<PAGE>
As filed with the Securities and Exchange
Commission on April 23, 1996
File No. 33-12988
811-05088
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. 20
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 22
THE ALLIANCE PORTFOLIOS
(Exact Name of Registrant as Specified in Charter)
1345 Avenue of the Americas, New York, N.Y. 10105
(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, N.Y. 10105
(Name and address of Agent for Service)
It is proposed that this filing will become effective (check
appropriate box):
immediately upon filing pursuant to paragraph (b)
on (date) pursuant to paragraph (b)
X 60 days after filing pursuant to paragraph (a)(i)
on (date) pursuant to paragraph (a)(i)
75 days after filing pursuant to paragraph (a)(2)
on (date) pursuant to paragraph (a)(2) of rule 485.
<PAGE>
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 Alliance Short-Term U.S. Government Fund's fiscal year
ended August 31, 1995 on October 27, 1995, Alliance Strategic
Balanced Fund's fiscal year ended July 31, 1995 on August 28,
1995, Alliance Conservative Investors Fund's fiscal year ended
April 30, 1995 on June 29, 1995, Alliance Growth Investor Fund's
fiscal year ended April 30, 1995 on June 29, 1995 and Alliance
Growth Fund's fiscal year ended October 31, 1995 on December 27,
1995.
<PAGE>
Cross Reference Sheet for
Alliance Short-Term U.S. Government Fund
ITEM NUMBER OF FORM N-1A LOCATION IN PROSPECTUS
CAPTION
PART A
1. Cover Page.......................... . Front Cover Page
2. Synopsis............................ . Expense Information
3. Condensed Financial Information..... . Financial Highlights
4.l General Description of Registrant .... General Information;
Description of the
Funds
5. Management of the Trust............... Management of the
Funds
5A. Management's Discussion of
Fund's Performance ............... Not Applicable
6. Capital Stock and Other Securities.... General Information;
Dividends,
Distributions and
Taxes
7. Purchase of Securities Purchase and Sale of
Being Offered .................... Shares; Management
of the Funds
8. Redemption or Repurchase . ........... Purchase and Sale of
Shares
9. Pending Legal Proceedings ............ Not Applicable
STATEMENT OF ADDITIONAL
ITEM NUMBER IN PART B INFORMATION CAPTION
10. Cover Page............................ Cover Page
11. Table of Contents..................... Table of Contents
12. General Information and History....... Not Applicable
13. Investment Objectives and Policies.... Investment Policies
and Restrictions;
Additional
<PAGE>
Investment
Techniques of the
Fund; Investment
Restrictions
14. Management of the Fund................ Management of the
Fund
15. Control Persons and Principal
Holders of Securities............. General Information
16. Investment Advisory................... Management of the
and Other Services.................... Fund; Expenses of
the Fund
17. Brokerage Allocation Portfolio
and Other Practices............... Transactions;
Expenses of the Fund
18. Capital Stock and Other Securities.... General Information
19. Purchase, Redemption and Pricing ..... Purchase of Shares;
of Securities Being Offered....... Redemption and
Repurchase of
Shares; Net Asset
Value
20. Tax Status............................ Dividends,
Distributions and
Taxes
21. Underwriters.......................... Expenses of the
Fund; Purchase of
Shares; Redemption
and Repurchase of
Shares
22. Calculation of Performance Data....... General Information
23. Financial Statements.................. Financial Statements
<PAGE>
<PAGE>
THE ALLIANCE
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STOCK FUNDS
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P.O. Box 1520, Secaucus, New Jersey 07096-1520
Toll Free (800) 221-5672
For Literature: Toll Free (800) 227-4618
Prospectus and Application
(Advisor Class)
June [ ], 1996
Domestic Stock Funds Global Stock Funds
- -The Alliance Fund -Alliance International Fund
- -Alliance Growth Fund -Alliance Worldwide Privatization Fund
- -Alliance Premier Growth Fund -Alliance New Europe Fund
- -Alliance Technology Fund -Alliance All-Asia Investment Fund
- -Alliance Quasar Fund -Alliance Global Small Cap Fund
Total Return Funds
-Alliance Strategic Balanced Fund
-Alliance Balanced Shares
-Alliance Income Builder Fund
-Alliance Utility Income Fund
-Alliance Growth and Income Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Table of Contents Page
<S> <C>
The Funds at a Glance ................................................. 2
Expense Information ................................................... 4
Financial Highlights .................................................. 4
Glossary .............................................................. 6
Description of the Funds .............................................. 7
Investment Objectives and Policies ................................. 7
Additional Investment Practices .................................... 15
Certain Fundamental Investment Policies ............................ 22
Risk Considerations ................................................ 25
Purchase and Sale of Shares ........................................... 28
Management of the Funds ............................................... 30
Dividends, Distributions and Taxes .................................... 31
General Information ................................................... 32
</TABLE>
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Adviser
Alliance Capital Management L.P.
1345 Avenue Of The Americas
New York, New York 10105
The Alliance Stock Funds provide a broad selection of investment alternatives to
investors seeking capital growth or high total return. The Domestic Stock Funds
invest mainly in the United States equity markets and the Global Stock Funds
diversify their investments among equity markets around the world, while the
Total Return Funds invest in both equity and fixed-income securities.
Each fund or portfolio (each a "Fund") is, or is a series of, an open-end
management investment company. This Prospectus sets forth concisely the
information which a prospective investor should know about each Fund before
investing. A "Statement of Additional Information" for each Fund which provides
further information regarding certain matters discussed in this Prospectus and
other matters which may be of interest to some investors has been filed with the
Securities and Exchange Commission and is incorporated herein by reference. For
a free copy, write Alliance Fund Services, Inc. at the indicated address or call
the "For Literature" telephone number shown above.
This Prospectus offers the Advisor Class shares of each Fund which may be
purchased at net asset value without any initial or contingent deferred sales
charges and without ongoing distribution expenses. Advisor Class shares are
offered solely to (i) investors participating in fee-based programs meeting
certain standards established by Alliance Fund Distributors, Inc., each Fund's
principal underwriters and (ii) participants in self-directed defined
contribution employee benefit plans (e.g., 401(k) plans) that meet certain
minimum standards. See "Purchase and Sale of Shares."
An investment in these securities is not a deposit or obligation of, or
guaranteed or endorsed by, any bank and is not federally insured by the Federal
Deposit Insurance Corporation, the Federal Reserve Board or any other agency.
Investors are advised to read this Prospectus carefully and to retain it for
future reference.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
Alliance(R)
Mutual funds without the Mystery.(SM)
(R)/SM These are registered marks used under licenses from the owner, Alliance
Capital Management L.P.
<PAGE>
The Funds At A Glance
The following summary is qualified in its entirety by the more detailed
information contained in this Prospectus.
The Funds' Investment Adviser Is . . .
Alliance Capital Management L.P. ("Alliance"), a global investment manager
providing diversified services to institutions and individuals through a broad
line of investments including 107 mutual funds. Since 1971, Alliance has earned
a reputation as a leader in the investment world with over $156 billion in
assets under management as of March 1, 1996. Alliance provides investment
management services to 34 of the FORTUNE 100 companies.
Domestic Stock Funds
Alliance Fund
Seeks . . . Long-term growth of capital and income primarily through investment
in common stocks.
Invests Principally in . . . A diversified portfolio of equity securities that,
in the judgment of Alliance, have the potential to achieve capital appreciation.
Growth Fund
Seeks . . . Long-term growth of capital by investing primarily in common stocks
and other equity securities.
Invests Principally in . . . A diversified portfolio of equity securities of
companies with a favorable outlook for earnings and whose rate of growth is
expected to exceed that of the United States economy over time.
Premier Growth Fund
Seeks . . . Long-term growth of capital by investing in the equity securities of
a limited number of large, carefully selected, high-quality American companies
from a relatively small universe of intensively researched companies.
Invests Principally in . . . A diversified portfolio of equity securities that,
in the judgment of Alliance, are likely to achieve superior earnings growth.
Normally, approximately 40 companies will be represented in the Fund's
investment portfolio. The Fund's investments in 25 of these companies most
highly regarded at any point in time by Alliance will usually constitute
approximately 70% of the Fund's net assets.
Technology Fund
Seeks . . . Growth of capital through investment in companies expected to
benefit from advances in technology.
Invests Principally in . . . A diversified portfolio of securities of companies
which use technology extensively in the development of new or improved products
or processes.
Quasar Fund
Seeks . . . Growth of capital by pursuing aggressive investment policies.
Invests Principally in . . . A diversified portfolio of equity securities of any
company and industry and in any type of security which is believed to offer
possibilities for capital appreciation.
Global Stock Funds
International Fund
Seeks . . . A total return on its assets from long-term growth of capital and
from income.
Invests Principally in . . . A diversified portfolio of marketable securities of
established non-United States companies, companies participating in foreign
economies with prospects for growth, and foreign government securities.
Worldwide Privatization Fund
Seeks . . . Long-term capital appreciation.
Invests Principally in . . . A non-diversified portfolio of equity securities
issued by enterprises that are undergoing, or have undergone, privatization. The
balance of the Fund's investment portfolio will include securities of companies
that are believed by Alliance to be beneficiaries of the privatization process.
New Europe Fund
Seeks . . . Long-term capital appreciation through investment primarily in the
equity securities of companies based in Europe.
Invests Principally in . . . A non-diversified portfolio of equity securities of
European companies.
All-Asia Investment Fund
Seeks . . . Long-term capital appreciation.
Invests Principally in . . . A non-diversified portfolio of equity securities of
Asian/Pacific companies.
Global Small Cap Fund
Seeks . . . Long-term growth of capital.
Invests Principally in . . . A diversified global portfolio of the equity
securities of small capitalization companies.
2
<PAGE>
Total Return Funds
Strategic Balanced Fund
Seeks . . . A high long-term total return by investing in a combination of
equity and debt securities.
Invests Principally in . . . A diversified portfolio of dividend-paying common
stocks and fixed-income securities, and also in equity-type securities such as
warrants, preferred stocks and convertible debt instruments.
Balanced Shares
Seeks . . . A high return through a combination of current income and capital
appreciation.
Invests Principally in . . . A diversified portfolio of equity and fixed-income
securities such as common and preferred stocks, U.S. Government and agency
obligations, bonds and senior debt securities.
Income Builder Fund
Seeks . . . Both an attractive level of current income and long-term growth of
income and capital.
Invests Principally in . . . A non-diversified portfolio of fixed-income
securities and dividend-paying common stocks. Alliance currently expects to
continue to maintain approximately 60% of the Fund's net assets in fixed-income
securities and 40% in equity securities.
Utility Income Fund
Seeks . . . Current income and capital appreciation through investment in the
utilities industry.
Invests Principally in . . . A diversified portfolio of equity securities, such
as common stocks, securities convertible into common stocks and rights and
warrants to subscribe for purchase of common stocks, and in fixed-income
securities such as bonds and preferred stocks.
Growth and Income Fund
Seeks . . . Income and appreciation through investment in dividend-paying common
stocks of quality companies.
Invests Principally in . . . A diversified portfolio of dividend-paying common
stocks of good quality, and, under certain market conditions, other types of
securities, including bonds, convertible bonds and preferred stocks.
A Word About Risk . . .
The price of the shares of the Alliance Stock Funds will fluctuate as the daily
prices of the individual securities in which they invest fluctuate, so that your
shares, when redeemed, may be worth more or less than their original cost. With
respect to those Funds permitted to invest in foreign currency denominated
securities, these fluctuations may be magnified by changes in foreign exchange
rates. Investment in the Global Stock Funds involves risks not associated with
funds that invest primarily in securities of U.S. issuers. While the Funds
invest principally in common stocks and other equity securities, in order to
achieve their investment objectives the Funds may at times use certain types of
investment derivatives, such as options, futures, forwards and swaps. These
involve risks different from, and, in certain cases, greater than, the risks
presented by more traditional investments. These risks are fully discussed in
this Prospectus.
Getting Started . . .
Shares of the Funds are available through your financial representative. Each
Fund offers multiple classes of shares, of which only the Advisor Class is
offered by this Prospectus. Advisor Class shares may be purchased at net asset
value without any initial or contingent deferred sales charges and are not
subject to ongoing distribution expenses. Advisor Class shares may be purchased
solely by investors (i) through accounts established under a fee-based program,
sponsored and maintained by a registered broker-dealer or other financial
intermediary and approved by Alliance Fund Distributors, Inc., each Fund's
principal underwriter, pursuant to which each investor pays an asset-based fee
at an annual rate of at least .50% of the assets in the investor's account, to
the broker-dealer or financial intermediary, or its affiliate or agent, for
investment advisory or administrative services, or (ii) through a self-directed
defined contribution employee benefit plan (e.g., a 401(k) plan) that has at
least 1,000 participants or $25 million in assets. Shares can be purchased for a
minimum initial investment of $250, and subsequent investments can be made for
as little as $50. Fee-based programs through which Advisor Class shares may be
purchased may impose different requirements with respect to minimal initial and
subsequent investment levels than described above. For detailed information
about purchasing and selling shares, see "Purchase and Sale of Shares." Be sure
to ask your financial representative about:
- --------------------------------------------------------------------------------
AUTOMATIC REINVESTMENT
- --------------------------------------------------------------------------------
AUTOMATIC INVESTMENT PROGRAM
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RETIREMENT PLANS
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SHAREHOLDER COMMUNICATIONS
- --------------------------------------------------------------------------------
DIVIDEND DIRECTION PLANS
- --------------------------------------------------------------------------------
AUTO EXCHANGE
- --------------------------------------------------------------------------------
SYSTEMATIC WITHDRAWALS
- --------------------------------------------------------------------------------
TELEPHONE TRANSACTIONS
- --------------------------------------------------------------------------------
24 HOUR INFORMATION
- --------------------------------------------------------------------------------
Alliance(R)
Mutual funds without the Mystery.(SM)
(R)/SM These are registered marks used under licenses from the owner, Alliance
Capital Management L.P.
3
<PAGE>
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EXPENSE INFORMATION
- --------------------------------------------------------------------------------
Shareholder Transaction Expenses are one of several factors to consider when you
invest in a Fund. The following table summarizes your maximum transaction costs
from investing in the Advisor Class shares of each Fund and estimated annual
expenses for Advisor Class shares of each Fund. For each Fund, the "Examples" to
the right of the table below show the cumulative expenses attributable to a
hypothetical $1,000 investment in Advisor Class shares for the periods
specified.
<TABLE>
<CAPTION>
Advisor Class Shares
--------------------
<S> <C>
Maximum sales charge imposed on purchases .............. None
Sales charge imposed on dividend reinvestments ......... None
Deferred sales charge .................................. None
Exchange fee ........................................... None
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Operating Expenses Examples
- ---------------------------------------------------------- -------------------------------------------
<S> <C> <C> <C>
Alliance Fund Advisor Class Advisor Class
------------- -------------
Management fees .71% After 1 year $ 9
Other expenses (a) .18% After 3 years $ 28
----
Total fund
operating expenses .89%
====
Growth Fund Advisor Class Advisor Class
------------- -------------
Management fees .75% After 1 year $ 11
Other expenses (a) .30% After 3 years $ 33
----
Total fund
operating expenses 1.05%
====
Premier Growth Fund Advisor Class Advisor Class
------------- -------------
Management fees 1.00% After 1 year $ 14
Other expenses (a) .38% After 3 years $ 44
----
Total fund
operating expenses 1.38%
====
Technology Fund Advisor Class Advisor Class
------------- -------------
Management fees 1.00% After 1 year $ 15
Other expenses (a) .45% After 3 years $ 46
----
Total fund
operating expenses 1.45%
====
Quasar Fund Advisor Class Advisor Class
------------- -------------
Management fees 1.00% After 1 year $ 16
Other expenses (a) .61% After 3 years $ 51
----
Total fund
operating expenses 1.61%
====
International Fund Advisor Class Advisor Class
------------- -------------
Management fees 1.00% After 1 year $ 17
Other expenses (a) .68% After 3 years $ 53
----
Total fund
operating expenses 1.68%
====
</TABLE>
- --------------------------------------------------------------------------------
Please refer to the footnotes on page [ ] and the discussion following these
tables on page [ ].
4
<PAGE>
<TABLE>
<CAPTION>
Operating Expenses Examples
- ---------------------------------------------------------- -------------------------------------------
<S> <C> <C> <C>
Worldwide Privatization Fund Advisor Class Advisor Class
------------- -------------
Management fees 1.00% After 1 year $ 20
Other expenses (a) .98% After 3 years $ 62
----
Total fund
operating expenses 1.98%
====
New Europe Fund Advisor Class Advisor Class
------------- -------------
Management fees 1.07% After 1 year $ 17
Other expenses (a) .65% After 3 years $ 54
----
Total fund
operating expenses 1.72%
====
All-Asia Investment Fund Advisor Class Advisor Class
------------- -------------
Management fees (b) 0.00% After 1 year $ 41
Other expenses After 3 years $125
Administration fees 0.00%
Other operating expenses (a) 4.12%
----
Total other expenses 4.12%
----
Total fund
operating expenses 4.12%
====
Global Small Cap Fund Advisor Class Advisor Class
------------- -------------
Management fees 1.00% After 1 year $ 23
Other expenses (a) 1.29% After 3 years $ 72
----
Total fund
operating expenses 2.29%
====
Strategic Balanced Fund Advisor Class Advisor Class
------------- -------------
Management fees (b) .45% After 1 year $ 11
Other expenses (a) .65% After 3 years $ 35
----
Total fund
operating expenses 1.10%
====
Balanced Shares Advisor Class Advisor Class
------------- -------------
Management fees .63% After 1 year $ 11
Other expenses (a) .48% After 3 years $ 35
----
Total fund
operating expenses 1.11%
====
Income Builder Fund Advisor Class Advisor Class
------------- -------------
Management fees .75% After 1 year $ 21
Other expenses (a) 1.33% After 3 years $ 65
----
Total fund
operating expenses 2.08%
====
Utility Income Fund Advisor Class Advisor Class
------------- -------------
Management fees .75% After 1 year $ 12
Other expenses (a) .45% After 3 years $ 38
----
Total fund
operating expenses 1.20%
====
Growth and Income Fund Advisor Class Advisor Class
------------- -------------
Management fees .53% After 1 year $ 9
Other expenses (a) .31% After 3 years $ 27
----
Total fund
operating expenses .84%
====
</TABLE>
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(a) These expenses include a transfer agency fee payable to Alliance Fund
Services, Inc., an affiliate of Alliance, based on a fixed dollar amount
charged to the Fund for each shareholder's account.
(b) Net of voluntary fee waiver. In the absence of such waiver, management fees
would be 1.00% for All-Asia Investment Fund and .75% for Strategic
Balanced Fund.
5
<PAGE>
The purpose of the foregoing table is to assist the investor in understanding
the various costs and expenses that an investor in a Fund will bear directly or
indirectly. The examples do not reflect any charges or expenses imposed by your
financial representative or your employee benefit plan. "Other Expenses" are
based on estimated amounts for each Fund's current fiscal year. The management
fee rates of Growth Fund, Premier Growth Fund, Strategic Balanced Fund,
Technology Fund, International Fund, Worldwide Privatization Fund, New Europe
Fund, All-Asia Investment Fund, Income Builder Fund, Utility Income Fund and
Global Small Cap Fund are higher than those paid by most other investment
companies, but Alliance believes the fees are comparable to those paid by
investment companies of similar investment orientation. The examples set forth
above assume reinvestment of all dividends and distributions and utilize a 5%
annual rate of return as mandated by Commission regulations. The examples should
not be considered representative of future expenses; actual expenses may be
greater or less than those shown.
- --------------------------------------------------------------------------------
GLOSSARY
- --------------------------------------------------------------------------------
The following terms are frequently used in this Prospectus.
Equity securities are (i) common stocks, partnership interests, business trust
shares and other equity or ownership interests in business enterprises, and (ii)
securities convertible into, and rights and warrants to subscribe for the
purchase of, such stocks, shares and interests.
Debt securities are bonds, debentures, notes, bills, repurchase agreements,
loans, other direct debt instruments and other fixed, floating and variable rate
debt obligations, but do not include convertible securities.
Fixed-income securities are debt securities and dividend-paying preferred stocks
and include floating rate and variable rate instruments.
Convertible securities are fixed-income securities that are convertible into
common stock.
U.S. Government securities are securities issued or guaranteed by the United
States Government, its agencies or instrumentalities.
Foreign government securities are securities issued or guaranteed, as to payment
of principal and interest, by governments, quasi-governmental entities,
governmental agencies or other governmental entities.
Asian company is an entity that (i) is organized under the laws of an Asian
country and conducts business in an Asian country, (ii) derives 50% or more of
its total revenues from business in Asian countries, or (iii) issues equity or
debt securities that are traded principally on a stock exchange in an Asian
country.
Asian countries are Australia, the Democratic Socialist Republic of Sri Lanka,
Hong Kong, the Islamic Republic of Pakistan, Japan, the Kingdom of Thailand,
Malaysia, Negara Brunei Darussalam (Brunei), New Zealand, the People's Republic
of China, the People's Republic of Kampuchea (Cambodia), the Republic of China
(Taiwan), the Republic of India, the Republic of Indonesia, the Republic of
Korea (South Korea), the Republic of the Philippines, the Republic of Singapore,
the Socialist Republic of Vietnam and the Union of Myanmar.
Moody's is Moody's Investors Service, Inc.
S&P is Standard & Poor's Ratings Services.
Duff & Phelps is Duff & Phelps Credit Rating Co.
Fitch is Fitch Investors Service, Inc.
Investment grade securities are fixed-income securities rated Baa and above by
Moody's or BBB and above by S&P, Duff & Phelps or Fitch, or determined by
Alliance to be of equivalent quality.
Lower-rated securities are fixed-income securities rated Ba or below by Moody's
or BB or below by S&P, Duff & Phelps or Fitch, or determined by Alliance to be
of equivalent quality, and are commonly referred to as "junk bonds."
Prime commercial paper is commercial paper rated Prime 1 by Moody's or A-1 or
higher by S&P or, if not rated, issued by companies that have an outstanding
debt issue rated Aa or higher by Moody's or AA or higher by S&P.
Qualifying bank deposits are certificates of deposit, bankers' acceptances and
interest-bearing savings deposits of banks having total assets of more than $1
billion and which are members of the Federal Deposit Insurance Corporation.
Rule 144A securities are securities that may be resold pursuant to Rule 144A
under the Securities Act of 1933, as amended (the "Securities Act").
Depositary receipts include American Depositary Receipts ("ADRs"), Global
Depositary Receipts ("GDRs") and other types of depositary receipts.
Commission is the Securities and Exchange Commission.
1940 Act is the Investment Company Act of 1940, as amended.
Code is the Internal Revenue Code of 1986, as amended.
6
<PAGE>
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DESCRIPTION OF THE FUNDS
- --------------------------------------------------------------------------------
Except as noted, (i) the Funds' investment objectives are "fundamental" and
cannot be changed without shareholder vote, and (ii) the Funds' investment
policies are not fundamental and thus can be changed without a shareholder vote.
No Fund will change a non-fundamental objective or policy without notifying its
shareholders. There is no guarantee that any Fund will achieve its investment
objective.
INVESTMENT OBJECTIVES AND POLICIES
Domestic Stock Funds
The Domestic Stock Funds have been designed to offer investors seeking capital
appreciation a range of alternative approaches to investing in the U.S. equity
markets.
The Alliance Fund
The Alliance Fund, Inc. ("Alliance Fund") is a diversified investment company
that seeks long-term growth of capital and income primarily through investment
in common stocks. The Fund normally invests substantially all of its assets in
common stocks that Alliance believes will appreciate in value, but it may invest
in other types of securities such as convertible securities, high grade
instruments, U.S. Government securities and high quality, short-term obligations
such as repurchase agreements, bankers' acceptances and domestic certificates of
deposit, and may invest without limit in foreign securities. While the
diversification and generally high quality of the Fund's investments cannot
prevent fluctuations in market values, they tend to limit investment risk and
contribute to achieving the Fund's objective. The Fund generally does not effect
portfolio transactions in order to realize short-term trading profits or
exercise control.
The Fund may also: (i) make secured loans of its portfolio securities equal in
value up to 25% of its total assets to brokers, dealers and financial
institutions; (ii) enter into repurchase agreements of up to one week in
duration with commercial banks, but only if those agreements together with any
restricted securities and any securities which do not have readily available
market quotations do not exceed 10% of its net assets; and (iii) write
exchange-traded covered call options with respect to up to 25% of its total
assets. For additional information on the use, risks and costs of these policies
and practices see "Additional Investment Practices."
Alliance Growth Fund
Alliance Growth Fund ("Growth Fund") is a diversified investment company that
seeks long-term growth of capital. Current income is only an incidental
consideration. The Fund seeks its objective by investing primarily in equity
securities of companies with favorable earnings outlooks and whose long-term
growth rates are expected to exceed that of the U.S. economy. The Fund's
investment objective is not fundamental.
The Fund may also invest up to 25% of its total assets in lower-rated
fixed-income and convertible securities. See "Risk ConsiderationsSecurities
Ratings" and "--Investment in Lower-Rated Fixed-Income Securities." The Fund
generally will not invest in securities with ratings below Caa- by Moody's and
CCC- by S&P, Duff & Phelps or Fitch or in securities judged by Alliance to be of
comparable investment quality. However, from time to time, the Fund may invest
in securities rated in the lowest grades (i.e., C by Moody's or D or equivalent
by S&P, Duff & Phelps or Fitch), or securities Alliance judges to be of
comparable investment quality, if there are prospects for an upgrade or a
favorable conversion into equity securities. For the period ended December 31,
1995, the Fund did not invest in any lower-rated securities. If the credit
rating of a security held by the Fund falls below its rating at the time of
purchase (or Alliance determines that the quality of such security has so
deteriorated), the Fund may continue to hold the security if such investment is
considered appropriate under the circumstances.
The Fund may also: (i) invest in "zero-coupon" bonds and "payment-in-kind"
bonds; (ii) invest in foreign securities, although the Fund will not generally
invest more than 15% of its total assets in foreign securities; (iii) invest in
securities that are not publicly traded, including Rule 144A securities; (iv)
buy or sell foreign currencies, options on foreign currencies, foreign currency
futures contracts (and related options) and deal in forward foreign exchange
contracts; (v) lend portfolio securities amounting to not more than 25% of its
total assets; (vi) enter into repurchase agreements on up to 25% of its total
assets and purchase and sell securities on a forward commitment basis; (vii) buy
and sell stock index futures contracts and buy and sell options on those
contracts and on stock indices; (viii) purchase and sell futures contracts,
options thereon and options with respect to U.S. Treasury securities; (ix) write
covered call and put options on securities it owns or in which it may invest;
and (x) purchase and sell put and call options. For additional information on
the use, risks and costs of these policies and practices see "Additional
Investment Practices."
Alliance Premier Growth Fund
Alliance Premier Growth Fund, Inc. ("Premier Growth Fund") is a diversified
investment company that seeks long-term growth of capital by investing
predominantly in the equity securities of a limited number of large, carefully
selected, high-quality U.S. companies that are judged likely to achieve superior
earnings growth. Normally, about 40 companies will be represented in the Fund's
portfolio, with the 25 most highly regarded of these companies usually
constituting approximately 70% of the Fund's net assets. The Fund is thus
atypical from most equity mutual funds in its focus on a relatively small number
of intensively researched companies and is designed for those seeking to
accumulate capital over time with less volatility than that associated with
investment in smaller companies.
As a matter of fundamental policy, the Fund normally invests at least 85% of its
total assets in the equity securities of U.S. companies. These are companies (i)
organized under U.S. law that have their principal office in the U.S., and (ii)
the equity securities of which are traded principally in the U.S.
Alliance's investment strategy for the Fund emphasizes stock selection and
investment in the securities of a limited number of issuers. Alliance relies
heavily upon the fundamental analysis and research of its large internal
research staff, which generally
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follows a primary research universe of more than 600 companies that have strong
management, superior industry positions, excellent balance sheets and superior
earnings growth prospects. An emphasis is placed on identifying companies whose
substantially above average prospective earnings growth is not fully reflected
in current market valuations.
In managing the Fund, Alliance seeks to utilize market volatility judiciously
(assuming no change in company fundamentals), striving to capitalize on
apparently unwarranted price fluctuations, both to purchase or increase
positions on weakness and to sell or reduce overpriced holdings. The Fund
normally remains nearly fully invested and does not take significant cash
positions for market timing purposes. During market declines, while adding to
positions in favored stocks, the Fund becomes somewhat more aggressive,
gradually reducing the number of companies represented in its portfolio.
Conversely, in rising markets, while reducing or eliminating fully valued
positions, the Fund becomes somewhat more conservative, gradually increasing the
number of companies represented in its portfolio. Alliance thus seeks to gain
positive returns in good markets while providing some measure of protection in
poor markets.
Alliance expects the average market capitalization of companies represented in
the Fund's portfolio normally to be in the range, or in excess, of the average
market capitalization of companies comprising the "S&P 500" (the Standard &
Poor's 500 Composite Stock Price Index, a widely recognized unmanaged index of
market activity).
The Fund may also: (i) invest up to 20% of its net assets in convertible
securities of companies whose common stocks are eligible for purchase by it;
(ii) invest up to 5% of its net assets in rights or warrants; (iii) invest up to
15% of its total assets in securities of foreign issuers whose common stocks are
eligible for purchase by it; (iv) purchase and sell exchange-traded index
options and stock index futures contracts; and (v) write covered exchange-traded
call options on common stocks, unless as a result, the amount of its securities
subject to call options would exceed 15% of its total assets, and purchase and
sell exchange-traded call and put options on common stocks written by others,
but the total cost of all options held by the Fund (including exchange-traded
index options) may not exceed 10% of its total assets. For additional
information on the use, risks and costs of these policies and practices see
"Additional Investment Practices." The Fund will not write put options.
Alliance Technology Fund
Alliance Technology Fund, Inc. ("Technology Fund") is a diversified investment
company that emphasizes growth of capital and invests for capital appreciation,
and only incidentally for current income. The Fund may seek income by writing
listed call options. The Fund invests primarily in securities of companies
expected to benefit from technological advances and improvements (i.e.,
companies that use technology extensively in the development of new or improved
products or processes). The Fund will normally have at least 80% of its assets
invested in the securities of these companies. The Fund normally will have
substantially all its assets invested in equity securities, but it also invests
in debt securities offering an opportunity for price appreciation. The Fund will
invest in listed and unlisted securities and U.S. and foreign securities, but it
will not purchase a foreign security if as a result 10% or more of the Fund's
total assets would be invested in foreign securities.
The Fund's policy is to invest in any company and industry and in any type of
security with potential for capital appreciation. It invests in well-known and
established companies and in new and unseasoned companies.
The Fund may also: (i) write and purchase exchange-listed call options and
purchase listed put options, including exchange-traded index put options; (ii)
invest up to 10% of its total assets in warrants; (iii) invest in restricted
securities and in other assets having no ready market if as a result no more
than 10% of the Fund's net assets are invested in such securities and assets;
(iv) lend portfolio securities equal in value to not more than 30% of the Fund's
total assets; and (v) invest up to 10% of its total assets in foreign
securities. For additional information on the use, risks and costs of the
policies and practices see "Additional Investment Practices."
Alliance Quasar Fund
Alliance Quasar Fund, Inc. ("Quasar Fund") is a diversified investment company
that seeks growth of capital by pursuing aggressive investment policies. It
invests for capital appreciation and only incidentally for current income. The
selection of securities based on the possibility of appreciation cannot prevent
loss in value. Moreover, because the Fund's investment policies are aggressive,
an investment in the Fund is risky and investors who want assured income or
preservation of capital should not invest in the Fund.
The Fund invests in any company and industry and in any type of security with
potential for capital appreciation. It invests in well-known and established
companies and in new and unseasoned companies. When selecting securities,
Alliance considers the economic and political outlook, the values of specific
securities relative to other investments, trends in the determinants of
corporate profits and management capability and practices.
The Fund invests principally in equity securities, but it also invests to a
limited degree in non-convertible bonds and preferred stocks. The Fund invests
in listed and unlisted U.S. and foreign securities. The Fund periodically
invests in special situations, which occur when the securities of a company are
expected to appreciate due to a development particularly or uniquely applicable
to that company and regardless of general business conditions or movements of
the market as a whole.
The Fund may also: (i) invest in restricted securities and in other assets
having no ready market, but not more than 10% of its total assets may be
invested in such securities or assets; (ii) make short sales of securities
"against the box," but not more than 15% of its net assets may be deposited on
short sales; and (iii) write call options and purchase and sell put and call
options written by others. For additional
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information on the use, risks and costs of these policies and practices see
"Additional Investment Practices."
Global Stock Funds
The Global Stock Funds have been designed to enable investors to participate in
the potential for long-term capital appreciation available from investment in
foreign securities.
Alliance International Fund
Alliance International Fund ("International Fund") is a diversified investment
company that seeks a total return on its assets from long-term growth of capital
and from income primarily through a broad portfolio of marketable securities of
established non-U.S. companies, companies participating in foreign economies
with prospects for growth, including U.S. companies having their principal
activities and interests outside the U.S. and foreign government securities.
Normally, more than 80% of the Fund's assets will be invested in such issuers.
The Fund expects to invest primarily in common stocks of established non-U.S.
companies that Alliance believes have potential for capital appreciation or
income or both, but the Fund is not required to invest exclusively in common
stocks or other equity securities, and it may invest in any other type of
investment grade security, including convertible securities, warrants, or
obligations of the U.S. or foreign governments and their political subdivisions.
The Fund intends to diversify its investments broadly among countries and
normally invests in at least three foreign countries, although it may invest a
substantial portion of its assets in one or more of such countries. At December
31, 1995, approximately 33% of the Fund's assets were invested in securities of
Japanese issuers. The Fund may invest in companies, wherever organized, that
Alliance judges have their principal activities and interests outside the U.S.
These companies may be located in developing countries, which involves exposure
to economic structures that are generally less diverse and mature, and to
political systems which can be expected to have less stability, than those of
developed countries. The Fund currently does not intend to invest more than 10%
of its total assets in companies in, or governments of, developing countries.
The Fund may also: (i) purchase or sell forward foreign currency exchange
contracts; (ii) write, sell and purchase U.S. or foreign exchange-listed put and
call options, including exchange-traded index options; (iii) enter into
financial futures contracts, including contracts for the purchase or sale for
future delivery of foreign currencies and stock index futures, and purchase and
write put and call options on futures contracts traded on U.S. or foreign
exchanges or over-the-counter; (iv) purchase and write put options on foreign
currencies traded on securities exchanges or boards of trade or
over-the-counter; (v) lend portfolio securities equal in value to not more than
30% of its total assets; and (vi) enter into repurchase agreements of up to
seven days' duration, provided that not more than 10% of the Fund's total assets
would be so invested. For additional information on the use, risks and costs of
these policies and practices see "Additional Investment Practices."
Alliance Worldwide Privatization Fund
Alliance Worldwide Privatization Fund, Inc. ("Worldwide Privatization Fund") is
a non-diversified investment company that seeks long-term capital appreciation.
As a fundamental policy, the Fund invests at least 65% of its total assets in
equity securities issued by enterprises that are undergoing, or have undergone,
privatization (as described below), although normally significantly more of its
assets will be invested in such securities. The balance of its investments will
include securities of companies believed by Alliance to be beneficiaries of
privatizations. The Fund is designed for investors desiring to take advantage of
investment opportunities, historically inaccessible to U.S. individual
investors, that are created by privatizations of state enterprises in both
established and developing economies, including those in Western Europe and
Scandinavia, Australia, New Zealand, Latin America, Asia and Eastern and Central
Europe and, to a lesser degree, Canada and the United States.
The Fund's investments in enterprises undergoing privatization may comprise
three distinct situations. First, the Fund may invest in the initial offering of
publicly traded equity securities (an "initial equity offering") of a
government- or state-owned or controlled company or enterprise (a "state
enterprise"). Secondly, the Fund may purchase securities of a current or former
state enterprise following its initial equity offering. Finally, the Fund may
make privately negotiated purchases of stock or other equity interests in a
state enterprise that has not yet conducted an initial equity offering. Alliance
believes that substantial potential for capital appreciation exists as
privatizing enterprises rationalize their management structures, operations and
business strategies in order to compete efficiently in a market economy, and the
Fund will thus emphasize investments in such enterprises.
The Fund diversifies its investments among a number of countries and normally
invests in issuers based in at least four, and usually considerably more,
countries. No more than 15% of the Fund's total assets, however, will be
invested in issuers in any one foreign country, except that the Fund may invest
up to 30% of its total assets in issuers in any one of France, Germany, Great
Britain, Italy and Japan. The Fund may invest all of its assets within a single
region of the world. To the extent that the Fund's assets are invested within
any one region, the Fund may be subject to any special risks that may be
associated with that region.
Privatization is a process through which the ownership and control of companies
or assets changes in whole or in part from the public sector to the private
sector. Through privatization a government or state divests or transfers all or
a portion of its interest in a state enterprise to some form of private
ownership. Governments and states with established economies, including France,
Great Britain, Germany and Italy,
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and those with developing economies, including Argentina, Mexico, Chile,
Indonesia, Malaysia, Poland and Hungary, are engaged in privatizations. Although
the Fund will invest in any country believed to present attractive investment
opportunities, currently approximately 70% of the Fund's total assets are
invested in countries with established economies.
A major premise of the Fund's approach is that the equity securities of
privatized companies offer opportunities for significant capital appreciation.
In particular, because privatizations are integral to a country's economic
restructuring, securities sold in initial equity offerings often are priced
attractively so as to secure the issuer's successful transition to private
sector ownership. Additionally, these enterprises often dominate their local
markets and typically have the potential for significant managerial and
operational efficiency gains.
Although the Fund anticipates that it will not concentrate its investments in
any industry, it is permitted to invest more than 25% of its total assets in
issuers whose primary business activity is that of national commercial banking.
Prior to so concentrating, however, the Fund's Directors must determine that its
ability to achieve its investment objective would be adversely affected if it
were not permitted to concentrate. The staff of the Commission is of the view
that registered investment companies may not, absent shareholder approval,
change between concentration and non-concentration in a single industry. The
Fund disagrees with the staff's position but has undertaken that it will not
concentrate in the securities of national commercial banks until, if ever, the
issue is resolved. If the Fund were to invest more than 25% of its total assets
in national commercial banks, the Fund's performance could be significantly
influenced by events or conditions affecting this industry, which is subject to,
among other things, increases in interest rates and deteriorations in general
economic conditions, and the Fund's investments may be subject to greater risk
and market fluctuation than if its portfolio represented a broader range of
investments.
The Fund may invest up to 35% of its total assets in debt securities and
convertible debt securities of issuers whose common stocks are eligible for
purchase by the Fund. The Fund may maintain not more than 5% of its net assets
in lower-rated securities. See "Risk Considerations Securities Ratings" and
"--Investment in Lower-Rated Fixed-Income Securities." The Fund will not retain
a non-convertible security that is downgraded below C or determined by Alliance
to have undergone similar credit quality deterioration following purchase.
The Fund may also: (i) invest up to 20% of its total assets in rights or
warrants; (ii) write covered put and call options and purchase put and call
options on securities of the types in which it is permitted to invest and on
exchange-traded index options; (iii) enter into contracts for the purchase or
sale for future delivery of fixed-income securities or foreign currencies, or
contracts based on financial indices, including any index of U.S. Government
securities, foreign government securities, or common stock and may purchase and
write options on future contracts; (iv) purchase and write put and call options
on foreign currencies for hedging purposes; (v) purchase or sell forward
contracts; (vi) enter in forward commitments for the purchase or sale of
securities; (vii) enter into standby commitment agreements; (viii) enter into
currency swaps for hedging purposes; (ix) enter into repurchase agreements
pertaining to U.S. Government securities with member banks of the Federal
Reserve System or primary dealers in such securities; (x) make short sales of
securities or maintain a short position; and (xi) make secured loans of its
portfolio securities not in excess of 30% of its total assets to entities with
which it can enter into repurchase agreements. For additional information on the
use, risks and costs of these policies and practices see "Additional Investment
Practices".
Alliance New Europe Fund
Alliance New Europe Fund, Inc. ("New Europe Fund") is a non-diversified
investment company that seeks long-term capital appreciation through investment
primarily in the equity securities of companies based in Europe. The Fund
intends to invest substantially all of its assets in the equity securities of
European companies and has a fundamental policy of normally investing at least
65% of its total assets in such securities. Up to 35% of its total assets may be
invested in high quality U.S. dollar or foreign currency denominated
fixed-income securities issued or guaranteed by European governmental entities,
or by European or multinational companies or supranational organizations.
Alliance believes that the quickening pace of economic integration and political
change in Europe creates the potential for many European companies to experience
rapid growth and that the emergence of new market economies in Europe and the
broadening and strengthening of other European economies may significantly
accelerate economic development. The Fund will invest in companies that Alliance
believes possess rapid growth potential. Thus, the Fund will emphasize
investments in smaller, emerging companies, but will also invest in larger,
established companies in such growing economic sectors as capital goods,
telecommunications, pollution control and consumer services.
The Fund will emphasize investment in companies believed to be the likely
beneficiaries of a program, originally known as the "1992 Program," to remove
substantially all barriers to the free movement of goods, persons, services and
capital within the European Community. Alliance believes that the beneficial
effects of this program upon economies, sectors and companies may be most
pronounced in the decade following 1992. The European Community is a Western
European economic cooperative organization consisting of Belgium, Denmark,
France, Germany, Greece, Ireland, Italy, Luxembourg, the Netherlands, Portugal,
Spain and the United Kingdom.
In recent years, economic ties between the former "east bloc" countries of
Eastern Europe and certain other European countries have been strengthened.
Alliance believes that as this strengthening continues, some Western European
financial institutions and other companies will have special opportunities to
facilitate East-West transactions. The Fund will seek investment opportunities
among such companies and, as
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such become available, within the former "east bloc," although the Fund will not
invest more than 20% of its total assets in issuers based therein, or more than
10% of its total assets in issuers based in any one such country.
The Fund diversifies its investments among a number of European countries and,
under normal circumstances, will invest in companies based in at least three
such countries. Subject to the foregoing and to the limitation on investment in
any one former "east bloc" country, the Fund may invest without limit in a
single European country. While the Fund does not intend to concentrate its
investments in a single country, at times 25% or more of its assets may be
invested in issuers located in a single country. During such times, the Fund
would be subject to a correspondingly greater risk of loss due to adverse
political or regulatory developments, or an economic downturn, within that
country. At December 31, 1995, approximately 27% of the Fund's assets were
invested in securities of issuers in the United Kingdom.
The Fund may also: (i) invest up to 10% of its total assets in securities for
which there is no ready market; (ii) invest up to 20% of its total assets in
warrants and rights to purchase equity securities of European companies; (iii)
invest in depositary receipts or other securities convertible into securities of
companies based in European countries, debt securities of supranational entities
denominated in the currency of any European country, debt securities denominated
in European Currency Units of an issuer in a European country (including
supranational issuers) and "semi-governmental securities"; (iv) purchase and
sell forward contracts; (v) write, sell and purchase exchange-traded put and
call options, including exchange-traded index options; (vi) enter into financial
futures contracts, including contracts for the purchase or sale for future
delivery of foreign currencies and futures contracts based on stock indices, and
purchase and write options on futures contracts; (vii) purchase and write put
options on foreign currencies traded on securities exchanges or boards of trade
or over-the-counter; (viii) make secured loans of portfolio securities not in
excess of 30% of its total assets to brokers, dealers and financial
institutions; (ix) enter into forward commitments for the purchase or sale of
securities; and (x) enter into standby commitment agreements. For additional
information on the use, risks and costs of these policies and practices see
"Additional Investment Practices."
Alliance All-Asia Investment Fund
Alliance All-Asia Investment Fund, Inc. ("All-Asia Investment Fund") is a
non-diversified investment company whose investment objective is to seek
long-term capital appreciation. In seeking to achieve its investment objective,
the Fund will invest at least 65% of its total assets in equity securities (for
the purposes of this investment policy, rights, warrants and options to purchase
common stocks are not deemed to be equity securities), preferred stocks and
equity-linked debt securities issued by Asian companies. The Fund may invest up
to 35% of its total assets in debt securities issued or guaranteed by Asian
companies or by Asian governments, their agencies or instrumentalities. The Fund
may also invest in securities issued by non-Asian issuers, provided that the
Fund will invest at least 80% of its total assets in securities issued by Asian
companies and the Asian debt securities referred to above. The Fund expects to
invest, from time to time, a significant portion, but less than 50%, of its
assets in equity securities of Japanese companies.
In the past decade, Asian countries generally have experienced a high level of
real economic growth due to political and economic changes, including foreign
investment and reduced government intervention in the economy. Alliance believes
that certain conditions exist in Asian countries which create the potential for
continued rapid economic growth. These conditions include favorable demographics
and competitive wage rates, increasing levels of foreign direct investment,
rising per capita incomes and consumer demand, a high savings rate and numerous
privatization programs. Asian countries are also becoming more industrialized
and are increasing their intra-Asian exports while reducing their dependence on
Western export demand. Alliance believes that these conditions are important to
the long-term economic growth of Asian countries.
As the economies of many Asian countries move through the "emerging market"
stage, thus increasing the supply of goods, services and capital available to
less developed Asian markets and helping to spur economic growth in those
markets, the potential is created for many Asian companies to experience rapid
growth. In addition, many Asian companies the securities of which are listed on
exchanges in more developed Asian countries will be participants in the rapid
economic growth of the lesser developed countries. These companies generally
offer the advantages of more experienced management and more developed market
regulation.
As their economies have grown, the securities markets in Asian countries have
also expanded. New exchanges have been created and the number of listed
companies, annual trading volume and overall market capitalization have
increased significantly. Additionally, new markets continue to open to foreign
investments. For example, South Korea and India have recently relaxed investment
restrictions and Vietnamese direct investments have recently become available to
U.S. investors. The Fund also offers investors the opportunity to access
relatively restricted markets. Alliance believes that investment opportunities
in Asian countries will continue to expand.
The Fund will invest in companies believed to possess rapid growth potential.
Thus, the Fund will invest in smaller, emerging companies, but will also invest
in larger, more established companies in such growing economic sectors as
capital goods, telecommunications and consumer services.
The Fund will invest in investment grade debt securities, except that the Fund
may maintain not more than 5% of its net assets in lower-rated securities and
lower-rated loans and other lower-rated direct debt instruments. See "Risk
Considerations--Securities Ratings", "--Investment in Lower-Rated Fixed-Income
Securities" and Appendix C in the Fund's Statement of
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Additional Information for a description of such ratings. The Fund will not
retain a security that is downgraded below C or determined by Alliance to have
undergone similar credit quality deterioration following purchase.
The Fund may also: (i) invest up to 25% of its net assets in the convertible
securities of companies whose common stocks are eligible for purchase by the
Fund; (ii) invest up to 20% of its net assets in rights or warrants; (iii)
invest in depositary receipts, instruments of supranational entities denominated
in the currency of any country, securities of multinational companies and
"semi-governmental securities;" (iv) invest up to 25% of its net assets in
equity-linked debt securities with the objective of realizing capital
appreciation; (v) invest up to 25% of its net assets in loans and other direct
debt instruments; (vi) write covered put and call options on securities of the
types in which it is permitted to invest and on exchange-traded index options;
(vii) enter into contracts for the purchase or sale for future delivery of
fixed-income securities or foreign currencies, or contracts based on financial
indices, including any index of U.S. Government securities, securities issued by
foreign government entities, or common stock and may purchase and write options
on future contracts; (viii) purchase and write put and call options on foreign
currencies for hedging purposes; (ix) purchase or sell forward contracts; (x)
enter into interest rate swaps and purchase or sell interest rate caps and
floors; (xi) enter into forward commitments for the purchase or sale of
securities; (xii) enter into standby commitment agreements; (xiii) enter into
currency swaps for hedging purposes; (xiv) enter into repurchase agreements
pertaining to U.S. Government securities with member banks of the Federal
Reserve System or primary dealers in such securities; (xv) make short sales of
securities or maintain a short position, in each case only if "against the box;"
and (xvi) make secured loans of its portfolio securities not in excess of 30% of
its total assets to entities with which it can enter into repurchase agreements.
For additional information on the use, risks and costs of these policies and
practices see "Additional Investment Practices".
Alliance Global Small Cap Fund
Alliance Global Small Cap Fund, Inc. ("Global Small Cap Fund") is a diversified
investment company that seeks long-term growth of capital through investment in
a global portfolio of the equity securities of selected companies with
relatively small market capitalization. The Fund's portfolio emphasizes
companies with market capitalizations that would have placed them (when
purchased) in about the smallest 20% by market capitalization of actively traded
U.S. companies, or market capitalizations of up to about $1 billion. Because the
Fund applies the U.S. size standard on a global basis, its foreign investments
might rank above the lowest 20%, and, in fact, might in some countries rank
among the largest, by market capitalization in local markets. Normally, the Fund
invests at least 65% of its assets in equity securities of these smaller
capitalization issuers, and these issuers are located in at least three
countries, one of which may be the U.S. Up to 35% of the Fund's total assets may
be invested in securities of companies whose market capitalizations exceed the
Fund's size standard. The Fund's portfolio securities may be listed on a U.S.
or foreign exchange or traded over-the-counter.
Alliance believes that smaller capitalization issuers often have sales and
earnings growth rates exceeding those of larger companies, and that these growth
rates tend to cause more rapid share price appreciation. Investing in smaller
capitalization stocks, however, involves greater risk than is associated with
larger, more established companies. For example, smaller capitalization
companies often have limited product lines, markets, or financial resources.
They may be dependent for management on one or a few key persons, and can be
more susceptible to losses and risks of bankruptcy. Their securities may be
thinly traded (and therefore have to be sold at a discount from current market
prices or sold in small lots over an extended period of time), may be followed
by fewer investment research analysts and may be subject to wider price swings
and thus may create a greater chance of loss than when investing in securities
of larger capitalization companies. Transaction costs in small capitalization
stocks may be higher than in those of larger capitalization companies.
The Fund may also: (i) invest up to 10% of its total assets in securities for
which there is no ready market; (ii) invest up to 20% of its total assets in
warrants to purchase equity securities; (iii) invest in depositary receipts or
other securities representing securities of companies based in countries other
than the U.S.; (iv) purchase or sell forward foreign currency contracts; (v)
write and purchase exchange-traded call options and purchase exchange-traded put
options, including put options on market indices; and (vi) make secured loans of
portfolio securities not in excess of 30% of its total assets to brokers,
dealers and financial institutions. For additional information on the use, risks
and costs of these policies and practices see "Additional Investment Practices."
Total Return Funds
The Total Return Funds have been designed to provide a range of investment
alternatives to investors seeking both growth of capital and current income.
Alliance Strategic Balanced Fund
Alliance Strategic Balanced Fund ("Strategic Balanced Fund") is a diversified
investment company that seeks 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 varies 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. The
Fund's investment objective is not fundamental.
The Fund's equity securities will generally consist of dividend-paying common
stocks and other equity securities of companies with favorable earnings outlooks
and long-term growth rates that Alliance expects will exceed that of the U.S.
economy. The Fund's debt securities may include U.S. Government securities and
securities issued by private
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corporations. The Fund may also invest in mortgage-backed securities, adjustable
rate securities, asset-backed securities and so-called "zero-coupon" bonds and
"payment-in-kind" bonds.
As a fundamental policy, the Fund will invest at least 25% of its total assets
in fixed-income securities, which for this purpose include debt securities,
preferred stocks and that portion of the value of convertible securities that is
attributable to the fixed-income characteristics of those securities.
The Fund's debt securities will generally be of investment grade. See "Risk
ConsiderationsSecurities Ratings" and "Investment in Lower-Rated Fixed-Income
Securities." In the event that the rating of any debt securities held by the
Fund falls below investment grade, the Fund will not be obligated to dispose of
such obligations and may continue to hold them if considered appropriate under
the circumstances.
The Fund may also: (i) invest in foreign securities, although the Fund will not
generally invest more than 15% of its total assets in foreign securities; (ii)
invest, without regard to this 15% limit, in Eurodollar CDs, which are
dollar-denominated certificates of deposit issued by foreign branches of U.S.
banks that are not insured by any agency or instrumentality of the U.S.
Government; (iii) write covered call and put options on securities it owns or in
which it may invest; (iv) buy and sell put and call options and buy and sell
combinations of put and call options on the same underlying securities; (v) lend
portfolio securities amounting to not more than 25% of its total assets; (vi)
enter into repurchase agreements on up to 25% of its total assets; (vii)
purchase and sell securities on a forward commitment basis; (viii) buy or sell
foreign currencies, options on foreign currencies, foreign currency futures
contracts (and related options) and deal in forward foreign exchange contracts;
(ix) buy and sell stock index futures contracts and buy and sell options on
those contracts and on stock indices; (x) purchase and sell futures contracts,
options thereon and options with respect to U.S. Treasury securities; and (xi)
invest in securities that are not publicly traded, including Rule 144A
securities. For additional information on the use, risks and costs of these
policies and practices see "Additional Investment Practices."
Alliance Balanced Shares
Alliance Balanced Shares, Inc. ("Balanced Shares") is a diversified investment
company that seeks a high return through a combination of current income and
capital appreciation. Although the Fund's investment objective is not
fundamental, the Fund is a "balanced fund" as a matter of fundamental policy.
The Fund will not purchase a security if as a result less than 25% of its total
assets will be in fixed-income senior securities (including short- and long-term
debt securities, preferred stocks, and convertible debt securities and
convertible preferred stocks to the extent that their values are attributable to
their fixed-income characteristics). Subject to these restrictions, the
percentage of the Fund's assets invested in each type of security will vary. The
Fund's assets are invested in U.S. Government securities, bonds, senior debt
securities and preferred and common stocks in such proportions and of such type
as are deemed best adapted to the current economic and market outlooks. The Fund
may invest up to 15% of the value of its total assets in foreign equity and
fixed-income securities eligible for purchase by the Fund under its investment
policies described above. See "Risk Considerations--Foreign Investment."
The Fund may also: (i) enter into contracts for the purchase or sale for future
delivery of foreign currencies; and (ii) purchase and write put and call options
on foreign currencies and enter into forward foreign currency exchange contracts
for hedging purposes. Subject to market conditions, the Fund may also seek to
realize income by writing covered call options listed on a domestic exchange.
For additional information on the use, risks and costs of these policies and
practices see "Additional Investment Practices."
Alliance Income Builder Fund
Alliance Income Builder Fund, Inc. ("Income Builder Fund") is a non-diversified
investment company that seeks an attractive level of current income and
long-term growth of income and capital by investing principally in fixed-income
securities and dividend-paying common stocks. Its investments in equity
securities emphasize common stocks of companies with a historical or projected
pattern of paying rising dividends. Normally, at least 65% of the Fund's total
assets are invested in income-producing securities. The Fund may vary the
percentage of assets invested in any one type of security based upon Alliance's
evaluation as to the appropriate portfolio structure for achieving the Fund's
investment objective, although Alliance currently maintains approximately 60% of
the Fund's net assets in fixed-income securities and 40% in equity securities.
The Fund may invest in fixed-income securities of domestic and foreign issuers,
including U.S. Government securities and repurchase agreements pertaining
thereto, corporate fixed-income securities of U.S. issuers, qualifying bank
deposits and prime commercial paper.
The Fund may maintain up to 35% of its net assets in lower-rated securities. See
"Risk Considerations--Securities Ratings" and "--Investment in Lower-Rated
Fixed-Income Securities." The Fund will not retain a non-convertible security
that is downgraded below CCC or determined by Alliance to have undergone similar
credit quality deterioration following purchase.
Foreign securities in which the Fund invests may include fixed-income securities
of foreign corporate and governmental issuers, denominated in U.S. Dollars, and
equity securities of foreign corporate issuers, denominated in foreign
currencies or in U.S. Dollars. The Fund will not invest more than 10% of its net
assets in equity securities of foreign issuers nor more than 15% of its total
assets in issuers of any one foreign country. See "Risk Considerations --
Foreign Investment."
The Fund may also: (i) invest up to 5% of its net assets in rights or warrants;
(ii) invest in depositary receipts and U.S.
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Dollar denominated securities issued by supranational entities; (iii) write
covered put and call options and purchase put and call options on securities of
the types in which it is permitted to invest that are exchange-traded; (iv)
purchase and sell exchange-traded options on any securities index composed of
the types of securities in which it may invest; (v) enter into contracts for the
purchase or sale for future delivery of fixed-income securities or foreign
currencies, or contracts based on financial indices, including any index of U.S.
Government securities, foreign government securities, corporate fixed income
securities, or common stock, and purchase and write options on future contracts;
(vi) purchase and write put and call options on foreign currencies and enter
into forward contracts for hedging purposes; (vii) enter into interest rate
swaps and purchase or sell interest rate caps and floors; (viii) enter into
forward commitments for the purchase or sale of securities; (ix) enter into
standby commitment agreements; (x) enter into repurchase agreements pertaining
to U.S. Government securities with member banks of the Federal Reserve System or
primary dealers in such securities; (xi) make short sales of securities or
maintain a short position as described below under "Additional Investment
Policies and Practices -- Short Sales;" and (xii) make secured loans of its
portfolio securities not in excess of 20% of its total assets to brokers,
dealers and financial institutions. For additional information on the use, risks
and costs of these policies and practices see "Additional Investment Practices."
Alliance Utility Income Fund
Alliance Utility Income Fund, Inc. ("Utility Income Fund") is a diversified
investment company that seeks current income and capital appreciation by
investing primarily in equity and fixed-income securities of companies in the
utilities industry. The Fund may invest in securities of both U.S. and foreign
issuers, although no more than 15% of the Fund's total assets will be invested
in issuers in any one foreign country. The utilities industry consists of
companies engaged in (i) the manufacture, production, generation, provision,
transmission, sale and distribution of gas and electric energy, and
communications equipment and services, including telephone, telegraph,
satellite, microwave and other companies providing communication facilities for
the public, or (ii) the provision of other utility or utility-related goods and
services, including, but not limited to, entities engaged in water provision,
cogeneration, waste disposal system provision, solid waste electric generation,
independent power producers and non-utility generators. The Fund is designed to
take advantage of the characteristics and historical performance of securities
of utility companies, many of which pay regular dividends and increase their
common stock dividends over time. As a fundamental policy, the Fund normally
invests at least 65% of its total assets in securities of companies in the
utilities industry. The Fund considers a company to be in the utilities industry
if, during the most recent twelve-month period, at least 50% of the company's
gross revenues, on a consolidated basis, were derived from its utilities
activities.
At least 65% of the Fund's total assets are invested in income-producing
securities, but there is otherwise no limit on the allocation of the Fund's
investments between equity securities and fixed-income securities. The Fund may
maintain up to 35% of its net assets in lower-rated securities. See "Risk
Considerations -- Securities Ratings" and "--Investment in Lower-Rated
Fixed-Income Securities." The Fund will not retain a security that is downgraded
below B or determined by Alliance to have undergone similar credit quality
deterioration following purchase.
The United States utilities industry has experienced significant changes in
recent years. Electric utility companies in general have been favorably affected
by lower fuel costs, the full or near completion of major construction programs
and lower financing costs. In addition, many utility companies have generated
cash flows in excess of current operating expenses and construction
expenditures, permitting some degree of diversification into unregulated
businesses. Regulatory changes with respect to nuclear and conventionally fueled
generating facilities, however, could increase costs or impair the ability of
such electric utilities to operate such facilities, thus reducing their ability
to service dividend payments with respect to the securities they issue.
Furthermore, rates of return of utility companies generally are subject to
review and limitation by state public utilities commissions and tend to
fluctuate with marginal financing costs. Rate changes, however, ordinarily lag
behind the changes in financing costs, and thus can favorably or unfavorably
affect the earnings or dividend pay-outs on utilities stocks depending upon
whether such rates and costs are declining or rising.
Gas transmission companies, gas distribution companies and telecommunications
companies are also undergoing significant changes. Gas utilities have been
adversely affected by declines in the prices of alternative fuels, and have also
been affected by oversupply conditions and competition. Telephone utilities are
still experiencing the effects of the break-up of American Telephone & Telegraph
Company, including increased competition and rapidly developing technologies
with which traditional telephone companies now compete. Although there can be no
assurance that increased competition and other structural changes will not
adversely affect the profitability of such utilities, or that other negative
factors will not develop in the future, in Alliance's opinion, increased
competition and change may provide better positioned utility companies with
opportunities for enhanced profitability.
Utility companies historically have been subject to the risks of increases in
fuel and other operating costs, high interest costs, costs associated with
compliance with environmental and nuclear safety regulations, service
interruptions, economic slowdowns, surplus capacity, competition and regulatory
changes. There can also be no assurance that regulatory policies or accounting
standards changes will not negatively affect utility companies' earnings or
dividends. Utility companies are subject to regulation by various authorities
and may be affected by the imposition of special tariffs and
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changes in tax laws. To the extent that rates are established or reviewed by
governmental authorities, utility companies are subject to the risk that such
authorities will not authorize increased rates. Because of the Fund's policy of
concentrating its investments in utility companies, the Fund is more susceptible
than most other mutual funds to economic, political or regulatory occurrences
affecting the utilities industry.
Foreign utility companies, like those in the U.S., are generally subject to
regulation, although such regulations may or may not be comparable to domestic
regulations. Foreign utility companies in certain countries may be more heavily
regulated by their respective governments than utility companies located in the
U.S. and, as in the U.S., generally are required to seek government approval for
rate increases. In addition, because many foreign utility companies use fuels
that cause more pollution than those used in the U.S., such utilities may yet be
required to invest in pollution control equipment. Foreign utility regulatory
systems vary from country to country and may evolve in ways different from
regulation in the U.S. The percentage of the Fund's assets invested in issuers
of particular countries will vary. See "Risk Considerations -- Foreign
Investment."
The Fund may invest up to 35% of its total assets in equity and fixed-income
securities of domestic and foreign corporate and governmental issuers other than
utility companies, including U.S. Government securities and repurchase
agreements pertaining thereto, foreign government securities, corporate
fixed-income securities of domestic issuers, corporate fixed-income securities
of foreign issuers denominated in foreign currencies or in U.S. dollars (in each
case including fixed-income securities of an issuer in one country denominated
in the currency of another country), qualifying bank deposits and prime
commercial paper.
The Fund may also: (i) invest up to 30% of its net assets in the convertible
securities of companies whose common stocks are eligible for purchase by the
Fund; (ii) invest up to 5% of its net assets in rights or warrants; (iii) invest
in depositary receipts, securities of supranational entities denominated in the
currency of any country, securities denominated in European Currency Units and
"semi-governmental securities;" (iv) write covered put and call options and
purchase put and call options on securities of the types in which it is
permitted to invest that are exchange-traded and over-the-counter; (v) purchase
and sell exchange-traded options on any securities index composed of the types
of securities in which it may invest; (vi) enter into contracts for the purchase
or sale for future delivery of fixed-income securities or foreign currencies, or
contracts based on financial indices, including an index of U.S. Government
securities, foreign government securities, corporate fixed-income securities, or
common stock, and may purchase and write options on futures contracts; (vii)
purchase and write put and call options on foreign currencies traded on U.S. and
foreign exchanges or over-the-counter for hedging purposes; (viii) purchase or
sell forward contracts; (ix) enter into interest rate swaps and purchase or sell
interest rate caps and floors; (x) enter in forward commitments for the purchase
or sale of securities; (xi) enter into standby commitment agreements; (xii)
enter into repurchase agreements pertaining to U.S. Government securities with
member banks of the Federal Reserve System or primary dealers in such
securities; (xiii) make short sales of securities or maintain a short position
as described below under "Additional Investment Practices -- Short Sales;" and
(xiv) make secured loans of its portfolio securities not in excess of 20% of its
total assets to brokers, dealers and financial institutions. For additional
information on the use, risk and costs of these policies and practices, see
"Additional Investment Practices."
Alliance Growth and Income Fund
Alliance Growth and Income Fund, Inc. ("Growth and Income Fund") is a
diversified investment company that seeks appreciation through investments
primarily in dividend-paying common stocks of good quality, although it is
permitted to invest in fixed-income securities and convertible securities.
The Fund may also try to realize income by writing covered call options listed
on domestic securities exchanges. See "Additional Investment PracticesOptions."
The Fund also invests in foreign securities. Since the purchase of foreign
securities entails certain political and economic risks, the Fund has restricted
its investments in securities in this category to issues of high quality. See
"Risk Considerations -- Foreign Investment."
ADDITIONAL INVESTMENT PRACTICES
Some or all of the Funds may engage in the following investment practices to the
extent described above.
Convertible Securities. Prior to conversion, convertible securities have the
same general characteristics as non-convertible debt securities, which provide a
stable stream of income with generally higher yields than those of equity
securities of the same or similar issuers. The price of a convertible security
will normally vary with changes in the price of the underlying stock, although
the higher yield tends to make the convertible security less volatile than the
underlying common stock. As with debt securities, the market value of
convertible securities tends to decline as interest rates increase and increase
as interest rates decline. While convertible securities generally offer lower
interest or dividend yields than non-convertible debt securities of similar
quality, they enable investors to benefit from increases in the market price of
the underlying common stock. Convertible debt securities that are rated Baa or
lower by Moody's or BBB or lower by S&P, Duff & Phelps or Fitch and comparable
unrated securities as determined by Alliance may share some or all of the risks
of non-convertible debt securities with those ratings. For a description of
these risks, see "Risk Considerations -- Securities Ratings" and "--Investment
in Lower-Rated Fixed-Income Securities."
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Rights and Warrants. A Fund will invest in rights or warrants only if the
underlying equity securities themselves are deemed appropriate by Alliance for
inclusion in the Fund's portfolio. Rights and warrants entitle the holder to buy
equity securities at a specific price for a specific period of time. Rights are
similar to warrants except that they have a substantially shorter duration.
Rights and warrants may be considered more speculative than certain other types
of investments in that they do not entitle a holder to dividends or voting
rights with respect to the underlying securities nor do they represent any
rights in the assets of the issuing company. The value of a right or warrant
does not necessarily change with the value of the underlying security, although
the value of a right or warrant may decline because of a decrease in the value
of the underlying security, the passage of time or a change in perception as to
the potential of the underlying security, or any combination thereof. If the
market price of the underlying security is below the exercise price set forth in
the warrant on the expiration date, the warrant will expire worthless.
Moreover, a right or warrant ceases to have value if it is not exercised prior
to the expiration date.
Depositary Receipts and Securities of Supranational Entities. Depositary
receipts may not necessarily be denominated in the same currency as the
underlying securities into which they may be converted. In addition, the issuers
of the stock of unsponsored depositary receipts are not obligated to disclose
material information in the United States and, therefore, there may not be a
correlation between such information and the market value of the depositary
receipts. ADRs are depositary receipts typically issued by a U.S. bank or trust
company that evidence ownership of underlying securities issued by a foreign
corporation. GDRs and other types of depositary receipts are typically issued by
foreign banks or trust companies and evidence ownership of underlying securities
issued by either a foreign or a U.S. company. Generally, depositary receipts in
registered form are designed for use in the U.S. securities markets, and
depositary receipts in bearer form are designed for use in foreign securities
markets. The investments of Growth Fund, Strategic Balanced Fund and Income
Builder Fund in ADRs are deemed to be investments in securities issued by U.S.
issuers and those in GDRs and other types of depositary receipts are deemed to
be investments in the underlying securities. The investments of All-Asia
Investment Fund in depositary receipts are deemed to be investments in the
underlying securities.
A supranational entity is an entity designated or supported by the national
government of one or more countries to promote economic reconstruction or
development. Examples of supranational entities include, among others, the World
Bank (International Bank for Reconstruction and Development) and the European
Investment Bank. A European Currency Unit is a basket of specified amounts of
the currencies of the member states of the European Economic Community.
"Semi-governmental securities" are securities issued by entities owned by either
a national, state or equivalent government or are obligations of one of such
government jurisdictions which are not backed by its full faith and credit and
general taxing powers.
Mortgage-Backed Securities. Interest and principal payments (including
prepayments) on the mortgages underlying mortgage-backed securities are passed
through to the holders of the securities. 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. Prepayments occur when the mortgagor on a
mortgage prepays the remaining principal before the mortgage's scheduled
maturity date. Because the prepayment characteristics of the underlying
mortgages vary, it is impossible 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, prepayments can be
expected to accelerate and a Fund investing in such securities would be required
to reinvest the proceeds at the lower interest rates then available. In
addition, prepayments of mortgages underlying securities purchased at a premium
could result in capital losses.
Adjustable Rate Securities. Adjustable rate securities have interest rates that
are reset at 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 reduce sharp
changes in the value of adjustable rate securities, these securities can change
in value based on changes in market interest rates or the issuer's
creditworthiness. 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.
Asset-Backed Securities. Asset-backed securities (unrelated to first mortgage
loans) represent fractional interests in pools of leases, retail installment
loans, revolving credit receivables and other payment obligations, both secured
and unsecured. 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. Certificate holders may also
experience delays in payment on the certificates if the full amounts due on
underlying sales contracts or receivables are not realized by the trust 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.
Zero-Coupon and Payment-in-Kind Bonds. Zero-coupon bonds are issued at a
significant discount from their principal amount
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in lieu of paying interest periodically. Payment-in-kind bonds allow the issuer
to make current interest payments on the bonds in additional bonds. Because
zero-coupon bonds and payment-in-kind bonds do not pay current interest in cash,
their value is generally subject to greater fluctuation in response to changes
in market interest rates than bonds that pay interest in cash 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, a Fund is nonetheless required
to accrue interest income on such investments and to distribute such amounts at
least annually to shareholders. Thus, a Fund could be required at times to
liquidate other investments in order to satisfy its dividend requirements.
Equity-Linked Debt Securities. Equity-linked debt securities are securities with
respect to which the amount of interest and/or principal that the issuer thereof
is obligated to pay is linked to the performance of a specified index of equity
securities. Such amount may be significantly greater or less than payment
obligations in respect of other types of debt securities. Adverse changes in
equity securities indices and other adverse changes in the securities markets
may reduce payments made under, and/or the principal of, equity-linked debt
securities held by the Fund. Furthermore, as with any debt securities, the
values of equity-linked debt securities will generally vary inversely with
changes in interest rates. The Fund's ability to dispose of equity-linked debt
securities will depend on the availability of liquid markets for such
securities. Investment in equity-linked debt securities may be considered to be
speculative. As with other securities, the Fund could lose its entire investment
in equity-linked debt securities.
Loans and Other Direct Debt Instruments. Loans and other direct debt instruments
are interests in amounts owed by a corporate, governmental or other borrower to
another party. They may represent amounts owed to lenders or lending syndicates
(loans and loan participations), to suppliers of goods or services (trade claims
or other receivables), or to other creditors. Direct debt instruments involve
the risk of loss in case of default or insolvency of the borrower and may offer
less legal protection to the Fund in the event of fraud or misrepresentation
than debt securities. In addition, loan participations involve a risk of
insolvency of the lending bank or other financial intermediary. Direct debt
instruments may also include standby financing commitments that obligate the
Fund to supply additional cash to the borrower on demand. Loans and other direct
debt instruments are generally illiquid and may be transferred only through
individually negotiated private transactions.
Purchasers of loans and other forms of direct indebtedness depend primarily upon
the creditworthiness of the borrower for payment of principal and interest.
Direct debt instruments may not be rated by any nationally recognized rating
service. If the Fund does not receive scheduled interest or principal payments
on such indebtedness, the Fund's share price and yield could be adversely
affected. Loans that are fully secured offer the Fund more protection than
unsecured loans in the event of non-payment of scheduled interest or principal.
However, there is no assurance that the liquidation of collateral from a secured
loan would satisfy the borrower's obligation, or that the collateral can be
liquidated. Indebtedness of borrowers whose creditworthiness is poor may involve
substantial risks, and may be highly speculative.
Borrowers that are in bankruptcy or restructuring may never pay off their
indebtedness, or may pay only a small fraction of the amount owed. Direct
indebtedness of Asian countries will also involve a risk that the governmental
entities responsible for the repayment of the debt may be unable, or unwilling,
to pay interest and repay principal when due.
Investments in loans through direct assignment of a financial institution's
interests with respect to a loan may involve additional risks to the Fund. For
example, if a loan is foreclosed, the Fund could become part owner of any
collateral, and would bear the costs and liabilities associated with owning and
disposing of the collateral. Direct debt instruments may also involve a risk of
insolvency of the lending bank or other intermediary.
A loan is often administered by a bank or other financial institution that acts
as agent for all holders. The agent administers the terms of the loan, as
specified on the loan agreement. Unless, under the terms of the loan or other
indebtedness, the Fund has direct recourse against the borrower, it may have to
rely on the agent to apply appropriate credit remedies against a borrower. If
assets held by the agent for the benefit of the Fund were determined to be
subject to the claims of the agent's general creditors, the Fund might incur
certain costs and delays in realizing payment on the loan or loan participation
and could suffer a loss of principal or interest.
Direct indebtedness purchased by the Fund may include letters of credit,
revolving credit facilities, or other standby financing commitments obligating
the Fund to pay additional cash on demand. These commitments may have the effect
of requiring the Fund to increase its investment in a borrower at a time when it
would not otherwise have done so, even if the borrower's condition makes it
unlikely that the amount will ever be repaid.
Illiquid Securities. Subject to any more restrictive applicable fundamental
investment policy, none of the Funds will maintain more than 15% of its net
assets in illiquid securities. Illiquid securities generally include (i) direct
placements or other securities that are subject to legal or contractual
restrictions on resale or for which there is no readily available market (e.g.,
when trading in the security is suspended or, in the case of unlisted
securities, when market makers do not exist or will not entertain bids or
offers), including many individually negotiated currency swaps and any assets
used to cover currency swaps and most privately negotiated investments in state
enterprises that have not yet conducted an initial equity offering, (ii)
over-the-counter options and assets used to cover over-the-counter options, and
(iii) repurchase agreements not terminable within seven days.
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Because of the absence of a trading market for illiquid securities, a Fund may
not be able to realize their full value upon sale. With respect to each Fund
that may invest in such securities, Alliance will monitor their illiquidity
under the supervision of the Directors of the Fund. To the extent permitted by
applicable law, Rule 144A securities will not be treated as "illiquid" for
purposes of the foregoing restriction so long as such securities meet liquidity
guidelines established by a Fund's Directors. Investment in non-publicly traded
securities by each of Growth Fund and Strategic Balanced Fund is restricted to
5% of its total assets (not including for these purposes Rule 144A securities,
to the extent permitted by applicable law) and is also subject to the 15%
restriction on investment in illiquid securities described above.
A Fund that invests in securities for which there is no ready market may
therefore not be able to readily sell such securities. To the extent that these
securities are foreign securities, there is no law in many of the countries in
which a Fund may invest similar to the Securities Act requiring an issuer to
register the sale of securities with a governmental agency or imposing legal
restrictions on resales of securities, either as to length of time the
securities may be held or manner of resale. However, there may be contractual
restrictions on resale of securities.
Options. An option gives the purchaser of the option, upon payment of a premium,
the right to deliver to (in the case of a put) or receive from (in the case of a
call) the writer a specified amount of a security on or before a fixed date at a
predetermined price. A call option written by a Fund is "covered" if the Fund
owns the underlying security, has an absolute and immediate right to acquire
that security upon conversion or exchange of another security it holds, or holds
a call option on the underlying security with an exercise price equal to or less
than that of the call option it has written. A put option written by a Fund is
covered if the Fund holds a put option on the underlying securities with an
exercise price equal to or greater than that of the put option it has written.
A call option is for cross-hedging purposes if a Fund does not own the
underlying security, and is designed to provide a hedge against a decline in
value in another security which the Fund owns or has the right to acquire.
Worldwide Privatization Fund, All-Asia Investment Fund, Income Builder Fund and
Utility Income Fund each may write call options for cross-hedging purposes. A
Fund would write a call option for cross-hedging purposes, instead of writing a
covered call option, when the premium to be received from the cross-hedge
transaction would exceed that which would be received from writing a covered
call option, while at the same time achieving the desired hedge.
In purchasing an option, a Fund would be in a position to realize a gain if,
during the option period, the price of the underlying security increased (in the
case of a call) or decreased (in the case of a put) by an amount in excess of
the premium paid; otherwise the Fund would experience a loss equal to the
premium paid for the option.
If an option written by a Fund were exercised, the Fund would be obligated to
purchase (in the case of a put) or sell (in the case of a call) the underlying
security at the exercise price. The risk involved in writing an option is that,
if the option were exercised, the underlying security would then be purchased or
sold by the Fund at a disadvantageous price. These risks could be reduced by
entering into a closing transaction (i.e., by disposing of the option prior to
its exercise). A Fund retains the premium received from writing a put or call
option whether or not the option is exercised. The writing of covered call
options could result in increases in a Fund's portfolio turnover rate,
especially during periods when market prices of the underlying securities
appreciate.
Technology Fund, Quasar Fund, International Fund, New Europe Fund and Global
Small Cap Fund will not write uncovered call options. Technology Fund and Global
Small Cap Fund will not write a call option if the premium to be received by the
Fund in doing so would not produce an annualized return of at least 15% of the
then current market value of the securities subject to the option (without
giving effect to commissions, stock transfer taxes and other expenses that are
deducted from premium receipts). Technology Fund, Quasar Fund and Global Small
Cap Fund will not write a call option if, as a result, the aggregate of the
Fund's portfolio securities subject to outstanding call options (valued at the
lower of the option price or market value of such securities) would exceed 15%
of the Fund's total assets or more than 10% of the Fund's assets would be
committed to call options that at the time of sale have a remaining term of more
than 100 days. The aggregate cost of all outstanding options purchased and held
by each of Premier Growth Fund, Technology Fund, Quasar Fund and Global Small
Cap Fund will at no time exceed 10% of the Fund's total assets. Neither
International Fund nor New Europe Fund will write uncovered put options.
A Fund that purchases or writes options on securities in privately negotiated
(i.e., over-the-counter) transactions will effect such transactions only with
investment dealers and other financial institutions (such as commercial banks or
savings and loan institutions) deemed creditworthy by Alliance, and Alliance has
adopted procedures for monitoring the creditworthiness of such entities. Options
purchased or written by a Fund in negotiated transactions are illiquid and it
may not be possible for the Fund to effect a closing transaction at an
advantageous time. See "Illiquid Securities."
Options on Securities Indices. An option on a securities index is similar to an
option on a security except that, rather than the right to take or make delivery
of a security at a specified price, an option on a securities index gives the
holder the right to receive, upon exercise of the option, an amount of cash if
the closing level of the chosen index is greater than (in the case of a call) or
less than (in the case of a put) the exercise price of the option.
Futures Contracts and Options on Futures Contracts. A "sale" of a futures
contract means the acquisition of a contractual obligation to deliver the
securities or foreign currencies or other commodity called for by the contract
at a specified price
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on a specified date. A "purchase" of a futures contract means the incurring of
an obligation to acquire the securities, foreign currencies or other commodity
called for by the contract at a specified price on a specified date. The
purchaser of a futures contract on an index agrees to take or make delivery of
an amount of cash equal to the difference between a specified dollar multiple of
the value of the index on the expiration date of the contract ("current contract
value") and the price at which the contract was originally struck. No physical
delivery of the securities underlying the index is made.
Options on futures contracts written or purchased by a Fund will be traded on
U.S. or foreign exchanges or over-the-counter. These investment techniques will
be used only to hedge against anticipated future changes in market conditions
and interest or exchange rates which otherwise might either adversely affect the
value of the Fund's portfolio securities or adversely affect the prices of
securities which the Fund intends to purchase at a later date.
No Fund will enter into any futures contracts or options on futures contracts if
immediately thereafter the market values of the outstanding futures contracts of
the Fund and the currencies and futures contracts subject to outstanding options
written by the Fund would exceed 50% of its total assets and Income Builder Fund
will also not do so if immediately thereafter the aggregate of initial margin
deposits on all the outstanding futures contracts of the Fund and premiums paid
on outstanding options on futures contracts would exceed 5% of the market value
of the total assets of the Fund. Premier Growth Fund may not purchase or sell a
stock index future if immediately thereafter more than 30% of its total assets
would be hedged by stock index futures. In connection with the purchase of stock
index futures contracts, a Fund will deposit in a segregated account with its
custodian an amount of cash, U.S. Government securities or other liquid
high-quality debt securities equal to the market value of the futures contracts
less any amounts maintained in a margin account with the Fund's broker. Premier
Growth Fund may not purchase or sell a stock index future if, immediately
thereafter, the sum of the amount of margin deposits on the Fund's existing
futures positions would exceed 5% of the market value of the Fund's total
assets.
Options on Foreign Currencies. As in the case of other kinds of options, the
writing of an option on a foreign currency constitutes only a partial hedge, up
to the amount of the premium received, and a Fund could be required to purchase
or sell foreign currencies at disadvantageous exchange rates, thereby incurring
losses. The purchase of an option on a foreign currency may constitute an
effective hedge against fluctuations in exchange rates although, in the event of
rate movements adverse to a Fund's position, it may forfeit the entire amount of
the premium plus related transaction costs. See the Statement of Additional
Information of each Fund that may invest in options on foreign currencies for
further discussion of the use, risks and costs of options on foreign currencies.
Forward Foreign Currency Exchange Contracts. A Fund purchases or sells forward
contracts to minimize the risk to it from adverse changes in the relationship
between the U.S. dollar and other currencies. A forward contract is an
obligation to purchase or sell a specific currency for an agreed price at a
future date, and is individually negotiated and privately traded.
A Fund may enter into a forward contract, for example, when it enters into a
contract for the purchase or sale of a security denominated in a foreign
currency in order to "lock in" the U.S. dollar price of the security
("transaction hedge"). A Fund will not engage in transaction hedges with respect
to the currency of a particular country to an extent greater than the aggregate
amount of the Fund's transactions in that currency. When a Fund believes that a
foreign currency may suffer a substantial decline against the U.S. dollar, it
may enter into a forward sale contract to sell an amount of that foreign
currency approximating the value of some or all of the Fund's portfolio
securities denominated in such foreign currency, or when the Fund believes that
the U.S. dollar may suffer a substantial decline against a foreign currency, it
may enter into a forward purchase contract to buy that foreign currency for a
fixed dollar amount ("position hedge"). A Fund will not position hedge with
respect to the currency of a particular country to an extent greater than the
aggregate market value (at the time of making such sale) of the securities held
in its portfolio denominated or quoted in that particular foreign currency.
Instead of entering into a position hedge, a Fund may, in the alternative, enter
into a forward contract to sell a different foreign currency for a fixed U.S.
dollar amount where the Fund believes that the U.S. dollar value of the currency
to be sold pursuant to the forward contract will fall whenever there is a
decline in the U.S. dollar value of the currency in which portfolio securities
of the Fund are denominated ("cross-hedge"). Unanticipated changes in currency
prices may result in poorer overall performance for the Fund than if it had not
entered into such forward contracts.
Hedging against a decline in the value of a currency does not eliminate
fluctuations in the prices of portfolio securities or prevent losses if the
prices of such securities decline. Such transactions also preclude the
opportunity for gain if the value of the hedged currency should rise. Moreover,
it may not be possible for a Fund to hedge against a devaluation that is so
generally anticipated that the Fund is not able to contract to sell the currency
at a price above the devaluation level it anticipates. International Fund, New
Europe Fund and Global Small Cap Fund will not enter into a forward contract
with a term of more than one year or if, as a result, more than 50% of its total
assets would be committed to such contracts. The dealings of International Fund,
New Europe Fund and Global Small Cap Fund in forward contracts will be limited
to hedging involving either specific transactions or portfolio positions.
Growth Fund and Strategic Balanced Fund may also purchase and sell foreign
currency on a spot basis.
Forward Commitments. Forward commitments for the purchase or sale of securities
may include purchases on a "when-issued"
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basis or purchases or sales on a "delayed delivery" basis. In some cases, a
forward commitment may be conditioned upon the occurrence of a subsequent event,
such as approval and consummation of a merger, corporate reorganization or debt
restructuring (i.e., a "when, as and if issued" trade).
When forward commitment transactions are negotiated, the price is fixed at the
time the commitment is made, but delivery and payment for the securities take
place at a later date. Normally, the settlement date occurs within two months
after the transaction, but settlements beyond two months may be negotiated.
Securities purchased or sold under a forward commitment are subject to market
fluctuation, and no interest or dividends accrue to the purchaser prior to the
settlement date. At the time a Fund intends to enter into a forward commitment,
it records the transaction and thereafter reflects the value of the security
purchased or, if a sale, the proceeds to be received, in determining its net
asset value. Any unrealized appreciation or depreciation reflected in such
valuation of a "when, as and if issued" security would be canceled in the event
that the required conditions did not occur and the trade was canceled.
The use of forward commitments enables a Fund to protect against anticipated
changes in interest rates and prices. For instance, in periods of rising
interest rates and falling bond prices, a Fund might sell securities in its
portfolio on a forward commitment basis to limit its exposure to falling prices.
In periods of falling interest rates and rising bond prices, a Fund might sell a
security in its portfolio and purchase the same or a similar security on a
when-issued or forward commitment basis, thereby obtaining the benefit of
currently higher cash yields. However, if Alliance were to forecast incorrectly
the direction of interest rate movements, a Fund might be required to complete
such when-issued or forward transactions at prices inferior to the then current
market values. When-issued securities and forward commitments may be sold prior
to the settlement date, but a Fund enters into when-issued and forward
commitments only with the intention of actually receiving securities or
delivering them, as the case may be. If a Fund chooses to dispose of the right
to acquire a when-issued security prior to its acquisition or dispose of its
right to deliver or receive against a forward commitment, it may incur a gain or
loss. Any significant commitment of Fund assets to the purchase of securities on
a "when, as and if issued" basis may increase the volatility of the Fund's net
asset value. No forward commitments will be made by New Europe Fund, All-Asia
Investment Fund, Worldwide Privatization Fund, Income Builder Fund or Utility
Income Fund if, as a result, the Fund's aggregate commitments under such
transactions would be more than 30% of the Fund's total assets. In the event the
other party to a forward commitment transaction were to default, a Fund might
lose the opportunity to invest money at favorable rates or to dispose of
securities at favorable prices.
