Letter To Shareholders Alliance Growth Fund
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June 2, 1995
Dear Shareholder:
We are pleased to provide you with an update of Alliance Growth Fund's
performance and investment activity during its fiscal semi-annual period ended
April 30, 1995. The following table compares your Fund's total returns with
that of the overall U.S. stock market, represented by the unmanaged S&P
500-stock Index, and with the Russell 1000 Index, also unmanaged, which is
composed of the 1,000 largest U.S. stocks as measured by price-to-book ratios;
those with the highest ratios are considered growth stocks and the remaining
are considered value stocks.
Six Months Ended April 30, 1995
Total Return Ending NAV
------------ ----------
Alliance Growth Fund
Class A +4.04% $25.52
Class B +3.68% $21.53
Class C +3.63% $21.53
S&P 500 +10.45%
Russell 1000 +9.91%
The Fund's total returns are based on the net asset values of each class of
shares as of April 30; additional investment results appear on page 3.
INVESTMENT ENVIRONMENT
After a weak performance in the fall of 1994, the stock market turned up in
December and moved steadily higher through April with only minor corrections
along the way.
The biggest driving force behind the market's upward move has been a
substantial drop in long-term interest rates. It has been over a year now since
the Federal Reserve began to increase interest rates in order to rein in an
overly exuberant economy. This tightening policy left
1994 with the worst bond market returns since the 1920s. As 1995 has unfolded,
however, the weight of evidence has increasingly suggested that economic
activity is slowing down. The bond market, sensing that the Fed's restrictive
policy may soon be eased or reversed, has recovered much of the previous year's
loss.
Lower interest rates have historically had a positive impact on common stock
valuation. Thus far, this has been a more important influence than has concerns
that a slowing economy could produce disappointing corporate earnings later in
the year.
MARKET OUTLOOK
After such a strong and sustained move up, it is probably wise to expect a
period of consolidation or correction. As the year goes on, the positive
influence of lower interest rates may be replaced by growing concern about a
weakening earnings trend. The ideal result would be a 'soft landing' for the
economy, in which it would slow for a while but not enter into a recession. The
biggest risk is that the opposite could occur - a 'hard landing' - with
unforeseen stresses and weak earnings. It is too early to predict this outcome
with confidence. We do not, however, see the kind of excesses in the economy
which would lead us to fear a severe recession, nor do we believe that the
stock market is greatly overvalued. The Federal Reserve tightened early in this
cycle, lending credence to the possibility of only a deceleration of growth and
not a recession. Looking beyond the next few months, we are optimistic about
U.S. equities.
During much of the last year the market was led by the large multinational
consumer and health care stocks. This was partly a result of investors moving
toward companies with relatively stable growth characteristics in the face of a
slowing economy, and also a function of the positive impact on their earnings
from the weakness of the U.S. dollar. We think the latter trend may reverse and
we doubt that these stocks will continue to be market leaders. We continue to
emphasize technology and communications companies, which are experiencing
tremendous demand growth. Computer technology is driving the 'digital
revolution,' a phenomenon which we believe will last for a number of years. We
also continue to favor the financial services industry.
1
Alliance Growth Fund
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Thank you for your continued interest and investment in Alliance Growth Fund.
We look forward to updating you on its progress in the coming months.
Sincerely,
John D. Carifa
Chairman and President
Tyler J. Smith
Portfolio Manager
2
INVESTMENT RESULTS Alliance Growth Fund
- -------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN AS OF APRIL 30, 1995
CLASS A SHARES
--------------------------------------------
Without With
Sales Charge Sales Charge
--------------------------------
. One Year +9.22% +4.58%
. Since Inception* +21.28 +20.17
CLASS B SHARES
--------------------------------------------
Without With
Sales Charge Sales Charge
--------------------------------
. One Year +8.49% +4.49%
. Five Years +17.64 +17.64
. Since Inception* +19.28 +19.28
CLASS C SHARES
--------------------------------------------
. One Year +8.43%
. Since Inception* +7.86
The average annual total returns reflect investment of dividends and/or capital
gains distributions in additional shares-with and without the effect of the
4.25% maximum front-end sales charge for Class A or applicable contingent
deferred sales charge for Class B (4% year 1, 3% year 2, 2% year 3, 1% year 4);
Class C shares are not subject to front-end or contingent deferred sales
charges. Past performance does not guarantee future results. Investment return
and principal value will fluctuate so that an investor's shares, when redeemed,
may be worth more or less than their original cost.
* Inception: 9/4/90, Class A;10/23/87, Class B; 8/2/93, Class C.
