time. On some occasions, such cash or other
incentives may take the form of payment for attendance at
seminars, meals, sporting events or theater performances, or
payment incurred in connection with travel, lodging and
entertainment 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
Each 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
52
<PAGE>
investors choosing the asset-based sales charge alternative. The
three classes of shares each represent an interest in the same
portfolio of investments of a 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,
higher transfer agency costs, (iii) each class has exclusive
voting rights with respect to the Rule 12b-1 Plan pursuant to
which its distribution services fee is paid and other matters for
which separate class voting is appropriate under applicable law,
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 a 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
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.
53
<PAGE>
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 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
period during which Class B shares are subject to a contingent
deferred sales charge may find it more advantageous to purchase
Class C shares.
The Trustees of the Trust 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 Trustees of
the Trust, 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 in the
Prospectus.
With respect to purchases of $1,000,000 or more, Class A
shares redeemed within one year of purchase will be subject to a
contingent deferred sales charge equal to 1% of the lesser of the
cost of the shares being redeemed or their net asset value at the
time of redemption. Accordingly, no sales charge will be imposed
on increases in net asset value above the initial purchase price.
In addition, no charge will be assessed on shares derived from
reinvestment of dividends or capital gains distributions. The
contingent deferred sales charge on Class A shares will be waived
on certain redemptions, 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 to defray
the expenses of the Principal Underwriter related to providing
54
<PAGE>
distribution-related services to the Funds in connection with
sales of Class A shares, such as the payment of compensation to
selected dealers and agents for selling Class A Shares. With
respect to purchases of $5,000,000 or more made through selected
dealers or agents, the Adviser may, pursuant to the Rule 12b-1
Plans 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.
Shares issued pursuant to the automatic reinvestment of
income dividends or capital gains distributions are not subject
to any sales charges. The Funds receive the entire net asset
value of their Class A shares sold to investors. The Principal
Underwriter's commission is the sales charge shown in the
Prospectus 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 in the Prospectus. The Principal
Underwriter may, however, 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 a 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 Growth Fund aggregating less
than $100,000 subject to the schedule of sales charges set forth
in the Prospectus at a price based upon the net asset value of
Class A shares of the Fund on January 31, 1995.
Net Asset Value per Class A
Share at January 31, 1995 $15.71
______
Per Share Sales Charge - 4.25%
of offering price (4.46% of
net asset value per share) $ .70
______
Class A Per Share Offering Price
to the Public $16.41
______
______
During the Strategic Balanced Fund's fiscal year ended
July 31, 1994, the aggregate amount of underwriting commissions
payable with respect to Class A shares of the Fund was $38,541.
Of that amount, the Principal Underwriter received the amount of
$1,207, representing that portion of the sales charges paid on
Class A shares of the Fund sold during the year which was not
55
<PAGE>
reallowed to selected dealers (and was, accordingly, retained by
the Principal Underwriter). During the Strategic Balanced Fund's
fiscal year ended July 31, 1994, the Principal Underwriter
received $21,732 in contingent deferred sales charges. During
the Strategic Balanced Fund's fiscal year ended April 30, 1994,
the aggregate amount of underwriting commissions payable with
respect to Class A shares of the Fund was $149,378. During the
period August 2, 1993 through April 30, 1994, the Principal
Underwriter received $53,292 in contingent deferred sales
charges, and during the period May 1, 1993 through August 1, 1993
Equico received $7,146 in contingent deferred sales charges with
respect to the Strategic Balanced Fund. During the Strategic
Balanced Fund's fiscal year ended April 30, 1993, the aggregate
amount of underwriting commissions payable with respect to
Class A shares of the Fund was $72,655. During the Strategic
Balanced Fund's fiscal year ended April 30, 1993, Equico received
$66,029 in contingent deferred sales charges.
During the Growth Fund's fiscal year ended October 31,
1994, the aggregate amount of underwriting commissions payable
with respect to Class A shares of the Fund was $3,061,478. Of
that amount, the Principal Underwriter received the amount of
$89,423, representing that portion of the sales charges paid on
Class A shares of the Fund sold during the year which was not
reallowed to selected dealers (and was, accordingly, retained by
the Principal Underwriter). During the Growth Fund's fiscal year
ended October 31, 1994, the Principal Underwriter received
$410,313 in contingent deferred sales charges. During the Growth
Fund's fiscal year ended April 30, 1994, the aggregate amount of
underwriting commissions payable with respect to Class A shares
of the Fund was $3,947,074. During the period August 2, 1993
through April 30, 1994, the Principal Underwriter received
$199,405 in contingent deferred sales charges, and during the
period May 1, 1993 through August 1, 1993 Equico received $67,835
in contingent deferred sales charges with respect to the Growth
Fund. During the Growth Fund's fiscal year ended April 30, 1993,
the aggregate amount of underwriting commissions payable with
respect to Class A shares of the Fund was $253,581. During the
Growth Fund's fiscal year ended April 30, 1993, Equico received
$102,633 in contingent deferred sales charges.
An investor choosing the initial sales charge
alternative may under certain circumstances be entitled to pay
reduced sales charges or no initial sales charge (but the shares
may nonetheless be subject in most cases to a contingent deferred
sales charge.) The circumstances under which such investors may
pay reduced sales charges are described below.
COMBINED PURCHASE PRIVILEGE. Certain persons may
qualify for the sales charge reductions indicated in the schedule
of such charges shown in the Prospectus by combining purchases of
shares of a 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
56
<PAGE>
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 a 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 that term is defined
in the 1940 Act, but does not include purchases by any such
company which has not been in existence for at least six months
or which has no purpose other than the purchase of shares of a
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
The Alliance Fund, Inc.
Alliance All-Asia Investment Fund, Inc.
Alliance Balanced Shares, 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 International Fund
Alliance Mortgage Securities Income Fund, Inc.
Alliance Mortgage Strategy 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
57
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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 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 a 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 sales charge for the $100,000 purchase
would be at the rate applicable to a single $300,000 purchase of
shares of the Fund.
To qualify for the Combined Purchase Privilege or to
obtain the Cumulative Quantity Discount on a purchase through a
selected dealer or agent, the investor or selected dealer or
agent must provide the Principal Underwriter with sufficient
information to verify that each purchase qualifies for the
privilege or discount.
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STATEMENT OF INTENTION. Class A investors may also
obtain the reduced initial sales charges shown in the Prospectus
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 a 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 a 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 a 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 initial
sales charge on the total amount being invested, i.e., 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
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 a 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
a Fund should complete the appropriate portion of the
Subscription Application found in the Prospectus while current
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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 a 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 a Fund will be that normally
applicable, under the schedule of the initial sales charges set
forth in the Prospectus, 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 a 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 30 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 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 a 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 a Fund at
the address shown on the cover of this Statement of Additional
Information.
SALES AT NET ASSET VALUE. The Funds may sell their
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 Adviser or its affiliates; (ii) officers
and present or former Trustees of the Trust; present or former
directors and trustees of other investment companies managed by
the Adviser; present or retired full-time employees of the
Adviser; officers, directors and present or retired full-time
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employees 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 relevant
Fund); (iii) certain employee benefit plans for employees of the
Adviser, the Principal Underwriter, Alliance Fund Services, Inc.
and their affiliates; and (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 service in the nature of
investment advisory or administrative services.
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 Funds 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 Funds 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 Funds to sell 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.
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To illustrate, assume that 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
charge because of dividend reinvestment. With respect to the
remaining 40 Class B shares, the charge is applied only to the
original cost of $10 per share and not to the increase in net
asset value of $2 per share. Therefore, $400 of the $600
redemption proceeds will be charged at a rate of 3.0% (the
applicable rate in the second year after purchase).
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.
Year Since Purchase Contingent Deferred Sales Charge for the
Subject to Charge Funds as a % of Dollar Amount
___________________ _________________________________________
Shares purchased
Shares on or after Shares
purchased August 2, 1993, purchased
before but before on or after
August 2, 1993 November 19, 1993 November 19,1993
______________ _________________ ________________
First 5.00% 5.50% 4.00%
Second 4.00% 4.50% 3.00%
Third 3.00% 3.50% 2.00%
Fourth 1.00% 2.50 1.00%
Fifth None 1.50 None
Sixth None None None
In determining the contingent deferred sales charge
applicable to a redemption, it will be assumed 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 four years and
third of Class A shares that are subject to a contingent deferred
sales charge 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
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of 1986, as amended (the "Code"), of a shareholder and (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.
CONVERSION FEATURE. Class B shares purchased on or
after August 2, 1993 and held for eight years after the end of
the calendar month in which the shareholder's purchase order was
accepted will automatically convert to Class A shares and such
shares will no longer be subject to a higher distribution
services fee. Class B shares purchased before August 2, 1993 and
held for six years after the calendar month in which the
shareholder's purchase order was accepted will automatically
convert to Class A Shares at the end of this period. Such
conversions 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. See "Shareholder
Services--Exchange Privilege."
For purposes of conversion to Class A shares, 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 a 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.
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
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either at the time of purchase or upon redemption. Class C
shares are sold without an initial sales charge so that a 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 a 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 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 Funds' Prospectus under the heading "Purchase and Sale of
Shares--How to Sell Shares."
REDEMPTION
Subject only to the limitations described below, the
Funds will redeem the shares tendered to them, 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 or Class B
shares, there is no redemption charge. Payment of the redemption
price will be made within seven days after a 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 Exchange is closed (other than customary weekend
and holiday closings) or during which the SEC determines that
trading thereon is restricted, or for any period during which an
emergency (as determined by the SEC) exists as a result of which
disposal by a Fund of securities owned by it is not reasonably
practicable or as a result of which it is not reasonably
practicable for a 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 a Fund.
Payment of the redemption price may be made either in
cash or in portfolio securities (taken at their value used in
determining the redemption price), or partly in cash and partly
in portfolio securities. However, payments will be made wholly
in cash unless economic conditions exist which would make such a
practice detrimental to the best interests of the Funds. The
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Trust has filed a formal election with the SEC pursuant to which
the Trust will only effect a redemption in portfolio securities
where the particular shareholder of record is redeeming more than
$250,000 or 1% of a Fund's total net assets, whichever is less,
during any 90-day period. In the opinion of the Trust's
management, however, the amount of a redemption request would
have to be significantly greater than $250,000 or 1% of total net
assets before a redemption wholly or partly in portfolio
securities would be made. If payment for shares redeemed is made
wholly or partly in portfolio securities, brokerage costs may be
incurred by the investor in converting the securities to 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 a Fund's
portfolio securities at the time of such redemption or
repurchase. Redemption proceeds on Class A shares and Class B
shares will reflect the deduction of the contingent deferred
sales charge, if any. Payment (either in cash or in portfolio
securities) 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 a Fund for which no share
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 share 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 $25,000. Proceeds of such redemptions are
remitted by check to the shareholder's address of record.
Telephone redemption by check is not available with respect to
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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 Funds reserve the
right to suspend or terminate their telephone redemption service
at any time without notice. Neither the Funds nor the Adviser,
the Principal Underwriter or Alliance Fund Services, Inc. will be
responsible for the authenticity of telephone requests for
redemptions that a Fund reasonably believes to be genuine.
Alliance Fund Services, Inc. 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 Alliance Fund
Services, Inc. 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 Funds represented by share
certificates, the investor should forward the appropriate share
certificate or certificates, endorsed in blank or with blank
stock powers attached, to the relevant 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 share 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 share certificate or certificates or, where
tender is made by mail, separately mailed to the relevant Fund.
The signature or signatures on the assignment form must be
guaranteed in the manner described above.
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REPURCHASE
The Funds 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 a Fund to the Principal Underwriter either directly or
through a selected dealer or agent. Neither the Funds 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 Funds 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 Funds as described
above is a voluntary service of the Funds and the Funds may
suspend or terminate this practice at any time.
GENERAL
The Funds reserve 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 Funds
recently purchased by check, redemption proceeds will not be made
available until the relevant Fund is reasonably assured that the
check has cleared, normally up to 15 calendar days following the
purchase date.
SHAREHOLDER SERVICES
The following information supplements that set forth in
the Funds' 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 Funds.
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AUTOMATIC INVESTMENT PROGRAM
Investors may purchase shares of the Funds 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 can exchange their Class A shares
for Class A shares of any other Alliance Mutual Fund that offers
Class A shares without the payment of any sales or service
charges. Class A shareholders may also exchange their Class A
shares for shares of any of the ten Alliance Cash Management
Funds: Alliance Capital Reserves, Alliance Money Reserves,
Alliance Government Reserves, Alliance Treasury Reserves and the
General, California, Connecticut, New Jersey and New York
Portfolios of Alliance Municipal Trust, all of which are money
market funds, and Alliance World Income Trust, Inc., a short-term
global income fund. 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
Information or by telephone at (800) 227-4618 or, in Illinois,
(800) 227-4170.
Class B shareholders of the Funds 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
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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.
Class C shareholders of the Funds 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 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 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 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 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 share certificates. Shares acquired pursuant
to a telephone request for exchange will be held under the same
account registration as the shares redeemed through such
exchange.
Eligible shareholders desiring to make an exchange
should telephone Alliance Fund Services, Inc. with their account
number and other details of the exchange at (800) 221-5672
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.
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A shareholder may elect to initiate a monthly "Auto
Exchange" whereby a specified dollar amount's worth of his or her
Fund shares (minimum $25) is automatically exchanged for shares
of another Alliance Mutual Fund. Auto Exchange transactions
normally occur on the 12th day of each month, or the Fund
business day prior thereto.
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 a Fund reasonably believes to be genuine.
Alliance Fund Services, Inc. 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 Alliance Fund
Services, Inc. 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 modify, restrict or
terminate the exchange privilege.
RETIREMENT PLANS
The Funds 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 Funds have available forms of
such plans pursuant to which investments can be made in a 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 a 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
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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 or Class 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.
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 Funds, 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 a 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
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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.
SYSTEMATIC WITHDRAWAL PLAN
Any shareholder who owns or purchases shares of a 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 a Fund automatically reinvested in additional shares of that
Fund.
Shares of a 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. 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 relevant 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 a
Fund's involuntary redemption provisions. See "How to Sell
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 shareholder 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.
For Class A shareholders, Class B shareholders that
purchased their Class B shares under a retirement plan and
Class C shareholders, payments under a systematic withdrawal plan
maybe made by check or electronically via the Automated Clearing
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House ("ACH") network. Investors wishing to establish a
systematic withdrawal plan in conjunction with their initial
investment in shares of a Fund should complete the appropriate
portion of the Subscription Application found in the Prospectus,
while current Fund shareholders desiring to do so can obtain an
application form by contacting Alliance Fund Services, Inc. at
the address or the "Literature" telephone number shown on the
cover of this Statement of Additional Information.
STATEMENTS AND REPORTS
Each shareholder 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 Trust's
independent auditors, 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 of a share of each class is
determined by dividing the value, as of the close of regular
trading on the New York Stock Exchange (currently 4:00 p.m.), of
the net assets of the Fund represented by that class (i.e., the
value of the assets of the Fund allocated to that class less the
liabilities of the Fund allocated to that class, including
expenses payable or accrued) by the total number of shares of
such class then outstanding at such closing.
For purposes of this computation, readily marketable
portfolio securities, including open short positions, listed on
the Exchange are valued at the last sale price reflected on the
consolidated tape at the close of the Exchange on the business
day as of which such value is being determined. If there has
been no sale on such day, then the security is valued at the mean
of the closing bid and asked prices on such day. If no bid and
asked prices are quoted on such day, then the security is valued
by such method as the Board of Trustees of the Trust shall
determine in good faith to reflect its fair market value.
Securities not listed on the Exchange but listed on other
national securities exchanges or admitted to trading on the
National Association of Securities Dealers Automatic Quotations,
Inc. ("NASDAQ") National List ("List") are valued in like manner.
Portfolio securities traded on more than one national
securities exchange are valued at the last sale price on the
business day as of which such value is being determined as
reflected on the tape at the close of the exchange representing
the principal market for such securities. Securities traded only
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in the over-the-counter market, excluding those admitted to
trading on the List, are valued at the mean of the current bid
and asked prices therefor as reported by NASDAQ or, in the case
of securities not quoted by NASDAQ, the National Quotation Bureau
or such other comparable sources as the Board of Trustees of the
Trust deems appropriate to reflect the fair market value thereof.
Call options written or purchased by a Fund are valued at the
last sale price and put options purchased by a Fund are valued at
the last sale price. Readily marketable fixed-income securities
may be valued on the basis of prices provided by a pricing
service when such prices are believed by the Adviser to reflect
the fair market value of such securities. The prices provided by
a pricing service take into account institutional size trading in
similar groups of securities and any developments related to
specific securities. U.S. Government Securities and other debt
instruments having 60 days or less remaining until maturity are
stated at amortized cost if their original maturity was 60 days
or less, or by amortizing their fair value as of the 61st day
prior to maturity if their original term to maturity exceeded 60
days (unless in either case the Board of Trustees of the Trust
determines that this method does not represent fair value). All
other assets, including restricted securities of a Fund, are
valued in such manner as the Board of Trustees of the Trust in
good faith deems appropriate to reflect their fair market value.
The Trustees may suspend the determination of a Fund's
net asset value (and the offering and sales of shares), subject
to the rules of the SEC and other governmental rules and
regulations, at a time when: (1) the Exchange is closed, other
than customary weekend and holiday closings, (2) an emergency
exists as a result of which it is not reasonably practicable for
a Fund to dispose of securities owned by it or to determine
fairly the value of its net assets, or (3) for the protection of
shareholders, the SEC by order permits a suspension of the right
of redemption or a postponement of the date of payment on
redemption.
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.
DIVIDENDS, DISTRIBUTIONS AND TAXES
Each Fund intends to qualify for tax treatment as a
"regulated investment company" under the Internal Revenue Code
for each taxable year. In order to qualify as a regulated
investment company, each Fund must, among other things,
(1) derive at least 90% of its gross income from dividends,
interest, payments with respect to securities loans, and gains
from the sale or other disposition of stock or securities,
foreign currencies or other income (including gains from options,
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futures or forward contracts) derived with respect to its
business of investing in stock, securities or currencies,
(2) derive less than 30% of its gross income from the sale or
other disposition of stock, securities, options, futures, forward
contracts, and certain foreign currencies (or options, futures,
or forward contracts on foreign currencies held for less than
three months), and (3) diversify its holdings so that at the end
of each quarter of its taxable year (i) at least 50% of the
market value of the Fund's assets is represented by cash or cash
items, U.S. Government Securities, securities of other regulated
investment companies, and other securities limited, in respect of
any one issuer, to an amount not greater than 5% of the value 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 U.S. Government Securities or the securities of other
regulated investment companies) or of two or more issuers that
the Fund controls and that are engaged in the same, similar, or
related trades or businesses. These requirements may restrict
the degree to which the Fund may engage in short-term trading and
limit the range of the Fund's investments. If a Fund qualifies
as a regulated investment company, it will not be subject to
federal income tax on the part of its income distributed to
shareholders, provided the Fund distributes during its taxable
year at least (a) 90% of its taxable net investment income
(generally, dividends, interest, certain other income, and the
excess, if any, of net short-term capital gain over net long-term
loss), and (b) 90% of the excess of (i) its tax-exempt interest
income less (ii) certain deductions attributable to that income.
Each Fund intends to make sufficient distributions to
shareholders to meet this requirement. Investors should consult
their own counsel for a complete understanding of the
requirements the Funds must meet to qualify for such treatment.
The information set forth in the Prospectus and the following
discussion relates solely to Federal income taxes on dividends
and distributions by a Fund and assumes that each Fund qualifies
as a regulated investment company. Investors should consult
their own counsel for further details and for the application of
state and local tax laws to his or her particular situation.
Dividends out of net ordinary income and distributions
of net short-term capital gains are taxable to shareholders as
ordinary income. The dividends-received deduction for
corporations should also be applicable to a Fund's dividends of
net investment income. The amount of such dividends and
distributions eligible for the dividends-received deduction is
limited to the amount of dividends from domestic corporations
received by a Fund during the fiscal year. Furthermore,
provisions of the tax law disallow the dividends-received
deduction to the extent a corporation's investment in shares of a
Fund is financed with indebtedness.