Standby Commitment Agreements. Standby commitment agreements commit a Fund, for
a stated period of time, to purchase a stated amount of a security that may be
issued and sold to the Fund at the option of the issuer. The price and coupon of
the security are fixed at the time of the commitment. At the time of entering
into the agreement the Fund is paid a commitment fee, regardless of whether the
security ultimately is issued, typically equal to approximately 0.5% of the
aggregate purchase price of the security the Fund has committed to purchase. A
Fund will enter into such agreements only for the purpose of investing in the
security underlying the commitment at a yield and price considered advantageous
to the Fund and unavailable on a firm commitment basis. No Fund, other than
Income Builder Fund, will enter into a standby commitment with a remaining term
in excess of 45 days. Investments in standby commitments will be limited so that
the aggregate purchase price of the securities subject to the commitments will
not exceed 25% with respect to New Europe Fund, 50% with respect to Worldwide
Privatization Fund and All-Asia Investment Fund, and 20% with respect to Utility
Income Fund, of the Fund's assets taken at the time of making the commitment.
There is no guarantee that the securities subject to a standby commitment will
be issued and the value of the security, if issued, on the delivery date may be
more or less than its purchase price. Since the issuance of the security
underlying the commitment is at the option of the issuer, a Fund will bear the
risk of capital loss in the event the value of the security declines and may not
benefit from an appreciation in the value of the security during the commitment
period if the issuer decides not to issue and sell the security to the Fund.
Currency Swaps. Currency swaps involve the individually negotiated exchange by a
Fund with another party of a series of payments in specified currencies. A
currency swap may involve the delivery at the end of the exchange period of a
substantial amount of one designated currency in exchange for the other
designated currency. Therefore the entire principal value of a currency swap is
subject to the risk that the other party to the swap will default on its
contractual delivery obligations. The net amount of the excess, if any, of a
Fund's obligations over its entitlements with respect to each currency swap will
be accrued on a daily basis. A Fund will not enter into any currency swap unless
the credit quality of the unsecured senior debt or the claims-paying ability of
the other party thereto is rated in the highest rating category of at least one
nationally recognized rating organization at the time of entering into the
transaction. If there is a default by the other party to such a transaction,
such Fund will have contractual remedies pursuant to the agreements related to
the transactions.
Interest Rate Transactions. Each Fund that may enter into interest rate
transactions expects to do so primarily to preserve a return or spread on a
particular investment or portion of its portfolio or to protect against any
increase in the price of securities the Fund anticipates purchasing at a later
date. The Funds do not intend to use these transactions in a speculative manner.
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Interest rate swaps involve the exchange by a Fund with another party of their
respective commitments to pay or receive interest (e.g., an exchange of floating
rate payments for fixed rate payments). Interest rate swaps are entered on a net
basis (i.e., the two payment streams are netted out, with the Fund receiving or
paying, as the case may be, only the net amount of the two payments). With
respect to All-Asia Investment Fund and Utility Income Fund, the exchange
commitments can involve payments in the same currency or in different
currencies. The purchase of an interest rate cap entitles the purchaser, to the
extent that a specified index exceeds a predetermined interest rate, to receive
payments of interest on a contractually-based principal amount from the party
selling such interest rate cap. The purchase of an interest rate floor entitles
the purchaser, to the extent that a specified index falls below a predetermined
interest rate, to receive payments of interest on an agreed principal amount
from the party selling the interest rate floor.
A Fund may enter into interest rate swaps, caps and floors on either an
asset-based or liability-based basis, depending upon whether it is hedging its
assets or liabilities. The net amount of the excess, if any, of a Fund's
obligations over its entitlements with respect to each interest rate swap, cap
and floor is accrued daily. A Fund will not enter into an interest rate swap,
cap or floor transaction unless the unsecured senior debt or the claims-paying
ability of the other party thereto is then rated in the highest rating category
of at least one nationally recognized rating organization. Alliance will monitor
the creditworthiness of counterparties on an ongoing basis. The swap market has
grown substantially in recent years, with a large number of banks and investment
banking firms acting both as principals and as agents utilizing standardized
swap documentation. As a result, the swap market has become relatively liquid.
Caps and floors are more recent innovations for which standardized documentation
has not yet been developed and, accordingly, they are less liquid than swaps.
The use of interest rate transactions is a highly specialized activity which
involves investment techniques and risks different from those associated with
ordinary portfolio securities transactions. If Alliance incorrectly forecasted
market values, interest rates and other applicable factors, the investment
performance of a Fund would be adversely affected by the use of these investment
techniques. Moreover, even if Alliance is correct in its forecasts, there is a
risk that the transaction position may correlate imperfectly with the price of
the asset or liability being hedged. There is no limit on the amount of interest
rate transactions that may be entered into by a Fund that is permitted to enter
into such transactions. These transactions do not involve the delivery of
securities or other underlying assets or principal. Accordingly, the risk of
loss with respect to interest rate transactions is limited to the net amount of
interest payments that a Fund is contractually obligated to make. If the other
party to an interest rate transaction defaults, a Fund's risk of loss consists
of the net amount of interest payments that the Fund contractually is entitled
to receive.
Repurchase Agreements. A repurchase agreement arises when a buyer purchases a
security and simultaneously agrees to resell it to the vendor at an agreed-upon
future date, normally a day or a few days later. The resale price is greater
than the purchase price, reflecting an agreed-upon interest rate for the period
the buyer's money is invested in the security. Such agreements permit a Fund to
keep all of its assets at work while retaining "overnight" flexibility in
pursuit of investments of a longer-term nature. If a vendor defaults on its
repurchase obligation, a Fund would suffer a loss to the extent that the
proceeds from the sale of the collateral were less than the repurchase price. If
a vendor goes bankrupt, a Fund might be delayed in, or prevented from, selling
the collateral for its benefit. Alliance monitors the creditworthiness of the
vendors with which the Fund enters into repurchase agreements. There is no
percentage restriction on a Fund's ability to enter into repurchase agreements,
other than as indicated under "Investment Objectives and Policies."
Short Sales. A short sale is effected by selling a security that a Fund does not
own, or if the Fund does own such security, it is not to be delivered upon
consummation of the sale. A short sale is "against the box" to the extent that a
Fund contemporaneously owns or has the right to obtain securities identical to
those sold short without payment. Worldwide Privatization Fund, All-Asia
Investment Fund, Income Builder Fund and Utility Income Fund each may make short
sales of securities or maintain short positions only for the purpose of
deferring realization of gain or loss for U.S. federal income tax purposes,
provided that at all times when a short position is open the Fund owns an equal
amount of securities of the same issue as, and equal in amount to, the
securities sold short. In addition, each of those Funds may not make a short
sale if as a result more than 10% of the Fund's net assets would be held as
collateral for short sales, except that All-Asia Investment Fund may not make a
short sale if as a result more than 25% of the Fund's net assets would be held
as collateral for short sales. If the price of the security sold short increases
between the time of the short sale and the time a Fund replaces the borrowed
security, the Fund will incur a loss; conversely, if the price declines, the
Fund will realize a capital gain. See "Certain Fundamental Investment Policies."
Certain special federal income tax considerations may apply to short sales
entered into by a Fund. See "Dividends, Distributions and Taxes" in the relevant
Fund's Statement of Additional Information.
Loans of Portfolio Securities. The risks in lending portfolio securities, as
with other extensions of credit, consist of possible loss of rights in the
collateral should the borrower fail financially. In determining whether to lend
securities to a particular borrower, Alliance will consider all relevant facts
and circumstances, including the creditworthiness of the borrower. While
securities are on loan, the borrower will pay the Fund any income earned thereon
and the Fund may invest any cash collateral in portfolio securities, thereby
earning additional income, or receive an agreed upon amount of income from a
borrower who has delivered equivalent collateral. Each Fund will have the right
to regain record ownership of loaned
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securities or equivalent securities in order to exercise ownership rights such
as voting rights, subscription rights and rights to dividends, interest or
distributions. A Fund may pay reasonable finders', administrative and custodial
fees in connection with a loan. A Fund will not lend its portfolio securities to
any officer, director, employee or affiliate of the Fund or Alliance.
General. The successful use of the foregoing investment practices draws upon
Alliance's special skills and experience with respect to such instruments and
usually depends on Alliance's ability to forecast price movements, interest
rates or currency exchange rate movements correctly. Should interest rates,
prices or exchange rates move unexpectedly, a Fund may not achieve the
anticipated benefits of the transactions or may realize losses and thus be in a
worse position than if such strategies had not been used. Unlike many
exchange-traded futures contracts and options on futures contracts, there are no
daily price fluctuation limits with respect to certain options and forward
contracts, and adverse market movements could therefore continue to an unlimited
extent over a period of time. In addition, the correlation between movements in
the prices of futures contracts, options and forward contracts and movements in
the prices of the securities and currencies hedged or used for cover will not be
perfect and could produce unanticipated losses.
A Fund's ability to dispose of its position in futures contracts, options and
forward contracts depends on the availability of liquid markets in such
instruments. Markets in options and futures with respect to a number of types of
securities and currencies are relatively new and still developing, and there is
no public market for forward contracts. It is impossible to predict the amount
of trading interest that may exist in various types of futures contracts,
options and forward contracts. If a secondary market does not exist with respect
to an option purchased or written by a Fund, it might not be possible to effect
a closing transaction in the option (i.e., dispose of the option) with the
result that (i) an option purchased by the Fund would have to be exercised in
order for the Fund to realize any profit and (ii) the Fund may not be able to
sell currencies or portfolio securities covering an option written by the Fund
until the option expires or it delivers the underlying security, futures
contract or currency upon exercise. Therefore, no assurance can be given that
the Funds will be able to utilize these instruments effectively for the purposes
set forth above. Furthermore, a Fund's ability to engage in options and futures
transactions may be limited by tax considerations. See "Dividends, Distributions
and Taxes" in the Statement of Additional Information of each Fund that invests
in options and futures.
Future Developments. A Fund may, following written notice to its shareholders,
take advantage of other investment practices that are not currently contemplated
for use by the Fund or are not available but may yet be developed, to the extent
such investment practices are consistent with the Fund's investment objective
and legally permissible for the Fund. Such investment practices, if they arise,
may involve risks that exceed those involved in the activities described above.
Defensive Position. For temporary defensive purposes, each Fund may invest in
certain types of short-term, liquid, high grade or high quality (depending on
the Fund) debt securities. These securities may include U.S. Government
securities, qualifying bank deposits, money market instruments, prime commercial
paper and other types of short-term debt securities including notes and bonds.
For Funds that may invest in foreign countries, such securities may also include
short-term, foreign-currency denominated securities of the type mentioned above
issued by foreign governmental entities, companies and supranational
organizations. For a complete description of the types of securities each Fund
may invest in while in a temporary defensive position, please see such Fund's
Statement of Additional Information.
Portfolio Turnover. Alliance anticipates that the annual turnover rate will not
exceed 100% for Alliance Fund, Worldwide Privatization Fund and All-Asia
Investment Fund; 150% for Premier Growth Fund, International Fund, New Europe
Fund, Global Small Cap Fund, Income Builder Fund and Growth and Income Fund; and
200% for Growth Fund, Technology Fund, Strategic Balanced Fund, Balanced Shares
and Utility Income Fund. A 100%, 150% and 200% annual turnover rate would occur,
for example, when all of the securities in a Fund's portfolio are replaced once,
one and one-half times and twice, respectively, in a period of one year. These
portfolio turnover rates are greater than those of most other investment
companies, including those which emphasize capital appreciation as a basic
policy. A high rate of portfolio turnover involves correspondingly greater
brokerage and other expenses than a lower rate, which must be borne by the Fund
and its shareholders. High portfolio turnover also may result in the realization
of substantial net short-term capital gains. See "Dividends, Distributions and
Taxes" in each Fund's Statement of Additional Information.
CERTAIN FUNDAMENTAL INVESTMENT POLICIES
Each Fund has adopted certain fundamental investment policies listed below,
which may not be changed without the approval of its shareholders. Additional
investment restrictions with respect to a Fund are set forth in its Statement of
Additional Information.
Alliance Fund may not: (i) invest more than 5% of its total assets in the
securities of any one issuer (other than the U.S. Government); (ii) acquire more
than 10% of the voting or other securities of any one issuer; or (iii) buy
securities of any company that (including its predecessors) has not been in
business at least three continuous years. Pursuant to investment policies which
are not fundamental, the Fund does not invest (i) in puts or calls (except as
discussed above); (ii) in straddles, spreads, or any combination thereof; (iii)
in oil, gas or other mineral exploration or development programs; or
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(iv) more than 5% of its gross assets in securities the disposition of which
would be subject to restrictions under the federal securities laws.
Growth Fund and Strategic Balanced Fund each may not: (i) invest more than 5% of
its total assets in the securities of any one issuer (other than U.S. Government
securities and repurchase agreements relating thereto), although up to 25% of
each Fund's total assets may be invested without regard to this restriction; or
(ii) invest 25% or more of its total assets in the securities of any one
industry.
Premier Growth Fund may not: (i) purchase more than 10% of the outstanding
voting securities of any one issuer; (ii) invest 25% or more of the value of its
total assets in the same industry; (iii) borrow money or issue senior securities
except for temporary or emergency purposes in an amount not exceeding 5% of the
value of its total assets at the time the borrowing is made; (iv) pledge,
mortgage, hypothecate or otherwise encumber any of its assets except in
connection with the writing of call options and except to secure permitted
borrowings; or (v) invest in the securities of any issuer that has a record of
less than three years of continuous operation (including the operation of any
predecessor) if as a result more than 10% of the value of the total assets of
the Fund would be invested in the securities of such issuer or issuers.
Technology Fund may not: (i) with respect to 75% of its total assets, have such
assets represented by other than: (a) cash and cash items, (b) U.S. Government
securities, or (c) securities of any one issuer (other than the U.S. Government
and its agencies or instrumentalities) not greater in value than 5% of the
Fund's total assets, and not more than 10% of the outstanding voting securities
of such issuer; (ii) purchase the securities of any one issuer, other than the
U.S. Government and its agencies or instrumentalities, if as a result (a) the
value of the holdings of the Fund in the securities of such issuer exceeds 25%
of its total assets, or (b) the Fund owns more than 25% of the outstanding
securities of any one class of securities of such issuer; (iii) concentrate its
investments in any one industry, but the Fund has reserved the right to invest
up to 25% of its total assets in a particular industry; and (iv) invest in the
securities of any issuer which has a record of less than three years of
continuous operation (including the operation of any predecessor) if such
purchase would cause 10% or more of its total assets to be invested in the
securities of such issuers.
Quasar Fund may not: (i) purchase the securities of any one issuer, other than
the U.S. Government or any of its agencies or instrumentalities, if as a result
more than 5% of its total assets would be invested in such issuer or the Fund
would own more than 10% of the outstanding voting securities of such issuer,
except that up to 25% of its total assets may be invested without regard to
these 5% and 10% limitations; (ii) invest more than 25% of its total assets in
any particular industry; (iii) borrow money except for temporary or emergency
purposes in an amount not exceeding 5% of its total assets at the time the
borrowing is made; or (iv) invest more than 10% of its assets in restricted
securities.
International Fund may not: (i) invest more than 5% of the value of its total
assets in securities of a single issuer (including repurchase agreements with
any one entity), except U.S. Government securities or foreign government
securities; provided, however, that the Fund may not, with respect to 75% of its
total assets, invest more than 5% of its total assets in securities of any one
foreign government issuer; (ii) own more than 10% of the outstanding securities
of any class of any issuer (for this purpose, all preferred stocks of an issuer
shall be deemed a single class, and all indebtedness of an issuer shall be
deemed a single class), except U.S. Government securities; (iii) invest more
than 25% of the value of its total assets in securities of issuers having their
principal business activities in the same industry; provided, that this
limitation does not apply to U.S. Government securities or foreign government
securities; (iv) invest more than 5% of the value of its total assets in the
securities of any issuer that has a record of less than three years of
continuous operation (including the operation of any predecessor or
unconditional guarantor), except U.S. Government securities or foreign
government securities; (v) invest more than 5% of the value of its total assets
in securities with legal or contractual restrictions on resale, other than
repurchase agreements, or more than 10% of the value of its total assets in
securities that are not readily marketable (including restricted securities and
repurchase agreements not terminable within seven business days); and (vi)
borrow money, except as a temporary measure for extraordinary or emergency
purposes, and then only from banks in amounts not exceeding 5% of its total
assets.
Worldwide Privatization Fund may not: (i) invest 25% or more of its total assets
in securities of issuers conducting their principal business activities in the
same industry, except that this restriction does not apply to (a) U.S.
Government securities, or (b) the purchase of securities of issuers whose
primary business activity is in the national commercial banking industry, so
long as the Fund's Directors determine, on the basis of factors such as
liquidity, availability of investments and anticipated returns, that the Fund's
ability to achieve its investment objective would be adversely affected if the
Fund were not permitted to invest more than 25% of its total assets in those
securities, and so long as the Fund notifies its shareholders of any decision by
the Directors to permit or cease to permit the Fund to invest more than 25% of
its total assets in those securities, such notice to include a discussion of any
increased investment risks to which the Fund may be subjected as a result of the
Directors' determination; (ii) borrow money except from banks for temporary or
emergency purposes, including the meeting of redemption requests that might
require the untimely disposition of securities; borrowing in the aggregate may
not exceed 15%, and borrowing for purposes other than meeting redemptions may
not exceed 5%, of the Fund's total assets (including the amount borrowed) less
liabilities (not including the amount borrowed) at the time the borrowing is
made; outstanding
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borrowings in excess of 5% of the value of the Fund's total assets will be
repaid before any investments are made; or (iii) pledge, hypothecate, mortgage
or otherwise encumber its assets, except to secure permitted borrowings. The
exception contained in clause (i)(b) above is subject to the operating policy
regarding concentration described in this Prospectus.
New Europe Fund may not: (i) purchase more than 10% of the outstanding voting
securities of any one issuer; (ii) invest more than 15% of its total assets in
the securities of any one issuer or 25% or more of its total assets in the same
industry, provided, however, that the foregoing restriction shall not be deemed
to prohibit the Fund from purchasing the securities of any issuer pursuant to
the exercise of rights distributed to the Fund by the issuer, except that no
such purchase may be made if as a result the Fund will fail to meet the
diversification requirements of the Code and any such acquisition in excess of
the foregoing 15% or 25% limits will be sold by the Fund as soon as reasonably
practicable (this restriction does not apply to U.S. Government securities, but
will apply to foreign government securities unless the Commission permits their
exclusion); (iii) borrow money except from banks for temporary or emergency
purposes, including the meeting of redemption requests that might require the
untimely disposition of securities; borrowing in the aggregate may not exceed
15%, and borrowing for purposes other than meeting redemptions may not exceed
5%, of the Fund's total assets (including the amount borrowed) less liabilities
(not including the amount borrowed) at the time the borrowing is made;
outstanding borrowings in excess of 5% of the Fund's total assets will be repaid
before any subsequent investments are made; or (iv) purchase a security (unless
the security is acquired pursuant to a plan of reorganization or an offer of
exchange) if, as a result, the Fund would own any securities of an open-end
investment company or more than 3% of the total outstanding voting stock of any
closed-end investment company, or more than 5% of the value of the Fund's total
assets would be invested in securities of any closed-end investment company, or
more than 10% of such value in closed-end investment companies in general.
All-Asia Investment Fund may not: (i) invest 25% or more of its total assets in
securities of issuers conducting their principal business activities in the same
industry; (ii) borrow money except from banks for temporary or emergency
purposes, including the meeting of redemption requests that might require the
untimely disposition of securities; borrowing in the aggregate may not exceed
15%, and borrowing for purposes other than meeting redemptions may not exceed
5%, of the Fund's total assets (including the amount borrowed) less liabilities
(not including the amount borrowed) at the time the borrowing is made;
outstanding borrowings in excess of 5% of the value of the Fund's total assets
will be repaid before any investments are made; or (iii) pledge, hypothecate,
mortgage or otherwise encumber its assets, except to secure permitted
borrowings.
Global Small Cap Fund may not: (i) purchase the securities of any one issuer,
other than the U.S. Government or any of its agencies or instrumentalities, if
immediately after such purchase more than 5% of the value of its total assets
would be invested in such issuer or the Fund would own more than 10% of the
outstanding voting securities of such issuer, except that up to 25% of the
Fund's total assets may be invested without regard to these 5% and 10%
limitations; (ii) invest 25% or more of its total assets in the same industry;
this restriction does not apply to U.S. Government securities, but will apply to
foreign government securities unless the Commission permits their exclusion;
(iii) borrow money except from banks for emergency or temporary purposes in an
amount not exceeding 5% of the total assets of the Fund; or (iv) make short
sales of securities or maintain a short position, unless at all times when a
short position is open it owns an equal amount of such securities or securities
convertible into or exchangeable for, without payment of any further
consideration, securities of the same issue as, and equal in amount to, the
securities sold short and unless not more than 5% of the Fund's net assets is
held as collateral for such sales at any one time.
Balanced Shares may not: (i) invest more than 5% of its total assets in the
securities of any one issuer, except U.S. Government securities; or (ii) own
more than 10% of the outstanding voting securities of any one issuer.
Income Builder Fund may not: (i) invest 25% or more of its total assets in
securities of companies engaged principally in any one industry, except that
this restriction does not apply to U.S. Government securities; (ii) borrow money
except from banks for temporary or emergency purposes, including the meeting of
redemption requests that might require the untimely disposition of securities;
borrowing in the aggregate may not exceed 15%, and borrowing for purposes other
than meeting redemptions may not exceed 5%, of the Fund's total assets
(including the amount borrowed) less liabilities (not including the amount
borrowed) at the time borrowing is made; securities will not be purchased while
borrowings in excess of 5% of the Fund's total assets are outstanding; or (iii)
pledge, hypothecate, mortgage or otherwise encumber its assets, except to secure
permitted borrowings.
Utility Income Fund may not: (i) invest more than 5% of its total assets in the
securities of any one issuer except the U.S. Government, although with respect
to 25% of its total assets it may invest in any number of issuers; (ii) invest
25% or more of its total assets in the securities of issuers conducting their
principal business activities in any one industry, other than the utilities
industry, except that this restriction does not apply to U.S. Government
securities; (iii) purchase more than 10% of any class of the voting securities
of any one issuer; (iv) borrow money except from banks for temporary or
emergency purposes, including the meeting of redemption requests that might
require the untimely disposition of securities; borrowing in the aggregate may
not exceed 15%, and borrowing for purposes other than meeting redemptions may
not exceed 5%, of the Fund's total assets (including the amount borrowed) less
liabilities (not including the amount borrowed) at the time the borrowing is
made; outstanding borrowings in excess of 5% of the Fund's total assets will be
repaid before any subsequent
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investments are made; or (v) purchase a security if, as a result (unless the
security is acquired pursuant to a plan of reorganization or an offer of
exchange), the Fund would own any securities of an open-end investment company
or more than 3% of the total outstanding voting stock of any closed-end
investment company or more than 5% of the value of the Fund's net assets would
be invested in securities of any one or more closed-end investment companies.
Growth and Income Fund may not (i) invest more than 5% of its net assets in the
security of any one issuer, except U.S. Government obligations or (ii) own more
than 10% of the outstanding voting securities of any issuer.
RISK CONSIDERATIONS
Investment in certain of the Funds involves the special risk considerations
described below. These risks may be heightened when investing in emerging
markets.
Investment in Privatized Enterprises by Worldwide Privatization Fund. In certain
jurisdictions, the ability of foreign entities, such as the Fund, to participate
in privatizations may be limited by local law, or the price or terms on which
the Fund may be able to participate may be less advantageous than for local
investors. Moreover, there can be no assurance that governments that have
embarked on privatization programs will continue to divest their ownership of
state enterprises, that proposed privatizations will be successful or that
governments will not re-nationalize enterprises that have been privatized.
Furthermore, in the case of certain of the enterprises in which the Fund may
invest, large blocks of the stock of those enterprises may be held by a small
group of stockholders, even after the initial equity offerings by those
enterprises. The sale of some portion or all of those blocks could have an
adverse effect on the price of the stock of any such enterprise.
Most state enterprises or former state enterprises go through an internal
reorganization of management prior to conducting an initial equity offering in
an attempt to better enable these enterprises to compete in the private sector.
However, certain reorganizations could result in a management team that does not
function as well as the enterprise's prior management and may have a negative
effect on such enterprise. After making an initial equity offering, enterprises
that may have enjoyed preferential treatment from the respective state or
government that owned or controlled them may no longer receive such preferential
treatment and may become subject to market competition from which they were
previously protected. Some of these enterprises may not be able to effectively
operate in a competitive market and may suffer losses or experience bankruptcy
due to such competition. In addition, the privatization of an enterprise by its
government may occur over a number of years, with the government continuing to
hold a controlling position in the enterprise even after the initial equity
offering for the enterprise.
Currency Considerations. Substantially all of the assets of International Fund,
New Europe Fund, All-Asia Investment Fund, Global Small Cap Fund and Worldwide
Privatization Fund will be invested in securities denominated in foreign
currencies, and a corresponding portion of these Funds' revenues will be
received in such currencies. Therefore, the dollar equivalent of their net
assets, distributions and income will be adversely affected by reductions in the
value of certain foreign currencies relative to the U.S. dollar. If the value of
the foreign currencies in which a Fund receives its income falls relative to the
U.S. dollar between receipt of the income and the making of Fund distributions,
the Fund may be required to liquidate securities in order to make distributions
if it has insufficient cash in U.S. dollars to meet distribution requirements
that the Fund must satisfy to qualify as a regulated investment company for
federal income tax purposes. Similarly, if an exchange rate declines between the
time a Fund incurs expenses in U.S. dollars and the time cash expenses are paid,
the amount of the currency required to be converted into U.S. dollars in order
to pay expenses in U.S. dollars could be greater than the equivalent amount of
such expenses in the currency at the time they were incurred. In light of these
risks, a Fund may engage in certain currency hedging transactions, which
themselves involve certain special risks. See "Additional Investment Practices"
above.
Foreign Investment. The securities markets of many foreign countries are
relatively small, with the majority of market capitalization and trading volume
concentrated in a limited number of companies representing a small number of
industries. Consequently, a Fund whose investment portfolio includes such
securities may experience greater price volatility and significantly lower
liquidity than a portfolio invested solely in equity securities of United States
companies. These markets may be subject to greater influence by adverse events
generally affecting the market, and by large investors trading significant
blocks of securities, than is usual in the United States. Securities settlements
may in some instances be subject to delays and related administrative
uncertainties. These problems are particularly severe in India, where settlement
is through physical delivery, and, where, currently, a severe shortage of vault
capacity exists among custodial banks, although efforts are being undertaken to
alleviate the shortage. Certain foreign countries require governmental approval
prior to investments by foreign persons or limit investment by foreign persons
to only a specified percentage of an issuer's outstanding securities or a
specific class of securities which may have less advantageous terms (including
price) than securities of the company available for purchase by nationals. These
restrictions or controls may at times limit or preclude investment in certain
securities and may increase the costs and expenses of a Fund. In addition, the
repatriation of investment income, capital or the proceeds of sales of
securities from certain of the countries is controlled under regulations,
including in some cases the need for certain advance government notification or
authority, and if a deterioration occurs in a country's balance of payments, the
country could impose temporary restrictions on foreign capital remittances.
A Fund could be adversely affected by delays in, or a refusal to grant, any
required governmental approval for repatriation, as
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well as by the application to it of other restrictions on investment. Investing
in local markets may require a Fund to adopt special procedures, which may
involve additional costs to a Fund. The liquidity of a Fund's investments in any
country in which any of these factors exists could be affected and Alliance will
monitor the effect of any such factor or factors on a Fund's investments.
Furthermore, transaction costs including brokerage commissions for transactions
both on and off the securities exchanges in many foreign countries are generally
higher than in the U.S.
Issuers of securities in foreign jurisdictions are generally not subject to the
same degree of regulation as are U.S. issuers with respect to such matters as
insider trading rules, restrictions on market manipulation, shareholder proxy
requirements and timely disclosure of information. The reporting, accounting and
auditing standards of foreign countries may differ, in some cases significantly,
from U.S. standards in important respects and less information may be available
to investors in foreign securities than to investors in U.S. securities.
Substantially less information is publicly available about certain non-U.S.
issuers than is available about U.S. issuers.
The economies of individual foreign countries may differ favorably or
unfavorably from the U.S. economy in such respects as growth of gross domestic
product or gross national product, rate of inflation, capital reinvestment,
resource self-sufficiency and balance of payments position. Nationalization,
expropriation or confiscatory taxation, currency blockage, political changes,
government regulation, political or social instability or diplomatic
developments could affect adversely the economy of a foreign country or the
Fund's investments in such country. In the event of expropriation,
nationalization or other confiscation, a Fund could lose its entire investment
in the country involved. In addition, laws in foreign countries governing
business organizations, bankruptcy and insolvency may provide less protection to
security holders such as the Fund than that provided by U.S. laws.
Investment in United Kingdom Issuers by New Europe Fund. Investment in
securities of United Kingdom issuers involves certain considerations not present
with investment in securities of U.S. issuers. As with any investment not
denominated in the U.S. dollar, the U.S. dollar value of the Fund's investment
denominated in the British pound sterling will fluctuate with pound
sterling--dollar exchange rate movements. Since 1972, when the pound sterling
was allowed to float against other currencies, it has generally depreciated
against most major currencies, including the U.S. dollar. From 1990 through
1994, the pound sterling declined at an average annual rate of approximately
3.6% against the U.S. dollar. Between September and December 1992, after the
United Kingdom's exit from the Exchange Rate Mechanism of the European Monetary
System, the value of the pound sterling fell by almost 20% against the U.S.
dollar. The pound sterling continued to fall in early 1993, but recovered due to
interest rate cuts throughout Europe and an upturn in the economy of the United
Kingdom.
The United Kingdom's largest stock exchange is the International Stock Exchange
of the United Kingdom and the Republic of Ireland (The London Stock Exchange),
which is the third largest exchange in the world. As measured by the FT-SE 100
index, the performance of the 100 largest companies in the United Kingdom
reached a record high of 3593.0 on October 18, 1995, up 17% from the end of
1994.
The public sector borrowing requirement ("PSBR"), a mandated measure of the
amount required to balance the budget, is running in excess of the November 1994
budget estimate, as a result of decreased revenue growth and increased
government spending. The PSBR estimate for the 1996-97 fiscal year has also been
raised, but is still expected to be under the European Union limit.
Since 1979, the Conservative Party has controlled Parliament. However, in recent
years, this dominance has been called into question. In 1990, due to an internal
challenge for leadership the Conservative Party chose John Major to replace
Margaret Thatcher as Prime Minister. Mr. Major's position has been strengthened
by his reelection as leader of the Conservative Party and is expected to retain
that position until the next general election. Unless the Conservative Party
calls for an earlier election, the next general election will take place in
April 1997. For further information regarding the United Kingdom, see the Fund's
Statement of Additional Information.
Investment in Japanese Issuers by All-Asia Investment Fund and International
Fund. Investment in securities of Japanese issuers involves certain
considerations not present with investment in securities of U.S. issuers. As
with any investment not denominated in the U.S. dollar, the U.S. dollar value of
each Fund's investments denominated in the Japanese yen will fluctuate with
yen-dollar exchange rate movements. The Japanese yen has generally been
appreciating against the U.S. dollar for the past decade but has recently fallen
from its post-World War II high against the U.S. dollar.
Japan's largest stock exchange is the Tokyo Stock Exchange, the First Section of
which is reserved for larger, established companies. As measured by the TOPIX, a
capitalization-weighted composite index of all common stocks listed in the First
Section, the performance of the First Section reached a peak in 1989.
Thereafter, the TOPIX declined approximately 46% through the beginning of 1993.
In 1993, the TOPIX increased by approximately 9% from the end of 1992, and by
the end of 1994 increased by approximately 8% from the end of 1993. As of
October 27, 1995, the TOPIX had declined by approximately 11% from the end of
1994. Certain valuation measures, such as price-to-book value and price-to-cash
flow ratios, indicate that the Japanese stock market is near its lowest level in
the last twenty years relative to other world markets. The price/earnings ratios
of First Section companies, however, are on average high in comparison with
other major stock markets.
In recent years, Japan has consistently recorded large current account trade
surpluses with the U.S. that have caused difficulties in the relations between
the two countries. On October 1, 1994, the U.S. and Japan reached an agreement
that may lead to more open Japanese markets with respect to trade in certain
goods and services. In June 1995, the two countries agreed in principle to
increase Japanese imports of American automobiles and automotive parts.
Nevertheless it is expected that the continuing friction between the U.S. and
Japan with
26
<PAGE>
respect to trade issues will continue for the foreseeable future.
Each Fund's investments in Japanese issuers also will be subject to uncertainty
resulting from the instability of recent Japanese ruling coalitions. From 1955
to 1993, Japan's government was controlled by a single political party. In
August 1993, following a split in that party, a coalition government was formed.
That coalition government collapsed in April 1994, and was replaced by a
minority coalition that, in turn, collapsed in June 1994. The stability of the
current ruling coalition, the third since 1993, and the first in 47 years led by
a socialist, is not assured. For further information regarding Japan, see each
Fund's Statement of Additional Information.
Investment in Smaller, Emerging Companies. The Funds may invest in smaller,
emerging companies. Global Small Cap Fund and New Europe Fund will emphasize
investment in, and All-Asia Investment Fund may emphasize investment in,
smaller, emerging companies. Investment in such companies involves greater risks
than is customarily associated with securities of more established companies.
The securities of smaller companies may have relatively limited marketability
and may be subject to more abrupt or erratic market movements than securities of
larger companies or broad market indices.
U.S. and Foreign Taxes. Foreign taxes paid by a Fund may be creditable or
deductible by U.S. shareholders for U.S. income tax purposes. No assurance can
be given that applicable tax laws and interpretations will not change in the
future. Moreover, non-U.S. investors may not be able to credit or deduct such
foreign taxes. Investors should review carefully the information discussed under
the heading "Dividends, Distributions and Taxes" and should discuss with their
tax advisers the specific tax consequences of investing in a Fund.
Fixed-Income Securities. The value of each Fund's shares will fluctuate with the
value of its investments. The value of each Fund's investments in fixed-income
securities will change as the general level of interest rates fluctuates. During
periods of falling interest rates, the values of fixed-income securities
generally rise.
Conversely, during periods of rising interest rates, the values of fixed-income
securities generally decline.
Under normal market conditions, the average dollar-weighted maturity of a Fund's
portfolio of debt or other fixed-income securities is expected to vary between
five and 30 years in the case of All-Asia Investment Fund, between eight and 15
years in the case of Income Builder Fund, between five and 25 years in the case
of Utility Income Fund and between one year or less and 30 years in the case of
all other Funds that invest in such securities.
Securities Ratings. The ratings of securities by S&P, Moody's, Duff & Phelps and
Fitch are a generally accepted barometer of credit risk. They are, however,
subject to certain limitations from an investor's standpoint. The rating of an
issuer is heavily weighted by past developments and does not necessarily reflect
probable future conditions. There is frequently a lag between the time a rating
is assigned and the time it is updated. In addition, there may be varying
degrees of difference in credit risk of securities within each rating category.
Securities rated Aaa by Moody's and AAA by S&P, Duff & Phelps and Fitch are
considered to be of the highest quality; capacity to pay interest and repay
principal is extremely strong. Securities rated Aa by Moody's and AA by S&P,
Duff & Phelps and Fitch are considered to be high quality; capacity to repay
principal is considered very strong, although elements may exist that make risks
appear somewhat larger than exist with securities rated Aaa or AAA. Securities
rated A are considered by Moody's to possess adequate factors giving security to
principal and interest. S&P, Duff & Phelps and Fitch consider such securities to
have a strong capacity to pay interest and repay principal. Such securities are
more susceptible to adverse changes in economic conditions and circumstances
than higher-rated securities.
Securities rated Baa by Moody's and BBB by S&P, Duff & Phelps and Fitch are
considered to have an adequate capacity to pay interest and repay principal.
Such securities are considered to have speculative characteristics and share
some of the same characteristics as lower-rated securities. Sustained periods of
deteriorating economic conditions or of rising interest rates are more likely to
lead to a weakening in the issuer's capacity to pay interest and repay principal
than in the case of higher-rated securities. Securities rated Ba by Moody's and
BB by S&P, Duff & Phelps and Fitch are considered to have speculative
characteristics with respect to capacity to pay interest and repay principal
over time; their future cannot be considered as well-assured. Securities rated B
by Moody's, S&P, Duff & Phelps and Fitch are considered to have highly
speculative characteristics with respect to capacity to pay interest and repay
principal. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Securities rated Caa by Moody's and CCC by S&P, Duff & Phelps and Fitch are of
poor standing and there is a present danger with respect to payment of principal
or interest. Securities rated Ca by Moody's and CC by S&P and Fitch are
minimally protected, and default in payment of principal or interest is
probable. Securities rated C by Moody's, S&P and Fitch are in imminent default
in payment of principal or interest and have extremely poor prospects of ever
attaining any real investment standing. Securities rated D by S&P and Fitch are
in default. The issuer of securities rated DD by Duff & Phelps is under an order
of liquidation.
Investment in Lower-Rated Fixed-Income Securities. Lower-rated securities, i.e.,
those rated Ba and lower by Moody's or BB and lower by S&P, Duff & Phelps or
Fitch, are subject to greater risk of loss of principal and interest than
higher-rated securities. They are also generally considered to be subject to
greater market risk than higher-rated securities, and the capacity of issuers of
lower-rated securities to pay interest and repay principal is more likely to
weaken than is that of issuers of higher-rated securities in times of
deteriorating economic conditions or rising interest rates. In addition,
lower-rated securities may be more susceptible to real or perceived adverse
economic conditions than investment grade securities, although the market values
of securities rated below investment grade and comparable unrated securities
tend to react less to fluctuations in interest rate levels than do those of
higher-rated securities.
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<PAGE>
The market for lower-rated securities may be thinner and less active than that
for higher-rated securities, which can adversely affect the prices at which
these securities can be sold. To the extent that there is no established
secondary market for lower-rated securities, a Fund may experience difficulty
in valuing such securities and, in turn, the Fund's assets. In addition, adverse
publicity and investor perceptions about lower-rated securities, whether or not
factual, may tend to impair their market value and liquidity.
Alliance will try to reduce the risk inherent in investment in lower-rated
securities through credit analysis, diversification and attention to current
developments and trends in interest rates and economic and political conditions.
However, there can be no assurance that losses will not occur. Since the risk of
default is higher for lower-rated securities, Alliance's research and credit
analysis are a correspondingly more important aspect of its program for managing
a Fund's securities than would be the case if a Fund did not invest in
lower-rated securities.
In seeking to achieve a Fund's investment objective, there will be times, such
as during periods of rising interest rates, when depreciation and realization of
capital losses on securities in a Fund's portfolio will be unavoidable.
Moreover, medium- and lower-rated securities and non-rated securities of
comparable quality may be subject to wider fluctuations in yield and market
values than higher-rated securities under certain market conditions. Such
fluctuations after a security is acquired do not affect the cash income received
from that security but are reflected in the net asset value of a Fund. See the
Statement of Additional Information for each Fund that invests in lower-rated
securities for a description of the bond ratings of Moody's, S&P, Duff & Phelps
and Fitch.
Certain lower-rated securities in which Growth Fund, Income Builder Fund and
Utility Income Fund may invest may contain call or buy-back features that permit
the issuers thereof to call or repurchase such securities. Such securities may
present risks based on prepayment expectations. If an issuer exercises such a
provision, a Fund may have to replace the called security with a lower yielding
security, resulting in a decreased rate of return to the Fund.
Non-Diversified Status. Each of Worldwide Privatization Fund, New Europe Fund,
All-Asia Investment Fund and Income Builder Fund is a "non-diversified"
investment company, which means the Fund is not limited in the proportion of its
assets that may be invested in the securities of a single issuer. However, each
Fund intends to conduct its operations so as to qualify to be taxed as a
"regulated investment company" for purposes of the Code, which will relieve the
Fund of any liability for federal income tax to the extent its earnings are
distributed to shareholders. See "Dividends, Distributions and Taxes" in each
Fund's Statement of Additional Information. To so qualify, among other
requirements, the Fund will limit its investments so that, at the close of each
quarter of the taxable year, (i) not more than 25% of the Fund's total assets
will be invested in the securities of a single issuer, and (ii) with respect to
50% of its total assets, not more than 5% of its total assets will be invested
in the securities of a single issuer and the Fund will not own more than 10% of
the outstanding voting securities of a single issuer. A Fund's investments in
U.S. Government securities are not subject to these limitations. Because
Worldwide Privatization Fund, New Europe Fund, All-Asia Investment Fund and
Income Builder Fund is each a non-diversified investment company, it may invest
in a smaller number of individual issuers than a diversified investment company,
and an investment in such Fund may, under certain circumstances, present greater
risk to an investor than an investment in a diversified investment company.
Foreign government securities are not treated like U.S. Government securities
for purposes of the diversification tests described in the preceding paragraph,
but instead are subject to these tests in the same manner as the securities of
non-governmental issuers.
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PURCHASE AND SALE
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OF SHARES
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HOW TO BUY SHARES
Each Fund offers multiple classes of shares, of which only the Advisor Class is
offered by this Prospectus. Advisor Class shares of each Fund may be purchased
through your financial representative at net asset value without any initial or
contingent deferred sales charges and are not subject to ongoing distribution
expenses. Advisor Class shares may be purchased solely by investors (i) through
accounts established under a fee-based program, sponsored and maintained by a
registered broker-dealer or other financial intermediary and approved by
Alliance Fund Distributors, Inc. ("AFD"), each Fund's principal underwriter,
pursuant to which each investor pays an asset-based fee at an annual rate of at
least .50% of the assets in the investor's account to the broker-dealer or
financial intermediary, or its affiliate or agent, for investment advisory or
administrative services, or (ii) through a self-directed defined contribution
employee benefit plan (e.g., a 401(k) plan) that has at least 1,000 participants
or $25 million in assets. The minimum initial investment in each Fund is $250.
The minimum for subsequent investments in each Fund is $50. Investments of $25
or more are allowed under the automatic investment program of each Fund and
under a 403(b)(7) retirement plan. Share certificates are issued only upon
request. See the Subscription Application and Statement of Additional
Information for more information.
The Funds may refuse any order to purchase Advisor Class shares. In this regard,
the Funds reserve the right to restrict purchases of Advisor Class shares
(including exchanges) when there appears to be evidence of a pattern of frequent
purchases and sales made in response to short-term fluctuations in share price.
How the Funds Value Their Shares
The net asset value of Advisor Class shares of a Fund is calculated by dividing
the value of the Fund's net assets allocable to the Advisor Class by the
outstanding shares of the Advisor Class. Shares are valued each day the New York
Stock Exchange (the "Exchange") is open as of the close of regular trading
(currently 4:00 p.m. Eastern time). The securities in a Fund 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 Fund's Directors
believe would accurately reflect fair market value.
HOW TO SELL SHARES
You may "redeem", i.e., sell your shares in a Fund to the Fund on any day the
Exchange is open, either directly or through your financial representative. The
price you will receive is the net asset value next calculated after the Fund
receives your request in proper form. Proceeds generally will be sent to you
within seven days. However, for shares recently purchased by
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<PAGE>
check or electronic funds transfer, a Fund will not send proceeds until it is
reasonably satisfied that the check or electronic funds transfer has been
collected (which may take up to 15 days). If you are in doubt about what
documents are required by your fee-based program or employee benefit plan, you
should contact your financial representative.
Selling Shares Through Your Financial Representative
Your financial representative must receive your request before 4:00 p.m. Eastern
time, and your financial representative must transmit your request to the Fund
by 5:00 p.m. Eastern time, for you to receive that day's net asset value. Your
financial representative is responsible for furnishing all necessary
documentation to a Fund and may charge you for this service.
Selling Shares Directly To A Fund
Send a signed letter of instruction or stock power form to Alliance Fund
Services, Inc. ("AFS") along with certificates, if any, that represent the
shares you want to sell. For your protection, signatures must be guaranteed by a
bank, a member firm of a national stock exchange or other eligible guarantor
institution. Stock power forms are available from your financial representative,
AFS, and many commercial banks. Additional documentation is required for the
sale of shares by corporations, intermediaries, fiduciaries and surviving joint
owners. For details contact:
Alliance Fund Services
P.O. Box 1520
Secaucus, NJ 07096-1520
1-800-221-5672
Alternatively, a request for redemption of shares for which no stock
certificates have been issued can also be made by telephone to 800-221-5672.
Telephone redemption requests must be made by 4 p.m. Eastern time on a Fund
business day in order to receive that day's net asset value, and, except for
certain omnibus accounts, may be made only once in any 30-day period. A
shareholder who has completed the Telephone Transactions section of the
Subscription Application, or the Shareholder Options form obtained from AFS, can
elect to have the proceeds of their redemption sent to their bank via an
electronic funds transfer. Proceeds of telephone redemptions also may be sent by
check to a shareholder's address of record. Except for certain omnibus accounts,
redemption requests by electronic funds transfer may not exceed $100,000 and
redemption requests by check may not exceed $50,000. Telephone redemption is not
available for shares held in nominee or "street name" accounts or retirement
plan accounts or shares held by a shareholder who has changed his or her address
of record within the previous 30 calendar days.
General
The sale of shares is a taxable transaction for federal tax purposes. Under
unusual circumstances, a Fund may suspend redemptions or postpone payment for up
to seven days or longer, as permitted by federal securities law. The Funds
reserve the right to close an account that through redemption has remained below
$200 for 90 days. Shareholders will receive 60 days' written notice to increase
the account value before the account is closed.
During drastic economic or market developments, you might have difficulty
reaching AFS by telephone, in which event you should issue written instructions
to AFS. AFS is not responsible for the authenticity of telephonic requests to
purchase, sell or exchange shares. AFS will employ reasonable procedures to
verify that telephone requests are genuine, and could be liable for losses
resulting from unauthorized transactions if it failed to do so. Dealers and
agents may charge a commission for handling telephonic requests. The telephone
service may be suspended or terminated at any time without notice.
SHAREHOLDER SERVICES
AFS offers a variety of shareholder services. For more information about these
services or your account, call AFS's toll-free number, 800-221-5672.
HOW TO EXCHANGE SHARES
You may exchange your Advisor Class shares of any Fund for Advisor Class shares
of other Alliance Mutual Funds (which include AFD Exchange Reserves, a money
market fund managed by Alliance). Exchanges of shares are made at the net asset
values next determined, without sales or service charges. Exchanges may be made
by telephone or written request. Telephone exchange requests must be received by
AFS by 4:00 p.m. Eastern time on a Fund business day in order to receive that
day's net asset value.
Please read carefully the Prospectus of the mutual fund into which you are
exchanging before submitting the request. Call AFS at 800-221-5672 to exchange
uncertificated shares. An exchange is a taxable capital transaction for federal
tax purposes. The exchange service may be changed, suspended, or terminated on
60 days' written notice.
GENERAL
If you are a Fund shareholder through an account established under a fee-based
program, your fee-based program may impose requirements with respect to the
purchase, sale or exchange of Advisor Class shares of a Fund that are different
from those described in this Prospectus. A transaction fee may be charged by
your financial representative with respect to the purchase, sale or exchange of
Advisor Class shares made through such financial representative.
Each Fund offers three classes of shares other than the Advisor Class, which are
Class A, Class B and Class C. All classes of shares of a Fund have a common
investment objective and investment portfolio. Class A shares are offered with
an initial sales charge and pay a distribution services fee. Class B shares have
a contingent deferred sales charge (a "CDSC") and also pay a distribution
services fee. Class C shares have no initial sales charge or CDSC but pay a
distribution services fee. Because Advisor Class shares have no initial sales
charge or CDSC and pay no distribution services fee, Advisor Class shares are
expected to have different performance from Class A, Class B or Class C shares.
You may obtain more information about Class A, Class B and Class C shares, which
are not offered by this Prospectus, by contacting AFS by telephone at
1-800-221-5672 or by contacting your financial representative.
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MANAGEMENT OF THE FUNDS
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ADVISER
Alliance, which is a Delaware limited partnership with principal offices at 1345
Avenue of the Americas, New York, New York 10105, has been retained under an
advisory agreement (the "Advisory Agreement") to provide investment advice and,
in general, to conduct the management and investment program of each Fund,
subject to the general supervision and control of the Directors of the Fund.
The following table lists the person or persons who are primarily responsible
for the day-to-day management of each Fund's portfolio, the length of time that
each person has been primarily responsible, and each person's principal
occupation during the past five years.
<TABLE>
<CAPTION>
Principal occupation
during the past
Fund Employee; year; title five years
- --------------------------------------------------------------------------------
<S> <C> <C>
The Alliance Fund Alfred Harrison since 1989-- Associated with
Vice Chairman of Alliance Capital Alliance
Management Corporation
("ACMC")*
Paul H. Jenkel since 1985-- Associated with
Senior Vice President of ACMC Alliance
Growth Fund Tyler Smith since inception-- Associated with
Senior Vice President of ACMC Alliance since
July 1993; prior
thereto,
associated with
Equitable Capital
Management
Corporation
("Equitable
Capital")**
Premier Growth Fund Alfred Harrison since inception-- (see above)
(see above)
Technology Fund Peter Anastos since 1992-- Associated with
Senior Vice President of ACMC Alliance
Gerald T. Malone since 1992-- Associated with
Senior Vice President of ACMC Alliance since
1992; prior
thereto
associated with
College
Retirement
Equities Fund
Quasar Fund Alden M. Stewart since 1994-- Associated with
Executive Vice President of ACMC Alliance since
1993; prior
thereto,
associated with
Equitable Capital
Randall E. Haase since 1994-- Associated with
Senior Vice President of ACMC Alliance since July
1993; prior
thereto,
associated with
Equitable Capital
Timothy Rice since 1993-- Associated with
Vice President of ACMC Alliance
International Fund A. Rama Krishna since 1993-- Associated with
Senior Vice President of ACMC Alliance since
and director of Asian Equity 1993, prior
research thereto,
Chief Investment
Strategist and
Director--Equity
Research for CS
First Boston
Worldwide Mark H. Breedon since inception-- Associated with
Privatization Senior Vice President of ACMC Alliance
and Director and Vice President
of Alliance Capital Limited ***
New Europe Fund Eric N. Perkins since 1992-- Associated with
Senior Vice President of ACMC Alliance
and director of European equity
research
All-Asia Investment A. Rama Krishna since inception-- (see above)
Fund (see above)
Global Small Cap Alden M. Stewart since 1994-- (see above)
Fund (see above)
Randall E. Haase since 1994-- (see above)
(see above)
Timothy Rice since 1993-- (see above)
(see above)
Ronald L. Simcoe since 1993-- Associated with
Vice President of ACMC Alliance since
1993; prior
thereto,
associated with
Equitable Capital
Strategic Balanced Robert G. Heisterberg since 1996-- Associated with
Fund Senior Vice President of ACMC Alliance
and Global Economic Policy Analyst
Balanced Shares Kevin J. O'Brien since 1996-- Associated with
Senior Vice President of ACMC Alliance
Income Builder Fund Andrew M. Aran since 1994-- Associated with
Senior Vice President of ACMC Alliance since
March 1991; prior
thereto, a Vice
President of
PaineWebber, Inc.
Thomas M. Perkins since 1991-- Associated with
Senior Vice President of ACMC Alliance
Utility Income Fund Gregory Allison since 1995-- Associated with
Portfolio Manager of Utility Alliance since
Income Fund 1994; prior
thereto
associated with
Gabelli & Co.
Growth & Income Paul Rissman since 1994-- Associated with
Fund Vice President of ACMC Alliance
</TABLE>
- --------------------------------------------------------------------------------
* The sole general partner of Alliance.
** Equitable Capital was, prior to Alliance's acquisition of it, a management
firm under common control with Alliance.
*** An indirect wholly-owned subsidiary of Alliance.
Alliance is a leading international investment manager supervising client
accounts with assets as of March 1, 1996 totaling more than $156 billion (of
which approximately $48 billion represented the assets of investment companies).
Alliance's clients are primarily major corporate employee benefit funds, public
employee retirement systems, investment companies, foundations and endowment
funds. The 50 registered investment companies managed by Alliance comprising 107
separate investment portfolios currently have
30
<PAGE>
over two million shareholders. As of March 1, 1996, Alliance was retained as
an investment manager for 34 of the Fortune 100 companies.
ACMC, the sole general partner of, and the owner of a 1% general partnership
interest in, Alliance, 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, which is a wholly-owned
subsidiary of The Equitable Companies Incorporated, a holding company controlled
by AXA, a French insurance holding company. Certain information concerning the
ownership and control of Equitable by AXA is set forth in each Fund's Statement
of Additional Information under "Management of the Fund."
ADMINISTRATOR AND CONSULTANT TO ALL-ASIA INVESTMENT FUND
Alliance has been retained by All-Asia Investment Fund under an administration
agreement (the "Administration Agreement") to perform administrative services
necessary for the operation of the Fund. For a description of such services, see
the Statement of Additional Information of the Fund.
In connection with its provision of advisory services to All-Asia Investment
Fund, Alliance has retained at its expense OCBC Asset Management Limited ("OAM")
as a consultant to provide to Alliance such statistical and other factual
information, research and assistance with respect to economic, financial,
political, technological and social conditions and trends in Asian countries,
including information on markets and industries, as Alliance shall from time to
time request. OAM will not furnish investment advice or make recommendations
regarding the purchase or sale of securities by the Fund nor will it be
responsible for making investment decisions involving Fund assets.
OAM is one of the largest Singapore-based investment management companies
specializing in investment in Asia- Pacific markets. OAM provides consulting and
advisory services to institutions and individuals, including mutual funds. As of
September 30, 1995, OAM had approximately $1.5 billion in assets under
management.
OAM is a wholly-owned subsidiary of Oversea-Chinese Banking Corporation Limited
("OCBC Bank"), which is based in Singapore. The OCBC Bank Group has an extensive
network of banking offices in the Asian Pacific region. The OCBC Bank Group
engages in a wide variety of activities including commercial banking, investment
banking, and property and hotel investment and management. OCBC Bank is the
third largest company listed on the Stock Exchange of Singapore with a market
capitalization as of September 30, 1995 of approximately $11.4 billion.
DISTRIBUTION SERVICES AGREEMENTS
Each Fund has entered into a Distribution Services Agreement with AFD with
respect to Advisor Class shares. The Glass-Steagall Act and other applicable
laws may limit the ability of a bank or other depository institution to become
an underwriter or distributor of securities. However, in the opinion of the
Funds' management, based on the advice of counsel, these laws do not prohibit
such depository institutions from providing services for investment companies
such as the administrative, accounting and other services referred to in the
Agreements. In the event that a change in these laws prevented a bank from
providing such services, it is expected that other services arrangements would
be made and that shareholders would not be adversely affected. The State of
Texas requires that shares of a Fund may be sold in that state only by dealers
or other financial institutions that are registered there as broker-dealers.
- --------------------------------------------------------------------------------
DIVIDENDS, DISTRIBUTIONS
- --------------------------------------------------------------------------------
AND TAXES
- --------------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS
If you receive an income dividend or capital gains distribution in cash you may,
within 120 days following the date of its payment, reinvest the dividend or
distribution in additional shares of that Fund without charge by returning to
Alliance, with appropriate instructions, the check representing such dividend or
distribution. Thereafter, unless you otherwise specify, you will be deemed to
have elected to reinvest all subsequent dividends and distributions in shares of
that Fund.
Each income dividend and capital gains distribution, if any, declared by a Fund
on its outstanding shares will, at the election of each shareholder, be paid in
cash or in additional shares of the same class of shares of that Fund having an
aggregate net asset value as of the close of business on the day following the
declaration date of such dividend or distribution equal to the cash amount of
such income dividend or distribution. Election to receive dividends and
distributions in cash or shares is made at the time shares are initially
purchased and may be changed at any time prior to the record date for a
particular dividend or distribution. Cash dividends can be paid by check or, if
the shareholder so elects, electronically via the ACH network. There is no sales
or other charge in connection with the reinvestment of dividends and capital
gains distributions.
While it is the intention of each Fund to distribute to its shareholders
substantially all of each fiscal year's net income and net realized capital
gains, if any, the amount and time of any such dividend or distribution must
necessarily depend upon the realization by such Fund of income and capital gains
from investments. There is no fixed dividend rate, and there can be no assurance
that a Fund will pay any dividends or realize any capital gains.
If you buy shares just before a Fund deducts a distribution from its net asset
value, you will pay the full price for the shares and then receive a portion of
the price back as a taxable distribution.
FOREIGN INCOME TAXES
Investment income received by a Fund from sources within foreign countries may
be subject to foreign income taxes withheld at the source. To the extent that
any Fund is liable for
31
<PAGE>
foreign income taxes withheld at the source, each Fund intends, if possible, to
operate so as to meet the requirements of the Code to "pass through" to the
Fund's shareholders credits for foreign income taxes paid, but there can be no
assurance that any Fund will be able to do so.
U.S. FEDERAL INCOME TAXES
Each Fund intends to qualify to be taxed as a "regulated investment company"
under the Code. To the extent that a Fund distributes its taxable income and net
capital gain to its shareholders, qualification as a regulated investment
company relieves that Fund of federal income and excise taxes on that part of
its taxable income including net capital gains which it pays out to its
shareholders. Dividends out of net ordinary income and distributions of net
short-term capital gains are taxable to the recipient shareholders as ordinary
income. In the case of corporate shareholders, such dividends may be eligible
for the dividends-received deduction, except that the amount eligible for the
deduction is limited to the amount of qualifying dividends received by the Fund.
A corporation's dividends-received deduction will be disallowed unless the
corporation holds shares in the Fund at least 46 days. Furthermore, the
dividends-received deduction will be disallowed 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 each Fund to its shareholders as capital gains
distributions is taxable to the shareholders as long-term capital gains,
irrespective of the length of time a shareholder may have held his or her stock.
Long-term capital gains distributions are not eligible for the
dividends-received deduction referred to above.
Under the current federal tax law the amount of an income dividend or capital
gains distribution declared by a Fund during October, November or December of a
year to shareholders of record as of a specified date in such a month that is
paid during January of the following year is includable in the prior year's
taxable income of shareholders that are calendar year taxpayers.
Any dividend or distribution received by a shareholder on shares of a Fund will
have the effect of reducing the net asset value of such shares by the amount of
such dividend or distribution. Furthermore, a dividend or distribution made
shortly after the purchase of such shares by a shareholder, although in effect a
return of capital to that particular shareholder, would be taxable to him or her
as described above. If a shareholder held shares six months or less and during
that period received a distribution taxable to such shareholder as long-term
capital gain, any loss realized on the sale of such shares during such six-month
period would be a long-term capital loss to the extent of such distribution.
A dividend or capital gains distribution with respect to shares of a Fund held
by a tax-deferred or qualified plan, such as an individual retirement account,
403(b)(7) retirement plan or corporate pension or profit-sharing plan, will not
be taxable to the plan. Distributions from such plans will be taxable to
individual participants under applicable tax rules without regard to the
character of the income earned by the qualified plan.
Distributions by a Fund may be subject to state and local taxes. Alliance Fund,
Premier Growth Fund, Technology Fund, Income Builder Fund, Quasar Fund, New
Europe Fund, Balanced Shares and Growth and Income Fund are qualified to do
business in the Commonwealth of Pennsylvania and, therefore, are subject to the
Pennsylvania foreign franchise and corporate net income tax in respect of their
business activities in Pennsylvania. Accordingly, shares of such Funds are
exempt from Pennsylvania personal property taxes. These Funds anticipate
continuing such business activities but reserve the right to suspend them at any
time, resulting in the termination of the exemptions.
A Fund will be required to withhold 31% of any payments made to a shareholder if
the shareholder has not provided a certified taxpayer identification number to
the Fund, or the Secretary of the Treasury notifies a Fund that a shareholder
has not reported all interest and dividend income required to be shown on the
shareholder's Federal income tax return.
Shareholders will be advised annually as to the federal tax status of dividends
and capital gains distributions made by a Fund for the preceding year.
Shareholders are urged to consult their tax advisers regarding their own tax
situation.
- --------------------------------------------------------------------------------
GENERAL INFORMATION
- --------------------------------------------------------------------------------
PORTFOLIO TRANSACTIONS
Consistent with the Rules of Fair Practice of the National Association of
Securities Dealers, Inc., and subject to seeking best price and execution, a
Fund may consider sales of its shares as a factor in the selection of dealers to
enter into portfolio transactions with the Fund.
ORGANIZATION
Each of the following Funds is a Maryland corporation organized in the year
indicated: The Alliance Fund, Inc. (1938), Alliance Balanced Shares, Inc.
(1932), Alliance Premier Growth Fund, Inc. (1992), Alliance Technology Fund,
Inc. (1980), Alliance Quasar Fund, Inc. (1968), Alliance Worldwide Privatization
Fund, Inc. (1994), Alliance New Europe Fund, Inc. (1990), Alliance All-Asia
Investment Fund, Inc. (1994), Alliance Global Small Cap Fund, Inc. (1966),
Alliance Income Builder Fund, Inc. (1991), Alliance Utility Income Fund, Inc.
(1993), and Alliance Growth and Income Fund, Inc. (1932). Each of the following
Funds is either a Massachusetts business trust or a series of a Massachusetts
business trust organized in the year indicated: Alliance Growth Fund and
Alliance Strategic Balanced Fund (each a series of The Alliance Portfolios)
(1987), and Alliance International Fund (1980). Prior to August 2, 1993, The
Alliance Portfolios was known as The Equitable Funds, Growth Fund was known
32
<PAGE>
as The Equitable Growth Fund and Strategic Balanced Fund was known as The
Equitable Balanced Fund. Prior to March 22, 1994, Income Builder Fund was known
as Alliance Multi-Market Income and Growth Trust, Inc.
It is anticipated that annual shareholder meetings will not be held; shareholder
meetings will be held only when required by federal, or in the case of the Funds
organized as Maryland corporations, state law. Shareholders have available
certain procedures for the removal of Directors.
A shareholder in a Fund will be entitled to his or her pro rata share of all
dividends and distributions arising from the Fund's assets and, upon redeeming
shares, will receive the then current net asset value of the Fund represented by
the redeemed shares. The Funds are empowered to establish, without shareholder
approval, additional portfolios, which may have different investment objectives,
and additional classes of shares. If an additional portfolio or class were
established in a Fund, each share of the portfolio or class would normally be
entitled to one vote for all purposes. Generally, shares of each portfolio and
class would vote together as a single class on matters, such as the election of
Directors, that affect each portfolio and class in substantially the same
manner. Advisor Class, Class A, Class B and Class C shares have identical
voting, dividend, liquidation and other rights, except that each class bears its
own transfer agency expenses and each of Class A, Class B and Class C shares
bears its own distribution expenses. Each class of shares votes separately with
respect to matters for which separate class voting is appropriate under
applicable law. Shares are freely transferable, are entitled to dividends as
determined by the Directors and, in liquidation of a Fund, are entitled to
receive the net assets of the Fund. Since this Prospectus sets forth information
about all the Funds, it is theoretically possible that a Fund might be liable
for any materially inaccurate or incomplete disclosure in this Prospectus
concerning another Fund. Based on the advice of counsel, however, the Funds
believe that the potential liability of each Fund with respect to the disclosure
in this Prospectus extends only to the disclosure relating to that Fund. Certain
additional matters relating to a Fund's organization are discussed in its
Statement of Additional Information.
REGISTRAR, TRANSFER AGENT AND DIVIDEND-DISBURSING AGENT
AFS, an indirect wholly-owned subsidiary of Alliance, located at 500 Plaza
Drive, Secaucus, New Jersey 07094, acts as each Fund's registrar, transfer agent
and dividend-disbursing agent for a fee based upon the number of shareholder
accounts maintained for the Funds.
PRINCIPAL UNDERWRITER
AFD, an indirect wholly-owned subsidiary of Alliance, located at 1345 Avenue of
the Americas, New York, New York 10105, is the principal underwriter of shares
of the Funds.
PERFORMANCE INFORMATION
From time to time, the Funds advertise their "total return," which is computed
separately for each class of shares, including Advisor Class shares. Such
advertisements disclose a Fund's average annual compounded total return for the
periods prescribed by the Commission. A Fund's total return for each such period
is computed by finding, through the use of a formula prescribed by the
Commission, the average annual compounded rate of return over the period that
would equate an assumed initial amount invested to the value of the investment
at the end of the period. For purposes of computing total return, income
dividends and capital gains distributions paid on shares of a Fund are assumed
to have been reinvested when paid and the maximum sales charges applicable to
purchases and redemptions of a Fund's shares are assumed to have been paid.
Balanced Shares, Growth and Income Fund, Income Builder Fund, Strategic Balanced
Fund and Utility Income Fund may also advertise their "yield," which is also
computed separately for each class of shares, including Advisor Class shares. A
Fund's yield for any 30-day (or one-month) period is computed by dividing the
net investment income per share earned during such period by the maximum public
offering price per share on the last day of the period, and then annualizing
such 30-day (or one-month) yield in accordance with a formula prescribed by the
Commission which provides for compounding on a semi-annual basis.
Strategic Balanced Fund, Balanced Shares, Income Builder Fund, Utility Income
Fund and Growth and Income Fund may also state in sales literature an "actual
distribution rate" for each class which is computed in the same manner as yield
except that actual income dividends declared per share during the period in
question are substituted for net investment income per share. The actual
distribution rate is computed separately for each class of shares, including
Advisor Class shares.
Advertisements may quote performance rankings or ratings of a Fund by financial
publications or independent organizations such as Lipper Analytical Services,
Inc. and Morningstar, Inc. or compare a Fund's performance to various indices.
ADDITIONAL INFORMATION
This Prospectus and the Statements of Additional Information, which have been
incorporated by reference herein, do not contain all the information set forth
in the Registration Statements filed by the Funds with the Commission under the
Securities Act. Copies of the Registration Statements may be obtained at a
reasonable charge from the Commission or may be examined, without charge, at the
offices of the Commission in Washington, D.C.
33
<PAGE>
This prospectus does not constitute an offering in any state in which such
offering may not lawfully be made.
This prospectus is intended to constitute an offer by each Fund only of the
securities of which it is the issuer and is not intended to constitute an offer
by any Fund of the securities of any other Fund whose securities are also
offered by this prospectus. No Fund intends to make any representation as to the
accuracy or completeness of the disclosure in this prospectus relating to any
other Fund. See "General Information--Organization."
34
<PAGE>
(LOGO) THE ALLIANCE PORTFOLIOS:
Alliance Strategic Balanced Fund
Alliance Growth Fund
This registered service mark used under license from the owner,
Alliance Capital Management L.P.
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
(Advisor Class)
June [ ], 1996
This Statement of Additional Information relating to Advisor
class shares of the Fund is not a prospectus and should be read
in conjunction with the Funds' current Prospectus relating to
Advisor class shares. A copy of the Funds' Prospectus relating
to Advisor class shares may be obtained by contacting Alliance
Fund Services, Inc. at the address or telephone numbers shown
above.
TABLE OF CONTENTS
PAGE
INVESTMENT POLICIES AND RESTRICTIONS........................
ADDITIONAL INVESTMENT TECHNIQUES OF THE FUNDS...............
MANAGEMENT OF THE FUNDS.....................................
PORTFOLIO TRANSACTIONS......................................
EXPENSES OF THE FUNDS.......................................
PURCHASE OF SHARES..........................................
REDEMPTION AND REPURCHASE OF SHARES.........................
SHAREHOLDER SERVICES........................................
NET ASSET VALUE.............................................
DIVIDENDS, DISTRIBUTIONS AND TAXES..........................
GENERAL INFORMATION.........................................
FINANCIAL STATEMENTS AND REPORT OF INDEPENDENT ACCOUNTANTS..
APPENDIX.................................................... A-1
<PAGE>
INVESTMENT POLICIES AND RESTRICTIONS
Incorporated by reference from the section "Investment
Policies and Restrictions" contained in the Statement of
Additional Information of Alliance Strategic Balanced Fund (the
"Strategic Balanced Fund") and Alliance Growth Fund (the "Growth
Fund") (each a "Fund" and together, the "Funds"), each of which
is a series of the Alliance Portfolios (the "Trust"), dated
February 1, 1996 as filed with the Securities and Exchange
Commission (the "SEC") pursuant to Rule 497(c) on February 13,
1996, (file nos. 33-12988 and 811-05088) (the "Rule 497 SAI").
Capitalized terms used herein that are not otherwise defined
herein are used as defined in the Rule 497 SAI.
ADDITIONAL INVESTMENT TECHNIQUES OF THE FUNDS
Incorporated by reference from the section "Additional
Investment Techniques of the Funds" contained in the Rule
497 SAI.
INVESTMENT RESTRICTIONS
Incorporated by reference from the section "Investment
Restrictions" contained in the Rule 497 SAI.
MANAGEMENT OF THE FUNDS
Incorporated by reference from the section "Management
of the Funds" contained in the Rule 497 SAI, except that the
second, third and fourth paragraphs of the sub-section "Adviser"
and the officer biographies and the last paragraph of the sub-
section "Officers" are restated as set forth below:
The Adviser is a leading international investment
manager supervising client accounts with assets as of March 1,
1996 of more than $156 billion (of which more than $48 billion
2
<PAGE>
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 March 1,
1996, 34 of the FORTUNE 100 Companies. As of that date, the
Adviser and its subsidiaries employed approximately 1,350
employees who operated out of domestic offices and the overseas
offices of subsidiaries in Bombay, Istanbul, London, Sydney,
Tokyo, Toronto, Bahrain, Luxembourg and Singapore. The 50
registered investment companies comprising 107 separate
investment portfolios managed by the Adviser currently have more
than two million shareholders.
Alliance Capital Management Corporation, the sole
general partner of, and the owner of a 1% general partnership
interest in, the Adviser, is an indirect wholly-owned subsidiary
of The Equitable Life Assurance Society of the United States
("Equitable"), one of the largest life insurance companies in the
United States and a wholly-owned subsidiary of The Equitable
Companies Incorporated ("ECI"), a holding company controlled by
AXA, a French insurance holding company. As of March 1, 1996,
ACMC, Inc. and Equitable Capital Management Corporation, each a
wholly-owned direct or indirect subsidiary of Equitable, together
with Equitable, owned in the aggregate approximately 57.6% of the
issued and outstanding units representing assignments of
beneficial ownership of limited partnership interests in the
Adviser ("Units"). As of March 1, 1996, approximately 32.4% and
10.0% 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 Trustees of the Trust.
AXA and its subsidiaries own approximately 63.9% of the
issued and outstanding shares of capital stock of ECI. AXA is
the holding company for an international group of insurance and
related financial services companies. AXA's insurance operations
include activities in life insurance, property and casualty
insurance and reinsurance. The insurance operations are diverse
geographically, with activities in France, the United States,
Australia, the United Kingdom, Canada and other countries,
principally in Europe and the Asia Pacific area. AXA is also
engaged in asset management, investment banking, securities
trading, brokerage, real estate and other financial services
activities in the United States, Europe and the Asia Pacific
area. Based on information provided by AXA, as of March 1, 1996,
42.1% of the issued ordinary shares (representing 53.4% of the
voting power) of AXA were owned by Midi Participations, a French
holding company ("Midi"). The shares of Midi were, in turn,
owned 61.4% (representing 62.5% of the voting power) by Finaxa, a
French holding company, and 38.6% (representing 37.5% of the
voting power) by subsidiaries of Assicurazioni Generali S.p.A.,
an Italian corporation (one of which, Belgica Insurance Holding
3
<PAGE>
S.A., a Belgian corporation, owned 30.8%, representing 33.1% of
the voting power). As of March 1, 1996, 61.1% of the voting
shares (representing 73.4% 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
34.7% of the voting shares representing 40.4% of the voting
power), and 25.5% of the voting shares (representing 16% of the
voting power) of Finaxa were owned by Banque Paribas, a French
bank. Including the ordinary shares owned by Midi, as of
March 1, 1996, the Mutuelles AXA directly or indirectly owned 51%
of the issued ordinary shares (representing 64.7% of the voting
power) of AXA. Acting as a group, the Mutuelles AXA control AXA,
Midi and Finaxa.
OFFICERS
John D. Carifa, President, see biography above.
Edmund P. Bergan, Jr., 45, 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, 45, 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.
Vincent S. Noto, 31, Controller and Chief Accounting
Officer, is an Assistant Vice President of Alliance Fund
Services, Inc. His address is 500 Plaza Drive, Secaucus, New
Jersey 07094.
Melvin J. Oliver, 38, Assistant Controller, is an
Accounting Manager of Alliance Fund Services, Inc. His address is
500 Plaza Drive, Secaucus, New Jersey 07094.
Bruce W. Calvert, 49, Vice President, is the Vice
Chairman and Chief Investment Officer of Alliance Capital
Management Corporation, the general partner of Alliance Capital
Management L.P. His address is 1345 Avenue of the Americas, New
York, NY 10105.
Kathleen A. Corbet, 36, Vice President, is, since July
23, 1993, Senior Vice President of Alliance Capital Management
Corporation, general partner of Alliance Capital Management L.P.
She was formerly employed by Equitable Capital. Her address is
1345 Avenue of the Americas, New York, NY 10105.
Barbara J. Krumsiek, 43, Vice President - Marketing, is,
since July 23, 1993, a Senior Vice President of Alliance Fund
Distributors, Inc. She was formerly an Investment Officer of
4
<PAGE>
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.
Wayne D. Lyski, 54, Vice President, is Executive Vice
President of Alliance Capital Management Corporation, the general
partner of Alliance Capital Management L.P. His address is 1345
Avenue of the Americas, New York, NY 10105.
As of April 5, 1996, the Trustees and officers of the
Funds as a group owned less than 1% of the shares of the Fund.
PORTFOLIO TRANSACTIONS
Incorporated by reference from the section "Portfolio
Transactions" contained in the Rule 497 SAI.
EXPENSES OF THE FUNDS
Distribution Arrangements
The Trust has entered into a Distribution Services
Agreement (the "Agreement") with Alliance Fund Distributors,
Inc., the Funds' principal underwriter (the "Principal
Underwriter"), to permit the Principal Underwriter to distribute
the Funds' Advisor class shares.
The Agreement was amended as of [ ], 1996 to
permit the distribution of the Advisor Class shares. The
amendment to the Agreement was approved by the vote of the
Trustees on [ ], 1996.
The Agreement will continue in effect for successive
twelve-month periods with respect to Advisor class shares
provided, however, that such continuance is specifically approved
at least annually by the Trustees of the Trust or by vote of the
holders of a majority of the outstanding voting securities (as
defined in the 1940 Act) of that class, and in either case, by a
majority of the Trustees of the Trust who are not parties to the
Agreement or interested persons, as defined in the 1940 Act, of
any such party (other than as Trustees of the Trust). All
amendments to the Agreement must be approved by a vote of the
Trustees of the Fund.
5
<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 each Class A, Class B, Class C and Advisor
class share of the Funds, plus reimbursement for out-of-pocket
expenses. [For the fiscal year ended [ ], 1995, transfer
agency fees in the amount of [ ] were paid to Alliance Fund
Services, Inc.]
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; --How to Sell Shares; --Shareholder
Services."
GENERAL
If you are a Fund shareholder through an account
established under a fee-based program, your fee-based program may
impose requirements with respect to the purchase, sale or
exchange of Advisor Class shares of the Fund that are different
from those described in the Prospectus and this Statement of
Additional Information. A transaction fee may be charged by your
financial representative with respect to the purchase, sale or
exchange of Advisor Class shares made through such financial
representative.
Advisor class shares of the Funds are offered on a
continuous basis at a price equal to their net asset value. 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.
Investors may purchase Advisor class shares of the Funds
solely through (i) accounts established under a fee-based
program, sponsored and maintained by registered broker-dealers or
other financial intermediaries and approved by the Principal
Underwriter pursuant to which each investor pays an asset-based
fee at an annual rate of at least .50% of the assets in the
investor's account, to the broker-dealer or financial
intermediary, or its affiliate or agent, for investment advisory
or administrative services, or (ii) a self-directed defined
contribution employee benefit plan (e.g., a 401(k) plan) that has
at least 1,000 participants or $25 million in assets. The Funds
6
<PAGE>
may refuse any order for the purchase of Advisor class shares.
The Funds reserve the right to suspend the sale of their Advisor
class shares to the public in response to conditions in the
securities markets or for other reasons.
The public offering price of Advisor class shares of the
Funds is their net asset value. 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 Advisor class 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. Eastern time) by dividing the
value of the total assets attributable to a class, less its
liabilities, by the total number of its Advisor class shares then
outstanding. A Fund business day is any weekday, exclusive of
days on which the Exchange is closed (most national holidays and
Good Friday). For purposes of this computation, Exchange-listed
securities and over-the-counter securities admitted to trading on
the NASDAQ National List are valued at the last quoted sale or,
if there is no such sale, at the mean of closing bid and asked
prices and portfolio bonds are presently valued by a recognized
pricing service. If accurate quotations are not available,
securities will be valued at fair value determined in good faith
by the Board of Trustees.
The Funds will accept unconditional orders for their
Advisor class shares to be executed at the public offering price
equal to their net asset value next determined. 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. In the
case of orders for purchase of Advisor class shares placed
through a shareholder's financial representative, the applicable
public offering price will be the net asset value as so
determined, but only if the financial representative receives the
order prior to the close of regular trading on the Exchange and
transmits it to the Principal Underwriter prior to its close of
business that same day (normally 5:00 p.m. Eastern time). The
financial representative is responsible for transmitting such
orders by 5:00 p.m. If the financial representative fails to do
so, the investor's right to that day's closing price must be
settled between the investor and the financial representative.
If the financial representative 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.
7
<PAGE>
Following the initial purchase of Advisor class shares,
a shareholder may place orders to purchase additional Advisor
class shares by telephone if the shareholder has completed the
appropriate portion of the Subscription Application. Except with
respect to certain omnibus accounts, a telephone purchase order
may not exceed $500,000. Payment for Advisor class shares
purchased by telephone can be made only by Electronic Funds
Transfer from a bank account maintained by the shareholder at a
bank that is a member of the National Automated Clearing House
Association ("NACHA"). If a shareholder's telephone purchase
request is received before 3:00 p.m. Eastern time on a Fund
business day, the order to purchase Advisor class 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 Advisor class 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 Funds, stock certificates representing Advisor
class shares of the Funds are not issued except upon written
request to the Fund by the shareholder or his or her authorized
financial representative. 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 Advisor class shares, although such
Advisor class shares remain in the shareholder's account on the
books of the Funds.
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 Advisor class shares tendered to them, as
described below, at a redemption price equal to their net asset
value as next computed following the receipt of Advisor class
shares tendered for redemption in proper form. Payment of the
redemption price will be made within seven days after a Fund's
receipt of such tender for redemption. If a shareholder is in
doubt about what documents are required by his or her fee-based
program or employee benefit plan, the shareholder should contact
his or her financial representative.
8
<PAGE>
The right of redemption may not be suspended or the date
of payment upon redemption postponed for more than seven days
after Advisor class 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 SEC may by
order permit for the protection of security holders of a Fund.
Payment of the redemption price will be made in cash.
The value of a shareholder's Advisor class shares on redemption
or repurchase may be more or less than the cost of such Advisor
class shares to the shareholder, depending upon the market value
of a Fund's portfolio securities at the time of such redemption
or repurchase. Payment received by a shareholder upon redemption
or repurchase of his or her Advisor class shares, assuming the
Advisor class shares constitute capital assets in his or her
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 Advisor class shares redeemed.
To redeem Advisor class shares of a Fund for which no
stock certificates have been issued, the registered owner or
owners should forward a letter to the Fund containing a request
for redemption. The signature or signatures on the letter must
be guaranteed by an "eligible guarantor institution" as defined
in Rule 17Ad-15 under the Securities Exchange Act of 1934, as
amended.
To redeem Advisor class shares of the Funds represented
by stock certificates, the investor should forward the
appropriate stock certificate or certificates, endorsed in blank
or with blank stock powers attached, to the relevant Fund with
the request that the Advisor class shares represented thereby, or
a specified portion thereof, be redeemed. The stock assignment
form on the reverse side of each stock certificate surrendered to
the Fund for redemption must be signed by the registered owner or
owners exactly as the registered name appears on the face of the
certificate or, alternatively, a stock power signed in the same
manner may be attached to the stock certificate or certificates
or, where tender is made by mail, separately mailed to the
relevant Fund. The signature or signatures on the assignment form
must be guaranteed in the manner described above.
Telephone Redemptions By Electronic Funds Transfer. Each
Fund shareholder is entitled to request redemption by electronic
funds transfer, once in any 30 day period (except for certain
9
<PAGE>
omnibus accounts), of Advisor class shares for which no stock
certificates have been issued by telephone at (800) 221-5672 by a
shareholder who has completed the appropriate portion of the
Subscription Application. A telephone redemption request may not
exceed $100,000 (except for certain omnibus accounts), and must
be made by 4:00 p.m. Eastern time on a Fund business day as
defined above. Proceeds of telephone redemptions will be sent by
Electronic Funds Transfer to a shareholder's designated bank
account at a bank selected by the shareholder that is a member of
the NACHA.
Telephone Redemption By Check. Except for certain
omnibus accounts or as otherwise noted below, each Fund
shareholder is eligible to request redemption by check, once in
any 30-day period, of Advisor class shares for which no stock
certificates have been issued by telephone at (800) 221-5672
before 4:00 p.m. Eastern time on a Fund business day in an amount
not exceeding $50,000. Proceeds of such redemptions are remitted
by check to the shareholder's address of record. Telephone
redemption by check is not available with respect to Advisor
class shares (i) for which certificates have been issued,
(ii) held in nominee or "street name" accounts, (iii) held by a
shareholder who has changed his or her address of record within
the preceding 30 calendar days or (iv) held in any retirement
plan account. 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.
Telephone Redemption -- 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. A shareholder's financial
10
<PAGE>
representative may charge a fee for handling telephone requests
for redemptions.
Repurchase
The Funds may repurchase Advisor class shares through
the Principal Underwriter or selected financial intermediaries.
The repurchase price will be the net asset value next determined
after the Principal Underwriter receives the request, except that
requests placed through selected financial intermediaries before
the close of regular trading on the Exchange on any day will be
executed at the net asset value determined as of such close of
regular trading on that day if received by the Principal
Underwriter prior to its close of business on that day (normally
5:00 p.m. Eastern time). The financial intermediary is
responsible for transmitting the request to the Principal
Underwriter by 5:00 p.m. If the financial intermediary fails to
do so, the shareholder's right to receive that day's closing
price must be settled between the shareholder and the financial
intermediary. A shareholder may offer Advisor class shares of a
Fund to the Principal Underwriter either directly or through a
financial intermediary. Neither the Funds nor the Principal
Underwriter charges a fee or commission in connection with the
repurchase of Advisor class shares. Normally, if Advisor class
shares of the Funds are offered through a financial intermediary,
the repurchase is settled by the shareholder as an ordinary
transaction with or through the financial intermediary, who may
charge the shareholder for this service. The repurchase of
Advisor class 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 90 days.
Shareholders will receive 60 days' written notice to increase the
account value before the account is closed. In the case of a
redemption or repurchase of Advisor class 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.
11
<PAGE>
SHAREHOLDER SERVICES
The following information supplements that set forth in
the Funds' Prospectus under the heading "Purchase and Sale of
Shares -- Shareholder Services."
Automatic Investment Program
Investors may purchase Advisor class 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 Advisor class shares through
the financial intermediary 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. 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
Advisor class shareholders of the Funds can exchange
their Advisor class shares for Advisor class shares of any other
Alliance Mutual Fund that offers Advisor class shares.
All exchanges are subject to the minimum investment
requirements and any other applicable terms set forth in the
Prospectus for the Alliance Mutual Fund whose Advisor class
shares are being acquired. An exchange is effected through the
redemption of the Advisor class shares tendered for exchange and
the purchase of Advisor class shares being acquired at their
respective net asset values as next determined following receipt
by the Alliance Mutual Fund whose Advisor class shares are being
exchanged of (i) proper instructions and all necessary supporting
documents as described in such Alliance Mutual 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 Advisor class shares recently
12
<PAGE>
purchased by check will be permitted only after the Alliance
Mutual Fund whose Advisor class 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 Advisor class shares of Alliance Mutual Funds will
generally result in the realization of a capital gain or loss for
Federal income tax purposes.
Each Fund shareholder, and the shareholder's financial
representative, 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. Such telephone requests
cannot be accepted with respect to Advisor class shares then
represented by stock certificates. Advisor class shares acquired
pursuant to a telephone request for exchange will be held under
the same account registration as the Advisor class shares
redeemed through such exchange.
Eligible shareholders desiring to make an exchange
should telephone Alliance Fund Services, Inc. with their account
number and other details of the exchange at (800) 221-5672 before
4:00 p.m., Eastern time, on a Fund business day as defined above.
Telephone requests for exchange received before 4:00 p.m. Eastern
time on a Fund business day will be processed as of the close of
business on that day. During periods of drastic economic or
market developments, such as the market break of October 1987, it
is possible that shareholders would have difficulty in reaching
Alliance Fund Services, Inc. by telephone (although no such
difficulty was apparent at any time in connection with the 1987
market break). If a shareholder were to experience such
difficulty, the shareholder should issue written instructions to
Alliance Fund Services, Inc. at the address shown on the cover of
this Statement of Additional Information.
A shareholder may elect to initiate a monthly "Auto
Exchange" whereby a specified dollar amount's worth of his or her
Fund shares (minimum $25) is automatically exchanged for shares
of another Alliance Mutual Fund. Auto Exchange transactions
normally occur on the 12th day of each month, or the following
Fund business day.
Neither the Alliance Mutual 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
13
<PAGE>
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. A shareholder's financial representative may
charge a fee for handling telephone requests for exchanges.
The exchange privilege is available only in states where
Advisor class shares of the Alliance Mutual Fund being acquired
may be legally sold. Each Alliance Mutual Fund reserves the
right, at any time on 60 days' notice to its shareholders, to
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
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 under which annual tax-deductible
contributions are made within prescribed limits based on
compensation paid to participating individuals.
Simplified Employee Pension Plan ("SEP"). Sole
proprietors, partnerships and corporations may sponsor a SEP
under which they make annual tax-deductible contributions to an
IRA established by each eligible employee within prescribed
limits based on employee compensation.
403(b)(7) Retirement Plan. Certain tax-exempt
organizations and public educational institutions may sponsor
retirement plans under which an employee may agree that monies
deducted from his or her compensation (minimum $25 per pay
period) may be contributed by the employer to a custodial account
established for the employee under the plan.
The Alliance Plans Division of Frontier Trust Company, a
subsidiary of The Equitable Life Assurance Society of the United
States, which serves as custodian or trustee under the retirement
14
<PAGE>
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 Advisor class account, an Advisor class account with one
or more other Alliance Mutual Funds may direct that income
dividends and/or capital gains paid on his or her Advisor class
shares be automatically reinvested, in any amount, without the
payment of any service charges, in Advisor class 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. Current shareholders should
contact Alliance Fund Services, Inc. to establish a dividend
direction plan.