3
TEN LARGEST HOLDINGS*
April 30, 1995 (unaudited) Alliance Growth Fund
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COMPANY VALUE PERCENT OF NET ASSETS
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Intel Corp. $68,042,106 4.8%
Sears Roebuck & Co. 67,134,375 4.7
cisco Systems, Inc. 59,326,563 4.2
American International Group, Inc. 56,353,325 4.0
Viacom, Inc. Cl.B 53,249,177 3.7
Motorola, Inc. 52,661,750 3.7
Travelers, Inc. 52,008,375 3.7
EMC Corp. 40,671,175 2.9
Eastman Kodak Co. 37,702,750 2.6
Mannesmann AG (ADR) 36,723,645 2.6
$523,873,241 36.9%
MAJOR PORTFOLIO CHANGES
Six Months Ended April 30, 1995 (unaudited)
SHARES
- -------------------------------------------------------------------------------
PURCHASES BOUGHT HOLDINGS 4/30/95
Air-Touch Communications, Inc. 721,000 1,170,700
cisco Systems, Inc. 900,000 1,549,000
Eastman Kodak Co. 372,800 655,700
Loews Corp. 223,600 317,600
Mannesmann AG (ADR) 135,000 135,000
Motorola, Inc. 507,000 926,800
Philip Morris Cos., Inc. 404,000 484,000
Sears Roebuck & Co. 436,500 1,237,500
Travelers, Inc. 707,000 1,257,000
U.S. Healthcare, Inc. 468,100 629,100
SALES SOLD HOLDINGS 4/30/95
Advanced Micro Devices, Inc. 415,200 -0-
Bethlehem Steel Corp. 723,500 -0-
Caterpillar, Inc. 175,000 -0-
Dell Computer Corp. pfd. 69,800 -0-
Emphesys Financial Group, Inc. 363,100 39,400
General Motors Corp. 356,000 496,500
Newmont Mining Corp. 347,175 -0-
Shawmut National Corp. 280,000 302,000
Texas Instruments, Inc. 193,000 -0-
Viacom, Inc. Cl.B 240,000 1,160,745
*Adjusted for market value of call options written.
4
PORTFOLIO OF INVESTMENTS
April 30, 1995 (unaudited) Alliance Growth Fund
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Company Shares Value
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COMMON STOCKS & OTHER INVESTMENTS - 99.6%
TECHNOLOG Y - 27.5%
ELECTRONICS - 19.3%
cisco Systems, Inc.(b)* 1,549,000 $ 61,669,563
EMC Corp.* 2,059,300 40,671,175
General Instrument Corp.(b)* 1,004,200 34,268,325
Intel Corp.(b) 738,300 75,629,606
Micron Technology, Inc. 104,500 8,595,125
Motorola, Inc.(b) 926,800 52,711,750
273,545,544
OFFICE EQUIPMENT & SERVICES - 1.1%
Dell Computer Corp.* 203,051 11,104,352
Silicon Graphics, Inc.(b)* 137,000 5,137,500
16,241,852
TELECOMMUNICATIONS - 7.1%
Air - Touch Communications, Inc.* 1,170,700 31,462,562
DSC Communications Corp.(b) 986,000 36,420,375
Millicom International Cellular S.A.* 275,000 6,875,000
QUALCOMM, Inc.* 41,400 1,078,988
Rogers Cantel Mobile Communications, Inc. Cl.B* 571,500 13,644,562
United States Cellular Corp.* 259,700 7,531,300
Vodafone PLC (ADR) 125,000 3,984,375
100,997,162
390,784,558
CREDIT SENSITIVE - 27.1%
BANKS - 1.1%
First Chicago Corp. 110,000 2,131,250
MBNA Corp. 170,000 5,142,500
Shawmut National Corp. 302,000 8,003,000
15,276,750
FINANCIAL SERVICES - 4.5%
American Express Co. 335,000 $ 11,641,250
Capital One Financial Corp. 203,000 4,085,375
Dean Witter, Discover & Co.(b) 150,000 6,356,250
Federal National Mortgage Assn. 112,800 9,954,600
First USA, Inc. 112,000 4,760,000
Franchise Financial Corp. of America 200,000 3,950,000
JP Realty, Inc. 609,300 11,576,700
Mercury Finance Co. 144,800 2,190,100
Merrill Lynch & Co., Inc. 50,000 2,275,000
Student Loan Marketing Assn. 186,000 7,533,000
64,322,275
INSURANCE - 13.0%
20th Century Industries, Inc. 1,118,300 13,559,387
Acceptance Insurance Cos., Inc.* 465,600 7,100,400
American International Group, Inc. 527,900 56,353,325
Delphi Financial Group, Inc.* 149,000 2,514,375
Emphesys Financial Group, Inc. 39,400 1,039,175
General Reinsurance Corp. 10,300 1,311,963
John Alden Financial Corp. 876,500 15,886,562
MGIC Investment Corp. 21,400 906,825
PennCorp Financial Group, Inc. 484,500 8,357,625
PMI Group, Inc. 71,700 2,670,825
Progressive Corp. (Ohio) 187,500 7,078,125
PXRE Corp.