The excess of net long-term capital gains over the net
short-term capital losses realized and distributed by a Fund to
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its shareholders as capital gains distributions will not be
taxable to the Fund but will be taxable to the shareholders as
long-term capital gains, irrespective of the length of time a
shareholder may have held his Fund shares. Capital gains
distributions are not eligible for the dividends-received
deduction referred to above. Any dividend or distribution
received by a shareholder on shares of the Fund shortly after the
purchase of such shares by him or her will have the effect of
reducing the net asset value of such shares by the amount of such
dividend or distribution. A loss on the sale of shares held for
less than six months will be treated as a long-term capital loss
for Federal income tax purposes to the extent of any capital gain
distribution made with respect to such shares.
Dividends and distributions are taxable in the manner
described above regardless of whether they are paid to the
shareholder in cash or are reinvested in additional shares of a
Fund.
For Federal income tax purposes, when equity call
options which a Fund has written expire unexercised, the premiums
received by the Fund give rise to short-term capital gains at the
time of expiration. When a call written by a Fund is exercised,
the selling price or purchase price of stock is increased by the
amount of the premium, and the gain or loss on the sale of stock
becomes long-term or short-term depending on the holding period
of the stock. There may be short-term gains or losses associated
with closing purchase transactions.
Each Fund is required to withhold and remit to the U.S.
Treasury 31% of all dividend income paid to any shareholder
account for which an incorrect or no taxpayer identification
number has been provided or where the Fund is notified that the
shareholder has under-reported income in the past (or the
shareholder fails to certify that he or she is not subject to
such withholding). In addition, the Fund will be required to
withhold and remit to the U.S. Treasury 31% of the amount of the
proceeds of any redemption of shares of a shareholder account for
which an incorrect or no taxpayer identification number has been
provided.
The foregoing discussion relates only to U.S. Federal
income tax law as it affects U.S. shareholders. The effects of
Federal income tax law on non-U.S. shareholders may be
substantially different. Foreign investors should consult their
counsel for further information as to the U.S. tax consequences
of receipt of income from a Fund.
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GENERAL INFORMATION
DESCRIPTION OF THE TRUST
The Trust is organized as a Massachusetts business trust
under the laws of The Commonwealth of Massachusetts by an
Agreement and Declaration of Trust ("Declaration of Trust") dated
March 26, 1987, a copy of which is on file with the Secretary of
State of The Commonwealth of Massachusetts. The Trust is a
"series" company as described in Rule 18f-2 under the 1940 Act,
having five separate portfolios, each of which is represented by
a separate series of shares. In addition to the Funds, the other
portfolios of the Trust are Alliance Short-Term U.S. Government
Fund, Alliance Conservative Investors Fund and Alliance Growth
Investors Fund.
The Declaration of Trust permits the Trustees to issue
an unlimited number of full and fractional shares of each series
and of each class of shares thereof. The shares of each Fund and
each class thereof do not have any preemptive rights. Upon
termination of any Fund or any class thereof, whether pursuant to
liquidation of the Trust or otherwise, shareholders of that Fund
or that class are entitled to share pro rata in the net assets of
that Fund or that class then available for distribution to such
shareholders.
The assets received by the Trust for the issue or sale
of the Class A, Class B and Class C shares of each Fund and all
income, earnings, profits, losses and proceeds therefrom, subject
only to the rights of creditors, are allocated to, and constitute
the underlying assets of, the appropriate class of that Fund. The
underlying assets of each Fund and each class of shares thereof
are segregated and are charged with the expenses with respect to
that Fund and that class and with a share of the general expenses
of the Trust. While the expenses of the Trust are allocated to
the separate books of account of each Fund and each class of
shares thereof, certain expenses may be legally chargeable
against the assets of all Funds or a particular class of shares
thereof.
The Declaration of Trust provides for the perpetual
existence of the Trust. The Trust or any Fund, however, may be
terminated at any time by vote of at least a majority of the
outstanding shares of each Fund affected. The Declaration of
Trust further provides that the Trustees may also terminate the
Trust upon written notice to the shareholders.
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CAPITALIZATION
Except as noted below under "Shareholder and Trustee
Liability," all shares of the Funds when duly issued will be
fully paid and non-assessable.
Set forth below is certain information as to all persons
who owned of record or beneficially 5% or more of any class of
the Funds' outstanding shares at May __, 1995:
NAMES AND ADDRESSES % OF CLASS
GROWTH FUND - CLASS A
Merrill Lynch
Mutual Fund Operations 8%
4800 Deer Lake Dr. East, 3rd Floor
Jacksonville, FL 32246-6484
CLASS B
Merrill Lynch
Mutual Fund Operations 18%
4800 Deer Lake Dr. East, 3rd Floor
Jacksonville, FL 32246-6484
CLASS C
Merrill Lynch
Mutual Fund Operations 47%
4800 Deer Lake Dr. East, 3rd Floor
Jacksonville, FL 32246-6484
STRATEGIC BALANCED FUND - CLASS C
Merrill Lynch
Mutual Fund Operations 13%
4800 Deer Lake Dr. East, 3rd Floor
Jacksonville, FL 32246-6484
Tri-M Corporation 401k
PS-Savings Plan 13%
204 Gale Lane, P.O. Box 69
Kennett Square, PA 19348-0069
Southern Colorado Clinic
PC 401k 22%
2002 Lake Ave.
Pueblo, CO 81004-3536
Mikeal K. Banker 5%
17175 Joe Sevario Rd.
Prairieville, LA 70769-5710
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VOTING RIGHTS
As summarized in the Prospectus, shareholders are
entitled to one vote for each full share held (with fractional
votes for fractional shares held) and will vote (to the extent
provided herein) in the election of Trustees and the termination
of the Trust or a Fund and on other matters submitted to the vote
of shareholders.
The By-Laws of the Trust provide that the shareholders
of any particular series or class shall not be entitled to vote
on any matters as to which such series or class is not affected.
Except with respect to matters as to which the Trustees have
determined that only the interests of one or more particular
series or classes are affected or as required by law, all of the
shares of each series or class shall, on matters as to which such
series or class is entitled to vote, vote with other series or
classes so entitled as a single class. Notwithstanding the
foregoing, with respect to matters which would otherwise be voted
on by two or more series or classes as a single class, the
Trustees may, in their sole discretion, submit such matters to
the shareholders of any or all such series or classes,
separately. Shares of each class of a Fund will vote separately
with respect to matters pertaining to the respective Distribution
Plans applicable to each class.
The terms "shareholder approval" and "majority of the
outstanding voting securities" as used in the Prospectus and this
Statement of Additional Information mean the lesser of (i) 67% or
more of the shares of the applicable Fund or applicable class
thereof represented at a meeting at which more than 50% of the
outstanding shares of such Fund or such class are represented or
(ii) more than 50% of the outstanding shares of such Fund or such
class.
There will normally be no meetings of shareholders for
the purpose of electing Trustees except that in accordance with
the 1940 Act (i) the Trust will hold a shareholders' meeting for
the election of Trustees at such time as less than a majority of
the Trustees holding office have been elected by shareholders,
and (ii) if, as a result of a vacancy on the Board of Trustees,
less than two-thirds of the Trustees holding office have been
elected by the shareholders, that vacancy may only be filled by a
vote of the shareholders. The Funds' shares have non-cumulative
voting rights, which means that the holders of more than 50% of
the shares voting for the election of Trustees can elect 100% of
the Trustees if they choose to do so, and in such event the
holders of the remaining less than 50% of the shares voting for
such election of Trustees will not be able to elect any person or
persons to the Board of Trustees. A special meeting of
shareholders for any purpose may be called by 10% of the Trust's
outstanding shareholders.
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Except as set forth above, the Trustees shall continue
to hold office and may appoint successor Trustees.
No amendment may be made to the Declaration of Trust
without the affirmative vote of a majority of the outstanding
shares of the Trust except (i) to change the Trust's name,
(ii) to establish, change or eliminate the par value of shares or
(iii) to supply any omission, cure any ambiguity or cure, correct
or supplement any defective or inconsistent provision contained
in the Declaration of Trust.
SHAREHOLDER AND TRUSTEE LIABILITY
Under Massachusetts law shareholders could, under
certain circumstances, be held personally liable for the
obligations of the Trust. However, the Declaration of Trust
disclaims shareholder liability for acts or obligations of the
Trust and requires that notice of such disclaimer be given in
each agreement, obligation, or instrument entered into or
executed by the Trust or the Trustees. The Declaration of Trust
provides for indemnification out of a Fund's property for all
loss and expense of any shareholder of that Fund held liable on
account of being or having been a shareholder. Thus, the risk of
a shareholder incurring financial loss on account of shareholder
liability is limited to circumstances in which the Fund of which
he was a shareholder would be unable to meet its obligations.
The Declaration of Trust further provides that the
Trustees will not be liable for errors of judgment or mistakes of
fact or law. However, nothing in the Declaration of Trust
protects a Trustee against any liability to which the Trustee
would otherwise be subject by reason of willful misfeasance, bad
faith, gross negligence, or reckless disregard of the duties
involved in the conduct of his office. The By-Laws of the Trust
provide for indemnification by the Trust of the Trustees and the
officers of the Trust but no such person may be indemnified
against any liability to the Trust or the Trust's shareholders to
which he would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of
the duties involved in the conduct of his office.
COUNSEL
Legal matters in connection with the issuance of the
shares of the Funds offered hereby are passed upon by Ropes &
Gray, One International Place, Boston, Massachusetts 02110.
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP, 1177 Avenue of the Americas, New
York, New York 10036, the independent accountants to the Trust,
is registered as a Registered Limited Liability Partnership (LLP)
under the laws of the State of Delaware.
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The financial statements of the Strategic Balanced Fund
for the fiscal year ended July 31, 1994, and of the Growth Fund
for the fiscal year ended October 31, 1994, which are included in
this Statement of Additional Information, have been audited by
Price Waterhouse LLP, the Trust's independent accountants for
such period, as stated in their report appearing herein, and have
been so included in reliance upon such report given upon the
authority of that firm as experts in accounting and auditing.
TOTAL RETURN QUOTATIONS
From time to time, a Fund may advertise its "total
return." Total return is computed separately for Class A,
Class B and Class C shares. Such advertisements disclose a
Fund's average annual compounded total return for recent one-
five-and ten-year periods (or the life of a Fund or class, if
shorter). Total return for each such period is computed by
finding, through the use of a formula prescribed by the SEC, the
average annual compounded rate of return over such 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 a 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. A Fund
will include performance data for each of the Class A, Class B
and Class C shares in any advertisement or information including
performance data of the Fund.
The average annual compounded total return for Class A
shares of the Growth Fund was 1.65% for the one-year period ended
October 31, 1994, and 21.69% for the period September 4, 1990
(commencement of distribution of Class A shares) through
October 31, 1994. The average annual compounded total return for
Class B shares of the Growth Fund was 1.80% for the one-year
period ended October 31, 1994, 16.93% for the five-year period
ended October 31, 1994, and 20.17% for the period October 23,
1987 (commencement of distribution of Class B shares) through
October 31, 1994. The average annual compounded total return for
Class C shares of the Growth Fund was 2.06% for the one-year
period ended October 31, 1994 and 8.04% for the period August 2,
1993 (commencement of distribution of Class C shares) through
October 31, 1994. The average annual compounded total return for
Class A shares of the Strategic Balanced Fund was (14.01%) for
the one-year period ended January 31, 1995 and 9.25% for the
period September 4, 1990 (commencement of distribution of Class A
shares) through January 31, 1995. The average annual compounded
total return for Class B shares of the Strategic Balanced Fund
was (14.33%) for the one-year period ended January 31, 1995,
8.10% for the five-year period ended January 31, 1995 and 10.96%
for the period October 23, 1987 (commencement of distribution of
Class B shares) through January 31, 1995. The average annual
compounded total return for Class C shares of the Strategic
Balanced Fund was (10.74%) for the one-year period ended January
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31, 1995 and was (2.60%) for the period August 2, 1993
(commencement of distribution of Class C shares) through
January 31, 1995.
A Fund's total return is not fixed and will fluctuate in
response to prevailing market conditions or as a function of the
type and quality of the securities in the Fund's portfolio and
the Fund's expenses. Total return information is useful in
reviewing the Fund's performance but such information may not
provide a basis for comparison with bank deposits or other
investments which pay a fixed return for a stated period of time.
An investor's principal invested in the Fund is not fixed and
will fluctuate in response to prevailing market conditions.
Advertisements quoting performance rankings of a Fund as
measured by financial publications or by independent
organizations such as Lipper Analytical Services, Inc. and
Morningstar, Inc., and advertisements presenting the historical
performance of such 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 such Fund.
ADDITIONAL INFORMATION
This Statement of Additional Information does not
contain all the information set forth in the Registration
Statement filed by the Trust with the SEC under the Securities
Act of 1933. Copies of the Registration Statement may be
obtained at a reasonable charge from the SEC or may be examined,
without charge, at the offices of the SEC in Washington, D.C.
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Portfolio of Investments
October 31, 1994 Alliance Growth Fund
- -------------------------------------------------------------------------------
Company Shares Value
COMMON STOCKS & OTHER
INVESTMENTS--94.3%
CREDIT SENSITIVE--29.4%
BANKS--2.1%
Citicorp 110,000 $ 5,252,500
First Chicago Corp. 110,000 2,557,500
Grupo Financiero
Bancomer (ADR) (a)* 72,900 1,667,587
Shawmut National Corp. 582,000 12,003,750
-------------
21,481,337
-------------
FINANCIAL SERVICES--2.4%
American Express Co. 285,000 8,763,750
Franchise Financial
Corp. of America 200,000 3,700,000
JP Realty, Inc. 609,300 11,957,512
-------------
24,421,262
-------------
INSURANCE--15.1%
Acceptance Insurance Cos., Inc.* 428,400 7,015,050
American International
Group, Inc. 527,900 49,424,638
Delphi Financial Group, Inc.* 149,000 2,924,125
Emphesys Financial Group, Inc. 402,500 13,835,937
John Alden Financial Corp. 876,500 26,295,000
PennCorp Financial Group, Inc. 484,500 7,630,875
Progressive Corp. (Ohio) 155,000 5,890,000
PXRE Corp.
common 77,000 1,905,750
cv. pfd. 50,000 2,525,000
TIG Holdings, Inc. 351,600 6,768,300
Transnational Re Corp.* 108,300 2,138,925
Travelers, Inc. 550,000 19,112,500
20th Century Industries, Inc. 712,100 8,634,213
USF&G Corp. 115,000 1,566,875
-------------
155,667,188
-------------
REAL ESTATE--8.5%
Amli Residential Properties Trust 135,000 $ 2,565,000
Associated Estates Realty Corp. 75,000 1,415,625
Avalon Properties, Inc. 60,700 1,183,650
Bay Apartment Communities, Inc.* 44,000 858,000
CBL & Associates Properties, Inc. 244,000 4,575,000
Columbus Realty Trust 167,600 3,037,750
Equity Residential Properties
Trust, Inc. 105,000 3,136,875
Essex Property Trust 165,000 2,908,125
Evans Withycombe Residential 67,500 1,333,125
First Industrial Realty Trust, Inc. 75,000 1,462,500
Gables Residential Trust 125,000 2,687,500
Highwoods Properties, Inc. 148,300 3,058,687
JDN Realty Corp. 59,500 1,309,000
Liberty Property, Inc. 85,000 1,615,000
Macerich Co. 313,900 6,278,000
Manufactured Home Communities, Inc. 200,000 3,725,000
Mid-America Apartment Communities, Inc. 75,700 1,883,038
Oasis Residential, Inc. 70,000 1,636,250
Paragon Group, Inc. 170,000 3,421,250
Regency Realty Corp. 39,000 619,125
Saul Centers, Inc. 238,000 3,599,750
Simon Property Group, Inc. 181,500 4,333,313
Spieker Properties, Inc. 211,200 4,224,000
Storage USA, Inc. 203,700 5,117,963
Summit Properties, Inc. 94,000 1,633,250
Sun Communities, Inc. 280,000 6,300,000
Tucker Properties Corp. 429,800 7,145,425
Walden Residential Properties, Inc. 222,100 4,275,425
Weeks Corp. 126,500 2,640,688
-------------
87,978,314
-------------
<PAGE>
Company Shares Value
UTILITY/GAS--0.0%
Enron Corp. 9,300 $ 205,762
-------------
UTILITY/TELEPHONE--1.3%
PT Tri Puyta Indonesian
Satellite (ADS) 71,300 2,798,525
Sprint Corp. 340,000 11,092,500
-------------
13,891,025
-------------
303,644,888
-------------
TECHNOLOGY--23.2%
ELECTRONICS--14.7%
Advanced Micro Devices, Inc.* 415,200 10,950,900
cisco Systems, Inc.* 649,000 19,510,562
EMC Corp.* 1,161,000 24,961,500
General Instrument Corp.* 879,200 29,453,200
Intel Corp. 441,300 27,443,344
Motorola, Inc. 419,800 24,715,725
Texas Instruments, Inc. 193,000 14,450,875
-------------
151,486,106
-------------
OFFICE EQUIPMENT
SERVICES--2.2%
Dell Computer Corp.*
common 26,000 1,157,000
pfd. 69,800 13,096,225
Microsoft Corp.* 89,800 5,663,013
Silicon Graphics, Inc.* 110,000 3,341,250
-------------
23,257,488
-------------
TELECOMMUNICATIONS--6.3%
Air-Touch Communications, Inc.* 449,700 13,434,787
DSC Communications Corp.* 811,000 24,988,937
QUALCOMM, Inc.* 161,400 4,801,650
Rogers Cantel Mobile Communications,
Inc.* 445,500 13,615,594
United States Cellular Corp.* 249,700 8,208,888
-------------
65,049,856
-------------
239,793,450
-------------
CONSUMER CYCLICALS--12.5%
AUTO & TRUCKS--7.4%
Chrysler Corp. (b) 792,700 $ 38,644,125
Ser. A cv. pfd. (a) 8,900 1,189,262
Ford Motor Co. 85,000 2,507,500
General Motors Corp. 852,500 33,673,750
-------------
76,014,637
-------------
PHOTO & OPTICAL--1.3%
Eastman Kodak Co. 282,900 13,614,563
-------------
RETAIL-GENERAL--3.8%
Sears Roebuck & Co. 801,000 39,649,500
-------------
129,278,700
-------------
BUSINESS SERVICES--11.4%
PRINTING, PUBLISHING &
BROADCASTING--11.2%
Chris-Craft Industries, Inc. 79,600 3,004,900
Comcast Corp. 225,000 3,712,500
Donnelley (R. R.) & Sons Co. 389,200 12,211,150
Grupo Televisa S.A. (ADS) 186,600 8,280,375
Multimedia, Inc.* 129,200 3,795,250
Tele-Communications, Inc.* 1,308,500 29,686,594
Viacom, Inc.*
Cl.A* 13,600 545,700
Cl.B* 1,400,745 54,979,241
-------------
116,215,710
-------------
TRUCKING & SHIPPING--0.2%
Covenant Transportation, Inc. 90,000 1,721,250
-------------
117,936,960
-------------
CONSUMER NONCYCLICALS--8.0%
DRUGS--2.7%
Abbot Laboratories 230,000 7,130,000
AB Astra 200,000 5,405,931
Lilly (Eli) & Co. 83,000 5,146,000
Gensia, Inc.(a)* 55,000 701,250
Merck & Co., Inc. 155,000 5,541,250
<PAGE>
Company Shares Value
Pfizer, Inc. 67,000 $ 4,966,375
-------------
28,890,806
-------------
HOSPITAL SUPPLY &
SERVICES--4.0%
Columbia--HCA Healthcare Corp. 30,562 1,272,143
Healthsource, Inc.* 449,000 17,398,750
Maxxim Medical, Inc.* 42,614 553,982
Quest Medical, Inc. 265,225 1,326,125
United Healthcare Corp. 240,900 12,707,475
U.S. Healthcare, Inc. 161,000 7,587,125
-------------
40,845,600
-------------
TOBACCO--1.3%
Loews Corp. 94,000 8,295,500
Philip Morris Cos., Inc. 80,000 4,900,000
-------------
13,195,500
-------------
82,931,906
-------------
BASIC MATERIALS--6.7%
CHEMICALS--2.9%
Great Lakes Chemical Corp. 202,000 11,867,500
Lubrizol Corp. 344,700 11,116,575
Union Carbide Corp. 200,000 6,625,000
-------------
29,609,075
-------------
METALS & MINING--1.4%
Newmont Mining Corp. 347,175 14,364,366
-------------
PAPER--0.2%
Jefferson Smurfit Group PLC* 126,300 2,036,588
-------------
STEEL--2.2%
AK Steel Holding Corp.* 110,000 3,602,500
Bethlehem Steel Corp.* 723,500 13,746,500
USX-US Steel Group, Inc. 154,000 5,775,000
-------------
23,124,000
-------------
69,134,029
-------------
Contracts (c),
Shares or
Principal
Amount
Company (000) Value
CAPITAL GOODS--1.5%
ELECTRICAL EQUIPMENT--0.5%
General Electric Co. 115,200 $ 5,630,400
-------------
MACHINERY--1.0%
Caterpillar, Inc. 175,000 10,456,250
-------------
16,086,650
-------------
ENERGY--1.2%
OIL-SUPPLIES
& CONSTRUCTION--1.2%
Energy Service Co., Inc.* 215,275 3,121,487
Western Atlas, Inc.* 155,600 7,157,600
YPF S.A. (ADS) 100,000 2,412,500
-------------
12,691,587
-------------
DIVERSIFIED--0.4%
Hanson PLC (ADR)* 839,000 314,625
warrants, 9/30/97* 1,000,000 368,007
India Growth Fund, Inc. 250,000 3,218,750
-------------
3,901,382
-------------
Total Common Stocks
(cost $965,041,432) 975,399,552
-------------
SHORT-TERM DEBT
SECURITIES--11.2%
Federal Farm Credit Bank
4.83%, 11/08/94 $ 10,000 9,990,608
-------------
Federal Home Loan Bank
4.66%, 11/04/94 3,830 3,828,513
4.77%, 11/18/94 5,000 4,988,737
4.79%, 12/06/94 6,500 6,469,730
4.81%, 11/28/94 8,000 7,971,140
4.88%, 11/14/94 2,000 1,996,475
-------------
25,254,595
-------------
Federal Home Loan Mortgage Corp.