Systematic Withdrawal Plan
General. Any shareholder who owns or purchases Advisor
class 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.
Advisor class 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.
Advisor class shares acquired with reinvested dividends and
distributions will be liquidated first to provide such withdrawal
payments and thereafter other Advisor class shares will be
liquidated to the extent necessary, and depending upon the amount
withdrawn, the investor's principal may be depleted. A systematic
15
<PAGE>
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 Advisor class 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."
Payments under a systematic withdrawal plan may be made
by check or electronically via the Automated Clearing House
network. Investors wishing to establish a systematic withdrawal
plan in conjunction with their initial investment in Advisor
class shares of a Fund should complete the appropriate portion of
the Subscription Application, 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
Incorporated by reference from the section "Net Asset
Value" contained in the Rule 497 SAI, except that the fifth
paragraph is restated as set forth below:
The assets belonging to the Class A, Class B, Class C
and Advisor class shares will be invested together in a single
portfolio.
16
<PAGE>
DIVIDENDS, DISTRIBUTIONS AND TAXES
Incorporated by reference from the section "Dividends,
Distributions and Taxes" contained in the Rule 497 SAI.
GENERAL INFORMATION
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 April 15, 1996:
Names And Addresses # of Shares % Of Class
GROWTH FUND - CLASS A
Merrill Lynch
Mutual Fund Operations 1,025,318 8.70%
4800 Deer Lake Dr. East, 3rd Floor
Jacksonville, FL 32246-6486
CLASS B
Merrill Lynch
Mutual Fund Operations 14,960,077 20.33%
4800 Deer Lake Dr. East, 3rd Floor
Jacksonville, FL 32246-6486
CLASS C
Merrill Lynch
Mutual Fund Operations 4,900,059 43.47%
4800 Deer Lake Dr. East, 3rd Floor
Jacksonville, FL 32246-6486
17
<PAGE>
STRATEGIC BALANCED FUND - CLASS C
Merrill Lynch
Mutual Fund Operations 38,719 18.79%
4800 Deer Lake Dr. East, 3rd Floor
Jacksonville, FL 32246-6486
Tri-M Corporation 401k
PS-Savings Plan 44,371 21.53%
284 Gale Lane, P.O. Box 69
Kennett Square, PA 19348-0069
Total Return Quotations
From time to time, a Fund may advertise its "total
return." Total return is computed separately for Class A,
Class B, Class C and Advisor class 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.
The average annual compounded total return for Class A
shares of the Growth Fund was 15.09% for the one-year period
ended October 31, 1995, 25.93% for the five-year period ended
October 31, 1995 and 21.39% for the period September 4, 1990
(commencement of distribution of Class A shares), through October
31, 1995. The average annual compounded total return for Class B
shares of the Growth Fund was 15.33% for the one-year period
ended October 31, 1995, 26.15% for the five-year period ended
October 31, 1995, and 20.06% for the period October 23, 1987
(commencement of distribution of Class B shares) through
October 31, 1995. The average annual compounded total return for
Class C shares of the Growth Fund was 19.32% for the one-year
period ended October 31, 1995 and 12.92% for the period August 2,
1993 (commencement of distribution of Class C shares) through
October 31, 1995. The average annual compounded total return for
Class A shares of the Strategic Balanced Fund was 18.64% for the
one-year period ended January 31, 1996 and 11.83% for the period
September 4, 1990 (commencement of distribution of Class A
shares) through January 31, 1996. The average annual compounded
total return for Class B shares of the Strategic Balanced Fund
was 19.13% for the one-year period ended January 31, 1996, 10.73%
18
<PAGE>
for the five-year period ended January 31, 1996 and 12.41% for
the period October 23, 1987 (commencement of distribution of
Class B shares) through January 31, 1996. The average annual
compounded total return for Class C shares of the Strategic
Balanced Fund was 23.04% for the one-year period ended
January 31, 1996 and was 6.94% for the period August 2, 1993
(commencement of distribution of Class C shares) through
January 31, 1996.
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.
19
00250184.AH3
<PAGE>
PORTFOLIO OF INVESTMENTS
JANUARY 31, 1996 (UNAUDITED) ALLIANCE STRATEGIC BALANCED FUND
_______________________________________________________________________________
COMPANY SHARES VALUE
- ------------------------------------------------------------------------
COMMON STOCKS-68.5%
TECHNOLOGY-19.0%
AEROSPACE & DEFENSE-0.3%
Coltec Industries, Inc.* 15,000 $ 176,250
COMPUTERS-7.2%
3Com Corp. 9,000 412,875
Bay Networks, Inc. 19,950 847,875
Ceridian Corp.* 41,400 1,863,000
Compuware Corp.* 5,200 94,900
Seagate Technology* 11,000 651,750
-----------
3,870,400
COMPUTER SOFTWARE & SERVICES-1.3%
Adobe Systems, Inc. 13,000 442,000
Informix Corp. 8,000 267,000
-----------
709,000
ELECTRONICS-1.4%
Applied Materials, Inc. 19,500 721,500
MISCELLANEOUS-2.3%
ITT Corp.* 22,400 1,243,200
-----------
TELECOMMUNICATIONS-4.9%
Cox Communications, Inc.* 24,000 501,000
MCI Communications Corp. 45,100 1,290,988
Scientific-Atlanta, Inc. 36,700 578,025
Tele-Communications, Inc.* 8,750 239,531
-----------
2,609,544
UTILITY-TELEPHONE-1.6%
Telephone and Data Systems, Inc. 21,800 885,625
-----------
10,215,519
CREDIT SENSITIVE-13.7%
FINANCIAL SERVICES-2.0%
CNA Financial Corp.* 2,800 319,900
Merrill Lynch & Co., Inc. 13,000 739,375
-----------
1,059,275
INSURANCE-11.7%
Aetna Life & Casualty Co. 14,000 1,043,000
American International Group, Inc. 10,650 1,031,719
Life Re Corp. 33,500 816,562
TIG Holdings, Inc. 32,500 901,875
Transatlantic Holdings, Inc. 18,000 1,287,000
Travelers, Inc. 18,000 1,183,500
-----------
6,263,656
-----------
7,322,931
CONSUMER NONCYCLICALS-13.1%
DRUGS-5.8%
Pharmacia & Upjohn, Inc. 26,325 1,102,359
Revco D. S., Inc.* 9,600 270,000
Warner-Lambert Co. 18,500 1,734,375
-----------
3,106,734
FOOD & BEVERAGES-1.1%
PepsiCo, Inc. 10,000 596,250
HOSPITAL SUPPLIES & SERVICES-1.9%
AMSCO International, Inc.* 30,800 438,900
U.S. Healthcare, Inc. 12,000 582,000
-----------
1,020,900
HOUSEHOLD PRODUCTS-0.5%
First Brands Corp. 5,200 256,750
TOBACCO-3.8%
Philip Morris Cos., Inc. 22,000 2,046,000
-----------
7,026,634
4
ALLIANCE STRATEGIC BALANCED FUND
_______________________________________________________________________________
COMPANY SHARES VALUE
- ------------------------------------------------------------------------
BASIC MATERIALS-9.8%
CHEMICALS-7.6%
Hercules, Inc. 27,500 $ 1,519,375
IMC Global 26,000 975,000
Monsanto Co. 12,300 1,602,075
-----------
4,096,450
ENVIRONMENTAL CONTROL-0.9%
Wellman, Inc. 25,000 500,000
METALS & MINING-1.3%
Freeport McMoran, Inc. 18,200 687,050
Nord Resources Corp.* 812 2,030
-----------
689,080
-----------
5,285,530
CONSUMER CYCLICALS-5.1%
AIRLINES-1.0%
Delta Air Lines, Inc. 7,500 512,813
LEISURE RELATED-2.0%
Cyrk International, Inc.* 20,900 263,862
Loews Corp. 10,000 826,250
-----------
1,090,112
RETAIL-BUILDING MATERIALS-0.3%
Payless Cashways* 30,000 131,250
RETAIL-GENERAL-1.8%
Fingerhut Cos., Inc. 72,300 985,088
-----------
2,719,263
BUSINESS SERVICES-4.7%
BROADCASTING-2.2%
Cablevision Systems Corp.* 21,000 1,181,250
ENVIRONMENTAL CONTROL-1.5%
WMX Technologies, Inc 27,000 806,625
SHARES OR
PRINCIPAL
AMOUNT
COMPANY (000) VALUE
- ------------------------------------------------------------------------
PRINTING, PUBLISHING & BROADCASTING-1.0%
Infinity Broadcasting Corp. Cl.A 14,000 $ 556,500
-----------
2,544,375
TRANSPORTATION-1.4%
RAILROADS-1.4%
Union Pacific Corp. 11,000 732,875
ENERGY-1.2%
OIL & GAS-1.2%
Louis Dreyfus Natural Gas Corp.* 27,200 336,600
Louisiana Land & Exploration Co. 7,000 301,000
-----------
637,600
COMMERCIAL SERVICES-0.5%
Ideon Group, Inc. 25,200 267,750
Total Common Stocks (cost $32,330,084) 36,752,477
LONG TERM DEBT SECURITIES-18.9%
U.S. GOVERNMENT & AGENCIES-14.8%
Federal National Mortgage Association
6.00%, 12/01/09 $1,340 1,329,800
U.S. Treasury Bonds
6.25%, 8/15/23 550 560,483
7.625%, 2/15/25 335 405,558
U.S. Treasury Notes
6.125%, 5/15/98 2,000 2,048,120
6.50%, 8/15/05 100 106,437
7.75%, 1/31/00 3,200 3,490,496
-----------
7,940,894
5
PORTFOLIO OF INVESTMENTS (CONTINUED) ALLIANCE STRATEGIC BALANCED FUND
_______________________________________________________________________________
PRINCIPAL
AMOUNT
COMPANY (000) VALUE
- ------------------------------------------------------------------------
MISCELLANEOUS-4.1%
First Union Corp.
7.05%, 8/01/05 $500 $ 527,175
Liberty Mutual Insurance Co.
8.50%, 5/15/25(a) 525 591,754
Quebec Province Canada
7.125%, 2/09/24 350 350,101
St. George Bank Ltd.
7.15%, 10/15/05 350 361,781
Time Warner, Inc.
8.375%, 3/15/23 350 373,653
-----------
2,204,464
Total Long Term Debt Securities
(cost $9,615,300) 10,145,358
PRINCIPAL
AMOUNT
(000) VALUE
- ------------------------------------------------------------------------
SHORT-TERM DEBT SECURITIES-7.3%
Federal Home Loan Bank
5.50%, 2/01/96
(amortized cost $3,900,000) $3,900 $ 3,900,000
TOTAL INVESTMENTS-94.7%
(cost $45,845,384) 50,797,835
Other assets less liabilities-5.3% 2,868,400
NET ASSETS-100% $53,666,235
* Non-income producing security.
(a) Securities exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may be resold in transactions exempt from
registration, normally to certain qualified institutional buyers. At January
31, 1996, these securities amounted to $591,754 representing 1.1% of net assets.
See notes to financial statements.
6
STATEMENTS OF ASSETS AND LIABILITIES
JANUARY 31, 1996 (UNAUDITED) ALLIANCE STRATEGIC BALANCED FUND
_______________________________________________________________________________
ASSETS
Investments in securities, at value (cost $45,845,384) $50,797,835
Cash 13,610
Receivable for investment securities sold 3,127,669
Interest and dividends receivable 159,723
Receivable for shares of beneficial interest sold 57,082
Total assets 54,155,919
LIABILITIES
Payable for investment securities purchased 294,269
Distribution fee payable 35,688
Payable for shares of beneficial interest redeemed 26,648
Advisory fee payable 24,590
Accrued expenses 108,489
Total liabilities 489,684
NET ASSETS $53,666,235
COMPOSITION OF NET ASSETS
Shares of beneficial interest, at par $ 32
Additional paid-in capital 47,280,711
Distributions in excess of net investment income (40,256)
Accumulated net realized gain on investments 1,487,738
Net unrealized appreciation on investments and other assets 4,938,010
$53,666,235
CALCULATION OF MAXIMUM OFFERING PRICE
CLASS A SHARES
Net asset value and redemption price per share ($15,757,953/
850,652 shares of beneficial interest issued and outstanding) $18.52
Sales charge-4.25% of public offering price .82
Maximum offering price $19.34
CLASS B SHARES
Net asset value and offering price per share ($34,654,912/
2,167,979 shares of beneficial interest issued and outstanding) $15.98
CLASS C SHARES
Net asset value, redemption and offering price per share($3,253,370
/203,553 shares of beneficial interest issued and outstanding) $15.98
See notes to financial statements.
7
STATEMENTS OF OPERATIONS
SIX MONTHS ENDED JANUARY 31, 1996 (UNAUDITED)
ALLIANCE STRATEGIC BALANCED FUND
_______________________________________________________________________________
INVESTMENT INCOME
Interest $410,463
Dividends(net of foreign of taxes withheld of $1,146) 308,440 $ 718,903
EXPENSES
Advisory fee 200,096
Distribution fee - Class A 20,031
Distribution fee - Class B 179,709
Distribution fee - Class C 20,316
Transfer agency 69,631
Custodian 41,520
Registration 39,320
Audit and legal 33,241
Trustees' fees 14,000
Printing 4,731
Amortization of organization expenses 951
Miscellaneous 8,708
Total expenses 632,254
Less: expenses waived and assumed by adviser
(see Note B) (119,751)
Net expenses 512,503
Net investment income 206,400
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain on investments 2,882,422
Net change in unrealized appreciation of investments
and other assets 1,077,583
Net gain on investments 3,960,005
NET INCREASE IN NET ASSETS FROM OPERATIONS $4,166,405
See notes to financial statements.
8
STATEMENT OF CHANGES IN NET ASSETS ALLIANCE STRATEGIC BALANCED FUND
_______________________________________________________________________________
SIX MONTHS ENDED YEAR ENDED
JANUARY 31,1996 JULY 31,
(UNAUDITED) 1995
------------ -------------
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS
Net investment income $ 206,400 $ 803,136
Net realized gain on investments 2,882,422 1,585,794
Net change in unrealized appreciation of
investments and other assets 1,077,583 3,225,074
Net increase in net assets from operations 4,166,405 5,614,004
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income
Class A (251,709) (128,387)
Class B (425,006) (351,616)
Class C (52,350) (36,666)
Net realized gain on investments
Class A (479,820) (20,950)
Class B (1,296,269) (105,192)
Class C (159,666) (10,969)
TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST
Net decrease (201,280) (10,129,045)
Total increase (decrease) 1,300,305 (5,168,821)
NET ASSETS
Beginning of period 52,365,930 57,534,751
End of period (including undistributed net
investment income of $482,409 for the year
ended July 31, 1995) $53,666,235 $52,365,930
See notes to financial statements.
9
NOTES TO FINANCIAL STATEMENTS
JANUARY 31, 1996 (UNAUDITED) ALLIANCE STRATEGIC BALANCED FUND
_______________________________________________________________________________
NOTE A: SIGNIFICANT ACCOUNTING POLICIES
Alliance Strategic Balanced Fund (the 'Fund'), formerly Alliance Balanced 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. The Funds offers Class A, Class
B and Class C shares. Class A shares are sold with a front-end sales charge of
up to 4.25%. Class B shares are sold with a contingent deferred sales charge
which declines from 4% to zero depending on the period of time the shares are
held. Shares purchased before August 2, 1993 and redeemed within eight 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 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. 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.
3. 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.
4. 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.
5. INCOME AND EXPENSES
All income earned, and expenses incurred by the Fund are borne on a pro-rata
basis by each outstanding class of shares, based on the proportionate interest
in the Fund represented by the 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.
NOTE B: ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
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 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
10
ALLIANCE STRATEGIC BALANCED FUND
_______________________________________________________________________________
expense cap for Class B Shares was 2.15%. For the six months ended January 31,
1996, such reimbursement amounted to $119,751 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 $56,388 for the six months ended January 31, 1996.
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 $232 from the sale of Class A shares and $30,785 in
contingent deferred sales charges imposed upon redemptions by shareholders of
Class B shares for the six months ended January 31, 1996.
Brokerage commissions paid on securities transactions for the six months ended
January 31, 1996 amounted to $62,161, 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.
Accrued expenses includes amounts owed to two of the Trustees under a deferred
compensation plan of $43,184.
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 $864,077 and $247,770 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 $23,981,798 and $32,540,676, respectively, for the six months ended
January 31, 1996. There were purchases of $463,746 and sales of $4,636,796 of
U.S. Government and government agency obligations for the six months ended
January 31, 1996. At January 31, 1996, the cost of securities for federal
income tax purposes was $45,931,191. Accordingly, gross unrealized appreciation
of investments was $6,074,970 and gross unrealized depreciation of investments
was $1,208,326 resulting in net unrealized appreciation of $4,866,644.
11
NOTES TO FINANCIAL STATEMENTS (CONTINUED) 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:
SHARES AMOUNT
------------------------- ---------------------------
SIX MONTHS SIX MONTHS
ENDED YEAR ENDED ENDED YEAR ENDED
JAN. 31,1996 JULY 31, JAN. 31,1996 JULY 31,
(UNAUDITED) 1995 (UNAUDITED) 1995
------------ ----------- ------------ -------------
CLASS A
Shares sold 331,167 215,830 $ 6,109,127 $ 3,566,155
Shares issued in
reinvestment of
dividends and
distributions 37,529 8,938 680,784 138,715
Shares redeemed (127,313) (208,409) (2,336,052) (3,417,256)
Net increase 241,383 16,359 $ 4,453,859 $ 287,614
CLASS B
Shares sold 214,812 323,750 $ 3,413,410 $ 4,608,223
Shares issued in
reinvestment of
dividends and
distributions 98,905 30,603 1,547,869 412,834
Shares redeemed (543,523) (1,047,251) (8,648,557) (14,853,928)
Net decrease (229,806) (692,898) $(3,687,278) $ (9,832,871)
CLASS C
Shares sold 30,441 88,024 $ 480,732 $ 1,241,321
Shares issued in
reinvestment of
dividends and
distributions 11,410 3,015 178,563 40,701
Shares redeemed (102,491) (132,830) (1,627,156) (1,865,810)
Net decrease (60,640) (41,791) $ (967,861) $ (583,788)
12
FINANCIAL HIGHLIGHTS ALLIANCE STRATEGIC BALANCED FUND
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING THROUGHOUT EACH
PERIOD
<TABLE>
<CAPTION>
CLASS A
----------------------------------------------------------------
SIX MONTHS
ENDED MAY 1,1994
JANUARY 31, YEAR ENDED TO YEAR ENDED APRIL 30,
1996 JULY 31, JULY 31, ---------------------------
(UNAUDITED) 1995 1994** 1994 1993 1992
------------ -------- ---------- ------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $17.98 $16.26 $16.46 $16.97 $17.06 $14.48
INCOME FROM INVESTMENT OPERATIONS
Net investment income* .06(a) .34 .07 .16 .39 .27
Net realized and unrealized gain (loss)
on investments 1.41 1.64 (.27) .74 .59 2.80
Net increase (decrease) in net asset
value from operations 1.47 1.98 (.20) .90 .98 3.07
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (.32) (.22) -0- (.24) (.42) (.17)
Distributions from net realized gains (.61) (.04) -0- (1.17) (.65) (.32)
Total dividends and distributions (.93) (.26) -0- (1.41) (1.07) (.49)
Net asset value, end of period $18.52 $17.98 $16.26 $16.46 $16.97 $17.06
TOTAL RETURN
Total investment return based on net
asset value (b) 8.29% 12.40% (1.22)% 5.06% 5.85% 20.96%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period(000's omitted) $15,758 $10,952 $9,640 $9,822 $8,637 $6,843
Ratios to average net assets of:
Expenses, net of waivers/reimbursements 1.40%(c) 1.40% 1.40%(c) 1.40% 1.40% 1.40%
Expenses, before waivers/reimbursements 1.84%(c) 1.81% 1.94%(c) 1.70% 1.85% 2.05%
Net investment income 1.28%(c) 2.07% 1.63%(c) 1.67% 2.29% 1.92%
Portfolio turnover rate 47% 172% 21% 139% 98% 103%
</TABLE>
See footnote summary on page 15.
13
FINANCIAL HIGHLIGHTS (CONTINUED) ALLIANCE STRATEGIC BALANCED FUND
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING THROUGHOUT EACH
PERIOD
<TABLE>
<CAPTION>
CLASS B
----------------------------------------------------------------
SIX MONTHS
ENDED MAY 1,1994
JANUARY 31, YEAR ENDED TO YEAR ENDED APRIL 30,
1996 JULY 31, JULY 31, ---------------------------
(UNAUDITED) 1995 1994** 1994 1993 1992
------------ -------- ---------- ------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $15.56 $14.10 $14.30 $14.92 $15.51 $13.96
INCOME FROM INVESTMENT OPERATIONS
Net investment income* .06(a) .22 .03 .06 .23 .22
Net realized and unrealized gain (loss)
on investments 1.17 1.40 (.23) .63 .53 2.70
Net increase (decrease) in net asset
value from operations 1.23 1.62 (.20) .69 .76 2.92
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (.20) (.12) -0- (.14) (.25) (.29)
Distributions from net realized gains (.61) (.04) -0- (1.17) (1.10) (1.08)
Total dividends and distributions (.81) (.16) -0- (1.31) (1.35) (1.37)
Net asset value, end of period $15.98 $15.56 $14.10 $14.30 $14.92 $15.51
TOTAL RETURN
Total investment return based on net
asset value (b) 8.01% 11.63% (1.40)% 4.29% 4.96% 20.14%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $34,655 $37,301 $43,578 $43,616 $36,155 $31,842
Ratios to average net assets of:
Expenses, net of waivers/reimbursements 2.10%(c) 2.10% 2.10%(c) 2.10% 2.15% 2.15%
Expenses, before waivers/reimbursements 2.55%(c) 2.49% 2.64%(c) 2.42% 2.56% 2.70%
Net investment income .60%(c) 1.38% .92%(c) .93% 1.55% 1.34%
Portfolio turnover rate 47% 172% 21% 139% 98% 103%
</TABLE>
See footnote summary on page 15.
14
ALLIANCE STRATEGIC BALANCED FUND
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING THROUGHOUT EACH
PERIOD
CLASS C
---------------------------------------------
SIX MONTHS MAY 1,
ENDED YEAR 1994 AUGUST 2,
JANUARY 31, ENDED TO 1993(D)
1996 JULY 31, JULY 31, TO APR. 30,
(UNAUDITED) 1995 1994** 1994
----------- ------- ----------- ----------
Net asset value, beginning of
period $15.57 $14.11 $14.31 $15.64
INCOME FROM INVESTMENT OPERATIONS
Net investment income (loss)* .08(a) .16 .03 .15
Net realized and unrealized gain
(loss) on investments 1.14 1.46 (.23) (.17)
Net increase (decrease) in net
asset value from operations 1.22 1.62 (.20) (.02)
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment
income (.20) (.12) -0- (.14)
Distributions from net realized
gains (.61) (.04) -0- (1.17)
Total dividends and distributions (.81) (.16) -0- (1.31)
Net asset value, end of period $15.98 $15.57 $14.11 $14.31
TOTAL RETURN
Total investment return based on
net asset value (b) 7.95% 11.62% (1.40)% .45%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(000's omitted) $3,253 $4,113 $4,317 $4,289
Ratios to average net assets of:
Expenses, net of waivers/
reimbursements 2.10%(c) 2.10% 2.10%(c) 2.10%(c)
Expenses, before waivers/
reimbursements 2.55%(c) 2.50% 2.64%(c) 2.07%(c)
Net investment income .61%(c) 1.38% .93%(c) .69%(c)
Portfolio turnover rate 47% 172% 21% 139%
* Net of fee waived and expenses reimbursed by the Adviser.
** The Fund changed its fiscal year end from April 30 to July 31.
(a) Based on average shares outstanding.
(b) Total investment return is calculated assuming an initial investment made
at the net asset value at the beginning of the period, reinvestment of all
dividends and distributions at net asset value during the period, and
redemption on the last day of the period. Initial sales charges or contingent
deferred sales charges 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.
15
<PAGE>
PORTFOLIO OF INVESTMENTS
JULY 31, 1995 ALLIANCE STRATEGIC BALANCED FUND
- -------------------------------------------------------------------------------
COMPANY SHARES VALUE
- ----------------------------------------------------------------------
COMMON STOCKS-74.3%
TECHNOLOGY-21.4%
AEROSPACE & DEFENSE-2.7%
Boeing Co. 18,000 $1,206,000
Coltec Industries, Inc.* 15,000 228,750
1,434,750
COMPUTERS-5.5%
Bay Networks, Inc.* 25,000 1,121,875
Ceridian Corp.* 31,900 1,319,863
Compuware Corp.* 17,000 429,250
2,870,988
ELECTRONICS-1.5%
Applied Materials, Inc.* 5,000 517,500
National Semiconductor Corp.* 10,000 270,000
787,500
TELECOMMUNICATIONS-6.6%
AirTouch Communications, Inc.* 15,300 481,950
Cox Communications, Inc* 35,000 708,750
General Instrument Corp.* 12,000 442,500
Scientific-Atlanta, Inc.* 30,600 657,900
Tele-Communications, Inc. Cl.A* 15,000 375,000
Vodafone Group Plc (ADR)(a) 20,700 815,062
3,481,162
MISCELLANEOUS-5.1%
ITT Corp. 22,400 2,688,000
11,262,400
CONSUMER NONCYCLICALS-11.6%
DRUGS-7.4%
Glaxo Wellcome Plc (ADR)(a) 30,000 720,000
Lilly (Eli) & Co. 9,000 704,250
Upjohn Co. 30,000 1,155,000
Warner-Lambert Co. 15,500 1,302,000
3,881,250
HOSPITAL SUPPLIES & SERVICES-0.6%
AMSCO International Inc.* 15,000 $279,375
TOBACCO-3.6%
Philip Morris Cos., Inc. 26,500 1,898,062
6,058,687
BUSINESS SERVICES-9.9%
BROADCASTING-3.5%
Cablevision Systems Corp.* 16,500 1,132,312
Comcast Corp. Cl.A SPL 35,000 708,750
1,841,062
ENVIRONMENTAL CONTROL-2.1%
WMX Technologies, Inc 35,000 1,093,750
PAPER & FOREST PRODUCTS-1.5%
Champion International Corp. 14,000 789,250
PRINTING, PUBLISHING & BROADCASTING-2.8%
Clear Channel Communications, Inc.* 8,000 535,000
Infinity Broadcasting Corp. Cl.A* 25,000 925,000
1,460,000
5,184,062
CONSUMER CYCLICALS-9.5%
AUTOS & TRUCKS-0.5%
General Motors Corp. 6,000 255,000
LEISURE RELATED-6.8%
Cyrk International Inc.* 30,900 351,488
Eastman Kodak Co. 31,500 1,815,187
Gaylord Entertainment Co. Cl.A* 12,915 353,548
Loews Corp. 5,000 601,875
Time Warner, Inc. 10,000 428,750
3,550,848
5
PORTFOLIO OF INVESTMENTS (CONTINUED) ALLIANCE STRATEGIC BALANCED FUND
- -------------------------------------------------------------------------------
COMPANY SHARES VALUE
- ----------------------------------------------------------------------
RETAIL - GENERAL-2.2%
Fingerhut Cos., Inc. 69,300 $1,160,775
4,966,623
BASIC MATERIALS-8.5%
CHEMICALS-6.4%
Hercules, Inc. 20,000 1,072,500
IMC Fertilizer Group, Inc. 18,000 1,084,500
Monsanto Co. 12,800 1,192,000
3,349,000
ENVIRONMENTAL CONTROL-2.1%
Wellman, Inc. 41,500 1,115,313
METALS & MINING-0.0%
Nord Resources Corp.* 812 2,639
4,466,952
CREDIT SENSITIVE-8.0%
INSURANCE-6.4%
Aetna Life & Casualty Co. 6,000 371,250
American International Group, Inc. 10,650 798,750
Life Re Corp. 30,000 536,250
TIG Holdings, Inc. 18,100 447,975
Transatlantic Holdings, Inc. 18,000 1,188,000
3,342,225
UTILITY - TELEPHONE-1.6%
Telephone and Data Systems, Inc. 21,800 844,750
4,186,975
ENERGY-3.5%
OIL & GAS-3.5%
Atlantic Richfield Co. 5,000 576,250
Louis Dreyfus Natural Gas Corp.* 12,200 164,700
Louisiana Land &
Exploration Co. 10,000 397,500
Occidental Petroleum Corp. 30,000 675,000
1,813,450
SHARES OR
PRINCIPAL
AMOUNT
COMPANY (000) VALUE
- ----------------------------------------------------------------------
CAPITAL GOODS-1.2%
MACHINERY-1.2%
Trinity Industry, Inc. 11,000 $ 368,500
York International Corp. 5,500 253,688
622,188
COMMERCIAL SERVICES-0.7%
Ideon Group, Inc. 35,200 369,600
Total Common Stocks (cost $35,336,818) 38,930,937
LONG-TERM DEBT SECURITIES-24.0%
U.S. GOVERNMENT AND AGENCY OBLIGATIONS-21.3%
Federal National Mortgage Association
6.00%, 12/01/09 $1,411 1,357,158
U.S. Treasury Bonds
6.25%, 8/15/23 1,400 1,284,934
7.625%, 2/15/25 335 367,401
U.S. Treasury Notes
6.125%, 5/15/98 2,000 2,006,240
6.50%, 5/15/05 815 818,692
7.75%, 1/31/00 5,000 5,301,550
11,135,975
MISCELLANEOUS-2.7%
BCH Cayman Islands
8.25%, 6/15/04 450 467,397
Liberty Mutual Insurance Co.
8.50%, 5/15/25(b) 525 528,659
Republic of Italy
6.875%, 9/27/23 500 436,715
1,432,771
6
ALLIANCE STRATEGIC BALANCED FUND
- -------------------------------------------------------------------------------
PRINCIPAL
AMOUNT
COMPANY (000) VALUE
- ----------------------------------------------------------------------
Total Long-Term Debt Securities
(cost $12,291,581) $12,568,746
SHORT-TERM DEBT
SECURITIES-2.5%
Federal Home Loan Mortgage Corp.
5.75%, 8/01/95
(amortized cost $1,300,000) $1,300 1,300,000
VALUE
- ----------------------------------------------------------------------
TOTAL INVESTMENTS-100.8%
(cost $48,928,399) $52,799,683
Other assets less liabilities-(0.8%) (433,753)
NET ASSETS-100% $52,365,930
* Non-income producing security.
(a) Country of origin - United Kingdom.
(b) Security exempt from registration under Rule 144A of the Securities Act of
1933. This security may be resold in transactions exempt from registration,
normally to certain qualified institutional buyers. At July 31, 1995, this
security amounted to $528,659 representing 1.0% of net assets.
Glossary:
ADR - American Depository Receipt
See notes to financial statements.
7
STATEMENT OF ASSETS AND LIABILITIES
JULY 31, 1995 ALLIANCE STRATEGIC BALANCED FUND
- -------------------------------------------------------------------------------
ASSETS
Investments in securities, at value (cost $48,928,399) $52,799,683
Cash 92,758
Receivable for shares of beneficial interest sold 515,449
Receivable for investment securities sold 370,648
Receivable due from adviser 50,370
Interest and dividends receivable 147,697
Deferred organization expenses 951
Total assets 53,977,556
LIABILITIES
Payable for investment securities purchased 1,010,660
Payable for shares of beneficial interest redeemed 410,779
Distribution fee payable 37,926
Accrued expenses 152,261
Total liabilities 1,611,626
NET ASSETS $52,365,930
COMPOSITION OF NET ASSETS
Shares of beneficial interest, at par $ 33
Additional paid-in capital 47,481,990
Undistributed net investment income 482,409
Accumulated net realized gain on investments 541,071
Net unrealized appreciation on investments and other assets 3,860,427
$52,365,930
CALCULATION OF MAXIMUM OFFERING PRICE
CLASS A SHARES
Net asset value and redemption price per share ($10,952,356/609,269
shares of beneficial interest issued and outstanding) $17.98
Sales charge-4.25% of public offering price .80
Maximum offering price $18.78
CLASS B SHARES
Net asset value and offering price per share ($37,300,701/2,397,785
shares of beneficial interest issued and outstanding) $15.56
CLASS C SHARES
Net asset value, redemption and offering price per share($4,112,873/
264,193 shares of beneficial interest issued and outstanding) $15.57
See notes to financial statements.
8
STATEMENT OF OPERATIONS
YEAR ENDED JULY 31, 1995 ALLIANCE STRATEGIC BALANCED FUND
- -------------------------------------------------------------------------------
INVESTMENT INCOME
Interest $1,339,107
Dividends (net of foreign taxes withheld of $4,918) 517,597
$1,856,704
EXPENSES
Advisory fee 400,593
Distribution fee - Class A 29,183
Distribution fee - Class B 395,190
Distribution fee - Class C 41,658
Transfer agency 123,873
Custodian 81,778
Registration 65,206
Audit and legal 60,406
Trustees' fees 28,000
Printing 22,117
Amortization of organization expenses 7,300
Miscellaneous 9,670
Total expenses 1,264,974
Less: expenses waived and assumed by adviser
(see Note B) (211,406)
Net expenses 1,053,568
Net investment income 803,136
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain on investments 1,585,794
Net change in unrealized appreciation of investments 3,225,074
Net gain on investments 4,810,868
NET INCREASE IN NET ASSETS FROM OPERATIONS $5,614,004
See notes to financial statements.
9
STATEMENT OF CHANGES IN NET ASSETS ALLIANCE STRATEGIC BALANCED FUND
- -------------------------------------------------------------------------------
YEAR ENDED MAY 1, 1994 YEAR ENDED
JULY 31, TO JULY 31, APRIL 30,
1995 1994* 1994
------------ ------------ ------------
INCREASE (DECREASE) IN NET ASSETS FROM
OPERATIONS
Net investment income $ 803,136 $ 151,149 $ 509,064
Net realized gain (loss) on
investments 1,585,794 (279,249) 1,846,056
Net change in unrealized appreciation
of investments 3,225,074 (677,270) (1,190,672)
Net increase (decrease) in net assets
from operations 5,614,004 (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)
TRANSACTIONS IN SHARES OF BENEFICIAL
INTEREST
Net increase (decrease) (10,129,045) 612,180 15,616,965
Total increase (decrease) (5,168,821) (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 $482,409,
$159,778 and $8,629, respectively) $52,365,930 $57,534,751 $57,727,941
* The Fund changed its fiscal year end from April 30 to July 31.
See notes to financial statements.
10
NOTES TO FINANCIAL STATEMENTS
JULY 31, 1995 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 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 have been deferred and are 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.
11
NOTES TO FINANCIAL STATEMENTS (CONTINUED) ALLIANCE STRATEGIC BALANCED FUND
- -------------------------------------------------------------------------------
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 year ended July 31, 1995, such reimbursement amounted
to $211,406. 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 $89,368 for the year ended July 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 $1,814 from the sale of Class A shares and $85,826
in contingent deferred sales charges imposed upon redemptions by shareholders
of Class B shares for the year ended July 31, 1995.
Brokerage commissions paid on securities transactions for the year ended July
31, 1995 amounted to $196,452, of which $240 was paid to brokers utilizing the
services of the Pershing Division of Donaldson, Lufkin & Jenrette Securities
Corp. ("DLJ"), an affiliate of the Adviser.
Accrued expenses includes amounts owed to two of the Trustees under a deferred
compensation plan, of $37,972.
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 $759,314 and $219,442 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.
12
ALLIANCE STRATEGIC BALANCED FUND
- -------------------------------------------------------------------------------
NOTE D: INVESTMENT TRANSACTIONS
Purchases and sales of investment securities (excluding short-term investments)
aggregated $76,930,163 and $75,103,749, respectively, for the year ended July
31, 1995. There were purchases of $18,087,684 and sales of $15,054,315 of U.S.
Government and government agency obligations for the year ended July 31, 1995.
At July 31, 1995, the cost of securities for federal income tax purposes was
the same as the cost for financial reporting purposes. Accordingly, gross
unrealized appreciation of investments was $4,429,309 and gross unrealized
depreciation of investments was $558,025 resulting in net unrealized
appreciation of $3,871,284.
The Fund fully utilized its capital loss carryover of $765,373 to offset gain
realized during the year ended July 31, 1995.
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 MAY 1, 1994
YEAR ENDED TO YEAR ENDED YEAR ENDED TO YEAR ENDED
JULY 31, JULY 31, APRIL 30, JULY 31, JULY 31, APRIL 30,
1995 1994** 1994 1995 1994** 1994
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
CLASS A
Shares sold 215,830 49,331 276,843 $ 3,566,155 $ 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 (208,409) (53,073) (223,556) (3,417,256) (861,885) (3,785,573)
Net increase (decrease) 16,359 (3,742) 87,660 $ 287,614 $ (63,357) $ 1,600,679
CLASS B
Shares sold 323,750 185,371 916,638 $ 4,608,223 $ 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 (1,047,251) (144,019) (493,204) (14,853,928) (2,029,917) (7,402,027)
Net increase (decrease) (692,898) 41,352 626,049 $(9,832,871) $ 591,087 $ 9,451,448
</TABLE>
<TABLE>
<CAPTION>
SHARES AMOUNT
------------------------------------------ -----------------------------------------
MAY 1, 1994 AUGUST 2, MAY 1, 1994 AUGUST 2,
YEAR ENDED TO 1993* YEAR ENDED TO 1993*
JULY 31, JULY 31, TO JULY 31, JULY 31, TO
1995 1994** APRIL 30,1994 1995 1994** APRIL 30,1994
------------- ------------ ------------- ------------ ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
CLASS C
Shares sold 88,024 42,010 357,421 $1,241,321 $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 (132,830) (35,791) (60,021) (1,865,810) (509,572) (871,855)
Net increase (decrease) (41,791) 6,219 299,765 $(583,788) $84,450 $4,564,838
</TABLE>
* Commencement of distribution.
** The Fund changed its fiscal year end from April 30 to July 31.
13
NOTES TO FINANCIAL STATEMENTS (CONTINUED) ALLIANCE STRATEGIC BALANCED FUND
- -------------------------------------------------------------------------------
NOTE F: RECLASSIFICATION OF COMPONENTS OF NET ASSETS
In accordance with Statement of Position 93-2 Determination, Disclosure, and
Financial Statement Presentation of Income, Capital Gain, and Return of Capital
Distributions by Investment Companies, permanent book and tax differences,
relating to shareholder distributions have been reclassified to additional
paid-in capital. As of July 31, 1995, the cumulative effect of such differences
totaling $36,164 was reclassified from undistributed net investment income to
additional paid in capital. Net investment income, net realized gains and net
assets were not affected by this change.
14
FINANCIAL HIGHLIGHTS ALLIANCE STRATEGIC BALANCED FUND
- -------------------------------------------------------------------------------
SELECTED DATA FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING THROUGHOUT EACH
PERIOD
<TABLE>
<CAPTION>
CLASS A
------------------------------------------------------------------
MAY 1,1994
YEAR ENDED TO YEAR ENDED APRIL 30,
JULY 31, JULY 31, ------------------------------------------
1995 1994** 1994 1993 1992 1991(A)
----------- ---------- -------- -------- -------- -----------
<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 * .34 .07 .16 .39 .27 .34
Net realized and unrealized gain (loss)
on investments 1.64 (.27) .74 .59 2.80 1.66
Net increase (decrease) in net asset
value from operations 1.98 (.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 $17.98 $16.26 $16.46 $16.97 $17.06 $14.48
TOTAL RETURN
Total investment return based on
net asset value (b) 12.40% (1.22)% 5.06% 5.85% 20.96% 16.00%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period(000's omitted) $10,952 $9,640 $9,822 $8,637 $6,843 $443
Ratios to average net assets of:
Expenses, net of waivers/
reimbursements 1.40% 1.40%(c) 1.40% 1.40% 1.40% 1.40%(c)
Expenses, before waivers/
reimbursements 1.81% 1.94%(c) 1.70% 1.85% 2.05% 11.59%(c)
Net investment income 2.07% 1.63%(c) 1.67% 2.29% 1.92% 3.54%(c)
Portfolio turnover rate 172% 21% 139% 98% 103% 137%
</TABLE>
See footnote summary on page 17.
15
FINANCIAL HIGHLIGHTS (CONTINUED) ALLIANCE STRATEGIC BALANCED FUND
- -------------------------------------------------------------------------------
SELECTED DATA FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING THROUGHOUT EACH
PERIOD
<TABLE>
<CAPTION>
CLASS B
--------------------------------------------------------------
MAY 1, 1994
YEAR ENDED TO YEAR ENDED APRIL 30,
JULY 31, JULY 31, --------------------------------------
1995 1994** 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 * .22 .03 .06 .23 .22 .43
Net realized and unrealized gain (loss)
on investments 1.40 (.23) .63 .53 2.70 1.60
Net increase (decrease) in net asset
value from operations 1.62 (.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 $15.56 $14.10 $14.30 $14.92 $15.51 $13.96
TOTAL RETURN
Total investment return based on
net asset value (b) 11.63% (1.40)% 4.29% 4.96% 20.14% 16.73%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period(000's omitted) $37,301 $43,578 $43,616 $36,155 $31,842 $22,552
Ratios to average net assets of:
Expenses, net of waivers/
reimbursements 2.10% 2.10%(c) 2.10% 2.15% 2.15% 2.10%
Expenses, before waivers/
reimbursements 2.49% 2.64%(c) 2.42% 2.56% 2.70% 2.93%
Net investment income 1.38% .92%(c) .93% 1.55% 1.34% 3.23%
Portfolio turnover rate 172% 21% 139% 98% 103% 137%
</TABLE>
See footnote summary on page 17.
16
ALLIANCE STRATEGIC BALANCED FUND
- -------------------------------------------------------------------------------
SELECTED DATA FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING THROUGHOUT EACH
PERIOD
CLASS C
-----------------------------------
MAY 1,1994 AUGUST 2,
YEAR ENDED TO 1993(D)
JULY 31, JULY 31, TO
1995 1994** APRIL 30,1994
--------- --------- -------------
Net asset value, beginning of period $14.11 $14.31 $15.64
INCOME FROM INVESTMENT OPERATIONS
Net investment income * .16 .03 .15
Net realized and unrealized loss
on investments 1.46 (.23) (.17)
Net increase (decrease) in net asset
value from operations 1.62 (.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 $15.57 $14.11 $14.31
TOTAL RETURN
Total investment return based on
net asset value (b) 11.62% (1.40)% .45%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $4,113 $4,317 $4,289
Ratios to average net assets of:
Expenses, net of waivers/
reimbursements 2.10% 2.10%(c) 2.10%(c)
Expenses, before waivers/
reimbursements 2.50% 2.64%(c) 2.07%(c)
Net investment income 1.38% .93%(c) .69%(c)
Portfolio turnover rate 172% 21% 139%
* 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.
17
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, 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, 1995, the results of its operations for the year then
ended, the changes in its net assets for the year then ended, for the period
May 1, 1994 to July 31, 1994, and for the year ended April 30, 1994, and the
financial highlights for each of the periods presented, in conformity with
generally accepted accounting principles. These financial statements and
financial highlights (hereafter referred to as "financial statements") are the
responsibility of the Fund's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by mangement, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at July 31, 1995 by
correspondence with the custodian and brokers and the application of
alternative auditing procedures where confirmations from brokers were not
received, provide a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
New York, New York
September 27, 1995
<PAGE>
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1995 ALLIANCE GROWTH FUND
_______________________________________________________________________________
COMPANY SHARES VALUE
- ----------------------------------------------------------------------
COMMON AND PREFERRED STOCKS96.7%
TECHNOLOGY31.7%
ELECTRONICS19.0%
3Com Corp.* (a) 283,300 $ 13,315,100
cisco Systems, Inc.* (a) 1,599,000 123,922,500
EMC Corp.* (a) 1,699,300 26,339,150
General Instrument Corp.* 1,666,300 31,659,700
Micron Technology, Inc.(a) 93,100 6,575,187
Motorola, Inc.(a) 1,396,800 91,665,000
Oracle Systems Corp.* (a) 913,000 39,829,625
Silicon Graphics, Inc.* (a) 252,000 8,379,000
Texas Instruments, Inc.(a) 500,000 34,125,000
Westinghouse Electric Corp. 500,000 7,062,500
382,872,762
OFFICE EQUIPMENT & SERVICES1.8%
Bay Networks, Inc.* (a) 339,700 22,505,125
Cabletron Systems, Inc.* 155,900 12,257,638
34,762,763
SEMI-CONDUCTORS & RELATED5.2%
Intel Corp.(a) 1,126,600 78,721,175
National Semiconductor Corp.* (a) 1,083,300 26,405,437
105,126,612
TELECOMMUNICATIONS5.7%
Air-Touch Communications, Inc.* 1,586,700 45,220,950
Cox Communications, Inc.* (a) 168,000 3,150,000
DSC Communications Corp.* (a) 783,700 28,996,900
Millicom International Cellular S.A.* 312,800 10,322,400
Northern Telecom, Ltd. 45,000 1,620,000
Rogers Cantel Mobile Communications,
Inc. Cl.B* 571,500 11,858,625
United States Cellular Corp.* 259,700 8,959,650
Vodafone PLC (ADR)(b) 125,000 5,109,375
115,237,900
638,000,037
CREDIT SENSITIVE22.3%
BANKS0.5%
First Chicago Corp. 90,000 1,586,250
NationsBank Corp. 124,000 8,153,000
9,739,250
FINANCIAL SERVICES2.4%
American Express Co. 250,000 10,156,250
Capital One Financial Corp. 193,000 4,728,500
Dean Witter, Discover & Co. 80,000 3,980,000
Federal National Mortgage Assn. 57,800 6,061,775
Franchise Financial Corp. of America 90,000 1,901,250
JP Realty, Inc. 755,300 15,483,650
Mercury Finance Co. 139,800 2,691,150
Student Loan Marketing Assn. 56,000 3,297,000
48,299,575
INSURANCE11.9%
20th Century Industries, Inc.* 1,098,300 18,259,238
Acceptance Insurance Cos., Inc.* 465,600 6,984,000
Allstate Corp.(a) 909,410 33,420,817
American International Group, Inc. 754,350 63,648,281
John Alden Financial Corp. 246,500 5,114,875
PennCorp. Financial Group, Inc. 484,500 11,567,438
PMI Group, Inc. 46,700 2,241,600
Progressive Corp. (Ohio) 401,800 16,674,700
PXRE Corp. 8 204
Travelers, Inc. 1,638,700 82,754,350
240,665,503
REAL ESTATE6.1%
Amli Residential Properties Trust 204,000 3,927,000
Associated Estates Realty Corp. 28,700 588,350
CBL & Associates Properties, Inc. 264,000 5,610,000
Columbus Realty Trust 167,600 3,016,800
Essex Property Trust 201,900 3,684,675
First Industrial Realty Trust, Inc. 187,000 3,810,125
5
PORTFOLIO OF INVESTMENTS (CONTINUED) ALLIANCE GROWTH FUND
_______________________________________________________________________________
COMPANY SHARES VALUE
- ----------------------------------------------------------------------
Gables Residential Trust 230,000 $ 4,945,000
Highwoods Properties, Inc. 544,200 14,489,325
Macerich Co. 644,400 12,968,550
Manufactured Home Communities, Inc. 160,000 2,640,000
Mitsubishi Estate 140,000 1,491,764
Oasis Residential, Inc. 30,000 652,500
cv. pfd. 160,000 4,040,000
Paragon Group, Inc. 150,000 2,587,500
Saul Centers, Inc. 238,000 3,421,250
Simon Property Group, Inc. 301,500 7,009,875
Spieker Properties, Inc. 426,200 10,335,350
Storage USA, Inc. 403,700 11,808,225
Summit Properties, Inc. 507,700 9,392,450
Sun Communities, Inc. 280,000 6,965,000
Tucker Properties Corp. 429,800 3,975,650
Walden Residential Properties, Inc. 228,100 4,191,338
Weeks Corp. 71,500 1,644,500
123,195,227
UTILITY/GAS0.4%
Renaissance Energy, Ltd.* 334,000 7,385,244
UTILITY/TELEPHONE1.0%
MCI Communications Corp. 369,000 9,201,937
Telefonos de Mexico, S.A. (ADS)* (a)(c) 100,000 2,750,000
Telephone and Data Systems, Inc. 210,000 8,400,000
20,351,937
449,636,736
CONSUMER NONCYCLICALS12.9%
BEVERAGES0.1%
Coca-Cola Femsa S.A. (ADR)(c) 175,000 3,150,000
DRUGS4.4%
Abbott Laboratories 535,000 21,266,250
Amgen, Inc.* 106,000 5,088,000
Astra AB,Series A(g) 400,000 14,697,467
Gensia, Inc.*(d) 68,500 804,875
Merck & Co., Inc. 432,000 24,840,000
Pfizer, Inc. 380,000 21,802,500
88,499,092
HOSPITAL SUPPLIES & SERVICES1.9%
Healthsource, Inc.* 262,500 13,912,500
Quest Medical, Inc.* 265,225 2,917,475
United Healthcare Corp. 388,900 20,660,312
37,490,287
TOBACCO6.5%
Loews Corp. 416,000 60,996,000
Philip Morris Cos., Inc. 827,000 69,881,500
130,877,500
260,016,879
CONSUMER CYCLICALS8.7%
AUTO & TRUCKS2.1%
Chrysler Corp. 246,830 12,742,599
General Motors Corp. Cl.E 623,000 29,358,875
42,101,474
PHOTO & OPTICAL1.7%
Eastman Kodak Co. 545,700 34,174,462
RETAILINGGENERAL4.9%
Home Depot, Inc. 779,000 29,017,750
Lowes Cos., Inc. 1,072,500 28,957,500
Melville Corp. 50,000 1,600,000
Sears Roebuck & Co. 1,098,500 37,349,000
Talbots, Inc. 71,700 1,738,725
98,662,975
174,938,911
BUSINESS SERVICES8.6%
PRINTING, PUBLISHING & BROADCASTING4.9%
Comcast Corp. Cl.A (SPL) 291,500 5,210,563
Donnelley (R.R.) & Sons Co. 904,200 33,003,300
Grupo Television S.A. de C.V. (ADR)* (a)(c) 100,000 1,712,500
Tele-Communications, Inc.* 621,375 15,301,359
Tele-Communications, Inc. Cl.A* 2,249,400 38,239,800
Time Warner, Inc. 140,000 5,110,000
98,577,522
6
ALLIANCE GROWTH FUND
_______________________________________________________________________________
COMPANY SHARES VALUE
- ----------------------------------------------------------------------
RAILROADS & EQUIPMENT2.9%
Conrail, Inc.(a) 319,000 $ 21,931,250
Union Pacific Corp. 550,000 35,956,250
57,887,500
TRANSPORTATION0.8%
Pittston Services Group 577,000 15,867,500
172,332,522
DIVERSIFIED3.5%
Hanson PLC (ADR)(b)*
warrants, 9/30/97 1,045,296 99,159
B warrants, 9/30/97 877,003 109,625
ITT Corp. 576,300 70,596,750
70,805,534
CAPITAL GOODS3.5%
MACHINERY3.5%
Applied Materials, Inc.* 50,000 2,506,250
Mannesmann AG (ADR)(e) 205,000 67,442,294
69,948,544
BASIC MATERIALS3.3%
CHEMICALS3.0%
Great Lakes Chemical Corp. 371,000 24,903,375
Monsanto Co. 219,000 22,940,250
W.R. Grace & Co. 227,000 12,655,250
60,498,875
METALS & MINING0.3%
Freeport-McMoRan, Inc. 180,983 6,764,240
67,263,115
ENERGY2.0%
OIL SUPPLIES & CONSTRUCTION2.0%
Ensco International, Inc.* 83,475 1,408,641
Gulf Canada Resources, Ltd.* 6,808,000 26,381,000
Western Atlas, Inc.* 296,600 13,013,325
40,802,966
SHARES,
CONTRACTS (F)
OR PRINCIPAL
AMOUNT
COMPANY (000) VALUE
- ----------------------------------------------------------------------
CONSUMER SERVICES0.2%
HOTELS & RESTAURANTS0.2%
McDonald's Corp. 90,000 $ 3,690,000
Total Common Stocks
(cost $1,713,059,502) 1,947,435,244
LONG TERM DEBT SECURITIES1.5%
ELECTRONICS1.5%
3Com Corp.
10.25%, 11/01/01(d) $ 8,500 13,610,625
Altera Corp.
5.75%, 6/15/02 5,550 7,443,938
Cypress Semiconductor Corp.
3.15%, 3/15/01(d) 6,500 8,588,125
Total Long Term Debt Securities
(cost $25,287,782) 29,642,688
SHORT-TERM DEBT SECURITIES3.5%
Federal Home Loan Bank
5.59%, 11/10/95 10,000 9,986,025
5.60%, 11/13/95 21,170 21,130,483
5.82%, 11/01/95 25,600 25,600,000
Federal National Mortgage Assn.
5.63%, 11/15/95 15,000 14,967,158
Total Short-Term Debt Securities
(amortized cost $71,683,666) 71,683,666
TOTAL INVESTMENTS101.7%
(cost $1,810,030,950) 2,048,761,598
OUTSTANDING CALL OPTIONS
WRITTEN(1.0%)
3Com Corp.
expiring Dec 1995
@ $45.50 1,000 (489,100)
Allstate Corp.
expiring Jan 1996
@ $39.63 1,000 (98,900)
7
PORTFOLIO OF INVESTMENTS (CONTINUED) ALLIANCE GROWTH FUND
_______________________________________________________________________________
COMPANY CONTRACTS (F) VALUE
- -----------------------------------------------------------------------
Bay Networks
expiring Jan 1996
@ $64.75 1,000 $ (787,500)
cisco Systems, Inc.
expiring Nov 1995
@ $66.13 3,000 (3,633,000)
expiring Jan 1996
@ $78.50 350 (229,915)
expiring Feb 1996
@ $79.75 500 (318,300)
Conrail, Inc.
expiring Dec 1995
@ $65.75 1,000 (501,000)
@ $65.96 1,500 (769,500)
@ $65.88 500 (253,000)
Cox Communications, Inc.
expiring Dec 1995
@ $20.25 1,500 (139,500)
DSC Communications Corp.
expiring Nov 1995
@ $52.70 1,000 (1,000)
expiring Jan 1996
@ $38.00 1,000 (352,000)
expiring Feb 1996
@ $38.38 1,000 (347,500)
EMC Corp.
expiring Nov 1995
@ $20.00 2,000 (200)
@ $19.88 1,000 (8,100)
expiring Dec 1995
@ $20.25 1,000 (10,900)
expiring Jan 1996
@ $14.13 3,000 (679,200)
Grupo Television S.A. de C.V. (ADR)(c)
expiring Jan 1996
@ $18.38 1,000 (131,000)
Intel Corp.
expiring Nov 1995
@ $61.63 500 (435,500)
expiring Dec 1995
@ $63.38 500 (380,500)
@ $62.38 1,000 (879,000)
@ $63.63 1,000 (787,500)
@ $59.63 1,000 (1,127,000)
expiring Jan 1996
@ $59.50 1,000 (1,159,000)
@ $58.63 1,000 (1,264,000)
Micron Technology, Inc.
expiring Nov 1995
@ $68.63 800 (510,400)
Motorola, Inc.
expiring Feb 1996
@ $65.75 500 (243,000)
National Semiconductor Corp.
expiring Jan 1996
@ $26.75 1,000 (169,900)
@ $25.38 1,000 (223,600)
expiring Feb 1996
@ $24.88 1,000 (246,000)
Oracle Systems Corp.
expiring Nov 1995
@ $42.75 1,000 (258,000)
expiring Dec 1995
@ $40.75 1,000 (462,500)
expiring Jan 1996
@ $38.13 500 (343,500)
@ $40.00 500 (283,000)
@ $44.25 500 (179,300)
Silicon Graphics, Inc.
expiring Dec 1995
@ $38.88 1,000 (52,000)
expiring April 1996
@ $33.25 1,500 (465,000)
Telefonos de Mexico S.A. (ADS)(c)
expiring Jan 1996
@ $30.88(c) 1,000 (65,000)
8
ALLIANCE GROWTH FUND
_______________________________________________________________________________
COMPANY CONTRACTS (F) VALUE
- -----------------------------------------------------------------------
Texas Instruments, Inc.
expiring Jan 1996
@ $73.25 1,000 $(362,700)
@ $72.38 1,000 (444,300)
@ $75.00 1,000 (530,200)
@ $68.75 500 (322,700)
@ $71.13 500 (270,200)
@ $70.13 500 (299,000)
expiring Feb 1996
@ $69.75 500 (309,000)
COMPANY VALUE
- -----------------------------------------------------------------------
Total Outstanding Call Options Written
(premiums received $18,649,332) $ (20,821,415)
TOTAL INVESTMENTS NET OF OUTSTANDING
CALL OPTIONS WRITTEN -100.7%
(cost $1,791,381,618) 2,027,940,183
Other assets less liabilities(0.7%) (14,097,962)
NET ASSETS100% $2,013,842,221
* Non-income producing security.
(a) Security on which options are written (shares subject to call have an
aggregate market value of $210,562,500).
(b) Country of origin-United Kingdom.
(c) Country of origin-Mexico.
(d) Securities are exempt from registration under Rule 144A of the Securities
Act of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At October 31, 1995,
these securities amounted to $23,003,625 or 1.1% of net assets.
(e) Country of origin-Germany.
(f) One contract relates to 100 shares.
(g) Country of origin-Sweden.
Glossary of Terms:
ADR - American Depository Receipt
ADS - American Depository Security
See notes to financial statements.
9
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1995 ALLIANCE GROWTH FUND
_______________________________________________________________________________
ASSETS
Investments in securities, at value (cost $1,810,030,950) $2,048,761,598
Cash 92,180
Receivable for investment securities sold 17,088,566
Receivable for shares of beneficial interest sold 13,929,879
Net unrealized appreciation of forward exchange currency
contracts 2,641,165
Dividends and interest receivable 1,568,078
Total assets 2,084,081,466
LIABILITIES
Payable for investment securities purchased 41,596,069
Outstanding call options written, at value
(premiums received $18,649,332) 20,821,415
Payable for shares of beneficial interest redeemed 4,404,092
Distribution fee payable 1,527,725
Advisory fee payable 1,272,524
Accrued expenses 617,420
Total liabilities 70,239,245
NET ASSETS $2,013,842,221
COMPOSITION OF NET ASSETS
Shares of beneficial interest, at par $ 794
Additional paid-in capital 1,728,807,797
Distributions in excess of net investment income (867,482)
Accumulated net realized gain on investments 46,729,327
Net unrealized appreciation of investments, options and
foreign currency denominated assets and liabilities 239,171,785
$2,013,842,221
CALCULATION OF MAXIMUM OFFERING PRICE
Class A Shares
Net asset value and redemption price per share ($285,160,612/
9,673,820 shares of beneficial interest issued and outstanding) $29.48
Sales charge-4.25% of public offering price 1.31
Maximum offering price $30.79
Class B Shares
Net asset value and offering price per share ($1,502,019,746/
60,609,109 shares of beneficial interest issued and outstanding) $24.78
Class C Shares
Net asset value, redemption and offering price per share($226,661,863
/9,143,242 shares of beneficial interest issued and outstanding) $24.79
See notes to financial statements.
10
STATEMENT OF OPERATIONS
YEAR ENDED OCTOBER 31, 1995 ALLIANCE GROWTH FUND
_______________________________________________________________________________
INVESTMENT INCOME
Dividends (net of foreign taxes withheld
of $90,923) $24,906,926
Interest 3,217,433 $ 28,124,359
EXPENSES
Advisory fee 11,100,437
Distribution fee - Class A 664,925
Distribution fee - Class B 10,954,700
Distribution fee - Class C 1,629,465
Transfer agency 3,130,468
Printing 509,666
Registration 388,877
Custodian 219,622
Audit and legal 124,419
Trustees' fees 27,866
Amortization of organization expenses 6,667
Miscellaneous 20,388
Total expenses 28,777,500
Net investment loss (653,141)
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain on securities transactions 49,687,961
Net realized gain on options transactions 2,542,001
Net realized loss on foreign currency transactions (3,644,535)
Net change in unrealized appreciation of securities 228,345,177
Net change in unrealized appreciation of options (2,479,328)
Net change in unrealized appreciation of foreign
currency denominated assets and liabilities 2,640,571
Net gain on investments 277,091,847
NET INCREASE IN NET ASSETS FROM OPERATIONS $276,438,706
See notes to financial statements.
11
STATEMENT OF CHANGES IN NET ASSETS ALLIANCE GROWTH FUND
_______________________________________________________________________________
Year Ended May 1, 1994
October 31, to
1995 Oct. 31,1994*
------------- --------------
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS
Net investment income (loss) $ (653,141) $ 1,087,125
Net realized gain on investments, options,
and foreign currency transactions 48,585,427 7,686,932
Net change in unrealized appreciation of
investments, options, and foreign currency
denominated assets and liabilities 228,506,420 29,276,693
Net increase in net assets from operations 276,438,706 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 725,770,828 434,991,030
Total increase 980,137,940 473,041,780
NET ASSETS
Beginning of period 1,033,704,281 560,662,501
End of period $2,013,842,221 $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
OCTOBER 31, 1995 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. CURRENCY TRANSLATION
Assets and liabilities denomintaed in foreign currencies are translated into
U.S. dollars at the mean of the quoted bid and asked price of the respective
currency against the U.S. dollar on the valuation date. Purchases and sales of
portfolio securities are translated at the rates of exchange prevailing when
such securities were acquired or sold. Income and expenses are translated at
rates of exchange prevailing when earned or accrued.
Net realized loss on foreign currency transactions of $3,616,989 represents net
foreign exchange gains and losses from holdings of forward foreign currency
contracts, currency gains or losses realized between the trade and settlement
dates on security transactions, and the difference between the amounts of
dividends and foreign taxes recorded on the Fund's books and the U.S. dollar
equivalent amounts actually received or paid. Net unrealized currency gains and
losses from valuing foreign currency denomintaed assets and liabilities at
fiscal year end exchange rates are reflected as a component of unrealized
appreciation of investments and foreign currency denomintaed assets and
liabilities.
3. TAXES
It is the Fund's policy to meet the requirements of the Internal Revenue Code
applicable to regulated investment companies and to distribute all of its
investment company taxable income and net realized gains, if applicable, to
shareholders. Therefore, no provisions for federal income or excise taxes are
required.
To reflect reclassifications arising from permanent book/tax differences for
the year ended October 31, 1995, $26,600 was reclassified from distributions in
excess of net investment income to accumulated net realized gain on investments.
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.
13
NOTES TO FINANCIAL STATEMENTS (CONTINUED) ALLIANCE GROWTH FUND
_______________________________________________________________________________
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 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.
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
annual rate for Class B shares was 2.15%. No reimbursement was required for the
year ended October 31, 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 (exclusive of interest, taxes, brokerage,
distribution fees, and extraordinary expenses) exceed the most restrictive
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 $2,182,567 for the year ended October 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 net
front-end sales charges of $144,082 from the sale of Class A shares and
$2,261,095 in contingent deferred sales charges imposed upon redemptions by
shareholders of Class B shares for the year ended October 31, 1995.
Brokerage commissions paid on securities transactions for the year ended
October 31, 1995 amounted to $3,231,153, of which $15,700 was paid to
Donaldson, Lufkin & Jenrette Securities Corp. ('DLJ'), an affiliate of the
Adviser.
Accrued expenses include amounts owed to two of the trustees under a deferred
compensation plan of $32,133.
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 average 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
14
ALLIANCE GROWTH FUND
_______________________________________________________________________________
expenses in excess of the distribution costs reimbursed by the Fund in the
amount of $3,367,375, and $638,657 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 $1,621,899,092 and $884,428,153, respectively, for the year ended
October 31, 1995. There were purchases of $17,813,299 and sales of $15,467,362
of U.S. Government and government agency obligations for the year ended October
31, 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 year ended October 31, 1995 were as
follows:
Number of
Contracts Premiums
--------- -------------
Options outstanding at beginning of year 15,000 $ 4,049,495
Options written 160,460 54,046,526
Options terminated in closing purchase transactions (43,200) (12,189,845)
Options expired (56,080) (17,331,519)
Options exercised (31,530) (9,925,325)
Options outstanding at October 31, 1995 44,650 $18,649,332
15
NOTES TO FINANCIAL STATEMENTS (CONTINUED) ALLIANCE GROWTH FUND
_______________________________________________________________________________
2. FOREIGN EXCHANGE CURRENCY CONTRACTS
The Fund enters into forward exchange currency contracts in order to hedge its
exposure to changes in foreign currency exchange rates on its foreign portfolio
holdings. A forward exchange currency contract is a commitment to purchase or
sell a foreign currency at a future date at a negotiated forward rate. The gain
or loss arising from the difference between the original contract and the
closing of such contract is included in net realized gain or loss from foreign
currency transactions. Fluctuations in the value of forward exchange currency
contracts are recorded for financial reporting purposes as unrealized gains or
losses by the Fund.
The Fund's custodian will place and maintain cash not available for investment
or securities in a separate account of the Fund having a value equal to the
aggregate amount of the Fund's commitments under forward exchange currency
contracts entered into with respect to position hedges. Risks may arise from
the potential inability of a counterparty to meet the terms of a contract and
from unanticipated movements in the value of a foreign currency relative to the
U.S. dollar.
At October 31, 1995, the Fund had outstanding forward exchange currency
contracts, both to purchase and sell foreign currencies against the U.S.
dollar, as follows:
<TABLE>
<CAPTION>
CONTRACT VALUE ON U.S.$ UNREALIZED
AMOUNT ORIGINATION CURRENT APRECIATION
(000) DATE VALUE (DEPRECIATION)
--------- ----------- ----------- -------------
<S> <C> <C> <C> <C>
FOREIGN CURRENCY BUY CONTRACTS
Japanese Yen, expiring 11/15/95 1,660,900 $16,615,646 $16,275,475 $ (340,171)
FOREIGN CURRENCY SALE CONTRACTS
Japanese Yen, expiring 11/15/95 1,660,900 19,256,811 16,275,475 2,981,336
-----------
$2,641,165
</TABLE>
At October 31, 1995, the cost of securities for federal income tax purposes was
$1,814,955,598. Accordingly gross unrealized appreciation of investments was
$313,807,208 and gross unrealized depreciation of investments was $80,001,208
resulting in net unrealized appreciation of $233,806,000.
16
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
------------------------- ----------------------------
YEAR ENDED MAY 1,1994* YEAR ENDED MAY 1,1994*
OCTOBER 31, TO OCTOBER 31, TO
1995 OCT. 31,1994 1995 OCT. 31,1994
----------- ------------ ------------- -------------
CLASS A
Shares sold 5,137,889 2,831,659 $138,168,292 $ 68,901,177
Shares issued in
reinvestment of
dividends and
distributions 136,788 -0- 3,174,842 -0-
Shares redeemed (2,291,772) (427,892) (62,614,033) (10,438,866)
Net increase 2,982,905 2,403,767 $ 78,729,101 $ 58,462,311
CLASS B
Shares sold 31,470,527 17,260,944 $706,760,789 $356,698,970
Shares issued in
reinvestment of
dividends and
distributions 631,579 -0- 12,397,903 -0-
Shares redeemed (6,927,995) (1,274,037) (156,819,474) (26,373,086)
Net increase 25,174,111 15,986,907 $562,339,218 $330,325,884
CLASS C
Shares sold 5,581,389 2,792,380 $125,759,340 $ 57,684,514
Shares issued in
reinvestment of
dividends and
distributions 61,296 -0- 1,203,861 -0-
Shares redeemed (1,894,060) (554,996) (42,260,692) (11,481,679)
Net increase 3,748,625 2,237,384 $ 84,702,509 $ 46,202,835
* The Fund changed its fiscal year end from April 30 to October 31.
** Commencement of distribution.
17
FINANCIAL HIGHLIGHTS ALLIANCE GROWTH FUND
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING THROUGHOUT EACH
PERIOD
<TABLE>
<CAPTION>
Class A
--------------------------------------------------------------------
May 1,1994
Year Ended to Year Ended April 30,
October 31, October 31, ------------------------------------------
1995 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) .12 .09 (.01)* .05* .29* .17*
Net realized and unrealized gain on investments 4.80 1.10 3.55 3.68 3.95 4.22
Net increase in net asset value from operations 4.92 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 $29.48 $25.08 $23.89 $22.67 $20.31 $17.94
TOTAL RETURN
Total investment return based on
net asset value (b) 20.18% 4.98% 15.66% 18.89% 23.61% 32.40%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $285,161 $167,800 $102,406 $13,889 $8,228 $713
Ratios to average net assets of:
Expenses, net of waivers/reimbursements 1.35% 1.35%(c) 1.40% 1.40% 1.40% 1.40%(c)
Expenses, before waivers/reimbursements 1.35% 1.35%(c) 1.46% 1.84% 1.94% 8.79%(c)
Net investment income .56% .86%(c) .32% .20% 1.44% 1.99%(c)
Portfolio turnover rate 61% 24% 87% 124% 137% 130%
</TABLE>
See footnote summary on page 20.
18
ALLIANCE GROWTH FUND
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING THROUGHOUT EACH
PERIOD
<TABLE>
<CAPTION>
CLASS B
-------------------------------------------------------------------------
MAY 1,1994
YEAR ENDED TO YEAR ENDED APRIL 30,
OCTOBER 31, OCTOBER 31, ---------------------------------------------
1995 1994** 1994 1993 1992 1991
------------ ------------ ------------- --------- --------- --------
<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) (.02) .01 (.07)*(e) (.06)* .17* .08*
Net realized and unrealized gain on investments 4.01 .93 2.98 3.23 3.67 3.22
Net increase in net asset value from operations 3.99 .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 $24.78 $21.21 $20.27 $19.68 $18.16 $16.88
TOTAL RETURN
Total investment return based on
net asset value (b) 19.33% 4.64% 14.79% 18.16% 22.75% 24.72%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $1,502,020 $751,521 $394,227 $56,704 $37,845 $22,710
Ratios to average net assets of:
Expenses, net of waivers/reimbursements 2.05% 2.05%(c) 2.10% 2.15% 2.15% 2.10%
Expenses, before waivers/reimbursements 2.05% 2.05%(c) 2.13% 2.52% 2.65% 3.06%
Net investment income (loss) (.15)% .16%(c) (.36)% (.53)% .78% .56%
Portfolio turnover rate 61% 24% 87% 124% 137% 130%
</TABLE>
See footnote summary on page 20.
19
FINANCIAL HIGHLIGHTS (CONTINUED) ALLIANCE GROWTH FUND
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING THROUGHOUT EACH
PERIOD
CLASS C
---------------------------------------
MAY 1,1994 AUGUST 2,
YEAR ENDED TO 1993 (D)
OCTOBER 31, OCTOBER 31, TO APRIL 30,
1995 1994** 1994
----------- ------------ ------------
Net asset value, beginning of period $21.22 $20.28 $21.47
INCOME FROM INVESTMENT OPERATIONS
Net investment income (loss) (.03) .01 (.02)*
Net realized and unrealized gain on
investments 4.02 .93 1.15
Net increase in net asset value from
operations 3.99 .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 $24.79 $21.22 $20.28
TOTAL RETURN
Total investment return based on
net asset value (b) 19.32% 4.64% 5.27%
RATIOS/SUPPLEMENTAL DATA
Net assets,end of period(000's omitted) $226,662 $114,455 $64,030
Ratios to average net assets of:
Expenses,net of waivers/reimbursements 2.05% 2.05%(c) 2.10%(c)
Expenses,before waivers/reimbursements 2.05% 2.05%(c) 2.13%(c)
Net investment income (loss) (.15)% .16%(c) (.31)%(c)
Portfolio turnover rate 61% 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.
20
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, 1995, the results of its operations for the year then ended, the
changes in its net assets for the year then ended, and for the period May 1,
1994 to October 31, 1994, and the financial highlights for each of the periods
presented, in conformity with generally accepted accounting principles. These
financial statements and financial highlights (hereafter referred to as
'financial statements') are the responsibility of the Fund's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement
presentation. We believe that our audits, which included confirmation of
securities at October 31, 1995 by correspondence with the custodian and brokers
and the application of alternative auditing procedures where confirmations from
brokers were not received, provide a reasonable basis for the opinion expressed
above.
PRICE WATERHOUSE LLP
New York, New York
December 14, 1995
<PAGE>
APPENDIX A
Incorporated by reference from "Appendix A" contained in
the Rule 497 SAI.
A-1
00250184.AH3
<PAGE>
THE ALLIANCE BOND FUNDS
_______________________________________________________________________________
P.O. BOX 1520, SECAUCUS, NEW JERSEY 07096-1520
TOLL FREE (800) 221-5672
FOR LITERATURE: TOLL FREE (800) 227-4618
PROSPECTUS AND APPLICATION
(ADVISOR CLASS)
JUNE [ ], 1996
U.S. GOVERNMENT FUNDS GLOBAL BOND FUNDS
- -ALLIANCE SHORT-TERM U.S. -ALLIANCE NORTH AMERICAN
GOVERNMENT FUND GOVERNMENT INCOME TRUST
- -U.S. GOVERNMENT -ALLIANCE GLOBAL DOLLAR
PORTFOLIO GOVERNMENT FUND
- -ALLIANCE LIMITED MATURITY -ALLIANCE GLOBAL STRATEGIC
GOVERNMENT FUND INCOME TRUST
MORTGAGE FUND CORPORATE BOND FUND
- -ALLIANCE MORTGAGE -CORPORATE BOND PORTFOLIO
SECURITIES INCOME FUND
MULTI-MARKET FUNDS
- -ALLIANCE SHORT-TERM
MULTI-MARKET TRUST
- -ALLIANCE MULTI-MARKET
STRATEGY TRUST
TABLE OF CONTENTS PAGE
The Funds at a Glance 2
Expense Information 4
Glossary 7
Description of the Funds 8
Investment Objectives and Policies 8
Additional Investment Practices 15
Certain Fundamental Investment Policies 26
Risk Considerations 27
Purchase and Sale of Shares 32
Management of the Funds 33
Dividends, Distributions and Taxes 34
General Information. 35
Appendix A: Bond Ratings A-1
Appendix B: General Information About Canada,
Mexico and Argentina B-1
Adviser
Alliance Capital Management L.P.
1345 Avenue Of The Americas
New York, New York 10105
The Alliance Bond Funds provide a broad selection of investment alternatives to
investors seeking high current income. The U.S. Government Funds invest mainly
in U.S. Government securities and the Mortgage Fund invests in mortgage-related
securities, while the Multi-Market Funds diversify their investments among debt
markets around the world and the Global Bond Funds invest primarily in foreign
government securities. The Corporate Bond Fund invests primarily in corporate
debt securities.
Each fund or portfolio (each a 'Fund') is, or is a series of, an open-end
management investment company. This Prospectus sets forth concisely the
information which a prospective investor should know about each Fund before
investing. A 'Statement of Additional Information' for each Fund that provides
further information regarding certain matters discussed in this Prospectus and
other matters that may be of interest to some investors has been filed with the
Securities and Exchange Commission and is incorporated herein by reference. For
a free copy, write Alliance Fund Services, Inc. at the indicated address or
call the 'For Literature' telephone number shown above.
This Prospectus offers the Advisor Class shares of each Fund which may be
purchased at net asset value without any initial or contingent deferred sales
charges and without ongoing distribution expenses. Advisor Class shares are
offered solely to (i) investors participating in fee-based programs meeting
certain standards established by Alliance Fund Distributors, Inc., each Fund's
principal underwriter, and (ii) participants in self-directed defined
contribution employee benefit plans (e.g., 401(k) plans) that meet certain
minimum standards. See 'Purchase and Sale of Shares.'
AN INVESTMENT IN THESE SECURITIES IS NOT A DEPOSIT OR OBLIGATION OF, OR
GUARANTEED OR ENDORSED BY, ANY BANK AND IS NOT FEDERALLY INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY.
INVESTORS ARE ADVISED TO READ THIS PROSPECTUS CAREFULLY AND TO RETAIN IT FOR
FUTURE REFERENCE.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
ALLIANCE
MUTUAL FUNDS WITHOUT THE MYSTERY.
R/SM These are registered marks used under licenses from the owner, Alliance
Capital Management L.P.
1
THE FUNDS AT A GLANCE
The following summary is qualified in its entirety by the more detailed
information contained in this Prospectus.
THE FUNDS' INVESTMENT ADVISER IS . . .
Alliance Capital Management L.P. ('Alliance'), a global investment manager
providing diversified services to institutions and individuals through a broad
line of investments including 107 mutual funds. Since 1971, Alliance has earned
a reputation as a leader in the investment world with over $156 billion in
assets under management as of March 1, 1996. Alliance provides investment
management services to 34 of the FORTUNE 100 companies.
U.S. GOVERNMENT FUNDS
SHORT-TERM U.S. GOVERNMENT FUND
SEEKS . . . High current income consistent with preservation of capital.
INVESTS PRIMARILY IN . . . A diversified portfolio of U.S. Government
securities.
U.S. GOVERNMENT PORTFOLIO
SEEKS . . . As high a level of current income as is consistent with safety of
principal.
INVESTS SOLELY IN . . . A diversified portfolio of U.S. Government securities
backed by the full faith and credit of the United States.
LIMITED MATURITY GOVERNMENT FUND
SEEKS . . . The highest level of current income, consistent with low volatility
of net asset value.
INVESTS PRIMARILY IN . . . U.S. Government securities, including
mortgage-related securities, and repurchase agreements relating to U.S.
Government securities.
MORTGAGE FUND
MORTGAGE SECURITIES INCOME FUND
SEEKS . . . A high level of current income consistent with prudent investment
risk.
INVESTS PRIMARILY IN . . . A diversified portfolio of mortgage-related
securities.
MULTI-MARKET FUNDS
SHORT-TERM MULTI-MARKET TRUST
SEEKS . . . The highest level of current income through investment in a
portfolio of high-quality debt securities having remaining maturities of not
more than three years.
INVESTS PRIMARILY IN . . . A non-diversified portfolio of debt securities
denominated in the U.S. Dollar and selected foreign currencies. While the Fund
normally will maintain a substantial portion of its assets in debt securities
denominated in foreign currencies, the Fund will invest at least 25% of its net
assets in U.S. Dollar-denominated securities.
MULTI-MARKET STRATEGY TRUST
SEEKS . . . The highest level of current income that is available from a
portfolio of high-quality debt securities having remaining maturities of not
more than five years.
INVESTS PRIMARILY IN . . . A non-diversified portfolio of debt securities
denominated in the U.S. Dollar and selected foreign currencies. The Fund
expects to maintain at least 70% of its assets in debt securities denominated
in foreign currencies, but not more than 25% of the Fund's total assets may be
invested in debt securities denominated in a single currency other than the
U.S. Dollar.
GLOBAL BOND FUNDS
NORTH AMERICAN GOVERNMENT INCOME TRUST
SEEKS . . . The highest level of current income that is available from a
portfolio of investment grade debt securities issued or guaranteed by the
governments of the United States, Canada and Mexico.
INVESTS PRIMARILY IN . . . A non-diversified portfolio of government securities
denominated in the U.S. Dollar, the Canadian Dollar and the Mexican Peso, and
expects to maintain at least 25% of its assets in securities denominated in the
U.S. Dollar. In addition, the Fund may invest up to 25% of its total assets in
debt securities issued by governmental entities in Argentina.
2
GLOBAL DOLLAR GOVERNMENT FUND
SEEKS . . . Primarily a high level of current income and, secondarily, capital
appreciation.
INVESTS PRIMARILY IN . . . A non-diversified portfolio of sovereign debt
obligations and in U.S. and non-U.S. corporate fixed-income securities.
Substantially all of the Fund's assets are invested in lower-rated securities.
GLOBAL STRATEGIC INCOME TRUST
SEEKS . . . Primarily a high level of current income and secondarily capital
appreciation.
INVESTS PRIMARILY IN . . . a non-diversified portfolio of fixed-income
securities of U.S. and non-U.S. issuers.
CORPORATE BOND FUND
CORPORATE BOND PORTFOLIO
SEEKS . . . Primarily to maximize income over the long term; secondarily, the
Fund will attempt to increase its capital through appreciation of its
investments.
INVESTS PRIMARILY IN . . . A diversified portfolio of U.S. Dollar-denominated
corporate bonds issued by domestic and foreign issuers that give promise of
relatively attractive yields.
A WORD ABOUT RISK . . .
The prices of the shares of the Alliance Bond Funds will fluctuate as the daily
prices of the individual bonds in which they invest fluctuate, so that your
shares, when redeemed, may be worth more or less than their original cost.
Price fluctuations may be caused by changes in the general level of interest
rates or changes in bond credit quality ratings. Changes in interest rates have
a greater effect on bonds with longer maturities than those with shorter
maturities. Some of the Funds invest in high-yield, high-risk bonds that are
rated below investment grade and are considered to have predominantly
speculative characteristics. The prices of non-U.S. Dollar denominated bonds
also fluctuate with changes in foreign exchange rates. Investment in the Global
Bond Funds, the Multi-Market Funds and any other Fund that may invest a
significant amount of its assets in non-U.S. securities involves risks not
associated with Funds that invest primarily in securities of U.S. issuers.
While the Funds invest principally in fixed-income securities, in order to
achieve their investment objectives, the Funds may at times use certain types
of derivative instruments, such as options, futures, forwards and swaps. These
instruments involve risks different from, and, in certain cases, greater than,
the risks presented by more traditional investments. These risks are fully
discussed in this Prospectus. See 'Description of the Funds-Additional
Investment Practices' and '-Risk Considerations.'
GETTING STARTED . . .
Shares of the Funds are available through your financial representative. Each
Fund offers multiple classes of shares, of which only the Advisor Class is
offered by this Prospectus. Advisor Class shares may be purchased at net asset
value without any initial or contingent deferred sales charges and without
ongoing distribution fees. Advisor Class shares may be purchased solely by
investors (i) through accounts established under a fee-based program, sponsored
and maintained by a registered broker-dealer or other financial intermediary
and approved by Alliance Fund Distributors, Inc., each Fund's principal
underwriter, pursuant to which each investor pays an asset-based fee at an
annual rate of at least .50% of the assets in the investor's account, to the
broker-dealer or financial intermediary, or its affiliate or agent, for
investment advisory or administrative services, or (ii) through a self-directed
defined contribution employee benefit plan (e.g., a 401(k) plan) that has at
least 1,000 participants or $25 million in assets. Shares of each Fund can be
purchased for a minimum initial investment of $250, and subsequent investments
can be made for as little as $50. Fee-based programs through which Advisor
Class shares may be purchased may impose different requirements with respect to
minimum initial and subsequent investment levels than described above. For
detailed information about purchasing and selling shares, see 'Purchase and
Sale of Shares.' Be sure to ask your financial representative about:
AUTOMATIC REINVESTMENT
AUTOMATIC INVESTMENT PROGRAM
RETIREMENT PLANS
SHAREHOLDER COMMUNICATIONS
DIVIDEND DIRECTION PLANS
AUTO EXCHANGE
SYSTEMATIC WITHDRAWALS
CHECK-WRITING
TELEPHONE TRANSACTIONS
24 HOUR INFORMATION
Alliance
Mutual funds without the Mystery.
R/SM These are registered marks used under licenses from the owner, Alliance
Capital Management L.P.
3
EXPENSE INFORMATION
_______________________________________________________________________________
SHAREHOLDER TRANSACTION EXPENSES are one of several factors to consider when
you invest in a Fund. The following tables summarize your maximum transaction
costs from investing in the Advisor Class shares each Fund and estimated annual
expenses for Advisor Class of shares of each Fund. For each Fund, the
'Examples' below show the cumulative expenses attributable to a hypothetical
$1,000 investment, assuming a 5% annual return, in Advisor Class shares for the
periods specified.
ADVISOR CLASS SHARES
--------------------
Maximum sales charge imposed on purchases None
Sales charge imposed on dividend reinvestments None
Deferred sales charge None
Exchange fee None
ANNUAL OPERATING EXPENSES EXAMPLES
- ---------------------------------------------- ------------------------------
SHORT-TERM U.S.
GOVERNMENT ADVISOR CLASS ADVISOR CLASS
- --------------- ------------- -------------
Management fees(b)(after waiver) None After 1 year $11
Other expenses(a) 1.10% After 3 years $36
Total fund operating expenses 1.10%
U.S. GOVERNMENT ADVISOR CLASS ADVISOR CLASS
- --------------- ------------- -------------
Management fees .53% After 1 year $ 7
Other expenses(a) .18% After 3 years $23
Total fund operating expenses .71%
LIMITED MATURITY
GOVERNMENT ADVISOR CLASS ADVISOR CLASS
- --------------- ------------- -------------
Management fees .65% After 1 year $19
Other expenses After 3 years $58
Interest expense .73%
Other operating expenses(a) .46%
Total other expenses 1.19%
Total fund operating expenses 1.84%
MORTGAGE SECURITIES
INCOME ADVISOR CLASS ADVISOR CLASS
- -------------------- ------------- -------------
Management fees .51% After 1 year $14
Other expenses After 3 years $43
Interest expense .63%
Other operating expenses(a) .22%
Total other expenses .85%
Total fund operating expenses 1.36%
SHORT-TERM
MULTI-MARKET ADVISOR CLASS ADVISOR CLASS
- --------------- ------------- -------------
Management fees .55% After 1 year $ 9
Other expenses(a) .38% After 3 years $30
Total fund operating expenses .93%
PLEASE REFER TO THE FOOTNOTES ON PAGE [ ] AND THE DISCUSSION FOLLOWING THESE
TABLES ON PAGE [ ].
4
ANNUAL OPERATING EXPENSES EXAMPLES
- ------------------------------------------------ ----------------------------
MULTI-MARKET STRATEGY ADVISOR CLASS ADVISOR CLASS
- ----------------- ------------- -------------
Management fees .60% After 1 year $13
Other expenses After 3 years $41
Interest expense .05%
Other operating expenses(a) .65%
Total other expenses .70%
Total fund operating expenses 1.30%
NORTH AMERICAN
GOVERNMENT INCOME ADVISOR CLASS ADVISOR CLASS
- ----------------- ------------- -------------
Management fees(c) .65% After 1 year $24
Other expenses After 3 years $72
Interest expense 1.11%
Other operating expenses(a) .56%
Total other expenses 1.67%
Total fund operating expenses 2.32%
GLOBAL DOLLAR GOVERNMENT ADVISOR CLASS ADVISOR CLASS
- ------------------------ ------------- -------------
Management fees .75% After 1 year $15
Other expenses(a) .73% After 3 years $47
Total fund operating expenses 1.48%
GLOBAL STRATEGIC INCOME ADVISOR CLASS ADVISOR CLASS
- ----------------------- ------------- -------------
Management fees .75% After 1 year $14
Other expenses(a) .64% After 3 years $44
Total fund operating expenses 1.39%
CORPORATE BOND ADVISOR CLASS ADVISOR CLASS
- --------------- ------------- -------------
Management fees .63% After 1 year $ 9
Other expenses(a) .27% After 3 years $29
Total fund operating expenses .90%
(A) THESE EXPENSES INCLUDE A TRANSFER AGENCY FEE PAYABLE TO ALLIANCE FUND
SERVICES, INC., AN AFFILIATE OF ALLIANCE, BASED ON A FIXED DOLLAR AMOUNT
CHARGED TO THE FUND FOR EACH SHAREHOLDER'S ACCOUNT.