common 58,200 1,425,900
cv. pfd. 50,000 2,475,000
TIG Holdings, Inc. 341,600 7,686,000
Travelers, Inc. 1,257,000 52,008,375
USF&G Corp. 227,500 3,355,625
183,729,487
5
PORTFOLIO OF INVESTMENTS (continued) Alliance Growth Fund
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Company Shares Value
- -------------------------------------------------------------------------------
REAL ESTATE - 7.4%
Amli Residential Properties Trust 204,000 $ 3,723,000
Associated Estates Realty Corp. 98,700 1,949,325
Avalon Properties, Inc. 60,700 1,191,238
CBL & Associates Properties, Inc. 244,000 4,758,000
Columbus Realty Trust 167,600 3,016,800
Essex Property Trust 201,900 3,280,875
Evans Withycombe Residential 77,500 1,453,125
First Industrial Realty Trust, Inc. 162,000 2,835,000
Gables Residential Trust 230,000 4,226,250
Highwoods Properties, Inc. 401,800 8,839,600
JDN Realty Corp. 59,500 1,100,750
Liberty Property, Inc. 85,000 1,583,125
Macerich Co. 391,400 7,876,925
Manufactured Home Communities, Inc. 235,000 3,701,250
Mid-America Apartment Communities, Inc. 75,700 1,892,500
Oasis Residential, Inc.
common 70,000 1,531,250
cv. pfd. 160,000 3,980,000
Paragon Group, Inc. 170,000 2,932,500
Regency Realty Corp. 39,000 619,125
Saul Centers, Inc. 238,000 4,016,250
Simon Property Group, Inc. 301,500 7,160,625
Spieker Properties, Inc. 211,200 4,118,400
Storage USA, Inc. 203,700 5,830,912
Summit Properties, Inc. 296,000 4,921,000
Sun Communities, Inc. 280,000 5,985,000
Tucker Properties Corp. 429,800 5,211,325
Walden Residential Properties, Inc. 222,100 4,275,425
Weeks Corp. 126,500 2,767,188
104,776,763
UTILITY-GAS - 0.6%
Enron Corp. 30,000 1,020,000
Renaissance Energy, Ltd. 334,000 7,554,060
8,574,060
UTILITY-TELEPHONE - 0.5%
Sprint Corp. 222,000 $ 7,326,000
384,005,335
CONSUMER NONCYCLICALS - 12.9%
DRUGS - 4.1%
Abbott Laboratories 274,000 10,788,750
Astra, Series A 400,000 11,671,920
Gensia, Inc.(a)* 68,500 573,688
Lilly (Eli) & Co. 41,000 3,064,750
Merck & Co., Inc. 378,000 16,206,750
Pfizer, Inc. 184,000 15,939,000
58,244,858
HOSPITAL SUPPLIES & SERVICES - 4.2%
Guidant Corp. 155,000 3,080,625
Healthsource, Inc.* 437,000 15,677,375
Quest Medical, Inc.* 265,225 2,320,719
U.S. Healthcare, Inc.(b) 629,100 16,749,787
United Healthcare Corp.(b) 608,900 22,072,625
59,901,131
TOBACCO - 4.6%
Loews Corp. 317,600 32,355,500
Philip Morris Cos., Inc. 484,000 32,791,000
65,146,500
183,292,489
CONSUMER CYCLICALS - 12.7%
AUTO & TRUCKS - 4.8%
Chrysler Corp.(b) 728,600 31,420,875
General Motors Corp.(b) 496,500 22,404,562
Cl.H 364,300 14,253,238
68,078,675
PHOTO & OPTICAL - 2.7%
Eastman Kodak Co. 655,700 37,702,750
RETAIL-GENERAL - 5.2%
Home Depot, Inc. 175,000 7,306,250
Sears Roebuck & Co. 1,237,500 67,134,375
74,440,625
180,222,050
6
Alliance Growth Fund
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Company Shares Value
- -------------------------------------------------------------------------------
BUSINESS SERVICES - 8.2%
PRINTING, PUBLISHING & BROADCASTING - 8.1%
Chris-Craft Industries, Inc. 21,238 $ 716,783
Comcast Corp., Cl. A (SPL) 250,000 3,921,875
Donnelley (R.R.) & Sons Co. 539,200 18,332,800