4.65%, 11/01/94 11,500 11,500,000
4.67%, 11/02/94 1,000 999,870
<PAGE>
Contracts (c),
or Principal
Amount
Company (000) Value
4.83%, 11/02/94 $12,440 $ 12,438,331
4.84%, 11/02/94 5,255 5,254,293
4.85%, 11/02/94 10,900 10,898,532
4.81%, 11/25/94 6,968 6,945,656
4.86%, 11/03/94 2,875 2,874,224
4.86%, 11/07/94 9,400 9,392,386
4.95%, 11/04/94 11,400 11,395,297
-------------
71,698,589
-------------
Federal National Mortgage Association
4.87%, 11/08/94 1,100 1,098,958
5.05%, 12/30/94 7,650 7,586,686
-------------
8,685,644
-------------
Total Short-Term Debt Securities
(amortized cost $115,629,436) 115,629,436
-------------
TOTAL INVESTMENTS--105.5%
(cost $1,080,670,868) 1,091,028,988
-------------
OUTSTANDING CALL OPTIONS WRITTEN--(0.4)%
Advanced Micro Devices, Inc. expiring
Nov 1994
@ $29.13 2,000 (175,000)
cisco Systems, Inc.
expiring Nov 1994
@ $26.00 2,000 (900,000)
expiring Dec 1994
@ $24.8 1,000 (562,500)
expiring Jan 1995
@ $30.17 1,000 (292,000)
Company Contracts (c) Value
DSC Communications Corp.
expiring Nov 1994
@ $28.63 2,000 $ (600,000)
expiring Dec 1994
@ $29.75 1,000 (262,500)
General Instrument Corp.
expiring Dec 1994
@ $30.25 1,000 (50,000)
Shawmut National Corp.
expiring Dec 1994
@ $22.50 1,000 (37,500)
expiring Nov 1994
@ $22.38 2,000 (60,000)
Texas Instruments, Inc.
expiring Dec 1994
@ $74.50 500 (206,250)
expiring Jan 1995
@ $75.00 500 (276,500)
United Healthcare, Inc.
expiring Nov 1994
@ $50.88 1,000 (320,000)
-------------
Total Outstanding Call
Options Written
(premiums received $4,049,495) (3,742,250)
-------------
TOTAL INVESTMENTS,
NET OF OUTSTANDING
CALL OPTIONS
WRITTEN--105.1% 1,087,286,738
Other assets less liabilities--(5.1)% (53,582,457)
-------------
NET ASSETS--100% $1,033,704,281
=============
- -----------------------------------------------------------------------------
* Non-income producing.
(a) Securities are exempt from registration under Rule 144A of the Securities
Act of 1933.
The securities may be resold in transactions exempt from registration,
normally to qualified institutional buyers. At October 31, 1994 these
securities amounted to $3,558,099 or 0.3% of net assets.
(b) Security on which options are written (shares subject to call have an
aggregate market value of $38,644,125).
(c) One contract relates to 100 shares.
See notes to financial statements.
<PAGE>
Statement Of Assets And Liabilities
October 31, 1994 Alliance Growth Fund
- -------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments in securities, at value (cost $1,080,670,868) $1,091,028,988
Receivable for shares of beneficial interest sold 16,124,239
Receivable for investment securities sold 5,141,122
Dividends receivable 817,817
Deferred organization expenses 6,667
--------------
Total assets 1,113,118,833
--------------
LIABILITIES
Due to custodian 134,852
Payable for investment securities purchased 71,853,707
Outstanding call options written, at value (premiums received $4,049,495) 3,742,250
Payable for shares of beneficial interest redeemed 2,119,634
Distribution fee payable 738,406
Advisory fee payable 625,858
Accrued expenses 199,845
--------------
Total liabilities 79,414,552
--------------
NET ASSETS $1,033,704,281
==============
COMPOSITION OF NET ASSETS
Shares of beneficial interest, at par $ 475
Additional paid-in capital 1,003,037,288
Undistributed net investment income 1,023,967
Accumulated net realized gain on investments 18,977,186
Net unrealized appreciation of investments and options 10,665,365
--------------
$1,033,704,281
==============
CALCULATION OF MAXIMUM OFFERING PRICE
Class A Shares
Net asset value and redemption price per share ($167,788,650 / 6,690,915 shares
of beneficial interest issued and outstanding) $25.08
Sales charge--4.25% of public offering price 1.11
--------------
Maximum offering price $26.19
==============
Class B Shares
Net asset value and offering price per share ($751,468,252 / 35,434,998 shares
of beneficial interest issued and outstanding) $21.21
==============
Class C Shares
Net asset value, redemption and offering price per share ($114,447,379 / 5,394,617 shares
of beneficial interest issued and outstanding) $21.22
==============
</TABLE>
See notes to financial statements.
<PAGE>
Statement Of Operations
Six Months Ended October 31, 1994* Alliance Growth Fund
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C>
INVESTMENT INCOME
Dividends $ 6,843,726
Interest 1,770,572 $ 8,614,298
------------
EXPENSES
Advisory fee 2,953,562
Distribution fee-Class A 202,698
Distribution fee-Class B 2,817,067
Distribution fee-Class C 445,356
Transfer agency 635,343
Registration 237,797
Custodian 127,000
Printing 15,284
Audit and legal 52,032
Trustee's fees 10,568
Amortization of organization expenses 3,680
Miscellaneous 26,786
------------
Total expenses 7,527,173
------------
Net investment income 1,087,125
------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain on securities transactions 1,112,395
Net realized gain on options transactions 6,574,537
Net change in unrealized depreciation of securities 30,001,883
Net change in unrealized appreciation of options (725,190)
------------
Net gain on investments 36,963,625
------------
NET INCREASE IN NET ASSETS FROM OPERATIONS $ 38,050,750
============
</TABLE>
Statement Of Changes In Net Assets
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
May 1, 1994 Year Ended
to April 30,
October 31, 1994* 1994
----------------- ----------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS
Net investment income $ 1,087,125 $ (461,406)
Net realized gain on investments 7,686,932 22,485,200
Net change in unrealized appreciation of investments 29,276,693 (25,776,098)
--------------- --------------
Net increase (decrease) in net assets from operations 38,050,750 (3,752,304)
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net realized gain on investments
Class A -0- (2,852,234)
Class B -0- (11,378,380)
Class C -0- (871,547)
TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST
Net increase 434,991,030 508,924,078
--------------- --------------
Total increase 473,041,780 490,069,613
NET ASSETS
Beginning of year 560,662,501 70,592,888
--------------- --------------
End of year $1,033,704,281 $560,662,501
=============== ==============
</TABLE>
* The Fund changed its fiscal year end from April 30 to October 31.
See notes to financial statements.
<PAGE>
Notes To Financial Statements
October 31, 1994 Alliance Growth Fund
- ------------------------------------------------------------------------------
NOTE A: Significant Accounting Policies
Alliance Growth Fund (the "Fund"), a series of The Alliance Portfolios (the
"Trust"), is registered under the Investment Company Act of 1940, as a
diversified, open-end investment company. Prior to August 2, 1993, the Trust
was known as The Equitable Funds, and the Fund was known as The Equitable
Growth Fund. Prior to August 2, 1993, the Fund offered two classes of shares,
Class A and Class B. On August 2, 1993, the Board of Trustees approved the
creation of a third class of shares, Class C shares. 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 4.00% to zero depending on the period of
time the shares are held. Shares purchased before August 2, 1993 and redeemed
within six years of purchase are subject to different rates than shares
purchased after that date. Class B shares purchased on or after August 2,
1993 and held for a period ending eight years after the end of the calendar
month of purchase will convert to Class A shares. 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. Distribution of Class C
shares commenced on August 2, 1993. 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 Trustees. The Board of Trustees 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. Restricted securities are valued at fair value as
determined by the Board of Trustees. 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. Organization Expenses
Organization expenses of approximately $30,000 has been deferred and is being
amortized on a straight-line basis through September, 1995.
3. Option Writing
When the Fund writes an option, an amount equal to 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. 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 in determining whether the Fund has realized a gain or loss. As
a writer of options, the Fund bears the risk of unfavorable changes in the
price of the financial instruments underlying the options.
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 applicable, 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 and amortizes premiums 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.
7. Income and Expenses
All income earned and expenses incurred by the Fund are borne on a pro rata
basis by each outstanding class of shares, based on the proportionate
interest in the Fund represented by the shares on such class, except that the
Funds' Class B and Class C shares bear higher distribution and transfer agent
fees. Expenses attributable to the Fund are charged to the Fund. Expenses of
the Trust are charged to the Fund in proportion to net assets.
8. Change of Year End
The Fund changed its fiscal year end from April 30 to October 31.
Accordingly, the statement of operations, charges in net assets and per share
data and ratios reflect the period from May 1, 1994 to October 31, 1994.
<PAGE>
9. Change in Accounting for Distribution to Shareholders
Effective in 1993, the Fund adopted Statement of Position 93-2:
Determination, Disclosure, and Financial Statement Presentation of Income,
Capital Gain, and Return of Capital Distributions by Investment Companies. As
a result, the Fund changed the classification of distributions to
shareholders to better disclose the differences between financial statement
amounts and distributions determined in accordance with income tax regula-
tions. As of October 31, 1994, the cumulative effect of such differences
totaling $289,877 and ($401,536) 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 the change.
NOTE B: Advisory Fee and Other Transactions With Affiliates
Prior to July 22, 1993, Equitable Capital Management Corporation (Equitable
Capital) served as the investment adviser to the Trust. On July 22, 1993,
Alliance Capital Management, L.P. (Alliance) acquired the business and
substantially all of the assets of Equitable Capital and became the
investment adviser to the Trust.
Under the terms of an investment advisory agreement, the Fund pays Alliance
an advisory fee at an annual rate of .75% of the Fund's average daily net
assets. Such a fee is accrued daily and paid monthly. The Investment Adviser
has agreed, under the terms of the investment advisory agreement, to
voluntarily waive its fees and bear certain expenses so that total expenses
do not exceed on an annual basis 1.40%, 2.10% and 2.10% of average net
assets, respectively, for the Class A, Class B and Class C shares. Prior to
August 2, 1993, the rate for Class B shares was 2.15%. No reimbursement was
required for the period ending October 31, 1994. In addition to these
voluntary arrangements, the Investment Adviser will reduce its compensation,
to the extent that expenses of the Fund for any fiscal year (not including
any distribution expenses paid by the Fund) exceed the lowest applicable
expense limitation prescribed by any state in which the Fund's shares are
qualified for sale. The Fund believes that the most restrictive 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 the Fund's 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.
The Fund has a Services Agreement with Alliance Fund Services, Inc. (a
wholly-owned subsidiary of the Adviser) to provide personnel and facilities
to perform transfer agency services for the Fund. Compensation under this
agreement amounted to $619,141 for the period ended October 31, 1994.
Alliance Fund Distributors, Inc. (a wholly-owned subsidiary of the Adviser)
serves as the Distributor of the Fund's shares. The Distributor received net
front-end sales charges of $89,423 from the sale of Class A shares and
$410,313 in contingent deferred sales charges imposed upon redemptions by
shareholders of Class B shares for the period ended October 31, 1994.
Brokerage commissions paid on securities transactions for the period ended
October 31, 1994 amounted to $909,509, none of which was paid to Donaldson,
Lufkin & Jenrette Securities Corp. ("DLJ"), an affiliate of the Adviser.
Trustees' fees and expenses payable include amounts owed to one of the
Trustees under a deferred compensation plan.
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 .50 of 1% 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 and Class C shares. The Trustees currently limit payments under
the Class A plan to .30 of 1% the Fund's aggregate daily net assets
attributable to Class A 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 $24,134,216,
and $529,804, for Class B and C shares, respectively; such costs may be
recovered from the Fund in future periods so long as the Agreement is in
effect. In accordance with the Agreement, there is no provision for recovery
of unreimbursed distribution costs incurred by the Distributor beyond the
current fiscal year for Class A shares. The Agreement also provides that the
Adviser may use its own resources to finance the distribution of the Fund's
shares.
<PAGE>
NOTE D: Investment Transactions
Purchases and sales of investment securities (excluding short- term
investments) aggregated $565,692,680 and $163,847,299 respectively, for the
period ended October 31, 1994. There were purchases of $1,602,481,913 and
sales of $31,689,860 of U.S. Government and government agency obligations for
the period ended October 31, 1994. Transactions in call options written were
as follows:
<TABLE>
<CAPTION>
Number of
Contracts Premiums
----------- ---------------
<S> <C> <C>
Options outstanding at beginning of year 20,995 $ 5,376,801
Options written 20,834 6,034,759
Option adjustment for splits 787 -0-
Options terminated in closing purchase transactions (1,650) (62,528)
Options expired (23,466) (6,574,537)
Options exercised (2,500) (725,000)
--------- -------------
Options outstanding at October 31, 1994 15,000 $ 4,049,495
========= =============
</TABLE>
At October 31, 1994, the cost of securities for federal income tax purposes
was $1,082,744,127. Accordingly gross unrealized appreciation of investments
was $56,979,210 and gross unrealized depreciation of investments was
$48,694,349 resulting in net unrealized appreciation of $8,284,861.
<PAGE>
NOTE E: Shares of Beneficial Interest
There is an unlimited number of $0.00001 par value shares of beneficial
interest authorized divided into three classes, designated Class A, Class B
and Class C shares. Transactions in shares of beneficial interest were as
follows:
<TABLE>
<CAPTION>
Shares Amount
----------------------------------- -------------------------------------
May 1, 1994* Year Ended May 1, 1994* Year Ended
to April 30, to April 30,
October 31, 1994 1994 October 31, 1994 1994
---------------- --------------- ---------------- -----------------
<S> <C> <C> <C> <C>
Class A
Shares sold 2,831,659 4,267,721 $ 68,901,177 $105,877,084
Shares issued in reinvestment of dividends
and distributions -0- 107,692 -0- 2,613,989
Shares redeemed (427,892) (700,973) (10,438,866) (17,042,677)
-------------- ------------- -------------- ---------------
Net increase 2,403,767 3,674,440 $ 58,462,311 $ 91,448,396
============== ============= ============== ===============
Class B
Shares sold 17,260,944 16,968,439 $356,698,970 $358,789,369
Shares issued in reinvestment of dividends
and distributions -0- 528,002 -0- 10,957,256
Shares redeemed (1,274,037) (929,651) (26,373,086) (19,361,143)
-------------- ------------- -------------- ---------------
Net increase 15,986,907 16,566,790 $330,325,884 $350,385,482
============== ============= ============== ===============
</TABLE>
<TABLE>
<CAPTION>
Shares Amount
----------------------------------- -------------------------------------
August 2,
May 1, 1994* 1993** May 1, 1994* August 2, 1993**
to to to to
October 31, 1994 April 30, 1994 October 31, 1994 April 30, 1994
---------------- --------------- ---------------- -----------------
<S> <C> <C> <C> <C>
Class C
Shares sold 2,792,380 3,658,224 $ 57,684,514 $ 77,567,639
Shares issued in reinvestment of dividends
and distributions -0- 24,351 -0- 500,962
Shares redeemed (554,996) (525,342) (11,481,679) (10,978,401)
-------------- ------------- -------------- ---------------
Net increase 2,237,384 3,157,233 $ 46,202,835 $ 67,090,200
============== ============= ============== ===============
</TABLE>
* The Fund changed its fiscal year end from April 30 to October 31.