(B) NET OF VOLUNTARY FEE WAIVER AND EXPENSE REIMBURSEMENT. IN THE ABSENCE
OF SUCH WAIVER AND EXPENSE REIMBURSEMENT, THE MANAGEMENT FEE WOULD BE
.55%, OTHER EXPENSES WOULD BE 2.33% AND TOTAL FUND OPERATING EXPENSES
WOULD BE 2.88%.
(C) REPRESENTS .65 OF 1% OF THE AVERAGE DAILY VALUE OF THE FUND'S ADJUSTED
TOTAL NET ASSETS.
5
The purpose of the tables on pages 4 and 5 is to assist the investor in
understanding the various costs and expenses that an investor in a Fund will
bear directly or indirectly. The examples do not reflect any charges or
expenses imposed by your financial representative or your employee benefit
plan. The management fee rate of GLOBAL DOLLAR GOVERNMENT and GLOBAL
STRATEGIC INCOME TRUST are higher than that paid by most other investment
companies, but Alliance believes the fee is comparable to those paid by
investment companies of similar investment orientation. 'Other Expenses'
are based on estimated amounts for that Fund's current fiscal year. The
Examples set forth above assume reinvestment of all dividends and
distributions and utilize a 5% annual rate of return as mandated by
Commission regulations. THE EXAMPLES SHOULD NOT BE CONSIDERED
REPRESENTATIVE OF FUTURE EXPENSES; ACTUAL EXPENSES MAY BE GREATER OR LESS
THAN THOSE SHOWN.
6
GLOSSARY
_______________________________________________________________________________
The following terms are frequently used in this Prospectus. Many of these terms
are explained in greater detail under 'Description of the Funds-Additional
Investment Practices' and in Appendix A.
BONDS are fixed, floating and variable rate debt obligations.
DEBT SECURITIES are bonds, debentures, notes, bills and repurchase agreements.
FIXED-INCOME SECURITIES are debt securities, convertible securities and
preferred stocks and include floating rate and variable rate instruments.
Fixed-income securities may be rated (or if unrated, for purposes of the Funds'
investment policies may be determined by Alliance to be of equivalent quality
to those rated) TRIPLE-A (Aaa or AAA), HIGH QUALITY (Aa or AA or above), HIGH
GRADE (A or above) or INVESTMENT GRADE (Baa or BBB or above) by, as the case
may be, Moody's, S&P, Duff & Phelps or Fitch, or may be lower-rated securities,
as defined below. In the case of 'split-rated' fixed-income securities (i.e.,
securities assigned non-equivalent credit quality ratings, such as Baa by
Moody's but BB by S&P, or, to take another example, Ba by Moody's and BB by S&P
but B by Fitch), a Fund will use the rating deemed by Alliance to be the most
appropriate under the circumstances.
LOWER-RATED SECURITIES are fixed-income securities rated Ba and BB or below, or
determined by Alliance to be of equivalent quality, and are commonly referred
to as 'junk bonds.'
EQUITY SECURITIES are common and preferred stocks, securities convertible into
common and preferred stocks and rights and warrants to subscribe for the
purchase of common and preferred stocks.
CONVERTIBLE SECURITIES are bonds, debentures, corporate notes and preferred
stocks that are convertible into common and preferred stock.
U.S. GOVERNMENT SECURITIES are securities issued or guaranteed by the U.S.
Government, its agencies or instrumentalities. These securities include
securities backed by the full faith and credit of the United States, those
supported by the right of the issuer to borrow from the U.S. Treasury and those
backed only by the credit of the issuing agency itself. The first category
includes U.S. TREASURY SECURITIES (which are U.S. Treasury bills, notes and
bonds) and certificates issued by GNMA (see below). U.S. Government securities
not backed by the full faith and credit of the United States include
certificates issued by FNMA and FHLMC (see below).
MORTGAGE-RELATED SECURITIES are pools of mortgage loans that are assembled for
sale to investors (such as mutual funds) by various governmental,
government-related and private organizations. These securities include:
ARMS, which are adjustable-rate mortgage securities,
SMRS, which are stripped mortgage-related securities,
CMOS, which are collateralized mortgage obligations,
GNMA CERTIFICATES, which are securities issued by the Government National
Mortgage Association,
FNMA CERTIFICATES, which are securities issued by the Federal National
Mortgage Association, and
FHLMC CERTIFICATES, which are securities issued by the Federal Home Loan
Mortgage Corporation.
INTEREST-ONLY or IO securities are debt securities that receive only the
interest payments on an underlying debt that has been structured to have two
classes, one of which is the IO class and another of which is the
PRINCIPAL-ONLY or PO class, which class receives only the principal payments on
the underlying debt obligation. POs are similar to, and are sometimes referred
to as, ZERO COUPON SECURITIES, which are debt securities issued without
interest coupons.
FOREIGN GOVERNMENT SECURITIES are securities issued or guaranteed, as to
payment of principal and interest, by a foreign government or any of its
political subdivisions, authorities, agencies or instrumentalities.
SOVEREIGN DEBT OBLIGATIONS are foreign government debt securities, loan
participations between foreign governments and financial institutions and
interests in entities organized and operated for the purpose of restructuring
the investment characteristics of foreign government securities.
WORLD BANK is the commonly used name for the International Bank for
Reconstruction and Development.
LIBOR is the London Interbank Offered Rate.
MOODY'S is Moody's Investors Service, Inc.
S&P is Standard & Poor's Ratings Services.
DUFF & PHELPS is Duff & Phelps Credit Rating Co.
FITCH is Fitch Investors Service, Inc.
PRIME COMMERCIAL PAPER is commercial paper rated Prime-1 or higher by Moody's,
A-1 or higher by S&P, Fitch-1 by Fitch or Duff 1 by Duff & Phelps. HIGHER
QUALITY COMMERCIAL PAPER is commercial paper rated at least Prime-2 by Moody's,
A-2 by S&P, Fitch-2 by Fitch or Duff 2 by Duff & Phelps.
QUALIFYING BANK DEPOSITS are certificates of deposit, bankers' acceptances and
interest-bearing savings deposits of banks having total assets of more than $1
billion and which are members of the Federal Deposit Insurance Corporation.
RULE 144A SECURITIES are securities that may be resold pursuant to Rule 144A
under the Securities Act of 1933, as amended (the 'SECURITIES ACT').
1940 ACT is the Investment Company Act of 1940, as amended.
CODE is the Internal Revenue Code of 1986, as amended.
COMMISSION is the Securities and Exchange Commission.
7
DESCRIPTION OF THE FUNDS
_______________________________________________________________________________
Except as noted, (i) the Funds' investment objectives are 'fundamental' and
cannot be changed without a shareholder vote, and (ii) the Funds' investment
policies are not fundamental and thus can be changed without a shareholder
vote. No Fund will change a non-fundamental objective or policy without
notifying its shareholders. There is no guarantee that any Fund will achieve
its investment objective.
INVESTMENT OBJECTIVES AND POLICIES
U.S. GOVERNMENT FUNDS
The U.S. Government Funds are diversified investment companies that have been
designed to offer investors high current income consistent with preservation of
capital by investing primarily in U.S. Government securities.
ALLIANCE SHORT-TERM U.S. GOVERNMENT FUND
Alliance Short-Term U.S. Government Fund ('Short-Term U.S. Government') seeks
high current income consistent with preservation of capital by investing
primarily in a portfolio of U.S. Government securities. Under normal
circumstances, the Fund maintains an average dollar-weighted portfolio maturity
of not more than three years and invests at least 65% of its total assets in
U.S. Government securities and repurchase agreements and forward commitments
relating to U.S. Government securities. The Fund's investment objective is not
fundamental.
In addition to investing in U.S. Government securities, the Fund may invest a
portion of its assets in securities of non-governmental issuers. Although these
investments will be of high quality at the time of purchase, they generally
involve higher levels of credit risk than do U.S. Government securities, as
well as the risk (present with all fixed-income securities) of fluctuations in
value as interest rates change. The Fund will not be obligated to dispose of
any security whose credit quality falls below high quality.
The Fund may also (i) invest in certain SMRS, (ii) invest in variable, floating
and inverse floating rate instruments, (iii) make short sales 'against the
box,' (iv) enter into various hedging transactions, such as interest rate
swaps, caps and floors, (v) enter into reverse repurchase agreements, (vi)
purchase and sell futures contracts for hedging purposes, (vii) purchase and
sell call and put options on futures contracts or on securities, for hedging
purposes or to earn additional income, (viii) make secured loans of portfolio
securities, (ix) enter into repurchase agreements, and (x) purchase securities
for future delivery. The Fund may not invest more than 5% of its total assets
in securities the disposition of which is restricted under Federal securities
laws (excluding, to the extent permitted by applicable law, Rule 144A
securities). For additional information on the use, risks and costs of these
practices, see 'Additional Investment Practices.'
U.S. GOVERNMENT PORTFOLIO
U.S. Government Portfolio ('U.S. Government') seeks as high a level of current
income as is consistent with safety of principal. As a matter of fundamental
policy, the Fund pursues its objective by investing solely in U.S. Government
securities that are backed by the full faith and credit of the U.S. Government.
These include U.S. Treasury securities, including zero coupon Treasury
securities, and GNMA certificates, including certain SMRS and variable and
floating rate instruments. The average weighted maturity of the Fund's
portfolio of U.S. Government securities is expected to vary between one year or
less and 30 years. For additional information on the use, risks and cost of
these practices, see 'Additional Investment Practices.' The Fund's investment
objective is not fundamental.
Counsel to the Fund has advised the Fund that, in their view, shares of the
Fund are a legal investment for, among other investors, (i) savings and loan
associations and commercial banks chartered under the laws of the United
States, (ii) savings and loan associations chartered under the laws of Arizona,
Arkansas, California, Colorado, Delaware, Florida, Illinois, Indiana, Kansas,
Louisiana, Maine, Mississippi, Nebraska, Nevada, New Hampshire, New Jersey, New
Mexico, North Carolina, Ohio, Oklahoma, Pennsylvania, South Dakota, Tennessee,
Texas, Utah and Washington, (iii) credit unions chartered under the laws of
California, Florida*, Kentucky, Maine, Maryland*, Minnesota, Nevada, New York,
Ohio*, Pennsylvania*, Rhode Island, Tennessee, Utah and West Virginia, and (iv)
commercial banks chartered under the laws of Alabama, Alaska, Arizona,
California, Colorado, Delaware, Florida, Hawaii*, Illinois, Indiana, Kansas,
Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota,
Mississippi, Nebraska, Nevada, New Hampshire, New Jersey, New Mexico, New York,
North Carolina*, North Dakota, Ohio, Oklahoma, Pennsylvania, Rhode Island,
Tennessee, Texas, Vermont, Washington, West Virginia and Wyoming. Institutions
in the asterisked(*) states should obtain prior state regulatory approval
before investing in shares of the Fund. In addition, the Fund believes that it
is currently a legal investment for savings and loan associations, credit
unions and commercial banks chartered under the laws of certain other states.
ALLIANCE LIMITED MATURITY GOVERNMENT FUND
Alliance Limited Maturity Government Fund, Inc. ('Limited Maturity Government')
seeks the highest level of current income, consistent with low volatility of
net asset value. As a matter of fundamental policy, the Fund normally has at
least 65% of the value of its total assets invested in U.S. Government
securities, including mortgage-related securities, and repurchase agreements
relating to U.S. Government securities. For a description of these securities,
see 'Additional Investment Practices.'
In pursuing its investment objective and policies, the Fund takes advantage of
a wide range of maturities of debt securities and adjusts the dollar-weighted
average maturity of its portfolio from time to time, depending on its
assessment of
8
relative yields on securities of different maturities and the expected effect
of future changes in interest rates on the market value of the Fund's
portfolio. At all times, however, each security held by the Fund has either a
final maturity of not more than 10 years or a duration not exceeding that of a
10-year Treasury note. Duration is a measure that relates the price volatility
of a security to changes in interest rates. The duration of a debt security is
the weighted average term to maturity, expressed in years, of the present value
of all future cash flows, including coupon payments and principal repayments.
Thus, by definition, duration is always less than or equal to full maturity.
The Fund believes that because of the nature of its assets, it is not exposed
to any material risk of loss as a result of default on its portfolio
securities. The Fund is, however, exposed to the risk that the prices of such
securities will fluctuate, in some cases significantly, as interest rates
change.
The Fund may invest up to 35% of its total assets in (i) high quality
asset-backed securities, including mortgage-related securities that are not
U.S. Government securities, (ii) Treasury securities issued by private
corporate issuers, (iii) certificates of deposit, bankers' acceptances and
interest-bearing savings deposits of domestic and foreign banks having total
assets of more than $1 billion, (iv) higher quality commercial paper or, if not
rated, issued by companies that have outstanding high quality debt issues and
(v) high quality debt securities of corporate issuers.
The Fund may also (i) enter into futures contracts and purchase and write
options on futures contracts, (ii) enter into forward commitments for the
purchase or sale of securities, (iii) enter into interest rate swaps, caps and
floors, (iv) invest in Eurodollar instruments, (v) purchase and write put and
call options on foreign currencies, (vi) invest in variable, floating and
inverse floating rate instruments, (vii) enter into repurchase agreements
pertaining to the types of securities in which it invests, (viii) use reverse
repurchase agreements and dollar rolls and (ix) make secured loans of its
portfolio securities. For additional information on the use, risks and costs of
these investment practices, see 'Additional Investment Practices.'
The Fund may invest up to 15% of the value of its total assets in debt
securities denominated in U.S. Dollars or in foreign currencies and issued or
guaranteed by foreign governments or issued by foreign non-governmental
issuers, provided that such foreign debt securities are of high quality. The
percentage of the Fund's assets invested in foreign debt securities will vary
and its portfolio of foreign debt securities may include those of a number of
foreign countries or, depending upon market conditions, those of a single
country. See 'Risk Considerations-Foreign Investment.'
MORTGAGE FUND
ALLIANCE MORTGAGE SECURITIES INCOME FUND
Alliance Mortgage Securities Income Fund, Inc. ('Mortgage Securities Income')
is a diversified investment company that seeks a high level of current income
to the extent consistent with prudent investment risk. The Fund invests
primarily in a diversified portfolio of mortgage-related securities, including
CMOs, and, as a matter of fundamental policy, maintains at least 65% of its
total assets in mortgage-related securities.
The Fund expects that governmental, government-related or private entities may
create mortgage loan pools offering pass-through investments in addition to
those described in this Prospectus. The mortgages underlying these securities
may be instruments whose principal or interest payments may vary or whose terms
to maturity may differ from customary long-term fixed-rate mortgages. As new
types of mortgage-related securities are developed and offered to investors,
the Fund will consider making investments in such new types of securities. The
Fund may invest up to 20% of its total assets in lower-rated mortgage-related
securities. See 'Risk Considerations-Securities Ratings' and '-Investment in
Lower-Rated Fixed-Income Securities.' The average weighted maturity of the
Fund's portfolio of fixed-income securities is expected to vary between two and
ten years.
The Fund may invest up to 35% of the value of its total assets in (i) U.S.
Government securities, (ii) qualifying bank deposits, (iii) prime commercial
paper or, if not rated, issued by companies which have an outstanding high
quality debt issue, (iv) high grade debt securities secured by mortgages on
commercial real estate or residential rental properties, and (v) high grade
asset-backed securities.
The Fund may also (i) invest in repurchase agreements pertaining to the types
of securities in which it invests, (ii) enter into forward commitments for the
purchase or sale of securities, (iii) purchase put and call options written by
others and write covered put and call options on the types of securities in
which the Fund may invest for hedging purposes, (iv) enter into interest rate
swaps, caps and floors, (v) enter into interest rate futures contracts, (vi)
invest in variable floating and inverse floating rate instruments, and (vii)
lend portfolio securities. The Fund will not invest in illiquid securities if,
as a result, more than 10% of its total assets would be illiquid. For
additional information on the use, risk and costs of these practices, see
'Additional Investment Practices.'
MULTI-MARKET FUNDS
The Multi-Market Funds are non-diversified investment companies that have been
designed to offer investors a higher yield than a money market fund and less
fluctuation in net asset value than a longer-term bond fund.
ALLIANCE SHORT-TERM MULTI-MARKET TRUST
ALLIANCE MULTI-MARKET STRATEGY TRUST
Alliance Short-Term Multi- Market Trust, Inc. ('Short-Term Multi-Market') and
Alliance Multi-Market Strategy Trust, Inc. ('Multi-Market Strategy') each seek
the highest level of current income, consistent with what Alliance considers to
be prudent investment risk, that is available from a portfolio of high quality
debt securities having remaining maturities of not more than, with respect to
SHORT-TERM MULTI-MARKET, three years, and with respect to MULTI-MARKET
STRATEGY, five years. Each Fund seeks
9
high current yields by investing in a portfolio of debt securities denominated
in the U.S. Dollar and selected foreign currencies. The Multi-Market Funds seek
investment opportunities in foreign, as well as domestic, securities markets.
SHORT-TERM MULTI-MARKET will normally maintain a substantial portion of its
assets in debt securities denominated in foreign currencies but will invest at
least 25% of its net assets in U.S. Dollar-denominated securities. MULTI-MARKET
STRATEGY normally expects to maintain at least 70% of its assets in debt
securities denominated in foreign currencies.
In pursuing their investment objectives, the Multi-Market Funds seek to
minimize credit risk and fluctuations in net asset value by investing only in
short-term debt securities. Normally, a high proportion of these Funds'
portfolios consists of money market instruments. Alliance actively manages the
Multi-Market Funds' portfolios in accordance with a multi-market investment
strategy, allocating a Fund's investments among securities denominated in the
U.S. Dollar and the currencies of a number of foreign countries and, within
each such country, among different types of debt securities. Alliance adjusts
each Multi-Market Fund's exposure to each currency such that the percentage of
assets invested in securities of a particular country or denominated in a
particular currency varies in accordance with Alliance's assessment of the
relative yield and appreciation potential of such securities and the relative
strength of a country's currency. Fundamental economic strength, credit quality
and interest rate trends are the principal factors considered by Alliance in
determining whether to increase or decrease the emphasis placed upon a
particular type of security or industry sector within the Fund's investment
portfolio. Neither of the Multi-Market Funds invests more than 25% of its net
assets in debt securities denominated in a single currency other than the U.S.
Dollar.
The returns available from short-term foreign currency-denominated debt
instruments can be adversely affected by changes in exchange rates. Alliance
believes that the use of foreign currency hedging techniques, including
'cross-hedges' (see 'Additional Investment Practices-Forward Foreign Currency
Exchange Contracts'), can help protect against declines in the U.S. Dollar
value of income available for distribution to shareholders and declines in the
net asset value of a Fund's shares resulting from adverse changes in currency
exchange rates. For example, the return available from securities denominated
in a particular foreign currency would diminish in the event the value of the
U.S. Dollar increased against such currency. Such a decline could be partially
or completely offset by an increase in value of a cross-hedge involving a
forward exchange contract to sell a different foreign currency, where such
contract is available on terms more advantageous to a Fund than a contract to
sell the currency in which the position being hedged is denominated. It is
Alliance's belief that cross-hedges can therefore provide significant
protection of net asset value in the event of a general rise in the U.S. Dollar
against foreign currencies. However, a cross-hedge cannot protect against
exchange rate risks perfectly, and if Alliance is incorrect in its judgment of
future exchange rate relationships, a Fund could be in a less advantageous
position than if such a hedge had not been established.
Each Multi-Market Fund invests in debt securities denominated in the currencies
of countries whose governments are considered stable by Alliance. In addition
to the U.S. Dollar, such currencies include, among others, the Australian
Dollar, Austrian Schilling, British Pound Sterling, Canadian Dollar, Danish
Krone, Dutch Guilder, European Currency Unit ('ECU'), French Franc, Irish
Pound, Italian Lira, Japanese Yen, Mexican Peso, New Zealand Dollar, Norwegian
Krone, Spanish Peseta, Swedish Krona, Swiss Franc and German Mark.
An issuer of debt securities purchased by a Multi-Market Fund may be domiciled
in a country other than the country in whose currency the instrument is
denominated. In addition, the Funds may purchase debt securities (sometimes
referred to as 'linked' securities) that are denominated in one currency while
the principal amounts of, and value of interest payments on, such securities
are determined with reference to another currency. In this regard, as of the
date of this Prospectus each Fund has invested in U.S. Dollar denominated
securities issued by Mexican issuers and/or Peso-linked securities. The value
of these investments may fluctuate inversely in correlation with changes in the
Peso-Dollar exchange rate and with the general level of interest rates in
Mexico. For a general description of Mexico, see Appendix B and each
Multi-Market Fund's Statement of Additional Information.
Each Multi-Market Fund may invest in debt securities denominated in the ECU,
which is a 'basket' consisting of specified amounts of the currencies of
certain of the member states of the European Union, a fifteen-nation
organization engaged in cooperative economic activities. The specific amounts
of currencies comprising the ECU may be adjusted by the Council of Ministers of
the European Union to reflect changes in relative values of the underlying
currencies.
Each Multi-Market Fund may invest in debt securities issued by supranational
organizations including the World Bank, which was chartered to finance
development projects in developing member countries; the European Union; the
European Coal and Steel Community, which is an economic union of various
European nations' steel and coal industries; and the Asian Development Bank,
which is an international development bank established to lend funds, promote
investment and provide technical assistance to member nations in the Asian and
Pacific regions.
Each Multi-Market Fund seeks to minimize investment risk by limiting its
portfolio investments to debt securities of high quality. Accordingly, the
Multi-Market Funds' portfolio securities will consist of (i) U.S. Government
securities, (ii) high quality foreign government securities, (iii) obligations
issued by supranational entities and corporate debt securities having a high
quality rating, (iv) certificates of deposit and bankers' acceptances issued or
guaranteed by, or time deposits maintained at, banks (including foreign
branches of foreign banks) having total assets of more than $500 million and
10
determined by Alliance to be of high quality, and (v) prime commercial paper
or, if not rated, determined by Alliance to be of equivalent quality and issued
by U.S. or foreign companies having outstanding: in the case of MULTI-MARKET
STRATEGY, high quality debt securities; and in the case of SHORT-TERM
MULTI-MARKET, high grade debt securities.
As a matter of fundamental policy, each Multi-Market Fund concentrates at least
25% of its total assets in debt instruments issued by domestic and foreign
companies engaged in the banking industry, including bank holding companies.
Such investments may include certificates of deposit, time deposits, bankers'
acceptances, and obligations issued by bank holding companies, as well as
repurchase agreements entered into with banks (as distinct from non-banks) in
accordance with the policies set forth with respect to the Funds in 'Additional
Investment Practices-Repurchase Agreements.' See 'Risk
Considerations-Investment in the Banking Industry.'
Each Multi-Market Fund may also (i) invest in indexed commercial paper, (ii)
enter into futures contracts and purchase and write options on futures
contracts, (iii) purchase and write put and call options on foreign currencies,
(iv) purchase or sell forward foreign currency exchange contracts, (v) enter
into interest rate swaps, caps and floors, (vi) invest in variable, floating
and inverse floating rate instruments, (vii) make secured loans of its
portfolio securities, and (viii) enter into repurchase agreements. A
Multi-Market Fund will not invest in illiquid securities if, as a result, more
than 10% of its assets would be so invested. For additional information on the
use, risks and costs of these practices, see 'Additional Investment Practices.'
MULTI-MARKET STRATEGY maintains borrowings of approximately 25% of its total
assets less liabilities (other than the amount borrowed). See 'Risk
Considerations-Effects of Borrowing.'
GLOBAL BOND FUNDS
The Global Bond Funds are non-diversified investment companies that have been
designed to offer investors a high level of current income through investments
primarily in foreign government securities.
ALLIANCE NORTH AMERICAN GOVERNMENT INCOME TRUST
Alliance North American Government Income Trust, Inc. ('North American
Government Income') seeks the highest level of current income, consistent with
what Alliance considers to be prudent investment risk, that is available from a
portfolio of debt securities issued or guaranteed by the United States, Canada
and Mexico, their political subdivisions (including Canadian provinces but
excluding states of the United States), agencies, instrumentalities or
authorities ('Government securities'). The Fund invests in investment grade
securities denominated in the U.S. Dollar, the Canadian Dollar and the Mexican
Peso and expects to maintain at least 25% of its assets in securities
denominated in the U.S. Dollar. In addition, the Fund may invest up to 25% of
its total assets in debt securities issued by governmental entities of
Argentina ('Argentine Government securities'). The Fund expects that it will
not retain a debt security which is down-graded below BBB or Baa, or, if
unrated, determined by Alliance to have undergone similar credit quality
deterioration, subsequent to purchase by the Fund. There may be circumstances,
however, such as the downgrading to below investment grade of all of the
securities of a governmental issuer in one of the countries in which the Fund
has substantial investments, under which the Fund, after considering all the
circumstances, would conclude that it is in the best interests of the
shareholders to retain its holdings in securities of that issuer. The average
weighted maturity of the Fund's portfolio of fixed-income securities is
expected to vary between one year or less and 30 years.
Alliance believes that the increasingly integrated economic relationship among
the United States, Canada and Mexico, characterized by the reduction and
projected elimination of most barriers to free trade among the three nations
and the growing coordination of their fiscal and monetary policies, will over
the long term benefit the economic performance of all three countries and
promote greater correlation of currency fluctuation among the U.S. and Canadian
Dollars and the Mexican Peso. See, however, Appendix B and the Fund's Statement
of Additional Information with respect to the current state of the Mexican
economy.
Alliance will actively manage the Fund's assets in relation to market
conditions and general economic conditions and adjust the Fund's investments in
an effort to best enable the Fund to achieve its investment objective. Thus,
the percentage of the Fund's assets invested in a particular country or
denominated in a particular currency will vary in accordance with Alliance's
assessment of the relative yield and appreciation potential of such securities
and the relationship of the country's currency to the U.S. Dollar. The Fund
invests at least, and normally substantially more than, 65% of its total assets
in Government securities. To the extent that its assets are not invested in
Government securities, however, the Fund may invest the balance of its total
assets in investment grade debt securities issued by the governments of
countries located in Central and South America or any of their political
subdivisions, agencies, instrumentalities or authorities, provided that such
securities are denominated in their local currencies. The Fund will not invest
more than 10% of its total assets in debt securities issued by the governmental
entities of any one such country, except that the Fund may invest up to 25% of
its total assets in Argentine Government securities. The Fund will normally
invest at least 65% of its total assets in income-producing securities. For a
general description of Canada, Mexico and Argentina, see Appendix B and the
Fund's Statement of Additional Information.
Canadian Government securities include the sovereign debt of Canada or any of
its provinces and Government of Canada bonds and Government of Canada Treasury
bills. Canada Treasury bills are debt obligations with maturities of less than
one year. A new issue of Government of Canada bonds frequently consists of
several different bonds with maturities ranging from one to 25 years.
11
All Canadian provinces have outstanding bond issues and several provinces also
guarantee bond issues of provincial authorities, agents and Crown corporations.
Each new issue yield is based upon a spread from an outstanding Government of
Canada issue of comparable term and coupon. Many Canadian municipalities,
municipal financial authorities and Crown corporations raise funds through the
bond market in order to finance capital expenditures. Unlike U.S. municipal
securities, which have special tax status, Canadian municipal securities have
the same tax status as other Canadian Government securities and trade similarly
to such securities. The Canadian municipal market may be less liquid than the
provincial bond market.
Canadian Government securities in which the Fund may invest include a modified
pass-through vehicle issued pursuant to the program established under the
National Housing Act of Canada. Certificates issued pursuant to this program
benefit from the guarantee of the Canada Mortgage and Housing Corporation, a
federal Crown corporation that is (except for certain limited purposes) an
agency of the Government of Canada whose guarantee is an unconditional
obligation of the Government of Canada in most circumstances (similar to that
of GNMA in the United States).
Mexican Government securities denominated and payable in the Mexican Peso
include (i) Cetes, which are book-entry securities sold directly by the Mexican
Government on a discount basis and with maturities that range from seven to 364
days, (ii) Bonds, which are long-term development bonds issued directly by the
Mexican Government with a minimum term of 364 days, and (iii) Ajustabonos,
which are adjustable-rate bonds with a minimum three-year term issued directly
by the Mexican Government with the face amount adjusted each quarter by the
quarterly inflation rate.
The Fund may invest up to 25% of its total assets in Argentine Government
securities that are denominated and payable in the Argentine Peso. Argentine
Government securities include (i) Bono de Inversion y Crecimiento ('BIC'),
which are investment and growth bonds issued directly by the Argentine
Government with maturities of up to ten years, (ii) Bono de Consolidacion
Economica ('BOCON'), which are economic consolidation bonds issued directly by
the Argentine Government with maturities of up to ten years and (iii) Bono de
Credito a la Exportacion ('BOCREX'), which are export credit bonds issued
directly by the Argentine government with maturities of up to four years. To
date, Argentine Government securities are not rated by either S&P, Moody's,
Duff & Phelps or Fitch. Alliance, however, believes, that there are Argentine
Government securities that are of investment grade quality.
The Fund may also (i) enter into futures contracts and purchase and write
options on futures contracts for hedging purposes, (ii) purchase and write put
and call options on foreign currencies, (iii) purchase or sell forward foreign
currency exchange contracts, (iv) write covered put and call options and
purchase put and call options on U.S. Government and foreign government
securities traded on U.S. and foreign securities exchanges, and write put and
call options for cross-hedging purposes, (v) enter into interest rate swaps,
caps and floors, (vi) enter into forward commitments for the purchase or sale
of securities, (vii) invest in variable, floating and inverse floating rate
instruments, (viii) make secured loans of its portfolio securities, and (ix)
enter into repurchase agreements. The Fund will not invest in illiquid
securities if, as a result, 10% of its net assets would be so invested. For
additional information on the use, risks and costs of these practices, see
'Additional Investment Practices.' The Fund also maintains borrowings of
approximately one-third of the Fund's total assets less liabilities (other than
the amount borrowed). See 'Risk Considerations-Effects of Borrowing.'
ALLIANCE GLOBAL DOLLAR GOVERNMENT FUND
Alliance Global Dollar Government Fund, Inc. ('Global Dollar Government') seeks
primarily a high level of current income, and secondarily capital appreciation.
In seeking to achieve these objectives, the Fund invests at least 65% of its
total assets in sovereign debt obligations. The Fund's investments in sovereign
debt obligations will emphasize obligations of a type customarily referred to
as 'Brady Bonds' that are issued as part of debt restructurings and that are
collateralized in full as to principal due at maturity by zero coupon U.S.
Government securities ('collateralized Brady Bonds'). See 'Additional
Investment Practices-Brady Bonds.' The Fund may also invest up to 35% of its
total assets in U.S. and non-U.S. corporate fixed-income securities. See 'Risk
Considerations-U.S. Corporate Fixed-Income Securities.' The Fund will limit its
investments in sovereign debt obligations and U.S. and non-U.S. corporate
fixed-income securities to U.S. Dollar-denominated securities. Alliance expects
that, based upon current market conditions, the Fund's portfolio of U.S.
fixed-income securities will have an average maturity range of approximately
nine to 15 years and the Fund's portfolio of non-U.S. fixed-income securities
will have an average maturity range of approximately 15 to 25 years. Alliance
anticipates that the Fund's portfolio of sovereign debt obligations will have a
longer average maturity.
Substantially all of the Fund's assets will be invested in lower-rated
securities, which may include securities having the lowest rating for
non-subordinated debt instruments (i.e., rated C by Moody's or CCC or lower by
S&P, Duff & Phelps and Fitch) and unrated securities of comparable investment
quality. These securities are considered to have extremely poor prospects of
ever attaining any real investment standing, to have a current identifiable
vulnerability to default, to be unlikely to have the capacity to pay interest
and repay principal when due in the event of adverse business, financial or
economic conditions, and/or to be in default or not current in the payment of
interest or principal. For a description of bond ratings, see Appendix A. The
Fund may also invest in investment grade securities. Unrated securities will be
considered for investment by the Fund when Alliance believes that the financial
condition of the issuers of such obligations and the protection afforded by the
terms of the obligations themselves limit the risk to the Fund to a degree
comparable to that of rated securities which are
12
consistent with the Fund's investment objectives and policies. As of August 31,
1995, the percentages of the Fund's assets invested in securities rated (or
considered by Alliance to be of equivalent quality to securities rated) in
particular rating categories were 3% in A and above, 57% in Ba or BB, 34% in B,
4% in Caa or CCC, and 2% in non-rated. See 'Risk Considerations-Securities
Ratings,' '-Investment in Fixed-Income Securities Rated Baa and BBB,'
'-Investment in Lower-Rated Fixed-Income Securities' and Appendix A.
With respect to its investments in sovereign debt obligations and non-U.S.
corporate fixed-income securities, the Fund will emphasize investments in
countries that are considered at the time of purchase to be emerging or
developing countries by the World Bank. A substantial part of the Fund's
initial investment focus is expected to be in securities or obligations of
Argentina, Brazil, Mexico, Morocco, the Philippines and Venezuela because these
countries are now, or are expected by Alliance at a future date to be, the
principal participants in debt restructuring programs (including, in the case
of Argentina, Mexico, the Philippines and Venezuela, issuers of currently
outstanding Brady Bonds) that, in Alliance's opinion, will provide the most
attractive investment opportunities for the Fund. See Appendix A to the Fund's
Statement of Additional Information for information about those six countries.
Alliance anticipates that other countries that will provide initial investment
opportunities for the Fund include, among others, Bolivia, Costa Rica, the
Dominican Republic, Ecuador, Jordan, Nigeria, Panama, Peru, Poland, Thailand,
Turkey and Uruguay. See 'Additional Investment Practices-Brady Bonds.'
The Fund may invest up to 30% of its total assets in the sovereign debt
obligations and corporate fixed-income securities of issuers in any one of
Argentina, Brazil, Mexico, Morocco, the Philippines or Venezuela, each of which
is an emerging market country, and the Fund will limit investments in the
sovereign debt obligations of each such country (or of any other single foreign
country) to less than 25% of its total assets. The Fund expects that it will
not invest more than 10% of its total assets in the sovereign debt obligations
and corporate fixed-income securities of issuers in any other single foreign
country and is not required to invest any minimum amount of its assets in the
securities or obligations of issuers located in any particular country.
A substantial portion of the Fund's investments will be in (i) securities which
were initially issued at discounts from their face values ('Discount
Obligations') and (ii) securities purchased by the Fund at a price less than
their stated face amount or, in the case of Discount Obligations, at a price
less than their issue price plus the portion of 'original issue discount'
previously accrued thereon, i.e., purchased at a 'market discount.'
The Fund may also (i) invest in structured securities, (ii) invest in fixed and
floating rate loans that are arranged through private negotiations between an
issuer of sovereign debt obligations and one or more financial institutions and
in participations in and assignments of these types of loans, (iii) invest in
other investment companies, (iv) invest in warrants, (v) enter into interest
rate swaps, caps and floors, (vi) enter into forward commitments for the
purchase or sale of securities, (vii) make secured loans of its portfolio
securities, (viii) enter into repurchase agreements pertaining to the types of
securities in which it invests, (ix) use reverse repurchase agreements and
dollar rolls, (x) enter into standby commitment agreements, (xi) make short
sales of securities or maintain a short position, (xii) write put and call
options on securities of the types in which it is permitted to invest and write
call options for cross-hedging purposes, (xiii) purchase and sell
exchange-traded options on any securities index composed of the types of
securities in which it may invest, and (xiv) invest in variable, floating and
inverse floating rate instruments. The Fund may also at any time, with respect
to up to 35% of its total assets, temporarily invest funds awaiting
reinvestment or held for reserves for dividends and other distributions to
shareholders in U.S. Dollar-denominated money market instruments. For
additional information on the use, risks and costs of these practices, see
'Additional Investment Practices.' While the Fund does not currently intend to
do so, it reserves the right to borrow an amount not to exceed one-third of the
Fund's assets less liabilities (other than the amount borrowed). See 'Risk
Considerations-Effects of Borrowing.'
ALLIANCE GLOBAL STRATEGIC INCOME TRUST
Alliance Global Strategic Income Trust ('Global Strategic Income') is a
non-diversified investment company that seeks primarily a high level of current
income and secondarily capital appreciation. The Fund pursues its investment
objectives by investing primarily in a portfolio of fixed-income securities of
U.S. and non-U.S. companies and U.S. Government and foreign government
securities and supranational entities, including lower-rated securities. The
Fund may also use derivative instruments to attempt to enhance income. The
average weighted maturity of the Fund's portfolio of fixed-income securities is
expected to vary between 5 years and 30 years in accordance with Alliance's
changing perceptions of the relative attractiveness of various maturity ranges.
Under normal market conditions, at least 65% of the value of the Fund's total
assets will be invested in the fixed-income securities of issuers located in
three countries, one of which may be the United States. No more than 25% of the
value of its total assets, however, will be invested in the securities of any
one foreign government. U.S. Government securities in which the Fund may invest
include mortgage-related securities and zero coupon securities. Fixed-income
securities in which the Fund may invest include preferred stock,
mortgage-related and other asset-backed securities, and zero coupon securities.
The Fund may also invest in rights and warrants (for debt securities or for
equity securities that are acquired in connection with debt instruments), and
loan participations and assignments.
The Fund will maintain at least 65% of the value of its total assets in
investment grade securities and may maintain not more that 35% of the value of
its total assets in lower-rated securities. See 'Additional Risk
Considerations-Securities Ratings' and '-Investment in Lower-Rated Fixed-Income
13
Securities.' Unrated securities will be considered for investment by the Fund
when Alliance believes that the financial condition of the issuers of such
obligations and the protection afforded by the terms of the obligations
themselves limit the risk to the Fund to a degree comparable to that of rated
securities which are consistent with the Fund's investment objectives and
policies. Lower-rated securities in which the Fund may invest include Brady
Bonds and fixed-income securities of issuers located in emerging markets. There
is no minimum rating requirement applicable to the Fund's investments in
lower-rated fixed-income securities.
The Fund may also: (i) invest in foreign currencies, (ii) purchase and write
put and call options on securities and foreign currencies, (iii) purchase or
sell forward foreign exchange contracts, (iv) invest in variable, floating and
inverse floating rate instruments, (v) invest in indexed commercial paper, (vi)
invest in structured securities, (vii) lend portfolio securities amounting to
not more than 25% of its total assets, (viii) enter into repurchase agreements
pertaining to the types of securities in which it invests, (ix) use reverse
repurchase agreements and dollar rolls, (x) purchase and sell securities on a
forward commitment basis, (xi) enter into standby commitments, (xii) enter into
contracts for the purchase or sale for future delivery of fixed-income
securities or foreign currencies, or contracts based on financial indices,
including any index of U.S. Government securities, foreign government
securities or common stock, and purchase and write options on futures
contracts, (xiii) invest in Eurodollar instruments, (xiv) enter into interest
rate swaps, caps and floors, and (xv) make short sales of securities or
maintain a short position. For additional information on the use, risks and
costs of these policies and practices see 'Additional Investment Practices and
Risks.' The Fund currently intends to limit its ability to borrow to an amount
not to exceed 25% of its total assets. See 'Additional Risk
Considerations-Effect of Borrowing.'
CORPORATE BOND FUND
CORPORATE BOND PORTFOLIO
Corporate Bond Portfolio ('Corporate Bond') is a diversified investment company
that seeks primarily to maximize income over the long term consistent with
providing reasonable safety in the value of each shareholder's investment, and
secondarily to increase its capital through appreciation of its investments in
order to preserve and, if possible, increase the purchasing power of each
shareholder's investment. In pursuing these objectives, the Fund's policy is to
invest in readily marketable securities which give promise of relatively
attractive yields, but which do not involve substantial risk of loss of
capital. The Fund follows a policy of maintaining at least 65% of its net
assets invested in debt securities. Such objectives and policies cannot be
changed without the approval of the shareholders. Although the Fund also
follows a policy of maintaining at least 65% of its total assets invested in
corporate bonds, it is permitted to invest in securities of non-corporate
issuers.
The Fund follows an investment strategy which in certain respects can be
regarded as somewhat more aggressive than the strategies of many other funds
investing primarily in corporate bonds. In this regard, the Fund's investment
portfolio normally tends to have a relatively long average maturity and
duration, and to place significant emphasis on both foreign corporate and
sovereign debt obligations and corporate bonds that are expected to benefit
from improvement in their issuers' credit fundamentals. Consequently, in recent
years the Fund frequently has experienced greater net asset value volatility
than most other corporate bond funds. Prospective investors in the Fund should
therefore be prepared to accept the degree of volatility associated with its
investment strategy. See 'Risk Considerations'.
There is no minimum rating requirement applicable to the Fund's investments in
fixed-income securities, except the Fund expects that it will not retain a
security that is downgraded below B, or if unrated, determined by Alliance to
have undergone similar credit quality deterioration subsequent to purchase.
Currently, the Fund believes its objectives and policies may best be
implemented by investing at least 65% of its total assets in fixed-income
securities considered investment grade or higher. The remainder of the Fund's
assets may be invested in lower-rated fixed-income securities. See 'Risk
Considerations-Securities Ratings,' '-Investment in Fixed-Income Securities
Rated Baa and BBB,' '-Investment in Lower-Rated Fixed-Income Securities' and
Appendix A. During the fiscal year ended June 30, 1995, on a weighted average
basis, the percentages of the Fund's assets invested in securities rated (or
considered by Alliance to be of equivalent quality to securities rated) in
particular rating categories were 23% in A and above, 44% in Baa or BBB, 25% in
Ba or BB, and 8% in B. The Fund did not invest in securities rated below B by
each of Moody's, S&P, Duff & Phelps and Fitch or, if not rated, considered by
Alliance to be of equivalent quality to securities so rated.
The Fund may invest up to 50% of the value of its total assets in foreign debt
securities which will consist primarily of corporate fixed-income securities
and sovereign debt obligations. Not more than 15% of the Fund's total assets
may be invested in these other sovereign debt obligations, which may be lower
rated and considered to be predominantly speculative as regards the issuer's
capacity to pay interest and repay principal. All of the Fund's investments,
whether foreign or domestic, are U.S. Dollar-denominated.
Within the foregoing limitations, the Fund has complete flexibility as to the
types of securities in which it will invest and the relative proportions
thereof, and the Fund plans to vary the proportions of its holdings of long-
and short-term fixed-income securities and of equity securities in order to
reflect its assessment of prospective cyclical changes even if such action may
adversely affect current income. However, substantially all of the Fund's
investments will be income producing. The average weighted maturity of the
Fund's portfolio of fixed-income securities is expected to vary between one
year or less and 30 years.
The Fund may also (i) invest in structured securities, (ii) invest in fixed and
floating rate loans that are arranged through
14
private negotiations between an issuer of sovereign debt obligations and one or
more financial institutions and in participations in and assignments of these
type of loans, (iii) for hedging purposes, purchase put and call options
written by others and write covered put and call options on the types of
securities in which the Fund may invest, (iv) for hedging purposes, enter into
various hedging transactions, such as interest rate swaps, caps and floors, (v)
invest in variable, floating and inverse floating rate instruments, (vi) invest
in zero coupon and pay-in-kind securities, and (vii) invest in CMOs and
multi-class pass-through. As a matter of fundamental policy, the Fund will not
purchase illiquid securities. For additional information on the use, risks and
costs of these practices, see 'Additional Investment Practices.'
ADDITIONAL INVESTMENT PRACTICES
Some or all of the Funds may engage in the following investment practices to
the extent described in this Prospectus. See the Statement of Additional
Information of each Fund for a further discussion of the uses, risks and costs
of engaging in these practices.
DERIVATIVES. The Funds may use derivatives in furtherance of their investment
objectives. Derivatives are financial contracts whose value depends on, or is
derived from, the value of an underlying asset, reference rate or index. These
assets, rates, and indices may include bonds, stocks, mortgages, commodities,
interest rates, currency exchange rates, bond indices and stock indices.
Derivatives can be used to earn income or protect against risk, or both. For
example, one party with unwanted risk may agree to pass that risk to another
party who is willing to accept the risk, the second party being motivated, for
example, by the desire either to earn income in the form of a fee or premium
from the first party, or to reduce its own unwanted risk by attempting to pass
all or part of that risk to the first party.
Derivatives can be used by investors such as the Funds to earn income and
enhance returns, to hedge or adjust the risk profile of a portfolio, and either
in place of more traditional direct investments or to obtain exposure to
otherwise inaccessible markets. Each of the Funds is permitted to use
derivatives for one or more of these purposes, although most of the Funds
generally use derivatives primarily as direct investments in order to enhance
yields and broaden portfolio diversification. Each of these uses entails
greater risk than if derivatives were used solely for hedging purposes.
Derivatives are a valuable tool which, when used properly, can provide
significant benefit to Fund shareholders. Alliance is not an aggressive user of
derivatives with respect to any of the Funds. However, a Fund may take a
significant position in those derivatives that are within its investment
policies if, in Alliance's judgement, this represents the most effective
response to current or anticipated market conditions. The MULTI-MARKET FUNDS
and GLOBAL STRATEGIC INCOME in particular generally make extensive use of
carefully selected forwards and other derivatives to achieve the currency
hedging that is an integral part of their investment strategy. Alliance's use
of derivatives is subject to continuous risk assessment and control from the
standpoint of each Fund's investment objectives and policies.
Derivatives may be (i) standardized, exchange-traded contracts or (ii)
customized, privately negotiated contracts. Exchange-traded derivatives tend to
be more liquid and subject to less credit risk than those that are privately
negotiated.
There are four principal types of derivative instruments-options, futures,
forwards and swaps-from which virtually any type of derivative transaction can
be created.
. OPTIONS-An option, which may be standardized and exchange-traded, or
customized and privately negotiated, is an agreement that, for a premium
payment or fee, gives the option holder (the buyer) the right but not the
obligation to buy or sell the underlying asset (or settle for cash an amount
based on an underlying asset, rate or index) at a specified price (the exercise
price) during a period of time or on a specified date. A call option entitles
the holder to purchase, while a put option entitles the holder to sell, the
underlying asset (or settle for cash an amount based on an underlying asset,
rate or index). Likewise, when an option is exercised the writer of the option
would be obligated to sell (in the case of a call option) or to purchase (in
the case of a put option) the underlying asset (or settle for cash an amount
based on an underlying asset, rate or index).
. FUTURES-A futures contract is an agreement that obligates the buyer to buy
and the seller to sell a specified quantity of an underlying asset (or settle
for cash the value of a contract based on an underlying asset, rate or index)
at a specific price on the contract maturity date. Futures contracts are
standardized, exchange-traded instruments and are fungible (i.e., considered to
be perfect substitutes for each other). This fungibility allows futures
contracts to be readily offset or cancelled through the acquisition of equal
but opposite positions, which is the primary method in which futures contracts
are liquidated. A cash-settled futures contract does not require physical
delivery of the underlying asset but instead is settled for cash equal to the
difference between the values of the contract on the date it is entered into
and its maturity date.
. FORWARDS-A forward contract is an obligation by one party to buy, and the
other party to sell, a specific quantity of an underlying commodity or other
tangible asset for an agreed upon price at a future date. Forward contracts are
customized, privately negotiated agreements designed to satisfy the objectives
of each party. A forward contract usually results in the delivery of the
underlying asset upon maturity of the contract in return for the agreed upon
payment.
. SWAPS-A swap is a customized, privately negotiated agreement that obligates
two parties to exchange a series of cash flows at specified intervals (payment
dates) based upon or calculated by reference to changes in specified prices or
rates (interest rates in the case of interest rate swaps, currency exchange
rates in the case of currency swaps) for a specified amount of an underlying
asset (the 'notional'
15
principal amount). The payment flows are netted against each other, with the
difference being paid by one party to the other. Except for currency swaps, the
notional principal amount is used solely to calculate the payment streams but
is not exchanged. With respect to currency swaps, actual principal amounts of
currencies may be exchanged by the counterparties at the initiation, and again
upon the termination, of the transaction.
Debt instruments that incorporate one or more of these building blocks for the
purpose of determining the principal amount of and/or rate of interest payable
on the debt instruments are often referred to as 'structured securities.' An
example of this type of structured security is indexed commercial paper. The
term is also used to describe certain securities issued in connection with the
restructuring of certain foreign obligations. See 'Indexed Commercial Paper'
and 'Structured Securities' below. The term 'derivative' is also sometimes used
to describe securities involving rights to a portion of the cash flows from an
underlying pool of mortgages or other assets from which payments are passed
through to the owner of, or that collateralize, the securities. These
securities are described below under 'Mortgage-Related Securities' and 'Other
Asset-Backed Securities.'
While the judicious use of derivatives by highly experienced investment
managers such as Alliance can be quite beneficial, derivatives also involve
risks different from, and, in certain cases, greater than, the risks presented
by more traditional investments. Following is a general discussion of important
risk factors and issues concerning the use of derivatives that investors should
understand before investing in a Fund.
. MARKET RISK-This is the general risk attendant to all investments that the
value of a particular investment will change in a way detrimental to the Fund's
interest.
. MANAGEMENT RISK-Derivative products are highly specialized instruments that
require investment techniques and risk analyses different from those associated
with stocks and bonds. The use of a derivative requires an understanding not
only of the underlying instrument but also of the derivative itself, without
the benefit of observing the performance of the derivative under all possible
market conditions. In particular, the use and complexity of derivatives require
the maintenance of adequate controls to monitor the transactions entered into,
the ability to assess the risk that a derivative adds to a Fund's portfolio and
the ability to forecast price, interest rate or currency exchange rate
movements correctly.
. CREDIT RISK-This is the risk that a loss may be sustained by a Fund as a
result of the failure of another party to a derivative (usually referred to as
a 'counterparty') to comply with the terms of the derivative contract. The
credit risk for exchange-traded derivatives is generally less than for
privately negotiated derivatives, since the clearing house, which is the issuer
or counterparty to each exchange-traded derivative, provides a guarantee of
performance. This guarantee is supported by a daily payment system (i.e.,
margin requirements) operated by the clearing house in order to reduce overall
credit risk. For privately negotiated derivatives, there is no similar clearing
agency guarantee. Therefore, the Funds consider the creditworthiness of each
counterparty to a privately negotiated derivative in evaluating potential
credit risk.
. LIQUIDITY RISK-Liquidity risk exists when a particular instrument is
difficult to purchase or sell. If a derivative transaction is particularly
large or if the relevant market is illiquid (as is the case with many privately
negotiated derivatives), it may not be possible to initiate a transaction or
liquidate a position at an advantageous price.
. LEVERAGE RISK-Since many derivatives have a leverage component, adverse
changes in the value or level of the underlying asset, rate or index can result
in a loss substantially greater than the amount invested in the derivative
itself. In the case of swaps, the risk of loss generally is related to a
notional principal amount, even if the parties have not made any initial
investment. Certain derivatives have the potential for unlimited loss,
regardless of the size of the initial investment.
. OTHER RISKS-Other risks in using derivatives include the risk of mispricing
or improper valuation of derivatives and the inability of derivatives to
correlate perfectly with underlying assets, rates and indices. Many
derivatives, in particular privately negotiated derivatives, are complex and
often valued subjectively. Improper valuations can result in increased cash
payment requirements to counterparties or a loss of value to a Fund.
Derivatives do not always perfectly or even highly correlate or track the value
of the assets, rates or indices they are designed to closely track.
Consequently, a Fund's use of derivatives may not always be an effective means
of, and sometimes could be counterproductive to, furthering the Fund's
investment objective.
DERIVATIVES USED BY THE FUNDS. Following is a description of specific
derivatives currently used by one or more of the Funds.
OPTIONS ON SECURITIES. In purchasing an option on securities, a Fund would be
in a position to realize a gain if, during the option period, the price of the
underlying securities increased (in the case of a call) or decreased (in the
case of a put) by an amount in excess of the premium paid; otherwise the Fund
would experience a loss not greater than the premium paid for the option. Thus,
a Fund would realize a loss if the price of the underlying security declined or
remained the same (in the case of a call) or increased or remained the same (in
the case of a put) or otherwise did not increase (in the case of a put) or
decrease (in the case of a call) by more than the amount of the premium. If a
put or call option purchased by a Fund were permitted to expire without being
sold or exercised, its premium would represent a loss to the Fund.
A Fund may write a put or call option in return for a premium, which is
retained by the Fund whether or not the option is exercised. Except with
respect to uncovered call options written for cross-hedging purposes, none of
the Funds will write
16
uncovered call or put options on securities. A call option written by a Fund is
'covered' if the Fund owns the underlying security, has an absolute and
immediate right to acquire that security upon conversion or exchange of another
security it holds, or holds a call option on the underlying security with an
exercise price equal to or less than that of the call option it has written. A
put option written by a Fund is covered if the Fund holds a put option on the
underlying securities with an exercise price equal to or greater than that of
the put option it has written.
The risk involved in writing an uncovered put option is that there could be a
decrease in the market value of the underlying securities. If this occurred, a
Fund could be obligated to purchase the underlying security at a higher price
than its current market value. Conversely, the risk involved in writing an
uncovered call option is that there could be an increase in the market value of
the underlying security, and a Fund could be obligated to acquire the
underlying security at its current price and sell it at a lower price. The risk
of loss from writing an uncovered put option is limited to the exercise price
of the option, whereas the risk of loss from writing an uncovered call option
is potentially unlimited.
A Fund may write a call option on a security that it does not own in order to
hedge against a decline in the value of a security that it owns or has the
right to acquire, a technique referred to as 'cross-hedging.' A Fund would
write a call option for cross-hedging purposes, instead of writing a covered
call option, when the premium to be received from the cross-hedge transaction
exceeds that to be received from writing a covered call option, while at the
same time achieving the desired hedge. The correlation risk involved in
cross-hedging may be greater than the correlation risk involved with other
hedging strategies.
SHORT-TERM U.S. GOVERNMENT, MORTGAGE SECURITIES INCOME, NORTH AMERICAN
GOVERNMENT INCOME, GLOBAL DOLLAR GOVERNMENT, GLOBAL STRATEGIC INCOME and
CORPORATE BOND generally purchase or write privately negotiated options on
securities. A Fund that purchases or writes privately negotiated options on
securities will effect such transactions only with investment dealers and other
financial institutions (such as commercial banks or savings and loan
institutions) deemed creditworthy by Alliance, and Alliance has adopted
procedures for monitoring the creditworthiness of such counterparties.
Privately negotiated options purchased or written by a Fund may be illiquid,
and it may not be possible for the Fund to effect a closing transaction at an
advantageous time. See 'Illiquid Securities' below. Neither MORTGAGE SECURITIES
INCOME nor CORPORATE BOND will purchase an option on a security if, immediately
thereafter, the aggregate cost of all outstanding options purchased by such
Fund would exceed 2% of the Fund's total assets. Nor will either such Fund
write an option if, immediately thereafter, the aggregate value of the Fund's
portfolio securities subject to outstanding options would exceed 15% of the
Fund's total assets.
OPTIONS ON SECURITIES INDICES. An option on a securities index is similar to an
option on a security except that, rather than taking or making delivery of a
security at a specified price, an option on a securities index gives the holder
the right to receive, upon exercise of the option, an amount of cash if the
closing level of the chosen index is greater than (in the case of a call) or
less than (in the case of a put) the exercise price of the option.
OPTIONS ON FOREIGN CURRENCIES. A Fund invests in options on foreign currencies
that are privately negotiated or traded on U.S. or foreign exchanges for the
purpose of protecting against declines in the U.S. Dollar value of foreign
currency denominated portfolio securities and against increases in the U.S.
Dollar cost of securities to be acquired. The purchase of an option on a
foreign currency may constitute an effective hedge against fluctuations in
exchange rates, although if rates move adversely, a Fund may forfeit the entire
amount of the premium plus related transaction costs.
RIGHTS AND WARRANTS. GLOBAL DOLLAR GOVERNMENT may invest in warrants, and
GLOBAL STRATEGIC INCOME may invest in rights and warrants, which are option
securities permitting their holders to subscribe for other securities. GLOBAL
DOLLAR GOVERNMENT may invest in warrants, and GLOBAL STRATEGIC INCOME may
invest in rights and warrants, for debt securities or for equity securities
that are acquired in connection with debt instruments. Rights are similar to
warrants except that they have a substantially shorter duration. Rights and
warrants do not carry with them dividend or voting rights with respect to the
underlying securities, or any rights in the assets of the issuer. As a result,
an investment in rights and warrants may be considered more speculative than
certain other types of investments. In addition, the value of a right or
warrant does not necessarily change with the value of the underlying
securities, and a right or warrant ceases to have value if it is not exercised
prior to its expiration date. GLOBAL STRATEGIC INCOME may invest up to 20% of
its total assets in rights and warrants.
FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS. Futures contracts that a
Fund may buy and sell may include futures contracts on fixed-income or other
securities or foreign currencies, and contracts based on interest rates or
financial indices, including any index of U.S. Government securities, foreign
government securities or corporate debt securities.
Options on futures contracts are options that call for the delivery upon
exercise of futures contracts. Options on futures contracts written or
purchased by a Fund will be traded on U.S. or foreign exchanges and, except
with respect to SHORT-TERM U.S. GOVERNMENT and GLOBAL STRATEGIC INCOME, will be
used only for hedging purposes.
LIMITED MATURITY GOVERNMENT, SHORT-TERM MULTI-MARKET, MULTI-MARKET STRATEGY,
NORTH AMERICAN GOVERNMENT INCOME and GLOBAL STRATEGIC INCOME will not enter
into a futures contract or option on a futures contract if immediately
thereafter the market values of the outstanding futures contracts of the Fund
and the currencies and futures contracts subject to outstanding options written
by the Fund would exceed 50% of its total assets. Nor will LIMITED MATURITY
GOVERNMENT, MORTGAGE SECURITIES INCOME, SHORT-TERM MULTI-MARKET, MULTI-MARKET
17
STRATEGY, NORTH AMERICAN GOVERNMENT INCOME or GLOBAL STRATEGIC INCOME do so if
immediately thereafter the aggregate of initial margin deposits on all the
outstanding futures contracts of the Fund and premiums paid on outstanding
options on futures contracts would exceed 5% of the market value of the total
assets of the Fund. In addition, MORTGAGE SECURITIES INCOME and GLOBAL
STRATEGIC INCOME will not enter into (i) any futures contract other than one on
fixed-income securities or based on interest rates, (ii) any futures contract
if immediately thereafter the sum of the then aggregate futures market prices
of financial instruments required to be delivered under open futures contract
sales and the aggregate futures market prices of instruments required to be
delivered under open futures contract purchases would exceed 30% of the value
of the Fund's total assets, or (iii) options on futures contracts.
EURODOLLAR INSTRUMENTS. Eurodollar instruments are essentially U.S.
Dollar-denominated futures contracts or options thereon that are linked to
LIBOR. Eurodollar futures contracts enable purchasers to obtain a fixed rate
for the lending of funds and sellers to obtain a fixed rate for borrowings.
LIMITED MATURITY GOVERNMENT and GLOBAL STRATEGIC INCOME intends to use
Eurodollar futures contracts and options thereon to hedge against changes in
LIBOR (to which many short-term borrowings and floating rate securities in
which the Fund invests are linked).
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS. Each Fund that purchases or sells
forward contracts on foreign currencies ('forward contracts') attempts to
minimize the risk to it from adverse changes in the relationship between the
U.S. Dollar and other currencies. A Fund may enter into a forward contract, for
example, when it enters into a contract for the purchase or sale of a security
denominated in a foreign currency in order to 'lock in' the U.S. Dollar price
of the security ('transaction hedge'). When a Fund believes that a foreign
currency may suffer a substantial decline against the U.S. Dollar, it may enter
into a forward sale contract to sell an amount of that foreign currency
approximating the value of some or all of the Fund's portfolio securities
denominated in such foreign currency, or when the Fund believes that the U.S.
Dollar may suffer a substantial decline against a foreign currency, it may
enter into a forward purchase contract to buy that foreign currency for a fixed
dollar amount ('position hedge'). Instead of entering into a position hedge, a
Fund may, in the alternative, enter into a forward contract to sell a different
foreign currency for a fixed U.S. Dollar amount where the Fund believes that
the U.S. Dollar value of the currency to be sold pursuant to the forward
contract will fall whenever there is a decline in the U.S. Dollar value of the
currency in which portfolio securities of the Fund are denominated
('cross-hedge').
FORWARD COMMITMENTS. Forward commitments are forward contracts for the purchase
or sale of securities, including purchases on a 'when-issued' basis or
purchases or sales on a 'delayed delivery' basis. In some cases, a forward
commitment may be conditioned upon the occurrence of a subsequent event, such
as approval and consummation of a merger, corporate reorganization or debt
restructuring or approval of a proposed financing by appropriate authorities
(i.e., a 'when, as and if issued' trade).
When forward commitments with respect to fixed-income securities are
negotiated, the price, which is generally expressed in yield terms, is fixed at
the time the commitment is made, but payment for and delivery of the securities
take place at a later date. Normally, the settlement date occurs within two
months after the transaction, but settlements beyond two months may be
negotiated. Securities purchased or sold under a forward commitment are subject
to market fluctuation, and no interest or dividends accrues to the purchaser
prior to the settlement date. At the time a Fund enters into a forward
commitment, it records the transaction and thereafter reflects the value of the
security purchased or, if a sale, the proceeds to be received, in determining
its net asset value. Any unrealized appreciation or depreciation reflected in
such valuation would be canceled if the required conditions did not occur and
the trade were canceled.
The use of forward commitments helps a Fund to protect against anticipated
changes in interest rates and prices. For instance, in periods of rising
interest rates and falling bond prices, a Fund might sell securities in its
portfolio on a forward commitment basis to limit its exposure to falling bond
prices. In periods of falling interest rates and rising bond prices, a Fund
might sell a security in its portfolio and purchase the same or a similar
security on a when-issued or forward commitment basis, thereby obtaining the
benefit of currently higher cash yields. No forward commitments will be made by
LIMITED MATURITY GOVERNMENT, NORTH AMERICAN GOVERNMENT INCOME, GLOBAL DOLLAR
GOVERNMENT or GLOBAL STRATEGIC INCOME if, as a result, the Fund's aggregate
forward commitments under such transactions would be more than 25% of the total
assets of GLOBAL STRATEGIC INCOME and 30% of the total assets of each of the
other Funds.
A Fund's right to receive or deliver a security under a forward commitment may
be sold prior to the settlement date. The Funds enter into forward commitments,
however, only with the intention of actually receiving securities or delivering
them, as the case may be. If a Fund, however, chooses to dispose of the right
to acquire a when-issued security prior to its acquisition or dispose of its
right to deliver or receive against a forward commitment, it may incur a gain
or loss.
INTEREST RATE TRANSACTIONS (SWAPS, CAPS AND FLOORS). Each Fund that may enter
into interest rate swap, cap or floor transactions expects to do so primarily
for hedging purposes, which may include preserving a return or spread on a
particular investment or portion of its portfolio or protecting against an
increase in the price of securities the Fund anticipates purchasing at a later
date. The Funds do not intend to use these transactions in a speculative manner.
Interest rate swaps involve the exchange by a Fund with another party of their
respective commitments to pay or receive interest (e.g., an exchange of
floating rate payments for fixed
18
rate payments) computed based on a contractually-based principal (or
'notional') amount. Interest rate swaps are entered into on a net basis (i.e.,
the two payment streams are netted out, with the Fund receiving or paying, as
the case may be, only the net amount of the two payments). Interest rate caps
and floors are similar to options in that the purchase of an interest rate cap
or floor entitles the purchaser, to the extent that a specified index exceeds
(in the case of a cap) or falls below (in the case of a floor) a predetermined
interest rate, to receive payments of interest on a notional amount from the
party selling the interest rate cap or floor. A Fund may enter into interest
rate swaps, caps and floors on either an asset-based or liability-based basis,
depending upon whether it is hedging its assets or liabilities.
There is no limit on the amount of interest rate transactions that may be
entered into by a Fund that is permitted to enter into such transactions.
SHORT-TERM MULTI-MARKET, MULTI-MARKET STRATEGY, NORTH AMERICAN GOVERNMENT
INCOME and GLOBAL STRATEGIC INCOME may enter into interest rate swaps involving
payments to the same currency or in different currencies. SHORT-TERM U.S.
GOVERNMENT, LIMITED MATURITY GOVERNMENT, MORTGAGE SECURITIES INCOME, GLOBAL
DOLLAR GOVERNMENT, GLOBAL STRATEGIC INCOME and CORPORATE BOND will not enter
into an interest rate swap, cap or floor transaction unless the unsecured
senior debt or the claims-paying ability of the other party thereto is then
rated in the highest rating category of at least one nationally recognized
rating organization. Each of SHORT-TERM MULTI-MARKET, MULTI-MARKET STRATEGY,
NORTH AMERICAN GOVERNMENT INCOME and GLOBAL STRATEGIC INCOME will enter into
interest rate swap, cap or floor transactions with its respective custodian,
and with other counterparties, but only if: (i) for transactions with
maturities under one year, such other counterparty has outstanding prime
commercial paper; or (ii) for transactions with maturities greater than one
year, the counterparty has outstanding high quality debt securities.
The swap market has grown substantially in recent years, with a large number of
banks and investment banking firms acting both as principals and as agents
utilizing standardized swap documentation. As a result, the swap market has
become well established and relatively liquid. Caps and floors are less liquid
than swaps. These transactions do not involve the delivery of securities or
other underlying assets or principal. Accordingly, unless there is a
counterparty default, the risk of loss to a Fund from interest rate
transactions is limited to the net amount of interest payments that the Fund is
contractually obligated to make.
STANDBY COMMITMENT AGREEMENTS. Standby commitment agreements are similar to put
options that commit a Fund, for a stated period of time, to purchase a stated
amount of a security that may be issued and sold to the Fund at the option of
the issuer. The price and coupon of the security are fixed at the time of the
commitment. At the time of entering into the agreement, the Fund is paid a
commitment fee regardless of whether the security ultimately is issued. The
Funds will enter into such agreements only for the purpose of investing in the
security underlying the commitment at a yield and price considered advantageous
and unavailable on a firm commitment basis. No Fund will enter into a standby
commitment with a remaining term in excess of 45 days. The Funds will limit
their investments in standby commitments so that the aggregate purchase price
of the securities subject to the commitments does not exceed 20%, 25% with
respect to GLOBAL STRATEGIC INCOME, of their respective assets.
There is no guarantee that the security subject to a standby commitment will be
issued. In addition, the value of the security, if issued, on the delivery date
may be more or less than its purchase price. Since the issuance of the security
is at the option of the issuer, a Fund will bear the risk of capital loss in
the event the value of the security declines and may not benefit from an
appreciation in the value of the security during the commitment period if the
issuer decides not to issue and sell the security to the Fund.
INDEXED COMMERCIAL PAPER. Indexed commercial paper may have its principal
linked to changes in foreign currency exchange rates whereby its principal
amount is adjusted upwards or downwards (but not below zero) at maturity to
reflect changes in the referenced exchange rate. Each Fund that invests in such
commercial paper may do so without limitation. A Fund will receive interest and
principal payments on such commercial paper in the currency in which such
commercial paper is denominated, but the amount of principal payable by the
issuer at maturity will change in proportion to the change (if any) in the
exchange rate between the two specified currencies between the date the
instrument is issued and the date the instrument matures. While such commercial
paper entails the risk of loss of principal, the potential for realizing gains
as a result of changes in foreign currency exchange rates enables a Fund to
hedge (or cross-hedge) against a decline in the U.S. Dollar value of
investments denominated in foreign currencies while providing an attractive
money market rate of return. A Fund will purchase such commercial paper for
hedging purposes only, not for speculation.
U.S. GOVERNMENT SECURITIES. U.S. Government securities may be backed by the
full faith and credit of the United States, supported only by the right of the
issuer to borrow from the U.S. Treasury or backed only by the credit of the
issuing agency itself. These securities include:
(I) the following U.S. Treasury securities, which are backed by the full faith
and credit of the United States and differ only in their interest rates,
maturities and times of issuance: U.S. Treasury bills (maturities of one year
or less with no interest paid and hence issued at a discount and repaid at full
face value upon maturity), U.S. Treasury notes (maturities of one to ten years
with interest payable every six months) and U.S. Treasury bonds (generally
maturities of greater than ten years with interest payable every six months);
(ii) obligations issued or guaranteed by U.S. Government agencies and
instrumentalities that are supported by the full faith and credit of the U.S.
Government, such as securities issued by GNMA, the Farmers Home Administration,
the Department of Housing and Urban Development, the Export-Import Bank, the
General Services Administration and the Small Business Administration; and
19
(iii) obligations issued or guaranteed by U.S. Government agencies and
instrumentalities that are not supported by the full faith and credit of the
U.S. Government, such as securities issued by FNMA and FHLMC, and governmental
CMOs.
The maturities of the U.S. Government securities listed in paragraphs (i) and
(ii) above usually range from three months to 30 years. Such securities, except
GNMA certificates, normally provide for periodic payments of interest in fixed
amounts with principal payments at maturity or specified call dates. For
information regarding GNMA, FNMA and FHLMC certificates and CMOs, see
'Mortgage-Related Securities' below.
U.S. Government securities also include zero coupon securities and
principal-only securities and certain SMRS. In addition, other U.S. Government
agencies and instrumentalities have issued stripped securities that are similar
to SMRS. Such securities include those that are issued with an IO class and a
PO class. See 'Mortgage-Related Securities' below and 'Zero Coupon and
Principal-Only Securities' below. Although these stripped securities are
purchased and sold by institutional investors through several investment
banking firms acting as brokers or dealers, these securities were only recently
developed. As a result, established trading markets have not yet developed and,
accordingly, these securities may be illiquid.
Guarantees of securities by the U.S. Government or its agencies or
instrumentalities guarantee only the payment of principal and interest on the
securities, and do not guarantee the securities' yield or value or the yield or
value of the shares of a Fund that holds the securities.
U.S. Government securities are considered among the safest of fixed-income
investments. As a result, however, their yields are generally lower than the
yields available from other fixed-income securities.
MORTGAGE-RELATED SECURITIES. The mortgage-related securities in which a Fund
may invest typically are securities representing interests in pools of mortgage
loans made to home owners. The mortgage loan pools may be assembled for sale to
investors (such as a Fund) by governmental or private organizations.
Mortgage-related securities issued by GNMA are backed by the full faith and
credit of the United States; those issued by FNMA and FHLMC are not so backed.
Mortgage-related securities bear interest at either a fixed rate or an
adjustable rate determined by reference to an index rate. Mortgage-related
securities frequently provide for monthly payments that consist of both
interest and principal, unlike more traditional debt securities, which normally
do not provide for periodic repayments of principal.
Securities representing interests in pools created by private issuers generally
offer a higher rate of interest than securities representing interests in pools
created by governmental issuers because there are no direct or indirect
governmental guarantees of the underlying mortgage payments. However, private
issuers sometimes obtain committed loan facilities, lines of credit, letters of
credit, surety bonds or other forms of liquidity and credit enhancement to
support the timely payment of interest and principal with respect to their
securities if the borrowers on the underlying mortgages fail to make their
mortgage payments. The ratings of such non-governmental securities are
generally dependent upon the ratings of the providers of such liquidity and
credit support and would be adversely affected if the rating of such an
enhancer were downgraded. A Fund may buy mortgage-related securities without
credit enhancement if the securities meet the Fund's investment standards.
Although the market for mortgage-related securities is becoming increasingly
liquid, those of certain private organizations may not be readily marketable.
One type of mortgage-related security is of the 'pass-through' variety. The
holder of a pass-through security is considered to own an undivided beneficial
interest in the underlying pool of mortgage loans and receives a pro rata share
of the monthly payments made by the borrowers on their mortgage loans, net of
any fees paid to the issuer or guarantor of the securities. Prepayments of
mortgages resulting from the sale, refinancing or foreclosure of the underlying
properties are also paid to the holders of these securities, which, as
discussed below, frequently causes these securities to experience significantly
greater price and yield volatility than experienced by traditional fixed-income
securities. Some mortgage-related securities, such as securities issued by
GNMA, are referred to as 'modified pass-through' securities. The holders of
these securities are entitled to the full and timely payment of principal and
interest, net of certain fees, regardless of whether payments are actually made
on the underlying mortgages. Another form of mortgage-related security is a
'pay-through' security, which is a debt obligation of the issuer secured by a
pool of mortgage loans pledged as collateral that is legally required to be
paid by the issuer regardless of whether payments are actually made on the
underlying mortgages.
Collateralized mortgage obligations (CMOs) are the predominant type of
'pay-through' mortgage-related security. In a CMO, a series of bonds or
certificates is issued in multiple classes. Each class of a CMO, often referred
to as a 'tranche,' is issued at a specific coupon rate and has a stated
maturity or final distribution date. Principal prepayments on collateral
underlying a CMO may cause it to be retired substantially earlier than the
stated maturities or final distribution dates. The principal and interest on
the underlying mortgages may be allocated among several classes of a series of
a CMO in many ways. In a common structure, payments of principal, including any
principal prepayments, on the underlying mortgages are applied to the classes
of the series of a CMO in the order of their respective stated maturities or
final distribution dates, so that no payment of principal will be made on any
class of a CMO until all other classes having an earlier stated maturity or
20
final distribution date have been paid in full. One or more tranches of a CMO
may have coupon rates that reset periodically, or 'float', at a specified
increment over an index such as LIBOR. Floating-rate CMOs may be backed by
fixed or adjustable rate mortgages. To date, fixed-rate mortgages have been
more commonly utilized for this purpose. Floating-rate CMOs are typically
issued with lifetime caps on the coupon rate thereon. These caps, similar to
the caps on adjustable-rate mortgages described below, represent a ceiling
beyond which the coupon rate on a floating-rate CMO may not be increased
regardless of increases in the interest rate index to which the floating-rate
CMO is tied. The collateral securing the CMOs may consist of a pool of
mortgages, but may also consist of mortgage-backed bonds or pass-through
securities. CMOs may be issued by a U.S. Government instrumentality or agency
or by a private issuer. Although payment of the principal of, and interest on,
the underlying collateral securing privately issued CMOs may be guaranteed by
GNMA, FNMA or FHLMC, these CMOs represent obligations solely of the private
issuer and are not insured or guaranteed by GNMA, FNMA, FHLMC, any other
governmental agency or any other person or entity.
Another type of mortgage-related security, known as adjustable-rate mortgage
securities (ARMS), bears interest at a rate determined by reference to a
predetermined interest rate or index. There are two main categories of rates or
indices: (i) rates based on the yield on U.S. Treasury securities and (ii)
indices derived from a calculated measure such as a cost of funds index or a
moving average of mortgage rates. Some rates and indices closely mirror changes
in market interest rate levels, while others tend to lag changes in market rate
levels and tend to be somewhat less volatile.
ARMS may be secured by adjustable-rate mortgages or fixed-rate mortgages. ARMS
secured by fixed-rate mortgages generally have lifetime caps on the coupon
rates of the securities. To the extent that general interest rates increase
faster than the interest rates on the ARMS, these ARMS will decline in value.
The adjustable-rate mortgages that secure ARMS will frequently have caps that
limit the maximum amount by which the interest rate or the monthly principal
and interest payments on the mortgages may increase. These payment caps can
result in negative amortization (i.e., an increase in the balance of the
mortgage loan). Furthermore, since many adjustable-rate mortgages only reset on
an annual basis, the values of ARMS tend to fluctuate to the extent that
changes in prevailing interest rates are not immediately reflected in the
interest rates payable on the underlying adjustable-rate mortgages.
Stripped mortgage-related securities (SMRS) are mortgage-related securities
that are usually structured with two classes of securities collateralized by a
pool of mortgages or a pool of mortgaged-backed bonds or pass-through
securities, with each class receiving different proportions of the principal
and interest payments from the underlying assets. A common type of SMRS has one
class of interest-only securities (IOs) receiving all of the interest payments
from the underlying assets, while the other class of securities, principal-only
securities (POs), receives all of the principal payments from the underlying
assets. IOs and POs are extremely sensitive to interest rate changes and are
more volatile than mortgage-related securities that are not stripped. IOs tend
to decrease in value as interest rates decrease, while POs generally increase
in value as interest rates decrease. If prepayments of the underlying mortgages
are greater than anticipated, the amount of interest earned on the overall pool
will decrease due to the decreasing principal balance of the assets. Changes in
the values of IOs and POs can be substantial and occur quickly, such as
occurred in the first half of 1994 when the value of many POs dropped
precipitously due to increases in interest rates. For this reason, none of the
Funds relies on IOs and POs as the principal means of furthering its investment
objective.
The value of mortgage-related securities is affected by a number of factors.
Unlike traditional debt securities, which have fixed maturity dates,
mortgage-related securities may be paid earlier than expected as a result of
prepayment of the underlying mortgages. If property owners make unscheduled
prepayments of their mortgage loans, these prepayments will result in the early
payment of the applicable mortgage-related securities. In that event a Fund may
be unable to invest the proceeds from the early payment of the mortgage-related
securities in an investment that provides as high a yield as the
mortgage-related securities. Consequently, early payment associated with
mortgage-related securities causes these securities to experience significantly
greater price and yield volatility than experienced by traditional fixed-income
securities. The occurrence of mortgage prepayments is affected by the level of
general interest rates, general economic conditions and other social and
demographic factors. During periods of falling interest rates, the rate of
mortgage prepayments tends to increase, thereby tending to decrease the life of
mortgage-related securities. During periods of rising interest rates, the rate
of mortgage prepayments usually decreases, thereby tending to increase the life
of mortgage-related securities. If the life of a mortgage-related security is
inaccurately predicted, a Fund may not be able to realize the rate of return it
expected.
As with fixed-income securities generally, the value of mortgage-related
securities can also be adversely affected by increases in general interest
rates relative to the yield provided by such securities. Such adverse effect is
especially possible with fixed-rate mortgage securities. If the yield available
on other investments rises above the yield of the fixed-rate mortgage
securities as a result of general increases in interest rate levels, the value
of the mortgage-related securities will decline. Although the negative effect
could be lessened if the mortgage-related securities were to be paid earlier
(thus permitting a Fund to reinvest the prepayment proceeds in investments
yielding the higher current interest rate), as described above the rate of
mortgage prepayments and early payment of mortgage-related securities generally
tends to decline during a period of rising interest rates.
Although the value of ARMS may not be affected by rising interest rates as much
as the value of fixed-rate mortgage
21
securities is affected by rising interest rates, ARMS may still decline in
value as a result of rising interest rates. Although, as described above, the
yield on ARMS varies with changes in the applicable interest rate or index,
there is often a lag between increases in general interest rates and increases
in the yield on ARMS as a result of relatively infrequent interest rate reset
dates. In addition, adjustable-rate mortgages and ARMS often have interest rate
or payment caps that limit the ability of the adjustable-rate mortgages or ARMS
to fully reflect increases in the general level of interest rates.
OTHER ASSET-BACKED SECURITIES. The securitization techniques used to develop
mortgage-related securities are being applied to a broad range of financial
assets. Through the use of trusts and special purpose corporations, various
types of assets, including automobile loans and leases, credit card
receivables, home equity loans, equipment leases and trade receivables, are
being securitized in structures similar to the structures used in mortgage
securitizations. These asset-backed securities are subject to risks associated
with changes in interest rates and prepayment of underlying obligations similar
to the risks of investment in mortgage-related securities discussed above.
Each type of asset-backed security also entails unique risks depending on the
type of assets involved and the legal structure used. For example, credit card
receivables are generally unsecured obligations of the credit card holder and
the debtors are entitled to the protection of a number of state and federal
consumer credit laws, many of which give such debtors the right to set off
certain amounts owed on the credit cards, thereby reducing the balance due.
There have also been proposals to cap the interest rate that a credit card
issuer may charge. In some transactions, the value of the asset-backed security
is dependent on the performance of a third party acting as credit enhancer or
servicer. Furthermore, in some transactions (such as those involving the
securitization of vehicle loans or leases) it may be administratively
burdensome to perfect the interest of the security issuer in the underlying
collateral and the underlying collateral may become damaged or stolen.
ZERO COUPON AND PRINCIPAL-ONLY SECURITIES. Zero coupon securities and
principal-only (PO) securities are debt securities that have been issued
without interest coupons or stripped of their unmatured interest coupons, and
include receipts or certificates representing interests in such stripped debt
obligations and coupons. Such a security pays no interest to its holder during
its life. Its value to an investor consists of the difference between its face
value at the time of maturity and the price for which it was acquired, which is
generally an amount significantly less than its face value. Such securities
usually trade at a deep discount from their face or par value and are subject
to greater fluctuations in market value in response to changing interest rates
than debt obligations of comparable maturities and credit quality that make
current distributions of interest. On the other hand, because there are no
periodic interest payments to be reinvested prior to maturity, these securities
eliminate reinvestment risk and 'lock in' a rate of return to maturity.
Zero coupon Treasury securities are U.S. Treasury bills issued without interest
coupons. Principal-only Treasury securities are U.S. Treasury notes and bonds
that have been stripped of their unmatured interest coupons, and receipts or
certificates representing interests in such stripped debt obligations and
coupons. Currently the only U.S. Treasury security issued without coupons is
the Treasury bill. Although the U.S. Treasury does not itself issue Treasury
notes and bonds without coupons, under the U.S. Treasury STRIPS program
interest and principal payments on certain long-term Treasury securities may be
maintained separately in the Federal Reserve book entry system and may be
separately traded and owned. In addition, in the last few years a number of
banks and brokerage firms have separated ('stripped') the principal portions
from the coupon portions of U.S. Treasury bonds and notes and sold them
separately in the form of receipts or certificates representing undivided
interests in these instruments (which instruments are generally held by a bank
in a custodial or trust account). The staff of the Commission has indicated
that, in its view, these receipts or certificates should be considered as
securities issued by the bank or brokerage firm involved and, therefore, should
not be included in a Fund's categorization of U.S. Government securities. The
Funds disagree with the staff's position but will not treat such securities as
U.S. Government securities until final resolution of the issue.
Current federal tax law requires that a holder (such as a Fund) of a zero
coupon security accrue a portion of the discount at which the security was
purchased as income each year even though the holder receives no interest
payment in cash on the security during the year. As a result, in order to make
the distributions necessary for a Fund not to be subject to federal income or
excise taxes, the Fund might be required to pay out as an income distribution
each year an amount, obtained by liquidation of portfolio securities or
borrowings if necessary, greater than the total amount of cash that the Fund
has actually received as interest during the year. Each Fund believes, however,
that it is highly unlikely that it would be necessary to liquidate portfolio
securities or borrow money in order to make such required distributions or to
meet its investment objective. For a discussion of the tax treatment of zero
coupon Treasury securities, see 'Dividends, Distributions and Taxes-Zero Coupon
Treasury Securities' in the Statement of Additional Information of each Fund
that is permitted to invest in such securities.
GLOBAL STRATEGIC INCOME and CORPORATE BOND may also invest in 'pay-in-kind'
debentures (i.e., debt obligations the interest on which may be paid in the
form of obligations of the same type rather than cash), which have
characteristics similar to zero coupon securities.
VARIABLE, FLOATING AND INVERSE FLOATING RATE INSTRUMENTS. Fixed-income
securities may have fixed, variable or floating rates of interest. Variable and
floating rate securities pay interest at rates that are adjusted periodically,
according to a
22
specified formula. A 'variable' interest rate adjusts at predetermined
intervals (e.g., daily, weekly or monthly), while a 'floating' interest rate
adjusts whenever a specified benchmark rate (such as the bank prime lending
rate) changes.
A Fund may invest in fixed-income securities that pay interest at a coupon rate
equal to a base rate, plus additional interest for a certain period of time if
short-term interest rates rise above a predetermined level or 'cap.' The amount
of such an additional interest payment typically is calculated under a formula
based on a short-term interest rate index multiplied by a designated factor.
Leveraged inverse floating rate debt instruments are sometimes known as inverse
floaters. The interest rate on an inverse floater resets in the opposite
direction from the market rate of interest to which the inverse floater is
indexed. An inverse floater may be considered to be leveraged to the extent
that its interest rate varies by a magnitude that exceeds the magnitude of the
change in the index rate of interest. The higher degree of leverage inherent in
inverse floaters is associated with greater volatility in market value, such
that, during periods of rising interest rates, the market values of inverse
floaters will tend to decrease more rapidly than those of fixed rate securities.
STRUCTURED SECURITIES. Structured securities in which GLOBAL DOLLAR GOVERNMENT,
GLOBAL STRATEGIC INCOME and CORPORATE BOND may invest represent interests in
entities organized and operated solely for the purpose of restructuring the
investment characteristics of sovereign debt obligations, with respect to
GLOBAL DOLLAR GOVERNMENT and GLOBAL STRATEGIC INCOME, or foreign government
securities, with respect to CORPORATE BOND. This type of restructuring involves
the deposit with or purchase by an entity, such as a corporation or trust, of
specified instruments (such as commercial bank loans or Brady Bonds) and the
issuance by that entity of one or more classes of structured securities backed
by, or representing interests in, the underlying instruments. The cash flow on
the underlying instruments may be apportioned among the newly issued structured
securities to create securities with different investment characteristics such
as varying maturities, payment priorities and interest rate provisions, and the
extent of the payments made with respect to structured securities is dependent
on the extent of the cash flow on the underlying instruments. Because
structured securities typically involve no credit enhancement, their credit
risk generally will be equivalent to that of the underlying instruments.
Structured securities of a given class may be either subordinated or
unsubordinated to the right of payment of another class. Subordinated
structured securities typically have higher yields and present greater risks
than unsubordinated structured securities. GLOBAL DOLLAR GOVERNMENT may invest
up to 25% of its total assets, and GLOBAL STRATEGIC INCOME and CORPORATE BOND
may invest without limit, in these types of structured securities.