Grupo Television S.A. de C.V. (ADR) 25,000 496,875
Tele-Communications, Inc. Cl.A(b)* 1,683,500 32,302,156
Time Warner, Inc. 158,600 5,808,725
Viacom, Inc. Cl.B* 1,160,745 53,249,177
114,828,391
RAILROADS & EQUIPMENT - 0.1%
Conrail, Inc. 20,300 1,108,887
115,937,278
BASIC MATERIALS - 4.5%
ALUMINUM - 0.0%
Kaiser Aluminum Corp. 25,000 281,250
CHEMICALS - 3.4%
Du Pont E I De Nemours & Co. 50,000 3,293,750
Great Lakes Chemical Corp. 309,100 18,159,625
Lubrizol Corp. 164,000 5,719,500
Monsanto Co. 179,000 14,901,750
Union Carbide Corp. 180,000 5,760,000
47,834,625
PAPER - 0.7%
Bowater, Inc. 200,000 7,650,000
Jefferson Smurfit Group PLC* 167,400 2,249,437
9,899,437
STEEL - 0.4%
AK Steel Holding Corp.* 18,900 $ 507,938
National Steel Corp. 432,000 5,508,000
6,015,938
64,031,250
ENERGY - 3.4%
OIL SUPPLIES & CONSTRUCTION - 3.4%
Apache Corp. 130,000 3,510,000
Baker Hughes, Inc. 103,000 2,317,500
Energy Service Co., Inc.* 228,475 3,826,956
Enron Oil & Gas Co. 100,100 2,289,788
Seagull Energy Corp. 294,000 5,218,500
Western Atlas, Inc.* 328,600 14,787,000
YPF S.A. (ADS) 809,000 16,382,250
48,331,994
CAPITAL GOODS - 2.6%
MACHINERY - 2.6%
Mannesmann AG (ADR) 135,000 36,723,645
CONSUMER BASICS - 0.4%
HOUSEHOLD
PRODUCTS - 0.4%
Colgate-Palmolive Co. 50,000 3,512,500
Corning, Inc. 80,000 2,670,000
6,182,500
CONSUMER SERVICES - 0.3%
HOTELS &
RESTAURANTS - 0.3%
McDonald's Corp. 100,000 3,500,000
DIVERSIFIED - 0.0%
Hanson PLC (ADR)* 839,000 209,750
warrants, 9/30/97* 1,000,000 245,413
455,163
Total Common Stocks & Other Investments
(cost $1,341,515,594) 1,413,466,262
7
PORTFOLIO OF INVESTMENTS (continued) Alliance Growth Fund
- -------------------------------------------------------------------------------
Contracts (c),
or Principal
Amount
Company (000) Value
- -------------------------------------------------------------------------------
LONG-TERM DEBT SECURITIES - 0.5%
ELECTRONICS- 0.5%
Cypress Semiconductor Corp.
3.15%, 3/15/01 (a)
(cost $6,093,732) $ 6,500 $ 7,491,250
SHORT-TERM DEBT SECURITIES - 1.9%
Federal Home Loan Bank
5.83%, 5/05/95 10,000 9,993,522
Federal Home Loan
Mortgage Corp.
5.85%, 5/01/95 11,200 11,200,000
5.95%, 5/03/95 5,200 5,198,281
16,398,281
Total Short-Term Debt Securities
(amortized cost $26,391,803) 26,391,803
TOTAL INVESTMENTS - 102.0%
(cost $1,374,001,129) 1,447,349,315
OUTSTANDING CALL OPTIONS WRITTEN - (1.1%)
Chrysler Corp.
expiring May 1995
@ $44.63 120 (9,600)
expiring May 1995
@ $45.50 100 (34,000)
expiring May 1995
@ $44.88 80 (23,200)
cisco Systems, Inc.
expiring May 1995
@ $35.00 100 (512,500)
expiring June 1995
@ $33.88 50 (343,000)
expiring June 1995
@ $36.38 150 (825,000)
expiring July 1995
@ $39.00 100 (362,500)
expiring July 1995
@ $39.50 100 (300,000)
Dean Witter, Discover & Co.
expiring May 1995
@ $40.00 50 $ (121,875)
DSC Communications Corp.
expiring May 1995
@ $31.88 200 (1,050,000)
expiring May 1995
@ $35.25 50 (121,875)
expiring May 1995
@ $36.13 50 (106,250)
expiring May 1995
@ $35.38 50 (118,750)
expiring June 1995
@ $35.75 50 (150,000)
expiring June 1995
@ $34.13 150 (678,000)
expiring July 1995
@ $34.13 100 (400,000)
General Instrument Corp.