** Commencement of distribution.
<PAGE>
Financial Highlights Alliance Growth Fund
- -------------------------------------------------------------------------------
Selected Data For A Share Of Beneficial Interest Outstanding Throughout Each
Period
<TABLE>
<CAPTION>
Class A
-------------------------------------------------------------------------
May 1, 1994
to Year Ended April 30,
---------------------------------------------------
October 31, 1994** 1994 1993 1992 1991(a)
------------------ ---------- --------- -------- ------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of
period $ 23.89 $ 22.67 $ 20.31 $17.94 $13.61
---------------- -------- ------- ------ ----------
Income From Investment Operations
- ---------------------------------
Net investment income (loss) .09 (.01)* .05* .29* .17*
Net realized and unrealized
gain on investments 1.10 3.55 3.68 3.95 4.22
---------------- -------- ------- ------ ----------
Net increase in net asset value
from operations 1.19 3.54 3.73 4.24 4.39
---------------- -------- ------- ------ ----------
Less: Distributions
- --------------------
Dividends from net investment
income -0- -0- (.14) (.26) (.06)
Distributions from net realized
gains -0- (2.32) (1.23) (1.61) -0-
---------------- -------- ------- ------ ----------
Total dividends and
distributions -0- (2.32) (1.37) (1.87) (.06)
---------------- -------- ------- ------ ----------
Net asset value, end of period $ 25.08 $ 23.89 $ 22.67 $20.31 $17.94
================ ======== ======= ====== ==========
Total Return
- ------------
Total investment return based
on net asset value (b) 4.98% 15.66% 18.89% 23.61% 32.40%
================ ======== ======= ====== ==========
Ratios/Supplemental Data
- ------------------------
Net assets, end of period
(000's omitted) $167,800 $102,406 $13,889 $8,228 $ 713
Ratios to average net assets
of:
Expenses, net of
waivers/reimbursements 1.35%(c) 1.40% 1.40% 1.40% 1.40%(c)
Expenses, before
waivers/reimbursements 1.35%(c) 1.46% 1.84% 1.94% 8.79%(c)
Net investment income .86%(c) .32% .20% 1.44% 1.99%(c)
Portfolio turnover rate 24% 87% 124% 137% 130%
</TABLE>
<PAGE>
Alliance Growth Fund
- -----------------------------------------------------------------------------
Selected Data For A Share Of Beneficial Interest Outstanding Throughout Each
Period
<TABLE>
<CAPTION>
Class B
-----------------------------------------------------------------------
May 1, 1994
to Year Ended April 30,
-------------------------------------------------
October 31, 1994** 1994 1993 1992 1991
------------------ ----------- -------- -------- ----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of
period $ 20.27 $ 19.68 $ 18.16 $ 16.88 $ 14.38
---------------- --------- ------ ------ --------
Income From Investment Operations
- ---------------------------------
Net investment income (loss) .01 (.07)*(e) (.06)* .17* .08*
Net realized and unrealized gain
on investments .93 2.98 3.23 3.67 3.22
---------------- --------- ------ ------ --------
Net increase in net asset value
from operations .94 2.91 3.17 3.84 3.30
---------------- --------- ------ ------ --------
Less: Distributions
- -------------------
Dividends from net investment
income -0- -0- (.03) (.21) (.09)
Distributions from net realized
gains -0- (2.32) (1.62) (2.35) (.71)
---------------- --------- ------ ------ --------
Total dividends and distributions -0- (2.32) (1.65) (2.56) (.80)
---------------- --------- ------ ------ --------
Net asset value, end of period $ 21.21 $ 20.27 $ 19.68 $ 18.16 $ 16.88
================ ========= ====== ====== ========
Total Return
- ------------
Total investment return based on
net asset value (b) 4.64% 14.79% 18.16% 22.75% 24.72%
================ ========= ====== ====== ========
Ratios/Supplemental Data
- ------------------------
Net assets, end of period (000's
omitted) $751,521 $394,227 $56,704 $37,845 $22,710
Ratios to average net assets of:
Expenses, net of
waivers/reimbursements 2.05%(c) 2.10% 2.15% 2.15% 2.10%
Expenses, before
waivers/reimbursements 2.05%(c) 2.13% 2.52% 2.65% 3.06%
Net investment income (loss) .16%(c) (.36)% (.53)% .78% .56%
Portfolio turnover rate 24% 87% 124% 137% 130%
</TABLE>
<TABLE>
<CAPTION>
Class C
----------------------------------------
May 1, 1994 August 2, 1993(d)
to to April 30,
October 31, 1994** 1994
------------------ ------------------
<S> <C> <C>
Net asset value, beginning of period $ 20.28 $ 21.47
---------------- ----------------
Income From Investment Operations
- ---------------------------------
Net investment income (loss) .01 (.02)*
Net realized and unrealized gain on investments .93 1.15
---------------- ----------------
Net increase in net asset value from operations .94 1.13
---------------- ----------------
Less: Distributions
- -------------------
Dividends from net investment income -0- -0-
Distributions from net realized gains -0- (2.32)
---------------- ----------------
Total dividends and distributions -0- (2.32)
---------------- ----------------
Net asset value, end of period $ 21.22 $ 20.28
================ ================
Total Return
- ------------
Total investment return based on net asset value
(b) 4.64% 5.27%
================ ================
Ratios/Supplemental Data
- ------------------------
Net assets, end of period (000's omitted) $114,455 $64,030
Ratios to average net assets of:
Expenses, net of waivers/reimbursements 2.05%(c) 2.10%(c)
Expenses, before waivers/reimbursements 2.05%(c) 2.13%(c)
Net investment income (loss) .16%(c) (.31)%(c)
Portfolio turnover rate 24% 87%
</TABLE>
* Net of fee waived and expenses reimbursed by the Adviser.
** The Fund changed its fiscal year end from April 30 to October 31.
(a) For the period September 4, 1990 (commencement of distribution) to
April 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.
(e) Per share data based upon average monthly shares outstanding.
<PAGE>
Report Of Independent Accountants Alliance Growth Fund
- -------------------------------------------------------------------------------
To the Board Of Directors and
Shareholders of Alliance Growth Fund
In our opinion, the accompanying statement of assets and liabilities,
including the portfolio of investments, and the related statements of
operations and of changes in net assets and the financial highlights present
fairly, in all material respects, the financial position of Alliance Growth
Fund (one of the portfolios of The Alliance Portfolios, hereafter referred to
as "the "Fund") at October 31, 1994, the results of its operations for the
period May 1, 1994 to October 31, 1994, the changes in its net assets for the
period ended October 31, 1994 and for the year ended April 30, 1994 and the
financial highlights for the periods presented in conformity with generally
accepted accounting principles. These financial statements and financial
highlights (hereafter referred to as "financial statements") are the
responsibility of the Fund's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audits, which included confirmation of securities at October 31, 1994 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
December 21, 1994
<PAGE>
<TABLE>
PORTFOLIO OF INVESTMENTS
JANUARY 31, 1995 (UNAUDITED) ALLIANCE STRATEGIC BALANCED FUND
<CAPTION>
COMPANY SHARES VALUE
<S> <C> <C>
COMMON STOCKS-55.9%
CONSUMER
NONCYCLICALS-12.3%
BEVERAGES-0.2%
Celestial Seasonings, Inc.<F1> 6,000 $ 89,250
CONTAINERS-0.5%
Bernis Co., Inc. 9,600 241,200
DRUGS-3.0%
Merck & Co. 10,000 402,500
Mylan Laboratories, Inc. 41,400 1,159,200
1,561,700
FOODS-4.7%
McCormick & Co., Inc. 25,700 558,975
Nabisco Holdings
Corp. Cl.A<F1> 40,000 1,130,000
Wrigley Wm. Jr., Co. 16,900 749,937
2,438,912
HOSPITAL SUPPLY &
SERVICE-1.4%
Isolyser Co., Inc.<F1> 7,800 130,650
Surgical Care Affiliates, Inc. 30,000 622,500
753,150
RETAIL - FOOD-0.9%
Sysco Corp. 18,300 496,388
SOAPS & TOILETRIES-1.6%
Clorox Co. 7,000 410,375
Gillette Co. 5,200 399,750
810,125
6,390,725
ENERGY-11.3%
OIL-DOMESTIC-3.9%
Anadarko Petroleum Corp. 16,200 619,650
Apache Corp. 12,000 279,000
Enron Oil & Gas Co. 11,000 195,250
Philips Petroleum Co. 17,100 545,062
Valero Energy Corp. 22,000 385,000
2,023,962
OIL-INTERNATIONAL-0.8%
YPF, S.A. (ADR) Cl.D 21,000 $ 433,125
OIL-SUPPLIES &
CONSTRUCTION-3.1%
Seitel, Inc.<F1> 18,800 519,350
Smith International, Inc.<F1> 28,000 325,500
Tidewater, Inc. 21,200 355,100
Western Atlas, Inc.<F1> 11,500 421,188
1,621,138
RAILROADS-3.5%
Illinois Central Corp. 55,000 1,808,125
5,886,350
CONSUMER CYCLICALS-9.5%
AUTOS & TRUCKS-1.3%
Ek Chor China Motorcycle
Co., Ltd. 21,200 251,750
PACCAR, Inc. 10,500 448,875
700,625
FOOD SERVICES &
LODGING-2.9%
Brinker International, Inc.<F1> 36,700 646,838
Luby's Cafeterias, Inc. 22,500 506,250
Taco Cabana, Inc. Cl.A<F1> 45,600 347,700
1,500,788
LEISURE RELATED-3.7%
Aldila, Inc.<F1> 28,100 139,622
Callaway Golf Co. 11,000 353,375
Cobra Golf, Inc.<F1> 7,000 224,875
Gaylord Entertainment Co. Cl.A 41,300 960,225
Oshmans Sporting Goods, Inc.<F1> 35,000 240,625
1,918,722
RETAIL-GENERAL-1.6%
May Department Stores Co. 10,000 351,250
Walgreen Co. 10,200 484,500
835,750
4,955,885
CREDIT SENSITIVE-7.8%
FINANCIAL SERVICES-1.5%
Mercury Finance Co. 51,000 $ 796,875
INSURANCE-1.0%
American International
Group, Inc. 4,800 499,800
REAL ESTATE-1.6%
Irvine Apartment
Communities, Inc. 20,000 317,500
Oasis Residential, Inc. 24,300 537,637
855,137
UTILITY-ELECTRIC-2.2%
Duke Power Co. 10,000 403,750
Southern Co. 18,000 375,750
Teco Energy, Inc. 18,000 391,500
1,171,000
UTILITY-GAS-0.6%
Enron Corp. 10,000 291,250
UTILITY-TELEPHONE-0.9%
Telephone & Data
Systems, Inc. 11,000 481,250
4,095,312
BUSINESS SERVICES-5.1%
ENVIRONMENTAL
CONTROL-1.9%
Thermo Instrument
Systems, Inc.<F1> 31,800 973,875
PRINTING, PUBLISHING &
BROADCASTING-2.1%
Clear Channel
Communications, Inc.<F1> 10,200 517,650
Infinity Broadcasting
Corp. Cl.A<F1> 19,000 608,000
1,125,650
PROFESSIONAL
SERVICES-1.1%
Loewen Group, Inc. 20,400 $ 567,375
2,666,900
TECHNOLOGY-5.0%
ELECTRONICS-2.8%
Sensormatic Electronics Corp. 50,750 1,478,094
OFFICE EQUIPMENT
SERVICES-0.1%
Franklin Quest Co.<F1> 2,000 66,000
TELECOMMUNICATIONS-2.1%
Airtouch Communications,
Inc.<F1> 19,800 544,500
Vodafone Group Plc. (ADR) 17,700 539,850
1,084,350
2,628,444
CAPITAL GOODS-3.0%
MACHINERY-3.0%
Deere & Co. 5,700 406,125
Solectron Corp.<F1> 16,000 382,000
Trinity Industries, Inc. 11,000 363,000
Wolverine Tube, Inc.<F1> 18,000 438,750
1,589,875
BASIC MATERIALS-1.2%
METALS & MINING-1.2%
Barrick Gold Corp. 31,500 626,062
DIVERSIFIED-0.7%
Hanson Plc. (ADR) 20,000 367,500
Total Common Stocks
(cost $29,971,978) 29,207,053
<CAPTION>
PRINCIPAL
AMOUNT
COMPANY (000) VALUE
<S> <C> <C>
LONG-TERM DEBT
SECURITIES-15.8%
CREDIT SENSITIVE-14.1%
U.S. Treasury Bond
6.25%, 8/15/23 $8,850 $ 7,352,403
TECHNOLOGY-1.7%
General Instrument Corp. cv.
5.00%, 6/15/00 720 882,900
Total Long-Term Debt Securities
(cost $8,590,260) 8,235,303
SHORT-TERM DEBT
SECURITIES-26.8%
FEDERAL HOME LOAN
MORTGAGE CORP.-20.7%
5.55%, 2/10/95 2,800 2,796,115
5.65%, 2/06/95 4,500 4,496,469
5.80%, 2/01/95 3,500 3,500,000
10,792,584
TENNESSE VALLEY AUTH
DISCOUNT NOTE-6.1%
5.66%, 2/07/95 $3,200 $ 3,196,981
Total Short-Term Debt Securities
(amortized cost $13,989,565) 13,989,565
TOTAL INVESTMENTS-98.5%
(cost $52,551,803) 51,431,921
Other assets less liabilities-1.5% 797,322
NET ASSETS-100% $52,229,243
<FN>
<F1>Non-income producing.
See notes to financial statements.
</FN>
</TABLE>
7
<PAGE>
<TABLE>
STATEMENT OF ASSETS AND LIABILITIES
JANUARY 31, 1995 (UNAUDITED) ALLIANCE STRATEGIC BALANCED FUND
<CAPTION>
ASSETS
<S> <C>
Investments in securities, at value (cost $52,551,803) $51,431,921
Cash 85,392
Receivable for investment securities sold 527,008
Dividends and interest receivable 304,477
Receivable due from advisor 39,933
Receivable for shares of beneficial interest sold 21,666
Prepaid expenses and other assets 6,955
Total assets 52,417,352
<CAPTION>
LIABILITIES
<S> <C>
Payable for shares of beneficial interest redeemed 68,793
Distribution fee payable 34,840
Accrued expenses 84,476
Total liabilities 188,109
NET ASSETS $52,229,243
<CAPTION>
COMPOSITION OF NET ASSETS
<S> <C>
Shares of beneficial interest, at par $ 37
Additional paid-in capital 54,142,602
Undistributed net investment income 82,593
Accumulated net realized loss on investments (854,144)
Net unrealized depreciation of investments and other assets (1,141,845)
$52,229,243
<CAPTION>
CALCULATION OF MAXIMUM OFFERING PRICE
<S> <C>
CLASS A SHARES
Net asset value and redemption price per share ($9,102,616/579,275 shares
of beneficial interest issued and outstanding) $15.71
Sales charge - 4.25% of public offering price .70
Maximum offering price $16.41
CLASS B SHARES
Net asset value and offering price per share ($39,007,701/2,858,496 shares
of beneficial interest issued and outstanding) $13.65
CLASS C SHARES
Net asset value, redemption and offering price per share ($4,118,926/301,638
shares of beneficial interest issued and outstanding) $13.66
See notes to financial statements.
</TABLE>
8
<PAGE>
<TABLE>
STATEMENT OF OPERATIONS
SIX MONTHS ENDED JANUARY 31, 1995 (UNAUDITED) ALLIANCE STRATEGIC BALANCED FUND
<CAPTION>
INVESTMENT INCOME
<S> <C> <C>
Dividends (net of foreign taxes withheld of $2,973) $ 613,327
Interest 377,361 $ 990,688
<CAPTION>
EXPENSES
<S> <C> <C>
Advisory fee $ 209,978
Distribution fee-Class A 14,418
Distribution fee-Class B 210,368
Distribution fee-Class C 21,542
Transfer agency 43,901
Custodian 30,342
Audit and legal 25,480
Registration 15,474
Printing 15,157
Trustees' fees 11,470
Amortization of organization expenses 1,580
Miscellaneous 5,498
Total expenses 605,208
Less: expenses waived and assumed by adviser (see Note B)(54,004)
Net expenses 551,204
Net investment income 439,484
<CAPTION>
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
<S> <C> <C>
Net realized gain on investments 190,579
Net change in unrealized appreciation of investments and other assets
(1,769,785)
Net loss on investments (1,579,206)
NET DECREASE IN NET ASSETS FROM OPERATIONS $(1,139,722)
</TABLE>
<TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<CAPTION> SIX MONTHS ENDED MAY 1, 1994 YEAR ENDED
JANUARY 31, 1995 TO APRIL 30,
(UNAUDITED) JULY 31, 1994<F1> 1994
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS
Net investment income $ 439,484 $ 151,149 $ 509,064
Net realized gain (loss) on investments 190,579 (279,249) 1,846,056
Net change in unrealized appreciation (depreciation) of
investments (1,769,785) (677,270) (1,190,672)
Net increase (decrease) in net assets from operations (1,139,722) (805,370) 1,164,448
DIVIDENDS AND DISTRIBUTIONs TO SHAREHOLDERS FROM:
Net investment income
Class A (128,387) -0- (104,771)
Class B (351,616) -0- (329,947)
Class C (36,666) -0- (5,749)
Net realized gain on investments
Class A (20,950) -0- (507,212)
Class B (105,192) -0- (2,851,133)
Class C (10,969) -0- (47,095)
CAPITAL STOCK TRANSACTIONS
Net increase (decrease) (3,512,006) 612,180 15,616,965
Total increase (decrease) (5,305,508) (193,190) 12,935,506
NET ASSETS
Beginning of period 57,534,751 57,727,941 44,792,435
End of period (including undistributed net investment income of $82,593,
$159,778 and $8,629, respectively) $52,229,243 $57,534,751 $57,727,941
<FN>
<F1>The Fund changed its fiscal year end from April 30 to July 31.
</FN>
</TABLE>
9
<PAGE>
NOTES TO FINANCIAL STATEMENTS
JANUARY 31, 1995 (UNAUDITED) ALLIANCE STRATEGIC BALANCED FUND
NOTE A: SIGNIFICANT ACCOUNTING POLICIES
Alliance Strategic Balanced Fund, formerly Alliance Balanced Fund (the "Fund"),
a series of The Alliance Portfolios (the "Trust"), is registered under the
Investment Company Act of 1940, as a diversified, open-end investment company.
Prior to August 2, 1993, the Trust was known as The Equitable Funds, and the
Fund was known as The Equitable Balanced Fund. 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. Shares purchased before August 2, 1993
and redeemed within six years of purchase are subject to different rates than
shares purchased after that date. Class C shares are sold without an initial or
contingent deferred sales charge. The shares also bear different distribution
fees. All three classes of shares have identical voting, dividend, liquidation
and other rights with respect to its distribution plan. The Fund has changed
its fiscal year end from April 30 to July 31. 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 Trustees. The Board of Trustees 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. Restricted securities are valued at fair value as determined
by the Board of Trustees. 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. ORGANIZATION EXPENSES
Organization expenses of approximately $30,000 has been deferred and is being
amortized on a straight-line basis through September, 1995.
3. TAXES
It is the Fund's policy to meet the requirements of the Internal Revenue Code
applicable to regulated investment companies and to distribute all of its
investment company taxable income and net realized gains, if applicable, to
shareholders. Therefore, no provisions for federal income or excise taxes are
required.
4. 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 and amortizes premiums as
adjustments to interest income.
5. 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.
6. INCOME AND EXPENSES
All income earned, and expenses incurred by the Fund are borne on a pro-rata
basis by each outstanding class of shares, based on the proportionate interest
in the Fund represented by the shares of such class, except that the Funds'
Class B and Class C shares bear higher distribution and transfer agent fees.
Expenses attributable to the Fund are charged to the Fund. Expenses of the
Trust are charged to the Fund in proportion to net assets.
10
<PAGE>
ALLIANCE STRATEGIC BALANCED FUND
7. CHANGE OF YEAR END
The Fund changed its fiscal year end from April 30 to July 31. Accordingly,
the statement of changes in net assets and per share data and ratios reflect
the period from May 1, 1994 to July 31, 1994.
8. CHANGE IN ACCOUNTING FOR DISTRIBUTION TO SHAREHOLDERS
Effective November 1, 1993, the Fund adopted Statement of Position 93-2:
Determination, Disclosure, and Financial Statement Presentation of Income,
Capital Gain, and Return of Capital Distributions by Investment Companies. As
a result, the Fund changed the classification of distributions to shareholders
to better disclose the differences between financial statement amounts and
distributions determined in accordance with income tax regulations.
NOTE B: ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Prior to July 22, 1993, Equitable Capital Management Corporation (Equitable
Capital) served as the investment adviser to the Trust. On July 22, 1993,
Alliance Capital Management, L.P. (Alliance) acquired the business and
substantially all of the assets of Equitable Capital and became the investment
adviser to the Trust.
Under the terms of an investment advisory agreement, the Fund pays Alliance an
advisory fee at an annual rate of .75% of the Fund's average daily net assets.
Under the old agreement the fee charge was the same. Such fee is accrued daily
and paid monthly. The Investment Adviser has agreed, under the terms of the
investment advisory agreement, to voluntarily waive its fees and bear certain
expenses so that total expenses do not exceed on an annual basis 1.40%, 2.10%
and 2.10% of average net assets, respectively, for the Class A, Class B and
Class C shares. Prior to August 2, 1993, the annual expense cap for Class B
Shares was 2.15%. For the six months ended January 31, 1995, such
reimbursement amount to $54,004. In addition to these voluntary arrangements,
the Investment Adviser will reduce its compensation, to the extent that
expenses of the Fund for any fiscal year (not including any distribution
expenses paid by the Fund) exceed the lowest applicable expense limitation
prescribed by any state in which the Fund's shares are qualified for sale.
The Fund believes that the most restrictive 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 the Fund's 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.