LOAN PARTICIPATIONS AND ASSIGNMENTS. A Fund's investments in loans are expected
in most instances to be in the form of participations in loans and assignments
of all or a portion of loans from third parties. A Fund's investment in loan
participations typically will result in the Fund having a contractual
relationship only with the lender and not with the borrower. A Fund will
acquire participations only if the lender interpositioned between the Fund and
the borrower is a lender having total assets of more than $25 billion and whose
senior unsecured debt is rated investment grade or higher. When a Fund
purchases a loan assignment from a lender it will acquire direct rights against
the borrower on the loan. Because loan assignments are arranged through private
negotiations between potential assignees and potential assignors, however, the
rights and obligations acquired by a Fund as the purchaser of an assignment may
differ from, and be more limited than, those held by the assigning lender. The
assignability of certain sovereign debt obligations, with respect to GLOBAL
DOLLAR GOVERNMENT and GLOBAL STRATEGIC INCOME, or foreign government
securities, with respect to CORPORATE BOND, is restricted by the governing
documentation as to the nature of the assignee such that the only way in which
the Fund may acquire an interest in a loan is through a participation and not
an assignment. A Fund may have difficulty disposing of assignments and
participations because to do so it will have to assign such securities to a
third party. Because there is no liquid market for such securities, such
securities can probably be sold only to a limited number of institutional
investors. The lack of a liquid secondary market may have an adverse effect on
the value of such securities and a Fund's ability to dispose of particular
assignments or participations when necessary to meet its liquidity needs in
response to a specific economic event such as a deterioration in the
creditworthiness of the borrower. The lack of a liquid secondary market for
assignments and participations also may make it more difficult for the Fund to
assign a value to these securities for purposes of valuing the Fund's portfolio
and calculating its net asset value.
GLOBAL DOLLAR GOVERNMENT and GLOBAL STRATEGIC INCOME may invest up to 25%, and
CORPORATE BOND may invest up to 15%, of their total assets, in loan
participations and assignments. The government that is the borrower on the loan
will be considered by a Fund to be the issuer of a loan participation or
assignment for purposes of its fundamental investment policy that it may not
invest 25% or more of its total assets in securities of issuers conducting
their principal business activities in the same industry (i.e., foreign
government).
BRADY BONDS. Brady Bonds are created through the exchange of existing
commercial bank loans to foreign entities for new obligations in connection
with debt restructurings under a plan introduced by former U.S. Secretary of
the Treasury, Nicholas F. Brady (the 'Brady Plan'). Brady Bonds have been
issued only recently, and, accordingly, do not have a long payment history.
They may be collateralized or uncollateralized and issued in various currencies
(although most are U.S. Dollar-denominated) and they are actively traded in the
over-the-counter secondary market.
U.S. Dollar-denominated, collateralized Brady Bonds, which may be fixed-rate
par bonds or floating rate discount bonds, are
23
generally collateralized in full as to principal due at maturity by U.S.
Treasury zero coupon obligations that have the same maturity as the Brady
Bonds. Interest payments on these Brady Bonds generally are collateralized by
cash or securities in an amount that, in the case of fixed rate bonds, is equal
to at least one year of rolling interest payments based on the applicable
interest rate at that time and is adjusted at regular intervals thereafter.
Certain Brady Bonds are entitled to 'value recovery payments' in certain
circumstances, which in effect constitute supplemental interest payments but
generally are not collateralized. Brady Bonds are often viewed as having up to
four valuation components: (i) collateralized repayment of principal at final
maturity, (ii) collateralized interest payments, (iii) uncollateralized
interest payments, and (iv) any uncollateralized repayment of principal at
maturity (these uncollateralized amounts constitute the 'residual risk'). In
the event of a default with respect to collateralized Brady Bonds as a result
of which the payment obligations of the issuer are accelerated, the U.S.
Treasury zero coupon obligations held as collateral for the payment of
principal will not be distributed to investors, nor will such obligations be
sold and the proceeds distributed. The collateral will be held by the
collateral agent to the scheduled maturity of the defaulted Brady Bonds, which
will continue to be outstanding, at which time the face amount of the
collateral will equal the principal payments that would have then been due on
the Brady Bonds in the normal course. In addition, in light of the residual
risk of Brady Bonds and, among other factors, the history of defaults with
respect to commercial bank loans by public and private entities of countries
issuing Brady Bonds, investments in Brady Bonds are to be viewed as speculative.
CONVERTIBLE SECURITIES. Convertible securities include bonds, debentures,
corporate notes and preferred stocks that are convertible into common stock.
Prior to conversion, convertible securities have the same general
characteristics as non-convertible debt securities, which provide a stable
stream of income with generally higher yields than those of equity securities
of the same or similar issuers. The price of a convertible security will
normally vary with changes in the price of the underlying stock, although the
higher yield tends to make the convertible security less volatile than the
underlying common stock. As with debt securities, the market value of
convertible securities tends to decline as interest rates increase and increase
as interest rates decline. While convertible securities generally offer lower
interest or dividend yields than non-convertible debt securities of similar
quality, they enable investors to benefit from increases in the market price of
the underlying common stock. Convertible debt securities that are rated Baa or
lower by Moody's or BBB or lower by S&P, Duff & Phelps or Fitch and comparable
unrated securities may share some or all of the risks of debt securities with
those ratings. For a description of these risks, see 'Risk
Considerations-Investment in Lower-Rated Fixed-Income Securities.'
SHORT SALES. A short sale is effected by selling a security that a Fund does
not own, or if the Fund owns the security, it is not to be delivered upon
consummation of the sale. A short sale is 'against the box' if a Fund owns or
has the right to obtain without payment securities identical to those sold
short. SHORT-TERM U.S. GOVERNMENT and GLOBAL DOLLAR GOVERNMENT each may make
short sales only against the box and only for the purpose of deferring
realization of gain or loss for U.S. federal income tax purposes. In addition,
each of these Funds may not make a short sale if, as a result, more than 10% of
net assets (taken at market value), with respect to GLOBAL DOLLAR GOVERNMENT,
and 10% of total assets, with respect to SHORT-TERM U.S. GOVERNMENT, would be
held as collateral for short sales. If the price of the security sold short
increases between the time of the short sale and the time a Fund replaces the
borrowed security, the Fund will incur a loss; conversely, if the price
declines, the Fund will realize a capital gain. GLOBAL STRATEGIC INCOME may
make a short sale in anticipation that the market price of that security will
decline. When the Fund makes a short sale of a security that it does not own,
it must borrow from a broker-dealer the security sold short and deliver the
security to the broker-dealer upon conclusion of the short sale. The Fund may
be required to pay a fee to borrow particular securities and is often obligated
to pay over any payments received on such borrowed securities. The Fund's
obligation to replace the borrowed security will be secured by collateral
deposited with a broker-dealer qualified as a custodian and will consist of
cash or highly liquid securities similar to those borrowed. Depending on the
arrangements the Fund makes with the broker-dealer from which it borrowed the
security regarding remittance of any payments received by the Fund on such
security, the Fund may not receive any payments (including interest) on its
collateral deposited with the broker-dealer.
If the price of the security sold short increases between the time of the short
sale and the time GLOBAL STRATEGIC INCOME replaces the borrowed security, the
Fund will incur a loss; conversely, if the price declines, the Fund will
realize a short-term capital gain. Any gain will be decreased, and any loss
increased, by the transaction costs described above. Although the Fund's gain
is limited to the price at which it sold the security short, its potential loss
is theoretically unlimited.
In order to defer realization of gain or loss for U.S. federal income tax
purposes, GLOBAL STRATEGIC INCOME may also make short sales 'against the box.'
The Fund may not make a short sale if, as a result, more than 25% of its total
assets would be held as collateral for short sales.
Certain special federal income tax considerations may apply to short sales
entered into by a Fund. See 'Dividends, Distributions and Taxes' in the
relevant Fund's Statement of Additional Information.
REPURCHASE AGREEMENTS. A repurchase agreement arises when a buyer purchases a
security and simultaneously agrees to resell it to the vendor at an agreed-upon
future date, normally a day or a few days later. The resale price is greater
than the purchase price, reflecting an agreed-upon interest rate for the period
the buyer's money is invested in the security. Such
24
agreements permit a Fund to keep all of its assets at work while retaining
'overnight' flexibility in pursuit of investments of a longer-term nature. A
Fund requires continual maintenance of collateral in an amount equal to, or in
excess of, the resale price. If a vendor defaults on its repurchase obligation,
a Fund would suffer a loss to the extent that the proceeds from the sale of the
collateral were less than the repurchase price. If a vendor goes bankrupt, a
Fund might be delayed in, or prevented from, selling the collateral for its
benefit. There is no percentage restriction on any Fund's ability to enter into
repurchase agreements, except that SHORT-TERM U.S. GOVERNMENT may enter into
repurchase agreements on not more than 25% of its total assets. The Funds may
enter into repurchase agreements with member banks of the Federal Reserve
System or 'primary dealers' (as designated by the Federal Reserve Bank of New
York), although LIMITED MATURITY GOVERNMENT, SHORT-TERM MULTI-MARKET,
MULTI-MARKET STRATEGY, NORTH AMERICAN GOVERNMENT INCOME and GLOBAL DOLLAR
GOVERNMENT currently enter into repurchase agreements only with their
custodians and such primary dealers.
REVERSE REPURCHASE AGREEMENTS AND DOLLAR ROLLS. Reverse repurchase agreements
involve sales by a Fund of portfolio assets concurrently with an agreement by
the Fund to repurchase the same assets at a later date at a fixed price. During
the reverse repurchase agreement period, the Fund continues to receive
principal and interest payments on these securities. Generally, the effect of
such a transaction is that a Fund can recover all or most of the cash invested
in the portfolio securities involved during the term of the reverse repurchase
agreement, while it will be able to keep the interest income associated with
those portfolio securities. Such transactions are advantageous only if the
interest cost to a Fund of the reverse repurchase transaction is less than the
cost of otherwise obtaining the cash.
Dollar rolls involve sales by a Fund of securities for delivery in the current
month and the Fund's simultaneously contracting to repurchase substantially
similar (same type and coupon) securities on a specified future date. During
the roll period, a Fund forgoes principal and interest paid on the securities.
A Fund is compensated by the difference between the current sales price and the
lower forward price for the future purchase (often referred to as the 'drop')
as well as by the interest earned on the cash proceeds of the initial sale.
Reverse repurchase agreements and dollar rolls involve the risk that the market
value of the securities a Fund is obligated to repurchase under the agreement
may decline below the repurchase price. In the event the buyer of securities
under a reverse repurchase agreement or dollar roll files for bankruptcy or
becomes insolvent, a Fund's use of the proceeds of the agreement may be
restricted pending a determination by the other party, or its trustee or
receiver, whether to enforce the Fund's obligation to repurchase the securities.
Reverse repurchase agreements and dollar rolls are speculative techniques and
are considered borrowings by the Funds. SHORT-TERM U.S. GOVERNMENT may enter
into reverse repurchase agreements with commercial banks and registered
broker-dealers in order to increase income, in an amount up to 33-1/3% of its
total assets. Under normal circumstances, LIMITED MATURITY GOVERNMENT does not
expect to engage in reverse repurchase agreements and dollar rolls with respect
to greater than 50% of its total assets. Reverse repurchase agreements and
dollar rolls together with any borrowings by GLOBAL DOLLAR GOVERNMENT will not
exceed 33% of its total assets less liabilities (other than amounts borrowed).
GLOBAL STRATEGIC INCOME may enter into reverse repurchase agreements with
commercial banks and registered broker-dealers in order to increase income, in
an amount up to 25% of its total assets. Reverse repurchase agreements and
dollar rolls together with any borrowings by GLOBAL STRATEGIC INCOME will not
exceed 25% of its total assets. See 'Risk Considerations-Effects of Borrowing.'
LOANS OF PORTFOLIO SECURITIES. A Fund may make secured loans of portfolio
securities to brokers, dealers and financial institutions, provided that cash,
liquid high-grade debt securities or bank letters of credit equal to at least
100% of the market value of the securities loaned is deposited and maintained
by the borrower with the Fund. The risks in lending portfolio securities, as
with other extensions of credit, consist of possible loss of rights in the
collateral should the borrower fail financially. In determining whether to lend
securities to a particular borrower, Alliance will consider all relevant facts
and circumstances, including the creditworthiness of the borrower. While
securities are on loan, the borrower will pay the Fund any income earned
thereon and the Fund may invest any cash collateral in portfolio securities,
thereby earning additional income, or receive an agreed upon amount of income
from a borrower who has delivered equivalent collateral. Each Fund will have
the right to regain record ownership of loaned securities or equivalent
securities in order to exercise ownership rights such as voting rights,
subscription rights and rights to dividends, interest or distributions. A Fund
may pay reasonable finders', administrative and custodial fees in connection
with a loan. A Fund will not lend portfolio securities in excess of 25%, with
respect to SHORT-TERM U.S. GOVERNMENT and GLOBAL STRATEGIC INCOME, and 20%,
with respect to each of LIMITED MATURITY GOVERNMENT, MORTGAGE SECURITIES
INCOME, SHORT-TERM MULTI-MARKET, MULTI-MARKET STRATEGY, NORTH AMERICAN
GOVERNMENT INCOME and GLOBAL DOLLAR GOVERNMENT, of its total assets, nor will a
Fund lend portfolio securities to any officer, director, employee or affiliate
of the Fund or Alliance.
ILLIQUID SECURITIES. Subject to any more restrictive applicable investment
policies, none of the Funds will maintain more than 15% of its net assets in
illiquid securities. Illiquid securities generally include (i) direct
placements or other securities that are subject to legal or contractual
restrictions on resale or for which there is no readily available market (e.g.,
when trading in the security is suspended or, in the case of unlisted
securities, when market makers do not exist or will not entertain bids or
25
offers), including many currency swaps and any assets used to cover currency
swaps, (ii) over-the-counter options and assets used to cover over-the-counter
options, and (iii) repurchase agreements not terminable within seven days. Rule
144A securities that have legal or contractual restrictions on resale but have
a readily available market are not deemed illiquid. Alliance will monitor the
liquidity of each Fund's Rule 144A portfolio securities under the supervision
of the Directors of that Fund. A Fund that invests in illiquid securities may
not be able to sell such securities and may not be able to realize their full
value upon sale.
INVESTMENT IN OTHER INVESTMENT COMPANIES. GLOBAL DOLLAR GOVERNMENT may invest
in other investment companies whose investment objectives and policies are
consistent with those of the Fund. Under the 1940 Act, the Fund may invest not
more than 10% of its total assets in securities of other investment companies.
In addition, under the 1940 Act the Fund may not own more than 3% of the total
outstanding voting stock of any investment company and not more than 5% of the
value of the Fund's total assets may be invested in the securities of any
investment company. If the Fund acquired shares in investment companies,
shareholders would bear both their proportionate share of expenses in the Fund
(including management and advisory fees) and, indirectly, the expenses of such
investment companies (including management and advisory fees).
FUTURE DEVELOPMENTS. A Fund may, following written notice to its shareholders,
take advantage of other investment practices that are not currently
contemplated for use by the Fund or are not available but may yet be developed,
to the extent such investment practices are consistent with the Fund's
investment objective and legally permissible for the Fund. Such investment
practices, if they arise, may involve risks that exceed those involved in the
practices described above.
DEFENSIVE POSITION. For temporary defensive purposes, each Fund may invest in
certain types of short-term, liquid, high grade or high quality (depending on
the Fund) debt securities. These securities may include U.S. Government
securities, qualifying bank deposits, money market instruments, prime
commercial paper and other types of short-term debt securities including notes
and bonds. For Funds that may invest in foreign countries, such securities may
also include short-term, foreign-currency denominated securities of the type
mentioned above issued by foreign governmental entities, companies and
supranational organizations. For a complete description of the types of
securities in which a Fund may invest while in a temporary defensive position,
see the Fund's Statement of Additional Information.
PORTFOLIO TURNOVER. Alliance anticipates that the annual turnover rate will not
exceed 300% for SHORT-TERM U.S. GOVERNMENT, SHORT-TERM MULTI-MARKET, NORTH
AMERICAN GOVERNMENT INCOME and GLOBAL DOLLAR GOVERNMENT; 400% for U.S.
GOVERNMENT; 500% for LIMITED MATURITY GOVERNMENT and GLOBAL STRATEGIC INCOME;
and 600% for MORTGAGE SECURITIES INCOME, MULTI-MARKET STRATEGY and CORPORATE
BOND. A 300%, 400%, 500% and 600% annual turnover rate would occur, for
example, when all of the securities in a Fund's portfolio are replaced three,
four, five and six times, respectively, in a period of one year. These rates of
portfolio turnover are greater than those of most other investment companies. A
high rate of portfolio turnover involves correspondingly greater brokerage and
other expenses than a lower rate, which must be borne by the Fund and its
shareholders. High portfolio turnover also may result in the realization of
substantial net short-term capital gains. See 'Dividends, Distributions and
Taxes' in each Fund's Statement of Additional Information.
CERTAIN FUNDAMENTAL INVESTMENT POLICIES
Each Fund has adopted certain fundamental investment policies listed below,
which may not be changed without the approval of its shareholders. Additional
investment restrictions with respect to a Fund are set forth in its Statement
of Additional Information.
SHORT-TERM U.S. GOVERNMENT may not (i) invest more than 5% of its total assets
in the securities of any one issuer (other than U.S. Government securities and
repurchase agreements relating thereto), although up to 25% of the Fund's total
assets may be invested without regard to this restriction, or (ii) invest 25%
or more of its total assets in the securities of any one industry.
U.S. GOVERNMENT may not (i) borrow money except from banks for temporary or
emergency purposes and then only in an amount not exceeding 5% of the value of
its total assets at the time the borrowing is made, (ii) make loans to other
persons, (iii) effect a short sale of any security, (iv) purchase securities on
margin, but it may obtain such short-term credits as may be necessary for the
clearance of purchases and sales of securities, or (v) write, purchase or sell
puts, calls or combinations thereof.
LIMITED MATURITY GOVERNMENT may not (i) invest more than 5% of its total assets
in the securities of any one issuer or own more than 10% of the outstanding
voting securities of such issuer (other than U.S. Government securities),
except that up to 25% of the value of the Fund's total assets may be invested
without regard to the 5% and 10% limitations, (ii) invest 25% or more of its
total assets in securities of companies engaged principally in any one
industry, except that this restriction does not apply to investments in the
mortgage and mortgage-financed industry (in which more than 25% of the value of
the Fund's total assets will, except for temporary defensive positions, be
invested) or U.S. Government securities, (iii) borrow money except from banks
for emergency or temporary purposes in an amount not exceeding 5% of the value
of the total assets of the Fund, except that the Fund may engage in reverse
repurchase agreements and dollar rolls in an amount up to 50% of the Fund's
total assets, and (iv) pledge, hypothecate, mortgage or otherwise encumber its
assets, except to secure permitted borrowings.
MORTGAGE SECURITIES INCOME may not (i) invest more than 5% of the value of its
total assets in the securities of any one issuer (other than U.S. Government
securities), except that up to 25% of the value of the Fund's total assets may
be invested
26
without regard to this limitation, (ii) invest more than 25% of the value of
its total assets in the securities of issuers conducting their principal
business activities in a single industry, except that this limitation shall not
apply to investments in the mortgage and mortgage-financed industry (in which
more than 25% of the value of the Fund's total assets will, except for
temporary defensive positions, be invested) or U.S. Government securities,
(iii) borrow money except from banks for temporary or emergency purposes,
including the meeting of redemption requests which might require the untimely
disposition of securities, borrowing in the aggregate may not exceed 15%, and
borrowing for purposes other than meeting redemptions may not exceed 5% of the
value of the Fund's total assets (including the amount borrowed) less
liabilities (not including the amount borrowed) at the time the borrowing is
made, outstanding borrowings in excess of 5% of the value of the Fund's total
assets will be repaid before any subsequent investments are made, (iv) pledge,
hypothecate, mortgage or otherwise encumber its assets, except in an amount of
not more than 15% of the value of its total assets to secure borrowings for
temporary or emergency purposes and except as provided in (vi) below, provided,
however, that this limitation does not apply to deposits made in connection
with the entering into and holding of interest rate futures contracts, (v)
invest more than 10% of the value of its total assets in the aggregate in
illiquid securities or other illiquid investments and repurchase agreements
maturing in more than seven days, or (vi) lend its portfolio securities if
immediately after such a loan more than 20% of the value of the Fund's total
assets would be subject to such loans.
SHORT-TERM MULTI-MARKET may not (i) invest 25% or more of its total assets in
securities of companies engaged principally in any one industry other than the
banking industry, except that this restriction does not apply to U.S.
Government securities, (ii) borrow money except from banks for temporary or
emergency purposes, including the meeting of redemption requests which might
require the untimely disposition of securities; borrowing in the aggregate may
not exceed 15%, and borrowing for purposes other than meeting redemptions may
not exceed 5% of the value of the Fund's total assets (including the amount
borrowed) less liabilities (not including the amount borrowed) at the time the
borrowing is made; securities will not be purchased while borrowings in excess
of 5% of the value of the Fund's total assets are outstanding, or (iii) pledge,
hypothecate, mortgage or otherwise encumber its assets, except to secure
permitted borrowings.
MULTI-MARKET STRATEGY may not (i) invest 25% or more of its total assets in
securities of companies engaged principally in any one industry other than the
banking industry, except that this restriction does not apply to U.S.
Government securities, (ii) borrow money, except the Fund may, in accordance
with provisions of the 1940 Act, (a) borrow from a bank, if after such
borrowing, there is asset coverage of at least 300% as defined in the 1940 Act,
and (b) borrow for temporary or emergency purposes in an amount not exceeding
5% of the value of the total assets of the Fund, or (iii) pledge, hypothecate,
mortgage or otherwise encumber its assets, except to secure permitted
borrowings.
NORTH AMERICAN GOVERNMENT INCOME may not (i) invest 25% or more of its total
assets in securities of companies engaged principally in any one industry
except that this restriction does not apply to U.S. Government securities, (ii)
borrow money, except that the Fund may, in accordance with provisions of the
1940 Act, (a) borrow from a bank, if after such borrowing, there is asset
coverage of at least 300% as defined in the 1940 Act, and (b) borrow for
temporary or emergency purposes in an amount not exceeding 5% of the value of
the total assets of the Fund, or (iii) pledge, hypothecate, mortgage or
otherwise encumber its assets, except to secure permitted borrowings.
GLOBAL DOLLAR GOVERNMENT may not (i) invest 25% or more of its total assets in
the securities of issuers conducting their principal business activities in any
one industry, except that this restriction does not apply to U.S. Government
securities, (ii) purchase more than 10% of any class of the voting securities
of any one issuer, (iii) borrow money, except the Fund may, in accordance with
provisions of the 1940 Act, (a) borrow from a bank, if after such borrowing,
there is asset coverage of at least 300% as defined in the 1940 Act, and (b)
borrow for temporary or emergency purposes in an amount not exceeding 5% of the
value of the total assets of the Fund, (iv) pledge, hypothecate, mortgage or
otherwise encumber its assets, except to secure permitted borrowings, or (v)
purchase a security if, as a result (unless the security is acquired pursuant
to a plan of reorganization or an offer of exchange), the Fund would own more
than 3% of the total outstanding voting stock of any investment company or more
than 5% of the value of the Fund's net assets would be invested in securities
of any one or more investment companies.
GLOBAL STRATEGIC INCOME may not : (i) borrow money, except the Fund may, in
accordance with provisions of the 1940 Act, (a) borrow from a bank, if after
such borrowing there is asset coverage of at least 300% as defined in the 1940
Act, and (b) borrow for temporary or emergency purposes in an amount not
exceeding 5% of the value of the total assets of the Fund, or (ii) pledge,
hypothecate, mortgage or otherwise encumber its assets, except to secure
permitted borrowings.
CORPORATE BOND may not (i) invest more than 5% of its total assets in the
securities of any one issuer other than U.S. Government securities, or (ii) own
more than 10% of the outstanding voting securities of any issuer.
RISK CONSIDERATIONS
FIXED-INCOME SECURITIES. The value of each Fund's shares will fluctuate with
the value of its investments. The value of each Fund's investments will change
as the general level of interest rates fluctuates. During periods of falling
interest rates, the values of a Fund's securities generally rise. Conversely,
during periods of rising interest rates, the values of a Fund's securities
generally decline. Changes in interest rates have a greater effect on
securities with longer maturities and durations than those with shorter
maturities and durations.
27
In seeking to achieve a Fund's investment objective, there will be times, such
as during periods of rising interest rates, when depreciation and realization
of capital losses on securities in a Fund's portfolio will be unavoidable.
Moreover, medium-and lower-rated securities and non-rated securities of
comparable quality may be subject to wider fluctuations in yield and market
values than higher-rated securities under certain market conditions. Such
fluctuations after a security is acquired do not affect the cash income
received from that security but are reflected in the net asset value of a Fund.
U.S. CORPORATE FIXED-INCOME SECURITIES. The U.S. corporate fixed-income
securities in which GLOBAL DOLLAR GOVERNMENT invests may include securities
issued in connection with corporate restructurings such as takeovers or
leveraged buyouts, which may pose particular risks. Securities issued to
finance corporate restructurings may have special credit risks due to the
highly leveraged conditions of the issuer. In addition, such issuers may lose
experienced management as a result of the restructuring. Finally, the market
price of such securities may be more volatile to the extent that expected
benefits from the restructuring do not materialize. The Fund may also invest in
U.S. corporate fixed-income securities that are not current in the payment of
interest or principal or are in default, so long as Alliance believes such
investment is consistent with the Fund's investment objectives. The Fund's
rights with respect to defaults on such securities will be subject to
applicable U.S. bankruptcy, moratorium and other similar laws.
FOREIGN INVESTMENT. The securities markets of many foreign countries are
relatively small, with the majority of market capitalization and trading volume
concentrated in a limited number of companies representing a small number of
industries. Consequently, a Fund whose investment portfolio includes such
securities may experience greater price volatility and significantly lower
liquidity than a portfolio invested solely in securities of U.S. companies.
These markets may be subject to greater influence by adverse events generally
affecting the market, and by large investors trading significant blocks of
securities, than is usual in the United States. Securities settlements may in
some instances be subject to delays and related administrative uncertainties.
Furthermore, foreign investment in the securities markets of certain foreign
countries is restricted or controlled to varying degrees. These restrictions or
controls may at times limit or preclude investment in certain securities and
may increase the cost and expenses of a Fund. In addition, the repatriation of
investment income, capital or the proceeds of sales of securities from certain
of the countries is controlled under regulations, including in some cases the
need for certain advance government notification or authority, and if a
deterioration occurs in a country's balance of payments, the country could
impose temporary restrictions on foreign capital remittances. A Fund could be
adversely affected by delays in, or a refusal to grant, any required
governmental approval for repatriation, as well as by the application to it of
other restrictions on investment. Investing in local markets may require a Fund
to adopt special procedures or seek local governmental approvals or other
actions, any of which may involve additional costs to a Fund. The liquidity of
a Fund's investments in any country in which any of these factors exists could
be affected and Alliance will monitor the effect of any such factor or factors
on a Fund's investments. Furthermore, transaction costs including brokerage
commissions for transactions both on and off the securities exchanges in many
foreign countries are generally higher than in the U.S.
Issuers of securities in foreign jurisdictions are generally not subject to the
same degree of regulation as are U.S. issuers with respect to such matters as
insider trading rules, restrictions on market manipulation, shareholder proxy
requirements and timely disclosure of information. The reporting, accounting
and auditing standards of foreign countries may differ, in some cases
significantly, from U.S. standards in important respects and less information
may be available to investors in foreign securities than to investors in U.S.
securities. Substantially less information is publicly available about certain
non-U.S. issuers than is available about U.S. issuers.
The economies of individual foreign countries may differ favorably or
unfavorably from the U.S. economy in such respects as growth of gross domestic
product or gross national product, rate of inflation, capital reinvestment,
resource self-sufficiency and balance of payments position. Nationalization,
expropriation or confiscatory taxation, currency blockage, political changes,
government regulation, political or social instability or diplomatic
developments could affect adversely the economy of a foreign country or the
Fund's investments in such country. In the event of expropriation,
nationalization or other confiscation, a Fund could lose its entire investment
in the country involved. In addition, laws in foreign countries governing
business organizations, bankruptcy and insolvency may provide less protection
to security holders such as the Fund than that provided by U.S. laws.
Alliance believes that, except for currency fluctuations between the U.S.
Dollar and the Canadian Dollar, the matters described above are not likely to
have a material adverse effect on NORTH AMERICAN GOVERNMENT INCOME'S
investments in the securities of Canadian issuers or investments denominated in
Canadian issuers or investments denominated in Canadian Dollars. The factors
described above are more likely to have a material adverse effect on the Fund's
investments in the securities of Mexican and other non-Canadian foreign
issuers, including investments in securities denominated in Mexican Pesos or
other non-Canadian foreign currencies. If not hedged, however, currency
fluctuations could affect the unrealized appreciation and depreciation of
Canadian Government securities as expressed in U.S. Dollars.
CURRENCY CONSIDERATIONS. Those Funds that invest some portion of their assets
in securities denominated in, and receive revenues in, foreign currencies will
be adversely affected by reductions in the value of those currencies relative
28
to the U.S. Dollar. These changes will affect a Fund's net assets,
distributions and income. If the value of the foreign currencies in which a
Fund receives income falls relative to the U.S. Dollar between receipt of the
income and the making of Fund distributions, a Fund may be required to
liquidate securities in order to make distributions if the Fund has
insufficient cash in U.S. Dollars to meet the distribution requirements that
the Fund must satisfy to qualify as a regulated investment company for federal
income tax purposes. Similarly, if an exchange rate declines between the time a
Fund incurs expenses in U.S. Dollars and the time cash expenses are paid, the
amount of the currency required to be converted into U.S. Dollars in order to
pay expenses in U.S. Dollars could be greater than the equivalent amount of
such expenses in the currency at the time they were incurred. In light of these
risks, a Fund may engage in certain currency hedging transactions, which
themselves, involve certain special risks. See 'Additional Investment
Practices' above.
SOVEREIGN DEBT OBLIGATIONS. No established secondary markets may exist for many
of the sovereign debt obligations in which GLOBAL DOLLAR GOVERNMENT and GLOBAL
STRATEGIC INCOME will invest. Reduced secondary market liquidity may have an
adverse effect on the market price and the Fund's ability to dispose of
particular instruments when necessary to meet its liquidity requirements or in
response to specific economic events such as a deterioration in the
creditworthiness of the issuer. Reduced secondary market liquidity for certain
sovereign debt obligations may also make it more difficult for the Fund to
obtain accurate market quotations for the purpose of valuing its portfolio.
Market quotations are generally available on many sovereign debt obligations
only from a limited number of dealers and may not necessarily represent firm
bids of those dealers or prices for actual sales.
By investing in sovereign debt obligations, the Fund will be exposed to the
direct or indirect consequences of political, social and economic changes in
various countries. Political changes in a country may affect the willingness of
a foreign government to make or provide for timely payments of its obligations.
The country's economic status, as reflected, among other things, in its
inflation rate, the amount of its external debt and its gross domestic product,
will also affect the government's ability to honor its obligations.
The sovereign debt obligations in which the Fund will invest in many cases
pertain to countries that are among the world's largest debtors to commercial
banks, foreign governments, international financial organizations and other
financial institutions. In recent years, the governments of some of these
countries have encountered difficulties in servicing their external debt
obligations, which led to defaults on certain obligations and the restructuring
of certain indebtedness. Restructuring arrangements have included, among other
things, reducing and rescheduling interest and principal payments by
negotiating new or amended credit agreements or converting outstanding
principal and unpaid interest to Brady Bonds, and obtaining new credit to
finance interest payments. Certain governments have not been able to make
payments of interest on or principal of sovereign debt obligations as those
payments have come due. Obligations arising from past restructuring agreements
may affect the economic performance and political and social stability of those
issuers.
The ability of governments to make timely payments on their obligations is
likely to be influenced strongly by the issuer's balance of payments, including
export performance, and its access to international credits and investments. To
the extent that a country receives payment for its exports in currencies other
than dollars, its ability to make debt payments denominated in dollars could be
adversely affected. To the extent that a country develops a trade deficit, it
will need to depend on continuing loans from foreign governments, multi-lateral
organizations or private commercial banks, aid payments from foreign
governments and on inflows of foreign investment. The access of a country to
these forms of external funding may not be certain, and a withdrawal of
external funding could adversely affect the capacity of a government to make
payments on its obligations. In addition, the cost of servicing debt
obligations can be affected by a change in international interest rates since
the majority of these obligations carry interest rates that are adjusted
periodically based upon international rates.
The Fund is permitted to invest in sovereign debt obligations that are not
current in the payment of interest or principal or are in default so long as
Alliance believes it to be consistent with the Fund's investment objectives.
The Fund may have limited legal recourse in the event of a default with respect
to certain sovereign debt obligations it holds. For example, remedies from
defaults on certain sovereign debt obligations, unlike those on private debt,
must, in some cases, be pursued in the courts of the defaulting party itself.
Legal recourse therefore may be significantly diminished. Bankruptcy,
moratorium and other similar laws applicable to issuers of sovereign debt
obligations may be substantially different from those applicable to issuers of
private debt obligations. The political context, expressed as the willingness
of an issuer of sovereign debt obligations to meet the terms of the debt
obligation, for example, is of considerable importance. In addition, no
assurance can be given that the holders of commercial bank debt will not
contest payments to the holders of securities issued by foreign governments in
the event of default under commercial bank loan agreements.
EFFECTS OF BORROWING. A Fund's loan agreements provide for additional
borrowings and for repayments and reborrowings from time to time, and each Fund
that may borrow expects to effect borrowings and repayments at such times and
in such amounts as will maintain investment leverage in an amount approximately
equal to its borrowing target. The loan agreements provide for a selection of
interest rates that are based on the bank's short-term funding costs in the
U.S. and London markets.
Borrowings by a Fund result in leveraging of the Fund's shares of common stock.
Utilization of leverage, which is usually considered speculative, however,
involves certain risks to a
29
Fund's shareholders. These include a higher volatility of the net asset value
of a Fund's shares of common stock and the relatively greater effect on the net
asset value of the shares. So long as a Fund is able to realize a net return on
its investment portfolio that is higher than the interest expense paid on
borrowings, the effect of leverage will be to cause the Fund's shareholders to
realize a higher current net investment income than if the Fund were not
leveraged. On the other hand, interest rates on U.S. Dollar-denominated and
foreign currency-denominated obligations change from time to time as does their
relationship to each other, depending upon such factors as supply and demand
forces, monetary and tax policies within each country and investor
expectations. Changes in such factors could cause the relationship between such
rates to change so that rates on U.S. Dollar-denominated obligations may
substantially increase relative to the foreign currency-denominated obligations
in which the Fund may be invested. To the extent that the interest expense on
borrowings approaches the net return on a Fund's investment portfolio, the
benefit of leverage to the Fund's shareholders will be reduced, and if the
interest expense on borrowings were to exceed the net return to shareholders, a
Fund's use of leverage would result in a lower rate of return than if a Fund
were not leveraged. Similarly, the effect of leverage in a declining market
could be a greater decrease in net asset value per share than if the Fund were
not leveraged. In an extreme case if a Fund's current investment income were
not sufficient to meet the interest expense on borrowings, it could be
necessary for the Fund to liquidate certain of its investments, thereby
reducing the net asset value of a Fund's shares.
In the event of an increase in rates on U.S. Government securities or other
changed market conditions, to the point where leverage by either MULTI-MARKET
STRATEGY or NORTH AMERICAN GOVERNMENT INCOME could adversely affect the Funds'
shareholders, as noted above, or in anticipation of such changes, either Fund
may increase the percentage of its investment portfolio invested in U.S.
Government securities, which would tend to offset the negative impact of
leverage on Fund shareholders. Either Fund may also reduce the degree to which
it is leveraged by repaying amounts borrowed.
Under the 1940 Act, a Fund is not permitted to borrow unless immediately after
such borrowing there is 'asset coverage,' as that term is defined and used in
the 1940 Act, of at least 300% for all borrowings of the Fund. In addition,
under the 1940 Act, in the event asset coverage falls below 300%, a Fund must
within three days reduce the amount of its borrowing to such an extent that the
asset coverage of its borrowings is at least 300%. Assuming, for example,
outstanding borrowings representing not more than one-third of a Fund's total
assets less liabilities (other than such borrowings), the asset coverage of the
Fund's portfolio would be 300%; while outstanding borrowings representing 25%
of the Fund's total assets less liabilities (other than such borrowings), the
asset coverage of the Fund's portfolio would be 400%. A Fund will maintain
asset coverage of outstanding borrowings of at least 300% and if necessary
will, to the extent possible, reduce the amounts borrowed by making repayments
from time to time in order to do so. Such repayments could require a Fund to
sell portfolio securities at times considered disadvantageous by Alliance. In
the event that a Fund is required to sell portfolio securities in order to make
repayments, such sales of portfolio securities could cause the Fund to incur
related transaction costs and might cause the Fund to realize gains on
securities held for less than three months. Because not more than 30% of a
Fund's gross income may be derived from the sale or disposition of stocks and
securities held for less than three months to maintain the Fund's tax status as
a regulated investment company, such gains would limit the ability of a Fund to
sell other securities held for less than three months that a Fund might wish to
sell in the ordinary course of its portfolio management and thus might
adversely affect the Fund's yield. See 'Dividends, Distributions and Taxes.'
GLOBAL STRATEGIC INCOME may borrow in order to purchase securities or make
other investments. Each of MULTI-MARKET STRATEGY, NORTH AMERICAN GOVERNMENT
INCOME, GLOBAL DOLLAR GOVERNMENT and GLOBAL STRATEGIC INCOME may also borrow to
repurchase its shares or to meet redemption requests. In addition, each Fund
may borrow for temporary purposes (including the purposes mentioned in the
preceding sentence) in an amount not exceeding 5% of the value of the assets of
the Fund. Borrowings for temporary purposes are not subject to the 300% asset
average limit described above. See 'Certain Fundamental Investment Policies.'
SHORT-TERM U.S. GOVERNMENT, MULTI-MARKET STRATEGY, NORTH AMERICAN GOVERNMENT
INCOME, GLOBAL DOLLAR GOVERNMENT and GLOBAL STRATEGIC INCOME may also borrow
through the use of reverse repurchase agreements, and GLOBAL DOLLAR GOVERNMENT
also through the use of dollar rolls to the extent permitted by the 1940 Act.
See 'Investment Objectives and Policies-Reverse Repurchase Agreements and
Dollar Rolls.'
INVESTMENT IN THE BANKING INDUSTRY. Due to the investment policies of
MULTI-MARKET STRATEGY and SHORT-TERM MULTI-MARKET with respect to investments
in the banking industry, those Funds will have greater exposure to the risk
factors which are characteristic of such investments. In particular, the value
of and investment return on each Fund's shares will be affected by economic or
regulatory developments in or related to the banking industry. Sustained
increases in interest rates can adversely affect the availability and cost of
funds for a bank's lending activities, and a deterioration in general economic
conditions could increase the exposure to credit losses. The banking industry
is also subject to the effects of: the concentration of loan portfolios in
particular business such as real estate, energy, agriculture or high
technology-related companies; national and local regulation; and competition
within those industries as well as with other types of financial institutions.
In addition, each Fund's investments in commercial banks located in several
foreign countries are subject to additional risks due to the combination in
such banks of commercial banking and diversified securities
30
activities. As discussed above, however, the Funds will seek to minimize their
exposure to such risks by investing only in debt securities which are
determined to be of high quality.
SECURITIES RATINGS. The ratings of fixed-income securities by S&P, Moody's,
Duff & Phelps and Fitch are a generally accepted barometer of credit risk. They
are, however, subject to certain limitations from an investor's standpoint. The
rating of an issuer is heavily weighted by past developments and does not
necessarily reflect probable future conditions. There is frequently a lag
between the time a rating is assigned and the time it is updated. In addition,
there may be varying degrees of difference in credit risk of securities within
each rating category.
INVESTMENT IN FIXED-INCOME SECURITIES RATED BAA AND BBB. Securities rated Baa
or BBB are considered to have speculative characteristics and share some of the
same characteristics as lower-rated securities, as described below. Sustained
periods of deteriorating economic conditions or of rising interest rates are
more likely to lead to a weakening in the issuer's capacity to pay interest and
repay principal than in the case of higher-rated securities.
INVESTMENT IN LOWER-RATED FIXED-INCOME SECURITIES. Lower-rated securities are
subject to greater risk of loss of principal and interest than higher-rated
securities. They are also generally considered to be subject to greater market
risk than higher-rated securities, and the capacity of issuers of lower-rated
securities to pay interest and repay principal is more likely to weaken than is
that of issuers of higher-rated securities in times of deteriorating economic
conditions or rising interest rates. In addition, lower-rated securities may be
more susceptible to real or perceived adverse economic conditions than
investment grade securities, although the market values of securities rated
below investment grade and comparable unrated securities tend to react less to
fluctuations in interest rate levels than do those of higher-rated securities.
Securities rated Ba or BB are judged to have speculative elements or to be
predominantly speculative with respect to the issuer's ability to pay interest
and repay principal. Securities rated B are judged to have highly speculative
elements or to be predominantly speculative. Such securities may have small
assurance of interest and principal payments. Securities rated Baa by Moody's
are also judged to have speculative characteristics.
The market for lower-rated securities may be thinner and less active than that
for higher-rated securities, which can adversely affect the prices at which
these securities can be sold. To the extent that there is no established
secondary market for lower-rated securities, a Fund may experience difficulty
in valuing such securities and, in turn, the Fund's assets.
Alliance will try to reduce the risk inherent in investment in lower-rated
securities through credit analysis, diversification and attention to current
developments and trends in interest rates and economic and political
conditions. However, there can be no assurance that losses will not occur.
Since the risk of default is higher for lower-rated securities, Alliance's
research and credit analysis are a correspondingly more important aspect of its
program for managing a Fund's securities than would be the case if a Fund did
not invest in lower-rated securities. In considering investments for the Fund,
Alliance will attempt to identify those high-yielding securities whose
financial condition is adequate to meet future obligations, has improved, or is
expected to improve in the future. Alliance's analysis focuses on relative
values based on such factors as interest or dividend coverage, asset coverage,
earnings prospects, and the experience and managerial strength of the issuer.
NON-RATED SECURITIES. Non-rated securities will also be considered for
investment by NORTH AMERICAN GOVERNMENT INCOME, GLOBAL DOLLAR GOVERNMENT and
CORPORATE BOND when Alliance believes that the financial condition of the
issuers of such securities, or the protection afforded by the terms of the
securities themselves, limits the risk to the Fund to a degree comparable to
that of rated securities which are consistent with the Fund's objective and
policies.
NON-DIVERSIFIED STATUS. Each of SHORT-TERM MULTI-MARKET, MULTI-MARKET STRATEGY,
NORTH AMERICAN GOVERNMENT INCOME, GLOBAL DOLLAR GOVERNMENT and GLOBAL STRATEGIC
INCOME is a 'non-diversified' investment company, which means the Fund is not
limited in the proportion of its assets that may be invested in the securities
of a single issuer. However, each Fund intends to conduct its operations so as
to qualify to be taxed as a 'regulated investment company' for purposes of the
Code, which will relieve the Fund of any liability for federal income tax to
the extent its earnings are distributed to shareholders. See 'Dividends,
Distributions and Taxes' in each Fund's Statement of Additional Information. To
so qualify, among other requirements, each Fund will limit its investments so
that, at the close of each quarter of the taxable year, (i) not more than 25%
of the Fund's total assets will be invested in the securities of a single
issuer, and (ii) with respect to 50% of its total assets, not more than 5% of
its total assets will be invested in the securities of a single issuer and the
Fund will not own more than 10% of the outstanding voting securities of a
single issuer. A Fund's investments in U.S. Government securities are not
subject to these limitations. Because each of SHORT-TERM MULTI-MARKET,
MULTI-MARKET STRATEGY, NORTH AMERICAN GOVERNMENT INCOME and GLOBAL DOLLAR
GOVERNMENT is a non-diversified investment company, it may invest in a smaller
number of individual issuers than a diversified investment company, and an
investment in such Fund may, under certain circumstances, present greater risk
to an investor than an investment in a diversified investment company.
Foreign government securities are not treated like U.S. Government securities
for purposes of the diversification tests described in the preceding paragraph,
but instead are subject to these tests in the same manner as the securities of
non-governmental issuers. In this regard sovereign debt obligations issued by
different issuers located in the same country are often treated as issued by a
single issuer for purposes of these diversification tests. Certain issuers of
structured securities
31
and loan participations may be treated as separate issuers for the purposes of
these tests. Accordingly, in order to meet the diversification tests and
thereby maintain its status as a regulated investment company, NORTH AMERICAN
GOVERNMENT INCOME will be required to diversify its portfolio of foreign
government securities in a manner which would not be necessary if the Fund had
made similar investments in U.S. Government securities.
PURCHASE AND SALE OF SHARES
_______________________________________________________________________________
HOW TO BUY SHARES
Each Fund offers multiple classes of shares, of which only the Advisor Class is
offered by this Prospectus. Advisor Class shares of each Fund may be purchased
through your financial representative at net asset value without any initial or
contingent deferred sales charges and without ongoing distribution expenses.
Advisor Class shares may be purchased soley by investors (i) through accounts
established under a fee-based program, sponsored and maintained by a registered
broker-dealer or other financial intermediary and approved by Alliance Fund
Distributors, Inc. ('AFD'), each Fund's principal underwriter, pursuant to
which each investor pays an asset-based fee at an annual rate of at least .50%
of the assets in the investor's account to the broker-dealer or financial
intermediary, or its affiliate or agent, for investment advisory or
administrative services, or (ii) through a self-directed defined contribution
employee benefit plan (e.g., a 401(k) plan) that has at least 1,000
participants or $25 million in assets. The minimum initial investment in each
Fund is $250. The minimum for subsequent investments in each Fund is $50.
Investments of $25 or more are allowed under the automatic investment program
of each Fund and under a 403(b)(7) retirement plan. Share certificates are
issued only upon request. See the Subscription Application and Statements of
Additional Information for more information.
The Funds may refuse any order to purchase Advisor Class shares. In this
regard, the Funds reserve the right to restrict purchases of Advisor Class
shares (including exchanges) when there appears to be evidence of a pattern
of frequent purchases and sales made in response to short-term fluctuations in
share price.
HOW THE FUNDS VALUE THEIR SHARES
The net asset value of Advisor Class shares of a Fund is calculated by dividing
the value of the Fund's net assets allocable to the Advisor Class by the
outstanding shares of the Advisor Class. Shares are valued each day the New
York Stock Exchange (the 'Exchange') is open as of the close of regular trading
(currently 4:00 p.m. Eastern time). The securities in a Fund 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 Fund's
Directors and Trustees believe would accurately reflect fair market value.
HOW TO SELL SHARES
You may 'redeem', i.e., sell your shares in a Fund to the Fund on any day the
Exchange is open, either directly or through your financial representative. The
price you will receive is the net asset value next calculated after the Fund
receives your request in proper form. Proceeds generally will be sent to you
within seven days. However, for shares recently purchased by check or
electronic funds transfer, a Fund will not send proceeds until it is reasonably
satisfied that the check or electronic funds transfer has been collected (which
may take up to 15 days). If you are in doubt what documents are required by
your fee-based program or employee benefit plan, you should contact your
financial representative.
SELLING SHARES THROUGH YOUR FINANCIAL REPRESENTATIVE
Your financial representative must receive your request before 4:00 p.m.
Eastern time, and your financial representative must transmit your request to
the Fund by 5:00 p.m. Eastern time, for you to receive that day's net asset
value. Your financial representative is responsible for furnishing all
necessary documentation to a Fund and may charge you for this service.
SELLING SHARES DIRECTLY TO A FUND
Send a signed letter of instruction or stock power form to Alliance Fund
Services, Inc. ('AFS'), along with certificates, if any, that represent the
shares you want to sell. For your protection, signatures must be guaranteed by
a bank, a member firm of a national stock exchange or other eligible guarantor
institution. Stock power forms are available from your financial
representative, AFS, and many commercial banks. Additional documentation is
required for the sale of shares by corporations, intermediaries, fiduciaries
and surviving joint owners. For details contact:
Alliance Fund Services
P.O. Box 1520
Secaucus, NJ 07096-1520
800-221-5672
Alternatively, a request for redemption of shares for which no stock
certificates have been issued can also be made by telephone to 800-221-5672.
Telephone redemption requests must be made by 4 p.m. Eastern time on a Fund
business day in order to receive that day's net asset value and, except for
certain omnibus accounts, may be made only once in any 30 day period. A
shareholder who has completed the Telephone Transactions section of the
Subscription Application, or the Shareholder Options form obtained from AFS,
can elect to have the proceeds of their redemption sent to their bank via an
electronic funds transfer. Proceeds of telephone redemptions also may be sent
by check to a shareholder's address of record. Except for certain omnibus
accounts, redemption requests by electronic funds transfer may not exceed
$100,000 and redemption requests by check may not exceed $50,000. Telephone
redemption is not available for shares held in nominees or 'street name'
accounts or retirement plan accounts or shares held by a shareholder who has
changed his or her address of record within the previous 30 calendar days.
GENERAL
The sale of shares is a taxable transaction for federal tax purposes. Under
unusual circumstances, a Fund may suspend redemptions or postpone payment for
up to seven days or longer, as permitted by federal securities law. The Funds
reserve the right to close an account that through redemption has remained
below $200 for 90 days. Shareholders will receive 60 days' written notice to
increase the account value before the account is closed.
32
During drastic economic or market developments, you might have difficulty
reaching AFS by telephone, in which event you should issue written instructions
to AFS. AFS is not responsible for the authenticity of telephonic requests to
purchase, sell or exchange shares. AFS will employ reasonable procedures to
verify that telephone requests are genuine, and could be liable for losses
resulting from unauthorized transactions if it failed to do so. Dealers and
agents may charge a commission for handling telephonic requests. The telephone
service may be suspended or terminated at any time without notice.
SHAREHOLDER SERVICES
AFS offers a variety of shareholder services. For more information about these
services or your account, call AFS's toll-free number, 800-221-5672.
HOW TO EXCHANGE SHARES
You may exchange your Advisor Class shares of any other Fund for Advisor Class
shares of other Alliance Mutual Funds (including AFD Exchange Reserves, a money
market fund managed by Alliance). Exchanges of shares are made at the net asset
values next determined, without sales or service charges. Exchanges may be made
by telephone or written request. Telephone exchange requests must be received
by AFS by 4:00 p.m. Eastern time on a Fund business day in order to receive
that day's net asset value.
Please read carefully the prospectus of the mutual fund into which you are
exchanging before submitting the request. Call AFS at 800-221-5672 to exchange
uncertificated shares. An exchange is a taxable capital transaction for federal
tax purposes. The exchange service may be changed, suspended, or terminated on
60 days' written notice.
GENERAL
If you are a Fund shareholder through an account established under a fee-based
program, your fee-based program may impose requirements with respect to the
purchase, sale or exchange of Advisor Class shares of a Fund that are different
from those described in this Prospectus. A transaction fee may be charged by
your financial representative with respect to the purchase, sale or exchange of
Advisor Class shares made through such financial representative.
Each Fund offers three classes of shares other than the Advisor Class, which
are Class A, Class B and Class C. All classes of shares of a Fund have a common
investment objective and investment portfolio. Class A shares are offered with
an initial sales charge and pay a distribution services fee. Class B shares
have a contingent deferred sales charge (a 'CDSC') and also pay a distribution
services fee. Class C shares have no initial sales charge or CDSC but pay a
distribution services fee. Because Advisor Class shares have no initial sales
charge or CDSC and pay no distribution services fee, Advisor Class shares are
expected to have different performance from Class A, Class B or Class C
shares. You may obtain more information about Class A, Class B and Class C
shares, which are not offered by this Prospectus, by contacting AFS by
telephone at 1-800-221-5672 or by contacting your financial representative.
MANAGEMENT OF THE FUNDS
_______________________________________________________________________________
ADVISER
Alliance, which is a Delaware limited partnership with principal offices at
1345 Avenue of the Americas, New York, New York 10105, has been retained under
an advisory agreement (the 'Advisory Agreement') to provide investment advice
and, in general, to conduct the management and investment program of each Fund,
subject to the general supervision and control of the Directors or Trustees of
the Fund.
Alliance is a leading international investment manager supervising client
accounts with assets as of March 1, 1996 totaling more than $156 billion
(of which more than $48 billion represented the assets of investment
companies). Alliance's clients are primarily major corporate employee benefit
funds, public employee retirement systems, investment companies, foundations
and endowment funds. The 50 registered investment companies managed by Alliance
comprising 107 separate investment portfolios currently have over two million
shareholders. As of March 1, 1996, Alliance was retained as an investment
manager for 34 of the Fortune 100 companies.
Alliance Capital Management Corporation ('ACMC'), the sole general partner of,
and the owner of a 1% general partnership interest in, Alliance, 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, which is a wholly-owned subsidiary of The Equitable Companies
Incorporated, a holding company controlled by AXA, a French insurance holding
company. Certain information concerning the ownership and control of Equitable
by AXA is set forth in each Fund's Statement of Additional Information under
'Management of the Fund.'
The following table lists the person or persons who are primarily responsible
for the day-to-day management of each Fund's portfolio, the length of time that
each person has been primarily responsible, and each person's principal
occupation during the past five years.
Principal occupation
Employee; time period; during the past
Fund title with ACMC five years
- -------------------------------------------------------------------------------
Short-Term U.S. Patricia J. Young since 1995 Associated with
Government -Senior Vice President Alliance since
March 1992; prior
thereto, a managing
director and portfolio
manager for Hyperion
Capital since March 1991
and a managing director
with Fischer, Francis,
Trees & Watts
33
Principal occupation
Employee; time period; during the past
Fund title with ACMC five years
- -------------------------------------------------------------------------------
Paul A. Ullman Associated with
since 1995-Vice President Alliance since
March 1992; prior
thereto, a director and
portfolio manager for
Hyperion Capital since
July 1990 and a
Vice President at
Salomon Brothers Inc.
U.S. Government Wayne D. Lyski since 1983 Associated with Alliance
-Executive Vice President
Paul J. DeNoon since Associated with Alliance
January 1992- since January 1992;
Vice President prior thereto, a
Vice President at
Manufacturers
Hanover Trust
Limited Maturity Patricia J. Young (see above)
Government since inception -(see above)
Paul A. Ullman (see above)
since inception-(see above)
Mortgage Securities Patricia J. Young since (see above)
Income March 1992-(see above)
Paul A. Ullman since (see above)
March 1992-(see above)
Short-Term Douglas J. Peebles since Associated with
Multi-Market 1995-Vice President Alliance
Multi-Market Douglas J. Peebles since (see above)
Strategy inception-(see above)
North American Wayne D. Lyski since inception (see above)
Government Income -(see above)
Global Dollar Wayne D. Lyski since inception (see above)
Government -(see above)
Global Strategic Wayne D. Lyski since inception (see above)
Income -(see above)
Douglas J. Peebles since (see above)
inception-(see above)
Corporate Bond Wayne D. Lyski since (see above)
1987-(see above)
Paul J. DeNoon since (see above)
January 1992-(see above)
DISTRIBUTION SERVICES AGREEMENTS
Each Fund has entered into a Distribution Services Agreement (the 'Agreement')
with AFD with respect to Advisor Class shares. The Glass-Steagall Act and other
applicable laws may limit the ability of a bank or other depository institution
to become an underwriter or distributor of securities. However, in the opinion
of the Funds' management, based on the advice of counsel, these laws do not
prohibit such depository institutions from providing services for investment
companies such as the administrative, accounting and other services referred to
in the Agreements. In the event that a change in these laws prevented a bank
from providing such services, it is expected that other service arrangements
would be made and that shareholders would not be adversely affected. The State
of Texas requires that shares of a Fund may be sold in that state only by
dealers or other financial institutions that are registered there as
broker-dealers.
DIVIDENDS, DISTRIBUTIONS AND TAXES
_______________________________________________________________________________
DIVIDENDS AND DISTRIBUTIONS
Dividends on shares of a Fund will be declared on each Fund business day from
the Fund's net investment income. Dividends on shares for Saturdays, Sundays
and holidays will be declared on the previous business day. Each Fund pays
dividends on its shares after the close of business on the twentieth day of
each month or, if such day is not a business day, the first business day
thereafter. At your election (which you may change at least 30 days prior to
the record date for a particular dividend or distribution), dividends and
distributions are paid in cash or reinvested without charge in additional
shares of the same class having an aggregate net asset value as of the payment
date of the dividend or distribution equal to the cash amount thereof.
If you receive an income dividend or capital gains distribution in cash you
may, within 120 days following the date of its payment, reinvest the dividend
or distribution in additional shares of that Fund without charge by returning
to Alliance, with appropriate instructions, the check representing such
dividend or distribution. Thereafter, unless you otherwise specify, you will be
deemed to have elected to reinvest all subsequent dividends and distributions
in shares of that Fund.
Cash dividends can be paid by check or, if the shareholder so elects,
electronically via the ACH network. There is no sales or other charge in
connection with the reinvestment of dividends and capital gains distributions.
While it is the intention of each Fund to distribute to its shareholders
substantially all of each fiscal year's net income and net realized capital
gains, if any, the amount and time of any such dividend or distribution must
necessarily depend upon the realization by such Fund of income and capital
gains from investments. There is no fixed dividend rate, and there can be no
assurance that a Fund will pay any dividends or realize any capital gains.
If you buy shares just before a Fund deducts a distribution from its net asset
value, you will pay the full price for the shares and then receive a portion of
the price back as a taxable distribution.
FOREIGN INCOME TAXES
Investment income received by a Fund from sources within foreign countries may
be subject to foreign income taxes
34
withheld at the source. To the extent that any Fund is liable for foreign
income taxes withheld at the source, each Fund intends, if possible, to operate
so as to meet the requirements of the Code to 'pass through' to the Fund's
shareholders credits for foreign income taxes paid, but there can be no
assurance that any Fund will be able to do so.
U.S. FEDERAL INCOME TAXES
Each Fund intends to qualify to be taxed as a 'regulated investment company'
under the Code. To the extent that a Fund distributes its taxable income and
net capital gain to its shareholders, qualification as a regulated investment
company relieves that Fund of federal income and excise taxes on that part of
its taxable income including net capital gains which it pays out to its
shareholders. Dividends out of net ordinary income and distributions of net
short-term capital gains are taxable to the recipient shareholders as ordinary
income. In the case of corporate shareholders, such dividends from certain
Funds may be eligible for the dividends-received deduction, except that the
amount eligible for the deduction is limited to the amount of qualifying
dividends received by the Fund. A corporation's dividends-received deduction
will be disallowed unless the corporation holds shares in the Fund at least 46
days. Furthermore, the dividends-received deduction will be disallowed 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 each Fund to its shareholders as capital
gains distributions is taxable to the shareholders as long-term capital gains,
irrespective of the length of time a shareholder may have held his or her
stock. Long-term capital gains distributions are not eligible for the
dividends-received deduction referred to above.
Under the current federal tax law the amount of an income dividend or capital
gains distribution declared by a Fund during October, November or December of a
year to shareholders of record as of a specified date in such a month that is
paid during January of the following year is includable in the prior year's
taxable income of shareholders that are calendar year taxpayers.
Any dividend or distribution received by a shareholder on shares of a Fund will
have the effect of reducing the net asset value of such shares by the amount of
such dividend or distribution. Furthermore, a dividend or distribution made
shortly after the purchase of such shares by a shareholder, although in effect
a return of capital to that particular shareholder, would be taxable to him or
her as described above. If a shareholder held shares six months or less and
during that period received a distribution taxable to such shareholder as
long-term capital gain, any loss realized on the sale of such shares during
such six-month period would be a long-term capital loss to the extent of such
distribution.
A dividend or capital gains distribution with respect to shares of a Fund held
by a tax-deferred or qualified plan, such as an individual retirement account,
403(b)(7) retirement plan or corporate pension or profit-sharing plan, will not
be taxable to the plan. Distributions from such plans will be taxable to
individual participants under applicable tax rules without regard to the
character of the income earned by the qualified plan.
Distributions by a Fund may be subject to state and local taxes. U.S.
GOVERNMENT, LIMITED MATURITY GOVERNMENT, MORTGAGE SECURITIES INCOME, SHORT-TERM
MULTI-MARKET, MULTI-MARKET STRATEGY, NORTH AMERICAN GOVERNMENT INCOME and
CORPORATE BOND are qualified to do business in the Commonwealth of Pennsylvania
and, therefore, are subject to the Pennsylvania foreign franchise and corporate
net income tax in respect of their business activities in Pennsylvania.
Accordingly, shares of such Funds are exempt from Pennsylvania personal
property taxes. These Funds anticipate continuing such business activities but
reserve the right to suspend them at any time, resulting in the termination of
the exemptions.
A Fund will be required to withhold 31% of any payments made to a shareholder
if the shareholder has not provided a certified taxpayer identification number
to the Fund, or the Secretary of the Treasury notifies a Fund that a
shareholder has not reported all interest and dividend income required to be
shown on the shareholder's Federal income tax return.
Shareholders will be advised annually as to the federal tax status of dividends
and capital gains distributions made by a Fund for the preceding year.
Shareholders are urged to consult their tax advisers regarding their own tax
situation.
GENERAL INFORMATION
_______________________________________________________________________________
PORTFOLIO TRANSACTIONS
Consistent with the Rules of Fair Practice of the National Association of
Securities Dealers, Inc., and subject to seeking best price and execution, a
Fund may consider sales of its shares as a factor in the selection of dealers
to enter into portfolio transactions with the Fund.
ORGANIZATION
Each of the following Funds is a Maryland corporation organized in the year
indicated: U.S. GOVERNMENT PORTFOLIO and CORPORATE BOND PORTFOLIO (each a
series of Alliance Bond Fund, Inc.) (1973), ALLIANCE LIMITED MATURITY
GOVERNMENT FUND, INC. (1992), ALLIANCE MORTGAGE SECURITIES INCOME FUND, INC.
(1983), ALLIANCE SHORT-TERM MULTI-MARKET TRUST, INC. (1989), ALLIANCE
MULTI-MARKET STRATEGY TRUST, INC. (1991), ALLIANCE NORTH AMERICAN GOVERNMENT
INCOME TRUST, INC. (1992) and ALLIANCE GLOBAL DOLLAR GOVERNMENT FUND, INC.
(1993). Prior to March 1, 1996, ALLIANCE LIMITED MATURITY GOVERNMENT FUND, INC.
was known as Alliance Mortgage Strategy Trust, Inc. Prior to January 4, 1993,
CORPORATE BOND PORTFOLIO was known as Monthly Income Portfolio. ALLIANCE
SHORT-TERM U.S. GOVERNMENT FUND is a series of The Alliance Portfolios, a
Massachusetts business trust that was organized in 1987. Prior to August 2,
1993, The Alliance Portfolios was known as The Equitable Funds and SHORT-TERM
U.S. GOVERNMENT was known as The Equitable Short-Term U.S. Government Fund.
35
It is anticipated that annual shareholder meetings will not be held;
shareholder meetings will be held only when required by federal, or in the case
of the Funds organized as Maryland corporations, state law. Shareholders have
available certain procedures for the removal of Directors or Trustees.
A shareholder in a Fund will be entitled to his or her pro rata share of all
dividends and distributions arising from the Fund's assets and, upon redeeming
shares, will receive the then current net asset value of the Fund represented
by the redeemed shares. The Funds are empowered to establish, without
shareholder approval, additional portfolios, which may have different
investment objectives, and additional classes of shares. If an additional
portfolio or class were established in a Fund, each share of the portfolio or
class would normally be entitled to one vote for all purposes. Generally,
shares of each portfolio and class would vote together as a single class on
matters, such as the election of Directors or Trustees, that affect each
portfolio and class in substantially the same manner. Advisor Class, Class A,
Class B and Class C shares have identical voting, dividend, liquidation and
other rights, except that each class bears its own transfer agency expenses and
each of Class A, Class B and Class C shares bears its own distribution
expenses. Each class of shares votes separately with respect to matters for
which separate class voting is appropriate under applicable law. Shares are
freely transferable, are entitled to dividends as determined by the Directors
and Trustees and, in liquidation of a Fund, are entitled to receive the net
assets of the Fund. Since this Prospectus sets forth information about all the
Funds, it is theoretically possible that a Fund might be liable for any
materially inaccurate or incomplete disclosure in this Prospectus concerning
another Fund. Based on the advice of counsel, however, the Funds believe that
the potential liability of each Fund with respect to the disclosure in this
Prospectus extends only to the disclosure relating to that Fund. Certain
additional matters relating to a Fund's organization are discussed in its
Statement of Additional Information.
PENDING LEGAL PROCEEDINGS INVOLVING NORTH AMERICAN GOVERNMENT INCOME
On July 25, 1995, a Consolidated and Supplemental Class Action Complaint
('Complaint') styled IN RE ALLIANCE NORTH AMERICAN GOVERNMENT INCOME TRUST,
INC. SECURITIES LITIGATION was filed in the United States District Court for
the Southern District of New York against the Fund, Alliance, ACMC, AFD, The
Equitable Companies Incorporated, a parent of Alliance, certain officers of the
Fund, certain current and former directors of the Fund, certain current and
former officers of ACMC and certain directors of ACMC, alleging violations of
federal securities laws, fraud and breach of fiduciary duty in connection with
the Fund's investments in Mexican and Argentine securities. The Complaint seeks
certification of a plaintiff class of all persons who purchased or owned Class
A, B or C shares of the Fund from March 27, 1992 through December 23, 1994. The
Complaint alleges that as of the date of the Complaint, the Fund's losses
exceeded $750,000,000. The Complaint seeks as relief unspecified damages, costs
and attorneys' fees.
The principal allegations of the Complaint are that upon the advice of Alliance
the Fund purchased debt securities issued by the Mexican and Argentine
governments in amounts that were not permitted by the Fund's investment
objective, and that there was no shareholder vote to change the investment
objective to permit purchases in such amounts. The Complaint further alleges
that the decline in the value of the Mexican and Argentine securities held by
the Fund caused the Fund's net asset value to decline to the detriment of the
Fund's shareholders.
On September 26, 1995, defendants jointly filed a motion to dismiss the
Complaint in its entirety. The Fund and Alliance believe that the allegations
in the Complaint are without merit and intend to vigorously defend against
these claims.
REGISTRAR, TRANSFER AGENT AND DIVIDEND-DISBURSING AGENT
AFS, an indirect wholly-owned subsidiary of Alliance, located at 500 Plaza
Drive, Secaucus, New Jersey 07094, acts as each Fund's registrar, transfer
agent and dividend-disbursing agent for a fee based upon the number of
shareholder accounts maintained for the Fund.
PRINCIPAL UNDERWRITER
AFD, an indirect wholly-owned subsidiary of Alliance, located at 1345 Avenue of
the Americas, New York, New York 10105, is the principal underwriter of shares
of the Funds.
PERFORMANCE INFORMATION
From time to time, the Funds advertise their 'yield' and 'total return,' which
are computed separately for each class of shares, including Advisor Class
shares. A Fund's yield for any 30-day (or one-month) period is computed by
dividing the net investment income per share earned during such period by the
maximum public offering price per share on the last day of the period, and then
annualizing such 30-day (or one-month) yield in accordance with a formula
prescribed by the Commission which provides for compounding on a semi-annual
basis. A Fund may also state in sales literature an 'actual distribution rate'
for each class which is computed in the same manner as yield except that actual
income dividends declared per share during the period in question are
substituted for net investment income per share. The actual distribution rate
is computed separately for each class of shares, including Advisor Class
shares. Advertisements of a Fund's total return disclose its average annual
compounded total return for the periods prescribed by the Commission. A Fund's
total return for each such period is computed by finding, through the use of a
formula prescribed by the Commission, the average annual compounded rate of
return over the period that would equate an assumed initial amount invested to
the value of the investment at the end of the period. For purposes of computing
total return, income dividends and capital gains distributions paid on shares
of a Fund are assumed to have been reinvested when paid and the maximum sales
charges applicable to
36
purchases and redemptions of a Fund's shares are assumed to have been paid. A
Fund's advertisements may quote performance rankings or ratings of a Fund by
financial publications or independent organizations such as Lipper Analytical
Services, Inc. and Morningstar, Inc. or compare a Fund's performance to various
indices.
ADDITIONAL INFORMATION
This Prospectus and the Statements of Additional Information, which have been
incorporated by reference herein, do not contain all the information set forth
in the Registration Statements filed by the Funds with the Commission under the
Securities Act. Copies of the Registration Statements may be obtained at a
reasonable charge from the Commission or may be examined, without charge, at
the offices of the Commission in Washington, D.C.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY STATE IN WHICH SUCH
OFFERING MAY NOT LAWFULLY BE MADE.
THIS PROSPECTUS IS INTENDED TO CONSTITUTE AN OFFER BY EACH FUND ONLY OF THE
SECURITIES OF WHICH IT IS THE ISSUER AND IS NOT INTENDED TO CONSTITUTE AN OFFER
BY ANY FUND OF THE SECURITIES OF ANY OTHER FUND WHOSE SECURITIES ARE ALSO
OFFERED BY THIS PROSPECTUS. NO FUND INTENDS TO MAKE ANY REPRESENTATION AS TO
THE ACCURACY OR COMPLETENESS OF THE DISCLOSURE IN THIS PROSPECTUS RELATING TO
ANY OTHER FUND. SEE 'GENERAL INFORMATION-ORGANIZATION.'
37
APPENDIX A: BOND RATINGS
_______________________________________________________________________________
MOODY'S INVESTORS SERVICE, INC.
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 bonds 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 larger 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 payment 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.
Caa-Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.
Ca-Bonds which are rated Ca represent obligations which are speculative in a
high degree. Such issues are often in default or have other marked shortcomings.
C-Bonds which are rated C are the lowest rated class of bonds and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing.
Absence of Rating-When no rating has been assigned or where a rating has been
suspended or withdrawn, it may be for reasons unrelated to the quality of the
issue.
Should no rating be assigned, the reason may be one of the following:
1. An application for rating was not received or accepted.
2. The issue or issuer belongs to a group of securities or companies that are
not rated as a matter of policy.
3. There is a lack of essential data pertaining to the issue or issuer.
4. The issue was privately placed, in which case the rating is not published
in Moody's publications.
Suspension or withdrawal may occur if new and material circumstances arise, the
effects of which preclude satisfactory analysis; if there is no longer
available reasonable up-to-date data to permit a judgment to be formed; if a
bond is called for redemption; or for other reasons.
Note-Moody's applies numerical modifiers, 1, 2 and 3 in each generic rating
classification from Aa through B in its corporate bond rating system. The
modifier 1 indicates that the security ranks in the higher end of its generic
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 generic rating
category.
STANDARD & POOR'S RATINGS SERVICES
AAA-Debt rated AAA has the highest rating assigned by S&P. 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 highest 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 in higher rated categories.
BB, B, CCC, CC, C-Debt rated BB, B, CCC, CC and C is regarded as having
predominantly speculative characteristics with respect to capacity to pay
interest and repay principal. BB indicates the least degree of speculation and
CCC the highest. While such debt will likely have some quality and protective
characteristics, these are outweighed by large uncertainties or major exposures
to adverse conditions.
A-1
CI-The rating CI is reserved for income bonds on which no interest is being
paid.
D-Debt rated D is in payment default. The D rating category is used when
interest payments or principal payments are not made on the date due even if
the applicable grace period has not expired, unless S&P believes that such
payments will be made during such grace period. The D rating also will be used
upon the filing of a bankruptcy petition if debt service payments are
jeopardized.
Plus (+) or Minus (-)-The ratings from AA to CCC may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.
NR-Not rated.
DUFF & PHELPS CREDIT RATING CO.
AAA-Highest credit quality. The risk factors are negligible, being only
slightly more than for risk-free U.S. Treasury debt.
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.
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 fluctutate 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 or interest. 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.
FITCH INVESTORS SERVICE, INC.
AAA-Bonds considered to be investment grade and of the highest credit quality.
The obligor has an exceptionally strong ability to pay interest and repay
principal, which is unlikely to be affected by reasonably foreseeable events.
AA-Bonds considered to be investment grade and of very high credit quality. The
obligor's ability to pay interest and repay principal is very strong, although
not quite as strong as bonds rated AAA. Because bonds rated in the AAA and AA
categories are not significantly vulnerable to foreseeable future developments,
short-term debt of these issuers is generally rated F- 1+.
A-Bonds considered to be investment grade and of high credit quality. The
obligor's ability to pay interest and repay principal is considered to be
strong, but may be more vulnerable to adverse changes in economic conditions
and circumstances than bonds with higher ratings.
BBB-Bonds considered to be investment grade and of satisfactory credit quality.
The obligor's ability to pay interest and repay principal is considered to be
adequate. Adverse changes in economic conditions and circumstances, however,
are more likely to have adverse impact on these bonds, and therefore impair
timely payment. The likelihood that the ratings of these bonds will fall below
investment grade is higher than for bonds with higher ratings.
BB-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-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-Bonds have certain identifiable characteristics which, if not remedied, may
lead to default.
The ability to meet obligations requires an advantageous business and economic
environment.
CC-Bonds are minimally protected. Default in payment of interest and/or
principal seems probable over time.
C-Bonds are in imminent default in payment of interest or principal.
DDD, DD, D-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 (+) Minus (-)-Plus and minus signs are used with a rating symbol to
indicate the relative position of a credit within the rating category. Plus and
minus signs, however, are not used in the AAA, DDD, DD or D categories.
NR-Indicates that Fitch does not rate the specific issue.
A-2
APPENDIX B: GENERAL INFORMATION ABOUT CANADA, MEXICO AND ARGENTINA
_______________________________________________________________________________
GENERAL INFORMATION ABOUT CANADA
Canada consists of a federation of ten Provinces and two federal territories
(which generally fall under federal authority) with a constitutional division
of powers between the federal and Provincial governments. The Parliament of
Canada has jurisdiction over all areas not assigned exclusively to the
Provincial legislatures, and has jurisdiction over such matters as the federal
public debt and property, the regulation of trade and commerce, currency and
coinage, banks and banking, national defense, the postal services, navigation
and shipping and unemployment insurance.
The Canadian economy is based on the free enterprise system, with business
organizations ranging from small owner-operated businesses to large
multinational corporations. Manufacturing and resource industries are large
contributors to the country's economic output, but as in many other highly
developed countries, there has been a gradual shift from a largely
goods-producing economy to a predominantly service-based one. Agriculture and
other primary production play a small but key role in the economy. Canada is
also an exporter of energy to the United States in the form of natural gas (of
which Canada has substantial reserves) and hydroelectric power, and has
significant mineral resources.
Canadian Dollars are fully exchangeable into U.S. Dollars without foreign
exchange controls or other legal restriction. Since the major developed-country
currencies were permitted to float freely against one another, the range of
fluctuation in the U.S. Dollar/Canadian Dollar exchange rate has been narrower
than the range of fluctuation between the U.S. Dollar and most other major
currencies. During the last several years, Canada has experienced a weakening
of its currency. In January 1995, the Canadian Dollar fell to a nine-year low
against the U.S. Dollar, decreasing in value compared to the U.S. Dollar by
approximately 25% from October 1991, but from January 20, 1995, through
February 15, 1996, the Canadian Dollar increased in value by approximately 3.4%
against the U.S. Dollar. The range of fluctuation that occurred in the past is
not necessarily indicative of the range of fluctuation that will occur in the
future. Future rates of exchange cannot be accurately predicted.
GENERAL INFORMATION ABOUT THE UNITED MEXICAN STATES
The United Mexican States ('Mexico') is a nation formed by 31 states and a
Federal District (Mexico City). The Political Constitution of Mexico, which
took effect on May 1, 1917, established Mexico as a Federal Republic and
provides for the separation of executive, legislative and judicial branches.
The President and the members of the General Congress are elected by popular
vote.
While in recent years the Mexican economy has experienced improvement in a
number of areas, including seven consecutive years (1987-1994) of growth in
gross domestic product and a substantial reduction in the rate of inflation and
in public sector financial deficit, beginning in 1994, Mexico has experienced
an economic crisis that led to the devaluation of the Peso in December 1994.
Much of the past improvement in the Mexican economy has been attributable to a
series of economic policy initiatives initiated by the Mexican government over
the past decade, which seek to modernize and reform the Mexican economy,
control inflation, reduce the financial deficit, increase public revenues
through the reform of the tax system, establish a competitive and stable
currency exchange rate, liberalize trade restrictions and increase investment
and productivity, while reducing the government's role in the economy. In this
regard, the Mexican government has been proceeding with a program for
privatizing certain state owned enterprises, developing and modernizing the
securities markets, increasing investment in the private sector and permitting
increased levels of foreign investment. The recent adoption by Canada, the
United States and Mexico of the North American Free Trade Agreement could also
contribute to the growth of the Mexican economy.
In 1994 Mexico faced internal and external conditions that resulted in an
economic crisis that continues to affect the Mexican economy adversely. Growing
trade and current account deficits, which could no longer be financed by
inflows of foreign capital, were factors contributing to the crisis. A
weakening economy and unsettling political and social developments caused
investors to lose confidence in the Mexican economy. This resulted in a large
decline in foreign reserves followed by a sharp and rapid devaluation of the
Mexican Peso. The ensuing economic and financial crisis resulted in higher
inflation and domestic interest rates, a contraction in real gross domestic
product and a liquidity crisis.
In response to the adverse economic conditions that developed at the end of
1994, the Mexican government instituted a new economic program; and a new
social accord among the government, business and labor sectors of the country
was entered into in an effort to stabilize the economy and the financial
markets. To help relieve Mexico's liquidity crisis and restore financial
stability to Mexico's economy, the Mexican government also obtained financial
assistance from the United States, other countries and certain international
agencies conditioned upon the implementation and continuation of the economic
reform program.
While the Mexican economy has stabilized, it is still in a recession and
suffers from high inflation and high interest rates. In October 1995, the
Mexican government announced a new accord designed to encourage economic growth
and reduce inflation. It cannot be accurately predicted whether this accord
will achieve its purpose. Mexico's economy may also be influenced by
international economic conditions, particularly those in the United States, and
by world prices for oil and other commodities. The recovery of the economy will
require
B-1
continued economic and fiscal discipline as well as stable political and social
conditions. There is no assurance that Mexico's economic policy initiatives
will be successful or that succeeding administrations will continue these
initiatives.
In August 1976, the Mexican government established a policy of allowing the
Mexican Peso to float against the U.S. Dollar and other currencies. Under this
policy, the value of the Mexican Peso consistently declined against the U.S.
Dollar. Under economic policy initiatives implemented since December 1987, the
Mexican government introduced a series of schedules allowing for the gradual
devaluation of the Mexican Peso against the U.S. Dollar. These gradual
devaluations continued until December 1994. On December 20, 1994, the Mexican
government announced a new policy that would allow a more substantial yet still
controlled devaluation of the Mexican Peso. On December 22, 1994, the Mexican
government announced that it would not continue with the policy announced two
days earlier and would instead permit the Peso to float against other
currencies, resulting in a continued decline against the U.S. Dollar. From
December 22, 1994 through February 15, 1996, the Mexican Peso decreased in
value compared to the U.S. Dollar by approximately 60%.
In 1982, Mexico imposed strict foreign exchange controls which shortly
thereafter were relaxed and were eliminated in 1991. There is no assurance that
future regulatory actions in Mexico would not affect the Fund's ability to
obtain U.S. Dollars in exchange for Mexican Pesos.
GENERAL INFORMATION ABOUT THE REPUBLIC OF ARGENTINA
The Republic of Argentina ('Argentina') consists of 23 provinces and the
federal capital of Buenos Aires. Its federal constitution provides for an
executive branch headed by a President, a legislative branch and a judicial
branch. Each province has its own constitution, and elects its own governor,
legislators and judges, without the intervention of the federal government.
The military has intervened in the political process on several occasions since
the 1930's and has ruled the country for 22 of the past 62 years. The most
recent military government ruled the country from 1976 to 1983. Four
unsuccessful military uprisings have occurred since 1983, the most recent in
December 1990.
Shortly after taking office in 1989, the country's current President adopted
market-oriented and reformist policies, including a large privatization
program, a reduction in the size of the public sector and an opening of the
economy to international competition.
In the decade prior to the current announcement of a new economic plan in March
1991, the Argentine economy was characterized by low and erratic growth,
declining investment rates and rapidly worsening inflation. Despite its
strengths, which include a well-balanced natural resource base and a high
literacy rate, the Argentine economy failed to respond to a series of economic
plans in the 1980's. The Economy Minister's plan represented a pronounced
departure from its predecessors in calling for raised revenues, reduced
expenditures and a reduced public deficit. The extensive privatization program
commenced in 1989 was accelerated, the domestic economy deregulated and opened
up to foreign trade and the frame-work for foreign investment reformed. As a
result of the economic stabilization reforms, gross domestic product has
increased and inflation has decreased.
Significant progress was also made in 1992 in rescheduling Argentina's debt
with both external and domestic creditors, which improved fiscal cash flows in
the medium terms and allowed a return to voluntary credit markets. Further
reforms are currently being implemented in order to sustain and continue the
progress to date. There is no assurance that Argentina's economic policy
initiatives will be successful or that succeeding administrations will continue
these initiatives.
In 1995 economic policy was directed toward the effects of the Mexican currency
crisis. The Mexican currency crisis led to a run on bank deposits, which was
brought under control by a series of measures designed to strengthen the
financial system. The measures included the 'dollarization' of banking
reserves, the establishment of two trust funds, and the implementation of
limited deposit insurance.
In 1991 the Argentine government enacted currency reforms, which required the
domestic currency to be fully backed by foreign exchange reserves, in an effort
to make the Argentine Peso fully convertible into the U.S. Dollar at a rate of
one to one.
The Argentine Peso has been the Argentine currency since January 1, 1992. Since
that date, the rate of exchange from the Argentine Peso to the U.S. Dollar has
remained approximately one to one. The fixed exchange rate has been
instrumental in stabilizing the economy, but has not reduced pressures from a
slow-growth economy and record unemployment. It is not clear that the
government will be able to resist pressure to devalue the currency. However,
the historic range is not necessarily indicative of fluctuations that may occur
in the exchange rate over time and future rates of exchange cannot be
accurately predicted. The Argentine foreign exchange market was highly
controlled until December 1989, when a free exchange rate was established for
all foreign currency transactions. Argentina has eliminated restrictions on
foreign direct investment and capital repatriation. On September 8, 1993,
legislation was adopted abolishing previous requirements of a three-year
waiting period for capital repatriation. Under the new legislation, foreign
investors will be permitted to remit profits at any time.
B-2
<PAGE>
(LOGO) THE ALLIANCE PORTFOLIOS-
Alliance Short-Term
U.S. Government 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
(Advisor Class)
June [ ], 1996
This Statement of Additional Information relating to Advisor
Class shares of the Fund is not a prospectus and should be read
in conjunction with the Fund's current Prospectus relating to
Advisor Class shares. A copy of the Fund's Prospectus relating to
Advisor Class shares may be obtained by contacting Alliance Fund
Services, Inc. at the address or telephone numbers shown above.
TABLE OF CONTENTS
PAGE
INVESTMENT POLICIES AND RESTRICTIONS. . . . . . . . . . . . .
ADDITIONAL INVESTMENT TECHNIQUES OF THE FUND. . . . . . . . .
INVESTMENT RESTRICTIONS . . . . . . . . . . . . . . . . . . .
MANAGEMENT OF THE FUND. . . . . . . . . . . . . . . . . . . .
PORTFOLIO TRANSACTIONS. . . . . . . . . . . . . . . . . . . .
EXPENSES OF THE FUND. . . . . . . . . . . . . . . . . . . . .
PURCHASE OF SHARES. . . . . . . . . . . . . . . . . . . . . .
REDEMPTION AND REPURCHASE OF SHARES . . . . . . . . . . . . .
SHAREHOLDER SERVICES. . . . . . . . . . . . . . . . . . . . .
NET ASSET VALUE . . . . . . . . . . . . . . . . . . . . . . .
DIVIDENDS, DISTRIBUTIONS AND TAXES. . . . . . . . . . . . . .
GENERAL INFORMATION . . . . . . . . . . . . . . . . . . . . .
FINANCIAL STATEMENTS. . . . . . . . . . . . . . . . . . . . .
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS . . . . . . . . . . . . . .
APPENDIX. . . . . . . . . . . . . . . . . . . . . . . . . . A-1
___________________
(R) This registered service mark used under license from the
owner, Alliance Capital Management, L.P.
<PAGE>
________________________________________________________________
INVESTMENT POLICIES AND RESTRICTIONS
________________________________________________________________
Incorporated by reference from the section "Description
of the Fund" contained in the Statement of Additional Information
of Alliance Short-Term U.S. Government Fund (the "Fund"), a
series of The Alliance Portfolio (the "Trust"), dated November 1,
1995 as filed with the Securities and Exchange Commission (the
"SEC") pursuant to Rule 497(c) on November 13, 1995, file nos.
33-12988 and 811-05088 (the "Rule 497 SAI").
Capitalized terms used herein that are not otherwise
defined herein are used as defined in the Rule 497 SAI.
________________________________________________________________
ADDITIONAL INVESTMENT TECHNIQUES OF THE FUND
________________________________________________________________
Incorporated by reference from the section "Additional
Investment Techniques of the Fund" contained in the Rule 497 SAI.
________________________________________________________________
INVESTMENT RESTRICTIONS
________________________________________________________________
Incorporated by reference from the section "Investment
Restrictions" contained in the Rule 497 SAI.
________________________________________________________________
MANAGEMENT OF THE FUND
________________________________________________________________
Incorporated by reference from the section "Management
of the Fund" contained in the Rule 497 SAI, except for the
second, third and fourth paragraphs of the sub-section "Adviser"
and the second, third and fourth paragraphs of the sub-section
"Officers", which are restated as set forth below:
Adviser
The Adviser is a leading international investment
manager supervising client accounts with assets as of March 1,
1996 of more than $156 billion (of which more than $48 billion
represented the assets of investment companies). The Adviser's
clients are primarily major corporate employee benefit funds,
public employee retirement systems, investment companies,
2
<PAGE>
foundations and endowment funds and included, as of March 1,
1996, 34 of the FORTUNE 100 Companies. As of that date, the
Adviser and its subsidiaries employed approximately 1,350
employees who operated out of domestic offices and the overseas
offices of subsidiaries in Bombay, Istanbul, London, Sydney,
Tokyo, Toronto, Bahrain, Luxembourg and Singapore. The 50
registered investment companies comprising 107 separate
investment portfolios managed by the Adviser currently have more
than two million shareholders.