expiring May 1995
@ $28.75 100 (412,500)
expiring July 1995
@ $35.13 100 (218,750)
General Motors Corp.
expiring May 1995
@ $39.13 210 (1,023,750)
Intel Corp.
expiring May 1995
@ $70.25 200 (6,500,000)
expiring July 1995
@ $94.38 100 (1,087,500)
Motorola, Inc.
expiring May 1995
@ $58.00 100 (50,000)
Silicon Graphics, Inc.
expiring June 1995
@ $34.88 50 (168,750)
Tele-Communications, Inc.
expiring May 1995
@ $21.75 20 (200)
expiring May 1995
@ $21.13 150 (18,750)
8
Alliance Growth Fund
- -------------------------------------------------------------------------------
Company Contracts(c) Value
- -------------------------------------------------------------------------------
expiring May 1995
@ $21.88 30 $ (300)
expiring June 1995
@ $20.75 40 (20,800)
U.S. Healthcare, Inc.
expiring May 1995
@ $44.00 100 (6,250)
expiring June 1995
@ $41.13 100 (12,500)
expiring June 1995
@ $45.25 150 (9,000)
expiring July 1995
@ $41.00 50 (12,500)
expiring July 1995
@ $30.00 100 (137,500)
United Healthcare Corp.
expiring June 1995
@ $42.38 100 (100,000)
expiring June 1995
@ $46.23 100 $ (312,500)
expiring July 1995
@ $44.50 100 (18,000)
expiring July 1995
@ $44.88 50 (9,000)
Total Outstanding Call
Options Written
(premiums received $9,646,493) (15,275,100)
TOTAL INVESTMENTS, NET OF OUTSTANDING
CALL OPTIONS WRITTEN - 100.9%
(cost $1,364,354,636) 1,432,074,215
Other assets less
liabilities - (0.9%) (12,183,079)
NET ASSETS - 100% $1,419,891,136
* 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 April 30,
1995 these securities amounted to $8,064,938 or 0.6% of net assets.
(b) Security on which options are written (shares subject to call have an
aggregate market value of $14,417,188).
(c) One contract relates to 100 shares.
See notes to financial statements.
9
STATEMENT OF ASSETS AND LIABILITIES
April 30, 1995 (unaudited) Alliance Growth Fund
- -------------------------------------------------------------------------------
ASSETS
Investments in securities, at value (cost $1,374,001,129) $1,447,349,315
Cash 59,612
Receivable for shares of beneficial interest sold 15,171,510
Receivable for investment securities sold 8,159,203
Dividends and interest receivable 782,518
Deferred organization expenses 3,047
Total assets 1,471,525,205
LIABILITIES
Payable for investment securities purchased 32,776,521
Outstanding call options written, at value
(premiums received $9,646,493) 15,275,100
Payable for shares of beneficial interest redeemed 1,387,220
Distribution fee payable 1,011,233
Advisory fee payable 848,236
Accrued expenses 335,759
Total liabilities 51,634,069
NET ASSETS $1,419,891,136
COMPOSITION OF NET ASSETS
Shares of beneficial interest, at par $644
Additional paid-in capital 1,359,191,209
Undistributed net investment income 394,973
Accumulated net realized loss on investments (7,340,019)
Net unrealized appreciation of investments, options
and other assets less liabilities 67,644,329
$1,419,891,136
CALCULATION OF MAXIMUM OFFERING PRICE
CLASS A SHARES
Net asset value and redemption price per share ($213,280,750 /
8,358,699 shares of beneficial interest issued and outstanding) $25.52
Sales charge-4.25% of public offering price 1.13
Maximum offering price $26.65
CLASS B SHARES
Net asset value and offering price per share ($1,051,753,558 /
48,858,750 shares of beneficial interest issued and outstanding) $21.53
CLASS C SHARES
Net asset value, redemption and offering price per share
($154,856,828 / 7,191,000 shares of beneficial interest issued
and outstanding) $21.53
See notes to financial statements.