The Fund has a Services Agreement with Alliance Fund Services, Inc. (a wholly
owned subsidiary of the Adviser) to provide personnel and facilities to perform
transfer agency services for the Fund. Compensation under this agreement
amounted to $31,640 for the six months ended January 31, 1995.
Alliance Fund Distributors, Inc. (a wholly owned subsidiary of the Adviser)
serves as the Distributor of the Fund's shares. The Distributor received
front-end sales charges of $1,349 from the sale of Class A shares and $48,469
in contingent deferred sales charges imposed upon redemptions by shareholders
of Class B shares for the six months ended January 31, 1995.
Brokerage commissions paid on securities transactions for the six months ended
January 31, 1995 amounted to $55,827, 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.
Trustees' fees and expenses payable include amounts owed to one of the Trustees
under a deferred compensation plan.
11
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED) ALLIANCE STRATEGIC BALANCED FUND
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 .50% of the Fund's average daily net assets attributable to
Class A shares and 1% of the average daily net assets attributable to both
Class B and Class C shares. The Trustees currently limit payments under the
Class A plan to .30% of the Fund's average daily net assets attributable to
Class A shares. Prior to August 2, 1993, Equico Securities served as the
distributor of the Fund. The Fund paid a distribution fee to the distributor
of .25% of the Funds average daily net assets attributed to Class A 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 $550,672 and $188,225 for Class B and C
shares, respectively; such costs may be recovered from the Fund in future
periods so long as the agreement is in effect. In accordance with the
Agreement, there is no provision for recovery of unreimbursed distribution
costs, incurred by the Distributor, beyond the current fiscal year for Class A
shares. The Agreement also provides that the 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 $13,695,138 and $19,316,912, respectively, for the six months ended
January 31, 1995. There were purchases of $311,533,650 and sales of
$311,215,503 of U.S. Government and government agency obligations for the six
months ended January 31, 1995. At January 31, 1995, the cost of securities for
federal income tax purposes was the same as the cost for financial reporting
purposes. Accordingly, gross unrealized appreciation of investments was
$1,644,203 and gross unrealized depreciation of investments was $2,764,085
resulting in net unrealized depreciation of $1,119,882.
NOTE E: TAXES
At July 31, 1994 the Alliance Strategic Balanced Fund had a net capital loss
carry forward of approximately $765,000 which will be available through July
31, 2002 to offset net realized gains, to the extent provided by regulations.
Any net capital losses incurred after October 31 ("Post-October losses") within
the taxable year are deemed to arise on the first business day of the Fund's
next taxable year. Pursuant to Federal income tax regulations, a net capital
loss of approximately $279,000 realized by the Alliance Strategic Balanced
Fund, between November 1, 1993 and July 31, 1994 has been deferred to fiscal
year 1995. This capital loss is available in fiscal 1995 to offset capital
gains and reduce amounts distributable to shareholders.
12
<PAGE>
ALLIANCE STRATEGIC BALANCED FUND
NOTE E: SHARES OF BENEFICIAL INTEREST
There is an unlimited number of $0.00001 par value shares of beneficial
interest authorized divided into three classes, designated Class A, Class B and
Class C shares. Transactions in shares of beneficial interest were as follows:
<TABLE>
<CAPTION>
SHARES AMOUNT
SIX MONTHS SIX MONTHS
ENDED ENDED
JANUARY 31, MAY 1, 1994 YEAR ENDED JANUARY 31, MAY 1, 1994 YEAR ENDED
1995 TO APRIL 30, 1995 TO APRIL 30,
(UNAUDITED) JULY 31, 1994<F2> 1994 (UNAUDITED) JULY 31, 1994<F2> 1994
<S> <C> <C> <C> <C> <C> <C>
CLASS A
Shares sold 91,401 49,331 276,843 $ 1,470,099 $ 798,528 $ 4,797,182
Shares issued in reinvestment of
dividends and distributions 8,938 -0- 34,373 138,715 -0- 589,070
Shares redeemed (113,974) (53,073) (223,556) (1,830,822) (861,885) (3,785,573)
Net increase (decrease) (13,635) (3,742) 87,660 $ (222,008) $ (63,357) $ 1,600,679
CLASS B
Shares sold 184,530 185,371 916,638 $ 2,581,361 $2,621,004 $13,826,031
Shares issued in reinvestment
of dividends and distributions 30,603 -0- 202,615 412,834 -0- 3,027,444
Shares redeemed (447,320) (144,019) (493,204) (6,225,700) (2,029,917) (7,402,027)
Net increase (decrease) (232,187) 41,352 626,049 $(3,231,505) $ 591,087 $ 9,451,448
<CAPTION>
SHARES AMOUNT
SIX MONTHS ENDED MAY 1, 1994 AUGUST 2, 1993<F1>SIX MONTHS ENDED MAY 1, 1994 AUGUST 2, 1993<F1>
JANUARY 31, 1995 TO TO JANUARY 31, 1995 TO TO
(UNAUDITED) JULY 31, 1994<F2>APRIL 30, 1994 (UNAUDITED) JULY 31, 1994<F2> APRIL 30, 1994
<S> <C> <C> <C> <C> <C> <C>
CLASS C
Shares sold 69,716 42,010 357,421 $ 974,795 $ 594,022 $5,401,615
Shares issued in
reinvestment of
dividends and
distributions 3,015 -0- 2,365 40,701 -0- 35,078
Shares redeemed (77,077) (35,791) (60,021) (1,073,989) (509,572) (871,855)
Net increase
(decrease) (4,346) 6,219 299,765 $ (58,493) $ 84,450 $4,564,838
<FN>
<F1>Commencement of distribution.
<F2>The Fund changed its fiscal year end from April 30 to July 31.
<FN>
</TABLE>
13
<PAGE>
<TABLE>
FINANCIAL HIGHLIGHTS ALLIANCE STRATEGIC BALANCED FUND
SELECTED DATA FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING THROUGHOUT EACH
PERIOD
<CAPTION>
CLASS A
SIX MONTHS ENDED MAY 1, 1994
JANUARY 31, 1995 TO YEAR ENDED APRIL 30,
(UNAUDITED) JULY 31, 1994<F2> 1994 1993 1992 1991<F3>
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $16.26 $16.46 $16.97 $17.06 $14.48 $12.51
INCOME FROM INVESTMENT OPERATIONS
Net investment income<F1> .18 .07 .16 .39 .27 .34
Net realized and unrealized
gain (loss) on investments (.47) (.27) .74 .59 2.80 1.66
Net increase (decrease) in net asset
value from operations (.29) (.20) .90 .98 3.07 2.00
LESS: DISTRIBUTIONS
Dividends from net
investment income (.22) -0- (.24) (.42) (.17) (.03)
Distributions from net
realized gains (.04) -0- (1.17) (.65) (.32) -0-
Total dividends and
distributions (.26) -0- (1.41) (1.07) (.49) (.03)
Net asset value,
end of period $15.71 $16.26 $16.46 $16.97 $17.06 $14.48
TOTAL RETURN
Total investment return
based on net asset value <F4> (1.79)% (1.22)% 5.06% 5.85% 20.96% 16.00%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(000's omitted) $9,102 $9,640 $9,822 $8,637 $6,843 $443
Ratios to average net assets of:
Expenses, net of waivers/
reimbursements 1.40%<F5> 1.40%<F5> 1.40% 1.40% 1.40% 1.40%<F5>
expenses, before waivers/
reimbursements 1.59%<F5> 1.94%<F5> 1.70% 1.85% 2.05% 11.59%<F5>
Net investment income 2.14%<F5> 1.63%<F5> 1.67% 2.29% 1.92% 3.54%<F5>
Portfolio turnover rate 34% 21% 139% 98% 103% 137%
See footnote summary on page 16.
</TABLE>
14
<PAGE>
<TABLE>
ALLIANCE STRATEGIC BALANCED FUND
SELECTED DATA FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING THROUGHOUT EACH
PERIOD
<CAPTION>
CLASS B
SIX MONTHS ENDED MAY 1, 1994
JANUARY 31, 1995 TO YEAR ENDED APRIL 30,
(UNAUDITED) JULY 31, 1994<F2> 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $14.10 $14.30 $14.92 $15.51 $13.96 $12.40
INCOME FROM INVESTMENT OPERATIONS
Net investment income <F1> .11 .03 .06 .23 .22 .43
Net realized and unrealized gain (loss) on
investments (.40) (.23) .63 .53 2.70 1.60
Net increase (decrease) in net asset value
from operations (.29) (.20) .69 .76 2.92 2.03
LESS: DISTRIBUTIONS
Dividends from net investment income (.12) -0- (.14) (.25) (.29) (.47)
Distributions from net realized gains (.04) -0- (1.17) (1.10) (1.08) -0-
Total dividends and distributions (.16) -0- (1.31) (1.35) (1.37) (.47)
Net asset value, end of period $13.65 $14.10 $14.30 $14.92 $15.51 $13.96
TOTAL RETURN
Total investment return based on net asset
value <F4> (2.07)% (1.40)% 4.29% 4.96% 20.14% 16.73%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's
omitted) $39,008 $43,578 $43,616 $36,155 $31,842 $22,552
Ratios to average net assets of:
Expenses, net of waivers/reimbursements 2.10%<F5> 2.10%<F5> 2.10% 2.15% 2.15% 2.10%
Expenses, before waivers/reimbursements 2.29%<F5> 2.64%<F5> 2.42% 2.56% 2.70% 2.93%
Net investment income 1.44%<F5> .92%<F5> .93% 1.55% 1.34% 3.23%
Portfolio turnover rate 34% 21% 139% 98% 103% 137%
See footnote summary on page 16.
</TABLE>
15
<PAGE>
<TABLE>
FINANCIAL HIGHLIGHTS (CONTINUED) ALLIANCE STRATEGIC BALANCED FUND
SELECTED DATA FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING THROUGHOUT EACH
PERIOD
<CAPTION>
CLASS C
SIX MONTHS ENDED MAY 1, 1994 AUGUST 2, 1993<F6>
JANUARY 31, 1995 TO TO APRIL 30,
(UNAUDITED) JULY 31, 1994<F2> 1994
<S> <C> <C> <C>
Net asset value, beginning of period $14.11 $14.31 $15.64
INCOME FROM INVESTMENT OPERATIONS
Net investment income <F1> .10 .03 .15
Net realized and unrealized loss on
investments (.39) (.23) (.17)
Net decrease in net asset value
from operations (.29) (.20) (.02)
LESS: DISTRIBUTIONS
Dividends from net investment income (.12) -0- (.14)
Distributions from net realized gains (.04) -0- (1.17)
Total dividends and distributions (.16) -0- (1.31)
Net asset value, end of period $13.66 $14.11 $14.31
TOTAL RETURN
Total investment return based on net asset value <F4> (2.07)% (1.40)% .45%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $4,119 $4,317 $4,289
Ratios to average net assets of:
Expenses, net of waivers/reimbursements 2.10%<F5> 2.10%<F5> 2.10%<F5>
Expenses, before waivers/reimbursements 2.29%<F5> 2.64%<F5> 2.07%<F5>
Net investment income 1.45%<F5> .93%<F5> .69%<F5>
Portfolio turnover rate 34% 21% 139%
<FN>
<F1>Net of fee waived and expenses reimbursed by the Adviser.
<F2>The Fund changed its fiscal year end from April 30 to July 31.
<F3>For the period September 4, 1990 (commencement of operations) to April 30,
1991.
<F4>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 is not reflected in the calculation of total investment
return. Total investment return calculated for a period of less than one year
is not annualized.
<F5>Annualized.
<F6>Commencement of distribution.
</FN>
</TABLE>
<PAGE>
PORTFOLIO OF INVESTMENTS
July 31, 1994 Alliance Strategic Balanced Fund
Company Shares Value
COMMON STOCKS & OTHER
UNITED STATES INVESTMENTS-55.0%
CONSUMER
CYCLICALS--18.7%
AIRLINES--1.4%
Southwest Airlines Co. ......... 29,400 $ 797,475
---------
AUTO & TRUCKS--2.1%
Ek Chor China Motorcycle
Co., Ltd ..................... 21,200 527,350
PACCAR, Inc. ................... 13,200 663,300
---------
1,190,650
---------
FOOD SERVICES &
LODGING--3.9%
Brinker International, Inc.* ... 27,000 604,125
Luby's Cafeterias, Inc. ........ 22,500 514,688
Outback Steakhouse, Inc.* ...... 24,000 612,000
Taco Cabana, Inc. Cl.A* ........ 40,500 526,500
---------
2,257,313
---------
HOUSEHOLD FURNITURE &
APPLIANCES--4.2%
Heilig-Meyers Co. .............. 29,800 789,700
Leggett & Platt, Inc. .......... 27,800 1,025,125
Maytag Corp. ................... 32,500 625,625
---------
2,440,450
---------
LEISURE RELATED--3.7%
Aldila, Inc.* .................. 25,900 335,081
Coastcast Corp.* ............... 22,200 457,875
Cyrk International, Inc.* ...... 10,000 256,250
Gaylord Entertainment Co. ......
Cl.A ......................... 34,800 809,100
Oshmans Sporting Goods,
Inc.* ........................ 35,000 273,438
---------
2,131,744
---------
RETAIL--GENERAL--2.8%
Eckerd Corp.* .................. 26,400 636,900
Sun Television & Appliance, Inc. 32,000 308,000
Walgreen Co. ................... 18,000 659,250
---------
1,604,150
---------
<PAGE>
TEXTILE PRODUCTS--0.6%
Burlington Industries, Inc ... 22,000 $ 327,250
----------
10,749,032
----------
ENERGY--10.7%
COAL & GAS PIPELINES-2.4%
Anadarko Petroleum Corp. ..... 19,500 933,563
California Energy Co., Inc.* . 26,800 438,850
----------
1,372,413
----------
OIL--5.3%
Philips Petroleum Co. ........ 14,000 458,500
Questar Corp. ................ 25,000 831,250
Seitel, Inc.* ................ 18,200 616,525
Smith International, Inc.* ... 20,000 342,500
Valero Energy Corp. .......... 22,000 418,000
Western Atlas, Inc.* ......... 8,500 413,313
----------
3,080,088
----------
RAILROADS--3.0%
Illinois Central Corp. ....... 55,000 1,753,125
----------
6,205,626
----------
CONSUMER
NONCYCLICALS--7.7%
BEVERAGES--1.1%
Celestial Seasonings, Inc.* .. 38,000 608,000
----------
CONTAINERS--0.7%
Bemis Co., Inc. .............. 17,000 418,625
----------
DRUGS--1.9%
Merck & Co. .................. 27,200 805,800
Mylan Laboratories, Inc. ..... 14,000 309,750
----------
1,115,550
----------
FOODS--2.1%
McCormick & Co., Inc. ........ 25,700 496,331
Wrigley Wm. Jr., Co. ......... 16,900 692,900
----------
1,189,231
----------
HOSPITAL
SUPPLY & SERVICE--1.1%
Surgical Care Affiliates, Inc. 44,700 659,325
----------
RETAIL - FOOD--0.8%
Sysco Corp. .................. 18,300 432,338
----------
4,423,069
----------
<PAGE>
BASIC MATERIALS--4.8%
CHEMICALS --
SPECIALITY-0.3%
Crompton & Knowles Corp. ..... 10,400 $ 174,200
---------
METALS & MINING--2.8%
American Barrick
Resources Corp ............... 36,600 818,925
Freeport McMoran Copper
& Gold, Inc. Cl.A* ........... 15,400 356,125
Phelps Dodge Corp. ........... 7,000 432,250
---------
1,607,300
---------
STEEL--1.7%
AK Steel Holdings Corp.* ..... 21,600 604,800
Nucor Corp. .................. 5,000 345,000
---------
949,800
---------
2,731,300
---------
BUSINESS SERVICES--4.5%
ENVIRONMENTAL
CONTROL--2.7%
Air & Water
Technologies Corp.* ......... 40,000 365,000
Thermo Instrument
Systems, Inc.* ............... 31,800 906,300
United States Filter Corp.*... 15,000 292,500
---------
1,563,800
---------
PRINTING, PUBLISHING &
BROADCASTING--1.1%
Clear Channel
Communications, Inc.* ........ 13,700 633,625
---------
PROFESSIONAL
SERVICES--0.7%
Reynolds & Reynolds Co.,
Cl.A ......................... 16,700 409,150
---------
2,606,575
---------
CREDIT SENSITIVE--4.0%
FINANCIAL SERVICES--0.9%
Mercury Finance Co. .......... 31,000 507,625
---------
Shares or
Principal
Amount
Company (000) Value
REAL ESTATE--0.9%
Oasis Residential, Inc.* ...... 20,300 $ 497,350
-----------
UTILITY - GAS--2.2%
Enron Corp. ................... 40,000 1,295,000
-----------
2,299,975
-----------
TECHNOLOGY--3.1%
ELECTRONICS--3.1%
Sensormatic Electronics Corp. . 59,450 1,783,500
-----------
CAPITAL GOODS--1.5%
MACHINERY--1.5%
Deere & Co. ................... 5,700 399,711
Wolverine Tube, Inc.* ......... 18,000 438,750
-----------
838,461
-----------
Total United States Investments
(cost $31,205,488) ............ 31,637,538
-----------
FOREIGN INVESTMENTS--3.2%
CHILE--1.2%
Compania de Telefonos de
Chile (ADR) ................... 8,800 707,300
-----------
MEXICO--2.0%
Grupo Televisa
S.A. (ADR) (a) ................ 20,300 1,136,800
-----------
Total Foreign Investments
(cost $1,974,382) ............. 1,844,100
-----------
Total Common Stocks and
Other Investments
(cost $33,179,870) ............ 33,481,638
-----------
LONG-TERM DEBT
SECURITIES--19.7%
CREDIT SENSITIVE--13.3%
U.S. Treasury Note
6.25%, 8/15/23 ................ $8,850 7,649,675
-----------
<PAGE>
Principal
Amount
Company (000) Value
CONSUMER
NONCYCLICALS--2.4%
Campbell Soup Co.
8.875%, 5/01/21 ............... $200 $ 218,982
ConAgra, Inc.
9.75%, 3/01/21 ................ 240 268,447
Hershey Foods Corp.
8.80%, 2/15/21 ................ 250 269,630
Kroger Co. cv.
6.375%, 12/01/99 .............. 470 646,250
-----------
1,403,309
-----------
CONSUMER CYCLICALS--1.8%
Lowe's Cos., Inc. cv.
3.00%, 7/22/03 ................ 340 463,250
Toys 'R' Us, Inc.
8.75%, 9/01/21 ................ 250 268,365
Wal-Mart Stores, Inc.
7.25%, 6/01/13 ................ 340 317,189
-----------
1,048,804
-----------
TECHNOLOGY--1.7%
General Instrument Corp. cv.
5.00%, 6/15/00 ................ 720 978,300
-----------
BASIC MATERIALS--0.5%
Mead Corp
8.125%, 2/01/23 ............... 270 262,931
-----------
Total Long-Term Debt Securities
(cost $11,009,434) ............ 11,343,019
-----------
SHORT-TERM DEBT
SECURITIES--23.1%
FEDERAL HOME LOAN
MORTGAGE CORP.--14.4%
4.00%, 8/01/94 ..................... $2,200 $ 2,200,000
4.33%, 8/01/94 ..................... 4,600 4,600,000
4.36%, 8/15/94 ..................... 1,500 1,497,454
-----------
8,297,454
-----------
FEDERAL FARM
CREDIT BANK--8.7%
4.17%, 8/16/94 ..................... 5,000 4,991,312
-----------
Total Short-Term Debt Securities
(amortized cost $13,288,766) ....... 13,288,766
-----------
TOTAL INVESTMENTS--101.0%
(cost $57,478,070) ................. 58,113,423
Other assets less liabilities--(1.0%) (578,672)
-----------
NET ASSETS--100% ................... $57,534,751
===========
* Non-income producing.