Alliance Capital Management Corporation, the sole
general partner of, and the owner of a 1% general partnership
interest in, the Adviser, is an indirect wholly-owned subsidiary
of The Equitable Life Assurance Society of the United States
("Equitable"), one of the largest life insurance companies in the
United States and a wholly-owned subsidiary of The Equitable
Companies Incorporated ("ECI"), a holding company controlled by
AXA, a French insurance holding company. As of March 1, 1996,
ACMC, Inc. and Equitable Capital Management Corporation, each a
wholly-owned direct or indirect subsidiary of Equitable, together
with Equitable, owned in the aggregate approximately 57.6% of the
issued and outstanding units representing assignments of
beneficial ownership of limited partnership interests in the
Adviser ("Units"). As of March 1, 1996, approximately 32.4% and
10.0% 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 Trustees of the Trust.
AXA and its subsidiaries own approximately 63.9% of the
issued and outstanding shares of capital stock of ECI. AXA is
the holding company for an international group of insurance and
related financial services companies. AXA's insurance operations
include activities in life insurance, property and casualty
insurance and reinsurance. The insurance operations are diverse
geographically, with activities in France, the United States,
Australia, the United Kingdom, Canada and other countries,
principally in Europe and the Asia Pacific area. AXA is also
engaged in asset management, investment banking, securities
trading, brokerage, real estate and other financial services
activities in the United States, Europe and the Asia Pacific
area. Based on information provided by AXA, as of March 1, 1996,
42.1% of the issued ordinary shares (representing 53.4% of the
voting power) of AXA were owned by Midi Participations, a French
holding company ("Midi"). The shares of Midi were, in turn,
owned 61.4% (representing 62.5% of the voting power) by Finaxa, a
French holding company, and 38.6% (representing 37.5% of the
voting power) by subsidiaries of Assicurazioni Generali S.p.A.,
an Italian corporation (one of which, Belgica Insurance Holding
S.A., a Belgian corporation, owned 30.8%, representing 33.1% of
the voting power). As of March 1, 1996, 61.1% of the voting
shares (representing 73.4% of the voting power) of Finaxa were
3
<PAGE>
owned by five French mutual insurance companies (the "Mutuelles
AXA") (one of which, AXA Assurances I.A.R.D. Mutuelle, owned
34.7% of the voting shares representing 40.4% of the voting
power), and 25.5% of the voting shares (representing 16% of the
voting power) of Finaxa were owned by Banque Paribas, a French
bank. Including the ordinary shares owned by Midi, as of
March 1, 1996, the Mutuelles AXA directly or indirectly owned 51%
of the issued ordinary shares (representing 64.7% of the voting
power) of AXA. Acting as a group, the Mutuelles AXA control AXA,
Midi and Finaxa.
OFFICERS
John D. Carifa, President, see biography above.
Edmund P. Bergan, Jr., 45, 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, 45, 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.
Vincent S. Noto, 31, Controller and Chief Accounting
Officer, is an Assistant Vice President of Alliance Fund
Services, Inc. His address is 500 Plaza Drive, Secaucus, New
Jersey 07094.
Melvin J. Oliver, 38, Assistant Controller, is an
Accounting Manager of Alliance Fund Services, Inc. His address is
500 Plaza Drive, Secaucus, New Jersey 07094.
Bruce W. Calvert, 49, Vice President, is the Vice
Chairman and Chief Investment Officer of Alliance Capital
Management Corporation, the general partner of Alliance Capital
Management L.P. His address is 1345 Avenue of the Americas, New
York, NY 10105.
Kathleen A. Corbet, 36, Vice President, is, since July
23, 1993, Senior Vice President of Alliance Capital Management
Corporation, general partner of Alliance Capital Management L.P.
She was formerly employed by Equitable Capital. Her address is
1345 Avenue of the Americas, New York, NY 10105.
Barbara J. Krumsiek, 43, 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.
4
<PAGE>
Wayne D. Lyski, 54, Vice President, is Executive Vice
President of Alliance Capital Management Corporation, the general
partner of Alliance Capital Management L.P. His address is 1345
Avenue of the Americas, New York, NY 10105.
The aggregate compensation paid to each of the Trustees
by the Fund during the fiscal year ended August 31,1995 and the
aggregate compensation paid to each of the Trustees during
calendar year 1995 by the Trust and by all of the registered
investment companies to which the Adviser provides investment
advisory services (collectively, the "Alliance Fund Complex") and
the total number of registered investment companies in the
Alliance Fund Complex with respect to which each Trustee serves
as a director or trustee, are set forth below. Neither the Fund
nor any Fund in the Alliance Fund Complex provides compensation
in the form of pension or retirement benefits to any of its
trustees or directors. Each of the Trustees is a trustee or
director of one or more other registered investment companies in
the Alliance Fund Complex.
Total Number
of Funds in
the Alliance
Total Fund Complex,
Compensation Including the
From the Fund, as to
Alliance Fund which the
Aggregate Complex, Director is a
Name of Trustee Compensation Including the Director or
of the Fund From the Fund Fund* Trustee
John D. Carifa $ -- $ -0- 49
Alberta B. Arthurs $4,800 $ 24,000 5
Ruth Block $4,800 $159,000 36
Richard W. Couper $4,800 $ 24,000 5
Brenton W. Harries $4,800 $ 24,000 5
Donald J. Robinson $4,800 $ 24,000 5
_____________________
* There are 107 investment companies or portfolios thereof in
the Alliance Fund Complex.
As of April 5, 1996, 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 the Fund or of the
Trust as a whole.
5
<PAGE>
________________________________________________________________
PORTFOLIO TRANSACTIONS
________________________________________________________________
Incorporated by reference from the section "Portfolio
Transactions" contained in the Rule 497 SAI.
________________________________________________________________
EXPENSES OF THE FUND
________________________________________________________________
Distribution Arrangements
The Trust has entered into a Distribution Services
Agreement (the "Agreement") with Alliance Fund Distributors,
Inc., the Fund's principal underwriter (the "Principal
Underwriter"), to permit the Principal Underwriter to distribute
the Fund's Advisor Class shares.
The Agreement was amended as of [ ], 1996 to
permit the distribution of the Advisor Class shares. The
amendment to the Agreement was approved by the vote of the
Trustees on [ ], 1996.
The Agreement will continue in effect for successive
twelve-month periods relating to Advisor Class shares) provided,
however, that such continuance is specifically approved at least
annually by the Trustees of the Trust or by vote of the holders
of a majority of the outstanding voting securities (as defined in
the 1940 Act) of that class, and in either case, by a majority of
the Trustees of the Trust who are not parties to the Agreement or
interested persons, as defined in the 1940 Act, of any such party
(other than as Trustees of the Trust). All amendments to the
Agreement must be approved by a vote of the Trustees of the Fund.
Transfer Agency Arrangements
Alliance Fund Services, Inc., an indirect wholly-owned
subsidiary of the Adviser, receives a transfer agency fee per
account holder of each Class A, Class B, Class C and Advisor
Class share of the Fund, plus reimbursement for out-of-pocket
expenses. [For the fiscal year ended __________, the Fund paid
Alliance Fund Services, Inc. $__________ for transfer agency
services.]
6
<PAGE>
________________________________________________________________
PURCHASE OF SHARES
________________________________________________________________
The following information supplements that set forth in
the Fund's Prospectus under the heading "Purchase and Sale of
Shares -- How To Buy Shares; -- How to Sell Shares; -- and
Shareholder Services."
General
If you are a Fund shareholder through an account
established under a fee-based program, your fee-based program may
impose requirements with respect to the purchase, sale or
exchange of Advisor Class shares of the Fund that are different
from those described in the Prospectus and this Statement of
Additional Information. A transaction fee may be charged by your
financial representative with respect to the purchase, sale or
exchange of Advisor Class shares made through such financial
representative.
Advisor Class shares of the Fund are offered on a
continuous basis at a price equal to their net asset value. The
minimum for initial investments is $250; subsequent investments
(other than reinvestments of dividends and capital gains
distributions in shares) must be in the minimum amount of $50.
As described under "Shareholder Services," the Fund offers an
automatic investment program and a 403(b)(7) retirement plan
which permit investments of $25 or more.
Investors may purchase Advisor Class shares of the Fund
solely through (i) accounts established under a fee-based
program, sponsored and maintained by registered broker-dealers or
other financial intermediaries and approved by the Principal
Underwriter, pursuant to which each investor pays an asset-based
fee at an annual rate of at least .50% of the assets in the
investor's account, to the broker-dealer or financial
intermediary, or its affiliate or agent, for investment advisory
or administrative services, or (ii) a self-directed defined
contribution employee benefit plan (e.g., a 401(k) plan) that has
at least 1,000 participants or $25 million in assets. The Fund
may refuse any order for the purchase of Advisor Class shares.
The Fund reserves the right to suspend the sale of its Advisor
Class shares to the public in response to conditions in the
securities markets or for other reasons.
The public offering price of Advisor Class shares of the
Fund is their net asset value. On each Fund business day on
which a purchase or redemption order is received by the Fund and
trading in the types of securities in which the Fund invests
7
<PAGE>
might materially affect the value of Advisor Class 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.
A Fund business day is any weekday, exclusive of days on which
the Exchange is closed (most national holidays and Good Friday).
For purposes of this computation, Exchange-listed securities and
over-the-counter securities admitted to trading on the NASDAQ
National List are valued at the last quoted sale or, if there is
no such sale, at the mean of closing bid and asked prices and
portfolio bonds are presently valued by a recognized pricing
service. If accurate quotations are not available, securities
will be valued at fair value determined in good faith by the
Board of Trustees.
The Fund will accept unconditional orders for its
Advisor Class shares to be executed at the public offering price
equal to their net asset value next determined. 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. In the
case of orders for purchase of Advisor Class shares placed
through a shareholder's financial intermediary, the applicable
public offering price will be the net asset value as so
determined, but only if the financial representative receives the
order prior to the close of regular trading on the Exchange and
transmits it to the Principal Underwriter prior to its close of
business that same day (normally 5:00 p.m. Eastern time). The
financial representative is responsible for transmitting such
orders by 5:00 p.m. If the financial representative fails to do
so, the investor's right to that day's closing price must be
settled between the investor and financial representative. If
the financial representative receives the order after the close
of regular trading on the Exchange, the price will be based on
the net asset value determined as of the close of regular trading
on the Exchange on the next day it is open for trading.
Following the initial purchase of Advisor Class shares,
a shareholder may place orders to purchase additional Advisor
Class shares by telephone if the shareholder has completed the
appropriate portion of the Subscription Application. Except with
respect to certain omnibus accounts, a telephone purchase order
may not exceed $500,000. Payment for Advisor Class 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
8
<PAGE>
request is received before 3:00 p.m. Eastern time on a Fund
business day, the order to purchase Advisor Class 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 Advisor Class shares are credited to
a subscriber's account in the amount of his or her subscription.
As a convenience to the subscriber, and to avoid unnecessary
expense to the Fund, stock certificates representing shares of
the Fund are not issued except upon written request to the Fund
by the shareholder or his or her authorized financial
representative. 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 Advisor Class shares, although such Advisor Class
shares remain in the shareholder's account on the books of the
Fund.
________________________________________________________________
REDEMPTION AND REPURCHASE OF SHARES
________________________________________________________________
The following information supplements that set forth in
the Fund's Prospectus under the heading "Purchase and Sale of
Shares -- How to Sell Shares."
Redemption
Subject only to the limitations described below, the
Fund will redeem the Advisor Class shares tendered to it, as
described below, at a redemption price equal to its net asset
value as next computed following the receipt of Advisor Class
shares tendered for redemption in proper form. Payment of the
redemption price will be made within seven days after the Fund's
receipt of such tender for redemption. If a shareholder is in
doubt about what documents are required by his or her fee-based
program or employee benefit plan, the shareholder should contact
his or her financial representative.
The right of redemption may not be suspended or the date
of payment upon redemption postponed for more than seven days
after Advisor Class 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 the Fund of securities owned by it is
not reasonably practicable or as a result of which it is not
9
<PAGE>
reasonably practicable for the Fund fairly to determine the value
of its net assets, or for such other periods as the SEC may by
order permit for the protection of security holders of the Fund.
Payment of the redemption price may be made in cash. The
value of a shareholder's Advisor Class shares on redemption or
repurchase may be more or less than the cost of such Advisor
Class shares to the shareholder, depending upon the market value
of the Fund's portfolio securities at the time of such redemption
or repurchase. Payment received by a shareholder upon redemption
or repurchase of his or her Advisor Class shares, assuming the
Advisor Class shares constitute capital assets in his or her
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 Advisor Class shares redeemed.
To redeem Advisor Class shares of the Fund for which no
stock certificates have been issued, the registered owner or
owners should forward a letter to the Fund containing a request
for redemption. The signature or signatures on the letter must
be guaranteed by an institution that is an eligible guarantor as
defined in Rule 17Ad-15 under the Securities Exchange Act of
1934, as amended.
To redeem Advisor Class shares of the Fund represented
by stock certificates, the investor should forward the
appropriate stock certificate or certificates, endorsed in blank
or with blank stock powers attached, to the Fund with the request
that the Advisor Class shares represented thereby, or a specified
portion thereof, be redeemed. The stock assignment form on the
reverse side of each stock certificate surrendered to the Fund
for redemption must be signed by the registered owner or owners
exactly as the registered name appears on the face of the
certificate or, alternatively, a stock power signed in the same
manner may be attached to the stock certificate or certificates
or, where tender is made by mail, separately mailed to the Fund.
The signature or signatures on the assignment form must be
guaranteed in the manner described above.
Telephone Redemption By Electronic Funds Transfer. Each
Fund shareholder is entitled to request redemption by electronic
funds transfer, once in any 30 day period (except for certain
omnibus accounts), of Advisor Class shares for which no stock
certificates have been issued by telephone at (800) 221-5672 by a
shareholder who has completed the appropriate portion of the
Subscription Application. A telephone redemption request may not
exceed $100,000, and must be made by 4:00 p.m. Eastern time on a
Fund business day as defined above. Proceeds of telephone
redemptions will be sent by Electronic Funds Transfer to a
shareholder's designated bank account at a bank selected by the
shareholder that is a member of the NACHA.
10
<PAGE>
Telephone Redemption By Check. Except for certain
omnibus accounts or as otherwise noted below, each Fund
shareholder is eligible to request redemption, by check, once in
any 30-day period, of Advisor Class shares for which no stock
certificates have been issued by telephone at (800) 221-5672
before 4:00 p.m. Eastern time on a Fund business day in an amount
not exceeding $50,000. Proceeds of such redemptions are remitted
by check to the shareholder's address of record. Telephone
redemption by check is not available with respect to Advisor
Class shares (i) for which certificates have been issued, (ii)
held in nominee or "street name" accounts, (iii) held by a
shareholder who has changed his or her address of record within
the preceding 30 calendar days or (iv) held in any retirement
plan account. A shareholder otherwise eligible for telephone
redemption by check may cancel the privilege by written
instruction to Alliance Fund Services, Inc., or by checking the
appropriate box on the Subscription Application found in the
Prospectus.
Telephone Redemption -- General. During periods of
drastic economic or market developments, such as the market break
of October 1987, it is possible that shareholders would have
difficulty in reaching Alliance Fund Services, Inc. by telephone
(although no such difficulty was apparent at any time in
connection with the 1987 market break). If a shareholder were to
experience such difficulty, the shareholder should issue written
instructions to Alliance Fund Services, Inc. at the address shown
on the cover of this Statement of Additional Information. The
Fund reserves the right to suspend or terminate their telephone
redemption service at any time without notice. Neither the Fund
nor the Adviser, the Principal Underwriter or Alliance Fund
Services, Inc. will be responsible for the authenticity of
telephone requests for redemptions that the Fund reasonably
believes to be genuine. 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. A shareholder's financial
representative may charge a fee for handling telephone requests
for redemptions.
Repurchase
The Fund may repurchase Advisor Class shares through the
Principal Underwriter or selected financial intermediaries. The
repurchase price will be the net asset value next determined
after the Principal Underwriter receives the request, except that
requests placed through selected financial intermediaries before
11
<PAGE>
the close of regular trading on the Exchange on any day will be
executed at the net asset value determined as of such close of
regular trading on that day if received by the Principal
Underwriter prior to its close of business on that day (normally
5:00 p.m. Eastern time). The financial intermediary is
responsible for transmitting the request to the Principal
Underwriter by 5:00 p.m. If the financial intermediary fails to
do so, the shareholder's right to receive that day's closing
price must be settled between the shareholder and the financial
intermediary. A shareholder may offer Advisor Class shares of
the Fund to the Principal Underwriter either directly or through
the financial intermediary. Neither the Fund nor the Principal
Underwriter charges a fee or commission in connection with the
repurchase of Advisor Class shares. Normally, if Advisor Class
shares of the Fund are offered through a financial intermediary,
the repurchase is settled by the shareholder as an ordinary
transaction with or through the financial intermediary, who may
charge the shareholder for this service. The repurchase of
Advisor Class shares of the Fund as described above is a
voluntary service of the Fund and the Fund may suspend or
terminate this practice at any time.
General
The Fund reserves the right to close out an account that
through redemption has remained below $200 for 90 days.
Shareholders will receive 60 days' written notice to increase the
account value before the account is closed. In the case of a
redemption or repurchase of Advisor Class shares of the Fund
recently purchased by check, redemption proceeds will not be made
available until the Fund is reasonably assured that the check has
cleared, normally up to 15 calendar days following the purchase
date.
________________________________________________________________
SHAREHOLDER SERVICES
________________________________________________________________
The following information supplements that set forth in
the Fund's Prospectus under the heading "Purchase and Sale of
Shares--Shareholder Services."
Automatic Investment Program
Investors may purchase Advisor Class shares of the Fund
through an automatic investment program utilizing "pre-authorized
check" drafts drawn on the investor's own bank account. Under
such a program, pre-authorized monthly drafts for a fixed amount
(at least $25) are used to purchase Advisor Class shares through
the financial intermediary designated by the investor at the
12
<PAGE>
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. 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.
Advisor Class shareholders of the Fund can exchange
their Advisor Class shares for Advisor Class shares of any other
Alliance Mutual Fund that offers Advisor Class shares.
All exchanges are subject to the minimum investment
requirements and any other applicable terms set forth in the
Prospectus for the Alliance Mutual Fund whose Advisor Class
shares are being acquired. An exchange is effected through the
redemption of the Advisor Class shares tendered for exchange and
the purchase of Advisor Class shares being acquired at their
respective net asset values as next determined following receipt
by the Alliance Mutual Fund whose Advisor Class 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 Advisor Class shares recently
purchased by check will be permitted only after the Alliance
Mutual Fund whose Advisor Class 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 Advisor Class shares of Alliance Mutual Funds will
generally result in the realization of a capital gain or loss for
Federal income tax purposes.
Each Fund shareholder, and the shareholder's financial
representative, 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. Such telephone requests
cannot be accepted with respect to Advisor Class shares then
represented by stock certificates. Advisor Class shares acquired
pursuant to a telephone request for exchange will be held under
the same account registration as the Advisor Class shares
redeemed through such exchange.
13
<PAGE>
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., Eastern, on a Fund business day
as defined above. Telephone requests for exchange received
before 4:00 p.m. Eastern time on a Fund business day will be
processed as of the close of business on that day. During periods
of drastic economic or market developments, such as the market
break of October 1987, it is possible that shareholders would
have difficulty in reaching Alliance Fund Services, Inc. by
telephone (although no such difficulty was apparent at any time
in connection with the 1987 market break). If a shareholder were
to experience such difficulty, the shareholder should issue
written instructions to Alliance Fund Services, Inc. at the
address shown on the cover of this Statement of Additional
Information.
A shareholder may elect to initiate a monthly "Auto
Exchange" whereby a specified dollar amounts worth of his or her
Advisor Class Fund shares (minimum $25) is automatically
exchanged for Advisor Class shares of another Alliance Mutual
Fund. Auto Exchange transactions normally occur on the 12th day
of each month, or the following Fund business day.
Neither the Alliance Mutual 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. A
shareholder's financial intermediary may charge a fee for
handling telephone requests for exchanges.
The exchange privilege is available only in states where
Advisor Class shares of the Alliance Mutual Fund being acquired
may be legally sold. Each Alliance Mutual Fund reserves the
right, at any time on 60 days' notice to its shareholders, to
modify, restrict or terminate the exchange privilege.
Retirement Plans
The Fund may be a suitable investment vehicle for part
or all of the assets held in various types of retirement plans,
such as those listed below. The Fund has available forms of such
plans pursuant to which investments can be made in the Fund and
other Alliance Mutual Funds. Persons desiring information
14
<PAGE>
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
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, under which annual tax-deductible
contributions are made within prescribed limits based on
compensation paid to participating individuals.
Simplified Employee Pension Plan ("SEP"). Sole
proprietors, partnerships and corporations may sponsor a SEP
under which they make annual tax-deductible contributions to an
IRA established by each eligible employee within prescribed
limits based on employee compensation.
403(b)(7) Retirement Plan. Certain tax-exempt
organizations and public educational institutions may sponsor
retirements plans under which an employee may agree that monies
deducted from his or her compensation (minimum $25 per pay
period) may be contributed by the employer to a custodial account
established for the employee under the plan.
The Alliance Plans Division of Frontier Trust Company, a
subsidiary of The Equitable Life Assurance Society of the United
States, which serves as custodian or trustee under the retirement
plan prototype forms available from the Fund, charges certain
nominal fees for establishing an account and for annual
maintenance. A portion of these fees is remitted to Alliance
Fund Services, Inc. as compensation for its services to the
retirement plan accounts maintained with the Fund.
Distributions from retirement plans are subject to
certain Code requirements in addition to normal redemption
procedures. For additional information please contact Alliance
Fund Services, Inc.
Dividend Direction Plan
A shareholder who already maintains, in addition to his
or her Advisor Class Fund account, an Advisor Class account with
one or more other Alliance Mutual Funds may direct that income
dividends and/or capital gains paid on his or her Advisor Class
shares be automatically reinvested, in any amount, without the
payment of any service charges, in Advisor Class shares of the
15
<PAGE>
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. Current shareholders should
contact Alliance Fund Services, Inc. to establish a dividend
direction plan.
Systematic Withdrawal Plan
General. Any shareholder who owns or purchases Advisor
Class shares of the Fund having a current net asset value of at
least $4,000 (for quarterly or less frequent payments), $5,000
(for bi-monthly payments) or $10,000 (for monthly payments) may
establish a systematic withdrawal plan under which the
shareholder will periodically receive a payment in a stated
amount of not less than $50 on a selected date. Systematic
withdrawal plan participants must elect to have their dividends
and distributions from the Fund automatically reinvested in
additional Advisor Class shares of the Fund.
Advisor Class shares of the Fund owned by a participant
in the Fund's systematic withdrawal plan will be redeemed as
necessary to meet withdrawal payments and such withdrawal
payments will be subject to any taxes applicable to redemptions.
Advisor Class shares acquired with reinvested dividends and
distributions will be liquidated first to provide such withdrawal
payments and thereafter other Advisor Class shares will be
liquidated to the extent necessary, and depending upon the amount
withdrawn, the investors principal may be depleted. A systematic
withdrawal plan may be terminated at any time by the shareholder
or the Fund.
Withdrawal payments will not automatically end when a
shareholder's account reaches a certain minimum level. Therefore,
redemptions of Advisor Class shares under the plan may reduce or
even liquidate a shareholder's account and may subject the
shareholder to the Fund's involuntary redemption provisions. See
"How to Sell Shares -- General" in the Prospectus.
Payments under a systematic withdrawal plan may be made
by check or electronically via the Automated Clearing House
network. Investors wishing to establish a systematic withdrawal
plan in conjunction with their initial investment in Advisor
Class shares of the Fund should complete the appropriate portion
of the Subscription Application, 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"
16
<PAGE>
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.
Checkwriting
An Advisor Class investor may fill out the Signature
Card to authorize the Fund to arrange for a checkwriting service
through State Street Bank and Trust Company (the "Bank") to draw
against Advisor Class shares of the Fund redeemed from the
investor's account. Under this service, checks may be made
payable to any payee in any amount not less than $500 and not
more than 90% of the net asset value of the Advisor Class shares
in the investor's account (excluding for this purpose the current
month's accumulated dividends and shares for which certificates
have been issued). An Advisor Class shareholder wishing to
establish this checkwriting service subsequent to the opening of
his or her Fund account should contact the Fund by telephone or
mail. Corporations, fiduciaries and institutional investors are
required to furnish a certified resolution or other evidence of
authorization. This checkwriting service will be subject to the
Bank's customary rules and regulations governing checking
accounts, and the Fund and the Bank each reserve the right to
change or suspend the checkwriting service. There is no charge
to the shareholder for the initiation and maintenance of this
service or for the clearance of any checks.
When a check is presented to the Bank for payment, the
Bank, as the shareholder's agent, causes the Fund to redeem, at
the net asset value next determined, a sufficient number of full
and fractional Advisor Class shares of the Fund in the
shareholder's account to cover the check. Because the level of
net assets in a shareholder's account constantly changes due,
among various factors, to market fluctuations, a shareholder
should not attempt to close his or her account by use of a check.
In this regard, the Bank has the right to return checks (marked
"insufficient funds") unpaid to the presenting bank if the amount
of the check exceeds 90% of the assets in the account. Canceled
(paid) checks are returned to the shareholder. The checkwriting
service enables the shareholder to receive the daily dividends
17
<PAGE>
declared on the Advisor Class shares to be redeemed until the day
that the check is presented to the Bank for payment.
________________________________________________________________
NET ASSET VALUE
________________________________________________________________
Incorporated by reference from the section "Net Asset
Value" contained in the Rule 497 SAI, except that the fifth
paragraph is restated as set forth below:
The assets belonging to the Class A, Class B, Class C
and Advisor Class shares will be invested together in a single
portfolio. The net asset value of each class will be determined
separately by subtracting the accrued expenses and liabilities
allocated to that class from the assets belonging to that class.
________________________________________________________________
DIVIDENDS, DISTRIBUTIONS AND TAXES
________________________________________________________________
Incorporated by reference from the section "Dividends,
Distributions and Taxes" contained in the Rule 497 SAI.
________________________________________________________________
GENERAL INFORMATION
________________________________________________________________
Incorporated by reference from the section "General
Information" contained in the Rule 497 SAI, except for the sub-
sections entitled "Capitalization" and "Yield and Total Return
Quotations", which are restated as set forth below:
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 Fund's outstanding shares at April 5, 1996:
18
<PAGE>
Names and Addresses # of Shares % of Class
Short Term U.S. Government Fund - Class A
Merrill Lynch 40,595 12.14%
Mutual Fund Operations
4800 Deer Lake Dr. East, 3rd Floor
Jacksonville, FL 32246-6484
Alliance Plans DIV/FTC 38,857 11.62%
Albert A. C. Noakes IRA
Hyde Cottage, E. Meon
Petersfield Hampshire
GU321NJ United Kingdom
Smith Barney Inc. 29,080 8.70%
00162781577
388 Greenwich St.
New York, NY 10013-2375
Bruce A. Toor 19,939 5.96%
1477 LeGrande Terrace
San Pedro, CA 90732
PaineWebber FBO 19,758 5.90%
Assoc. Radiologists LTD
2nd PSP
FBO Edward J. Wickman
450 West 5th Place
New York, NY
Carlton Prejean & 30,090 9.00%
Lucy C. Prejean
728 Arthur
Lafayette, LA 70501
Class B
Merrill Lynch 184,400 25.59%
Mutual Fund Operations
4800 Deer Lake Dr. East, 3rd Floor
Jacksonville, FL 32246-6484
Class C
Merrill Lynch 141,170 30.37%
Mutual Fund Operations
4800 Deer Lake Dr. East, 3rd Floor
Jacksonville, FL 32246-6484
19
<PAGE>
Todd Austin Blake 39,232 8.44%
2769 Union Street
San Francisco, CA 94125
Marilyn Katherine Blake 54,806 11.79%
79 Willow Tree Place
Gross Pointe, MI 48236-1322
Total Return and Yield Quotations
From time to time, the Fund advertises its "total
return". Total return is computed separately for Class A,
Class B, Class C and Advisor Class shares. Such advertisements
disclose the Fund's average annual compounded total return for
recent one-, five- and ten-year periods (or the life of the 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 the Fund are assumed to
have been reinvested when received and the maximum sales charge
applicable to purchases of Fund shares is assumed to have been
paid. 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.
From time to time, the Fund may advertise the "yield" or
"actual distribution rate" of each class of shares. Yield for
any 30-day (or one month) period is computed by dividing the net
investment income per share earned during such period by the
maximum public offering price per share on the last day of the
period, and then annualizing such 30-day (or one month) yield in
accordance with a formula prescribed by the SEC which provides
for compounding on a semi-annual basis. "Actual distribution
rate," which may be advertised in items of sales literature, is
computed in the same manner as yield except that actual income
dividends declared per share during the period in question is
substituted for net investment income per share.
The yield of Class A shares of the Fund was 4.42% for
the 30-day period ended February 29, 1996. The yield of Class B
shares of the Fund was 3.89% for the 30-day period ended February
29, 1996. The yield of Class C shares of the Fund was 3.88% for
the 30-day period ended February 29, 1996.
The average annual compounded total return for Class A
shares of the Short-Term U.S. Government Fund was 1.63% for the
one-year period ended February 29, 1996 and 3.32% for the period
May 4, 1992 (commencement of distribution of Class A shares)
20
<PAGE>
through February 29, 1996. The average annual compounded total
return for Class B shares of the Short-Term U.S. Government Fund
was 2.35% for the one-year period ended February 29, 1996 and
3.72% for the period May 4, 1992 (commencement of distribution of
Class B shares) through February 29, 1996. The average annual
compounded total return for Class C shares of the Short-Term U.S.
Government Fund was 5.35% for the one-year period ended February
29, 1996 and 2.11% for the period August 2, 1993 (commencement of
distribution of Class C shares) through February 29, 1996.
The Fund's total return is not fixed and will fluctuate
in response to prevailing market conditions or as a function of
the type and quality of the securities in the Funds 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.
21
00250184.AH3
<PAGE>
PORTFOLIO OF INVESTMENTS
FEBRUARY 29, 1996 (UNAUDITED) ALLIANCE SHORT-TERM U.S. GOVERNMENT FUND
_______________________________________________________________________________
PRINCIPAL
AMOUNT
(000) VALUE
- ------------------------------------------------------------------------
U.S. GOVERNMENT AND AGENCY OBLIGATIONS-90.6%
U.S. TREASURY NOTE-69.8%
7.875%, 7/15/96 (a) $10,350 $10,453,500
FEDERAL AGENCY SECURITIES-20.8%
Federal Home Loan Mortgage Corp.
12.00%, 2/01/14 447 515,442
Federal National Mortgage Association
11.50%, 6/01/20 491 559,358
12.00%, 3/01/13-5/01/15 1,778 2,044,290
3,119,090
Total U.S. Government and Agency Obligations
(cost $13,504,224) 13,572,590
COLLATERALIZED MORTGAGE OBLIGATIONS-14.0%
FIXED RATE-13.2%
Federal Home Loan Bank
7.61%, 4/25/02 1,445 1,466,920
Federal Home Loan Mortgage Corp.
Series 1163 Cl. H
7.50%, 12/15/19 515 519,837
1,986,757
ADJUSTABLE RATE-0.8%
Federal National Mortgage Association
Series 1993-89 Cl. F
5.744%, 9/25/21 $114 $114,614
Total Collateralized Mortgage Obligations
(cost $2,103,207) 2,101,371
REPURCHASE AGREEMENT-5.0%
UBS Securities LLC. 5.45%,
dated 2/29/96, due 3/01/96
collateralized by $1,728,000
FHLMC 1287C, 7.25%, 9/15/04,
(cost $744,000) 744 744,000
TOTAL INVESTMENTS-109.6%
(cost $16,351,431) 16,417,961
Other assets less liabilities-(9.6%) (1,431,498)
NET ASSETS-100% $14,986,463
(a) Security segregated to collateralize reverse repurchase agreement with an
aggregate market value of $1,530,000.
Glossary of Terms:
FHLMC - Federal Home Loan Mortgage Corp.
See notes to financial statements.
4
STATEMENT OF ASSETS AND LIABILITIES
FEBRUARY 29, 1996 (UNAUDITED) ALLIANCE SHORT-TERM U.S. GOVERNMENT FUND
_______________________________________________________________________________
ASSETS
Investments in securities, at value (cost $16,351,431) $16,417,961
Cash 746
Interest receivable 134,938
Receivable for shares of beneficial interest sold 56,264
Receivable due from adviser 27,323
Deferred organization expense 10,221
Prepaid expenses and other assets 577
Total assets 16,648,030
LIABILITIES
Payable for reverse repurchase agreement 1,530,227
Dividend payable 14,887
Distribution fee payable 10,337
Accrued expenses and other liabilities 106,116
Total liabilities 1,661,567
NET ASSETS $14,986,463
COMPOSITION OF NET ASSETS
Shares of beneficial interest, at par $ 15
Additional paid-in capital 15,576,434
Distributions in excess of net investment income (12,906)
Accumulated net realized loss (644,555)
Net unrealized appreciation of investments and other assets 67,475
$14,986,463
CALCULATION OF MAXIMUM OFFERING PRICE
CLASS A SHARES
Net asset value and redemption price per share ($3,087,393/
316,640 shares of beneficial interest issued and outstanding) $ 9.75
Sales charge-4.25% of public offering price .43
Maximum offering price $10.18
CLASS B SHARES
Net asset value and offering price per share ($6,887,837/
698,691 shares of beneficial interest issued and outstanding) $ 9.86
CLASS C SHARES
Net asset value, redemption and offering price per share($5,011,233
/508,970 shares of beneficial interest issued and outstanding) $ 9.85
See notes to financial statements.
5
STATEMENT OF OPERATIONS
SIX MONTHS ENDED FEBRUARY 29, 1996 (UNAUDITED)
ALLIANCE SHORT-TERM U.S. GOVERNMENT FUND
_______________________________________________________________________________
INVESTMENT INCOME
Interest $474,306
EXPENSES
Advisory fee $ 40,547
Distribution fee - Class A 4,231
Distribution fee - Class B 33,260
Distribution fee - Class C 26,359
Custodian 41,327
Registration 34,564
Audit and legal 30,347
Printing 25,600
Transfer agency 16,592
Trustees' fees 11,041
Amortization of organization expenses 5,489
Miscellaneous 3,183
Total expenses 272,540
Less: expenses waived and reimbursed by adviser
(See Note B) (127,597)
Net expenses 144,943
Interest expense 2,692
Total expenses including interest expense 147,635
Net investment income 326,671
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain on investments 1,072
Net change in unrealized appreciation of investments 44,175
Net gain on investments 45,247
NET INCREASE IN NET ASSETS FROM OPERATIONS $371,918
See notes to financial statements.
6
STATEMENT OF CHANGES IN NET ASSETS ALLIANCE SHORT-TERM U.S. GOVERNMENT FUND
_______________________________________________________________________________
SIX MONTHS ENDED
FEB. 29,1996 YEAR ENDED
(UNAUDITED) AUG. 31,1995
------------ ------------
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS
Net investment income $ 326,671 $ 547,800
Net realized gain (loss) on investments 1,072 (26,997)
Net change in unrealized appreciation
(depreciation) of investments 44,175 71,312
Net increase in net assets from operations 371,918 592,115
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income
Class A (65,135) (117,047)
Class B (127,861) (210,021)
Class C (102,056) (196,348)
Distributions in excess of net investment income
Class A -0- (9,973)
Class B -0- (17,854)
Class C -0- (16,698)
TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST
Net increase (decrease) 352,645 (1,148,386)
Total increase (decrease) 429,511 (1,124,212)
NET ASSETS
Beginning of year 14,556,952 15,681,164
End of period $14,986,463 $14,556,952
See notes to financial statements.
7
NOTES TO FINANCIAL STATEMENTS
FEBRUARY 29, 1996 (UNAUDITED) ALLIANCE SHORT-TERM U.S. GOVERNMENT FUND
_______________________________________________________________________________
NOTE A: SIGNIFICANT ACCOUNTING POLICIES
Alliance Short-Term U.S. Government Fund (the 'Fund'), a series of The Alliance
Portfolios (the 'Trust') which was organized as a Massachusetts Business Trust
on March 29, 1987, is registered under the Investment Company Act of 1940, as a
diversified, open-end management investment company. The Fund offers Class A,
Class B and Class C shares. Class A shares are sold with a front-end sales
charge of up to 4.25%. Class B shares are sold with a contingent deferred sales
charge which declines from 3.0% to zero depending on the period of time the
shares are held. Class B 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. All three classes of shares have identical
voting, dividend, liquidation and other 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 reported sales price on such exchange. Listed securities not traded and
securities traded in the over-the-counter market, including listed debt
securities whose primary market is believed to be over-the-counter, are valued
at the mean of the closing bid and asked price as obtained from a recognized
pricing service and brokers. Securities for which bid and asked price
quotations are not readily available are valued in good faith at fair value
using methods determined by the Board of Trustees. Securities which mature in
60 days or less are valued at amortized cost, which approximates market value.
2. ORGANIZATION EXPENSES
Organization expenses of approximately $50,000 have been deferred and are being
amortized on a straight-line basis through May, 1997.
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
Interest income is accrued daily. Security transactions are accounted for on
the date securities are purchased or sold. Security gains and losses are
determined on the identified cost basis. The Fund accretes discounts as
adjustments to interest income.
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 settled class of shares, based on the proportionate interest in
the Fund represented by the shares of such Class, except that the Fund's Class
B and Class C shares bear higher distribution fees and, in the case of Class B
shares, higher transfer agent fees. Expenses of the Trust are charged to each
Fund in proportion to net assets.
NOTE B: ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Under the terms of an investment advisory agreement, the Fund pays Alliance an
advisory fee at an annual rate of .55 of 1% of the Fund's average daily net
assets. Under the old agreement the fee charged 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 the daily average net assets for the Class A, Class B
and Class C shares, respectively. For the six months ended February 29, 1996,
such reimbursement amounted to $127,597. 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
8
ALLIANCE SHORT-TERM U.S. GOVERNMENT FUND
_______________________________________________________________________________
qualified for sale. The Adviser 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 $8,886 for
the six months ended February 29, 1996. 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 $2,263 from the
sale of Class A shares and $28,444 in contingent deferred sales charges imposed
upon redemptions by shareholders of Class B shares for the six months ended
February 29, 1996. Accrued expenses includes an amount owed to two of the
Trustees under a deferred compensation plan of $16,360.
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. For the six months ended February 29, 1996, the Fund paid a
distribution fee to the distributor at an annual rate of .30% of the Fund's
average daily net assets attributable to Class A shares. The Trustees currently
limit payments under the Class A plan to .30% of the Fund's aggregate average
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 since
inception expenses in excess of the distribution costs reimbursed by the Fund
in the amount of $415,312 and $578,615 for Class B and C shares, respectively;
such costs may be recovered from the Fund in future periods. In accordance with
the Agreement, there is no provision for recovery of unreimbursed distribution
costs, incurred by the Distributor, beyond the current fiscal year for Class A
shares. The Agreement also provides that the Adviser may use its own resources
to finance the distribution of the Fund's shares.
NOTE D: INVESTMENT TRANSACTIONS
Purchases and sales of investment securities (excluding short-term investments)
aggregated $4,641,088 and $1,732,495, respectively, for the six months ended
February 29, 1996. At February 29, 1996 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 $72,371 and gross
unrealized depreciation of investments was $5,841 resulting in net unrealized
appreciation of $66,530.
9
NOTES TO FINANCIAL STATEMENTS (CONT.)
ALLIANCE SHORT-TERM U.S. GOVERNMENT 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 YEAR ENDED SIX MONTHS ENDED YEAR ENDED
FEB. 29,1996 AUGUST 31, FEB. 29,1996 AUGUST 31,
(UNAUDITED) 1995 (UNAUDITED) 1995
----------- ---------- ------------ ------------
CLASS A
Shares sold 124,948 424,619 $1,216,536 $ 4,020,889
Shares issued in
reinvestment of
dividends 3,810 8,027 37,063 77,235
Shares redeemed (121,063) (358,681) (1,177,691) (3,383,335)
Net increase 7,695 73,965 $ 75,908 $ 714,789
CLASS B
Shares sold 456,733 591,993 $4,492,760 $ 5,759,616
Shares issued in
reinvestment of
dividends 7,247 13,420 71,261 130,566
Shares redeemed (415,872) (597,126) (4,090,871) (5,807,282)
Net increase 48,108 8,287 $ 473,150 $ 82,900
CLASS C
Shares sold 181,739 275,893 $1,784,635 $ 2,678,828
Shares issued in
reinvestment of
dividends 5,241 12,237 51,484 118,917
Shares redeemed (206,740) (488,878) (2,032,532) (4,743,820)
Net decrease (19,760) (200,748) $ (196,413) $(1,946,075)
NOTE F: FEDERAL INCOME TAX STATUS
At August 31, 1995, the Fund had net capital loss carryforward of $631,486 of
which $72,933 expires in the fiscal year ending 2001, $36,136 in the fiscal
year ending 2002, and $522,417 in the fiscal year ending 2003 to the extent
provided by the regulations. To the extent that this loss carryforward is used
to offset future capital gains, it is probable that the gains as offset will
not be distributed to the shareholders. Capital losses incurred after October
31, within the Funds fiscal year are deemed to arise on the first business day
of the following fiscal year. The Fund incurred and elected to defer a post
October net capital loss of $14,141.
10
ALLIANCE SHORT-TERM U.S. GOVERNMENT FUND
_______________________________________________________________________________
NOTE G: REVERSE REPURCHASE AGREEMENTS
Under a reverse repurchase agreement, the Fund sells securities and agrees to
repurchase them at a mutually agreed upon date and price. At the time the Fund
enters into a reverse repurchase agreement, it will establish a segregated
account with the custodian containing cash, cash equivalents or liquid
high-grade debt securities having a value at least equal to the repurchase
price.
As of February 29, 1996, the Fund had entered into the following reverse
repurchase agreement:
AMOUNT BROKER INTEREST RATE MATURITY
- ------------ -------------- ------------- -------------
$1,530,000 Morgan Stanley 5.30% March 7, 1996
For the six months ended February 29, 1996, the maximum amount of reverse
repurchase agreements outstanding was $1,530,000, the average amount
outstanding was approximately $1,086,316, and the daily weighted average
interest rate was 5.65%.
11
FINANCIAL HIGHLIGHTS ALLIANCE SHORT-TERM U.S. GOVERNMENT FUND
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING THROUGHOUT EACH
PERIOD
<TABLE>
<CAPTION>
CLASS A
-----------------------------------------------------------
SIX MONTHS MAY 4,
ENDED MAY 1,1994 1992(C)
FEBRUARY 29, YEAR ENDED THROUGH YEAR ENDED TO
1996 AUGUST 31, AUGUST 31, APRIL 30, APRIL 30,
(UNAUDITED) 1995 1994(A) 1994 1993
-------------- -------- ----------- -------- -----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $9.70 $9.67 $9.77 $10.22 $10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income (b) .24 .42 .14 .35 .46
Net realized and unrealized gain (loss) .04 .05 (.09) (.29) .34
Net increase in net asset value from
operations .28 .47 .05 .06 .80
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (.23) (.41) (.12) (.42) (.46)
Dividends in excess of net investment income -0- (.03) -0- (.01) -0-
Return of capital -0- -0- (.03) (.08) -0-
Distributions from net realized gains -0- -0- -0- -0- (.12)
Total dividends and distributions (.23) (.44) (.15) (.51) (.58)
Net asset value, end of period $9.75 $9.70 $9.67 $ 9.77 $10.22
TOTAL RETURN
Total investment return based on net asset
value (d) 2.86% 5.14% .53% .52% 8.20%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $3,087 $2,997 $2,272 $2,003 $6,081
Ratio to average net assets of:
Expenses, net of waivers/reimbursements 1.43%(g)(e) 1.40% 1.40%(e) 1.27% 1.00%(e)
Expenses, before waivers/reimbursements 3.18%(e) 3.71% 2.95%(e) 2.17% 2.20%(e)
Net investment income 5.03%(e) 4.56% 3.98%(e) 4.41% 4.38%(e)
Portfolio turnover rate 12% 15% 144% 55% 294%
</TABLE>
See footnotes on page 14.
12
ALLIANCE SHORT-TERM U.S. GOVERNMENT FUND
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING THROUGHOUT EACH
PERIOD
<TABLE>
<CAPTION>
CLASS B
-----------------------------------------------------------
SIX MONTHS MAY 4,
ENDED MAY 1,1994 1992(C)
FEBRUARY 29, YEAR ENDED THROUGH YEAR ENDED TO
1996 AUGUST 31, AUGUST 31, APRIL 30, APRIL 30,
(UNAUDITED) 1995 1994(A) 1994 1993
-------------- -------- ----------- -------- -----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $9.81 $9.78 $9.88 $10.31 $10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income (b) .21 .36 .10 .40 .38
Net realized and unrealized gain (loss) .03 .04 (.07) (.39) .33
Net increase in net asset value from
operations .24 .40 .03 .01 .71
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (.19) (.34) (.11) (.35) (.38)
Dividends in excess of net investment income -0- (.03) -0- (.01) -0-
Return of capital -0- -0- (.02) (.08) -0-
Distributions from net realized gains -0- -0- -0- -0- (.02)
Total dividends and distributions (.19) (.37) (.13) (.44) (.40)
Net asset value, end of period $9.86 $9.81 $9.78 $ 9.88 $10.31
TOTAL RETURN
Total investment return based on net asset
value (d) 2.47% 4.32% .28% .03% 7.22%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $6,888 $6,380 $6,281 $7,184 $1,292
Ratios of average net assets of:
Expenses, net of waivers/reimbursements 2.14%(g)(e) 2.10% 2.10%(e) 2.05% 1.75%(e)
Expenses, before waivers/reimbursements 3.87%(e) 4.33% 3.60%(e) 3.21% 4.81%(e)
Net investment income 4.30%(e) 3.82% 3.22%(e) 3.12% 3.36%(e)
Portfolio turnover rate 12% 15% 144% 55% 294%
</TABLE>
See footnotes on page 14.
13
FINANCIAL HIGHLIGHTS (CONTINUED) ALLIANCE SHORT-TERM U.S. GOVERNMENT FUND
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING THROUGHOUT EACH
PERIOD
<TABLE>
<CAPTION>
CLASS C
-------------------------------------------------
SIX MONTHS AUGUST 2,
ENDED MAY 1,1994 1993(F)
FEB. 29, YEAR ENDED THROUGH TO
1996 AUGUST 31, AUGUST 31, APRIL 30,
(UNAUDITED) 1995 1994(A) 1994
-------------- -------- ----------- -----------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $9.80 $9.77 $9.87 $10.34
INCOME FROM INVESTMENT OPERATIONS
Net investment income (b) .21 .34 .10 .26
Net realized and unrealized gain (loss) .03 .06 (.07) (.42)
Net increase (decrease) in net asset value
from operations .24 .40 .03 (.16)
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (.19) (.34) (.11) (.25)
Dividends in excess of net investment income -0- (.03) -0- (.01)
Return of capital -0- -0- (.02) (.05)
Distributions from net realized gains -0- -0- -0- -0-
Total dividends and distributions (.19) (.37) (.13) (.31)
Net asset value, end of period $9.85 $9.80 $9.77 $ 9.87
TOTAL RETURN
Total investment return based on net asset
value (d) 2.47% 4.33% .28% (1.56)%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $5,011 $5,180 $7,128 $8,763
Ratios of average net assets of:
Expenses, net of waivers/reimbursements 2.14%(g)(e) 2.10% 2.10%(e) 2.10%(e)
Expenses, before waivers/reimbursements 3.86%(e) 4.23% 3.64%(e) 3.10%(e)
Net investment income 4.27%(e) 3.80% 3.26%(e) 2.60%(e)
Portfolio turnover rate 12% 15% 144% 55%
</TABLE>
(a) The Fund changed its fiscal year end from April 30 to August 31.
(b) Net of fee waived and expenses reimbursed by Adviser.
(c) Commencement of operations.
(d) 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.
(e) Annualized.
(f) Commencement of distribution.
(g) Expense ratio includes interest expense.
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. acquired the business and substantially all of
the assets of Equitable Capital and became the investment adviser of the Trust.
<PAGE>
PORTFOLIO OF INVESTMENTS
AUGUST 31, 1995 ALLIANCE SHORT-TERM U.S. GOVERNMENT FUND
_______________________________________________________________________________
Principal
Amount
(000) Value
- ----------------------------------------------------------------------
U.S. GOVERNMENT AND AGENCY OBLIGATIONS-82.8%
U.S. TREASURY NOTES-80.7%
7.875%, 2/15/96-7/15/96
(cost $11,722,712) $11,550 $11,745,961
FEDERAL AGENCY-2.1%
Federal Home Loan Bank
15.00%, 9/01/95 (cost $300,000) 300 300,000
Total U.S. Government and Agency Obligations
(cost $12,022,712) 12,045,961
COLLATERALIZED MORTGAGE OBLIGATIONS-5.3%
FIXED RATE-4.5%
Federal Home Loan Mortgage Corp. Series 1163 N
7.50%, 12/15/19 (cost $657,121) 652 656,613
ADJUSTABLE RATE-0.8%
Federal National Mortgage Association REMIC
Series 1993-89 F 6.49375%, 9/25/21
(cost $123,391) 123 123,308
Total Collateralized Mortgage Obligations
(cost $780,512) 779,921
REPURCHASE AGREEMENT-9.4%
Mortgage Repo (UBS)
5.85%, dated 8/31/95, due 9/01/95
collateralized by $1,428,000 FNMA FNR
93-168 Series P, 6.25%, 1/25/20, value:
$1,387,838; proceeds $1,361,221
(cost $1,361,000) 1,361 1,361,000
TOTAL INVESTMENTS-97.5%
(cost $14,164,224) 14,186,882
Other assets less liabilities-2.5% 370,070
NET ASSETS-100% $14,556,952
Glossary:
REMIC - Real Estate Mortgage Investment Conduit
See notes to financial statements.
5
STATEMENT OF ASSETS AND LIABILITIES
AUGUST 31, 1995 ALLIANCE SHORT-TERM U.S. GOVERNMENT FUND
_______________________________________________________________________________
ASSETS
Investments in securities, at value (cost $14,164,224) $14,186,882
Cash 388
Receivable due from adviser 229,782
Receivable for shares of beneficial interest sold 176,221
Interest receivable 137,624
Deferred organization expense 15,710
Prepaid expenses and other assets 11,133
Total assets 14,757,740
LIABILITIES
Payable for shares of beneficial interest redeemed 92,107
Dividend payable 14,906
Distribution fee payable 10,247
Accrued expenses 83,528
Total liabilities 200,788
NET ASSETS $14,556,952
COMPOSITION OF NET ASSETS
Shares of beneficial interest, at par $ 15
Additional paid-in capital 15,223,789
Distributions in excess of net investment income (44,525)
Accumulated net realized loss (645,627)
Net unrealized appreciation of investments and other assets 23,300
$14,556,952
CALCULATION OF MAXIMUM OFFERING PRICE
CLASS A SHARES
Net asset value and redemption price per share ($2,997,333/308,945
shares of beneficial interest issued and outstanding) $ 9.70
Sales charge-4.25% of public offering price .43
Maximum offering price $10.13
CLASS B SHARES
Net asset value and offering price per share ($6,379,995/650,583
shares of beneficial interest issued and outstanding) $ 9.81
CLASS C SHARES
Net asset value, redemption and offering price per share($5,179,624/
528,730 shares of beneficial interest issued and outstanding) $ 9.80
See notes to financial statements.
6
STATEMENT OF OPERATIONS
YEAR ENDED AUGUST 31, 1995 ALLIANCE SHORT-TERM U.S. GOVERNMENT FUND
_______________________________________________________________________________
INVESTMENT INCOME
Interest $819,775
EXPENSES
Advisory fee $ 76,173
Distribution fee - Class A 8,086
Distribution fee - Class B 57,770
Distribution fee - Class C 53,773
Audit and legal 99,773
Registration 77,061
Printing 53,359
Transfer agency 51,719
Custodian 47,318
Trustees' fees 28,543
Amortization of organization expenses 11,008
Miscellaneous 13,347
Total expenses 577,930
Less: expenses waived and reimbursed by adviser
(See Note B) (305,955)
Net expenses 271,975
Net investment income 547,800
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized loss on investments (26,997)
Net change in unrealized depreciation of investments 71,312
Net gain on investments 44,315
NET INCREASE IN NET ASSETS FROM OPERATIONS $592,115
See notes to financial statements.
7
STATEMENT OF CHANGES IN NET ASSETS ALLIANCE SHORT-TERM U.S. GOVERNMENT FUND
_______________________________________________________________________________
YEAR ENDED MAY 1, 1994 YEAR ENDED
AUGUST 31, THROUGH APRIL 30,
1995 AUG. 31,1994* 1994
----------- ------------- -----------
INCREASE (DECREASE) IN NET ASSETS FROM
OPERATIONS
Net investment income $ 547,800 $ 182,068 $ 398,559
Net realized loss on investments (26,997) (509,561) (29,976)
Net change in unrealized appreciation
(depreciation) of investments 71,312 366,675 (562,535)
Net increase (decrease) in net assets
from operations 592,115 39,182 (193,952)
DIVIDENDS AND DISTRIBUTIONS TO
SHAREHOLDERS FROM:
Net investment income
Class A (117,047) (23,466) (186,963)
Class B (210,021) (58,127) (92,418)
Class C (196,348) (67,817) (113,051)
Distributions in excess of net
investment income
Class A (9,973) (3,831) (15,558)
Class B (17,854) (9,485) (7,691)
Class C (16,698) (11,068) (9,409)
Return of capital
Class A -0- (6,485) (39,984)
Class B -0- (16,063) (19,765)
Class C -0- (18,742) (24,177)
TRANSACTIONS IN SHARES OF BENEFICIAL
INTEREST
Net increase (decrease) (1,148,386) (2,093,364) 11,280,320
Total increase (decrease) (1,124,212) (2,269,266) 10,577,352
NET ASSETS
Beginning of period 15,681,164 17,950,430 7,373,078
End of period $14,556,952 $15,681,164 $17,950,430
* The Fund changed its fiscal year end from April 30 to August 31.
See notes to financial statements.
8
NOTES TO FINANCIAL STATEMENTS
AUGUST 31, 1995 ALLIANCE SHORT-TERM U.S. GOVERNMENT FUND
_______________________________________________________________________________
NOTE A: SIGNIFICANT ACCOUNTING POLICIES
Alliance Short-Term U.S. Government Fund (the 'Fund'), a series of The Alliance
Portfolios (the 'Trust') which was organized as a Massachusetts Business Trust
on March 29, 1987 is registered under the Investment Company Act of 1940, as a
diversified, open-end management investment company. The Fund offers Class A,
Class B and Class C shares. Class A shares are sold with a front-end sales
charge of up to 4.25%. Class B shares are sold with a contingent deferred sales
charge which declines from 3.0% to zero depending on the period of time the
shares are held. Class B 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. All three classes of shares have identical
voting, dividend, liquidation and other 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 reported sales price on such exchange. Listed securities not traded and
securities traded in the over-the-counter market, including listed debt
securities whose primary market is believed to be over-the-counter, are valued
at the mean of the closing bid and asked price as obtained from a recognized
pricing service and brokers. Securities for which bid and asked price
quotations are not readily available are valued in good faith at fair value
using methods determined by the Board of Trustees. Securities which mature in
60 days or less are valued at amortized cost, which approximates market value.
2. ORGANIZATION EXPENSES
Organization expenses of approximately $50,000 have been deferred and are being
amortized on a straight-line basis through May, 1997.
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
Interest income is accrued daily. Security transactions are accounted for on
the date securities are purchased or sold. Security gains and losses are
determined on the identified cost basis. The Fund accretes discounts as
adjustments to interest income.
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 settled class of shares, based on the proportionate interest in
the Fund represented by the shares of such Class, except that the Fund's Class
B and Class C shares bear higher distribution fees and, in the case of Class B
shares, higher transfer agent fees. Expenses of the Trust are charged to each
Fund in proportion to net assets.
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 .55 of 1% of the Fund's
average daily net assets. Under the old agreement the fee charged 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 the daily average net assets for the
Class A, Class B and Class C shares, respectively. For the year ended August
31, 1995, such reimbursement amounted to
9
NOTES TO FINANCIAL STATEMENTS (CONT.) ALLIANCE SHORT-TERM U.S. GOVERNMENT FUND
_______________________________________________________________________________
$305,955. 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 Adviser 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 $29,367 for the year ended August 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 $1,837 from the sale of Class A shares and $44,667 in contingent
deferred sales charges imposed upon redemptions by shareholders of Class B
shares for the year ended August 31, 1995. Accrued expenses includes an amount
owed to one of the Trustees under a deferred compensation plan of $13,015.
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. For the year ended August 31, 1995 the Fund paid a
distribution fee to the distributor at an annual rate of .30% of the Fund's
average daily net assets attributable to Class A shares. The Trustees currently
limit payments under the Class A plan to .30% of the Fund's aggregate average
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 since
inception expenses in excess of the distribution costs reimbursed by the Fund
in the amount of $348,789 and $500,617 for Class B and C shares, respectively;
such costs may be recovered from the Fund in future periods. In accordance with
the Agreement, there is no provision for recovery of unreimbursed distribution
costs, incurred by the Distributor, beyond the current fiscal year for Class A
shares. The Agreement also provides that the Adviser may use its own resources
to finance the distribution of the Fund's shares.
NOTE D: INVESTMENT TRANSACTIONS
Purchases and sales of investment securities (excluding short-term investments)
aggregated $2,006,114 and $4,300,128, respectively, for the year ended August
31, 1995. At August 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 $23,248 and gross unrealized
depreciation of investments was $590 resulting in net unrealized appreciation
of $22,658.
10
ALLIANCE SHORT-TERM U.S. GOVERNMENT 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
--------------------------------------- -----------------------------------------
MAY 1,1994 MAY 1,1994
YEAR ENDED THROUGH YEAR ENDED YEAR ENDED THROUGH YEAR ENDED
AUGUST 31, AUGUST 31, APRIL 30, AUGUST 31, AUGUST 31, APRIL 30,
1995 1994* 1994 1995 1994* 1994
---------- ------------ ------------ ------------ ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
CLASS A
Shares sold 424,619 63,865 305,285 $ 4,020,889 $ 621,582 $ 3,088,288
Shares issued in reinvestment of
dividends and distributions 8,027 2,640 18,496 77,235 24,637 188,107
Shares redeemed (358,681) (36,470) (713,916) (3,383,335) (353,354) (7,238,334)
Net increase (decrease) 73,965 30,035 (390,135) $714,789 $292,865 $(3,961,939)
CLASS B
Shares sold 591,993 191,442 1,038,373 $5,759,616 $1,879,078 $10,509,198
Shares issued in reinvestment of
dividends and distributions 13,420 4,974 6,998 130,566 48,786 71,232
Shares redeemed (597,126) (281,109) (443,714) (5,807,282) (2,763,343) (4,491,840)
Net increase (decrease) 8,287 (84,693) 601,657 $ 82,900 $ (835,479) $6,088,590
</TABLE>
<TABLE>
<CAPTION>
SHARES AMOUNT
--------------------------------------- -----------------------------------------
MAY 1,1994 AUGUST 2, MAY 1,1994 AUGUST 2,
YEAR ENDED THROUGH 1993** YEAR ENDED THROUGH 1993**
AUGUST 31, AUGUST 31, TO APRIL 30, AUGUST 31, AUGUST 31, TO APRIL 30,
1995 1994* 1994 1995 1994* 1994
---------- ------------ ------------ ------------ ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
CLASS C
Shares sold 275,893 236,907 1,504,955 $ 2,678,828 $ 2,323,716 $15,510,590
Shares issued in reinvestment of
dividends and distributions 12,237 5,079 6,182 118,917 49,793 62,755
Shares redeemed (488,878) (400,146) (623,499) (4,743,820) (3,924,259) (6,419,676)
Net increase (decrease) (200,748) (158,160) 887,638 $(1,946,075) $(1,550,750) $ 9,153,669
</TABLE>
NOTE F: RECLASSIFICATION OF COMPONENTS OF NET ASSETS
In accordance with Statement of Position 93-2 Determination, Disclosure, and
Financial Statement Presentation of Income, Capital Gain, and Return of Capital
Distributions by Investment Companies, permanent book and tax differences
relating to shareholder distributions are reclassified to additional paid-in
capital. For the year ended August 31, 1995, there were no reclassifications
made.
* The Fund changed its fiscal year end from April 30 to August 31.
** Commencement of distribution.
11
NOTES TO FINANCIAL STATEMENTS (CONT.) ALLIANCE SHORT-TERM U.S. GOVERNMENT FUND
_______________________________________________________________________________
NOTE G: FEDERAL INCOME TAX STATUS
At August 31, 1995, the Fund had net capital loss carryforward of $631,486 of
which $72,933 expires in the fiscal year ending 2001, $36,136 in the fiscal
year ending 2002, and $522,417 in the fiscal year ending 2003 to the extent
provided by the regulations. To the extent that this loss carryforward is used
to offset future capital gains, it is probable that the gains as offset will
not be distributed to the shareholders. Capital losses incurred after October
31, within the Funds fiscal year are deemed to arise on the first business day
of the following fiscal year. The Fund incurred and elected to defer a post
October net capital loss of $14,141.
12
FINANCIAL HIGHLIGHTS ALLIANCE SHORT-TERM U.S. GOVERNMENT FUND
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING THROUGHOUT EACH
PERIOD
CLASS A
-------------------------------------------------
YEAR ENDED MAY 1,1994 YEAR ENDED MAY 4,1992(A)
AUGUST 31, THROUGH APRIL 30, TO
1995 AUG.31,1994* 1994 APRIL 30,1993
--------- ------------ --------- -------------
Net asset value, beginning of
period $9.67 $9.77 $10.22 $10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income .42** .14** .35** 46**
Net realized and unrealized gain
(loss) .05 (.09) (.29) .34
Net increase in net asset value
from operations .47 .05 .06 .80
LESS: DISTRIBUTIONS
Dividends from net investment
income (.41) (.12) (.42) (.46)
Dividends in excess of net
investment income (.03) -0- (.01) -0-
Return of capital -0- (.03) (.08) -0-
Distributions from net realized
gains -0- -0- -0- (.12)
Total dividends and distributions (.44) (.15) (.51) (.58)
Net asset value, end of period $9.70 $ 9.67 $ 9.77 $10.22
TOTAL RETURN
Total investment return based
on net asset value (b) 5.14% .53% .52% 8.20%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(000's omitted) $2,997 $2,272 $2,003 $6,081
Ratio to average net assets of:
Expenses, net of waivers/
reimbursements 1.40% 1.40%(c) 1.27% 1.00%(c)
Expenses, before waivers/
reimbursements 3.71% 2.95%(c) 2.17% 2.20%(c)
Net investment income 4.56% 3.98%(c) 4.41% 4.38%(c)
Portfolio turnover rate 15% 144% 55% 294%
See footnotes on page 15.
13
FINANCIAL HIGHLIGHTS (CONT.) ALLIANCE SHORT-TERM U.S. GOVERNMENT FUND
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING THROUGHOUT EACH
PERIOD
CLASS B
-------------------------------------------------
YEAR ENDED MAY 1,1994 YEAR ENDED MAY 4,1992(A)
AUGUST 31, THROUGH APRIL 30, TO
1995 AUG.31,1994* 1994 APRIL 30,1993
---------- ------------- --------- -------------
Net asset value, beginning of
period $9.78 $9.88 $10.31 $10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income .36** .10** .40** .38**
Net realized and unrealized gain
(loss) .04 (.07) (.39) .33
Net increase in net asset value
from operations .40 .03 .01 .71
LESS: DISTRIBUTIONS
Dividends from net investment
income (.34) (.11) (.35) (.38)
Dividends in excess of net
investment income (.03) -0- (.01) -0-
Return of capital -0- (.02) (.08) -0-
Distributions from net realized
gains -0- -0- -0- (.02)
Total dividends and distributions (.37) (.13) (.44) (.40)
Net asset value, end of period $9.81 $9.78 $9.88 $10.31
TOTAL RETURN
Total investment return based
on net asset value (b) 4.32% .28% .03% 7.22%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(000's omitted) $6,380 $6,281 $7,184 $1,292
Ratios of average net assets of:
Expenses, net of waivers/
reimbursements 2.10% 2.10%(c) 2.05% 1.75%(c)
Expenses, before waivers/
reimbursements 4.33% 3.60%(c) 3.21% 4.81%(c)
Net investment income 3.82% 3.22%(c) 3.12% 3.36%(c)
Portfolio turnover rate 15% 144% 55% 294%
See footnotes on page 15.
14
ALLIANCE SHORT-TERM U.S. GOVERNMENT FUND
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING THROUGHOUT EACH
PERIOD
CLASS C
-------------------------------------
YEAR ENDED MAY 1,1994 AUG.2,1993(D)
AUGUST 31, THROUGH TO
1995 AUG.31,1994* APR.30,1994
---------- ----------- -------------
Net asset value, beginning of period $9.77 $9.87 $10.34
INCOME FROM INVESTMENT OPERATIONS
Net investment income .34** .10** .26**
Net realized and unrealized gain (loss) .06 (.07) (.42)
Net increase (decrease) in net asset value
from operations .40 .03 (.16)
LESS: DISTRIBUTIONS
Dividends from net investment income (.34) (.11) (.25)
Dividends in excess of net investment income (.03) -0- (.01)
Return of capital -0- (.02) (.05)
Distributions from net realized gains -0- -0- -0-
Total dividends and distributions (.37) (.13) (.31)
Net asset value, end of period $9.80 $9.77 $ 9.87
TOTAL RETURN
Total investment return based on net
asset value (b) 4.33% .28% (1.56)%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $5,180 $7,128 $8,763
Ratios of average net assets of:
Expenses, net of waivers/reimbursements 2.10% 2.10%(c) 2.10%(c)
Expenses, before waivers/reimbursements 4.23% 3.64%(c) 3.10%(c)
Net investment income 3.80% 3.26%(c) 2.60%(c)
Portfolio turnover rate 15% 144% 55%
* The Fund changed its fiscal year end from April 30 to August 31.
** Net of fee waived and expenses reimbursed by Adviser.
(a) Commencement of operations.
(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.
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. acquired the business and substantially all of
the assets of Equitable Capital and became the investment adviser of the Trust.
15
REPORT OF INDEPENDENT ACCOUNTANTS ALLIANCE SHORT-TERM U.S. GOVERNMENT FUND
_______________________________________________________________________________
TO THE BOARD OF DIRECTORS AND SHAREHOLDERS OF ALLIANCE SHORT-TERM U.S.
GOVERNMENT FUND
In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, 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 Short-Term U.S.
Government Fund (one of the portfolios of the Alliance Portfolios, hereafter
referred to as the 'Fund') at August 31, 1995, the results of its operations
for the year then ended, the changes in its net assets for the year then ended,
for the period May 1, 1994 through August 31, 1994 and for the year ended April
30, 1994, and the financial highlights for each of the periods presented, in
conformity with generally accepted accounting principles. These financial
statements and financial highlights (hereafter referred to as 'financial
statements') are the responsibility of the Fund's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall finan-cial statement
presentation. We believe that our audits, which included confirmation of
securities at August 31, 1995 by correspondence with the custodian and brokers
provide a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
New York, New York
October 20, 1995
<PAGE>
APPENDIX A
DESCRIPTION OF CORPORATE BOND RATINGS
Incorporated by reference from "Appendix A" contained in
the Rule 497 SAI.
A-1
<PAGE>
<PAGE>
ALLIANCE
- --------------------------------------------------------------------------------
ASSET
- --------------------------------------------------------------------------------
ALLOCATION FUNDS
- --------------------------------------------------------------------------------
P.O. Box 1520, Secaucus, New Jersey 07096-1520
Toll Free (800) 221-5672
For Literature: Toll Free (800) 227-4618
PROSPECTUS AND APPLICATION
(Advisor Class)
June [ ], 1996
Alliance Growth Investors Fund
Alliance Conservative Investors Fund
TABLE OF CONTENTS PAGE
The Funds at a Glance .................................................... 2
Expense Information ...................................................... 3
Financial Highlights ..................................................... 4
Description of the Funds ................................................. 5
Purchase and Sale of Shares .............................................. 9
Management of the Funds .................................................. 10
Dividends, Distribution and Taxes ........................................ 11
General Information ...................................................... 12
Appendix A ............................................................... A-1
Investment Adviser
Alliance Capital Management L.P.
1345 Avenue Of The Americas
New York, New York 10105
Alliance Growth Investors Fund ("Growth Investors Fund") and Alliance
Conservative Investors Fund ("Conservative Investors Fund") use asset allocation
strategies, and each Fund is designed with a view toward a particular "investor
profile." The Growth Investors Fund seeks the highest total return consistent
with Alliance's determination of reasonable risk by investing in a diversified
mix of publicly traded equity and fixed-income securities. The Conservative
Investors Fund seeks a high total return without, in the view of Alliance, undue
risk to principal by investing in a diversified mix of publicly traded equity
and fixed-income securities.
Each Fund is a series of The Alliance Portfolios (the "Trust"), and is a
diversified, open-end management investment company. This Prospectus offers only
Advisor Class shares of Alliance Growth Investors Fund and Alliance Conservative
Investors Fund. Other classes of the Funds and shares of the Trust's other
series, each of which has its own investment objective and policies, are offered
by separate Prospectuses. This Prospectus sets forth concisely the information
which a prospective investor should know about the Funds before investing. A
"Statement of Additional Information" dated June [ ], 1996, which provides
further information regarding certain matters discussed in this Prospectus and
other matters which may be of interest to some investors, has been filed with
the Securities and Exchange Commission and is incorporated herein by reference.
For a free copy, write Alliance Fund Services, Inc. at the indicated address or
call the "For Literature" telephone number shown above.
This Prospectus offers the Advisor Class shares of each Fund which may be
purchased at net asset value without any initial or contingent deferred sales
charges and without ongoing distribution expenses. Advisor Class shares are
offered solely to (i) investors participating in fee-based programs meeting
certain standards established by Alliance Fund Distributors, Inc., each Fund's
principal underwriter, and (ii) participants in self-directed defined
contribution employee benefit plans (e.g., 401(k) plans) that meet certain
minimum standards. See "Purchase and Sales of Shares."
An investment in the Funds is not a deposit or obligation of, or guaranteed or
endorsed by, any bank and is not federally insured by the Federal Deposit
Insurance Corporation, the Federal Reserve Board, or any other agency.
Investors are advised to read this Prospectus carefully and to retain it for
future reference.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
ALLIANCE(R)
Mutual funds without the Mystery.(SM)
(R)/SM These are registered marks used under licenses from the owner, Alliance
Capital Management L.P.
<PAGE>
THE FUNDS AT A GLANCE
The following summary is qualified in its entirety by the more detailed
information contained inside this Prospectus.
The Funds Seek to Provide . . .
Growth Investors Fund: Highest total return with reasonable risk through
investment in a mix of equity and fixed-income securities. Normally the Fund
will hold approximately 70% of its total assets in equity securities.
Conservative Investors Fund: High total return without undue risk to principal
through investment in a mix of equity and fixed-income securities. Normally the
Fund will hold approximately 70% of its total assets in fixed-income securities.
The Funds Will Invest . . .
Principally in publicly traded equity and fixed-income securities.
The Trust's Investment Manager Is . . .
Alliance Capital Management L.P. ("Alliance"), a global investment adviser
providing diversified services to institutions and individuals through a broad
line of investments including 107 mutual funds. Since 1971, Alliance has earned
a reputation as a leader in the investment world, with over $156 billion in
assets under management. Alliance provides investment management services to 34
of the FORTUNE 100 companies.
Getting Started . . .
Shares of the Funds are available through your financial representative. Each
Fund offers multiple classes of shares, of which only the Advisor Class is
offered by this Prospectus. Advisor Class shares may be purchased at net asset
value without any initial or deferred sales charges and are not subject to
ongoing distribution expenses. Advisor Class shares may be purchased solely by
investors (i) through accounts established under a fee-based program, sponsored
and maintained by a registered broker-dealer or other financial intermediary and
approved by Alliance Fund Distributors, Inc., each Fund's principal underwriter,
pursuant to which each investor pays an asset-based fee at an annual rate of at
least .50% of the assets in the investor's account, to the broker-dealer or
financial intermediary, or its affiliate or agent, for investment advisory or
administrative services, or (ii) through a self-directed defined contribution
employee benefit plan (e.g., a 401(k) plan) that has at least 1,000 participants
or $25 million in assets. Shares can be purchased for a minimum initial
investment of $250, and subsequent investments can be made for as little as $50.
Fee-based programs through which Advisor Class shares may be purchased may
impose different requirements with respect to minimum initial and subsequent
investment levels than described above. For detailed information about
purchasing and selling shares, see "Purchase and Sale of Shares." Be sure to ask
your financial representative about:
Automatic Reinvestment
Automatic Investment Program
Retirement Plans
Shareholder Communications
Dividend Direction Plans
Auto Exchange
Systematic Withdrawals
Telephone Transactions
24 Hour Information
ALLIANCE(R)
Mutual funds without the Mystery.(SM)
<PAGE>
- --------------------------------------------------------------------------------
EXPENSE INFORMATION
- --------------------------------------------------------------------------------
SHAREHOLDER TRANSACTION EXPENSES are one of several factors to consider when you
invest in a Fund. The following tables summarize your maximum transaction costs
from investing in Advisor Class shares of each Fund and estimated annual
expenses for Advisor Class shares. The examples following the tables show the
cumulative expenses attributable to a hypothetical $1,000 investment in Advisor
Class shares for the periods specified.
CONSERVATIVE INVESTORS FUND
Advisor Class Shares
--------------------
SHAREHOLDER TRANSACTION EXPENSES
Maximum sales charge imposed on purchases ........... None
Sales charge imposed on dividend reinvestments ...... None
Deferred sales charge ............................... None
Exchange fee ........................................ None
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Management fees (after waiver)(a) ................... 0.51%
Other expenses(b) ................................... 0.59%
----
Total Fund operating expenses ....................... 1.10%
====
- --------------------------------------------------------------------------------
(a) Reflects the agreement of Alliance to waive management fees to the extent
necessary to ensure that total Fund operating expenses do not exceed the
amounts shown in the table above. In the absence of such agreement,
management fees would have been .75%.
(b) These expenses include a transfer agency fee payable to Alliance Fund
Services, Inc., an affiliate of Alliance, based on a fixed dollar amount
charged to the Fund for each shareholder's account.
Example
Cumulative Expenses
Paid for the Period of:
----------------------
1 Year 3 Years
------ -------
An investor would pay the following expenses on a
$1,000 investment assuming a 5% annual return
throughout the periods:
Advisor Class ................................. $11 $35
<PAGE>
GROWTH INVESTORS FUND
Advisor Class Shares
--------------------
SHAREHOLDER TRANSACTION EXPENSES
Maximum sales charge imposed on purchases
(as a percentage of offering price) ........... None
Sales charge imposed on dividend reinvestments. None
Deferred sales charge (as a percentage of
original purchase price or redemption
proceeds, whichever is lower) ............... None
Exchange fee .................................. None
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Management fees (after waiver)(a) ........... 0.38%
Other expenses(b) ........................... .72%
----
Total Fund operating expenses ................. 1.10%
====
- --------------------------------------------------------------------------------
(a) Reflects the agreement of Alliance to waive management fees to the extent
necessary to ensure that total Fund operating expenses do not exceed the
amounts shown in the table above. In the absence of such agreement,
management fees would have been .75%.
(b) These expenses include a transfer agency fee payable to Alliance Fund
Services, Inc., an affiliate of Alliance, based on a fixed dollar amount
charged to the Fund for each shareholder's account.
EXAMPLE
Cumulative Expenses
Paid for the Period of:
----------------------
1 Year 3 Years
------ -------
An investor would pay the following expenses
on a $1,000 investment, assuming a 5% annual
return throughout the periods:
Advisor Class ............................... $11 $35
- --------------------------------------------------------------------------------
The purpose of the foregoing tables is to assist the investor in understanding
the various costs and expenses that an investor in Advisor Class shares of a
Fund will bear directly or indirectly. The examples do not reflect any charges
or expenses imposed by your financial representative or your employee benefit
plan. The examples set forth above assume reinvestment of all dividends and
distributions and utilize a 5% annual rate of return as mandated by Securities
and Exchange Commission (the "Commission") regulations. The examples should not
be considered a representation of future expenses; actual expenses may be
greater or less than those shown.
<PAGE>
- --------------------------------------------------------------------------------
Description Of The Funds
- --------------------------------------------------------------------------------
Except for certain investment restrictions designated as fundamental in this
Prospectus and the Statement of Additional Information, the investment
objectives and policies of the Funds are not fundamental policies and may be
changed by the Trustees without shareholder approval. However, the Trust will
give shareholders contemporaneous notice of any change in a Fund's investment
objective. There can be, of course, no assurance that the Funds will achieve
their investment objectives.
INVESTMENT OBJECTIVES AND POLICIES
General. The Conservative Investors and Growth Investors Funds invest in a
variety of fixed-income securities, money market instruments and equity
securities, each pursuant to a different asset allocation strategy, as described
below. The term "asset allocation" is used to describe the process of shifting
assets among discrete categories of investments in an effort to adjust risk
while producing desired return objectives. Portfolio management, therefore, will
consist not only of specific securities selection but also of setting,
monitoring and changing, when necessary, the asset mix.
Each Fund has been designed with a view toward a particular "investor profile."
The "conservative investor" has a relatively short-term investment bias, either
because of a limited tolerance for market volatility or a short investment
horizon. This investor is averse to taking risks that may result in principal
loss, even though such aversion may reduce the potential for higher long-term
gains and result in lower performance during periods of equity market strength.
Consequently, the asset mix for the Conservative Investors Fund attempts to
reduce volatility while providing modest upside potential. The "growth investor"
has a longer-term investment horizon and is therefore willing to take more risks
in an attempt to achieve long-term growth of principal. This investor wishes, in
effect, to be risk conscious without being risk averse. The asset mix for the
Growth Investors Fund should therefore provide for upside potential without
excessive volatility.
Alliance has established an asset allocation committee (the "Committee"), all
the members of which are employees of Alliance, which is responsible for setting
and continually reviewing the asset mix ranges of each Fund. The Committee
generally meets at least twice each month. Under normal market conditions, the
Committee is expected to change allocation ranges approximately three to five
times per year. However, the Committee has broad latitude to establish the
frequency, as well as the magnitude, of allocation changes within the guidelines
established for each Fund. During periods of severe market disruption,
allocation ranges may change frequently. It is also possible that in periods of
stable and consistent outlook no change will be made. The Committee's decisions
are based on and may be limited by a variety of factors, including liquidity,
portfolio size, tax consequences and general market conditions, always within
the context of the appropriate investor profile for each Fund. Consequently,
asset mix decisions for the Conservative Investors Fund principally emphasize
risk assessment of each asset class viewed over the shorter term, while
decisions for the Growth Investors Fund are principally based on the longer term
total return potential for each asset class.
The Funds are permitted to use a variety of hedging techniques to attempt to
reduce market, interest rate and currency risks.
INVESTMENT POLICIES OF THE CONSERVATIVE INVESTORS FUND
The investment objective of the Conservative Investors Fund is to achieve a high
total return without, in the view of Alliance, undue risk of principal. The
Conservative Investors Fund attempts to achieve its investment objective by
allocating varying portions of its assets among investment grade, publicly
traded fixed-income securities, money market instruments and publicly traded
common stocks and other equity securities of United States and non-United States
issuers.
All fixed-income securities owned by the Fund will be of investment grade. This
means that they will be in one of the top four rating categories assigned by
Standard & Poor's Corporation ("S&P") or Moody's Investors Service, Inc.
("Moody's") or will be unrated securities of comparable quality as determined by
Alliance. Securities in the fourth such rating category (rated Baa by Moody's or
BBB by S&P) 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 security held by the
Conservative Investors Fund falls below investment grade (or, in the case of an
unrated security, Alliance determines that it is no longer of investment grade),
the Fund will not be obligated to dispose of such security and may continue to
hold the obligation if, in the opinion of Alliance, such investment is
considered appropriate in the circumstances. For a description of the ratings
referred to above, see Appendix A.
Equity securities invested in by the Conservative Investors Fund will consist of
common stocks and securities convertible into common stocks, such as convertible
bonds, convertible preferred stocks and warrants, issued by companies with a
favorable outlook for earnings and whose rate of growth is expected to exceed
that of the United States' economy over time.
The Conservative Investors Fund will at all times hold at least 40% of its total
assets in investment grade fixed-income securities, each having a duration less
than that of a 10-year Treasury bond (the "Fixed Income Core"). The duration of
a fixed-income security is the weighted average maturity, expressed in years, of
the present value of all future cash flows, including coupon payments and
principal repayments.
<PAGE>
The Conservative Investors Fund is generally expected to hold approximately 70%
of its total assets in fixed-income securities (including the Fixed Income Core,
cash and money market instruments) and 30% in equity securities. Actual asset
mixes will be adjusted in response to economic and credit market cycles. The
fixed-income asset class will always comprise at least 50%, but never more than
90%, of the Fund's total assets. The equity class will always comprise at least
10%, but never more than 50%, of the Fund's total assets. For temporary
defensive purposes, the Fund may invest in money market instruments.
INVESTMENT POLICIES OF THE GROWTH INVESTORS FUND
The investment objective of the Growth Investors Fund is to achieve the highest
total return consistent with Alliance's determination of reasonable risk. The
Fund attempts to achieve its investment objective by allocating varying portions
of its assets among a number of asset classes. Equity investments will include
publicly traded common stocks and other equity securities of the type in which
the Conservative Investors Fund may invest, but may also include equity
securities issued by intermediate and small-sized companies with favorable
growth prospects, companies in cyclical industries, companies whose securities
are temporarily undervalued, companies in special situations and less widely
known companies. Fixed-income investments will include investment grade fixed-
income securities (including cash and money market instruments) and may include
securities that are rated in the lower rating categories by recognized ratings
agencies (i.e., Ba or lower by Moody's or BB or lower by S&P) or that are
unrated but determined by Alliance to be of comparable quality. Lower rated
fixed-income securities generally provide greater current income than higher
rated fixed-income securities, but are subject to greater credit and market
risk. The Fund will not invest more than 25% of its total assets in securities
rated below investment grade, that is, securities rated Ba or lower by Moody's
or BB or lower by S&P, or in unrated securities deemed to be of comparable
quality by Alliance. For a description of the ratings referred to above, see
Appendix A. For more information about the risks associated with investment in
lower rated securities, see "High-Yield Securities" below.
The Growth Investors Fund will at all times hold at least 40% of its total
assets in publicly traded common stocks and other equity securities of the type
purchased by the Conservative Investors Fund (the "Equity Core"). The Growth
Investors Fund is generally expected to hold approximately 70% of its total
assets in equity securities (including the Equity Core) and 30% in fixed-income
securities (including cash and money market instruments). Actual asset mixes
will be adjusted in response to economic and credit market cycles. The fixed-
income asset class will always comprise at least 10%, but never more than 60%,
of the Fund's total assets. The equity class will always comprise at least 40%,
but never more than 90%, of the Fund's total assets. For temporary defensive
purposes, the Fund may invest in money market instruments.
ADDITIONAL INVESTMENT POLICIES AND TECHNIQUES APPLICABLE TO THE FUNDS
Foreign Securities. Each Fund may invest without limit in securities of foreign
issuers and securities which are not publicly traded in the United States,
although the Conservative Investors Fund generally will not invest more than 15%
of its total assets, and the Growth Investors Fund generally will not invest
more than 30% of its total assets, in such securities. Such securities 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 and
costs), 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' ability to invest in certain issuers
located in those 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 Funds' assets held abroad) and expenses not present in
the settlement of domestic investments.
The Growth Investors 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 the value of the currency in which the foreign investment is
denominated. The Funds 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 the Statement of Additional Information.
Non-Publicly Traded Securities. Each Fund 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
<PAGE>
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 them at less
than fair market value. Investment in these securities is restricted to 5% of a
Fund's total assets (not including for these purposes Rule 144A Securities, to
the extent permitted by applicable law) and is also subject to the Funds'
restriction against investing more than 15% of total assets in "illiquid"
securities. To the extent permitted by applicable law, Rule 144A Securities will
not be treated as "illiquid" for purposes of the foregoing restriction so long
as such securities meet liquidity guidelines established by the Trust's Board of
Trustees. For additional information see the Statement of Additional
Information.
Mortgage-Backed Securities. Each Fund may invest in mortgage-backed securities,
including collateralized mortgage obligations or "CMOs." 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 Funds
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.
The Funds may also invest in derivative instruments, including certificates
representing rights to receive payments of the interest only or principal only
of mortgage-backed securities ("IO/PO Strips"). These securities may be more
volatile than other types of securities. IO Strips involve the additional risk
of loss of the entire remaining value of the investment if the underlying
mortgages are prepaid.
Adjustable Rate Securities. Each Fund may invest in adjustable rate securities.
Adjustable rate securities are securities that have interest rates that are
reset at 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.
Asset-Backed Securities. Each Fund may invest in asset-backed securities which
represent fractional interests in pools of leases, retail installment loans or
revolving credit receivables, both secured and unsecured. These assets are
generally held by a trust. Payments of principal and interest or interest only
are passed through 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.
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 much with interest
rates and the short-term nature of the underlying car loans or other receivables
tends to dampen the impact of any change in the prepayment level. Certificate
holders may also experience delays in payment on the certificates if the full
amounts due on underlying sales contracts or receivables are not realized by the
trust 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
its investment objective and policies, the Funds may invest in other asset-
backed securities that may be developed in the future.
High-Yield Securities. The Growth Investors 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 Alliance to
be of comparable quality ("High-Yield Securities"). The Growth Investors Fund
will generally invest in securities with a minimum rating of Caa- by Moody's or
CCC- by S&P or in unrated securities judged by Alliance 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) or S&P (D) or in unrated securities judged by
Alliance to be of comparable quality, if Alliance 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 are in default. For the fiscal year ended April 30,
1995, neither Fund invested in 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
<PAGE>
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.
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 Growth Investors 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. In addition, the values of such securities may be more volatile.
Some High-Yield Securities in which the Growth Investors 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 and S&P, a description of which is included
as Appendix A, 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,
Alliance conducts its own independent credit analysis of High-Yield Securities.
When the Growth Investors Fund invests in securities in the lower rating
categories, the achievement of the Fund's goals is more dependent on Alliance'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 Growth
Investors Fund falls below its rating at the time of purchase (or, in the case
of unrated securities, Alliance 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 Alliance, such investment is considered appropriate in the
circumstances.