10
STATEMENT OF OPERATIONS
Six Months Ended April 30, 1995 (unaudited) Alliance Growth Fund
- -------------------------------------------------------------------------------
INVESTMENT INCOME
Dividends $10,440,947
Interest 1,689,517 $12,130,464
EXPENSES
Advisory fee 4,424,968
Distribution fee - Class A 277,475
Distribution fee - Class B 4,329,401
Distribution fee - Class C 645,678
Transfer agency 1,329,980
Registration 214,306
Printing 149,806
Custodian 91,604
Audit and legal 65,365
Trustees' fees 12,000
Amortization of organization expenses 3,620
Miscellaneous 3,547
Total expenses 11,547,750
Net investment income 582,714
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized loss on securities transactions (6,977,741)
Net realized gain on options transactions 1,520,422
Net change in unrealized appreciation of securities 62,914,816
Net change in unrealized appreciation of options
and other assets less liabilities (5,920,502)
Net gain on investments 51,536,995
NET INCREASE IN NET ASSETS FROM OPERATIONS $52,119,709
11
STATEMENT OF CHANGES IN NET ASSETS Alliance Growth Fund
- -------------------------------------------------------------------------------
Six Months Ended May 1, 1994*
April 30, 1995 to
(unaudited) Oct. 31, 1994
--------------- -------------
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS
Net investment income $582,714 $1,087,125
Net realized gain (loss) on investments (5,457,319) 7,686,932
Net change in unrealized appreciation of
investments, options and other assets less
liabilities 56,994,314 29,276,693
Net increase in net assets from operations 52,119,709 38,050,750
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income
Class A (773,224) -0-
Class B (380,866) -0-
Class C (57,618) -0-
Net realized gain on investments
Class A (2,882,018) -0-
Class B (15,615,519) -0-
Class C (2,362,349) -0-
TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST
Net increase 356,138,740 434,991,030
Total increase 386,186,855 473,041,780
NET ASSETS
Beginning of period 1,033,704,281 560,662,501
End of period (including undistributed net
investment income of $394,973 and
$1,023,967, respectively) $1,419,891,136 $1,033,704,281
* The Fund changed its fiscal year end from April 30 to October 31.
See notes to financial statements.
12
NOTES TO FINANCIAL STATEMENTS
April 30, 1995 (unaudited) 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. 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. 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.
13
NOTES TO FINANCIAL STATEMENTS (continued) Alliance Growth Fund
- -------------------------------------------------------------------------------
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 changes in net assets and per share data and ratios reflect the period from
May 1, 1994 to October 31, 1994.
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 six months
ended April 30, 1995. 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 $956,509 for the six months ended April 30, 1995.
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 $62,444 from the sale of Class A shares and $971,711
in contingent deferred sales charges imposed upon redemptions by shareholders
of Class B shares for the six months ended April 30, 1995.
Brokerage commissions paid on securities transactions for the six months ended
April 30, 1995 amounted to $1,276,977, 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
14
Alliance Growth Fund
- -------------------------------------------------------------------------------
excess of the distribution costs reimbursed by the Fund in the amount of
$31,659,056, and $749,906, 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 $675,568,774 and $293,031,980 respectively, for the six months ended
April 30, 1995. There were purchases of $2,852,279,207 and sales of
$2,943,072,657 of U.S. Government and government agency obligations for the six
months ended April 30, 1995.
1. OPTION TRANSACTIONS
For hedging purposes, the Fund purchases and writes (sells) put and call
options on U.S. and foreign government securities and foreign currencies that
are traded on U.S. and foreign securities exchanges and over-the-counter
markets.
The risk associated with purchasing an option is that the Fund pays a premium
whether or not the option is exercised. Additionally, the Fund bears the risk
of loss of premium and change in market value should the counterparty not
perform under the contract. Put and call options purchased are accounted for in
the same manner as portfolio securities. The cost of securities acquired
through the exercise of call options is increased by premiums paid. The
proceeds from securities sold through the exercise of put options are decreased
by the premiums paid.
When the Fund writes an option, the premium received by the Fund is recorded as
a liability and is subsequently adjusted to the current market value of the
option written. Premiums received from writing options which expire unexercised
are recorded by the Fund on the expiration date as realized gains from option
transactions. The difference between the premium and the amount paid on
effecting a closing purchase transaction, including brokerage commissions, is
also treated as a realized gain, or if the premium is less than the amount paid
for the closing purchase transaction, as a realized loss. If a call option is
exercised, the premium is added to the proceeds from the sale of the underlying
security or currency in determining whether the Fund has realized a gain or
loss. If a put option is exercised, the premium reduces the cost basis of the
security or currency purchased by the Fund. In writing an option, the Fund
bears the market risk of an unfavorable change in the price of the security or
currency underlying the written option. Exercise of an option written by the
Fund could result in the Fund selling or buying a security or currency at a
price different from the current market value.