(a) Security is exempt from registration under Rule 144A of the Securities Act
Of 1933. This security may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At July 31, 1994
this security was valued at $1,136,800 representing 2.0% of net assets.
See notes to financial statements.
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
July 31, 1994 Alliance Strategic Balanced Fund
ASSETS
Investments in securities, at value
(cost $57,478,070) .............................. $58,113,423
Cash ............................................ 25,315
Receivable for investment securities sold ....... 538,388
Interest and dividends receivable ............... 327,219
Receivable for shares of
beneficial interest sold....................... 157,761
Receivable due from advisor ..................... 31,477
Prepaid expenses and other assets ............... 8,251
-----------
Total assets ..................................... 59,201,834
-----------
LIABILITIES
Payable for investment securities purchased ...... 1,414,485
Payable for shares of beneficial
interest redeemed............................... 53,286
Accrued expenses ................................. 199,312
-----------
Total liabilities ................................ 1,667,083
-----------
NET ASSETS ....................................... $57,534,751
===========
COMPOSITION OF NET ASSETS
Shares of Beneficial interest, at par ..... $40
Additional paid-in capital ................ 57,647,192
Undistributed net investment income ....... 159,778
Accumulated net realized loss on investment (907,612)
Net unrealized appreciation of investments 635,353
-----------
$57,534,751
===========
CALCULATION OF MAXIMUM OFFERING PRICE
Class A Shares
Net asset value and
redemption price per share
($9,639,811/592,910 shares
of beneficial interest
issued and outstanding)....................... $16.26
Sales charge - 4.25%
of public offering price...................... 0.72
------
Maximum offering price ....................... $16.98
======
Class B Shares
Net asset value and offering
price per share
($43,577,821/3,090,683 shares
of beneficial interest
issued and outstanding)...................... $14.10
======
Class C Shares
Net asset value, redemption
and offering price per share
($4,317,119/305,984 shares
of beneficial interest
issued and outstanding)...................... $14.11
======
See notes to financial statements.
<PAGE>
STATEMENT OF OPERATIONS Alliance Strategic Balanced Fund
<TABLE>
<CAPTION>
May 1, 1994 Year Ended
to April 30,
July 31, 1994* 1994
-------------- ----------
<S> <C> <C>
INVESTMENT INCOME
Interest.................................................. $ 330,578 $1,044,401
Dividends (net of foreign taxes
withheld of $2,366 and -$0-)............................ 105,118 426,385
--------- ---------
Total Income.............................................. 435,696 1,470,786
EXPENSES
Advisory fee.............................................. 108,893 363,684
Distribution fee-Class A ................................ 7,375 24,021
Distribution fee-Class B ................................ 110,010 388,608
Distribution fee-Class C ................................ 10,598 12,949
Audit and legal ......................................... 37,371 30,291
Transfer agency ......................................... 30,864 87,444
Printing ................................................ 20,000 49,733
Custodian ............................................... 18,089 70,912
Registration ............................................. 11,315 24,959
Trustees' fees .......................................... 6,000 45,000
Amortization of organization expenses ................... 1,840 7,392
Miscellaneous ........................................... 3,259 14,594
--------- ---------
Total expenses .......................................... 365,614 1,119,587
Less: expenses waived and assumed by adviser (see Note B) (81,067) (157,865)
--------- ---------
Net expenses ............................................. 284,547 961,722
--------- ---------
Net investment income .................................... 151,149 509,064
--------- ---------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain (loss) on investments ................. (279,249) 1,846,056
Net change in unrealized appreciation of investments ..... (677,270) (1,190,672)
--------- ---------
Net gain (loss) on investments .......................... (956,519) 655,384
--------- ---------
NET INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS....... $(805,370) $1,164,448
========= =========
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
May 1, 1994 Year Ended Year Ended
to April 30, April 30,
July 31, 1994* 1994 1993
-------------- ---- ----
<S> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS
Net investment income .................................. $151,149 $ 509,064 $ 713,991
Net realized gain (loss) on investments ................ (279,249) 1,846,056 1,460,870
Net change in unrealized appreciation of investments ... (677,270) (1,190,672) 137,306
---------- ---------- ----------
Net increase (decrease) in net assets from operations .. (805,370) 1,164,448 2,312,167
Net equalization credits................................. -0- -0- 197,542
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income
Class A................................................. -0- (104,771) (204,852)
Class B ............................................... -0- (329,947) (572,464)
Class C ............................................... -0- (5,749) -0-
Net realized gain on investments
Class A ............................................... -0- (507,212) (314,861)
Class B ............................................... -0- (2,851,133) (2,471,355)
Class C ............................................... -0- (47,095) -0-
CAPITAL STOCK TRANSACTIONS
Net increase ........................................... 612,180 15,616,965 7,160,920
---------- ---------- ----------
Total increase (decrease) .............................. (193,190) 12,935,506 6,107,097
NET ASSETS
Beginning of year ...................................... 57,727,941 44,792,435 38,685,338
---------- ---------- ----------
End of period (including undistributed net investment
income of $159,778, $8,629 and $32,440 respectively) .... $57,534,751 $57,727,941 $44,792,435
========== ========== ==========
</TABLE>
*The Fund changed its fiscal year end from April 30 to July 31.
See notes to financial statements.
<PAGE>
NOTES TO FINANCIAL STATEMENTS
July 31, 1994 Alliance Strategic Balanced Fund
NOTE A: Significant Accounting Policies
Alliance Strategic Balanced Fund, formerly Alliance Balanced Fund (the "Fund"),
a series of The Alliance Portfolios (the "Trust"), is registered under the
Investment Company Act of 1940, as a diversified, open-end investment company.
Prior to August 2, 1993, the Trust was known as The Equitable Funds, and the
Fund was known as The Equitable Balanced Fund. Prior to August 2, 1993, the Fund
offered two classes of shares, Class A and Class B. On August 2, 1993, the Board
of Trustees approved the creation of a third class of shares, 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. Shares purchased
before August 2, 1993 and redeemed within six years of purchase are subject to
different rates than shares purchased after that date. Class C shares are sold
without an initial or contingent deferred sales charge. The shares also bear
different distribution fees. All three classes of shares have identical voting,
dividend, liquidation and other rights with respect to its distribution plan.
The Fund has changed its fiscal year end from April 30 to July 31. 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 Trustees.
The Board of Trustees 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.
Restricted securities are valued at fair value as determined by the Board of
Trustees. 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. Organization Expenses
Organization expenses of approximately $30,000 has been deferred and is being
amortized on a straight-line basis through September, 1995.
3. Taxes
It is the Fund's policy to meet the requirements of the Internal Revenue Code
applicable to regulated investment companies and to distribute all of its
investment company taxable income and net realized gains, if applicable, to
shareholders. Therefore, no provisions for federal income or excise taxes are
required.
4. 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 and amortizes premiums as adjustments to
interest income.
5. 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.
6. Income and Expenses
All income earned, and expenses incurred by the Fund are borne on a pro-rata
basis by each outstanding class of shares, based on the proportionate interest
in the Fund represented by the shares of such class, except that the Funds'
Class B and Class C shares bear higher distribution and transfer agent fees.
Expenses attributable to the Fund are charged to the Fund. Expenses of the Trust
are charged to the Fund in proportion to net assets.
<PAGE>
Alliance Strategic Balanced Fund
7. Equalization
On September 7, 1993, the Fund discontinued the accounting practice known as
equalization by which a portion of the proceeds from sales and cost of
repurchases of capital equivalent, on a per share basis, to the amount of
distributable investment income on the date of the transaction was credited or
charged to undistributed investment income. This change had no significant
effect on the Fund's financial statements.
8. Change of Year End
The Fund changed its fiscal year end from April 30 to July 31. Accordingly, the
statement of operations, changes in net assets and per share data and ratios
reflect the period from May 1, 1994 to July 31, 1994.
9. Change in Accounting for Distribution to Shareholders
Effective November 1, 1993, the Fund adopted Statement of Position 93-2:
Determination, Disclosure, and Financial Statement Presentation of Income,
Capital Gain, and Return of Capital Distributions by Investment Companies. As a
result, the Fund changed the classification of distributions to shareholders to
better disclose the differences between financial statement amounts and
distributions determined in accordance with income tax regulations.
NOTE B: Advisory Fee and Other Transactions With Affiliates
Prior to July 22, 1993, Equitable Capital Management Corporation (Equitable
Capital) served as the investment adviser to the Trust. On July 22, 1993,
Alliance Capital Management, L.P. (Alliance) acquired the business and
substantially all of the assets of Equitable Capital and became the investment
adviser to the Trust.
Under the terms of an investment advisory agreement, the Fund pays Alliance an
advisory fee at an annual rate of .75% of the Fund's average daily net assets.
Under the old agreement the fee charge was the same. Such fee is accrued daily
and paid monthly. The Investment Adviser has agreed, under the terms of the
investment advisory agreement, to voluntarily waive its fees and bear certain
expenses so that total expenses do not exceed on an annual basis 1.40%, 2.10%
and 2.10% of average net assets, respectively, for the Class A, Class B and
Class C shares. Prior to August 2, 1993, the annual expense cap for Class B
Shares was 2.15%. For the period ended July 31, 1994, such reimbursement amount
to $81,067. In addition to these voluntary arrangements, the Investment Adviser
will reduce its compensation, to the extent that expenses of the Fund for any
fiscal year (not including any distribution expenses paid by the Fund) exceed
the lowest applicable expense limitation prescribed by any state in which the
Fund's shares are qualified for sale. The Fund believes that the most
restrictive 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 the Fund's
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.
The Fund has a Services Agreement with Alliance Fund Services, Inc. (a wholly
owned subsidiary of the Adviser) to provide personnel and facilities to perform
transfer agency services for the Fund. Compensation under this agreement
amounted to $21,314 for the period ended July 31, 1994.
Alliance Fund Distributors, Inc. (a wholly owned subsidiary of the Adviser)
serves as the Distributor of the Fund's shares. The Distributor received
front-end sales charges of $1,207 from the sale of Class A shares and $21,732 in
contingent deferred sales charges imposed upon redemptions by shareholders of
Class B shares for the period ended July 31, 1994.
Brokerage commissions paid on securities transactions for the period ended July
31, 1994 amounted to $33,604, 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.
Trustees' fees and expenses payable include amounts owed to one of the Trustees
under a deferred compensation plan.
<PAGE>
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 .50% of the Fund's average daily net assets attributable to Class A
shares and 1% of the average daily net assets attributable to both Class B and
Class C shares. The Trustees currently limit payments under the Class A plan to
.30% of the Fund's average daily net assets attributable to Class A shares.
Prior to August 2, 1993, Equico Securities served as the distributor of the
Fund. The Fund paid a distribution fee to the distributor of .25% of the Funds
average daily net assets attributed to Class A 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
$523,532 and $127,615 for Class B and C shares, respectively; such costs may be
recovered from the Fund in future periods so long as the agreement is in effect.
In accordance with the Agreement, there is no provision for recovery of
unreimbursed distribution costs, incurred by the Distributor, beyond the current
fiscal year for Class A shares. The Agreement also provides that the 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 $14,548,815 and $8,967,857, respectively, for the period ended July
31, 1994. There were purchases of $90,353,194 and sales of $86,910,000 of U.S.
Government and government agency obligations for the period ended July 31, 1994.
At July 31, 1994, the cost of securities for federal income tax purposes was the
same as the cost for financial reporting purposes. Accordingly, gross unrealized
appreciation of investments was $2,660,297 and gross unrealized depreciation of
investments was $2,024,944 resulting in net unrealized appreciation of $635,353.
NOTE E: Taxes.
At July 31, 1994 the Alliance Strategic Balanced Fund had a net capital loss
carry forward of approximately $765,000 which will be available through July 31,
2002 to offset net realized gains, to the extent provided by regulations. Any
net capital losses incurred after October 31 ("Post-October losses") within the
taxable year are deemed to arise on the first business day of the Fund's next
taxable year. Pursuant to Federal income tax regulations, a net capital loss of
approximately $279,000 realized by the Alliance Strategic Balanced Fund, between
November 1, 1993 and July 31, 1994 has been deferred to fiscal year 1995. This
capital loss is available in fiscal 1995 to offset capital gains and reduce
amounts distributable to shareholders.
<PAGE>
NOTE F: Shares of Beneficial Interest
There is an unlimited number of $0.00001 par value shares of beneficial interest
authorized divided into three classes, designated Class A, Class B and Class C
shares. Transactions in shares of beneficial interest were as follows:
<TABLE>
<CAPTION>
SHARES AMOUNT
------ ------
May 1, 1994 Year Ended Year Ended May 1, 1994 Year Ended Year Ended
to April 30, April 30, to April 30, April 30,
July 31, 1994** 1994 1993 July 31, 1994** 1994 1993
------------- ------------ ----------- ---------------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
Class A
Shares sold.................. 49,331 276,843 226,191 $ 798,528$ 4,797,182$ 3,695,004
Shares issued in
reinvestment of
dividends and
distributions ............ -0- 34,373 311 -0- 589,070 5,112
Shares redeemed.............. (53,073) (223,556) (119,320) (861,885) (3,785,573) (1,962,409)
--------- -------- --------- ---------- ----------- -----------
Net increase (decrease) ..... (3,742) 87,660 107,182 $ (63,357) $ 1,600,679 $ 1,737,707
========= ======== ========= ========== =========== ===========
Class B
Shares sold.................. 185,371 916,638 712,162 $2,621,004 $13,826,031 $10,457,017
Shares issued in
reinvestment of
dividends and
distributions ............ -0- 202,615 568 -0- 3,027,444 8,232
Shares redeemed.............. (144,019) (493,204) (342,428) (2,029,917) (7,402,027) (5,042,036)
--------- -------- -------- ---------- ---------- ----------
Net increase ................ 41,352 626,049 370,302 $ 591,087 $ 9,451,448 $ 5,423,213
========= ======== ========= ========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
SHARES AMOUNT
------ ------
May 1, 1994 August 2, 1993* May 1, 1994 August 2, 1993*
to to to to
July 31, 1994** April 30, 1994 July 31, 1994** April 30, 1994
--------------- -------------- --------------- --------------
<S> <C> <C> <C> <C>
Class C
Shares sold.................. 42,010 357,421 $ 594,022 $5,401,615
Shares issued in
reinvestment of
dividends and
distributions ........... -0- 2,365 -0- 35,078
Shares redeemed............. (35,791) (60,021) (509,572) (871,855)
------- ------- -------- ----------
Net increase........................ 6,219 299,765 $84,450 $4,564,838
======= ======= ======== ==========
</TABLE>
* Commencement of distribution.
** The Fund changed its fiscal year end from April 30 to July 31.
<PAGE>
FINANCIAL HIGHLIGHTS Alliance Strategic Balanced Fund
Selected Data For A Share Of Beneficial Interest Outstanding Throughout Each
Period
<TABLE>
<CAPTION>
May 1, 1994 Year Ended April 30,
to ----------------------------------------------------
July 31, 1994** 1994 1993 1992 1991(a)
----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of period ......... $ 16.46 $ 16.97 $ 17.06 $ 14.48 $ 12.51
------- ------- ------- ------- -------
Income From
Investment Operations
Net investment
income* ..................... .07 .16 .39 .27 .34
Net realized and
unrealized gain (loss)
on investments .............. (.27) .74 .59 2.80 1.66
------- ------- ------- ------- -------
Net increase (decrease)
in net asset value
from operations ............. (.20) .90 .98 3.07 2.00
------- ------- ------- ------- -------
Less: Distributions
Dividends from net
investment
income ...................... -0- (.24) (.42) (.17) (.03)
Distributions
from net realized
gains ....................... -0- (1.17) (.32) (.65) -0-
------- ------- ------- ------- -------
Total dividends and
distributions .............. -0- (1.41) (1.07) (.49) (.03)
------- ------- ------- ------- -------
Net asset value,
end of period .............. $ 16.26 $ 16.46 $ 16.97 $ 17.06 $ 14.48
======= ======= ======= ======= =======
Total Return
Total investment
return based on
net asset value (b) ......... (1.22)% 5.06% 5.85% 20.96% 16.00%
======= ======= ======= ======= =======
Ratios/Supplemental Data
Net assets,
end of period
(000's omitted) ............. $9,640 $9,822 $8,637 $6,843 $ 443
Ratios to average
net assets of:
Expenses, net of
waivers/reimbursements..... 1.40%(c) 1.40% 1.40% 1.40% 1.40%(c)
Expenses, before
waivers/reimbursements..... 1.94%(c) 1.70% 1.85% 2.05% 11.59%(c)
Net investment income ...... 1.63%(c) 1.67% 2.29% 1.92% 3.54%(c)
Portfolio turnover rate ...... 21% 139% 98% 103% 137%
</TABLE>
See footnote summary on page 15.
<PAGE>
<TABLE>
<CAPTION>
Class B Class C
---------------------------------------------------------- --------------------------------
May 1, 1994 Year Ended April 30, May 1, 1994 August 2, 1993(d)
to --------------------------------------- to to April 30,
July 31, 1994** 1994 1993 1992 1991 July 31, 1994** 1994
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period .............. $ 14.30 $ 14.92 $ 15.51 $ 13.96 $ 12.40 $ 14.31 $ 15.64
------- ------- ------- ------- ------- ------- -------
Income From Investment
Operations
Net investment income * ............ .03 .06 .23 .22 .43 .03 .15
Net realized and unrealized
gain (loss) on investments ....... (.23) .63 .53 2.70 1.60 (.23) (.17)
Net increase (decrease)
in net asset value
from operations .................. (.20) .69 .76 2.92 2.03 (.20) (.02)
Less: Distributions
Dividends from net
investment income ................ -0- (.14) (.25) (.29) (.47) -0- (.14)
Distributions from net
realized gains ................... -0- (1.17) (1.10) (1.08) -0- -0- (1.17)
Total dividends and
distributions .................... -0- (1.31) (1.35) (1.37) (.47) -0- (1.31)
Net asset value,
end of period .................... $ 14.10 $ 14.30 $ 14.92 $ 15.51 $ 13.96 $ 14.11 $ 14.31
======= ======= ======= ======= ======= ======= =======
Total Return
Total investment
return based on
net asset value (b) .............. (1.40)% 4.29% 4.96% 20.14% 16.73% (1.40)% .45%
======= ======= ======= ======= ======= ======= =======
Ratios/Supplemental
Data
Net assets, end of period
(000's omitted) .................. $43,578 $43,616 $36,155 $31,842 $22,552 $4,317 $4,289
Ratios to average
net assets of:
Expenses, net of waivers/
reimbursements ................. 2.10%(c) 2.10% 2.15% 2.15% 2.10% 2.10%(c) 2.10%(c)
Expenses, before waivers/
reimbursements ................. 2.64%(c) 2.42% 2.56% 2.70% 2.93% 2.64%(c) 2.07%(c)
Net investment income ............ .92%(c) .93% 1.55% 1.34% 3.23% .93%(c) .69%(c)
Portfolio turnover rate .......... 21% 139% 98% 103% 137% 21% 139%
</TABLE>
* Net of fee waived and expenses reimbursed by the Adviser.
** The Fund changed its fiscal year end from April 30 to July 31.
(a) For the period September 4, 1990 (commencement of operations) to April 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 is 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.
Prior to July 22, 1993, Equitable Capital Management Corporation (Equitable
Capital) served as investment adviser to the Trust. On July 22, 1993,
Alliance Capital Management L.P. acquired the business and substantially all
of the assets of Equitable Capital and became investment adviser for the
Trust.