Convertible Securities. Each 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. Convertible debt securities that
are rated below BBB (S&P) or Baa (Moody's) or comparable unrated securities as
determined by Alliance 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 Funds 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 and payment-in-kind bonds do not pay current interest
in cash, their value is generally subject to greater fluctuation in response to
changes in market interest rates than bonds which pay interest currently in
cash. 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 in cash.
Even though such bonds do not pay current interest in cash, a Fund is
nonetheless required to accrue interest income on such investments and to
distribute such amounts at least annually to shareholders. Thus, a Fund could be
required at times to liquidate other investments in order to satisfy its
dividend requirements.
Futures and Related Options. Each Fund may buy and sell stock index futures
contracts ("index futures") and may buy options on index futures for hedging
purposes and may buy and sell options on stock indices for hedging purposes or
to earn additional income. The Funds may also, for hedging purposes, purchase
and sell futures contracts, options thereon and options with respect to U.S.
Treasury securities, including U.S. Treasury bills, notes and bonds.
The use of futures and options involves certain special risks. Futures and
options transactions involve costs and may result in losses. Certain risks arise
because of the possibility of imperfect correlations between movements in the
prices of futures and options and movements in the prices of the underlying
stock index or security or of the securities in a Fund's portfolio that are the
subject of a hedge. The successful use of the strategies described above further
depends on Alliance's ability to forecast market movements correctly. Other
risks arise from a Fund's potential inability to close out its futures or
options positions. In addition there can be no assurance that a liquid secondary
market will exist for any future or option at any particular time. Certain
provisions of the Internal Revenue Code and certain regulatory requirements may
limit the Funds' ability to engage in futures and options transactions. A more
detailed explanation of futures and options transactions, including the risks
associated with them, is included in the Statement of Additional Information.
Options. A Fund may seek to increase current return by writing covered call and
put options on securities it owns or in which it may invest. The Fund receives a
premium from writing a call or put option, which increases the Fund's return if
the option expires unexercised or is closed out at a net profit. When the Fund
writes a call option, it gives up the opportunity to profit from any increase in
the price of a security above the exercise price of the option; when it writes a
put option, the Fund takes the risk that it will be required to purchase a
security from the
<PAGE>
option holder at a price above the current market price of the security. The
Fund may terminate an option that it has written prior to its expiration by
entering into a closing purchase transaction in which it purchases an option
having the same terms as the option written. A Fund may also buy and sell put
and call options for hedging purposes. A Fund may also from time to time buy and
sell combinations of put and call options on the same underlying security to
earn additional income. A Fund's use of these strategies may be limited by
applicable law.
Securities Loans, Repurchase Agreements and Forward Commitments. Each Fund may
lend portfolio securities amounting to not more than 25% of its total assets and
may enter into repurchase agreements on up to 25% of its total assets. These
transactions must be fully collateralized at all times, but involve some risk to
a Fund if the other party should default on its obligation and the Fund is
delayed or prevented from recovering the collateral. Each Fund may also purchase
securities for future delivery, which may increase its overall investment
exposure and involves a risk of loss if the value of the securities declines
prior to the settlement date.
Portfolio Management. Alliance manages each Fund's portfolio by buying and
selling securities to help attain its investment objective. Alliance anticipates
that the annual turnover rate will not exceed 200% for Growth Investors Fund and
300% for Conservative Investors Fund. A 200% and 300% annual turnover rate would
occur, for example, when all of the securities in a Fund's portfolio are
replaced twice and three times, respectively, in a period of one year. These
portfolio turnover rates are greater than those of most other investment
companies. 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" below
and "Portfolio Transactions" in the Statement of Additional Information.
Certain Fundamental Investment Policies. The Funds have adopted certain
fundamental investment policies which may not be changed without shareholder
approval, including policies which provide that each Fund may not: (i) invest
more than 5% of its total assets in the securities of any one issuer (other than
U.S. Government securities and repurchase agreements relating thereto), although
up to 25% of a Fund's total assets may be invested without regard to this
restriction; or (ii) invest 25% or more of its total assets in the securities of
any one industry.
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PURCHASE AND SALE
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OF SHARES
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HOW TO BUY SHARES
Each Fund offers multiple classes of shares, of which only the Advisor Class is
offered by this Prospectus. Advisor Class shares of each Fund may be purchased
through your financial representative at net asset value without any initial or
contingent deferred sales charges and are not subject to ongoing distribution
expenses. Advisor Class shares may be purchased solely by investors (i) through
accounts established under a fee-based program, sponsored and maintained by a
registered broker-dealer or other financial intermediary and approved by
Alliance Fund Distributors, Inc. ("AFD"), each Fund's principal underwriter,
pursuant to which each investor pays an asset-based fee at an annual rate of at
least .50% of the assets in the investor's account to the broker-dealer or
financial intermediary, or its affiliate or agent, for investment advisory or
administrative services, or (ii) through a self-directed defined contribution
employee benefit plan (e.g., a 401(k) plan) that has at least 1,000 participants
or $25 million in assets. The minimum initial investment is $250. The minimum
for subsequent investments is $50. Investments of $25 or more are allowed under
the automatic investment program and a 403(b)(7) retirement plan. Share
certificates are issued only upon request. See the Statement of Additional
Information and the Application for more information.
The Funds may refuse any order to purchase Advisor Class shares. In this regard,
the Funds reserve the right to restrict purchases of Advisor Class shares
(including exchanges) when there appears to be evidence of a pattern of frequent
purchases and sales made in response to short-term fluctuations in share price.
HOW THE FUNDS VALUE THEIR SHARES
The net asset value of Advisor Class shares of a Fund is calculated by dividing
the value of the Fund's net assets allocable to the Advisor Class by the
outstanding shares of Advisor Class. Shares are valued each day the New York
Stock Exchange (the "Exchange") is open as of the close of regular trading
(currently 4:00 p.m. Eastern time). The securities in a Fund 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.
HOW TO SELL SHARES
You may "redeem," i.e., sell your shares in a Fund to a Fund on any day the
Exchange is open, either directly or through your financial representative. The
price you will receive is the net asset value next calculated after the Fund
receives your request in proper form. Proceeds generally will be sent to you
within seven days. However, for shares recently purchased by check or electronic
fund transfer, a Fund will not send proceeds until it is reasonably satisfied
that the check has been collected (which may take up to 15 days). If you are in
doubt about what documents are required by your fee-based program or employee
benefit plan, you should contact your financial representative.
SELLING SHARES THROUGH YOUR FINANCIAL REPRESENTATIVE
Your financial representative must receive your request before 4:00 p.m. Eastern
time and your financial representative must transmit your request to the Fund by
5:00 p.m. Eastern time to receive that day's net asset
<PAGE>
value. Your financial representative is responsible for furnishing all necessary
documentation to the Fund and may charge you for this service.
SELLING SHARES DIRECTLY TO A FUND
Send a signed letter of instruction or stock power form to Alliance Fund
Services, Inc. ("AFS") along with certificates, if any, that represent the
shares you want to sell. For your protection, signatures must be guaranteed by a
bank, a member firm of a national stock exchange or other eligible guarantor
institution. Stock power forms are available from your financial representative,
AFS, and many commercial banks. Additional documentation is required for the
sale of shares by corporations, intermediaries, fiduciaries and surviving joint
owners. For details contact:
Alliance Fund Services
P.O. Box 1520
Secaucus, NJ 07096-1520
1-800-221-5672
Alternatively, a request for redemption of shares for which no stock
certificates have been issued can also be made by telephone to 800-221-5672.
Telephone redemption requests must be made by 4 p.m. Eastern time on a Fund
business day in order to receive that day's net asset value and, except for
certain omnibus accounts, may be made only once in any 30-day period. A
shareholder who has completed the Telephone Transactions section of the
Subscription Application, or the Shareholder Options form obtained from AFS, can
elect to have the proceeds of their redemption sent to their bank via an
electronic find transfer. Proceeds of telephone redemptions also may be sent by
check to a shareholder's address of record. Except for certain omnibus accounts,
redemption requests by electronic funds transfer may not exceed $100,000 and
redemption requests by check may not exceed $50,000. Telephone redemption is not
available for shares held in nominees or "street name" accounts or retirement
plan accounts or shares held by a shareholder who has changed his or her address
or record within the previous 30 calendar days.
GENERAL
The sale of shares is a taxable transaction for Federal tax purposes. Under
unusual circumstances, the Funds may suspend redemptions or postpone payment for
up to seven days or longer, as permitted by Federal securities law. The Funds
reserve the right to close an account that through redemption has remained below
$200 for 90 days. Shareholders will receive 60 days' written notice to increase
the account value before the account is closed.
During drastic economic or market developments, you might have difficulty in
reaching AFS by telephone, in which event you should issue written instructions
to AFS. AFS is not responsible for the authenticity of telephonic requests to
purchase, sell or exchange shares. AFS will employ reasonable procedures to
verify that telephone requests are genuine, and could be liable for losses
resulting from unauthorized transactions if it failed to do so. Dealers and
agents may charge a commission for handling telephonic requests. The telephone
service may be suspended or terminated at any time without notice.
SHAREHOLDER SERVICES
AFS offers a variety of shareholder services. For more information about these
services or your account, call AFS's toll-free number, 800-221-5672.
HOW TO EXCHANGE SHARES
You may exchange your Advisor Class shares of any Fund for Advisor Class shares
of other Alliance Mutual Funds (which include AFD Exchange Reserves, a money
market fund managed by Alliance). Exchanges of shares are made at the net asset
values next determined, without sales or service charges. Exchanges may be made
by telephone or written request. Telephone exchange requests must be received by
AFS by 4:00 p.m. Eastern time on a Fund business day in order to receive that
day's net asset value.
Please read carefully the prospectus of the fund into which you are exchanging
before submitting the request. Call AFS at 800-221-5672 to exchange by telephone
uncertificated shares. An exchange is a taxable capital transaction for Federal
tax purposes. The exchange service may be changed, suspended, or terminated on
60 days' written notice.
GENERAL
If you are a Fund shareholder through an account established under a fee-based
program, your fee-based program may impose requirements with respect to the
purchase, sale or exchange of Advisor Class shares of a Fund that are different
from those described in this Prospectus. A transaction fee may be charged by
your financial representative with respect to the purchase, sale or exchange of
Advisor Class shares made through such financial representative.
Each Fund offers three classes of shares other than the Advisor Class, which are
Class A, Class B and C. All classes of shares of a Fund have a common investment
objective and investment portfolio. Class A shares are offered with an initial
sales charge and pay a distribution services fee. Class B shares have a
contingent deferred sales charge (a "CDSC") and also pay a distribution services
fee. Class C shares have no initial sales charge or CDSC but pay a distribution
services fee. Because Advisor Class shares have no initial sales charge or CDSC
and pay no distribution services fee, Advisor Class shares are expected to have
different performance Class A, Class B or Class C shares. You may obtain more
information about Class A, Class B and Class C shares, which are not offered by
this Prospectus, by contacting AFS by telephone at 1-800-221-5672 or by
contacting your financial representative.
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MANAGEMENT OF THE FUNDS
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ADVISER
Alliance, which is 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 contract (the "Investment Advisory Contract") to provide
investment advice and, in general, to conduct the management and investment
program of each Fund subject to the general supervision and control of the
Trustees of the Trust. The employee of Alliance principally responsible for the
Funds' investment program is Bruce W. Calvert, who has had such responsibility
since April 1995. Mr. Calvert is the Vice Chairman and Chief Investment Officer
of Alliance and has been associated with Alliance since 1973.
Alliance is a leading international investment manager supervising client
accounts with assets as of March 31, 1996 totalling more than $156 billion (of
which more than $43 billion represents the assets of investment companies).
Alliance's clients are primarily major corporate employee benefit funds, public
employee retirement systems, investment companies, foundations and endowment
funds. The 50 registered investment companies managed by Alliance comprising 107
separate investment portfolios currently have over two million shareholders. As
of March 31, 1996, Alliance was retained as an investment manager of employee
benefit fund assets for 34 of the Fortune 100 companies.
<PAGE>
Alliance Capital Management Corporation, the sole general partner of, and the
owner of a 1% general partnership interest in, Alliance, 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,
which is a wholly-owned subsidiary of The Equitable Companies Incorporated, a
holding company controlled by AXA, a French insurance holding company. Certain
information concerning the ownership and control of Equitable by AXA is set
forth in the Statement of Additional Information under "Management of the
Trust."
Alliance provides investment advisory, administrative and clerical services,
office space, and order placement facilities for each Fund and pays all
compensation of the Trustees and officers of the Trust who are affiliated
persons of Alliance. For its services, Alliance is entitled to receive a monthly
fee from each Fund at an annual rate of 0.75% of such Fund's average daily net
assets. However, Alliance has voluntarily agreed to waive its fees and bear
certain expenses so that total expenses of each Fund do not exceed 1.10% on an
annual basis of average net assets for Advisor Class shares.
DISTRIBUTION SERVICES AGREEMENTS
Each Fund has entered into a Distribution Services Agreement with AFD with
respect to Advisor Class shares. The Glass-Steagall Act and other applicable
laws may limit the ability of a bank or other depository institution to become
an underwriter or distributor of securities. However, in the opinion of the
Trust's management, based on the advice of counsel, these laws do not prohibit
such depository institutions from providing services for investment companies
such as the administrative, accounting and other services referred to in the
Agreement. In the event that a change in these laws prevented a bank from
providing such services, it is expected that other service arrangements would be
made and that shareholders would not be adversely affected. The State of Texas
requires that shares of the Funds may be sold in that state only by dealers or
other financial institutions that are registered there as broker-dealers.
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DIVIDENDS, DISTRIBUTIONS
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AND TAXES
- --------------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS
If you receive an income dividend or capital gains distribution in cash from a
Fund, you may, within 30 days following the date of its payment, reinvest the
dividend or distribution in additional shares of the Fund without charge by
returning to Alliance, with appropriate instructions, the check representing
such dividend or distribution. Thereafter, unless you otherwise specify, you
will be deemed to have elected to reinvest all subsequent dividends and
distributions in shares of the Fund.
It is the intention of the Conservative Investors Fund to distribute net
investment income quarterly and any net realized capital gains at least
annually. It is the intention of the Growth Investors Fund to distribute any net
investment income and any net realized capital gains at least annually.
Distributions from net investment income, if any, are expected to be small.
Distributions from net capital gains are made after applying any available loss
carryovers.
TAXES
Each Fund intends to qualify to be taxed as a "regulated investment company"
under the Internal Revenue Code. So long as a Fund distributes at least 90% of
its income, qualification as a regulated investment company relieves that Fund
of Federal income and excise taxes on that part of its taxable income including
net capital gains which it pays out to its shareholders. Dividends out of net
ordinary income and distributions of net short-term capital gains are taxable to
the recipient shareholders as ordinary income. In the case of corporate
shareholders, such dividends may be eligible for the dividends-received
deduction, except that the amount eligible for the deduction is limited to the
amount of qualifying dividends received by the Fund. A corporation's dividends-
received deduction will be disallowed unless the corporation holds shares in the
Fund at least 46 days. Furthermore, the dividends-received deduction will be
disallowed to the extent that 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 each Fund to its shareholders as capital gains
distributions is taxable to the shareholders as long-term capital gains,
irrespective of the length of time a shareholder may have held his or her Fund
shares. Long-term capital gains distributions are not eligible for the
dividends-received deduction referred to above.
Under current federal tax law, the amount of an income dividend or capital gains
distribution declared by a Fund during October, November or December of a year
to shareholders of record as of a specified date in such a month that is paid
during January of the following year is includable in the prior year's taxable
income of shareholders that are calendar year taxpayers.
Any dividend or distribution received by a shareholder on shares of a Fund will
have the effect of reducing the net asset value of such shares by the amount of
such dividend or distribution. Furthermore, a dividend or distribution made
shortly after the purchase of such shares by a shareholder, although in effect a
return of capital to that particular shareholder, would be taxable to him or her
as described above. Any loss realized on the sale of shares held six months or
less will be a long-term capital loss to the extent of distribution with respect
to such shares of net capital gain.
A dividend or capital gains distribution with respect to shares of a Fund held
by a tax-deferred or qualified plan, such as an individual retirement account,
403(b)(7) retirement plan or corporate pension or profit-sharing plan, will not
be taxable to
<PAGE>
the plan. Distributions from such plans will be taxable to individual
participants under applicable tax rules without regard to the character of the
income earned by the qualified plan.
- --------------------------------------------------------------------------------
GENERAL INFORMATION
- --------------------------------------------------------------------------------
PORTFOLIO TRANSACTIONS
Consistent with the Rules of Fair Practice of the National Association of
Securities Dealers, Inc., and subject to seeking best price and execution, the
Trust may consider sales of shares of the Funds as a factor in the selection of
dealers to enter into portfolio transactions with the Funds.
ORGANIZATION
The Trust is a Massachusetts business trust organized on March 26, 1987. Prior
to August 2, 1993, the Trust was known as The Equitable Funds, and the Growth
Investors Fund and the Conservative Investors Fund were known as The Equitable
Growth Investors Fund and The Equitable Conservative Investors Fund,
respectively.
The Trust is an open-end management investment company with an unlimited number
of authorized shares of beneficial interest, which may, without shareholder
approval, be divided into an unlimited number of series of such shares which, in
turn, may be subdivided into an unlimited number of classes of shares. The Trust
currently consists of five series of shares, two of which represent the Funds.
Each Fund and the related series is divided into four classes of shares,
designated Advisor Class shares, Class A shares, Class B shares and Class C
shares. The Trustees may, without shareholder approval, further divide each
series into additional classes of shares which may be sold under conditions or
with charges varying from those of the present classes of shares of each series.
Shareholders are entitled to one vote for each share held and to vote in the
election of Trustees and the termination of the Trust and on other matters
submitted to meetings of shareholders. Shareholders of a series or a class
thereof are entitled to vote only on matters which affect that series or that
class, and shareholders of the series or a particular class of shares of the
series which are affected generally vote together as a single class. The Trust
is not required and does not presently intend to hold annual meetings of its
shareholders for election of Trustees and ratification of the selection of
auditors. Shareholders may remove Trustees from office by votes cast in person
or by proxy at a meeting of shareholders or by written consent. The shares of
each Fund are freely transferable, are entitled to distributions from the assets
of the relevant Fund as declared by the Trustees, and, if a Fund were
liquidated, would receive the net assets of the Fund attributable to the
relevant class. The Trust may suspend the sale of shares of any Fund or class
thereof at any time and may refuse any order to purchase shares.
Shareholders could, under certain circumstances, be held personally liable for
obligations of the Trust. However, the risk of a shareholder incurring financial
loss on account of such liability is considered remote since it may arise only
in very limited circumstances. See "Shareholder and Trustee Liability" under
"General Information" in the Statement of Additional Information.
REGISTRAR, TRANSFER AGENT AND DIVIDEND-DISBURSING AGENT
AFS, an indirect wholly-owned subsidiary of Alliance, located at 500 Plaza
Drive, Secaucus, New Jersey 07094, is the Trust's registrar, transfer agent and
dividend-disbursing agent for a fee based upon the number of shareholder
accounts maintained for the Trust.
PRINCIPAL UNDERWRITER
AFD, an indirect wholly-owned subsidiary of Alliance, located at 1345 Avenue of
the Americas, New York, New York 10105, is the principal underwriter of the
shares of the Trust.
PERFORMANCE INFORMATION
From time to time the Funds advertise their "yield" and "total return." Yield
and total return are computed separately for each class of shares, including
Advisor Class shares. A Fund's yield for any 30-day (or one-month) period is
computed by dividing the net investment income per share earned during such
period by the maximum public offering price per share on the last day of the
period, and then annualizing such 30-day (or one-month) yield in accordance with
a formula prescribed by the Commission which provides for compounding on a semi-
annual basis. The Funds may also state in sales literature an "actual
distribution rate" for each class which is computed in the same manner as yield
except that actual income dividends declared per share during the period in
question are substituted for net investment income per share. The actual
distribution rate is computed separately for each class of shares, including
Advisor Class shares. Advertisements of total return disclose the average annual
compounded total return for the recent one-year period and the life of the
class. Total return for each such period is computed by finding, through the use
of a formula prescribed by the Commission, the average annual compounded rate of
return over the period that would equate an assumed initial amount invested to
the value of the investment at the end of the period. For purposes of computing
total return, income dividends and capital gains distributions paid on shares of
the Funds are assumed to have been reinvested when paid and the maximum sales
charges applicable to purchases and redemptions of Fund shares are assumed to
have been paid. Advertisements may quote performance rankings or ratings of the
Funds as measured by financial publications or by independent organizations such
as Lipper Analytical Services, Inc. and Morningstar, Inc. or compare the Funds'
performance to various indices.
<PAGE>
ADDITIONAL INFORMATION
This Prospectus and the Statement of Additional Information, which has been
incorporated by reference herein, do not contain all the information set forth
in the Registration Statement filed by the Trust with the Commission under the
Securities Act of 1933. Copies of the Registration Statement may be obtained at
a reasonable charge from the Commission or may be examined, without charge, at
the offices of the Commission in Washington, D.C.
This prospectus does not constitute an offering in any state in which such
offering may not lawfully be made.
<PAGE>
- --------------------------------------------------------------------------------
APPENDIX A
- --------------------------------------------------------------------------------
RATINGS OF CORPORATE BONDS
DESCRIPTIONS OF THE BOND RATINGS OF STANDARD & POOR'S CORPORATION ARE:
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.
D--Debt rated D is in default and payment of interest and/or repayment of
principal is in arrears.
The ratings from AA 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 Moody's Investors Service, 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 bonds 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.
Caa--Bonds which are rated Caa are of poor standing. Such issues may be in
default or 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.
A-1
<PAGE>
(LOGO) THE ALLIANCE PORTFOLIOS:
ALLIANCE CONSERVATIVE INVESTORS FUND
ALLIANCE GROWTH INVESTORS 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
(Advisor Class)
June [ ], 1995
_________________________________________________________________
This Statement of Additional Information relating to Advisor
Class shares of the Fund is not a prospectus and should be read
in conjunction with the Funds' current Prospectus relating to
Advisor Class shares. A copy of the Funds' Prospectus relating
to Advisor Class shares may be obtained by contacting Alliance
Fund Services, Inc. at the address or telephone numbers shown
above.
_________________________________________________________________
TABLE OF CONTENTS
Page
____
INVESTMENT POLICIES AND RESTRICTIONS....................
ADDITIONAL INVESTMENT TECHNIQUES OF THE FUNDS..... .....
INVESTMENT RESTRICTIONS.................................
MANAGEMENT OF THE FUNDS.................................
PORTFOLIO TRANSACTIONS..................................
EXPENSES OF THE FUNDS...................................
PURCHASE OF SHARES......................................
REDEMPTION AND REPURCHASE OF SHARES.....................
SHAREHOLDER SERVICES....................................
NET ASSET VALUE.........................................
DIVIDENDS, DISTRIBUTIONS AND TAXES......................
GENERAL INFORMATION.....................................
<PAGE>
FINANCIAL STATEMENTS....................................
REPORT OF INDEPENDENT ACCOUNTANTS.......................
APPENDIX A..............................................A-1
______________________
(R) This registered service mark used under license from the
owner, Alliance Capital Management L.P.
<PAGE>
________________________________________________________________
INVESTMENT POLICIES AND RESTRICTIONS
_________________________________________________________________
This section is incorporated by reference from the
section "Investment Policies and Restrictions" contained in the
Statement of Additional Information of Alliance Conservative
Investors Fund ("Conservative Investors Fund") and Alliance
Growth Investors Fund ("Growth Investors Fund") (together, the
"Funds"), each a series of The Alliance Portfolios (the "Trust")
dated September 1, 1995 relating to Class A, Class B and Class C
shares of the Fund as filed with the Securities and Exchange
Commission (the "SEC") pursuant to Rule 497(c) on September 7,
1995, file nos. 33-12988 and 811-05088 (the "Rule 497 SAI").
Capitalized terms used herein that are not otherwise
defined herein are used as defined in the Rule 497 SAI.
_________________________________________________________________
ADDITIONAL INVESTMENT TECHNIQUES OF THE FUNDS
_________________________________________________________________
Incorporated by reference from the section "Additional
Investment Techniques of the Funds" contained in the Rule 497
SAI.
_________________________________________________________________
INVESTMENT RESTRICTIONS
_________________________________________________________________
Incorporated by reference from the section "Investment
Restrictions" contained in the Rule 497 SAI.
_________________________________________________________________
MANAGEMENT OF THE FUNDS
_________________________________________________________________
The first paragraph of the section "Management of the
Funds" contained in the Rule 497 SAI is incorporated by
reference.
The Adviser is a leading international investment
manager supervising client accounts with assets as of March 1,
1996 of more than $156 billion (of which more than $48 billion
represented the assets of investment companies). The Adviser's
clients are primarily major corporate employee benefit funds,
public employee retirement systems, investment companies,
2
<PAGE>
foundations and endowment funds and included, as of March 1,
1996, 34 of the FORTUNE 100 Companies. As of that date, the
Adviser and its subsidiaries employed approximately 1,350
employees who operated out of domestic offices and the overseas
offices of subsidiaries in Bombay, Istanbul, London, Sydney,
Tokyo, Toronto, Bahrain, Luxembourg and Singapore. The 50
registered investment companies comprising 107 separate
investment portfolios managed by the Adviser currently have more
than two million shareholders.
Alliance Capital Management Corporation, the sole
general partner of, and the owner of a 1% general partnership
interest in, the Adviser, is an indirect wholly-owned subsidiary
of The Equitable Life Assurance Society of the United States
("Equitable"), one of the largest life insurance companies in the
United States and a wholly-owned subsidiary of The Equitable
Companies Incorporated ("ECI"), a holding company controlled by
AXA, a French insurance holding company. As of March 1, 1996,
ACMC, Inc. and Equitable Capital Management Corporation, each a
wholly-owned direct or indirect subsidiary of Equitable, together
with Equitable, owned in the aggregate approximately 57.6% of the
issued and outstanding units representing assignments of
beneficial ownership of limited partnership interests in the
Adviser ("Units"). As of March 1, 1996, approximately 32.4% and
10.0% 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 and its subsidiaries own approximately 63.9% of the
issued and outstanding shares of capital stock of ECI. AXA is
the holding company for an international group of insurance and
related financial services companies. AXA's insurance operations
include activities in life insurance, property and casualty
insurance and reinsurance. The insurance operations are diverse
geographically, with activities in France, the United States,
Australia, the United Kingdom, Canada and other countries,
principally in Europe and the Asia Pacific area. AXA is also
engaged in asset management, investment banking, securities
trading, brokerage, real estate and other financial services
activities in the United States, Europe and the Asia Pacific
area. Based on information provided by AXA, as of March 1, 1996,
42.1% of the issued ordinary shares (representing 53.4% of the
voting power) of AXA were owned by Midi Participations, a French
holding company ("Midi"). The shares of Midi were, in turn,
owned 61.4% (representing 62.5% of the voting power) by Finaxa, a
French holding company, and 38.6% (representing 37.5% of the
voting power) by subsidiaries of Assicurazioni Generali S.p.A.,
an Italian corporation (one of which, Belgica Insurance Holding
S.A., a Belgian corporation, owned 30.8%, representing 33.1% of
the voting power). As of March 1, 1996, 61.1% of the voting
shares (representing 73.4% of the voting power) of Finaxa were
3
<PAGE>
owned by five French mutual insurance companies (the "Mutuelles
AXA") (one of which, AXA Assurances I.A.R.D. Mutuelle, owned
34.7% of the voting shares representing 40.4% of the voting
power), and 25.5% of the voting shares (representing 16% of the
voting power) of Finaxa were owned by Banque Paribas, a French
bank. Including the ordinary shares owned by Midi, as of
March 1, 1996, the Mutuelles AXA directly or indirectly owned 51%
of the issued ordinary shares (representing 64.7% of the voting
power) of AXA. Acting as a group, the Mutuelles AXA control AXA,
Midi and Finaxa.
Investment Advisory Contract and Expenses
Incorporated by reference from the sub-section
"Investment Advisory Contract and Expenses" contained in the
Rule 497 SAI.
TRUSTEES AND OFFICERS
The Trustees and principal officers of the Trust, their
ages as of the date of this Statement of Additional Information
and their primary occupations during the past five years are set
forth below.
OFFICERS
John D. Carifa, President, see biography above.
Edmund P. Bergan, Jr., 45, 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, 45, 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.
Vincent S. Noto, 31, Controller and Chief Accounting
Officer, is an Assistant Vice President of Alliance Fund
Services, Inc. His address is 500 Plaza Drive, Secaucus, New
Jersey 07094.
Melvin J. Oliver, 38, Assistant Controller, is an
Accounting Manager of Alliance Fund Services, Inc. His address is
500 Plaza Drive, Secaucus, New Jersey 07094.
Bruce W. Calvert, 49, Vice President, is the Vice
Chairman and Chief Investment Officer of Alliance Capital
Management Corporation, the general partner of Alliance Capital
Management L.P. His address is 1345 Avenue of the Americas, New
York, NY 10105.
4
<PAGE>
Kathleen A. Corbet, 36, Vice President, is, since July
23, 1993, Senior Vice President of Alliance Capital Management
Corporation, general partner of Alliance Capital Management L.P.
She was formerly employed by Equitable Capital. Her address is
1345 Avenue of the Americas, New York, NY 10105.
Barbara J. Krumsiek, 43, 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.
Wayne D. Lyski, 54, Vice President, is Executive Vice
President of Alliance Capital Management Corporation, the general
partner of Alliance Capital Management L.P. His address is 1345
Avenue of the Americas, New York, NY 10105.
The aggregate compensation paid to each of the Trustees
by the Growth Fund for the fiscal year ended October 31, 1995 and
by the Strategic Balanced Fund for the fiscal year ended July 31,
1995, the aggregate compensation paid to each of the Trustees
during calendar year 1995 by all of the funds to which the
Adviser provides investment advisory services (collectively, the
"Alliance Fund Complex") and the total number of registered
investment companies in the Alliance Fund Complex with respect to
which each of the Trustees serves as a director or trustee, are
set forth below. Neither of the Funds nor any fund in the
Alliance Fund Complex provides compensation in the form of
pension or retirement benefits to any of its directors or
trustees. Each of the Trustees is a director or trustee of one
or more other registered investment companies in the Alliance
Fund Complex.
5
<PAGE>
Total Number of
Funds in the
Alliance Fund
Total Complex,
Aggregate Compensation Including the
Compensation Aggregate From the Trust, as to
from the Compensation Alliance which the
Conservative from the Fund Complex Trustee is a
Name of Trustee Investors Growth Including Director or
of the Fund Fund Investors Fund the Trust* Trustee
_______________ ____________ _____________ ____________ ______________
John D. Carifa $ -- $ -- $ -- 49
Alberta B. Arthurs $4,800 $4,800 $ 24,000 5
Ruth Block $5,000 $5,000 $159,000 36
Richard W. Couper $5,000 $5,000 $ 24,000 5
Brenton W. Harries $5,000 $5,000 $ 24,000 5
Donald J. Robinson $5,000 $5,000 $ 24,000 5
____________________________
* There are 107 investment companies or portfolios thereof in the Alliance
Fund Complex.
As of April 5, 1996, the Trustees and officers of the
Funds as a group owned less than 1% of the shares of the Fund.
_________________________________________________________________
PORTFOLIO TRANSACTIONS
_________________________________________________________________
Incorporated by reference from the section "Portfolio
Transactions" contained in the Rule 497 SAI.
_________________________________________________________________
EXPENSES OF THE FUNDS
_________________________________________________________________
Distribution Arrangements
The Trust has entered into a Distribution Services
Agreement (the "Agreement") with Alliance Fund Distributors,
Inc., the Trust's principal underwriter (the "Principal
Underwriter"), to permit the Principal Underwriter to distribute
the Funds' Advisor Class shares.
The Agreement was amended as of [ ], 1996 to
permit the distribution of the Advisor Class shares. The
6
<PAGE>
amendment to the Agreement was approved by the vote of the
Trustees on [ ], 1996.
The Agreement will continue in effect for successive
twelve-month periods with respect to Advisor Class shares
provided, however, that such continuance is specifically approved
at least annually by the Trustees of the Trust or by vote of the
holders of a majority of the outstanding voting securities (as
defined in the 1940 Act) of that class, and in either case, by a
majority of the Trustees of the Trust who are not parties to the
Agreement or interested persons, as defined in the 1940 Act, of
any such party (other than as directors of the Trust). All
amendments to the Agreement must be approved by a vote of the
Trustees of the Fund.
Transfer Agency Arrangements
Alliance Fund Services, Inc., an indirect wholly-owned
subsidiary of the Adviser, receives a transfer agency fee per
account holder of each Class A, Class B, Class C and Advisor
Class share of the Funds, plus reimbursement for out-of-pocket
expenses. [For the fiscal year ended [ ], 1995, transfer
agency fees in the amount of [ ] were paid to Alliance Fund
Services, Inc.]
_________________________________________________________________
PURCHASE OF SHARES
_________________________________________________________________
The following information supplements that set forth in
the Prospectus under the heading "Purchase and Sale of Shares --
How To Buy Shares; -- How to Sell Shares; -- and Shareholder
Services."
General
If you are a Fund shareholder through an account
established under a fee-based program, your fee-based program may
impose requirements with respect to the purchase, sale or
exchange of Advisor Class shares of the Fund that are different
from those described in the Prospectus and this Statement of
Additional Information. A transaction fee may be charged by your
financial representative with respect to the purchase, sale or
exchange of Advisor Class shares made through such financial
representative.
Advisor Class shares of the Funds are offered on a
continuous basis at a price equal to their net asset value. The
minimum for initial investments is $250; subsequent investments
(other than reinvestments of dividends and capital gains
7
<PAGE>
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.
Investors may purchase shares of the Fund solely through
(i) accounts established under a fee-based program, sponsored and
maintained by registered broker-dealers or other financial
intermediaries and approved by the Principal Underwriter,
pursuant to which each investor pays an asset-based fee at an
annual rate of at least .50% of the assets in the investor's
account, to the broker-dealer or financial intermediary, or its
affiliate or agent, for investment advisory or administrative
services, or (ii) a self-directed defined contribution employee
benefit plan (e.g., a 401(k) plan) that has at least 1,000
participants or $25 million in assets. The Fund may refuse any
order for the purchase of Advisor Class shares. The Fund
reserves the right to suspend the sale of its Advisor Class
shares to the public in response to conditions in the securities
markets or for other reasons.
The public offering price of Advisor Class shares of the
Funds is their net asset value. 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 Advisor Class 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.
A Fund business day is any weekday, exclusive of days on which
the Exchange is closed (most national holidays and Good Friday).
For purposes of this computation, Exchange-listed securities and
over-the-counter securities admitted to trading on the NASDAQ
National List are valued at the last quoted sale or, if there is
no such sale, at the mean of closing bid and asked prices and
portfolio bonds are presently valued by a recognized pricing
service. If accurate quotations are not available, securities
will be valued at fair value determined in good faith by the
Board of Trustees.
The Funds will accept unconditional orders for their
Advisor Class shares to be executed at the public offering price
equal to their net asset value next determined. 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. In the
case of orders for purchase of Advisor Class shares placed
8
<PAGE>
through a shareholder's financial representative, the applicable
public offering price will be the net asset value as so
determined, but only if the financial representative receives the
order prior to the close of regular trading on the Exchange and
transmits it to the Principal Underwriter prior to the close of
trading on the Exchange and transmits it to the Principal
Underwriter prior to 5:00 p.m. Eastern time. The financial
representative is responsible for transmitting such orders by
5:00 p.m. If the financial representative fails to do so, the
investor's right to that day's closing price must be settled
between the investor and the financial representative. If the
financial representative receives the order after the close of
regular trading on the Exchange, the price will be based on the
net asset value determined as of the close of regular trading on
the Exchange on the next day it is open for trading.
Following the initial purchase of Advisor Class shares,
a shareholder may place orders to purchase additional Advisor
Class shares by telephone if the shareholder has completed the
appropriate portion of the Subscription Application. Except with
respect to certain omnibus accounts, a telephone purchase order
may not exceed $500,000. Payment for Advisor Class shares
purchased by telephone can be made only by Electronic Funds
Transfer from a bank account maintained by the shareholder at a
bank that is a member of the National Automated Clearing House
Association ("NACHA"). If a shareholder's telephone purchase
request is received before 3:00 p.m. Eastern time on a Fund
business day, the order to purchase Advisor Class 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 Advisor Class shares are credited to
a subscriber's account in the amount of his or her subscription.
As a convenience to the subscriber, and to avoid unnecessary
expense to the Fund, stock certificates representing Advisor
Class shares of the Fund are not issued except upon written
request to the Fund by the shareholder or his or her authorized
financial representative. 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 Advisor Class shares, although such
shares remain in the shareholder's account on the books of the
Fund.
9
<PAGE>
_________________________________________________________________
REDEMPTION AND REPURCHASE OF SHARES
_________________________________________________________________
The following information supplements that set forth in
the Funds' Prospectus under the heading "Purchase and Sale of
Share-- How to Sell Shares."
Redemption
Subject only to the limitations described below, the
Funds will redeem the Advisor Class shares tendered to them, as
described below, at a redemption price equal to their net asset
value as next computed following the receipt of Advisor Class
shares tendered for redemption in proper form. Payment of the
redemption price will be made within seven days after a Fund's
receipt of such tender for redemption. If a shareholder is in
doubt about what documents are required by his or her fee-based
program or employee benefit plan, the shareholder should contact
his or her financial representative.
The right of redemption may not be suspended or the date
of payment upon redemption postponed for more than seven days
after Advisor Class 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 in cash. The
value of a shareholder's Advisor Class shares on redemption or
repurchase may be more or less than the cost of such Advisor
Class shares to the shareholder, depending upon the market value
of a Fund's portfolio securities at the time of such redemption
or repurchase. Payment (either in cash or in portfolio
securities) received by a shareholder upon redemption or
repurchase of his or her Advisor Class shares, assuming the
Advisor Class shares constitute capital assets in his or her
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 Advisor Class shares redeemed.
10
<PAGE>
To redeem Advisor Class shares of a Fund for which no
stock certificates have been issued, the registered owner or
owners should forward a letter to the Fund containing a request
for redemption. The signature or signatures on the letter must
be guaranteed by an "eligible guarantor institution" as defined
in Rule 17Ad-15 under the Securities Exchange Act of 1934, as
amended.
To redeem Advisor Class shares of the Funds represented
by stock certificates, the investor should forward the
appropriate stock certificate or certificates, endorsed in blank
or with blank stock powers attached, to the relevant Fund with
the request that the Advisor Class shares represented thereby, or
a specified portion thereof, be redeemed. The stock assignment
form on the reverse side of each stock certificate surrendered to
the Fund for redemption must be signed by the registered owner or
owners exactly as the registered name appears on the face of the
certificate or, alternatively, a stock power signed in the same
manner may be attached to the stock certificate or certificates
or, where tender is made by mail, separately mailed to the
relevant Fund. The signature or signatures on the assignment form
must be guaranteed in the manner described above.
Telephone Redemption By Electronic Funds Transfer. Each
Fund shareholder is entitled to request redemption by electronic
funds transfer, once in any 30-day period (except for certain
omnibus accounts), of Advisor Class shares for which no stock
certificates have been issued by telephone at (800) 221-5672 by a
shareholder who has completed the appropriate portion of the
Subscription Application. A telephone redemption request may not
exceed $100,000 (except for certain omnibus accounts), and must
be made by 4:00 p.m. Eastern time on a Fund business day as
defined above. Proceeds of telephone redemptions will be sent by
Electronic Funds Transfer to a shareholder's designated bank
account at a bank selected by the shareholder that is a member of
the NACHA.
Telephone Redemption By Check. For certain omnibus
accounts or as otherwise noted below, each Fund shareholder is
eligible to request redemption by check, once in any 30-day
period, of Advisor Class shares for which no stock certificates
have been issued by telephone at (800) 221-5672 before 4:00 p.m.
Eastern time on a Fund business day in an amount not exceeding
$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 Advisor Class shares (i)
for which certificates have been issued, (ii) held in nominee or
"street name" accounts, (iii) held by a shareholder who has
changed his or her address of record within the preceding 30
calendar days or (iv) held in any retirement plan account. A
shareholder otherwise eligible for telephone redemption by check
11
<PAGE>
may cancel the privilege by written instruction to Alliance Fund
Services, Inc., or by checking the appropriate box on the
Subscription Application.
Telephone Redemption -- 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. A shareholder's financial
representative may charge a fee for handling telephone requests
for redemptions.
Repurchase
The Funds may repurchase Advisor Class shares through
the Principal Underwriter or a shareholder's financial
representative. The repurchase price will be the net asset value
next determined after the Principal Underwriter receives the
request, except that requests placed through the selected
financial intermediary before the close of regular trading on the
Exchange on any day will be executed at the net asset value
determined as of such close of regular trading on that day if
received by the Principal Underwriter prior to its close of
business on that day (normally 5:00 p.m. Eastern time). The
financial intermediary is responsible for transmitting the
request to the Principal Underwriter by 5:00 p.m. If the
financial intermediary fails to do so, the shareholder's right to
receive that day's closing price must be settled between the
shareholder and the financial intermediary. A shareholder may
offer Advisor Class shares of a Fund to the Principal Underwriter
either directly or through a financial representative. Neither
the Funds nor the Principal Underwriter charges a fee or
commission in connection with the repurchase of Advisor Class
shares. Normally, if Advisor Class shares of the Funds are
12
<PAGE>
offered through a financial intermediary, the repurchase is
settled by the shareholder as an ordinary transaction with or
through the financial intermediary, who may charge the
shareholder for this service. The repurchase of Advisor Class
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 90 days.
Shareholders will receive 60 days' written notice to increase the
account value before the account is closed. In the case of a
redemption or repurchase of Advisor Class 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."
Automatic Investment Program
Investors may purchase Advisor Class 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 Advisor Class shares through
the financial intermediary 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. 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.
13
<PAGE>
Advisor Class shareholders of the Funds can exchange
their Advisor Class shares for Advisor Class shares of any other
Alliance Mutual Fund that offers Advisor Class shares.
All exchanges are subject to the minimum investment
requirements and any other applicable terms set forth in the
Prospectus for the Alliance Mutual Fund whose Advisor Class
shares are being acquired. An exchange is effected through the
redemption of the Advisor Class shares tendered for exchange and
the purchase of Advisor Class shares being acquired at their
respective net asset values as next determined following receipt
by the Alliance Mutual Fund whose Advisor Class 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 Advisor Class shares recently
purchased by check will be permitted only after the Alliance
Mutual Fund whose Advisor Class 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 Advisor Class shares of Alliance Mutual Funds will
generally result in the realization of a capital gain or loss for
Federal income tax purposes.
Each Fund shareholder, and the shareholder's financial
representative, 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. Such telephone requests
cannot be accepted with respect to Advisor Class shares then
represented by stock certificates. Advisor Class shares acquired
pursuant to a telephone request for exchange will be held under
the same account registration as the Advisor Class 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., Eastern time, on a Fund business
day as defined above. Telephone requests for exchange received
before 4:00 p.m. Eastern time on a Fund business day will be
processed as of the close of business on that day. During
periods of drastic economic or market developments, such as the
market break of October 1987, it is possible that shareholders
would have difficulty in reaching Alliance Fund Services, Inc. by
telephone (although no such difficulty was apparent at any time
in connection with the 1987 market break). If a shareholder were
to experience such difficulty, the shareholder should issue
written instructions to Alliance Fund Services, Inc. at the
14
<PAGE>
address shown on the cover of this Statement of Additional
Information.
A shareholder may elect to initiate a monthly "Auto
Exchange" whereby a specified dollar amount's worth of his or her
Advisor Class Fund shares (minimum $25) is automatically
exchanged for Advisor Class 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 Mutual 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. A
shareholder's financial representative may charge a fee for
handling telephone requests for exchanges.
The exchange privilege is available only in states where
Advisor Class shares of the Alliance Mutual Fund being acquired
may be legally sold. Each Alliance Mutual Fund reserves the
right, at any time on 60 days' notice to its shareholders to
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
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, under which annual tax- deductible
15
<PAGE>
contributions are made within prescribed limits based on
compensation paid to participating individuals.
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 Advisor Class Fund account, an Advisor Class account with
one or more other Alliance Mutual Funds may direct that income
dividends and/or capital gains paid on his or her Advisor Class
Fund shares be automatically reinvested, in any amount, without
the payment of any service charges, in Advisor Class 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. Current shareholders should
contact Alliance Fund Services, Inc. to establish a dividend
direction plan.
16
<PAGE>
Systematic Withdrawal Plan
Any shareholder who owns or purchases Advisor Class
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 Advisor Class
shares of that Fund.
Advisor Class 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.
Advisor Class shares acquired with reinvested dividends and
distributions will be liquidated first to provide such withdrawal
payments and thereafter other Advisor Class 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 Advisor Class 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."
Payments under a systematic withdrawal plan may be made
by check or electronically via the Automated Clearing House
network. Investors wishing to establish a systematic withdrawal
plan in conjunction with their initial investment in Advisor
Class shares of the Fund should complete the appropriate portion
of the Subscription Application, 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
17
<PAGE>
arrange for copies of his or her account statements to be sent to
another person.
_________________________________________________________________
NET ASSET VALUE
_________________________________________________________________
Incorporated by reference from the section "Net Asset
Value" contained in the Rule 497 SAI.
_________________________________________________________________
DIVIDENDS, DISTRIBUTIONS AND TAXES
_________________________________________________________________
Incorporated by reference from the section "Dividends,
Distributions and Taxes" contained in the Rule 497 SAI.
_________________________________________________________________
GENERAL INFORMATION
_________________________________________________________________
Incorporated by reference from the section "General
Information" contained in the Rule 497 SAI, except for the sub-
sections entitled "Capitalization" and "Total Return Quotations,"
which are restated as follows:
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 Fund's outstanding shares at April 5, 1996:
18
<PAGE>
Names and Addresses # of Shares % of Class
___________________ ___________ __________
Conservative Investors Fund - Class A
Alliance Plan Div/FTC
C/F Jack S. Hoffman IRA
Rollover Account..................... 24,450 5.68
224 Windsor Drive
Mineral Wells, WV 26250-9623
Growth Investors Fund - Class A
Trust for Profit Sharing Plan
for Employees of ACMC L.P. Plan P ... 132,407 5.90
1345 Avenue of the Americas
New York, NY 10105-0302
Trust for Profit Sharing Plan
for Employees of ACM L.P. Hedge Fund. 183,084 8.16
1345 Avenue of the Americas
New York, NY 10105
Growth Investors Fund - Class C
Merrill Lynch
Mutual Fund Operations ... 20,817 5.19
4800 Deer Lake Dr.
Jacksonville, FL 32246-6486
Total Return Quotations
From time to time, a Fund may advertise its "total
return." Total return is computed separately for Class A, Class
B, Class C and Advisor Class 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.
19
<PAGE>
The average annual compounded total return for Class A
shares of the Conservative Investors and Growth Investors Funds
was 9.99% and 13.92%, respectively, for the one-year period ended
October 31, 1995. The average annual compounded total return for
Class A shares of the Conservative Investors and Growth Investors
Funds was 6.04% and 10.23%, respectively, for the period May 4,
1992 (commencement of distribution of Class A shares) through
October 31, 1995. The average annual compounded total return for
Class B shares of the Conservative Investors and Growth Investors
Funds was 10.07% and 14.16%, respectively, for the one year
period ended October 31, 1995. The average annual compounded
total return for Class B shares of the Conservative Investors and
Growth Investors Funds was 6.35% and 10.56%, respectively, for
the period May 4, 1992 (commencement of distribution of Class B
shares) through October 31, 1995. The average annual compounded
total return for Class C shares of the Conservative Investors and
Growth Investors Funds was 14.17% and 18.16% respectively, for
the one-year period ended October 31, 1995. The average annual
compounded total return for Class C shares of the Conservative
Investors and Growth Investors Funds was 4.03% and 8.11%,
respectively, for the period August 2, 1992 (commencement of
distribution of Class C shares) through October 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.
20
00250184.AH3
<PAGE>
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1995 (UNAUDITED) ALLIANCE GROWTH INVESTORS FUND
_______________________________________________________________________________
COMPANY SHARES VALUE
- ----------------------------------------------------------------------
COMMON STOCKS & OTHER INVESTMENTS59.2%
UNITED STATES INVESTMENTS52.1%
CONSUMER NONCYCLICALS20.3%
BEVERAGES2.3%
Coca-Cola Co. 9,000 $ 646,875
PepsiCo., Inc. 25,000 1,318,750
1,965,625
BROADCASTING3.4%
Capital Cities ABC, Inc. 5,000 593,125
Comcast Corp., Cl.A (SPL) 45,000 804,375
Cox Communications, Inc. Cl.A* 25,000 468,750
Tele-Communications, Inc.* 26,350 648,869
Tele-Communications, Inc. Cl.A* 18,000 306,000
2,821,119
ENTERTAINMENT & LEISURE1.9%
Carnival Corp. 30,000 697,500
Quality Dino Entertainment, Ltd.* 3,000 10,125
Walt Disney Co. 15,000 864,375
1,572,000
DRUGS, HOSPITAL SUPPLIES & MEDICAL SERVICES8.0%
Columbia/HCA Healthcare Corp. 25,000 1,228,125
Healthsource, Inc.* 10,000 530,000
Medtronic, Inc. 11,000 635,250
Merck & Co., Inc. 25,000 1,437,500
Pfizer, Inc. 20,000 1,147,500
Schering-Plough Corp. 20,000 1,072,500
United Healthcare Corp. 11,000 584,375
6,635,250
COSMETICS2.0%
Gillette Co. 35,000 1,693,125
TOBACCO2.7%
Philip Morris Cos., Inc. 27,000 2,281,500
16,968,619
TECHNOLOGY15.3%
COMPUTER HARDWARE1.0%
COMPAQ Computer Corp.* 15,000 836,250
COMPUTER SOFTWARE2.2%
cisco Systems, Inc.* 12,000 930,000
General Motors Corp. Cl.E 20,000 942,500
1,872,500
ELECTRICAL EQUIPMENT0.4%
Tellabs, Inc.* 9,500 323,000
ELECTRONICS1.8%
Applied Materials, Inc.* 14,000 701,750
Motorola, Inc. 12,000 787,500
1,489,250
OFFICE EQUIPMENT3.3%
Alco Standard Corp. 8,500 752,250
Microsoft Corp.* 8,000 800,000
Oracle Corp.* 20,000 872,500
Xerox Corp. 3,000 389,250
2,814,000
SEMI-CONDUCTORS & RELATED2.6%
Intel Corp. 22,000 1,537,250
Lam Research Corp.* 5,500 334,812
National Semiconductor Corp.* 13,000 316,875
2,188,937
TELECOMMUNICATIONS4.0%
Air-Touch Communications, Inc.* 15,000 427,500
AT&T Corp. 27,000 1,728,000
DSC Communications Corp.* 9,000 333,000
MCI Communications Corp. 30,000 748,125
7
PORTFOLIO OF INVESTMENTS (CONTINUED) ALLIANCE GROWTH INVESTORS FUND
_______________________________________________________________________________
COMPANY SHARES VALUE
- ----------------------------------------------------------------------
Total Access Communication Public Co. Ltd.*(a) 16,000 $ 96,800
3,333,425
12,857,362
CREDIT SENSITIVE7.3%
BANKS1.8%
MBNA Corp. 20,000 737,500
NationsBank Corp. 12,000 789,000
1,526,500
FINANCIAL SERVICES0.6%
Merrill Lynch & Co., Inc. 8,000 444,000
Banco Latinoamericano
De Exportaciones, S.A. 1,000 41,750
Banks
485,750
INSURANCE4.9%
American International Group, Inc. 7,500 632,813
General Reinsurance Corp. 4,000 579,500
MGIC Investment Corp. 8,000 455,000
NAC Re Corp. 14,000 491,750
PMI Group, Inc. 10,000 480,000
Travelers Group, Inc. 28,000 1,414,000
4,053,063
6,065,313
BASIC MATERIALS2.1%
CHEMICALS2.1%
Monsanto Co. 11,000 1,152,250
Morton International, Inc. 20,000 610,000
1,762,250
CONSUMER CYCLICALS2.1%
RESTAURANTS & LODGING1.2%
La Quinta Inns, Inc. 11,300 290,975
McDonald's Corp. 17,000 697,000
987,975
RETAIL-0.9%
AutoZone, Inc.* 30,000 742,500
1,730,475
CAPITAL GOODS1.7%
ELECTRICAL EQUIPMENT1.7%
General Electric Co. 23,000 1,454,750
DIVERSIFIED1.3%
Allied Signal, Inc. 9,000 382,500
ITT Corp. 6,000 735,000
1,117,500
ENERGY1.3%
OILDOMESTIC0.0%
XCL, Ltd.* 5,000 2,188
PIPELINES1.3%
Enron Corp. 31,000 1,065,625
1,067,813
BASIC INDUSTRIES-0.7%
MINING & METALS-0.7%
UCAR International, Inc.* 19,000 541,500
Total United States Investments
(cost $36,837,961) 43,565,582
FOREIGN INVESTMENTS7.1%
AUSTRALIA0.2%
AAPC, Ltd. 15,000 8,684
Food Services & Lodging
Advance Bank Australia 5,000 36,944
Banks
Biron Corp., Ltd. 10,000 3,808
Mining & Metals
Brambles Industries, Ltd. 1,000 10,634
Trucking & Shipping
Gwalia Consolidated, Ltd. 5,000 7,808
Mining & Metals
Oil Search, Ltd. 15,000 12,683
Oil & Gas Exploration
Plutonic Resources 5,000 22,852
Mining & Metals
Villa World, Ltd. 40,000 29,250
Homebuilders
Westralian Sands 10,000 27,803
Miscellaneous
160,466
8
ALLIANCE GROWTH INVESTORS FUND
_______________________________________________________________________________
COMPANY SHARES VALUE
- ----------------------------------------------------------------------
AUSTRIA0.1%
Ams Austria Mikros 150 $ 27,799
Miscellaneous
Omv AG 400 34,540
OilInternational
Vae Eisenbahnsyst 100 8,948
Electrical Equipment
71,287
CANADA0.7%
Accugraph Corp.* 4,500 12,427
Computer Software & Services
Cinar Films, Inc.* 1,000 12,000
Leisure Related
Maax, Inc.* 1,500 10,216
Household Furniture & Appliances
Magna International, Inc. 12,000 519,000
Machinery
Nelvana Ltd.*(a) 1,500 22,392
Leisure Related
576,035
CHILE0.1%
Banco Osornoy La Un (ADR) 1,000 13,500
Banking-Regional
Enersis S.A. (ADR) 1,500 37,688
UtilityElectric
51,188
CHINA0.0%
Ek Chor China Motorcycle Co. 1,000 14,000
Auto Related
DENMARK0.2%
Novo Nordisk AS 200 25,439
Hospital Supplies & Medical Services
Scandinavian Mobility Intl.(a) 3,200 76,135
Miscellaneous
Tele Danmark AS 600 31,296
UtilityTelephone
132,870
FINLAND0.2%
Aamulehti Yhtymae OY-II* 2,000 47,086
Printing, Publishing & Broadcasting
Coflexip S.A. (ADR) 1,088 15,232
OilSupplies & Construction
Enso-Gutzeit OY 6,000 47,038
Forest Products
Nokia AB OY Corp. pfd. 800 45,767
Telecommunications
Tamro Yhtymae OY AB 4,000 16,480
Hospital Supplies & Medical Services
171,603
FRANCE0.1%
Casino Guichard Perrachon 1,000 28,629
Recycling Equipment
Ecco Travail Temporary 600 41,840
Temporary Help
Lafarge Coppee S.A. 330 21,871
Building & Construction
Michelin 500 20,194
Tire & Rubber
112,534
GERMANY0.3%
Apcoa Parking AG(b) 300 20,247
Business Services
Fielmann AG pfd.(b) 800 44,047
Auto & Trucks
Merck KG(a)(b) 2,000 83,547
Hospital Supplies & Medical Services
Schwarz Pharma(b) 500 21,135
Hospital Supplies & Medical Services
9
PORTFOLIO OF INVESTMENTS (CONTINUED) ALLIANCE GROWTH INVESTORS FUND
_______________________________________________________________________________
COMPANY SHARES VALUE
- ----------------------------------------------------------------------
SGL Carbon AG(a)(b) 1,700 $111,473
ChemicalsSpecialty
Veba AG(b) 200 8,211
UtilityElectric
288,660
HONG KONG0.2%
Amoy Properties 20,000 19,271
Real Estate
Asia Pacific Resources Holdings, Ltd. 1,000 7,250
Paper
Guangzhou Investment 100,000 20,565
Investment companies
Hong Kong Land Holdings 15,000 27,000
Real Estate
Hong Kong Telecomm 10,000 17,460
UtilityTelephone
HSBC Holdings Plc. 2,000 29,101
Banks
International Bank Of Asia 30,300 17,864
Banks
Paul Y-ITC Construction Holdings, Inc. 50,000 10,735
Building & Construction
Sing Tao Holdings, Ltd. 30,000 11,576
Printing, Publishing & Broadcasting
160,822
INDIA0.0%
Gujarat Narmada Valley Fertilizers Co.,
Ltd. (GDR)(a) 1,800 7,610
Basic Material
Shiram Indl. Enterprises, Ltd.(GDR)(a) 2,400 13,200
Food
20,810
INDONESIA0.0%
Indonesian Satellite Corp. (ADR) 1,000 33,125
Telecommunications
IRELAND0.1%
Allied Irish Bank 82 $414
Banks
Aran Energy 30,000 36,048
Energy
Crean James 10,000 32,378
Food
Irish Continental Group 4,500 34,240
Trucking & Shipping
103,080
ITALY0.1%
Industrie Natuzzi S.p.A. (ADS) 800 32,000
Household Products
Stet Societa Finanziaria Telfonica S.p.A. 6,000 16,995
UtilityTelephone
48,995
JAPAN2.4%
Akita Bank(b) 2,000 13,197
Banking-Regional
Alpine Electronics(b) 3,000 41,644
Electronics
Asahi Bank(b) 1,000 9,971
Banking-Regional
Asahi Diamond Industrial(b) 1,000 12,806
Machinery
Asatsu, Inc.(b) 1,000 34,508
Professional Services
Aval Data Corp.(b) 1,000 21,115
Semi-Conductors & Related
Canon, Inc.(b) 3,000 51,322
Office Equipment
Chiyoda Co.(b) 1,000 19,649
RetailGeneral
Chodai Co.(b) 1,000 31,869
Building & Construction
Credit Saison Co.(b) 2,600 54,646
RetailGeneral
Daibiru Corp.(b) 2,000 20,333
Real Estate
Daiichi Corp.(b) 1,000 20,627
RetailGeneral
10
ALLIANCE GROWTH INVESTORS FUND
_______________________________________________________________________________
COMPANY SHARES VALUE
- ----------------------------------------------------------------------
Dainippon Ink & Chemical, Inc.(b) 2,000 $ 8,505
Chemicals
Eiden Sakakiya Co.(b) 1,000 11,633
Retail
Eyeful Home Technology(b) 1,000 18,867
Building & Construction
Fujitsu Electronics(b) 2,000 23,853
Electronics
Fukuda Corp.(b) 1,000 9,287
Building & Construction
Hachijuni Bank(b) 1,000 11,144
Banks
Hitachi Metals, Ltd.(b) 2,000 24,635
Cosmetics
Honda Motor Co.(b) 3,000 52,202
Auto Related
Hoya Corp.(b) 1,000 29,327
Industrial Machinery
Idec Izumi Corp.(b) 3,000 25,808
Electrical Equipment
Ishihara Sangyo(b) 14,000 41,605
Chemicals
Kaneshita Construction(b) 2,000 25,221
Building & Construction
Kawasaki Kisen(b) 10,000 26,785
Trucking & Shipping
Keihanshin Real Estate(b) 2,000 12,708
Real Estate
Keyence Corp.(b) 300 36,952
Machinery
Koa Fire & Marine(b) 8,000 43,717
International
Mabuchi Motor Co.(b) 600 36,307
Technology-Computer Peripherals
Matsushita Electrical Industries(b) 1,000 14,175
Electrical Equipment
Matsuyadenki Co.(b) 1,000 8,886
RetailGeneral
Minebea Co., Ltd.(b) 2,000 16,228
Machinery
Ministop Co.(b) 1,000 24,244
Retail-Food
Mitsubishi Bank(b) 1,000 19,551
Banks
Mitsubishi Estate(b) 2,000 21,311
Miscellaneous
Mitsubishi Materials Corp.(b) 2,000 9,033
Miscellaneous
Mitsubishi Trust and Bank(b) 2,000 27,958
Banks
Mitsui Home Co.(b) 1,000 14,175
Homebuilders
Nanno Construction(b) 2,000 26,394
Building & Construction
NEC Corp.(b) 4,000 52,789
Electronics
New Oji Paper Co., Ltd.(b) 1,000 9,179
Paper
Ngk Spark Plug Co.(b) 1,000 13,686
Semi-Conductors & Related
Nichiei Co.(b) 1,000 62,075
Credit Sensitive
Nichiha Corp.(b) 1,000 16,619
Building Materials & Forest Products
Nikon Corp.(b) 2,000 28,545
Semi-Conductors & Related
Nippon Electric Glass(b) 1,000 18,476
Consumer Appliances
Nippon Kanzai Co.(b) 1,000 28,349
Business Services
Nippon Paper Industries Co.(b) 3,000 20,617
Paper
Nippon TV Network(b) 100 23,853
Broadcasting
Nissen Co.(b) 1,000 28,838
RetailGeneral
NSK Ltd.(b) 3,000 17,977
Machinery
Ohmoto Gumi, Co.(b) 1,000 22,484
Building & Construction
11
PORTFOLIO OF INVESTMENTS (CONTINUED) ALLIANCE GROWTH INVESTORS FUND
_______________________________________________________________________________
COMPANY SHARES VALUE
- ----------------------------------------------------------------------
Omron Corp.(b) 2,000 $ 46,728
Machinery
Paris Miki, Inc.(b) 1,000 31,673
RetailGeneral
Penta Ocean Construction(b) 3,000 21,291
Homebuilders
Promise Co.(b) 500 19,698
Miscellaneous
PS Corp.(b) 1,400 23,540
Building & Construction
Sankyo Co.(b) 2,000 43,990
Hospital Supplies & Medical Services
Santen Pharmaceutical Co.(b) 1,000 23,657
Drugs
Sanyo Shinpan Finance Co., Ltd.(b) 500 35,681
Financial Services
Sato Corp.(b) 1,000 20,529
Technology-Electronics
Sekisui Chemical Co.(b) 2,000 26,003
Chemicals
Seven Eleven Japan(b) 1,000 66,670
RetailGeneral
Sho Bond Corp.(b) 1,000 32,162
Building & Construction
SMC Corp.(b) 700 49,201
Industrial Machinery
Sotoh Co.(b) 1,000 11,242
Apparel & Textile
Takeda Chemical Industries(b) 2,000 28,154
Drugs
Teijin(b) 2,000 9,170
Textile Products
Toda Corp.(b) 3,000 24,517
Building & Construction
Toho Bank(b) 2,000 13,412
Banking-Regional
Tokyo Broadcasting(b) 1,000 14,663
Broadcasting
Tokyo Electron, Ltd.(b) 1,000 43,404
Semi-Conductors & Related
Wesco Investments, Ltd.(b) 1,200 30,735
Building & Construction
Xebio Co.(b) 300 11,144
RetailGeneral
Yamaichi Securities Co.(b) 5,000 26,199
Financial Services
Yamanashi Chuo Bank(b) 2,000 19,942
Banking-Regional
Yamanouchi Pharmaceutical(b) 1,000 22,288
Drugs
Yaskawa Electric Corp.(b) 9,000 37,744
Electronics
2,029,122
KOREA0.0%
Yukong, Ltd. 22 231
Oil-International
Yukong, Ltd. (GDR)(a) 575 6,038
OilInternational
Yukong, Ltd. (GDS) 185 1,942
OilInternational
8,211
MALAYSIA0.2%
Hock Hua Bank Berhad 5,000 14,758
Banks
Kim Hin Ind. Berhad 750 449
Building & Construction
Lion Corp. Berhad 10,000 13,774
Mining & Metals
Malaysian Assurance 6,000 24,321
Insurance
MBF Capital Berhad 20,000 18,890
Financial Services
Metacorp Berhad 10,000 25,384
Engineering & Construction
Peladang Kimia Berhad 6,000 15,348
Miscellaneous
Road Builder (M)
Holdings BHD 10,000 30,893
Building & Construction
143,817
12
ALLIANCE GROWTH INVESTORS FUND
_______________________________________________________________________________
COMPANY SHARES VALUE
- ----------------------------------------------------------------------
MEXICO0.0%
Grupo Financiero Banorte 4,000 $ 4,098
Financial Services
Grupo Industrial Durango S.A. de C V (ADR) 2,000 16,000
Forest Products
20,098
NETHERLANDS0.4%
Aegon N.V.(b) 1,000 37,647
Insurance
Amev N.V(b). 500 31,404
International
ASM Lithography Hl(b) 400 19,724
Semi-Conductors
Elsevier N.V.(b) 4,000 51,718
Printing, Publishing & Broadcasting
IHC Caland N.V.(b) 1,000 28,204
Transportation
KLM(b) 1,500 48,866
Auto & Trucks
Kon Ptt Nederland(a)(b) 1,000 35,049
UtilityTelephone
Ver Ned Uitgevers(b) 300 41,925
Printing, Publishing & Broadcasting
Wolters Kluwer N.V.(b) 300 27,266
Printing, Publishing & Broadcasting
321,803
NEW ZEALAND0.2%
Air New Zealand 10,000 34,458
Auto & Trucks
Fisher & Paykel Industries 10,000 32,675
Electronics
Helicopter Line 15,000 43,567
Leisure Related
Lion Nathan, Ltd. 15,000 34,062
Food & Beverages
144,762
NORWAY0.2%
Elkjop 600 15,513
RetailGeneral
Fokus Bank 1,000 5,299
Banks
Merkantildata 5,000 44,163
Computers
Tomra Systems AS 17,000 107,291
Environmental Control
172,266
SINGAPORE0.1%
Elec. & Eltek Intl. Co., Ltd. 5,000 11,300
Electronics
GP Batteries International 10,000 24,400
Electrical Equipment
Hong Leong Finance, Ltd. 5,000 15,145
Financial Services
Keppel Corp.. Ltd. 1,000 8,209
Machinery
Overseas Union Bank Ltd. 2,600 16,193
Banks
75,247
SPAIN0.3%
Acerinox S.A. 210 22,126
Mining & Metals
Banco Popular Espanol 200 31,773
Banks
Centros Commerciales Continente S.A. 1,000 21,302
RetailGeneral
Corporacion Mapfre 1,000 51,206
Insurance
Cubiertas Y Mzov S.A. 500 29,208
Homebuilders
Fomento De Construcciones Y Contratas S.A. 500 35,312
Building & Construction
Repsol S.A. 1,000 29,864
Miscellaneous
13
PORTFOLIO OF INVESTMENTS (CONTINUED) ALLIANCE GROWTH INVESTORS FUND
_______________________________________________________________________________
COMPANY SHARES VALUE
- ----------------------------------------------------------------------
Telefonica de Espana 2,000 $ 25,234
UtilityTelephone
Viscofan Envolturas Celulosi 1,000 12,535
Foods
258,560
SWEDEN0.2%
Astra Corp. Series A 1,000 36,744
Drugs
Autoliv AB (ADR)(a) 700 39,988
Auto Related
Kalmar Industries AB(a) 2,000 32,527
Machinery
Nordbanken AB(a) 2,800 41,743
Banks
Svenskt Stal AB 2,000 20,028
Mining & Metals
Volvo AB 800 18,010
Auto & Trucks
189,040
SWITZERLAND0.1%
BBC Brown Boveri AG 25 29,001
Miscellaneous
Roche Holdings AG, Ltd. 10 72,668
Drugs
Schweizerischer Bankverein 30 12,314
Banks
113,983
TAIWAN0.0%
Taiwan Fund, Inc.* 200 4,375
Mutual FundsDiversified
UNITED KINGDOM0.7%
Barclays Plc. 2,000 23,478
Banks
British Airways Plc. 6,000 43,162
Airlines
British Steel N.E.* 5,000 12,905
Mining & Metals
Chloride Group Plc. 40,000 14,704
Building & Related
SHARES OR
PRINCIPAL
AMOUNT
COMPANY (000) VALUE
- ----------------------------------------------------------------------
Filtronic Comtek Plc. 18,000 $ 135,178
Telecommunications
Hanson Plc. 6,000 18,379
Conglomerates
Johnson Matthey Plc. 1,000 9,581
Mining & Metals
McBride Plc.*(a) 7,000 23,296
Household Products
Misys Plc. 2,000 18,878
Computer Software & Services
Powerscreen International Plc. 7,000 42,719
Environmental Control
Rank Organisation Plc. 6,000 39,937
Entertainment & Leisure
Tate & Lyle Plc. 3,000 21,296
Food
United Newspapers Plc. 2,068 16,969
Printing, Publishing & Broadcasting
William Morrison Supermarkets Plc. 20,000 47,115
RetailFood
WPP Group Plc. 15,000 36,285
Advertising
Zeneca Group Plc. 3,000 55,897
Drugs
559,779
Total Foreign Investments
(cost $5,547,171) 5,986,538
Total Common Stocks & Other Investments
(cost $42,385,132) 49,552,120
LONG TERM DEBT SECURITIES29.0%
CREDIT SENSITIVE6.0%
Abbey National Plc.
6.69%, 10/17/05 $375 377,310
BCH Cayman Islands
8.25%, 6/15/04 550 588,660
14
ALLIANCE GROWTH INVESTORS FUND
_______________________________________________________________________________
PRINCIPAL
AMOUNT
COMPANY (000) VALUE
- ----------------------------------------------------------------------
General Instrument Corp.
5.00%, 6/15/00 $ 300 $ 301,500
Lehman Brothers, Inc.
7.125%, 7/15/02 600 606,228
Liberty Mutual Capital Corp.
8.50%, 5/15/25(a) 725 773,249
Prudential Insurance Co.
7.65%, 7/01/07 850 866,490
Tele-Communications, Inc.
10.125%, 4/15/22 700 835,625
Time Warner Entertainment Co.
8.375%, 3/15/23 650 665,554
5,014,616
MISCELLANEOUS0.8%
Boskalis Westminister
5.25%, 6/01/00 50 30,105
Italy (Republic of)
6.875%, 9/27/23 700 646,541
676,646
MORTGAGE BACKED SECURITIES2.5%
Federal National Mortgage Association
6.00%, 12/01/09 2,132 2,081,026
U.S. GOVERNMENT & AGENCIES19.7%
Federal Home Loan Bank
7.00%, 9/01/25 $1,224 $1,214,594
U.S. Treasury Bonds
6.875%, 8/15/25 1,970 2,114,362
7.625%, 2/15/25 855 992,604
U.S. Treasury Notes
5.75%, 10/31/00 1,050 1,047,543
6.25%, 5/31/00 1,100 1,118,733
6.50%, 8/15/05 1,355 1,403,265
7.25%, 2/15/98 6,000 6,198,720
7.75%, 12/31/99 2,200 2,355,716
16,445,537
Total Long Term Debt Securities
(cost $23,680,818) 24,217,825
SHORT-TERM DEBT SECURITIES12.4%
Federal Home Loan Bank
5.82%, 11/01/95
(amortized cost $10,400,000) 10,400 10,400,000
TOTAL INVESTMENTS -100.6%
(cost $76,465,950) 84,169,945
Other assets less liabilities(0.6%) (528,373)
NET ASSETS100% $83,641,572
* Non-income producing security.
(a) Securities are exempt from registration under Rule 144A of the Securities
Act of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At October 31, 1995,
these securities amounted to $1,363,047 or 1.6% of net assets.
(b) Securities with an aggregate market value of $2,639,585 have been
segregated to collateralize forward exchange currency contracts.
Glossary of Terms:
ADR - American Depository Receipt
ADS - American Depository Security
GDR - Global Depository Receipt
GDS - Global Depository Security
See notes to financial statements.
15
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1995 (UNAUDITED) ALLIANCE CONSERVATIVE INVESTORS FUND
_______________________________________________________________________________
COMPANY SHARES VALUE
- ----------------------------------------------------------------------
COMMON STOCKS15.0%
CONSUMER NONCYCLICALS3.8%
BEVERAGES0.6%
PepsiCo., Inc. 5,400 $ 284,850
DRUGS0.3%
Astra AB, Series A 2,700 97,875
Lilly (Eli) & Co. 630 60,874
158,749
HOSPITAL SUPPLIES & SERVICES1.2%
Columbia HCA Healthcare Corp. 2,700 132,637
Guidant Corp. 1,291 41,312
Schering-Plough Corp. 3,600 193,050
U.S. Healthcare, Inc. 4,000 154,000
United Healthcare Corp. 1,800 95,625
616,624
HOUSEHOLD PRODUCTS0.2%
Procter & Gamble Co. 1,100 89,100
COSMETICS0.2%
Gillette Co. 1,600 77,400
TIRE & RUBBER0.4%
Goodyear Tire & Rubber Co. 6,000 228,000
TOBACCO0.9%
Philip Morris Cos., Inc. 5,500 464,750
1,919,473
CREDIT SENSITIVE3.8%
BANKS0.8%
BankAmerica Corp. 1,800 103,500
NationsBank Corp. 2,100 138,075
Republic New York Corp. 2,700 158,287
399,862
FINANCIAL SERVICES0.5%
Merrill Lynch & Co., Inc. 1,200 66,600
Travelers, Inc. 3,600 181,800
248,400
INSURANCE0.7%
American International Group, Inc. 2,700 227,812
General Reinsurance Corp. 900 130,388
358,200
TELECOMMUNICATIONS-1.8%
Air-Touch Communications, Inc.* 8,000 228,000
ALLTEL Corp. 8,500 260,313
AT&T Corp. 3,000 192,000
Century Telephone Enterprises, Inc. 5,060 146,740
MCI Communications Corp. 5,500 137,156
964,209
1,970,671
TECHNOLOGY1.8%
COMMUNICATIONS EQUIPMENT0.4%
Nokia Corp. (ADR) 2,600 144,950
Scientific-Atlanta, Inc. 4,500 55,688
200,638
COMPUTER HARDWARE0.6%
COMPAQ Computer Corp.* 1,800 100,350
International Business Machines Corp. 1,950 189,637
289,987
SEMI-CONDUCTORS & RELATED0.5%
Intel Corp. 2,700 188,662
National Semiconductor Corp.* 3,000 73,125
261,787
COMPUTER SOFTWARE-0.3%
General Motors Corp. Cl.E 3,600 169,650
16
ALLIANCE CONSERVATIVE INVESTORS FUND
_______________________________________________________________________________
COMPANY SHARES VALUE
- ----------------------------------------------------------------------
ENERGY1.5%
OIL0.5%
Atlantic Richfield Co. 1,800 $ 192,150
Western Atlas, Inc.* 1,800 78,975
271,125
UTILITYELECTRIC0.4%
Portland General Corp. 7,300 198,012
UTILITYGAS0.6%
Enron Corp. 5,600 192,500
NIPSCO Industries, Inc. 2,700 98,550
291,050
760,187
BASIC INDUSTRIES1.3%
CHEMICALS0.9%
Monsanto Co. 1,600 167,600
Morton International, Inc. 3,600 109,800
Rohm & Haas Co. 1,800 99,450
Union Carbide Corp. 2,000 75,750
452,600
MACHINERY0.2%
Coltec Industries, Inc.* 11,000 119,625
TRANSPORTATION0.2%
Xtra Corp. 1,800 78,975
651,200
CONSUMER CYCLICALS1.1%
AUTO & TRUCKS0.2%
Magna International, Inc. 1,800 77,850
PHOTO & OPTICAL0.2%
Eastman Kodak Co. 1,800 112,725
RESTAURANTS0.2%
Wendy's International, Inc. 4,500 89,438
RETAILGENERAL0.5%
Federated Department
Stores, Inc.* 1,800 45,675
Lowes Cos., Inc. 5,400 145,800
May Department Stores Co. 1,800 70,650
262,125
542,138
SHARES OR
PRINCIPAL
AMOUNT
COMPANY (000) VALUE
- ----------------------------------------------------------------------
BUSINESS SERVICES0.8%
ENVIRONMENTAL CONTROL0.3%
WMX Technologies, Inc. 5,400 $151,875
PRINTING, PUBLISHING & BROADCASTING0.5%
American Greetings Corp. 4,000 126,000
Comcast Corp. Cl.A (SPL) 2,300 41,113
Cox Communications, Inc. Cl.A* 4,000 75,000
242,113
393,988
CAPITAL GOODS0.5%
ELECTRICAL0.5%
General Electric Co. 3,400 215,050
General Instrument Corp.* 2,300 43,700
258,750
DIVERSIFIED0.4%
Allied Signal, Inc. 1,800 76,500
ITT Corp. 900 110,250
186,750
Total Common Stocks (cost $7,020,958) 7,605,219
LONG TERM DEBT SECURITIES77.0%
CREDIT SENSITIVE19.7%
Abbey National Plc.
6.69%, 10/17/05 $ 650 654,004
BCH Cayman Islands
8.25%, 6/15/04 1,000 1,070,290
Lehman Brothers, Inc.
7.125%, 7/15/02 1,100 1,111,418
Liberty Mutual Capital Corp.
8.50%, 5/15/25(a) 1,325 1,413,179
Premier Auto Trust
7.15%, 2/04/99 1,500 1,530,465
Prudential Insurance Co.
7.65%, 7/01/07(a) 1,450 1,478,130
17
PORTFOLIO OF INVESTMENTS (CONTINUED) ALLIANCE CONSERVATIVE INVESTORS FUND
_______________________________________________________________________________
PRINCIPAL
AMOUNT
COMPANY (000) VALUE
- ----------------------------------------------------------------------
Tele-Communications, Inc.
10.125%, 4/15/22 $1,330 $ 1,587,687
Time Warner Entertainment Co.
8.375%, 3/15/23 1,150 1,177,520
10,022,693
MISCELLANEOUS-2.4%
Italy (Republic of)
6.875%, 9/27/23 1,300 1,200,719
MORTGAGE BACKED SECURITIES7.8%
Federal National Mortgage Association
6.00%, 4/01/09 945 922,007
6.00%, 12/01/09 3,127 3,052,172
3,974,179
U.S. GOVERNMENT & AGENCIES49.5%
Federal Home Loan Bank
7.00%, 9/01/25 1,959 1,943,351
U.S. Treasury Bonds
6.875%, 8/15/25 950 1,019,616
7.625%, 2/15/25 1,980 2,298,661
U.S. Treasury Notes
5.75%, 8/15/03 1,500 1,479,615
6.25%, 5/31/00 2,100 2,135,763
6.50%, 8/15/05 1,085 1,123,648
7.25%, 2/15/98 6,500 6,715,280
7.75%, 12/31/99 7,850 8,405,623
25,121,557
Total Long Term Debt Securities
(cost $39,074,077) 40,319,148
SHORT-TERM DEBT SECURITIES4.5%
Federal Home Loan Bank
5.82%, 11/01/95
(amortized cost $2,300,000) 2,300 2,300,000
TOTAL INVESTMENTS98.9%
(cost $48,395,035) 50,224,367
Other assets less liabilities1.1% 578,279
NET ASSETS100% $50,802,646
* Non-income producing security.
(a) Securities are exempt from registration under Rule 144A of the Securities
Act of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At October 31, 1995,
these securities amounted to $2,891,309 or 5.7% of net assets.
Glossary:
ADR - American Depository Receipt
See notes to financial statements.
18
STATEMENTS OF ASSETS AND LIABILITIES) ALLIANCE GROWTH INVESTORS AND
OCTOBER 31, 1995 (UNAUDITED CONSERVATIVE INVESTORS FUNDS
_______________________________________________________________________________
GROWTH CONSERVATIVE
INVESTORS INVESTORS
FUND FUND
------------ ------------
ASSETS
Investments in securities, at value
(cost $76,465,950 and $48,395,035,respectively) $84,169,945 $50,224,367
Cash -0- 95,770
Receivable for investment securities and
foreign currency sold 921,117 66,317
Interest and dividends receivable 392,543 653,505
Receivable for shares of beneficial interest sold 164,452 70,750
Net unrealized appreciation of forward exchange
currency contracts 84,418 -0-
Deferred organization expenses 13,980 13,980
Total assets 85,746,455 51,124,689
LIABILITIES
Due to custodian 139,974 -0-
Payable for investment securities and foreign
currency purchased 1,701,488 183,412
Distribution fee payable 54,481 32,352
Advisory fee payable 34,322 21,834
Payable for shares of beneficial interest redeemed 29,559 -0-
Accrued expenses 145,059 84,445
Total liabilities 2,104,883 322,043
NET ASSETS $83,641,572 $50,802,646
COMPOSITION OF NET ASSETS
Shares of beneficial interest, at par $ 61 $ 45
Additional paid-in capital 70,946,726 49,135,606
Undistributed net investment income 1,185,814 1,035,689
Accumulated net realized gain (loss) on
investments and foreign currency transactions 3,720,873 (1,196,953)
Net unrealized appreciation of investments and
foreign currency denominated assets and
liabilities 7,788,098 1,828,259
$83,641,572 $50,802,646
CALCULATION OF MAXIMUM OFFERING PRICE
CLASS A SHARES
Net asset value and redemption price per share
($26,774,161/1,938,571 and $14,570,276/1,307,870
shares of beneficial interest issued and
outstanding, respectively) $13.81 $11.14
Sales charge-4.25% of public offering price .61 .49
Maximum offering price $14.42 $11.63
CLASS B SHARES
Net asset value and offering price per share
($52,074,966/3,779,260 and $31,526,898/2,794,436
shares of beneficial interest issued and
outstanding, respectively) $13.78 $11.28
CLASS C SHARES
Net asset value, redemption and offering price per
share($4,792,445/347,672 and $4,705,472/416,864
shares of beneficial interest issued and
outstanding, respectively) $13.78 $11.29
See notes to financial statements.
19
STATEMENTS OF OPERATIONS ALLIANCE GROWTH INVESTORS AND
SIX MONTHS ENDED OCTOBER 31, 1995 (UNAUDITED) CONSERVATIVE INVESTORS FUNDS
_______________________________________________________________________________
GROWTH CONSERVATIVE
INVESTORS INVESTORS
FUND FUND
------------ ------------
INVESTMENT INCOME
Interest $ 980,011 $1,471,061
Dividends (net of foreign tax withheld of $6,769
and $119, respectively) 343,290 80,297
Total income 1,323,301 1,551,358
EXPENSES
Advisory fee 292,358 193,047
Distribution fee - Class A 37,431 23,422
Distribution fee - Class B 242,432 156,504
Distribution fee - Class C 22,610 22,819
Custodian 100,356 36,293
Transfer agency 75,398 38,227
Registration 29,925 22,374
Audit and legal 25,839 26,907
Printing 24,166 6,981
Trustees' fees 13,807 13,807
Amortization of organization expenses 5,520 5,520
Miscellaneous 4,299 1,950
Total expenses 874,141 547,851
Less: expenses waived and assumed by adviser
(See Note B) (142,876) (61,970)
Net expenses 731,265 485,881
Net investment income 592,036 1,065,477
REALIZED AND UNREALIZED GAIN ON INVESTMENTS AND
FOREIGN CURRENCY
Net realized gain on investments 5,246,294 2,501,465
Net realized gain on foreign currency transactions 72,173 -0-
Net change in unrealized appreciation of
investments 4,008,624 608,214
Net change in unrealized appreciation of foreign
currency denominated assets and liabilities 84,072 -0-
Net gain on investments 9,411,163 3,109,679
NET INCREASE IN NET ASSETS FROM OPERATIONS $10,003,199 $4,175,156
See notes to financial statements.
20
ALLIANCE GROWTH INVESTORS AND
STATEMENTS OF CHANGES IN NET ASSETS CONSERVATIVE INVESTORS FUNDS
_______________________________________________________________________________
<TABLE>
<CAPTION>
GROWTH INVESTORS FUND CONSERVATIVE INVESTORS FUND
----------------------------- ------------------------------
SIX MONTHS ENDED SIX MONTHS ENDED
OCT. 31, 1995 YEAR ENDED OCT. 31,1995 YEAR ENDED
(UNAUDITED) APRIL 30,1995 (UNAUDITED) APRIL 30,1995
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS
Net investment income $ 592,036 $ 1,141,094 $ 1,065,477 $ 2,148,851
Net realized gain (loss) on investments
and foreign currency transactions 5,318,467 (1,679,163) 2,501,465 (3,216,833)
Net change in unrealized appreciation of
investments and foreign currency
denominated assets and liabilities 4,092,696 3,962,035 608,214 3,119,273
Net increase in net assets from operations 10,003,199 3,423,966 4,175,156 2,051,291
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income
Class A -0- (254,436) (200,183) (685,964)
Class B -0- (345,858) (286,316) (1,045,681)
Class C -0- (35,052) (41,764) (168,380)
Net realized gain on investments
Class A -0- (22,749) -0- -0-
Class B -0- (46,345) -0- -0-
Class C -0- (4,697) -0- -0-
TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST
Net increase (decrease) 3,875,370 16,138,284 (3,910,329) 1,247,586
Total increase (decrease) 13,878,569 18,853,113 (263,436) 1,398,852
NET ASSETS
Beginning of period 69,763,003 50,909,890 51,066,082 49,667,230
End of period $83,641,572 $69,763,003 $50,802,646 $51,066,082
</TABLE>
See notes to financial statements.
21
NOTES TO FINANCIAL STATEMENTS ALLIANCE GROWTH INVESTORS AND
OCTOBER 31, 1995 (UNAUDITED) CONSERVATIVE INVESTORS FUNDS
_______________________________________________________________________________
NOTE A: SIGNIFICANT ACCOUNTING POLICIES
Alliance Growth Investors Fund and Conservative Investors Fund (the 'Funds'),
two series of The Alliance Portfolios (the 'Trust'), are registered under the
Investment Company Act of 1940, as diversified, open-end investment companies.
Prior to August 2, 1993, the Trust was known as The Equitable Funds, and the
Funds were known as The Equitable Growth Investors Fund and Conservative
Investors Fund. Each 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 Funds offer Class A, Class B and Class C shares.
Class A shares are sold with a front-end sales charge of up to 4.25%. Class B
shares are sold with a contingent deferred sales charge which declines from 4%
to zero depending on the period of time the shares are held. 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. 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 Funds.