Transactions in options written for the six months ended April 30, 1995 were as
follows:
Number of
Contracts Premiums
--------- ------------
Options outstanding at beginning of year 1,500 $ 4,049,495
Options written 6,131 17,156,794
Options terminated in closing purchase transactions (2,088) (9,507,414)
Options expired (1,725) (937,922)
Options exercised (368) (1,114,460)
Options outstanding at April 30, 1995 3,450 $ 9,646,493
At April 30, 1995, the cost of securities for federal income tax purposes was
$1,376,016,083. Accordingly gross unrealized appreciation of investments was
$144,768,843 and gross unrealized depreciation of investments was $73,435,611
resulting in net unrealized appreciation of $71,333,232.
15
NOTES TO FINANCIAL STATEMENTS (continued) Alliance Growth 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:
Shares Amount
--------------------------- ----------------------------
Six Months Ended May 1,1994* Six Months Ended May 1,1994*
April 30,1995 to April 30,1995 to
(unaudited) Oct.31,1994 (unaudited) Oct.31,1994
------------- ------------ ------------- -------------
CLASS A
Shares sold 2,470,036 2,831,659 $ 60,646,656 $ 68,901,177
Shares issued in
reinvestment of
dividends and
distributions 136,788 -0- 3,174,842 -0-
Shares redeemed (939,040) (427,892) (23,111,998) (10,438,866)
Net increase 1,667,784 2,403,767 $ 40,709,500 $ 58,462,311
CLASS B
Shares sold 15,771,708 17,260,944 $327,607,697 $356,698,970
Shares issued in
reinvestment of
dividends and
distributions 631,579 -0- 12,397,903 -0-
Shares redeemed (2,979,535) (1,274,037) (61,847,663) (26,373,086)
Net increase 13,423,752 15,986,907 $278,157,937 $330,325,884
CLASS C
Shares sold 2,676,466 2,792,380 $ 55,628,864 $ 57,684,514
Shares issued in
reinvestment of
dividends and
distributions 61,296 -0- 1,203,861 -0-
Shares redeemed (941,379) (554,996) (19,561,422) (11,481,679)
Net increase 1,796,383 2,237,384 $ 37,271,303 $46,202,835
* The Fund changed its fiscal year end from April 30 to October 31.
** Commencement of distribution.
16
FINANCIAL HIGHLIGHTS Alliance Growth Fund
- -------------------------------------------------------------------------------
SELECTED DATA FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING THROUGHOUT EACH
PERIOD
<TABLE>
<CAPTION>
Class A
--------------------------------------------------------------------------------------
Six Months
Ended May 1, 1994 Year Ended April 30,
April 30, 1995 to Oct. 31, ------------------------------------------------------
(unaudited) 1994** 1994 1993 1992 1991(a)
-------------- ------------ ----------- ----------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $25.08 $23.89 $22.67 $20.31 $17.94 $13.61
INCOME FROM INVESTMENT OPERATIONS
Net investment income (loss) .08 .09 (.01)* .05* .29* .17*
Net realized and unrealized gain
on investments .88 1.10 3.55 3.68 3.95 4.22
Net increase in net asset value
from operations .96 1.19 3.54 3.73 4.24 4.39
LESS: DISTRIBUTIONS
Dividends from net investment income (.11) -0- -0- (.14) (.26) (.06)
Distributions from net realized gains (.41) -0- (2.32) (1.23) (1.61) -0-
Total dividends and distributions (.52) -0- (2.32) (1.37) (1.87) (.06)
Net asset value, end of period $25.52 $25.08 $23.89 $22.67 $20.31 $17.94
TOTAL RETURN
Total investment return based on
net asset value (b) 4.04% 4.98% 15.66% 18.89% 23.61% 32.40%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $213,281 $167,800 $102,406 $13,889 $8,228 $713
Ratios to average net assets of:
Expenses, net of waivers/reimbursements 1.37%(c) 1.35%(c) 1.40% 1.40% 1.40% 1.40%(c)
Expenses, before waivers/reimbursements 1.37%(c) 1.35%(c) 1.46% 1.84% 1.94% 8.79%(c)
Net investment income .69%(c) .86%(c) .32% .20% 1.44% 1.99%(c)
Portfolio turnover rate 25% 24% 87% 124% 137% 130%
</TABLE>
See footnote summary on page 19.