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS Alliance Strategic Balanced Fund
To the Board of Directors and
Shareholders of Alliance Strategic Balanced Fund
In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Alliance Strategic Balanced Fund
(one of the portfolios of The Alliance Portfolios, hereafter referred to as "the
"Fund") at July 31, 1994, the results of its operations for the period May 1,
1994 through July 31, 1994 and the year ended April 30, 1994, the changes in its
net assets for the period May 1, 1994 through July 31, 1994 and the years ended
April 30, 1994 and April 30, 1993 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 audit. We conducted our audit 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 audit, which included confirmation of securities at July 31,
1994 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 20, 1994
<PAGE>
APPENDIX A
DESCRIPTION OF CORPORATE BOND RATINGS
Description of the bond ratings of Moody's Investors
Services, Inc. are as follows:
Aaa-- Bonds which are rated Aaa are judged to be of the
best quality. They carry the smallest degree of investment risk
and are generally referred to as "gilt edge." Interest payments
are protected by a large or by an exceptionally stable margin,
and principal is secure. While the various protective elements
are likely to change, such changes as can be visualized are most
unlikely to impair the fundamentally strong position of such
issues.
Aa-- Bonds which are rated Aa are judged to be of high
quality by all standards. Together with the Aaa group they
comprise what are generally known as high grade bonds. They are
rated lower than the best bond because margins of protection may
not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other
elements present which make the long-term risks appear somewhat
greater than the Aaa securities.
A-- Bonds which are rated A possess many favorable
investment attributes and are to be considered as upper-medium-
grade obligations. Factors giving security to principal and
interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment some time in the
future.
Baa-- Bonds which are rated Baa are considered as medium
grade obligations, i.e., they are neither highly protected nor
poorly secured. Interest payments and principal security appear
adequate for the present, but certain protective elements may be
lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as
well.
Ba-- Bonds which are rated Ba are judged to have
speculative elements; their future cannot be considered as well
assured. Often the protection of interest and principal payments
may be very moderate and thereby not well safeguarded during both
good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B-- Bonds which are rated B generally lack
characteristics of the desirable investment. Assurance of
interest and principal payments or of maintenance of other terms
of the contract over any long period of time may be small.
A-1
<PAGE>
Caa-- Bonds which are rated Caa are of poor standing.
Such issues may be in default of there may be present elements of
danger with respect to principal or interest.
Ca-- Bonds which are rated Ca represent obligations
which are speculative to a high degree. Such issues are often in
default or have other marked shortcomings.
C-- Bonds which are rated C are the lowest class of
bonds and issues so rated can be regarded as having extremely
poor prospects of ever attaining any real investment standing.
Moody's applies modifiers to each rating classification
from Aa through B to indicate relative ranking within its rating
categories. The modifier "1" indicates that a security ranks in
the higher end of its rating category; the modifier "2" indicates
a mid-range ranking; and the modifier "3" indicates that the
issue ranks in the lower end of its rating category.
Descriptions of the bond ratings of Standard & Poor's
Corporation are as follows:
AAA-- Debt rated AAA has the highest rating assigned by
Standard & Poor's. Capacity to pay interest and repay principal
is extremely strong.
AA-- Debt rated AA has a very strong capacity to pay
interest and repay principal and differs from the higher rated
issues only in small degree.
A-- Debt rated A has a strong capacity to pay interest
and repay principal although it is somewhat more susceptible to
the adverse effects of changes in circumstances and economic
conditions than debt in higher rated categories.
BBB-- Debt rated BBB is regarded as having an adequate
capacity to pay interest and repay principal. Whereas it
normally exhibits adequate protection parameters, adverse
economic conditions or changing circumstances are more likely to
lead to a weakened capacity to pay interest and repay principal
for debt in this category than for debt in higher rated
categories.
BB, B, CCC, CC, or C -- Debt rated BB, B, CCC, CC or C
is regarded, on balance, as predominantly speculative with
respect to the issuer's capacity to pay interest and repay
principal in accordance with the terms of the obligation. While
such debt will likely have some quality and protective
characteristics,these are outweighed by large uncertainties or
major risk exposures to adverse debt conditions.
C1-- The rating C1 is reserved for income bonds on which
no interest is being paid.
A-2
<PAGE>
D-- Debt rated D is in default and payment of interest
and/or repayment of principal is in arrears.
The ratings from AAA to CC may be modified by the
addition of a plus (+) or minus (-) sign to show relative
standing within the major rating categories.
Descriptions of the bond ratings of Fitch Investors
Service, Inc. are as follows:
AAA-- Securities of this rating are regarded as strictly
high-grade, broadly marketable, suitable for investment by
trustees and fiduciary institutions, and liable to but slight
market fluctuation other than through changes in the money rate.
The factor last named is of importance varying with the length of
maturity. Such securities are mainly senior issues of strong
companies, and are most numerous in the railway and public
utility fields, though some industrial obligations have this
rating. The prime feature of an AAA rating is showing of
earnings several times or many times interest requirements with
such stability of applicable earnings that safety is beyond
reasonable question whatever changes occur in conditions. Other
features may enter in, such stability of applicable earnings
conditions. Other features may enter in, such as a wide margin
of protection through collateral security or direct lien on
specific property as in the case of high class equipment
certificates or bonds that are first mortgages on valuable real
estate. Sinking funds or voluntary reduction of the debt by call
or purchase are often factors, while guarantee or assumption by
parties other than the original debtor may also influence the
rating.
AA-- Securities in this group are of safety virtually
beyond question, and as a class are readily salable while many
are highly active. Their merits are not greatly unlike those of
the AAA class, but a security so rated may be of junior though
strong lien-- in many cases directly following an AAA security--
or the margin of safety is less strikingly broad. The issue may
be the obligation of a small company, strongly secured but
influenced as to ratings by the lesser financial power of the
enterprise and more local type of market.
A-- A securities are strong investments and in many
cases of highly active market, but are not so heavily protected
as the two upper classes or possibly are of similar security but
less quickly salable. As a class they are more sensitive in
standing and market to material changes in current earnings of
the company. With favoring conditions such securities are likely
to work into a high rating, but in occasional instances changes
cause the rating to be lowered.
BBB-- BBB rated bonds are considered to be investment
grade and of satisfactory quality. The obligor's ability to pay
interest and repay principal is considered to be adequate.
A-3
<PAGE>
Adverse changes in economic conditions and circumstances,
however, are more likely to weaken this ability than bonds with
higher ratings.
BB-- BB rated bonds are considered speculative. The
obligor's ability to pay interest and repay principal may be
affected over time by adverse economic changes. However, business
and financial alternatives can be identified which could assist
the obligor in satisfying its debt service requirements.
B-- B rated bonds are considered highly speculative.
While bonds in this class are currently meeting debt service
requirements, the probability of continued timely payment of
principal and interest reflects the obligor's limited margin of
safety and the need for reasonable business and economic activity
throughout the life of the issue.
CCC-- CCC rated bonds have certain identifiable
characteristics that, if not remedied, may lead to default. The
ability to meet obligations requires an advantageous business and
economic environment.
CC-- CC rated bonds are minimally protected. Default in
payment of interest and/or principal seems probable over time.
C-- C rated bonds are in imminent default in payment of
interest or principal.
DDD, DD and D-- These bonds are in default on interest
and/or principal payments. Such bonds are extremely speculative
and should be valued on the basis of their ultimate recovery
value in liquidation or reorganization of the obligor. 'DDD'
represents the highest potential for recovery on these bonds, and
'D' represents the lowest potential for recovery.
Plus (+) and minus (-) signs are used with a rating
symbol to indicate the relative position of a credit within the
rating agency. Plus and minus signs, however, are not used in
the 'AAA' and "D' categories.
Descriptions of the bond ratings of Duff & Phelps Credit
Rating Co. are as follows:
AAA-- Highest credit quality. The risk factors are
negligible.
AA+, AA, AA-: High credit quality. Protection factors
are strong. Risk is modest but may vary slightly from time to
time because of economic conditions.
A+, A, A-: Protection factors are average but adequate.
However, risk factors are more variable and greater in periods of
economic stress.
A-4
<PAGE>
BBB+, BBB, BBB-: Below average protection factors but
still considered sufficient for prudent investment. Considerable
variability in risk during economic cycles.
BB+, BB, BB-: Below investment grade but deemed likely
to meet obligations when due. Present or prospective financial
protection factors fluctuate according to industry conditions or
company fortunes. Overall quality may move up or down frequently
within this category.
B+, B, B-: Below investment grade and possessing risk
that obligations will not be met when due. Financial protection
factors will fluctuate widely according to economic cycles,
industry conditions and/or company fortunes. Potential exists
for frequent changes in the rating within this category or into a
higher or lower rating grade.
CCC: Well below investment grade securities.
Considerable uncertainty exists as to timely payment of
principal, interest or preferred dividends. Protection factors
are narrow and risk can be substantial with unfavorable
economic/industry conditions, and/or with unfavorable company
developments.
DD: Defaulted debt obligations. Issuer failed to meet
scheduled principal and/or interest payments.
A-5
00250157.AT6
<PAGE>
C. OTHER INFORMATION
Item 24. FINANCIAL STATEMENTS AND EXHIBITS:
(a) Financial Statements:
For financial statements, which are part of this Registration
Statement see "Financial Highlights" in the Prospectuses and
"Financial Statements" in the Statements of Additional
Information.
(b) Exhibits:
1. Agreement and Declaration of Trust (previously filed
with Pre-Effective Amendment No. 1 to the Registrant's
Registration Statement on July 8, 1987); Amendment No.
1 to Agreement and Declaration of Trust (previously
filed with Pre-Effective Amendment No. 1 to the
Registrant's Registration Statement on July 8, 1987);
Amendment No. 2 to Agreement and Declaration of Trust
(previously filed with Post-Effective Amendment No. 11
to the Registrant's Registration Statement on June 28,
1993).
2. By-Laws (previously filed with Post-Effective
Amendment No. 1 to the Registrant's Registration
Statement on April 29, 1988); Amendment to By-Laws
dated October 16, 1991 (previously filed with Post-
Effective Amendment No. 9 to the Registrant's
Registration Statement on August 31, 1992).
3. Not applicable.
4(a). Specimen Share Certificate with respect to (a) The
Equitable Growth Fund; (b) The Equitable Balanced
Fund; (c) The Equitable Government Securities Fund;
(d) The Equitable Tax Exempt Fund; (e) The Equitable
Growth and Income Fund; and (f) The Equitable Short-
Term World Income Fund (previously filed with Post-
Effective Amendment No. 6 to the Registrant's
Registration Statement on February 8, 1991).
4(b). Specimen Share Certificate with respect to (a) The
Equitable Aggressive Growth Fund; (b) The Equitable
Short-Term U.S. Government Fund; (c) The Equitable
Conservative Investors Fund; and (d) The Equitable
Growth Investors Fund (previously filed with Post-
Effective Amendment No. 9 to the Registrant's
Registration Statement on August 31, 1992).
4(c). Portions of the Registrant's Agreement and Declaration
of Trust and By-Laws pertaining to shareholders'
rights (previously filed with Post-Effective Amendment
<PAGE>
No. 11 to the Registrant's Registration Statement on
June 28, 1993).
5(a). Form of Investment Advisory Agreement between the
Registrant and Alliance Capital Management L.P.
(previously filed with Post-Effective Amendment No. 11
to the Registrant's Registration Statement on June 28,
1993).
6(a). Form of Distribution Services Agreement between the
Registrant and Alliance Fund Distributors, Inc.
(previously filed with Post-Effective Amendment No. 11
to the Registrant's Registration Statement on June 28,
1993).
6(b). Form of Selected Dealers Agreement between Alliance
Fund Distributors, Inc. and selected dealers offering
shares of the Registrant (previously filed with Post-
Effective Amendment No. 11 to the Registrant's
Registration Statement on June 28, 1993).
6(c). Form of Selected Agents Agreement between Alliance
Fund Distributors, Inc. and selected agents making
available shares of the Registrant (previously filed
with Post-Effective Amendment No. 11 to the
Registrant's Registration Statement on June 28, 1993).
7. Not applicable.
8. Custodian Agreement between the Registrant and State
Street Bank and Trust Company (previously filed with
Post-Effective Amendment No. 2 to the Registrant's
Registration Statement on November 21, 1988).
9(a). Transfer Agent Agreement between the Registrant and
State Street Bank and Trust Company (previously filed
with Post-Effective Amendment No. 4 to the
Registrant's Registration Statement on June 29, 1989).
9(b). Accounting Agreement between Equitable Capital
Management Corporation and State Street Bank and Trust
Company concerning (a) The Equitable Growth Fund; (b)
The Equitable Balanced Fund; (c) The Equitable
Government Securities Fund; and (d) The Equitable Tax
Exempt Fund (previously filed with Post-Effective
Amendment No. 4 to the Registrant's Registration
Statement on June 29, 1989).
10. Opinion and Consent of Counsel (previously filed with
Post-Effective Amendment No. 9 to the Registrant's
Registration Statement on August 31, 1992).
11. Consent of Independent Accountants - filed herewith.
<PAGE>
12. Not applicable.
13. Investment Letter of The Equitable Life Assurance
Society of the United States (previously filed with
Pre-Effective Amendment No. 2 to the Registrant's
Registration Statement on October 19, 1987).
14. Not applicable.
15(a). Amended and Restated Distribution Plan applicable to
the Registrant's Class A shares (previously filed with
Post-Effective Amendment No. 11 to the Registrant's
Registration Statement on June 28, 1993).
15(b). Amended and Restated Distribution Plan applicable to
the Registrant's Class B shares (previously filed with
Post-Effective Amendment No. 11 to the Registrant's
Registration Statement on June 28, 1993).
15(c). Form of Distribution Plan applicable to the
Registrant's Class C shares (previously filed with
Post-Effective Amendment No. 11 to the Registrant's
Registration Statement on June 28, 1993).
16. Schedule for computation of performance quotations
(previously filed with Post-Effective Amendment No. 15
to the Registrant's Registration Statement on January
27, 1995).
17. Financial Data Schedule.
Item 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH
REGISTRANT
As of December 30, 1994 the Registrant, The Alliance
Portfolios, believes that no person is directly or
indirectly controlled by or under common control with
the Registrant.
<PAGE>
Item 26. NUMBER OF HOLDERS OF SECURITIES
(as of May 24, 1995)
(1) (2)
Number of Record
TITLE OF CLASS HOLDERS
______________ ________________
Class A shares of
beneficial interest
of Alliance Growth Fund 20,239
Class B shares of
beneficial interest
of Alliance Growth Fund 92,071
Class C shares of
beneficial interest of
Alliance Growth Fund 9,315
Class A shares of
beneficial interest of
Alliance Strategic Balanced
Fund 993
Class B shares of
beneficial interest
of Alliance Strategic
Balanced Fund 3,431
Class C shares of
beneficial interest of
Alliance Strategic
Balanced Fund 264
Class A shares of
beneficial interest of
Alliance Short-Term
U.S. Government Fund 141
Class B shares of
beneficial interest
of Alliance Short-Term
U.S. Government Fund 276
Class C shares of
beneficial interest of
Alliance Short-Term
U.S. Government Fund 156
<PAGE>
Class A shares of
beneficial interest of
Alliance Growth Investors
Fund 2,059
Class B shares of
beneficial interest of
Alliance Growth Investors
Fund 4,446
Class C shares of
beneficial interest of
Alliance Growth Investors
Fund 491
Class A shares of
beneficial interest of
Alliance Conservative
Investors Fund 1,040
Class B shares of
beneficial interest of
Alliance Conservative
Investors Fund 2,245
Class C shares of
beneficial interest of
Alliance Conservative
Investors Fund 399
Item 27. INDEMNIFICATION
Paragraph (n) of Section 3, Article IV of the
Registrant's Agreement and Declaration of Trust
provides in relevant part that the Trustees of the
Trust have the power:
"(n) To purchase and pay for entirely out of Trust
property such insurance as they may deem necessary or
appropriate for the conduct of the business, including
without limitation, insurance policies insuring the
assets of the Trust and payment of distributions and
principal on its portfolio investments, and insurance
policies insuring the Shareholders, Trustees,
officers, employees, agents, investment advisers or
managers, principal underwriters, or independent
contractors of the Trust individually against all
claims and liabilities of every nature arising by
reason of holding, being or having held any such
office or position, or by reason of any action alleged
to have been taken or omitted by any such person as
Shareholder, Trustee, officer, employee, agent,
<PAGE>
investment adviser or manager, principal underwriter,
or independent contractor, including any action taken
or omitted that may be determined to constitute
negligence, whether or not the Trust would have the
power to indemnify such person against such
liability;"
Section 2 of Article VII of the Registrant's Agreement
and Declaration of Trust provides in relevant part:
"Limitation of Liability
Section 2. The Trustees shall not be responsible
or liable in any event for any neglect or wrongdoing
of any officer, agent, employee, manager or principal
underwriter of the Trust, nor shall any Trustee be
responsible for the act or omission of any other
Trustee, but nothing herein contained shall protect
any Trustee against any liability to which he or she
would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of his
or her office."
Article VIII of the Registrant's Agreement and
Declaration of Trust provides in relevant part:
ARTICLE VIII
Indemnification
"Section 1. The Trust shall indemnify each of its
Trustees and officers (including persons who serve at
the Trust's request as directors, officers or trustees
of another organization in which the Trust has any
interest as a shareholder, creditor or otherwise)
(hereinafter referred to as a "Covered Person")
against all liabilities and expenses, including but
not limited to amounts paid in satisfaction of
judgments, in compromise or as fines and penalties,
and counsel fees reasonably incurred by any Covered
Person in connection with the defense or disposition
of any action, suit or other proceeding, whether civil
or criminal, before any court or administrative or
legislative body, in which such Covered Person may be
or may have been involved as a party or otherwise or
with which such Covered Person may be or may have been
threatened, while in office or thereafter, by reason
of being or having been such a Covered Person except
with respect to any matter as to which such Covered
Person shall have been finally adjudicated in any such
action, suit or other proceeding to be liable to the
Trust or its Shareholders by reason of wilful
misfeasance, bad faith, gross negligence or reckless
<PAGE>
disregard of the duties involved in the conduct of
such Covered Person's office. Expenses, including
counsel fees so incurred by any such Covered Person
(but excluding amounts paid in satisfaction of
judgments, in compromise or as fines or penalties),
shall be paid from time to time by the Trust in
advance of the final disposition of any such action,
suit or proceeding upon receipt of an undertaking by
or on behalf of such Covered Person to repay amounts
so paid to the Trust if it is ultimately determined
that indemnification of such expenses is not
authorized under this Article, provided, however, that
either (a) such Covered Person shall have provided
appropriate security for such undertaking, (b) the
Trust shall be insured against losses arising from any
such advance payments or (c) either a majority of the
disinterested Trustees acting on the matter (provided
that a majority of the disinterested Trustees then in
office act on the matter), or independent legal
counsel in a written opinion, shall have determined,
based upon a review of readily available facts (as
opposed to a full trial type inquiry) that there is
reason to believe that such Covered Person will be
found entitled to indemnification under this Article.
"Section 2. As to any matter disposed of (whether
by a compromise payment, pursuant to a consent decree
or otherwise) without an adjudication by a court, or
by any other body before which the proceeding was
brought, that such Covered Person is liable to the
Trust or its Shareholders by reason of wilful
misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of his
or her office, indemnification shall be provided if
(a) approved as in the best interests of the Trust,
after notice that it involves such indemnification, by
at least a majority of the disinterested Trustees
acting on the matter (provided that a majority of the
disinterested Trustees then in office act on the
matter) upon a determination, based upon a review of
readily available facts (as opposed to a full trial
type inquiry) that such Covered Person is not liable
to the Trust or its Shareholders by reason or wilful
misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of his
or her office, or (b) there has been obtained an
opinion in writing of independent legal counsel, based
upon a review of readily available facts (as opposed
to a full trial type inquiry) to the effect that such
indemnification would not protect such Person against
any liability to the Trust to which he would otherwise
be subject by reason of wilful misfeasance, bad faith,
gross negligence or reckless disregard of the duties
involved in the conduct of his office. Any approval
<PAGE>
pursuant to this Section shall not prevent the
recovery from any Covered Person in accordance with
this Section as indemnification if such Covered Person
is subsequently adjudicated by a Court of competent
jurisdiction to have been liable to the Trust or its
Shareholders by reason or wilful misfeasance, bad
faith, gross negligence or reckless disregard of the
duties involved in the conduct of such Covered
Person's office.