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 Funds to meet their obligations may be affected by
economic developments in a specific industry or region.
2. CURRENCY TRANSLATION
Assets and liabilities denominated in foreign currencies are translated into
U.S. dollars at the mean of the quoted bid and asked price of the respective
currency against the U.S. dollar on the valuation date. Purchases and sales of
portfolio securities are translated at the rates of exchange prevailing when
such securities were acquired or sold. Income and expenses are translated at
rates of exchange prevailing when earned or accrued.
Net realized gain on foreign currency transactions of $72,173 for Growth
Investors Fund, represents net foreign exchange gains and losses from holdings
of foreign currencies, currency gains or losses realized between the trade and
settlement dates on security transactions, and the difference between the
amounts of dividends and foreign taxes recorded on the Fund's books and the
U.S. dollar equivalent amounts actually received or paid. Net unrealized
currency gains and losses from valuing foreign currency denominated assets and
liabilities at fiscal year end exchange rates are reflected as a component of
unrealized appreciation of investments and foreign currency denominated assets
and liabilities.
3. ORGANIZATION EXPENSES
Organization expenses of approximately $50,000 for each Fund have been deferred
and are being amortized on a straight-line basis through May, 1997.
4. 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 Funds on the expiration date as
realized gains. The difference between the premiun 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 real-
22
ALLIANCE GROWTH INVESTORS AND
CONSERVATIVE INVESTORS FUNDS
_______________________________________________________________________________
ized 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.
5. 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.
6. 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.
7. DIVIDENDS AND DISTRIBUTIONS
Dividends and distributions to shareholders are recorded on the ex-dividend
date.
8. 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 each Funds'
Class B and Class C shares bear higher distribution and transfer agent fees.
Expenses attributable to a single Fund are charged to that Fund. Expenses of
the Trust are charged to each Fund in proportion to net assets.
NOTE B: ADIVSORY 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 Funds pays Alliance an
advisory fee at an annual rate of .75% of each 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
annual rate for Class B shares was 2.15%. For the six months ended October 31,
1995, such reimbursement amounted to $142,876 and $61,970 for the Growth
Investors and Conservative Investors Fund, respectively. In addition to these
voluntary arrangements, the Investment Adviser will reduce its compensation, to
the extent that expenses of the Funds for any fiscal year (not including any
distribution expenses paid by the Funds) exceed the lowest applicable expense
limitation prescribed by any state in which the Fund's shares are qualified for
sale. The Funds believe that the most restrictive expense ratio limitation
imposed by any state in which the Funds 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 Funds have 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 Funds. Compensation under this
agreement amounted $56,584 and $30,490 for the Growth Investors and
Conservative Investors Funds, respectively, for the six months ended October
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 $9,177 from the sale of Class A shares and $112,364
in contingent deferred sales charges imposed upon redemptions by shareholders
of Class B shares for the six months ended October 31, 1995 for the Growth
Investors Fund. The Distributor also received front-end sales charges of $4,182
from the sale of Class A shares and $105,786 in contingent deferred sales
charges imposed upon redemptions by shareholders of Class B
23
ALLIANCE GROWTH INVESTORS AND
NOTES TO FINANCIAL STATEMENTS (CONTINUED) CONSERVATIVE INVESTORS FUNDS
_______________________________________________________________________________
shares for the six months ended October 31, 1995 for the Conservative Investors
Fund.
Brokerage commissions paid on securities transactions for the six months ended
October 31, 1995 amounted to $120,077 and $24,389 for the Growth Investors and
Conservative Investors Funds, respectively, none of which was paid to
Donaldson, Lufkin & Jenrette Securities Corp. ('DLJ'), an affiliate of the
Adviser.
Trustees' fees and expenses payable included amounts owed to one of the
Trustees under the deferred compensation plan.
NOTE C: DISTRIBUTION SERVICES AGREEMENT
The Funds have adopted a Distribution Services Agreement (the 'Agreement')
pursuant to Rule 12b-1 under the Investment Company Act of 1940. Under the
Agreement, the Funds pay a distribution fee to the Distributor at an annual
rate of up to .50% of each 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 Funds paid a distribution fee to the
distributor at an annual rate of .25% of each Fund's average daily net assets
attributable to Class A shares. The Trustees currently limit payments under the
Class A plan to .30% of 1% of the Fund's aggregate average 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 Growth Investors Fund in the amount of
$1,937 and $157 for Class B and C shares, respectively. The Distributor has
also incurred expenses in excess of the distribution costs reimbursed by the
Conservative Investors Fund in the amount of $1,451 and $242, for Class B and
Class C shares, respectively; such costs may be recovered from each 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 each Fund's shares.
NOTE D: INVESTMENT TRANSACTIONS
Purchases and sales of investment securities (excluding short-term investments)
for the Growth Investors Fund aggregated $64,615,119 and $63,461,067,
respectively, for the six months ended October 31, 1995. There were purchases
of $23,192,365 and sales of $24,159,838 of U.S. Government and government
agency obligations for the six months ended October 31, 1995. At October 31,
1995, the cost of securities for federal income tax purposes for the Growth
Investors Fund was $76,465,950. Accordingly gross unrealized appreciation of
investments was $8,585,234 and gross unrealized depreciation of investments was
$881,239 resulting in net unrealized appreciation of $7,703,995.
The Growth Investors Fund enters into forward exchange currency contracts in
order to hedge its exposure to changes in foreign currency exchange rates on
its foreign portfolio holdings. A forward exchange currency contract is a
commitment to purchase or sell a foreign currency at a future date at a
negotiated forward rate. The gain or loss arising from the difference between
the original contracts and the closing of such contracts is included in net
realized gain or loss from foreign currency transactions. Fluctuations in the
value of forward exchange currency contracts are recorded for financial
reporting purposes as unrealized gains or losses by the Fund. Risks may arise
from the potential inability of a counterparty to meet the terms of a contract
and from unanticipated movements in
24
ALLIANCE GROWTH INVESTORS AND
CONSERVATIVE INVESTORS FUNDS
_______________________________________________________________________________
the value of a foreign currency relative to the U.S. dollar. At October 31,
1995, the Growth Investors Fund had outstanding forward exchange currency
contracts, both to purchase and sell foreign currencies against the U.S.
dollar, as follows:
CONTRACT VALUE ON U.S. $ UNREALIZED
AMOUNT ORIGINATION CURRENT APPRECIATION
(000) DATE VALUE (DEPRECIATION)
-------- ----------- -------- -------------
FOREIGN CURRENCY BUY CONTRACT
- -------------------------------
Japanese Yen,
expiring 11/15/95 65,000 $666,153 $636,947 $(29,206)
FOREIGN CURRENCY SALE CONTRACTS
- -------------------------------
Deutsche Mark,
expiring 1/18/96 109 73,375 77,322 (3,947)
Japanese Yen,
expiring 11/15/95 80,000 916,800 783,935 132,865
Netherland Guilder,
expiring 1/18/96 451 271,778 287,072 (15,294)
---------
$ 84,418
Purchases and sales of investment securities (excluding short-term investments)
for the Conservative Investors Fund aggregated $59,900,368 and $62,357,673,
respectively, for the six months ended October 31, 1995. There were purchases
of $41,312,568 and sales of $47,573,738 of U.S. Government and government
agency obligations for the six months ended October 31, 1995. At October 31,
1995, the cost of securities for federal income tax purposes for the
Conservative Investors Fund was $48,395,035. Accordingly gross unrealized
appreciation of investments was $2,092,174 and gross unrealized depreciation of
investments was $262,842 resulting in net unrealized appreciation of $1,829,332.
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 for both Funds. Transactions in shares of beneficial interest
were as follows:
ALLIANCE GROWTH INVESTORS FUND
---------------------------------------------------------
SHARES AMOUNT
--------------------------- -----------------------------
SIX MONTHS ENDED SIX MONTHS ENDED
OCTOBER 31, YEAR ENDED OCTOBER 31, YEAR ENDED
1995 APRIL 30, 1995 APRIL 30,
(UNAUDITED) 1995 (UNAUDITED) 1995
-------------- ---------- ------------ ------------
CLASS A
Shares sold 249,854 878,301 $3,288,761 $10,219,392
Shares issued in
reinvestment of
dividends and
distributions -0- 23,903 -0- 266,999
Shares redeemed (148,695) (508,295) (1,954,819) (5,946,807)
Net increase 101,159 393,909 $1,333,942 $4,539,584
25
ALLIANCE GROWTH INVESTORS AND
NOTES TO FINANCIAL STATEMENTS (CONTINUED) CONSERVATIVE INVESTORS FUNDS
_______________________________________________________________________________
SHARES AMOUNT
--------------------------- -----------------------------
SIX MONTHS ENDED SIX MONTHS ENDED
OCTOBER 31, YEAR ENDED OCTOBER 31, YEAR ENDED
1995 APRIL 30, 1995 APRIL 30,
(UNAUDITED) 1995 (UNAUDITED) 1995
-------------- ---------- ------------ ------------
CLASS B
Shares sold 421,770 1,384,786 $ 5,552,011 $16,126,761
Shares issued in
reinvestment of
dividends and
distributions -0- 33,860 -0- 379,230
Shares redeemed (226,789) (485,135) (2,977,569) (5,718,545)
Net increase 194,981 933,511 $ 2,574,442 $10,787,446
CLASS C
Shares sold 69,671 188,858 $ 925,799 $ 2,197,932
Shares issued in
reinvestment of
dividends and
distributions -0- 3,451 -0- 38,687
Shares redeemed (73,115) (122,670) (958,813) (1,425,365)
Net increase (decrease) (3,444) 69,639 $ (33,014) $ 811,254
ALLIANCE CONSERVATIVE INVESTORS FUND
---------------------------------------------------------
SHARES AMOUNT
--------------------------- -----------------------------
SIX MONTHS ENDED SIX MONTHS ENDED
OCTOBER 31, YEAR ENDED OCTOBER 31, YEAR ENDED
1995 APRIL 30, 1995 APRIL 30,
(UNAUDITED) 1995 (UNAUDITED) 1995
-------------- ---------- ------------ ------------
CLASS A
Shares sold 100,537 548,552 $ 1,093,204 $ 5,617,109
Shares issued in
reinvestment of
dividends and
distributions 17,337 65,422 189,878 656,166
Shares redeemed (361,159) (566,559) (3,955,332) (5,791,900)
Net increase (decrease) (243,285) 47,415 $(2,672,250) $ 481,375
CLASS B
Shares sold 215,607 798,920 $2,387,849 $ 8,264,467
Shares issued in
reinvestment of
dividends and
distributions 23,730 94,772 263,507 960,854
Shares redeemed (349,990) (825,918) (3,858,123) (8,495,394)
Net increase (decrease) (110,653) 67,774 $(1,206,767) $ 729,927
CLASS C
Shares sold 58,803 224,223 $ 654,404 $ 2,320,546
Shares issued in
reinvestment of
dividends and
distributions 3,510 15,711 39,000 159,243
Shares redeemed (65,579) (237,610) (724,716) (2,443,423)
Net increase (decrease) (3,266) 2,324 $ (31,312) $ 36,366
26
ALLIANCE GROWTH INVESTORS AND
CONSERVATIVE INVESTORS FUNDS
_______________________________________________________________________________
NOTE F: TAXES
At April 30, 1995, the Alliance Growth Investors Fund and Conservative
Investors Fund had net capital loss carryovers of approximately $1,120,000 and
$2,692,000, respectively. Such losses will be available to offset capital gains
arising through April 30, 2003. To the extent that any net capital loss
carryover or post-October loss is used to offset future capital gains, it is
probable that the gains so offset will not be distributed to shareholders.
27
FINANCIAL HIGHLIGHTS ALLIANCE GROWTH INVESTORS FUND
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING THROUGHOUT EACH
PERIOD
<TABLE>
<CAPTION>
CLASS A
----------------------------------------------------
SIX MONTHS ENDED
OCTOBER 31, YEAR ENDED APRIL 30, MAY 4, 1992(A)
1995 ----------------------- TO APRIL 30,
(UNAUDITED) 1995 1994 1993
------------ ---------- ---------- -------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $12.08 $11.61 $11.35 $10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income .12* .25* .12* .20*
Net realized and unrealized gain on
investments 1.61 .38 .39 1.43
Net increase in net asset value from
operations 1.73 .63 .51 1.63
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income -0- (.15) (.11) (.16)
Distributions from net realized gains -0- (.01) (.14) (.12)
Total dividends and distributions -0- (.16) (.25) (.28)
Net asset value, end of period $13.81 $12.08 $11.61 $11.35
TOTAL RETURN
Total investment return based on net
asset value (b) 14.32% 5.57% 4.46% 16.32%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $26,774 $22,189 $16,759 $3,503
Ratios to average net assets of:
Expenses, net of waivers/reimbursements 1.40%(c) 1.40% 1.40% 1.40%(c)
Expenses, before waivers/reimbursements 1.77%(c) 1.97% 2.33% 4.27%(c)
Net investment income 1.99%(c) 2.32% 1.67% 1.91%(c)
Portfolio turnover rate 90% 134% 96% 114%
</TABLE>
See footnote summary on page 33.
28
ALLIANCE GROWTH INVESTORS FUND
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING THROUGHOUT EACH
PERIOD
<TABLE>
<CAPTION>
CLASS B
----------------------------------------------------
SIX MONTHS ENDED
OCTOBER 31, YEAR ENDED APRIL 30, MAY 4, 1992(A)
1995 ---------------------- TO APRIL 30,
(UNAUDITED) 1995 1994 1993
------------ ---------- --------- --------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $12.09 $11.65 $11.41 $10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income .08* .17* .07* .07*
Net realized and unrealized gain on
investments 1.61 .38 .37 1.45
Net increase in net asset value from
operations 1.69 .55 .44 1.52
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income -0- (.10) (.06) (.05)
Distributions from net realized gains -0- (.01) (.14) (.06)
Total dividends and distributions -0- (.11) (.20) (.11)
Net asset value, end of period $13.78 $12.09 $11.65 $11.41
TOTAL RETURN
Total investment return based on net
asset value (b) 13.98% 4.83% 3.84% 15.23%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $52,075 $43,328 $30,871 $7,999
Ratios to average net assets of:
Expenses, net of waivers/reimbursements 2.10%(c) 2.10% 2.11% 2.15%(c)
Expenses, before waivers/reimbursements 2.47%(c) 2.67% 3.00% 4.48%(c)
Net investment income 1.30%(c) 1.62% .95% 1.07%(c)
Portfolio turnover rate 90% 134% 96% 114%
</TABLE>
See footnote summary on page 33.
29
FINANCIAL HIGHLIGHTS (CONTINUED) ALLIANCE GROWTH INVESTORS FUND
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING THROUGHOUT EACH
PERIOD
CLASS C
-------------------------------------
SIX MONTHS ENDED AUGUST 2,
OCTOBER 31, YEAR ENDED 1993(D)
1995 APRIL 30, TO APRIL 30,
(UNAUDITED) 1995 1994
------------ -------- ------------
Net asset value, beginning of period $12.10 $11.65 $11.88
INCOME FROM INVESTMENT OPERATIONS
Net investment income .09* .18* .08*
Net realized and unrealized gain (loss)
on investments 1.59 .38 (.11)
Net increase (decrease) in net asset value
from operations 1.68 .56 (.03)
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income -0- (.10) (.06)
Distributions from net realized gains -0- (.01) (.14)
Total dividends and distributions -0- (.11) (.20)
Net asset value, end of period $13.78 $12.10 $11.65
TOTAL RETURN
Total investment return based on net
asset value (b) 13.89% 4.91% (.26)%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $4,792 $4,247 $3,280
Ratios to average net assets of:
Expenses, net of waivers/reimbursements 2.10%(c) 2.10% 2.10%(c)
Expenses, before waivers/reimbursements 2.47%(c) 2.66% 3.02%(c)
Net investment income 1.29%(c) 1.62% 1.04%(c)
Portfolio turnover rate 90% 134% 96%
See footnote summary on page 33.
30
ALLIANCE CONSERVATIVE INVESTORS FUND
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING THROUGHOUT EACH
PERIOD
<TABLE>
<CAPTION>
CLASS A
----------------------------------------------------
SIX MONTHS ENDED
OCTOBER 31, YEAR ENDED APRIL 30, MAY 4, 1992(A)
1995 ---------------------- TO APRIL 30,
(UNAUDITED) 1995 1994 1993
------------ ---------- --------- --------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $10.38 $10.37 $10.79 $10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income .28* .48* .31* .39*
Net realized and unrealized gain (loss)
on investment .62 (.02) (.26) .82
Net increase in net asset value from
operations .90 .46 .05 1.21
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (.14) (.45) (.29) (.36)
Distributions from net realized gains -0- -0- (.18) (.06)
Total dividends and distributions (.14) (.45) (.47) (.42)
Net asset value, end of period $11.14 $10.38 $10.37 $10.79
TOTAL RETURN
Total investment return based on net
asset value (b) 8.70% 4.65% .35% 12.25%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $14,570 $16,105 $15,595 $5,339
Ratios to average net assets of:
Expenses, net of waivers/reimbursements 1.40%(c) 1.40% 1.40% 1.40%(c)
Expenses, before waivers/reimbursements 1.64%(c) 1.83% 2.03% 3.45%(c)
Net investment income 4.63%(c) 4.66% 3.43% 3.92%(c)
Portfolio turnover rate 128% 248% 133% 84%
</TABLE>
See footnote summary on page 33.
31
FINANCIAL HIGHLIGHTS (CONTINUED) ALLIANCE CONSERVATIVE INVESTORS FUND
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING THROUGHOUT EACH
PERIOD
<TABLE>
<CAPTION>
CLASS B
----------------------------------------------------
SIX MONTHS ENDED
OCTOBER 31, YEAR ENDED APRIL 30, MAY 4, 1992(A)
1995 ---------------------- TO APRIL 30,
(UNAUDITED) 1995 1994 1993
------------ ---------- --------- --------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $10.51 $10.47 $10.88 $10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income .22* .46* .24* .24*
Net realized and unrealized gain (loss)
on investments .65 (.02) (.26) .89
Net increase (decrease) in net asset value
from operations .87 .44 (.02) 1.13
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (.10) (.40) (.21) (.22)
Distributions from net realized gains -0- -0- (.18) (.03)
Total dividends and distributions (.10) (.40) (.39) (.25)
Net asset value, end of period $11.28 $10.51 $10.47 $10.88
TOTAL RETURN
Total investment return based on net
asset value (b) 8.31% 3.91% (.31)% 11.39%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $31,527 $30,542 $29,697 $9,210
Ratios to average net assets of:
Expenses, net of waivers/reimbursements 2.10%(c) 2.10% 2.11% 2.15%(c)
Expenses, before waivers/reimbursements 2.34%(c) 2.52% 2.73% 3.95%(c)
Net investment income 3.93%(c) 3.96% 2.72% 3.06%(c)
Portfolio turnover rate 128% 248% 133% 84%
</TABLE>
See footnote summary on page 33.
32
ALLIANCE CONSERVATIVE INVESTORS FUND
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING THROUGHOUT EACH
PERIOD
CLASS C
---------------------------------------
SIX MONTHS ENDED AUGUST 2,
OCTOBER 31, YEAR ENDED 1993(D)
1995 APRIL 30, TO APRIL 30,
(UNAUDITED) 1995 1994
------------ --------- ------------
Net asset value, beginning of period $10.52 $10.47 $11.12
INCOME FROM INVESTMENT OPERATIONS
Net investment income .22* .46* .18*
Net realized and unrealized gain (loss)
on investments .65 (.01) (.50)
Net increase (decrease) in net asset
value From operations .87 .45 (.32)
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (.10) (.40) (.15)
Distributions from net realized gains -0- -0- (.18)
Total dividends and distributions (.10) (.40) (.33)
Net asset value, end of period $11.29 $10.52 $10.47
TOTAL RETURN
Total investment return based on net
asset value (b) 8.31% 4.01% (2.98)%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period(000's omitted) $4,705 $4,419 $4,375
Ratios to average net assets of:
Expenses, net of waivers/reimbursements 2.10%(c) 2.10% 2.10%(c)
Expenses, before waivers/reimbursements 2.34%(c) 2.52% 2.69%(c)
Net investment income 3.93%(c) 3.97% 2.94%(c)
Portfolio turnover rate 128% 248% 133%
* Net of fee waived and expenses reimbursed by Adviser.
(a) Commencement of operations.
(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.
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. acquired the business and substantially all of
the assets of Equitable Capital and became the investment adviser to the Trust.
33
<PAGE>
PORTFOLIO OF INVESTMENTS
APRIL 30, 1995 ALLIANCE GROWTH INVESTORS FUND
- -------------------------------------------------------------------------------
COMPANY SHARES VALUE
- -------------------------------------------------------------------------------
COMMON STOCKS & OTHER INVESTMENTS-60.9%
UNITED STATES INVESTMENTS-54.0%
CONSUMER NONCYCLICALS-19.1%
BEVERAGES-0.8%
Coca-Cola Co. 10,000 $581,250
BROADCASTING-2.0%
Capital Cities ABC, Inc. 11,000 929,500
Central European Media Enterprises Ltd. 1,400 17,150
Comcast Corp., Cl. A 30,000 470,625
1,417,275
COMPUTERS-0.5%
COMPAQ Computer Corp. 8,000 304,000
DRUGS-3.3%
Merck & Co., Inc. 25,000 1,071,875
Pfizer, Inc. 14,000 1,212,750
2,284,625
ENTERTAINMENT & LEISURE-0.6%
Walt Disney Co. 8,000 443,000
FOOD-1.8%
IBP, Inc. 28,000 1,036,000
Kellogg Co. 3,000 190,500
1,226,500
HOSPITAL SUPPLIES & SERVICES-4.0%
Columbia HCA Healthcare Corp. 6,000 252,000
Medtronic, Inc. 19,000 1,413,125
U.S. Healthcare, Inc. 6,700 178,387
United Healthcare Corp. 26,300 953,375
2,796,887
SOAPS & TOILETRIES-2.4%
Gillette Co. 20,000 1,640,000
TOBACCO-3.7%
Philip Morris Cos., Inc. 30,000 $2,032,500
UST, Inc. 20,000 562,500
2,595,000
13,288,537
TECHNOLOGY-10.5%
COMPUTERS-0.5%
cisco Systems, Inc.* 8,000 318,500
ELECTRONICS-4.8%
Applied Materials, Inc.* 10,000 617,500
Linear Technology Corp. 10,000 593,750
Molex, Inc. 17,000 646,000
Motorola, Inc. 20,000 1,137,500
Silicon Graphics, Inc.* 10,000 375,000
3,369,750
OFFICE EQUIPMENT-0.9%
Oracle Systems Corp. 20,000 608,750
SEMI-CONDUCTORS & RELATED-0.4%
Intel Corp. 3,000 307,313
TELECOMMUNICATIONS-3.9%
ADC Telecommunications, Inc. 20,000 660,000
Air-Touch Communications, Inc.* 20,000 537,500
Andrew Corp.* 15,000 744,375
AT&T Corp. 10,000 507,500
MCI Communications Corp. 12,000 260,250
2,709,625
7,313,938
CREDIT SENSITIVE-5.9%
BANKS-3.4%
Bank of New York Co., Inc. 40,000 1,315,000
Citicorp 14,000 649,250
First Bank System, Inc. 11,000 445,500
2,409,750
FINANCIAL SERVICES-0.1%
Dean Witter, Discover & Co. 1,800 76,275
9
PORTFOLIO OF INVESTMENTS (CONTINUED) ALLIANCE GROWTH INVESTORS FUND
- -------------------------------------------------------------------------------
COMPANY SHARES VALUE
- -------------------------------------------------------------------------------
INSURANCE-2.4%
AFLAC, Inc. 20,000 $825,000
American International Group, Inc. 3,000 320,250
General Reinsurance Corp. 4,000 509,500
1,654,750
4,140,775
CONSUMER CYCLICALS-5.3%
AUTO RELATED-0.5%
Cooper Tire & Rubber 15,000 367,500
AUTO & TRUCKS-0.5%
AutoZone, Inc.* 15,000 346,875
BUSINESS SERVICES-0.4%
Browning Ferris Industries, Inc. 8,000 264,000
HOTELS & RESTAURANTS-0.2%
Wendy's International, Inc. 10,000 170,000
MISCELLANEOUS-0.7%
Hasbro, Inc. 15,000 476,250
RESTAURANTS & LODGING-1.6%
Marriot International Inc. 14,000 504,000
McDonald's Corp. 17,000 595,000
1,099,000
RETAIL - GENERAL-1.4%
May Department Stores Co. 12,000 435,000
Office Depot, Inc.* 24,000 546,000
981,000
3,704,625
CAPITAL GOODS-3.9%
ELECTRICAL EQUIPMENT-2.4%
General Electric Co. 30,000 1,680,000
INDUSTRIAL MACHINERY-0.6%
Tyco International, Ltd. 8,000 $420,000
MACHINERY-0.9%
Deere & Co. 8,000 656,000
2,756,000
BASIC MATERIALS-3.8%
CHEMICALS-2.0%
Hercules, Inc. 15,000 748,125
Morton International, Inc. 20,000 620,000
1,368,125
MINING & METALS-1.3%
Aluminum Co. of America 20,000 897,500
PAPER-0.5%
International Paper Co. 5,000 385,000
2,650,625
ENERGY-2.4%
OIL - DOMESTIC-1.1%
Phillips Petroleum Co. 22,000 770,000
XCL, Ltd.* 5,000 2,500
772,500
PIPELINES-1.3%
Enron Corp. 26,000 884,000
1,656,500
GENERAL BUSINESS-1.2%
BUSINESS SERVICES-1.2%
Manpower Inc. 10,000 333,750
Paychex, Inc. 11,000 524,563
858,313
BUSINESS SERVICES-1.1%
PROFESSIONAL SERVICES-1.1%
Reynolds & Reynolds Co., Cl. A 30,000 795,000
10
ALLIANCE GROWTH INVESTORS FUND
- -------------------------------------------------------------------------------
COMPANY SHARES VALUE
- -------------------------------------------------------------------------------
DIVERSIFIED-0.5%
Allied-Signal, Inc. 9,000 $356,625
BASIC INDUSTRIES-0.3%
CHEMICALS-0.3%
Union Carbide Corp. 5,000 160,000
Total United States Investments
(cost $34,369,869) 37,680,938
FOREIGN INVESTMENTS-6.9%
ARGENTINA-0.0%
YPF S.A. (ADS) 500 10,125
Oil & Gas Exploration
AUSTRALIA-0.2%
AAPC, Ltd. 15,000 7,964
Food Services & Lodging
Ampolex, Ltd.* 9,000 25,987
Oil - International
Biron Corp., Ltd. 10,000 5,091
Mining & Metals
Brambles Industries, Ltd. 1,000 9,863
Trucking & Shipping
Diamond Ventures, Ltd.* 30,000 3,710
Mining & Metals
Gwalia Consolidated, Ltd. 15,000 20,183
Mining & Metals
MacMahon Holdings. Ltd.* 25,000 7,819
Building & Construction
Westralian Sands 10,000 23,056
Miscellaneous
103,673
AUSTRIA-0.1%
Ams Austria Mikros 500 49,672
Miscellaneous
Vae Eisenbahnsyst 100 9,000
Electrical Equipment
58,672
BELGIUM-0.1%
Solvay Et Cie S.A. 70 38,030
Chemicals
Tessenderlo Chemie 100 $35,226
Chemicals
73,256
CANADA-0.8%
AIT Advanced Technology Corp. 3,000 28,961
Printing, Publishing & Broadcasting
BCE Inc. 500 15,813
Telecommunications
Cinar Films, Inc.* 4,000 30,156
Leisure Related
Maax, Inc. 1,500 12,688
Household Furniture & Appliances
MacMillan Bloedel, Ltd. 1,000 12,963
Building Materials & Forest Products
Magna International, Inc. 10,000 346,250
Machinery
Miramar Mining Corp.* 1,000 5,149
Mining & Metals
Nelvana Ltd.* 3,000 27,306
Leisure Related
Orbit Oil & Gas Ltd.* 10,000 8,605
Oil-International
Prime Resources Group, Inc.* 2,000 13,791
Mining & Metals
Royal Plastics Group Ltd.(a) 5,000 53,324
Building & Construction
555,006
CHILE-0.0%
Banco Osornoy La Un (ADR) 1,000 12,000
Banks
Empresas Telex Chile S.A. (ADR) 2,000 15,750
Utility-Telephone
Enersis S.A. (ADR)* 500 14,000
Utility-Electric
41,750
11
PORTFOLIO OF INVESTMENTS (CONTINUED) ALLIANCE GROWTH INVESTORS FUND
- -------------------------------------------------------------------------------
COMPANY SHARES VALUE
- -------------------------------------------------------------------------------
DENMARK-0.0%
Tele Danmark As 500 $26,090
Utility - Telephone
FINLAND-0.3%
Aamulehti Yhtymae OY-II 2,000 40,366
Printing, Publishing & Broadcasting
Coflexip S.A. (ADR) 1,088 32,776
Oil-Supplies & Construction
Enso-Gutzeit OY 6,000 54,072
Forest Products
Nokia AB OY Corp. pfd. 800 32,668
Telecommunications
Tamro Yhtymae OY AB 4,000 21,028
Hospital Supplies & Services
180,910
FRANCE-0.1%
Ecco Travail Temporary 500 33,273
Miscellaneous
Lafarge Coppee S.A. 300 23,382
Building & Construction
56,655
GERMANY-0.5%
Bayer Motoren Werk pfd. 54 19,866
Auto & Trucks
Bayer Motoren Werke AG 200 49,196
Auto & Trucks
Dresdner Bank AG 100 27,736
Banks
Fag Kugelfischer 30 3,809
Machinery
Fielmann AG pfd.* 1,000 40,900
Auto & Trucks
Gea AG 60 19,693
Machinery
Hach AG pfd. 50 21,532
Auto & Trucks
Mannesmann AG (ADR) 100 27,122
Telecommunications
Plettac AG 50 31,018
Building & Construction
Sgl Carbon 1,700 $67,813
Chemical - Specialty
Veba AG 50 18,611
Utility-Electric
327,296
HONG KONG-0.3%
Asia Pacific Resources Holding Ltd. 3,300 25,988
Paper
Dao Heng Bank Group, Ltd.* 5,000 12,789
Banks
Hong Kong and China Gas Co., Ltd.
warrants expiring 12/31/95* 300 32
Utility-Gas
Hong Kong Land Holdings 15,000 28,200
Real Estate
Hopewell Holdings 35,000 24,868
Real Estate
HSBC Holdings Plc.* 1,000 11,594
Banks
International Bank Of Asia 30,000 13,661
Banks
Jardine International Motor 10,000 10,205
Auto Related
Paul Y-ITC Construction Holdings, Inc.* 50,000 7,751
Building & Construction
Sing Tao Holdings, Ltd. 20,000 13,047
Printing, Publishing & Broadcasting
148,135
INDIA-0.0%
Gujarat Narmada Vy Fertilizers (GDR) (a) 1,000 8,908
Basic material
Shiram Indl. Enterprises, Ltd.* 2,400 21,600
Food
Shiram Indl. Enterprises, Ltd.
warrants expiring 4/01/96* 800 200
Food
30,708
12
ALLIANCE GROWTH INVESTORS FUND
- -------------------------------------------------------------------------------
COMPANY SHARES VALUE
- -------------------------------------------------------------------------------
IRELAND-0.2%
Allied Irish Bank 7,082 $32,796
Banks
Aran Energy 50,000 36,007
Energy
Crean James 5,000 18,785
Food
Heiton Holdings Plc. ord. 23,571 25,989
Building & Construction
Irish Continental Group 4,500 28,299
Trucking & Shipping
Ryan Hotels Plc 50,000 22,460
Food Services & Lodging
164,336
ITALY-0.1%
Industrie Natuzzi S.p.A., (ADS) 1,000 37,375
Household Products
La Rinascente S.p.A 3,000 16,612
Retail-General
Stet Societa Finanziaria
Telfonica S.p.A. 6,000 17,104
Utility-Telephone
71,091
JAPAN-2.5%
Akita Bank 3,150 27,176
Banks
Asahi Diamond Industria 2,000 29,749
Machinery
Bunkyodo Co. 300 10,353
Retail - General
Canon, Inc. 3,000 49,622
Office Equipment
Chodai Co. 1,000 34,509
Building & Construction
Chuoh Pack Ind. Co., Ltd. 1,000 7,378
Paper
Daiichi Corp. 1,200 26,703
Retail - General
Daikin Manufacturing Co. 1,000 17,374
Auto Related
Dainippon Ink & Chemical, Inc. 2,000 $9,996
Chemicals
DDI Corp. 5 44,029
Telecommunications
Denki Kagaku Kogyo 5,000 23,145
Chemicals
Eiden Sakakiya Co. 1,000 13,566
Conglomerates
Eyeful Home Technology 1,000 18,564
Building & Construction
Familymart Co. 300 14,280
Business Services
Fuji Electronics 1,000 24,514
Electronics
Fukuda Corp. 1,000 9,972
Building & Construction
Hachijuni Bank 1,000 12,733
Banks
Hitachi Metals, Ltd. 4,000 48,551
Soaps & Toiletries
Innotech Corp. 300 9,996
Electronics
Ishiguro Homa Corp. 1,000 19,040
Retail - General
Kaneshita Construction 2,000 29,036
Building & Construction
Kawasaki Kisen 1,000 3,582
Trucking & Shipping
Kawasaki Steel Co.* 2,000 8,092
Steel
Keihanshin Real Estate 2,000 16,089
Real Estate
Keyence Corp. 400 42,649
Machinery
Kinden Corp. 1,000 19,873
Building & Construction
Koa Fire & Marine 8,000 53,597
International
Mabuchi Motor Co. 500 33,022
Auto Related
Matsuyadenki Co. 1,000 10,948
Retail - General
13
PORTFOLIO OF INVESTMENTS (CONTINUED) ALLIANCE GROWTH INVESTORS FUND
- -------------------------------------------------------------------------------
Minebea Co., Ltd. 2,000 $14,827
Auto Related
Ministop Co. 1,000 22,015
Miscellaneous
Mitsubishi Bank 1,000 24,514
Banks
Mitsubishi Motors Corp. 2,000 18,587
Auto & Trucks
Mitsui Petrochemical Ind. 2,000 18,944
Chemicals
Murata Mfg Co., Ltd. 1,000 40,221
Electronics
Namura Shipbuildng 1,000 5,950
Industrial Machinery
National House Industrial 1,000 20,468
Building & Construction
New Oji Paper Co., Ltd.* 4,000 44,743
Paper
Nichiha Corp. 1,000 18,921
Building Materials & Forest Products
Nikon Corp. 1,000 8,520
Electronics
Nippon Electric Glass 1,100 19,504
Industrial Machinery
Nippon Sanso Corp. 7,000 37,068
Chemicals
Nippon Steel Corp. 2,000 7,949
Steel
Nippon Yakin Kogyo 1,000 5,831
Soaps & Toiletries
Noritz Corp. 2,000 40,697
Household Furniture & Appliances
Omron Corp. 1,000 19,635
Electrical Equipment
Oriental Construction 1,000 20,706
Building & Related
P S Corp. 1,300 25,680
Building & Construction
Promise Co. 200 8,734
Miscellaneous
Ricoh Elemex Corp. 1,000 $13,090
Office Equipment
Rohm Co. 1,000 46,290
Electric
Santen Pharmaceutical Co. 1,100 27,881
Hospital Supplies & Services
Sato Corp. 1,110 22,983
Retail - General
Sekichu Company 1,000 17,850
Retail - General
Sekisui Chemical Co. 2,000 24,990
Chemicals
Sharp Corp. 1,000 16,422
Household Furniture & Appliances
Showa Shell Sekiyu 1,000 12,733
Miscellaneous
SMC Corp. 600 31,772
Industrial Machinery
Sotoh Co. 1,000 15,470
Apparel & Textile
Takara Shuzo Co. 1,000 8,175
Food, Beverages & Tobacco
Takeda Chemical Industries 1,000 13,328
Chemicals
TDK Corp. 1,000 45,695
Electronics
Toda Corp. 2,000 21,420
Building & Construction
Toho Bank 4,000 31,891
Banks
Tokyo Broadcasting 3,000 48,194
Broadcasting
Tokyo Electron, Ltd. 1,000 31,177
Electronics
Tokyo Ohka Kogyo 1,000 31,177
Electronics
Toppan Printing Co., Ltd. 3,000 43,553
Printing, Publishing & Broadcasting
Wesco Investments, Ltd. 1,200 36,413
Building & Construction
14
ALLIANCE GROWTH INVESTORS FUND
- -------------------------------------------------------------------------------
COMPANY SHARES VALUE
- -------------------------------------------------------------------------------
Xebio Co. 300 $10,567
Retail - General
Yamanouchi Pharmaceudical 2,000 44,981
Hospital Supplies & Services
York Benimaru Co. 1,000 39,507
Household Products
1,727,211
KOREA-0.0%
Yukong, Ltd.*(a) 700 7,350
Oil - International
MALAYSIA-0.1%
C.I. Holdings Berhad 4,000 14,401
Building Materials & Forest Products
Hock Hua Bank Berhad 5,000 14,260
Banks
Kim Hin Ind. Berhad 750 191
Building & Construction
Malaysian Assurance 15,000 48,847
Insurance
77,699
MEXICO-0.0%
Groupo Finance Delaware Norte 4,000 5,178
Banks
Grupo Industrial Durango
S.A. de C V (ADR)* 2,000 16,000
Forest Products
21,178
NETHERLANDS-0.4%
AKZO N.V. 300 34,792
Chemicals
Asm Lithography Hl 1,100 30,475
Electronics
KLM 1,500 45,616
Auto & Trucks
Kon Ptt Nederland (a) 2,000 69,712
Utility - Telephone
Polygram N.V. 500 28,220
Leisure Related
Ver Ned Uitgevers 300 $33,554
Printing, Publishing & Broadcasting
Wolters Kluwer N.V. 300 24,412
Printing, Publishing & Broadcasting
266,781
NORWAY-0.1%
Norsk Hydro AS 500 20,345
Oil - International
Tomra Systems AS 12,000 44,109
Environmental Control
Western Bulk Shipping AS 2,500 12,239
Trucking & Shipping
Wilrig AS 2,000 15,570
Transportation
92,263
PHILIPPINES-0.0%
Banco Latinoamericano De Exp 1,000 31,000
Banks
SINGAPORE-0.1%
Elec. & Eltek Int'l Co., Ltd. 5,000 6,400
Electronics
Hong Leong Finance, Ltd. 5,000 15,859
Financial Services
Keppel Corp.. Ltd. 2,000 16,218
Machinery
Overseas Union Bank, Ltd. 2,600 15,020
Banks
53,497
SPAIN-0.3%
Acerinox S.A. 210 24,049
Mining & Metals
Banco Popular Espanol 200 27,322
Banks
Centros Commerciales Continente S.A.* 2,000 35,411
Retail-General
Corporacion Mapfre 1,000 43,858
International
15
PORTFOLIO OF INVESTMENTS (CONTINUED) ALLIANCE GROWTH INVESTORS FUND
- -------------------------------------------------------------------------------
COMPANY SHARES VALUE
- -------------------------------------------------------------------------------
Repsol S.A. 1,000 $31,837
Miscellaneous
Telefonica de Espana 1,000 12,223
Utility - Telephone
Viscofan Envolturas Celulosi 1,000 13,198
Foods
187,898
SWEDEN-0.2%
Astra Corp. Series A 1,000 29,180
Drugs
Autoliv AB (ADR)* (a) 700 31,456
Auto Related
Electrolux AB 500 25,532
Household Products
Kalmar Industries AB* (a) 2,000 27,390
Machinery
SSAB Svenskt Stal AB-B Free 500 22,023
Mining & Metals
Volvo AB 1,000 18,788
Auto & Trucks
154,369
SWITZERLAND-0.1%
BBC Brown Boveri AG 25 24,664
Miscellaneous
Schweizerischer Bankverein 30 9,866
Banks
34,530
TAIWAN-0.0%
Taiwan Fund, Inc. 800 17,200
Mutual Fund-Diversified
UNITED KINGDOM-0.4%
British Steel N.E. 5,000 13,598
Mining & Metals
Chloride Group Plc.* 40,000 12,552
Building & Related
SHARES OR
PRINCIPAL
AMOUNT
COMPANY (000) VALUE
- -------------------------------------------------------------------------------
Filtronic Comtek 20,000 $78,854
Telecommunications
Hanson PLC 10,000 38,059
Conglomerates
Johnson Matthey Plc. 1,000 8,779
Mining & Metals
Powerscreen International 7,000 31,542
Environmental Control
Tate & Lyle 5,000 34,841
Food
United Newspapers Plc. 2,068 16,474
Printing, Publishing & Broadcasting
WPP Group 15,000 26,794
Professional Services
Zeneca Group Plc. 3,000 43,607
Chemicals
305,100
Total Foreign Investments
(cost $4,693,766) 4,823,779
Total Common Stocks & Other Investments
(cost $39,063,635) 42,504,717
LONG TERM DEBT SECURITIES-29.8%
BASIC MATERIALS-0.9%
Georgia Pacific
8.25%, 3/01/23 $ 675 650,207
CREDIT SENSITIVE-0.7%
General Instrument Corp.
5.00%, 6/15/00 300 447,375
MISCELLANEOUS-0.9%
Boskalis Westminister
5.25%, 6/01/00 80 45,873
Italy (Republic of)
6.875%, 9/27/23 700 576,793
622,666
16
ALLIANCE GROWTH INVESTORS FUND
- -------------------------------------------------------------------------------
PRINCIPAL
AMOUNT
COMPANY (000) VALUE
- -------------------------------------------------------------------------------
MORTGAGE BACKED SECURITIES-6.4%
Federal National Mortgage Association
8.00%, 4/01/25 $2,348 $2,342,000
Government National Mortgage Association
7.00%, 12/15/23 807 763,490
7.00%, 4/15/25 1,428 1,351,688
4,457,178
RETAIL-0.7%
Lowe's Cos., Inc.
3.00%, 7/22/03 360 468,450
US GOVERNMENT-20.2%
U.S. Treasury Bonds
7.50%, 11/15/24 1,690 1,712,714
7.625%, 2/15/25 425 439,412
U.S. Treasury Notes
7.125%, 9/30/99 2,170 2,190,680
7.25%, 2/15/98 3,650 3,700,187
7.50%, 2/15/05 2,400 2,473,872
7.75%, 12/31/99 2,200 2,274,250
7.875%, 11/15/04 1,250 1,318,363
14,109,478
SHARES OR
PRINCIPAL
AMOUNT
COMPANY (000) VALUE
- -------------------------------------------------------------------------------
Total Long Term Debt Securities
(cost $20,503,891) $20,755,354
SHORT-TERM DEBT SECURITIES-9.2%
Federal Home Loan Mortgage Corp.
6.00%, 6/15/95 $ 250 248,125
5.85%, 5/02/95 6,200 6,199,328
Total Short-Term Debt Securities
(amortized cost $6,447,453) 6,447,453
INVESTMENT IN AFFILIATED ISSUERS-0.1%
FRANCE-0.1%
Axa
Insurance
(cost $49,921) 1,000 52,747
TOTAL INVESTMENTS-100.0%
(cost $66,064,900) 69,760,271
Other assets less
liabilities-0.0% 2,732
NET ASSETS-100% $69,763,003
* Non-income producing.
(a) Securities are exempt from registration under Rule 144A of the Securities
Act of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At April 30, 1995,
these securities amounted to $198,140 or 0.3% of net assets.
Glossary of Terms:
ADR - American Depository Receipt
ADS - American Depository Security
GDR - Global Depository Receipt
See notes to financial statements.
17
PORTFOLIO OF INVESTMENTS
APRIL 30, 1995 ALLIANCE CONSERVATIVE INVESTORS FUND
- -------------------------------------------------------------------------------
COMPANY SHARES VALUE
- -------------------------------------------------------------------------------
COMMON STOCKS & OTHER INVESTMENTS-16.1%
CONSUMER NONCYCLICALS-4.9%
BEVERAGES-0.6%
Coca-Cola Co. 5,000 $290,625
DRUGS-0.9%
Merck & Co., Inc. 4,000 171,500
Pfizer, Inc. 3,000 259,875
431,375
ENTERTAINMENT & LEISURE-0.2%
Walt Disney Co. 2,000 110,750
FOOD-0.5%
IBP, Inc. 7,000 259,000
HOSPITAL SUPPLIES & SERVICES-1.0%
Columbia HCA Healthcare Corp. 1,000 42,000
Medtronic, Inc. 4,000 297,500
Schering-Plough Corp. 1,000 75,375
U.S. Healthcare, Inc. 1,400 37,275
United Healthcare Corp. 2,200 79,750
531,900
SOAPS & TOILETRIES-0.6%
Gillette Co. 4,000 328,000
TOBACCO-1.1%
Philip Morris Cos., Inc. 6,000 406,500
UST, Inc. 5,000 140,625
547,125
2,498,775
CREDIT SENSITIVE-3.8%
BANKS-1.3%
Bank of New York Co., Inc. 15,000 493,125
Citicorp 2,000 92,750
First Bank System, Inc. 2,000 81,000
666,875
FINANCIAL SERVICES-0.3%
American Express Co. 4,000 $139,000
Dean Witter, Discover & Co. 200 8,475
147,475
INSURANCE-1.3%
AFLAC, Inc. 10,000 412,500
American International Group, Inc. 1,000 106,750
General Reinsurance Corp. 1,000 127,375
646,625
UTILITY - TELEPHONE-0.9%
Ameritech Corp. 6,000 270,000
AT & T Corp. 4,000 203,000
473,000
1,933,975
BASIC MATERIALS-1.7%
ALUMINUM-0.3%
Aluminum Co. of America 4,000 179,500
CHEMICALS-0.9%
Hercules, Inc. 6,000 299,250
Morton International, Inc. 4,000 124,000
Union Carbide Corp. 1,000 32,000
455,250
PAPER-0.5%
International Paper Co. 3,000 231,000
865,750
ENERGY-1.4%
OIL-0.8%
Amoco Corp. 1,000 65,625
Mobil Corp. 2,000 189,750
Phillips Petroleum Co. 5,000 175,000
430,375
RAILROADS-0.1%
Conrail, Inc. 1,000 54,625
UTILITY - GAS-0.5%
Enron Corp. 5,000 170,000
18
ALLIANCE CONSERVATIVE INVESTORS FUND
- -------------------------------------------------------------------------------
COMPANY SHARES VALUE
- ---------------------------------------------------------------------------
NIPSCO Industries, Inc. 2,000 $64,500
234,500
719,500
CAPITAL GOODS-1.3%
ELECTRICAL-1.0%
General Electric Co. 9,000 504,000
MACHINERY-0.3%
Deere & Co. 2,000 164,000
668,000
CONSUMER CYCLICALS-1.2%
AUTO & TRUCKS-0.2%
General Motors Corp. Cl.E 1,000 43,250
Magna International, Inc. 1,000 34,625
77,875
PHOTO & OPTICAL-0.2%
Eastman Kodak Co. 2,000 115,000
RESTAURANTS & LODGING-0.3%
McDonald's Corp. 4,000 140,000
Wendy's International, Inc. 2,000 34,000
174,000
RETAIL - GENERAL-0.5%
Gap, Inc. 2,000 63,750
Hasbro, Inc. 2,000 63,500
May Department Stores Co. 4,000 145,000
272,250
639,125
BUSINESS SERVICES-0.8%
ENVIRONMENTAL CONTROL-0.1%
Browning Ferris Industries, Inc. 2,000 66,000
PRINTING, PUBLISHING & BROADCASTING-0.4%
Capital Cities ABC, Inc. 2,000 169,000
PROFESSIONAL
SERVICES-0.3%
Reynolds & Reynolds Co. 6,000 159,000
394,000
SHARES OR
PRINCIPAL
AMOUNT
COMPANY (000) VALUE
- ---------------------------------------------------------------------------
TECHNOLOGY-0.8%
COMPAQ Computer Corp. 1,000 $38,000
Molex, Inc. 4,000 152,000
Motorola, Inc. 4,000 227,500
417,500
DIVERSIFIED-0.2%
Allied Signal, Inc. 2,000 79,250
Total Common Stocks & Other Investments
(cost $7,368,404) 8,215,875
LONG-TERM DEBT SECURITIES-76.5%
CREDIT SENSITIVE-10.2%
General Motors Acceptance Corp.
1.00%, 10/15/02 $ 1,300 1,366,703
Georgia Pacific Corp.
8.25%, 3/01/23 1,300 1,252,251
Italy (Republic of)
6.875%, 9/27/23 1,300 1,071,187
Premier Auto Trust
7.15%, 2/04/99 1,500 1,498,594
5,188,735
MORTGAGE BACKED SECURITIES-15.5%
Federal National Mortgage Association
8.00%, 4/01/25 1,272 1,268,583
Government National Mortgage Association
7.00%, 4/15/23 266 251,485
7.00%, 6/15/23 281 265,550
7.00%, 2/15/24 2,455 2,324,090
7.00%, 4/15/25 2,142 2,027,531
7.50%, 11/15/23 1,844 1,798,605
7,935,844
U.S. GOVERNMENT-50.8%
U.S. Treasury Bonds
7.50%, 11/15/24 2,290 2,320,778
7.625%, 2/15/25 2,150 2,222,907
19
PORTFOLIO OF INVESTMENTS (CONTINUED) ALLIANCE CONSERVATIVE INVESTORS FUND
- -------------------------------------------------------------------------------
PRINCIPAL
AMOUNT
COMPANY (000) VALUE
- -------------------------------------------------------------------------------
U.S.Treasury Notes
7.125%, 9/30/99 $ 3,100 $3,129,543
7.25%, 2/15/98 6,400 6,488,000
7.50%, 2/15/05 1,900 1,958,482
7.75%, 12/31/99 7,850 8,114,937
7.875%, 11/15/04 1,600 1,687,504
25,922,151
Total Long-Term Debt Securities
(cost $38,673,950) 39,046,730
SHORT-TERM DEBT SECURITIES-6.4%
Federal Home Loan Mortgage Corp.
5.85%, 5/01/95
(amortized cost $3,300,000) $ 3,300 $3,300,000
TOTAL INVESTMENTS-99.0%
(cost $49,342,354) 50,562,605
Other assets less liabilities-1.0% 503,477
NET ASSETS-100% $51,066,082
See notes to financial statements.
20
STATEMENTS OF ASSETS AND LIABILITIES ALLIANCE GROWTH INVESTORS AND
APRIL 30, 1995 CONSERVATIVE INVESTORS FUNDS
- -------------------------------------------------------------------------------
GROWTH CONSERVATIVE
INVESTORS INVESTORS
FUND FUND
------------ ------------
ASSETS
Investments in securities, at value (cost
$66,064,900 and $49,342,354, respectively) $69,760,271 $50,562,605
Cash -0- 57,452
Receivable for investment securities and
foreign currency sold 2,311,201 1,167,574
Interest and dividends receivable 382,880 618,292
Receivable for shares of beneficial interest sold 137,454 29,285
Receivable due from Adviser 56,927 7,819
Deferred organization expenses 19,500 19,500
Total assets 72,668,233 52,462,527
LIABILITIES
Due to custodian 17,959 -0-
Payable for investment securities and
foreign currency purchased 2,684,029 1,260,321
Distribution fee payable 44,201 30,910
Payable for shares of beneficial interest redeemed 43,264 13,783
Accrued expenses 115,777 91,431
Total liabilities 2,905,230 1,396,445
NET ASSETS $69,763,003 $51,066,082
COMPOSITION OF NET ASSETS
Shares of beneficial interest, at par $58 $49
Additional paid-in capital 67,071,359 53,045,931
Undistributed net investment income 593,778 498,475
Accumulated net realized loss on investments and
foreign currency transactions (1,597,594) (3,698,418)
Net unrealized appreciation of investments and
other assets less liabilities 3,695,402 1,220,045
$69,763,003 $51,066,082
CALCULATION OF MAXIMUM OFFERING PRICE
CLASS A SHARES
Net asset value and redemption price per share
($22,188,537/1,837,412 and $16,104,549 / 1,551,155
shares of beneficial interest issued and outstanding,
respectively) $12.08 $10.38
Sales charge-4.25% of public offering price .54 .46
Maximum offering price $12.62 $10.84
CLASS B SHARES
Net asset value and offering price per share ($43,327,596/
3,584,279 and $30,542,458 / 2,905,089 shares of beneficial
interest issued and outstanding, respectively) $12.09 $10.51
CLASS C SHARES
Net asset value, redemption and offering price per share
($4,246,870 / 351,116 and $4,419,075 / 420,130 shares
of beneficial interest issued and outstanding,
respectively) $12.10 $10.52
See notes to financial statements.
21
STATEMENTS OF OPERATIONS ALLIANCE GROWTH INVESTORS AND
YEAR ENDED APRIL 30, 1995 CONSERVATIVE INVESTORS FUNDS
- -------------------------------------------------------------------------------
GROWTH ONSERVATIVE
INVESTORS INVESTORS
FUND FUND
------------ ------------
INVESTMENT INCOME
Interest $1,773,462 $2,967,732
Dividends 531,825 150,365
Total income 2,305,287 3,118,097
EXPENSES
Advisory fee 464,336 385,818
Distribution fee - Class A 58,355 47,590
Distribution fee - Class B 385,615 307,217
Distribution fee - Class C 38,982 48,572
Custodian 159,361 97,921
Transfer agency 140,054 95,859
Audit and legal 89,198 68,225
Registration 57,106 60,125
Printing 46,913 25,609
Trustees' fees 27,000 27,000
Amortization of organization expenses 10,950 10,950
Miscellaneous 36,558 12,010
Total expenses 1,514,428 1,186,896
Less: expenses waived and assumed by adviser
(See Note B) (350,235) (217,650)
Net expenses 1,164,193 969,246
Net investment income 1,141,094 2,148,851
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
AND FOREIGN CURRENCY
Net realized loss on investments and
options transactions (1,748,900) (3,216,833)
Net realized gain on foreign currency transactions 69,737 -0-
Net change in unrealized depreciation of investments 3,951,748 3,119,273
Net change in unrealized depreciation of foreign
currency denominated assets and liabilities 10,287 -0-
Net gain (loss) on investments 2,282,872 (97,560)
NET INCREASE IN NET ASSETS FROM OPERATIONS $3,423,966 $2,051,291
See notes to financial statements.
22
STATEMENTS OF CHANGES IN NET ASSETS ALLIANCE GROWTH INVESTORS AND
CONSERVATIVE INVESTORS FUNDS
- -------------------------------------------------------------------------------
GROWTH INVESTORS FUND CONSERVATIVE INVESTORS FUND
------------------------- ---------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
APRIL 30, APRIL 30, APRIL 30, APRIL 30,
1995 1994 1995 1994
----------- ----------- ----------- -----------
INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS
Net investment income $1,141,094 $313,765 $2,148,851 $929,682
Net realized gain
(loss) on investments
and foreign currency
transactions (1,679,163) 121,229 (3,216,833) (47,183)
Net change in unrealized
appreciation(depreciation)
of investments and
foreign currency
denominated assets
and liabilities 3,962,035 (702,808) 3,119,273 (2,208,179)
Net increase (decrease)
in net assets from
operations 3,423,966 (267,814) 2,051,291 (1,325,680)
DIVIDENDS AND DISTRIBUTIONS
TO SHAREHOLDERS FROM:
Net investment income
Class A (254,436) (72,572) (685,964) (289,744)
Class B (345,858) (80,463) (1,045,681) (387,379)
Class C (35,052) (4,770) (168,380) (32,066)
Net realized gain
on investments
Class A (22,749) (74,093) -0- (184,501)
Class B (46,345) (159,336) -0- (334,032)
Class C (4,697) (3,179) -0- (23,205)
TRANSACTIONS IN SHARES OF
BENEFICIAL INTEREST
Net increase 16,138,284 40,069,758 1,247,586 37,695,255
Total increase 18,853,113 39,407,531 1,398,852 35,118,648
NET ASSETS
Beginning of year 50,909,890 11,502,359 49,667,230 14,548,582
End of year (including
undistributed net
investment income of
$593,778, $168,135,
$498,475 and $249,649,
respectively) $69,763,003 $50,909,890 $51,066,082 $49,667,230
See notes to financial statements.
23
NOTES TO FINANCIAL STATEMENTS ALLIANCE GROWTH INVESTORS AND
APRIL 30, 1995 CONSERVATIVE INVESTORS FUNDS
- -------------------------------------------------------------------------------
NOTE A: SIGNIFICANT ACCOUNTING POLICIES
Alliance Growth Investors Fund and Conservative Investors Fund (the 'Funds'),
two series of The Alliance Portfolios (the 'Trust'), are registered under the
Investment Company Act of 1940, as diversified, open-end investment companies.
Prior to August 2, 1993, the Trust was known as The Equitable Funds, and the
Funds were known as The Equitable Growth Investors Fund and Conservative
Investors Fund. Prior to August 2, 1993, each 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 Funds offer Class
A, Class B and Class C shares. Class A shares are sold with a front-end sales
charge of up to 4.25%. Class B shares are sold with a contingent deferred sales
charge which declines from 4% to zero depending on the period of time the
shares are held. 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. 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 Funds.
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 Funds to meet their obligations may be affected by
economic developments in a specific industry or region.
2. CURRENCY TRANSLATION
Assets and liabilities denominated in foreign currencies are translated into
U.S. dollars at the mean of the quoted bid and asked price of the respective
currency against the U.S. dollar on the valuation date. Purchases and sales of
portfolio securities are translated at the rates of exchange prevailing when
such securities were acquired or sold. Income and expenses are translated at
rates of exchange prevailing when earned or accrued.
Net realized gain on foreign currency transactions of $69,737 for Growth
Investors Fund, represents net foreign exchange gains and losses from holdings
of foreign currencies, currency gains or losses realized between the trade and
settlement dates on security transactions, and the difference between the
amounts of dividends and foreign taxes recorded on the Fund's books and the
U.S. dollar equivalent amounts actually received or paid. Net unrealized
currency gains and losses from valuing foreign currency denominated assets and
liabilities at fiscal year end exchange rates are reflected as a component of
unrealized appreciation on investments and foreign currency denominated assets
and liabilities.
3. ORGANIZATION EXPENSES
Organization expenses of approximately $50,000 for each Fund have been deferred
and are being amortized on a straight-line basis through May, 1997.
4. 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 Funds on the expiration date as
realized gains. The difference between the premiun 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
24
ALLIANCE GROWTH INVESTORS AND
CONSERVATIVE INVESTORS FUNDS
- -------------------------------------------------------------------------------
the risk of unfavorable changes in the price of the financial instruments
underlying the options.
5. 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.
6. 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.
7. DIVIDENDS AND DISTRIBUTIONS
Dividends and distributions to shareholders are recorded on the ex-dividend
date.
8. INCOME AND EXPENSES
All income earned and expenses incurred by a 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 each Funds' Class B
and Class C shares bear higher distribution and transfer agent fees. Expenses
attributable to a single Fund are charged to that Fund. Expenses of the Trust
are charged to each Fund in proportion to net assets.
NOTE B: ADIVSORY 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 Funds 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 charged was the same. 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 annual rate for Class B shares
was 2.15%. For the year ended April 30, 1995, such reimbursement amounted to
$350,235 and $217,650 for the Growth Investors and Conservative Investors Fund,
respectively. In addition to these voluntary arrangements, the Investment
Adviser will reduce its compensation, to the extent that expenses of the Funds
for any fiscal year (not including any distribution expenses paid by the Funds)
exceed the lowest applicable expense limitation prescribed by any state in
which the Fund's shares are qualified for sale. The Funds believe that the most
restrictive expense ratio limitation imposed by any state in which the Funds
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 Funds have 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 Funds. Compensation under this
agreement amounted $97,970 and $58,940 for the Growth Investors and
Conservative Investors Funds, respectively for the year 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
front-end sales charges of $12,658 from the sale of Class A shares and $111,820
in contingent deferred sales charges imposed upon redemptions by shareholders
of Class B shares for the year ended April 30, 1995 for the Growth Investors
Fund. The Distributor also received front-end sales charges of $6,497 from the
sale of Class A shares and $131,358 in contingent deferred sales charges
imposed upon redemptions by shareholders of Class B shares for the year ended
April 30, 1995 for the Conservative Investors Fund.
25
NOTES TO FINANCIAL STATEMENTS (CONTINUED) ALLIANCE GROWTH INVESTORS AND
CONSERVATIVE INVESTORS FUNDS
- -------------------------------------------------------------------------------
Brokerage commissions paid on securities transactions for the year ended April
30, 1995 amounted to $143,563 and $3,758 for the Growth Investors and
Conservative Investors Funds, respectively, of which $33 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's fees and expenses payable included amounts owed to one of the
Trustees under the deferred compensation plan.
NOTE C: DISTRIBUTION SERVICES AGREEMENT
The Funds have adopted a Distribution Services Agreement (the 'Agreement')
pursuant to Rule 12b-1 under the Investment Company Act of 1940. Under the
Agreement, the Funds pay a distribution fee to the Distributor at an annual
rate of up to .50% of each 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. Prior to August 2, 1993, Equico Securities served
as distributor to the Funds. The Funds paid a distribution fee to the
distributor at an annual rate of .25% of each Fund's average daily net assets
attributable to Class A shares. The Trustees currently limit payments under the
Class A plan to .30% of the Fund's aggregate average 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 Growth Investors Fund in the amount of
$1,129,165 and $124,579 for Class B and C shares, respectively. The Distributor
has also incurred expenses in excess of the distribution costs reimbursed by
the Conservative Investors Fund in the amount of $1,276,362 and $196,425,
respectively and for the Class B and Class C shares, respectively; such costs
may be recovered from each 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 each Fund's
shares.
NOTE D: INVESTMENT TRANSACTIONS
Purchases and sales of investment securities (excluding short-term investments)
for the Growth Investors Fund aggregated $91,295,274 and $62,800,691,
respectively, for the year ended April 30, 1995. There were purchases of
$34,604,273 and sales of $24,810,074 of U.S. Government and government agency
obligations for the year ended April 30, 1995. At April 30, 1995, the cost of
securities for federal income tax purposes for the Growth Investors Fund was
$66,095,352. Accordingly gross unrealized appreciation of investments was
$4,788,910 and gross unrealized depreciation of investments was $1,123,991
resulting in net unrealized appreciation of $3,664,919.
The Growth Investors Fund enters into forward exchange currency contracts in
order to hedge its exposure to changes in foreign currency exchange rates on
its foreign portfolio holdings. A forward exchange currency contract is a
commitment to purchase or sell a foreign currency at a future date at a
negotiated forward rate. The gain or loss arising from the difference between
the original contracts and the closing of such contracts is included in net
realized gain or loss from foreign currency transactions. Fluctuations in the
value of forward exchange currency contracts are recorded for financial
reporting purposes as unrealized gains or losses by the Fund. Risks may arise
from the potential inability of a counter-party to meet the terms of a contract
and from unanticipated movements in the value of a foreign currency relative to
the U.S. dollar. At April 30, 1995, there were no outstanding forward exchange
currency contracts.
Purchases and sales of investment securities (excluding short-term investments)
for the Conservative Investors Fund aggregated $108,535,724 and $98,995,442,
respectively, for the year ended April 30, 1995. There were purchases of
$73,553,555 and sales of $58,226,588 of U.S. Government and government agency
obligations for the year ended April 30, 1995. At April 30, 1995, the cost of
securities for federal income tax purposes for the Con-
26
ALLIANCE GROWTH INVESTORS AND
CONSERVATIVE INVESTORS FUNDS
- -------------------------------------------------------------------------------
servative Investors Fund was $49,536,512. Accordingly gross unrealized
appreciation of investments was $1,284,394 and gross unrealized depreciation of
investments was $258,301 resulting in net unrealized appreciation of $1,026,093.
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 for both Funds. Transactions in shares of beneficial interest
were as follows:
ALLIANCE GROWTH INVESTORS FUND
----------------------------------------------------
SHARES AMOUNT
------------------------ --------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
APRIL 30, APRIL 30, APRIL 30, APRIL 30,
1995 1994 1995 1994
---------- ------------ ------------ ------------
CLASS A
Shares sold 878,301 1,224,513 $10,219,392 $14,527,190
Shares issued in
reinvestment of
dividends and
distributions 23,903 12,123 266,999 143,134
Shares redeemed (508,295) (101,933) (5,946,807) (1,218,333)
Net increase 393,909 1,134,703 $4,539,584 $13,451,991
CLASS B
Shares sold 1,384,786 2,121,895 $16,126,761 $25,302,089
Shares issued in
reinvestment of
dividends and
distributions 33,860 20,028 379,230 237,891
Shares redeemed (485,135) (192,181) (5,718,545) (2,290,398)
Net increase 933,511 1,949,742 $10,787,446 $23,249,582
ALLIANCE GROWTH INVESTORS FUND
-----------------------------------------------------
SHARES AMOUNT
------------------------- --------------------------
AUGUST 2, AUGUST 2,
YEAR ENDED 1993* TO YEAR ENDED 1993* TO
APRIL 30, APRIL 30, APRIL 30, APRIL 30,
1995 1994 1995 1994
----------- ------------ ------------ ------------
CLASS C
Shares sold 188,858 337,111 $2,197,932 $4,037,220
Shares issued in
reinvestment of
dividends and
distributions 3,451 670 38,687 7,927
Shares redeemed (122,670) (56,304) (1,425,365) (676,962)
Net increase 69,639 281,477 $811,254 $3,368,185
27
NOTES TO FINANCIAL STATEMENTS (CONTINUED) ALLIANCE GROWTH INVESTORS AND
CONSERVATIVE INVESTORS FUNDS
- -------------------------------------------------------------------------------
ALLIANCE CONSERVATIVE INVESTORS FUND
-----------------------------------------------------
SHARES AMOUNT
------------------------- --------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
APRIL 30, APRIL 30, APRIL 30, APRIL 30,
1995 1994 1995 1994
----------- ------------ ------------ ------------
Class A
Shares sold 548,552 1,189,333 $5,617,109 $13,031,463
Shares issued in
reinvestment of
dividends and
distributions 65,422 40,811 656,166 442,601
Shares redeemed (566,559) (221,331) (5,791,900) (2,381,952)
Net increase 47,415 1,008,813 $481,375 $11,092,112
CLASS B
Shares sold 798,920 2,302,220 $8,264,467 $25,384,220
Shares issued in
reinvestment of
dividends and
distributions 94,772 62,734 960,854 687,832
Shares redeemed (825,918) (374,172) (8,495,394) (4,077,813)
Net increase 67,774 1,990,782 $729,927 $21,994,239
ALLIANCE CONSERVATIVE INVESTORS FUND
------------------------------------------------------
SHARES AMOUNT
-------------------------- --------------------------
AUGUST 2, AUGUST 2,
YEAR ENDED 1993* TO YEAR ENDED 1993* TO
APRIL 30, APRIL 30, APRIL 30, APRIL 30,
1995 1994 1995 1994
------------ ------------ ------------ ------------
CLASS C
Shares sold 224,223 510,177 $2,320,546 $5,606,322
Shares issued in
reinvestment of
dividends and
distributions 15,711 4,767 159,243 51,975
Shares redeemed (237,610) (97,138) (2,443,423) (1,049,393)
Net increase 2,324 417,806 $36,366 $4,608,904
NOTE F: RECLASSIFICATION OF COMPONENTS OF NET ASSETS
In accordance with Statement of Position 93-2 Determination, Disclosure, and
Financial Statement Presentation of Income, Capital Gain and Return of Capital
Distributions by Investment Companies, permanent book and tax differences
relating to shareholder distributions have been reclassified to additional
paid-in capital. During the current period the accumulated undistributed net
investment income was charged and accumulated undistributed net realized gains
was credited for $80,105 for Alliance Growth Investors Fund. Net investment
income, net realized gains and net assets were not affected by this change.
NOTE G: TAXES
Capital and currency losses incurred after October 31 within the Fund's fiscal
year are deemed to arise on the first business day of the following fiscal
year. The Alliance Growth Investors Fund incurred and elected to defer post
October currency losses of $71,562 and capital losses of $447,337. The Alliance
Conservative Investors Fund incurred and elected to defer post October capital
losses of $812,541. At April 30, 1995, the Alliance Growth Investors Fund and
Conservative Investors Fund had net capital loss carryovers of approximately
$1,120,000 and $2,692,000, respectively. Such losses will be available to
offset capital gains arising through April 30, 2003. To the extent that any net
capital loss carryover or post-October loss is used to offset future capital
gains, it is probable that the gains so offset will not be distributed to
shareholders.
* Commencement of distribution.
28
FINANCIAL HIGHLIGHTS ALLIANCE GROWTH INVESTORS FUND
- -------------------------------------------------------------------------------
SELECTED DATA FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING THROUGHOUT EACH
PERIOD
CLASS A
--------------------------------
YEAR YEAR MAY 4,
ENDED ENDED 1992(A) TO
APRIL 30, APRIL 30, APRIL 30,
1995 1994 1993
--------- -------- ----------
Net asset value, beginning of period $11.61 $11.35 $10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income .25* .12* .20*
Net realized and unrealized gain on investments .38 .39 1.43
Net increase in net asset value from operations .63 .51 1.63
LESS: DISTRIBUTIONS
Dividends from net investment income (.15) (.11) (.16)
Distributions from net realized gains (.01) (.14) (.12)
Total dividends and distributions (.16) (.25) (.28)
Net asset value, end of period $12.08 $11.61 $11.35
TOTAL RETURN
Total investment return based on
net asset value (b) 5.57% 4.46% 16.32%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000's omitted) $22,189 $16,759 $3,503
Ratios to average net assets of:
Expenses, net of waivers/reimbursements 1.40% 1.40% 1.40%(c)
Expenses, before waivers/reimbursements 1.97% 2.33% 4.27%(c)
Net investment income 2.32% 1.67% 1.91%(c)
Portfolio turnover rate 134% 96% 114%
<TABLE>
<CAPTION>
CLASS B CLASS C
--------------------------------- -----------------------
YEAR YEAR MAY 4, YEAR AUGUST 2,
ENDED ENDED 1992(A) TO ENDED 1993(D) TO
APRIL 30, APRIL 30, APRIL 30, APRIL 30, APRIL 30,
1995 1994 1993 1995 1994
-------- -------- ---------- -------- -----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $11.65 $11.41 $10.00 $11.65 $11.88
INCOME FROM INVESTMENT OPERATIONS
Net investment income .17* .07* .07* .18* .08*
Net realized and unrealized gain
(loss) on investments .38 .37 1.45 .38 (.11)
Net increase (decrease) in net asset
value from operations .55 .44 1.52 .56 (.03)
LESS: DISTRIBUTIONS
Dividends from net investment income (.10) (.06) (.05) (.10) (.06)
Distributions from net realized gains (.01) (.14) (.06) (.01) (.14)
Total dividends and distributions (.11) (.20) (.11) (.11) (.20)
Net asset value, end of period $12.09 $11.65 $11.41 $12.10 $11.65
TOTAL RETURN
Total investment return based on
net asset value (b) 4.83% 3.84% 15.23% 4.91% (.26)%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000's omitted) $43,328 $30,871 $7,999 $4,247 $3,280
Ratios to average net assets of:
Expenses, net of waivers/reimbursements 2.10% 2.11% 2.15%(c) 2.10% 2.10%(c)
Expenses, before waivers/reimbursements 2.67% 3.00% 4.48%(c) 2.66% 3.02%(c)
Net investment income 1.62% .95% 1.07%(c) 1.62% 1.04%(c)
Portfolio turnover rate 134% 96% 114% 134% 96%
</TABLE>
See footnote summary on page 31.
29
FINANCIAL HIGHLIGHTS (CONTINUED) ALLIANCE CONSERVATIVE INVESTORS FUND
- -------------------------------------------------------------------------------
SELECTED DATA FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING THROUGHOUT EACH
PERIOD
CLASS A
--------------------------------
YEAR YEAR MAY 4,
ENDED ENDED 1992(A) TO
APRIL 30, APRIL 30, APRIL 30,
1995 1994 1993
--------- -------- ----------
Net asset value, beginning of period $10.37 $10.79 $10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income .48* .31* .39*
Net realized and unrealized gain
(loss) on investment (.02) (.26) .82
Net increase in net asset value
from operations .46 .05 1.21
LESS: DISTRIBUTIONS
Dividends from net investment income (.45) (.29) (.36)
Distributions from net realized gains -0- (.18) (.06)
Total dividends and distributions (.45) (.47) (.42)
Net asset value, end of period $10.38 $10.37 $10.79
TOTAL RETURN
Total investment return based
on net asset value (b) 4.65% .35% 12.25%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000's omitted) $16,105 $15,595 $5,339
Ratios to average net assets of:
Expenses, net of waivers/reimbursements 1.40% 1.40% 1.40%(c)
Expenses, before waivers/reimbursements 1.83% 2.03% 3.45%(c)
Net investment income 4.66% 3.43% 3.92%(c)
Portfolio turnover rate 248% 133% 84%
<TABLE>
<CAPTION>
CLASS B CLASS C
--------------------------------- -----------------------
YEAR YEAR MAY 4, YEAR AUGUST 2,
ENDED ENDED 1992(A) TO ENDED 1993(D) TO
APRIL 30, APRIL 30, APRIL 30, APRIL 30, APRIL 30,
1995 1994 1993 1995 1994
-------- -------- ---------- -------- -----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $10.47 $10.88 $10.00 $10.47 $11.12
INCOME FROM INVESTMENT OPERATIONS
Net investment income .46* .24* .24* .46* .18*
Net realized and unrealized gain (loss)
on investments (.02) (.26) .89 (.01) (.50)
Net increase (decrease) in net asset value
from operations .44 (.02) 1.13 .45 (.32)
LESS: DISTRIBUTIONS
Dividends from net investment income (.40) (.21) (.22) (.40) (.15)
Distributions from net realized gains -0- (.18) (.03) -0- (.18)
Total dividends and distributions (.40) (.39) (.25) (.40) (.33)
Net asset value, end of period $10.51 $10.47 $10.88 $10.52 $10.47
TOTAL RETURN
Total investment return based on
net asset value (b) 3.91% (.31)% 11.39% 4.01% (2.98)%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000's omitted) $30,542 $29,697 $9,210 $4,419 $4,375
Ratios to average net assets of:
Expenses, net of waivers/reimbursements 2.10% 2.11% 2.15%(c) 2.10% 2.10%(c)
Expenses, before waivers/reimbursements 2.52% 2.73% 3.95%(c) 2.52% 2.10%(c)
Net investment income 3.96% 2.72% 3.06%(c) 3.97% 2.94%(c)
Portfolio turnover rate 248% 133% 84% 248% 133%
</TABLE>
See footnote summary on page 31.
30
ALLIANCE GROWTH INVESTORS AND
CONSERVATIVE INVESTORS FUNDS
- -------------------------------------------------------------------------------
FOOTNOTE SUMMARY
* Net of fee waived and expenses reimbursed by Adviser.
(a) Commencement of operations.
(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.
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. acquired the business and substantially all of
the assets of Equitable Capital and became the investment adviser to the Trust.
31
REPORT OF INDEPENDENT ACCOUNTANTS ALLIANCE GROWTH INVESTORS AND
CONSERVATIVE INVESTORS FUNDS
- -------------------------------------------------------------------------------
TO THE BOARD OF TRUSTEES AND SHAREHOLDERS OF ALLIANCE GROWTH INVESTORS FUND
AND ALLIANCE CONSERVATIVE INVESTORS FUND
In our opinion, the accompanying statements of assets and liabilities,
including the portfolios 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
Investors Fund and Alliance Conservative Investors Fund (separately managed
portfolios constituting part of The Alliance Portfolios, hereafter referred to
as the 'Funds') at April 30, 1995, the results of each of their operations for
the year then ended, the changes in each of their net assets for each of the
two years in the period then ended and the financial highlights for each of the
periods presented, in conformity with generally accepted accounting principles.
These financial statements and financial highlights (hereafter referred to as
'financial statements') are the responsibility of the Funds' 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 April 30, 1995 by correspondence with the custodian and brokers
and the application of alternative auditing procedures where confirmations from
brokers were not received, provide a reasonable basis for the opinion expressed
above.
PRICE WATERHOUSE LLP
New York, New York
June 22, 1995
32
<PAGE>
APPENDIX A
DESCRIPTION OF CORPORATE BOND RATINGS
Incorporated by reference from "Appendix A" contained in
the Rule 497 SAI.
A-1
00250184.AH3
<PAGE>
PART 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).
C-1
<PAGE>
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 No. 11 to the Registrant's
Registration Statement on June 28, 1993).
4(d). Specimen Share Certificate with respect to Class C
shares of (a) Alliance Conservative Investors Fund
and (b) Alliance Growth Investors Fund (previously
filed with Post-Effective Amendment No. 17 to the
Registrant's Registration Statement on August 30,
1995).
4(e). Specimen Share Certificate with respect to Class C
shares of (a) Alliance Strategic Balanced Fund; (b)
Alliance Growth Fund; and (c) Alliance Short-Term
U.S. Government Fund (previously filed with Post-
Effective Amendment No. 19 to the Registrant's
Registration Statement on October 31, 1995.)
5. 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
C-2
<PAGE>
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).
9(c). Transfer Agent Agreement between the Registrant and
State Street Bank and Trust Company (previously
filed with Post-Effective Amendment No. 17 to the
Registrant's Registration Statement on August 30,
1995).
10(a). Opinion and Consent of Counsel (previously filed
with Post-Effective Amendment No. 9 to the
Registrant's Registration Statement on August 31,
1992).
10(b). Opinion and Consent of Counsel (previously filed
with Post-Effective Amendment No. 17 to the
Registrant's Registration Statement on August 30,
1995).
11. Consent of Independent Accountants - filed
herewith.
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).
C-3
<PAGE>
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 - filed herewith.
18. Rule 18f-3 Plan (previously filed with Post-Effective
Amendment No. 19 to the Registrant's Registration
Statement on January 31, 1996.)
Item 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH
REGISTRANT
As of April 5, 1996, the Registrant, The Alliance
Portfolios, believes that no person is directly or indirectly
controlled by or under common control with the Registrant.
Item 26. NUMBER OF HOLDERS OF SECURITIES
(as of April 5, 1996)
(1) (2)
NUMBER OF
RECORD
TITLE OF CLASS HOLDERS
Class A shares of
beneficial interest of
Alliance Conservative
Investors Fund 1,000
Class B shares of
beneficial interest of
Alliance Conservative
Investors Fund 2,255
Class C shares of
beneficial interest of
C-4
<PAGE>
Alliance Conservative
Investors Fund 417
Class A shares of
beneficial interest of
Alliance Growth
Investors Fund 2,354
Class B shares of
beneficial interest of
Alliance Growth
Investors Fund 5,116
Class C shares of
beneficial interest of
Alliance Growth
Investors Fund 572
Class A shares of
beneficial interest of
Alliance Growth Fund 30,464
Class B shares of
beneficial interest of
Alliance Growth Fund 142,545
Class C shares of
beneficial interest of
Alliance Growth Fund 15,951
Class A shares of
beneficial interest of
Alliance Short-Term
U.S. Government Fund 136
Class B shares of
beneficial interest of
Alliance Short-Term
U.S. Government Fund 368
Class C shares of
beneficial interest of
Alliance Short-Term
U.S. Government Fund 160
Class A shares of
beneficial interest of
Alliance Strategic
Balanced Fund 1,383
Class B shares of
C-5
<PAGE>
beneficial interest of
Alliance Strategic
Balanced Fund 2,918
Class C shares of
beneficial interest of
Alliance Strategic
Balanced Fund 255
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, 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."
C-6
<PAGE>
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 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.
C-7
<PAGE>
"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 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
C-8
<PAGE>
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."
_____________
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
C-9
<PAGE>
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.
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.
C-10
<PAGE>
Item 28. BUSINESS AND OTHER CONNECTIONS OF ADVISER.
The descriptions of Alliance Capital Management
L.P. under the captions "Management of the Fund" 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.
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 herein.
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:
ACM Institutional Reserves, Inc.
AFD Exchange Reserves
Alliance All-Asia Investment Fund, Inc.
Alliance Balanced Shares, Inc.
Alliance Bond Fund, Inc.
Alliance Capital Reserves
Alliance Developing Markets Fund, Inc.
Alliance Global Dollar Government Fund, Inc.
Alliance Global Small Cap Fund, Inc.
Alliance Global Strategic Income Trust, Inc.
Alliance Government Reserves
Alliance Growth and Income Fund, Inc.
Alliance Income Builder Fund, Inc.
Alliance International Fund
Alliance Limited Maturity Government Fund, Inc.
Alliance Money Market Fund
Alliance Mortgage Securities Income Fund, Inc.
Alliance Multi-Market Strategy Trust, Inc.
Alliance Municipal Income Fund, Inc.
Alliance Municipal Income Fund II
Alliance Municipal Trust
Alliance New Europe Fund, Inc.
Alliance North American Government Income
Trust, Inc.
Alliance Premier Growth Fund, Inc.
Alliance Quasar Fund, Inc.
C-11
<PAGE>
Alliance Short-Term Multi-Market Trust, Inc.
Alliance Technology Fund, Inc.
Alliance Utility Income Fund, Inc.
Alliance Variable Products Series Fund, Inc.
Alliance World Income Trust, Inc.
Alliance Worldwide Privatization Fund, Inc.
Fiduciary Management Associates
The Alliance Fund, Inc.
The Alliance Portfolios
(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 Offices Positions and Offices
Name With Underwriter With Registrant
Michael J. Laughlin Chairman
Robert L. Errico President
Edmund P. Bergan, Senior Vice President, Clerk
Jr. Secretary & General
Counsel
Daniel J. Dart Senior Vice President
Richard A. Davies Senior Vice President,
Managing Director
Byron M. Davis Senior Vice President
Kimberly A. Gardner Senior Vice President
Geoffrey L. Hyde Senior Vice President
Barbara J. Krumsiek Senior Vice President Vice President-
Marketing
Stephen R. Laut Senior Vice President
Daniel D. McGinley Senior Vice President
Dusty W. Paschall Senior Vice President
Antonios G. Senior Vice President
Poleondakis
C-12
<PAGE>
Gregory K. Senior Vice President
Shannahan
Joseph F. Sumanski Senior Vice President
Peter J. Szabo Senior Vice President
Nicholas K. Willett Senior Vice President
Richard A. Winge Senior Vice President
Warren W. Babcock III Vice President
Benji A. Baer Vice President
Warren W. Babcock III Vice President
Kenneth F. Barkoff Vice President
William P. Vice President
Beanblossom
Jack C. Bixler Vice President
Casimir F. Bolanowski Vice President
Kevin T. Cannon Vice President
William W.
Collins, Jr. Vice President
Leo H. Cook Vice President
Richard W. Dabney Vice President
John F. Dolan Vice President
Mark J. Dunbar Vice President
Sohaila S. Farsheed Vice President
Linda A. Finnerty Vice President
William C. Fisher Vice President
Robert M. Frank Vice President
Gerard J. Friscia Vice President
and Controller
Andrew L. Gangolf Vice President Assistant Clerk
C-13
<PAGE>
Mark D. Gersten Vice President Treasurer and Chief
Financial Officer
Joseph W. Gibson Vice President
Herbert H. Goldman Vice President
James E. Gunter Vice President
Alan Halfenger Vice President
Daniel M. Hazard Vice President
George R. Hrabovsky Vice President
Valerie J. Hugo Vice President
Robert H. Joseph, Jr. Vice President
and Treasurer
Richard D. Keppler Vice President
Sheila F. Lamb Vice President
Donna M. Lamback Vice President
Thomas Leavitt, III Vice President
James M. Liptrot Vice President
James P. Luisi Vice President
Christopher J. Vice President
MacDonald
Michael F. Mahoney Vice President
Maura A. McGrath Vice President
Matthew P. Mintzer Vice President
Joanna D. Murray Vice President
Nicole M. Vice President
Nolan-Koester
Daniel J. Phillips Vice President
Robert T. Pigozzi Vice President
James J. Posch Vice President
C-14
<PAGE>
Robert E. Powers Vice President
Domenick Pugliese Vice President and
Associate General Counsel
Bruce W. Reitz Vice President
Dennis A. Sanford Vice President
Raymond S. Sclafani Vice President
Richard J. Sidell Vice President
J. William Strott, Jr. Vice President
Richard E. Tambourine Vice President
Joseph T. Tocyloski Vice President
Neil S. Wood Vice President
Emilie D. Wrapp Vice President and
Special Counsel
Maria L. Carreras Assistant Vice President
Sarah A. Chodera Assistant Vice President
John W. Cronin Assistant Vice President
Leon M. Fern Assistant Vice President
William B. Hanigan Assistant Vice President
Vicky M. Hayes Assistant Vice President
John C. Hershock Assistant Vice President
James J. Hill Assistant Vice President
Kalen H. Holliday Assistant Vice President
Thomas K. Intoccia Assistant Vice President
Edward W. Kelly Assistant Vice President
Patrick Look Assistant Vice President
and Assistant Treasurer
Shawn P. McClain Assistant Vice President
C-15
<PAGE>
Thomas F. Monnerat Assistant Vice President
Jeanette M. Nardella Assistant Vice President
Carol H. Rappa Assistant Vice President
Lisa Robinson-Cronin Assistant Vice President
Karen C. Satterberg Assistant Vice President
Robert M. Smith Assistant Vice President
Wesley S. Williams 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
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.
C-16
<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.
C-17
<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 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 22nd day of April,
1996.
THE ALLIANCE PORTFOLIOS
By: /s/ John D. Carifa
_______________________
John D. Carifa
Chairman and President
Pursuant to the requirements of the Securities Act of
l933, 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 April 22, 1996
___________________ and President
John D. Carifa
2) Principal Financial
and Accounting Officer
/s/ Mark D. Gersten Treasurer April 22, 1996
____________________ and Chief
Mark D. Gersten Financial Officer
C-18
<PAGE>
3. 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. April 22, 1996
_____________________________
(Attorney-in-fact)
Edmund P. Bergan, Jr.
C-19
<PAGE>
EXHIBIT INDEX
Exhibit
No. Description
11. Consent of Independent Accountants
27. Financial Data Schedule
C-20
00250184.AH3
<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. 20 to the registration statement on Form N-1A (the
"Registration Statement") of our report dated September 27, 1995,
relating to the financial statements and financial highlights of
The Alliance Portfolios, Inc., which appears in such Statement of
Additional Information. We also consent to the reference to us
under the heading "Statements and Reports" in such Statement of
Additional Information.
PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York
April 19, 1996
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