17
FINANCIAL HIGHLIGHTS (continued) Alliance Growth Fund
- -------------------------------------------------------------------------------
SELECTED DATA FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING THROUGHOUT EACH
PERIOD
<TABLE>
<CAPTION>
Class B
-----------------------------------------------------------------------------------
Six Months May 1, 1994
Ended to Year Ended April 30,
April 30, 1995 October 31, ----------------------------------------------------
(unaudited) 1994** 1994 1993 1992 1991(a)
-------------- ----------- ------------- ------------ ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $21.21 $20.27 $19.68 $18.16 $16.88 $14.38
INCOME FROM INVESTMENT OPERATIONS
Net investment income (loss) -0- .01 (.07)*(e) (.06)* .17* .08*
Net realized and unrealized gain
on investments .74 .93 2.98 3.23 3.67 3.22
Net increase in net asset value from
operations .74 .94 2.91 3.17 3.84 3.30
LESS: DISTRIBUTIONS
Dividends from net investment income (.01) -0- -0- (.03) (.21) (.09)
Distributions from net realized gains (.41) -0- (2.32) (1.62) (2.35) (.71)
Total dividends and distributions (.42) -0- (2.32) (1.65) (2.56) (.80)
Net asset value, end of period $21.53 $21.21 $20.27 $19.68 $18.16 $16.88
TOTAL RETURN
Total investment return based
on net asset value (b) 3.68% 4.64% 14.79% 18.16% 22.75% 24.72%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $1,051,753 $751,521 $394,227 $56,704 $37,845 $22,710
Ratios to average net assets of:
Expenses, net of waivers/reimbursements 2.07%(c) 2.05%(c) 2.10% 2.15% 2.15% 2.10%
Expenses, before waivers/reimbursements 2.07%(c) 2.05%(c) 2.13% 2.52% 2.65% 3.06%
Net investment income (loss) (.01)%(c) .16%(c) (.36)% (.53)% .78% .56%
Portfolio turnover rate 25% 24% 87% 124% 137% 130%
</TABLE>
See footnote summary on page 19.
18
Alliance Growth Fund
- -------------------------------------------------------------------------------
SELECTED DATA FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING THROUGHOUT EACH
PERIOD
Class C
------------------------------------------
Six Months May 1, 1994 August 2,
Ended to 1993 (d)
April30,1995 Oct. 31, to April 30,
(unaudited) 1994** 1994
------------- -------------- ------------
Net asset value, beginning of period $21.22 $20.28 $21.47
INCOME FROM INVESTMENT OPERATIONS
Net investment income (loss) -0- .01 (.02)*
Net realized and unrealized gain
on investments .73 .93 1.15
Net increase in net asset value
from operations .73 .94 1.13
LESS: DISTRIBUTIONS
Dividends from net investment income (.01) -0- -0-
Distributions from net realized gains (.41) -0- (2.32)
Total dividends and distributions (.42) -0- (2.32)
Net asset value, end of period $21.53 $21.22 $20.28
TOTAL RETURN
Total investment return based
on net asset value (b) 3.63% 4.64% 5.27%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(000's omitted) $154,857 $114,455 $64,030
Ratios to average net assets of:
Expenses, net of waivers/
reimbursements 2.07%(c) 2.05%(c) 2.10%(c)
Expenses, before waivers/
reimbursements 2.07%(c) 2.05%(c) 2.13%(c)
Net investment income (loss) (.01)%(c) .16%(c) (.31)%(c)
Portfolio turnover rate 25% 24% 87%
* 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.
19
Alliance Growth Fund
- -------------------------------------------------------------------------------
TRUSTEES
John D. Carifa, Chairman and President
Alberta B. Arthurs (1)
Ruth Block (1)
Richard W. Couper (1)
Brenton W. Harries (1)
Donald J. Robinson (1)
OFFICERS
Bruce Calvert, Vice President
Kathleen A. Corbet, Vice President
Franklin Kennedy III, Vice President
Barbara J. Krumsiek, Vice President
Edmund P. Bergan, Jr., Clerk
Andrew L. Gangolf, Assistant Clerk
Mark D. Gersten, Treasurer & Chief Financial Officer
CUSTODIAN
State Street Bank & Trust Company
225 Franklin Street
Boston, MA 02110
PRINCIPAL UNDERWRITER
Alliance Fund Distributors, Inc.
1345 Avenue of the Americas
New York, NY 10105
LEGAL COUNSEL
Ropes & Gray
One International Place
Boston, MA 02110-2624
TRANSFER AGENT
Alliance Fund Services, Inc.
P.O. Box 1520
Secaucus, NJ 07096-1520
Toll-Free 1-(800) 221-5672
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
1177 Avenue of the Americas
New York, NY 10036-2798
20
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BULK RATE
U.S. POSTAGE
PAID
New York, NY
Permit No. 7131
Alliance Growth Fund, Inc.
1345 Avenue of the Americas
New York, NY 10105
(800) 221-5672
This report is distributed solely to shareholders of the Fund
and is not to be used as sales literature.
R These registered service marks used under license from the owner,
Alliance Capital Management L.P.
GFSR
Alliance
Growth
Fund
Semi-Annual
Report
April 30, 1995