Section 3. The right of indemnification hereby
provided shall not be exclusive of or affect any other
rights to which such Covered Person may be entitled.
As used in this Article VIII, the term "Covered
Person" shall include such person's heirs, executors
and administrators and a "disinterested Trustee" is a
Trustee who is not an "interested person" of the Trust
as defined in Section 2(a)(19) of the Investment
Company Act of 1940, as amended, (or who has been
exempted from being an "interested person" by any
rule, regulation or order of the Commission) and
against whom none of such actions, suits or other
proceedings or another action, suit or proceeding on
the same or similar grounds is then or has been
pending. Nothing contained in this Article shall
affect any rights to indemnification to which
personnel of the Trust, other than Trustees or
officers, and other persons may be entitled by
contract or otherwise under law, nor the power of the
Trust to purchase and maintain liability insurance on
behalf of any such person.
Section 2 of Article IX of the Registrant's Agreement
and Declaration of Trust provides in relevant part:
"TRUSTEE'S GOOD FAITH ACTION, EXPERT ADVICE, NO BOND
OR SURETY
Section 2. The exercise by the Trustees of their
powers and discretions hereunder shall be binding upon
everyone interested. A Trustee shall be liable for
his or her own willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties
involved in the conduct of the office of Trustee, and
for nothing else, and shall not be liable for errors
of judgment or mistakes of fact or law. The Trustees
may take advice of counsel or other experts with
respect to the meaning and operation of this
Declaration of Trust, and shall be under no liability
for any act or omission in accordance with such advice
or for failing to follow such advice. The Trustees
shall not be required to give any bond as such, nor
any surety if a bond is required."
<PAGE>
_____________
The form of Investment Advisory Agreement between
the Registrant and Alliance Capital Management L.P.
provides that Alliance Capital Management L.P. will
not be liable under such agreement for any mistake of
judgment or in any event whatsoever except for lack of
good faith and that nothing therein shall be deemed to
protect, or purport to protect, Alliance Capital
Management L.P. against any liability to the
Registrant or its shareholders to which it would
otherwise be subject by reason or willful misfeasance,
bad faith or gross negligence in the performance of
its duties thereunder, or by reason or reckless
disregard of its obligations or duties thereunder.
The form of Distribution Services Agreement between
the Registrant and Alliance Fund Distributors, Inc.
provides that the Registrant will indemnify, defend
and hold Alliance Fund Distributors, Inc., and any
person who controls it within the meaning of Section
15 of the Investment Company Act of 1940, free and
harmless from and against any and all claims, demands,
liabilities and expenses which Alliance Fund
Distributors, Inc. or any controlling person may incur
arising out of or based upon any alleged untrue
statement of a material fact contained in Registrant's
Registration Statement, Prospectus or Statement of
Additional Information or arising out of, or based
upon, any alleged omission to state a material fact
required to be stated in any one of the foregoing or
necessary to make the statements in any one of the
foregoing not misleading, provided that nothing
therein shall be so construed as to protect Alliance
Fund Distributors, Inc. against any liability to
Registrant or its security holders to which it would
otherwise be subject by reason or willful misfeasance,
bad faith or gross negligence in the performance of
its duties thereunder, or by reason of reckless
disregard of its obligations or duties thereunder.
The foregoing summaries are qualified by the entire
text of Registrant's Agreement and Declaration of
Trust, the Advisory Agreement between the Registrant
and Alliance Capital Management L.P., the Advisory
Agreements between the Registrant and Equitable
Capital Management Corporation and the Distribution
Services Agreement between the Registrant and Alliance
Fund Distributors, Inc.
The Registrant participates in a joint directors
and officers liability policy for the benefit of its
Trustees and officers.
<PAGE>
Insofar as indemnification for liabilities arising
under the Securities Act of 1933 (the "Act") may be
permitted to Trustees, Officers and controlling
persons of the Trust pursuant to the foregoing
provisions, or otherwise, the Registrant has been
advised that in the opinion of the Securities and
Exchange Commission, such indemnification is against
public policy as expressed in the act, and is,
therefore, unenforceable. In the event that a claim
for indemnification against such liabilities (other
than the payment by the Trust of expenses incurred or
paid by a Trustee, Officer or controlling person of
the Trust in the successful defense of any action,
suit or proceeding) is asserted by such Trustee,
Officer or controlling person in connection with the
securities being registered, the Trust will, unless in
the opinion of its counsel the matter has been settled
by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such
indemnification by it is against public policy as
expressed in the Act and will be governed by the final
adjudication of such issue.
Item 28. BUSINESS AND OTHER CONNECTIONS OF ADVISER.
The descriptions of Alliance Capital Management L.P.
under the captions "Management of the Trust" in the
Prospectus and in the Statement of Additional
Information constituting Parts A and B, respectively,
of this Registration Statement are incorporated by
reference herein.
Alliance Capital Management L.P. acts as investment
adviser to, in addition to Registrant, the following
investment companies:
ACM Government Income Fund, Inc.
ACM Government Opportunity Fund, Inc.
ACM Government Securities Fund, Inc.
ACM Government Spectrum Fund, Inc.
ACM Managed Dollar Income Fund, Inc.
ACM Managed Income Fund, Inc.
ACM Managed Multi-Market Trust, Inc.
ACM Municipal Securities Income Fund, Inc.
ACM Institutional Reserves, Inc.
AFD Exchange Reserves, Inc.
Alliance All-Asia Investment Fund, Inc.
Alliance All-Market Advantage Fund, Inc.
Alliance Balanced Shares, Inc.
Alliance Bond Fund, Inc.
Alliance Capital Reserves
Alliance Counterpoint Fund
<PAGE>
Alliance Developing Markets Fund, Inc.
Alliance Global Dollar Government Fund, Inc.
Alliance Global Environment 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 II
Alliance Municipal Income Fund, Inc.
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 Dollar Government Fund, Inc.
Alliance World Dollar Government Fund II, Inc.
Alliance World Income Trust, Inc.
Alliance Worldwide Privatization Fund, Inc.
Fiduciary Management Associates
The Hudson River Trust
The Alliance Fund, Inc.
The Global Privatization Fund, Inc.
The Austria Fund, Inc.
The Korean Investment Fund, Inc.
The Southern Africa Fund, Inc.
The Spain Fund, Inc.
The information as to the directors and executive officers of
Alliance Capital Management Corporation, the general partner of
Alliance Capital Management L.P., set forth in Alliance Capital
Management L.P.'s Form ADV filed with the Securities and Exchange
Commission on April 21, 1988 (File No. 801-32361) and amended
through the date hereof, is incorporated by reference.
ITEM 29. Principal Underwriters
(a) Alliance Fund Distributors, Inc., the Registrant's
Principal Underwriter in connection with the sale of
shares of the Registrant, also acts as principal
Underwriter or Distributor for the following
investment companies:
<PAGE>
ACM Institutional Reserves, Inc.
AFD Exchange Reserves
Alliance Balanced Shares, Inc.
Alliance Bond Fund, Inc.
Alliance Capital Reserves
Alliance Counterpoint Fund
Alliance Global Small Cap Fund, Inc.
Alliance Government Reserves
Alliance Global Dollar Government Fund, Inc.
Alliance Growth and Income Fund, Inc.
Alliance Income Builder Fund, Inc.
Alliance International 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.
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 Utility Income Fund, Inc.
Alliance Variable Products Series Fund, Inc.
Alliance World Income Trust, Inc.
Alliance Worldwide Privatization Fund, Inc.
Fiduciary Management Associates
The Alliance Fund, Inc.
Alliance Technology Fund, Inc.
The Hudson River Trust
(b) The following are the Directors and Officers of
Alliance Fund Distributors, Inc., the principal place
of business of which is 1345 Avenue of the Americas,
New York, New York, 10105.
Positions and
Position and Offices Offices
Name with Underwriter with Registrant
____ ____________________ ________________
John D. Carifa Chairman Chairman and
President
Robert L. Errico President
Michael J. Laughlin Executive Vice President
<PAGE>
Kimberly A.
Baumgardner Senior Vice President
Edmund P. Bergan, Senior Vice President Clerk
Jr. & General Counsel
Daniel J. Dart Senior Vice President
Byron M. Davis Senior Vice President
Geoffrey L. Hyde Senior Vice President
Barbara J. Krumsiek Senior Vice President Vice President
William F. O'Grady Senior Vice President
Dusty W. Paschall Senior Vice President
Antonios G. Senior Vice President
Poleonadkis
Richard K. Saccullo Senior Vice President
Gregory K. Senior Vice President
Shannahan
James P. Syrett Senior Vice President
Peter J. Szabo Senior Vice President
Richard A. Winge Senior Vice President
Jim A. Yockey Senior Vice President
Robert H. Joseph Vice President & Controller
Michael T. Anderson Vice President
Kenneth F. Barkoff Vice President
William P. Vice President
Beanblossom
Kevin T. Cannon Vice President
Mark J. Dunbar Vice President
Deirdre E. Duffy Vice President
Linda A. Finnerty Vice President
Sheila M. Flynn Vice President
Robert M. Frank Vice President
<PAGE>
Gerard J. Friscia Vice President
Mark D. Gersten Vice President Treasurer and
Chief Financial
Officer
Troy L. Glawe Vice President
James E. Gunter Vice President
Alan Halfenger Vice President
Steven P. Hecht Vice President
George R. Hrabovsky Vice President
Valerie J. Hugo Vice President
Mark H. Huston Vice President
Walter P. Kehoe Vice President
Marek E. Lakotko Vice President
Sheila F. Lamb Vice President
Stephen R. Laut Vice President
Thomas Leavitt, III Vice President
Christopher J. Vice President
MacDonald
John A. McClain Vice President
Gregory T. McCombs Vice President
Daniel D. McGinley Vice President
Matthew P. Mintzer Vice President
Nicole M. Nolan Vice President
Robert T. Pigozzi Vice President
Bruce W. Reitz Vice President
David P. Lambert Assistant Vice President
Nicholas J. Lapi Assistant Vice President
Michael F. Mahoney Assistant Vice President
<PAGE>
Shawn P. McClain Assistant Vice President
Maura A. McGrath Assistant Vice President
Paul J. McIntyre Assistant Vice President
Kevin M. McLoughlin Assistant Vice President
Charles R. Mechler Assistant Vice President
Thomas F. Monnerat Assistant Vice President
Mark A. Moore Assistant Vice President
Joanna D. Murray Assistant Vice President
Jeanette M. Nardella Assistant Vice President
William E. Noe Assistant Vice President
Marilyn I. Noonan Assistant Vice President
Robert E. Powers Assistant Vice President
Patrick J. Pung Assistant Vice President
Carol H. Rappa Assistant Vice President
Karen C. Satterberg Assistant Vice President
Raymond S. Scalfani Assistant Vice President
Rodney J. Schull Assistant Vice President
Robert M. Smith Assistant Vice President
William J. Strott Assistant Vice President
Joseph T. Tocyloski Assistant Vice President
Neil B. Wood Assistant Vice President
Joseph F. Sumanski Vice President
Nicholas K. Willett Vice President
Richard D. Allen Assistant Vice President
Warren W. Babcock Assistant Vice President
III
Benji A. Baer Assistant Vice President
Angela F. Bisagna Assistant Vice President
<PAGE>
Casimir F. Assistant Vice President
Bolanowski
Maria L. Carreras Assistant Vice President
Leo H. Cook Assistant Vice President
John W. Cronin Assistant Vice President
Richard W. Dabney Assistant Vice President
Gerard P. DiSalvo Assistant Vice President
Sohaila S. Farsheed Assistant Vice President
Leon M. Fern Assistant Vice President
William C. Fisher Assistant Vice President
Joseph W. Gibson Assistant Vice President
William B. Hanigan Assistant Vice President
Alan C. Hanson Assistant Vice President
Daniel M. Hazard Assistant Vice President
Vicky M. Hayes Assistant Vice President
John C. Hershock Assistant Vice President
Kenneth R. Hill Assistant Vice President
William C. Howard Assistant Vice President
Thomas K. Intoccia Assistant Vice President
Edward W. Kelly Assistant Vice President
Donna M. Lamback Assistant Vice President
Mark R. Manley Assistant Secretary
(c) Not applicable.
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS.
The accounts, books and other documents required to be
maintained by Section 31(a) of the Investment Company
Act of 1940 and the Rules thereunder are maintained as
follows: journals, ledgers, securities records and
other original records are maintained principally at
the offices of Alliance Fund Services, Inc., 500 Plaza
<PAGE>
Drive, Secaucus, New Jersey 07094 and at the offices
of State Street Bank and Trust Company, the
Registrant's Custodian, 225 Franklin Street, Boston,
Massachusetts 02110. All other records so required
to be maintained are maintained at the offices of
Alliance Capital Management L.P., 1345 Avenue of the
Americas, New York, New York 10105.
ITEM 31. MANAGEMENT SERVICES.
Not applicable.
ITEM 32. UNDERTAKINGS.
Not applicable.
<PAGE>
********************
NOTICE
A copy of the Agreement and Declaration of Trust of The
Alliance Portfolios (the "Trust") is on file with the Secretary
of State of The Commonwealth of Massachusetts and notice is
hereby given that this Registration Statement has been executed
on behalf of the Trust by an officer of the Trust as an officer
and by its Trustees as trustees and not individually and the
obligations of or arising out of this Registration Statement are
not binding upon any of the Trustees, officers or shareholder
individually but are binding only upon the assets and property of
the Trust.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933,
as amended, and the Investment Company Act of 1940, as amended,
the Registrant certifies that it meets all of the requirements
for effectiveness of this Amendment to its Registration Statement
pursuant to Rule 485(b) under the Securities Act of 1933 and has
duly caused this Amendment to its Registration Statement to be
signed on its behalf by the undersigned, thereunto duly
authorized, in the City of New York and State of New York, on the
1st day of June, 1995.
THE ALLIANCE PORTFOLIOS
by /s/ John D. Carifa
_______________________
Chairman and President
Pursuant to the requirements of the Securities Act of 1933,
as amended, this Amendment to the Registration Statement has been
signed below by the following persons in the capacities and on
the dates indicated:
Signature Title Date
_________ _____ ____
1) Principal
Executive Officer
/s/ John D. Carifa Chairman and June 1, 1995
___________________ President
John D. Carifa
2) Principal Financial
and Accounting Officer
/s/ Mark D. Gersten Treasurer and Chief June 1, 1995
___________________ Financial Officer
Mark D. Gersten
<PAGE>
ALL OF THE TRUSTEES
Alberta B. Arthurs
Ruth Block
John D. Carifa
Richard W. Couper
Brenton W. Harries
Donald J. Robinson
by \s\ Edmund P. Bergan, Jr. June 1, 1995
_______________________
(Attorney-in-fact)
Edmund P. Bergan, Jr.
<PAGE>
EXHIBIT INDEX
Exhibit Sequential
No. Description Page No.
________ ___________ ___________
(11) Consent of Independent
Accountants.
(27) Financial Data Schedules.
26
00250157.AT6
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
THE ALLIANCE PORTFOLIOS
STRATEGIC BALANCED FUND
<ARTICLE> 6
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUL-31-1995
<PERIOD-END> JAN-31-1995
<INVESTMENTS-AT-COST> 52,551,803
<INVESTMENTS-AT-VALUE> 51,431,921
<RECEIVABLES> 893,084
<ASSETS-OTHER> 92,347
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 52,417,352
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 188,109
<TOTAL-LIABILITIES> 188,109
<SENIOR-EQUITY> 37
<PAID-IN-CAPITAL-COMMON> 54,142,602
<SHARES-COMMON-STOCK> 3,739,409
<SHARES-COMMON-PRIOR> 3,989,577
<ACCUMULATED-NII-CURRENT> 82,593
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (854,144)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (1,141,845)
<NET-ASSETS> 52,229,243
<DIVIDEND-INCOME> 613,327
<INTEREST-INCOME> 377,361
<OTHER-INCOME> 0
<EXPENSES-NET> 551,204
<NET-INVESTMENT-INCOME> 439,484
<REALIZED-GAINS-CURRENT> 190,579
<APPREC-INCREASE-CURRENT> (1,769,785)
<NET-CHANGE-FROM-OPS> (1,139,722)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 516,669
<DISTRIBUTIONS-OF-GAINS> 137,111
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 5,026,255
<NUMBER-OF-SHARES-REDEEMED> 9,130,511
<SHARES-REINVESTED> 592,250
<NET-CHANGE-IN-ASSETS> (5,305,508)
<ACCUMULATED-NII-PRIOR> 159,778
<ACCUMULATED-GAINS-PRIOR> (907,612)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 209,978
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 605,208
<AVERAGE-NET-ASSETS> 55,533,612
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
ALLIANCE PORTFOLIOS-GROWTH FUND
<ARTICLE> 6
<S> <C>
<PERIOD-TYPE> ANNUAL
<FISCAL-YEAR-END> OCT-31-1994
<PERIOD-END> OCT-31-1994
[INVESTMENTS-AT-COST] 1,080,670,868
[INVESTMENTS-AT-VALUE] 1,091,028,988
[RECEIVABLES] 22,083,178
[ASSETS-OTHER] 6,667
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 1,113,118,833
[PAYABLE-FOR-SECURITIES] 71,853,707
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 7,560,845
[TOTAL-LIABILITIES] 79,414,552
[SENIOR-EQUITY] 475
[PAID-IN-CAPITAL-COMMON] 1,003,037,288
[SHARES-COMMON-STOCK] 47,520,530
[SHARES-COMMON-PRIOR] 26,892,472
[ACCUMULATED-NII-CURRENT] 1,023,967
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] 18,977,186
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 10,665,365
[NET-ASSETS] 1,033,704,281
[DIVIDEND-INCOME] 6,843,726
[INTEREST-INCOME] 1,770,572
[OTHER-INCOME] 0
[EXPENSES-NET] 7,527,173
[NET-INVESTMENT-INCOME] 1,087,125
[REALIZED-GAINS-CURRENT] 7,686,932
[APPREC-INCREASE-CURRENT] 29,276,693
[NET-CHANGE-FROM-OPS] 38,050,750
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 0
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 483,284,661
[NUMBER-OF-SHARES-REDEEMED] 48,293,631
[SHARES-REINVESTED] 0
[NET-CHANGE-IN-ASSETS] 473,041,780
[ACCUMULATED-NII-PRIOR] 0
[ACCUMULATED-GAINS-PRIOR] 11,290,254
[OVERDISTRIB-NII-PRIOR] 63,158
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 2,953,562
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 7,527,173
[AVERAGE-NET-ASSETS] 781,195,813
[PER-SHARE-NAV-BEGIN] 0
[PER-SHARE-NII] 0
00250157.AY0
</TABLE>
<PAGE>
Consent of Independent Accountants
We hereby consent to the use in the Statement of Additional
Information constituting part of this Post-Effective Amendment
No. 16 to the registration statement on Form N-1A (the
"Registration Statement") of our reports dated September 20, 1994
and December 21, 1994 relating to the financial statements and
financial highlights of Alliance Strategic Balanced Fund and
Alliance Growth Fund, respectively, which appears in such
Statement of Additional Information, and to the incorporation by
reference of our reports into the Prospectus which constitutes
part of this Registration Statement. We also consent to the
references to us under the headings "Statements and Reports" and
"Independent Accountants" in such Statement of Additional
Information and to the reference to us under the heading
"Financial Highlights" in such Prospectuses.
We also consent to the incorporation by reference of our report
dated June 24, 1994 relating to the financial statements and
financial highlights of Alliance Growth Investors Fund and
Alliance Conservative Investors Fund and our report dated
October 14, 1994 relating to the financial statements and
financial highlights of Alliance Short-Term U.S. Government Fund
into this Registration Statement and to the references to us
under the headings "Statements and Reports" and "Independent
Accountants" in such Statement of Additional Information and to
the reference to us under the heading "Financial Highlights" in
such Prospectuses.
/s/ Price Waterhouse LLP
PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York
May 31, 1995
00250157.AY6
